A procedural mechanism that allows an investor from one country to bring arbitral proceedings directly against the country in which it has invested.

ISDS provisions are contained in many international agreements including free trade agreements, bilateral investment treaties, multilateral investment agreements, national investment laws, and investment contracts. If an investor from one country (the "home state") invests in another country (the "host state"), both of which have agreed to ISDS, and the host state violates the rights granted to the investor under public international law (such as the right not to have property expropriated without prompt, adequate, and effective compensation), then that investor may sue the host state in neutral arbitration rather than in the domestic courts of the host state.

Although ISDS is invoked as a catch-all term, there are a wide variety of differences in scope and process. ISDS provisions are intended to avoid state-to-state conflict, protect citizens abroad, and signal to potential investors that the rule of law will be respected. Without ISDS provisions, to enforce its rights, an investor would normally need to seek the intervention of the government of its home state.