It is a truism that political risk to foreign investment increases in the vicinity of changes of power in host states,^[1]  including where change comes about democratically. In one of many investment treaty arbitrations arising out of Argentina’s economic crisis at the turn of the millennium, for example, the offending measure was said to have been driven by the government’s “electoral strategies”.^[2] And in an investment treaty claim against Tanzania, to take another example, the state contract at issue was found to have been terminated “against the backdrop of forthcoming elections”.^[3]

The three-year saga of Haiti’s legislative elections^[4] — postponed repeatedly since 2011 by disagreement between the country’s legislature and executive — shows that the reverse may also be true: in a democratic state, the failure to hold elections can also increase political risk to foreign investment. Where prospective investors are concerned, a recent New York Times article attributes Haiti’s underwhelming “handful of new hotels” and factories precisely to the “thwarting” effect of its governance troubles. Echoing an assessment by the World Trade Organization of the island’s untapped potential for tourism services,^[5] the article explains that “many investors who have expressed interest in Haiti have not followed through in part because of the unsettled politics”.^[6] 

If Haiti’s legislative elections are not held by January 2015, the country’s president will rule by decree^[7] — a prospect that has international actors increasingly concerned.  Having long championed the link between participatory democracy and economic development in so far as regular elections substitute “voice” for “violence”,^[8] the World Bank affirms that ongoing “political instability and volatility” in Haiti represent “critical obstacles to investment”.^[9]   

Put differently, the country’s political crisis is antithetical to the “favourable conditions” that Haiti has committed to create for foreign investment under its three bilateral investment treaties (BITs) with European states. That commitment, though it appears among the operative provisions of the United Kingdom-Haiti BIT,^[10] is relegated to the preamble of Haiti’s BITs with France and Germany.^[11] There is, in short, no treaty protection for investments not made.

But the pre-electoral crisis may yet bring consequences under Haiti’s operative obligations toward existing foreign investors. In June 2014, the Speaker of the Haitian Senate warned that “the country would plunge into chaos if there are no elections” in the autumn.^[12] Evidencing the lack of progress since then, another senior Haitian Senator declared in September 2014, “civil war is at our doorstep”.^[13] The island’s turbulent history suggests that such predictions may be more than mere hyperbole. Depending on the level of resulting volatility, Haiti could find itself tested in providing full protection and security for investments on its territory.  

At its venerable core under customary international law, the obligation of full protection and security requires due diligence by states to prevent physical harm by private actors to the tangible interests of foreign investors. Among the paradigmatic examples of its breach is violence in the course of rioting, as by supporters of rival political factions.^[14] 

The obligation remains relatively underdeveloped in contemporary investor-state arbitration. If senior Haitian legislators are to be believed, events in Haiti over the coming months could change that.