AMSTERDAM: Recent years have seen an increase in the amount of cross-border activity in the construction and engineering sector, particularly in projects in developing economies. In 2012 PwC noted that “infrastructure spending has begun to rebound from the global financial crisis and is expected to grow significantly over the coming decade” and predicted that “some regions, particularly emerging Asia, are projected to enjoy a bigger boom in infrastructure development than more advanced economies.”[1] This was soon reflected in the market.
Almost half of the major construction and engineering firms surveyed by KPMG in 2013 indicated that they planned to expand internationally by targeting projects in new locations, most commonly in Africa and Asia, and particularly major infrastructure projects in the energy, mining, rail and water sectors.[2] This increased international activity was observed by UNCTAD in 2014; it estimated that the amount of foreign investment for the construction of greenfield projects in developing economies had jumped from $22 billion in 2013 to $42 billion in 2014.[3]
Many of the locations for these new projects have traditionally been perceived as jurisdictions with higher risks, including concerns such as greater political risks, less-predictable policy or greater exposure for foreign investors. To address these concerns in order to attract foreign investment (both in the construction sector and generally), many States have committed to protect incoming investors and their investments against expropriatory, unfair or discriminatory treatment by public authorities within their territories. These protections are commonly agreed in international investment treaties between capital exporting States and capital importing States wishing to attract investment.
