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Although the precise date is debatable, it has been about 20 years since investment treaty arbitration became a real subject of professional practice. Investment protection treaties have been around substantially longer – the first was signed by Pakistan and Germany in 1959. And the possibility of mandatory investor–state arbitration arrived about 10 years later, first in French treaty practice and then elsewhere. But then there was silence, perhaps unsurprisingly given the lack of fanfare with which these novel international legal instruments began slowly to proliferate around the world.

One might say that the specialism was born in 1987, with the launch of the first arbitral procedure based on an investment treaty, AAPL v. Sri Lanka.[2] But that case, which arose out of overzealous government raids on suspected Tamil Tiger hideouts, seemed at the time like a fascinating but isolated point of trivia. There was no doubt, however, that this was revolutionary: a private investor advancing claims in its own name against a host state for the breach of enumerated substantive standards of treatment. In AAPL, the Sri Lankan government’s indiscriminate destruction of private property in the name of national security was found to have violated its international obligation to protect and secure qualifying investments. The arbitration also cast light on the International Centre for the Settlement of Investment Disputes (ICSID), an institution founded on a multilateral convention within the World Bank framework specifically to resolve investor–state disputes. But the institution had been a mere footnote in arbitration throughout the 1970s and 1980s, used only occasionally in the state contracts that had served until 1987 as the sole basis for ICSID jurisdiction. Six years passed after the start of the AAPL case without a single investment treaty arbitration. Incidentally, the second bilateral investment treaty arbitration, AMT v. Zaire,[3] also dealt with harm wrought on private property by government forces in times of civil conflict. This too may have contributed to the sense that investment treaty arbitration was only a narrow (and perhaps temporary) deviation from the norm of contractual and state-to-state procedures.

Only a handful of arbitrations were initiated each year based on investment treaties throughout the 1990s. The subject matter was broad, the geography scattered. Because the procedures were lengthy, very few awards were rendered in that decade, and the literature on the subject was sparse and largely theoretical. Even then there were the beginnings of a policy debate about the tension between public interest and private rights. The Loewen v. United States[4] and Methanex v. United States[5] cases focused US public attention on the investment chapter of the North American Free Trade Agreement, which, until the US was sued, had been seen as a trade treaty for the benefit of US interests. Now journalists and lawmakers raised the alarm: ‘secret’ tribunals set up at the behest of foreign companies were going to second-guess US court decisions and environmental regulations. This was a ‘brave new world’ indeed!

It was probably the Argentine financial crisis of 2001 that gave rise to investment treaty arbitration as a true practice specialty for lawyers. Dozens of cases were brought against Argentina for ‘pesification’ and other remedial measures implemented to revitalise an economy in total meltdown, measures that effectively shifted value from foreign infrastructure and utility owners to locally owned industry and agriculture. And in almost all these disputes, arbitral tribunals held the state to have fallen short of its promises in applicable investment treaties, whether by unfair treatment, de facto expropriation without compensation or otherwise. Hundreds of millions of dollars were awarded against Argentina, proving the efficacy of these instruments to obtain real compensation from a sovereign state. It was in these disputes that many of the first generation of future specialists learned their trade (mostly on the claimant side, as Argentina did not hire outside counsel), inventing the practice as they went along as much as learning it, given the dearth of authority and established custom. These pioneering lawyers went on to advise other clients (now both private and public) in other countries with other problems. Then came successive waves of new claims: the Yukos debacle in Russia, energy nationalism in Bolivia and Peru, nationalisations in Venezuela, and protectionism and arbitrary regulation in Eastern Europe. Troublesome situations like these had arisen before, but never had they resulted in such a direct and visible response from private investors, in the form of binding arbitration against the relevant states.

At the beginning of the 2000s, the very existence of investment protection treaties was known only to a very select few. By the end of the first decade of the 21st century, they had become part of the international lawyer’s standard toolkit. Tax optimisation advice for structuring transactions in high-risk jurisdictions now came paired with arbitration specialists’ views on the best investment vehicles to attract treaty protection against political risk. An expertise that had previously been the bailiwick of a few elite law firms, primarily based in London and Paris, spread quickly to firms across the world, to individual practitioners and scholars. And while even today the absolute number of investor–state arbitration cases remains miniscule when compared to the tens of thousands of commercial arbitrations launched each year, in relative terms the growth has been striking, and the cases, unlike in commercial arbitration, have usually played out in the public domain, thus drawing additional scrutiny. Now ICSID alone often registers more than 50 cases a year and saw a record 58 new cases in 2020. That number probably rises to 100 or more when considering ad hoc, International Chamber of Commerce, Stockholm Chamber of Commerce and Singapore International Arbitration Centre investor–state cases.

