The Effects of Armed Conflict on Investment Treaties

Armed conflict has disastrous effects on societies. Lives are lost, civilians displaced, infrastructure destroyed, and societal, political, and economic institutions damaged. Alongside humanitarian costs stands the economic impact of conflict with potentially long-lasting and substantial effects on the state's economic growth and development that, in turn, can lead to prolonged instability and resurgence in violence. Even in case a conflict party's territory is not the theatre of military operations, the respective state is still affected by its engagement in hostilities and, depending on the scale of the conflict, may be forced to adopt more or less extensive emergency measures to cope with the situation. Among those affected by conflict and attendant state responses are foreign investors, be it individuals or corporations, their employees as well as their property. The regime of international investment law accords foreign investors and investments specific protection from encroachments by state authorities and violent threats by third parties-protection that becomes, from the perspective of investors, all the more relevant and, from the perspective of states, all the more difficult to provide in times of armed conflict. In light of the increasing prevalence of investment treaties as well as the global flow of foreign investments, it was only a matter of time for investment disputes to arise out of armed conflict more frequently. The upheaval in many Arab countries from 2010 to 2012, the 'Arab Spring', marks a watershed moment in this respect. It has caused a wave of investor-state proceedings that pose new questions and challenges to a legal regime that has become one of the most dynamic and, at the same time, most controversial areas of international law--