Investor-state dispute settlement allows aggrieved foreign investors to more readily resolve disputes with the government in the country in which the investment was made. This article describes how it works and how The Bahamas uses it.

When investors choose investments in countries foreign to them, resolving any disputes that arise can be very challenging because of the foreign legal system, distance, and expense. In the past, investors have often complained about inadequate dispute resolution processes and obstacles such as sovereign immunity blocking their suits. Investor-state dispute settlement (ISDS) agreements provide for binding arbitration in a neutral forum before a neutral arbitrator or arbitrators. Foreign investors can avoid potentially unfair or capricious treatment.

Investors and governments benefit from the neutral international forum (meaning that the arbitration might take place outside both the investor and the government's areas to permit neutrality) and the transparent rules. In addition, ISDS proceedings may result in monetary compensation awards, declaratory relief, or restitution. In some cases, interim or interlocutory relief may be ordered to restrain conduct that could make the dispute worse.

To engage in ISDS, a claimant must be a resident of a country that is party to a treaty containing an ISDS agreement and have an investment in another country that is party to that treaty. The Bahamas is a party to the International Centre for Settlement of Investment Disputes (ICSID) Convention, which permits investor-state dispute settlement. ICSID also oversees arbitrations between individual investors located in different countries.

Further, The Bahamas is a member of the Multilateral Investment Guarantee Agency (MIGA), which “insuresinvestors against current transfer restrictions, expropriation, war and civil disturbances, and breach of contract by member countries.” These organizations provide investors with some assurance that they will have recourse for their investment-related disputes in countries with governments that belong to ICSID or MIGA.

To find out more about investor-state dispute settlement, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.