Investment Treaty Arbitration

Written by Team Farallon

  • Farallon Law Corporation
  • September 19, 2023

Investment treaty arbitration is a formal and binding international dispute resolution mechanism rooted in agreements, or treaties, made between two or more countries. These treaties establish rules for settling disputes concerning investments made by investors from these countries. Notably, they grant investors certain substantive protections and the right to directly file claims against host countries for alleged treaty violations through arbitration. These treaties, numbering over 2,500 globally, primarily consist of bilateral investment treaties (BITs) but also include an increasing number of free trade agreements (FTAs) and multilateral treaties with investment protections.


Singapore began signing BITs shortly after gaining independence in the 1960s. These early BITs were signed with countries like the United States and Canada, and Singapore continued to expand its network of BITs throughout the 1970s and beyond, eventually having BITs with over 50 countries.

In addition to BITs, Singapore has also engaged in regional investment agreements and FTAs to foster economic cooperation and trade with various partners. This has resulted in some overlap in the coverage of these agreements. For example, Singapore has both BITs and FTAs with certain countries, such as the United States, and it has multiple agreements with China to cover its investment relationship.

Scope of Application of Singapore’s Investment Treaties

There are three key aspects regarding the scope of application of Singapore’s investment treaties. The first key aspect is the definition of “investors” covered by these treaties, which can vary depending on the specific agreement and may include individuals, companies, or entities. Second, it is the wide range of assets considered as “investments” protected by these treaties, encompassing physical assets, financial assets, and intellectual property. Finally, it is that the applicability of these treaties may be conditional on investors meeting certain legal requirements imposed by the host state, underscoring the importance of adhering to the laws and regulations of the country where investments are made.

Singapore’s investment treaties define and interpret the term “investor” in varying ways. In general, Singapore’s investment treaties tend to have a broad interpretation of who can qualify as an “investor.” They typically determine eligibility for protection under the treaty based on the type of corporate entities and where they are incorporated. These treaties don’t impose additional conditions or requirements related to the source of the invested capital or the extent of substantial business activities conducted by the company.

However, there are exceptions to this general approach. Some agreements, like certain FTAs and regional investment agreements that Singapore is part of, introduce restrictions or limitations on which entities can be recognized as “investors” entitled to the treaty’s protection.

For instance, in the case of the Singapore-India FTA, there is a specific clause that narrows down the definition of eligible investors. It excludes certain legal entities from being considered investors entitled to treaty protection. This exclusion applies to legal entities that are established and located within the territory of one of the parties to the agreement but have either very limited business operations or do not engage in genuine and continuous business activities within that specific territory.

Substantive Protection of Investment under Singapore’s Investment Treaties


Singapore’s investment treaties include provisions that prohibit the expropriation of foreign investments without providing compensation to the affected investors. Expropriation here refers to actions by a host country that result in the government taking over or significantly affecting the value of foreign investments. For instance, Article 6(1) of the Hungary-Singapore BIT explicitly states that expropriation or other measures equivalent to nationalisation or expropriation are prohibited unless compensation is paid to the affected investors. This means that if the host country takes actions that negatively impact the value of foreign investments, it must compensate the affected investors for their losses.

Most Favoured Nation

Many of Singapore’s BITs, FTAs, and regional investment agreements include most favoured nation (MFN) provisions. These provisions ensure that foreign investors receive treatment that is no less favourable than what the host country accords to investments from any other third state. For example, in the Kuwait-Singapore BIT, Article 4 states that the host country must not subject investments protected under the treaty to treatment that is less favourable than what it provides to investments from any other third state in like circumstances. This means that if a host country treats investments from different countries differently when they are in similar situations, an affected investor can file a complaint under the MFN provision.

Importantly, the phrase “in like circumstances” is included to clarify that investors can only complain about differences in treatment when their investments are otherwise comparable. In other words, if two investments are fundamentally different or not in similar circumstances, the MFN provision would not apply.

National Treatment

National treatment provisions are designed to prevent discrimination against foreign investors by ensuring that they receive treatment no less favourable than what is provided to domestic investors in the host country under similar circumstances. While MFN provisions are more common in Singapore’s investment treaties, national treatment provisions are still present, especially in regional investment treaties and FTAs. In recent treaties, there’s been a trend to expand the scope of national treatment obligations to cover various aspects of investments, including their establishment.

For instance, in the Peru-Singapore FTA, both parties commit to treating each other’s investors and their investments in a manner no less favourable than their treatment of domestic investors and investments. This means that foreign investors should expect equitable treatment during the setup, acquisition, expansion, management, and sale of their investments. An example from the Singapore-US FTA demonstrates how national treatment provisions can result in practical benefits for investors, such as lower tax rates on land purchases. In essence, national treatment provisions aim to create a level playing field for foreign investors, ensuring they are not subjected to discriminatory practices in the host country.

