Investor-State Arbitration 2025

Definitive global law guides offering comparative analysis from top-ranked lawyers

CHAMBERS GLOBAL PRACTICE GUIDES

Definitive global law guides offering comparative analysis from top-ranked lawyers

Contributing Editor Stephen Jagusch KC Quinn Emanuel Urquhart & Sullivan

Global Practice Guides

Investor-State Arbitration Contributing Editor Stephen Jagusch KC Quinn Emanuel Urquhart & Sullivan, LLP

2025

Chambers Global Practice Guides For more than 20 years, Chambers Global Guides have ranked lawyers and law firms across the world. Chambers now offer clients a new series of Global Practice Guides, which contain practical guidance on doing legal business in key jurisdictions. We use our knowledge of the world’s best lawyers to select leading law firms in each jurisdiction to write the ‘Law & Practice’ sections. In addition, the ‘Trends & Developments’ sections analyse trends and developments in local legal markets. Disclaimer: The information in this guide is provided for general reference only, not as specific legal advice. Views expressed by the authors are not necessarily the views of the law firms in which they practise. For specific legal advice, a lawyer should be consulted. Content Management Director Claire Oxborrow Content Manager Jonathan Mendelowitz Senior Content Reviewers Sally McGonigal, Ethne Withers, Deborah Sinclair and Stephen Dinkeldein Content Reviewers Vivienne Button, Lawrence Garrett, Sean Marshall, Marianne Page, Heather Palomino and Adrian Ciechacki Content Coordination Manager Nancy Laidler Senior Content Coordinators Carla Cagnina and Delicia Tasinda Content Coordinator Hannah Leinmüller Head of Production Jasper John Production Coordinator Genevieve Sibayan

Published by Chambers and Partners 165 Fleet Street London EC4A 2AE Tel +44 20 7606 8844 Fax +44 20 7831 5662 Web www.chambers.com

Contents

INTRODUCTION Contributed by Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP p.4

ITALY Law and Practice p.121 Contributed by PedersoliGattai Trends and Developments p.134 Contributed by PedersoliGattai LATVIA Law and Practice p.140 Contributed by Sorainen Trends and Developments p.148 Contributed by Sorainen LITHUANIA Law and Practice p.155 Contributed by Sorainen Trends and Developments p.171 Contributed by Sorainen

BANGLADESH Law and Practice p.8

Contributed by Rahman’s Chambers Trends and Developments p.16 Contributed by Rahman’s Chambers DENMARK Law and Practice p.21 Contributed by Bech-Bruun Law Firm P/S Trends and Developments p.39 Contributed by Bech-Bruun Law Firm P/S

EGYPT Law and Practice p.47

Contributed by Shahid Law Firm Trends and Developments p.61 Contributed by Shahid Law Firm ESTONIA Law and Practice p.69 Contributed by Sorainen Trends and Developments p.80 Contributed by Sorainen

PERU Law and Practice p.178 Contributed by Monroy & Shima Abogados Trends and Developments p.198 Contributed by Monroy & Shima Abogados

SOUTH KOREA Law and Practice p.206 Contributed by Bae, Kim & Lee LLC

GERMANY Law and Practice p.86 Contributed by Herbert Smith Freehills Kramer LLP Trends and Developments p.100 Contributed by Herbert Smith Freehills Kramer LLP

SPAIN Law and Practice p.219 Contributed by Ramón y Cajal Abogados, S.L.P. Trends and Developments p.234 Contributed by Ramón y Cajal Abogados, S.L.P.

HONG KONG SAR, CHINA Law and Practice p.106 Contributed by Reed Smith Trends and Developments p.116 Contributed by Reed Smith

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INTRODUCTION

Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP

Quinn Emanuel Urquhart & Sullivan, LLP is the world's largest business litigation firm, with 1,200+ lawyers across 34 global offices. For over 12 years, BTI Consulting has recognised the firm as part of the “Fearsome Foursome”, and named it the world's most feared law firm five times, including for three consecutive years. With an 86% win rate across

2,500+ trials, Quinn Emanuel has secured nearly USD80 billion for plaintiffs, including USD28 billion in a recent two-year period. Notable results include seven nine-figure jury verdicts, four ten-figure jury verdicts, 51 nine-figure settlements, and 20 ten-fig- ure settlements.

Contributing Editor

Co-Author

Stephen Jagusch KC is global chair of Quinn Emanuel's international arbitration practice, specialising in international commercial and investment treaty arbitration. He has served as adviser and advocate in

Epaminontas Triantafilou is one of the leading disputes lawyers in London. He has extensive international arbitration experience as counsel to individuals, corporations and governments, and as arbitrator in

dozens of ad hoc and institutional arbitrations worldwide, under various governing laws. Many cases involve sovereign states or major multinational organisations, with Stephen serving as lead counsel in numerous landmark investment treaty cases.

multimillion-dollar disputes. He has handled several dozen arbitrations involving government contracts, joint ventures, intellectual property, construction and other commercial disputes under all major arbitral rules (LCIA, ICC, UNCITRAL, SCC, ICSID).

