In the context of increasing globalization and deep international economic integration, cross-border investment activities have become more common, leading to numerous disputes between investors and host States. When such disputes cannot be effectively resolved through internal mechanisms or bilateral negotiations, filing complaints or initiating proceedings before international organizations becomes an option that many investors consider.
Below, NPLaw analyzes the legal grounds, necessary procedures, and important considerations in the process of filing complaints to international organizations on investment issues.
I. The need to file complaints to international organizations on investment issues
In the process of conducting international investment activities, especially foreign direct investment (FDI), investors often expect a stable, transparent, and fair legal environment. However, in practice, there are many cases where investors’ legitimate rights and interests are infringed by acts or policies of the host State, such as expropriation of assets, arbitrary revocation of business licenses, sudden changes in laws, or discriminatory treatment between domestic and foreign investors.
In such situations, if domestic complaint mechanisms prove ineffective, lack independence, or are excessively prolonged, resorting to international organizations or international dispute resolution mechanisms becomes a considered option. This need is increasingly evident as many countries have signed bilateral investment treaties (BIT) or free trade agreements (FTA) that include investor-state dispute settlement (ISDS) mechanisms.
II. Legal regulations on filing complaints to international organizations regarding investment issues
1. What is a complaint to international organizations on investment?
Currently, the law does not specifically define “complaints to international organizations on investment.” It can be generally understood as actions by investors, either individuals or legal entities, requesting an international agency or organization with competent jurisdiction to review and resolve disputes or legal violations arising from cross-border investment activities between investors and the host State.
It is often the unilateral action of an investor claiming that the host State has violated commitments under bilateral investment treaties or free trade agreements, or general principles of international investment protection.
Such complaints typically take the form of international arbitration proceedings or submitting petitions to specialized international organizations. Common international organizations and mechanisms invoked in investment-related cases include:
- The International Centre for Settlement of Investment Disputes (ICSID) under the Washington Convention of 1965;
- The United Nations Commission on International Trade Law (UNCITRAL) with its arbitration rules;
- The Permanent Court of Arbitration (PCA) or regional arbitration centers;
- Dispute resolution mechanisms under free trade agreements (FTA) such as Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and European-Vietnam Free Trade Agreement (EVFTA);
- In special cases, Organization for Economic Cooperation and Development (OECD), WTO, or international human rights agencies may also be involved.
2. What is an international investment dispute?
According to Clause 1, Article 2 of the Regulation on Coordination in Settlement of International Investment Disputes issued together with Decision No. 14/2020/QĐ-TTg dated April 8, 2020 of the Prime Minister, an international investment dispute is:
- A dispute arising from a foreign investor suing the Government, the State of Vietnam, or Vietnamese State agencies or organizations authorized to perform State management functions (hereinafter collectively referred to as “State agencies”), under one of the following cases:
- Under investment promotion and protection agreements, trade agreements or other international treaties on investment protection to which Vietnam is a member (hereinafter collectively referred to as “investment agreements”), which stipulate settlement of international investment disputes by international arbitration;
- Under contracts or agreements between Vietnamese State agencies and foreign investors that specify an international arbitration agency to resolve disputes arising from such contracts or agreements.
3. Competence to settle international investment disputes
Article 5 of the Regulation on Coordination in Settlement of International Investment Disputes under Decision No. 14/2020/QĐ-TTg stipulates the competence to resolve disputes, as follows:
- Ministries, ministerial-level agencies, Government agencies, or provincial People’s Committees that lead negotiations, sign, or represent the State or Government of Vietnam in signing contracts, agreements, or commitments with foreign investors are agencies responsible for handling international investment disputes arising from such contracts, agreements, or commitments.
- The Ministry of Finance is the agency responsible for handling international investment disputes arising from foreign investors suing the State or Government of Vietnam related to Government debts and loans, Government-guaranteed debts under public debt management laws, or disputes involving financial and tax laws.
- In cases of complex international investment disputes that significantly impact foreign relations, national security, or defense, the Ministry of Justice reports to the Prime Minister to decide the lead agency.
III. Questions on filing complaints to international organizations regarding investment issues
1. Some shortcomings in settling international investment disputes in current
Although international investment dispute resolution mechanisms, especially through international arbitration, have played an important role in protecting investors’ interests and promoting a stable investment environment, several notable shortcomings still exist:
- Lack of transparency and openness in proceedings: Most international investment disputes are conducted in closed arbitration proceedings, making it difficult for the public, civil society organizations, and even other States to access information. It can lead to doubts about the transparency and fairness of the process and arbitral awards.
