Determining the Role of FDI Screening in International Investment Law

Investment screening and control mechanisms are in sharp contrast to the international investment law regime that seeks to promote the free flow of foreign capital. Investment screening decisions may significantly affect investment transactions and thus may be contrary to states’ obligations contained in international investment agreements (IIAs). Most IIAs provide for investor-state-dispute-settlement (ISDS), allowing foreign investors to claim compensation for the breach of investment protection standards. However, the relations between investment screening and international investment law remain largely obscure. This contribution aims to provide a better understanding of the application of investment treaties in the context of screening mechanisms and international obligations limiting states’ screening power. Several jurisdictional hurdles exist and state defenses are available if an investor seeks to bring a claim before an arbitral tribunal. Nevertheless, states should take account of their international obligations when introducing and operating screening mechanisms.