Quinn Emanuel Urquhart & Sullivan, LLP 90 High Holborn London WC1V 6LJ United Kingdom

Tel: +44 20 7653 2000 Fax: +44 20 7653 2100 Email: publicrelations@quinnemanuel.com Web: www.quinnemanuel.com

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INTRODUCTION Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP

Global Overview on Investor–State Dispute Settlement Introduction Investor–state dispute settlement (ISDS) has long stood as a cornerstone of international investment law, offering foreign investors a mechanism to chal- lenge state conduct that interferes with investor rights. For decades, it has provided recourse to a largely neu- tral international dispute resolution mechanism, which mitigated the risk of investing in jurisdictions with per- ceived judicial or political uncertainty. However, as the global investment and political land- scape experiences tectonic shifts, ISDS has increas- ingly come under close legal and policy scrutiny. Concerns over regulatory chill, consistency in arbi- tral outcomes, and questions around legitimacy and transparency (among others) have spurred a wave of reform efforts, which vary from changes to arbitral procedure to the push for a multilateral investment court, and in some instances the outright abolishment of ISDS. For investor–state dispute practitioners, this evolv- ing terrain raises significant questions. How is the practice of ISDS adapting to new realities? How will this practice look in the next ten years? This overview explores the current trajectory of ISDS, considering the sustained criticism it faces, the steady rise of cases, and the potential pathways shaping its future development. The backlash against ISDS and its consequences In recent years, ISDS has been widely criticised by various stakeholders, particularly academics and civil society actors such as NGOs, as well as officials of several sovereign states or supra-national organisa- tions, such as the European Union. Critics argue that ISDS undermines state sovereignty, prioritises corpo- rate interests over public policy, and lacks consist- ency, transparency and accountability. The stated concerns also revolve around investment treaty pro- tections affecting limitations on a state’s ability to regulate in the public interest, including public health, environmental and labour regulations. Citing such concerns, several states across diverse geographies have chosen to phase out ISDS provi-

sions in their investment treaties. In the case of the member states of the European Union, this was apparently done to protect and advance the suprem- acy of EU law in regulating investment. Several African countries, such as South Africa, Tanzania and Kenya, have selectively terminated investment treaties with European states. South Africa opted to enact domes- tic legislation that offers more limited protection of foreign investment. Other African countries have cho- sen a more region-specific route, adopting the Afri- can Continental Free Trade Area (AfCFTA) Investment Protocol as a substitute for “traditional” investment treaties. Other states that have partly or wholly cancelled their investment treaties, such as Indonesia, Ecuador, Bolivia or Venezuela, justified their choice by referring to treaty obligations as having been imposed on them for the benefit of large foreign corporations, and to the detriment of their sovereign discretion over natural resources and investment-related policies. Perhaps ironically, while ISDS was created ostensibly to “de- politicise” disputes between foreign investors and sovereign states by creating an impartial forum for their resolution, the very existence of ISDS eventually became a political issue – and a hotly debated one. Instead of outright eliminating ISDS, other states have chosen to modernise their investment treaties and to reform ISDS rules, reportedly aiming for a better bal- ance between protecting investors’ rights and allow- ing states to regulate in the public interest, particularly in areas such as climate change and environmental protection, public health and human rights. Prominent examples of such “new generation” treaties include the Switzerland–Chile, EU–Chile and Singapore–Ken- ya bilateral investment treaties (BITs). This rebalanc- ing leans in favour of increased sovereign discretion: according to data published by UNCTAD, nearly all newly drafted or revised investment treaties limit the scope of claims that can be brought under ISDS. In parallel, state parties to ICSID and UNCITRAL have proposed procedural reforms to the rules governing ISDS to enhance efficiency and fairness, increase transparency, and ensure a more balanced approach in resolving disputes. ICSID adopted new rules in 2022 incorporating rules on expedited procedure, costs

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INTRODUCTION Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP

and provisional measures, amongst others. In 2023, UNCITRAL approved, inter alia, a Code of Conduct for Arbitrators and Judges, and Model Provisions on Mediation. Ongoing discussions in UNCITRAL’s Work- ing Group III (which consists of representatives of the state members of UNCITRAL) are focusing on reforms in procedural arbitration rules, the establishment of a specialised investment court, and the creation of a centre for advising sovereign states involved in treaty disputes. ISDS is still ascendant, but for how long? Despite – or perhaps partly because of – the criticisms and legal and regulatory initiatives intended to limit ISDS, the number of ISDS cases continues to rise. Over the past ten years, during which time the back- lash against ISDS has been strongest, the number of such cases has reportedly more than doubled. This increase can be attributed to several factors. First, as foreign direct investment continues to grow globally, so does the potential for disputes and the recourse to ISDS. The proliferation of BITs over the past few decades has created an environment where investors can rely on ISDS mechanisms to settle dis- putes with host states. There are still around 2,000 BITs in effect around the world, with the majority containing ISDS provisions. It is trite to observe that investors can derive substantial value from the availability of ISDS remedies, especially when the relevant domestic court system lacks the resources or the expertise to handle disputes of great size and complexity. Second, in recent years the political climate has reverted to regionalism and resource nationalism, which in turn has led to disputes over compensation for investments adversely affected by state actions, including outright expropriations. Several high-profile cases have brought attention to the ISDS system, most recently involving energy and national resourc- es, with several states settling investment treaty dis- putes arising from expansive regulatory programmes or nationalisations in those areas. At the same time, the geopolitical uncertainty created by armed conflict, most prominently in Ukraine and in the Middle East, gives rise to new circumstances in which investment treaties can be deployed to protect valuable assets

