The Importance Of Arbitration In Foreign Investments

1626 words - 7 pages

Most of the foreign investments are protected by investment treaties and if there is any breach, the investor can seek for compensation under international arbitration . The question is whether to which extent does the arbitration provides them solution and which ways or methods they can seek alternative to arbitration. The answers for all these will be discussed in this research analysis step by step considering all the issues and the pros and cons as well, which it will give a meaningful conclusion at the end.
International arbitration serves as the important method where foreign investors can bring claims against host state arising from an investment disputes under the current international investment law . Investor State Dispute Settlement (ISDS) provisions are in place under all current International Investment Agreements (IIAs), where the main aim is to provide that arbitration should act as the main actor in resolving investment disputes and not litigation in national courts which is an essential part of investment protection .
Still to date international arbitration has got its place in resolving disputes arising between them, due to its flexibility, cheaper, depoliticizing investment disputes and because of the familiar procedure etc…Further it ensures the parties to exercise considerable amount of control over litigation process whereby further ensuring that the awards are enforceable by creating awareness of legitimacy .
However, in practice there are also many disadvantages that comes along with international arbitration which would possibly minimizes IIAs benefits to developing economies. One of the main disadvantages is the unique quality of international investment arbitration, including a power as defendant and challenging measures and acts taken by sovereign state .
With the increasement of investment growth and investment treaties, since 1987 investor state disputes to have rapidly grown. Further it has been said that as the end of 2008, total of 317 treaty based cases were brought and where most of them were filed under UNCITRAL or ICSID, which involves 77 governments, 17 developed worlds, 47 among them were developing countries, and 13 countries in transition to economies. More than 70% among 317 were within last six years. So it’s identifiable that in recent years increasement of investor state disputes has grown up rapidly, whereby putting forward challenges mainly for developing countries and for host states.
International arbitration process varies from litigation in national courts where in it international law governs the dispute and is based on international treaty violation, where investors can seek arbitration as their option . Next distinctive feature is that the relationship investor and state has which involves long term engagement; as a consequence a resolved dispute will result in an award of damages which will lead to an ending of this relationship. Moreover financial costs are very high in investor...

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