XII Settling Investment Disputes

This chapter focuses on the settlement of investment disputes. Under traditional international law, investors did not have direct access to international remedies to pursue claims against foreign States for violations of their rights. Instead, they depended on diplomatic protection by their home States. However, the gaps left by the traditional methods of dispute settlement (diplomatic protection and action in domestic courts) has led to the idea of offering investors direct access to effective international procedures, especially arbitration. Arbitration between a host State and a foreign investor may take place in the framework of a variety of institutions or rules. If arbitration is not supported by a particular arbitration institution, it is referred to as ad hoc arbitration. Ad hoc arbitration requires an arbitration agreement that regulates a number of issues. These include selection of arbitrators, applicable law and a large number of procedural questions. A number of institutions, like the United Nations Commission on International Trade Law (UNCITRAL), have developed standard rules that may be incorporated into the parties' agreement. The chapter then looks at the creation of the International Centre for Settlement of Investment Disputes (ICSID). It also details the procedures for investment arbitration.