Rethinking investment treaties and dispute settlement in the light of sustainable development

International investment treaties are a key part of the legal architecture that underpins the global economy. IIED works with partners to realign these legal documents with sustainable development.

January 2014 - ongoing
Lorenzo Cotula

Principal researcher and head of law, economies and justice programme

Law, economies and justice
A collaborative programme of work on renegotiating the law to promote fairer, more sustainable economies
Flags outside the Palais des Nations, Geneva

Flags outside the Palais des Nations, Geneva. The United Nations is among bodies considering reform to investor-state arbitration. IIED is working to promote sustainable development in the process (Photo: United Nations Photo via Flickr, CC BY-NC-ND 2.0)

Growing concerns that the pressures that human activities place on the world’s ecosystems may be reaching a tipping point have prompted important advances in international environmental diplomacy, including the Paris Agreement.

The Sustainable Development Goals (SDGs) have charted a new bold sustainable development agenda that encompasses the major social, economic and environmental challenges the world faces. Translating these advances into real change requires aligning sustainable development with the legal architecture of global economic governance. 

The 2015 plan of action underpinning the SDGs recognises the role of private investment in strategies to realise the goals. This raises questions about designing international legal frameworks that can promote the right types of investments in response to local development agendas, and ensure that business activity is aligned with the SDGs and contributes to achieving them.

At the same time, a growing number of investment disputes has shown how tensions can arise between commercial and sustainable development objectives, with action to promote public health, protect the environment or advance indigenous peoples’ rights having led to investor lawsuits.

Also, growing evidence suggests that, on several occasions, the prospect or threat of suits has discouraged authorities from acting in the first place.

In other words, global economic governance shapes room for states to take action, it influences the ways in which the costs of reorienting unsustainable development patterns are shared between businesses and states and, ultimately, it affects the balance of public and commercial interests in global society. 

A rapidly evolving international policy context has created openings for reform of the international investment regime. Many states have been reviewing their investment treaty policies.

At the multilateral level, United Nations member states gathered in the Working Group on ISDS Reform of the United Nations Commission on International Trade Law (UNCITRAL) are exploring options to reform the investor-state dispute settlement system associated with international investment treaties.

Meanwhile, the United Nations Conference on Trade and Development (UNCTAD)’s International Investment Agreements Reform Forum and the OECD's longstanding work on investment law reform have established and consolidated important forums for multilateral reform debates.

What is IIED doing?

We support global efforts to reform the international investment regime by contributing technical analysis to ongoing reform processes, and promoting informed public debate about policy reform issues.  

Contributions to the UNCITRAL reform process

Additional resources

Blog: How a documentary film can help UNCITRAL Working Group III think through ISDS reform (April 2024), Lorenzo Cotula, Ladan Mehranvar, EJIL:Talk!

Labour rights in special economic zones: between unilateralism and transnational law diffusion, Lorenzo Cotula, Liliane Mouan (2021), Journal of International Economic Law article

Blog: Research-to-policy transitions in international economic law, Lorenzo Cotula, Afronomics Law (March 2021)

Rethinking investment law from the ground up: extractivism, human rights, and investment treaties, Lorenzo Cotula (2021), IISD

(Dis)integration in global resource governance: extractivism, human rights, and investment treaties, Lorenzo Cotula (2020), Journal of International Economic Law

Long read: Investment disputes from below: whose rights matter?, Lorenzo Cotula (2020)

Dataset: Examine the data on foreign owned coal plants (.xls file) used in the Raising the cost of climate action? Investor-state dispute settlement and compensation for stranded fossil fuel assets report

Land deals and investment treaties: visualising the interface, Lorenzo Cotula, Thierry Berger (2015), IIED Report

Land rights and investment treaties: exploring the interface, Lorenzo Cotula (2015), IIED Report

Bringing community perspectives to investor-state arbitration: the Pac Rim case (2015), Thierry Berger, Saúl Baños, Marcos A. Orellana, IIED Report | en Español

Expropriation Clauses and Environmental Regulation: Diffusion of Law in the Era of Investment Treaties, Lorenzo Cotula (2015), Wiley (journal article)

IIED submission to the EU public consultation on the Transatlantic Trade and Investment Partnership, Lorenzo Cotula and Thierry Berger (2014), IIED

Do investment treaties unduly constrain regulatory space?, Lorenzo Cotula (2014), Questions of International Law, QIL 9, 19-31 

The New Enclosures? Polanyi, international investment law and the global land rush (2013), Journal article