from state interference or direct taking, such as in the occupied territories of Crimea or Eastern Ukraine. The future: a return to domestic courts? It is reasonable to expect that the current politi- cal trend against multilateralism, combined with the ongoing efforts to limit the reach of ISDS, will have a profound impact on how international disputes are resolved in future. As noted, one possibility is an agreement on a stand- ing investment court. The ostensible goal of this per- manent investment court is to improve the legitimacy, transparency and accountability of the ISDS system by creating a more “standardised” judicial process – one of the main criticisms against ISDS being that it takes place in various fora under ad hoc tribunals and varying procedural rules. The court is intended to consist of permanent judges selected through a presumably transparent and meritocratic process. The timing (or indeed the ultimate political feasibility) of the establishment of such a court is currently unknown. Notably, in recent years mediation has been promoted as an alternative to arbitration in ISDS cases. Media- tion could foster a more collaborative approach to resolving disputes, but so far it has not been widely adopted by either investors or states. The prospects of mediation-related initiatives in the ISDS space therefore remain uncertain. The abolition of ISDS mechanisms in several jurisdic- tions could also imply a greater role for the local judi- ciary in resolving investor–state disputes, in addition to its current role of enforcing any resulting awards. In anticipation of this development, which inevitably means presenting local courts with complex, often politically significant matters with substantial stakes, states should be taking steps to ensure that local judicial systems are adequately funded and staffed, and to promote prompt access to, and administration of, justice. Improvement in domestic court systems would also motivate foreign investors and states alike to agree to the preservation of foreign investor protec- tions in contractual agreements governed by domes- tic law – an approach that was also favoured before investment treaties became widely available.

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INTRODUCTION Contributed by: Stephen Jagusch KC and Epaminontas Triantafilou, Quinn Emanuel Urquhart & Sullivan, LLP

Conclusion Looking ahead, there is significant potential for a new model of ISDS that can address the concerns sur- rounding transparency, fairness and state sovereignty. Whether through adapted arbitration rules, the crea- tion of a permanent multilateral court, the introduc- tion of alternative dispute resolution mechanisms or the increased use of domestic courts, the future of ISDS will likely involve a mix of reform and adaptation, ensuring that it continues to offer investors protection, while respecting the regulatory autonomy of states and the public interest.

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BANGLADESH

Bhutan

India

Bangladesh Dhaka

India

Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader Rahman’s Chambers

Myanmar

Contents 1. Overview p.11 1.1 National Position p.11 1.2 Arbitration Conventions p.11 1.3 Prevalence of Investor–State Arbitration p.11 1.4 Key Industries p.11 1.5 Major Arbitrations p.11 1.6 Reaction to Awards Made Against the State p.11 2. Investment Treaties, Free Trade Agreements and Investment Laws p.12 2.1 Bilateral and Multilateral Investment Treaties p.12 2.2 Model Bilateral Investment Treaty p.12 2.3 Free Trade Agreements p.12

6. Third-Party Funding p.14 6.1 Prevalence of Third-Party Funding p.14 6.2 Third-Party Funding Case Law p.14 6.3 Disclosure and Security for Costs p.14

7. Other Procedural and Evidentiary Issues p.14 7.1 Notice of Dispute and Consultation Period p.14 7.2 Confidentiality and Transparency p.14 8. Damages and Valuation p.14 8.1 Remedies p.14 8.2 Methodologies for Quantum Assessment p.14 8.3 Recovering Interest and Legal Costs p.14 8.4 Mitigation of Damages p.14

2.4 Interpretive Aids p.12 2.5 Investment Laws p.12

9. Enforcement of Awards p.14 9.1 Enforcement Procedure p.14 9.2 Approach of the Courts p.15 9.3 Asset Tracing and Recovery p.15

2.6 Arbitration Clauses in Investor–State Contracts p.12 3. Substantive Protections and Breaches p.13

3.1 Common Complaints p.13 4. The Arbitral Tribunal p.13

4.1 Limits on Selection p.13 4.2 Default Procedures p.13 4.3 Court Intervention p.13 4.4 Challenge and Removal of Arbitrators p.13 4.5 Arbitrator Requirements p.13 5. Preliminary and Interim Relief p.13 5.1 Types of Relief p.13 5.2 Role of Domestic Courts p.13 5.3 Security for Costs p.13

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

Rahman’s Chambers is a leading international arbi- tration law firm boasting a global reach. With a strong focus on shipping, infrastructure, construction, ener- gy, aviation, and international trade, the firm provides comprehensive legal counsel and representation to clients in Bangladesh and worldwide. The team’s ex- pertise extends beyond traditional cross-border dis- putes, encompassing both institutional and arbitra- tion matters in jurisdictions outside Bangladesh. The team comprises seasoned international arbitration practitioners and distinguished arbitrators, provid- ing deep expertise in complex legal frameworks and

procedures. The firm boasts extensive experience in shipping, international trade, energy, infrastructure and investment disputes, handling complex matters under various arbitration rules including those of the ICC, the Singapore International Arbitration Centre (SIAC), the LMAA, and the Bangladesh International Arbitration Centre (BIAC). Beyond representing cli- ents in international forums, Rahman’s Chambers provides comprehensive support in Bangladesh, including enforcing foreign awards and securing in- terim relief.

