Large investments in foreign countries are vulnerable to mistreatment by the host government. The recent wave of nationalizations in Venezuela and the Russian government's treatment of oil giant Yukos are examples of the troubles encountered by foreign investors with interests in sometimes unfriendly locales. Such government actions have triggered the rise in international investor-state arbitration. Billions of dollars worth of arbitral claims against foreign governments are currently pending in arbitration proceedings worldwide.
Most of these claims arise from a network of treaties that protect investors against the political risk of improper actions by governments in countries receiving foreign investment. This network includes multilateral treaties like the North American Free Trade Agreement ("NAFTA"), the Energy Charter Treaty, over 2,600 bilateral investment treaties ("BITs"), and the Washington (or ICSID) Convention. Substantive provisions protect against expropriation, unfair treatment, and discrimination. Procedural protections include arbitration by foreign, private investors directly against States, outside the host country.
The global economic crisis may contribute to the woes of foreign investors. As regimes (and commodity prices) change, host governments will sometimes seek to change the terms of the foreign investor's deal. This has occurred in recent years with special frequency in the energy and banking sectors. Bolivia announced nationalizations of foreigners' oil and gas interests there. Venezuela has taken over foreign companies' oil and gas projects as well as foreign-owned banks. The front page of any international newspaper is rife with such disputes. All sectors face political perils when investing overseas, including construction, telecommunications and food processing.
Investor-state arbitration has had an obvious impact on foreign governments. Even the most hostile foreign governments are concerned because they can now be sued, directly, by foreign investors. Awards are paid from the national treasury. The course will therefore address the inevitable political, economic, and policy questions raised by this significant cession of sovereignty to private actors.
The course will introduce students to the network of treaty protection and its practical implementation. Students will be taken through the identical arbitration process as that experienced by investors in some of the most important cases in recent years. Core materials for this course include the United Nations Conference on Trade and Development and arbitral awards involving claims against foreign governments. To provide the business background of energy deals, guest speakers from major international companies will clarify the real stakes of this emerging area of international arbitration.