Module IV·Article II·~1 min read
Protection of Foreign Investments: International Treaties
Private International Law
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Risks of Foreign Investments
A foreign investor faces risks not typical for domestic investments: nationalization, changes in legislation, discrimination, denial of justice.
Bilateral Investment Treaties (BIT)
BIT (Bilateral Investment Treaty) — a treaty between two states for mutual protection of investments. Provides the investor with: most-favored-nation treatment (no worse than any other foreign investor), fair and equitable treatment (Fair and Equitable Treatment), protection against expropriation without compensation, free transfer of profits and capital, access to international arbitration (ICSID).
There are more than 3,000 BITs in the world. Russia has entered into about 80 BITs.
ICSID: International Centre for Settlement of Investment Disputes
ICSID (World Bank) reviews disputes between foreign investors and states. ICSID decisions are enforced as the decisions of domestic courts in 160 member states of the Washington Convention.
High-profile cases: Yukos v. Russia (2014) — a $50 billion award (later annulled by Dutch courts and reinstated).
Energy Charter
The Energy Charter Treaty (ECT) — a multilateral treaty protecting foreign investments in the energy sector. Russia signed, but did not ratify. Created significant risks of claims against the state in case of changes in energy policy.
Practical Assignment
The UAE and Russia concluded a BIT. A Russian company invested in a real estate asset in the UAE, but the emirate authorities introduced new regulations, significantly limiting profitability. Analyze: (1) Does this violate the BIT? (2) Which arbitration should be addressed? (3) What are the chances of success?
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