Towards a Balanced Approach: ISDS Alternatives for Sustainable Investment Protection

Abstract

Investor-State Dispute Settlement (ISDS) mechanisms have emerged as an important tool for resolving conflicts between foreign investors and host countries, aiming to provide neutral arbitration outside of domestic courts. Over time, however, ISDS has received widespread criticism over the years for its opacity, high costs, and disproportionate favouritism of investors, often at the expense of state sovereignty and public welfare. These concerns have prompted a global rethinking of how investment disputes are handled. In response to rising discontentment, countries are turning to alternatives that prioritize a long-term commitment while protecting state interests. India, which was once an enthusiastic supporter of ISDS through early Bilateral Investment Treaties (BITs), has significantly shifted its thinking. Its previous agreements, which were characterized by investor-centric provisions, left plenty of scope for broad and sometimes harmful interpretations by tribunals. The socioeconomic and regulatory landscape has since evolved, prompting the country to take a more balanced and forward-thinking stance. India’s 2016 Model BIT, which focuses on investor obligations and alternative dispute resolution, represents a significant departure from its previous pro-investor frameworks. This approach reflects an overall global movement toward solutions such as the European Union’s
Multilateral Investment Court (MIC) and the incorporation of mediation and conciliation into dispute resolution. The future of investment protection lies in models that not only protect investor rights but also ensure host countries’ sovereignty and sustainability, resulting in a more equitable and transparent global investment regime. There are various issues which the paper will be discussing and looking for a balanced approach in investment protection regime.