Arbitration under International Investment Agreements a Guide to the Key Issues

Arbitration Under International Investment Agreements: A Guide to the Key Issues

International investment agreements (IIAs) have been established to protect and encourage foreign investment by providing investors with legal protection against political risks. These agreements often include provisions for allowing investors to seek arbitration in the event of a dispute with the host state. Arbitration is a widely accepted method of dispute resolution in international investment law, as it offers parties a neutral forum and a chance to resolve disputes efficiently.

This guide provides an overview of the key issues that arise in the arbitration under IIAs.

Understanding Arbitration

Arbitration under IIAs is a process where parties agree to refer a dispute to a neutral decision-maker, known as an arbitrator, who will decide the case based on the evidence presented by the parties. Arbitration is an alternative to litigation in national courts and is favored because it offers greater flexibility, confidentiality, and a specialized decision-making process.

Arbitration Clause

Arbitration under IIAs usually begins with a written agreement between the investor and the host state. This agreement, known as an arbitration clause, sets out the terms of the arbitration process. The arbitration clause generally includes the following key provisions:

• Seat of arbitration – specifies the location where the arbitration will take place.

• Rules of arbitration – sets out the procedural rules that will govern the arbitration.

• Language of arbitration – specifies the language in which the arbitration will be conducted.

• Applicable law – identifies the law that will apply to the dispute.

• Number of arbitrators – specifies the number of arbitrators who will hear the case.

• Qualifications of arbitrators – sets out the qualifications required for the arbitrators.

• Timelines – sets out the time limits for the various stages of arbitration.


One of the key issues faced in arbitration under IIAs is determining jurisdiction. Jurisdiction refers to the power of the arbitrator to hear and decide the dispute. The arbitration clause defines the scope of the arbitrator`s jurisdiction, and it is the arbitrator who will ultimately determine whether they have jurisdiction to hear the dispute.

Once the arbitrator has determined jurisdiction, they will begin the substantive process of deciding the dispute. The arbitrator`s decision is called an award and is binding on the parties.

Enforcement and Recognition

Another significant issue in arbitration under IIAs is the enforcement and recognition of the award. Unlike domestic court judgments, international arbitral awards cannot be directly enforced in all countries. The New York Convention provides a framework for the recognition and enforcement of foreign arbitral awards in up to 162 countries. However, enforcement and recognition can be challenging in some countries due to local legal systems and political factors.


Arbitration under international investment agreements is a complex legal process that requires specialized knowledge and experience. It is crucial for investors and host states to have a clear understanding of the key issues and challenges that arise in arbitration. By doing so, they can ensure that they protect their interests and resolve disputes efficiently and effectively.

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