Investor Diligence in Investment Proceedings: Sources and Arguments

Abstract

This paper analyses the concept of investor diligence and its practical and policy implications for investment arbitration proceedings. It proceeds in two stages. Firstly, the sources of investor diligence are identified and discussed. In this process, I discuss not only (i) the main CSR and SRI instruments but also (ii) the legal techniques to give legal grounding to these and other standards of investor behaviour and, perhaps most importantly, (iii) how investor diligence has featured in investment proceedings at the jurisdictional, admissibility, merits and quantum levels. Secondly, I analyse the implications of mainstreaming investor diligence for three policy questions, namely (i) the debate over investor-State asymmetry in investment protection frameworks, (ii) the distinction between commercial and political risk, and (iii) the use of the legitimate expectations doctrine.

Keywords: investor diligence, investment arbitration, investor obligations, corporate social responsibility, investor-State asymmetry, political risk, legitimate expectations, pleas of illegality