Who makes International Investment Law?

International Investment Law

Arbitration as a dispute resolution system has evolved over time and is literally the only overarching international system for dispute resolution, a space in which the national courts fall short. However, with the vast growth of international Arbitration and its strategic position in helping parties resolve disputes, the system has continued to receive serious attention and study from both proponents and critics as to what guides its operation mechanism.

dispute resolution

One area in the system that has received more attention than any other is how its law works in settling disputes. Clearly, anybody who has heard of Arbitration knows that it is much more different from the National courts, with their similarities being that they are both binding and final. However, their operations are significantly different. A state involved in a dispute with a foreign investor is more open to scrutiny in the tribunal than how it would have been adjudged if the ruling was from its own National courts. 

Hence, what has continued to beg the question about International Arbitration is the source of its international investment law? Who makes it, and how is it controlled, or who dos the system answers to?

International Investment Law 

As already a continuous question on international Arbitration is about the source of its international Investment law and on what authority does it bind contracting parties to it. This question, however, isn’t exactly appropriately structured as international investment law is quite different from state laws with a centralized power source. The nature of international Arbitration is its lack of centrality; that means that it is a decentralized system, and ultimately, its investment laws, which are the founding blocks on which parties get to settle disputes,, are also decentralized.

In more simple terms, international investment laws are generally created by the parties going into a contract and are subscribing to Arbitration as a way for them to settle disputes if they end up arising in the contract. International Investment Law is more like a law that gives two contracting parties the authority to carve out investment treaties that would help keep the both of them in check and ensure none encroach in the contractual right of the other. 

In a situation where one party breaches a contract, the aggrieved party can activate the treaty with which the encroaching party is bound to in an arbitral tribunal and request for remunerations in like sum to the damage or loss caused to it. The tribunal then decides if the encroaching party wants, and if such is the case, the tribunal will activate its power built on the power of both party contracts to order a binding law that obligates the encroaching party to duly compensate the aggrieved party.

International investment law is prominent in contracts involving a foreign investor or foreign investors seeking to invest in a sovereign state. Hence international Investment Law is defined as a field of international law that guides and governs the investment relationship between foreign investors and host states where investment is carried out. The law is built with an international scope and obliges all states signed into the New York Convention to abide to treaties willingly entered with foreign investors.

International investment law is a much more prominent feature in foreign investment as foreign investors use its foundational blocks to set up treaties that host states must agree to before investing in the host state. It is a protective arm that gives foreign investors protection that may not be available if with the host state national court due to the possibility of the courts being biased and more likely to pass ruling in favor of its state. 

There are majorly two overarching differences between International investment law and the National courts. International Investment Law covers international and global cases across jurisdictions that are members of the New York Convention, unlike the National courts, whose enforceability is much limited. 

Also, International Investment Law gives foreign investors the right to create an investment treaty and will only generally invest in a state if it agrees to the treaty such that it is automatically bound by it. This is different from the laws of National Courts which are set up by the state and cannot be altered by the Foreign Investor. These differences outline the friendliness and protection that foreign investors enjoy in international Arbitration that is not available with state laws.

Also, the obvious differences between International investment law and the National courts show the foundation of the latter. While Investment Law is outlined under the New York Convention and is generally binding to states that subscribe to the convention, the bilateral treaties chosen on the ground of this law are decided by the foreign investor and the host state. 

As it stands, International Investment laws comprise more than 3200 bilateral treaties with an unknown number of investor-state contracts subscribing to them.  Generally, investment law and the protection it offers foreign investors against encroaching host states are major reasons that outline the acceptance and general accessibility of international Arbitration as a dispute mechanism. 


Arbitration and International Investment Law cannot be separated as long as international investment continues. However, investors must ensure that they choose the right treaties that do not leave them open to host states such that they end up incurring significant losses in their investment due to unwholesome policies and treaties by host states.

Generally, it is advised that an investor seek the counsel of an international professional arbitrator or arbitration to choose investment treaties that do not leave them vulnerable and open to exploitation by host states. 

Rattsakuten is an arbitration institution with highly qualified and expert arbitrators on the issue of international investment law and knows the dos and don’ts clients must abide to when drafting an investment treaty. The firm can be reached here for more inquiries and details.

Fredrik Jörgensen

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