OUTLOOK FOR INVESTMENT TREATY ARBITRATION

CD: Could you provide an overview of the common types of disputes that can arise from investment treaties? What key trends have you seen over the last 12 months or so?

Gladstone: Investment treaty disputes arise where government action or inaction interferes with a protected investment in breach of the investor’s treaty rights. Typical fact patterns for investment treaty disputes tend to centre around scenarios where, for example, there has been a loss of, or failure to grant, a licence to operate, or a change in tax or regulation which has fundamentally changed the economics of a project, such as the Spanish solar disputes. Flagrant nationalisations tend to be rare, although we are seeing more outright expropriations in a number of jurisdictions, including in parts of Africa. In terms of sectors where we have seen the most activity, oil, gas and mining disputes continue to generate the largest share of cases, with electric power and other energy disputes close behind. Disputes are also seen in construction, IT and communications, finance, transport, services and trade. Geographically, we have been seeing a lot of activity in South America, in particular in Colombia and Peru, but cases have also been on the rise in Eastern Europe and Central Asia.

Boykin: It should not come as any great surprise that the most common types of disputes concern extractive industries. In part, this may be attributable to the fact that such investments, for example one made in a gold mine, will often involve large capital investment prior to the investor making a return on its investment. If such an investment is made in a country without a firm commitment to the rule of law, that investment may become subject to expropriation if there are significant political changes after the investment has commenced and the capital has been invested. Energy is another area where you will often see disputes. Under international law, there is no right for an individual to sue a state without that state’s consent. However, the Energy Charter Treaty (ECT) is an example of a multilateral instrument in which signatory states have consented in advance to arbitrate certain future claims related to investment in energy projects.

Jul-Sep 2021 issue

Clifford Chance

Dentons

Hughes Hubbard & Reed LLP

Skadden, Arps, Slate, Meagher & Flom LLP

Wilmer Cutler Pickering Hale and Dorr LLP