Investment arbitration is a dispute settlement procedure between a sovereign State and a foreign investor.
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:
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:
Despite their generic formulation, international law gives each of these standards of protection a specific technical meaning.
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.
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: