Arbitration or Litigation for Global Investment Disputes: How Governing Law, Jurisdiction and Enforcement Shape the Choice

International investments often comprise cross-border elements. This is particularly the case where the assets are diversified, numerous jurisdictions are involved and the contracts are negotiated in a foreign country. In commercial relationships, disputes are likely to arise that may be resolved relatively simply, but pose significant challenges when it comes to determining which venue has jurisdiction.

 

This is especially the case in connection with disputes over foreign shareholder agreements, infrastructure investments, joint ventures, financing arrangements and takeovers. A contractual dispute may be submitted to a national court, an international arbitration tribunal or an arbitration under an investment treaty. The consequences for the dispute management process, interim protection, costs and enforceability will be significantly different.

 

Arbitration is often the preferred method due to its neutrality and international enforceability, but litigation can offer more extensive powers, including appeals and greater control over third parties. At the same time, neither of these tools is universally advantageous. The choice between them depends on the nature of the investment, the contractual formulation and, above all, on the location of the assets of the obligor.

 

Governing Law and Jurisdiction Are Not the Same

 

One of the most common mistakes when drafting international investment contracts is confusing governing law with jurisdiction.

 

Although the terms often overlap, these concepts are different in almost every legal system and the principles that apply to them are also different. Governing law determines the law that will govern the obligations of the parties. The jurisdiction clause determines which court will have jurisdiction over disputes, while an arbitration agreement determines which arbitration rules will apply to the dispute.

 

An agreement governed by English law and subject to arbitration in Singapore will involve applying English substantive law to interpret the contractual obligations, while arbitration proceedings in Singapore will be governed by local arbitration legislation.

 

The law governing the contract does not always apply to all issues. The arbitration agreement’s validity, regulatory requirements, company law or property law may involve different rules. The tribunals or courts also have to consider whether there are mandatory laws that must be applied or whether there are applicable conflict-of-laws rules.

 

For investors, this nuance is especially important because in international disputes, problems often arise precisely due to the incorrect drafting of the contract. Conflicts can arise between different jurisdiction clauses, as well as different governing law and arbitration rules. The resolution of jurisdiction disputes consumes significant resources without directly shedding light on the essence of the conflict.

 

Why Seat of Arbitration Matters

 

The seat of arbitration is not a place where hearings are held, but rather the legal jurisdiction where the arbitration proceedings are considered to take place. Consequently, it is determined by the arbitration law under which the arbitration tribunal has jurisdiction.

 

An arbitration seated in London can have its hearings in Dubai or Singapore, without affecting the fact that it is still a London arbitration. This means that it is the law of the seat that governs the arbitration powers of the tribunal and the courts that may have jurisdiction over challenges to awards or other measures.

 

When choosing the seat of arbitration, investors should consider the general reliability of the judiciary, arbitration legislation, judicial oversight of arbitration, and the grounds for challenging awards. The arbitration law of individual jurisdictions such as Singapore, England and Wales, France and Hong Kong is well developed. However, this does not mean that the approaches of these jurisdictions are identical in relation to arbitration.

 

The arbitration legislation of many jurisdictions is based on the UNCITRAL Model Law on International Commercial Arbitration. This instrument also contains recommendations on the extent to which courts should intervene in arbitration proceedings, and what measures courts should take at the request of the parties, including preliminary injunctions. The choice of the seat of arbitration and the associated arbitration law, which determines the procedural aspects of the dispute settlement, is no less significant.

 

The Enforcement Question Can Often Decide the Matter

 

Even if the winning party manages to obtain a favorable decision or award, this does not automatically entitle them to recover the due amount. One of the advantages of arbitration is the ease of enforcement of awards under the New York Convention of 1958, which has been ratified by almost all jurisdictions. This instrument provides for the recognition and enforcement of arbitration awards in contracting states, which removes many of the obstacles to enforcement.

 

However, it is necessary to consider the exceptions, including the possibility for the local courts to refuse recognition or enforcement. This may be the case, if, for example, the arbitration agreement was concluded on unequal terms, or if the award was issued illegally or exceeded the jurisdiction of the tribunal. In any case, the New York Convention does not protect against local enforcement proceedings and does not ensure the possibility of immediate execution of the award.

 

Meanwhile, the situation with the enforcement of court decisions is more complicated. The recognition and enforcement of foreign judgments depends on the legislation of individual countries, bilateral agreements or the Hague Convention of 2019 on the Choice of Court Agreements, which has so far been ratified by a few states. This instrument provides for the recognition and direct enforcement of judgments in contracting states, but the procedure for doing so depends on the specific circumstances of each case.

 

Consequently, an investor who has received a favorable decision or award may face difficulties when it comes to the actual enforcement of this decision and the seizure of the assets.

 

The asset location factor is especially relevant in this regard. If the respondent has significant assets in a particular jurisdiction, enforcement proceedings should be initiated there, even if this is not the most convenient option. Even an enforceable award may be subject to various objections, including the insufficiency of assets for offsetting the due amount, the priority of other creditors, or the impossibility of enforcing this measure under local law.

 

Urgent Measures Are Sometimes More Significant than Waiting for the Final Decision

 

There are disputes in which time is of the essence. This is especially the case when it comes to investments protected by international treaties or arbitration agreements. A shareholder may believe that company assets are at risk of being transferred to another party, a contracting party may terminate the agreement to dereference pledged assets, or confidential information may be at risk of being misappropriated.

 

National courts are often in a better position to respond to such situations, as they can issue and enforce decisions that restrain the enforcement of disputed assets. However, this factor also applies to arbitration. The seat of the arbitration determines the law according to which the arbitral tribunal can issue all measures, including preliminary, interim and final measures.

