Originally from The American Review of International Arbitration, Vol. 29, No. 3

This article examines the nature and scope of the full protection and security standard present in bilateral investment treaties and how arbitral tribunals have defined and applied it within the context of modern-day terrorism.  Part I provides an overview of international investment law, starting with its eighteenth-century roots and culminating with modern day international investment law norms, including examples of common guarantees and protections Bilateral Investment Treaties (“BITs”) afford investors. Part II focuses specifically on the “full protection and security” guarantees common in many BITs, and the various ways in which investment arbitration tribunals have interpreted them.  Part III concludes by proposing a new way of interpreting the full protection and security standard, particularly in the context of claims being brought due to terrorism destroying foreign investments.  To facilitate the creation of more BITs and support foreign direct investment (“FDI”) inflows despite the growing concern of investors regarding the potential for terrorism to destroy investments, a clear, consistent and easily applicable “full protection and security” standard needs to be implemented by arbitration tribunals.  Failure to respond to current inconsistencies is likely to negatively impact FDI and in turn, the global economy.

I. INTRODUCTION

During the last fifteen years, the number of investment agreements pertaining to the “protection or liberalization of foreign investment” has increased substantially. Nearly 3,000 international investment agreements exist today, which serves as a reflection of the growing global economy.

During the first seven months of 2017, “investors initiated at least thirty-five treaty-based investor-State dispute settlement (‘ISDS’) cases,” bringing the total number of cases for that period to 817.

Most, if not all, BITs guarantee that a host-State will provide “full protection and security” to a foreign investment. Thus, when an investment has been destroyed, rendered inoperable or unable to fulfill its purpose, the investor has the option of initiating a claim against the host-State, under a BIT, for violation of the “full protection and security” guarantee. With the growing incidence of terrorism globally, tribunals will likely be faced with deciding whether or not host-States should be held liable to investors for terrorist acts perpetrated by private parties.