- High costs of dispute resolution: One of the biggest barriers for small investors and developing countries is the high cost of international arbitration, including fees for international lawyers, arbitrators, and administrative expenses. In many cases, investors have to abandon their claims due to insufficient financial capacity to pursue prolonged cases.
- Lack of appeal or review mechanisms for awards: Unlike domestic judicial systems, international investment arbitral awards generally do not have substantial appeal mechanisms, raising concerns about inconsistent rulings and the inability to correct serious legal or procedural errors.
- Imbalance between investor rights and State obligations: Investor-State Dispute Settlement (ISDS) mechanisms are often criticized for heavily protecting investors’ rights without imposing corresponding obligations or providing adequate tools to safeguard the legitimate interests of host States, especially when policies are issued for public interests.
2. What is Investor-State Dispute Settlement (ISDS) mechanism?
Investor-State Dispute Settlement (ISDS) mechanisms is a legal mechanism that allows foreign investors to directly sue the host State before an independent international tribunal (typically international arbitration) if they believe the State has violated international obligations to them, thereby damaging their lawful rights and interests.
3. Common types of international investment disputes
- Expropriation or nationalization of assets without adequate compensation (e.g., Metalclad vs. Mexico).
- Unfair or discriminatory treatment, where investors face non-transparent, unfair treatment or discrimination (e.g., CMS vs. Argentina).
- Breach of investment contracts, where the State fails to fulfill obligations under BOT, PPP contracts, etc. (e.g., Vivendi vs. Argentina).
- Regulatory changes causing harm, such as sudden changes in laws or policies negatively impacting investors (e.g., Vattenfall vs. Germany over environmental policy).
- Denial or revocation of investment licenses without justifiable reasons or transparent procedures.
4. In what cases can enterprises file complaints to international organizations on investment issues?
Enterprises can file complaints to international organizations in the following cases:
- Expropriation or confiscation of assets: The State seizes or requisitions investment assets without adequate compensation.
- Unfair or discriminatory treatment: Policies or acts of the government discriminate against foreign investors or treat them less favorably than domestic investors or other foreign investors.
- Breach of investment contracts with State agencies: The State fails to perform obligations under PPP, BOT, BT contracts, etc.
- Sudden policy or legal changes causing serious harm, disrupting investments or causing losses.
- Arbitrary denial or withdrawal of investment licenses, lacking clear reasons or legal procedures.
- Denial of access to justice or unfair local proceedings, where domestic courts fail to ensure protection of investors’ rights.
5. What are the procedures for filing complaints to international organizations on investment?
a. Determining legal grounds
- Checking if there is an investment agreement (BIT, FTA) or contract allowing the investor to initiate arbitration.
- Identifying the appropriate arbitration agency: ICSID, UNCITRAL, PCA, etc.
b. Notifying intention on filling complaints
- Submitting a notice of dispute to the host State.
- Many treaties require a mediation or negotiation period (usually 3–6 months).
c. Filing complaints (the request for arbitration)
- Filing a formal complaint (request) to the chosen arbitration institution.
- Clearly stating: acts of violation, legal grounds, and compensation claims.
d. Constituting the arbitral tribunal
- Each party appoints an arbitrator; and the third arbitrator (tribunal president) is agreed by both parties or appointed by the arbitration institution.
e. Hearings and arguments
- The parties present arguments and evidence.
- Arbitrators deliberate and issue an award.
f. Enforcement of the award
- The award is binding.
- Enforcement follows the Washington Convention (ICSID) or New York Convention (UNCITRAL).
6. Do complaints to international organizations on investment affect diplomatic relations between States?
When a State is sued, especially in high-profile cases, it can strain relations between the host State and the investor’s State. The host State may view international arbitration as interference with its sovereignty and may oppose intervention in its internal policies.
If the case draws attention from international agencies or non-governmental organizations, the State may also face pressure to demonstrate transparency and commitment to protecting investors’ rights.
IV. Legal consultancy services on filing complaints to international organizations regarding investment issues
The above provides detailed information by NPLaw to assist clients regarding filing complaints to international organizations on investment. If you have any questions on the above or other legal matters, please do not hesitate to contact NPLaw for direct advice and guidance.
