International Arbitration Trends in 2026
In 2026, sovereignty and boundary disputes will continue to be a driver of arbitration — not just between states but also for businesses, particularly those operating or invested in the energy, extractives and infrastructure sectors.
As states seek greater control over increasingly contested spaces, businesses face increased legal and geopolitical uncertainty, especially in environments affected by technological advancement, energy demand and trade tensions.
Offering neutrality, a right to sue host States directly, and awards that are legally binding and enforceable in most countries, arbitration is an especially useful tool for businesses to proactively manage risk in projects affected by territorial disputes or in new frontiers.
Samantha Tan
Partner
In detail
Disputes related to sovereignty and boundaries can give rise to several forms of arbitration including:
- State-to-state arbitrations: Mechanisms for resolving sovereignty and boundary disputes under international law (as an alternative to litigation before the International Court of Justice).
- Investor-state arbitrations: Redress under investment treaties for foreign investors when state measures (such as expropriation, license revocation, unfair or discriminatory treatment, or a failure to provide adequate protection and security) arise from sovereignty and boundary disputes.
- Contractual arbitrations: Disputes between private parties (and/or involving state‑owned entities) arising from project delays, force majeure claims or other contractual breaches due to sovereignty and boundary-related disruptions.
While these forms of arbitration will continue to arise from traditional inter‑state disputes in 2026, we also expect them to expand into new areas previously considered beyond any state’s individual jurisdiction.
States have contested sovereignty and boundaries for centuries, often to secure access to valuable natural resources. Even where a boundary is settled, uncertainty can persist or unexpectedly arise, especially in areas of overlapping resources, creating long‑term risks for businesses and the potential for a wide range of disputes.
This is illustrated by the following examples:
Guyana v.Venezuela (Essequibo Region)
The territorial dispute over the oil-rich territory and its offshore waters has directly affected oil companies operating concessions in the area, exposing them to:
- Physical risks to infrastructure and equipment, such as the 2018 incident involving a drilling ship.
- Delays or withdrawal of oil concessions: Guyana’s moratorium on further exploration in the area directly impacted existing and future oil concessions. Even absent such a moratorium, investing in disputed areas generally carries significant risk, as a change in state “ownership” may lead to the cancellation of concessions.
South China Sea
Sovereignty and boundary disagreements have, for decades, disrupted offshore resource development (see the South China Sea Arbitration between the Philippines and China, which concluded in 2016). More recently, such inter-state disputes have begun to extend beyond hydrocarbons, impacting subsea cables that are essential to global data transmission, with knock-on effects for private businesses. We have seen:
- Interference and sabotage by foreign ships: Growing reports of Chinese vessels scraping the seabed along subsea‑cable routes pose national‑security concerns and expose private cable owners to significant risks. With private technology companies now responsible for over 70% of global subsea‑cable usage, such interference can lead to substantial losses and insurance claims, but also legal exposure from service interruptions.
- Licensing delays: Contested sovereignty in the South China Sea has also caused licensing delays that affect private operators of subsea-cables. The Southeast Asia–Japan 2 (SJC2) cable project was reportedly held up due to China’s permitting requirements and concerns over potential espionage by the contractor.
Practical takeaways
As sovereignty and boundary disputes increasingly affect energy, extractives and infrastructure projects, businesses should consider taking proactive steps to protect their investments and operations, such as:
- Conduct thorough due diligence: Before investing or contracting, assess the risk that disputed sovereignty and boundary claims could affect the project’s viability or operations.
- Draft for uncertainty: Contractual agreements should anticipate sovereignty and boundary‑related disruptions. Consider, for example, including appropriate warranties, as well as force majeure and stabilization clauses.
- Diversify protection mechanisms: Strategic investment treaty planning can help secure access to investor‑state arbitration where disputes lead to expropriation or unfair treatment. Additional safeguards, such as political risk insurance, may also be put in place, tailored to the project’s profile and location.
With a thorough understanding of these complex issues, our international arbitration team helps clients anticipate and resolve disputes in this important sector. Please contact us to learn more.
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