Which Foreign Investors Could Sue the United States in Arbitration? A TRW Law Guide (2025)

By Tahmidur Remura Wahid (TRW) Law Firm — Investor-State Arbitration

Foreign investors sometimes have the right to sue a State directly before an international arbitral tribunal when State measures harm their protected investments. In the United States context, those rights do not arise from U.S. domestic law; they come from international treaties—primarily Bilateral Investment Treaties (BITs) and Free Trade Agreements (FTAs) with investment chapters.

This guide explains, in practical terms, which investors could bring claims against the United States, under what treaties, for what kinds of measures, and how to evaluate standing, jurisdiction, and strategy in light of recent policy shifts.

For a deeper dive into investor-State disputes and procedure, see: Investment Arbitration, ICSID Arbitration, UNCITRAL Arbitration, and International Arbitration.

1) The Big Picture: When Can Foreign Investors Sue a State?

Investor-State Dispute Settlement (ISDS) exists only if a treaty (or sometimes an investment contract with an arbitration clause) consents to arbitration. In the U.S. setting, that consent typically appears in:

• U.S. BITs (concluded mainly from the late 1980s through the 2010s);
• FTAs with investment chapters (e.g., with Chile, Colombia, Korea (KORUS), Morocco, Oman, Panama, Peru, Singapore);
• A few legacy arrangements (e.g., NAFTA legacy claims have largely expired; USMCA significantly narrowed ISDS between the U.S. and Mexico and eliminated it with Canada, save for state-to-state).

No treaty consent means no ISDS claim, regardless of the policy impact on a foreign business. That is why nationality structuring (who the investor is in treaty terms) and treaty coverage (what rights are promised) are decisive threshold questions.

2) Who Is Potentially Covered? Countries with U.S. Treaty Protection

2.1 Investors from Countries with a U.S. BIT in Force

The United States maintains BITs with a number of countries whose nationals (natural or juridical persons) may bring ISDS claims against the U.S. if all jurisdictional requirements are met. Examples include:

Albania, Argentina, Armenia, Azerbaijan, Bahrain, Bangladesh, Bulgaria, Cameroon, Congo, DR Congo, Croatia, Czechia, Egypt, Estonia, Georgia, Grenada, Honduras, Jamaica, Jordan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Mongolia, Morocco, Mozambique, Panama, Poland, Romania, Rwanda, Senegal, Slovakia, Sri Lanka, Trinidad & Tobago, Tunisia, Türkiye, Ukraine, Uruguay.

Practical note: Each BIT’s entry into force, amendments, suspensions, or terminations must be verified at the moment a claim is considered. The exact text controls (definitions, standards, carve-outs, time limits).

2.2 Investors from FTA Partners with Investment Chapters

The U.S. FTAs with Chile, Colombia, Korea, Morocco, Oman, Panama, Peru, and Singapore include investment protections and usually ISDS consent—subject to each treaty’s procedures, reservations, and carve-outs.

• KORUS (United States–Korea FTA): Includes ISDS with detailed procedural steps and reservations.
• Singapore, Chile, Peru, Colombia, Panama, Morocco, Oman: Investment chapters generally allow ISDS, often with pre-arbitration consultation and cooling-off periods and particular waiver requirements.

2.3 Treaties with Limited or No ISDS

• Australia–U.S. FTA: Does not establish a standing ISDS system. It contemplates consultations if a dispute arises, but there is no automatic investor-State arbitration mechanism.
• USMCA (U.S.–Mexico–Canada): Eliminated ISDS between U.S. and Canada. For U.S.–Mexico, ISDS is limited: only certain covered government contracts in specific “covered sectors” (e.g., oil & gas, power generation, telecoms, transportation, infrastructure) may go to ISDS; broader claims largely ended with NAFTA’s legacy window, which has expired. Mexican investors contemplating claims against the United States would generally need to show the requisite covered government contract in a covered sector and comply strictly with Annex requirements.
• No U.S.–China BIT and no U.S.–EU investment treaty with ISDS currently in force.

