Litigating Terror in The Sinai After The Egyptian Spring Revolution: Should States Be Liable to Foreign Investors for Failure to Prevent Terrorist Attacks?

Abstract

The ambiguity of the due diligence standard of the Full Protection and Security obligation in investment treaties persists to this day. A recent ICSID tribunal found a developing state liable for breaching the Full Protection and Security obligation due to its inability to protect a foreign investment against terrorist attacks in a remote deserted area. In this article, we analytically criticize the Ampal v. Egypt arbitral award against the comprehensive factual matrix behind the case. Based on our criticism of Ampal, we argue that developing states should not be liable for failing to prevent or stop terrorist attacks under the Full Protection and Security obligation when they exert efforts relevant to their limited capacity to offer such protection. Further, we argue that investors should also optimize political risk insurance offered by the Multilateral Investment Guarantee Agency when they choose to invest in a host state that might be vulnerable to terrorist attacks, might face potential insurgencies, or suffer from political turmoil. Finally, we highlight the importance of integrating other subfields of international law – such as international human rights law – to the international investment arbitration system, especially in defining what acts or omissions are required of a host state to fulfill the due diligence standard of the Full Protection and Security Obligation.