Authors

Mohammed Forrukh Rahman is a leading dispute resolution expert at Rahman’s Chambers, with a

Kamrunnaher Shimu is a seasoned arbitration specialist at Rahman’s Chambers, whose extensive experience at Nishimura & Asahi, Japan, equips her with a global perspective on complex commercial

distinguished career comprising more than 22 years of practice. Admitted to Lincoln’s Inn and the Bangladesh Supreme Court’s Appellate Division, and renowned as an arbitrator and international arbitration practitioner, Mohammed’s practice covers arbitration, litigation, and mediation. Specialising in shipping, aviation, infrastructure investment and commercial disputes, he handles complex cross- border matters involving international law. Mohammed’s deep legal expertise encompasses construction, energy, trade, customs, and company law disputes. Memberships of esteemed arbitration institutes such as the ICC Commission and the LMAA (supporting), as well as his role at the SAARC Arbitration Council, cement Mohammed’s leadership in the field.

and investment disputes. As an advocate of the Supreme Court of Bangladesh, Kamrunnaher excels in providing strategic support for international arbitration cases. Her expertise lies in conducting in-depth legal research, crafting compelling arguments, and effectively managing case logistics. Kamrunnaher’s ability to navigate intricate legal challenges makes her a valuable asset to the arbitration team.

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

Salauddin Kader is a dedicated legal professional with a focus on international trade, investment, and taxation law. As a member of the international and taxes and finance department at Rahman’s Chambers,

Salauddin contributes to the firm’s practice by supporting due diligence processes and handling customs-, VAT- and tax-related matters. His knowledge of international trade agreements, including the EU’s Generalised Scheme of Preferences (GSP) and preferential trade agreements, provides valuable insights for the team. Salauddin’s enthusiasm and commitment to understanding complex legal frameworks make him a promising asset to the firm’s international arbitration practice.

Rahman’s Chambers Suite 5B (4th Floor) Ataturk Tower 22 Kemal Ataturk Avenue Banani Commercial Area Dhaka-1213 Bangladesh Tel: +88 096 786 62666 Email: info@rahmansc.com Web: www.rahmansc.com

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

1. Overview 1.1 National Position

often arise concerning project delays, cost over- runs, variations, and land acquisition. 1.5 Major Arbitrations Several arbitrations have defined the scope of invest- ment protection and the consequences of state actions, as follows. • Saipem SpA v People’s Republic of Bangladesh (ICSID Case No ARB/05/7) (“ Saipem ”) – this semi- nal case established the doctrine of “judicial expro- priation”. The ICSID tribunal held that the actions of Bangladeshi courts (which revoked the authority of an ICC tribunal seated in Dhaka and nullified its award) constituted an unlawful indirect expropria- tion of the investor’s contractual rights. • Smith Cogeneration (Bangladesh) Private Limited v BPDB (ICC arbitration and enforcement) – this case highlighted the risks of SOE non-participation in arbitration. Crucially, the subsequent enforce- ment action led the Supreme Court of Bangladesh (Appellate Division, 2015) to rule decisively that SOEs cannot use procedural mechanisms outside the Arbitration Act 2001 (specifically Order XXI Rule 29 of the Code of Civil Procedure (CPC)) to stay the enforcement of foreign arbitral awards. • Niko Resources (Bangladesh) Ltd v BAPEX and Petrobangla (ICSID Case Nos ARB/10/11 and ARB/10/18) (“ Niko Resources ”) – these were con- solidated, contract-based ICSID cases involving claims related to gas field blowouts and unpaid invoices, featuring complex jurisdictional debates. • Chevron v People’s Republic of Bangladesh (ICSID Case No ARB/06/10) although Bangladesh pre- vailed on the merits, the tribunal notably awarded costs against Bangladesh owing to Bangladesh’s dilatory conduct during the proceedings. 1.6 Reaction to Awards Made Against the State Bangladesh and its SOEs typically utilise available legal recourse, including jurisdictional challenges and annulment proceedings. While the state vigorously contests claims, the ultimate rejection of the annul- ment application in Niko Resources (2023) demon- strates that the review mechanisms within the ICSID framework are utilized, respecting the finality of the process.

