Arbitration Under International Investment Agreements: A Guide to the Key Issues [2 ed.] 0198758081, 9780198758082

Table of contents :
Dedicaiton
Foreword to the First Edition • Stephen M Schwebel
Foreword to the Second Edition • Meg Kinnear
Acknowledgements
Contents
Table of Cases
International Legislation
National Legislation
List of Contributors
PART I: INVESTMENT TREATIES AND THE SETTLEMENT OF INVESTMENT DISPUTES: THE FRAMEWORK
1. Bilateral Investment Treaties and Investment Provisions in Preferential Trade Agreements: Recent Developments in Investment Rule-making • Roberto Echandi
2. The Energy Charter Treaty • Emmanuel Gaillard and Mark McNeill
3. International Investment Dispute Settlement Mechanisms • Ucheora Onwuamaegbu
4. The Role of Precedent in Investment Treaty Arbitration • Jan Paulsson
PART II: GUIDE TO KEY PRELIMINARY AND PROCEDURAL ISSUES
5. An Overview of Procedure in an Investment Treaty Arbitration • Barton Legum
6. Aspects of Procedure for Institution of Proceedings and Establishment of Tribunals in Investment Treaty Arbitration • Milanka Kostadinova
7. The Fate of Frivolous and Unmeritorious Claims • Katia Yannaca-Small and David Earnest
8. Challenges of Arbitrators in Investment Arbitration: Still Work in Progress? • Loretta Malintoppi and Alvin Yap
9. Piercing the Veil of Confidentiality: The Recent Trend towards Greater Public Participation and Transparency in Investment Treaty Arbitration • Andrea J Menaker and Eckhard Hellbeck
PART III: GUIDE TO KEY JURISDICTIONAL ISSUES
10. Who is Entitled to Claim? The Definition of Nationality in Investment Arbitration • Katia Yannaca-Small
11. The Meaning of ‘Investment’ in Investment Treaty Arbitration • Katia Yannaca-Small and Dimitrios Katsikis
12. Bifurcation of Investment Disputes • Baiju S Vasani and Sarah Z Vasani
13. Burden and Standard of Proof at the Jurisdictional Stage • Baiju S Vasani, Timothy L Foden, and Hafsa Zayyan
14. Attribution: State Organs and Entities Exercising Elements of Governmental Authority • Georgios Petrochilos
15. Breach of Treaty Claims and Breach of Contract Claims: When Can an International Tribunal Exercise Jurisdiction? • Stanimir A Alexandrov
16. The Umbrella Clause: Is the Umbrella Closing? • Katia Yannaca-Small
17. Counterclaims in Investment Treaty Arbitration • Mark A Clodfelter and Diana Tsutieva
18. The State’s Corruption Defence, Prosecutorial Efforts, and Anti-corruption Norms in Investment Treaty Arbitration • Charles N Brower and Jawad Ahmad
PART IV: GUIDE TO KEY SUBSTANTIVE ISSUES
19. The Law Applicable in Investment Treaty Arbitration • Yas Banifatemi
20. Fair and Equitable Treatment: Have Its Contours Fully Evolved? • Katia Yannaca-Small
21. The National Treatment Obligation • Andrea K Bjorklund
22. Indirect Expropriation and the Right to Regulate: Has the Line Been Drawn? • Katia Yannaca-Small
23. The MFN Clause and Its Evolving Boundaries • Abby Cohen Smutny, Petr Polášek, and Chad Farrell
PART V: REMEDIES AND COSTS
24. Interim Relief in Investment Treaty Arbitration • Gabrielle Kaufmann-Kohler, Aurélia Antonietti, and Michele Potestà
25. Compensation and Damages in Investment Treaty Arbitration • Irmgard Marboe
26. Third-party Funding in Investment Treaty Arbitration • Nigel Blackaby and Alex Wilbraham
PART VI: THE POST-AWARD PHASE
27. Annulment of ICSID Awards: Is it Enough or Is Appeal around the Corner? • Katia Yannaca-Small
28. Review of non-ICSID Awards by National Courts • Kaj Hobér and Nils Eliasson
29. Enforcement of Investment Treaty Awards • August Reinisch
30. A Practical Guide: Research Tools in International Investment Law • Julien Fouret
Index

Citation preview

ARBITRATION UNDER INTERNATIONAL INVESTMENT AGREEMENTS

ARBITRATION UNDER INTERNATIONAL INVESTMENT AGREEMENTS A Guide to the Key Issues

Second Edition Edited by

Katia Yannaca-​S mall

1

1 Great Clarendon Street, Oxford, OX2 6DP, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2018 The moral rights of the authors‌have been asserted First Edition publisthed in 2010 Second Edition published in 2018 Impression: 1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number: 2018936199 ISBN 978–​0–​19–​875808–​2 Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

To David, Alexander, Sophia and Ileana

FOREWORD TO THE FIRST EDITION International investment arbitration has a lineage that may be traced to concession and other contracts of foreign investors with host governments. Disputes under those contracts gave rise to a small number of large arbitrations between the two World Wars and for some three decades after the Second World War. Only very large investors were normally in a position to persuade host governments to agree to arbitration of disputes that might arise under contracts between them. Implementation of the resultant arbitral obligations was in some cases significant: in others frustrated. Two developments transformed this episodic scene. The first was the conclusion of the World Bank’s Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, the ICSID Convention, which came into force in 1966. It provides a standing forum for the settlement of disputes between foreign investors and host governments. The second was the conclusion of bilateral investment treaties between states. By this writing, there are—​counting agreements arising not only bilaterally but those from the Energy Charter Treaty, NAFTA, and CAFTA—​some 2,700 such treaties in force. They are the main source of the jurisdiction of ICSID. But they are by no means simply procedural and jurisdictional in effect, because they provide standards for the treatment and taking of foreign investment that represent a remarkable advance on the contentious content of customary international law. By together enabling the foreign investor to require a host government to arbitrate disputes between them, on the basis of agreed international legal standards, a new era in international dispute settlement has opened. ICSID currently deals with as many cases as has the International Court of Justice in the whole of its history. This cascade of international litigation has spawned a multiplicity of problems, procedural, jurisdictional, and substantive. This book analyses recurrent issues that arise in the disposition of those problems. Katia Yannaca-​Small, drawing on her experience as a senior lawyer both of the OECD and ICSID, has assembled a group of knowledgeable and acute authors, many of them leading practitioners in this field, who address the most salient and persistent of those issues. And she herself has written six of the chapters, which tackle some of the most sensitive questions. In the last few years, international investment arbitration has come under attack. The criticism, much of it uninformed, has a nationalistic and autarchic tinge. Two South American states members of ICSID, apparently under the influence of a third, have withdrawn from the treaty, giving reasons that would have warmed the heart of Carlos Calvo. The European Union is poised to displace bilateral investment treaties between its members by its own rules. The adoption by the United States of a revised model bilateral investment treaty in 2004 was regressive, and current reconsideration in the Congress may lead the United States to resile further from its traditional support of foreign investment. Nevertheless, fresh bilateral investment treaties are being concluded, and international investment arbitration flourishes. This valuable volume will assist the student and practitioner of international investment arbitration in understanding and addressing its primary problems, which are as complex as they are recurrent. Stephen M Schwebel, Former President of the International Court of Justice

vii

FOREWORD TO THE SECOND EDITION When the first edition of this text was published a short seven years ago, it quickly became an authoritative reference guide for practitioners, academics, and tribunals on investor-​ state questions. While (relatively) little time has passed since publication of the first edition, international investment law and investor-​state dispute settlement have continued to evolve rapidly. Much of this change has been generated from the core of the discipline, through revision of international investment agreements. This has been accomplished by the adoption of new or revised ‘model’ treaties by numerous states, allowing them to update their obligations based on current policies and state-​of-​the-​art phrasing. A similar exercise has occurred on a multilateral basis, where we have witnessed a trend towards negotiation of investment disciplines on a multi-​party level. In particular, the European Union has negotiated and continues to negotiate a number of agreements with investment chapters. The new generation agreements have addressed substantive and procedural matters, and their hallmark is an increasingly detailed elaboration of the obligations undertaken by states and the procedure available to ensure compliance with treaty undertakings. One good example of the new approach to substance has been elaboration of the ‘right to regulate’, confirming that states can take bona fide measures to act for the public good, without incurring an obligation to compensate for the effects of such measures. Another example has been sharpening the identification of who may invoke the protection of investment treaties, for example through revised definitions of ‘investment’ and ‘investor’, increased use of exhaustion of local remedies, and more frequent inclusion of denial of benefits clauses. An equally significant evolution has occurred on the procedural side of investment treaties and in investment practice. For example, many states have taken a more proactive role in the supervision of treaties after ratification. This has been effected by committees’ supervising implementation of treaties, by according non-​respondent treaty parties a right to participate in arbitrations, and by giving states the ability to make interpretive declarations about the meaning of a treaty. Another example has been the continuation of the move towards increased transparency, which started in the NAFTA cases and in the 2006 amendments to the ICSID Convention and Additional Facility arbitration rules. This evolution was furthered in 2014 with the UNCITRAL Rules on Transparency and the ratification of the Mauritius Convention in October 2017. Another striking procedural innovation is the policy of the European Union to conclude agreements with standing tribunals and appellate bodies. A scant eleven years ago an Appellate Facility proposal was suggested by ICSID but rejected by states as premature. By 2017, Canada and the European Union had agreed to a standing body to adjudicate investment disputes arising under their free trade agreement, with ICSID being named the Secretariat of that body. Perhaps the most significant procedural innovation is one that is ongoing: ICSID has embarked upon a procedure to amend its rules and regulations, and is consulting member states as well as the public for comments and proposals. These amendments will apply to new cases in accordance with Articles 33 and 44 of the ICSID Convention and could have a far-​reaching effect, given that ICSID administers over 70 per cent of all investment arbitration. While treaties have evolved, the number of cases initiated by investors has continued at a steady pace. In fiscal year 2016, ICSID registered forty-​eight cases, and had registered more than 620 cases in total by June 2017. About three-​quarters of these cases were commenced

ix

Foreword to the Second Edition under treaties, predominantly bilateral investment treaties. However, a distinct trend towards the use of multilateral treaties is evident, with 31 per cent of the ICSID cases commenced in fiscal year 2016 having been initiated under the Energy Charter Treaty. Another new trend has been the diversification of respondents and claimants in investment cases: for the first time, western European Member States are being named in investment cases, while claimants increasingly come from developing and transition economies. One trend that has proved stable has been the outcome of cases: roughly 30–​35 per cent of cases settle before an award is rendered, and of those cases where an award is rendered, roughly half uphold the claim while the other half dismiss the claim on jurisdictional or merits bases. The scope of issues raised in arbitration has also continued to expand, and the interplay between individual awards and systemic approaches to treaty drafting is clear. As attested by the breadth and depth of the topics in this edition, investment treaties and arbitration continue to raise novel legal questions. The editor is an expert in the field, having dealt with investment law and procedure from the distinct perspectives of an international organization, an arbitral institution, a law firm representing both states and investors in individual cases, and as a professor of law. Her knowledge and expertise is evident throughout. In addition, the contributing authors are all well known in this discipline, with backgrounds and knowledge that bring an intelligent and up-​to-​date perspective on the most important questions in the field. Given this combination, it is certain that this edition will become equally authoritative as the first edition. Meg Kinnear, Secretary-​General, International Centre for Settlement of Investment Disputes, November 2017

x

ACKNOWLEDGEMENTS The fast pace at which investor-​state arbitration has been evolving in the last decade has made a second edition of this book an absolute necessity. Although its foundational elements have remained the same in the last eight years, the wealth of claims, awards, scholarly writings, policy reconsiderations, and recalibrations driven by concerns and criticisms, point to a system that has been maturing while changing at the same time. At the time of publication, it is still unknown where these changes will take it but, wherever this will be, the need to understand the key issues, as they evolve, will remain. This second edition, following the path of the first, aims to serve as a guide on investment treaty arbitration not only for the knowledgeable sophisticated reader but also the newcomer to this field. This challenging task, to balance the educational and expert elements, could not have been achieved without the wonderful group of outstanding contributors who very graciously undertook this task with me again, with enthusiasm and no hesitation. I am also thankful to those who joined us in this second edition and enriched the book greatly. I am deeply grateful to all not only for their valuable contributions to this book but also for the collegiality and cooperation I have enjoyed with all of them throughout the years. I take the opportunity to thank the many people at Oxford University Press who saw the need for a second edition and persuaded me to go ahead, as well as those who accompanied me throughout the process with great professionalism, advice, and patience. Jamie Berezin, Faye Mousley, Liana Green, and, during the last stretch, Catherine Rogers, who offered me wise support in the last, most demanding phase of the editing process. I express my appreciation to Newgen’s Nancy Rebecca for aptly managing the production process, and to Nicola Prior for copy-​editing. Last but not least, my utmost thanks and gratitude go to my husband, David Small, former General Counsel of the OECD, who not only greatly assisted with the editing of this volume but also never stopped encouraging me and supporting me. Without his support, this second edition would not have seen the light of day.

xi

CONTENTS xxvii lxvii lxxxix xci

Table of Cases  International Legislation  National Legislation List of Contributors  PART I  INVESTMENT TREATIES AND THE SETTLEMENT OF INVESTMENT DISPUTES: THE FRAMEWORK 1. Bilateral Investment Treaties and Investment Provisions in Preferential Trade Agreements: Recent Developments in Investment Rule-​making Roberto Echandi

I. Introduction 

1.01

II. BITs and Investment Provisions in PTAs: The Gradual Shift from Investment Protection to the Promotion of Liberalization of Investment Flows 

1.12

A. The Investment Protection Rationale of BITs  B. Investment Protection and Liberalization in ‘New Generation’ BITs and Investment Chapters of RTAs  C. Impact of Investor-​state Dispute Settlement Experience on Investment Rule-​making: A New Generation of IIAs 

III. Conclusion 

1.12 1.23 1.28

1.120

2. The Energy Charter Treaty Emmanuel Gaillard and Mark McNeill

I. Introduction 

2.01

II. The Making of the Energy Charter Treaty 

2.06

III. ‘Investments’ and ‘Investors’ Covered by the Energy Charter Treaty 

2.10

IV. Denial of Benefits 

2.21

V. Substantive Investment Protections 

2.31

VI. Dispute Settlement 

2.47

VII. Fork in the Road 

2.53

VIII. Provisional Application 

2.58

IX. Taxation Carve-​out 

2.85

X. Conclusion 

2.89

3. International Investment Dispute Settlement Mechanisms Ucheora Onwuamaegbu

I. Introduction 

3.01

II. Institutionally Supported Arbitration 

3.03

A. Overview  B. International Centre for Settlement of Investment Disputes 

xiii

3.03 3.06

Contents C. International Court of Arbitration of the International Chamber of Commerce, Paris  D. The Arbitration Institute of the Stockholm Chamber of Commerce 

III. Selected Procedural Issues 

A. Commencement of Proceedings and the Role of the Institution in the Initial Determination of Jurisdiction  B. Appointment and Disqualification of Arbitrators  C. Interim Measures  D. Seat/​Place of Arbitration, Language of Proceedings, and Applicable Law  E. Tribunal’s Experts  F. Transparency and Third-​party Participation  G. The Award and Post-​award Remedies  H. Costs 

3.14 3.20

3.24 3.24 3.32 3.38 3.42 3.44 3.45 3.47 3.55

IV. Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules 

3.62

V. Conclusion 

3.83

A. Overview of UNCITRAL  B. Commencement of Proceedings under the UNCITRAL Arbitration Rules  C. Appointment and Disqualification of Arbitrators  D. Proceedings  E. Transparency  F. Other Provisions  G. Other UNCITRAL Texts 

3.62 3.66 3.67 3.70 3.72 3.76 3.81

4. The Role of Precedent in Investment Treaty Arbitration Jan Paulsson

I. Introduction 

4.01

II. The Anti-​arbitrariness Vaccine 

4.13

III. Limitations 

4.18

IV. The Legal Status of Precedents 

4.22

V. The Core Concepts 

4.34

VI. Life and Death of Precedent in a Decentralized System 

4.53

VII. Reconsidering the Value of Precedents 

4.57

VIII. Towards More Rigorous Reasoning by Precedent 

4.63

IX. Concluding Thoughts: Is a Synthesis Possible? 

4.82

PART II  GUIDE TO KEY PRELIMINARY AND PROCEDURAL ISSUES 5. An Overview of Procedure in an Investment Treaty Arbitration Barton Legum

I. Introduction 

5.01

II. Overview of the Overview 

5.04

III. Preparation of the Case 

5.07

A. The Beginning  B. Initial Case Assessment  C. The Request for Arbitration  D. Selection of Arbitration Rules 

5.08 5.11 5.13 5.17

xiv

Contents E. Selection of the Arbitrators  F. The First Session with the Tribunal 

5.24 5.27

IV. The Written Submissions 

5.40

V. The Hearing 

5.44

VI. Conclusion 

5.59

A. Post-​hearing Activity  B. The Decision or Award and Its Aftermath 

5.49 5.53

6. Aspects of Procedure for Institution of Proceedings and Establishment of Tribunals in Investment Treaty Arbitration Milanka Kostadinova

I. Introduction 

6.01

II. The Initiation of Proceedings 

6.04

III. The Establishment of the Arbitral Tribunal 

6.50

A. The Issue of Consent  B. ‘Gate-​keeping’ Provisions in Treaties  C. The Request for Arbitration  A. Preliminary Remarks  B. Composition of the Tribunal  C. Appointment of the Arbitral Tribunal 

IV. Conclusion 

6.04 6.09 6.17 6.50 6.52 6.65

6.100

7. The Fate of Frivolous and Unmeritorious Claims Katia Yannaca-​Small and David Earnest

I. Introduction 

7.01

II. Treatment of Frivolous Claims under International Investment and Trade Agreements 

7.02

III. Summary Disposition under Institutional Rules 

7.11

IV. Investor-​state Cases that Address Preliminary Objections to Frivolous Claims 

7.21

A. The United States Model Bilateral Investment Treaty  B. The Comprehensive Economic and Trade Agreement (CETA)  C. Other International Investment Agreements  A. ICSID  B. Other International Arbitration Rules 

A. Cases under the Dominican Republic–​United States–​Central American Free Trade Agreement  B. Cases under the United States–​Peru Trade Promotion Agreement  C. Cases Applying ICSID Rule 41(5) 

IV. Conclusion 

7.02 7.05 7.08 7.11 7.16

7.22 7.26 7.27

7.31

8. Challenges of Arbitrators in Investment Arbitration: Still Work in Progress? Loretta Malintoppi and Alvin Yap

I. Introduction 

8.01

II. The Role of Institutions and Professional Associations 

8.10

A. International Centre for Settlement of International Disputes (ICSID) 

xv

8.10

Contents B. Permanent Court of Arbitration (PCA)  C. United Nations Commission on International Trade Law (UNCITRAL)  D. International Chamber of Commerce (ICC)  E. Stockholm Chamber of Commerce (SCC)  F. London Court of International Arbitration (LCIA)  G. Singapore International Arbitration Centre (SIAC)  H. The IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) 

8.22 8.27 8.34 8.43 8.47 8.52 8.56

III. Innovations in International Investment Agreements 

8.60

IV. Selected Decisions on Challenges 

8.81

A. ‘Issue Conflicts’  B. Administrative Secretaries  C. Social Media 

V. Conclusion 

8.86 8.99 8.109

8.115

9. Piercing the Veil of Confidentiality: The Recent Trend towards Greater Public Participation and Transparency in Investment Treaty Arbitration Andrea J Menaker and Eckhard Hellbeck

I. Introduction 

9.01

II. Public Access to Documents 

9.09

III. Third-​party Written Submissions 

9.52

A. The NAFTA Approach  B. ICSID’s Disclosure Regime  C. The UNCITRAL Rules on Transparency  D. The Mauritius Convention  E. Mandating Disclosure Through Investment Treaty Provisions 

9.12 9.21 9.32 9.38 9.41

A. NAFTA Chapter 11: The Beginning of Modern Third-​party Participation in Investment Arbitration  9.54 B. The NAFTA Free Trade Commission Interpretation and Guidelines and Subsequent NAFTA Practice  9.65 C. Third-​party Submissions in ICSID Cases  9.77 D. Treatment of Third-​party Submissions by Other Arbitral Rules  9.108 E. Treatment of Third-​party Submissions by Other Investment Treaties  9.113

IV. Public Access to Arbitral Hearings 

A. The NAFTA Experience: The First Open Hearings  B. Open Hearings Under the ICSID Arbitration Rules: Still Subject to the Parties’ Consent  C. Open Hearings: Recent Developments 

V. Conclusion 

9.121 9.122 9.136 9.144

9.157

PART III  GUIDE TO KEY JURISDICTIONAL ISSUES 10. Who is Entitled to Claim? The Definition of Nationality in Investment Arbitration Katia Yannaca-​Small

I. Introduction 

10.01

II. Natural Persons as Investors 

10.03

A. Customary International Law  B. State Practice/​Investment Agreements 

xvi

10.04 10.08

Contents C. Jurisprudence under the ICSID Convention 

III. Legal Persons as Investors 

A. Customary International Law  B. State Practice/​Investment Agreements  C. Jurisprudence 

IV. Conclusion

10.11

10.22

10.24 10.34 10.52

10.129

11. The Meaning of ‘Investment’ in Investment Treaty Arbitration Katia Yannaca-​Small and Dimitrios Katsikis

I. Introduction 

11.01

II. The Definition of ‘Investment’ in International Agreements 

11.06

III. Arbitral Jurisprudence on the Definition of ‘Investment’ 

11.23

A. The Definition of ‘Investment’ in Investment Treaties  B. The Notion of ‘Investment’ in the ICSID Convention 

A. Types of Assets Constituting an ‘Investment’  B. The Interpretation of ‘Investment’ by Arbitral Tribunals  C. The Requirement that an Investment Be Made ‘In Accordance with the Host State’s Law’  D. The Requirement that an Investment Be ‘In the Territory of the Host State’

IV. Conclusion

11.06 11.16 11.23 11.47 11.96

11.101

11.116

12. Bifurcation of Investment Disputes Baiju S Vasani and Sarah Z Vasani

I. Introduction 

12.01

II. The Framework under Major Arbitral Rules 

12.03

III. The Standard 

12.12

IV. Bifurcation Procedure 

12.28

V. Conclusion 

12.30

A. ICSID Convention/​Rules  B. ICSID Additional Facility Rules  C. UNCITRAL Rules  D. ICC Rules  E. SCC Rules 

A. Procedural Economy  B. Likelihood of Dismissal/​Reduction in the Scope of Case  C. Overlapping Issues 

12.03 12.06 12.07 12.09 12.11 12.14 12.20 12.24

13. Burden and Standard of Proof at the Jurisdictional Stage Baiju S Vasani, Timothy L Foden, and Hafsa Zayyan



I. General Principles Regarding Burdens of Proof 

13.01

II. Distinguishing the Burden of Proof from the Standard of Proof 

13.05

III. Who Bears the Burden of Proof at the Jurisdictional Phase? 

13.06

A. The Claimant Bears the Burden of Proving the Tribunal’s Jurisdiction  B. Either Party Can Bear the Burden of Proving or Disproving the Tribunal’s Jurisdiction 

xvii

13.06 13.14

Contents C. The Respondent Bears the Burden of Proof  D. The Centrist Position: Neither Party Bears the Burden of Proving the Tribunal’s Jurisdiction 

13.25 13.29

IV. Who Bears the Burden of Proof Regarding Specific Jurisdictional Objections? 

13.35

V. Once the Tribunal Determines Who Has the Burden of Proof, What Standard of Proof Is Applicable at the Jurisdictional Phase? 

13.46

VI. Conclusion 

13.72

A. The National Identity of the Natural Person Claimant is in Dispute  B. The Claim Does Not Arise out of an ‘Investment’  C. The Claimant is Not an ‘Investor’ Within the Meaning of the BIT/​Treaty  D. Consent to Arbitrate  E. Case Already Litigated Through Domestic Courts  F. Dispute Arose Prior to the Entry of the BIT into Force  G. Dispute Barred by a Provision of the BIT/​Treaty 

A. Prima Facie Standard  B. The Standard Depends on the Facts  C. Establishing a Prima Facie Case 

13.36 13.37 13.39 13.40 13.41 13.44 13.45

13.46 13.61 13.66

14. Attribution: State Organs and Entities Exercising Elements of Governmental Authority Georgios Petrochilos

I. Introduction 

14.01

II. What Are State Organs? 

14.10

III. Para-​statal Entities 

14.32

IV. Inexistence of ‘Non-​justiciable’ Acts of state Organs 

14.58

V. Attribution of Representations 

14.67

VI. Conclusion 

14.92

A. Internal Law is the Source of Legal Data, Not Classifications  B. Institutional Separateness or Lack Thereof  A. ‘Governmental Authority’  B. Acts in Exercise of Governmental Authority 

A. Representations Frustrated by Later Conduct  B. Contractual breaches actionable under umbrella Clauses 

14.16 14.21 14.37 14.44

14.68 14.78

15. Breach of Treaty Claims and Breach of Contract Claims: When Can an International Tribunal Exercise Jurisdiction? Stanimir A Alexandrov

I. Introduction 

15.01

II. Treaty-​based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract 

15.04

A. Contract Protection under Customary International Law  B. Contract Protection under Investment Treaties  C. Investment Treaty Claims Arising out of Contracts 

xviii

15.06 15.11 15.17

Contents III. Treaty-​based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims  A. Umbrella Clause Provisions as a Basis for Jurisdiction over Contract Claims  B. Provisions Granting Jurisdiction over ‘Any Disputes’  C. Provisions Granting Jurisdiction over Disputes Relating to ‘Investment Agreements’ 

IV. Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims  A. The Power of Treaty-​based Tribunals to Interpret Contracts  B. The Difficulty (and Irrelevance) of Attempting to Identify Contract Claims ‘Dressed’ as Treaty Claims  C. The Impact of Contractual Forum Selection Clauses on the Jurisdiction of Treaty-​based Tribunals  D. The Role and Significance of ‘Fork-​in-​the-​Road’ Provisions 

V. Conclusion 

15.20 15.23 15.24 15.35

15.38

15.44 15.48 15.57 15.72

15.80

16. The Umbrella Clause: Is the Umbrella Closing? Katia Yannaca-​Small

I. Introduction 

16.01

II. History of the Umbrella Clause and State Practice 

16.06

III. Significance of the Umbrella Clause in Treaties 

16.16

IV. Effects, Scope, and Conditions of Application of the Umbrella Clause 

16.23

V. Conclusion 

16.84

A. The Effects of the Umbrella Clause  B. The Scope of the Umbrella Clause or the Conditions of Its Application 

16.26 16.52

17. Counterclaims in Investment Treaty Arbitration Mark A Clodfelter and Diana Tsutieva

I. Introduction 

17.01

II. Milestone Cases 

17.06

III. Counterclaims under the ICSID Convention 

17.19

IV. Counterclaims Under the UNCITRAL Rules 

17.68

A. Introduction to Article 46  B. Counterclaims Arising Directly out of the Subject Matter of the Dispute  C. Counterclaims Within the Scope of the Parties’ Consent  D. Counterclaims Otherwise Within ICSID’s Jurisdiction  E. Conclusion  A. Introduction  B. Ipso Facto Importation of Consent  C. The 1976 UNCITRAL Rules: Implied Modification by State Parties  D. The Connection Requirement under the New and Old UNCITRAL Rules  E. Conclusion 

V. Moving Forward: Greater Expectations in Counterclaim Practice 

xix

17.20 17.25 17.37 17.65 17.67 17.68 17.73 17.82 17.88 17.94

17.95

Contents 18. The State’s Corruption Defence, Prosecutorial Efforts, and Anti-​corruption Norms in Investment Treaty Arbitration Charles N Brower and Jawad Ahmad

I. Introduction 

18.01

II. Binary Outcomes of the Corruption Defence—​Can the Playing Field be Levelled? 

18.12

A. Preliminary Remarks Regarding Jurisdiction, Admissibility, and Merits  B. Illegality Where There Is a Legality Clause  C. Illegality Where There Is No Legality Clause  D. The State’s Obligation to Prosecute or Investigate and the Corruption Defence 

III. Anti-corruption Norms in Recent Investment Agreements 

A. Introduction  B. Independent Anti-​corruption Provisions—​the Japanese Treaties  C. Anti-​corruption Norms as a Part of Corporate Social Responsibility (CSR)—​the Canadian Treaties

IV. Conclusion

18.14 18.19 18.24 18.29

18.84 18.84 18.88

18.102

18.110

PART IV  GUIDE TO KEY SUBSTANTIVE ISSUES 19. The Law Applicable in Investment Treaty Arbitration Yas Banifatemi

I. Introduction 

19.01

II. Identification of the Law Chosen by the Parties 

19.04

III. Determination of the Applicable Law by the Arbitrators in the Absence of the Parties’ Agreement 

19.14

IV. Implications of the Specific Nature of Investment Treaties in the Choice of Law Process 

19.22

A. Choice of Law in Context  B. Variations on the Law of the Host State and International Law 

19.05 19.09

20. Fair and Equitable Treatment: Have Its Contours Fully Evolved? Katia Yannaca-​Small

I. Introduction 

20.01

II. Does FET Refer to Customary International Law or Is It an Autonomous Standard? 

20.08

A. The NAFTA Tribunals  B. Non-​NAFTA Tribunals  C. What Difference Does It Make Whether Fair and Equitable Treatment Refers to the Minimum Standard of Customary Law? 

