Assessment of Legality of Investment: ICSID Case-law

A great number of bilateral investment treaties including the treaties concluded by Iran, specify that in order to enjoy protection provided in the treaties investment should be made in accordance with internal law of host state. It is evident that nature, magnitude of breach and the subject matter of the laws which are likely to be violated by investors are not identical. The question which arise as to the issue in the light of case law of ICSID tribunals and object and purpose of investment treaties is whether hierarchical value and subject matter of internal law and regulation of host state have any impact on the evaluation of an investment legality. Analysis of the case-law developed on the issue shows that subject matter of internal law of host state has no bearing on the issue. On the other hand, nature, magnitude of breach and relevance of the law in accepting and establishment of investment in host state are relevant factors in evaluating legality of investment.