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IISD Best Practices Series: Security for Costs

Security for costs is an issue attracting more and more attention in investor-state dispute settlement (ISDS), as states look for ways to manage the very high costs to their taxpayers of responding to ISDS cases.

Security for costs is an order made by the tribunal requiring the investor bringing the claim to pay a deposit to cover the state’s expected costs in defending itself. It is increasingly in the spotlight, especially in the context of increased use of third-party funding in ISDS.

This Best Practices brief outlines why states would want to obtain an order for security of costs and the challenges they face in obtaining such orders. It explains the limited guidance on the issue of security for costs in arbitral rules and treaties and the fact that tribunals have, as a result, been free to establish a very high threshold for granting it. It also provides recommended treaty language on the issue of security for costs that can be used to overcome the challenges outlined in the brief.