 

This may be limited by the rules of the arbitration institution, but the possibility of requesting preliminary measures is usually provided for, as is the case with the rules of the ICC, according to which an emergency arbitration award may also be issued. Under the new ICC Arbitration Rules 2026 that came into force in June 2026, an emergency arbitrator may be appointed ex officio.

 

However, the availability of this option and the extent to which it is available depends on the specifics of the dispute, the arbitration rules and the seat of arbitration. Emergency measures are subject to the law of the seat, which may require additional steps to enforce them.

 

If the dispute concerns assets that must be subject to immediate seizure or other third-party measures, the situation may arise where it is necessary to resort to the intervention of the local judiciary, despite the existence of an arbitration agreement. Investors in disputes of this kind should carefully consider whether the arbitration clause includes language that would prevent them from applying to the local court for urgent measures. A properly drafted arbitration clause should minimize the risk that the request for judicial protection will be interpreted as a violation of the arbitration agreement.

 

Litigation Has Its Own Advantages over Arbitration

 

Although arbitration is often the preferred choice when it comes to international investment disputes, litigation has its advantages. Above all, courts have more tools at their disposal to compel witnesses to appear and produce evidence. This is important in disputes in which there are allegations of fraud, concealment of evidence or other violations committed by third parties who have not concluded an arbitration agreement. Litigation also provides for detailed procedural controls, which are often considered a disadvantage in arbitration, but which turn out to be decisive in complex disputes.

 

Finally, this kind of dispute resolution is characterized by transparency, although this varies depending on the jurisdiction. Arbitration proceedings are held behind closed doors by default, but this may not be the case if the parties so agree. On the contrary, litigation is conducted in public, which makes it difficult to protect commercial secrets. This factor, among others, may be decisive in choosing between arbitration and litigation for an investor who cares about the confidentiality of the dispute details.

 

Neither of the two methods is universally superior in terms of costs and speed. Litigation is generally considered to be more time-consuming, but arbitration costs can be prohibitively high for small disputes. At the same time, the complexity of the claims, the need for additional evidence and enforcement proceedings also affect the final cost. Commercial litigation, especially when it comes to proving allegations of fraud, can be associated with significant expenses, including legal fees and a long trial.

 

Treaty Claims Require a Separate Analysis

 

Not all investment-related disputes are purely contractual in nature. If the measures taken by the state affect the investor’s assets, they may have to turn to the bilateral investment treaties that have been concluded between the investor’s home country and the host country. These instruments set out the terms for protecting investments and require states to submit disputes to international arbitration. The content of such treaties varies from jurisdiction to jurisdiction, but they generally cover compensation for expropriation, protection against discrimination and other violations. However, the mere existence of the treaty does not automatically entitle the investor to compensation, but rather requires a separate analysis of the details of the dispute.

 

Investor-state disputes are often governed by the ICSID Convention, but other arbitration rules are also available. Each of these instruments, in turn, has detailed provisions on the recognition and enforcement of awards. An ICSID award is binding on the contracting states, which must enforce it as if it were a domestic judgment. However, this does not extend to all measures, for example, the seizure of assets in the event of the respondent’s default. In addition, each state has the right to adopt laws on ICSID arbitration and its enforcement, including those relating to state immunity from execution.

 

ICSID arbitration and other forms of dispute resolution under investment treaties have their own procedural peculiarities. At the same time, there are also exceptions, including variations in the requirements for eligibility to bring a claim, definitions of the term investment, and the ability to restructure investments. When choosing between arbitration and litigation, an investor who finds himself in a dispute under an investment treaty should take into account all the subtleties of the wording of the applicable instruments. The same applies to the analysis of jurisdiction, which is often complicated by overlapping claims and potential double recovery.

 

The Nuances of the Contract Are Often Decisive

 

Dispute resolution clauses are often the last detail in an investment contract, which means that they are given less attention. However, the choice between arbitration and litigation and all the nuances that go with it can affect the entire transaction.

 

A properly drawn up clause should contain information on the governing law, the seats of arbitration, the rules of arbitration institutions, language, the number of arbitrators, and the list of disputes subject to arbitration. The allocation of jurisdiction clauses is particularly relevant to disputes concerning complex investment structures that may include many contracts. Their wording should be carefully considered so that, for example, a dispute arising under one agreement does not end up in a completely different dispute resolution procedure than a dispute under a related agreement.

 

Parties should also consider whether consolidation of disputes is possible, whether new parties can be added to the dispute, and whether the dispute resolution method allows for recovery against guarantors or related entities. Finally, before determining which procedure to use, it is necessary to analyze the practical aspects of enforcing the decision, the availability of urgent measures, the complexity of evidence collection, and the cost of lengthy proceedings.

 

A Commercial Decision With Long-Term Legal Consequences

 

The choice between arbitration and litigation is ultimately a commercial decision that weighs the risks to the investment against the possibility of a swift and safe recovery of the due amount. Arbitration offers neutrality and expertise, as well as relatively simple enforcement of awards through the New York Convention. Litigation, on the other hand, offers more options for enforcing assets, especially when it comes to third-party claims. International investors considering one of these two options should understand the advantages of each procedure, as well as the alternatives that may be available to them.

 

They should also consider that, in some cases, the two procedures can be combined. Courts can be used to supplement arbitration, for example, by obtaining urgent interim measures, while arbitration agreements under investment treaties can be used to protect against state interference.

 

In making this choice, investors should bear in mind that the enforceability of the decision in the relevant jurisdictions is often more important than the ability to win the dispute. The right to recover the investment with a minimum of costs and time is essential to any commercial decision.

 

Dr. Sunil Ambalavelil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.
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