News & Views

Protecting Investments Abroad: Part 1 – International Investment Agreements and Investment Protection

27 January 2023

Authors: Anna-Maria Tamminen and Ricardo Gomes

This is part one of a series of four blog posts published after the Dispute Resolution Breakfast Seminar on this topic. If you wish to learn more about these topics, feel free to get in touch with our experts Anna-Maria Tamminen and Ricardo Gomes.

Over the past few decades, the development of investor-state dispute settlement (“ISDS”) has been remarkable. To date, there have been around 1,190 known treaty-based ISDS cases worldwide[1] and around 2,850 bilateral investment treaties (“BITs”)[2] signed.

Recently, our team has received several requests regarding the protection of investments of Finnish companies abroad. Similarly, Finland and all other Nordic states have seen the first cases brought against them in international arbitration over the past few years.

The departure point for our seminar on this topic was the following: A company has made significant investments in another country with an expectation to benefit from those investments over time. The company has been conducting operations from that country for several years, even decades. The company has, among other things, employees, premises, movable and immovable assets, investments, and intellectual property in several locations throughout that country. Several events can take place overnight that can have a major impact on the company’s business operations, and it becomes impossible to operate in the host state. These events could include, for example, a war, an invasion by a third country, a new law, an internal rebellion, an economic crash, or a cut in diplomatic relations (or all/some of these at the same time). These events may not always be initiated solely by the host state; they can also be a result of being part of a regional political and economic block (such as the EU) where sanctions are put in place by a group of states and not individually.

On the other hand, there may also be foreign companies operating in Finland. While some of the above-mentioned examples are not very likely to happen in Finland, new laws that restrict the rights of foreign investors or discriminate between foreign investors and national investors can lead to the same conclusion.

In both cases, there is naturally an underlying network of commercial contracts between commercial parties or a government agency/state-owned enterprise. These commercial contracts may be very comprehensive and heavily negotiated. In addition, however, certain types of investments are protected by international treaties, that is, international law treaties between the host state and the home state of the investor. These treaties often provide that if commercial and diplomatic conciliation efforts are not sufficient to resolve a conflict, the investor may bring claims to investment arbitration before independent and impartial arbitrators. Sometimes this is even agreed beforehand by governments in what is called a bilateral investment treaty or a multilateral treaty (such as the Energy Charter Treaty).

While intra-EU BITs have become less relevant since 2009, the diversification of investments has also found new geographical areas. Latin America, Asia, and Africa have become attractive regions for investments, and Nordic investors have made substantial investments in these areas. Finland has BITs with several countries in these regions, for example, China (BIT signed in 2004), Russia (BIT signed in 1989), Uruguay (BIT signed in 2002), and Kenya (BIT signed in 2008). As an alternative to Russia, Nordic investors are also relocating to Eastern European states that are not part of the EU.

BITs provide for reciprocal undertakings between the host state and the home state of investors. Historically, BITs have been essential in providing confidence for the investor to make an investment in the host state with the guarantee that their investment is not going to be negatively affected by arbitrary or aggressive measures taken by the host state. However, when that happens, BITs enable investors to bring claims in a neutral forum before an independent tribunal instead of the host state’s own national courts.

The underlying reason behind Finland signing these BITs is above all economic and political. However, from Finnish investors’ perspective, these treaties offer an extra security net that protects their investments abroad. But are Finnish businesses aware of the investment protection offered by the international investment agreements?

Stay tuned — more to follow next week.


[1] (accessed 16 November 2022)

[2] (accessed 16 November 2022)

More News