Investor-State Arbitration and the Global South: Prevention, Capacity and Sector-Specific Expertise

On 3 June 2026, the Investment Treaty Forum (ITF) at the British Institute of International and Comparative Law (BIICL), in collaboration with Keidan Harrison LLP and Essex Court Chambers, hosted a roundtable discussion on Investor-State Arbitration and the Global South as part of London International Disputes Week.

The event brought together academics, government officials and practitioners to examine how Global South states can navigate the challenges of investor-State dispute settlement (ISDS) in an increasingly complex geopolitical environment. The discussion was chaired by Professor Yarik Kryvoi (BIICL and Keidan Harrison) and featured contributions from Professor Chester Brown SC (University of Sydney and Essex Court Chambers), Zenith Europa (Department of Justice of the Philippines), Thabo Chakaka Nyirenda SC (former Attorney General of Malawi and Reserve Bank of Malawi), and Luke Harrison (Keidan Harrison).

The discussion formed part of a broader programme of ITF events examining contemporary developments in international investment law. Earlier in the year, the ITF hosted Countering ISDS Claims: Old Tensions and New Defences, which explored emerging State defences based on security exceptions, sanctions measures and counterclaims.

The June roundtable shifted attention from doctrinal developments to a practical question: how can Global South States prevent disputes, manage them more effectively, and build the expertise needed to engage with the investment arbitration system on equal terms?

The Geopolitical ISDS Context in Which Global South States Operate

Professor Kryvoi began by setting the scene. Historically, investment treaties were negotiated primarily between developed capital-exporting States and developing capital-importing States. These treaties were designed to encourage foreign investment by offering international legal protections to investors operating in jurisdictions perceived as riskier.

Many of these States remain bound by first-generation bilateral investment treaties negotiated decades ago. Such treaties often contain broad and open-ended standards, including fair and equitable treatment and indirect expropriation provisions, which leave considerable discretion to arbitral tribunals. Governments increasingly argue that these treaties do not adequately reflect modern regulatory priorities such as climate change, energy transition, digital governance, public health, or sustainable development.

At the same time, Professor Kryvoi noted that the traditional distinction between capital-importing and capital-exporting States is becoming increasingly blurred. Countries such as India, Saudi Arabia and the United Arab Emirates are no longer merely recipients of foreign investment; they are also significant exporters of capital. This shift is changing how many Global South States perceive investment treaties and ISDS. Rather than viewing the system solely through the lens of defensive risk management, governments are increasingly balancing their desire to preserve regulatory autonomy with the need to protect their own investors abroad.

These developments explain the growing momentum behind investment treaty reform. UNCITRAL Working Group III, ICSID rule amendments, and treaty modernisation initiatives all seek to address concerns regarding cost, duration, consistency and legitimacy. Yet the panel noted that developed States often possess greater resources and technical capacity to renegotiate treaties and influence reform processes. Building similar expertise within the Global South therefore remains an important priority.

How Global South States Can Avoid Disputes

One of the strongest messages emerging from the BIICL discussion was that dispute prevention deserves far more attention than it currently receives. While governments and practitioners devote substantial resources to defending claims once they arise, relatively little attention is given to preventing disputes from materialising in the first place.

Professor Chester Brown highlighted the recently adopted UNCITRAL Working Group III Toolkit on the Prevention and Mitigation of Investment Disputes. The toolkit identifies practical measures that States can implement to identify investor concerns at an early stage and prevent grievances from escalating into legal disputes.

A recurring theme was the importance of communication with investors. Governments should establish clear channels through which investors can raise concerns before disputes crystallise. Investment ombudsmen, focal points and grievance mechanisms can provide investors with access to information while enabling governments to identify emerging problems and resolve them before legal positions become entrenched.

Equally important is coordination within government. Investment disputes frequently arise because different ministries or regulatory agencies act independently, without fully appreciating the broader implications of their decisions. Establishing a lead agency capable of coordinating policy responses and sharing information across government can significantly reduce these risks.

Zenith Europa talked about the Philippine experience and highlighted the importance of involving legal experts at the earliest stages of investment projects. She observed that disputes often originate long before any notice of arbitration is filed. In many jurisdictions, government lawyers responsible for negotiating contracts or approving investments may have little exposure to arbitration or international investment law. Capacity-building initiatives aimed at government lawyers can therefore improve decision-making during contract formation and reduce future exposure to claims.

Thabo Chakaka SC based on Malawi experience emphasised another often-overlooked aspect of dispute prevention: procurement and project selection. In his experience, governments should conduct comprehensive business, financial, legal and anti-corruption due diligence before entering into major investment projects. Weak procurement processes, inadequate due diligence and poorly structured investments frequently become the root causes of later disputes. From this perspective, dispute prevention begins not with arbitration strategy but with sound governance and project management.

The discussion also underscored the importance of political leadership. Transparent decision-making, adherence to the rule of law and a commitment to good governance create conditions in which disputes are less likely to arise. Conversely, where corruption concerns, governance failures or inconsistent regulatory practices exist, the risk of disputes increases substantially.