20.12 20.20 20.25

III. The Normative Content of the Fair and Equitable Treatment Standard  20.28 A. Denial of Justice, Due Process  B. Transparency, Stability, and Legitimate Expectations  C. Obligation of Vigilance and Protection  D. Lack of Arbitrariness and Non-​discrimination 

IV. Conclusion 

20.31 20.45 20.87 20.90

20.98

xx

Contents 21. The National Treatment Obligation Andrea K Bjorklund

I. Introduction 

21.01

II. Precluding Nationality-​based Discrimination 

21.05

III. National Treatment in Practice 

21.17

A. The Like Circumstances Inquiry  B. Treatment Accorded the Investor  C. ‘Arbitrary and Discriminatory’ Treatment  D. Determining the Level of Treatment that Must Be Accorded a Foreign Investor  E. Objective Justifications for Differential Treatment: The Role of Burden Shifting in National Treatment Analysis 

IV. Reservations and Exceptions 

A. State, Provincial, or Municipal Government Measures  B. Measures to Protect Health, Safety, and the Environment C. Measures to Protect Local Culture

V. Conclusions

21.22 21.59 21.77 21.83 21.89

21.94

21.97 21.103 21.105

21.106

22. Indirect Expropriation and the Right to Regulate: Has the Line Been Drawn? Katia Yannaca-​Small

I. Introduction 

22.01

II. Basic Concepts of the Obligation to Compensate for Expropriation 

22.06

III. The Notion of ‘Property’ 

22.13

IV. Legal Instruments and Other Texts 

22.25

V. Main Sources of Jurisprudence 

22.35

VI. Criteria Indicating Whether an Indirect Expropriation Has Occurred 

22.49

A. The Iran–​US Tribunal  B. The European Court of Human Rights  C. Investor-​state Tribunals 

22.39 22.42 22.46

A. Degree of Interference with the Property Right  22.51 B. Duration of the Regulation  22.73 C. Economic Impact as the Exclusive Criterion  22.79 D. Character of Governmental Measures and the Police Powers of the State  22.85 E. Proportionality  22.97 F. Interference of the Measure with Reasonable Investment-​backed Expectations 22.109

VII. Conclusion

22.119

23. The MFN Clause and Its Evolving Boundaries Abby Cohen Smutny, Petr Polášek, and Chad Farrell

I. Introduction 

23.01

II. Historical Background 

23.04

III. Bilateral Investment Treaty Practice 

23.48

A. Origins  B. Work of the International Law Commission  C. Early Jurisprudence 

xxi

23.04 23.08 23.35

Contents A. MFN Clauses and Dispute Settlement  B. The Cases 

23.48 23.57

IV. Treaty-​making Practice and Investment Treaty Jurisprudence

23.114

V. Conclusion

23.118 PART V  REMEDIES AND COSTS

24. Interim Relief in Investment Treaty Arbitration Gabrielle Kaufmann-​Kohler, Aurélia Antonietti, and Michele Potestà

I. Introduction 

24.01

II. The Power to Grant Interim Relief 

24.03

A. Interim Relief in the ICSID System  B. Interim Relief under the UNCITRAL Arbitration Rules  C. Other Relevant Provisions 

24.04 24.11 24.17

III. Purpose of the Measures: Preserving the Respective Rights of the Parties  24.19 A. ICSID System  B. NAFTA Proceedings  C. UNCITRAL Arbitration Rules 

IV. Types of Measures 

A. Preservation of a Right  B. Preservation of the Status Quo/​Non-​aggravation of the Dispute  C. Preserving the Integrity of the Proceedings/​Preventing Prejudice to the Arbitral Process Itself  D. Preserving Evidence  E. Protection of the Tribunal’s Jurisdiction  F. Non-​frustration of the Award 

V. Requirements for Interim Relief 

24.20 24.28 24.29

24.35 24.37 24.47 24.62 24.65 24.70 24.84

24.92

A. The Initiative to Request Interim Relief  B. Jurisdiction of the Tribunal?  C. Prima Facie Case on the Merits? D. Urgency E. Necessity or Risk of Irreparable Harm

24.93 24.96 24.105 24.113 24.130

VI. Against Whom Can the Measures be Ordered?

24.144

VII. Effect of Interim Measures

24.147

VIII. Concurrent Jurisdiction of Domestic Courts

24.162

IX. Conclusion

24.168

A. ICSID Convention Cases B. Additional Facility Cases C. NAFTA Proceedings D. UNCITRAL Rules

24.148 24.154 24.157 24.158

A. ICSID Convention Proceedings B. Additional Facility Rules C. UNCITRAL Rules D. NAFTA Proceedings

xxii

24.163 24.165 24.166 24.167

Contents 25. Compensation and Damages in Investment Treaty Arbitration Irmgard Marboe

I. Introduction 

25.01

II. Applicable Legal Rules and Principles 

25.06

III. Causation 

25.26

IV. Valuation Date 

25.33

V. Limiting Circumstances 

25.40

VI. Valuation Methods 

25.56

VII. Conclusion 

25.70

A. Rules on State Responsibility  B. BIT Provisions on Compensation  C. Other BIT Provisions  D. Contractual Obligations 

A. Contributory Negligence  B. Mitigation of Damages  C. Country Risk 

25.07 25.13 25.18 25.21

25.41 25.44 25.52

A. Market Approach  B. Income Approach  C. Asset-​based or Cost Approach 

25.59 25.62 25.67

26. Third-​party Funding in Investment Treaty Arbitration Nigel Blackaby and Alex Wilbraham

I. Introduction 

26.01

II. Does Third-​party Funding Provoke Frivolous Claims? 

26.12

III. The Different Forms of Funding 

26.15

IV. Regulation of Litigation Funding 

26.23

V. Jurisdiction and Admissibility 

26.27

VI. Third-​party Funding and Liability for Costs 

26.34

VII. Disclosure of Third-​party Funding 

26.52

VIII. Concluding Remarks 

26.63

A. Non-​recourse Financing  B. Financing by Lawyers  C. Insurance  D. Equity Financing  E. Debtor in Possession Financing  F. Pro Bono or Charitable Funding  G. Common Interest Funding 

A. The Right to Recover Costs if Successful  B. Recovery of Funding Costs  C. Security for Costs 

A. Disclosure of a Third-​party Funder’s Identity  B. Should the Terms of Funding Agreements be Disclosed? 

xxiii

26.16 26.17 26.18 26.19 26.20 26.21 26.22

26.35 26.38 26.44 26.53 26.59

Contents PART VI  THE POST-​AWARD PHASE 27. Annulment of ICSID Awards: Is it Enough or Is Appeal around the Corner? Katia Yannaca-​Small

I. Introduction 

27.01

II. Scope and Application of Annulment under the ICSID Convention 

27.04

III. The Grounds for Annulment 

27.23

IV. Stay of Enforcement 

27.55

V. The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism 

27.70

A. Annulment: An Exceptional Recourse?  27.08 B. Annulment versus Appeal: A Thin Line in ICSID Annulment Proceedings  27.15 A. Improper Constitution of the Tribunal  B. Manifest Excess of Powers  C. Failure to State Reasons  D. Serious Departure from a Fundamental Rule of Procedure 

A. Past and Current Efforts to include Provisions on the Establishment of an Appeal Mechanism in Investment Agreements  B. What Lies Ahead? A Multilateral Solution?

VI. Conclusion

27.24 27.30 27.44 27.50

27.74 27.101

27.106

28. Review of non-​ICSID Awards by National Courts Kaj Hobér and Nils Eliasson

I. Introduction 

28.01

II. The Legal Framework for Review and Challenge of Investment Treaty Awards 

28.09

III. Decisions by National Courts 

28.14

A. Republic of Poland v Saar Papier Vertriebs GmbH  28.15 B. Russian Federation v Sedelmayer  28.18 C. Republic of Ecuador v Occidental Exploration & Production Company  28.26 D. Petrobart Ltd v Kyrgyz Republic and Kyrgyz Republic v Pertrobart Ltd  28.34 E. Czech Republic v Saluka Investments BV  28.45 F. Bayview Irrigation District 11 and Ors v Mexico  28.49 G. Czech Republic v European Media Ventures SA  28.57 H. Mexico v Cargill, Incorporated  28.66 I. Argentina v BG Group PLC  28.76 J. Energoalians (Currently Known as Komstroy) v Moldova  28.83 K. Ecuador v Chevron (USA) and Texaco  28.88 L. Sanum Investments Ltd v Lao People’s Republic  28.98 M. Russian Federation v Renta 4 S.V.S.A. et al. 28.117

IV. Discussion

A. Do National Courts Have Jurisdiction to Determine Challenges of Investment Treaty Awards? B. Is It Appropriate for National Courts to Review Investment Treaty Awards? C. What Standards of Review Do National Courts Adopt for Reviewing Challenges to the Jurisdiction of Investment Treaty Arbitral Tribunals?

V. Conclusion

28.127 28.128 28.134 28.145

28.159 xxiv

Contents 29. Enforcement of Investment Treaty Awards August Reinisch

I. Introduction 

29.01

II. Enforcement of Non-​ICSID Awards 

29.03

A. Foreign Arbitral Awards  B. Investment Awards as Commercial Disputes  C. Investment Treaty Arbitration and the Requirement of a Written Arbitration Agreement  D. Obligation of National Courts to Enforce Investment Awards 

III. Obstacles to the Recognition and Enforcement of Investment Awards  A. The Article V(1) Grounds for Refusing Enforcement of Investment Awards  B. The Article V(2) Grounds for Refusing Enforcement of Investment Awards  C. State Immunity as an Additional Hurdle 

IV. Enforcement of ICSID Awards 

A. The Autonomous International Law Obligation to Comply with ICSID Awards  B. Exclusivity  C. The Strict Obligation to Recognize and Enforce ICSID Awards  D. State Immunity Rules on Enforcement Measures as Remaining Obstacles  E. Other Failed Attempts to Enforce ICSID Awards 

29.04 29.06 29.10 29.12

29.13 29.16 29.29 29.44

29.64 29.66 29.68 29.71 29.75 29.82

V. Alternative Enforcement Mechanisms 

29.83

VI. Conclusion 

29.87

30. A Practical Guide: Research Tools in International Investment Law Julien Fouret

I. Introduction 

30.01

II. Arbitral Case Law and Public International Case Law 

30.08

III. International Treaties: Identification and Interpretation 

30.11

IV. Customary International Law 

30.21

V. Conclusion 

30.36

A. Case Law  B. Journal Reviews of Investment Arbitration Case Law 

A. Resources to Identify Investment Treaties  B. Fundamental Rules of Treaty Interpretation in Public International Law 

30.09 30.10 30.12 30.13

A. What Is International Custom and How Is a Customary Norm Created?  30.22 B. Means to Identify Customary Norms in Public International Law  30.27 C. Applicability and Relevance of Customary Norms in International Investment Law  30.33

Index 

837

xxv

TABLE OF CASES INTERNATIONAL Aanes v FILA, CAS 2000/​A/​317 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.86 Abaclat & Others v Argentine Republic, ICSID Case No ARB/​07/​5, Decision on Jurisdiction & Admissibility (Aug 4, 2011). . . . . . . . . . . . . . . . . . . . . 13.10, 15.50n85, 15.52, 26.22n47, 26.29 Abaclat & Others v Argentine Republic, ICSID Case No ARB/​07/​5, Decision on the Proposal to Disqualify a Majority of the Tribunal (Feb 4, 2014), . . . . . . . . . . . . . . . . . . 8.17, 8.83, 11.33–​11.36, 11.103n183, 11.112, 11.113 Abaclat & Others v Argentine Republic, ICSID Case No ARB/​07/​5, Procedural Order No 11 (June 27, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.136 Abaclat & Others v Argentine Republic, ICSID Case No ARB/​07/​5, Procedural Order No 13 (Sept 27, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.66 Aboilard (1905), 11 RIAA 71 (France v Haiti). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74n245 Antoine Abou Lahoud & Leila Bounafeh-​Abou Lahoud v Democratic Republic of the Congo, ICSID Case No ARB/​10/​4, Decision on Annulment (July 25, 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.38, 27.42 Accession Mezzanine Capital LP & Danabius Kereskedohaz v Hungary, ICSID Case No ARB/​12/​3, Decision on Respondent’s Notice of Jurisdictional Objections & Request for Bifurcation (Aug 8, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.13, 12.22 Accession Mezzanine Capital LP & Danabius Kereskedohaz v Hungary, ICSID Case No ARB/​12/​3, Decision on Respondents Objection Under Arbitration Rule 41(5) (Jan 16, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29n67 Achmea BV v Slovak Republic [I]‌, PCA Case No 2008/​13, Award on Jurisdiction, Arbitrability & Suspension (Oct 26, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.111 Achmea BV v Slovak Republic [II], PCA Case No 2013/​12, Award on Jurisdiction & Admissibility (20 May 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.32n69, 20.04n4 ADC Affiliate Ltd & ADMC Management Ltd v Hungary, ICSID Case No ARB/​03/​16 . . . . . . 25.04n6, 25.38, Award (Oct 2, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.25n26, 19.26, 26.35, 26.41 Adel A. Hamadi Al Tamimi v Oman, ICSID Case No ARB/​11/​13, Procedural Order No 6 (Mar 18, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.12n21 Adel A. Hamadi Al Tamimi v Oman, ICSID Case No ARB/​11/​13, Award (Oct 27, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.16n35 Adel A. Hamadi Al Tamimi v Oman, ICSID Case No ARB/​11/​13, Award (Nov 3, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.40, 14.34n109 Adem Dogan v Turkmenistan, ICSID Case No ARB/​09/​9 (Jan 15, 2016). . . . . . . . 26.10n26, 27.38 ADF Group Inc. v United States, ICSID Case No ARB (AF)/​00/​1, Award (Jan 9, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74, 20.14, 20.63, 21.25, 21.67, 30.29 Adriano Gardella S.p.A. v Republic of the Ivory Coast, ICSID Case No ARB/​74/​1, Award (Aug 29, 1977), 1 ICSID Rep. 283 (1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.06 Aegean Sea Continental Shelf (Greece v Turkey), Order of September 11, 1976, ICJ Rep. 1976 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.96n164, 24.131, 24.132 Aeroport Belbek LLC & Mr. Igor Valerievich Kolomoisky v Russia, PCA Case No 2014-​30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.104n185 AES Corporation v Argentine Republic, ICSID Case No ARB/​02/​17, Decision on Jurisdiction (Apr 26, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.71 AES Summit Generation Ltd & AES Tisza Erömü Kft v Republic of Hungary, ICSID Case No ARB/​07/​22, Award (Sept 23, 2010). . . . . . . . . . . . . . 9.30, 9.104n176, 152n30 AES Summit Generation Ltd & AES Tisza Erömü Kft v Republic of Hungary, ICSID Case No ARB/​07/​22, Decision on Annulment (June 29, 2012). . . . . . . . . . . . . . . . 27.42 AGIP v People’s Republic of the Congo ICSID Case No ARB/​77/​1, Award (Nov 30, 1979), 1 ICSID Rep. 306. . . . . . . . . . . . . . 17.26n70, 19.09n15, 24.66, 24.151

xxvii

Table of Cases Aguas del Tunari SA v Republic of Bolivia, ICSID Case No ARB/​02/​3, Decision on Jurisdiction (Oct 21, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.65–​15.67 Aguas del Tunari SA v Republic of Bolivia, ICSID Case No ARB/​02/​3, Decision on Jurisdiction (Oct 21, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.12 Aguas del Tunari SA v Republic of Bolivia, ICSID Case No ARB/​02/​3, NGO Petition to Participate as Amici Curiae (Aug 29, 2002) . . . . . . . . . . . . . . . . . . . . . . 9.77–​9.80, 9.85–​9.89, 10.74, 10.74n154 Aguas Provinciales de Santa Fe SA, Suez, Sociedad General de Aguas de Barcelona SA & InterAguas Servicios Integrales del Agua SA v Argentine Republic, ICSID Case No ARB/​03/​17, Order in Response to a Petition for Participation as Amicus Curiae (Mar 17, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.90 Ahmadou Sadio Diallo (Guinea v Democratic Republic of Congo) Compensation ICJ Rep. 322 2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.01n1 Ahmadou Sadio Diallo (Guinea v Democratic Republic of Congo) Compensation ICJ Rep. 322 2012, Preliminary Objections (May 24, 2007). . . . . 4.85, 10.33, 10.33n60, 25.01 Ahmonseto, Inc. & Others v Arab Republic of Egypt, ICSID Case No ARB/​02/​15, Award (June 18, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.26n61 AIG Capital Partners Inc. & CJSC Tema Real Estate Company v Republic of Kazakhstan, ICSID Case No ARB/​01/​6, Award (Oct 7, 2003) . . . . . . . . . . . . . . . . . . 15.29n48, 29.78, 29.82 AIG Capital Partners, Inc. & CJSC Tema Real Estate Company v Republic of Kazakhstan, ICSID Case No. ARB/​01/​6, Award (Oct 2, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.44n80 AJ van den Berg, on behalf of the Arbitral Tribunal in Dunkeld International Investment Ltd v Government of Belize, UNICTRAL, PCA Case No 2010-​13/​DUN-​BZ, Order No 6 (Mar 3 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.30 Aktau Petrol Ticaret AŞ v Kazakhstan, ICSID Case No ARB/​15/​8, Award (Nov 13, 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41n130 Alapli Elektrik B.V. v Republic of Turkey, ICSID Case No. ARB/​08/​13. . . . . . . . . . . . . . . . . 26.10n26 Alasdair Ross Anderson & Others v Republic of Costa Rica, ICSID Case No ARB (AF)/​07/​3, Award (May 19, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.63, 26.35 Alcoa Minerals of Jamaica Inc. v Jamaica, ICSID Case No ARB/​74/​2 Preliminary Award (July 6, 1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.24n25 Giovanni Alemanni & Others v Argentine Republic, ICSID Case No ARB/​07/​8, Decision on Jurisdiction & Admissibility (Nov 17, 2014) . . . . . . . . . . . . . . . . . . . . 11.33–​11.36, 11.112n197, 13.17, 15.17n23, 15.53n92, 26.10n26, 26.22n47, 26.30 Alex Genin, Eastern Credit Ltd, Inc. & AS Baltoil v Republic of Estonia, ICSID Case No ARB/​99/​2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1 Alex Genin, Eastern Credit Ltd, Inc. & AS Baltoil v Republic of Estonia, ICSID Case No ARB/​99/​2, Final Award (June 25, 2001) . . . . . . . . . . . . . . . . . . . . 20.39, 20.46 Almås v Poland, PCA Case No 2015-​13, Award (June 27, 2016). . . . . . . . . . . . . . . . . . . 14.47, 14.50 Alpha Projektholding GmbH v Ukraine, ICSID Case No ARB/​07/​16, Award (Nov 8, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.41, 20.46, 20.55, 20.90n197 Alpha Projektholding GmbH v Ukraine, ICSID Case No ARB/​07/​16, Decision on Challenge to Arbitrator (Mar 19, 2010). . . . . . . 8.62n115, 11.78n133, 11.91n155, 11.100n175 Alps Finance & Trade AG v Slovak Republic (UNCITRAL), Award (Mar 5, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.87, 11.58 The Ambatielos Claim 1952 ICJ 28 (Judgment on Preliminary Objection of July 1). . . . . . . . . . 23.43 The Ambatielos Claim 1953 ICJ 10 (Judgment on the Obligation to Arbitrate of May 19). . . . . 23.43 The Ambatielos Claim (Greece v UK), XII RIAA 91 (Award of Mar 6, 1956). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.43–​23.47,  23.65 Ambiente Ufficio S.p.A. & Others v Argentine Republic, ICSID Case No ARB/​08/​09, Decision of Jurisdiction & Admissibility (Feb 8, 2013). . . . . . . . . . . . . . . . . 6.19n40, 6.19n42, 11.20n19, 11.33–​11.36, 11.77, 11.93n163, 11.112, 13.14–​13.16, 19.01, 26.29 Amco Asia Corporation et al. v Republic of Indonesia, ICSID Case No ARB/​81/​1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1, 27.38, 27.40, 27.43, 27.44, 27.44n107, 27.47

xxviii

Table of Cases Amco Asia Corporation et al. v Republic of Indonesia, ICSID Case No ARB/​81/​1, Decision on Annulment (May 16, 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.18n38, 27.09n17, 27.18 Amco Asia Corporation et al. v Republic of Indonesia, ICSID Case No ARB/​81/​1, Decision on Jurisdiction (Sept 25, 1983). . . . . . . . . . . . . . 4.33, 8.15n15, 8.81, 9.24, 10.67, 14.27n78, 14.62 Amco Asia Corporation et al. v Republic of Indonesia, ICSID Case No ARB/​81/​1, Decision on Request for Provisional Measures (Dec 9, 1983) ICSID Rep. 1993 . . . . . . . . 24.21, 24.48, 24.58 Decisions on the Stay of Enforcement (May 17 1985). . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Amco Asia Corporation et al. v Republic of Indonesia, ICSID (Resubmitted), Decision on Jurisdiction (May 10, 1988). . . . . . . . . . . . . . . . . . . . . . . . 17.06, 17.66, 17.89, 27.09n17, 27.18 Amco Asia Corporation et al. v Republic of Indonesia, ICSID (Resubmitted), Award (June 5, 1990). . . . . . . . . . . . . . . . . . . . . 25.23, 25.28, 25.45n86, 25.66n125, 27.09n17, 27.18, 27.38, 27.47, 27.48 Amco Asia Corporation et al. v Republic of Indonesia, ICSID (Resubmitted), Interim Order (March 2, 1991). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Amco Asia Corporation et al. v Republic of Indonesia, ICSID (Resubmitted), Second Decision on Annulment of the 1990 Award & the 1990 Supplemental Award (Dec 17, 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.19 American Manufacturing & Trading Inc. v Democratic Republic of the Congo, ICSID Case No ARB/​93/​1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n4 American Manufacturing & Trading Inc. v Republic of Zaire, ICSID Case No ARB/​93/​1, Award (Feb 21, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.67, 20.88 Amoco International Finance v Iran 15 IUSCTR 189. . . . . . . . . . . . . . . . . . . . . . 22.18, 25.29, 25.38 Amoco International Finance v Iran 15 IUSCTR 189, Partial Award (July 14, 1987) . . . . . . 25.38n67 Ampal-​American Israel Corporation & Others v Arab Republic of Egypt, ICSID Case No ARB/​12/​11, Decision on Jurisdiction (Feb 1, 2016). . . . . . . . . . . 10.117, 12.28 AMTO Llc v Ukraine, Case No 080/​2005 SCC, Final Award (Mar 26, 2008). . . . . . . . 2.12, 2.27n37, 14.34n109, 14.45, 14.47, 14.90, 16.69, 17.56n172 Anglo-​French Continental Shelf Case (United Kingdom v France) (1977, 1978) 18 R.I.A.A. 3. . . 4.28 Anglo-​Iranian Oil Co. (UK v Iran), ICJ 1951, Interim Protection Order (July 5, 1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.19, 24.49, 24.141n246 Anglo-​Iranian Oil Co. (UK v Iran), ICJ 1951, Judgment on Preliminary Objection (July 22, 1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.19n34, 23.36–​23.39 Ansung Housing Co. Ltd v People’s Republic of China, ICSID Case No ARB/​14/​25, Award (Mar 9, 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.111 Apotex Holdings Inc. & Apotex Inc. v United States, ICSID Case No ARB (AF)/​12/​1, Award (Aug 25, 2014). . . . . . . . . . . . . . . . 11.107n189, 12.06, 12.19, 20.18, 21.18n39, 21.47, 21.93 Apotex Holdings Inc. & Apotex Inc. v United States, ICSID Case No ARB (AF)/​12/​1, Procedural Order No 2 (Oct 11, 2011). . . . . . . . . . . . . . . . 9.73, 9.75 Application of the Convention on the Prevention & Punishment of the Crime of Genocide, Judgment, ICJ Reports 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.10 Application of the Convention on the Prevention & Punishment of the Crime of Genocide (Bosn. & Herz. v Serb. & Montenegro). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.93 Application of the Convention on the Prevention & Punishment of the Crime of Genocide (Bosn. & Herz. v Serb. & Montenegro), Counter-​Claims Order (Dec 17, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.34n102 Application of the Convention on the Prevention & Punishment of the Crime of Genocide (Bosnia & Herzegovina v Serbia & Montenegro), Order of September 13, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.42n85 Archer Daniels Midland Co. et al. v United Mexican States, ICSID Case No ARB (AF)/​04/​05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1 Archer Daniels Midland Co. et al. v United Mexican States, ICSID Case No ARB (AF)/​04/​05, Award, redacted version (Nov 21, 2007) . . . . 9.20n31, 21.36, 21.69, 22.50, 25.29n50, 28.70n106 Archer Daniels Midland Co. et al. v United Mexican States, ICSID Case No ARB (AF)/​04/​05, Order of the Consolidation Tribunal (May 20, 2005) . . . . . . . 10.124

xxix

Table of Cases Franck Charles Arif v Republic of Moldova, ICSID Case No ARB/​11/​23, Award (Apr 8, 2013) . . . . . . . . . . . . . . . . . . . . . . . . 11.92n159, 18.49, 20.60, 20.62n136, 23.49 Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v Rwanda), ICJ Rep. 2006. . . . . . . . . 17.26n73, 24.96n165 Asian Agricultural Products Ltd v Republic of Sri Lanka, ICSID Case No ARB/​87/​3, Final Award (June 27, 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.101n231, 17.26n70, 19.05–​19.07, 19.05n5, 19.23–​19.24, 20.88, 25.69 Asylum Case (Columbia v Peru), Judgment (Nov 27, 1950) [1950] ICJ Rep. . . . . . . . . . . . . . . . 30.21 ATA Construction, Industrial & Trading Company v Jordan, ICSID Case No ARB/​08/​2, Award (May 18, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.38 ATA Construction, Industrial & Trading Company v Jordan, ICSID Case No ARB/​08/​2, Order Taking Note of the Discontinuance of the Proceeding (July 11, 2011). . . . . . . . . . . . 26.36 Atlantic Richfield Co. & the Islamic Republic of Iran et al. No 50-​396-​1 IUSCTR. Interim Award (May 8, 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.146 Atlantic Triton Company Ltd v People’s Revolutionary Republic of Guinea, ICSID Case No ARB/​84/​1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.44n53, 24.72, 24.86, 24.163 Atlantic Triton Company Ltd v People’s Revolutionary Republic of Guinea, ICSID Case No ARB/​84/​1, Award (Apr 21, 1986) . . . . . . . . . . . . . . . . . . . . . . 17.06, 19.09n14 Austrian Airlines v Slovak Republic, UNCITRAL, Final Award (Oct 9, 2009). . . . . . 23.35n85, 23.98 Autopista Concesionada de Venezuela CA v Bolivarian Republic of Venezuela, ICSID Case No ARB/​00/​5 Award (Sept 23, 2003) . . . . . . . . . . 14.64n224, 19.09n14, 19.19n39 Aven et al. v Republic of Costa Rica, UNCITRAL, UNCT/​15/​3, Procedural Order No 2 (Feb 4, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08 AWG Group Ltd v Argentine Republic, UNCITRAL, Decision on Liability (July 30, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.27n65, 20.55, 22.60n95 Robert Azinian, Kenneth Davitian & Ellen Baca v United Mexican States, ICSID Case No ARB (AF)/​97/​2, Mexico (1998), 5 ICSID Rep. 269. . . . . . . . . . . . . . . . . . 14.63 Robert Azinian, Kenneth Davitian & Ellen Baca v United Mexican States, Case No. ARB (AF)/​97/​2, Award (Nov. 1, 1999) . . . . . . . . . 10.119n280, 10.119n281, 14.63n220, 21.18 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Decision on Jurisdiction (Feb 5 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.77n122 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Decision on Jurisdiction (Dec 8, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.107, 19.01, 19.24 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Award (July 14, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.15n14, 15.50n83, 15.53, 16.71, 16.78–​16.80, 20.23, 20.25, 20.88, 22.103, 22.117 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Award (July 26, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.50n29 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Decision on Annulment (Sept 1, 2009) . . . . . . . . . . . . . . . . . . . . . . . 25.04n6, 27.24–​27.26, 27.29, 27.62 Azurix Corp. v Argentine Republic, ICSID Case No ARB/​01/​12, Decision on the Annulment Application of the Argentine Republic (Sept 1, 2009). . . . . . . . 6.53n108, 15.16 B-​Mex LLC et al. v United Mexican States, ICSID Case No ARB (AF)/​16/​3, Procedural Order No 1 (Apr 4, 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.28 Balkan Energy Company v Republic of Ghana, UNCITRAL, Award (Apr 1, 2014) . . . . . . . . . . 17.06 Michael Ballantine & Lisa Ballantine v Dominican Republic, UNCITRAL, PCA Case No 2016-​17, Procedural Order No 2 (Apr 21, 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.20 Barcelona Traction see Case Concerning Barcelona Traction, Light & Power Company, Limited Cas(Belg. v Spain) (Feb 5, 1970) (1970) Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Pakistan, ICSID Case No ARB/​03/​29, Decision on Jurisdiction (Nov 14, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.42, 11.74n122, 13.07, 14.51n172, 15.42n69, 15.51, 15.56, 24.87, 30.04 Bayindir Insaat Turizm Ticaret Ve Sanayi AS v Pakistan, ICSID Case No ARB/​03/​29, Award (Aug 27, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.47n106, 21.22, 21.53, 21.75

