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Portigon v Spain: new frontiers for financial institutions in investor–state arbitration?


 Historically, financial institutions have preferred litigation over arbitration as a dispute resolution mechanism. In recent years, however, financial institutions have turned to international arbitration more often. This is reflected in the 2018 Queen Mary International Arbitration Survey which concluded that financial institutions are ‘contemplating arbitration with much greater interest than ever before’. In addition to incorporating international arbitration clauses more often in their contracts, financial institutions have become increasingly aware of the protections established by international investment treaties and are more actively seeking to benefit from the rights they establish for qualifying investors. A recent decision has revealed how important those rights could be. In August 2020, for the first time in investor–state arbitration, in Portigon v Spain, a tribunal found that a financial institution may seek protection under an investment treaty for project finance because project finance, in the form of long-term loans and swaps, constitutes a protected ‘investment’ under the relevant investment treaty. While the decision remains confidential as of the publication of this article, it is an opportune moment to review the proposition that project financiers may seek protection under investment treaties against state actions that affect adversely the projects they are financing.