Introduction

In her famous book “The Retreat of the State”,[1] political economist Susan Strange argues that legal concepts of the public-private divide are challenged by the State’s withdrawal from a variety of governmental responsibilities as well as the transfer of such functions to non-State entities.[2] States are reportedly more willing to accept the transfer of adjudicative authority from courts to arbitrators, particularly with regard to the sovereign power to ultimately resolve a legal issue.[3]

But this view gets an immediate retort from the legal sociologist Gunther Teubner, who contends that the growth of lex mercatoria and international commercial arbitration justifies looking beyond states and their positive laws to recognise the emergence of transnational legal orders in which private entities create law without the consent of a sovereign.[4] This is a challenging role. However, the emergence of commercial arbitration does show a way of “retreat” from the traditional model of adjudication, in which specific categories of disputes, often commercial in nature, are now settled by private adjudicators who operate in a legal market and whose rulings are shielded from court oversight on legal issues.[5]

However, we should not forget that in support of the State’s traditional role in adjudication, States also have the authority to define lex mercatoria as a source of law through commercial arbitration.[6] This authority stems from the State’s endorsement of an agreement between the disputing parties to remove a specific dispute or legal relationship from the primary jurisdiction of the courts and submit it to arbitration. Thus, the State defines or supports arbitration as “private” by respecting non-State actors’ autonomous decisions to replace the courts’ jurisdiction with a mutually created alternative.[7]

The growth of international commercial arbitration appears to present a less convincing argument for the State’s retreat than the alternative scenario in which international arbitration is used to settle disputes within the public sphere, assuming (for the time being) the validity of this public-private distinction. One might wonder what would happen if states expanded their delegation of adjudicative power by permitting arbitrators to decide regulatory issues between the state and individuals—that is, disputes arising from the state’s sovereign rather than commercial activities. Would this not be a more obvious concession of sovereignty given its reorganisation of the courts’ role as the ultimate judges of administrative and constitutional law?[8]

This is precisely what we will discuss in this paper, and I can say without hesitation that it is already happening. By discussing the points of distinction and overlaps, we will see that states have actually taken this extra step by creating an international adjudicative system based on investment treaties that grants arbitrators comprehensive jurisdiction over disputes that are essentially regulatory in nature. The paper will show that arbitrations carried out in accordance with investment treaties differ from international commercial arbitration, which deals with disputes between a state and a private company, organisation, or individual, since states are presumed to be acting in a private capacity in the commercial context.[9]

In the context of international arbitration, it is acknowledged that it is not always easy to discern between sovereign and private acts of the state. However, the scope of international commercial arbitration is restricted to conflicts arising from a particular legal connection between an individual and a state, insofar as they involve regulatory issues. Investment treaty arbitration, on the other hand, covers the entirety of the State’s regulatory relationship with foreign investors within its jurisdiction. Because investment treaty arbitration replaces courts with a private model of adjudication in matters of public law, it is a much clearer example of the State’s retreat from adjudication.[10]

Based on an evaluation of the nature of the pertinent State acts, Part 1 of this paper discusses the conceptual foundation by highlighting how the investor-state dispute settlement (“ISDS”) regime has emerged, and then how it has transformed international commercial arbitration, and outlining some key features of investment arbitration. Part 2 of this paper uses this analytical framework to argue that investment treaty arbitration should be properly classified as public-law adjudication by private individuals and thus distinct from international commercial arbitration, which is only a mutually consensual adjudication between juridical equals. The paper concludes with a discussion on how the public nature of ISDS is turning investment arbitration into a system that enforces global administrative law, which at times creates problems.

Part 1

The Emergence of Investor-State Dispute Settlement

The conclusion of more than 2,000 bilateral and regional investment treaties—most of which mandate the arbitration of investment disputes involving the state—led to the development of investment arbitration into an international adjudicative system.[11] As per the United Nations Conference on Trade and Development’s International Investment Agreements Navigator, there are a total of 2861 BITs signed to date, out of which 2235 are in force, the majority of which provide for investment arbitration.[12] This is a relatively new phenomenon. A few bilateral investment treaties (“BITs”) negotiated in the late 1960s were the first to include states’ agreements to investment arbitration.[13] In the 1970s and 1980s, agreements to investment arbitration in BITs became more widespread, albeit not universal. However, investment arbitration did not become a well-known international adjudicative mechanism until the 1990s.[14]

Approximately 1,500 BITs were signed during that decade, and states’ agreements to investment arbitration—which were founded on liberal investment standards and broad jurisdictional concepts—became commonplace.[15] In addition, several innovative regional investment agreements, such as the Energy Charter Treaty (“ECT”)[16] and the North American Free Trade Agreement (“NAFTA”)[17], were signed, permitting mandatory investment arbitration.[18]

Ultimately, in the 1990s, investment treaties grew to include numerous BITs between developing and former Soviet Bloc nations, going beyond traditional ties between capital-importing and capital-exporting nations.[19] Although there has been substantial discussion about the rationale behind this extension as well as the broader costs and advantages of investment treaties for governments.[20] However, it is significant that the growth of investment arbitration has resulted from the expansion of investment treaties. In 1988 and 1990, the World Bank’s International Centre for the Settlement of Investment Disputes (“ICSID”), a premier forum for investment arbitration, issued its first awards based on a state’s general consent under a statute and a treaty, respectively.[21]

Arbitration clauses in investment contracts served as the foundation for early ICSID arbitral proceedings. However, according to one ICSID employee, “the floodgates . . . seemed to open” only since 1996.[22] ICSID registered four times as many claims between 1995 and 2004 as it had in the preceding thirty years, and the growth trend seems to be continuing. There were 91 pending claims as of July 2005, more than all the claims filed at ICSID up to 2001.[23] Investment arbitration then grew quickly and steadily, with 301 pending ICSID cases according to the ICSID website as of 21 July 2026.[24]

Furthermore, investment arbitration has evolved from a collection of dispute resolution procedures in various treaties to an international mechanism for adjudicative review in the regulatory domain due to the extensive geographic reach of investment treaties and the corresponding availability of investment arbitration.[25] This system may seem complicated, disjointed, and occasionally illogical due to changes under several treaties.[26] Furthermore, as Professor Philip Sands KC argues, quoting Nobel Prize-winning economist Joseph Stiglitz, this does not yet form a global system since the capital-exporting governments themselves do not have BITs.[27]

However,

The use of investment arbitration as an international adjudicative review mechanism is its main unifying characteristic.[28] This provides evidence of a quickly developing international regime that has the potential to become a unique component of an administrative law system, as will be demonstrated. With this background, let us discuss the cross-fertilisation of substance and procedure from commercial arbitration, which led to the development of modern-day investor-treaty arbitrations.

