Investment Treaties Research Articles

How bilateral investment treaties affect cross-border mergers and acquisitions: Novel evidence from China's internationalization

How bilateral investment treaties affect cross-border mergers and acquisitions: Novel evidence from China's internationalization

Does the Indian Diaspora Work as a Strategic Asset for the Indian Economy? An Empirical Investigation

International migration plays a vital role in attracting foreign direct investment to their respective host countries and channeling remittances to their home country. Remittances from the diaspora contribute to the circular flow of money in the economy and increase aggregate demand along with economic growth. The present study examines the role of the Indian diaspora in the growth of outward foreign direct investment (OFDI) to the host countries and the contribution of international remittances to the economic growth of home country, that is, India. The study developed two models, first, considering Indian OFDI and the role of the diaspora and bilateral investment treaties covering 35 OECD host countries. Using FMOLS regression, a positive and significant impact of diaspora and bilateral investment treaties is found on OFDI growth in India. Moreover, in the second model, the study found that the international remittances sent by the diaspora to their home country are contributing to the economic growth of India. The study recommends that active policymakers in India should deliberate on the effective management of international migration and develop initiatives for strengthening the social networks between India and the host countries.

The Protection of Crypto-Assets in International Investment Law

Abstract The recent spate of regulatory intervention in the crypto-industry suggests it is only a matter of time before investment treaty claims concerning crypto-assets emerge. Crypto-assets today represent immense economic value, but many are traded for pure financial speculation. As such, there is clear tension between international investment law and the nature of these cryptocurrencies as assets capable of treaty protection. Several questions emerge: how can decentralised assets be localised in a State's territory? Can (and should) States be liable to protect investors holding speculative assets, with a remote economic contribution, from State regulation? Is international investment law equipped to address the challenges to the conventional boundaries of jurisdiction and merits that these assets will provoke? To answer these questions, this article envisages a hypothetical crypto-exchange on which crypto-assets are traded worldwide. A hypothetical investor seeks to bring a claim against a State for regulating the exchange, but their only ‘investment’ is the crypto-tokens hosted on the exchange. Through this hypothetical, the article explores the legal and economic materialisation of a crypto ‘investment’, and highlights its relevance for substantive questions of expropriation and fair and equitable treatment (FET). It also contends that traditionally flexible notions of ‘territory’ for financial instruments are unsuitable for crypto-assets, advocating a return to private international law instead. This article situates the immense potential of crypto-assets within the competing concerns of States’ newer investment treaties. Accordingly, it identifies the characteristics of value-generating crypto-assets that should be protected under international investment law.

Phasing Out Coal Investment Contracts: Does Just Transition Finance Legitimize Unjust Compensation?

Abstract By locking States in a long-term carbon-intensive trajectory that contradicts international climate change mitigation efforts, coal power purchase agreements (PPAs) and related investment contracts pose a significant obstacle to the just energy transition. Just Energy Transition Partnerships (JETPs) aim to mobilize public and private finance to accelerate the energy transition in developing countries, including by compensating coal investors for the early termination of their PPAs. Paradoxically, the risk of similar compensation under international investment treaties has led to severe criticism, as illustrated by States’ withdrawal from the Energy Charter Treaty. Taking into account this apparent contradiction, this article investigates the compensation of coal investors under the JETPs, and related transition finance initiatives, building on the just transition and climate-investment law literature. The analysis focuses on the early termination of coal PPAs in Indonesia and Vietnam—two JETP countries that provide relevant case studies to understand the obstacle that investment contracts present for the energy transition, and the justice implications of fully compensating investors for terminating these contracts.

Balancing the Investor-country Interests: Reforming FET Standards and Indirect Expropriation

Foreign Direct Investment (FDI) plays a key role in the global economy, and its protection is often ensured through provisions in Bilateral Investment Treaties (BITs), particularly the Fair and Equitable Treatment (FET) standard. However, when the host country's actions lead to substantive devaluation of an investor's assets, often referred to as indirect expropriation, investors frequently invoke FET clauses to seek redress. Both FET and indirect expropriation are vaguely defined in international law, resulting in considerable space for interpretation by arbitral tribunals. Due to the protective nature of these provisions, tribunals often interpret these standards in favor of investors, which may lead to an imbalanced protection of investor rights. This imbalance can, in turn, encroach upon the sovereignty of host states and their ability to regulate in the public interest. Although Tribunals recently have taken some measures to restrict the interpretation of FET and indirect expropriation in dispute, these two treatments still face the risk of being abused by investors and becoming a pocket clause. This paper uses case studies and legal analysis to explore the ways in which such unbalanced interpretations undermine the interests of host states, particularly with respect to their regulatory and sovereign powers. This paper further proposes potential reforms of FET and indirect expropriation aimed at restricting the interpretation space of Tribunals while sustaining the flexibility of these two treatments, rebalancing the interests of both foreign investors and host countries.

