International arbitration in 2024

Public international law’s growing relevance for businesses

By: Will Thomas KC, Carsten Wendler, Alexa van der Meulen, Joshua Kelly

The challenges States and businesses experienced during 2023 are likely to persist in 2024. Businesses involved in foreign investment will continue to have a wide range of options to protect their investments, engage constructively with host-State governments in the event of a dispute and, where necessary, obtain binding resolution of their disputes. In this context, public international law, while existing primarily on a State-to-State plane, will also be of increasing relevance for private businesses.

Transactions involving State-owned entities

Over the last few years, State-owned entities (SOEs), and particularly sovereign wealth funds, have provided much-needed capital for leveraged dealmaking. The trend of State-backed funding for acquisitions looks set to continue through 2024 as dealmakers look for alternative routes to obtain returns.

One of the higher-risk issues that can arise when transacting with a SOE or State is the law of State immunity, which permits a State to claim immunity from suit, or enforcement of a judgment, subject to certain exceptions. As SOEs and States increasingly become involved in significant transactions, public international law will play an important role in the management of SOE-specific risks, such as State immunity – and the ability of businesses to seek and obtain waivers of State immunity. In this regard, we expect incremental development of:

• the “commercial transaction” exception to State immunity (which generally precludes a State from relying on State immunity in respect of a commercial transaction);
• the circumstances in which SOEs are permitted to rely on State immunity; and
• new exceptions to State immunity in light of emerging State practice.

Boundary disputes and natural resources

Control over (increasingly rare) natural resources will remain a key underlying factor for inter-State disputes over international boundaries on land and at sea (see trend on critical raw minerals). Several disputes are likely to come to a head in 2024, including the longstanding dispute between Guyana and Venezuela regarding the oil-rich Essequibo region (ahead of Venezuela’s 2024 presidential elections), and the maritime delimitation dispute between Kenya and Somalia.

For businesses holding State-granted licenses or concessions to explore, develop and produce natural resources in contested areas, public international law will play an essential role in calibrating what steps license holders can or cannot take pending a resolution.

Public international law will also inform the analysis on how best to allocate risk through contracts governed by international law (such as petroleum agreements), as well as how to most effectively implement co-operative inter-State agreements (such as joint development agreements which can be facilitated by the private sector). Failing any prospect of a constructive solution, affected businesses will also be looking to public international law for routes to resolution, whether via inter-State proceedings and/or investor-State arbitration.

Corporate human rights claims

Although international human rights law is frequently perceived as only providing protections for natural persons, in many contexts businesses can invoke human rights protections against States. One of the clearest examples is the protections available to corporate entities under the European Convention on Human Rights (ECHR).

Given the current proposals for legislation and policy objectives of the European Union and many European States, 2024 is likely to see businesses increasingly relying on the ECHR – both in domestic courts and before the European Court of Human Rights itself – to bring claims in relation to violations of, among other things, their property rights, and their rights to a fair trial, free expression and freedom of association.

Factors driving this trend may include the termination of intra-EU investment treaties, limiting access to investor-State arbitration for many investors (see our trend on intra-EU investor-State arbitration). Claims may also arise as a result of measures taken by European States (particularly in States with elections looming) resulting in unlawful restrictions on freedom of expression. 

ESG and supply chains

On the flip side, businesses are increasingly likely to find themselves subject to international law obligations being reflected by States in their national legislation – for example, human rights-focused norms, via ESG standards and their implementation in domestic laws.

In some jurisdictions, international law has already become a crucial element of compliance and risk assessment. For example, the German Supply Chain Act and the French Duty of Vigilance Law require companies to take measures to prevent human rights violations and environmental harm throughout their supply chains. Both existing and future projects, including energy transition projects, are therefore under increased scrutiny concerning their impact on human rights and the environment.

This has already led to companies facing inquiries from regulators concerning compliance with international legal norms such as the right to self-determination and the free, prior and informed consent (FPIC) of indigenous peoples. ESG standards are likely to gain further importance if the proposed EU-wide Supply Chain Act is adopted, which will build on pre-existing supply chain laws.