A Coming Crisis: Expansionary Trends in Investment Treaty Arbitration

Abstract Investment treaties are entered into on the assumption that providing security for investment through the recognition of standards of treatment, compensation for expropriation and the repatriation of profits will result in larger flows of foreign investment (FDI) into developing countries. That assumption is now doubted in several studies by economists and others. Moreover, since the award in AAPL v. Sri Lanka, in which the tribunal found jurisdiction on the basis of the provisions of an investment treaty, the number of investment disputes subjected to arbitration on the basis of treaty provisions has reached explosive proportions. Th e question thus raised for developing countries, in light of those studies and a recent bevy of adverse awards against developing countries, is whether the advantages of entering into investment treaties outweigh their potential disadvantages.