HONG KONG: A FUTURE HUB FOR INVESTOR-STATE ARBITRATION
Investments made into foreign jurisdictions impose a variety of risks. Investors need to take measures to ensure their investment interests are protected. An important way to protect investments and mitigate risks is to ensure adequate dispute resolution mechanisms are in place. Investors may not wish to have a dispute decided by the national courts of the host country for fear that they might be treated less favourably than the nationals. However, to encourage foreign investments, states have been entering into bilateral investment treaties (BITs) and multilateral investment treaties (MITs), in which they afford special standards of treatment to foreign investors and stipulate that they consent to international arbitration for the resolution of any disputes. The investors can therefore vindicate their rights through international arbitration.
If we imagine an example of a BIT between state A and state B, and let us say that the investor is a national of state A and the host state of the investment is state B. In this instance, the investor will be able to assert its rights and commence an arbitration against state B, pursuant to the BIT concluded between the two states.
There are more than 3000 BITs, and they usually provide for one of the following arbitration rules to apply: the International Centre for Settlement of Investment Disputes (ICSID) rules, the United Nations Commission on International Trade Law (UNCITRAL) rules, the Stockholm Chamber of Commerce (SCC) rules or the International Chamber of Commerce (ICC) rules. The majority of investor-state arbitrations will be administered by an arbitral institution, such as ICSID, the Permanent Court of Arbitration (PCA) or the Hong Kong International Arbitration Centre (HKIAC).
Jan-Mar 2019 issue