Investment arbitration is an altogether different beast from commercial arbitration and that is why it was left to the very end. In order to understand the mechanics of investment arbitration, which unlike its commercial counterpart is quintessentially a field of public international law, one must be familiar with substantive international investment law. At the end of the chapter we offer a brief analysis of the fundamental guarantees affordable to foreign investors with the aim of linking the discussion on investment arbitration with substantive investment law. Given the complexity of the subject matter, an effort has been made, first of all, to demonstrate in what sense investment arbitration proper is different from other forms of arbitration with an investment dimension.
We begin by identifying inter-state, investment-related, disputes which although peripheral to investor-state disputes allow us to comprehend the operation of diplomatic protection, which was the predecessor to investor-state arbitration. From there we turn to the nature and function of investor-state disputes and their particular sources and we explain in what manner investment arbitration is different from its commercial counterpart. Given that the focus of this chapter – and a book on arbitration more generally – is on the procedure of investment arbitration, we then examine particular jurisdictional aspects, namely: cause of action, the existence of an investment dispute and the meaning of the term ‘investment’. Equally, we discuss the meaning of nationality of natural and legal persons and the place of such persons in BITs and other IIAs. Key to the understanding of the uniqueness of investment arbitration is its particular requirement of consent. Unlike commercial arbitration, where consent must be expressed unequivocally by all parties, investment arbitration does not always require the express simultaneous consent of the investor, particularly where consent to arbitration is achieved by a treaty (to which the investor is not a party) or by the host state's legislation.
At the close of the chapter we examine the nature of applicable law in investor-state arbitration. By this stage the reader will be familiar with the various requirements for investment arbitration and hence the discussion on investor guarantees will make ample sense.