Identifying risk factors of Qatari investments abroad …

Planning any foreign investment requires one to identify and assess risk factors involved. These commercial and legal risks are managed by Bilateral Investment Treaties (BITs). Dr. Minas Khatchadourian of the Qatar International Center for Conciliation and Arbitration, explores the types of protection that these treaties offer Qatari investments and what recourse the private investor has in cases of breach.

The last few years have witnessed sizeable investment activities led by the Qatar Investment Authority and by a few Qatari businessmen in various countries. In modern times, forms of investment may be diverse and include assets either tangible or intangible, spanning real estate, shares, stocks, equity participations, bonds, concession licences, intellectual property rights and technological know-how.

However, when any investor decides on where to invest internationally, his attention is usually focused on a comparison of the tax rules of the various countries under consideration. Often little or no attention is paid to the issue of investment protection and the risks, which it may face in the host state, rendering an investment worthless.

Therefore, a key feature in planning foreign investment is identifying and assessing the risk factors inherent in the long-term relationship involved, both from a commercial perspective and a legal one. Investing in other countries carries certain perils that are often quite different from those in one’s own country. These considerable risks have been largely managed by BITs, which are instruments negotiated and signed between two states with the objective of promoting, but more of protecting, the investments of the nationals of each state in the territory of the other.

Qatar and the other Gulf Cooperation Council (GCC) countries have signed a relatively large number of BITs, which reciprocally offer eligible investors protection of their investments in a host state by providing them three basic guarantees or measures of protection – national treatment, most favoured nation treatment, and fair and equitable treatment, respectively.

A national treatment protection, guarantees a Qatari investor treatment is no less favourable than what the host state grants to its own nationals in like circumstances. The most favoured nation treatment increases the level of protection to match the highest level that the host state provides to nationals of any other foreign state in similar situations, and the fair and equitable treatment protects the right of an investor to carry out business, free from unreasonable and discriminatory measures. A Qatari investor should feel relatively safe and at ease by investing in a country which has concluded a BIT with their home country.

In case a host state breaches any of these guarantees, the investor can use the Investor-State Dispute Settlement  mechanism to bring a claim directly against that country, claiming a breach of the expropriation provision in the BIT and seeking compensation. Commonly, BITs provide a choice of dispute resolution mechanisms to an investor, which may include resolution by the courts of the host state or arbitration.

Nevertheless, relying on the national courts of the host country to enforce obligations in an investment agreement is not always easy. The investor may not want to take an action against the host country in that country’s courts because of bias or lack of independence.

They may not be able to access the local courts in the host country, and investors have no legal recourse unless there is an arbitration provision in the investment agreement to submit the case before the International Center for the Settlement of Investment Disputes, which was created especially to settle disputes between the host state and a foreign investor as one of the five international organisations of the World Bank.

More than 140 countries, including Qatar, have already adhered to the Washington Convention on the Settlement of Investment Disputes Between States and Nationals of Other States to attract investments.

Source: The Edge Magazine

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