Domestic insolvency proceedings before investment treaty arbitration

ABSTRACT The involvement of foreign investors in domestic insolvency proceedings has raised complex and controversial issues in investment treaty arbitration, both procedurally and substantively. Among the most disputed procedural questions is the legal standing and ability of insolvent foreign investors to access investment treaty arbitration. Arbitral tribunals have generally leaned towards ensuring access for insolvent foreign investors to arbitration. Moreover, several arbitral awards have examined substantive issues related to investment treaty protection standards in the context of domestic insolvency proceedings. On the one hand, insolvency administrators or judicial authorities may cause the host state to violate its investment treaty obligations due to irregularities or unfair practices in the bankruptcy process. On the other hand, actions by state organs outside the judiciary could invoke state responsibility under investment treaties if their wrongful conduct caused the insolvency of the foreign investor’s company. Thus, states can be held responsible for breaches of investment treaties in matters related to insolvency.