Investor-State/Investment treaty Arbitration
Unlike commercial arbitration as discussed above, Investment treaty arbitration is not a purely private dispute settlement mechanism that is entirely subject to party autonomy and limited to its effects to the parties to the proceedings. Rather, it fulfils a public function in influencing the behaviour of foreign investors, states and civil society. Thus, it works and operates as part of public system of investment protection. It is one of the most vibrant and fastest growing fields of international dispute settlement, while the total number of known treaty-based cases reached 608. It is the result of both an unprecedented increase in foreign investment flows, in particular since the end of the Cold War, and an expansion of substantive and procedural protection for foreign investors under international law.
The number of International Investment Agreements existing today is more than 3000. International Investment Agreements (IIAs) are treaties between two states thereby agreeing to protect the investments made by the investors of both states in each other’s territory, by undertaking certain obligations and restrictions in respect of the treatment and regulation of the investments made by the investor of the other state party. IIAs impose a number of obligations and restrictions on the host states in order to protect the rights of a foreign investor. The obligations and the restrictions placed on the host states by the IIAs include obligations:- to create a favourable environment for investments; to provide most-favoured nation treatment to investors and investments of the other party; to provide fair and equitable treatment and full protection and security to foreign investors and their investments; to refrain from expropriating the investments of a foreign investor except for public purpose, without adequate compensation; to allow repatriation of the profits and returns on the investments; to refrain from discriminating the foreign investments against the investments made by the domestic investors; to allow the foreign investors access to justice through administrative or judicial tribunals; and most significantly, to allow individuals to bring cases against the host states for the breaches of the standards of treatment ensured by the IIAs (i.e. investor-state dispute settlement or investor-state arbitration). The basic rationale for the states accepting obligations and restrictions of the kind aforementioned lies in the assumption that the framework that is created by the IIAs leads to the increased flow of foreign investments.