INTERNATIONAL INVESTMENT ARBITRATION – AN OUTLOOK FROM CROATIA

Since Croatia’s establishment as a sovereign country in the early 1990s, foreign investments have been identified as a strategic priority of its economic policy. Croatia seeks to provide a stable legal environment for foreign investors through its domestic rules, EU law or bilateral investment treaties. Providing legal protection in international investment disputes is a challenging task, and requires careful balancing between protecting private investor interests and the public interest in the State of investment. Entrusting this task to ad hoc arbitration tribunals, which adjudicate based on a specific body of investment law, and its open concepts, has been under increasing criticism, leading to a conclusion that the characteristics that distinguish arbitration from court proceedings are, at the same time, its greatest shortcomings. On the trail of this reflection, and following the Achmea case, there is increasing advocacy for establishing a special EU court for international investment disputes. This paper focuses, however, on the investment dispute resolution before ICSID involving Croatia either as the respondent or the home state in the last half decade.

MONTENEGRO RECAP: THE STANDARD OF FAIR AND EQUITABLE TREATMENT (FET) AS A CATALYST FOR INVESTMENT DISPUTES

The fair and equitable treatment (FET) standard stands for one of the most significant yet debated principles in safeguarding foreign investments. While its wording is often broad and vague, its definition often emerges through arbitral awards based on the particulars of each case. This paper analyses the FET clauses in Montenegro’s Bilateral Investment Treaties (BITs) within the context of its EU accession and modern approaches to FET regulation. By examining Montenegrin BITs and reviewing past disputes, the paper explores key aspects of FET application in Montenegro’s Investor State Dispute Settlement (ISDS) practice so far. Given that the FET standard has been a central issue in nearly all disputes against Montenegro, the analysis underscores the need to review and refine FET regulation in Montenegrin BITs, in order to ensure better protection for foreign investments and clarify which state actions violate FET. Furthermore, the paper compares Montenegro’s FET clauses with those in EU practice, offering recommendations for aligning it with more robust frameworks.

Legal Analysis Of The Effectiveness Of The Icsid Arbitration Institution As A Means Of Resolving Foreign Investment Disputes In Indonesia

Resolving disputes related to foreign investment is not as straightforward as one might think, as it involves investment disputes that engage two or more legal systems. Therefore, the resolution is not solely determined by the law applicable within the territory of Indonesia, but also takes into account the laws of other countries participating in the convention. When a settlement between the parties cannot be reached, the dispute can be resolved through an arbitration body designated by the parties to facilitate the resolution or through conventional judicial bodies in accordance with their authority as regulated by legislation. Alternative dispute resolution through arbitration will be more efficient and effective as it is achieved through deliberation and consensus or a win-win solution. This research is descriptive in nature, aiming to provide an overview or description of the law on divestment in foreign companies in Indonesia. As a descriptive study, a normative approach is used, focusing on the examination of legal principles, legal systems, vertical and horizontal synchronization of legislation, and legal history. The Bilateral Investment Treaty (BIT) serves as a legal basis that needs to be revised. The initial role of this agreement was to attract investors to enter Indonesia, with the hope of reaching a balanced agreement between the two countries. However, in practice, the BIT has become the foundation relied upon by foreign investors in Indonesia. The recommendation made in this study is that the Government of the Republic of Indonesia, in establishing Bilateral Investment Treaties, must include clear provisions so that the description of the agreement does not overlap with the positive law already established in Indonesia.

Anti-enforcement Actions and the Assignment of Intra-EU Awards

The assignment of intra-EU arbitral awards has become a strategy used by investors to mitigate the risk of EU Member States refusing to comply with the awards against them. In the recent case PV Investors v. Spain case, the original Dutch claimants sought to enforce an intra-EU award rendered under the ECT in the District Court for the District of Columbia. In response, Spain petitioned the District Court of Amsterdam for an injunction to bar the investors from pursuing enforcement, arguing that the payment of the award would violate EU state aid rules. The original claimants then assigned the award to the United States company Blasket and asked the District Court for the District of Columbia to substitute Blasket as a petitioner in the enforcement proceeding. By assigning the award to Blasket, the Dutch companies attempted to change the nationality of the party enforcing the award before domestic courts so that Blasket could continue with the enforcement. This paper examines the practice of monetization of awards, with a focus on the legal issues that may be encountered by the assignees when trying to enforce the assigned awards. It then draws a comparative analysis between the strategy employed by the Dutch investors and corporate restructuring practices employed by legal entities that seek to access investment treaty protection that would otherwise be unavailable. This analysis shows the impact of nationality planning not only in the context of an investment arbitration proceeding but also when it comes to the enforcement of the award.

