A foreign investor’s power to sue a host State plays a vital role in investment protection. Investment arbitration is undertaken to resolve disputes between a foreign investor and the host State and is also known as Investor-State Dispute Settlement (ISDS) and differs from an International Commercial Arbitration (ICA/s) dispute due to the nature of the claim and the parties involved. While the former deals with disputes arising under a public treaty between two contracting States, the latter deals with disputes arising out of a commercial contractual obligation.
Under a Bilateral Investment Treaty (BIT/s), States ensure certain rights and protections to investors from the other contracting State. These include Fair and Equitable Treatment, National Treatment, Most Favoured Nation (MFN), Protection from Expropriation to name a few. Each of these are protections accorded under international law and are usually negotiated upon by the contracting States, such that any derogation from the protections accorded give rise to the investor’s right to initiate an investment arbitration against the host State. Currently, there are 2,344 BITs and around 314 Treaties with Investment Provisions in force globally.