Investment treaty arbitration—an introduction
Produced in partnership with Joe Tirado, Partner of Garrigues UK LLP and Elisa Vicente, Senior Associate of J&A Garrigues, S. L. P.
Investment treaty arbitration—an introduction

The following Arbitration practice note produced in partnership with Joe Tirado, Partner of Garrigues UK LLP and Elisa Vicente, Senior Associate of J&A Garrigues, S. L. P. provides comprehensive and up to date legal information covering:

  • Investment treaty arbitration—an introduction
  • Investment treaties
  • Bilateral investment treaties
  • Multilateral investment treaties
  • Protection for investors under BITs and MITs
  • Resolution of investment treaty disputes
  • Other arbitral bodies
  • Common issues in investment disputes
  • Who is an 'investor'?
  • More...

This Practice Note provides an introduction to arbitration'>investment treaty arbitration.

Broadly, an investment treaty arbitration involves the resolution of (most commonly) a foreign investor’s claim against a respondent state for alleged breaches of investor protections contained in an investment treaty concluded between either two states or a group of states pursuant to an arbitration agreement contained within the investor-state dispute settlement provisions of the relevant treaty. ‘Investment treaty arbitration’ is sometimes contrasted with ‘international commercial arbitration’, and both forms of arbitration are sometimes referred to under the umbrella term ‘international arbitration’, see Practice Note: International arbitration—an introduction to the key features of international arbitration for consideration of the meaning of ‘international commercial arbitration’.

Investment treaties

Bilateral investment treaties (BITs) and multilateral investment treaties (MITs) are central to any consideration of investment treaty arbitration.

Bilateral investment treaties

A BIT is a treaty between two states by which each state agrees to afford rights and protections to investors from the other. Generally, a BIT will provide for the investor to have recourse to international arbitration if a dispute arises in respect of its investment. Bilateral Free Trade Agreements also often contain investor dispute resolution provisions.

More than 2900 BITs have been concluded worldwide and there are now more than 2340 BITs in operation. The United Nations Conference on Trade and Development (UNCTAD) maintains a useful searchable database of BITs for each


The UK has entered into numerous BITs with other states. There were also some BITs between existing EU Member States (so-called intra-EU BITs), usually concluded with Central and Eastern European countries prior to their accession to the EU. On 5 May 2020, the majority of EU Member States signed a plurilateral treaty for the termination of all bilateral investment treaties applicable between them, which entered into force on 29 August 2020. This plurilateral treaty followed by the Court of Justice of the European Union decision in the Achmea case (Achmea v Slovak Republic

) which ruled that intra-EU investor-state arbitration was incompatible with EU law. For more information on this subject (including the latest developments), see Practice Note: Intra-EU investment disputes—an introduction.

Multilateral investment treaties

A MIT offers many of the same protections to investors as a BIT but is made between multiple countries.

Prominent examples of MITs include free trade agreements such as the US-Mexico-Canada Agreement (USMCA) and its predecessor the North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico, the Association of South-East Asian Nations (ASEAN) Agreement for the Promotion and Protection of Investments between the members of ASEAN (Brunei, Indonesia, Malaysia, Burma, Singapore, Thailand, the Philippines, Cambodia, Laos and Vietnam), and the Comprehensive Economic and Trade Agreement (CETA) between Canada, the EU and its Member States.

The Energy Charter Treaty (ECT) is a significant multilateral treaty for participants in the energy industry. Conceived in the 1990s as a means of encouraging investment in energy reserves in Russia and elsewhere, the ECT includes provisions for investor-state arbitration (see Energy Charter Treaty, Pt V, art 26(3) as well as the protections found in ICSID (discussed below), the UNCITRAL Arbitration Rules or the Arbitration Institute of the Stockholm Chamber of Commerce (SCC)). For more information on the ECT, see Practice Note: Investment treaty arbitration under the Energy Charter Treaty.