EU law and International Investment Arbitration: The Compatibility of ISDS in Bilateral Investment Treaties (BITs) and the Energy Charter Treaty (ECT) with the autonomy of EU law by Michael De Boeck (Leiden: Brill | Nijhoff, 2022)

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Review of Julia Calvert, The Politics of Investment Treaties in Latin America (Oxford University Press, 2022)

Review of Julia Calvert, The Politics of Investment Treaties in Latin America (Oxford University Press, 2022)

Investment structuring and re-structuring: the Italian perspective

Abstract The multiplication of international investment treaties provides foreign investors with a valuable network to obtain and/or maximize investment protection through investment structuring and/or re-structuring (also known as nationality planning). When selecting the most appropriate treaty for structuring and/or re-structuring its investment, an investor should carry out a case-by-case assessment including on the basis of the following factors: (i) the requirements to access investment protection; (ii) the degree of the substantive and procedural protections; (iii) the timing of the re-structuring; and (iv) the overall language of the chosen treaty. Against this background, the article analyses each of the foregoing factors through the lens of the bilateral investment treaties concluded by Italy, as well as the case law involving Italian investors as claimants and/or Italy as respondent. The analysis shows that foreign investors should take into consideration the Italian network of bilateral investment treaties for investment structuring and/or re-structuring purposes since most of these treaties provide for advantageous jurisdictional requirements, as well as effective substantive and procedural protections.

Exchange rate volatility and foreign direct investment: do bilateral investment treaties matter?

ABSTRACT This article attempts to investigate whether exchange rate volatility suppresses outward foreign direct investment and how to mitigate such adverse effects. Using OFDI data from six Asia Emerging Market Countries, the estimation results based on conditional logit model suggest that exchange rate volatility hinders firms of emerging market countries from investing in host countries. More importantly, we further demonstrate that bilateral investment treaties can mitigate such adverse effects of exchange rate volatility on FDI activities. Our results indicate that signing BITs with emerging market countries is beneficial to attracting FDI inflows, which is illuminating particularly when exchange rate volatilities are higher.

Human Rights Obligations in FDI Operation: A Paradigm Shift in BITs

Incorporation of human rights obligations into bilateral investment treaties (BITs) is rare. However, with the rise of mega investment-related disputes in developing countries, there are growing concerns about the negative impact of foreign direct investment (FDI) on the human rights of the local population from various aspects, directly and indirectly. Apart from jus cogens norms, the international investment law does not impose any direct obligation on human rights in BITs. Therefore, the scope of ‘human rights’ within the present BITs is yet to be determined. There is a pressing need to include human rights obligations in BITs from various corners, including civil society and the UN Conference on Trade and Development (UNCTAD). This paper focuses on the changing paradigm of approaches adopted by the UN, UNCTAD, and scholars in advocating for the inclusion of human rights obligations in the context of FDI operations, mainly referring to the Ruggie Report (2011). The paper focuses on which set of human rights instruments should be referred to as the BITs and the appropriate mechanism to enforce those obligations, as well as addresses the challenges to implement. The paper aims to emphasise the fact that human rights will claim greater significance in future, and countries negotiating BITs will eventually be pushed forward to include human rights obligations, at least in response to growing concerns about the rightfulness of the treaty obligations of the current generation of BITs and the growing demand for more balanced BITs. Dhaka University Law Journal, 2024, 35 (1), 31-52

The Colombian Santurbán Páramo saga and its contribution to the development of international investment law and arbitration

Abstract The Colombian Santurbán Páramo saga is a series of three arbitral proceedings initiated by Canadian companies claiming that Colombia’s actions with regard to the protection of the Santurbán Páramo area, a high-altitude wetland ecosystem on the Colombian Andes, had negatively impacted their mining activities. The three proceedings, which concluded with three awards in 2024, were characterized by the presence of different interests at stake. In fact, while markets represent the Santurbán Páramo as a source of gold to feed the global economy, local communities see the area as a key source of water as well as a fragile ecosystem deserving protection. From an international investment law’s standpoint, the analysis of the Colombian Santurbán Páramo saga offers the possibility to reflect on several key aspects of investment treaty provisions as well as customary international law. In this light, the findings of the three tribunals on expropriation, minimum standard of treatment, and exception clauses will likely be considered by future investment tribunals which have to adjudicate environmental-related disputes. This holds a fortiori true if one considers that more and more disputes will be based on new-generation investment agreements, which generally contain provisions like those of the Canada-Colombia Free Trade Area.