3) What Protections Do These Treaties Typically Provide?

Although language varies, U.S. BITs and modern U.S. model-based FTAs often include:

• National Treatment (NT): Treatment no less favorable than domestic investors in like circumstances.
• Most-Favored-Nation (MFN): Treatment no less favorable than investors from any third State in like circumstances (often with limits on importing dispute-settlement provisions).
• Expropriation (Direct & Indirect): No nationalization or measures “equivalent to expropriation” unless for a public purpose, non-discriminatory, with prompt, adequate, and effective compensation, and due process.
• Fair and Equitable Treatment (FET): In U.S. practice, typically tethered to the customary international law minimum standard (protection against denial of justice, fundamental due process violations, and egregious arbitrariness).
• Full Protection and Security (FPS): Generally physical protection to a reasonable-diligence standard.
• Free Transfer of Funds: Capital, returns, and proceeds may be moved freely and without delay, subject to standard exceptions (e.g., anti-money-laundering, bankruptcy).
• Non-discrimination & Performance Requirements: Limits on discriminatory measures and certain forced-localization obligations.
• Umbrella Clauses (occasionally): Elevate specific commitments to the treaty plane (not universal in U.S. practice).

Modern U.S. treaties frequently add annexes clarifying indirect expropriation (police-powers carve-out, multi-factor test) and FET (as customary international law), and contain prudential, security, taxation, and financial-services carve-outs.

4) What Kinds of U.S. Measures Could Trigger Treaty Claims?

Treaty claims do not arise from policy disagreement alone. Investors must show measures breaching specific treaty standards and causing loss to a covered investment. Illustrative scenarios:

• Regulatory shocks that discriminate against foreign investors in like circumstances (potential NT/MFN issues).
• Sweeping restrictions that substantially deprive the economic use/value of an investment without compensation (potential indirect expropriation).
• Denials of justice in courts or agencies (extreme procedural unfairness or undue delay).
• Arbitrary or ultra-vires enforcement campaigns (potential FET violations).
• Restrictions on capital transfers (potential breach of transfers provisions).
• Contract interference by State entities (depending on treaty text, possibly umbrella or expropriation/FET).

Important constraints: U.S. treaties typically preserve regulatory space (public health, environment, safety) and include security exceptions. Well-designed, good-faith, non-discriminatory regulation adopted through due process may not violate treaty standards even if it adversely impacts profits. The analysis is fact-specific.

5) Nationality, Ownership Chains, and “Denial of Benefits”

5.1 Who Counts as the “Investor”?

Treaties define “investor of a Party”. For companies, place of incorporation is common, sometimes with substantial business activities requirements.

5.2 Treaty Shopping vs. Treaty Planning

Many investors structure holdings through treaty-protected jurisdictions. U.S. treaties often include a Denial of Benefits (DoB) clause allowing the U.S. to deny protections to enterprises with no substantial business activities in the home State and owned/controlled by persons of a non-party or the respondent State.

Takeaway: If your holding vehicle is a mailbox, expect a DoB defense. Substance matters (office, staff, operations, tax filings, revenues).

6) Covered Investment: What Qualifies?

Treaties define “investment” broadly (enterprise, shares, debt instruments, IP, licenses, concessions), but there are limits:

• The contribution must typically be capital-committed, of some duration, and with risk (the well-known Salini-style indicia, though U.S. texts are their own yardstick).
• Pure sales contracts without ongoing commitment or an expectation interest in future government action may not qualify.
• Portfolio holdings can qualify in some texts, but minority, passive positions can be vulnerable if they lack investment characteristics.

Early asset mapping and corporate-tree analysis are crucial to confirm what the investment is, where it sits, and which treaty can be invoked.

