Investor-state conflicts before ISDS: Evidence from the Swiss & German archives (1959-1989)

Over the past 30 years, treaty-based Investor-State Dispute Settlement (ISDS) has become one of the main ways to settle disputes between investors and host states. Although scholars have tried to empirically measure the expected effects of a ‘Future without (Treaty-Based) ISDS,’ history can also shed light on this question. It is well known that in the past, several legal and political tools were available to deal with investor-state disputes, such as recourse to lump-sum agreements, diplomatic protection, etc. One question has not yet been answered: how are investor-state disputes mediated when a bilateral investment treaty (BIT) exists between two states, but without an ISDS clause? Although it has been convincingly shown how and why several capital-exporting states included ISDS clauses in their BITs during the 1960s and 1970s, outliers exist. (West-)Germany and Switzerland were, besides for the first countries to start negotiating BITs, also among the last capital-exporting states to include ISDS clauses in their Model BITs, doing so respectively in the early and late 1980s. As a result, both countries have concluded dozens of BITs that only include state-state dispute settlement clauses. In this paper, I describe how investor conflicts based on these ‘non-ISDS BITs’ were dealt with by the Swiss and German government during the period 1959-1989, using archival records of the ministries involved in the negotiation of BITs in Germany and Switzerland. These records, which refer to investor conflicts in countries such as Iran or Ecuador, not only reveal how such conflicts were mediated, but also show how a future without treaty-based ISDS could look like.