Bangladesh maintains a policy favourable to for- eign direct investment (FDI) and recognises inves- tor‒state arbitration as a crucial mechanism for pro- tecting investments. The government actively seeks FDI through bilateral investment treaties (BITs) and national legislation. Bangladesh remains focused on fostering an investment climate conducive to eco- nomic growth, particularly as the country prepares for graduation from Least Developed Country (LDC) status (expected in 2026). 1.2 Arbitration Conventions Bangladesh is a signatory to the major international arbitration conventions. It ratified the ICSID Conven- tion in 1980 and acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) in 1992. The Arbitration Act 2001 (based on the UNCITRAL Model Law on International Commercial Arbitration (1985) (the “UNCITRAL Model Law”) serves as the implementing legislation. 1.3 Prevalence of Investor–State Arbitration Investor–state arbitration is an established method for resolving disputes. Foreign investors strongly prefer arbitration over domestic litigation, which is often per- ceived as time-consuming. 1.4 Key Industries Arbitration activity involving the state and state-owned entities (SOEs) is concentrated in two main sectors, as follows. • Energy and power – historically the most active area, involving oil and gas exploration (contracts with Petrobangla) and power generation (power purchase agreements (PPAs) with the Bangladesh Power Development Board (BPDB)). Disputes frequently concern tariffs, capacity payments, and contract termination. • Infrastructure – increasingly prominent owing to large-scale PPPs for expressways (eg, Dhaka Elevated Expressway and Hatirjheel-Demra High- way), bridges, and port developments. Disputes

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

2. Investment Treaties, Free Trade Agreements and Investment Laws 2.1 Bilateral and Multilateral Investment Treaties According to UNCTAD (United Nations Conference on Trade and Development) data, Bangladesh has signed 33 BITs – of which, 25 are currently in force. Key treaty partners include the USA,the UK, China, Germany, Japan, and India. Bangladesh is also a party to several treaties with investment provisions (TIPs). 2.2 Model Bilateral Investment Treaty Bangladesh does not utilise a single “model BIT”. Its treaties reflect the prevailing standards at the time of negotiation. Older BITs typically include broad protec- tions. A notable development is the Joint Interpretative Notes (JIN) adopted in 2017 for the India–Bangladesh BIT (2009), which refined the scope of protections, pegging the Fair and Equitable Treatment (FET) stand- ard to the customary international law minimum. 2.3 Free Trade Agreements Bangladesh is a signatory to regional trade agree- ments – for example, SAFTA (South Asian Free Trade Area) and BIMSTEC (Bay of Bengal Initiative for Multi- Sectoral Technical and Economic Cooperation). How- ever, these currently lack the detailed investor pro- tections and robust investor–state dispute settlement (ISDS) mechanisms found in BITs. 2.4 Interpretive Aids Bangladesh generally does not publish extensive commentaries. Interpretation typically relies on the Vienna Convention on the Law of Treaties (VCLT). The primary exception is the 2017 JIN concerning the India–Bangladesh BIT (2009). 2.5 Investment Laws The primary national legislation is the Foreign Pri- vate Investment (Promotion and Protection) Act 1980 (the “FPIP Act”). It guarantees FET, full protection and security, national treatment, protection against expropriation (requiring adequate compensation), and the repatriation of capital and returns. The FPIP Act provides a baseline level of protection but does not contain provisions referring investors directly to inter- national arbitration.

2.6 Arbitration Clauses in Investor–State Contracts Direct arbitration clauses in contracts between inves- tors and SOEs or state authorities are standard prac- tice – although their robustness varies. • Infrastructure PPPs – agreements for major pro- jects typically include multi-tiered dispute resolu- tion clauses culminating in international arbitration, often specifying recognised institutional rules (SIAC or ICC). • PPAs – PPAs exhibit diverse approaches, as fol- lows. (a) International standard – many PPAs, particu- larly for large-scale fossil fuel projects (eg, Bibiyana II PPA), adopt international best prac- tices, specifying a foreign seat (eg, Geneva and Singapore) and recognised institutional rules (ICC and UNCITRAL). Some explicitly provide pathways to ICSID. (b) Domestic risk – conversely, some PPAs (in- cluding certain renewable energy agreements) stipulate arbitration under the Bangladesh Arbitration Act 2001 with a seat in Dhaka. This poses significant risks of judicial interference, as evidenced in Saipem . • The BERC conflict and the hierarchy of dispute resolution – the Bangladesh Energy Regulatory Commission (BERC) Act 2003 grants the BERC statutory authority to arbitrate disputes between licensees in the energy sector. However, this statu- tory mandate operates within a clear legal hierar- chy, as follows. (a) Treaty arbitration (ISDS) – international treaty obligations supersede domestic law. If a foreign investor invokes a BIT, they can access interna- tional arbitration (eg, ICSID), bypassing BERC entirely. (b) Contractual arbitration – the Supreme Court of Bangladesh has affirmed that specific, mutu- ally agreed arbitration clauses within a PPA (eg, specifying ICC/SIAC rules) supersede the BERC’s general statutory arbitration mandate. • Regional mechanisms – certain regional agree- ments mandate the South Asian Association for Regional Cooperation (SAARC) Arbitration Council (“SARCO”) as the dispute resolution forum (eg,

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

SAARC Framework Agreement for Energy Coop- eration).

