Foreign investments enjoy international legal protection through some 3000 or more bilateral and multilateral investment treaties (BITs and MITs respectively). Investment treaties concluded between two or more states contain reciprocal state-level undertakings for the promotion and protection of foreign investment. A central feature of investment treaties is their dispute resolution mechanisms, which allow protected foreign investors to sue states directly by submitting claims to international arbitration rather than to the national courts. This can be an important protection for an investor making an investment in a country where the national court system may not provide adequate means for resolving a dispute, or in circumstances where that dispute will be against the state itself.

In order to gain treaty protection and submit a dispute to arbitration, a foreign investor will need to demonstrate that certain requirements are met, including as set out below.

A foreign investor must qualify for investment treaty protection. The investor will need to show that the tribunal has jurisdiction under the applicable treaty to decide the dispute. Typically, this requires the investor to demonstrate that it is a national of a state party to the investment treaty that is not the host state. The investor must also have made a qualifying investment in the host state. The term ‘investment’ is variously defined in investment treaties, but typically covers ‘every type of asset’ or ‘every form of investment’, including shares or other forms of participation in local companies, real and contractual property rights, IP rights, bonds and concession contracts. Some tribunals have required a contribution or commitment by the investor, a certain duration, risk and contribution to economic development.

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