Investment conflict prevention tools are designed to facilitate resolution of investors’ grievances at a very early stage, thereby preventing their escalation into full blown legal disputes. Should the issue invoked by the investor still persist and escalate into a full dispute, conflict management tools allow for an effective and coordinated response from the host state.
Conflict prevention and management mechanisms are fundamental to the maintenance of a long-term relationship between the investor and the host state. The ability of states to respond to investment-related issues strengthens existing investment relationships and contributes to the maintenance of those relationships in the host state’s economy. Moreover, they increase investment confidence of new investors to start their operations in the host economy.