International arbitration is a complex mechanism that allows parties from different legal systems to solve commercial disputes outside of national courts. It is becoming increasingly popular among investors as a mean to solve investment disputes with host states. However, when it comes to investment disputes, there is another crucial factor to consider: the status of the investment treaty that governs the dispute. This article aims to explore the difference between investment treaties that are in force and those that are not and how they can affect the outcome of an arbitration.
What Are Investment Treaties
These types of treaties are bilateral or multilateral agreements between states that aim to promote foreign investments in the host state by providing investors with certain rights, protections, and guarantees. They also include dispute resolution mechanisms, which usually follow the path of international arbitration. When an investor initiates arbitration against the host state, the tribunal will decide the outcome of the dispute based on the treaty in force at the time of the dispute.
Investment treaties can either be in force or not in force. A treaty is in force when it is ratified by both parties and has entered into legal effect. It means that the treaty provisions, including dispute resolution mechanisms, are binding on the parties. On the other hand, an treaty that is not in force is a treaty that has been signed but not ratified by one or both parties. In such cases, the parties cannot rely on the treaty provisions, and the arbitral tribunal cannot rule on the basis of the treaty. For finding the proper investment treaty, please visit International Investment Agreements Navigator | UNCTAD Investment Policy Hub
Implication of Enforceability
In the context of investment arbitration, the status of the investment treaty can have a significant impact on the outcome of the dispute. When an investment treaty is in force, the arbitral tribunal can interpret and apply the treaty provisions, including the substantive provisions, in deciding the dispute. The substantive provisions of an investment treaty, including expropriation, fair and equitable treatment, and national treatment, provide investors with rights and protections, and they are the basis of the investor’s claim against the host state.
On the other hand, if the investment treaty is not in force, the arbitral tribunal cannot rely on its provisions unless the parties have agreed otherwise. In such cases, the tribunal will have to rely on other sources of law, such as customary international law or the law of the host state, to decide the outcome of the dispute. This can result in an investor losing the rights and protections that would have been provided by the investment treaty.
It is also worth noting that if an investment treaty is not in force, the investor may still have a claim based on principles of international law. However, such claims tend to be weaker than claims based on treaty provisions, and the outcome of the dispute is less predictable.
In conclusion, the status of the investment treaty can have a significant impact on the outcome of investment arbitration. An investment treaty that is in force provides investors with rights and protections and is the basis of their claim against the host state. On the other hand, an investment treaty that is not in force weakens the investor’s claim, and the outcome of the dispute is less predictable. Therefore, investors should carefully assess the status of the investment treaty before initiating arbitration and ensure that the treaty provisions are in force. At Transnational Matters, our experts are always available to assist you in understanding and assessing the status of any investment treaty. Contact us today for more information. Contact Our Office – Transnational Matters
Resources for Investors : Investment Treaties: A Guide For Investors – Transnational Matters