In the face of rising populism across the globe, many States are implementing increasingly protectionist policies aimed at favouring domestic investors and industries, often at the expense of foreign investors.
These protectionist measures can have devastating financial repercussions for foreign investors. Without proper planning, adverse legal and regulatory changes can upend a foreign investor’s operations and expected returns, often crippling longstanding businesses.
Businesses investing internationally can take steps to protect their investments against the risks of changing legal and regulatory environments. By planning in advance and structuring investments to maximise protection, qualifying investors can benefit from both the substantive and procedural protections afforded through bilateral and/or multilateral international investments agreements (IIAs).
The Investor-State Dispute Settlement (ISDS) system provides international law protections to foreign investors. It may also provide protections in relation to tax matters.
Since 2018, the Court of Justice of the European Union (CJEU) has issued a number of decisions that have led to the near evisceration of investment protection for businesses with intra-EU investments. Under the current legal system, even if an intra-EU investor obtains an ISDS award against an EU Member State, enforcement of that award will be nearly impossible. These actions have repercussions for investment contracts directly with States too.
