The OIC Investment Agreement and the Long Road to a Functional Investment Arbitration Framework

Foreign direct investment thrives on predictability. Investors look for clear rules on how their capital will be treated, and—when things go wrong—how disputes will be resolved. In the Islamic world, one of the most ambitious multilateral instruments designed to provide that predictability is the OIC Investment Agreement (formally, the Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference/Cooperation).

The Organisation of Islamic Cooperation (OIC)—with 57 Member States—presents itself as the second-largest intergovernmental organization after the United Nations. (İslam İşbirliği Teşkilatı) While the OIC is often discussed in political terms, its economic architecture is equally notable: intra-OIC trade initiatives, development finance institutions, and investment-risk mitigation tools have been developed over decades. For cross-border investors within the OIC space, however, the most direct “legal backbone” is the OIC Investment Agreement.

This post revisits the Agreement’s investment protection and dispute settlement design—and explains why the creation of the OIC Arbitration Centre in Istanbul matters, even if important institutional questions remain open.

1) A multilateral investment treaty with broad ambition

The OIC Investment Agreement was adopted in 1981 and entered into force in February 1988, once the threshold of ten ratifications was met. (OIC) In practical terms, its substantive protections apply among the states for which it is in force (and the precise status—signature, ratification, entry into force—should always be checked for any specific pair of states). UNCTAD’s IIA Navigator, for example, lists a set of states for which the Agreement was in force as of 2021. (UNCTAD Investment Policy Hub)

The Agreement’s promise is straightforward: encourage intra-OIC investment flows by offering a baseline level of protection, including guarantees related to:

• Security and protection of invested capital,

• Non-discriminatory treatment (often framed around national treatment and MFN concepts),

• Protection against unlawful expropriation, and

• The ability to transfer capital and proceeds out of the host state. (OIC)

  
  

In an investment landscape where many bilateral investment treaties (BITs) either never existed or have been terminated/left inactive, a multilateral treaty like this can be an important “coverage backstop.”

2) Dispute settlement: domestic courts or international mechanisms

The heart of the Agreement—at least from an investor’s perspective—is its dispute settlement architecture.

• Article 16 points to recourse to national courts.

• Article 17 provides for conciliation and arbitration “until” a dedicated dispute settlement organ is established. (UNCTAD Investment Policy Hub)

  
  

This design reflects a transitional logic: states acknowledge that investor–state disputes may require an international forum, but also envision a future institutional structure that would systematize dispute settlement under the OIC umbrella.

A distinctive operational feature of Article 17 is the role given to the OIC Secretary General in completing tribunal appointments when necessary—an attempt to prevent respondent inaction from paralyzing proceedings.

3) From dormancy to real cases: Al-Warraq v. Indonesia and beyond

For many years, the Agreement remained largely dormant in terms of investor–state arbitration. That changed when a Saudi investor initiated arbitration against Indonesia: Hesham T. M. Al-Warraq v. Republic of Indonesia.

According to UNCTAD’s ISDS Navigator, the case was initiated in 2011 and is recorded as having concluded with a finding of liability but no damages (among other notable features of its outcome). (UNCTAD Investment Policy Hub) Public repositories such as italaw also reflect key procedural milestones, including jurisdictional and final award stages. (italaw)

One of the most consequential elements of this dispute was the tribunal’s approach to the question of state consent: whether Article 17 amounted to a binding offer to arbitrate, capable of acceptance by an investor. The tribunal’s reasoning is frequently cited as a turning point that helped “activate” the treaty’s arbitration clause in practice.

4) How many cases are there today?

Older commentary often described only a handful of known cases. But publicly available datasets have grown. UNCTAD’s ISDS Navigator currently shows 22 treaty-based ISDS cases associated with the OIC Investment Agreement (1981). (UNCTAD Investment Policy Hub)

5) The OIC Arbitration Centre in Istanbul: a milestone, with open questions

A major recent development is the establishment of the OIC Arbitration Centre (OIC-AC) in Istanbul. The establishment of the OIC Arbitration Centre signals an intent to build institutional capacity for trade and investment dispute resolution in the OIC space.It can help address practical needs: administration, rules, rosters, and procedural infrastructure—elements that ad hoc arbitration often struggles to provide efficiently.The Centre is an important institutional achievement

6) Why the treaty still matters: investment, legitimacy, and the OIC’s economic agenda

The OIC’s economic ecosystem includes initiatives such as the Trade Preferential System among OIC Member States (TPS-OIC), promoted under COMCEC to foster intra-OIC trade. (COMCEC) The broader development finance and risk-mitigation architecture—such as the Islamic Development Bank (operations formally opened in 1975) and the Islamic Corporation for the Insurance of Investment and Export Credit (established in 1994)—also supports the policy objective of making cross-border economic activity more viable. (idb-40.org)

Against that backdrop, the OIC Investment Agreement remains a key legal instrument because it:

• provides baseline protections where BIT coverage is absent or uncertain,

• offers a path (domestic + international) for dispute resolution, and

• increasingly functions as an actual basis for investor–state proceedings, as the case numbers show. (UNCTAD Investment Policy Hub)

  
  

Conclusion

More than four decades after its adoption, the OIC Investment Agreement continues to occupy a distinctive space: it is a multilateral framework with significant membership reach, substantive protections that mirror classic investment treaty standards, and a dispute settlement clause that has proved arbitrable in practice. The establishment of the OIC Arbitration Centre in Istanbul is a positive institutional step.

About the Author

Prof. Dr. Cemile Demir Gökyayla is an esteemed professor and Head of the Private International Law Department at İstanbul Bilgi Üniversitesi and a Partner in KP Law, specialising in international arbitration and cross-border commercial and investment disputes. 

Prof. Gökyayla has acted as a counsel and arbitrator in numerous ad hoc and administered international arbitration proceedings under the UNCITRAL, ICC, DIAC, ICSID, SIAC,ISTAC, TOBBUyum, ITOTAM arbitration rules governed by many jurisdictions including Swiss, German, Turkish, Uzbekh, Kyrgyz, Kazakh, Qatari, United Arab Emirates, Iraqi, Maltese and Romanian laws. She is particularly experienced in disputes arising from construction contracts. 

She has authored numerous publications on international arbitration and international private law. She also contributes as speaker or moderator in conferences on international arbitration law.

Prof. Gökyayla was a member of ISTAC National Court and Advising Committee, and she worked on the drafting of ISTAC Arbitration Rules. She is a member of the ICC Commission on Arbitration and ADR and National Committee. OIC-AC Supervisory board member 

Prof. Gökyayla holds a Bachelor's Degree in Law from Dokuz Eylül University, where she also obtained her Master's and Ph.D. degrees in Private Law. She was also a visiting researcher at Saarlandes University, Germany with DAAD Scholarship between 2002-2003.