The Stakes for States in Defending Investment Treaty Arbitrations: A game of luck and chance?

The document argues that investment treaty arbitration is a high-stakes gamble for developing states because the system is structurally biased toward investors. While states may successfully defend claims on the merits, they rarely recover the substantial costs of arbitration, which often amount to several million dollars. The author highlights a disparity in cost allocation: successful investors are more likely to have their costs covered by the state than successful states are to recover costs from investors. This risk is further exacerbated for states because they cannot utilize 'no win no fee' arrangements or third-party financing, as they have no damages to claim.

• Investment treaty arbitration is structurally skewed in favor of investors because states can only defend claims and cannot bring counter-claims, meaning a 'win' for a state only results in the dismissal of the investor's claim without the possibility of recovering damages.
• A UNCTAD study of 164 concluded investment treaty arbitrations at the end of 2009 showed that states were successful in 57% of the 109 non-settled cases, while investors prevailed in 43%. However, these figures may be incomplete due to confidential awards and the unknown outcomes of the 55 settled cases.
• There is a significant disparity in how arbitration tribunals allocate costs. In a study of 54 awards from 2007–2010, successful states covered their own costs in 70% of cases, whereas successful investors covered their own costs in only 40% of cases. Furthermore, in cases where jurisdiction was declined, states had to meet their own costs in approximately 80% of instances.
• Investors can mitigate financial risk through third-party financing and contingency fee agreements, whereas states remain fully exposed to the costs of defense regardless of the outcome because they have no damages to claim.

APA

Malik, M. (2011). The Stakes for States in Defending Investment Treaty Arbitrations: A game of luck and chance? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/dci_2010_stakes_of_states.pdf

Chicago

Malik, Mahnaz. The Stakes for States in Defending Investment Treaty Arbitrations: A game of luck and chance? International Institute for Sustainable Development, 2011. https://www.iisd.org/system/files/publications/dci_2010_stakes_of_states.pdf.

Wikipedia

{{cite report |last1=Malik |first1=Mahnaz |title=The Stakes for States in Defending Investment Treaty Arbitrations: A game of luck and chance? |publisher=International Institute for Sustainable Development |date=2011 |url=https://www.iisd.org/system/files/publications/dci_2010_stakes_of_states.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{malik2011stakes, author = {Malik, Mahnaz}, title = {{The Stakes for States in Defending Investment Treaty Arbitrations: A game of luck and chance?}}, institution = {International Institute for Sustainable Development}, year = {2011}, url = {https://www.iisd.org/system/files/publications/dci_2010_stakes_of_states.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }