Foreign investment forms an intrinsic part of the global economy. Several disputes arise in the course of foreign investment involving violation of legal rights of the investors. To adjudicate those disputes, states have resorted to Investor- state dispute settlement mechanisms in Bilateral Investment Treaties (BITs) and Free- Trade Agreements (FTAs) that safeguards the sovereignty and upholds the supremacy of the State. Considered as an assurance of investor protection, it builds up credence in the mind of investors before they plan to invest in a foreign country.
Current patterns of stockpile and stashes of investor- state arbitration disputes coupled with extortionate proceedings has paved way for investor- state mediation as a viable option. In international context, resolution of disputes requires a pliable forum which encompasses proposition of all the parties. Hence, mediation seems the most feasible solution.

Approach to Investor- State Dispute Settlement: MEDIATION

The dispute settlement mechanism wherein a neutral third party negotiates constitutes mediation. It is a voluntary and an amenable process where control over the outcome is preserved by the parties through ‘self-determination’. The mediator expedites communications between the parties. An important choice that mediation makes in structuring the process is the extent to which they will be directive or facilitative with regard to the substance of dispute.1

The inception of resolution of disputes in congenial manner by negotiations can be traced to a time when it was referred to as “amicable settlement period” or “cooling-off period” in several multilateral investment treaties for instance; Article 10.152 of the Central American Free Trade Agreement states that “the claimant and the respondent should initially seek to resolve the [investment] dispute through consultation and negotiation, which may include the use of non-binding, third-party procedures such as conciliation and mediation”. Article 263 of the Investment Agreement for the COMESA Common Investment Area requires a six-month cooling off period, during which the parties “shall seek the assistance of a mediator of non-disputing parties.”

A ground-breaking study by James Claxton4 of 143 Asian treaties that entered into force after 2010 found that 24 percent of them had ISDS provisions specifically providing for mediation or conciliation through various means. In the international resolution of disputes framework, mediation continues to be the ‘missing third piece’.5 Being cost efficient and relationship friendly, mediation may evolve to become the most chosen dispute settlement mechanism in the international commercial transactions.

Investor- State mediation contains certain specific issues which must be envisioned before the onset of the process of mediation. These are listed hereunder:6
a) Selection and appointment of a mediator- The parties are generally free to appoint one or several mediators unless the investment treaty provides. Because of the complex nature of investment disputes, parties prefer appointing more than one mediator. The disputes arising out of investment may be referred to a mediation institution specialized in investor-state dispute settlement either because of a clause in the investment treaty or by mutual agreement between the parties about the same. These institutions hire qualified mediators who facilitate administrative support to the proceeding.
b) Authority to settle- As mediation invariably involves public bodies, the necessary approval process needs to be identified and considered throughout the mediation.

Singapore Convention on Mediation

The United Nations Convention on International Settlement Agreements Resulting from Mediation,7 which is to be known as the Singapore Convention on Mediation, is an instrument for the facilitation of international trade and the promotion of mediation as an alternative and effective method of resolving trade disputes. Being a binding international instrument, it is expected to bring certainty and stability to the international framework on mediation, thereby contributing to the Sustainable Development Goals (SDG), mainly the SDG 16.8 It is on terms with the UNCITRAL Model Law on International Commercial Mediation and International Settlement Agreements. In this convention, the States can espouse to either the convention or the Model Law as a standalone text or both the Convention and the Model Law as complementary instruments of a comprehensive legal framework on mediation.

Enforceability under the Convention & Model Law

Despite being the most viable option for dispute settlement, mediation continues to pose threat to the investor states where issues such as efficacy of conformity with settlement agreements are concerned since they are not directly enforceable in the courts. With the enactment of United Nation Convention on International Settlement Agreements Resulting from Mediation, also known as the Singapore Convention on Mediation, some relief has been granted. Article 3 of the Convention provides that signatories may, in accordance with their respective domestic procedures enforce an international settlement agreement9 or where a dispute arises in respect of a matter claimed to have been resolved by an international settlement agreement, invoke such agreement.10

States which are party to the Singapore Convention on Mediation and States that have enacted legislations based on the Model Law on Mediation follow the enforcement procedures defined therein. While drafting the settlement agreement, the parties may take note of the requirements under the Singapore Convention on Mediation and Model Law on Mediation as outlined in Article 411 and 512 of the Convention and Article 1813 and 1914 of the Model Law. By signing the settlement agreement, the parties should state their understanding that the settlement agreement can be used as evidence that it resulted from mediation and that it can be relied upon for seeking relief under the applicable framework.15