The Procedure in ISDS: Cross-fertilisation from Commercial Arbitration

Prior to delving into the differences between commercial and investment arbitration, it is imperative to elucidate how this regime integrates the procedural framework and enforcement structure of international commercial arbitration. States gradually acknowledged arbitration as a mechanism for settling business disputes starting with the Geneva Protocol of 1923.[29] They did this primarily to promote international trade rather than to control the use of public power.

States specifically signed a number of treaties and other agreements, most notably the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”)[30], which committed them to both recognise and uphold foreign arbitration awards and restrict the extent to which international arbitration could replace domestic courts’ jurisdiction to settle regulatory disputes (i.e., disputes between the state and an individual arising from the state’s exercise of public authority within its territory).[31]

Arbitration may be subject to the preferences of the disputing parties because it is essentially a private or “alternative” form of adjudication. This allows the application of adjudicative rules pertaining to matters such as the confidentiality of proceedings that would otherwise be unavailable in the public court system.[32] Therefore, international arbitration involving private-party claims was traditionally restricted to commercial relationships, and domestic courts constrained the extent to which it could be used to settle conflicts in the public domain. Regulatory disputes arising from the state’s exercise of public authority regarding foreign nationals, including foreign investors, were typically outside the jurisdiction of a commercial arbitration tribunal.[33]

This is made possible by the incorporation of arbitration treaties into investment treaties, which provide investment arbitration with an institutional forum and procedural framework. Arbitration treaties are also necessary for domestic courts to enforce arbitration awards under investment treaties.[34]

As a result, the previously established arbitration treaty arrangements were merely integrated into the investment arbitration architecture when new investment treaties were being formulated. In the process, regulatory disputes between individuals and the state were resolved by extending the enforcement structure and procedural framework of international commercial arbitration, thereby laying the foundation for the use of a private model of adjudication.[35]

The Key Elements of Investment Treaty Arbitration

A. TheExpress Authorisationof Individual Claims

The first component of investment arbitration is the approval of foreign investors’ international claims against the state in disputes resulting from the state’s exercise of public authority, without the need for claims to be screened by an international organisation or the investor’s home state.[36] States grant prospective, or broad, assent to the arbitration of future investment disputes under investment treaties.[37] Because it is not restricted to a particular investor, investment project, dispute, or set of disputes resulting from a specific historical event, the state’s consent is general. Rather, the consent permits any member of an unspecified class of potential claimants to initiate mandatory arbitration for a very broad range of disputes. In essence, this gives international tribunals broad jurisdiction over disputes that might eventually arise from a state’s exercise of public power.[38]

A state’s customary immunity from suit before an international tribunal or before a domestic court called upon to enforce an international award is typically broadly waived when a state consents to investment arbitration. The presumption that the resolution of a regulatory dispute involving a foreign national is initially a matter of the domestic law of the state in which the dispute arose is recognised in customary international law.[39] States are exempt from having international tribunals or foreign courts arbitrate disputes on their soil.[40] Conventionally, a disagreement over how one state treats an investor from another state could lead the investor’s home state to claim diplomatic protection, but under international law, the investor could not make an independent claim.[41]

Furthermore, only after the investor had used all available local remedies could the home state file a claim for diplomatic protection, allowing the host state to resolve the investor’s grievance before turning to international law.[42] Even in that case, the host state’s approval was required before the dispute could be sent to an international tribunal. Except for the International Court of Justice, no international institution has been granted comprehensive jurisdiction over conflicts involving states and foreign nationals.[43] Additionally, few cases concerning the regulatory relationship between states and foreign investors have been brought before the International Court of Justice due to many states’ unwillingness to refer investment disputes to it.[44]

Investment treaties typically provided for the resolution of international disputes involving the regulatory relationship between the state and investors through interstate adjudication and diplomacy prior to the recent proliferation of general state consents to investment arbitration.[45] Investment treaties go beyond traditional international adjudication involving a claim by one state against another by authorising individual claims.[46] Furthermore, investment treaties go beyond historical claims tribunals that permitted individuals to make international claims, as they also permit individual claims regarding future disputes, subject to the state’s general consent.[47] In the past, claims tribunals established in the wake of war or revolution occasionally allowed individuals to file claims against states.[48]

From the Iran–US Claims Tribunal to the Jay Treaty of 1794, states have authorised international tribunals to settle disputes resulting from one state’s treatment of another’s citizens.[49] In certain situations, investors may file claims directly. However, because historical claims tribunals’ jurisdiction was retroactive, they did not engage in generalised international adjudication.[50] An international tribunal was given adjudicative jurisdiction only after the fact, and that authority was restricted to disputes arising within a specific time frame, sequence of events, or topic.[51]

An advance consent is not the same as this retrospective consent. A state is better able to predict the significance of its acceptance of mandatory arbitration because the latter is granted after the relevant events have occurred. The state exposes itself to claims from any foreign natural person or multinational corporation with an economic interest that could be adversely affected by the state’s exercise of public authority by granting broad assent in an investment treaty. Therefore, future disputes pertaining to a wide range of governmental activities involving an indeterminate class of potential claimants are covered by investment arbitration.[52] From the perspective of the investor, the general consent is comparable to “a blank cheque which may be cashed for an unknown amount at a future, and as yet unknown, date,” to use a metaphor from commercial arbitration.[53]

In addition to being prospective, investment arbitration allows for the submission of specific claims in a particularly comprehensive manner. Investment treaties define “investment” to encompass a very broad range of assets, apply international standards of investor protection to almost any sovereign act of the state, and provide broad definitions of the state’s assent and the jurisdiction of international tribunals.[54] Additionally, the criteria used to assess governmental actions are written in general terms. The standards’ definition generally settles historical disputes regarding whether and how international law shields foreign companies from discriminatory treatment, denials of justice, expropriation, and other types of state intervention or regulation in favour of investor protection.[55]

Consequently, a variety of regulatory issues between investors and the state are now governed by international arbitration at the investors’ request. The custom that a foreign national must exhaust local remedies before bringing an international claim is limited or eliminated by numerous investment treaties, which further broadens the individualisation of claims.[56] This original conception of exhaustion of local remedies has at least four justifications.[57]

First, it was believed that foreigners had an obligation to consider home remedies for wrongs. Second, out of respect for state autonomy and equality, municipal courts were assumed capable of administering justice even in cases involving foreign investors. Thirdly, the exhaustion of local remedies was necessary to confirm that the wrongdoing or denial of justice was the intentional conduct of the host state in cases where a foreign person was harmed by a private individual or a minor official. Fourth, the regulation gave the host country’s legal system a chance to make amends for wrongs committed against foreign nationals.[58]

Investment treaties have subordinated each of these justifications for requiring the exhaustion of local remedies, thereby allowing investors to initially file claims before an international tribunal rather than a domestic court. Investment treaties establish investment arbitration as a regime independently accessible to investors, regardless of the reliability of the respondent state’s own legal system, by limiting or eliminating the obligation to exhaust local remedies. It replaces the presumption of deference to and respect for local remedies.[59]

This increases the likelihood that disputes pertaining to the state’s regulatory conduct, which are typically resolved through domestic judicial review, will be subject to international adjudication. It also increases the likelihood of multiple claims arising from the same underlying dispute under both domestic law and an investment treaty.[60]

B. The Application of Damages as a Public Law Remedy

Unlike other international systems, including international commercial arbitration, investment treaties create an individualised system of state liability to address the improper use of public power. An investor often seeks damages for injury caused by a state’s purported violation of the treaty’s principles of investor protection when filing a claim under an investment treaty. An arbitration tribunal may grant damages to the investor if it finds that a state violated the treaty. The award of damages has a deterrent effect on the state by imposing a retrospective sanction, even though compensatory awards typically exclude exemplary or punitive damages.[61]

As a result, investment treaties permit arbitration tribunals to grant damages as a public-law remedy. This is because damages awards under investment treaties are given both to compensate an individual and to punish the state when it is determined that the state’s use of public authority was illegal. In international law, claims for individualised damages are extremely uncommon. In response to a state’s alleged breach of international law, no international regime outside of the European Union permits individuals to pursue damages through international adjudication.[62]

The World Trade Organisation and the non-investment chapters of NAFTA, for example, prohibit individual claims and restrict the dispute resolution process to interstate adjudication, with remedies including a declaration of illegality and the potential suspension of trade concessions. States have avoided adjudication (let alone individual damages claims) in other areas of international law, like environmental law and humanitarian law, in order to uphold international norms or provide compensation to those injured by illegal activity.[63] With these key features in mind, let us now discuss some elements that differentiate ISDS from commercial arbitration.

Part 2

The Key Distinction between Commercial and Investor-Treaty Arbitration

Investment arbitration may resemble commercial arbitration because investment treaties primarily rely on private mechanisms to resolve disputes. There are three key parallels. First, investment arbitration is similar to commercial arbitration in that a private party files a claim before a panel of arbitrators chosen by the disputing parties through a private contract.[64] Second, the rules governing investment arbitration proceedings have their roots in private arbitration. Lastly, as already stated, the main remedy in non-ICSID ISDS arbitrations is a damages award based primarily on the New York Convention and enforceable under the framework of international commercial arbitration.

Despite these obvious parallels, it would be incorrect to conflate commercial arbitration with investment arbitration under a treaty. The authority of commercial arbitration stems from people’s freedom to manage their personal affairs as they see fit. It begins with an agreement between private parties to arbitrate disputes among themselves in a specific way.[65] Investment arbitration, on the other hand, stems from the state’s power to use adjudication to settle disputes resulting from the use of public authority.[66] Investment arbitration is more akin to domestic legal review of the state’s regulatory conduct since it is established by a sovereign act of the state rather than a private act, as we will demonstrate.

A. The Nature of Commercial Arbitration

Commercial arbitration is a private method of decision-making approved by the disputing parties’ consent.[67] Therefore, private law principles, starting with the primacy of party autonomy, apply to commercial arbitration.[68] According to these principles, the state should respect people’s free choices about their private matters. Respecting the choice of people who, in the course of conducting business with one another, agree to arbitrate any conflicts that may occur between them is known as honouring party autonomy. Thus, the “foundation stone” of international commercial arbitration is an “agreement to arbitrate” created by mutual consent.[69]

Contracts are the foundation of commercial arbitration’s authority.[70] The public court system gave rise to commercial arbitration.[71] People could decide that private arbitrators, rather than state-appointed judges, would settle disputes between them. The use of arbitration may be favoured because it is quicker and less expensive than going to court, because the parties can choose the applicable rules, or because it can be kept private.[72] Arbitration could be utilised globally to bridge legal system disparities and prevent issues in enforcing foreign court rulings.[73]