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Table of Cases Bayview Irrigation District et al. v Mexico, ICSID Case No ARB (AF)/​05/​1, Award (June 19, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.106, 11.107, 28.51, 28.75 BdB v Netherlands (Communication No 273/​1989), Human Rights Committee, Report 1989, U.N. Doc. A/​44/​40 (1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 Bear Creek Mining Corporation v Republic of Peru, ICSID Case No ARB/​14/​21, Procedural Order No 6 (July 21, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.117, 9.150 Behring International, Inc. & the Islamic Republic of Iran Air Force et al., Interim Award No 46-​382-​3 (Feb 22, 1985). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.31, 24.46n56, 24.141, 24.142 Beijing Urban Construction Group Co. Ltd v Republic of Yemen, ICSID Case No ARB/​14/​30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.95n217, 10.97 Bendone-​Derossi International & Government of the Islamic Republic of Iran, Award No 352-​375-​1 ITM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.57n176 Bernhard von Pezold & Others v Zimbabwe, ICSID Case No ARB/​10/​15 . . . . . . . . . . . 9.107, 9.143, 11.40, 11.68n104, 11.78n133, 11.79, 13.19–​13.20 Bernhard von Pezold & Others v Zimbabwe, ICSID Case No ARB/​10/​15, Award (July 28, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.25n26, 17.26 Bernhard von Pezold & Others v Zimbabwe, ICSID Case No ARB/​10/​15, Decision on Applicant’s Application for Provisional Measures to Exclude Consideration of the Merits in Part I (Oct 13, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.20n12 Vladimir Berschader & Moïse Berschader v Russian Federation, SCC Case No 080/​2004. . . . . . . 9.40 Award (Apr 21, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.19n21, 23.86n178, 23.90–​23.94 BG Group Plc v Argentine Republic, UNCITRAL, Final Award (Dec 24, 2007). . . . . . . . . . . . . 1.53n31, 28.76, 28.79, 29.23 William Bikoff & George Eisenpresser & Islamic Republic of Iran, Award No 138-​82-​2 (June 29, 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.57n176 Bilcon v Government of Canada, PCA Case No 2009-​04, Award on Jurisdiction & Liability (Mar 17, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.02, 21.15, 21.18, 21.56 Rupert Binder v Czech Republic, UNCITRAL, Final Award (Redacted) (July 15, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.41n90, 20.43, 20.73n160, 20.92 Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania, ICSID Case No ARB/​05/​22, Award (July 24, 2008) . . . . . . . . . . . . . . . . 20.26, 20.69, 25.29n50 Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania, ICSID Case No ARB/​05/​22, Procedural Order No 1 (Mar 31, 2006). . . . . . . . . . . . . . 24.23n19, 24.27, 24.66, 24.116 Biwater Gauff (Tanzania) Ltd v United Republic of Tanzania, ICSID Case No ARB/​05/​22, Procedural Order No 3 (Sept 29, 2006). . . . . . . 9.20n29, 9.25, 9.29, 9.97, 9.99–​9.102, 9.143, 11.67, 14.51n175, 14.62n214, 15.46 Blue Bank International & Trust (Barbados) Ltd v Bolivarian Republic of Venezuela, ICSID Case No Arb/​12/​20, Decision on the Parties’ Proposal to Disqualify the Majority of the Tribunal (Nov 12, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.16, 8.17 Blue Bank International & Trust (Barbados) Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB/​12/​20, Award (Apr 26, 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . 13.59n122 Boeing et al. & the Islamic Republic of Iran, Interim Award No 34-​222-​1 (Feb 17, 1984). . . . . 24.141 Border Timbers Ltd, Timber Products International (Private) Ltd & Hangani Development Co. (Private) Ltd v Republic of Zimbabwe, ICSID Case No ARB/​10/​25. . . . . . . . . . . . . . . 24.20n12 Border Timbers Ltd, Timber Products International (Private) Ltd & Hangani Development Co. (Private) Ltd v Republic of Zimbabwe, ICSID Case No ARB/​10/​25, Procedural Order No 2 (June 26, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.107n184, 9.143 Border Timbers Ltd, Timber Products International (Private) Ltd & Hangani Development Co. (Private) Ltd v Republic of Zimbabwe, ICSID Case No ARB/​10/​25, Procedural Order No 5 (Apr 3, 2013) . . . . . . . . . . . . . . . . . 24.62, 24.122 Bosh International, Inc. & B&P Ltd Foreign Investments Enterprise v Ukraine, ICSID Case No ARB/​08/​11, Award (Oct 25, 2012) . . . . . . . . . . 14.34n109, 14.41, 14.42n143, 14.46, 14.84, 16.74, 20.30n67

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Table of Cases BP America Production Co. & Others v Argentine Republic, ICSID Case No ARB/​04/​8, Decision on Jurisdiction (July 27, 2006). . . . . . . . . . . . . . . . . . . . 16.37n52 Brandes Investment Partners, LP v Bolivarian Republic of Venezuela, ICSID Case No ARB/​08/​3, Decision on the Respondent’s Objection Under Rule 41(5) of the ICSID Arbitration Rules (Feb 2, 2009) . . . . . . . . . . . . . . . . . . . . . 7.26n54, 7.28, 7.28n62 Brazilian Loans Case (Braz. v Fr.) 1929 PCIJ (ser. A) No 21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.55 Bridas v Turkmenistan, Third Partial Award & Dissent (Sept 6, 2000), ICC Case No 9058/​FMS/​KGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.44n81 Briegel v Germany (1923) 3 MAT 358. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.64n222 BSG Resources Ltd, BSG Resources (Guinea) Ltd & BSG Resources (Guinea) SÀRL v Republic of Guinea, ICSID Case No ARB/​14/​22, Procedural Order No 2 (Sept 17, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.37 BSG Resources Ltd, BSG Resources (Guinea) Ltd & BSG Resources (Guinea) SÀRL v Republic of Guinea, ICSID Case No ARB/​14/​22, Procedural Order No 3 (Nov 25, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.85n138 Bureau Veritas, Inspection, Assessment & Control BV v Republic of Paraguay, ICSID Case No ARB/​07/​9, Decision of the Tribunal on Objections to Jurisdiction (May 29, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.42n65, 11.110, 11.111, 15.17n22, 15.23n31, 15.50n83 Bureau Veritas, Inspection, Assessment & Control BV v Republic of Paraguay, ICSID Case No ARB/​07/​9, Decision on Jurisdiction (Oct 9, 2012) . . . . . . . . . . 14.51n172, 16.41, 16.49, 16.76 Burimi SRL & Eagle Games SA v Republic of Albania, ICSID Case No ARB/​11/​18, Procedural Order No 1 & Decision on Bifurcation (Apr 18, 2012). . . . . . . . . . . . . . . . . . . 12.25 Burimi SRL & Eagle Games SA v Republic of Albania, ICSID Case No ARB/​11/​18, Procedural Order No 2 (May 3, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.87, 24.136 Burlington Resources Inc. & Others v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No ARB/​08/​5. . . . . . . . . . . 4.04, 8.17, 15.23 Burlington Resources Inc. & Others v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No ARB/​08/​5, Procedural Order No 1 on Burlington Oriente’s Request for Provisional Measures (June 29, 2009). . . . . . . . . . 24.25–​24.26, 24.27, 24.42, 24.52, 24.75n121, 24.92, 24.117, 24.135, 24.139 Burlington Resources Inc. & Others v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No ARB/​08/​5, Decision on Jurisdiction (June 2, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.59, 16.73 Burlington Resources Inc. & Others v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No ARB/​08/​5, Decision on Liability (Dec 14, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.20, 22.70, 22.84, 24.152 Burlington Resources Inc. & Others v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No ARB/​08/​5, Decision on Ecuador’s Counterclaims (Feb 7, 2017). . . . . . . . . . . . . . . . . . . . . . . . . . . 17.16n44, 17.19n59, 17.59n182 Camuzzi International SA v Argentine Republic, ICSID Case No ARB/​03/​7, Decision on Jurisdiction (May 11, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.104n242 Camuzzi International SA v Argentine Republic, ICSID Case No ARB/​03/​7, Decision on Jurisdiction (June 10, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.69 Canadian Cattlemen for Fair Trade v United States, NAFTA/​UNCITRAL, Award on Jurisdiction (Jan 28, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14, 11.107 UNCITRAL, Decision on the Place of Arbitration, Filing of a Statement of Defence and Bifurcation of the Proceedings (Jan 23, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.16 Canfor Corp. v United States of America and Terminal Forest Products Ltd. v United States of America, UNCITRAL, Decision on Preliminary Question (June 6, 2006) . . . . . 13.22–​13.23, 13.45 Canfor Corporation v United States of America; Tembec Inc. et al. v United States of America & Terminal Forest Products Ltd v United States of America, UNCITRAL, Order of the Consolidation Tribunal (Sept 7, 2005). . . . . . . . . . . . . . . . . . . . . . . . . 1.106n60, 9.20n29, 9.129 Capital Financial Holdings Luxembourg SA v Republic of Cameroon, ICSID Case No ARB/​15/​18 Award (June 22, 2017) . . . . . . . . . . . 11.70n108, 11.92, 11.92n160

xxxii

Table of Cases Caratube International Oil Company LLP & Devincci Salah Hourani v Republic of Kazakhstan, ICSID Case No ARB/​13/​13, Decision on the Proposal for Disqualification of Mr. Bruno Boesch (Mar 20, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . .8.17, 8.90, 10.55, 11.71, 11.73n120, 11.92n159, 13.21, 13.36 Caratube International Oil Company LLP & Devincci Salah Hourani v Republic of Kazakhstan, ICSID Case No ARB/​13/​13, Decision on the Claimant’s Request for Provisional Measures (Dec 4, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.55n73, 24.98n168, 24.136 Caratube International Oil Company LLP & Devincci Salah Hourani v Republic of Kazakhstan ICSID Case No ARB/​13/​13, Award (Sept 27 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.11 Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/​08/​12, Decision Regarding Claimant’s Application for Provisional Measures (July 31, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.55n73 Caratube International Oil Company LLP v Republic of Kazakhstan, ICSID Case No ARB/​08/​12, Decision on Annulment (Feb 21, 2014). . . . . . . 27.42, 27.44n107 Cargill Inc. v United Mexican States, ICSID Case No ARB (AF)/​05/​2 . . . . . . . . . . . . . . . . . . . . 25.11 Cargill Inc. v United Mexican States, ICSID Case No ARB (AF)/​05/​2, Award (Sept 18, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.47n106, 20.49, 21.15, 21.36, 29.20 Case Concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Georgia v Russian Federation), Order (Oct 15, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.115n195, 24.116n200 Case Concerning Armed Activities on the Territory of Congo, Counter-​Claims Order (Nov 29, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.34n102 Case Concerning Barcelona Traction, Light & Power Company, Ltd Cas (Belgium v Spain) (Feb 5, 1970) . . . . . . . . . . . . . . . . . 4.85, 10.25–​10.29, 10.25n43, 10.28n53, 10.32, 10.38n67, 10.60, 10.60n106, 10.100 Case Concerning Border and Transborder Armed Actions (Nicaragua v Honduras) (1986). . . . . 13.34 Case Concerning Delimitation of the Maritime Boundary in the Gulf of Maine Area, Gulf of Maine ICJ Reports 1984, 246. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.28, 14.73 Case Concerning German Interests in Polish Upper Silesia & the Factory at Chorzów (Ger. v Pol.), 1926 PCIJ (ser. A) No 7 (May 25, 1926). . . . . . 14.16, 15.07, 15.45n73, 22.15, 25.07, 25.10 Case Concerning German Interests in Polish Upper Silesia & the Factory at Chorzów (Ger. v Pol.), 1926 PCIJ (ser. A) No 7 (May 25, 1926), Judgment No 13 (Claim for Indemnity) (Merits) (Sept 13, 1928). . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.15, 26.41 Case Concerning Payment in Gold of Brazilian Federal Loans Issued in France (France v Brazil), 1929 PCIJ (ser. A) Nos 21-​22 (July 12, 1929) . . . . . . . . . . . . . . . . . . 15.45n73 CC/​Devas (Mauritius) Ltd & Others v India, PCA Case No 2013-​09, Decision on the Respondent’s Challenge to Hon. Marc Lalonde as Presiding Arbitrator & Professor Francisco Orrego Vicuña as Co-​Arbitrator (Sept 30, 2013) . . . . . . . . . . . . . . . . . . . . . 8.95–​8.97 CDC Group plc v Republic of the Seychelles, ICSID Case No ARB/​02/​14, Award (Dec 17, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.95n217 CDC Group plc v Republic of the Seychelles, ICSID Case No ARB/​02/​14, Decision on Whether or Not to Continue Stay & Order (July 14, 2004). . . . . . . . . . . 27.58n158 CDC Group plc v Republic of the Seychelles, ICSID Case No ARB/​02/​14, Decision on Annulment (June 29, 2005). . . . . . . . . . . . . . . . . . . . . . . . 27.13, 27.16n30, 27.31, 27.40, 27.47 CEMEX Caracas Investments BV & CEMEX II Caracas Investments BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​08/​15, Decision on the Claimant’s Request for Provisional Measures (Mar 3, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.06n4, 24.53, 24.136 CEMEX Caracas Investments BV & CEMEX II Caracas Investments BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​08/​15, Decision on Jurisdiction (December 30, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.106n246 Central European Aluminium Company (CEAC) v Montenegro, ICSID Case No ARB/​14/​8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.88, 12.12 Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v Nicaragua), Provisional Measures, Order (Mar 8, 2011), ICJ Rep. 2011. . . . . . . . . . . . . . . . . . . . 24.106n181 Certain Criminal Proceedings in France (Republic of the Congo v France), Provisional Measure, Order of 17 June, 2003, ICJ Reports 2003. . . . . . . . . . . . . . . . . . . . . . 24.115n195, 24.132n222

xxxiii

Table of Cases Československá Obchondní Banka AS v Slovak Republic, ICSID Case No ARB/​97/​4 (Dec 129, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 Československá Obchondní Banka AS v Slovak Republic, ICSID Case No ARB/​97/​4, Decision of the Tribunal on Objections to Jurisdiction (May 24, 1999). . . . 10.95n217, 10.96, 11.21n20, 11.25n26, 11.30, 11.30n34, 11.53, 11.54, 11.65, 26.27 Československá Obchondní Banka AS v Slovak Republic, ICSID Case No ARB/​97/​4, Orders No 4 & No 5 (Jan 11, 1999 & Mar 1, 2000). . . . . . . . . . . . . . 24.74 Chagos Marine Protected Area Arbitration (Mauritius v U.K.), Reasoned Decision on Challenge (Nov 30, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.59n105 Champion Trading Co. et al. v Egypt, ICSID Case No ARB/​02/​9. . . . . . . . . . . . . . . 10.18, 10.18n32 Champion Trading Co. et al. v Egypt, ICSID Case No ARB/​02/​9, Award (Oct 27, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.22, 21.37 Chemtura Corporation v Government of Canada (UNCITRAL), Award (Aug 2, 2010). . . . . . . 22.59 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23. . . . . . . . . . . 29.25 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Order on Interim Measures (May 14, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.61, 24.64, 24.168 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Order for Interim Measures (Feb 9, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.104, 24.125 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Procedural Order No 8 (Apr 18, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.144 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, First Interim Award on Interim Measures (Jan 25, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.125 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Second Interim Award on Interim Measures (Feb 16, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.146 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Third Interim Award on Jurisdiction & Admissibility (Feb 27, 2012) . . . . . . . . . . . . . . . . . . . 11.37n54 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 2009-​23, Fourth Interim Award (Feb 7, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.146 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 34877, Interim Award (Nov 1, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.37n54 Chevron Corporation & Texaco Petroleum Co. v Ecuador, PCA Case No 34877, Final Award (Aug 31, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.11 Chorzów Factory see Case Concerning German Interests in Polish Upper Silesia & the Factory at Chorzów (Ger. v Pol.), 1926 P.C.I.J. (ser. A) No 7 (May 25, 1926) Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 2 (Feb 5, 2013). . . . . . . . . . . . . . . . . . . . . . . . . 6.21 Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 3 (Mar 4, 2013). . . . . . . . . . . . . . . . 24.101, 24.137 Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 4 (Mar 4, 2013). . . . . . . . . . . . 24.23n20, 24.25n23 Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 9 (Aug 7, 2014). . . . . . . . . . . . . . 24.78n127, 24.92 Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 14 (Dec 22, 2014). . . . . . . . . . . . 24.56, 24.94n161 Churchill Mining PLC & Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case No ARB/​12/​14 & 12/​40, Procedural Order No 15 (Jan 12, 2015) . . . . . . . . . . . . . . . 12.29 City Oriente Ltd v Republic of Ecuador & Empresa Estatal Petroleos del Ecuador, ICSID Case No ARB/​06/​21, Decision on Provisional Measures (Nov 19, 2007). . . . . . . 24.116, 24.119n206, 24.121, 24.134, 24.139, 24.142, 24.149 City Oriente Ltd v Republic of Ecuador & Empresa Estatal Petroleos del Ecuador, ICSID Case No ARB/​06/​21, Decision on Revocation of Provisional Measures & Other Procedural Matters (May 13, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.42 Clayton & Others v Government of Canada, UNCITRAL, PCA Case No 2009-​04, Procedural Order No 20 (Jan 5, 2016). . . . . . . . . . . . . . . . . . 12.08n14, 12.14, 14.19, 14.24n67, 14.38n118 CME Czech Republic BV v Czech Republic, UNCITRAL, Partial Award (Sept 13, 2001) . . . . . . . . . . . . . 1.104n59, 4.69n28, 10.115, 14.45, 21.82, 22.61, 29.08, 29.15

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Table of Cases CME Czech Republic BV v Czech Republic, UNCITRAL,, Final Award (Mar 14, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.12, 19.12n26, 25.33, 25.42, 25.44n80 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/​01/​08 . . . . . . . . . . . . . . . . . . . . . . . . . . 27.21, 27.38, 27.40, 27.47, 27.48, 27.71 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/​01/​08, Decision on Jurisdiction (July 17, 2003). . . . . . . . . . . . . . . . . . . . 4.29n11, 4.66n25, 10.103, 10.103n237, 10.103n240, 14.80, 15.77n123, 19.01 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/​01/​08, Award (May 12, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.15n14, 15.77, 16.57, 16.63, 16.82, 16.83, 20.54, 20.61, 20.62, 20.65, 20.91, 20.96, 21.11n18, 22.63, 25.48, 29.82 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/​01/​08, Decision on Stay of Enforcement (Sept 1, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 CMS Gas Transmission Company v Argentine Republic, ICSID Case No ARB/​01/​08, Decision on Annulment (Sept 25, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.51n98 Commerce Group Corp. & San Sebastian Gold Mines Inc. v El Salvador, ICSID Case No ARB/​09/​17, Public Hearing (Nov 17, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.142 Commerce Group Corp. & San Sebastian Gold Mines Inc. v El Salvador, ICSID Case No ARB/​09/​17, Award (Mar 18, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . 6.43n88, 7.01n1 Commerce Group Corp. & San Sebastian Gold Mines Inc. v El Salvador, ICSID Case No ARB/​09/​17, Decision on El Salvador’s Application for Security for Costs (Sept 20, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.20n12, 26.47 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1, 27.31, 27.33n68 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Award (Nov 21, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . 15.60–​15.64,  15.76 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Decision on the Challenge to the President of the Committee (3 Oct 3, 2001). . . . . . . . . . 8.15n15, 9.29, 9.74, 9.85, 9.92–​9.95, 9.102, 9.137 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Decision on Annulment (July 3, 2002) . . . . 14.80, 15.41–​15.42, 15.42n69, 15.45, 15.47, 15.53, 15.60, 15.61, 15.70, 15.71, 15.76, 19.30, 27.07, 27.20, 27.44, 27.46–​27.47 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Second Award (Aug 20, 2007) (Vivendi v Argentina II). . . . . . . . 15.15n15, 15.16, 15.47, 20.23, 22.65, 25.04n6, 25.38n68 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award (Nov 4, 2008) . . . . . . . . . . . . . . . . . . 27.58n135 Compañía de Aguas del Aconquija SA & Vivendi Universal SA v Argentine Republic, ICSID Case No ARB/​97/​3, Second Decision on Annulment (Aug 10, 2010) (Vivendi v Argentina II). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.24, 27.27–​27.28, 27.47, 27.67 Compañía del Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/​96/​1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.83 Compañía del Desarrollo de Santa Elena SA v Republic of Costa Rica, ICSID Case No ARB/​96/​1, Final Award (Feb 17, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . 19.11 Companie d’Exploitation du Chemin de Fer Transgabonais v Gabonese Republic, ICSID Case No ARB/​04/​5, Decision on Stay of Enforcement of the award (Mar 13, 2009). . . . . . 27.58n135 Companie d’Exploitation du Chemin de Fer Transgabonais v Gabonese Republic, ICSID Case No ARB/​04/​5, Decision on Annulment (May 11, 2010). . . . . . . . . . . 27.24, 27.28 Company General of the Orinoco Case (France v Venezuela), 10 RIAA 250 (1906) . . . . . . . . . . 15.08 Computer Sciences Corp. v Iran et al. (1986-​I) 10 IUSCTR 269. . . . . . . . . . . . . . . . . . . . . . . . . 14.42 Concessions des Phares de l’Empire Ottoman (1956) 12 RIAA 155 (France v Greece). . . . . . . . . 14.62 Condorelli (1984-​VI) 189 RdC 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.51n174 ConocoPhillips Company et al. v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​30, Decision on the Proposal to Disqualify L. Yves Fortier, Q.C. Arbitrator (Feb 27, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.14, 8.17, 8.62

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Table of Cases ConocoPhillips Company et al. v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​30, Decision on the Proposal to Disqualify a Majority of the Tribunal (May 5, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.17, 8.84, 8.86 Consistency of Certain Danzig Legislative Decrees with the Constitution of the Free City, Advisory Opinion, 1935 P.C.I.J. (ser. A/​B) No 65 (Dec 4, 1935) . . . . . . . . . . . . . . . . . 15.45n73 Consortium Groupement LESI-​DIPENTA v République Algérienne Démocratique et Populaire, ICSID Case No ARB/​03/​08, Award (Jan 10, 2005). . . . . . . . . . . 11.91, 11.97n169, 11.100n175, 16.46, 16.46n76 Consortium RFCC v Kingdom of Morocco, ICSID Case No ARB/​00/​6. . . . 6.66n140, 14.88, 15.12, 15.12n9, 15.21n29, 15.50n83, 15.53n92 Consortium RFCC v Kingdom of Morocco, ICSID Case No ARB/​00/​6, Award (Dec 22, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.22, 21.70 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/​03/​9. . . . . . . . . 27.02n1 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/​03/​9, Decision on Jurisdiction (Feb 22, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.66, 30.13 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/​03/​9, Award (Sept 5, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.44, 16.83, 20.03, 20.70, 25.49 Continental Casualty Company v Argentine Republic, ICSID Case No ARB/​03/​9, Decision by ad hoc Committee on Continental Casualty Company’s preliminary objection to Argentina’s application for annulment (Oct 23, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.62 Convial Callao SA & CCI-​Compañía de Concesiones de Infraestructura SA v Republic of Peru, ICSID Case No ARB/​10/​2, Decision on Application for Provisional Measures (Feb 22, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.25, 24.57 Corfu Channel (UK v Albania) (Damages) [1949] ICJ Rep. 243. . . . . . . . . . . . . . . . . . . . . . . 25.01n1 Corn Products International Inc v Mexico, ICSID Case No ARB (AF)/​04/​01. . . . . . . . . . . . . . 10.124 Corn Products International Inc v Mexico, ICSID Case No ARB (AF)/​04/​01, Decision on Responsibility (Jan 15, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.30, 21.36, 21.69 Corona Materials LLC v Dominican Republic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26 Cortec Mining Kenya Ltd, Cortec (Pty) Ltd & Stirling Capital Ltd v Kenya. . . . . . . . . . . . . 26.10n26 The Republic of Croatia v MOL Hungarian Oil & Gas Plc, PCA Case No 2014-​15, Final Award (Dec 23, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.60, 18.65 Crystallex International Co. v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​11/​2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26 Crystallex International Co. v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​11/​2, Award (Apr 4, 2016). . . . . . . . . . . . . . . . 15.49, 19.20n41, 19.30n52, 20.50, 20.62, 20.62n136, 20.96, 25.19, 25.29n50, 25.30, 25.61, 25.66 Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/​05/​1, Award (Aug 22, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.35n85, 23.47n102, 23.56 Daimler Financial Services AG v Argentine Republic, ICSID Case No ARB/​05/​1, Decision on Annulment (Jan 7, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.38 Dan Cake (Portugal) SA v Hungary, ICSID Case No ARB/​12/​9, Decision on Jurisdiction & Liability (Aug 24, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.38 Dawood Rawat v Republic of Mauritius (UNCITRAL), PCA Case 2016-​20, Order Regarding Claimant’s & Respondent’s Requests for Interim Measures (Jan 11, 2017). . . . 26.47, 26.59n158 Jan de Nul NV & Dredging International NV v Arab Republic of Egypt, ICSID Case No ARB/​04/​13, Decision on Jurisdiction (June 16, 2006). . . . . . . . 11.73n119, 11.74n121, 11.77n129, 11.84n140, 11.90n153, 13.37, 13.41, 13.44, 14.30n89, 14.47, 14.48, 14.50, 14.51, 14.51n173, 14.53, 14.54, 15.64 Jan de Nul NV & Dredging International NV v Arab Republic of Egypt, ICSID Case No ARB/​04/​13, Award (Nov 6, 2008). . . . . . . . . . . . . . . . . . . . . . . . . 20.41, 20.89 Democratic Republic of the Congo v Rwanda, Provisional Measures, Order (July 10, 2002), ICJ Rep. 2002,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.96n165 Denunciation of the Treaty of 2 November 1865 between China & Belgium see Sino Belgian Treaty Case, 1927 P.C.I.J. Series A, No 8, p. 7, Order (Feb 21, 1927)

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Table of Cases Desert Line Projects LLC v Republic of Yemen, ICSID Case No ARB/​05/​17, Award (Feb 6, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.100n175, 13.27, 14.75, 17.19n59, 18.47, 18.47n81, 25.09 Detroit International Bridge Company v Government of Canada, NAFTA/​UNCITRAL, Procedural Order No 8 (May 12, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.132 Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/​09/​2, Award (Oct 23, 2012) . . . . . . . . . . . . . . . . . . 11.74n121, 11.83, 11.84n140, 11.86, 11.88n148, 11.91n155, 11.113, 14.28, 14.30n101, 15.50n85 Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/​09/​2, Award (Oct 31, 2012). . . . . . . . . . . . . . . . . . . . . . . . . 20.26, 22.68, 22.106 Deutsche Bank AG v Democratic Socialist Republic of Sri Lanka, ICSID Case No ARB/​09/​2, Dissenting Opinion of Makhdoom Ali Khan (Oct 31, 2012). . . . . . . . . . . . . . . . . . . . . 20.33n73 Dredging International NV v Egypt, ICSID Case No ARB/​04/​13 Award (Nov 6, 2008). . . . 14.30n89 Duke Energy Electroquil Partners & Electroquil SA v Republic of Ecuador, ICSID Case No ARB/​04/​19, Award (Aug 18, 2008). . . . . . . . . . . . . . . . . . . . . . 16.59, 20.26, 25.29n50 Duke Energy International Peru Investments No 1 Ltd v Republic of Peru, ICSID Case No ARB/​03/​28, Award (Aug 18, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74n246 Duke Energy International Peru Investments No 1 Ltd v Republic of Peru, ICSID Case No ARB/​03/​28, Decision on Stay of Enforcement (not public) (June 23, 2009). . . . . . . . 27.58n135 E-​Systems, Rockwell International Systems Inc. & Islamic Republic of Iran, Ministry of Defence, Interim Award No 20-​430-​1 (June 6, 1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.81 E-​systems v Islamic Republic of Iran & Bank Melli (Feb 4, 1983). . . . . . . . . . . . . . . . . . . . . 24.60n87 ECE Projektmanagement International GmbH & Kommanditgesellschaft PANTA Achtundsechzigste Grundstücksgesellschaft mbH & Co v Czech Republic, PCA Case No 2010-​5, Award, (Sept 19, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.51 EDF International SA (France) v Republic of Hungary, UNCITRAL Award (Dec 4, 2014). . . . 29.43 EDF International SA SAUR International SA & Leon Participaciones Argentinas SA v Argentine Republic, ICSID Case No ARB/​03/​23, Challenge Decision Regarding Professor Gabrielle Kaufmann-​Kohler (June 25, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.15n15 EDF International SA SAUR International SA & Leon Participaciones Argentinas SA v Argentine Republic, ICSID Case No ARB/​03/​23, Award (June 11, 2012). . . . . . . . . . . . . . 23.49 EDF International SA SAUR International SA & Leon Participaciones Argentinas SA v Argentine Republic, ICSID Case No ARB/​03/​23, Decision on Stay of Enforcement (July 18, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 EDF International SA SAUR International SA & Leon Participaciones Argentinas SA v Argentine Republic, ICSID Case No ARB/​03/​23, Decision on Annulment (Feb 5, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.24, 27.26–​27.29, 27.38 EDF (Services) Ltd v Romania, ICSID Case No ARB/​05/​13, Award (Oct 8, 2009). . . . . . . 14.22n55, 14.30n101, 14.45, 18.57, 18.59, 18.108, 18.110, 20.84, 25.52n99, 26.35 EDF (Services) Ltd v Romania, ICSID Case No ARB/​05/​13, Dissenting Opinion (Oct 8, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.84 El Paso Energy International Co. v Argentine Republic, ICSID Case No ARB/​03/​15 . . . 25.11, 25.24 El Paso Energy International Co. v Argentine Republic, ICSID Case No ARB/​03/​15, Decision on Jurisdiction (Apr 27, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . 11.66n101, 16.36, 16.37, 16.55 El Paso Energy International Co. v Argentine Republic, ICSID Case No ARB/​03/​15, Award (Oct 31, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.05n5, 20.46, 20.59, 20.60, 20.82n174, 20.88, 22.69, 22.105, 22.118 El Paso Energy International Co. v Argentine Republic, ICSID Case No ARB/​03/​15, Decision on Annulment (Sept 22, 2014). . . . . . . . . . . . . . . . . . . . . . . . 27.31, 27.40, 27.44n107 Electrabel SA v Republic of Hungary, ICSID Case No ARB/​07/​19, Decision on Jurisdiction, Applicable Law & Liability (Nov 30, 2012). . . . . . . . . . . . . . 2.33, 2.34, 2.45, 9.31, 9.104, 9.104n176, 9.105, 11.74n121, 14.30, 14.30n103, 14.45, 22.72 Electrabel SA v Republic of Hungary, ICSID Case No ARB/​07/​19, Award (Nov 25, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.30n67, 20.57 Electricity Company of Sofia & Bulgaria, Pleadings, PCIJ, Series C, No 88 (1939) 60 . . . . 14.63n221