For the practitioner, each of those new cases is a world unto itself, with unique facts, economic realities, arbitrator and counsel combinations, historical and political background, and legal problems. Taken together, the solutions that parties, lawyers and arbitrators together forge in these diverse situations gradually create a legal practice. This is not a world of theory, nor of normative judgement. It is simply the particular (and at times, peculiar) way things are done in this once-obscure realm at the crossroads of private and public international law.

Over the past two decades, a thick literature has sprung up in this field, with exceptional volumes by remarkable commentators. But no comprehensive attempt has yet been made to describe the practice of investment treaty arbitration – from start to finish, from the moment an investment treaty is negotiated, or an investor structures an investment to bring it within its reach, all the way to when an investor (or funder) seeks to collect on its award, and with a glance to the future. That is what we and our contributors have sought to do in this volume. Building on the approach and format of the other Global Arbitration Review Guides, we have selected representatives of the main stakeholders to create a practical handbook on investment treaty protection and enforcement. Investors, states, counsel, arbitrators, experts and litigation funders – each has its own point of view and lived experience, which together we now rightly call the practice of investment treaty arbitration.

This practical guide to the life cycle of investment treaty protection and enforcement begins with the state’s perspective because the origin of treaties lies inevitably in government hands. The authors canvass the negotiation of treaties and the balancing of regulatory discretion and investment stability in the negotiation calculus. The debate continues with respect to the real motivation of government actors in concluding these agreements, considering the extent to which that has evolved in recent years. The questions as to when and how in practice states modify and even terminate investment protection treaties in response to changing circumstances and political expediency are also addressed.

The next part covers the pre-dispute stage of the investment life cycle, which businesses and governments alike hope will be the only stage. Successful strategies for structuring investments to gain the protection of investment treaties are explained, as are useful practices to build the foundations for a solid claim should the state adopt adverse measures. Also covered is the financing of investor–state arbitrations, with a focus on third-party funding from both the investor and state perspectives. The constitution of the tribunal closes out this second section.

The largest part of the volume is dedicated to the actual conduct of arbitration in terms of procedure, jurisdiction, substantive standards of protection and the quantification of damages. Our contributors have sought to bring a balanced view of these wide-ranging topics with a practical focus. The idea is not to present a comprehensive analysis of prior decisions, but to shed some light on the way arbitrators in these cases approach the issues and adjudicate in reality. Within this part we have included an extensive chapter assessing the ways in which investor–state arbitration is dealing with societal challenges such as climate change and human rights, and how this is impacting private and public parties in investment disputes today. The book concludes with several chapters on the role of national courts in the investment arbitration process, and the end-game through annulment and enforcement proceedings.

We have gathered for this project a roster of contributors that is as diverse as it is accomplished. Our book benefits from the views of government lawyers, financial experts, financiers and private counsel from Asia, Africa and South America, as well as from Europe and North America. This is the future of arbitration. In the meantime, the perspectives of a diverse range of backgrounds and cultures will make this volume richer and more useful to its readers. The book also benefits enormously from commentary provided by some 13 senior arbitrators and commentators, who have provided their own insights into the practice of investor–state arbitration today, which have been incorporated into the relevant chapters.

Lastly, we would like to thank the staff of Global Arbitration Review, starting with David Samuels with whom we first collaborated in the development of the GAR Investment Treaty Know-How series in 2012 and who inspired us earlier this year to develop a practical and authoritative guide to investment treaty arbitration. Our gratitude must also be expressed to the GAR management and editorial staff, including Mahnaz Arta, Hannah Higgins, Jack Levy, Grace Middleton and Georgia Goldberg, whose dedication and persistence helped us realise our collective ambition within a period of only 12 months from its inception to publication, which is quite remarkable in the circumstances. We would also like to thank our law firm colleagues, especially Ananya Mitra and Sharon Tang of Dechert LLP’s Singapore arbitration team, who assisted with the development and management of the book.

This has been a rewarding project for us, and we hope that the final product will assist our colleagues already ensconced in the practice of investment treaty arbitration, and guide those just starting their careers in this ever-changing, challenging and ultimately fascinating area of law.


[1] Mark Mangan is a partner at Dechert LLP and Noah Rubins KC is a partner at Freshfields Bruckhaus Deringer LLP.

[2] Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3.

[3] American Manufacturing & Trading, Inc. v. Republic of Zaire, ICSID Case No. ARB/93/1.

[4] Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No. ARB(AF)/98/3.

[5] Methanex Corporation v. United States of America, UNCITRAL.

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