Reforming Ethiopian Bilateral Investment Treaties in Line with Domestic Development Policies: Challenges, Prospects and Simplified Reform Options

Reforming Ethiopian Bilateral Investment Treaties in Line with Domestic Development Policies: Challenges, Prospects and Simplified Reform Options

The Limits of Diplomacy by Treaty: Evidence from China's Bilateral Investment Treaty Program

The Limits of Diplomacy by Treaty: Evidence from China's Bilateral Investment Treaty Program

New players, same problems: Michael Lee-Chin v Dominican Republic, and the rising tide of inconsistency in South–South ISDS

Abstract This article provides a critical analysis of the Michael Lee-Chin v Dominican Republic arbitral award, highlighting its problematic reasoning and inconsistencies. Despite being a rare South–South investment dispute, the case demonstrates many of the same shortcomings criticized in North–South arbitrations. The tribunal’s expansive interpretation of investor protections, particularly regarding fair and equitable treatment and the umbrella clause, raises concerns about potential overreach. Most troublingly, the tribunal’s restrictive approach to the national security exception imposes a high threshold that may undermine states’ ability to respond to genuine environmental and public health crises. The award stands in stark contrast to the more balanced approach adopted in the recent Seda v Colombia case. By exposing these issues, the article argues that the problems plaguing investment arbitration are not merely a product of North–South power dynamics, but are deeply entrenched in how investment treaties are interpreted and applied. It calls for a fundamental reassessment of investment treaty interpretation that gives due weight to state regulatory space and public interest concerns, regardless of the geographical context of the dispute.

Protecting American investors in emerging markets: A comparative study

Emerging markets provide significant opportunities for American investors, but they also carry substantial risks, including political instability, regulatory unpredictability, and currency volatility. This comparative study examines the key challenges faced by American investors in emerging markets such as Brazil, India, and China, focusing on strategies and legal mechanisms available to protect their investments. The paper explores the role of bilateral investment treaties, which provide a legal framework ensuring fair treatment, safeguards against expropriation, and recourse through international arbitration. Additionally, the study evaluates the effectiveness of U.S. regulations such as the Foreign Corrupt Practices Act, which has helped reduce corruption risks but can create challenges in high-risk markets. Drawing on economic and legal data, this article proposes several policy recommendations to enhance protections for American investors, including the expansion of bilateral investment treaties and the strengthening of international arbitration mechanisms. Ultimately, this study underscores the need for robust legal and financial frameworks to foster investor confidence and promote stable growth in emerging markets.

BILATERAL INVESTMENT AGREEMENTS OF GEORGIA: THREATS, CHALLENGES AND OPPORTUNITIES

Relevance of the topic. Bilateral investment treaties are an extremely important form of investment promotion. The purpose of signing these agreements is to deepen the economic ties between the countries. No matter how big the role of investments is in the economy, it is necessary to regulate them. It is necessary to pay more attention to the discussion of this issue from an academic point of view. Especially, taking into account the adverse experience that Georgia received from the judgments against it from international arbitrations. It is important to facilitate the legal study of various norms and protective measures for foreign investments, taking into account the agreements. Insufficient consideration of regulations and relevant norms regarding the issue, considering the development of investments, may even lead to financial responsibility. The purpose of the article. To evaluate the effectiveness of bilateral agreements. Scientific novelty of the paper. The issue is very relevant and its practical purpose is the possibility of using the obtained results in the educational process during the study of the mentioned topic, through analysis. Identifying advantages, disadvantages, as well as opportunities and threats, developing relevant recommendations in terms of effectiveness. Accepting the challenges in this field is a necessary condition. The mentioned issues have practical value and potential impact on the field and wider society. Methodology. Based on the SWOT analysis of bilateral investment agreements, their importance and socio-economic aspects are evaluated. The importance of investment agreements, foreign experience of their regulation is reviewed. As well as an innovative SWOT analysis of the concluded bilateral investment agreements. Discussion. An in-depth analysis of this issue leads to the promotion of the foreign investment regulation process. It will also give Georgia the opportunity to establish more effective approaches for attracting and protecting foreign investment capital. Conclusions. Taking into account the recommendations based on the scientific analysis proposed in the work will contribute to the improvement of the investment environment, thus raising employment and living standards, and the economic situation of Georgia.