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Table of Cases Electricity Company of Sofia & Bulgaria (Belgium v Bulgaria), Judgment (Dec 5, 1939), PCIJ series A/​B, No 79, 199. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.47 Elettronica Sicula S.p.A. (ELSI) (US v Italy), ICJ Judgment (July 20, 1989), ICJ Rep. (1989) 15. 4.85, 10.32, 14.64, 20.96 Eli Lilly & Co. v Government of Canada, Case No UNCT/​14/​1, Procedural Order No 4 (Feb 23, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.76, 9.103n174, 9.127n211 Elsamex, SA v Republic of Honduras, ICSID Case No ARB/​09/​4, Award (Nov 16, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.19n59 Elsamex, SA v Republic of Honduras, ICSID Case No ARB/​09/​4, Decision on Elsamex S.A.’s Preliminary Objections (Jan 7, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.30 Elsamex, SA v Republic of Honduras, ICSID Case No ARB/​09/​4, Decision on Stay of Enforcement (Jan 7, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Emmis International Holding BV, Emmis Radio Operating BV & MEM Magyar Electronic Media Kereskedelmi és Szolgáltató Kft. v Hungary, ICSID Case No ARB/​12/​2, Decision on Objection under ICSID Arbitration Rule 41(5) (Mar 11, 2013). . . . . 7.29n67, 12.18–​12.19, 12.22, 12.27, 13.09, 13.58 Empresas Lucchetti SA & Lucchetti Peru SA v Republic of Peru, ICSID Case No ARB/​03/​4, Award (Feb 7, 2005), 12 ICSID Rep. 219. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26n70 EnCana Corporation v Republic of Ecuador, LCIA Case No UN3481, UNCITRAL (Canada/​ Ecuador BIT). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.38, 14.53n181 EnCana Corporation v Republic of Ecuador, LCIA Case No UN3481, UNCITRAL (Canada/​Ecuador BIT), Award (Feb 3, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.88 EnCana Corporation v Republic of Ecuador, LCIA Case No UN3481, UNCITRAL (Canada/​Ecuador BIT), Interim Award, Request for Interim Measures of Protection (Jan 31, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.103, 24.123 Energoalians TOB v Republic of Moldova, Ad Hoc UNCITRAL Award (Oct 23, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13, 2.15n23, 2.20n30, 11.61 Enkev Beheer BV v Republic of Poland, PCA Case No 2013-​01, First Partial Award (Apr 29, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.61 Enron Corp. & Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/​01/​3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1, 27.38, 27.43, 27.48 Enron Corp. & Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/​01/​3, Decision on Jurisdiction (Jan 14, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . 2.51n79, 10.111, 15.77 Enron Corp. & Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/​01/​3, Award (May 22, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.15n14, 16.64, 20.22, 20.56, 20.75, 21.78 Enron Corp. & Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/​01/​3, Decision on the Argentine Republic’s Request for a Continued State of Enforcement of the Award (Oct 7, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.57n134 Enron Corp. & Ponderosa Assets LP v Argentine Republic, ICSID Case No ARB/​01/​3, Decision on Annulment (July 30, 2010) . . . . . . . . . 25.51n98, 27.22, 27.68 Ethyl Corp v Canada (Jurisdiction) (1999) 38 I.L.M. 708. . . . . . . . . . . . . . . . . . . . . . . . . . 14.65n227 Eudoro Armando Olguín v Republic of Paraguay, ICSID Case No ARB/​98/​5, Decision on Jurisdiction (Aug 8, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.77n123 Eudoro Armando Olguín v Republic of Paraguay, ICSID Case No ARB/​98/​5, Award (July 26, 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.11 Eureko BV v Republic of Poland, Ad Hoc Partial Award (Aug 19, 2005). . . . . . . 11.42, 14.65, 14.83, 15.12n9, 15.17, 15.64, 16.17, 16.41, 16.41n61, 16.51, 16.60, 16.64 EuroGas Inc. & Belmont Resources Inc. v Slovak Republic, ICSID Case No ARB/​14/​14, Procedural Order No 2 (Apr 16, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.45, 9.46 EuroGas Inc. & Belmont Resources Inc. v Slovak Republic, ICSID Case No ARB/​14/​14, Procedural Order No 3 (June 23, 2015). . . . . . . . . . . . . . . . . . . . . . . 24.54n71, 24.87, 26.10n26 European American Investment Bank AG v Slovak Republic, PCA Case No 2010-​17, Award on Jurisdiction (Oct 22, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.56, 23.101 European American Investment Bank AG v Slovak Republic, PCA Case No 2010-​17, Second Award on Jurisdiction (June 4, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.16

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Table of Cases Fábrica de Vidrios Los Andes CA & Owens-​Illinois de Venezuela CA v Venezuela, ICSID Case No ARB/​12/​21, Notice of Arbitration (Aug 10, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.116 Fábrica de Vidrios Los Andes CA & Owens-​Illinois de Venezuela CA v Venezuela, ICSID Case No ARB/​12/​21, Reasoned Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (Mar 28, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . 8.14n10, 8.111, 8.114 “Factory at Chorzów” see Case Concerning German Interests in Polish Upper Silesia & the Factory at Chorzów (Ger. v Pol.), 1926 PCIJ (ser. A) No 7 (May 25, 1926) Saba Fakes v Republic of Turkey, ICSID Case No ARB/​07/​20, Award (July 14, 2010). . . . . 11.56n84, 11.71, 11.91n155, 11.94n165, 11.97, 11.100n175, 11.100n177, 18.20n25 Fedax NV v Republic of Venezuela, ICSID Case No ARB/​96/​3, Award (Mar 9, 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.03, 16.03n5 Fedax NV v Republic of Venezuela, ICSID Case No ARB/​96/​3, Decision of the Tribunal on Objections to Jurisdiction (July 11, 1997). . . . . . . . . . . . . . . . . . . . . 11.19, 11.24, 11.29, 11.52, 11.63, 11.65, 11.74, 11.74n122, 11.112n195 Fedders Corp. v Loristan Refrigeration Industries et al. (1986-​IV) 13 IUSCTR 97 . . . . . . . . . . . 14.42 Marvin Ray Feldman Karpa v United Mexican States, Case No ARB (AF)/​99/​1 . . . . . . . . . . . 27.02n1 Marvin Ray Feldman Karpa v United Mexican States, Case No ARB (AF)/​99/​1, Procedural Order No 2 concerning request for provisional measures & the schedule of the proceeding (May 3, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.28 Marvin Ray Feldman Karpa v United Mexican States, Case No ARB (AF)/​99/​1, Award (Dec 16, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.47n106, 22.58, 22.87, 22.113, 29.08, 29.18, 29.38 Feldman v United Mexican States, ICSID Case No ARB (AF)/​99/​1, Award (Dec 16, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.48–​21.51, 21.55, 21.62, 21.74, 21.75, 21.87, 21.90, 21.91, 25.29 Fireman’s Fund Ins. Co. v United Mexican States, ICSID Case No ARB (AF)/​02/​1, Award (Redacted) (July 17, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.20n31, 14.19 Fisheries Jurisdiction Case (Spain v Canada), 1998 ICJ 432, 1998 WL 1797317. . . . . . . . . . . . . 13.32 Fisheries Jurisdiction Case (UK v Iceland), 1972 ICJ 12 (Interim Protection Order of 17 August) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.54, 24.141n246 Flemingo Duty Free Shop Private Ltd v Poland, Award (Aug 12, 2016). . . . . 14.07, 14.19, 14.42n140 Flexi-​Van Leasing, Inc. v Government of the Islamic Republic of Iran, Award No 259-​36-​1 (Oct 13, 1986), 12 IUSCTR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10n8 Flughafen Zürich y Gestión e Ingeniería IDC SA v Bolivarian Republic of Venezuela, ICSID Case No ARB/​10/​19, Award (Nov 18, 2014) . . . . . . . 6.66n140, 19.26n47 Fluor Corporation & Islamic Republic of Iran, Interim Award No I62-​333-​1 (Aug 6, 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.82n135 Ford Aerospace & Communications Corporation & the Air Force of the Islamic Republic of Iran, Interim Award No 39-​159-​3 (June 4, 1984). . . . . . . . . . . . . . . . . . 24.103n176 Piero Foresti, Laura de Carli and Others v Republic of South Africa, ICSID Case No. ARB (AF)/​07/​1, Letter from the Tribunal to the Legal Resources Centre & the International Commission of Jurists (Oct 5, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.106 Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines, ICSID Case No ARB/​03/​25 (Fraport I). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50–​4.51, 4.66n25 Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines, ICSID Case No ARB/​03/​25 (Fraport I), Award (Aug 16, 2007) . . . . . . . . . . . . . . . . . . . . . . . 11.63n96, 18.19n20, 18.30, 18.30n41, 18.46–​18.48, 18.54, 18.59 Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines, ICSID Case No ARB/​03/​25 (Fraport I), Decision on Annulment (Dec 23, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.30n41,27.22, 27.54 Fraport AG Frankfurt Airport Services Worldwide v The Republic of the Philippines, ICSID Case No ARB/​11/​12 (Fraport II), Award (Dec 10, 2014). . . . . . 17.57n177, 18.19n20, 18.30n41 Frontier Petroleum Services Ltd v Czech Republic, PCA Final Award (Nov 12, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.37n54, 11.37n55, 14.43n148, 20.89n195 Ron Fuchs v Republic of Georgia, ICSID Case No ARB/​07/​15. . . . . . . . . . . . . . . . . . 27.02n4, 27.56 Ron Fuchs v Republic of Georgia, ICSID Case No ARB/​07/​15, Decision on Stay of Enforcement (Nov 12, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135

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Table of Cases Funnekotter v Zimbabwe, ICSID Case No ARB/​05/​6, Award (Apr 22, 2009). . . . . . . . . . . . . . . 25.38 Gabčíkovo-​Nagymaros Project (Hungary v Slovakia), Judgment (Sept 25, 1997) (1997) ICJ Reports, 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.44n80 Gabriel Resources Ltd & Gabriel Resources (Jersey) Ltd v Romania ICSID Case No ARB/​15/​31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.150, 26.10n26 GAMI Investments Inc. v United Mexican States, Final Award (Nov 15, 2004) [2005] 44 ILM 545. . . . . . . . . . . . . . . . . . . . 4.29n12, 10.105, 14.04, 14.24n66, 21.52, 21.55, 21.64 Garanti Koza LLP v Turkmenistan, ICSID Case No ARB/​11/​20, Decision on Jurisdiction of 3 July 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.97 Gas Natural SDG SA v Republic of Argentina, ICSID Case No ARB/​03/​10, Decision on Jurisdiction (June 17, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.108, 10.108n248 GEA Group Aktiengesellschaft v Ukraine, ICSID Case No ARB/​08/​16 Award (Mar 31, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.39, 22.19 Gemplus SA, SLP SA & Gemplus Industrial SA de CV v United Mexican States, ICSID Case No ARB (AF)/​04/​3 & ARB (AF)/​04/​4, Award (June 16, 2010). . . . . . . . . . . . . 15.17n22, 22.67, 25.29n50, 26.35, 26.41n92 Generation Ukraine, Inc. v Ukraine, ICSID Case No ARB/​00/​9, Award (Sept 16, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . 4.66n25, 10.81, 11.46n71, 14.80n256, 14.87, 14.87n270, 15.35–​15.36, 22.47 Genin, Eastern Credit Ltd Inc. & AS Baltoil v Estonia, ICSID Case No ARB/​99/​2, Award (June 25, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.34n109, 14.41, 15.77n123, 15.78 German Settlers in Poland, Advisory Opinion, 1923 PCIJ (ser. B) No 6 (Sept 10, 1923) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.45n73 Glamis Gold, Ltd v United States of America, NAFTA/​UNCITRAL, Procedural Order No 2 (May 31, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08n13, 12.13n25, 12.21, 12.25 Glamis Gold, Ltd v United States of America, NAFTA/​UNCITRAL, Decision on Application & Submission by Quechan Indian Nation (Sept 16, 2005) . . . . . . . . . . . . . . . . 9.70–​9.71,  9.130 Glamis Gold, Ltd v United States of America, NAFTA/​UNCITRAL, Award (June 8, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.32n69, 20.15, 20.66 Global Trading Resource Corp. & Globex International Inc. v Ukraine, ICSID Case No ARB/​09/​11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.13n41 Global Trading Resource Corp. & Globex International Inc. v Ukraine, ICSID Case No ARB/​09/​11, Award (Dec 1, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29, 11.43n67 Antoine Goetz et al. v Republic of Burundi I, ICSID Case No ARB/​95/​03, Award (Feb 10, 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.51n79, 19.08 Antoine Goetz et al. v Republic of Burundi II, ICSID Case No ARB/​01/​2, Award (June 21, 2012). . . . . . . . . . . 17.11, 17.14–​17.15, 17.29, 17.40, 17.42, 17.52, 25.42n75 Gold Reserve Inc. v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​09/​1 . . . . . . . 10.73 Gold Reserve Inc. v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​09/​1, Award (Sept 22, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.64n141, 25.07n10, 25.19, 25.30, 25.55, 25.66, 29.40 Grand River Enter. Six Nations Ltd et al. v United States, NAFTA/​UNCITRAL, Transcripts of the Hearing on Jurisdiction (Mar 23-​25, 2006). . . . . . . . . . . . . . . . 9.135n216, 11.107 Grand River Enter. Six Nations Ltd et al. v United States, NAFTA/​UNCITRAL, Decision on Jurisdiction (July 20, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.29 Grynberg (Rachel, Stephen & Miriam) & RSM Production Corporation v Grenada, ICSID Case No ARB/​10/​6, Decision on Respondent’s Application for Security for Costs (Oct 14, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.46n109 Grynberg (Rachel, Stephen & Miriam) & RSM Production Corporation v Grenada, ICSID Case No ARB/​10/​6, Award (Dec 10, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29 Guaracachi America Inc. & Rurelec PLC v Plurinational State of Bolivia, PCA Case No 2011–​17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26 Guaracachi America Inc. & Rurelec PLC v Plurinational State of Bolivia, PCA Case No 2011–​17, Procedural Order No 13 (Feb 21, 2013). . . . . . . . . . . . . . . . . . . . 26.54 Guaracachi America Inc. & Rurelec PLC v Plurinational State of Bolivia, PCA Case No 2011–​17, Procedural Order No 14 (Mar 11, 2013). . . . . . . . 24.90, 24.110, 26.45, 26.47, 26.49

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Table of Cases Guinea-​Bissau v Senegal, ICJ Arbitral Award of July 31, 1989. . . . . . . . . . . . . . . . . . . . . . . . 24.20n14 Gujarat State Petroleum Corporation Ltd & others v Republic of Yemen, ICC Arbitration No 19299/​MCP, Award (July 10, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26 Gustav FW Hamester GmbH & Co KG v Republic of Ghana, ICSID Case No ARB/​07/​24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07, 14.22 Gustav FW Hamester GmbH & Co KG v Republic of Ghana, ICSID Case No ARB/​07/​24, Award (June 18, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.62–​13.63, 14.45, 14.47, 14.49, 14.50, 17.52, 18.19n20, 18.23, 26.49 Hanocal Holding BV & IPIC International BV v Republic of Korea, ICSID Case No ARB/​15/​ 17, Order of the Tribunal discontinuing the proceedings (Oct 5, 2016). . . . . . . . . . . . 10.95n217 Helnan International Hotels AS v Arab Republic of Egypt, ICSID Case No ARB/​05/​19, Decision on Jurisdiction (Oct 17, 2006) . . . . . . . . . . . . . . . . . . . . 11.93n162, 14.41, 14.55n191 Helnan International Hotels AS v Arab Republic of Egypt, ICSID Case No ARB/​05/​19, Award (July 3, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.35 Helnan International Hotels AS v Arab Republic of Egypt, ICSID Case No ARB/​05/​19, Decision on Annulment (June 14, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.22 Hesham TM Al-​Warraq v Republic of Indonesia, UNCITRAL, Award on Respondent’s Preliminary Objections to Jurisdiction & Admissibility of the Claims (June 21, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.37–​18.39, 24.61, 24.89, 26.46, 26.47 Hesham TM Al-​Warraq v Republic of Indonesia, UNCITRAL, Award (Dec 1, 2014). . . . . . . . . 20.37 Hesham TM Al-​Warraq v Republic of Indonesia, UNCITRAL, Final Award (Dec 15, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.06, 17.17–​17.18, 17.88, 18.35–​18.36, 18.98, 23.49 Himpurna California Energy Ltd v PT (Persero) Perusahaan Listruik Negara (Indonesia), Final Award (May 4, 1999), 25 YB Comm. Arb. 13 (2000) . . . . . . . . . . . . . . . . . . 25.04n6, 25.45n84 Hochtief AG v Argentine Republic, ICSID Case No ARB/​07/​31, Decision on Jurisdiction (Oct 24, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.99, 23.104 Hoffland Honey v NIOC, Award (Jan 26, 1983), 2 IUSCTR 41. . . . . . . . . . . . . . . . . . . . . . 25.29n53 Holiday Inns SA & Others v Kingdom of Morocco, ICSID Case No ARB/​72/​1. . . . . . . . . . . 9.21n33 Holiday Inns SA & Others v Kingdom of Morocco, ICSID Case No ARB/​72/​1, Order (July 2, 1972). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.48, 24.74, 24.94 Holiday Inns SA & Others v Kingdom of Morocco, ICSID Case No ARB/​72/​1, Decision on Jurisdiction (May 12, 1974). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.24n25 Joseph Houben v Burundi, ICSID Case No ARB/​13/​7, Award (Jan 12, 2016) . . . . . . . . . . . . . . 11.40 Hrvatska Elektroprivreda DD v Republic of Slovenia, ICSID Case No ARB/​05/​24, Decision on the treaty interpretation issue (June 12, 2009) . . . . . . . . . . . . . . . . . . . . . 10.95n217 Hulley Enterprises Ltd (Cyprus) v Russian Federation, UNCITRAL, PCA Case No AA 226, Interim Award on Jurisdiction & Admissibility (Nov 30, 2009) (Yukos Interim Award). . . . . . . . . . . . . . . . . . . 2.15, 2.20, 2.25, 2.25n35, 2.29, 2.44, 2.58, 2.84, 2.88, 11.60, 11.92n159, 11.99 Hulley Enterprises Ltd (Cyprus) v Russian Federation, UNCITRAL, PCA Case No AA 226, Final Award (July 18, 2014). . . . . . . 8.100–​8.103, 10.82n185, 12.29, 14.30n101, 14.43, 14.67, 18.27n39, 18.28, 25.41n73, 29.27 Hussein Nuaman Soufraki v United Arab Emirates, ICSID Case No ARB/​02/​7, Decision on Jurisdiction (July 7, 2004). . . . . 10.13, 10.16, 10.16n23, 10.16n24, 10.16n25, 10.16n27, 10.17 Hussein Nuaman Soufraki v United Arab Emirates, ICSID Case No ARB/​02/​7, Decision on Annulment (June 5, 2007). . . . . . . . . . . . . . . . . . . . . . 13.36, 13.55, 27.31, 27.38, 27.41, 27.47 Hydro S.r.l. & Others v Republic of Albania, ICSID Case No ARB/​15/​28, Order on Provisional Measures (Mar 3, 2016), revoked & modified by a Decision of September 1, 2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.54n70, 24.57 Iberdrola SA & Iberdrola Energía SAU v Plurinational State of Bolivia, PCA Case No 2015-​05, Procedural Order (Aug 7, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.37 İçkale İnşaat Ltd Şirketi v Turkmenistan, ICSID Case No ARB/​10/​24. . . . . . . . . . . . . . . . . . . 27.02n1 İçkale İnşaat Ltd Şirketi v Turkmenistan, ICSID Case No ARB/​10/​2, Decision on Claimant’s Proposal to Disqualify Professor Phillipe Sands (July 11, 2014) . . . . . . . . . . . . . . 8.14 İçkale İnşaat Ltd Şirketi v Turkmenistan, ICSID Case No ARB/​10/​2, Award (Mar 8, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.25n26, 23.49n110

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Table of Cases ICS Inspection & Control Services Ltd v Argentine Republic, PCA Case No 2010-​9, Award on Jurisdiction (Feb 10, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.40, 23.35n85, 23.95, 23.104 Impregilo S.p.A. v Argentine Republic, ICSID Case No ARB/​07/​17. . . . . . . . . . . . . . . . . . . . . . 25.69 Impregilo S.p.A. v Argentine Republic, ICSID Case No ARB/​07/​17, Award (June 21, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.17, 20.57, 20.89, 20.90n198 Impregilo S.p.A. v Argentine Republic, ICSID Case No ARB/​07/​17, Decision on Annulment (Jan 24, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.31, 27.40 Impregilo S.p.A. v Islamic Republic of Pakistan, ICSID Case No ARB/​03/​3, Decision on Jurisdiction (Apr 22, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . 11.42, 13.52, 14.30n95, 14.51n172, 14.90, 15.12, 15.12n10, 15.34, 15.42, 15.50n83, 15.53, 16.70, 17.26n70 Inceysa Vallisoletana SL v Republic of El Salvador, ICSID Case No ARB/​03/​26, Award (Aug 2, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.100n176, 18.19n20, 18.25 Industria Nacional de Alimentos SA & Indalsa Perú SA v Republic of Peru ICSID Case No ARB/​03/​4, Decision of the Ad hoc Committee on Annulment (Sept 5, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.34 Industria Nacional de Alimentos SA & Indalsa Perú SA v Republic of Peru ICSID Case No ARB/​03/​4, Dissenting Opinion Attached to Decision on Annulment. . . . . . . . . . 27.34 Infinito Gold Ltd v Republic of Costa Rica, ICSID Case No ARB/​14/​5 . . . . . . . . . . . . . . . . 26.10n26 Infinito Gold Ltd v Republic of Costa Rica, ICSID Case No ARB/​14/​5, Procedural Order No 2 (June 1, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.31, 9.103, 9.144 Inmaris Perestroika Sailing Maritime Services GmbH & Others v Ukraine, ICSID Case No ARB/​08/​8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.21 Inmaris Perestroika Sailing Maritime Services GmbH & Others v Ukraine, ICSID Case No ARB/​08/​8, Decision on Jurisdiction (Mar 8, 2010). . . . . . . . . 11.42, 18.47n81 Interhandel (Switzerland v U.S.), Judgment (Mar 21, 1959) [1959] ICJ Rep. 6. . . . . . . . . . . . . . 30.22 International Fisheries (1931), 4 RIAA 631 (US-​Mexico General Claims Commission). . . . . . . 14.63 International Technical Products Corp v Iran et al. (1985-​II) 9 IUSCTR 206. . . . . 14.51n175, 14.57 International Thunderbird Gaming Corp. v Mexico, UNCITRAL. . . . . . . . . . . . . . . . . . . . 9.135n216 International Thunderbird Gaming Corp. v Mexico, UNCITRAL, Award (Jan 26, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.76, 22.114 International Thunderbird Gaming Corp. v Mexico, UNCITRAL, Procedural Order No 4 (Dec 24, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.25, 13.46n95 International Thunderbird Gaming Corp. v Mexico, UNCITRAL, Separate Opinion (Dissent in Part) by Professor Thomas Wälde (Jan 26, 2006). . . . . . 20.61, 20.64, 20.80 Intertrade Holding GmbH v Czech Republic, PCA Case No 2009-​12, Final Award (May 29, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.47, 14.51 Invesmart v Czech Republic, Ad Hoc UNCITRAL Award (June 26, 2009). . . . . . . . . . . . . . . . . 21.22 Islamic Republic of Iran v United States of America, Award (Dec 28, 1998), IUSCTR Cases A15(IV). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.26n43 Islamic Republic of Iran v United States of America, Case No B1 (Counterclaim), Interlocutory Award (Sept 9, 2004), ITL No 83-​B1-​FT . . . . . . . . . . . . . . . . . . . 17.60n184, 17.76, 17.77n228 Islamic Republic of Iran v United States of America, IUSCTR, Case No A/​2, Decision (Jan 13, 1982). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.60n184 Islamic Republic of Iran v United States America (Case No A27), (1998) 34 IUSCTR 39. . . . . . 14.62 Italba Corporation v Oriental Republic of Uruguay, ICSID Case No ARB/​16/​9, Decision on Claimant’s Application for Provisional Measures & Temporary Relief (Feb 15, 2017) . . . . . 24.55 Italian Republic v Republic of Cuba, Ad-​Hoc, Final Award (Jan 15, 2008) . . . . . . . . . . . . . . . . . 14.38 Itera International Energy LLC & Itera Group NV v Georgia, ICSID Case No ARB/​08/​7, Decision on Admissibility of Ancillary Claims (Dec 4, 2009). . . . . . . . . . . . . . . . . . . . . 17.28n83 Iurii Bogdanov, Agurdino-​Invest Ltd & Agurdino-​Chimia JSC v Moldova, SCC Award (Sept 22, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.42n74 JKX Oil & Gas plc v Ukraine, PCA Case No 2015-​11, Award (Feb 6, 2017). . . . . . . . . . . . . . . . 14.79 Joy Mining Machinery Ltd v Egypt, ICSID Case No ARB/​03/​11, Award (Aug 6, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.21n23, 11.43n67, 11.55, 11.77n131, 11.93n162, 14.65, 15.48, 15.50n83, 15.68, 16.21, 16.35, 16.35n47

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Table of Cases Kaiser Bauxite Company v Jamaica, ICSID Case No ARB/​74/​3, Decision on Jurisdiction (July 6, 1975). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.24n25,19.09n15 Ioannis Kardassopoulos v Republic of Georgia, ICSID Case No ARB/​05/​18. . . . . 26.10n26, 27.02n4, 27.56, 27.57 Ioannis Kardassopoulos v Republic of Georgia, ICSID Case No ARB/​05/​18, Decision on Jurisdiction (July 6, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.90n153, 28.147n225 Ioannis Kardassopoulos v Republic of Georgia, ICSID Case No ARB/​05/​18, Award (Mar 3, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.44, 2.64, 2.68, 2.74, 25.38n68, 26.36 Khan Resources Inc., Khan Resources BV, CAUC Holding Company Ltd v Government of Mongolia & MonAtom LLC, PCA Case No 2011-​09, Decision on Jurisdiction (July 25, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.25n35, 2.28, 2.39, 2.57, 10.83, 16.67 Khan Resources Inc., Khan Resources BV, CAUC Holding Company Ltd v Government of Mongolia & MonAtom LLC, PCA Case No 2011-​09, Award (Mar 2, 2015). . . . . . 26.40, 26.61 Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan, ICSID Case No ARB/​10/​1, Award (July 2, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.47, 23.107 Klöckner Industrie-​Anlagen GmbH & Others v Republic of Cameroon, ICSID Case No ARB/​ 81/​2, Award (Oct 21, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . 10.67, 17.07–​17.09, 17.33, 27.09 Klöckner Industrie-​Anlagen GmbH & Others v Republic of Cameroon, ICSID Case No ARB/​ 81/​2, Decision on Annulment (May 3, 1985) . . . . . . . . . . . . . . . . . 19.18n38, 27.09n16, 27.18, 27.38, 27.39, 27.43, 27.44n107, 27.48 Klöckner Industrie-​Anlagen GmbH & Others v Republic of Cameroon: Resubmitted Case, Second Decision on Annulment (May 17, 1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.19 KT Asia Investment Group B.v v Republic of Kazakhstan, ICSID Case No ARB/​09/​8, Award (Oct 17, 2013). . . . . . . . . . . . . . . . . . 11.56n84, 11.73, 11.73n119, 11.79n134, 11.83, 11.85, 11.88n148, 11.91n155, 11.92, 11.92n160 The Government of the State of Kuwait & the American Independent Oil Co., Ad-​Hoc, Final Award (Mar 24, 1982), 21 I.L.M. 976, 1051 (1982). . . . . . . . . . . . . . . . 15.39n61 LaGrand Case (Germany v United States), Judgment (June 27, 2001), ICJ Rep. [2001] 466. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.47, 24.149n263 Lalanne & Ledour (1903), 10 RIAA 17 (France-​Mexico Commission) . . . . . . . . . . . . . . . . 14.59n202 Lanco International Inc. v Republic of Argentina, Preliminary Decision on Jurisdiction (Dec 8, 1998), 40 ILM 457 (2001). . . . . . . . . . . . . . . . . . . . . . 10.102, 15.59, 15.75 Lao Holdings NV v Lao People’s Democratic Republic, ICSID Case No ARB (AF)/​12/​6, Decision on Jurisdiction (Feb 21, 2014). . . . . . . . . . . . . 10.76n164, 13.28, 14.27n77 Lao Holdings NV v Lao People’s Democratic Republic, ICSID Case No ARB (AF)/​12/​6, Ruling on Motion to Amend the Provisional Measures Order (May 30, 2014) . . . . . . . . 24.09n6, 24.57 Ronald S. Lauder v Czech Republic, UNCITRAL, Final Award (Sept 3, 2001). . . . . . . . . . . . . 1.104, 4.69n28, 10.115, 10.127, 14.45, 15.77n122, 21.80–​21.82, 22.93 Joseph C. Lemire v Ukraine, ICSID Case No ARB/​06/​18. . . . . . . . . . . . . . . 11.92n159, 25.09–​25.10 Joseph C. Lemire v Ukraine, ICSID Case No ARB/​06/​18, Decision on Jurisdiction & Liability (Jan 14, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.63n96 Joseph C. Lemire v Ukraine, ICSID Case No ARB/​06/​18, Dissenting Opinion of Arbitrator Dr. Jürgen Voss (March 28, 2011). . . . . . . . . . . . . . . . . . . . . 20.28n66, 20.30, 20.30n67, 20.49 Joseph C. Lemire v Ukraine, ICSID Case No ARB/​06/​18, Award (May 28, 2011) . . . . . 25.11, 25.30 Joseph C. Lemire v Ukraine, ICSID Case No ARB/​06/​18, Decision on Stay of Enforcement (Feb 14, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 LESI S.p.A. & ASTALDI S.p.A. v République Algérienne Démocratique et Populaire, ICSID Case No ARB/​05/​3, Merits (July 26, 2006). . . . . . . . . . . . . . . . . . . . . . . . 14.30n91, 14.35n110, 14.41, 14.55, 14.86 LESI S.p.A. & ASTALDI S.p.A. v République Algérienne Démocratique et Populaire, ICSID Case No ARB/​05/​3, Award (Nov 12, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.82, 26.35 Liberian Eastern Timber Corporation v Republic of Liberia, ICSID Case No. ARB/​83/​2, Award (Mar 31, 1986), 2 ICSID Rep. 343. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.77 LG&E Energy Corp, LG&E Capital Corp & LG&E Int’l Inc v Argentine Republic, ICSID Case No ARB/​02/​1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1

