Inadequate arbitration on commercial development rights

Lack of dispute resolution mechanisms for foreign investors

Incidence

Prospective investors are made uncomfortable by the anticipation of disagreement with a host country which, in the event of deadlock, cannot be submitted to a binding determination by a third party expert. The situation becomes most difficult if the dispute is about what standard should be established. In this case, the issue is how much damage to local interests should be permitted for the sake of a profitable development from which the government will derive needed revenues.

Counter-claim

Governments in most developing countries are now prepared to agree to dispute settlement provisions involving international arbitration or expert determination. But the particular situation will always be tempered by the question: would it be right or, indeed feasible politically, for governments to allow foreigners to decide on issues which may involve for its own people balancing the advantage of increased revenue from a development project against the disadvantage of environmental damage ?