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We are pleased to introduce the second part of our trilogy of brief commentaries on Investment Treaty Protection & Covid-19 driven State Intervention. In Part I, we saw that states have taken invasive measures in response to the Covid-19 pandemic; some of these give rise to significant claims.

While investment treaties are individually negotiated and drafted, they typically include a number of key protections for investors. Provided that foreign individuals or companies meet the definition of “investor” under the instrument and have made a qualifying “investment” (both of which tend to be broadly defined), they can seek to rely on these protections to bring claims against the relevant State possibly side-stepping the national court system.

Critically, they may claim for all of the losses they have suffered from the state. Some reports state that the average amount claimed in an investment treaty claim is USD 1.2 billion, with an average where the claimant succeeds of USD 486 million awarded. As will be clear from the examples below, however, the amount in dispute varies greatly.

This is because investment treaty protections typically include:

1. Protection from unlawful expropriation without compensation: when there is a substantial deprivation of the investment as a result of actions of the host state, which can be through the nationalisation of an industry, taking physical possession of an asset or through “indirect” or “creeping” expropriation, where a series of actions over time have the effect of depriving an investor of the value of their investment. An expropriation will be unlawful if it was discriminatory, disproportionate or without adequate compensation.

Case on point: many States will have taken a series of measures as a result of COVID-19 that have substantially impacted the profitability and commercial viability of the investor’s business. In 2020, Spain nationalised its hospitals and healthcare providers to help fight against COVID-19. Tribunals have found government restrictions or interference to have constituted an unlawful expropriation and awarded damages for the loss of the investment. ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V., ConocoPhillips Gulf of Paria B.V. and ConocoPhillips Company v. The Bolivarian Republic of Venezuela[i] is an example of a successful claim for expropriation where Venezuela was found to have expropriated ConocoPhillips’ investments in three oil projects in nationalising the projects without compensation. The investor was awarded over USD 8.7 billion in damages.

2. Fair and equitable treatment: considered to be the broadest protection, it often includes an obligation for the state to provide a stable and predictable legal and regulatory framework, for the state to act consistently and transparently, that it must not act arbitrarily, nor contrary to the legitimate expectations of the investor and it must provide due process.[ii]

Case on point: in the COVID-19 context, such a claim may arise when, for example, a host state’s interference with a foreign investment was not proportionate to the public interest objective being pursued. Peru’s emergency law suspending the collection of tolls on roads under concession to facilitate the transport of essential goods has been alleged to have been an arbitrary and disproportionate measure. In Técnicas Medioambientales Tecmed, S.A. v Mexico,[iii] Mexico was found to have violated the fair and equitable treatment standard in its contradictory actions in relation to the renewal of a license to operate a landfill, having frustrated the investor’s legitimate expectation that the license would be provided. Mexico had to pay USD 5.5 million in damages.

3. Most favoured nation (MFN) treatment and national treatment: foreign investors are to be treated no less favourably than local investors (national treatment) and other foreign investors (MFN treatment), subject only to specific and carefully defined exceptions. Tribunals often look beyond the letter of the law to see whether the practical effect of the state measure is to create a disproportionate benefit for nationals over non-nationals and whether the measure, on its face, appears to favour its nationals over non-nationals who are protected by the relevant treaty.[iv]

Case on point: this protection may be particularly relevant to investors seeking compensation for COVID-19 bailout measures that favour domestic investors. In Germany, a 750 billion euro package was introduced in March 2020 to mitigate the damage of COVID-19, including a stabilisation fund to protect domestic firms from foreign takeover by taking direct equity in German companies.[v] Germany’s Economy Minister Peter Altmaier warned foreign investors as follows: “I say to all those people in hedge funds and elsewhere who are looking forward to acquiring one or the other [German firms] on the cheap — make no mistake, we are determined to stand by our companies.[vi] Germany subsequently bought a stake in vaccine developer CureVac AG for EUR 300 m after speculation that the US was looking to buy the company.[vii]

Other governments have made similar public statements expressing their protection of local investors, suggesting that we may increasingly see a move to local investors being treated more favourably than foreign investors – for example:

