University of Petroleum and Energy Studies

School of Law

B. B.A. L.L.B (Hons.)

Corporate Law Semester 9
Academic Year :2022-23
Session : Aug- Dec

Assignment on
TOPIC-Discuss origin of International Investment Arbitration and critically examine its
process before and after the economic liberalization of 1990s which occurred in India

Under the supervision of Prof. GOVIND NARAYAN SINHA

Submitted by: Gaurav Kumar , Roll No-119, SAP ID-500071413
Enrollment Number: R760218119
Discuss origin of International Investment Arbitration and critically examine its
process before and after the economic liberalization of 1990s which occurred in India.

Since the 1990s, laws based on treaties between linked nations have been extensively formed regarding
foreign direct investment, which is economic activity conducted in a foreign country by a private individual
(natural or legal person) from another country. These accords are referred to as "investment treaties" in this
research. Investment treaties have been signed. predominantly in the form of bilateral treaties (bilateral
investment treaties, or BITs).
The BIT addresses the handling of a Contracting Party State's investor (national) who creates an investment
in the other Contracting Party State. Because each BIT is negotiated bilaterally, the specifics of the
provisions vary from treaty to treaty. Many governments, however, have produced model accords to which
they refer. Some nations, on the other hand, refer to an earlier pact. To some degree, these provisions are
common. And since many BITs include most-favored-nation rules, variations in provisions may be
irrelevant to some degree. BITs typically include definitions (the scope of the treaty), most-favored-nation
status, treatment of investors in the treaty partner country (national treatment, fair and equitable treatment,
and full protection), expropriation conditions, investor-State dispute resolution, and State-to-State dispute
resolution.
Many classic BITs seek to "encourage and safeguard" mutual private investment. However, in terms of
investor treatment, it is a "protective type" treaty that provides for the treatment of investors from one
Contracting Party State who have made interests in the territory of another Contracting Party State. In
general, the criteria for allowing foreign investments are left to choices made in conformity with the host
country's internal legislation. BITs of the "liberalised kind" have also been completed in recent years. These
accords include measures to lower obstacles to private investment from partner nations. These "liberalised
type" investment treaties are occasionally included as investment chapters in free trade agreements (FTAs)
and economic partnership agreements (EPAs).
(EPAs). Prior to the creation of an investment, the terms of the "liberalised type" investment treaty should
also apply to a "prospective investor." In this case, entrance barriers that are incompatible with the terms
agreed upon in the investment treaty are in breach of the treaty. However, there are certain restrictions on
prospective investors' ability to file a challenge.ISDS-based settlement Because the ISDS provision is
established under the investment treaty for disputes between an investor of a Contracting Party State and a
host nation (another Contracting Party State). A prospective investor has not invested or created an interest
in the literal sense, hence they are not subject to the treaty. The extension of the investment definition
addresses such issues. The term is concerned with "investment establishment, acquisition, and growth."
Even if an investment treaty has such a definition, i.e. prospective investors are recognised as investors, they
may not always be subject to dispute settlement under the ISDS clause. ISDS processes cover investment
losses. As a result, prospective investors
Those who have not made a financial investment may be unable to employ the processes.
If, notwithstanding the signing of a liberalised investment treaty, impediments to investment from the other
Contracting Party State exist, actions other than the ISDS provisions are required to achieve investment
liberalisation. Such measures may include dispute resolution mechanisms and discussions between States
Parties. This document examines and summarises the provisions on investment liberalisation in the Doha
Development Agenda. the investment pact, and then analyses ways to assure liberalisation implementation.

Investment liberalisation under the Investment Treaty

II-1. Investment roadblocks

The goal of investment liberalisation under the investment treaty is to lower obstacles to international
investment. As a result, particular hurdles to foreign investment must be examined. Foreign investment entry
obstacles come in a variety of shapes and sizes. Discriminatory policies, such as requiring foreign investors
to meet higher standards than local investors and imposing arbitrary and costly administrative processes, are
common. Foreign and local investors may face restrictions, as well as discriminatory hurdles to entry aimed
only at foreign investors. There are also direct and indirect difficulties to overcome. Foreign investment is
restricted as a discriminatory barrier to entry. In general, states have the authority to set the terms for foreign
investment admission and establishment on their territory. As foreign investment rules, states may regulate
and limit foreign investment entrance and establishment, as well as restrict foreign investment.
domestic company ownership and control Quantitative restrictions, registration, screening and monitoring,
and conditional entry are examples of entry controls over access to the host-economy, country's while
performance requirements for local procurement and domestic economic development include cost sharing,
special taxation, special guarantees, and capital and exchange restrictions. The regulations that govern
foreign ownership and control of
Quantitative limitations on foreign ownership, forced transfers to local businesses, and mandatory joint
ventures or partnerships are all examples of local business. There are further regulations based on the
limiting of shareholder powers, such as limits on shareholder rights and the ability to transfer shares.
Controls based on governmental involvement in the operation of the investment are also enforced, such as
direct governmental intervention in management and management limits.

Rules meant to defend national interests, such as environmental and tax regulations, may also limit the
development of foreign investments. These laws often apply equally to local and international investors.
However, for valid domestic policy goals such as security, natural resource management, essential
infrastructure, public health, the environment, and development, excessive and unjustified restrictions are
permissible.
Only foreign investors may face disproportional requirements4.
.
Conclusion

Investment treaties liberalise investment through broadening the definition of investment, broadening the
extent of substantive provisions, and broadening the scope of dispute resolution (including potential
investors, damages in pre-investment activities, and so on). Recent investment treaties, as well as the
investment chapters of EPAs/FTAs, have included meaningful norms to decrease impediments to investment
liberalisation, such as foreign investment laws. However, there is a limit to the application of the ISDS
clause, which has been employed as a mechanism against investment infractions, in order to make
investment liberalisation successful.
Treaties must be established and developed between Contracting Party States in order to demand
accountability (pay for damages). Furthermore, there is a limit to the liberalisation of investment under
investment treaties, which have mostly been established as bilateral treaties. It is preferable to develop
international standards and international cooperation structures for investment liberalisation in "multilateral
forums" such as the World Trade Organization.
The World Bank, the OECD, UNCTAD, and the World Trade Organization41 In such circumstances, not
only must laws for encouraging investment liberalisation be considered, but also rules for guaranteeing
"transparency" in investment regulations and supporting the development of the investment environment42.