Fair and Equitable Treatment

The obligation to provide fair and equitable treatment (FET) is found in many international investment agreements like BITs and FTAs. It sets a standard for how host countries should treat foreign investors and their investments. This provision obligates host countries to provide foreign investors with a fair and equitable business environment, free from arbitrary, discriminatory, or unfair actions. When disputes arise between foreign investors and host countries, the FET provision is frequently invoked by investors as the basis for their claims in investor-state arbitration. Importantly, this provision has a noteworthy track record of success for foreign investors, meaning that arbitration tribunals often rule in favour of investors who can demonstrate that the host country’s actions violated the fair and equitable treatment standard.

Commencing Arbitration under Singapore’s Investment Treaties

Singapore’s investment treaties offer a relatively straightforward path for foreign investors seeking arbitration to resolve disputes arising under these treaties. Typically, foreign investors are obligated to engage in a preliminary process before resorting to arbitration, which involves attempting to resolve the dispute through negotiations or consultations with the host state. This negotiation or consultation phase is typically required to last for a period of six months.

While some treaties explicitly stipulate that investors must provide written notice of their intent to initiate negotiations, even in cases where such a requirement is not expressly stated, it is considered prudent practice for investors to submit written notice. This precaution is advisable because any obligation to pursue a negotiated solution within a specified timeframe before initiating formal arbitration proceedings may be interpreted as a mandatory precondition to arbitration.

Subject to meeting any relevant notice and consultation requirements, most of Singapore’s investment treaties afford investors the option to bypass the negotiation phase and proceed directly to arbitration should they choose to do so. Furthermore, it’s important to note that a significant number of these investment treaties consent to investor-State arbitration under the International Centre for Settlement of Investment Disputes (ICSID) Convention. This means that investors can utilise the ICSID arbitration framework as a means to resolve their disputes with the host state, providing an established and recognized avenue for dispute resolution in the context of these treaties.

For countries not party to the ICSID Convention, such as India, Mexico, Russia, and Thailand, investors can choose to bring their claims to arbitration under the United Nations Commission on International Trade Law (UNCITRAL) Rules.

Singapore as a Seat in Investor-State Arbitration

Significant disparities arise when considering the role of the arbitration seat, with a notable distinction emerging between ICSID and UNCITRAL investor-State arbitrations. Under the ICSID framework, arbitrations operate in relative isolation from the supervisory jurisdiction of local courts. Consequently, the involvement of domestic courts is considerably curtailed in ICSID arbitration, extending even to the enforcement of ICSID awards, as challenges to such awards typically fall within the purview of the ICSID Convention itself.

In stark contrast, within UNCITRAL rules governing investor-State arbitrations, domestic courts may assume a more active and pronounced role in overseeing and enforcing arbitration awards.

UNCITRAL Arbitrations with a Seat in Singapore

The International Arbitration Act (IAA) serves as the legal framework governing specific international arbitration cases held in Singapore. It primarily applies to arbitrations falling under UNCITRAL and other non-ICSID investment treaty scenarios that opt for Singapore as their arbitration venue.

In tandem with the IAA, the Singapore International Arbitration Centre (SIAC) has introduced specialised guidelines known as the Investment Arbitration Rules. These rules are carefully crafted to provide a tailored set of procedures that cater to the unique requirements of international investment arbitration.

To illustrate the practical implications of these principles, consider the case of Philip Morris Asia Limited v. The Commonwealth of Australia UNCITRAL, PCA Case No. 2012-12. In this instance, where UNCITRAL rules governed the arbitration, a decision had to be made regarding the arbitration’s location: Singapore or London.

The tribunal weighed several factors in making this determination. Both Singapore and London were regarded as suitable hosts for BIT arbitrations, and neither was seen as having a significant edge in terms of neutrality. However, the pivotal factor was the nature of the case, which involved a Hong Kong-based company and Australia. This geographic proximity favoured choosing Singapore, situated within the broader Asian region, over London in Europe. Additional considerations, such as the location of the disputed subject matter and the convenience of accessing evidence, further supported Singapore as the preferred arbitration venue.

Furthermore, the fact that the Permanent Court of Arbitration (PCA), the entity overseeing the arbitration process, had a Host Country Agreement with Singapore played a significant role in tilting the decision in Singapore’s favour. This aspect carried weight, even though no such agreement existed between PCA and the United Kingdom or London.

Procedural Powers: Interim Measures

The case of Maldives Airports Co Ltd and another v GMR Malé International Airport Pte Ltd [2013] SGCA 16 concerned an appeal to the Singapore Court of Appeal regarding the issuance of an interim injunction by a High Court judge.

The background of the case involves a complex concession agreement between the Maldives Airports Company Limited (MACL), the Maldives Government, and GMR Malé International Airport Private Limited. Disputes emerged when the Maldives Government sought to revoke its prior consent to a fee variation.

The central issues addressed in the appeal encompassed whether a Singapore court had the authority to grant an injunction against a foreign sovereign state and, if so, whether such an injunction should be granted based on the balance of convenience.