To enable the effective settlement of cross-border business disputes, nations supported commercial arbitration as an international organisation. International commercial arbitration may be set up in a neutral jurisdiction that does not favour any one private party. Commerce would be encouraged by fostering trust between players from various nations over the possibility of just, timely, and efficient dispute settlement.[74]

The agreement to arbitrate must be respected by states, especially by domestic courts, in accordance with the principle of party autonomy. The arbitration process should be shielded from domestic court supervision within the parameters of consent and fundamental procedural fairness.[75] Therefore, a motion by the losing party to suspend the arbitration or set aside an award should be denied if the arbitration is within the parameters of the agreement to arbitrate. Generally speaking, where a state’s conception of justice or policy clashes with the parties’ arbitration agreement, it should not be enforced.[76] Adherence to this principle does not preclude the state from exercising public authority concerning private arbitration.[77]

Arbitration relies on the state’s ability to enforce arbitral awards and the mechanism to ensure it is provided for in the New York Convention.[78] Therefore, for a variety of reasons, including safeguarding the interests of a weaker party, third parties, or the public at large, the state may choose to override arbitration agreements. However, most states have chosen to restrict their involvement in private agreements to arbitrate in order to facilitate commerce. A famous commentary on international arbitration observes that “parties give up one of the basic rights of the citizens of any civilised community – that is to say, the right to go to their own courts of law” when they agree to arbitrate.[79]

According to this conceptual framework,

In response, the courts will respect commercial arbitration, beginning with the acceptance of arbitration agreements and concluding with the execution of judgments against the losing party. However, this reasoning does not apply to arbitration under investment treaties.[80]

The authority for investment arbitration stems from the general consent of states acting in a sovereign capacity to establish investment arbitration as a mechanism for reviewing state regulatory conduct, even though states incorporate some elements of commercial arbitration into investment treaties. It is important to distinguish between the state’s conduct of supporting reciprocally consensual adjudication in the private sector and its approval of the use of adjudication to limit government and so protect investors. In this case, the state is acting in its sovereign role, and disputes that are arbitrated stem directly from the use of public power.[81]

B. Source of Consent to Arbitrate

In an international commercial dispute, consent is derived from a private arbitration agreement — typically an arbitration clause embedded in the underlying commercial contract. Such arbitration agreements must comply with the formal requirements of Section 7 of the Indian Arbitration Act and may be evidenced by a document signed by the parties, by exchange of communications, or by statements of claim and defence. As reaffirmed by the Indian Supreme Court’s Constitution Bench in In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899,[82] the arbitration agreement is “juridically independent from the underlying contract” and embodies the “mutual intention of the parties to submit their disputes to arbitration.”

In an investment treaty dispute, consent is derived from the treaty itself — the host State’s acceptance of the BIT or multilateral treaty is its standing offer to arbitrate to any qualifying investor from the home State, who may accept that offer by filing a Notice of Intent to Arbitrate. The investor need not be privy to any separate written contract with the State. The principles of interpretation applicable to treaty-based consent are governed by the Vienna Convention on the Law of Treaties, 1969, not national contract law.

It is pertinent to note that, fundamentally, public authority is conflated with private authority when investment arbitration is compared with commercial arbitration. The general function of consent in converting international arbitration from a mutually agreeable means of resolving disputes between private parties into a tool for monitoring and regulating the use of public power highlights the confusion. A private party’s agreement to commercial arbitration is particular to the conflict or the private connection that gave birth to it. In contrast, a state’s consent to investment arbitration is an agreement to arbitrate future disputes involving investors collectively. Each of these two types of consent—specific and general—is examined separately.[83]

An agreement between private parties acting in that capacity is the foundation of private arbitration. This agreement may be reached before or after the conflict has emerged. Consent is unique to the disagreement when it is provided after it has started. When consent is granted in advance, it is specific to the parties’ relationship. In both situations, the permission is restricted to a specific disagreement or a private relationship. Since neither third parties nor the state (acting in a public capacity) has agreed to the arbitration, the subject matter of the dispute cannot extend beyond the private relationship between the disputing parties; it cannot address issues that affect the state’s or third parties’ interests in the regulatory domain.[84]

In this way, by signing a contract with a foreign investor, the state might expressly agree to investment arbitration as a type of commercial arbitration. Arbitration clauses are frequently included in contracts between states and foreign investors, sometimes known as state contracts, economic development agreements, or investment agreements. In these situations, arbitration is a form of contract-based investment arbitration permitted by the consent of two parties acting in a private capacity and based on a business connection between the state and an investor.[85] The idea of party autonomy is crucial in contract-based investment arbitration because, notwithstanding the state’s involvement, the dispute is a private-domain investment dispute.[86]

C. Substantive Standards of Protection

In an international commercial dispute, the substantive rights and obligations of the parties are determined by the governing law of the contract, which is the national law chosen by the parties, and are essentially creatures of that private law. The Indian Arbitration Act, which is akin to the Model Law, provides under Section 28 that the tribunal shall apply the rules of law designated by the parties and, failing that, the rules of law determined appropriate by the tribunal. In an investment treaty dispute, the host State’s obligations arise under public international law and are specific to the treaty. Standard protections accorded to investors under most BITs include:

• Fair and Equitable Treatment (“FET”): Along with other requirements, the duty to offer “fair and equitable treatment” is frequently mentioned as part of the protection afforded by host nations to foreign direct investment. Unlike the other “relative” standards embodied in the BIT, commentators define this standard as “absolute”, “non-contingent”, and specify the treatment to be accorded in terms whose precise meaning must be determined by reference to specific circumstances of [87] Pre-2016 Indian BITs provided an unqualified FET obligation. The 2015 Model BIT replaced this with the “International Minimum Standard,” which requires protection against the denial of justice, a fundamental breach of due process, targeted discrimination, and manifestly abusive treatment.
• Protection against Expropriation: Both direct expropriation and indirect expropriation (regulatory taking) are covered, subject to exceptions for legitimate public purpose
• National Treatment (“NT”): The host State must treat foreign investors no less favourably than its domestic investors in like
• Most-Favoured-Nation (“MFN”) treatment: The investor may invoke more favourable protections available to investors of third This was a key issue in White Industries Australia Limited v. Republic of India[88]where the claimant invoked the Kuwait–India BIT through the MFN clause in the India–Australia BIT.
• Full Protection and Security: Physical and legal protection against harm to the