India: Status quo

In White industries case16 and Cairn’s case,17 India’s experience with investor- state arbitration did not leave good taste in the Indian legal regime. The Cairn’s arbitration award is highly likely to be challenged in various international courts;18 establishment of an investor- state mediation framework becomes vital. In India, adjudication of disputes by mediation does not in any way contravene or attempts to contravene the sovereignty of the State. Its incorporation into the Bilateral Investment Treaty and other Investor- State Dispute Settlement processes will not only identify and resolve legal issues but also build sustainable relationship between the parties.

In India, the High- Level Committee on Arbitration in 2017 recommended mediation to be included in India’s new generation of BITs which it has started to sign after the unilateral termination of a large number of its past bilateral investment treaties.19 The 47th Chief Justice of India, Justice S A Bobde, while comparing the viability of mediation with respect to arbitration, he has remarked that “An ounce of mediation is worth a pound of arbitration and a ton of litigation”.20 The substructure for the buildout of an effective Investor- State Mediation in India should focus on the following 3 pillars:
a) Constructional & Structural reforms- For setting up specialised institutions consisting of independent and impartial mediators who assist the process of mediation. Development of uniform framework of rules adressing issues related to enforcement of international settlement agreement, confidentiality of the parties, conduction of mediation etc.
b) Development of sound and credible body of mediators who facilitate smooth mediation process- The mediators should possess professional expertise on the subject- matter, language as well as requisite technical skills.
c) Investment in snapping up stakeholders, institutions, lawyers and government officials.


The existence of undying disputes pertaining to demarcating the edges of sovereignty of the state and subjective elucidation of BIT has mandated the need for mutual cooperation and coexistence among parties’ i.e. foreign investors and the host state. These conflicts can be effectively resolved by adopting investor- state mediation in practise. It is only this adjudicative technique which is highly beneficial to the parties where factors such as time, resources and energy are concerned. Here, the primary focus is on holistic development of sustainable relationship between the parties which encompasses the cultures and traditions of the host state and capitalistic object of the foreign investor.


1 Leonard L. Riskin, Understanding Mediators’ Orientations, Strategies, and Techniques: A Grid for the Perplexed, 1 HARV. NEGOT. L. REV. 7 (1996) (surveying different approaches that mediators take)
2 Leonard L. Riskin, Understanding Mediators’ Orientations, Strategies, and Techniques: A Grid for the Perplexed, 1 HARV. NEGOT. L. REV. 7 (1996) (surveying different approaches that mediators take)
3Investment Agreement for the COMESA Common Investment Area, Article 26
4Mediation : Putting Mediation and Conciliation Back into ISDS-The Asian Experience
5Prime Minister’s Office (Singapore), ‘Speech by PM Lee Hsien Loong at Singapore Convention on Mediation Signing Ceremony & Conference’ at Singapore and Fiji both ratified the Convention on 25 February 2020
6Markanda P.C., Markanda Naresh, Markanda Rajesh, Mediation: Step By Step, First edn, Thomson Reuters, 2021
7United Nations Convention on International Settlement Agreements Resulting from Mediation, available at PDF
8United Nations
9United Nations Commission on International Trade Law, ‘Status: United Nations Convention on International Settlement Agreements Resulting from Mediation’ Article 3(1)
10ibid, Article 3(2).
11ibid, Article 4
12ibid, Article 5
13United Nations Commission on International Trade Law Model Law on International Commercial Mediation, Article 18
14ibid, Article 19
16White Industries Australia Ltd. v. Republic of India PDF.
17Cairn Energy PLC v. Union of India, PCA Case No. 2016-7.
18PTI, India to Appeal against Cairn Arbitration Award : Report, The Times of India
19Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, 30 July, 2017, p. 110, available at PDF.
20 Speech of Hon’ble Mr. Justice S.A. Bobde, Chief Justice of India on the occasion of 3rd edition of International Conference on Arbitration in the Era of Globalisation organised by Indian Council of Arbitration & Federation of Indian Chambers of Commerce and Industry 8th February, 2020, Bar & Bench, available at PDF

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