Browse

Sovereign investment, particularly by SovereignWealth Funds, constitutes an increasingly important portion of foreign investment. In 2009, Sovereign Wealth Funds invested US$22.9 billion in foreign direct investment, 15 per cent more than in 2008. 1 Investment treaties protect investments of investors of the contracting parties. Whether sovereign investors benefit from investment treaty protection depends on the definitions of “investor” and “investment” in an otherwise applicable investment treaty. Investments made by sovereign investors are clearly protected under an investment treaty if these definitions expressly include the State, State entities and companies and their investments. This article addresses the more difficult question of protection where the definitions are silent or ambiguous as to whether sovereign investment is covered. Also addressed are the evolving standards of admission of sovereign investment and access of sovereign investors to investor-State arbitration, ICSID arbitration constituting a special case.

This chapter explores the role of the doctrine of “legitimate expectations” in state defenses against investment treaty claims. It argues that an investor's failure to establish its legitimate expectations may lead to the partial or full dismissal of a case at the jurisdictional, merits, or damages phases of an investment claim. An investor's expectations are generally established by reference to municipal law, and failure to establish the existence of valid and enforceable rights might result in the dismissal of a claim for lack of jurisdiction ratione materiae, or could defeat a claim of expropriation if the investor had no valid claim to the rights allegedly expropriated. Legitimate expectations might play a role in damages calculations, particularly when they are predicated on fair and equitable treatment claims.