Regarding jurisdictional objections, the Respondent argued that the State Immunity Act barred an injunction against a state. However, the Court of Appeal determined that the Concession Agreement contained sufficient written consent as required by the Act. The Appellants contended that the act of State doctrine prevented the Singapore court from issuing the injunction, but the Court of Appeal disagreed, reasoning that the dispute was of a private nature, despite the involvement of sovereign entities.

In terms of the power to grant the injunction, the Court of Appeal delved into Section 12A of the International Arbitration Act, which confers upon the High Court the authority to issue interim measures connected to arbitration proceedings. The Court clarified the meaning of “assets” in this context, asserting that it encompassed contractual rights that couldn’t be adequately compensated through damages, with the Respondent’s interest in the leased airport land qualifying as an “asset.”

The Court determined that damages would suffice as an adequate remedy, and the Respondent failed to present a compelling case to the contrary. Additionally, concerns were raised about the practical challenges of enforcing the injunction, its potential impact on third parties, and the ambiguity surrounding its scope.

In its final decision, the Court ruled that the Singapore court possessed the authority to grant the injunction but decided against doing so, primarily based on the balance of convenience. It ordered that costs be reserved for determination by the arbitral tribunal in the 2nd Arbitration. In essence, this case offered significant clarifications on arbitration-related matters, sovereign immunity, and the jurisdiction of the Singapore court, ultimately leading to the denial of the injunction based on considerations of practicality and convenience.

Confidentiality of Proceedings

Investor-State arbitrations are of significant public interest due to the subject matter involved. As a result, there has been a growing demand for transparency in these proceedings.

To address this demand, some investment treaties or agreements that Singapore is a party to include provisions related to transparency. However, in cases where such provisions are absent, investor-State tribunals must determine how to balance the need for confidentiality with the relevant arbitral rules and domestic case law.

In the case of Philip Morris Asia Limited v The Commonwealth of Australia, the question was whether Australia had the right to make its written pleadings and accompanying exhibits public. The tribunal’s ruling was that both parties were allowed to publish all the documents they filed during the arbitration process, but with a provision that allowed the other party to designate certain information as confidential within those documents. This allowed for a balance between transparency and confidentiality in the proceedings.

Challenging the Award

Challenging awards in investor-State arbitration cases, particularly at the seat of arbitration, where legal proceedings related to the arbitration occur, has become commonplace. Previously, there was an argument that the courts of the seat should refrain from interpreting the BIT governing the arbitration, and instead, disputes about its interpretation should be exclusively resolved by the arbitral tribunal. However, this argument has been rejected and courts at the seat of arbitration have a role in interpreting the BIT when challenges arise.

In Sanum Investments Ltd v Government of the Lao People’s Democratic Republic [2016] SGCA 57,  the Court of Appeal in Singapore made it clear that the argument against the courts of the seat interpreting the BIT would not have succeeded before them. This clarified that the courts of the seat have a legitimate role in considering and interpreting the BIT when disputes regarding the arbitration process or jurisdiction arise. This role stemmed from the fact that when parties select a particular country as the seat of arbitration, such as Singapore in this case, it implies that the courts of that country must weigh in on issues like the jurisdiction of the arbitral tribunal.

The case underscores that the courts have an obligation to interpret and apply the relevant BIT, especially when the jurisdiction of the arbitral tribunal hinges on its interpretation. It notes that the states party to the BIT have consented to have their treaty interpreted and applied not only by the arbitral tribunal but also by the courts of the seat whenever challenges are raised. Ultimately, the case argues that there is no need for judicial restraint in such matters, emphasising that the courts have the authority and responsibility to adjudicate disputes involving the BIT in investor-State arbitration cases.

Enforcement of Investor-State Awards

For awards under the ICSID Convention, Article 55 of the ICSID Convention explicitly states that even when an award is issued, state immunity laws in the contracting state where execution is sought must still be respected. In essence, this means that a state against which an ICSID award is rendered retains certain legal immunities unless the laws of the contracting state explicitly allow for their waiver.

In contrast, for non-ICSID investor-State awards, enforcement operates under Singapore’s IAA. According to Section 11 of the State Immunity Act, if a state has committed in writing to resolve a dispute through arbitration, that state cannot claim immunity in Singaporean courts in proceedings linked to the arbitration. Essentially, if a state has agreed to arbitration and a dispute arises as a result of that agreement, it cannot invoke immunity from legal actions in Singapore related to the arbitration process or the enforcement of the award.


The intricate landscape of investment treaty arbitration underscores its critical role in safeguarding investor rights, fostering economic cooperation, and ensuring equitable dispute resolution between states. Singapore’s rich history in forging bilateral investment treaties, coupled with its robust legal framework and arbitration expertise, positions it as a global leader in the field. With over 2,500 such treaties worldwide, these agreements have become the bedrock of international commerce, providing investors with safeguards against unjust treatment and serving as a beacon of transparency and accountability in an increasingly interconnected global economy. As Singapore continues to enhance its legal and institutional infrastructure, it reaffirms its commitment to serving as a trusted hub for resolving investment disputes, contributing to the stability and prosperity of the international business community.

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