Originally from Investment Treaty Arbitration and International Law - Volume 2

This contribution considers the role that domestic legislation regulating foreign investment (Foreign Investment Laws or “FILs”) has played in the development of international investment law and, particularly, in the field of investment disputes. As is the case with Bilateral Investment Treaties (BITs), some FILs provide certain substantial protections to foreign investors that are not generally available to local investors, as well as the possibility of resorting to international arbitration to solve disputes with the host government.

FILs that provide for access to international arbitration, however, are the “poor cousin” of Bilateral Investment Treaties (BITs). Their geographical coverage is limited to a small number of countries which, in the main, are not significant recipients of foreign investment. For this reason, the number of disputes based on FILs has been negligible in comparison to the number of disputes concluded and pending under BITs. Not surprisingly, this type of arrangement for the protection of foreign investors has received less attention from practitioners, academics and international organizations responsible for legal and policy issues related to foreign investment.

The decision on jurisdiction in the famous Pyramids case of 1985 was the first published decision based on an FIL, and led to this subject receiving more attention. More recently, the Venezuelan Law on Foreign Investment has attracted significant interest given the political circumstances affecting foreign investors in that country, and the fact that some of them are relying on this law to commence international arbitration against the government.