ity when the agreed mechanism fails, as prescribed under Section 12 of the Arbitration Act 2001. 4.4 Challenge and Removal of Arbitrators The Arbitration Act 2001 governs challenges to the arbitrators. Section 13 outlines the grounds, which are that: • there are justifiable doubts as to the arbitrator’s independence or impartiality; or • the arbitrator lacks agreed qualifications. The tribunal decides on the challenge. If unsuccessful, the party may appeal the decision to the High Court Division (Section 14 (4)). 4.5 Arbitrator Requirements Independence and impartiality are fundamental requirements. Section 13 of the Arbitration Act 2001 mandates that a prospective arbitrator must disclose any circumstances likely to give rise to justifiable doubts regarding their independence or impartiality. This duty is ongoing. An arbitral tribunal seated in Bangladesh is permitted to award binding preliminary or interim relief. Under Section 21 of the Arbitration Act 2001, the tribunal may order any interim measure of protection it con- siders necessary in respect of the subject matter of the dispute. 5.2 Role of Domestic Courts Domestic courts play a supportive role. A landmark decision by the Appellate Division ( Italian Thai Devel- opment v Export-Import Bank of China ) confirmed that Bangladeshi courts have the authority to grant interim measures in support of arbitration, even if the seat is outside Bangladesh (Section 7A). Courts can grant relief before, during or until the enforcement of the award. 5.3 Security for Costs The national law allows both the courts and the arbi- tral tribunal to order security for costs. Section 21 (2) 5. Preliminary and Interim Relief 5.1 Types of Relief

3. Substantive Protections and Breaches 3.1 Common Complaints

The most frequently cited complaints by investors against Bangladesh centre on breaches of contract by SOEs and allegations of expropriation. • Breach of contract – disputes frequently arise from alleged breaches of production sharing contracts (PSCs), PPAs, and PPP agreements, including issues related to cost recovery, tariffs, failure to make payments, and premature termination. • Expropriation – claims of indirect expropriation are significant. The Saipem case established that judicial interference with an arbitration and the nullification of an award by domestic courts can constitute an unlawful expropriation of contractual rights. Parties generally enjoy broad autonomy in selecting arbitrators, subject to the applicable BIT or contract and the chosen arbitration rules. The Arbitration Act 2001 reflects this autonomy; Section 12 (2) explicitly states that a person of any nationality may be an arbi- trator, unless otherwise agreed by the parties. 4.2 Default Procedures If the parties’ chosen method for selecting arbitra- tors fails, the default procedure is governed by the applicable arbitration rules. If the Arbitration Act 2001 applies, Section 12 provides a default mechanism, involving judicial assistance from the Chief Justice of Bangladesh or a designated Supreme Court judge for international commercial arbitration (Section 12 (5)). 4.3 Court Intervention Courts in Bangladesh intervene in the selection of arbitrators primarily as a default appointing author- 4. The Arbitral Tribunal 4.1 Limits on Selection

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

8. Damages and Valuation 8.1 Remedies

of the Arbitration Act 2001 empowers the tribunal to require the party requesting an interim measure to provide appropriate security. 6. Third-Party Funding 6.1 Prevalence of Third-Party Funding The Arbitration Act 2001 is silent on third-party fund- ing. Although the status of common law doctrines of maintenance and champerty remains somewhat ambiguous, it is generally considered that funding agreements are likely permissible unless contrary to public policy. Third-party funding is not prevalent in Bangladesh. 6.2 Third-Party Funding Case Law There is no significant recent case law in Bangladesh specifically addressing third-party funding in the con- text of arbitration. 6.3 Disclosure and Security for Costs There are currently no statutory rules requiring the mandatory disclosure of a third-party funding arrange- ment. 7. Other Procedural and Evidentiary Issues 7.1 Notice of Dispute and Consultation Period Pre-arbitration procedural requirements are dictated by the specific BIT or contract. Commonly, these instruments require a mandatory negotiation or con- sultation period (cooling-off period), typically lasting three to six months, following a formal Notice of Dis- pute. 7.2 Confidentiality and Transparency The Arbitration Act 2001 does not mandate confiden- tiality. In investor–state disputes, there is inherent ten- sion between the private nature of arbitration and the public interest. Increasing demands for transparency are influencing modern institutional rules. However, most of Bangladesh’s existing BITs predate this trend and do not typically include extensive transparency provisions.

Arbitral tribunals generally have broad authority to award remedies, primarily focused on monetary compensation. Consistent with the international law principle of full reparation, the goal is compensatory; punitive damages are generally not awarded in ISDS. 8.2 Methodologies for Quantum Assessment The following standard international valuation meth- odologies are employed to quantify damages, typi- cally aiming to establish the fair market value (FMV) of the investment: • discounted cash flow (DCF) – commonly used for going concerns or long-term project; • market value – used where reliable data exists, based on comparable transactions; and • cost-based approaches (sunk costs) – used when future profitability is deemed too speculative. 8.3 Recovering Interest and Legal Costs Parties are generally entitled to recover interest (pre- award and post-award), often calculated at commer- cially reasonable rates (frequently compound interest). International practice increasingly follows the “costs follow the event” approach. Tribunals retain discretion based on conduct. As seen in Chevron v Bangladesh , dilatory conduct can lead to adverse cost awards Under established principles of international law, the investor has a duty to mitigate its losses. Failure to take reasonable steps may lead to a reduction in the compensation awarded. 9. Enforcement of Awards 9.1 Enforcement Procedure The procedures and standards for enforcing an award in Bangladesh are as follows. even for the prevailing party. 8.4 Mitigation of Damages • ICSID awards – these are recognised as binding and enforced as a final decree of a domestic court (Article 54 of the ICSID Convention).

