SSS · Investment Protection & Arbitration

Arbitration is costly; does it make sense for small investments?

The cost of arbitration is a real constraint, but its value lies not only in the case itself: it lies in the negotiating power the prospect of arbitration creates. Even on small investments…

Updated · July 20261 min readCategory · Investment Protection & Arbitration
Short answer

Arbitration is the last step; the real value is that the POSSIBILITY of arbitration creates negotiating leverage. Moreover, third-party funding can remove the cost barrier in strong cases.

The cost of arbitration is a real constraint, but its value lies not only in the case itself: it lies in the negotiating power the prospect of arbitration creates. Even on small investments, protection under a valid bilateral investment treaty and a well-documented file give you a counterweight in discussions with the host state or the institution concerned. Most disputes are settled in that shadow, without arbitration ever being commenced.

Against the cost barrier there are instruments worth weighing: third-party funding, where a funder carries the costs on a strong case; narrowing the focus of the claim; and, where it is possible, acting jointly with others in the same position. Even so, arbitration will not be economic for every dispute, so the expected recovery, the timescale and the cost should be modelled realistically in advance, with arbitration positioned as the last step rather than the first.

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Investment Protection & Arbitration

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