What constitutes an act of taking of foreign property in international law was once clear but is now befuddled with difficulty due to the progressive expansion of the concept of taking. The reaction to this by states has been to curtail the expansionary trends through the revival of the rule on non-compensable regulatory takings. The response of the expansionists has been to restrict the rule through the introduction of a hitherto unused rule that requires proportionality between the object of the regulatory taking and the harm to the investor. In the past, the law was discussed in the context of outright takings of the property of the alien. There was no difficulty in characterising the act of physical dispossession and transfer of ownership as a taking.1 After colonialism came to an end, there was a spate of nationalisations intended to regain control of the economy from the companies of the erstwhile colonial powers. These involved the taking of property from the foreign multinational corporations of the former imperial power and vesting ownership of it in the state or a state-owned company.

The first bilateral investment treaty, the treaty between Pakistan and Germany, was made in 1959. The reason for the treaty was that two states, knowing that the international law on the protection of foreign investment was uncertain, made the rules certain as between themselves. Treaty activity between 1957 and 1990 was slow. There was a massive proliferation of bilateral investment treaties in the 1990s. A World Bank study stated that in 1994 there were over 700 such treaties.1 By the end of the millennium, the figure had moved towards 2,600 treaties.2 It exceeded that mark, reaching around 3,300.3 There has been a decrease in numbers since then, due to termination of treaties by many states. UNCTAD states that the number of treaties now is around 2,896.4 There are 390 free trade agreements and other treaties with investment provisions. There are now mega-treaties like the Trans Pacific Partnership (TPP),5 which contain chapters on investment. The Regional Comprehensive Economic Partnership was negotiated in 2020, though it has not been ratified. It includes the ten ASEAN states and China, India, Australia, New Zealand, Japan and Korea.

Consent of the parties is the basis of all arbitration. In contract-based arbitration, the consent is specific to disputes arising from the contract. It is usually expressed in the arbitration clause. In treaty-based arbitration, the consent of the state is said to be given to all present and potential investors who satisfy nationality criteria and whose investment is protected by the treaty in advance of the dispute. The rule can be so simply put. However, much dispute has arisen as to the jurisdictional criteria that have to be satisfied before an arbitral tribunal can proceed to the merits of a case. In virtually every treaty-based dispute that has arisen, the jurisdiction of the tribunal has been queried. So, it is necessary to examine the jurisdictional criteria that need to be established. Since most treaty-based arbitrations take place before ICSID tribunals,1 the rules are best stated on the basis of ICSID arbitration, which is likely to provide the standard for other types of treaty-based arbitration.

The usual cause of action in investment disputes has hitherto been the taking of property. Though, as was claimed, customary international law recognised an international minimum standard of treatment of a foreign investor, the violation of this standard outside the context of the taking of property was seldom discussed.1 The growth of such a customary law was dealt with in Chapter 3. It forms a prelude to the discussion here. That chapter dealt with the manner in which the creation of an international standard was effected and the conflicts which attended it. But, investment treaties have sought to iron out such conflicts and provide recognition of certain standards of treatment of investments as between the parties to such treaties. It is only with the spelling out of the different standards of treatment in the investment treaties that the breach of treatment standards has become a head of liability distinct from the taking of property. In more recent disputes, the failure to provide treatment according to standards prescribed in investment treaties has become important, especially in the context of Chapter 11 of the North American Free Trade Agreement (NAFTA).