International Investment Arbitration and International Commercial Arbitration
A foreign investor's power to sue a host State assumes an indispensable role in investment insurance and protection. Investment arbitration is undertaken to determine or resolve disputes between a foreign investor and the host State and is otherwise called Investor-State Dispute Settlement (ISDS) and varies from an International Commercial Arbitration (ICA/s) dispute because of the idea of the case and the parties in dispute. While the former deals with disputes emerging under a public treaty between two contracting States, the latter deals with disputes emerging out of a commercial legally binding or contractual obligation.
The legal systems governing the ICA and investment arbitration are distinctive to the degree that, in an ICA, the main pertinent treaty is the New York Convention, which deals the acknowledgment, recognition, and implementation of foreign arbitral awards, while in investment arbitration, treaties of public international law give the fundamental structure. The job of national law is also unique in both. In an ICA, procedurally the legal system of the "seat" governs the arbitration and gives national courts of the seat administrative and superior jurisdiction on the arbitral method. Further, the substantive national law is applied by the arbitrators to choose the benefits and merits of the case.
However, in investment arbitration, procedurally, mandatory provisions of national law are just pertinent if the arbitration is not represented and governed by treaties, for example, the International Center for Settlement of Investment Disputes (ICSID) or the North American Free Trade Agreement (NAFTA), however, is rather administered and governed by non-legislative associations, for example, the London Court of International Arbitration (LCIA) or the International Chamber of Commerce (ICC).
In an ICA, jurisdictional disputes for the most part identify with the extent of the arbitration clause, assent, and signatories. However In any case, in investment arbitration, the extent of jurisdictional disputes is very vast and immense. The consent to arbitration emerges under a treaty, and standards of interpretation as set down in the Vienna Convention become applicable. The State's assent relies on: (I) regardless of whether an "investment" existed as comprehended under the BIT; (ii) whether the claimant is a resident of the home State; and (iii) whether the resident/citizen possesses and/or controls the investor company.
Even though India has not acquiesced to the ICSID Convention, Courts in India have perceived the basic distinction between the nature of the disputes between an ICA and investment arbitration, and have held "the reason for action (regardless of whether legally binding or not) is grounded on State certifications and confirmations (and are not business in nature). The underlying foundations of Investment Arbitrations are in open universal law, commitments of State and authoritative law". They have on numerous occasions strengthened the non-interventionist approach of Indian courts corresponding to BIT arbitration and constrained the equivalent to "uncommon and convincing circumstances". Indian Courts have perceived their impediment in meddling in venture mediations, which drives their separate purviews to move more like an investor's benevolent condition as guaranteed under the BITs.
The real difference between investment arbitration and an ICA lies at the very heart of each and every dispute. Factors, such as, parties, nature of the matter in dispute, and the agreement from which the dispute emerges assume a determinative role in separating and differentiating the two arbitrations. For investment arbitration, to reduce the number of procedures, particularly since they are so cost substantial, it is imperative for States to (I) guarantee intelligence between the provisions of existing BITs and their domestic legal system; (ii) guarantee insurance to the foreign investor as long as it doesn't damage domestic public policy; and (iii) take part in effective negotiations once a dispute arises to keep away from mediation or arbitration.