2025 in Review: ISDS Reforms in Review

2025 was an intensive year for the United Nations Commission on International Trade Law (“UNCITRAL”) Working Group III (“Working Group”), with deliberations and review in full swing. Building on the momentum of 2024, 2025 advanced the Working Group's investor-State dispute settlement (“ISDS”) reform agenda mainly by reviewing draft provisions. Below is a summary of the Working Group's key progress in 2025 and related Kluwer Arbitration Blog coverage.

An Overview of Working Group Progress in 2025

In 2025, the Working Group held three formal sessions, the 9th intersessional meeting, and two Advisory Centre operationalization meetings. Having received prior submission of written comments, the 50th session in January, as contemplated during the 49th session, continued the review work on the procedural and cross-cutting issues and standing mechanism (see A/CN.9/WG.III/WP.244 and A/CN.9/WGIII/WP.245).

The 51st session, split into the first part in February and the second in April 2025, dedicated the second part to advancing deliberations on the same drafts on the standing mechanism and the procedural and cross-cutting issues. The Working Group’s 52nd session in September and the 9th intersessional meeting in Santiago in November 2025 further facilitated this review.

The first part of the 51st session, in the meantime, discussed operationalization of the Advisory Centre on International Investment Dispute Resolution (“Advisory Centre”), as previously agreed at the 57th session of the UNCITRAL Commission (see prior post). The Working Group additionally discussed the draft multilateral instrument on ISDS reform (“MIIR”) (see A/CN.9/WG.III/WP.246), reviewing the proposed texts of articles.

In July 2025, the UNCITRAL Commission, at its 58th session, adopted the UNCITRAL Toolkit on Prevention and Mitigation of International Investment Disputes (“Toolkit”). The Commission further considered the operationalization of the Advisory Centre; and decided to recommend extending additional conference resources to the Working Group Secretariat (“Secretariat”) through 2027 (see A/CN.9/1217).

The sections below set out some detailed points discussed in relation to each of these reform options.

Draft Provisions on Procedural and Cross-Cutting Issues

The Working Group examined draft procedural and cross-cutting provisions intended to supplement the UNCITRAL Arbitration Rules (“UARs”) and to be presented to the Commission, while also considering their possible conversion into treaty provisions or application in current practice and a standing mechanism (see A/CN.9/1195, para. 22). The Working Group reiterated the importance of procedural reform in addressing its identified concerns and emphasized the need to modernize and update the procedural framework governing ISDS through inclusive and comprehensive reforms (see A/CN.9/1195, paras. 17, 43).

The discussions on these draft provisions addressed a wide range of matters to improve the efficiency, transparency, consistency, and cost-effectiveness of investment dispute proceedings. Specifically, they concerned evidence, bifurcation, interim/provisional measures, and manifest lack of legal merit/early dismissal (i.e., draft provisions 1-4); local remedies, waiver of rights to initiate dispute resolution proceedings, limitation period, denial of benefits, shareholder claims, and right to regulate (i.e., draft provisions 14-19); security for costs, suspension and termination of proceedings, and period of time for making awards (i.e., draft provisions 5-8); and third-party funding, shareholder claims, right to regulate, assessment of damages and compensation, and implementation of the draft provisions (i.e., draft provisions 12 and 12bis, 18-20).

While opinions varied on several topics, delegations found common ground on, inter alia, examples of issues appropriate for bifurcation, such as the assessment of damages (see A/CN.9/1195, para. 45) and whether the Tribunal should be permitted to take decisions on certain issues on its own initiative (see A/CN.9/1195, paras. 55, 62, 65). Several draft provisions remained unchanged after discussion, many of which replicated UARs, as the Working Group agreed that draft provisions identical to the UARs “should be retained” to the extent that no deviation was desired (see A/CN.9/1195, paras. 15, 22).

Draft Provisions of a Standing Mechanism

The draft statute establishing a standing mechanism to resolve international investment disputes remained another central focus throughout 2025. It was simultaneously reiterated that participation in these discussions did not affect States’ views on the desirability, possible models, or potential participation in a standing mechanism.

Divergent views emerged on institutional design, including governance structures and design, appointment and removal mechanisms, case management procedures, and the relationship between a potential first-tier mechanism and an appellate mechanism. Regarding the selection and appointment of Tribunal and Appeals Tribunal members (see Articles 10-13, 18-21, 27-33), it was widely felt that States should have a vote in each Tribunal to which they are a party, and that elections should generally occur among candidates from each regional group (see A/CN.9/1195, para. 80). There was also general support for a longer, non-renewable term of office to ensure independence and impartiality (see A/CN.9/1195, paras. 89-91).

