Re-thinking the requirement of making an investment in accordance with domestic laws as a substantive right and a cause of action for host states under the BITs

Abstract

This paper challenges one of the most traditional notions in international investment arbitration, which is that host states don’t have any substantive rights under the BIT’s framework. This work’s thesis is that the current BIT framework actually grants the host state a substantive right, and therefore a cause of action in the investment arbitration system. This right emanates from the requirement that the investment must be in accordance with the host state’s law. The paper explains that there’s a line of both BITs and ICSID cases that hold the requirement of compliance with the host state’s laws as autonomous, and that this autonomy imports a substantive right for the host states grounded solely in the BITs. This idea is also supported by the spirit and objectives of both the ICSID Convention and the BITs.