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Table of Cases LG&E Energy Corp, LG&E Capital Corp & LG&E Int’l Inc v Argentine Republic, ICSID Case No ARB/​02/​1, Decision on Jurisdiction (Apr 30, 2004) . . . . . . . . . . . . . . . . . . . . . . . 12.12 LG&E Energy Corp, LG&E Capital Corp & LG&E Int’l Inc v Argentine Republic, ICSID Case No ARB/​02/​1, Decision on Liability (Oct 3, 2006). . . . . 1.53n31, 3.44, 15.15n14, 16.43, 16.65, 16.83, 19.24, 20.55, 20.74, 20.93, 21.11n20, 21.78, 22.77, 22.103 LG&E Energy Corp, LG&E Capital Corp & LG&E Int’l Inc v Argentine Republic, ICSID Case No ARB/​02/​1, Award (July 25, 2007). . . . . . . . . . . . . . . . . 25.11, 25.29n53, 25.30, 25.49 Libyan American Oil Company (LIAMCO) v The Libyan Arab Republic, Mahmassani, Sole Arbitrator (Apr 12, 1977), 62 ILR 141. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.32 Libananco Holdings Co. Ltd v Republic of Turkey, ICSID Case No ARB/​06/​8, Decision on Preliminary Issues (June 23, 2008). . . . . . . . . . . . . . . . . . . . . . . . 24.20n12, 24.62, 26.47, 26.49 Libananco Holdings Co. Ltd v Republic of Turkey, ICSID Case No ARB/​06/​8, Procedural Order (Dec 17, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.26 Libananco Holdings Co. Ltd v Republic of Turkey, ICSID Case No ARB/​06/​8, Award (Sept 2, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.29, 13.65 Libananco Holdings Co. Ltd v Republic of Turkey, ICSID Case No ARB/​06/​8, Decision on Applicant’s Request for a Continued Stay of Enforcement of the Award (May 7, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.57, 27.60 Liberian Eastern Timber Corporation v Liberia, ICSID Case No ARB/​83/​2 Award (Mar 31, 1986), 2 ICSID Rep (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.24n25 Liman Caspian Oil BV & NCL Dutch Investment BV v Republic of Kazakhstan, ICSID Case No ARB/​07/​14, Excerpts of the Award (June 22, 2010). . . . . . . . . . . . . . . . . . . . . . . . 2.28, 2.34 Lion Mexico Consolidated LP v United Mexican States, ICSID Case No ARB (AF)/​15/​ 2, Decision on Respondent’s Preliminary Objection Under Art. 45(6) of the ICSID Arbitration (Additional Facility) Rules (Dec 12, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29n67 Loewen Group Inc. & Raymond L. Loewen v United States of America, ARB (AF)/​98/​3 . . . . 27.02n1 Loewen Group Inc. & Raymond L. Loewen v United States of America, ARB (AF)/​98/​3, Decision on Hearing of Respondent’s Objection to Competence & Jurisdiction (Jan 5, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.16 Loewen Group Inc. & Raymond L. Loewen v United States of America, ARB (AF)/​98/​3, Final Award (June 26, 2003). . . . . . . . . . . . . . . . . . . . . . . . 20.35, 20.41n93, 20.49n111, 21.27, 21.68 Lotus Case (Series A-​N 10), PCIJ Judgment (Sept 7, 1927). . . . . . . . . . . . . . . . . . . . . . . 30.22, 30.25 Lundin Tunisia v Tunisian Republic, ICSID Case No ARB/​12/​30 Award (Dec 22, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.56n85 M/​V ‘SAIGA’ (No 2) Case (Saint Vincent & the Grenadines v Guinea) (Judgment of July 1, 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.01n1 M/​V ‘Virginia G’ (No, 19) Case (Panama v Guinea-​Bissau) (Judgment of April 14, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.01n1 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No Arb/​97/​7, Decision of the Tribunal on Objections to Jurisdiction (Oct 28, 1999). . . . . . . . . . . . . . . . . . . . . . . . . . 17.26n70 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No Arb/​97/​7, Decision on Request for Provisional Measures (Oct 28, 1999) . . . . . . . . . 24.22, 24.38, 24.87, 24.92, 24.115, 24.149 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No Arb/​97/​7, Procedural Order No 2 (Oct 28, 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.47n112 Emilio Agustín Maffezini v Kingdom of Spain, ICSID Case No Arb/​97/​7, Decision on Jurisdiction (Jan 25, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.47, 13.39, 14.18n43, 14.27n76, 14.42, 23.52, 23.57–​23.61, 23.62, 23.64, 23.67–​23.68, 23.81, 23.88, 23.116 Malaysian Historical Salvors SDN, BHD v Government of Malaysia, ICSID Case No ARB/​05/​10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.66n25 Malaysian Historical Salvors SDN, BHD v Government of Malaysia, ICSID Case No ARB/​05/​10, Award on Jurisdiction (17 May 17, 2007). . . . . . . . . . . . . 4.66n25, 11.21, 11.86n143, 11.87, 11.88n148, 13.38 Malaysian Historical Salvors SDN, BHD v Government of Malaysia, ICSID Case No ARB/​05/​ 10, Decision on the Application for Annulment (Apr 16, 2009) . . . . . . 11.81n135, 27.35, 27.42

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Table of Cases Malaysian Historical Salvors SDN, BHD v Government of Malaysia, ICSID Case No ARB/​05/​ 10, Dissenting opinion by Mohamed Shahabuddeen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.35 Malicorp Ltd v Arab Republic of Egypt, ICSID Case No ARB/​08/​18, Award (Feb 7, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.45, 11.98n172, 15.50n84, 29.28 Malicorp Ltd v Arab Republic of Egypt, ICSID Case No ARB/​08/​18, Decision on Annulment (July 3, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.44n107 Mamidoil Jetoil Greek Petroleum Products SA v Republic of Albania, ICSID Case No ARB/​11/​ 24, Award (Mar 30, 2015). . . . . . . . . . . . . . . . . . . . 2.46, 11.25n26, 11.100n175, 20.77, 20.86, 20.90n199, 22.60n95 Maritime Delimitation & Territorial Questions (Qatar v Bahrain) (Jurisdiction), ICJ Reports 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.16 Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No ARB/​84/​4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.66 Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No ARB/​84/​4, Decision on Provisional Measures (Dec 4, 1985). . . . . . . . . . . . . . 24.72, 24.163 Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No ARB/​84/​4, Final Award (Jan 6, 1988) . . . . . . . . . . . . . . . . . . . 17.06, 17.19n59 Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No ARB/​84/​4, Interim Order No 1 on Guinea’s Application for Stay of Enforcement of the Award (Aug 12, 1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.67 Maritime International Nominees Establishment (MINE) v Republic of Guinea, ICSID Case No ARB/​84/​4, Decision on Annulment (Dec 22, 1989) . . . . . . . . . . 27.09, 27.19, 27.38, 27.40, 27.44n104, 27.45, 27.47, 27.48, 27.51 Massey (1927), 4 RIAA 155 (US-​Mexico General Claims Commission) . . . . . . . . . . . . . . . . . . . 14.11 The Mavrommatis Jerusalem Concessions (Greece v UK), 1925 PCIJ (ser. A) No 5 (Mar 26, 1925) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.45n73, 17.26n70 MCI Power Group, LC & New Turbine Inc. v Republic of Ecuador, ICSID Case No ARB/​03/​6, Award (July 31, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04, 11.68, 11.86, 20.76 MCI Power Group, LC & New Turbine Inc. v Republic of Ecuador, ICSID Case No ARB/​03/​6, Decision on Annulment (Oct 19, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 27.16n32, 27.31, 27.42 M. Meerapfel Sohne AG v Central African Republic, ICSID Case No. ARB/​07/​10, Award (May 21, 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.69 Menzies Middle East & Africa SA et Aviation Handling Services International Ltd v Republic of Senegal, ICSID Case No ARB/​15/​21, Procedural Order No 2 (Dec 2, 2015) . . . . 24.27, 24.136 Mercer International Inc. v The Government of Canada, ICSID Case No ARB (AF)/​12/​3, Confidentiality Order (Jan 24, 2013) . . . . . . . . . . . . . . . . . 9.127n211 Merrill & Ring Forestry LP v The Government of Canada, UNCITRAL (ICSID Administered), Award (Mar 31, 2010). . . . . . . . . . . . . . . . . . . . . . . 20.19, 20.47n106, 21.15, 21.18, 21.76n134 de Merode and ors v World Bank, WBAT Decision No 1 (5th June 1981), 1 WBAT Rep 734) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.86 Mesa Power Group, LLC v The Government of Canada, UNCITRAL, PCA Case No 2012-​17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.34n109, 14.41, 14.46, 14.52 Mesa Power Group, LLC v The Government of Canada, UNCITRAL, PCA Case No 2012-​17, Procedural Order No 2 (Jan 18, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . 9.133, 12.08n13, 12.16 Metal-​Tech Ltd v Republic of Uzbekistan, ICSID Case No ARB/​10/​3, Award (Oct 4, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.94n165, 17.38n116, 17.57, 17.57n177, 18.06, 18.19n20, 18.78 Metalclad Corporation v United Mexican States, Case No ARB (AF)/​97/​1 . . . . . . . . . . . . . . . . . 21.18 Metalclad Corporation v United Mexican States, Case No ARB (AF)/​97/​1, Decision on a Request by the Respondent for an Order Prohibiting the Claimant from Revealing Information (Oct 27, 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.09, 24.133 Metalclad Corporation v United Mexican States, Case No ARB (AF)/​97/​1, Award (Aug 30, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.32n69, 9.16, 20.06, 20.12, 20.19, 20.45, 20.47, 22.62, 22.82, 22.112, 29.08 Metalpar SA & Buen Aire SA v Argentine Republic, ICSID Case No ARB/​03/​5, Award (June 6, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152n30

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Table of Cases Methanex Corporation v United States of America, UNICTRAL, Partial Award (Aug 7, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.98, 7.03, 7.04 Methanex Corporation v United States of America, UNICTRAL, Final Award of the Tribunal on Jurisdiction & the Merits (Aug 3, 2005). . . . . 7.03, 9.18, 9.54, 9.55–​9.61, 9.56, 9.71n121, 9.81, 9.87, 9.98, 9.109, 9.129, 9.137, 13.11, 21.15, 21.54–​21.55, 22.88 Ioan Micula, Viorel Micula SC, European Food SA, SC Starmill SRL & SC Multipack SRL v Romania, ICSID Case No ARB/​05/​20, Decision on Jurisdiction & Admissibility (Sept 24, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.51n79, 7.30n68, 9.104n176, 10.20 Ioan Micula, Viorel Micula SC, European Food SA, SC Starmill SRL & SC Multipack SRL v Romania, ICSID Case No ARB/​05/​20, Final Award (Dec 11, 2013). . . . . . . . 20.47n106, 20.51, 20.68n152, 20.73n160, 20.85, 20.95n212, 25.11, 29.42 Ioan Micula, Viorel Micula SC, European Food SA, SC Starmill SRL & SC Multipack SRL v Romania, ICSID Case No ARB/​05/​20, Decision on Stay of Enforcement (Aug 7, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Ioan Micula, Viorel Micula SC, European Food SA, SC Starmill SRL & SC Multipack SRL v Romania, ICSID Case No ARB/​05/​20, Decision (Aug 18, 2014) . . . . . . . . . . . . . . . . . 24.20n12 Ioan Micula, Viorel Micula SC, European Food SA, SC Starmill SRL & SC Multipack SRL v Romania, ICSID Case No ARB/​05/​20, Decision on Annulment (Feb 26, 2016). . . . . . . . . 27.42 Middle East Cement Shipping & Handling Co. SA v Arab Republic of Egypt, ICSID Case No ARB/​99/​6, Award (Apr 12, 2002) . . . . . . . . . . . . . . 15.77n122, 19.19n39, 25.44n80, 25.45n86 Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt, ICSID Case No. ARB/​84/​3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.09 Mihaly International Corporation v Sri Lanka, ICSID Case No ARB/​00/​2, Award (Mar 15, 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.44, 11.44n68, 13.10, 13.37 Military & Paramilitary Activities in & against Nicaragua (Nicaragua v United States of America), Provisional Measures, Order (May 10, 1984), ICJ Rep. 1984. . . . . . . . . 24.96, 24.103 Military & Paramilitary Activities in & against Nicaragua (Nicaragua v United States of America), Judgment (June 27, 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.26n35 Military & Paramilitary Activities in & against Nicaragua (Nicaragua v United States of America), Merits, ICJ Reports 1986, 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n93 Millicom International Operations BV & Sentel GSM SA v Senegal, ICSID Case No ARB/​08/​20, Decision (Dec 9, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.76 Millicom International Operations BV & Sentel GSM SA v Senegal, ICSID Case No ARB/​08/​ 20, Decision on Jurisdiction (July 16, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.69 Patrick Mitchell v Democratic Republic of the Congo, ICSID Case No ARB/​99/​7, Decision on the Stay of Enforcement of the Award, (Nov 30 2004). . . . . . . . . . . . . . . . . . . . . . . 29.67, 29.86 Patrick Mitchell v Democratic Republic of the Congo, ICSID Case No ARB/​99/​7, Decision on Annulment (Nov 1, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . 11.90n153, 27.16n32, 27.21, 27.36, 27.44n106, 27.47, 27.48, 27.55n128, 27.61, 27.71 MNSS BV & Recupero Credito Acciaio NV v Montenegro, ICSID Case No ARB (AF)/​12/​8, Award (May 4, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.25n26, 11.32, 11.91n155 Mobil Corporation et al. v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​27, Decision on Jurisdiction (June 10, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.75 Mobil Corporation et al. v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​27, Award (Apr 4, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.55 Mobil Investments Canada Inc. & Murphy Oil Corporation v Canada, ICSID Case No ARB (AF)/​07/​4, Decision on Liability (May 22, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . 20.18, 29.21 Mobil Investments Canada Inc. & Murphy Oil Corporation v Canada, ICSID Case No ARB (AF)/​07/​4, Award (Feb 20, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.21 Mobil Investments Canada Inc. & Murphy Oil Corporation v Canada, ICSID Case No ARB (AF)/​07/​4, Award (Redacted). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.20n31 Mohammad Ammar Al-​Bahloul v Republic of Tajikistan, SCC Case No V064/​2008, Partial Award on Jurisdiction & Liability (Sept 2, 2009). . . . . . . . . . . . 2.35, 2.45, 2.51n78, 14.34n109 MOL Hungarian Oil & Gas Company Plc v Republic of Croatia, ICSID Case No ARB/​13/​32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.60

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Table of Cases MOL Hungarian Oil & Gas Company Plc v Republic of Croatia, ICSID Case No ARB/​13/​32, Decision on Respondent Application under ICSID Arbitration Rules 41(5) (Dec 2, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29n67 Mondev International Ltd v United States of America, ICSID Case No ARB (AF)/​99/​2. . . . . . . 21.18 Mondev International Ltd v United States of America, ICSID Case No ARB (AF)/​99/​2, Interim Decision Regarding Confidentiality of Documents (Nov 13, 2000). . . . . . . . . . . . . . . . . . . . 9.17 Mondev International Ltd v United States of America, ICSID Case No ARB (AF)/​99/​2, Award (Oct 11, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62n214, 20.13, 20.27, 20.33, 20.41n93, 20.43 Montano Case, II Moore, International Arbitrations (1898) 1630. . . . . . . . . . . . . . . . . . . . 14.41n130 MTD Equity Sdn Bhd & MTD Chile SA v Republic of Chile, ICSID Case No ARB/​01/​7, Award (May 25, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.76–​14.77, 19.31, 20.78, 20.81, 20.92, 23.49, 25.42n74, 25.43n78 MTD Equity Sdn Bhd & MTD Chile SA v Republic of Chile, ICSID Case No ARB/​01/​7, Decision on Annulment (Mar 21, 2007). . . . . . . . . . . . . . . . . . . . . . . . 27.38, 27.40, 27.55n128 Muhammet Cap & Sehil Insaat Endustri ve Ticaret Ltd Sti. v Turkmenistan, ICSID Case No ARB/​12/​6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26 Muhammet Cap & Sehil Insaat Endustri ve Ticaret Ltd Sti. v Turkmenistan, ICSID Case No ARB/​12/​6, Decision on Jurisdiction under Article VII(2) (Feb 13, 2015) . . . . . . . . . . . . . . 13.30 Muhammet Cap & Sehil Insaat Endustri ve Ticaret Ltd Sti. v Turkmenistan, ICSID Case No ARB/​12/​6, Procedural Order No 3 (June 12, 2015). . . . . . . . . . . . . . . . . . 26.54, 26.60 Murphy Exploration & Production Company International v Republic of Ecuador, ICSID Case No ARB/​08/​4, Award on Jurisdiction (Dec 15, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . 17.26n73 Mytilineos Holdings SA v State Union of Serbia & Montenegro & Republic of Serbia, UNICTRAL, Partial Award on Jurisdiction (Sept 8, 2009) . . . . . . . . . . . . . . . . . 11.12n8, 11.62 William Nagel v Czech Republic, SCC Case No 049/​2002, Final Award (Sept 9, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.46n71, 28.149n228 Franz Nahlik v Austria (Communication No 608/​1995), Human Rights Committee, Report 1996, UN Doc. A/​51/​40 vol. II (1996). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 National Gas SAE v Arab Republic of Egypt, ICSID Case No ARB/​11/​7, Award on Jurisdiction (Apr 3, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.70, 10.70n147, 13.09, 13.40 National Grid Plc v Argentine Republic, UNCITRAL, Decision on Jurisdiction (June 20, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.54, 23.69 National Grid Plc v the Argentine Republic, LCIA Case No UN 7949, Award (Nov 3, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.83, 25.66 National Grid Plc v the Argentine Republic, LCIA Case No UN 7949, Decision on the Challenge to Mr Judd L. Kessler (Dec 3, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.27 L.F.H. Neer & Pauline Neer v United Mexican States (Oct 15, 1926), 4 UNRIAA 60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.14n30, 20.16–​20.17 Niko Resources (Bangladesh) Ltd v Bangladesh Petroleum Exploration & Production Company Ltd & Bangladesh Oil Gas & Mineral Corporation, ICSID Case Nos ARB/​10/​11 & ARB/​ 10/​18, Decision on Jurisdiction (Aug 19, 2013). . . . . . . . . . . . . . . . . . . . . . . . 18.55, 18.55n100 Niko Resources (Bangladesh) Ltd v Bangladesh Petroleum Exploration & Production Company Ltd & Bangladesh Oil Gas & Mineral Corporation, ICSID Case Nos ARB/​10/​11 & ARB/​ 10/​18, Procedural Order No 5 (Mar 6, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.77 Niko Resources (Bangladesh) Ltd v Bangladesh Petroleum Exploration & Production Company Ltd & Bangladesh Oil Gas & Mineral Corporation, ICSID Case Nos ARB/​10/​11 & ARB/​ 10/​18, Procedural Order No 6 (May 1, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.77n123 Niko Resources (Bangladesh) Ltd v Bangladesh Petroleum Exploration & Production Company Ltd & Bangladesh Oil Gas & Mineral Corporation, ICSID Case Nos ARB/​10/​11 & ARB/​ 10/​18, Decision on the Payment Claim (Sept 11, 2014) . . . . . . . . . . . . . . . . . . . . . . . 24.77n123 Noble Energy Inc. & Machalapower Cia. Ltd v Republic of Ecuador & Consejo Nacional de Electricidad, ICSID Case No ARB/​05/​12, Decision on Jurisdiction (Mar 5, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.112, 17.80n238 Noble Ventures, Inc. v Romania, ICSID Case No ARB/​01/​11, Award (Oct 12, 2005). . . . . . . . 14.56, 14.86, 15.14, 16.42, 16.42n66, 16.60, 16.75, 21.11n20, 21.79, 30.12

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Table of Cases Nordzucker AG v Republic of Poland, UNCITRAL, Partial Award (Jurisdiction) (Dec 10, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.07, 14.41, 14.56, 14.67 Nordzucker AG v Republic of Poland, UNCITRAL, Second Partial Award (Merits) (Jan 28, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.50 North Sea Continental Shelf (Germany v Netherlands), Judgment (Feb 20,1969) [1969] ICJ Rep. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.76, 30.22–​30.23 Norwegian Loans, ICJ Rep 1957, 36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.38n116 Norwegian Shipowners’ Claims (Norway v USA), Permanent Court of Arbitration (PCA) (Oct 13 1922). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.14 Nottebohm Case (Liechtenstein v Guatemala), 2nd phase, Judgment of April 6, 1955, 1955 ICJ Reports 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.04–​10.07 Nova Scotia Power Incorporated v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​11/​1, Award (Apr 30, 2014) . . . . . . . . . . . . . . . . . . . . . . . . 11.74n122, 11.76, 11.78n133, 11.91n155, 11.113 Pren Nreka v Czech Republic, UNCITRAL, Award (1 February 2007). . . . . . . . . . . 11.58, 11.58n88 Nuclear Tests (Australia v France/​New Zealand v France) Order of June 22, 1973, ICJ Rep. 1973 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.96n164 Nykomb Synergetics Technology Holding AB v The Republic of Latvia, SCC, (2003) 11 ICSID Rep. 158 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n90, 14.43, 14.86 Nykomb Synergetics Technology Holding AB v The Republic of Latvia, SCC,Award (Dec 16, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.22, 21.91, 22.71, 25.24 Occidental Exploration & Production Company v The Republic of Ecuador, LCIA Case No. UN3467 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.50, 1.50n29 Occidental Exploration & Production Company v The Republic of Ecuador, LCIA Case No. UN3467, Final Award (July 1, 2004). . . . . . . . . . . . . . . . . . . 20.53, 20.88, 21.22, 21.44–​21.47, 22.62, 22.116, 28.26, 29.11, 29.34 Occidental Petroleum Corp. & Occidental Exploration & Production Company v Republic of Ecuador, ICSID Case No ARB/​06/​11, Decision on Provisional Measures (Aug 17, 2007).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.41–​24.42, 24.52, 24.92, 24.98, 24.100, 24.106, 24.115, 24.132, 24.139, 24.149 Occidental Petroleum Corp. & Occidental Exploration & Production Company v Republic of Ecuador, ICSID Case No ARB/​06/​11, Decision on Jurisdiction (Sept 9, 2008). . . . . . . . . . 15.66 Occidental Petroleum Corp. & Occidental Exploration & Production Company v Republic of Ecuador, ICSID Case No ARB/​06/​11, Award (Oct 5, 2012). . . . . . . . . . . . . . . 25.42n75, 26.35 Occidental Petroleum Corp. & Occidental Exploration & Production Company v Republic of Ecuador, ICSID Case No ARB/​06/​11, Decision on Annulment (Nov 2, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.05, 27.22, 27.31, 27.37, 27.40, 27.44n107 OI European Group BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​11/​25, Award (Mar 10, 2015). . . . . . . . . . . . . . . . . . . . . 10.116, 11.56n84, 11.68, 11.70, 20.44, 25.55 Oil Platforms (Iran v United States of America) ICJ Reports 1996. . . . . . . . . . . . . . . . . 28.52, 28.147 Oil Platforms (Iran v United States of America) ICJ Reports 1996, Counter-​Claims Order (March 10, 1998) [1998] ICJ Rep. 190. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.34n102, 17.35 Oil Platforms (Iran v United States of America) ICJ Reports 1996, Judgment (Nov 6, 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.04, 13.11, 13.47 OKO Pankki Oyj, VTB Bank (Deutschland) AG & Sampo Bank PLC v Republic of Estonia, ICSID Case No ARB/​04/​6, Award (Nov 19, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . 11.93n162 Ömer Dede & Serdar Elhüseyni v Romania, ICSID Case No ARB/​10/​22, Award (Sept 5, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11n27 Jan Oostergetel & Theodora Laurentius v Slovak Republic, Ad Hoc UNCITRAL, Decision on Jurisdiction (Apr 20, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.62n94 Jan Oostergetel & Theodora Laurentius v Slovak Republic, Ad Hoc UNCITRAL, Final Award (Apr 23, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.32, 20.36, 20.77 Oscar Chinn (Britain v Belgium), PCIJ Judgment No 61 (Dec 12, 1934) (ser. A./​B. No 63). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.16, 22.110 Owens-​Corning Fiberglass Corp. v Iran, Case ITL 18-​113-​2 (May 13, 1983), 2 IUSCTR 322 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.91n258

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Table of Cases Oxus Gold plc v Republic of Uzbekistan, UNCITRAL, Final Award (Dec 17, 2015) . . . . . . . . 17.06, 17.18, 17.58, 20.05, 20.62n136, 26.10n26 Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/​09/​12. . . . . . . . . . . . . . 10.85 Pac Rim Cayman LLC v Republic of El Salvador, ICSID Case No ARB/​09/​12, Decision on the Respondent’s Preliminary Objections under CAFTA Articles 10.20.4 & 10.20.5 (Aug 2, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.22n48, 7.23, 7.24, 7.25, 9.142, 10.76, 10.76n164, 10.79, 10.84, 13.18, 13.61 Award (Oct 14, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.01 Pan American Energy LLC et al. v the Argentine Republic, ICSID Case No ARB/​03/​13. . . . . . . 16.37 Decision on Preliminary Objections (July 27, 2006) . . . . . . . . . . . . . . . 13.12, 13.37, 13.67, 14.81 Pan American Energy LLC v Plurinational State of Bolivia, ICSID Case No ARB/​10/​8, Decision on the Respondent’s preliminary objections pursuant to ICSID Arbitration Rule 41(5) (Apr 26, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29n67 The Panevezys-​Saldutiskis Railway Case (Estonia v Lithuania), 1939 PCIJ (ser. A/​B) No 76 (Feb 28, 1939). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.45n73 Pantechniki SA Contractors & Engineers v Republic of Albania, ICSID Case No ARB/​07/​21, Award (July 30, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.91n156 Parkerings Compagniet AS v Republic of Lithuania, ICSID Case No ARB/​05/​8, Final Award (Sept 11, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.67, 20.79 Passage through the Great Belt (Finland v Denmark), Provisional Measures Order of 29 July 1991, ICJ Reports 1991. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.115n195, 24.116n200 Sergei Paushok, CJSC Golden East Company & CJSC Vostokneftegaz Company v Government of Mongolia, Order on Interim Measures (Sept 2, 2008). . . . . . . . . . . . . . . . 24.88n150, 24.109, 24.123, 24.142, 24.143 Sergei Paushok, CJSC Golden East Company & CJSC Vostokneftegaz Company v Government of Mongolia, Award on Jurisdiction & Liability (Apr 28, 2011). . . . . . . . . . . . . 13.37n78, 17.06, 17.10, 17.49, 17.73n218, 17.74 Perenco Ecuador Ltd v Republic of Ecuador, ICSID Case No ARB/​08/​6, Decision on Provisional Measures (May 8, 2009). . . . . . . 24.57, 24.75, 24.115, 24.122, 24.152, 24.158n282 Perenco Ecuador Ltd v Republic of Ecuador, ICSID Case No ARB/​08/​6, Decision on Jurisdiction (June 30, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.10n14 Perenco Ecuador Ltd v Republic of Ecuador, ICSID Case No ARB/​08/​6, Decision on the Remaining Issues of Jurisdiction & on Liability (Sept 12, 2014) . . . . . . . . . . . . . . . . . . . . 22.108 Perenco Ecuador Ltd v Republic of Ecuador, ICSID Case No ARB/​08/​6, Interim Decision on the Environmental Counterclaim (Aug 11, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.16n44 Perenco Ecuador Ltd v Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (Petroecuador), PCA Case No IR-​2009/​1, Decision on Challenge to Arbitrator (Dec 8, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.57 Peru v United States of America, 1808. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41n130 Peter Pázmány University, PCIJ Series A/​B, No 61, 207 (1933) 231 . . . . . . . . . . . . . 14.06, 14.30n98 Petrobart Ltd v Kyrgyz Republic, Case No 126/​2003 SCC, Award (Mar 29, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13, 2.33n48, 2.54, 2.63, 11.37n55, 11.61, 14.79n254 Petrolane Inc. et al. v Iran et al. (1991) 27 IUSCTR 64. . . . . . . . . . . . . . . . . . . . . . . . . . 14.38, 14.53 Petrolane Inc. et al. v Iran et al. (1991) 27 IUSCTR 64, Award (Aug 14, 1991). . . . . . . . . . . . . . 25.45 Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​98/​2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1, 27.53 Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​98/​2, Decision on Provisional Measures (Sept 25, 2001). . . . . . . . . . . . . 24.06n4, 24.40, 24.49, 24.87, 24.93, 24.99n170, 24.115, 24.153n278, 26.46n109 Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​ 98/​2, Award (Apr 22, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.17, 10.17n29, 10.17n30, 11.72, 11.73, 11.91n155 Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​98/​2, Award (May 8, 2008). . . . . . . . . . . . . . . . . . . . . . . . 11.56n84, 20.40, 30.17

