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Proving Denial of Justice in Investor-State Disputes2 December 2025

This article is part of our mini-series on investment arbitration. Drawing on the experience and expertise of our partners and lawyers in bringing and defending treaty claims, the series provides practical guidance for both foreign investors and host States. In this first article, we examine the concept of denial of justice, highlighting the high threshold required to establish a successful claim and outlining strategic considerations for investors and States alike. Upcoming articles will explore key issues such as regulatory expropriation, interpreting standards like full protection and security, national treatment and MFN clauses, as well as analysing umbrella clauses and the role of contractual commitments in treaty disputes.

"Denial of justice is one of the most serious and complex claims an investor can bring against a host State."

Proving denial of justice in investor-State disputes

In international investment arbitration, denial of justice is one of the most serious and complex claims an investor can bring against a host State. It directly implicates the conduct of domestic courts and, when proven, can result in significant liability under international law. For foreign investors, especially those operating in jurisdictions with developing legal systems, understanding how denial of justice claims function under the Fair and Equitable Treatment (“FET”) standard is essential for protecting their investments and navigating disputes effectively. Equally, States must understand the contours of denial of justice to meet their obligations under applicable treaties and to effectively defend against such claims, especially when the reputation and integrity of their judicial systems are at stake.

Denial of justice as a breach of the FET standard

Denial of justice is typically framed as a breach of the FET standard found in most bilateral investment treaties (“BITs”) and free trade agreements (“FTAs”). Tribunals have interpreted this standard to include protection against serious failures in domestic judicial systems, with some extending it to administrative proceedings. Such failures may include undue delay, bias, lack of due process or manifestly unjust decisions.

Several landmark cases have shaped the jurisprudence. In Loewen v. United States, Loewen, a Canadian company, was subjected to a highly prejudicial trial in Mississippi, resulting in a US$500m jury verdict. The tribunal acknowledged the possibility of a denial of justice claim under the North American Free Trade Agreement (“NAFTA”) but ultimately dismissed the claim due to jurisdictional issues and failure to exhaust local remedies. Despite this, the tribunal remarked that “the conduct of the trial by the trial judge was so flawed that it constituted a miscarriage of justice.”¹

In Mondev v. United States, Mondev, a Canadian real estate developer, lost a contract dispute in US courts and claimed denial of justice under NAFTA. The tribunal found that the judicial decisions, though adverse, did not meet the high threshold required. The tribunal emphasised that “international tribunals are not courts of appeal” and clarified that “the question is whether, at an international level and having regard to generally accepted standards of the administration of justice, a tribunal can conclude in the light of all the available facts that the impugned decision was clearly improper and discreditable.”²

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"Tribunals are generally cautious in their findings, often requiring clear evidence of serious irregularities to establish a breach."

In Chevron v. Ecuador, the tribunal unanimously held that a 2011 judgment awarding US$9.5bn against Chevron for environmental remediation was procured through fraud, bribery and corruption. The tribunal relied on evidence indicating that the presiding judge had engaged in corrupt conduct by colluding with the plaintiffs in the domestic proceedings and permitting the “ghost writing” of the judgment. It found that such conduct “justifies the very gravest concerns as to judicial propriety in regard to the Lago Agrio Judgment,” noting that the subsequent decisions of the Appellate Court, Cassation Court and Constitutional Court failed to remedy the defects in the original judgment. The tribunal characterised Judge Zambrano’s conduct as “grossly improper by any moral, professional, and legal standards,” and concluded that it directly and adversely impacted Chevron’s rights.³

These cases demonstrate that tribunals assess denial of justice claims primarily through the lens of procedural integrity, examining whether due process was upheld and whether the proceedings conformed to internationally accepted standards. Tribunals are generally cautious in their findings, often requiring clear evidence of serious irregularities to establish a breach.

Threshold for a successful denial of justice claim

Denial of justice claims face a high evidentiary threshold. Tribunals typically require investors to exhaust all reasonable avenues within the host State’s legal system unless those remedies are unavailable or futile. This reflects the principle that domestic courts should be given the first opportunity to correct any errors or injustices.

To succeed, investors must demonstrate that:

  • they pursued all available and reasonable local remedies;
  • the judicial process was fundamentally flawed, involving serious procedural irregularities, bias or manifestly unjust decisions (e.g. “an outcome which offends a sense of judicial propriety”⁴); and
  • the conduct of the courts violated international standards of due process and fairness.

"A claim for denial of justice must not be confounded with an appeal against decisions of national judiciary."

