(The author is grateful to Matthew Harnett for his assistance with the research needed to complete this work.)

An arbitration clause forms the basis of the consent between investors and States that certain disputes are to be determined by arbitration.¹ This consent is what gives rise to the Jurisdiction of the arbitral tribunal (see Jurisdiction).²

Consent to arbitration by a State and an investor may be given in three ways.³ The first is via direct agreement between the parties.⁴ The second is via the legislation of a host State.⁵ The third is through a treaty between the host State and the investor's State of nationality (the treaty may be either bilateral or multilateral).

Whichever way the consent is given, it is important that the consent is clearly expressed and binding upon the parties in order for it to be valid.⁶

An arbitration clause, regardless of the instrument in which it exists, will usually contain the following:⁷

1. An explicit referral of disputes to arbitration;
2. The governing law of the arbitration agreement;
3. The seat of arbitration;
4. The rules governing the arbitration;
5. The number of arbitrators and their method of selection (see Arbitrator Appointment); and
6. If applicable, the institution governing proceedings (see Institutional Arbitration) or confirmation of Ad Hoc Arbitration.

Each of these components is important for any agreement to arbitrate and are discussed in separate sections of this Wiki.

A direct agreement between the parties to arbitrate investment disputes is usually made by way of a compromissory clause in an investment agreement between the investor and host State.⁸

The compromissory clause must contain a clear reference of disputes (or category of disputes) to arbitration and clauses usually refer to "any dispute" under the agreement.⁹ Clauses might, however, provide that only certain disputes are referred to arbitration and other particular disputes might be referred to State courts or other forms of dispute resolution such as expert determination.

Issues can arise if investments are agreed over a number of different contracts and only some of those contracts contain compromissory clauses. The question then becomes whether only disputes in relation to those contracts containing the compromissory clause can be referred to arbitration, or whether all disputes concerning the particular investment can be referred to arbitration.¹⁰ In such cases, a tribunal might employ the "Unity of Investment" doctrine and consider the investment as a whole rather than as separate contracts.¹¹ A party might also seek to establish that a compromissory clause is included by reference, for example through a most favoured nation clause (see Most Favoured Nation Treatment).¹²

Tribunals have traditionally adopted a broad interpretation of the "Unity of  Investment" doctrine and have looked at the parties' relationship as a whole, and the nature of the investment, to interpret such compromissory clauses as applying to the entire investment.¹³ 

It must also be noted that consent to arbitrate might arise under an Umbrella Clause (see Umbrella Clause).

A State and an investor can agree to refer an investment dispute to arbitration after the dispute has arisen.¹⁴ This separate agreement is sometimes referred to as a "compromis", and is just as valid as a pre-existing offer or agreement to arbitrate through legislation or an investment treaty.¹⁵

Some States provide for recourse to arbitration in their national legislation.¹⁶ Whether references in national legislation amount to an offer to consent to arbitrate depends upon the wording of such legislation. Consent must be clear and, therefore, ambiguous wording might be interpreted not to have intended to provide consent.¹⁷

For the most part, consent provided by a host State in its national legislation amounts to an offer to arbitrate. The investor must accept that offer, either via an express route provided for in the relevant legislation or by initiating arbitration, for the agreement to arbitrate to be binding.¹⁸

Some clauses, however, require further agreement between the host State and the investor before consent to arbitration is perfected.¹⁹ Such clauses which require additional consent by the State, do not by themselves amount to offers to arbitrate.

Consent to arbitrate is often found in investment treaties between States.²⁰ Arbitration clauses in investment treaties will most commonly operate as an offer by the host State to arbitrate with an investor having to accept that offer for the consent to be perfected.²¹

Not all arbitration clauses in investment treaties, however, amount to binding offers of consent from host States. Much depends upon how the clause is drafted. As with legislation, further agreement might be required.²²

Absent wording to the contrary, it is a firm rule of investment arbitration that an investor accepts a State's offer to arbitrate under the ICSID rules by filing their request for arbitration with ICSID (see also Trigger Letter).²³ With respect to multilateral treaties, much will depend upon the wording of the particular clause. The Energy Charter Treaty ("ECT"), for example, provides that an investor may submit the dispute to arbitration under the ICSID Convention,²⁴ the ICSID Additional Facility Rules, the UNCITRAL Arbitration Rules, or the Arbitration Rules of the Arbitration Institution of the Stockholm Chamber of Commerce. (ECT Art 26(4)).²⁵ The ICSID Convention however requires separate consent by the host State and by the foreign investor.²⁶

If the State terminates its BIT or withdraws from an MIT, depending on the circumstances, that State might be considered to have withdrawn its consent to arbitration also.²⁷