The Promises and Pitfalls of Investor-State Mediation

States are increasingly seeking to develop alternative forms of investor-State dispute settlement to supplement and/or replace investor-State arbitration in order to avoid its perceived pitfalls. Alternative dispute settlement options such as mediation are thus increasingly likely to work in tandem with, or even as a replacement for, investment arbitration. Uncertainties nevertheless remain around the transparency, authority, and enforcement regimes applicable to investor-State mediations. Diverting investor State disputes to mediation may therefore risk undercutting important reform efforts that have taken place to improve investor-State arbitration in recent years. This article considers recent developments in investor-State mediation to analyse how mediation interacts with investment arbitration, and to explore the benefits and risks associated with such developments. Section B introduces mediation as a non arbitral means of investor-State dispute settlement. The Section examines uses of investor-State mediation, and references to its use, under investment treaties to date. It further considers recent developments which indicate that mediation may increasingly be used to resolve future investment disputes alongside or instead of investor-State arbitration. Section C examines the relative strengths of mediation vis-à-vis arbitration as a method for resolving investor-State disputes. Section D considers three key disadvantages potentially associated with investor-State mediation: issues of confidentiality, issues of authority, and issues of enforcement. Section E considers how, despite these potential disadvantages, the benefits of mediation could nonetheless be leveraged and coupled with arbitration to improve the processes associated with the settlement of investment disputes.