Protection for investors under BITs and MITs

Although there are thousands of different BITs in force around the world, the majority of BITs offer similar kinds of protections to investors. Some of the most common protections include the following:

  1. to accord fair and equitable treatment to the investments of nationals of the other party, see Practice Note: Protections for foreign investors and investment treaty arbitration—fair and equitable treatment of investors

  2. not to take unreasonable or discriminatory measures against those nationals

  3. to subject investment from nationals of the other country to no less favourable treatment than its own nationals or those of any third country (known as 'most favoured nation' status, see Practice Note: Most favoured nation clauses in investment treaty arbitration)

  4. to preserve any rights conferred on investors by a treaty different than the applicable investment treaty that are more favourable than the rights accorded to investors under the applicable investment itself (known as ‘preservation of rights’ clauses)

  5. not to expropriate or to nationalise investments, except for a public purpose and on payment of reasonable compensation, see Practice Note: Expropriation—investment treaty arbitration)

  6. full protection and security or protection by the state from the use of force and the provision of a secure environment, see Practice Note: Protections for foreign investors and investment treaty arbitration—full protection and security of investments

  7. the right to repatriate returns on investments or loan repayments (subject to specified and legitimate restrictions), and

  8. currency transfer standards such as the obligation to establish the monetary transfers related to the investments to be free and without delay

BITs may also include provisions that seek to guarantee the free movement of an investor’s key employees. A small number of BITs also contain performance requirements with which investors must comply, which may include local employment or content requirements (although these requirements may conflict with other trade liberalisation agreements entered into by the state).

Finally, BITs will usually allow an investor to pursue arbitration to resolve a dispute and each forum in which the arbitration may be brought will be listed.

For more detail, see Practice Notes: Securing investment protection for foreign direct investment and Protections for foreign investors and investment treaty arbitration.

Resolution of investment treaty disputes


The International Centre for the Settlement of Investment Disputes (ICSID) is one of the organisations most commonly designated by BITs and MITs to hear and resolve investment disputes.

ICSID was set up by the World Bank and is constituted under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention). ICSID publishes a list of current contracting states to the ICSID Convention.

Ratifying the ICSID Convention does not in itself mean that a state submits to arbitrate its disputes there. States sign up to BITs or MITs by which they agree to refer investment disputes to ICSID, and perhaps to other bodies, or agree to submit disputes to ICSID arbitration in their domestic legislation. To learn more about ICSID arbitration (including the latest key developments), see Practice Note: ICSID arbitration—introduction and procedure.

ICSID carries out both conciliations and arbitrations, yet unlike most other arbitration bodies, ICSID is limited as to the kinds of cases it can hear. Broadly, ICSID hears legal disputes between a state (or a state agency or enterprise) and a national of another state arising directly out of an investment. The investor and the state must consent in writing to the dispute being submitted to ICSID.

Finally, it should be noted that there has been a move away from ICSID by some states. For example, Venezuela formally denounced the ICSID Convention with effect from 25 July 2012 following similar denunciation and withdrawal from the ICSID Convention by Bolivia in 2007 and Ecuador in 2009.

Other arbitral bodies

Other dispute resolution bodies are often nominated by the parties to BITs for investor-state disputes. These are usually arbitration bodies that provide a forum for international arbitration more generally; examples include the International Court of Arbitration run by the International Chamber of Commerce (ICC) (see: ICC arbitration—overview) and the SCC (see: SCC arbitration—overview). The ICC Arbitration Rules 2021 (in force from 1 January 2021) (the ICC Rules) include two provisions applying specifically to investment arbitrations based on a treaty. The first (ICC Rules, Article 13(6)) aims at ensuring the complete neutrality of the tribunal in cases involving the public interest, by providing that no arbitrator shall have the same nationality as that of any party, while the second (ICC Rules, Article 29(6)(c)) codifies the ICC Court’s established practice that emergency arbitration is not available in investor-state disputes.

The Singapore International Arbitration Centre (SIAC) also has its own dedicated investment arbitration rules, see Practice Note: SIAC Investment Arbitration Rules (2017)—an overview.

Disputes are often also resolved in accordance with the ad hoc arbitration rules promulgated by the United Nations Commission on International Trade Law (UNCITRAL). Commonly, UNCITRAL investor-state arbitrations are administered by the Permanent Court of Arbitration in The Hague (see: UNCITRAL arbitration—overview and PCA arbitration—overview).

Common issues in investment disputes

Naturally, investment disputes give rise to numerous, often complex, legal issues. The list below represents those most commonly encountered in practice.

Who is an 'investor'?

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