Introducing the CELIS–Arnold & Porter Initiative on Investment Security x Investment Arbitration
Authors: Steffen Hindelang (Uppsala University; CELIS Institute), Helene Schramm (CELIS Institute) and Liam McGrath (CELIS Institute)
Most international rules governing foreign investment still breathe the air of the liberal, if not neoliberal era in which they were created. They place particular emphasis on the promotion and protection of foreign-owned property and often enable foreign investors to enforce those rights with only limited oversight by State courts.
The winds have changed, however. The rationale underpinning the contemporary international investment regime, which leaves markets largely in the hands of private actors while holding States strictly accountable for disproportionately interfering with them, appears increasingly out of step with newer policy priorities. We are witnessing the resurgence of great power politics. Against this background, States increasingly rely on a broad range of instruments to safeguard strategic industries and protect critical assets. These instruments include inbound and outbound investment screening regimes, economic sanctions, and other regulatory measures aimed at preserving what are now framed as national security interests and economic sovereignty.
Yet measures pursuing economic security priorities give rise to a dilemma: what may be considered as legitimate from a security-oriented perspective may equally be viewed, from another vantage point, as interventionist or even protectionist. A recent example is the Dutch government’s intervention in Nexperia (as discussed in a CELIS Blog post here), where emergency powers were invoked to prevent the potential relocation of semiconductor production to China. The authorities framed the measure as necessary to safeguard economic security, while the investor condemned it as ‘an act of excessive interference driven by geopolitical bias.’
In short, the shift towards securitisation of international investment relations stands in direct tension, if not outright conflict, with the frequently stated objective of international investment agreements (“IIAs”) to promote and protect investments. This creates considerable uncertainty for governments and investors alike, given that security-motivated measures may increasingly end up before arbitral tribunals, with only limited existing guidance on how they will be assessed.
The joint CELIS – Arnold & Porter Initiative on Investment Security x Investment Arbitration (“Initiative”) seeks to engage constructively with this tension and attempts to map ways of addressing the growing interaction between investment security and investment protection. Over the long term, the Initiative aims to establish a dedicated platform for discussion and to contribute to a more systematic understanding of where the boundaries lie between investment security and investment protection – and what investors, States and practitioners can expect when these boundaries are tested.
As part of the Initiative, we are launching a new CELIS – Arnold & Porter Blog Series (“Blog Series”), designed to bring together the worlds of arbitration and economic security by providing a dedicated forum platform for stakeholders from both fields.
Given the increasing prevalence of investment screening mechanisms worldwide (OECD, 2025, p. 9), the Blog Series will start off by analysing the legal interface between States’ investment screening powers and IIAs. Across eleven blog posts, we will zoom in on the potential for investor–State dispute settlement (“ISDS”) claims throughout the cycle of a “typical” investment screening process:
The first batch of three blog posts will lay the groundwork by analysing the scope of application of IIAs in relation to investment screening mechanisms. In the context of inbound investment screening, it is essential to differentiate between three scenarios.
First, domestic screening regimes may establish a procedure that allows the State to restrict or deny initial market access. Thise scenario is addressed in our opening blog post (1), in which Steffen Hindelang, Helene Schramm, and Liam McGrath examine whether existing IIAs may afford investor protection when a foreign investment is screened prior its market entry.
Second, many screening mechanisms also cover the expansion of existing investments and may, therefore, impact the investor’s ability to acquire additional shares in, assets of, or control over a target company. Global Telecom v. Canada (Award, 2020) – the only publicly known ISDS award to date addressing an investment screening mechanism – falls within this category.
Third, screening mechanisms may allow for retrospective review of an investment that has already been established. Such review may ultimately limit the enjoyment of an investment by conditioning its use, or even require forced divestment, thereby interfering with an investment protected under an IIA. Both latter scenarios will be explored in greater depth in blog post (2) by Bart Wasiak and Naina Gupta. They focus in particular on the UK’s screening decision regarding LetterOne/Upp Corporation (2022).