In response, Oguzhan Samanci and Shay Lakhter addressed whether this standing mechanism, staffed by permanent adjudicators who are selected only by States and randomly assigned to disputes, adequately responds to concerns about arbitrator legitimacy in investment dispute resolution. The authors, reporting on the most recent UNCITRAL Working Group III note on the standing mechanism member selection and appointment, explained how it outlines candidate eligibility requirements, which include independence and recognized competence in the field of public international law. The authors presented that the additionally proposed requirements that include government or judicial experience could “considerably restrict the pool of potential candidates” (referencing a previous post). They contrasted this State-only selection with traditional three-member tribunals, where bilateral appointment creates a “balanced” system ensuring panels “are not prone to systematically decide in favour of one group of parties rather than the other.” Drawing a parallel to sports arbitration, they observed that the standing mechanism could shift the focus to a structural design which potentially favours States instead of investors (referencing a previous post) and ultimately question whether the standing mechanism approach, which they found “unfortunate,” genuinely enhances legitimacy for both States and investors. Samanci and Lakhter concluded that whether the selection process for the standing mechanism adjudicators enhances the legitimacy of ISDS hinges on how “legitimacy” is viewed.

Konstantin Ksenofontov and Elena Murashko, in the same vein, commented on the discussion surrounding the standing mechanism. Focusing specifically on diversity in the selection and appointment of members of the standing mechanism, they noted that the draft statute establishing a standing mechanism to resolve international investment disputes (“draft statute”) adheres to the existing model emphasizing the “merit” of prospective candidates, but goes beyond the “meritocratic” model by recognizing that diversity factors shall also be considered in the appointment process. At the same time, Ksenofontov and Murashko criticized the draft statute’s failure to address arbitrator bias and its State-centric design. Echoing the concerns raised by Samanci and Lakhter, they pointed out that granting States exclusive nomination power while excluding investors risks creating a pro-State systemic bias, and that a careful balance must be struck to ensure a neutral forum for ISDS.

With respect to the Working Group, pursuant to the widely shared aim of delivering and recommending concrete reform options to the Commission at its 59th session in 2026, the Secretariat prepared separate draft statutes for a first-tier standing mechanism and an appellate standing mechanism to facilitate focused discussions on both levels of the proposed institutional reform. These are scheduled for discussion at the Working Group’s 54th session in March 2026.

Draft Multilateral Instrument on ISDS Reform

On the draft MIIR, similar to its work on the procedural and cross-cutting issues and standing mechanism, the Working Group reviewed the draft convention proposed by the Secretariat, which included issues of entry into force, reservations, and denunciation (see Articles 5-11). The discussions aimed at considering how to transform them into treaty provisions or make them applicable to existing investment agreements and to proceedings under other arbitration rules through the MIIR.

Advisory Centre Operationalization Meetings

Following the adoption in principle of the Statute of the Advisory Centre at the 57th Session of the UNCITRAL Commission in 2024, 2025 saw progress on operationalization. The operationalization work in 2025, building on the first meeting in Bangkok (December 2024), addressed key practical issues necessary to establish the Advisory Centre, but without taking any decisions (see A/CN.9/1196, para. 20).

The second and third Advisory Centre operationalization meetings, respectively in Armenia and France, enabled active dialogue in moving from conceptual agreement to practical implementation. The second meeting focused on establishing the Advisory Centre within the United Nations system as a related organization or a specialized agency (see A/CN.9/1196, para. 21), criteria to determine the location of the headquarters and regional offices, anticipated budget based on potential membership and workload, methods of payment and contribution amounts by Members, thresholds for entry into force, and classification of the members of the Advisory Centre. The third meeting discussed the practical implementation aspects of the Advisory Centre, including budget considerations, governance structures, and the criteria for establishing regional offices. Additional operationalization meetings will follow, pursuant to the UNCITRAL Commission’s mandate, to address key implementation issues.

Prevention and Mitigation Toolkit

Another notable development in 2025 was the finalization and adoption by the Commission of the UNCITRAL Toolkit. This Toolkit is a non-prescriptive document subject to updates (A/80/17, para. 141) and would serve as a practical resource for States and other stakeholders involved in ISDS in preventing and managing investment disputes. The Toolkit will be published in six United Nations languages (A/80/17, paras. 146-47).

Conclusion

2025 can be characterized as a year of sustained momentum on ISDS reform as meaningful and concrete steps forward were taken (e.g., the Toolkit, continued operationalization of the Advisory Centre, advancement of the standing mechanism proposals, and refinement of procedural and cross-cutting issues). The active review of draft provisions and statutes will continue in 2026.

Most recently, at its 53rd session in January 2026, the Working Group further considered draft provisions on procedural and cross-cutting issues, including allocation of costs, counterclaim, the form and implementation of the draft provisions, consolidation and coordination of arbitrations, third-party funding, submissions by a non-disputing Treaty Party, and amicable settlement. With the goal of presenting concrete reform options to the Commission at its fifty-ninth session, the Working Group’s foundation, laid in 2025, would facilitate the reform process for potential finalization of key elements. The extension of additional resources through 2027 would further provide the necessary support for this reform agenda, though questions remain about how the work will continue beyond that period and how discussions will conclude, especially given the challenges in reaching agreements. Regardless, the reform process continues to demonstrate that achieving complex systemic reform requires sustained effort and inclusive participation as discussions move into the next critical phase.