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Table of Cases Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​ 98/​2, Decision on the Application for the Revision of the Award (Nov 18, 2009) . . . . . . 27.02n4 Víctor Pey Casado & President Allende Fondation v Republic of Chile, ICSID Case No ARB/​98/​2, Decision on Annulment (Dec 18, 2012). . . . . . . . . . . . . . . . . 27.22, 27.57 Phelps Dodge International Corp. v Government of the Islamic Republic of Iran, Case No 99, Award (Dec 19, 1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.74, 22.81 Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Procedural Order No 3 (Feb 17, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.102n172, 11.41, 11.68, 11.91n155, 13.16 Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Award (July 8, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.68, 22.23, 22.96 Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-​12, Procedural Order No 4 Regarding the Procedure until a Decision on Bifurcation (Oct 26, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.28, 13.16 Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012-​12, Award on Jurisdiction & Admissibility (Dec 17, 2015). . . . . . . . . . . 10.79, 10.79n171, 12.08, 12.21, 12.25 Philippe Gruslin v Malaysia, ICSID Case No ARB/​99/​3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.09 Phillips Petroleum Co. Iran v Iran et al. (1989) 21 IUSCTR 79. . . . . . . . . . 14.30n90, 15.10, 15.10n8 Phillips Petroleum Co. Iran v Iran et al. (1989) 21 IUSCTR 79, Award (June 29, 1989). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.17, 22.84, 25.38n67 Phoenix Action, Ltd v The Czech Republic, ICSID Case No ARB/​06/​5, Decision on Provisional Measures (Apr 6 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.45 Phoenix Action, Ltd v The Czech Republic, ICSID Case No ARB/​06/​5, Award (Apr 15, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.54, 11.73n120, 11.91n155, 11.94, 13.53–​13.54, 13.56, 13.58–​13.59 13.65, 13.73, 18.20, 18.21–​18.23, 18.28 PJSC CB PrivatBank & Finance Company Finilon LLC v Russia, PCA Case No 2015-​21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.104n185 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24. . . . . . . . . . 27.02n4 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Decision on Jurisdiction (Feb 8, 2005). . . . . . . . . . . . . . . . . 2.20, 2.22, 2.25, 2.62, 10.82, 10.83, 11.98n171, 13.11, 13.37, 13.39, 13.47, 13.60, 14.41n130, 18.22, 18.25, 23.56n125, 23.81–​23.86, 23.88, 23.92, 23.95, 23.97, 28.147n225 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Order (Sept 6, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.23–​24.24, 24.50, 24.74n119, 24.92, 24.115, 24.133, 24.142, 24.145 Planet Mining Pty Ltd v Republic of Indonesia, ICSID Case Nos ARB/​12/​14 & 12/​40, Decision on Jurisdiction (Feb 24, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.57 PNG Sustainable Development Program Ltd v Independent State of Papua New Guinea, ICSID Case No ARB/​13/​33, Decision on the Claimant’s Request for Provisional Measures (Jan 21, 2015). . . . . . . . . . . . . . . . . . 24.53n69, 24.62, 24.100, 24.107, 24.137–​24.138, 24.149 Polo Garments Majunga S.A.R.L. v Republic of Madagascar, ICC Award (Aug 29, 2014). . . 29.17n45 Pope & Talbot, Inc. v Government of Canada, UNCITRAL. . . . . . . . . . . 1.38, 9.20n30, 9.135n216, 11.26, 22.56, 22.62 Pope & Talbot, Inc. v Government of Canada, UNCITRAL, Award on Interim Measures Motion (Jan 7, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.28n27 Pope & Talbot, Inc. v Government of Canada, UNCITRAL, Interim Award (June 26, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.24n37 Pope & Talbot, Inc. v Government of Canada, UNCITRAL, Award on the Merits of Phase 2 (Apr 10, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.15, 21.28, 21.38, 21.41–​21.43, 21.72–​21.73, 21.74, 21.84–​21.86, 21.90, 21.100 Poštová banka AS & ISTROKAPITAL SE v Hellenic Republic, ICSID Case No ARB/​13/​8, Award (Apr 9, 2015) . . . . . . . . . . . . . . . . . . . . . . 6.71, 11.33–​11.36, 11.76–​11.79, 11.112n198

l

Table of Cases Process & Industrial Developments Ltd v Ministry of Petroleum Resources of Nigeria, Part Final Award (July 3, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.22n56 PSEG Global Inc., North American Coal Corporation, & Konya Ilgin Elektrik Dretim ve Ticaret Ltd Sirketi v Turkey, ICSID Case No ARB/​02/​5, Decision on Jurisdiction (June 4, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.64 PSEG Global Inc., North American Coal Corporation, & Konya Ilgin Elektrik Dretim ve Ticaret Ltd Sirketi v Turkey, ICSID Case No ARB/​02/​5, Award (Jan 19, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.45, 11.45n69, 11.91n155, 20.57, 20.88, 20.92, 20.98 Pulp Mills on the River Uruguay (Argentina v Uruguay). . . . . . . . . . . . . . . . . . 24.53n69, 24.96n165 Pulp Mills on the River Uruguay (Argentina v Uruguay), Provisional Measures Order (July 13, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.106 Pulp Mills on the River Uruguay (Argentina v Uruguay), Preliminary Objections Order (Jan 23, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.115n195, 24.131n222 Quasar de Valores SICAV SA et al. v Russian Federation, SCC Case No V024/​2007. . . . . . . . . . . 9.40 Quasar de Valores SICAV SA et al. v Russian Federation, SCC Case No V024/​2007, Award (July 20, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.22n47, 26.31 Questions relating to Settlers of German Origin in Poland, PCIJ, Series B, No 6 (1925) 22. . . . 14.11 Questions relating to the Obligation to Prosecute or Extradite (Belgium v Senegal), Provisional Measures, Order (May 28, 2009), ICJ Rep. 2009. . . . . . . . . . . . . . . . . . . 24.106n181 Questions relating to the Seizure & Detention of Certain Documents & Data (Timor-​Leste v Australia), Provisional Measures, Order (Mar 3, 2014), ICJ Rep. 2014. . . . . . . . . . 24.106n181 Quiborax et al. v Plurinational State of Bolivia, ICSID Case No ARB/​6/​2. . . . . . . . . . . . . . 11.74n121 Quiborax et al. v Plurinational State of Bolivia, ICSID Case No ARB/​6/​2, Decision on Provisional Measures (Feb 26, 2010) . . . . . . . . . . . . . . . . 23.25, 24.27, 24.54n70, 24.57, 24.66, 24.78n127, 24.115, 24.117, 24.152 Quiborax et al. v Plurinational State of Bolivia, ICSID Case No ARB/​6/​2, Decision on Jurisdiction (Sept 27, 2012). . . . . . . . . . . . . . . . . 11.56n84, 11.91n155, 11.94n165, 11.99n173 Quiborax et al. v Plurinational State of Bolivia, ICSID Case No ARB/​6/​2, Award (Sept 16, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.20n41, 25.38n68 Rafat ali Rizvi v Republic of Indonesia, ICSID Case No ARB/​11/​13, Award on Jurisdiction (July 16, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.29n67 Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/​07/​23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.02n1 Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/​07/​23, Decision on Objection to Jurisdiction CAFTA Article 10.20.5 (Nov 17, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.22, 12.29 Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/​07/​23, Second Decision on Objections to Jurisdiction (May 18, 2010). . . . . . . . . . . . 7.22, 18.47–​18.48 Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/​07/​23, Public Hearing (Nov 18, 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.142 Railroad Development Corporation v Republic of Guatemala, ICSID Case No ARB/​07/​23, Award (June 29, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.47n89 RCA Global Communications Disc, Inc. & Islamic Republic of Iran, Award No ITM 30-​160-​1 (Oct 31, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.13n10 The Renco Group Inc. v Republic of Peru, ICSID Case No UNCT/​13/​1, Non-​Disputing State Party Submission of the United States of America (Sept 10, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.04, 7.26, 9.153 Renée Rose Levy & Gremcitel S.A. v Republic of Peru, ICSID Case No ARB/​11/​17, Award (Jan 9, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.78, 10.78n165, 11.72, 11.73 Repsol YPF Ecuador S.A. v Empresa Estatal Petróleos del Ecuador, ICSID Case No ARB/​01/​10, Award (Feb 20, 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.53n181 Repsol YPF Ecuador S.A. v Empresa Estatal Petróleos del Ecuador, ICSID Case No ARB/​01/​10, Procedural Order No 1 concerning the Stay of Enforcement of the Award (Dec 22, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135, 27.64

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Table of Cases Repsol YPF Ecuador S.A. v Empresa Estatal Petróleos del Ecuador, ICSID Case No ARB/​01/​10, Procedural Order No 4 concerning the Stay of Enforcement of the Award (Feb 22, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Repsol YPF Ecuador S.A. v Empresa Estatal Petróleos del Ecuador, ICSID Case No ARB/​01/​10, Decision on Annulment (Jan 8, 2007). . . . . . . . . . . . . . . . . . . 27.13–​27.14, 27.31, 27.40, 27.64 Resolute Forest Products Inc. v Government of Canada, UNCITRAL, PCA Case No 2016-​13, Procedural Order No 4 (Nov 18, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08n13, 12.20 Rights of Nationals of the United States of America in Morocco (France v USA), 1952 ICJ 176 (Judgment of Aug 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.11n22, 23.40–​23.42 Rockwell International Systems Inc. & Islamic Republic of Iran, Ministry of Defence, Award No ITM20-​430-​1 (June 6, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.13n10 Romak SA v Republic of Uzbekistan, PCA Case No AA280 Award (Nov 26, 2009) . . . . . . 11.37n54, 11.43n67, 11.57, 11.57n87, 11.75, 11.83, 11.86, 11.88n148 Rompetrol Group NV v Romania, ICSID Case No ARB/​06/​3, Decision on Respondent’s Preliminary Objections on Jurisdiction & Admissibility (Apr 18, 2008). . . . . . . . . . . . . 4.35n15, 10.61, 13.05, 13.25, 13.39, 13.42 RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. V079/​2005 . . . . . . . . . . . . . . . . 9.40 RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. V079/​2005, Award on Jurisdiction (Oct 5, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.28 RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. V079/​2005, Final Award (Sept 12, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.60n95, 26.32 Spyridon Roussalis v Romania, ICSID Case No ARB/​06/​1, Award (Dec 7, 2011). . . . . . 17.11–​17.13, 17.14, 17.16, 17.38–​17.41, 17.43, 17.44n135, 17.50, 17.56, 20.30n67, 22.84 RREEF Infrastructure (GP) Ltd & RREEF Pan-​European Infrastructure Two Lux S.à.r.l. v Kingdom of Spain, ICSID Case No ARB/​13/​30, Decision on Jurisdiction (June 6, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.11, 9.107n184, 11.63, 11.72n115, 11.74n122, 11.92n159 RSM Production Corporation & Others v Grenada, ICSID Case No ARB/​05/​14. . . . . . . . . 26.13n41 RSM Production Corporation & Others v Grenada, ICSID Case No ARB/​05/​14, Order of the Committee Discontinuing the Proceeding & Decision on Costs (Apr 28, 2011). . . . . . . . . 26.36 RSM Production Corporation & Others v Grenada, ICSID Case No ARB/​05/​14, Procedural Order (May 14, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.87 RSM Production Corporation v Central African Republic, ICSID Case No ARB/​07/​2, Decision on Annulment (Feb 20, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.44n107 RSM Production Corporation v Saint Lucia, ICSID Case No ARB/​12/​10, Decision on Provisional Measures (Aug 13, 2014). . . . . . . . 24.27, 24.39, 24.85, 24.87, 24.101n174, 24.149 RSM Production Corporation v Saint Lucia, ICSID Case No ARB/​12/​10, Decision on Saint Lucia’s Request for Security for Costs (Aug 13, 2014) . . . . . . . . . . . . . . . . . 26.44, 26.47, 26.48, 26.51, 26.60, 26.63 RSM Production Corporation v Saint Lucia, ICSID Case No ARB/​12/​10, Decision on Security for Costs (Aug 14, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26, 26.11n30 RSM Production Corporation v Saint Lucia, ICSID Case No ARB/​12/​10, Assenting Opinion of Gavan Griffith. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.101n174 RSM Production Corporation v Saint Lucia, ICSID Case No ARB/​12/​10, Dissenting Opinion of Judge Edward Nottingham. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.39 Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No ARB/​05/​16, Award (July 21, 2008) . . . . . . . . . . 10.95n217, 20.26, 20.30n67, 20.42, 20.97, 27.65 Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No ARB/​05/​16, Decision on Stay of Enforcement (Mar 19, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v Republic of Kazakhstan, ICSID Case No ARB/​05/​16, Decision on Annulment (Mar 25, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.31, 27.47n114 Rusoro Mining Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​12/​5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26

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Table of Cases Rusoro Mining Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB (AF)/​12/​5, Award (Aug 22, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.22, 25.17 Russian Indemnities (Russia v Turkey), Award (Nov 11, 1912), 11 RIAA, 431. . . . . . . . . . . . . . . 25.47 Ryan, Schooner Capital LLC, Atlantic Investment Partners LLC v Republic of Poland, ICSID Case No ARB (AF)/​11/​3, Award (Nov 24, 2015). . . . . . . . . . . . . . . . . . . . . . . 11.72n112 Saghi v Government of the Islamic Republic of Iran, Case No 298, Award (Jan 12, 1987). . . . . . 22.74 Saipem S.p.A. v Bangladesh, ICSID Case No ARB/​05/​07. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.52 Saipem S.p.A. v Bangladesh, ICSID Case No ARB/​05/​07, Decision on Jurisdiction & Recommendation on Provisional Measures (Mar 21, 2007). . . . . . . . . . . . 4.04, 4.52, 11.37n54, 11.74n122, 11.90n153, 13.07n6, 13.31–​13.32, 13.37, 13.43, 13.47, 14.30, 30.17 Saipem S.p.A. v Bangladesh, ICSID Case No ARB/​05/​07, Award (June 30, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.65n226, 22.19–​22.20, 25.38n68 Salini Costruttori & Italstrade v Hashemite Kingdom of Jordan, ICSID Case No ARB/​02/​13, Decision on Jurisdiction (Nov 29, 2004). . . . . . . . . 14.27n76, 14.35n110, 14.41, 14.65, 14.75, 14.88–​14.90, 16.18–​16.19, 18.20, 23.47n102, 23.75, 23.88 Salini Costruttori SpA & Italstrade SpA v Kingdom of Morocco, ICSID Case No ARB/​00/​4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.15, 6.66n140, 10.125, 11.54, 11.58, 11.65–​11.69, 11.65n98, 11.71, 11.74n121, 11.76, 11.87, 11.89, 11.90, 11.91, 11.93, 11.97n169, 13.11, 14.88, 15.34n56, 15.64 Saluka Investments BV (Netherlands) v Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic’s Counterclaim (May 7, 2004). . . . . . . . . . . 17.08, 17.32, 17.33, 17.49, 17.58, 17.73n218, 17.74, 17.88, 17.89, 17.95 Saluka Investments BV (Netherlands) v Czech Republic, UNCITRAL, Partial Award (Mar 17, 2006). . . . . . . . . . . . . . . . . . . 2.20n29, 10.72, 20.25, 20.49n111, 20.62, 20.73, 20.92, 22.48, 22.89, 22.104, 28.45, 30.12 Sapphire International Petroleum Ltd v National Iranian Oil Company, Arbitral Award (Mar 15, 1963), 35 ILR 136. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.04n6 S.A.R.L. Benvenuti & Bonfant v People’s Republic of Congo, ICSID Case No ARB/​77/​2, 1 ICSID Rep 330, Award (Aug 8, 1980). . . . . . . . . . . 10.127, 17.06, 29.81 SAUR International SA v Republic of Argentina, ICSID Case No ARB/​04/​4, Decision on Jurisdiction & Liability (June 6, 2012). . . . . . . . . . . . . . . . . . . . . . . 11.98n171, 18.25n32, 20.26 SAUR International SA v Republic of Argentina, ICSID Case No ARB/​04/​4, Award (May 22, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.24 SD Myers Inc. v Government of Canada, UNCITRAL, Procedural Order No 11 (Nov 11, 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.18 SD Myers Inc. v Government of Canada, UNCITRAL, First Partial Award (Nov 13, 2000). . . . . . . . . . . . . . . . . . . . . 11.27, 20.12, 20.72, 20.92n204, 20.94, 21.15, 21.24, 21.27n55, 21.31, 21.63, 21.65, 21.104, 22.24n37, 22.57, 22.75, 22.86, 25.29, 29.39 SD Myers Inc. v Government of Canada, UNCITRAL, Second Partial Award (Oct 21, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.11, 29.39 SD Myers Inc. v Government of Canada, UNCITRAL, Final Award (Dec 30, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.38, 3.80, 29.39 Sea-​Land Service Inc v Iran et al. (1984-​II) 6 IUSCTR 149. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30 SeaCo Inc. v Government of the Islamic Republic of Iran, Award 531-​260-​2 (June 25, 1992) 28 IUSCTR 198. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.10n8 Sedco Inc et al. v National Iranian Oil Co. et al., Award, No ITL 55-​129-​3 (Oct 28, 1985), reprinted in 9 IUSCTR 248. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.92 Sedco Inc v NIOC & Iran (1987-​II) 15 IUSCTR 23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.63n221 Seismograph Service Corporation v NIOC, Award (Dec 22, 1988), 22 IUSCTR (1989) 3 . . . . . 25.45 Sempra Energy International v the Argentine Republic, ICSID Case No ARB/​02/​16, Decision on Jurisdiction (May 11 2005). . . . . . . . . . . . . . . . . . . . . . . . 10.104, 10.104n241, 10.104n242, 16.40, 16.56, 16.66 Sempra Energy International v the Argentine Republic, ICSID Case No ARB/​02/​16, Award (Sept 28, 2007) . . . . . . . . . . . . . . . . . . 11.32n39, 20.02, 20.24, 20.27, 20.56, 21.78n138, 22.66

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Table of Cases Sempra Energy International v the Argentine Republic, ICSID Case No ARB/​02/​16, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award (Mar 5, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Sempra Energy International v the Argentine Republic, ICSID Case No ARB/​02/​16, Decision on Annulment (June 29, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.51n98, 27.06n10, 27.22, 27.40, 27.43, 27.55n128, 27.69, 27.71 Serafin García Armas & Karina García Gruber v Bolivarian Republic of Venezuela (UNCITRAL), Decision on Jurisdiction (Dec 15, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . 10.21 Serbian Loans Case (France v Serbia), 1929 PCIJ (ser. A.) Nos. 21-​22 (July 12, 1929). . . . . . 15.45n73 SGS Société Générale de Surveillance, SA v Pakistan, ICSID Case No ARB/​01/​13, Procedural Order No 2 (Oct 16, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.79, 24.100, 24.153n278 SGS Société Générale de Surveillance, SA v Pakistan, ICSID Case No ARB/​01/​13, Decision of the Tribunal on Objections to Jurisdiction (Aug 6, 2003). . . . . . . . . . . . . 2.39, 11.42n65, 13.70, 14.63, 14.86, 15.01, 15.18–​15.19, 15.25, 15.39, 15.42, 15.55, 16.03, 16.18, 16.21, 16.23–​16.24, 16.33–​16.35, 16.47, 16.61, 16.84 SGS Société Générale de Surveillance S.A. v Republic of Paraguay, ICSID Case No ARB/​07/​29, Decision on Annulment (May 19, 2014). . . . . . . . . . . . . . . . 27.56, 27.71 SGS Société Générale de Surveillance S.A. v Republic of Paraguay, ICSID Case No ARB/​07/​29, Decision on Jurisdiction (Feb 12, 2010). . . . . . . . . . . . . . . . . . . . 11.42n65, 11.78n133, 11.110, 16.41, 16.41n65, 16.58 SGS Société Générale de Surveillance SA v Republic of the Philippines, ICSID Case No ARB/​ 02/​6, Decision of the Tribunal on Objections to Jurisdiction (Jan 29, 2004). . . . . . . . 11.42n65, 11.109, 11.110n191, 13.11, 15.01, 15.18–​15.19, 15.25–​15.28, 15.30–​15.31, 15.31n50, 15.39, 15.69, 16.03, 16.22, 16.24, 16.36, 16.39, 16.47, 16.47n77, 16.49, 16.62, 16.84 Shipside Packing Company, Incorporated & Islamic Republic of Iran, Interim Award No 27-​11875-​1 (Sept 6, 1983) IUSCTR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.127 Shufeldt Claim (US v Guatemala), 2 RIAA 1081 (1930). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.08 Siag & Vecchi v Arab Republic of Egypt, ICSID Case No ARB/​05/​15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.47, 13.60 Siag & Vecchi v Arab Republic of Egypt, ICSID Case No ARB/​05/​15, Decision on Jurisdiction (Apr 11, 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.19 Siag & Vecchi v Arab Republic of Egypt, ICSID Case No ARB/​05/​15, Award (June 1, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.37n83, 25.10, 26.36, 26.40 Siemens AG v the Argentine Republic, ICSID Case No ARB/​02/​8 . . . . . . . . . . . . . . . . . . . . . 27.02n4 Siemens AG v the Argentine Republic, ICSID Case No ARB/​02/​8, Decision on Jurisdiction (Aug 3, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.109, 23.56, 23.62–​23.68, 23.81 Siemens AG v the Argentine Republic, ICSID Case No ARB/​02/​8, Award (Feb 6, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.78–​16.80, 20.21, 25.38n68, 25.69 Sino-​Belgian Treaty Case, 1927 PCIJ Series A, No 8, Order (Feb 21, 1927). . . . . . . . . . . . . . . . 24.131 Sistem Muhendislik Insaat Sanayi ve Ticaret AS v Kyrgyz Republic, ICSID Case No ARB (AF)/​06/​1, Award (Sept 9, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.80 Sociedad Anónima Eduardo Vieira v Republic of Chile, ICSID Case No ARB/​04/​7, Decision on Annulment (Dec 10, 2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.44n107 Société Anonyme de Filatures de Schappe (1954), 13 RIAA 598 (France-​Italy Conciliation Commission). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.53 Société Civile Immobilière de Gaëta v Republic of Guinea, ICSID Case No ARB/​12/​36 Award (Dec 21, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.56n85 Société Générale In respect of DR Energy Holdings Ltd & Empresa Distribuidora de Electricidad del Este SA v Dominican Republic, UNCITRAL, LCIA Case No UN7927, Award on Preliminary Objections to Jurisdiction (Sept 19, 2008) . . . . . . . . . . . . . . . . . . . 10.113 Société Ouest Africaine des Bétons Industriels v Senegal, ICSID Case No ARB/​82/​1, Decision on Jurisdiction (Aug 1, 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.24n25 Société Ouest Africaine des Bétons Industriels v Senegal, ICSID Case No ARB/​82/​1, Award (Feb 25, 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.79

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Table of Cases South American Silver Ltd v Bolivia PCA Case No 2013-​15, Procedural Order No 10 (Jan 11, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . 24.90, 24.111, 24.124, 26.10n26, 26.45, 26.46, 26.47, 26.50, 26.54, 26.60 South West Africa Cases (Ethiopia v South Africa; Liberia v South Africa), Preliminary Objections, Judgment Dec 21, 1962, ICJ Rep. 319. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.26n73 Southern Pacific Properties (Middle East) Ltd (SPP) v Arab Republic of Egypt, ICSID Case No ARB/​84/​3, Award (Mar 11, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.42 Southern Pacific Properties (Middle East) Ltd (SPP) v Arab Republic of Egypt, ICSID Case No ARB/​84/​3, Decision on Preliminary Objections to Jurisdiction (Nov 27, 1985). . . . . . . . 10.127 Southern Pacific Properties (Middle East) Ltd (SPP) v Arab Republic of Egypt, ICSID Case No ARB/​84/​3, Decision on Jurisdiction (Apr 14, 1988) . . . . . . . . . . . . . . . . . . . . . 11.42n66, 15.09, 15.29, 17.80n238, 18.32, 18.34, 18.41, 18.45 Southern Pacific Properties (Middle East) Ltd (SPP) v Arab Republic of Egypt, ICSID Case No ARB/​84/​3, Award (May 20, 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . 14.74, 25.30n56, 25.45n86 Spence International Investments & Others v Republic of Costa Rica, ICSID Case No UNCT/​ 13/​2, Interim Award (Oct 25, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.71n146 ST-​AD GmbH v Republic of Bulgaria, PCA Case No 2011-​06, Award on Jurisdiction (July 18, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.56, 23.106 S & T Oil Equipment and Machinery Ltd. v Romania, ICSID Case No. ARB/​07/​13. . . . . . 26.10n26 Standard Chartered Bank v United Republic of Tanzania, ICSID Case No ARB/​10/​12, Award (Nov 2, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.38 Stans Energy v Kyrgyzstan, PCA Case No 2015-​32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.10n26 Starrett Housing Corporation, Starrett Systems Inc., Starrett Housing International Inc. v Islamic Republic of Iran, Bank Omran, Bank Mellat & Bank Markazi, Case No 24, Interlocutory Award (Dec 19, 1983) . . . . . . . . . . . . . . . . . . . . . . 15.10n8, 22.17, 22.53, 22.111 State Enterprise Energorynok v Moldova, SCC Arbitration No V 2012/​175, Final Award (Jan 29, 2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17n26 State General Reserve Fund of the Sultanate of Oman v Republic of Bulgaria, ICSID Case No ARB/​15/​43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.95n217 Suez, Sociedad General de Aguas Barcelona SA & Vivendi Universal SA v the Argentine Republic & other cases, ICSID Case Nos. ARB/​03/​19 & ARB/​03/​17, Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (May 12, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.63, 9.99 Suez, Sociedad General de Aguas de Barcelona S.A. v the Argentine Republic, ICSID Case No ARB/​03/​17, Decision on Jurisdiction (May 16, 2006). . . . . . . . . . . . 23.69, 23.86n178 Suez, Sociedad General de Aguas de Barcelona S.A. v the Argentine Republic, ICSID Case No ARB/​03/​17, Decision on Proposal for Disqualification (Oct 22, 2007). . . . . . . . . . . . . . . . . 8.14 Swembalt AB, Sweden v The Republic of Latvia, UNCITRAL, [2004] SAR 97. . . . . . . . . . . . . . 14.85 Swisslion DOO Skopje v Macedonia, ICSID Case No ARB/​09/​16, Award (July 6, 2012). . . . . . 20.32 Tanzania Electric Supply Co. Ltd v Independent Power Tanzania Ltd, ICSID Case No ARB/​98/​8, Decision on the Respondent’s Request for Provisional Measures (Appendix A to the Award) (Dec 20, 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.44 Tanzania Electric Supply Co. Ltd v Independent Power Tanzania Ltd, ICSID Case No ARB/​98/​8, Final Award (July 12, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.79 Técnicas Medioambientales SA v United Mexican States, ICSID Case No ARB (AF)/​00/​2, Award (May 29, 2003). . . . . . . . . . . . . 14.22n59, 20.20, 20.45, 20.48, 20.81, 22.94, 22.102, 22.104, 22.115, 23.75 TECO Guatemala Holdings, LLC v Republic of Guatemala, ICSID Case No ARB/​10/​23, Award (Dec 19, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.11 TECO Guatemala Holdings, LLC v Republic of Guatemala, ICSID Case No ARB/​10/​23, Decision on Annulment (Apr 5, 2016). . . . . . . . . . . . . . . . . . . . 27.31, 27.44n107, 27.48, 27.49 Teinver SA, Transportes de Cercanías SA & Autobuses Urbanos del Sur SA v the Argentine Republic, ICSID Case No ARB/​09/​1, Decision on Jurisdiction (Dec 21, 2012) . . . 10.106n246, 14.07, 23.104, 26.10n26, 26.33 Teinver SA, Transportes de Cercanías SA & Autobuses Urbanos del Sur SA v the Argentine Republic, ICSID Case No ARB/​09/​1, Decision on Provisional Measures (Apr 8, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.25, 24.45n55, 24.58

