Reports Worried about UK BITs? Analysis of UK Bilateral Investment Treaties

Reports
READING TIME 15 mins

Worried about UK BITs? Analysis of UK Bilateral Investment Treaties

This TJM report outlines the state of play in the UK investment protection regime. The UK has an extensive UK system of ‘Bilateral Investment Treaties’ (BITs) that companies are increasingly using to challenge government policy making.

UK BITs offer foreign investors wide-ranging rights that go beyond anything that is offered either to domestic companies or citizens. Most worrying among these is the investor-to-state dispute settlement (ISDS) mechanism, which gives companies the right to sue governments in private tribunals, bypassing domestic courts. Awards against governments are frequently in the millions, if not billions, of dollars and the average cost of defending a case is $8 million.

TJM’s report ‘Worried About UK BITs? The case for reviewing UK investment protection provisions’ for the first time pieces together a full picture of the UK’s significant role in the international investment protection regime:

  • The UK has the second highest number of international investment agreements in the world, including no less than 105 BITs.
  • UK companies have initiated more than 50 of the total 696 known global cases against governments.
  • The cases challenge governments like Indonesia, India, Tanzania and Bolivia, and relate to a broad range of investment activities, from mining and shareholding to the provision of energy and water services.

To qualify for protection under UK treaties, companies have to do little more than make their investment. Unlike German BITs, UK treaties don’t require companies to have substantial business interests in either the UK or the partner country. This meant that Yukos Universal Ltd., a shell company registered in the Isle of Man (a tax haven) was eligible to use UK membership of the Energy Charter Treaty to sue Russia. The resulting award was no less than $50 billion, the single largest award in arbitration history.

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Published February 2017 TJM

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