Investor-state dispute settlement mechanism aims to protect foreign investment and settle the investment disputes in a neutral way. In practice, multinational corporations use ISDS to challenge policy measures of host states, and ISDS was considered to have several faults. As a result, several states do not incorporate this mechanism in their treaty practice including Australia. To reform the ISDS, we may set up appellate body, permanent international investment court and incorporate ADRs. China may take similar measures to the dispute settlement practice of Shanghai pilot FTZ.