Consistency vs. Judicialization: The EU Investment Court System as a Paradigm for Reforming ISDS

Abstract

This paper examines the EU’s Investment Court System (ICS) as a model of “constrained judicialization” in response to widespread concerns about the current Investor-State Dispute Settlement (ISDS) system. ICS introduces a more structured approach to investment disputes by combining centralized appellate review with mechanisms that protect state sovereignty. These include the ability of treaty parties to issue binding interpretations and clearly defined limits on tribunal jurisdiction. Through a detailed comparison with traditional ISDS structures, the paper highlights three major innovations in ICS: a two-level court system to ensure consistency, permanent judges appointed by governments, and procedures that allow greater public access and transparency. While the goal is to improve legal predictability and legitimacy, these reforms have also sparked internal tensions, especially within the EU. The Court of Justice of the European Union’s stance on intra-EU investment treaties illustrates how efforts to unify legal standards can clash with national autonomy. The research posits that ICS provides insights for ISDS reform under UNCITRAL Working Group III, showing how legal coherence can be achieved without sidelining government control. By reframing the consistency-versus-sovereignty debate, it contributes to broader discussions on designing more legitimate and balanced systems of global economic governance.