Columbia University study finds ISDS costs outweigh benefits for many governments

August 14, 2018: A recent study published by the Columbia University Centre for Sustainable Investment evaluates the costs and benefits for states of investor-state dispute settlement (ISDS) provisions in trade and investment agreements. It concludes that expected benefits in terms of increased levels of foreign investment have not clearly materialized, whereas the costs have been unexpectedly high.

ISDS claims brought under international investment treaties have risen steeply to over 800 known cases, with a broadening set of claims against public interest laws, and often seeking millions or even billions of dollars in damages for alleged breaches of fairly open-ended treaty standards.

The study shows that many governments around the world are thinking critically about their international investment treaties and international investment policy. States are considering whether any potential benefits in terms of investment flows outweigh the costs of ISDS in terms of litigation expenses, potential liability, reduced policy space, or other considerations; and whether there are other policies that are better tailored to meet their investment attraction and development objectives.

South Africa, India and Indonesia have cancelled many existing investment treaties. Brazil, which has attracted high levels of foreign investment without investment treaties, has developed an investment promotion strategy which does not include ISDS.