Paul Bugden, Bugden + Co., London
International forwarding and logistics, and indeed international trade more generally, nowadays often involves significant overseas investment; especially as new markets develop in emerging countries. Cross-border investments in unstable or emerging markets face a volatile risk environment. Even businesses in developed counties are at risk from government intervention or regulatory measures as the last economic crisis well shows.
Political risk insurance is costly, and often does not provide comprehensive protection from government interference. Few investors, or even for that matter lawyers, know about the international law guarantees available to investors in over 2,700 bilateral and multilateral investment treaties signed by over 180 countries around the world.
These investment treaties offer a range of guarantees to foreign investors – both corporate entities and individuals – against conduct of host-State government entities, including protection against expropriation without fair compensation, protection against unfair treatment, guarantees of full protection and security for your investment, and guarantees that your investment will be treated no less favourably than investment made by locals.
This means that if any act of the host-State harms the integrity of profitability of your investment (e.g. the revocation of a licence, inadequate policing, the seizure of your assets, or the imposition of an unfavourable tax or tariff regime on your investment activity), then you can invoke these investment treaty protections directly before an independent and impartial international arbitral tribunal without the need to refer your dispute to the local courts.
The extent of the protection is surprisingly wide. There is no requirement for you to have a contract with a host-state entity, or to involve officials from your host-state, in order to bring such a claim under an investment treaty.
The arbitration proceedings are often administered by the International Centre for Settlement of Investment Disputes in Washington (‘’ICSID”), which is part of the World Bank Group. Consequently, States tend to comply voluntarily with ICSID awards.
If a State does not comply voluntarily, ICSID awards can be automatically enforced in over 145 states without the rights for any court to review the arbitral award. Over 400 international businesses have already brought claims against States under these treaties.
Investors can benefit from these powerful protections if they structure their investments properly. In fact, a growing number of cross-border businesses are using corporate vehicles in third party jurisdictions to gain the protection of investment treaties. Although companies can restructure their existing investments to benefit from investment treaty protection, this issue is best addressed at the “investment planning” stage (i.e. when choosing the appropriate jurisdiction for incorporating the investment vehicle).
Often the threat of a possible international investment claim at ICSID is an effective negotiating tool and fosters more willingness in governments to resolve investor grievances.
Bugden & Co can help structure (or restructure) your foreign investment projects to ensure that they benefit from the “free political risk insurance” available under investment treaties. We can also advise you in relation to any international law remedies you may have against a government and help you enforce these remedies during negotiations and in arbitration proceedings. We can also identify suitable third party funders who may be willing to finance your claim in return for a share of the damages recovered.