Guidance on resolving international investment disputes for businesses

Article overview

International investment disputes are increasing in the context of globalization and international economic integration. Vietnam, as an investment receiving country, has been facing many challenges in this field. This article will analyze common types of disputes, effective resolution methods, and important notes when participating in resolving international investment disputes. Please refer.

 Resolving international investment disputes for businesses
Resolving international investment disputes for businesses

Some common international investment disputes

International investment disputes are disagreements that arise between foreign investors and investment-receiving countries. Common types of disputes include:

  • Expropriation: This is the case where the state receiving the investment confiscates, nationalizes or commits acts equivalent to expropriating the foreign investor’s assets. This dispute often occurs when the state takes measures to strongly interfere with investors’ ownership rights, seriously affecting investment value.
  • Unfair and inadequate treatment: This dispute arises when the host state violates its obligation to treat foreign investors fairly and adequately. For example: sudden policy changes, retroactive application of laws, refusal of permits without good reason.
  • Violation of contractual commitments: Disputes occur when the state fails to comply with commitments in investment contracts signed with foreign investors. For example: not issuing a license, not fulfilling financial obligations, unilaterally terminating the contract.
  • Discrimination: Disputes arise when the state receiving investment discriminates between foreign investors and domestic investors, or between foreign investors. For example, applying different tax rates, creating barriers to market entry.
  • Tax dispute: This is a dispute related to tax measures of the host state that the investor believes violates investment protection commitments. For example, retroactive tax application, sudden and excessive tax increases.

To effectively prevent and resolve these disputes, businesses need to master investment laws, regularly update policies, and build appropriate risk management strategies.

Effective method of resolving international investment disputes

Resolving international investment disputes requires a deep understanding of international law and practical experience. Effective solutions include:

  • Negotiation: This is the first and important step in the dispute resolution process. The parties directly exchange and discuss to find a satisfactory solution. This method saves time, costs and protects long-term relationships.
  • Mediation: In case of unsuccessful negotiations, the parties can ask a neutral third party to mediate. The mediator will assist the parties in finding a common solution, but does not have the authority to make a binding decision.
  • International arbitration: This is a popular and effective method in resolving international investment disputes. The parties agreed to bring the case to international arbitration such as ICSID or UNCITRAL. Arbitral awards are binding and generally widely recognized.
  • International Court: In some special cases, disputes can be brought to an International Court such as the International Court of Justice (ICJ). However, this method is rarely used in investment disputes.

Dispute resolution mechanism under investment agreements: Many bilateral and multilateral investment agreements stipulate separate dispute resolution mechanisms. Businesses need to carefully study these regulations to choose the appropriate method.

To choose an effective resolution method, businesses need to carefully consider the characteristics of the case, costs, time and ability to enforce the judgment.

Effective way to resolve international investment disputes
Effective way to resolve international investment disputes

Some notes when participating in resolving international investment disputes

When participating in resolving international investment disputes, businesses need to pay attention to a number of important issues to protect their rights and increase the likelihood of success:

Identify the agency with the authority to resolve the dispute

Identifying the correct authority to resolve the dispute is an important first step. Enterprises need to carefully study the provisions in relevant investment agreements and the laws of the investment-receiving country. Typically, competent authorities include:

  • International Center for Settlement of Investment Disputes (ICSID): This is a specialized arbitration body that resolves investment disputes between investors and the state.
  • Arbitration Court of the International Chamber of Commerce (ICC): This body also has jurisdiction to resolve many international investment disputes.
  • Permanent Court of Arbitration (PCA): This is a long-standing international dispute resolution body, with jurisdiction to adjudicate both investor-state disputes.

Enterprises need to carefully review the dispute resolution provisions in investment contracts and applicable investment agreements to accurately determine the competent authority.

Language and applicable law for effective dispute resolution

The language and law applied in the dispute resolution process have an important influence on the outcome of the case. Businesses should note:

  • Language: Normally, the language used in proceedings is English or French. Enterprises need to prepare a team of lawyers and experts who can fluently use procedural language.
  • Applicable law: Can be international law, law of the investment receiving country, or law agreed upon by the parties. Businesses need to carefully research applicable laws to build effective legal strategies.

Businesses should consult experts to choose the language and applicable law that is most beneficial to them during the dispute resolution process.

Enforceability of judgments after dispute resolution

A favorable judgment is invalid if it cannot be enforced. Enterprises need to evaluate the ability to enforce the judgment from the beginning, considering the following factors:

  • New York Convention 1958: Check whether the host country is a party to this Convention, as it creates the legal basis for the recognition and enforcement of foreign arbitral awards.
  • Assets of the losing party: Determine the location and value of the losing party’s assets to ensure the ability to enforce the judgment.
  • Internal law regulations: Research the investment-receiving country’s regulations on recognition and enforcement of foreign arbitration awards.

Enterprises should consult with experienced lawyers to accurately assess the ability to enforce the judgment and develop appropriate strategies.

 Note when international investment disputes
Note when international investment disputes

Professional and effective international dispute resolution consulting service at Long Phan

Long Phan provides professional consulting services on resolving international investment disputes, meeting the diverse needs of businesses:

  • Dispute prevention consulting: Support businesses in building safe investment strategies, drafting strict contracts, and complying with host country laws.
  • Dispute assessment: Comprehensive analysis of the case, assessment of risks and opportunities, and proposal of optimal solutions.
  • Develop an effective dispute resolution plan;
  • Support for enforcement of awards: Consulting and supporting businesses in the process of recognizing and enforcing international arbitration awards.

With a team of experienced experts, Long Phan is confident that it will be a reliable partner for your business.

International investment disputes that occur bring many disadvantages. We are committed to providing the most effective consulting services to help businesses ensure their rights and interests. If you have any further questions, please contact us via Hotline: 0906735386 for free consultation.