Investment treaties expose Sovereigns to significant liability if the rights of foreign investors are encroached on. At the same time, they also grant powerful protections and direct claims to SWFs when they act as foreign investors in other states. For this reason, investment treaties are both controversial and critical.

In this episode, Andy Moody, partner and head of the dispute resolution practice in London, and Katia Finkel, senior associate in the same practice in London, cover recent examples of sovereign wealth funds bringing investment treaty claims and how others can obtain access to these protections. The episode also analyzes why investors should consider investment treaties as part of their decision-making process.

Here are other takeaways from the episode:

  • Investment treaty protection will be particularly important for those sovereigns that invest abroad either directly or indirectly, including as part of a portfolio.
  • Investment treaties expose sovereigns to significant liability if the rights of foreign investors are encroached on. At the same time, they also grant powerful protections and direct claims to SWFs when they act as foreign investors in other states. For this reason, investment treaties are both controversial and critical.
  • Over the last decade we have seen an increase in economic nationalism. The pandemic has put a spotlight on this trend. Under the umbrella of public health or national security, sovereigns have increasingly imposed measures that impede on (and some say infringe) foreign investment.
  • The investment treaty landscape has been shifting significantly. Intra-EU BITs and other treaties have been terminated or replaced; and there is a rise in abuse of process type arguments (for example, around investment structuring and treaty shopping).

Any financial institution would be well advised to consider its investment structuring and investment treaty protections, but it is all the more critical for sovereigns – both on the respondent side and, increasingly, on the claimant side. Any existing sovereign investor (whether direct or indirect) whose investment has been affected by state measures is likely to be affected by such measures and we recommend to analyze carefully its existing protections.

You can also read the accompanying publication, The State of State Immunity, which is part of the on-going Sovereigns Series – Worlds in Motion. The series maps the post-pandemic environment for sovereigns globally.

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