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Accessing foreign investment protection for international construction and engineering projects

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19-07-2016

In 2015, the United Nations Conference on Trade and Development (UNCTAD) estimated that foreign direct investment for the construction of greenfield projects in developing economies had jumped from US$22 billion in 2013, to US$42 billion in 2014 with year on year increases of 116% in East and South East Asia, West Asia (155%) and developing economies as a whole (55%).  This trend is expected to continue in the medium term for, with investment in international infrastructure projects as a particular focus. 

Many of the locations for these new projects in developing countries have traditionally been perceived as having higher country risk factors, including greater political uncertainty, less-predictable government policy or higher levels of exposure for foreign investors. Investors into these jurisdictions often seek the reassurance of additional protections for their inward investments, which is why States wishing to attract inward investment offer such protections under international law to incoming investors. These protections take the form of international legal obligations contained bilateral investment treaties between two States in which each State grants rights and protections to investors from the other State investing into it, or in the investment chapters of free trade agreements, or in multilateral investment treaties.

By carefully planning their corporate structures and investments at an early stage, developers, contractors and other investors involved in cross-border clean energy projects often seek to benefit from these international commitments, and may secure important protections from possible harmful interferences by the host State.

This article recently published by the International Construction Law Review examines the legal criteria surrounding a foreign investor’s qualification for protection offered by a host State, focusing on the construction and projects sector, and discusses the gateway jurisdictional and qualifying criteria which should be met in order for international cross-border projects to access the benefits of protections offered by host States.

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