States
have traditionally recognized the importance of foreign direct investment and have
sought to ensure the protection of their own investors in foreign nations. States
have thus negotiated and ratified bilateral and multilateral treaties in order
to promote and attract foreign investment by guaranteeing foreign investors
access to fair and impartial mechanisms for dispute resolution.
A
current trend in such treaties is to allow investors of one State to bring
claims directly against the government of another State before an international
arbitration tribunal, allowing investors to bypass local remedies, which may
otherwise be skewed against foreign parties. Investors are thereby permitted to
initiate a claim against a State under mutually agreed-to arbitration rules, such
as those issued by the United Nations Commission on International Trade Law (“UNCITRAL”)
or the International Centre for Settlement of Investment Disputes (“ICSID”).
My
latest piece discusses how these trends play out in the unique context of Israel and Palestine,
which are each among the other State’s largest trade partners, with nearly US $5
billion traded between the two partners annually. What this means is that a
strong and continuous link between Israeli and Palestinian businesses occurs
every day. However, unlike investment between sovereign nations, there is
currently no foreign investment protection treaty in place between Israel and Palestine.
Unlike the case of disputes that arise within the context of foreign investment
amongst other nations, Israel
does not recognize Palestinian Statehood and thus has no formal diplomatic
relations or bilateral treaties with Palestine.
Moreover,
unlike the case of disputes that arise between two parties situated within a
domestic context, Israeli and Palestinian companies do not each have equal
access to one another’s courts. It can be difficult for Palestinian companies
to participate in Israel-based judicial proceedings. Israeli companies may have
difficulty in enforcing judgments in Palestinian territories, and vice versa. Moreover,
the Israeli courts are sometimes perceived by Palestinians as biased. These are
among the classic problems that have spurred many States to ratify foreign
investment protection treaties, but such a solution will remain unachievable in
the case of Israel and Palestine, unless Israel
recognizes Palestine
as a sovereign State and formal diplomatic relations are established.
My
piece, posted by the Kluwer Arbitration Blog, shows what civil society is able
to achieve spontaneously when governments are at an impasse. What is remarkable
about the Jerusalem
Arbitration Center
is, in the words of Professor Catherine Rogers, that it seeks “to bring
peaceful dispute resolution to disputants from jurisdictions that are openly
hostile to each other and that lack formal diplomatic relations.”