The Role of Arbitration in Settling Foreign Investment Related Disputes - Dissertation Example

The declining number of ISA claims corresponds with the rapid growth in investment treaties. By 2007 there were approximately 3000 BITs and the proliferation of these treaties are attributed to the initiative of the Organization for Economic Development (OECD) in the 1960s. At the time the OECD began taking steps for the stabilization of commercial relationships between “developed, capital-exporting countries and their capital-importing countries” among the “developing post-colonial world”.

These measures contributed to the proliferation of BITs among and with developing nations such as those in Asia, Latin America, and transitioning Eastern European states. Although the growth in foreign investment was negatively impacted by the recent global financial crisis with the collapse of transnational companies (TNCs) and banks, the United Nations Conference on Trade and Development (UNCTAD) remains optimistic. In its most recent report on trends in foreign investments, UNCTAD reported that in 2010, there were signs that foreign investment inflows and outflows were beginning to improve with the slow recovery of the global recession.

UNCTAD predicted that FDI inflows were expected to reach US$1.3-US$1.5 trillion this year 2011 and up to US$1.6-US$2 trillion by 2012. Half of these inflows are expected to go to transition and developing countries. The growth of foreign investment and the anticipated growth in the future corresponds with developments in customary international law. Foreign investment treaties, particularly BITs have been constructed in such a way that they have been accorded their own laws and have broadened the scope and range of customary international law.

The principle of fair and equitable treatment, together with other clauses providing for most favoured nation treatment and protection against expropriation, functions together to provide significant protection and treatment of foreign investors and their investments.