<![CDATA[Abstract The origin of Investor-State Dispute Settlement (ISDS) is an attempt to eliminate political aspects (depoliticization) in resolving investment disputes. Previously, the settlement of investment disputes was carried out through State-State Dispute Settlement (SSDS) mechanism. The implementation of ISDS relatively marks the end of exhaustion of local remedies’s principle (ELR). As customary international law, the ELR principle requires foreign national whose rights are violated to take local remedies. This research used juridical-normative and comparative method. Based on the specifications, this research is descriptive-analytical. In response to ISDS’s problem, third world countries such as Indonesia, India, Brazil, and South Africa drafted new Bilateral Investment Treaty (BIT) model, specifically the ISDS clause. The ELR principle is adopted by India and South Africa. While Brazil and South Africa employ SSA mechanism, instead of ISA. Even India facilitates an appeal mechanism based on separate international agreement. Meanwhile, instead of reforming by applying the ELR principle, Indonesia has only strengthened alternative dispute resolution while also facilitating the ISA. Thus, Indonesia has not fully anticipated the ISDS legitimacy crisis and, therefore, has the potential to receive lawsuits from investors that could be detrimental, both to national regulations and state finance. Abstrak Latar belakang kemunculan ISDS adalah upaya penghilangan aspek politis (depolitisasi) dalam penyelesaian sengketa investasi. Sebelumnya, penyelesaian sengketa investasi ditempuh melalui mekanisme State-State Dispute Settlement (SSDS). Implementasi ISDS relatif menandai berakhinya prinsip exhaustion of local remedies/ELR. Sebagai hukum kebiasaan internasional, prinsip ELR mensyaratkan pihak asing yang hak-haknya dilanggar untuk menempuh peradilan lokal terlebih dahulu. Metode pendekatan yang digunakan dalam penelitian ini adalah yuridis normatif dan komparatif. Berdasarkan spesifikasinya, penelitian ini bersifat deskriptif analitis. Merespon krisis ISDS, negara-negara dunia ketiga seperti Indonesia, India, Brazil dan Afrika Selatan menyusun model Perjanjian Investasi Bilateral (BIT), khususnya klausul ISDS baru. Prinsip ELR kembali digunakan oleh India dan Afrika Selatan, sementara Brazil dan Afrika Selatan menerapkan mekanisme SSA, alih-alih ISA. India bahkan membuka peluang bagi diterapkannya upaya banding berdasarkan perjanjian internasional secara terpisah. Sementara, alih-alih reformis dengan menerapkan prinsip ELR, Indonesia hanya memperkuat alternatif penyelesaian sengketa seraya tetap memfasilitasi ISA. Dengan demikian, Indonesia belum sepenuhnya mengantisipasi krisis legitimasi ISDS dan, karenanya, berpotensi menerima gugatan dari investor yang dapat merugikan, baik terhadap regulasi nasional maupun secara finansial.]]>
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