Certain IIAs seek to address the potential tension between investment protection and investment screening by explicitly excluding, or otherwise shielding, investment screening mechanisms from review. These techniques range from explicit exclusions of screening laws from ISDS, to lists of non-conforming measures, carve-outs for particular sectors that may be subject to screening, and general or security exceptions. Joshua Paine examines these exclusion mechanisms for investment screening in IIAs in blog post (3).
The second batch of blog posts will consider the essential procedural rights that a foreign investor enjoys under IIAs throughout the investment screening process. In two blog posts adopting different perspectives, Roland M. Stein and Henriette Wohlschläger (blog post (4a)) and Xueji Su and Alessandro Zocchia (blog post (4b)) examine the investor’s right to a decision within a reasonable time, with particular reference to Alcmene (2023), Aeonmed (2023), and GlobalWafers (2022) before German courts.
Following this, Bálint Kovács examines in blog post (5) the protection, under IIAs, of the investor’s right of access to the file and evidence, the right to be heard and to engage, and the right of procedural transparency. His contribution focuses in particular on the US investment screening decision in Ralls Corporation (2012) and Japan’s screening of Toshiba (2021).
Jonas Hallberg then explores, on the basis of findings in Global Telecom v. Canada (Award, 2020), the interaction of IIAs and the right to a motivated decision and transparency in an investment screening authority’s decision-making process, in blog post (6). He assesses the extent to which screening authorities can – without triggering liability under an IIA – base decisions on information not part of the file or that is confidential or otherwise not disclosed to the investor.
The procedural part concludes with blog posts by Dorieke Overduin (blog post (7a)) and Bärbel Sachs (blog post (7b)),which examine the protection that IIAs afford to investors against inappropriate disclosure of confidential information during the investment screening process.
The third batch of blog posts addresses the interaction between IIAs and investment screening mechanisms during the substantive assessment of a transaction for clearance. Does international investment law impose any outer limits on the State’s exercise of discretion, in particular where that discretion is exercised in an arbitrary or unreasonable manner? In blog post (8), Steffen Hindelang, Helene Schramm, and Liam McGrath address this question through the example of the UK screening decision in the Newport Wafer Fab case (2022), examining the scope of prohibition of arbitrary conduct, as reflected in IIAs and arbitral practice.
Subsequently, in blog post (9), Dean Merriman analyses conditional approvals and burdensome mitigation measures in light of IIA protections, illustrating these issues through Australian screening scenarios involving Hanwha (2025), TransGrid (2015), and China Mengniu Dairy Company Limited (2019).
Closing the arc of a screening process, the next blog post turns to situations of parallel proceedings, i.e., where the investor challenges the screening decision in a domestic court while simultaneously initiating ISDS proceedings. Many jurisdictions provide special mechanisms to challenge screening decisions, often departing from the “standard model” of judicial review of administrative decisions. This may raise a host of issues under IIAs, including fork-in-the-road clauses, due process, and denial of justice. Joel Dahlquist and Sally Pei will examine these questions through the UK’s screening decision concerning FTDI Holding Ltd (2024) in blog post (10).
Moving beyond inbound investment screening, the final blog post (11) addresses the more recent phenomenon of outbound investment screening, as seen, for example, in the USA or China. Unlike inbound investment screening, restrictions on outbound investment intersect with IIAs in a more fragmented and indirect way, but there may still be legal exposure. Yanqin Mao addresses this tension through a hypothetical European outbound investment screening scenario involving BASF’s €8.7 billion investment in a large chemical facility in the Chinese province of Guangdong (2018).
All the screening scenarios mentioned above and further explored in this Blog Series – ranging from medical technology manufacturers in Germany to chemical plants in China, from telecommunications networks in Canada to wafer fabrication in the United Kingdom – demonstrate the potential for ISDS claim to arise where States exercise their powers to screen foreign investment. The contributors engage with complex legal questions along the full arc of a screening process, systematically dissecting the contested terrain where investment security and investor protection collide.
