New Developments in the Exhaustion of Local Remedies under ISDS Reform: A Perspective from India’s BIT Model

From the late 19th century to the 1980s, the application of the exhaustion of local remedies in international investment dispute resolution evolved from mandatory to optional. This shift is closely linked to economic globalization, investment liberalization, and developments in international investment dispute resolution. Recent challenges to the legitimacy of the Investor-State Dispute Settlement (ISDS) and changes in investment governance have spurred reforms in dispute resolution mechanisms, reviving the concept of exhausting local remedies. Notably, India’s 2015 Bilateral Investment Treaties (BIT) model mandates that investors must exhaust local remedies before pursuing international arbitration. This innovative practice enhances the credibility of the host country’s legal system, encourages local institutions to improve their capacity to handle investment disputes, and promotes a more balanced development of international investment law. These developments not only boost investor confidence in the host country’s judiciary and support its economic growth but also provide valuable insights for the further refinement of international investment law.