Originally from American Review of International Arbitration - ARIA

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I. INTRODUCTION
Today’s governance of foreign investment is dictated by a patchwork of
investment treaties and preferential trade agreements.1 The flow of foreign direct
investment (“FDI”) has increased dramatically over the past two decades, up to
US $1.24 trillion in 2010. A further upsurge to $1.7 trillion in 2011 was
anticipated.2 Whilst FDI arbitration3 was largely unknown until fifteen years ago,
the present number of publicly identified FDI arbitrations, in a context of more
than 2800 bilateral investment treaties (“BITS”) and approximately 300 trade
agreements, is well over 390.4 The governance of FDI is premised on the notion
that the provision of reciprocal investment protection fosters investment and
economic prosperity. However, as is well known, FDI has an impact on essential
interests other than the economic development it seeks. These include human
rights and environmental protection. There are increasing concerns that present
arrangements under FDI arbitration constrain States’ exercise of national
sovereignty, particularly their regulatory autonomy to enact regulations and
design policies to advance these public interests.5 FDI arbitration is tainted by
incoherencies and imbalances. Some are inherent to International Investment
Agreements (“IIAs”) that explicitly grant investors extensive protection of their
interests. The right to bring a claim for arbitration is a case in point. Others are
implicit to FDI arbitration procedures, which arguably tip the balance in favor of
investor interests. This article will examine how these issues taint the law and
practice of FDI. Its structure is three-fold. The next part will contextualize the
evolution of the FDI governance system from investor protection through