An investor operates a facility in what has become one of the most dangerous places in the Middle East; despite the efforts of the host state's army, terrorist attacks on the facility continue. According to a recent ICSID decision, the failure of Egypt to stop terrorist attacks on a pipeline running through the Sinai area is a violation of the investment treaty obligation to provide "full protection and security." Even against the low standards of investor-state arbitration, the decision is sparse in legal reasoning, and citations to the prior case law are almost non-existent. But the policy question raised by converting a rather typical treaty provision that gives the investor a right to normal police protection into absolute liability for terrorist attacks is an important one. In a contradictory if not tendentious and disingenuous finding, the arbitral tribunal held that Egypt had not exercised "due diligence" while the facts presented to the tribunal indicated that what happened was in fact that in response to the situations Egypt's army had indeed reacted, but proved ineffective in stopping further attacks. It is true that in the case of some of attacks the security services didn't come running; but the notion that a sovereign state with limited resources and extreme security challenges must prioritize a foreign investor, reacting in real time, is close to absurd. In an act of unbelievable historical and political blindness, the tribunal largely ignored the context of the Arab Spring, and the complex political transition in Egypt through the period in question (while paying lip service to it occasionally). Making the host state pay in that situation is not about "due diligence" but rather, in truth, absolute liability-effectively, an insurance policy-for terrorism. Unless the tribunal is so confused that it does not understand the distinction. I would note that the President of the tribunal was Yves Fortier who, in another case (Yukos), according to expert evidence, had his assistant ghost-write almost his entire reasons.
There may be a need to operate essential infrastructure and provide essential services in conflict zones where foreign investors may be unlikely to invest unless they have some kind of cover for extreme risks such as terrorism and insurrection. This challenge has been recognized by the World Bank's political risk insurer, MIGA and it may provide some forms of risk insurance in such situations. Failed or fragile states can scarce afford to indemnify investors, often in the 100s of millions of dollars for risks they can far from fully control. Had the tribunal bothered to analyse the case law on, the origins of, and academic commentary concerning, the meaning of the general obligation of full protection and security, it could not possibly have come to the conclusion that it requires indemnification for terrorism. In effect, the consequence of this decision is that investors would likely be put above all other victims of terrorism and related political violence in conflict areas. That is shocking from the perspective of international justice.