Contracts between States and investors, especially in the extractives and infrastructure sectors, are designed to endure. They often last for decades, lock in fiscal and regulatory commitments negotiated years earlier, and shape the lives of communities that were never at the negotiating table. The arbitration clause in these contracts can become one of the main mechanisms through which those long-term public consequences are later enforced and contested.
CCSI’s starting point, building on decades of research, is that treaty-based investor–State dispute settlement (ISDS) is beyond incremental repair, and that domestic courts—with State–State dispute settlement available where needed—should be the default forum for investor–State disputes, including disputes arising from State–investor contracts.
But because arbitration remains a common and often expected feature of these contracts, this brief asks a narrow and practical question: where an arbitration clause is likely to be included in a contract, what should it require to protect the public interest, avoid the pitfalls associated with treaty-style arbitration, and still remain acceptable in practice?
CCSI answers that question with 17 mutually reinforcing safeguards, organized into three clusters: anchoring arbitration in the host State’s legal and institutional framework, expanding access and accountability, and securing procedural integrity. The safeguards are deliberately ambitious—designed around what the public interest requires, while treating acceptance by investors and the arbitration community as a constraint to be tested against practice.
Safeguards are most durable when enacted through legislation and applied across contracts, though negotiated safeguards remain a reasonable stopgap where legislation is absent. Examples of State practice, including from Bolivia, Brazil, Ecuador, and Tanzania, illustrate that departures from boilerplate are feasible.
The brief is directed at four audiences: governments negotiating or reforming these contracts, civil society organizations advocating for fair dispute settlement, legal academics assessing the framework, and the investor and arbitration communities whose practice will determine its effect.
The authors draw on interviews with practitioners, government officials, and scholars conducted between August 2025 and April 2026, and on a virtual expert roundtable convened by CCSI in June 2026 under the Chatham House Rule.
The 17 Safeguards
First Cluster: Anchoring arbitration in the host State’s legal and institutional framework
- Domestic law as the governing law of the contract
- Clear definition and limitation of the scope of arbitrable disputes
- Limits on permissible remedies and damages
- Arbitral seat in the host State, or failing that, in the region
- National or regional arbitral institutions
- Proceedings in an official language of the host State
- Deliberate selection of arbitration rules
- Domestic rules of evidence
- Pre-arbitration steps: exhaustion of local remedies and negotiation
- Arbitration only once the investment is lawfully established
Second Cluster: Expanding access and accountability
- Transparency by default
- Symmetry: the State can also initiate arbitration
- No advance waiver of immunity from execution
- Meaningful participation and remedy for affected third parties
Third Cluster: Procedural integrity
- The contractual forum as the exclusive remedy
- Institutional appointment and enforceable conflict-of-interest rules
- Review for legal error by specialized host State or regional courts
