Wonders & Co SLP

Investment arbitration

What is investment arbitration?

Investment arbitration is a dispute settlement procedure between a sovereign State and a foreign investor.

What are the international investment agreements? 

Investment agreements are international treaties that aim to create a stable legal framework for foreign investment. There are currently some 2,500 investment agreements in force worldwide.

Investment agreements can take various forms. The most common are bilateral investment treaties (known as BITs). Other frequent investment agreements are the following:

  • free trade agreements, which can be multilateral (such as USMCA, CAFTA, etc.) or bilateral, and
  • multilateral sectoral agreements (such as the Energy Charter Treaty).

What protection do investment agreements offer to a foreign investor?

Investment agreements contain clauses whereby the State receiving the investment undertakes to treat and protect it in accordance with certain standards of international law.

The substantive protections enjoyed by the foreign investor depend on the particular international agreement that applies. The most common protections afforded to foreign investors are the following:

  • prohibition of expropriation, nationalisation or equivalent measures, unless taken for reasons of public interest and upon payment of prompt, adequate and effective compensation
    prohibition of arbitrary or discriminatory measures
  • fair and equitable treatment
  • full protection and security
  • national treatment: the foreign investor and its investment must be treated no less favourably than nationals and their investments
  • most-favoured-nation treatment: the foreign investor and its investment must be treated no less favourably than investors of any other country
  • right to free transfer of capital, profits and other investment-related payments
  • duty to fulfil the contractual obligations entered into with the investor by the host State of the investment

Despite their generic formulation, international law gives each of these standards of protection a specific technical meaning.


What happens if a State breaches these standards of protection?

Investment agreements provide mechanisms for the foreign investor to hold the host State liable if it breaches its obligations under the treaty. The most common solution is for the investor to submit its claim to an international arbitral tribunal, initiating an investment arbitration.

Arbitration allows the foreign investor to bypass domestic courts and access independent and highly qualified arbitrators, who will resolve its claim in accordance with the protections afforded by international law.

Which institutions administer investment arbitration?

Often the investor can choose, among the options offered by the investment agreement, the institution to which it entrusts the administration of the arbitration. The most common alternatives are the following:


Wonders&Co has extensive experience in arbitration proceedings at ICSID and the PCA as well as under the UNCITRAL Arbitration Rules.

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