What Need to Know About Dispute between Foreign Investor and
Host State?
In the globalization and international
integration in general as well as economic integration in particular, foreign investment including foreign direct investment
(FDI) and indirect foreign investment in countries are increasing significant.
This trend also comes along with the growth of international investment dispute
between foreign investor and host state (or related state agencies). This
dispute is often complex with huge amount of compensation demanded by the
investor.
Subjects of this dispute include foreign investor (plaintiff)
and host state or related state agencies (defendant). In particular, Vietnam
laws stipulate that foreign investor means an individual holding a foreign
nationality or an organization established under foreign laws an making
business investment in Vietnam. The second subject is state, a “special”
subject because this subject is the beneficiary of “jurisdictional immunity”.
Specifically, jurisdictional immunity is a right of a state which do not be
judged by any international or national jurisdiction without the consent of
such state.
Subjects of this dispute include foreign investor (plaintiff)
and host state or related state agencies (defendant). In particular, Vietnam
laws stipulate that foreign investor means an individual holding a foreign
nationality or an organization established under foreign laws an making
business investment in Vietnam. The second subject is state, a “special”
subject because this subject is the beneficiary of “jurisdictional immunity”.
Specifically, jurisdictional immunity is a right of a state which do not be
judged by any international or national jurisdiction without the consent of
such state.
This dispute shall relate to the investment of foreign investor
in host state according to regulation of (i) investment law of host state; (ii)
treaty of promotion and protection of investment (bilateral investment treaty –
BIT) or investment chapter in bilateral/regional trade agreements; or (iii)
contract relating to investment of foreign investor and competent state
agencies.
To promote foreign investment and to protect investors,
countries around the world as well as Vietnam have signed and will sign
bilateral agreements on promotion and protection of investment (BIT), agreement
between countries on promotion and protection of investment (international
investment agreement – IIA), free trade agreement (FTA) having investment
chapter. Accordingly, investor holding the nationality of a signatory to
investment agreement (chapter) is entitled to have full protection and
security, fair and equitable treatment, non-discrimination, no expropriation…
of investment according to regulation of such investment agreement (chapter) in
host state. Besides, to ensure that dispute between foreign investor and host
state will be fairly and properly settled and to prevent the case of refering
to jurisdictional immunity to avoid being sued, there are provisions on dispute settlement mechanisms
between foreign investorand host state in most of these
agreements.
Through investment agreement (chapter), the host state abandons
its right of jurisdictional immunity to be sued and judged at competent
jurisdiction. If the host state violates and harms the foreign investor, such
country shall compensate according to judgement of that jurisdiction.
Jurisdictions being competent to resolve disputes between foreign investor and
host state may be arbitration, court of the host state; international
arbitration; or other jurisdictions by agreement between the parties.
Behaviours which state violates commitment on investment
protection may be very broad, including: (i) expropriation such as: requisition
or nationalization without compensation; “indirect” requisition or “according
to regulation” without reasonable compensation; (ii) no fair and equitable
treatment; (iii) no full protection and security; (iv) there is discrimination
such as violation of most favoured nation and national treatment; (v) and/or
other violations such as: legal obligation/commitment, right of withdrawing investment
and interest, compensation due to war or riot.
Dispute resolution process between foreign
investor and host state usually takes place with three stages, including (i)
conflict management stage means carrying out resolving complaints and
consultation, mediation; (ii) dispute resolution stage; and (iii)
implementation stage. In above process, consulting with international
trade dispute lawyers in Vietnam to for resolution of international investment disputes is
a very important and necessary.
Law firm in Vietnam with Litigation and Dispute lawyers in Ho Chi Minh City,
Hanoi and Da Nang cities that help clients dealing with dispute resolution and
alternative dispute resolution in Vietnam. For advice or service request, please contact us via email
ant@antlawyers.vn, or call us +84 24 730 86 529
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