Cross-border investment today is fraught with geopolitical risk.
Regulatory shifts, geopolitical tensions and government intervention are no longer outliers; they are part of doing business. For cross-border investors, there is a powerful – and often underused – tool in the toolkit to manage or mitigate those risks: the investment treaty regime.
Investment treaties can give foreign investors protection against adverse government action, access to international arbitration and leverage to negotiate. Understanding your position early, including when structuring an investment and before responding to adverse government action, is essential.
Investment treaties are no longer a ‘left field’ legal consideration. They are a key part of an investor’s foreign investment strategy. The question is simple: have you structured your investment to manage sovereign risk – or are you exposed to it?
What are investment treaties and how do they protect investors?
Investment treaties are agreements between States that give investors from one State legally enforceable protections against adverse government action by the other State, being the host State of their investment. In effect, the host State guarantees certain protections for the foreign investor, such as fair and equitable treatment, protection from expropriation and non-discrimination.
If there is then a dispute with the host State, the investor can bring a claim directly against that State before a neutral international arbitral tribunal to enforce those protections (rather than battling it out in the courts of the host State). In general terms, if the investor is successful at arbitration, the award is enforceable and can have real ‘bite’: if the State doesn’t pay up, investors can seek enforcement against the host State’s assets abroad.
The great news for investors is that you might be protected by an investment treaty and not even know it. You don’t need a contract with the host State of your investment or any contractual right to arbitration. Put simply: if there’s an investment treaty between your home State and the host State of your investment, you automatically benefit from the international law protections in that treaty.
Investors, including Australian & Singaporean, are increasingly invoking their treaty rights
Today, more than 2,500 investment treaties are in force globally. Their use continues to grow – by the end of 2025, at least 1,463 investor–State disputes had been commenced worldwide across all sectors, many involving claims exceeding US$100 million.[1]
The leading investor-State arbitration institution, the International Centre for the Settlement of Investment Disputes (ICSID), published in its 2026 Annual Report that it had:
- registered 1,118 cases since 1972, including 60 new cases in FY2026 alone[2]
- administered 363 cases in FY2026, the highest number ever.[3]
The distribution of cases is shown below.[4]
Protection for Australian investors
Australia has (and has had for many years) a network of investment treaties with foreign States. According to DFAT, there are:
- 15 bilateral investment treaties in force
- two investment agreements concluded alongside an FTA, and
- 10 free trade agreements (including both bilateral and multilateral agreements)
that contain investor-State dispute settlement provisions.
The diagram below shows the spread of Australia’s investment treaties that include investment dispute settlement.
Until relatively recently, Australian investors did not bring claims. This is changing – and there has been a significant uptick recently in Australia’s involvement in investment treaty cases:
-
- as investor: half of the 14 cases brought directly by Australian investors as recorded by UN Trade & Development (UNCTAD) were commenced in or after 2020, and in many of these cases that have run to their conclusion (not being settled or discontinued), the tribunal has found in favour of the Australian investor. Most of the cases brought by Australian investors have focused on mining and extractive industries, consistent with the trend seen generally at ICSID, although one claim in 2024 was brought by a manufacturer of paper products against the Philippines;[5] and
- as respondent: since Australia was first issued with proceedings in 2011 in Philip Morris v Australia, Australia has faced claims from investors in 6 proceedings, including its first ICSID arbitration.[6]
Protection for Singaporean investors
There is a similar uptick in claimant activity from Singapore. Of the 17 claims brought by Singaporean investors, 11 claims were brought in or after 2020 (four of these were brought by the same claimant, being Zeph Investments against Australia under the Australia-New Zealand ASEAN FTA).[7]
Singaporean investors also benefit from an even broader network of investment treaties, with investment treaties in force with over 60 trading partners, as shown below.[8]
Why should investors think about treaty protection?
Investment treaties help investors when things go wrong in three key ways:
- International law protections against adverse government action
The investor has access to protections under international law (even if these are not available under domestic law) against egregious government acts at all levels of government. Typical protections include protection against direct and indirect expropriation, discrimination based on nationality, and the requirement to provide fair and equitable treatment.
- Access to neutral arbitration
If there is a dispute and an investment treaty applies, the investor can bypass local courts or other processes and commence arbitration directly against the host State. The financial outcomes of any such proceedings can be significant for investors, and it is not just the large listed entities that are benefiting from using protections under investment treaties.
