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Like commercial arbitration, consent from a host state and an investor is the basis for a tribunal’s jurisdiction in international investment arbitration. However, unlike the commercial one, investment arbitration between a host state and an investor is without privity. This means an investor can bring an arbitration case against the host state without a contract, but will have to rely on the investment treaty signed between two or more sovereign states. Under the bilateral or multilateral investment treaties, each contracting state agrees that it will protect foreign investors from another contracting state. For its side, the investor is entitled to bring a claim directly against the host state without seeking diplomatic protection from its home state. The difference between commercial and international investment arbitration resulted in the diversified method for an investor to reach consensus to arbitration with the host state. This article will introduce methods of consent between a host state and an investor in international investment arbitration.

Consent by direct agreement. Although an investor can bring an arbitration case against a host state without a contact, it does not prevent the parties recording their consent to arbitration directly through an investment agreement. The agreement on consent between the parties need not be recorded in a single instrument. For example, an investment application from an investor may provide for arbitration. If the competent authority of the host state approves the application, the parties have consent for arbitration. In addition, a reference in an agreement between the parties to a Bilateral Investment Treaty (BIT) may incorporate the consent for arbitration contained in that BIT in the agreement.

Consent through BITs or multilateral treaties. Consent through BITs or multilateral treaties is the most common way to establish jurisdiction. A vast majority of BITs contain clauses referring to investment arbitration should there be any dispute. For the host state, the consent to arbitration in the BIT is a standing open offer to the investor of the other contacting state. An investor may accept that offer at any time. It is an established practice that an investor can accept an offer of consent by initiating an arbitration proceeding or sending a triggering letter to the host state.

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Zhang Xi is a case manager of Beijing Arbitration Commission/Beijing International Arbitration Centre

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