Alternative Resolution to Investor-State Arbitration-Applying Mediation and Its Prospects

This paper brings attention to the recent extensive discussions and proposed institutional rules about the use of mediation in the investor-state dispute. It addresses problems of existing arbitration regime and advantages of use of mediation in investor-state mediation for the more efficient resolution of international investment disputes. Investor-State Dispute Settlement (ISDS) is not suitable for the international investment regime of sovereign countries cases, and Mediation can be attractive when it is used in investment disputes because it is quicker in process, less expensive and preserves longer business relationship between the parties. Mediation also can encourage investors and states to develop trust each other and share important information so that both can meet their interests and needs. ICSID, IBA and UNCITRAL are actively advocating for the increased use of mediation to supplement investor-state arbitration. Initiatives and Rules developed by IBA Rules for Investor-State Mediation, ICSID and UNCITRAL Working Groups show clear merits of mediation as one alternative to investor-state dispute settlements. Even though enforceability issue is still in debate such as in upcoming EU-China BIT, necessity of incorporation of mediation will be more emphasized. As a result, mediation will be used as a complementary tool within the investment system, creating a practical alternative system. Korean government needs to consider mediation as an alternative dispute resolution mechanism and it will surely decrease damage when Korean government face foreign investor-brought ISDS. Problems still remain that whether parties will likely to self-regulate their disputes in the given rules, and whether transparency and standards to ensure the quality of investor-state mediators will be resolved. In the end, however, the real solution to fix the flaws in ISDS lies in finding innovative remedies to the problems.