  • On 18 April 2020 the Canadian Government published its Policy Statement on Foreign Investment Review and COVID-19 that announced an “enhanced scrutiny” under the Investment Canada Act of “foreign direct investments of any value, controlling or non-controlling, in Canadian businesses that are related to public health or involved in the supply of critical goods and services to Canadians or to the Government”.[viii]
  • Ursula von der Leyen, President of the European Commission addressed all EU member states in March 2020 with the following call to action: “You should use all options to protect critical European companies from foreign takeovers or influence that could undermine our security and public order”.[ix]

4. Umbrella clause: the host state often undertakes to comply with all the obligations it owes to the investor, which has been previously held to include obligations contained in contracts between the state and the investor.

Case on point: this will be particularly relevant where an investor has an agreement or contract with the state or a state agency that has been breached, for example, where the host state took COVID-19 related measures in breach of public sector procurement contracts giving rise to potential investment treaty claims.

5. International arbitration: as famously stated before “there is no right without a remedy”. What differentiates investment treaty protection from other international legal safeguards is that it usually offers the foreign investor, be it an individual or a company, the ability to bring proceedings against the host state directly. There may be jurisdictional or admissibility pre-conditions, but this ability to commence proceedings against the state in a neutral setting under international law (and scrutiny) with an enforceable decision is the real guardian of foreign investments.

For any foreign investor who has suffered as a result of state measures, there are two key takeaways:

First, foreign investors affected by state measures as a result of COVID-19 should consider whether they have treaty protections and can seek compensation for the loss suffered.[x]

Second, prospective foreign investors must ensure that they structure their foreign investments so as to benefit from investment treaty protection; not to do so would be imprudent.[xi]

Next time, we will change perspective and tell you how what legitimate armoury governments have in the face of a claim by foreign investors.

[i] ICSID Case No. ARB/07/30.

[ii] See for example, Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States (ICSID Case No. ARB (AF)/00/2), in which the tribunal stated that “[t]he foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparently in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations” (para 154, Award, 29 May 2003). See also Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania (ICSID Case No. ARB/05/20) where the tribunal sated that “the state may always change its legislation, being aware and thus taking into consideration that: (i) an investor’s legitimate expectations must be protected; (ii) the state’s conduct must be substantively proper (e.g., not arbitrary or discriminatory); and (iii) the state’s conduct must be procedurally proper (e.g., in compliance with due process and fair administration)” (Award, 11 December 2003, para 529).

[iii] ICSID Case No. ARB (AF)/00/2.

[iv] D. Myers, Inc. v. Government of Canada (UNCITRAL), Partial Award, 13 November 2000, para 252.

[v] Michael Nienaber, “Germany launches 750 billion euro package to fight coronavirus”, Thomson Reuters (23 March 2020, accessed 24 March 2021,

[vi] Guy Chazan and Jim Brunsden,”Coronavirus crisis pushes Europe into nationalist economic turn”, FT (26 March 2020, accessed 24 March 2021,

[vii] Naomi Kresge, Germany Moves to Secure Stake in Virus Vaccine Developer, Bloomberg (15 June 2020, accessed 24 March 2021,

[viii] “Policy Statement on Foreign Investment Review and COVID-19” ( Government of Canada website, 18 April 2020, accessed 24 March 2021,

[ix] Guy Chazan and Jim Brunsden,”Coronavirus crisis pushes Europe into nationalist economic turn”, FT (26 March 2020, accessed 24 March 2021,

[x] See our COVID-19 Government Intervention Schemes guide at:

[xi] See our Empirical Study: Corporate Restructuring and Investment Treaty Protection at:


Jo Delaney was a partner with the Dispute Resolution team at Baker McKenzie in Sydney.


Katia Contos is an associate in the Baker McKenzie Dispute Resolution team, based in London. Katia has worked on a range of matters including commercial litigation, international arbitration and general advisory work. Katia has experience in both commercial arbitration and investment treaty disputes, with experience acting for parties in disputes under DIFC-LCIA, ICC, ICSID and UNCITRAL Arbitration Rules. Katia previously worked at the London Court of International Arbitration (LCIA) as a Casework Assistant and as Assistant to the Director-General, where she had extensive first hand-experience of LCIA administered disputes.