Governments owe $80bn in investor-state Arbitration losses
Investor-state disputes have more than doubled over the last decade, with decisions against governments totalling over $250m (£186m), and governments’ debts accumulating over $80bn (£60bn).
Investor-state disputes enable overseas investors to recoup some of their investment if a government breaches its investment treaty obligations. Arbitration, an out-of-court method, is the preferred system for resolving these disputes.
According to a new report by Thorndon Partners, the volume of these disputes worldwide has more than doubled between 2015 and 2024, with the average successful case against a government resulting in an award of over $250m (£186m).
Arbitration is often assumed to be shrouded in secrecy as the hearing, documents, and decisions are confidential; however, this report has revealed that investor-state cases have made headlines at an unprecedented rate.
Thorndon’s analysis found over 1,600 media mentions of investor-state Arbitration cases in 2024 across the top five jurisdictions for arbitration, London, Singapore, Paris, Beijing, and Hong Kong.
London was found to have attracted the most media coverage (31 per cent) among the top jurisdictions since 2020; however, the capital is recognised as the world’s leading arbitration hub.
Earlier this year, the new Arbitration Act received royal assent, aiming to enhance the UK’s ranking in modern dispute resolution and attract international business.
Governments stall on debts
Between 2022 and 2024, the number of arbitration debts remaining unpaid by governments increased by 209 per cent, with the total known value rising by 31 per cent to exceed $83bn.
The report noted that States have many reasons not to immediately pay their debts resulting from investment treaty rulings, such as deferring them until an election, lacking the liquidity to satisfy the debt, or simply refusing to comply with international law.
The enforcement of awards is, in short, notoriously difficult.
Thorndon’s analysis of one specific case against the Spanish Government found that public pressure can lead to states paying. Professor Nikos Lavranos stated, “The media is also a tool to increase pressure on states to pay their adverse awards.”
Since 2022, Professor Lavranos has been tracking compliance with Arbitral awards, showing that Spain, Venezuela, and Russia have retained the top spots for consistent ‘bad debtors’. Italy, India, Ecuador, Kyrgyzstan, Kazakhstan, Ukraine, Croatia, and Romania were identified as falling in the rankings.
The analyses also indicated that economic issues could signal a government’s intention to change its stance on refusing to pay indebted investors, as four in five countries investigated that paid out to creditors between 2021 and 2025 held national elections in the twelve months prior to payment.
Charles McKeon, co-founder of Thorndon Partners and report author, said: “Governments are wary of the flak that can arise from ‘handing over taxpayer money’ or ‘surrendering’ to international investors. The electoral temptation is therefore to stall, making any outstanding debts the next administration’s problem.”
“The level of public scrutiny for states and investors during these disputes is far higher than you might think. Confidentiality is not guaranteed,” he added.