CHALLENGES OF ARBITRATION AS A METHOD OF INVESTMENT DISPUTE SETTLEMENT

Abstract

The purpose of the paper is to question the challenges of arbitration as a method for 
settlement of foreign direct investment disputes and to provide answers to several important 
questions, such as: defining the challenges of the concept as an alternative to domestic courts 
decisions, determining its outline, explaining the basic advantages and disadvantages of 
arbitration, analyzing the arbitration systems and their features, the enforcement mechanisms, 
the way to reform the investor-state dispute settlement, arbitration institutions in the Western 
Balkan and the challenges of investment arbitration in North Macedonia. It discusses the legal 
remedies available to foreign investors if state conduct breaches those standards. The default 
rule usually is that the investor must bring the case to national courts in the host state. However, 
many states have allowed investors to bring disputes to international arbitration instead of (or 
in addition to) national courts, as part of strategies to promote foreign investment. In the paper 
is discussed the concept of arbitration as a procedure whereby both sides to a dispute agree to 
let a designated third party, the arbitrator or the arbitral tribunal, decide the outcome of a legal 
dispute. Arbitration serves a purpose of advancing the collaboration of the disputing parties, 
with an ultimate objective of effective and efficient settlement of legal issues. It explores 
dispute settlement in international investment law, evaluating the criticisms that it is 
undemocratic and non-transparent and at the same time seen as a major advantage to foreign 
firms because it ensures fairness and confidentiality. Use of investor-state arbitration has 
increased sharply since the late 1990s. By the end of 2014, there were over 600 known cases 
of international arbitration under investment treaties; while up to the year 2000, this number 
was below 50. Choosing arbitrators, as well as the desired characteristics of an arbitrator is an 
important step in any international arbitration. It will be reviewed the claim that the common 
practice in international arbitration is that disputes are decided by a three-arbitrator panel.  The 
advantages of arbitration over conventional litigation are numerous and cover issues such as: 
highly-qualified arbitrators, better ratio cost and result, less adversarial system and 
confidentiality of the procedure. In general, it could be made difference between 2 arbitration 
systems: ad-hoc and institutional which is furtherly explained in this paper. One important 
difference of the available arbitration systems is in regards to the enforcement mechanism. For 
that purpose are being compared the enforcement mechanisms under the ICSID and under the 
1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 
Moreover, the reforming initiatives for investor-state dispute settlement are being presented. 
Next, arbitration institutions in the Western Balkan are being previewed. 
Finally, the challenges of investment arbitration in North Macedonia are being 
presented.