7) Procedure: ICSID or UNCITRAL, and the U.S. Model Features

Most U.S. treaties offer a choice between:

• ICSID Arbitration (World Bank system) — awards enforceable like final domestic judgments in all ICSID Convention States, with annulment (not appeals) as the only recourse; or
• UNCITRAL Arbitration — ad hoc arbitration with the New York Convention used for recognition/enforcement; set-aside is at the seat court.

Common U.S.-style procedural features include:

• Consultation/cooling-off periods (often 3–6 months after notice of dispute).
• Waiver requirements (claimant must waive other proceedings for the same measures, excluding interim relief).
• Time limits (typically 3–4 years from knowledge of breach and loss).
• Transparency provisions (public access to key documents and hearings), especially under FTAs.
• Fork-in-the-road / No U-turn features vary: read the text closely.

8) Sectors and Measures Likely to Matter in 2025

Depending on the policy mix, expect foreign-investor scrutiny in:

• Energy & Natural Resources: Leasing regimes, pipeline permits, export controls, critical-minerals policy, refinery/terminal standards.
• Climate & Environment: Abrupt eligibility changes for incentives or tax credits; setbacks or bans impacting renewables or carbon-intensive operations.
• Trade & Tariffs: New tariffs or quotas that differentiate suppliers or effectively block market access for specific foreign-owned U.S. plants or distributors.
• Technology & Data: Restrictions on data flows, equipment approvals, or sales to designated customers; outbound/inbound investment screening spillovers.
• Healthcare & Pharma: Price controls, procurement exclusions, or sudden formulary changes with disproportionate effect on foreign-owned U.S. operations.
• Public Contracts & Concessions: Termination or re-scoping of federal concessions or supply contracts (watch USMCA Annex 14-E for Mexico-U.S. covered contracts).

Note: Many such measures can be lawful under treaties. Viability turns on discrimination, due process, legitimate expectations, proportionality, and how the measure was designed and applied.

9) What a Strong Investor Case Looks Like

1. Clear Coverage

• Investor nationality matches a U.S. treaty with ISDS; DoB cannot be credibly invoked.
• The asset qualifies as a covered investment.

1. Cohesive Theory of Breach

• NT/MFN: evidence of less favorable treatment vs like-circumstance U.S. or third-country investors.
• Expropriation: severe economic deprivation plus failure of compensation; address the police-powers annex.
• FET/Denial of Justice: extreme arbitrariness, targeted campaign, or serious procedural unfairness.

1. Causation & Loss

• Expert-supported models linking the State measure to enterprise value loss, lost cash flows, or quantified incremental costs.

1. Procedural Hygiene

• Timely notice of dispute, genuine consultations, waiver compliance, and limitation observance.
• Early seat/enforcement mapping (ICSID vs UNCITRAL strategy).

10) How the United States Typically Defends

• Police Powers / Right to Regulate: Non-discriminatory, good-faith regulation for public welfare is not compensable expropriation; indirect expropriation annex bolsters this defense.
• FET as Customary International Law: No “legitimate expectations” beyond what customary law protects; requires egregious conduct to breach.
• Like Circumstances: Domestic comparators not similarly situated; differences justified by policy objectives.
• Security, Prudential, and Tax Carve-Outs: Measures fall under explicit reservations or exceptions.
• DoB: Corporate claimant is controlled by nationals of a non-party and lacks substantial business activities in the home State.
• Waiver/Limitations: Procedural non-compliance bars jurisdiction or relief.
• Quantum: Attack valuation assumptions; argue no causation, no permanent loss, or mitigation failures.

11) Strategy for Investors Potentially Affected by U.S. Measures

1. Treaty Audit & Structuring

• Confirm which treaty (if any) covers you today; assess DoB exposure. If feasible and consistent with good faith, consider pre-dispute corporate housekeeping to reinforce nationality and substance.

1. Evidence & Chronology

• Document the measure, its impact, comparators, communications with agencies, and internal board materials on reliance and expectations.

1. Notices & Consultations

• Draft a targeted Notice of Dispute that preserves multiple treaty lanes (NT/MFN/FET/expropriation/transfers) without over-committing facts that may evolve.

1. Forum & Rules Choice

• If the treaty offers ICSID or UNCITRAL, model speed, cost, transparency, and enforcement. ICSID’s self-contained enforcement regime often favors investors with global recovery plans.

1. Early Quantum Framing

• Involve valuation experts early. Build but/for scenarios, DCF or market multiples, and country-/policy-risk coherence.

1. Interim Relief & Mitigation

• Where the measure jeopardizes assets or evidentiary integrity, evaluate interim measures (tribunal or court support). Preserve mitigation optics.

1. Settlement Readiness

• Investor-State disputes often settle after jurisdictional rulings or key document production. Maintain a confidential settlement track and keep political optics in mind.

For procedural tools and tactics around urgent relief, see Enforcement of Interim Measures in International Arbitration.

12) Illustrative Investor Profiles That Might Have Standing (Hypotheticals)

• Korean parent with U.S. manufacturing subsidiary impacted by a targeted import quota coupled with discriminatory subsidy access. KORUS offers a path to ISDS, subject to notices, limitations, and defenses.
• Singapore holding company owning U.S. logistics assets facing abrupt, selective exclusion from federal concessions. The U.S.–Singapore FTA investment chapter may apply.
• Uruguayan or Rwandan investor with U.S. renewable-energy assets whose offtake eligibility is rescinded in a way that effectively destroys value and appears arbitrary or discriminatory—rely on the U.S.–Uruguay or U.S.–Rwanda BIT, respectively.
• Mexican investor under a federal covered government contract in a USMCA Annex 14-E sector whose contract is terminated or expropriated without due process or compensation—limited but potentially viable USMCA route, if all annex criteria are met.

Each scenario turns on facts, treaty text, annexes, exceptions, and timelines. There is no one-size-fits-all answer.

13) Frequently Asked Questions

Is a policy change, by itself, an expropriation?
Not usually. Legitimate, non-discriminatory regulation for public purposes, with due process, typically does not amount to compensable expropriation under U.S. model-style annexes.

Can MFN import a more favorable dispute-settlement clause from another treaty?
Often no under modern U.S. texts; many limit MFN to substantive treatment and prevent importing procedural advantages.

Do I have to litigate in U.S. courts first?
Typically no, but check exhaustion rules and waivers. Most modern texts require notice and a cooling-off period, not exhaustion.

Can shareholders bring claims for reflective loss?
Some treaties allow claims for loss to the value of shares caused by injury to the enterprise; others are more restrictive. Treaty text and tribunal approach matter.

How long do I have to file?
Many treaties set a limitation period (commonly 3–4 years) from when you knew or should have known of the breach and loss. Act early to stop the clock via proper notice and to preserve evidence.

14) Key Takeaways

• Only investors from treaty-partner States with ISDS can pursue arbitration against the U.S., and only for covered investments under treaty definitions.
• USMCA now limits Mexico–U.S. ISDS to covered government contracts in covered sectors; no ISDS with Canada.
• U.S. treaties narrow FET to the customary international law minimum and use indirect expropriation annexes to safeguard legitimate regulation.
• Denial of Benefits and waiver/limitations defenses loom large—structure and procedure are as important as merits.
• Build jurisdiction, breach, and quantum coherently from day one; keep an eye on political optics and settlement windows.

If you believe a U.S. federal or state measure has harmed your investment and you hold a qualifying nationality, we can rapidly evaluate treaty standing, preserve rights, and design a jurisdiction-first strategy toward an enforceable result.

How TRW Law Can Help

• Treaty & nationality audit (coverage, DoB risk, viable forums).
• Rapid evidence and damages blueprint (valuation, causation, mitigation).
• Pre-arbitration posture (notices, consultations, confidentiality).
• Forum selection & rules (ICSID vs UNCITRAL) aligned with enforcement.
• Interim relief where assets/process are at risk.
• Settlement leverage designed from day one.

Learn more about our approach: Investment Arbitration and International Arbitration.