Investment treaty protection —
mitigating the risk of government
intervention
Investors should always be very
diligent, when choosing the right
investment, as well as the right
investment vehicle but, as a Turkish
real estate fund promoter recently
pointed out to me, investors should
also be aware that their investment
might be subject to politically
motivated scrutiny by a government.
This might lead to economically
negative results for the investors.
The problem of being subject to
adverse governmental measures that
are directed at foreign investors is of
course a problem that exists in many
emerging markets, but you can also be
at risk in economies that appear more
developed and are considered more
stable.
The use of BITs
has become a
standard instrument
in international
investment
law, leading to
many cases of
international
investment
arbitration
Bilateral investment treaties (BITs) are
instruments that are used to mitigate
such a risk. The fi rst such BIT was
concluded between Germany and
Pakistan in 1959. In recent decades, there
has been a tremendous growth in the
number of BITs. Today, more than 2,500
BITs between 170 countries have created
a network of treaties, which provide
a range of substantive rights and
protections, such as full compensation
for direct or indirect expropriation, and
protection from unfair or inequitable
actions, actions that are discriminatory,
breaches of investment obligations of the
state and other forms of governmental
interference with investments.
In order to qualify for a protection
under a BIT, the investor should either
be a national of a country that is a party
to the BIT or its company should be
incorporated in such a jurisdiction. The
most active jurisdictions, that seek such
asset protection for their nationals, are
European countries, such as Germany,
Switz erland, the UK, France, the
Netherlands, Belgium and Luxembourg.
In order to obtain optimal treaty
protection, investors may structure their
investments by using intermediary
investment vehicles incorporated in a
state with a BIT in force with the host
state. The BITs provide, in most cases,
that the investors have the right to
launch international arbitration against
the host state, by claiming damages for
violation of treaty obligations. The use
of BITs has become a standard
instrument in international investment
law, leading to many cases of
international investment arbitration. It is
important for investors, whether
conventional or Islamic, to understand
the additional layer of protection BITs
off er.
Bishr Shiblaq is the head of the Dubai
representative offi ce of Arendt & Medernach.
He can be contacted at Bishr.Shiblaq@
arendt.com.
IFN Sector Correspondents
CROSS-BORDER FINANCING
Fara Mohammad, Director Of Islamic Finance, Foot Anstey
DEBT CAPITAL MARKETS:
Muhammad Shoaib Ibrahim, managing director & CEO,
First Habib Modaraba
DERIVATIVES
Suhaimi Zainul – Abidin, treasurer for Gulf-Asia Shariah
Compliant Investment Association and advisor to 5Pillars
LAW (EUROPE):
Ayhan Baltaci, att orney at law, Bereket & Baltaci Law Firm
LAW (MIDDLE EAST) Bishr Shiblaq, head of Dubai offi ce, Arendt &
Medernach
LEASING:
Prof Shahinaz Rashad Abdellatif, executive director,
Financial Services Institute, Egyptian Financial
Supervisory Authority.
MERGERS & ACQUISITIONS
Jamal Hijres, CEO, Cappinova Investment Bank
MICROFINANCE (ASIA):
Dr Mahmood Ahmed, executive vice president and
director training, Islami Bank Training and Research
Academy
MICROFINANCE (AFRICA): Mansour Ndiaye, director of microfi nance, Assistance and
Consulting for Development
PRIVATE BANKING & WEALTH MANAGEMENT:
Thomas Woods, product development, wealth
management, The Islamic Bank of Asia
PRIVATE EQUITY & VENTURE CAPITAL:
Arshad Ahmed, partner, Elixir Capital
PROJECT & INFRASTRUCTURE FINANCE
Anthony Coleby, head of corporate commercial
department, Said Al Shahry Law Offi ce (SASLO)
REAL ESTATE
Philip Churchill, founder partner, 90 North Real Estate
Partners
REAL ESTATE (MIDDLE EAST):
Yahya Abdulla, head of capital markets — Middle East,
Cushman & Wakefi eld
REGULATORY ISSUES (ASIA)
Intan Syah Ichsan , chief operating offi cer, Samuel Aset
Manajemen
REGULATORY ISSUES (MIDDLE EAST):
Mohammad Abdullah Malik Dewaya, head of Shariah
compliance and audit, Maisarah Islamic Banking Services
RETAIL BANKING:
Chowdhury Shahed Akbar, Offi cer, Southeast Bank,
Bangladesh.
RISK MANAGEMENT:
Hylmun Izhar, economist, Islamic Research and Training
Institute, Islamic Development Bank Country
SECURITIES & SECURITIZATION:
Nidhi Bothra, executive vice president, Vinod Kothari
Consultants
STOCK BROKING & TRADING:
Athif Shukri, research analyst, Adl Capital
STRUCTURED FINANCE:
John Dewar, partner and head of Islamic fi nance, Milbank,
Tweed, Hadley & McCloy
SUKUK
Anthony Coleby, head of corporate commercial
department, Said Al Shahry Law Offi ce (SASLO)
SYNDICATED FINANCE
Elina Khayrullina, investor relations manager, AK BARS
Bank
TAKAFUL & RE-TAKAFUL:
Dr Sutan Emir Hidayat, assistant professor and academic
advisor for Islamic fi nance, University College of Bahrain
TAKAFUL & RE-TAKAFUL (AFRICA):
Uwaiz Jassat, acting head of Islamic banking, Absa Islamic
Banking
TAKAFUL & RE-TAKAFUL (EUROPE):
Ezzedine Ghlamallah, director, Solutions Insurance and
Islamic Finance in France (SAAFI)
TRADE FINANCE
Anthony Coleby, head of corporate commercial
department, Said Al Shahry Law Offi ce (SASLO)
TREASURY PRODUCTS:
Nafi th ALHersh Nazzal, certifi ed fi nancial & investment
advisor
IFN Correspondents are experts in their respective fi elds
and are selected by Islamic Finance news to contribute
designated short sector reports. For more information
about becoming an IFN Correspondent, please contact
sasikala.thiagaraja@redmoneygroup.com
