Beyond Diplomatic Protection: The Evolution of Investor Rights in International Law

Abstract

The effectiveness and utility of diplomatic protection as a core mechanism for the traditional protection of investors’ interests has been challenged with the rise of bilateral investment treaties (BITs) and investor-state dispute settlement (ISDS) mechanisms. While diplomatic protection remains advantageous in some cases, particularly in investment treaties without arbitration clauses, this essay analyses its limitations in terms of politicisation, high costs, inefficiency and lack of investor control. In contrast, the investment treaty arbitration mechanism offers a more rapid, independent and predictable means of dispute resolution. This essay concludes that diplomatic protection, while not completely obsolete, is no longer the most attractive instrument in modern international investment protection and is gradually being transformed into a complementary tool.