Yi Du
The legitimacy crisis of the traditional investor–state dispute settlement (ISDS) system has intensified due to concerns over imbalanced protection of investors and host states, inconsistent arbitral decisions, prolonged proceedings, high costs, and the adversarial nature of arbitration. Against this background, mediation has emerged as an important direction in the reform of international investment dispute settlement because of its flexibility, procedural efficiency, confidentiality, and capacity to preserve long-term cooperative relationships. This article examines the institutional role of the International Organization for Mediation (IOMed) in promoting the development of international investment mediation. Using doctrinal legal analysis and institutional comparison, it evaluates the limitations of arbitration-centered dispute resolution and identifies the distinctive advantages of IOMed in terms of specialized resource allocation, intergovernmental legitimacy, consensus-oriented dispute resolution culture, and institutional innovation. The analysis shows that IOMed has the potential to transform mediation from a supplementary mechanism into a more independent and institutionalized means of resolving international investment disputes. Nevertheless, its future effectiveness will depend on addressing several challenges, including the cross-border enforceability of mediated settlement agreements, the tension between confidentiality and transparency, mediator neutrality, and the establishment of broad international credibility. The article argues that these difficulties should be addressed through the gradual development of enforcement arrangements, differentiated transparency rules, professional and geographically diverse mediator panels, and stronger cooperation with existing international dispute settlement institutions. The development of IOMed may contribute to a more balanced, efficient, cooperative, and sustainable framework for international investment governance.