Political risk materialises. Country gets sued by investor. Simple story?

It is often believed that investment arbitrations are filed because some form of political risk materialized, harming the investor’s interests. The story seems simple and convincing. But is it true? Or, a more properly academic question, when exactly is this a true story, under what conditions?

Colleagues and I have examined certain aspects of that question in a paper entitled “Types of Political Risk Leadings to Investment Arbitrations in the Oil & Gas Sector“, which is forthcoming in the Journal of World Energy Law & Business. To be specific, we examine which types of political risk, present in the host state, eventually lead oil & gas investors to file investment arbitration claims against that state.

What we find is that bad governance and economic nationalism seem indeed to be conducive to arbitration claims in the oil & gas sector. But, curiously, it appears that economic hardship does not have the same triggering effect.

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