Traditionally, investment disputes between foreign investors and host countries were resolved in the local courts of the host countries.1 However, developed countries tried to protect their foreign investors from discrimination and weak legal systems of developing countries and therefore resorted to international arbitration. The capacity of foreign investors to choose international arbitration as a dispute settlement mechanism gave rise to new problems.2 The paper first examines the current investor-state dispute settlement regime under the International Convention on the Settlement of Investment Disputes (ICSID Convention) and United Nations Commission on International Trade law (UNCITRAL). It then identifies and analyzes the various criticisms of the current system. The next section of the paper aims at recognizing and evaluating the commonly proposed recommendations with a special focus on the ones by United Nations Convention on Trade and Development (UNCTAD). Lastly it is argued that the current challenges of the investor-state dispute settlement can only be improved by undertaking responsibilities of drafting exhaustive treaty provisions by the state parties and maintaining transparency and accountability by the arbitration forums.

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Corresponding author. Himaloya Saha: editor@uklsa.co.uk

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COPYRIGHT: © The UK Law and Society Association, 2016