We anticipate a rise in investor-State arbitrations, with investors arguing that States have breached treaty obligations.
State responses to the challenges posed by the COVID-19 crisis have been rapid, dramatic and all-encompassing. Many of the measures taken have widespread implications for international investors. Investors have suffered significant economic losses and face the prospects of further losses to come. They will necessarily be considering their options.
Although the parties to investment treaties are the contracting States, many treaties contain provisions allowing investors whose rights have been infringed to bring proceedings directly against the host State in international arbitration. The claimant needs to be an Investor who has made a qualifying Investment as defined by the applicable treaty. Depending on the treaty's terms, investments may take the form not only of tangible assets, but also contractual rights such as rights under debt instruments. They may encompass not only directly-held investments, but also indirect investments held via intermediaries such as subsidiaries.
Despite calls for a green recovery, the acute economic pressure on States may lead them to withdraw incentive schemes from renewable energy projects. Mexico's recent decision to place restrictions on renewable energy production following a fall in the demand for electricity caused by the pandemic has been questioned by some investors, for example. If decisions to remove incentive schemes for renewable energy projects are taken wrongly or opportunistically, we may see a new wave of investor-State disputes in their wake.
Key contacts
If you have any questions, contact a member of the Investor - State arbitration in renewable energy team for assistance:
