With annual inflows exceeding $1.2 trillion, foreign direct investment is fundamental to the global economy. It contributes to economic growth, better business practices, trade integration, and accounts as the largest source of external capital for developing countries.

Despite this significance, foreign investment disputes lack a centralized resolution mechanism such as the World Trade Organization. In addition, controversy over the private enforcement process called “investor-state dispute settlement” (ISDS) has undermined support for trade agreements and exposed institutional deficiencies in the international investment regime, which has grown exponentially over the past 25 years.

To address these concerns, the European Commission has recently finalized a proposal for an ­international investment court to gradually replace ISDS. The proposed court system contains features that include independent judges, an appeal tribunal and transparency. This proposal could lay the foundation for a system that replaces ISDS in all international investment agreements, such the proposed Transatlantic Trade and Investment Partnership.