Investor–State Arbitration 2026

Global Overview

Investor-State Dispute Settlement (ISDS) remains in regular use even as states reconsider the commitments that underlie it. The UN Conference on Trade and Development (UNCTAD) recorded 1,463 known treaty-based cases by the end of 2025. Yet recent agreements place greater emphasis on investment facilitation and co-operation, and often restrict access to arbitration. The resulting gap between treaty policy and arbitral practice is likely to persist. Older treaties continue to govern investments made under them, sometimes long after their termination.

Given the different “generations” of investment protection available across the treaty landscape, the terms of the applicable treaty, the date of the investment and the available forum may matter more than a state’s current policy towards ISDS. Recent developments also show why withdrawal, reform and renewed participation should not be treated as stages of a single global retreat.

Tensions in Treaty Policy

The concerns driving ISDS reform remain familiar. States question (sometimes self-servingly – ie, to mitigate the impact of extant or potential, if legitimate, treaty claims) the cost of defending claims, the consistency of awards and the constraints that broadly worded protections may place on regulation. New agreements increasingly define those protections more closely or omit investor-state arbitration. UNCTAD recorded at least 44 investment agreements signed in 2025, with facilitation and co-operation continuing to gain prominence.

India illustrates the pressure to preserve regulatory discretion while attracting foreign capital. Its 2025–26 budget announced plans to make the model bilateral investment treaty more investor-friendly. That ambition does not itself alter existing treaty rights. It does, however, show that reconsideration of ISDS can lead towards stronger investor protection as well as away from it.

Honduras provides a more concrete example. Having withdrawn from the ICSID Convention in 2024, it rejoined with effect from 16 August 2026. Membership restores access to the Convention’s framework, subject to the usual jurisdictional requirements. It does not, by itself, constitute consent to arbitrate a particular dispute.

In Africa, the African Continental Free Trade Area Investment Protocol envisages a regional framework and the eventual termination of bilateral investment treaties between its parties. Its adoption in 2023 is hardly the end of that process. Negotiations on the dispute-resolution annexe remain pending. The Protocol cannot yet be described as an operating replacement for the existing treaty network.

Energy Disputes Continue Unabated

The energy transition is a source of disputes across both conventional and renewable energy. UNCTAD’s analysis of cases initiated in 2024 found that more than half of such disputes concerned extractive activities and energy supply. Six involved critical minerals needed for the transition. Disputes over mining rights and renewable support schemes sit alongside claims concerning fossil fuel investments. The legal questions turn on the treatment of particular investments and the commitments made to them.

The Energy Charter Treaty (ECT) reflects the competing policy responses. The EU and Euratom withdrew with effect from 28 June 2025, citing the Treaty’s incompatibility with their climate ambitions. Other contracting parties pursued modernisation. Withdrawal does not necessarily end exposure immediately: survival clauses may preserve protection for existing investments. The effect of those clauses, and the separate dispute over intra-EU arbitration, require careful analysis.

These disputes also resist simple assumptions about investor interests. Renewable energy developers may invoke the same protections that states regard as an obstacle to climate regulation. A policy’s environmental purpose and its consistency with a treaty are distinct questions. Tribunals must examine the measure, the applicable exceptions and the evidence of loss.

Attempts at Procedural Reform in ISDS

UNCITRAL’s reform programme advanced in 2026. At its 59th session, the Commission finalised the draft Statute of the Advisory Centre on International Investment Dispute Resolution for submission to the UN General Assembly. The proposed Centre would provide legal assistance and representation to participating states. Its practical value will depend on the resources and expertise available to it.

The Commission also adopted Supplementary Provisions on the Conduct of Proceedings to Resolve International Investment Disputes. These add to the procedural tools available to states and disputing parties. Their adoption does not automatically amend existing treaties or the rules governing pending cases. Agreement on reform must still be translated into provisions applicable to individual disputes.

The proposal for permanent adjudication is less settled. UNCITRAL’s work now includes separate draft statutes for a permanent tribunal and a permanent appellate tribunal. Discussions continued in 2026. Questions of jurisdiction, appointments and financing remain central. A standing institution may improve consistency, but its reach will depend on which states participate and which disputes they submit to it.

Domestic Courts Remain Essential

National courts already influence the value of treaty protection through recognition and enforcement. In March 2026, the UK Supreme Court rejected immunity objections by Spain and Zimbabwe to the registration of ICSID awards. It held that Article 54 of the ICSID Convention constituted the necessary submission to the court’s jurisdiction. Immunity from execution remained a separate issue. Recognition of an award therefore does not guarantee recovery against state assets.

Where treaty remedies narrow, domestic proceedings and contractual protections assume greater importance. Their effectiveness depends on judicial independence, access to relief and the terms actually agreed with the state. Investors cannot assume that a contractual claim will reproduce the protections of a treaty, or that consent to one form of arbitration extends to another.

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Looking ahead, it is reasonable to expect the continued coexistence of older treaties, more restrictive agreements and new procedural mechanisms. Each serves different investments and different disputes. For states, reform requires attention to obligations that survive policy changes. For investors, the task is to establish what protection remains available and whether it can deliver an effective remedy.