How investment treaty arbitration works

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John Savage of King & Spalding explains why Indian and foreign investors need to know more about bilateral investment treaties

Not enough people know it, but investment treaties give Indian companies that invest abroad, and foreign companies investing in India, robust protection against government mistreatment. An important part of this protection is the investor’s right to sue the host government in effective offshore arbitration, rather than resort to often ineffective dispute resolution in the courts of the host country. Foreign investors have recently started using these treaties to sue the Indian government in offshore arbitration, especially over 2G telecom licence cancellations. But it’s not a one-way street: these treaties also benefit and have been used by at least one Indian investor arbitrating against a foreign government.

John Savage
John Savage

An investment treaty is an agreement concluded by two or more states to promote and protect the foreign investments of investors of each state from mistreatment by the other state parties. Today there are over 2,600 bilateral investment treaties (BITs) and a growing number of multilateral treaties. India has signed more than 80 of these treaties, over 60 of which are in force. Few states have signed more. The key point to remember is that these treaties give investors covered by them direct rights to invoke the treaty protections and sue host governments in arbitration without involving the investor’s own government.

Here’s an example of how it typically works: the India-Myanmar BIT protects investments by Indian investors in Myanmar against mistreatment by the Myanmar government and its different agencies and officials. If Indian investors believe they have been mistreated, they won’t be forced to litigate against Myanmar in its own courts – instead, they can invoke the BIT and bring their claim against Myanmar in an impartial, effective, international arbitration.

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John Savage is the head of King & Spalding’s arbitration practice in Asia and is the managing partner of the firm’s Singapore office. King & Spalding has one the world’s leading investment arbitration practices, typically representing investors. Learn more at www.kslaw.com.

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