Article by: Joseph M. Cardosi

41 PEPP. L. REV. 125 (2013)

Winner winner, chicken dinner . . . right? Not so fast. The thrill a private investor experiences after prevailing against a sovereign state in arbitration can quickly turn to frustration when the state refuses to pay up; cashing in is not as easy as presenting the award to a cashier—but maybe it can be. Investor–state arbitration is a dispute resolution procedure that offers a private investor a means to call upon a sovereign state to appear in a neutral forum and respond to investment-mistreatment claims that can lead to binding awards that carry worldwide enforceability. This sovereign generosity is a product of the explosion of foreign direct investment over the last several decades that led to the rise of international investment agreements (IIAs) such as bilateral investment treaties (BITs) and free trade agreements (FTAs). These instruments include dispute resolution provisions that, more often than not, call for arbitration of disputes arising out of the agreement. In the event of a dispute governed by an arbitration clause, the provision provides for an arbitral tribunal with jurisdiction over the parties. Although agreeing to submit to arbitration acts as a waiver of sovereign immunity as to jurisdiction, prevailing investors may encounter the obstacle of sovereign immunity following the arbitration when attempting to execute an award against a noncompliant state. If a state refuses to comply with an award, investors must set off on a worldwide search for assets held by that state; if and when investors find state assets, they must overcome the obstacle of sovereign immunity laws governing access to those assets.

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