Brazil’s decision to stay outside the investment arbitration world and reliable alternatives for foreign investors

Currently ranked as the largest economy in South America and twelfth largest worldwide, Brazil has traditionally been one of the top destinations for foreign direct investment (‘FDI’). According to the latest UNCTAD World Investment Report, in 2021 Brazil continued the trend from previous years and ranked sixth in the top host economies for FDI inflow worldwide. It has also become an important outbound investor and is currently among the top 20 home economies for FDI outflow worldwide.

As an important player in the international investment world, it would be reasonable to expect Brazil to take part in investment arbitration. However, the country has historically chosen to remain outside of it and, to date, has never ratified a traditional bilateral investment treaty (‘BIT’) nor adhered to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (‘ICSID Convention’), nor even put into place any investor-State dispute settlement (‘ISDS’) mechanism. Nevertheless, Brazil continues to constantly receive high FDI inflows, and to play an increasingly important role in FDI outflows.

This article addresses Brazil’s unique position in the investment arbitration world and outlines a reliable alternative dispute settlement mechanism for its foreign investors.

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