In his first speech before the United Nations, President Trump emphasised national sovereignty and asserted that the duty of governments is always to put their country and citizens first. He argued against what he described as “mammoth, multinational trade deals, unaccountable international tribunals, and powerful global bureaucracies”. He has withdrawn the United States from the Trans-Pacific Partnership and seeks to renegotiate the North American Free Trade Agreement.

This marks the first time that a capital-exporting nation has retreated from the post-World War II norms of international trade cooperation. When the rising tide of nativist and nationalist sentiment engulfs a nation like the US, which so obviously gains from the international trade and investment system of which it was a principal architect, we can expect the wave of withdrawals from bilateral investment treaties (BITs) that started over the past five years to quicken and swell.  In Asia, both Indonesia and India have taken steps to reduce exposure to investor claims by terminating or not renewing BITs.

In March 2014, Indonesia announced it would not renew its BIT with the Netherlands with effect from 1 July 2015. This was closely followed by a further announcement from Indonesia that it would allow all 67 of its BITs to expire, including those with Australia, China, Singapore, and the United Kingdom.

This move followed cases brought against it by foreign investors; including the Churchill Mining plc v Indonesia and Planet Mining Pty Ltd v Indonesia cases, brought under the UK-Indonesia and Australia-Indonesia BITs respectively. They concern expropriation claims arising from a coal project in Borneo. These claims, along with a multitude of other investor-state disputes arising from BITs, added to mounting concern that BITs tended to favour foreign investors at the expense of developing economies.

Nonetheless, Indonesia is not likely to remove all bilateral investor protections. It is more likely to recalibrate them in the process of negotiating renewals. For example, as it has announced it will do in the case of the BIT with Singapore. In addition, foreign investors will remain eligible to seek protection under Indonesia's multilateral treaties, including various ASEAN treaties. Indonesia is a member of ASEAN and a signatory to the ASEAN Comprehensive Investment Agreement, which provides protection to foreign investors who are from other ASEAN countries. ASEAN in turn has free trade agreements with a number of countries including China, Korea, Japan, Australia and New Zealand, which include similar investment protections.

India is another nation that has decided to reduce the extent of investor protection by terminating some of its BITs. In July 2016, India sent notices to 58 countries announcing its intention to terminate (or not renew) its various BITs. This marked a clear departure from India's previous stance: India had signed four or five investment treaties yearly in the period from 1994 to 2011.

As in the case of Indonesia, the change of position may stem from the growing number of claims being brought by foreign investors against India. More than 10 cases have been brought against India over the past five years. One example is White Industries v India, where the Tribunal ruled against India and ordered damages in favour of an Australian investor. The case related to excessive judicial delays for the enforcement of an ICC arbitral award.

Mirroring Indonesia’s willingness to remain open to some level of investor protection, India has proposed that future BITs be renegotiated on the basis of its 2015 Model BIT. This Model BITrebalances the relationship between the State and foreign investors, addressing the concern that previous BITs unduly favoured foreign investors. In the 2015Model BIT:

• Most favoured nation treatment is excluded;
• Fair and equitable treatment is excluded and replaced with a list of measures, such as denial of justice, fundamental breach of due process and discrimination, or manifestly abusive treatment, each of which must constitute a violation of customary international law; and
• Full protection and security provisions are restricted to physical security of investors
• The foreign investor's right to commence arbitration is made subject to the requirement that the investor first attempt to exhaust local remedies for a period of five years.

These developments in relation to BITs bring to the fore the importance of effective recourse via international commercial arbitration, including the efforts made by nations that wish to attract foreign direct investment to ensure that their court systems readily recognise and enforce arbitration awards made at foreign seats. Arbitral institutions such as the ICC and SIAC should continue their good work in building awareness of international arbitration among judges and lawyers in emerging markets, and in training lawyers so they can participate in, and thus acquire a stake in the success of, international commercial arbitration. Investors who may not be able to rely on investor protections under BITs will be anxious that their rights are protected by other means, chief among which will be international commercial arbitration against their contractual counter party, together with consideration of contractual allocation of risk where there are changes of law in the host nation.

Philip Jeyaretnam is a Senior Counsel, Global Vice Chair and Regional CEO of Dentons Rodyk & Davidson LLP and Chairman of Maxwell Chambers