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BANGLADESH Law and Practice Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

• Non-ICSID (foreign) awards – enforced under Sec- tion 45 of the Arbitration Act 2001 (New York Con- vention) via the District and Sessions Judge Court in Dhaka. The Supreme Court’s ruling in Smith Cogeneration v BPDB is crucial, preventing the use of generalised procedural tools under the CPC to stay the enforcement of a foreign award by citing pending challenges in other domestic courts. Consequences of Non-Compliance with ICSID Awards Failure by Bangladesh to comply with a final ICSID award constitutes a breach of Bangladesh’s interna- tional treaty obligations under the ICSID Convention. Although Article 27 of the ICSID Convention prohibits the investor’s home state from exercising diplomatic protection during the arbitration, this prohibition ceas- es if the host state fails to honour the resulting award. In such instances, the investor’s home state may exer- cise diplomatic protection, which can include formal protests, negotiations, or even the initiation of state- to-state dispute settlement proceedings to compel compliance. 9.2 Approach of the Courts Since the Arbitration Act 2001, the higher judiciary has generally adopted a supportive approach towards the recognition of international awards. Sovereign Immunity Bangladesh adheres to the restrictive theory of sov- ereign immunity, protecting assets used for sovereign purposes (jure imperii) but generally not those used for commercial activities (acta jure gestionis).

Consent to arbitration waives immunity from jurisdic- tion. Furthermore, PPAs and implementation agree- ments in Bangladesh typically contain explicit, broad waivers of sovereign immunity, covering jurisdiction, attachment of assets, and execution of awards – con- firming the commercial nature of the activities. However, the scope of these waivers varies. Some older PPAs include carve-outs that protect assets necessary for maintaining the electrical grid (“pro- tected assets”) from execution, thus limiting recovery options. 9.3 Asset Tracing and Recovery Enforcement is typically pursued against the com- mercial assets of the state or SOEs. Sophisticated enforcement strategies may involve targeting inter- national financial flows, such as funds held in Nostro accounts (correspondent accounts held by Bang- ladeshi banks abroad). Identifying the commercial purpose of such accounts, supported by contractual waivers of immunity, is crucial for successful execu- tion in the jurisdiction where the account is located.

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BANGLADESH Trends and Developments

Trends and Developments Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader Rahman’s Chambers

Authors

Mohammed Forrukh Rahman is a leading dispute resolution expert at Rahman’s Chambers, with a

Kamrunnaher Shimu is a seasoned arbitration specialist at Rahman’s Chambers, whose extensive experience at Nishimura & Asahi, Japan, equips her with a global perspective on complex commercial

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BANGLADESH Trends and Developments Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

Rahman’s Chambers Suite 5B (4th Floor) Ataturk Tower 22 Kemal Ataturk Avenue Banani Commercial Area Dhaka-1213 Bangladesh Tel: +88 096 786 62666 Email: info@rahmansc.com Web: www.rahmansc.com

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BANGLADESH Trends and Developments Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

Beyond the Framework: Due Diligence, Dispute Risks, and Evolving Strategies for Investment in Bangladesh Bangladesh presents a compelling narrative of growth, driven by significant ambitions in infrastructure and energy development. This ambition attracts substan- tial foreign direct investment (FDI) and international contracting expertise. However, the landscape is complicated by significant macroeconomic pressures, intricate regulatory environments, and the practical challenges of project execution. Although the legal framework for investor protection is modern, the practical realities on the ground often dic- tate the success of investments and the trajectory of disputes. This article analyses the critical importance of rigorous due diligence, the shift in procurement strategies, the evolving definition of “investor”, and the key dispute risks shaping the investment climate in Bangladesh. The shift to competitive bidding and the need for rigorous legal oversight A significant transformation is underway in Bangla- desh’s procurement strategy for major projects. The government is decisively transitioning away from reliance on unsolicited proposals and fast-tracked approvals (such as those facilitated by the Quick Enhancement of Electricity and Energy Supply Act 2010) towards standardised, competitive bidding pro- cesses governed by the Public Procurement Act and associated regulations. This shift aims to enhance transparency and secure better value for money. However, it also introduces new challenges for investors and contractors. Com- petitive tender processes are characterised by com- plex procedures, strict timelines, and rigorous evalu- ation criteria. The scope for amending bid documents or negotiating terms post-submission is extremely limited. In this environment, the timing of decisions and the meticulous preparation of bid documents are critical. Errors or omissions during the bidding stage can lead to disqualification or the acceptance of unfavourable contractual terms that cannot be easily renegotiated later. Consequently, specialised legal assistance is

