Being aware that your foreign investment is protected by an investment treaty is the first step in the right direction. But it is only the first step.

The difference between a successful legal claim by an investor and a dismissed case often lies in the groundwork laid years prior. To help companies navigate the high-stakes world of investment arbitration, we have compiled a „Best Practices“ checklist. This guide walks you through the critical actions required – from pre-investment structuring to the cooling-off period – to ensure you are fully protected by international investment law.

Phase 1: Pre-Investment & Structuring

Decisions made at the inception phase can determine whether you have access to international legal protection and on what terms.

• Identify Applicable Treaties (BITs, FTAs, ECT etc.) (see our article on this topic).

• Confirm “Investor” Status: Check treaty definition of a protected “investor.” Does it cover individuals, corporations, or both? Are there specific requirements regarding nationality (e.g., place of incorporation, location of headquarters)?

• Actionable Tip: Depending on the applicable treaty, structuring your investment through a subsidiary in a country that has a more favourable BIT with the host State can be a legitimate strategy.

• Confirm “Investment” Status: Check treaty definition of a protected “investment.” While often broad, some treaties require specific characteristics like a contribution of capital, a certain duration, and the assumption of risk.

• Comply with Host State Law: Make sure the investment is established and operated in full compliance with the host State’s laws and regulations. Keep meticulous records of all permits, licenses, and approvals.

• Document Legitimate Expectations: Record any specific promises or assurances made by the host State that induced you to make or maintain the investment. Also keep records of your own pre-investment due diligence, including professional advice and reports.

• Review Dispute Resolution Clause: Check availability of arbitration and applicable pre-conditions.

Phase 2: During Operations

Proactive management and documentation are key to building a strong case if a dispute emerges.

• Keep Impeccable Records: Maintain a comprehensive file of all communications with government officials, contracts, financial statements, business plans, tax records, and evidence of capital transfers.

• Monitor Political and Legal Changes: Stay informed about any new laws, regulations, or policy shifts that could negatively impact your investment.

• Maintain Good Faith: Continue to act in good faith and comply with all local laws. A tribunal may look unfavourably on an investor who has “unclean hands.”

Phase 3: When a Dispute Arises

How you manage the initial phase of a dispute can significantly impact your leverage and the outcome.

• Engage Legal Counsel Early: As soon as you suspect a potential breach of the investment treaty, consult with specialized international investment lawyers.

• Send a Formal Notice of Dispute: Formally communicate your grievances to the relevant government body (for a deeper look into what makes a good notice of dispute, see our article on this topic)

• Consider your options: You may have a choice between local litigation, commercial arbitration, and investment treaty arbitration. Consider the pros and cons and possible implications of each option.

• Comply with „Fork-in-the-Road“ Rules: If considering local litigation prior to arbitration, confirm that no prior actions taken in domestic courts bar you from initiating arbitration.

• Observe the Cooling-off Period: Respect the mandatory negotiation period stipulated in the treaty. Use this time to attempt an amicable settlement.

• Gather Evidence: Immediately begin compiling all relevant documents, witness testimony, and expert analyses related to the dispute and the damages suffered.

Phase 4: Initiating Arbitration

If negotiations fail, consider initiating investment arbitration.

• Obtain specialized legal advice: Before launching arbitration, ask specialized international investment lawyers for advice on the chances of obtaining compensation, length and costs of the proceeding, and the most suitable from among the available arbitral fora.

• File a Request for Arbitration: Formally trigger the arbitration by filing a Request for Arbitration as required by the treaty and the chosen arbitration rules.

• Adhere to Procedural Deadlines: Strictly follow all timelines and procedural requirements set out in the treaty and the chosen arbitral rules (e.g., ICSID or UNCITRAL).

• Appoint an Arbitrator: The process of constituting the arbitral tribunal will begin. You will need to select a qualified and impartial arbitrator to hear your case. This is one of the most important decisions in the entire arbitration and demands comprehensive due diligence to ensure the appointee possesses all the necessary qualities.

Following this checklist helps ensure that if your investment is harmed by a host State’s actions, you are in the strongest possible position to seek recourse through international law.