Handling Disputes More Efficiently

Professor Brown described one of the central challenges facing States as institutional coordination. Governments are complex organisations involving multiple ministries, agencies and regulatory bodies. Without clear procedures, even basic tasks such as identifying and responding to a notice of dispute can become problematic. The panel discussed examples where notices of arbitration were not properly escalated within government structures because officials lacked the necessary training to recognise their significance.

To address these challenges, many States establish a dedicated coordinating authority, whether within the Ministry of Justice, Attorney General's Office, Ministry of Foreign Affairs or a specialised disputes unit. Such institutions can centralise communications, oversee document preservation, coordinate interactions with external counsel and ensure that relevant government stakeholders remain informed throughout proceedings.

Document management emerged as another critical issue. Relevant evidence is often dispersed across different departments, particularly in disputes involving long-term infrastructure, energy or natural resources projects. Effective document preservation and collection at an early stage can significantly improve a State's ability to evaluate claims and prepare its defence.

The choice of legal representation presents a further challenge. States employ a variety of models, ranging from fully in-house teams to complete reliance on external counsel. Most governments adopt some form of hybrid approach, combining internal expertise with specialist international arbitration practitioners.

The panel generally favoured hybrid models that combine external expertise with internal capacity-building. External counsel bring experience from previous disputes, while government lawyers contribute institutional knowledge and policy insight. Co-counselling arrangements can also ensure that expertise developed during one case remains within government after the dispute concludes.

Cost management is equally important. For many developing States, investor-State arbitration can impose substantial financial burdens. Governments therefore face difficult decisions about whether to pursue a full defence, seek settlement, or engage in mediation. As panellists observed, these decisions require not only legal analysis but also consideration of broader public-interest factors, including economic consequences, political realities and social priorities. The objective should not always be to litigate every issue to the end, but rather to identify solutions that best serve the public interest.

How Sector-Specific Experience Impacts Handling Investor-State Disputes

A final theme emerging from the discussion was the importance of sector-specific expertise. Investment disputes are rarely purely legal disputes. Rather, they arise within highly specialised commercial and regulatory environments.

Luke Harrison talked about the mining sector as a particularly clear example. Many mining disputes involve questions concerning licensing arrangements, environmental obligations, fiscal terms, concession agreements and community relations. Governments that understand the commercial realities of mining operations are better positioned to identify risks, negotiate effective contracts and evaluate potential claims.

Energy disputes present similar challenges. The global energy transition has generated a growing number of disputes involving renewable energy policies, fossil fuel investments and changing regulatory frameworks. Successfully managing such disputes requires expertise not only in investment law but also in energy markets, environmental regulation and project finance.

Climate change provides a particularly striking example of the growing tension between the traditional objectives of investment protection and the policy priorities of host States. Governments are under increasing pressure to phase out fossil fuels, accelerate renewable energy transitions and meet international climate commitments. Yet many of these measures directly affect foreign investments in energy and natural resource projects. Several high-profile arbitrations have emerged from this tension, raising difficult questions about whether investment treaties drafted decades ago should constrain contemporary efforts to address global environmental challenges.

Infrastructure projects raise their own complexities. Public-private partnerships, concession arrangements and build-operate-transfer projects often span decades and involve multiple stakeholders. Effective management requires familiarity with both legal and commercial dimensions of long-term infrastructure investments.

The panel also highlighted the growing importance of taxation issues. Thin-capitalisation arrangements, intra-group financing structures, transfer pricing practices and treaty-shopping strategies frequently arise in disputes involving multinational investors. Governments that possess expertise in these areas are often better equipped to identify potential problems before they evolve into claims.

Sector-specific knowledge enables governments to negotiate stronger agreements, conduct more effective due diligence, engage more productively with investors and assess claims more accurately when disputes arise. Most importantly, it allows governments to distinguish between legitimate investor concerns and attempts to exploit regulatory weaknesses.

The importance of capacity building

The panellists agreed that while Global South States face significant challenges within the ISDS system, they also possess a growing range of tools to manage those challenges effectively. Across all four themes—geopolitical context, dispute prevention, dispute management and sector-specific expertise—a common thread emerged: the importance of institutional capacity.

Building the right expertise and institutions takes time. Whether through updating investment treaties, improving coordination across government, training public officials, strengthening procurement processes or making effective use of external counsel, States that continuously invest in capacity are generally better placed to prevent disputes and respond to them when they arise. As more Global South countries become both destinations for foreign investment and sources of outbound investment, they are likely to play an increasingly active and sophisticated role in the ISDS system.

Ultimately, success in managing investment disputes depends less on any single reform and more on a State's ability to build and retain expertise. Governments that understand investment law, coordinate effectively and learn from past disputes are better positioned to protect both investors and the public interest. This will become even more important as an increasing number of Global South countries participate in the global economy not only as hosts of investment but also as exporters of capital.

Author

Professor Yarik Kryvoi, Senior Fellow in International Economic Law and Director of the Investment Treaty Forum, BIICL