now indispensable throughout the entire tender pro- cess – from the initial review of the request for pro- posal (RFP) and the drafting of clarifications, to ensur- ing compliance with all mandatory requirements and finalising the bid submission. Rigorous legal oversight is necessary to navigate these complex procedures and ensure that decisions taken at different stages are properly documented and strategically sound. The imperative of rigorous due diligence A recurring theme in disputes involving major pro- jects in Bangladesh is the gap between contractual assumptions and operational realities. Although the government and state-owned enterprises (SOEs) typi- cally provide feasibility studies and foundational data, tender documents for major infrastructure and energy projects invariably place the burden of verification on the bidder. These documents often contain explicit disclaimers regarding the accuracy or completeness of the provided information and require bidders to conduct their own independent investigations. Con- sequently, the responsibility for due diligence is effec- tively mutualised; the state provides the data, but the investor assumes the risk of its reliability. Comprehensive, independent due diligence is essen- tial. It should be focused on three critical areas, as follows. Land acquisition and site verification Land acquisition remains the single most significant cause of delays and disputes in infrastructure and energy projects. Bangladesh’s high population den- sity and complex land tenure systems create inherent challenges. Delays in the handover of unencumbered land by the government authority to the project com- pany frequently precipitate claims for extensions of time (EoT) and additional costs. Due diligence must go beyond reviewing title docu- ments. Physical verification of the site is crucial to assess encumbrances, potential resettlement issues, and the actual ground conditions. A thorough under- standing of the Acquisition and Requisition of Immov- able Property Act 2017 and the social dynamics sur- rounding the project site is vital for realistic project scheduling and risk pricing.

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BANGLADESH Trends and Developments Contributed by: Mohammed Forrukh Rahman, Kamrunnaher Shimu and Salauddin Kader, Rahman’s Chambers

Regulatory approvals and environmental clearances The regulatory landscape is complex, involving a mul- tiplicity of agencies. Disputes frequently arise when necessary permits are delayed or issued with unex- pected conditions. A notable trend involves SOEs proceeding with tenders before securing all critical clearances, transferring the risk to the contractor or investor. By way of example, in the power sector, environmen- tal impact assessments (EIAs) and specific technical clearances (such as height clearances from the Civil Aviation Authority for power plant stacks) are critical. If these are not finalised before contract execution, subsequent regulatory conditions can render the original technical specifications unworkable. Due dili- gence must involve a critical review of the status of all required permits and an independent assessment of the feasibility of obtaining pending approvals. Project conditions and technical feasibility Investors should independently verify the technical assumptions and feasibility studies provided by the government. Unforeseen site conditions, inadequate supporting infrastructure (eg, grid connectivity for power projects), or erroneous assumptions in fea- sibility reports can lead to significant variations and cost overruns. Independent technical due diligence is necessary to validate the project’s viability under the proposed contractual terms. Broadening the definition of “investor” The scope of protection available under international investment law and domestic legislation is broad, extending beyond traditional FDI providers. International contractors as investors International engineering, procurement, and construc- tion (EPC) contractors play a crucial role in Bangla- desh’s development. Under most bilateral invest- ment treaties (BITs) and the domestic Foreign Private Investment (Promotion and Protection) Act 1980, the definition of “investment” typically includes contrac- tual rights, mobilisation of capital, and assumption of risk. Consequently, EPC contractors committing sig- nificant resources to long-term projects often qualify as “investors” entitled to protection against arbitrary state action or expropriation.

Strategic structuring: the role of branch offices A common strategy employed by international con- tractors is the establishment of a branch office in Bangladesh. This structure serves several strategic purposes, as follows. • Tax efficiency – operating through a registered branch allows companies to utilise double taxation avoidance agreements (DTAAs) between Bang- ladesh and their home jurisdiction, thereby opti- mising tax liabilities on profits generated from the project. • Regulatory compliance – a local presence facili- tates compliance with domestic registration and reporting requirements. • Strengthening investor status – establishing a formal presence in the territory consolidates the contractor’s status as an investor, enhancing their ability to claim protections under applicable BITs or domestic investment laws should a dispute esca- The complexity of large-scale projects in Bangladesh invariably gives rise to disputes. Understanding the common flashpoints is crucial for effective contract management and dispute resolution strategies. Delays and EoT late beyond a purely contractual claim. Key dispute areas in major projects Disputes over EoT are ubiquitous. Although land acquisition delays are a primary cause, other factors include regulatory hurdles, force majeure events, and the actions of the employer (SOE). The COVID-19 pandemic introduced new complexities, with debates centering on whether government-ordered lockdowns constitute a force majeure event or a “change in law” entitling the contractor to both time and cost relief under standard contract clauses (eg, FIDIC ( Fédéra- tion Internationale des Ingénieurs-Conseils /Interna- tional Federation of Consulting Engineers) clauses). Variations, additional costs, and changes in law Unforeseen site conditions often necessitate contract variations. Disputes commonly arise over the valuation of these variations and the entitlement to associated costs. Furthermore, changes in the fiscal regime can significantly impact project economics. For instance, the imposition of VAT on payments under PPP agree-

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