In international commercial arbitration, jurisdictional challenges predominantly concern the scope of the arbitration clause, the validity of the arbitration agreement, and the identity of the signatories. The doctrine of kompetenz-kompetenz (competence-competence), as codified in Section 16 of the India Arbitration Act, which has been borrowed from the UNCITRAL Model Law, empowers the tribunal to rule first on its own jurisdiction.[89] The Supreme Court has held that Section 16 “gives full effect to the procedural and substantive aspects of the doctrine of competence-competence.”[90]

In an investment treaty arbitration, jurisdictional disputes are far broader in scope. The tribunal must satisfy itself on several ratione questions:

• Rationepersonae — Whether the claimant is a national of the home State and owns or controls the investment;
• Rationemateriae — Whether the investment qualifies under the definition in the BIT, generally adopting an enterprise-based approach from Salini Costruttori v Morocco[91];
• Rationetemporis — Whether the dispute arose and the investment was made within the temporal scope of the treaty;
• Ratione voluntatis — Whether the State has validly consented to arbitrate this category of dispute under the treaty.

D. Role of National Courts and the Direct Enforceability of ICSID Awards

In international commercial arbitration, national law plays a central role. Courts of the seat, often referred to as lex fori, have supervisory jurisdiction as per the UNCITRAL Model Law on Arbitration.[92] Awards in international commercial arbitration are enforced primarily under the New York Convention framework. For instance, Part II of the Indian Arbitration Act domesticates the Convention, and foreign awards are enforced by application to the appropriate High Court under Sections 47 and 49 of the Act.[93] Courts may refuse enforcement on limited grounds, including violation of public policy, as provided under Article V of the New York Convention.[94]

However, enforcement of investment treaty awards is governed by a different architecture. ICSID awards are self-enforcing under Article 54 of the Washington Convention — each contracting State must enforce an ICSID award as if it were a final judgment of its own courts.[95] Article 53(1) specifically provides that the Award of the Tribunal is binding upon the Parties.[96] Investment treaties further enable investors to seek automatic enforcement of an investment arbitration award against assets of the respondent state before the domestic courts of any state that is a party to the ICSID Convention.[97]

The ability of many states to enforce awards within their borders, based on accords that permit the enforcement of ICSID awards, thereby supports the coercive power of an investment arbitration award more than a commercial arbitration award, which is enforced under the New York Convention.[98] Naturally, since most states willingly cooperate, an investor does not always need to use domestic courts to enforce an investment arbitration award. It is noteworthy that international financial institutions, the investor’s home state, other capital-exporting governments, and the broader investment community would likely pressure a state if it failed to act promptly.[99]

States parties to the ICSID Convention are typically required to acknowledge and uphold awards made under the treaty. Because the respondent state’s ratification of the ICSID Convention amounts to a waiver of its sovereign immunity from enforcement, it permits an investor to seek automatic enforcement by domestic courts in the treaty’s states parties.[100] However, since India is not a signatory of the Washington Convention, this mechanism is unavailable for awards against India. For non-ICSID investment awards (including those under UNCITRAL rules), enforcement must be sought under the regular New York Convention mechanism in foreign jurisdictions.[101] This unique enforcement structure of ICSID awards gives credence to the argument of some commentators that investment arbitration has become another branch of global administrative law.[102] Let’s discuss it in the conclusion.

Conclusion

The distinct features of ISDS, as discussed above, suggest that investment arbitration has become a distinct, globally organised branch of administrative law systems, parallel to other systems of dispute settlement in place. It is definitely not just a branch of commercial arbitration, although there has been significant cross-fertilisation of procedure as discussed above. The jurisprudence of ISDS tribunals shows that the investment arbitration regime is intended to settle disputes arising from the exercise of public power.

A regulatory dispute between the state (acting in a public capacity) and an individual who is subject to the state’s exercise of public authority is the subject matter of investment arbitration. Here, the general consent permits the adjudication of regulatory conflicts by an international tribunal, even though the majority of regulatory disputes are decided by domestic courts in compliance with domestic law or by a specialised domestic tribunal under the supervision of domestic courts. This is fundamentally a public law issue, regardless of whether domestic or international law is used to decide it.[103]

Therefore, it is important to distinguish the regime from reciprocally consensual adjudication, which is typically used to settle international disputes between states or commercial disputes between private parties. This is because the regime engages in a regulatory relationship between the state and an individual rather than a reciprocal relationship between juridical equals. The investment arbitration tribunals have become a semi-autonomous international adjudicative body that examines and regulates state behaviour in the public domain. It is a type of global administrative law. The ICSID tribunal’s decisions are not subject to court oversight, making it semi-autonomous. Because a treaty gives it authority, it is international.[104]

It is an administrative review agency because, had it not been established internationally, it would have carried out functions like to those of a semi-autonomous domestic tribunal tasked with settling regulatory disputes. The investment arbitration tribunal is a new and distinctive addition to the conceptual framework of administrative law, having been established at the international level to regulate state governments’ actions. Because of their international scope, investment arbitration tribunals created under one state’s legal system have the power to settle a regulatory dispute involving another state, which is what makes them such a powerful form of international administrative law.[105]

As a result, investment arbitration is both specifically excluded from the respondent state’s domestic legal system and specifically incorporated into the domestic enforcement frameworks of numerous other states. Consequently, investors have an unparalleled ability to assert and uphold international rights under investment treaties. More than any other international adjudicative arrangement since the colonial era, investment arbitration possibly exposes the regulatory relationship between the state and investors to control through international adjudication. Because of this, the system of investment arbitration need to be acknowledged as a particularly significant and potent example of international administrative law.[106]

*Justice AK Sikri, International Judge: Singapore International Commercial Court and Former Judge Supreme Court of India

[1] Susan Strange, The Retreat of the State: The Diffusion of Power in the World Economy (Cambridge University Press, 2009).

