INTRODUCTION. This article discusses growing popularity of investment arbitration as a forum for resolving sanctions-related disputes. The crunch point, however, is that so far none of such disputes brought before investment tribunals has resulted in the arbitral award. Thus, investment arbitration, despite its mentioned attractiveness and growing popularity, largely remains terra incognita for persons wishing to pursue sanctions-related disputes. The authors contribute to this emerging discussion providing analysis of relevant recent case law. The purpose of this Article is to examine how investment tribunals have interpreted good faith as a requirement for a lawful exercise of police powers and to explore how these findings can be used in the sanctions-related disputes from an investor’s perspective. The choice of this topic is based on the hypothesis that governmental officials of the sanctioning state typically accompany the adoption of sanctions with public statements that can be used by the sanctioned investors to expose the lack of good faith on the part of the sanctioning state and crush the state’s invocation of the police powers. It is these statements that may reveal that a sanctioning state, in the words of the Eskosol tribunal, acts for ulterior purposes.MATERIALS AND METHODS. General scientific methods of cognition (analysis, synthesis, induction, and deduction), special legal methods (formal-legal, technical-legal, method of legal analogy), comparative legal and primarily case study method were used in the presented research. The authors focus on the probative value that arbitral tribunals ascribe to public statements. They also examine other evidence relied upon by investors to prove the absence of good faith of the state and, on this basis, to distinguish lost cases from successful ones. The forthcoming analysis will consist of a review of the following cases in which the good faith requirement has been scrutinized by arbitral tribunals: Marfin Investment Group v. Cyprus, ICSID: Award, 26 July 2018, Deutsche Bank v. Shri Lanka, ICSID: Award. 31 October 2012, Casinos v. Argentina, ICSID: Award of the Tribunal. 5 November 2021 and Sodexo v. Hungary, ICSID: Excerpts of Award. 28 January 2019. These cases are chosen because they analyze good faith as a requirement for the conduct of the state receiving investments and they pay sufficient attention to the discussion of the evidence presented by investors. RESEARCH RESULTS. Presented analysis has shown that investment arbitration proceedings do not result in elimination of sanctions. Investment treaties which serve as a jurisdictional basis for investment arbitration disputes provide for compensation as a primary remedy. At the same time, investment arbitration may provide investors with an opportunity to obtain compensation from the sanctioning state, or, at least, to encourage that state to initiate consultations and persuade it to lift sanctions in a friendly manner. For those investors who have been unsuccessful in achieving the desired outcome through negotiations, it is important to consider what “trump cards” or defences the sanctioning state may rise in arbitration. Undoubtedly, the main “trump card” is the police powers doctrine, which has been deservedly referred to as a recognized component of State sovereignty. This “component” is invoked by the respondent state in virtually every dispute involving a public interest, such as public order or security. To invoke the police powers as a defence is a natural, almost intuitive step for a state as the doctrine allows for regulation to protect the public interest without being held liable for breach of international investment obligations to foreign investors.DISCUSSION AND CONCLUSIONS. Authors came to the conclusion that states do not possess extremely broad discretion to interfere with investments in the exercise of legitimate regulatory authority. The standard of proof for bad faith allegations is clear and convincing or cogent evidence. Not only is the standard important, but also the quantity – the evidence must be sufficient. No matter how laudable the goal that a host state declares, this fact would not prevent a tribunal from finding that a genuine, behind-thedoors aim was political. Tribunals ascribe different weight to public media statements of state officials. The principle of proportionality can serve the investor’s position even in the absence of clear and unambiguous public statements from top officials. To draw the tribunal’s attention to the timing of the events surrounding the challenged measures may contribute to the investor’s success.
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