What the future holds for mediation in investor-state dispute settlement

Below, we look at the prevalence of mediation in ISDS at the moment, how reforms could impact on its take-up, and investor attitudes towards proposals that would require them to attempt mediation before initiating arbitration proceedings.

What the data says about use of mediation in ISDS

A 2022 survey into international dispute resolution by the Singapore International Dispute Resolution Academy (SIDRA) found an increase in the use of institutional mediation to resolve investor-state disputes. However, its findings also showed an overwhelming preference for arbitration among the corporate executives, in-house counsel, dispute resolution lawyers, and corporate lawyers that participated in the study.

Read more of our report on international arbitration in 2025

• International arbitration: regional, sectoral and industry developments reinforce dispute resolution status
• UAE: recent arbitration reforms while legacy DIFC-LCIA clause debate continues
• Saudi Arabia firmly on the map as key arbitration and dispute resolution hub
• New digital services and legal developments boost international arbitration usage in Qatar
• Egypt a ‘central hub’ for arbitration in the MENA region
• Investment disputes continue to drive international arbitration developments in Africa
• Southern African states form harmonised arbitration framework
• UK arbitration developments continue to enhance position as key dispute resolution jurisdiction
• French arbitration law evolves ahead of 2025 reforms
• Germany to become more attractive for international arbitration proceedings
• Singapore continues to rise as an international dispute resolution hub
• Continued improvements in international arbitration driven by new HKIAC rules and case law
• India continues work to modernise arbitration landscape
• Significant developments in Japan’s arbitration landscape
• South Korea strengthens international arbitration framework
• China continues to improve arbitration process efficiency and effectiveness
• Australian court rulings strengthen pro-arbitration stance and expand scope of arbitration
• Construction projects and contracts must consider sanctions risks
• New types of M&A disputes will drive up international arbitration cases
• Growing demand for expertise in cryptocurrency related arbitration in 2025
• Major changes crystallising in investor-state dispute settlement
• What the future holds for mediation in investor-state dispute settlement

Reasons given by SIDRA why mediation is not as popular as arbitration include “the limited track record of mediation” in the context of investor-state disputes, compared with arbitration. The confidentiality of mediations means that successful outcomes are not publicised and that there is therefore little information on how prevalent mediations are in this area. SIDRA also said that the risk of there being a perception of “impropriety”, given successful mediations would result in disputes being “settled behind closed doors”, could also dissuade parties from selecting mediation as a mechanism for resolving their disputes.

The opaque picture relating to use of mediation in investor-state disputes is also confirmed in an article published in July 2022 in the Journal of International Dispute Settlement. Prominent academics in the field of international arbitration highlighted just 13 ICSID conciliation cases either pending or concluded as of 8 April 2021. There were a further 11 cases in which conciliation was “attempted”. The academics said the data “does not include cases where a dispute may have settled amicably in the cooling-off period” as “no such reliable data exist” for this.

More recent data published by the International Centre for Settlement of Investment Disputes (ICSID), the leading institution globally for resolution of investor-state disputes, also highlights the issue.

ICSID’s latest caseload statistics, published in August 2024, revealed that 35% of all ICSID arbitrations concluded were settled or otherwise discontinued. Of that 35%, 11% of ICSID arbitrations were settled in an agreement embodied in an award and 51% of ICSID arbitrations were discontinued at the request of both parties. Some regions appear to have a substantial amount of settlements. For example in 2022, almost half of the cases involving states from the MENA region were settled or otherwise discontinued (20-page / 345KB PDF). However, the statistics do not reveal if the settlement or discontinuation of the claims resulted from a mediation of the dispute. In the ICSID system, as of 2024, only 14 cases out of 874 are conciliation cases.

Reform on the agenda

For years, a working group established under the umbrella of the UN Commission on International Trade Law (UNCITRAL) has been exploring potential reforms to ISDS. This process has brought concerns about the current arbitration-prevalent system to the surface, including in relation to the cost and duration of proceedings and around transparency.

The SIDRA survey reflects some of those concerns. According to its findings, the ability to use mediation was cited as a development that would improve ISDS by 62% of all respondents – and by 100% of the corporate executives and in-house counsel that participated.

For its part, the working group has been considering whether mediation or other dispute resolution mechanisms could be built into ISDS.

In the report from its 39th session, the working group noted that there was a “general interest” in pursuing further work on alternative dispute resolution (ADR) methods, including mediation, with a view to ensuring that these methods “could be more effectively used”. The working group, according to the report, highlighted “structural, legislative and policy impediments” to use of ADR in ISDS.

Options for encouraging mediation were discussed by the group, which tasked its secretariat to develop model clauses that would incentivise use of mediation before parties revert to arbitration. The secretariat was also invited to develop or adapt rules for mediation in the ISDS context and consider how model clauses promoting mediation or other ADR options could be “used in investment treaties or a potential multilateral instrument on ISDS reform”.

Asian states, including China and Thailand, are among those that have expressed their inclination for ADR to UNCITRAL’s working group on ISDS reform. China said (6-page / 215KB PDF) it “believes that the establishment of a more effective investment conciliation mechanism should be actively explored”.

Mediation rules

Steps to better support use of mediation under their auspices of prominent ISDS institutions have also been taken by the institutions themselves.

ICSID, for example, developed new Mediation Rules that took effect in 2022. These are specifically designed for mediation of investment matters involving states or regional economic integration organisations and their respective sub-divisions or agencies. Under the ICSID Mediation Rules, parties can institute mediation proceedings based on a prior party agreement. Parties that do not have a prior written agreement can institute mediation proceedings by filing a request with the ICSID Secretary-General.