For example, in 2020 an Australian investor (formerly Prairie, now GreenX Metals) brought a claim against Poland alleging that the Polish government took action to block two coking coal projects in Poland. In 2024, the tribunal awarded GreenX Metals approximately AU$519 million,[9] a significant sum particularly given GreenX Metals total asset value as at 30 June 2026 was AU$13.9 million.[10]
- Leverage to negotiate
Perhaps more importantly, investment treaties give investors leverage to negotiate with the host State. This can work before making a claim: governments may refrain from taking adverse action if they are put on notice of potential investor-State arbitration proceedings; or at the very least the prospect of such a claim provides investors with a significant chip to use to reach a negotiated outcome. Making a claim can also lead to a negotiated settlement, with 37% of all ICSID arbitration proceedings being settled or otherwise discontinued in FY2026 (as opposed to being decided by the tribunal).[11]
Sometimes the award itself leads to the renegotiation of the project. For example, in July 2019 an ICSID tribunal awarded approximately US$5.9 billion to Tethyan Copper, an Australian investor, who had invested in a mining project in Pakistan but was denied a mining lease.[12] Pakistan applied for annulment of the award, but the parties ultimately discontinued the proceeding and renegotiated a revised deal for the project instead.
When should investors think about treaty protections?
Investment treaty protections should be front of mind for investors with investments overseas across all sectors. The coverage and strength of those protections should be considered regularly, particularly:
At the structuring stage
Even where there is no investment treaty between Australia and the host State of your investment – it may be possible to structure the investment through another State that does have a treaty with that host State. This should be done as early as possible (as you can’t retrofit treaty protection after a dispute arises) and will be particularly important for investors entering higher-risk or politically volatile markets.
When a government dispute arises
As soon as there is any whiff of adverse government action against your investment, you should carefully consider your investment treaty protections. This is because, under some treaties, if the investor takes steps in local courts or other processes first – they may automatically forgo their rights under the treaty.
Otherwise, periodically
Things change. Investment treaties can be terminated or new treaties with better protections come into force. Similarly, the sovereign risk of an investment can change quickly; meaning previously so-called ‘safe’ investments may now be higher risk. Accordingly, investors with significant cross-border investments should regularly review their investment treaty coverage across their portfolio of investments.
Want to know more?
Reach out to your Mallesons contact if you have questions or need advice. You can also find related trends and developments on our View from Asia: Driving Growth, Embracing Change hub, including on:
-
- What prolonged disruption means for supply chains, why trusted relationships can be critical, and more in a conversation between Amanda Lees and Mallesons International Director David Olsson AM
- The strategic advantages of genuine Asia capability under pressure: lessons from the Hormuz disruption
- The use of Force Majeure, Frustration and Contract Renegotiation in Times of Geopolitical Turbulence
- The Indo-Pacific trade deals that are reshaping business: RCEP, ASEAN agreements and beyond
[1] UNCTAD, Investment Policy Hub, ‘Investment Dispute Settlement Navigator’, available at: Investment Dispute Settlement Navigator | UNCTAD Investment Policy Hub.
[2] ICSID Annual Report, 16 October 2026, p. 9, available at: ICSID2026AR_ENG.pdf.
[3] ICSID Annual Report, 16 October 2026, pp. 8, available at: ICSID2026AR_ENG.pdf.
[4] ICSID Annual Report, 16 October 2026, p. 15 (‘Distribution of ICSID Cases Registered in FY2026, by Economic Sector’), available at: ICSID2026AR_ENG.pdf.
[5] UNCTAD, ISDS Navigator Dataset 31 December 2025.
[6] Ye Cheng, Ye Fang, Landbridge International Commercial Ltd., and Shandong Landbridge Group Co., Ltd. v. Commonwealth of Australia, in which Mallesons is acting for the investors.
[7] UNCTAD, ISDS Navigator Dataset 31 December 2025.
[8] Singapore Ministry of Energy, Trade and Industry, ‘International Investment Agreements’, updated 25 September 2026: International Investment Agreements (IIAs) | Ministry of Energy, Trade and Industry.
[9] The investor was also awarded 183m (US$378m) under the Energy Charter Treaty, with payments under one award to be offset against the other. In January 2026, a Singapore court upheld the enforceability of the ECT award (which was challenged by Poland).
[10] See: GreenX Metals Annual Report, Consolidated Statement of Financial Position as at 30 June 2026, ‘Total Current Assets’, p. 29.
[11] ICSID Annual Report, 16 October 2026, p. 18 ICSID2026AR_ENG.pdf.
[12] See: Tethyan Copper Company Pty Limited v Islamic Republic of Pakistan, ICSID Case No. ARB/12/1.
