Originally from Revolution in the International Rule of Law: Essays in Honor of Don Wallace, Jr.

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One of the constants in Prof. Don Wallace's professional life has
been the intertwining of political risk and arbitration. In honor of Prof.
Wallace, this Essay addresses a question that arises in the public policy
debate about investment treaty arbitration--does the availability of
political risk insurance ("PRI") make investment treaty arbitration
unnecessary?

The answer is: No.

We will be able to draw a few significant conclusions from the
following comparison between PRI products and investment treaty
arbitration:

• Investment treaty arbitration is a forum, not a guarantee.
• Investors lose more often than they win in treaty arbitration.
When they win, they are awarded only a fraction of their claims.
• Obtaining an investment treaty award is just the beginning of the
process of collecting the awarded sum. States increasingly resist
payment of awards, thereby forcing an arduous and often
unsuccessful collection process.
• Payment under a PRI policy does not extinguish the claim
against the host State. Payment by the PRI provider merely shifts
the claim from the investor to the PRI provider to pursue itself.
• PRI policies generally do not cover conduct that constitutes
breach of the international Minimum Standard of Treatment/Fair
& Equitable Treatment protections found in investment treaties.
• PRI policies generally do not cover discriminatory conduct in
breach of the Most Favored Nation and National Treatment
protections found in investment treaties.