Mediation provisions in international investment agreements

Some states have taken matters into their own hands in terms of making provision for mediation or conciliation in international investment agreements they have recently negotiated. UN Trade and Development (UNCTAD) has identified bilateral investment treaties agreed between Japan and Argentina, Japan and Armenia, Australia and Peru, and India and Belarus, as well as free trade agreements put in place between Singapore and Sri Lanka, and Central American countries and Korea, as examples of this. The Singapore-EU Investment Protection Agreement (IPA) is a further example, as is the EU-Vietnam IPA, currently being ratified by EU countries, as it provides for a comprehensive mediation mechanism.

This reflects a wider trend noted by ICSID.

In a July 2021 research paper (13-page / 272KB pdf), ICSID noted: “Over the past 25-30 years, there has been a gradual trend to expressly provide for amicable dispute resolution within disputes clauses. The last decade has seen an increase in the provision for mediation as a means of amicable dispute resolution”. ICSID noted that these amicable dispute resolution clauses range from those that mandate mediation through to those with an “amicable settlement period” that must elapse before a dispute can be referred to arbitration.

There is a tendency towards having mandatory conciliation or mediation provision in investment protection agreements (IPAs). This is, for example, reflected in recent IPAs entered into by the EU. The Singapore-EU Investment Protection Agreement (IPA) and the EU-Vietnam IPA, mentioned above provide for a mandatory mediation mechanism.

The views of investors

There is some support for mandating parties to ISDS cases to go through mediation before triggering arbitration proceedings. According to a 2020 study by Queen Mary University of London (QMUL) (32-page / 1.48MB PDF) regarding investors’ perceptions of ISDS, 63% of respondents said they considered the introduction of such a requirement favourably, with 30% of respondents “strongly favouring” the idea.

However, the QMUL said respondents had been “clear” that they are more positive about ISDS as it stands “as compared to other options such as government negotiation, direct negotiation between investors and states, mediation and litigation in the host state’s courts”.

The QMUL study also involved interviews with investors and their perceptions of mediation in the context of investment disputes. This revealed significant opposition to the idea of mandatory mediation in ISDS.

“An interviewee expressed the view that mediation was not appropriate for all investment disputes and should therefore be available on a voluntary basis to the parties,” the QMUL said in its study report. “This point was echoed by interviewees generally who said that mediation should not be forced upon the parties.” 

The question of whether mandatory mediation was also put to survey respondents. They were asked to rank, on a scale of zero to 10, what impact they believed mandatory mediation would have on the cost and duration of ISDS proceedings, with zero representing a substantial reduction in cost and duration and 10 representing a substantial increase.

The QMUL said: “Respondents believed that the introduction of mandatory mediation would lead to an increase on costs, with the majority of responses ranging between 6-10 (49%). This finding was confirmed by interviewees, who expressed their concerns over the introduction of mandatory mediation with respect to the potential increase of time and costs.”

The Corporate Counsel International Arbitration Group (CCIAG) supported the QMUL study. In a submission to the UNCITRAL working group on ISDS reform (22-page / 183KB PDF), it said ADR mechanisms “should be optional for disputing parties rather than a prerequisite to pursuing ISDS”, since it could result in a “waste of time and resources” in cases where both parties consider it unlikely that there would be resolution of their issues via mediation or conciliation.

The Singapore Convention

Even where mediation provisions are triggered, a challenge parties can face is enforcing any mediation settlement reached. This is because mediation falls outside the scope of the ICSID Convention and the New York Convention, which provides for the cross-border recognition and enforcement of foreign arbitral awards.

To address this problem, The UN Convention on International Settlement Agreements Resulting from Mediation – the so-called Singapore Convention – has been developed. It opened for signature in August 2019 and aims to provide reassurance that cross-border mediation outcomes will be recognised and enforced outside of the host jurisdiction.

Parties to a settlement agreement which has been signed in one country can enforce or invoke it in another country, provided the country in which enforcement is sought is a member of the Convention and the settlement agreement is within the Convention’s scope. To date, there are 57 signatories to the Convention but just 16 states have gone on to formally ratify it in their national frameworks.

In addition, there is a reservation provision built into article 8(1)(b) of the Convention that allows parties to adopt an opt-in approach whereby the Convention would only apply to the extent that the disputing parties agree to its application. Belarus, Georgia, Japan, Kazakhstan and Saudi Arabia are signatories that have exercised the article 8 reservation.

Some doubt has been expressed about the extent to which the Singapore Convention enables enforcement of mediation settlements in the context of investor-state disputes. This is because only international commercial settlement agreements resulting from mediation can be enforced under the Convention.

However, the UNCITRAL working group responsible for drafting the Convention set out its intention that the Convention apply to settlement agreements involving government entities. In 2015, it said (17-page / 207KB PDF): “It would not be desirable for the instrument to include a blanket exclusion of settlement agreements involving government entities as those entities also engaged in commercial activities and might seek to use conciliation to resolve disputes”.

Not every issue settled in mediation in ISDS cases may be enforceable under the Convention, however. In 2016, the working group said the instrument “would not have any impact or interfere with the public international law aspects of state liability or state immunity”.

Bahrain was the latest country to ratify the Convention, with its implementing legislating entering into force on 17August 2025. The UK is one of the signatories to the Convention that is still to ratify, though it has pledged to do so.

The future

As more treaties include mandatory mediation, we will see an uptick in mediation in investor-state dispute settlement, particularly against Asian states where support for mediation mechanisms appears strongest. From an investors’ perspective, mediation could be a useful option in certain disputes, but they will oppose attempts to make engaging in mediation a prior condition for instituting arbitration proceedings.

Co-written by Johanne Brocas of Pinsent Masons.