Tribunals tend to defer to domestic courts, recognising their role as the primary adjudicators of national law. As a result, “a claim for denial of justice must not be confounded with an appeal against decisions of national judiciary”.⁵ Mere errors in interpreting national law or unfavourable outcomes are not, in themselves, sufficient to establish a denial of justice. For example, in Big Sky Energy v. Kazakhstan, the tribunal acknowledged that while some of the court’s actions were “questionable,” none of the relevant judicial conduct was found to be “sufficiently flawed as to constitute a denial of justice.”⁶ To succeed, investors must demonstrate that the State in question failed to provide “even a minimally adequate justice system”.⁷

Successful denial of justice claims have relied on evidence such as:

  • due process violations in court proceedings, including investors not being able to defend themselves or present their case fully;⁸
  • corruption or bribery within the judiciary, including documented interference in judicial decisions;⁹ and
  • criminal proceedings lacking any probable cause.¹⁰

Recently, in Lion Mexico Consolidated LP v. Mexico, the tribunal found denial of justice due to the Mexican judiciary’s failure to enforce mortgage rights over several years, despite clear legal entitlements.¹¹ The case illustrates that persistent obstruction by courts can also meet the threshold for denial of justice.

Implications for investors

Foreign investors should be aware that denial of justice claims can serve as a powerful tool to defend their interests in investment arbitration. However, success requires careful strategic planning. At every stage of the investment lifecycle, there are proactive steps investors can take to strengthen their position in a potential dispute.

"To succeed, investors must demonstrate that the State in question failed to provide “even a minimally adequate justice system."

Key strategies include:

  • at the time of investment: conduct thorough due diligence on the host State’s judicial system, assessing its independence, efficiency and transparency;
  • before any dispute arises: structure investments to maximise treaty protections, such as using entities based in jurisdictions with robust BITs or FTAs; and
  • once issues emerge:
    • maintain detailed records of any litigation involving the investment, including court filings, transcripts and evidence of delays or irregularities;
    • engage local counsel early to navigate the legal landscape and identify procedural risks; and
    • carefully consider the timing and strategy for invoking treaty protections, especially when local remedies appear ineffective or compromised.

Aligning business practices with local regulatory frameworks and anticipating potential conflicts can help avoid disputes and reinforce the investor’s position if arbitration becomes necessary.

Defending denial of justice claims: strategies for States

Effectively responding to denial of justice claims in arbitration requires a strategic approach. States should not only rely on established defences but also proactively present compelling evidence that affirms the integrity of their judicial systems.

Common strategies include:

  • demonstrating that the investor failed to exhaust local remedies;
  • providing evidence of procedural safeguards such as access to appeal, legal representation and transparency;
  • showing that the courts operated free from political or economic influence, reinforcing the legitimacy of the judicial process; and
  • establishing that the judicial decision fell within the bounds of reasonable interpretation and aligned with accepted international norms and practices.

To support their position in any future arbitration, States should, where possible, ensure that judicial records are complete and that all procedural steps are clearly documented.

Conclusion

"Denial of justice remains one of the most serious and difficult claims in investor-State arbitration."

Denial of justice remains one of the most serious and difficult claims in investor-State arbitration.

For foreign investors, understanding the contours of denial of justice under the FET standard is essential. By conducting due diligence, structuring investments wisely, and documenting procedural abuses, investors can better protect their rights. For States, defending against such claims requires a well-defined legal strategy backed by a strong commitment to procedural fairness, judicial independence and adherence to international standards.

The upcoming articles in this series will delve deeper into substantive standards of investment protection and outline effective strategies for both investors and States to safeguard their interests in investment arbitration.

[1] Loewen Group, Inc. and Raymond L. Loewen v. United States of America (ICSID Case No. ARB(AF)/98/3), Award dated 26 June 2003, para. 54.
[2] Mondev International Ltd v United States of America (ICSID Case No. ARB (AF)/99/2), Award dated 11 October 2002, para. 127.
[3] Chevron Corporation and Texaco Petroleum Corporation v. Ecuador (II) (PCA Case No. 2009-23), para. 8.59.
[4] Loewen Group, Inc. and Raymond L. Loewen v. United States of America (ICSID Case No. ARB(AF)/98/3), Award dated 26 June 2003, para. 132.
[5] Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania (ICSID Case No. ARB/11/24), Award dated 30 March 2015, para. 764.
[6] Big Sky Energy Corporation v. Republic of Kazakhstan (ICSID Case No. ARB/17/22), Award dated 24 November 2021, para. 516.
[7] Pantechniki S.A. Contractors & Engineers v. The Republic of Albania (ICSID Case No. ARB/07/21), Award dated 30 July 2009, para. 94
[8] Manchester Securities Corporation v. Republic of Poland (PCA Case No. 2015-18), Award dated 7 December 2018, para. 498.
[9] Chevron Corporation and Texaco Petroleum Corporation v. Ecuador (II) (PCA Case No. 2009-23), para. 8.59.
[10] Mohamed Abdel Raouf Bahgat v. Arab Republic of Egypt (I) (PCA Case No. 2012-07), Final Award dated 23 December 2019, paras. 250-252.
[11] Lion Mexico Consolidated L.P. v. United Mexican States (ICSID Case No. ARB(AF)/15/2), Award dated 20 September 2021, paras. 506-509.

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