A Theoretical and Doctrinal Study of Investor Due Diligence in International Investment Arbitration

Abstract

Investor prudence obligations are crucial in international investment arbitration, yet their application faces challenges due to unclear and inconsistent standards set by arbitral tribunals. This inconsistency stems from the concept of investor prudence obligations being derived from the broader notion of prudential obligations, which primarily focus on States as the subjects of regulation. Consequently, applying these obligations to non-State actors, like investors, presents inherent difficulties. Moreover, the theoretical frameworks employed by arbitral tribunals often fail to address the specific needs of investor prudence obligations within this context. The obligations have evolved, influenced by the interactions between sovereign States and investors, leading to a shift in their functional positioning and boundaries.  To enhance the normative expression of these obligations, it is essential to align them with the operational logic of existing jurisprudence. Key considerations should include the investor's identity, economic capacity, and the host country's social environment, which affect their control over risks. Additionally, tribunals should differentiate between various stages of legal relations, assessing both the investor's and host country's risk control capacities, to establish case-specific standards for prudential obligations.