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Arbitration under International Investment Agreements – Mercurius
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Arbitration under International Investment Agreements

Arbitration under International Investment Agreements: A Brief Overview

In today`s globalized world, international investment has become a key driver of economic growth and development. This has resulted in an increase in cross-border investments and a rising number of disputes between foreign investors and host states. To address such disputes, international investment agreements (IIAs) often include provisions for investor-state arbitration. In this article, we will discuss the basics of investor-state arbitration under IIAs and its implications for foreign investors and host states.

What is Investor-State Arbitration?

Investor-state arbitration is a dispute resolution mechanism that allows foreign investors to bring claims against host states for alleged violations of their rights under IIAs. These rights may include protection against expropriation without compensation, fair and equitable treatment, and the right to transfer funds abroad. Typically, investor-state arbitration is conducted before a panel of three arbitrators, who are appointed by the parties or designated by an arbitration institution. The proceedings are generally confidential and the decisions are final and binding.

Why is Investor-State Arbitration Controversial?

Despite its popularity, investor-state arbitration is controversial for several reasons. One of the main criticisms is that it allows foreign investors to challenge legitimate policy measures of host states. For example, a tobacco company could use investor-state arbitration to challenge a public health regulation, arguing that it violates the company`s investment rights. This has led to concerns that investor-state arbitration could undermine the democratic process and limit the policy space of host states.

Another criticism of investor-state arbitration is that it lacks transparency and accountability. The proceedings are often conducted in secret and the decisions are not subject to appeal or review by national courts. This has led to calls for greater transparency and public scrutiny of investor-state arbitration.

The Future of Investor-State Arbitration

In recent years, there has been growing debate over the future of investor-state arbitration. Some have called for its reform or even its abolition, while others argue that it remains an essential tool for protecting investment rights and fostering economic development.

One proposal for reform is the establishment of a permanent investment court, which would replace the ad hoc arbitrators currently used in investor-state disputes. The court would have greater institutional legitimacy and transparency, and decisions would be subject to appeal or review by national courts. Another proposal is to include more safeguards for host states, such as the right to regulate in the public interest and the obligation to conduct impact assessments before implementing policy measures.

Conclusion

Investor-state arbitration is a complex and controversial mechanism that plays a key role in resolving disputes between foreign investors and host states. While it has its critics, it remains an important tool for protecting investment rights and fostering economic development. The future of investor-state arbitration will depend on the willingness of states and stakeholders to engage in meaningful dialogue and reform efforts that balance the interests of investors and host states.