UNCITRAL Working Group III and Reform of Investor–State Dispute Settlement

In 2017, UNCITRAL mandated its Working Group III to identify concerns regarding investor–state dispute settlement (ISDS)—the model for settling disputes between foreign investors and states under investment treaties and investor-state contracts—and develop reform solutions.

ISDS allows foreign investors to launch claims against government policies they deem can impact profits and is repeatedly used to challenge states' public interest policies, including on climate change, public health, local community rights, and environmental protection. ISDS claims are ruled on by ad hoc international arbitration tribunals, with little transparency or regulation, and the awards are binding and not subject to appeal. Reforming the system is crucial for delivering on the Sustainable Development Goals.

The Working Group is key for reform of ISDS and investment treaties, as the only initiative with a genuine global reach. IISD has been an observer member of the Working Group since 2017 and has participated in all of its sessions. Our aim as a member of the Working Group is to make the process itself more inclusive and to promote a new approach to investment disputes that is more sustainable, equitable, and transparent.

As an observer member, IISD provides technical guidance, tailored briefings, and strategic advice to delegations. We also deliver submissions to the UNCITRAL Secretariat, organize on-site workshops and side events, and publish updates and analyses of the process throughout the international investment community.

Through our initiatives, we have continuously highlighted agenda issues with a high reform potential, such as the unfair way damages in ISDS disputes are calculated, and proposed practical solutions.

For example, our joint submission with the Columbia Center on Sustainable Investment and the International Institute for Environment and Development on regulating third-party funding of ISDS claims—a practice that has enabled speculative claims that often generate inflated costs for developing countries—triggered the Working Group to publish draft regulation reflecting our recommendations.