The backlash against investment treaties grows, but we are not seeing a mass extinction. In recent months, the network of treaties for protecting foreign investment flows has garnered a lot of negative publicity.

Governments have long since woken up to the risks that they will be sued under such treaties for alleged mistreatment of foreign investors. And some governments are seeking to terminate such treaties, rather than bear such risks in the future.


Defenders of investment treaties stress that the threat of occasional investor lawsuits is a positive thing: countries tempted to step over the line and mistreat a foreign-owned investor will think twice if they may be forced to pay for harms caused. Critics counter that the 'lines' imposed by investment treaties are not clearly demarcated, and that countries can find themselves facing costly lawsuits even in cases where well-meaning policies cause financial pain for foreign investors.

Claims such as the one being pursued by tobacco company Philip Morris against Australia and Uruguay, in response to new restrictions on the use of cigarette trademarks, are seized upon by critics as examples of situations where a government acts for bona fide regulatory reasons, but could be forced to compensate foreign investors harmed in the process.

While some governments have opted to stand and fight when hit by the occasional lawsuit, others have used such lawsuits as a basis for wider soul searching about the necessity and advisability of investment treaties.

Over the past five years, some developing countries, such as Venezuela, Ecuador and South Africa, have been cancelling some of their older treaties. Recent months have brought word that some key EU member states, including France and Germany, do not want an investor-state dispute settlement mechanism in any future EU trade agreement with the US.

Still, we need to put these developments in context. France and Germany may not want to expose themselves to lawsuits from litigious US investors, but those countries have fewer qualms, thus far, about the dozens upon dozens of treaties each of them have concluded with primarily developing countries. Moreover, even when some governments, such as South Africa and Indonesia, announce plans to terminate their existing treaties, they sometimes leave the door open to negotiating new treaties the terms of which are viewed as less far reaching or risky.

Thus, despite a growing amount of rethinking and retrenchment, it does not appear that we are seeing a mass extinction of international treaties for the protection of foreign investment.

Luke Peterson is the publisher of Investment Arbitration Reporter ( an online news and analysis service tracking FDI legal disputes.