M - What GCC Contractors Need to Know about Bilateral Investment Treaties
Many construction contractors operating in the Middle East are unaware that they may have the option of pursuing their contractual claims in a bilateral investment treaty (BIT) arbitration against a host state or one of its entities.
This is regardless of whether the construction contract provides for claims to be settled by local courts or commercial arbitration, although some BITs may include a ‘fork in the road' provision that allows a contractor to elect which forum to take their dispute to.
What Is a BIT?
A BIT is a state-level treaty whereby two countries agree to provide certain protections to investors and their investments. Its purpose is to promote foreign direct investment between contracting states.
If a host state subsequently violates one of these protections, then the aggrieved investor, in this case, the contractor, can commence dispute resolution proceedings under the BIT, which will usually provide for arbitration under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).