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Table of Cases Teinver SA, Transportes de Cercanías SA & Autobuses Urbanos del Sur SA v the Argentine Republic, ICSID Case No ARB/​09/​1, Award (July 21, 2017) . . . . . . . . . . . . . . . . . . . 23.49n110 Teledyne Industries Incorporated & the Islamic Republic of Iran, Order (Sept 9, 1983), Case No 10812 IUSCTR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.127 Telefónica SA v United Mexican States, ICSID Case No ARB (AF)/​12/​4, Procedural Order No 1 (July 8, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.28, 9.28n50 Telenor Mobile Communications AS v Republic of Hungary, ICSID Case No ARB/​04/​15, Award (June 22, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.95n217 Telenor Mobile Communications AS v Republic of Hungary, ICSID Case No ARB/​04/​15, Award (Sept 13, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.12, 13.51, 23.87–​23.90 Tembec Inc. et al. v United States, Order of the Consolidation Tribunal (7 Sept 7, 2005) . . . 1.106n60 Temple of Preah Vihear Case (Cambodia v Thailand), ICJ Rep. (1962). . . . . . . . . . . . . . . . . . . . 18.42 Temple of Preah Vihear Case (Cambodia v Thailand), Provisional Measures Order (July 18, 2011) (request for interpretation). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.106n181 Tenaris SA & Talta-​Trading e Marketing Sociedade Unipessoal Lda v Bolivarian Republic of Venezuela (I) ICSID Case No ARB/​11/​26, Award (Jan 12, 2016). . . . . . . . . . . . . . 10.89–​10.90 Tenaris SA & Talta-​Trading e Marketing Sociedade Unipessoal Lda v Bolivarian Republic of Venezuela (I) ICSID Case No ARB/​11/​26, Award (Jan 29, 2016). . . . . . . . . . . . . . . . . 11.25n26 Tenaris SA & Talta-​Trading e Marketing Sociedade Unipessoal Lda v Bolivarian Republic of Venezuela (II), ICSID Case No ARB/​12/​23, Award (Dec 12, 2016) . . . . 10.91, 11.31, 11.43n67 Tethyan Copper Company Pty Ltd v Islamic Republic of Pakistan, ICSID Case No ARB/​12/​1, Decision on Claimant’s Request for Provisional Measures (Dec 13, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.43, 24.136 Texaco Overseas Petroleum Co v Libya (Jurisdiction) (1975), 53 ILR 392. . . . . 14.22n56, 14.79n254 Tidewater Inc. et al v Bolivarian Republic of Venezuela, ICSID Case No ARB/​10/​5, Decision on Claimant’s Proposal to Disqualify Professor Brigitte Stern, Arbitrator (Dec 23, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . 8.59, 8.62n115, 8.91–​8.92, 10.76n164, 10.79 Tidewater Inc. et al v Bolivarian Republic of Venezuela, ICSID Case No ARB/​10/​5, Award (Mar 13, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.55 Tidewater Inc. et al v Bolivarian Republic of Venezuela, ICSID Case No ARB/​10/​5, Decision on the Application for the Revision of the Award (July 7, 2015). . . . . . . . . . . . . . . . . . . . . . 27.02n4 Tippetts et al. v TAMS-​AFFA & Iran et al. (1984-​II) 6 IUSCTR 219. . . . . . . . . . . . . . . . . . . . 14.62 Tippetts et al. v TAMS-​AFFA & Iran et al. (1984-​II), Award No 141-​7-​2 (June 22, 1984). . . . . . . . . . . . . . . . . . . 22.41, 22.54, 22.61, 22.74, 22.80–​22.81, 22.83–​22.84 Tokios Tokelés v Ukraine, ICSID Case No ARB/​02/​18, Decision on Jurisdiction (Apr 29, 2004). . . . . . . . . . . . . . . . . 10.59–​10.60, 10.61n109, 10.64, 11.92, 11.100n175, 14.75 Tokios Tokelés v Ukraine, ICSID Case No ARB/​02/​18, Procedural Order No 3 (Jan 18, 2005). . . . . . . . . . . . . . . . . . . . . . 24.55, 24.73, 24.97, 24.115, 24.132, 24.134, 24.149 Too v Greater Modesto Insurance Associates, Award of Dec 29, 1989, 23 IUSCTR 378. . . . . . . 22.91 Total SA v the Argentine Republic, ICSID Case No ARB/​04/​01, Decision on Liability (Dec 27, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.70, 22.95, 22.107 Total SA v Argentine Republic, ICSID Case No ARB/​04/​01, Decision on Liability, Individual Opinion of Henri Alvarez (Dec 27, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.62n138, 20.68 Total SA v Argentine Republic, ICSID Case No ARB/​04/​01, Decision on Argentine Republic’s Proposal to Disqualify Ms. Teresa Cheng (Aug 26, 2015). . . . . . . . . . . . . . . . . . . . . . . 8.18, 8.56 Total SA v Argentine Republic, ICSID Case No ARB/​04/​01, Decision on Annulment (Feb 1, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.07n11, 27.38, 27.44n107 Toto Costruzione Generali S.p.A. v Republic of Lebanon, ICSID Case No ARB/​07/​12, Decision on Jurisdiction (Sept 11, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.50n83, 16.48 Toto Costruzione Generali S.p.A. v Republic of Lebanon, ICSID Case No ARB/​07/​12, Award (June 7, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.32, 11.76, 11.78n133, 14.55 Tradex Hellas SA v Republic of Albania, ICSID Case No ARB/​94/​2 . . . . . . . . . . . . . . . . . . . . 14.03n3 Trans-​Global Petroleum Inc. v Hashemite Kingdom of Jordan, ICSID Case No ARB/​07/​25, Decision on the Respondent’s Objection Under Rule 41(5) of the ICSID Arbitration Rules (May 12, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.27

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Table of Cases Transglobal Green Energy LLC & Transglobal Green Energy de Panama SA v Panama, ICSID Case No ARB/​13/​28, Decision on Respondent’s Request for Shifting the Costs of the Arbitration (Mar 4, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.85n138, 24.87 Transglobal Green Energy LLC & Transglobal Green Energy de Panama SA v Panama, ICSID Case No ARB/​13/​28, Decision on the Respondent’s Request for Provisional Measures Relating to Security for Costs (Jan 21, 2016). . . . . . . . . . . . . . . . . . . . . 24.26n24, 24.27, 24.149 Transglobal Green Energy LLC & Transglobal Green Energy de Panama SA v Panama, ICSID Case No ARB/​13/​28, Procedural Order No 2 (Jan 21, 2016). . . . . . . . . . . . . . . 12.03, 12.17n33 TSA Spectrum de Argentina, SA v Argentine Republic, ICSID Case No ARB/​05/​5, Award (Dec 19, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.63, 18.56 Tulip Real Estate & Development Netherlands BV v Republic of Turkey, ICSID Case No ARB/​11/​28, Decision on the Respondent’s Request for Bifurcation (Nov 2, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04, 12.13, 12.26, 13.08 Tulip Real Estate & Development Netherlands BV v Republic of Turkey, ICSID Case No ARB/​ 11/​28, Award (Mar 10, 2014) . . . . . . . . . . . . . . . . 14.07, 14.27, 15.32n51, 15.32n52, 15.50n83 Tulip Real Estate & Development Netherlands BV v Republic of Turkey, ICSID Case No ARB/​ 11/​28, Decision on Annulment (Dec 30, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.44n107 Tza Yap Shum v Republic of Peru, ICSID Case No ARB/​07/​6, Award (July 7, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.78, 22.104 Tza Yap Shum v Republic of Peru, ICSID Case No ARB/​07/​6, Decision on Annulment (Feb 12, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.44n107 Ulysseas Inc v Republic of Ecuador, UNCITRAL, Final Award (June 12, 2012) . . . 14.34n109, 14.47 Ulysseas Inc v Republic of Ecuador, UNCITRAL, Interim Award (Sept 28, 2010) . . . . . . . 14.22n55, 14.52, 14.79n254, 14.90 Marion Unglaube v Republic of Costa Rica, Award (May 16, 2012), ICSID Cases No ARB/​08/​ 1 & ARB/​09/​20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.17 United Parcel Service of America, Inc. v Government of Canada, NAFTA/​UNCITRAL, Decision of the Tribunal on Petitions for Intervention & Participation as Amici Curiae (Oct 17, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.61–​9.64, 9.81, 9.109, 9.129, 9.137, 13.47, 13.51 14.04, 14.34n109, 14.38, 14.45, 14.53n180 United Parcel Service of America, Inc. v Government of Canada, NAFTA/​UNCITRAL, Award on Jurisdiction (Nov 22, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.53n92 United Parcel Service of America, Inc. v Government of Canada, NAFTA/​UNCITRAL, Separate Statement of Dean Cass (May 24, 2007) . . . . . . . . . . . . . . . . . . . . 21.21, 21.32–​21.35, 21.66, 21.88, 21.92, 21.105 United Utilities (Tallinn) BV & Aktsiaselts Tallinna Vesi v Republic of Estonia, ICSID Case No ARB/​14/​24, Procedural Order No 2 (June 17, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . 12.22n42 United Utilities (Tallinn) BV & Aktsiaselts Tallinna Vesi v Republic of Estonia, ICSID Case No ARB/​14/​24, Decision on Respondent’s Application for Provisional Measures (May 12, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.26, 9.27, 9.29, 24.58, 24.92, 24.149 Urbaser SA & Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v Argentine Republic, ICSID Case No ARB/​07/​26, Award, (Dec 8, 2016). . . . . . . . . . . . . . 17.16, 17.16n43, 17.16n46, 17.29, 17.64 Vacuum Salt Products Ltd v Government of the Republic of Ghana, ICSID Case No ARB/​92/​1, Decision No 3 on Request for Recommendation of Provisional Measures (June 14, 1993). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.66 Vacuum Salt Products Ltd v Government of the Republic of Ghana, ICSID Case No ARB/​92/​1, Award (Feb 16, 1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.68 Valeri Belokon v Kyrgyz Republic, PCA Case No AA518, Decision on Challenges to Arbitrators Professor Kaj Hobér & Professor Jan Paulsson (Oct 6, 2014). . . . . . . . . . . . . . . . . . . . . . . . . 8.62 Valeri Belokon v Kyrgyz Republic, PCA Case No AA518, Award (Oct 24, 2014) . . . . . . . . . . . . 29.82 Valle Verde Sociedad Financiera SL v Bolivarian Republic of Venezuela, ICSID Case No ARB/​ 12/​18, Decision on the Provisional Measures (Jan 25, 2016). . . . . . . 24.85n138, 24.136, 24.149 Van Zyl & Others v Kingdom of Lesotho, UNCITRAL, PCA Case No 2016-​21, Procedural Order No 1 (Nov 3, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.08n12

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Table of Cases Vannessa Ventures Ltd v Bolivarian Republic of Venezuela, ICSID case No ARB (AF)/​04/​6, Award (Jan 16, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.94n165, 11.100n176, 22.21 Vattenfall AB & Others v Federal Republic of Germany, ICSID Case No ARB/​12/​12, Decision on the Respondent’s preliminary objections pursuant to ICSID Arbitration Rule 41(5) (July 2, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.02, 7.29n67, 9.142 Venable v United Mexican States (1927), 4 RIAA 219 (US-​Mexico General Claims Commission). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n98, 14.43 Venezuela Holdings BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​27, Award (Oct 9, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.64 Venezuela Holdings BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​27, Decision on the Application for the Revision of the Award (June 12, 2015). . . . . . . . . . . 27.02n4 Venezuela Holdings BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​07/​27, Decision on Stay of Enforcement (Sept 17, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Venoklim Holding BV v Bolivarian Republic of Venezuela, ICSID Case No ARB/​12/​22, Decision on the Respondent’s Preliminary Objection under ICSID Arbitration Rule 41(5) (Mar 8, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.30, 10.64 Vestey Group Ltd v Bolivarian Republic of Venezuela, ICSID Case No ARB/​06/​4, Award (Apr 15, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.56n85, 17.18n56 Veteran Petroleum Ltd (Cyprus) v Russian Federation, UNCITRAL, PCA Case No AA228, Award (July 18, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.27 Vigotop Ltd v Hungary, ICSID Case No ARB/​11/​22, Award (Oct 1, 2014). . . . . . . . . . . . . . . . 22.22 Vito G. Gallo v Government of Canada, PCA Case No 55798, Decision on the Challenge to Mr. J. Christopher Thomas, QC (Oct 14, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.27 Vito G. Gallo v Government of Canada, PCA Case No 55798, Award (Redacted) (Sept 15, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.24, 13.56 Walter Bau AG (in liquidation) v Kingdom of Thailand, UNCITRAL, Award (July 1, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.26 Waste Management Inc. v United Mexican States, ARB (AF)/​00/​3, Dissenting Opinion of Keith Highet (June 2, 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.98n54, 2.56n89, 15.39, 15.39n64 Waste Management Inc. v United Mexican States, ARB (AF)/​00/​3, Award (Apr 30, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.45, 20.34, 20.95 Waste Management Inc v United Mexican States (II) (2004) 11 ICSID Rep. 362 . . . . . . . . . . . . 14.65 William T Way (USA) v United Mexican States (1928), 4 RIAA 391, (US-​Mexico General Claims Commission). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.11n25 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4 . . . . . . . . . . . . . . . 14.62n214 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Decision on Jurisdiction (June 29, 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.53n92 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Award (Dec 8, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.88, 22.76, 25.69 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Procedural Order No 1 (Apr 5, 2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.58n135 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Decision on Annulment (Feb 5, 2002). . . . . . . . . . . . . . . . 15.77n122, 18.32n45, 18.33, 18.41, 18.45, 19.17, 19.19–​19.20, 19.25, 27.31, 27.47, 27.52 Wena Hotels Ltd v Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Decision on Interpretation, (Oct 31, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.76 Westinghouse Electric Corp. v Islamic Republic of Iran, Award No 579-​389-​2, 33 IUSCTR 60 (Mar 26, 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.91n258 White Industries Australia Ltd v Republic of India, UNCITRAL, Final Award (Nov 30, 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30, 23.49 Windstream Energy LLC v. Government of Canada, PCA Case No. 2013-​22, Award (Sept 27, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.133, 21.18 Wintershall AG v Argentine Republic, ICSID Case No ARB/​04/​14, Award (Dec 8, 2008). . . . . . . . . . . . . . . . . . . . . . . 6.11n28, 23.35n85, 23.47n102, 23.56, 23.94–​23.95 Wintershall AG v Government of Qatar, Ad-​Hoc, Partial Award (1988) . . . . . . . . . . 14.28n81, 14.29 WNC Factoring Ltd v the Czech Republic, PCA Case No 2014-​34, Award (Feb 22, 2017). . . . 23.109 Woodruff Case (US v Venezuela), 9 RIAA 213 (1903). . . . . . . . . . . . . . . . . . . . . . . . . . . 15.70–​15.71

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Table of Cases World Duty Free Co. Ltd v Republic of Kenya, ICSID Case No ARB/​00/​7, Award (Aug 31, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.02, 18.04–​18.06, 18.25–​18.26 World Duty Free Co. Ltd v Republic of Kenya, ICSID Case No ARB/​00/​7, Award (Sept 25, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.24, 18.78 World Duty Free Co. Ltd v Republic of Kenya, ICSID Case No ARB/​00/​7, Award (Oct 4, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.06 World Duty Free Co. Ltd v Republic of Kenya, ICSID Case No ARB/​00/​7, Decision on Provisional Measures (Apr 25, 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.58 Yeager v Islamic Republic of Iran (1987-​IV) 17 IUSCTR 92. . . . . . . . . . . . . . . . 14.03n3, 14.41n135 Yosef Maiman, Merhav (Mnf ) Ltd, Merhav Ampal Group Ltd & Merhav Ampal Energy Holdings Ltd Partnership v Arab Republic of Egypt, PCA Case No 2012-​26. . . . . . . . . . . 10.117 Young, James & Webster v UK, Series A, No 44 (1981). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.04n8 Yukos Final Award see Hulley Enterprises Ltd. (Cyprus) v Russian Federation, UNCITRAL, PCA Case No AA 226, Final Award (July 18, 2014) Yukos Interim Award see Hulley Enterprises Ltd. (Cyprus) v Russian Federation, Interim Award on Jurisdiction & Admissibility (Nov 30, 2009) (Yukos Interim Award) Zeevi Holdings v Republic of Bulgaria & the Privatization Agency of Bulgaria, UNCITRAL Case No UNC39/​DK, Award (Oct 25, 2006). . . . . . . . . . . . . . . . . . . . . . . . . 17.06, 17.74n223 Zhinvali Development Ltd v Georgia, ICSID Case No ARB/​00/​1 Award (Jan 24, 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.44, 11.44n68 NATIONAL Austria Radenska v Kajo, Austria, Oberster Gerichtshof, Judgment (Oct 20, 1993), 26(a) Y.B. Comm. Arb. 919 (1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.28 Belgium Republic of Poland v Eureko, Court of First Instance of Brussels (Nov 23, 2006), RG 2005/​ 1542/​A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n1 Société Nationale pour la Recherche, le Transport et la Commercialisation des Hydrocarbures (Sonatrach) v Ford, Bacon & Davis Inc, Belgium, Brussels Tribunal de Première Instance, Judgment (Dec 6, 1988), 15 YB Comm Arb 370 (1990). . . . . . . . . . . . . . . . . . . . . . . . . . . 29.28 Canada Attorney General of Canada v Mobil et al., Canada, Superior Court of Justice, Ontario, 2016 ONSC 790 (Feb 16, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n2, 28.156, 29.21 Attorney General of Canada v SD Myers, Inc. & United Mexican States (Intervener), Canada, Federal Court (Jan 30, 2004), 8 ICSID Rep. 194. . . . . . . . . . . . . . . . 21.28n57, 28.02n2, 28.75, 28.155, 29.39 Bayview Irrigation District #11 & Others v Mexico, Ontario Superior Court, Ontario Superior Court of Justice, Judgment (May 5, 2008). . . . . . . . . . . . . . . . . . 28.02n2, 28.49–​28.56, 28.154 Belokon et al. v Kyrgyz Republic, Canada, Superior Court of Justice, Ontario, 2016 ONSC 4506 (July 11, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.82 Mexico v Cargill, Incorporated, Superior Court of Justice Ontario, Judgment (Aug 26, 2010) & Court of Appeal for Ontario, Judgment (Oct 4, 2011). . . . . . . . . 28.02n2, 28.66–​28.75, 28.156 Noble China Inc. v Lei Kat Cheong, Ontario Court of Justice (Nov 13, 1998) . . . . . . . . . 28.142n222 Osprey, Inc. v Cabana Ltd P’ship, 532 S.E.2d 269, 273 (S.C. 2000) . . . . . . . . . . . . . . . . . . . . . . 26.03 United Mexican States v Marvin Ray Feldman Karpa, Canada, Ontario Court of Appeal (Jan 11, 2005), 9 ICSID Rep 508 . . . . . . . . . . . . . . . . . . . . 28.02n2, 29.08, 29.18, 29.20, 29.38 United Mexican States v Metalclad, Canada, Supreme Court of British Columbia (May 2, 2001) [2001] BCSC 664, 5 ICSID Rep. 236. . . . . . . . . . . . . . . . . . . . . . . 28.02n2, 28.75, 29.17 United Mexican States v Metalclad, Canada, Supreme Court of British Columbia (May 2, 2001) [2001] BCSC 664, 5 ICSID Rep. 236 [hereinafter Mexico v Metalclad]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.08

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Table of Cases Czech Republic Binder v Czech Republic, District Court of Prague, Default Judgment, (22 June 2009). . . . . . 28.02n3 Binder v Czech Republic, Higher Court of Prague, Judgment (July 2, 2010). . . . . . . . . . . . . . 28.02n3 Egypt Libya v Mohamed Abdulmohsen Al-​Kharafi &Sons Co. (a Kuwaiti group), Egyptian Supreme Court, Judgment (Nov 4, 2015) (pending). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n13 Malicorp Ltd v Arab Republic of Egypt, Cairo Regional Centre for International Commercial Arbitration, Award (Mar 7, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.28 European Union Austria v Italy, ECommHR, App. No 788/​60, 4 YB. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.42n65 Beyeler v Italy, Judgment & Merits, App. No 33202/​96, ECHR 2000-​I57, (2001) 33 EHRR 52. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.43 Bimer SA v Moldova, App No 15084/​03, Judgment (July 10, 2007). . . . . . . . . . . . . . . . . . . . . . 22.43 Case 18/​60 Worms v High Authority [1962] ECR 195. . . . . . . . . . . . . . . . . . . . . . . . . . 14.32, 14.45 Case 30/​77 Regina v Bouchereau [1977] ECR 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62 Case 102/​81 Nordsee Deutsche Hochseefischerei v Reederei Mond Hochseefischerei [1982] ECR 1095 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n69 Case 126/​97 Eco Swiss China Time Ltd v Benetton International NV [1999] ECR I-​3055. . . . . 29.15, 29.41 Case 188/​89 Foster v British Gas plc [1990] ECR I-​3313. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.38 Case 249/​81 Commission v Ireland [1982] ECR 4005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n91 Case 470/​03 AGM-​COS.MET Srl v Suomen valtio [2007] ECR I-​2749. . . . . . . . . . . . . . . 14.62n214 Commission Decision (EU) 2015/​1470 of March 30, 2015 on State aid SA.38517 (2014/​C) (ex 2014/​NN) implemented by Romania-​Arbitral award Micula v Romania of December 11, 2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.42 Handyside v United Kingdom, 24 ECHR (ser. A) 29 (1976). . . . . . . . . . . . . . . . . . . . . . . . . 22.52n79 Holy Monasteries v Greece, Apps. Nos. 13092/​87, 13984/​88, Series A, No 301-​A (1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n70 Ilașcu et al. v Moldova & Russia, App. No 48787/​99 (July 8, 2004) . . . . . . . . . . . . . . . . . . . 14.30n98 James v United Kingdom, 98 ECHR (ser. A) 9, 32 (1986). . . . . . . . . . . . . . . . . . . . . 22.44n71, 22.99 Kačapor et al. v Serbia, Apps. Nos. 2269/​06, ECHR 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30 Kalogeropoulou v Greece & Germany, App. No 59021/​00, ECHR 2002-​X. . . . . . . . . . . . 14.65n226 Kotov v Russia, App. No 54522/​00, ECHR Judgment of April 3, 2012. . . . . . . . . . . . . . . . . . . . 14.43 KR v Switzerland. App. No 10881/​84, (1987) 51 DR 83. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n69 Liseytseva & Maslov v Russian Federation Apps. Nos. 39483/​05, 40527/​10, ECHR 2014.14.42n139 Lisyanskiy v Ukraine, App. No 17899/​02 (Apr 4, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.26n74 Lithgow v United Kingdom, Judgment(July 8, 1986), (ser. A). . . . . . . . . . . . . . . . . . . . . . . . . . . 22.43 Matos e Silva, Lda. v Portugal, App. No 15777/​89, 24 ECHR Rep 573. . . . . . . . . . . . . . . . 22.52n79 Mykhaylenky et al. v Ukraine, App. No 35091/​02, ECHR 2004-​XII. . . . . . . . . . . . . . . . . . 14.26n74 Papamichalopoulos v Greece (Just Satisfaction) ECHR (ser. A), No 330-​B (Oct 31, 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.38n67 Poiss v Austria, 117 ECHR (ser. A) 84 (1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.52n79 Radio France et al. v France, App. No 53984/​00, ECHR 2003-​X, . . . . . . . . . . . . . . . . . . . . 14.26n74 Rosenzweig & Bonded Warehouses Ltd v Poland, App. No 51728/​99, Judgment of July 28, 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.43 Schmidt & Dahlstrom v Sweden, Series A, No 21 (1976) . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62n207 Sovtransavto Holding v Ukraine, No 48553/​99, Judgment (July 25, 2002), ECHR 2002-​VII. . . 22.43 Sporrong & Lonnroth v Sweden, ECHR. App. No 7152/​75 (1983) 5 EHRR 35 (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.55n86, 22.100 Swedish Engine Drivers’ Union case, Series A, No 20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62n207 X v France, Series A, No 234-​C (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.62 X v Ireland, App. No 4125/​69 (1971) 14 YBECHR 219. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.45 Zlínsat, Spol. SRO v Bulgaria, App. No 57785/​00, Judgment (June 15, 2006) . . . . . . . . . . . . . . 22.43

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Table of Cases France Benvenuti & Bonfant Srl v Banque Commercial Congolaise, Cour de cassation Paris (July, 21, 1987), 1 ICSID Rep. 373. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.47n103, 29.82 Czech Republic v Pren Nreka, Recours en Annulation, Court d’Appel de Paris, Arret (Sept 25, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n5 Peter De Sutter, Kristof De Sutter, DS 2 SA & Polo Garments Majunga SARL v Republic of Madagascar, Paris Court of Appeal (Mar 15, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n5 Energoalians v Moldova, Paris Court of Appeal (Apr 12, 2016) 13/​22531. . . . . . . . . . . 2.13, 28.02n5, 28.83–​28.87,  28.144 Époux Martin v Banque d’Éspagne (1953) 80 JDI 654 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41 Kalininggrad Region v Lithuania, Paris Court of Appeal (Nov 18, 2010). . . . . . . . . . . . . . . . . 28.02n5 République Bolivarienne du Venezuela v Société Gold Reserve Inc., RG No 14/​21103, France, Cour d’appel de Paris, Pôle 1: Chambre 1 (Jan 29, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . 29.40 Republique de Madagascar v Peter & Kristof de Sutter, DS2, & SARL Polo Garments Majunga RG N° 14/​19164, France, Cour d’appel de Paris, Pôle 1: Chambre 1 (Mar 29, 2016). . 29.17n45 SOABI v Senegal, Cour d’appel, Paris (Dec 5, 1989), 2 ICSID Rep. 338. . . . . . . . . 29.70n157, 29.79 Socialist Federal Republic of Yugoslavia v Societé Européenne d’Etudes et d’Entreprises, Tribunal de grande instance of Paris (July 6, 1970), 65 ILR 46. . . . . . . . . . . . . . . . . . . . . . . . . . 29.63n142 Société Creighton c/​ministre des finances de l’Etat du Qatar et autres, Cour de cassation (1re chambre civile) (July 6, 2000), Bulletin civil I, 207 Revue de l’arbitrage (2001). . . . . . 29.63n144 Société Hilmarton v Société OTV, France, Cour de Cassation, Judgment (Mar 23, 1994), Revue de l’Arbitrage 327 (1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.28 Société Viajes v Office National du Tourisme Espagnol, Tribunal Civil Seine, Oct 17, 1936, 8 I.L.R. 277 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n71 Walker International Holdings v Société nationale des pétroles du Congo (SNPC), Cour d’Appel de Paris (Jan 23, 2003); Cour de cassation (Feb 6, 2007), 04-​13107 . . . . . . . . . . . . . . . . . . 29.47 Germany Achmea BV v Slovak Republic, Frankfurt Higher Regional Court, Judgment (May 10, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n6 NIOC Revenues Case, Federal Constitutional Court (Bundesverfassungsgericht) (Apr 12, 1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.58n134 Philippine Embassy Bank Account Case, Federal Constitutional Court Bundesverfassungsgericht (Dec 13, 1977), 46 BVerfG 342 65 ILR 146. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.58–​29.59 Russian Federation v Sedelmayer, German Federal Supreme Court (Bundesgerichtshof ), Order IX ZR 64/​08 (Nov 6, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.60 Sedelmayer v Russian Federation, Amtsgericht Frankfurt, 83 M 12303/​2001, Pfändungs und Überweisungsbeschluss (Jan 22, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.58 Sedelmayer v Russian Federation, German Federal Supreme Court, Order VII ZB 9/​05 (Oct 4, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.45, 29.55, 29.63n145 Sedelmayer v Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Az. 25 W 15/​03 (Dec 3, 2003), SchVZ (2004) 102. . . . . . . . . . . . . . . . . . . . . . . . . 29.53–​29.54,  29.56 Sedelmayer v Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Order, 1 W 276/​09 (June 14, 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.62 Sedelmayer v Russian Federation, Higher Regional Court Cologne (Oberlandesgericht Köln) (Oct 6, 2003), SchVZ (2004) 99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.55 Sedelmayer v Russian Federation, Higher Regional Court Frankfurt, Beschluss, 26 W 101/​2002 (Oct 4, 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.59n136 Sedelmayer v Russian Federation, Regional Court Cologne, Beschluss (May 11, 2007), Oberlandesgericht Köln, Az. 22 U 98/​07 (Mar 18, 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . 29.60 Sedelmayer v Russian Federation, Regional Court Hagen, Beschluss, 3 T 405/​07 (Jan 16, 2008).29.60 Sedelmayer v Russian Federation, Regional Court Munich, Az. 20 T 8856/​07 (Feb 21, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.53n118 Spanish Consular Bank Accounts Case, Regional Court Stuttgart Landgericht Stuttgart (Sept 21, 1971), 65 I.L.R. 114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.58n134

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Table of Cases India Capital India Power Mauritius I v Maharashtra Power Development Corp Ltd et al. ICC 12913/​2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n94 Ireland Persona Digital Telephony Ltd & Anor v Minister for Public Enterprise & Ors [2016] IEHC 187. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.08 Netherlands Adria Beteiligungs GmbH v Croatia, Hague Court, Judgment (Aug 15, 2012) . . . . . . . . . . . . 28.02n7 Chevron Annulment, District Court of The Hague, Case No C/​09/​477457 (Jan 20, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.146 Ecuador v Chevron & Texaco, Court of Appeal of The Hague, Case no. 200.112.516/​01 (June 18, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.93 Ecuador v Chevron (U.S.A.) & Texaco, Hague District Court, Judgment (May 2, 2012) & Dutch Supreme Court, Judgment (Sept 26, 2014). . . . . . . . . . . . . . . 28.02n7, 28.88–​28.97,  28.153 Russia v Veteran Petroleum Ltd, Russia v Hulley Enterprises Ltd, & Russia v Yukos Universal Ltd, Hague District Court, Judgment (Apr 20, 2016) (pending). . . . . . . . . . . . . . . . . . . . 28.144 Russian Federation v Hulley Enterprises Ltd (Cyprus), Yukos Universal Ltd (Isle of Man) & Veteran Petroleum Ltd (Cyprus), Rechtbank Den Haag, C/​09/​477160 /​HA ZA 15-​1, ECLI: NL: RBDHA:2016:4230 (Apr 20, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.27 Veteran Petroleum Ltd v Russia, Hulley Enterprises Ltd v Russia; Yukos Universal Ltd v Russia, Hague District Court, Judgment (Apr 20, 2016) (pending). . . . . . . . . . . . . 28.02n13, 28.44n67 Poland Case SK 26/​03, Polish Constitutional Court (Jan 20, 2004) . . . . . . . . . . . . . . . . . . . . . . . . 14.41n130 Russia Government of the Russian Federation, Decision No 992 on the Conclusion of International Treaties of the Russian Federation on the Promotion & Protection of Investments (Sept 30, 2016) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.07 Lee John Beck & Central Asian Development Corporation v Kyrgyz Republic, Moscow Arbitrazh Court, Judgment (June 5, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n8 Stans Energy v Kyrgyz Republic, Moscow Arbitrazh Court, Judgment (May 25, 2015). . . . . . 28.02n8 Singapore Government of the Lao People’s Democratic Republic v Sanum Investments Ltd [2015] 2 SLR 322, [2015] SGHC 15. . . . . . . . . . . . . . . . . . . . . . . . . . 28.104, 28.131, 28.134, 28.141, 28.144 Newspeed Int’l Ltd v Citus Trading Pte Ltd, Singapore High Ct, 2001, 28 Y.B. Comm. Arb. 829, 833 (2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.17n44 Sanum Investments Ltd v Government of Lao People’s Democratic Republic, Singapore Court of Appeal [2016] SGCA 57 . . . . . . . . . . . . . . . . . . . . . 28.02n11, 28.04, 28.110–​28.116, 28.150 Sanum Investments Ltd v Lao People’s Democratic Republic, Singapore High Court, Judgment (Jan 20, 2015). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n11, 28.98–​28.116, 28.118 Spain Casado Coca v Spain, Series A, No 258-​A (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.41n135 Sweden Anatolie Stati, Gabriel Stati, Ascom Group SA & Terra Raf Trans Traiding Ltd v Kazakhstan, SCC Case No 116/​2010, Award (Dec 19, 2013). . . . . . . . . . 2.15, 2.33, 11.78n133, 11.97n170 Charanne & Construction Investments v Spain SCC Case No 062/​2012, Award (Jan 21, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.36, 2.46, 2.57, 10.62