[2] As cited in Gus Van Harten, “The Public-Private Distinction in the International Arbitration of Individual Claims against the State”, (2007) 56(2) The International and Comparative Law Quarterly 371.

[3] Ibid, p 371; Alessandra Casella, “On Market Integration and the Development of Institutions: The Case of International Commercial Arbitration”, (1996) 40 European Economic Review 155, at pp 155-159; Saskia Sassen, Losing Control? Sovereignty in an Age of Globalization (Columbia University Press, 1996) pp 14-16.

[4] Harten (n 2); Gunther Teubner, “Global Bukowina: Legal Pluralism in the World Society” in Gunther Teubner (ed), Global Law Without a State (Brookfield: Dartmouth, 1997) pp 3-28.

[5] See, United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959), Article V; Model Law on International Commercial Arbitration, 21 June 1985, UNCITRAL, UN Doc A/40/17, Annex I, 24 ILM 1302, Articles 34 – 36.

[6] Francis Snyder, “Governing Economic Globalisation: Global Legal Pluralism and European Law”, (1999) 5 European Law Journal 334, at pp 341-342.

[7] Nigel Blackaby KC, Constantine Partasides and Alan Redfern, Redfern and Hunter on International Arbitration (7th Edn., Oxford University Press, 2022), paras 1.12 – 1.13.

[8] Harten (n 2), p 372.

[9] Harten (n 2), p 372.

[10] Harten (n 2), pp 372-373.

[11] Rudolf Dolzer and Margrete Stevens, Bilateral Investment Treaties (Martinus Nijhoff Publishers, 1995), at 126; As per the United Nations Conference on Trade and Development’s International Investment Agreements Navigator, there are total of 2861 BITs signed till date out of which 2235 are in force.

[12] United Nations Conference on Trade and Development, International Investment Agreements Navigator, available at <https://investmentpolicy.unctad.org/international-investment-agreements>.

[13] Gus Van Harten and Martin Loughlin, “Investment Treaty Arbitration as a Species of Global Administrative Law”, (2006) 17(1) European Journal of International Law 121, at p 123. This paper is cited as the primary basis for the main theme advanced in the present article.

[14] United Nations Conference on Trade and Development, Bilateral Investment Treaties in the Mid-1990s (New York and Geneva, 1998), at pp 8-10, available at <https://digitallibrary.un.org/record/264901?v=pdf>. As quoted in Harten and Loughlin (n 13) at p 123.

[15] United Nations Conference on Trade and Development, Bilateral Investment Treaties: 1959–1999 (Geneva/ New York, 2000), at pp 1-6, available at <https://unctad.org/system/files/o?icial-document/poiteiiad2.en.pdf>. The Report highlights that that the number of BITs quintupled during the 1990s, from 385 in 1989 to 1857 by 1999, involving 102 countries in 1989 and 173 countries in 1999.

[16] The Energy Charter Treaty, 17 December 1994 (entered into force on 16 April 1998), Article 26.

[17] North American Free Trade Agreement, 17 December 1992 (entered into force on 1 January 1994), Articles 1116 and 1117; As cited in Harten and Loughlin (n 13) at p 123.

[18] Harten and Loughlin (n 13) at pp 123-124.

[19] United Nations Conference on Trade and Development, Trends in International Investment Agreements: An Overview, UNCTAD Series on Issues in International Investment Agreements (New York and Geneva, 1999), at pp 33–34, available at <https://unctad.org/system/files/o?icial-document/iteiit13_en.pdf>.

[20] Andrew T. Guzman, “Why LDCs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties” (1998) 38 Virginia Journal of International Law 639 available at <https://lawcat.berkeley.edu/record/1116105?ln=en&v=pdf>; Mary Hallward-Driemeier, “Do Bilateral Investment Treaties Attract Foreign Direct Investment? Only a Bit … and They Could Bite” World Bank Policy Research Working Paper No. 3121 (2003), available at <https://openknowledge.worldbank.org/entities/publication/8a973d19-1e85-515d-aa6b-f8fd541e9560>.

[21] Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Decision on Jurisdiction (14 April 1988); Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/87/3, Award (27 June 1990).

[22] Harten and Loughlin (n 13) at p 124.

[23] Ibid.

[24] ICSID, Pending Cases, available at <https://icsid.worldbank.org/cases/pending>.

[25] Jeswald W. Salacuse, “Towards a Global Treaty on Foreign Investment: A Search for a Grand Bargain”, in Norbert Horn and Stefan M. Kröll (eds.), Arbitrating Foreign Investment Disputes – Procedural and Substantive Legal Aspects, (Kluwer Law International, 2004), at pp 68–70.

[26] Global Arbitration Review, “Sands: ages of innocence, experience and discomfort”, (07 March 2025) available at <https://globalarbitrationreview.com/article/sands-ages-of-innocence-experience-and-discomfort>; Report on the 2025 Lalive Lecture by Philippe Sands KC, (2025) 43(1) ASA Bulletin 241, pp 241-243.

[27] United Nations Conference on Trade and Development, World Investment Report 2004 (New York and Geneva, 2004), at 53–86, available at <https://unctad.org/system/files/o?icial-document/wir2004_en.pdf>.

[28] David Schneiderman, “Investment Rules and the New Constitutionalism”, (2000) 25(3) Law & Social Inquiry 757, at pp 769–770 and p 781.

