THE AUTHORS:<\/strong> On Monday, 23 March 2026, as part of the 2026 edition of Paris Arbitration Week, FTI Consulting hosted a conference on the complex relationship between commercial contracts and investment treaty protections. The panel, moderated by Mr Nicolas Mocq<\/strong> (Senior Director at FTI Consulting<\/strong>), brought together Ms Maxi Scherer<\/a> (Co\u2011Founder of ArbBoutique<\/a> and Professor at Queen Mary University of London), Mr Noah Rubins<\/a> KC (Partner at Freshfields<\/a>), Ms Juliette Fortin<\/a> (Senior Managing Director at FTI Consulting<\/strong>) and Ms Marion Gady<\/strong> (Managing Director at FTI Consulting).<\/strong> The discussion examined how and when contractual rights may qualify as protected investments, the strategic considerations that guide the choice between commercial and treaty arbitration, and the implications of that choice for damages and valuation.<\/p>\n\n\n\n The floor was first given to Ms Scherer, who set out the historical evolution of the distinction between contract and treaty claims. She explained that the 19th century was marked by the prevalence of the Calvo doctrine, which held that claims had to be treated by national jurisdictions according to the principle of equality between foreign and local investors. She noted that the second half of the 20th century marked a turning point with the proliferation of investment treaties and the introduction of Article 26 of the ICSID Convention of 1966<\/a>, which granted investors a direct right to arbitrate under the investment treaty and often bypass local remedies. She observed that the 21st century brought a backlash against investor\u2011state arbitration, leading to renegotiations of bilateral investment treaties (\u201cBIT\u201d) and a renewed emphasis in the European Union on domestic and regional judicial remedies. It was noted that this shift explains the current resurgence of interest in investment contracts and contractual claims.<\/p>\n\n\n\n Ms Scherer then explored the reasons why the dividing line between contract and treaty claims remains blurry. The first reason lies in the definition of \u201cinvestment\u201d, which many treaties frame in asset\u2011based terms that include both tangible and intangible assets, such as shares, claims for money, and contracts. She highlighted that this expansion created interpretative challenges for tribunals, which had to determine when a contract constituted an ordinary commercial agreement and when it qualified as an investment. It was noted that more recent BITs attempt to clarify this point, such as the 2012 US Model BIT, which lists certain types of contracts as investments, and NAFTA<\/a>, which excludes mere contracts for goods and services. Umbrella clauses were identified as the second reason for the blurred boundary, as these clauses elevate contractual commitments to treaty obligations. It was explained that tribunals examine the specific wording of the clause to determine whether a contractual breach can be treated as a treaty breach. Some tribunals attempted to narrow the scope of umbrella clauses, prompting States to remove or refine them in later treaty models.<\/p>\n\n\n\n Ms Scherer concluded by addressing the renewed interest in investment contracts and contract claims. From the investor\u2019s perspective, instability in the treaty system encourages investors to seek alternative protections, including investment contracts with stabilisation clauses or arbitration clauses. From the host State\u2019s perspective, investment contracts allow States to rebalance obligations by imposing commitments on investors, such as environmental or labour standards. It was predicted that the number of contract claims will increase as more investment contracts are concluded.<\/p>\n\n\n\n The floor was then given to Mr Rubins, who addressed the strategic considerations that guide the choice between bringing a claim under a commercial contract or under an investment treaty. He observed that although parallel claims are often criticised as abusive, the drafting history of BITs shows a clear intent by States to cover certain types of contracts. He explains that this is evident in two ways. First, most first\u2011 and second\u2011generation BITs explicitly listed contract claims among protected investments, reflecting States\u2019 desire to offer additional protection to attract investment. Second, umbrella clauses were initially included to provide an additional layer of protection.<\/p>\n\n\n\n Mr Rubins then identified six strategic factors that influence the choice between contract and treaty claims. He highlighted that the first factor is where the rights are strongest and clearest. If the treaty is well drafted and favourable to the investor, there may be strong incentive to pursue a treaty claim. The second factor is the dispute resolution mechanism, as contractual clauses that send parties to national courts may be unattractive, except in jurisdictions where domestic courts have shown independence. The third factor is whether the dispute truly concerns the contract, as regulatory measures may cause harm that cannot be remedied through contractual claims. The fourth factor is whether the investor remains involved in the project, since investors who continue operating may avoid antagonising the State. The fifth factor is attribution, which concerns whether the conduct of a State\u2011owned entity can be attributed to the State; it was noted that tribunals have narrowed attribution in recent years. The sixth factor is enforceability, as enforcement prospects may differ depending on whether the counterparty is the State or a State\u2011owned company. Mr Rubins concluded by stressing that the choice is not binary and that parallel remedies may coexist in distinct legal frameworks. In this respect, Ms Scherer further noted that fork-in-the-road clauses can play an important role in preventing parallel proceedings, although their application ultimately depends on how tribunals interpret the concept of the \u201csame dispute\u201d.<\/p>\n\n\n\n The floor was then given to Ms Gady, who addressed the implications of the choice between commercial and treaty arbitration for damages. She explained that the valuation date differs significantly: treaty claims often value the investment at the date of breach, whereas contractual claims typically use the current valuation date or the termination date. Valuation period also differs, as contractual damages run until the contract\u2019s expiry, while treaty claims may value the asset as a going concern. Similarly, interest rates also diverge, with contractual claims relying on contractual or statutory rates, while treaty claims may invoke the respondent State\u2019s borrowing rate under the forced loan theory.<\/p>\n\n\n\n Ms Fortin then addressed valuation frameworks and adjustments, explaining that fair market value is appropriate when the business is fully expropriated, whereas loss of profits applies when the harm affects an ongoing business. It was also noted that complex ownership structures require adjustments for taxes, lack of control, lack of marketability, and insolvency within the corporate chain.<\/p>\n\n\n\n The discussion concluded with questions from the audience on sequential proceedings, res judicata, lenders\u2019 reluctance to bring BIT claims, and the psychological impact of losing a contractual case before pursuing a treaty claim. The panel emphasised that the formulation of the claim, the factual basis, and the strategic context all play a decisive role in determining the appropriate forum and the scope of recoverable damages.<\/p>\n\n\n\n This article was originally published in PBA Bulletin on 17 April 2026, as part of a special edition curated by Paris Baby Arbitration (PBA)<\/a>, in collaboration with Jus Mundi <\/a>and Jus Connect<\/a>.<\/p>\n\n\n\n
Nour el Ghadban,\u00a0<\/strong>Self-Employed, admitted to the Cairo and Versailles Bars
Margherita Duse,<\/strong>\u00a0Master 2 International Economic Law, Paris 2 Panth\u00e9on-Assas<\/strong><\/p>\n\n\n\n
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As part of Paris Arbitration Week 2026, Paris Baby Arbitration (PBA)<\/a><\/strong>, in collaboration with Daily Jus<\/a><\/strong> and Jus Mundi<\/a><\/strong>, brings together contributions in a special edition of PBA Bulletin<\/a>,<\/strong> sharing reflections and perspectives from across this year\u2019s events.<\/em><\/h4>\n<\/blockquote>\n\n\n\n
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