Protection and Admission of Sovereign Investment under Investment Treaties

Sovereign investment, particularly by Sovereign Wealth Funds, constitutes an increasingly important portion of foreign investment. In 2009, Sovereign Wealth Funds invested US$22.9 billion in foreign direct investment, 15 per cent more than in 2008.(1) Investment treaties protect investments of investors of the contracting parties. Whether sovereign investors benefit from investment treaty protection depends on the definitions of "investor" and "investment" in an otherwise applicable investment treaty. Investments made by sovereign investors are clearly protected under an investment treaty if these definitions expressly include the State, State entities and companies and their investments. This article addresses the more difficult question of protection where the definitions are silent or ambiguous as to whether sovereign investment is covered. Also addressed are the evolving standards of admission of sovereign investment and access of sovereign investors to investor-State arbitration, ICSID arbitration constituting a special case.