[29] Geneva Convention on the Execution of Foreign Arbitral Awards, (26 September 1927, Geneva) available at <https://jusmundi.com/en/document/treaty/en-geneva-convention-on-the-execution-of-foreign-arbitral-awards-geneva-convention-on-the-execution-of-foreign-arbitral-awards-monday-26th-september-1927>.

[30] New York Convention (n 5); Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (Kluwer Law and Taxation, 1981)

[31] Harten and Loughlin (n 13) at p 125.

[32] Ibid.

[33] Harten and Loughlin (n 13) at p 125.

[34] United Nations Conference on Trade and Development (n 14), at pp 62–64 and pp 97–98.

[35] Harten and Loughlin (n 13) at p 126.

[36] Harten and Loughlin (n 13) at p 127.

[37] Jan Paulsson, “Arbitration without Privity”, (1995) 10 ICSID Review – Foreign Investment Law Journal 232, at pp 232–233.

[38] Szilárd Gáspár-Szilágyi, “Foreign Investors, Domestic Courts and Investment Treaty Arbitration from Part II – Process Legitimacy” in Daniel Behn, Ole Kristian Fauchald and Malcolm Langford (eds), The Legitimacy of Investment Arbitration Empirical Perspectives (Cambridge University Press, 2022), pp 171-229.

[39] Payment of Various Serbian Loans Issued in France, France v. Kingdom of the Serbs, Croats, and Slovenes, Judgment, (PCIJ) 12 July 1929, para 41; Peter Wolfgang, Arbitration and Renegotiation of International Investment Agreements (Kluwer Law International, 1995) at pp 167-169.

[40] Status of Eastern Carelia, Advisory Opinion (1923), PCIJ Series B. No 5, at 27; Greece v. United Kingdom (Ambatielos Claim) (1956), 12 RIAA 83, at 103.

[41] Greece v. Great Britain (Mavrommattis Palestine Concessions) (1924), PCIJ Ser A, No 2, at 12; Manley O. Hudson, International Tribunals: Past and Future (University of Michigan Library, 1944), at pp 67–69 and p 198, available at <https://babel.hathitrust.org/cgi/pt?id=mdp.39015020817766&seq=4>.

[42] Ambatielos case (n 40), at pp 118–119; Switzerland v. United States (Interhandel Case) [1959] ICJ Rep 6, at 26–27; Clyde Eagleton, The Responsibility of States in International Law (New York University Press, 1928), at p 70.

[43] The exception is the Central American Court of Justice of 1907–1918. See, Charles Ripley, “The Central American Court of Justice (1907-1918): Rethinking the World’s First Court” (2018) 19(1) Diálogos Rev. Elec. de Historia 47.

[44] See Belgium v. Spain (Barcelona Traction, Light and Power Co) [1970] ICJ Rep 3, 9 ILM (1970) 227; United States v. Italy (Elettronica Sicula SpA) [1989] ICJ Rep 14; and United Kingdom v Iran [1952] ICJ Rep 93.

[45] August Reinisch, “The Proliferation of International Dispute Settlement Mechanisms: The Threat of Fragmentation vs. the Promise of a More E?ective System? Some Reflections From the Perspective of Investment Arbitration”, in I. Bu?ard/J. Crawford/A. Pellet/S. Wittich (eds.), International Law between Universalism and Fragmentation: Festschrift in Honour of Gerhard Hafner, (Koninklijke Brill, 2008) pp 107-126; Harten and Loughlin (n 13) at p 129.

[46] Chester Brown, A Common Law of International Adjudication (Oxford University Press, 2007), at pp 52-55.

[47] Chiara Giorgetti, “Cross-Fertilisation of Procedural Law Among International Courts and Tribunals: Methods and Meanings”, in Arman Sarvarian and others (eds.), Procedural Fairness in International Courts and Tribunals (BIICL, 2015).

[48] Makane Moïse Mbengue, “Historical Overview of International Claims Commissions” in Chiara Giorgetti, Patrick W. Pearsall, and Hélène Ruiz-Fabri (eds.), Research Handbook on International Claims Commissions (Edward Elgar Publishing, 2023).

[49] Maurizio Brunetti, “The Lex Mercatoria in Practice: The Experience of the Iran-United States Claims Tribunal” (2002) 18 Arbitration International 355, at pp 355-358.

[50] For example, the Iran–US Claims Tribunal; See Charles N. Brower and Jason D. Brueschke, The Iran-United States Claims Tribunal (Martinus Nijho?, 1998) p 133.

[51] Harten and Loughlin (n 13) at p 129.

[52] Ibid.

[53] Allen Redfern and Martin Hunter, Law and Practice of International Commercial Arbitration (Kluwer Law International, 1999), at pp. 21-22.

[54] Thomas Wälde, “Investment Arbitration Under the Energy Charter Treaty – From Dispute Settlement to Treaty Implementation”, (1996) 12 Arbitration International 429, at pp 434-436.

[55] Peter Muchlinski, Multinational Enterprises and the Law (Blackwell, 1999), at p 173 and pp 501-514.

[56] CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award (13 September 2001), para 410; CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Final Award (14 March 2003), paras 398 and 412-413; Vicki Been and Joel C. Beauvais, “The Global Fifth Amendment: NAFTA’s Investment Protections and the Misguided Quest for an International “Regulatory Takings” Doctrine”, (2003) 78 NYU Law Review 30, at pp 83-86.

[57] Eagleton (n 42), at pp 79, 96, and 100.

[58] Harten and Loughlin (n 13) at p 130.

[59] Exceptions to the requirement to exhaust local remedies are typically limited to cases when a viable local remedy is unavailable; See France v. Norway [1957] ICJ Rep 9, at 39.

[60] CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8, Decision of the Tribunal on Objections to Jurisdiction (17 July 2003), paras 78 and 80; Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction (3 August 2004), paras 151 and 160.

[61] Harten and Loughlin (n 13) at p 131.

[62] Ibid.

