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Investor Presentaiton

23 I. EXPLANATION OF THE ISSUE A. Historical context States started to include ISDS in their investment treaties in the late 1960s and early 1970s; by the 1990s this treaty element had become standard. Without ISDS, a foreign investor had two avenues to pursue if a host State expropriated its property or otherwise interfered with its investment. The first was to seek relief in the local courts or administrative tribunals of the host State. Investors seeking such redress often encountered problems such as domestic sovereign immunity or a non-independent judiciary that could be influenced by the host State's political officials which prevented them from securing recovery for their losses. _ 10 Secondly, if domestic courts were ineffective, a foreign investor's remaining hope was to convince its home government to espouse its claim (i.e. exercise diplomatic protection). For investors from "powerful" States this could be an effective weapon; yet even "powerful" States would often prove reluctant to intervene on behalf of an investor should higher political considerations dictate. For a small investor lacking political clout in a discrete dispute, the hurdle to obtain espousal could be very high indeed. Even if an investor did obtain espousal, the claim would then belong to the investor's home State, which could decide how to prosecute it and even whether to settle. Further, proceeds from the dispute would technically belong to the State, rather than the investor. Moreover, transnational corporations (TNCs) with affiliates in numerous countries (each possessing, in all probability, a different legal nationality) and a highly international shareholder profile might find it difficult to accurately define the firm's nationality for the purposes of establishing the right of diplomatic protection. 10 See Borchard, 1915. UNCTAD Series on International Investment Agreements II
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