Investment Treaties between Developed States: The Dilemma of Dispute Resolution

Abstract

This paper examines three basic models for resolving investment disputes between developed countries: (1) allowing investors to bring direct claims against host governments without exhausting their remedies in domestic courts as in NAFTA Chapter 11; (2) prohibiting direct investor claims and allowing only state-to-state dispute resolution as in the Australia-U.S. Free Trade Agreement; and (3) allowing arbitration of direct investor claims only after exhaustion of domestic remedies as in the Hong Kong-U.K. Bilateral Investment Treaty. The paper argues that the third option is worth serious consideration.