[63] Edith Brown Weiss, “Invoking State Responsibility in the Twenty-First Century Invoking State Responsibility in the Twenty-First Century” (2002) 96 American Journal of International Law 798, at pp 811-812; Christopher Greenwood, “International humanitarian law (laws of war)” in The Centennial of the First International Peace Conference (Martinus Nijho? Publishers, 2002), pp 161-260.

[64] For example, a designated appointing authority typically appoints the presiding arbitrator if the disputing parties cannot agree.

[65] Lon L. Fuller, “Consideration and Form” (1941) 41(5) Columbia Law Review 799, pp 806-808; Redfern and Hunter (n 53), at p 135.

[66] Abram Chayes, “The Role of the Judge in Public Law Litigation”, (1976) 89 Harvard Law Review 1281, at pp 1294-1295 and p 1302.

[67] Report of the Secretary-General: Possible Features of a Model Law on International Commercial Arbitration, UN Doc. A/CN.9/207 (14 May 1981), (1981) 12 Year Book UNCITRAL 77, at p 78.

[68] Yves Fortier, “Delimiting the Spheres of Judicial and Arbitral Power”, (2000) 80 Canadian Bar Review 143, at pp 147-148.

[69] Redfern and Hunter (n 53), at p 135; Harten and Loughlin (n 13) at p 140.

[70] Alan Scott Rau, “Integrity in Private Judging”, (1997) 38 South Texas Law Review 455, at pp 486-487.

[71] Yves Dézelay and Bryant Garth, Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order (The University of Chicago Press, 1996), at pp 27-30.

[72] Redfern and Hunter (n 53), at pp 23-25; Harten and Loughlin (n 13) at p 140.

[73] Redfern and Hunter (n 53), at pp 12-13

[74] Harten and Loughlin (n 13) at p 141.

[75] Frederic Bachand, “Court Intervention in International Arbitration: The Case for Compulsory Judicial Internationalism Symposium”, (2012) Journal of Dispute Resolution 83, available at: <https://scholarship.law.missouri.edu/jdr/vol2012/iss1/6>.

[76] Redfern and Hunter (n 53), at pp 431-432.

[77] Harten and Loughlin (n 13) at p 141.

[78] New York Convention (n 5), Article V.

[79] Redfern and Hunter (n 53), at p 5 and p 22.

[80] Harten and Loughlin (n 13) at p 141.

[81] Harten and Loughlin (n 13) at p 142.

[82] In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, (2023) INSC 1066.

[83] Harten and Loughlin (n 13) at p 142.

[84] George A. Bermann, “What Does it Mean to be ‘Pro-Arbitration’?”, (2018) 34 Arbitration International 341, available at: <https://scholarship.law.columbia.edu/faculty_scholarship/2880>; See Mitsubishi Motors Corporation v. Soler Chrysler Plymouth, (1985) 473 US 614, at pp 627-637.

[85] All of the early ICSID arbitrations were based on agreements that were traditionally documented by a provision in an investment contract. For example, Holiday Inns SA v. Morocco, Award on Jurisdiction) (12 May 1974), 1 ICSID Report 645; Kaiser Bauxite Company v. Jamaica, Award on Jurisdiction, (6 July 1975), 1 ICSID Report 296; Adriano Gardella v. Côte d’Ivoire, Final Award (29 August 1979), 1 ICSID Report 283.

[86] Harten and Loughlin (n 13) at p 143.

[87] OECD, “Fair and Equitable Treatment Standard”, Working Papers on International Investment Number 2004/3 (September 2004), available at: <https://www.oecd.org/content/dam/oecd/en/publications/reports/2004/09/fair-and-equitable-treatment-standard-in-international-investment-law_g17a166b/675702255435.pdf>.

[88] White Industries Australia Limited v. The Republic of India, Final Award, UNCITRAL (30 November 2011).

[89] United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration (1985).

[90] N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. (N.N. Global III), 2023 SCC OnLine SC 1666.

[91] Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco [I], ICSID Case No. ARB/00/4, Decision on Jurisdiction (French Original: 129 Journal du droit international 196 (2002)) (English translation: 42 ILM 609 (2003), 6 ICSID Rep. 400 (2004)).

[92] UNCITRAL Model Law (n 89).

[93] Indian Arbitration and Conciliation Act, 1996, available at: <https://www.indiacode.nic.in/bitstream/123456789/21922/1/the_arbitration_and_conciliation_act%2 C_1996_act_no._26_of_1996.pdf>.

[94] New York Convention (n 5), Article V.

[95] Convention on the Settlement of Investment Disputes between States and Nationals of Other States (adopted 18 March 1965, entered into force 14 October 1966) 575 UNTS 159 (ICSID Convention) Article 54.

[96] Ibid, Article 53(1).

[97] Marc Bungenberg, Andrés E Alvarado-Garzón and Bianca Böhme, “Recognition and Enforcement of ICSID Convention Awards” in Katia Fach Gómez and Catharine Titi (edn.), The Award in International Investment Arbitration (Oxford University Press, 2024), at pp 467-471.

[98] Ibid.

[99] In fact, considering the World Bank’s control over host governments’ access to foreign financing, one of the reasons ICSID was placed within the organization was to give ICSID awards more weight. See Ingrid Delupis, Finance and Protection of Investments in Developing Countries (Gower Press, 1973), at p 3.

[100] Bungenberg and others (n 97).

[101] Hiarlouski Vitali, “Enforcement and Recognition of Non-ICSID Awards” (Jus Mundi, updated on 1 January 2026), available at: <https://jusmundi.com/en/document/publication/en-enforcement-and-recognition-of-non-icsid-awards>.

[102] Harten and Loughlin (n 13).

[103] Harten and Loughlin (n 13), at pp 148-149.

[104] Harten and Loughlin (n 13), at p 149.

[105] Harten (n 2), pp 392-393.

[106] 106 Harten and Loughlin (n 13), at p 149.