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Table of Cases Czech Republic v CME Czech Republic BV, Judgment of the Svea Court of Appeal (May 15, 2003), Case No T-​8735-​01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.104n59, 28.02n9, 29.08 Kyrgyz Republic v Petrobart Ltd, Judgment of the Svea Court of Appeal (Jan 19, 2007), Case No T 5208-​05. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n9, 28.40–​28.44, 28.43, 28.151 Libyan American Oil Company v Libya, Sweden, Svea Court of Appeal (Svea hovrätt) (June 18, 1980), 62 I.L.R. 225 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.63n143 Nagel v Czech Republic, Decision of the Svea Court of Appeal (May 30, 2005), Case No T 9059-​03. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n9 Petrobart Ltd v Kyrgyz Republic, Judgment of the Supreme Court (Mar 28, 2008), Case No 2113-​06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.39 Petrobart Ltd v Kyrgyz Republic, Judgment of the Svea Court of Appeal (Apr 13, 2006), Case No T 3739-​03. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.36, 28.151 Petrobart Ltd v Kyrgyz Republic, Judgment of the Svea Court of Appeal (Apr 13, 2006), Case No T 3739-​03 & Judgment of the Supreme Court (Mar 28, 2008), Case No 2113-​06 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n9, 28.34–​28.39, 28.144 Petrobart Ltd v Kyrgyzstan, Award, SCC Case No 126/​2003 (Mar 29, 2005) . . . . . . . . . 28.40, 28.42 Renta 4 SVSA et al. v Russian Federation, SCC, Award on Preliminary Objections (Mar 20, 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.35n85, 23.56, 23.56n125, 28.119 Renta 4 SVSA et al. v Russian Federation, Stockholm District Court, Judgment (Sept 14, 2014) & Svea Court of Appeal, Judgment (Jan 8, 2016) . . . . . . . . . . . . 28.02n9, 28.117–​28.126 Republic of Kazakhstan v Anatolie Stati, Gabriel Stati, Ascom Group S.A. & Terra Raf Trans Traiding Ltd, Svea Court of Appeal, Judgment (Dec 9, 2016) . . . . . . . . . . . . . . . . . . . . . 28.02n9 RosInvest Co UK Ltd v the Russian Federation, Swedish District Court, Default Judgment (Nov 9, 2011) & Svea Court of Appeal, Judgment (Sept 5, 2013). . . . . . . . . . . . . . . . . . . . . . . 28.02n9 RosInvestCo UK Ltd v Russian Federation, Case No Ő 2301-​09. . . . . . . . . . . . . . . . . . . . . . . 8.45n81 RosInvestCo UK Ltd v Russian Federation, SCC Case No V079/​2005, Award on Jurisdiction (Oct 5, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.77–​23.78, 23.77n161 Russian Federation v Franz J Sedelmayer, Supreme Court of Sweden, Case No Ö 170-​10 (July 1, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.61 Russian Federation v Franz J Sedelmayer, Sweden, Svea Court of Appeal, Case No T 525-​03 (June 15, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.22 Russian Federation v GBI 9000 SICAV SA et al., Svea Court of Appeal Case No T9128-​14, Judgment (Jan 18, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.35n85 Russian Federation v Renta 4, et al., Judgment of the Svea Court of Appeal (Jan 18, 2016). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.124, 28.144, 28.152 Russian Federation v Renta 4 et. al., Judgment of the Stockholm District Court (Sept 11, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.123 Russian Federation v RosInvestCo UK Ltd, Svea Court of Appeal, Case No T10060-​10, Judgment (Sept 5, 2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.77n116 Russian Federation v Sedelmayer, Judgment of the Stockholm District Court (Dec 12, 2002), Case No T6-​583-​98. . . . . . . . . . . . . . . . . . . . . 28.02n9, 28.18–​28.25, 28.131–​28.132, 28.152 Russian Federation v Sedelmayer, Judgment of the Svea Court of Appeal (May 15, 2003), Case No T8735-​ 01. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.25 Sedelmayer v Russian Federation, Award (July 7, 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.22 Switzerland Bezirksgericht Zurich, Decision (Mar 25, 2008) No EQ080051/​U. . . . . . . . . . . . . . . . . . . . . . . 29.82 Czech Republic v Saluka Investments BV, Judgment of the Federal Court of Switzerland (Sept 7, 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n10, 28.45–​28.48 EDF Int’l S.A. v Hungary, Federal Supreme Court, Judgment (Oct 6, 2015). . . . . . . . . . . . . 28.02n10 Lebanon v France Télécom Mobiles Internationales S.A. & FTML SAL, Judgment of the Federal Court of Switzerland (Nov 10, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n10 Republic of Poland v Saar Papier Vertriebs GmbH, Judgment of the Federal Court (Sept 20, 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n10, 28.15–​28.17 République A. v B., Swiss Federal Tribunal, 4A_​34/​2015, Decision (Oct 6, 2015). . . . . . . . . . . 29.43 Saar Papier Vertriebs GmbH v Republic of Poland, Judgment (Mar 1, 2002). . . . . . . 28.02n10, 28.04

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Table of Cases Socialist People’s Libyan Arab Jamahiriya v LIAMCO, Switzerland, Federal Tribunal (June 19, 1980), 20 I.L.M. 151 (1981), BGE 106 Ia 142. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.51 Swiss Federal Tribunal, 5A_​681/​2011, Decision (Nov 23, 2011), 30 ASA Bulletin 4/​2012, 816. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.80 Thailand v Walter Bau, Swiss Federal Tribunal, Judgment (Aug 14, 2012). . . . . . . . . . . . . . . 28.02n10 United Kingdom AIG Capital Partners Inc. & Another v Republic of Kazakhstan (National Bank of Kazakhstan Intervening), High Court, Queen’s Bench Division (Commercial Court) (Oct 20,2005) , [2005] EWHC 2239 (Comm), 11 ICSID Rep. 118. . . . . . . . . . . . . . . . 29.47n103, 29.78, 29.82 Anderton v Ryan [1985] A.C. 560. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14 Arkin v Borchard Lines Ltd [2005] EWCA (Civ) 655 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.05n10 Baccus SRL v Servicio Nacional del Trigo [1957] 1 QB 438 (CA), 23 ILR 160. . . . . . . . . . . 14.23n60 British Rail International, Inc v Office & Professional Employees International Union, 63 ILR 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n71 Czech Republic v European Media Ventures SA, Judgment on jurisdiction [2007] EWHC 285 (Comm) (Dec 5, 2007) . . . . . . . . . . . . . . . . . . . 28.02n4, 28.57–​28.65, 28.104, 28.118, 28.150 Davies Middleton & Davies Ltd v Cardiff Corp. (1964) 62 LGR 134. . . . . . . . . . . . . . . . . . . . . . 4.68 Ecuador v Occidental, England, High Court, Queen’s Bench Division (Apr 29, 2005), [2005] EWHC 774 (Comm), 12 ICSID Rep. 101; Court of Appeal (Sept 9, 2005), [2005] EWCA 1116, 12 ICSID Rep. 129. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.34 Ecuador v Occidental Exploration & Production Company, Judgment [2006] EWHC 345 (Comm) (Mar 2, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n4, 28.04, 28.26–​28.33 Ecuador v Occidental Exploration & Production Company, Judgment of the Court of Appeal [2007] EWCA Civ 656 (July 4, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.33 Ecuador v Occidental Exploration & Production Company (non-​justiciability), Judgment [2005] EWHC 774 (Comm) (Apr 29,2005). . . . . . . . . . . . . . . . . . 28.29, 28.31, 28.63, 28.131, 28.134, 28.141, 28.150 Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.41 “Gécamines” see La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27 Holman v Johnson (1775) 1 Cowp. 341 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.05 I° Congreso del Partido [1983] AC 244 (HL) 64 ILR 307. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.54 JH Rayner Ltd v Department of Trade [1990] 2 AC 418. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.29 Krajina v TASS Agency [1949] 2 All ER 274. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.25n71 La Générale des Carrières et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.28–​14.29 Malicorp Ltd v Government of the Arab Republic of Egypt & Ors [2015] EWHC 361 (Comm). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.28 Mobil Cerro Negro Ltd v Petroleos de Venezuela [2008] EWHC 532. . . . . . . . . . . . . . . . . . . . . 14.54 National Enterprises v Racal Communications [1974] 3 All ER 1010. . . . . . . . . . . . . . . . . . . . . . 4.68 Occidental Exploration Production Co. v Republic of Ecuador, (2005) EWCA Civ 1116 (Sept 9, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.46n88, 21.58 Occidental Exploration & Production Company v Ecuador, Judgment of the Court of Appeal [2005] EWCA Civ 1116 (Sept 9, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.30 Parochial Church Council of the Parish of Aston Cantlow & Wilmcote v Wallbank [2003] UKHL 37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.26n75 Qualcast Ltd v Haynes [1959] AC 743 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.40 R. v Shivpuri [1987] AC 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.14n4 R (Factortame) v Secretary of State for Transport (No 8) [2003] QB 381. . . . . . . . . . . . . . . . . . . 26.05 Republic of Ecuador v Occidental Exploration & Production Co. [2007] EWCA Civ 656 (July 4, 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.46n88 Republic of Ecuador v Occidental Exploration & Production Co., [2006] EWHC 345 (Comm.) (Mar 2, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.46n88

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Table of Cases Republic of Ecuador v Occidental Exploration & Production Company, England, Court of Appeal (Sept 9, 2005) [2005] EWCA 1116, 12 ICSID Rep. 129. . . . . . . . . . . . . . . 29.11, 29.70 Ross-​Smith v Ross-​Smith [1963] AC 280. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.56 Re State of Norway’s Application (No 2), [1990] AC 723 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.66n25 Stran Greek Refineries & Stratis Andreadis v Greece, Admissibility, merits & just satisfaction, App. No 13427/​87, Case No 22/​1993/​417/​496, A/​301-​B, [1994] ECHR 48, (1994) 19 EHRR 293 (Dec 9, 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.18 Svenska Handelsbanken v Sun Alliance & London Insurance plc [1995] 2 Lloyd’s Rep. 84. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.62n168 W Ltd v M Sdn Bhd [2016] EWHC 422 (Comm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.59 United States Aaron C. Berkowitz, Brett E. Berkowitz & Trevor B. Berkowitz (formerly Spence International Investments & Others) v Republic of Costa Rica, United States District Court for the District of Columbia (pending). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n13 Argentina v BG Group PLC, US Court of Appeals for the District of Columbia Circuit, Docket No 1:08-​cv-​00485 (Jan 17, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n12, 28.76–​28.82 Argentina v National Grid PLC, US District Court for the District of Columbia, Civil Action No 09-​248 (RBW) (June 7,2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n12 BG Group Plc v Argentina, 134 S. Ct. 1198 (2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.23 BG Group Plc v Argentina, 665 F. 3d 1363 (DC Cir. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.23 BG Group PLC v Republic of Argentina, US Supreme Court, Docket No 12-​138 (Mar 5, 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n12, 28.157 Compagnie Noga d’Importation et d’Exportation SA v Russian Federation, 361 F.3d 676 (2d Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.22n58 Del Webb Communities, Inc. v Partington, 652 F.3d. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.07 Devon IT, Inc. v IBM Corp., (E.D. Pa. Sept 27, 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.62n169 First Nat’l City Bank v Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 629 (1983) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30n94 Garb et al. v Republic of Poland, 207 F. Supp. 2d 16, 35 (E.D.N.Y. 2002) . . . . . . . . . . . . . . . . . 14.83 Himpurna California Energy Ltd v PLN (Final Award) (2000) 25 Y.C.A. 11. . . . . . . . . . . . . 14.30n92 Himpurna California Energy Ltd v Republic of Indonesia (Interim Award) (2000) 25 YCA 112. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.30 International Thunderbird Gaming Corporation v Mexico, United States District Court for the District of Columbia, Civil Action 06-​00748 (Feb 14, 2007). . . . . . . . . . . . . . . . . . . . 28.02n12 LETCO v Liberia, District Court, D.C. (Apr 16, 1987), 2 ICSID Rep. 390. . . . . . . . . . . . . . . . 29.77 LETCO v Liberia, District Court, S.D.N.Y. (Dec 12, 1986), 2 ICSID Rep. 385. . . . . . . . . . . . . 29.77 LIAMCO v Libya, U.S. Court of Appeals, D.C. Circuit (May 6, 1981), 62 I.L.R. 224. . . . . . . . 29.32 LIAMCO v Libya, U.S. District Court, District of Columbia, (Jan 18, 1980), 482 F. Supp. 1175 (1980), 62 I.L.R. 220 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.32 Miller UK v Caterpillar (N.D. III, Jan 6, 2014). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.62n169 Parsons & Whittemore Overseas Co v Société Générale de l’Industrie du Papier, 508 F. 2d 969, 974 (2d Cir. 1974). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.37 Raymond L. Loewen v United States of America, United States District Court for the District of Columbia; Civil Action No 04-​2151 (Oct 31, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n12 Republic of Argentina v BG Group PLC, U.S. District Court for the District of Columbia, Civil Action No 08-​485 (RBW) (June 7,2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.80 Republic of Ecuador v Chevron Corp., 638 F. 3d 384, 393 (2d Cir. 2011) . . . . . . . . . . . 24.61, 24.64, 24.146, 29.25, 29.33 Revere Copper & Brass Inc. v Overseas Private Inv Corp., 628 F. 2d 81, 83 (D.C. Cir.) . . . . . . . 29.37 Saladini v Righellis, 687 N.E.2d 1224, 1226 (Mass. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.07 Southern Pacific Co. v Jensen 244 U.S. 205 (1917). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.84n35 Telkes v Hungarian National Museum, 38 NYS (2d) 419 (S. Ct., 1942), 10 ILR 576. . . . . . 14.25n71 Tembec Inc et al. v U.S., US District Court for the District of Columbia, Civil Action No 07-​1905 (RMC) (Aug 14, 2008). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.02n12 Transaero, Inc v La Fuerza Aerea Boliviana, 30 F.3d 148, 153 (DC Cir. 1994). . . . . . . . . . . . 14.23n64

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Table of Cases Walker Digital LLC v Google Inc. (Dl Del., Feb 12, 2013). . . . . . . . . . . . . . . . . . . . . . . . . 26.62n169 Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau A.G. (in liquidation) v Kingdom of Thailand, Docket No 11-​1458-​cv (2d Cir. Aug 8, 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.26 Xerox Corp. v Google Inc. (D. Del. Aug 1, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.62n169 Yessenin-​Volpin v Novosti Press Agency, 443 F. Supp. 949, 852 (S.D.N.Y. 1978) . . . . . . . . . 14.25n71

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INTERNATIONAL LEGISLATION Art 2 ��������������������������������������������������������� 9.38 Art 3 ��������������������������������������������������������� 9.39 European Convention on Human Rights 1950 (ECHR) Agreement on Trade-​Related Aspects of Art 1 ������������������������������������������������������� 21.06 Intellectual Property Rights 1994 Art 3 ������������������������������������������������������� 21.06 Art 34 ����������������������������������������������� 14.26n74 Art 35, § 3��������������������������������������������� 7.01n2 American Convention on Human Rights 1969 Art 1(1)��������������������������������������������������� 21.06 Protocol 1������������������������������������������������ 22.18 art 1������������������������������ 22.29, 22.37, 22.52, Charter of Economic Rights and Duties of 22.55, 22.100 States 1974 Art 2(c) ����������������������������������������������� 22.01n2European Convention on State Immunity of 1972����������������������� 29.49 Convention for the Protection of Investors Rights 1997��������������������������������� 28.03 Arts 27(1)-​(2)������������������������������������������� 14.48 General Agreement on Tariffs and Trade Convention for the Protection of Human 1947����������� 21.14, 21.15–​21.16, 21.29 Rights and Fundamental Freedoms Art I(1)����������������������������������������������������� 23.06 1950 see European Convention on Art III ����������������������������������������������������� 21.06 Human Rights (ECHR) Art X������������������������������������������������� 20.12n26 Convention on International Trade in Art XX��������������������������������������������������� 21.103 Endangered Species of Wild Fauna General Agreement on Trade in Services 1995 and Flora 1973 (Washington ��������������������������������� 21.14, 24.98n168 Convention)����������� 10.28, 10.29, 30.32 Art 46 ����������������������������������������������������� 17.39 Art XVAA������������������������������������������������ 21.06 Arts 53-​54����������������������������������������������� 29.70International Centre for Settlement of Investment Dispute Convention Convention on the Recognition and 1966������������������ 1.07, 3.82, 6.02, 6.03, Enforcement of Foreign Arbitral 6.10n26, 7.25, 8.67, 8.83, 8.84, 9.26, 9.29, Awards 1958 (New York 9.52, 10.12, 10.17, 10.78n165, Convention)�� 3.10, 15.22, 24.155, 10.94, 10.112, 10.130, 11.03, 11.05, 28.12, 29.02, 29.64, 29.65, 29.75 11.16–​11.22, 11.24, 11.25n26, 11.29, Art I��������������������������������������������������� 29.07n17 11.34, 11.43, 11.50–​11.58, 11.63, 11.65, art I(1)�������������������������������������� 29.04, 29.05 11.67, 11.72n115, 11.80, 11.81, 11.83n138, art I(3)������������������������������������������������� 29.06 11.86, 11.87, 11.92, 11.93, 13.14, 13.26, Art II(1)��������������������������������������������������� 29.10 13.60, 15.29, 17.03, 17.05, 17.09, Art II(2)�������������������������������������������� 3.81–​3.82 17.19–​17.67, 17.95, 18.23, 23.83, Art III ���������������������� 5.22, 29.12, 29.44–​29.45 24.04–​24.07, 24.70, 24.79, 24.150n268, Arts IV(1)-​(2)������������������������������������������� 29.12 24.152, 24.168, 26.30, 27.01, 27.02, 27.25, Art V������������������������������������� 5.22, 5.57, 27.73 27.50, 27.62, 28.10, 28.140, art V(1) ������������������������ 29.12, 29.15, 29.28, 29.02, 29.83, 30.14 29.68–​29.69 art V(1)(d)������������������������������������������������� 6.52 Art 4(1)��������������������������������������������������� 13.67 art V(2) ������� 29.13, 29.16–​29.28, 29.28–​29.43 Art 5 ��������������������������������������������������������� 8.10 art V(2)(a) ������������������������������������ 29.31–​29.32 Art 9 ������������������������������������������������������� 18.26 art V(2)(b)����������������������������������������������� 29.36 Art 13 ������������������������������������������������������� 3.32 Art VI ������������������������������������������������������� 5.22 Art 14 ������������������������������������������������������� 3.32 art 14(1)����������������������� 6.53n108, 6.74n151, Art VII(1)������������������������������������������ 3.81–​3.82 6.82, 8.10, 8.12, 8.13, 8.15 Convention on the Succession of States in Arts 18-​24������������������������������������������������� 3.13 Respect of Treaties 1978 Art 15 �������������������������������������� 28.100, 28.108 Art 20(1)��������������������������������������������� 2.20n29 Art 25 ������������������������������������ 3.13, 6.28, 6.48, Convention on Transparency in Treaty-​based 7.29, 10.61, 11.21n23, 11.43n67, Investor-​State Arbitration 2014 11.44n68, 11.45n70, 11.55, 11.62, 13.57, (Mauritius Convention)���������������� 8.29, 13.60, 17.15, 17.27, 17.29, 17.32, 17.33, 9.02, 9.03, 9.38–​9.40, 27.105 17.65, 19.01, 27.21, 27.32 Art 1 ��������������������������������������������������������� 9.38 CONVENTIONS, TREATIES AND STATUTES

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International Legislation art 25(1)������������������2.15, 5.21n17, 6.05n9, 6.19n40, 6.26, 6.28n63, 10.11, 10.14, 10.70, 10.95n217, 10.96, 11.17, 11.21, 11.53, 11.97n169, 13.38, 15.53n92, 17.65n202, 17.66, 18.06, 18.20, 27.35 art 25(2)����������������10.11, 10.12n18, 10.21, 10.23, 10.54 art 25(2)(a)��������3.25, 6.28n64, 6.39, 10.55 art 25(2)(b) ������6.28n65, 10.55, 10.55n96, 10.55n97, 10.63, 10.65–​10.66, 10.68–​10.70, 10.70n144, 10.103n240, 13.36, 14.06 art 25(3)�����������������������������������������6.28n63 art 25(4)������������������������������������6.27, 11.18 Art 26 �������������������������������������6.04n8, 15.59, 24.71–​24.73, 24.150, 24.163 art 26(7)���������������������������������������10.55n97 Art 27(1)�����������������������������������������������29.84 Art 36 ������������������������3.26, 3.27, 5.13, 24.99 art 36(1)�����������������������6.17, 6.19n40, 6.40 art 36(2)�����������������������6.21, 6.22, 6.25n56 art 36(3)����������������������6.25n56, 6.42, 6.44, 7.11, 7.12, 7.12n20, 7.18, 26.13 Art 37 �����������������������������������������������������8.10 art 37(2)�����������������������������������������������5.25 art 37(2)(a)�������������������������������������������6.53 Art 38 ���������5.25, 6.60, 6.73n147, 6.78, 8.11 Art 39 ���������������������������6.78, 6.85n174, 8.11 Art 40 ������������������������������������6.55n117, 8.10 art 40(2)�����������������������������������������������6.82 Art 41 �����������������������11.21n23, 19.01, 24.04 art 41(2)���������������������������������������������12.03 Art 42 ���������������������3.42, 3.43, 17.54, 19.05, 19.08, 27.32 art 42(1)������������������������������������17.54n169, 19.01, 19.04, 19.07, 19.09, 19.09n14, 19.11, 19.13, 19.13n28, 19.15, 19.17n34, 19.18, 19.21, 19.25, 27.38 Art 43 �������������������������������������������24.66n105 Art 44 ����9.86, 17.68n212, 17.80n238, 24.65 Art 46 �����������������17.07, 17.12, 17.14–​17.15, 17.19, 17.20–​17.24, 17.29, 17.32, 17.36–​17.37, 17.40–​17.43, 17.45–​17.46, 17.57n177, 17.58, 17.64, 17.65, 17.67, 17.70, 17.72, 17.75 Art 47 ������������������������������3.38, 17.40, 24.09, 24.20, 24.47, 24.53, 24.66n105, 24.86, 24.132, 24.134, 24.148, 24.152, 26.44 Art 48(3)�����������������������������������������������27.44 Art 48(4)�������������������������������������������������3.48 Art 49 �����������������������3.10, 27.02n1, 27.02n2 art 49(2)�����������������������������������������������3.51 Art 50 �����������������������������3.10, 3.52, 27.02n3 art 50(2)�����������������������������������������������3.54

Art 51 �����������������������������3.10, 3.52, 27.02n4 art 51(4)�����������������������������������������������3.54 Art 52 �������������������������������������������3.10, 3.53, 27.02, 27.07, 27.15, 27.78 art 52(1)������������������������������������5.57, 27.04 art 52(1)(a)��������������6.52n106, 6.53n108 art 52(1)(b) �����������������������������27.40n90 art 52(3)������������������������������������5.22, 27.06 art 52(5)������������������������������������3.54, 27.55 Art 53 ���������������������3.10, 5.55, 27.15, 27.68, 29.67, 29.73 art 53(1)������������������������������������5.22, 27.07 Art 54 �������������������������������3.10, 27.68, 29.75 art 54(1)�������������������������5.22, 29.71, 29.73 Art 55 �������������������������������3.10, 29.64, 29.75 Art 56 �����������������������������������������������������6.96 Art 57 �������������������������3.33, 6.82, 6.96, 8.10, 8.15, 8.16, 8.64, 27.26, 29.68 Art 58 �����������������������������������������������������6.96 Art 59 �����������������������������������������������������3.56 Art 60(2)����������������������������������������3.56, 3.57 Art 61(2)�����������������������������������������26.35n70 Art 62 �����������������������������������������������������3.71 Art 63 �����������������������������������������������������3.42 Art 64 ���������������������������������������������������29.67 Art 66(1)�������������������������������������������������8.19 Art 67 �����������������������������������������������3.07n15 Ch IV�������������������������������������������������������24.150 International Court of Justice Statute 1945 Art 38 �������������4.23, 4.54, 4.82, 30.12, 30.20 art 38(1)����������������������������4.24–​4.25, 4.84, 15.45n73, 20.28n66, 30.06 art 38(1)(d) �����������������������������������11.68 Art 41 �������������������������24.06n4, 24.106n181, 24.149n263 Art 59 �����������������������������4.22, 4.24, 30.06n6 Art 64 ���������������������������������������������������26.35 Marrakesh Agreement Establishing the World Trade Organization 1994 Annex IB���������������������������������������������������21.06 Annex IC���������������������������������������������������21.06 Convention on the Organisation for Economic Co-​operation and Development 1960�������������������18.110 Art 5 �����������������������������������������������������18.70 Rome Statute of the International Criminal Court 1998 Art 17(2)�����������������������������������������������18.67 Art 17(3)�����������������������������������������������18.67 Statutes of the International Court of Arbitration 1923 Art 1(1)���������������������������������������������������3.15 United Nations Convention against Corruption 2003���������������������18.104 Art 15 �����������������������������������������18.110n160 Art 30(3)�����������������������������������������������18.73

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International Legislation United Nations Convention on Jurisdictional Immunities of States and Their Property 2004��29.49 Art 19 �������������������������������������������29.53n116 Art 20 �������������������������������������������29.63n141 Art 21 ��������������������������������29.53, 29.53n117 United Nations Convention on the Law of the Sea 1982 Arts 139(1)-​(2)�����������������������������������14.04n6 Art 153(2)(b)�������������������������������������14.04n6 United Nations Convention on the Prevention and Punishment of Genocide 1948����������14.19, 14.30n94 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 1985 ������������24.11, 29.07 United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration 2006 �������������3.81, 24.11, 24.135, 29.07n18 Art 17(1)������������������������������������24.32, 24.33 Art 17(2)�����������������������������������������������24.34 art 17(2)(d) ����������������������������24.67–​24.68 Art 17A �����������������������������������������������24.142 art 17A(1)(c) �����������������������������������24.139 Art 17B �����������������������24.63, 24.128–​24.129 Art 17C����������������������������������24.128–​24.129 Art 17E �����������������������������������������������24.128 Art 17G�����������������������������������������������24.160 Art 17H����������������������������������24.158–​24.159 Art 17I�������������������������������������������������24.158 Art 18 ���������������������������������������������������28.52 Art 19(2)�����������������������������������������������24.68 Art 26(3)(a)�����������������������������������������24.143 Art 34 ������������������������������28.13, 28.142n222 art 34(2)(a)�����������������������������������������29.17 art 34(2)(a)(ii) ��������������������28.52, 29.18 art 34(2)(a)(iii)��������������������28.68, 28.74 art 34(2)(a)(iv)�������������������������������29.18 Art I(1)���������������������������������������������29.07n19 Universal Declaration of Human Rights 1948 Art 2 �����������������������������������������������������21.06 Vienna Convention on the Law of Treaties 1969��������������������������������2.74, 11.61, 17.50, 23.11, 23.26, 23.34, 23.97, 23.99, 30.27 Arts 7-​8 �������������������������������������������������14.67 Art 25(1)�������������������������������������������2.58n94 Art 29 �����������������������28.100, 28.108, 28.114 Art 31 ����������������������������10.21, 23.10, 23.95, 23.118, 28.63, 28.87, 28.124, 30.12, 30.15, 30.18 art 31(1)������������15.24, 16.17, 23.52, 30.13

art 31(2)��������������������������������18.111, 23.30 art 31(3)��������������������������17.96n264, 23.30 art 31(3)(c)������������������������17.78, 18.110 Art 32 �����������������23.10, 23.30, 23.52, 23.95, 23.118, 28.63, 28.78, 28.124, 30.12, 30.14, 30.18 DRAFT CONVENTIONS Draft Convention on Foreign Investment 1959 (Abs-​Shawcross Draft) Art II�����������������������������������������������������16.07 Draft Convention on the International Responsibility of States for Injuries to Aliens 1961 (Harvard Convention)��������������14.27n80, 22.28 Art 3 ���������������������������������������������14.80n255 Art 8(b)�����������������������������������������14.80n255 Art 10(5)�����������������������������������������������22.30 Art 12 �������������������������������������������14.80n255 Draft International Convention for the Mutual Protection of Private Property Rights in Foreign Countries 1956 (Abs Draft) Art IV(4)�����������������������������������������������16.06 Convention on the Organisation for Economic Co-​operation and Development Draft Convention on the Protection of Foreign Property 1967 �����16.10, 20.06, 22.28 Art 2 ������������������������������������������16.09, 16.11 Art 3 �����������������������������������������������������22.31 Art 9 �����������������������������������������������������16.09 Convention on the Organisation for Economic Co-​operation and Development Draft Multilateral Agreement on Investment 1995������������������������������������������22.28 UNITED NATIONS RESOLUTIONS United Nations General Assembly Resolution 31/​98 1976������3.63, 17.05n10, 17.06 United Nations General Assembly Resolution 56/​83 2001�������14.08n15 United Nations General Assembly Resolution 2205(XXI) 1966���������3.62 art II(8)(c)�������������������������������������������3.62 United Nations General Assembly Resolution A/​69/​116 2014 ����������������������������������������27.105n212 United Nations General Assembly Resolution adopting the Declaration on the Establishment of a New International Economic Order No. 3201 (S-​VI) 1974�����������25.13n19

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International Legislation United Nations General Assembly Resolution on the ‘Charter of Economic Rights and Duties of States’ No. 3281 (XXIX) 1974�����������������25.13n19 United Nations General Assembly Resolution on the Permanent Sovereignty over Natural Resources No. 1803 (XVII) 1962���������������������������25.13n19 United Nations General Assembly Resolution on the Programme of Action on the Establishment of a New International Economic Order No. 3202 (S-​VI) 1974 ������������������������������������25.13n19

(Additional Facility) Rules 2006�������������������6.02, 6.10n26, 24.02, 24.08–​24.10, 24.28, 24.57, 24.70, 24.80, 24.154–​24.156, 24.157, 26.22, 27.02n1, 27.95, 28.11, 28.50, 28.66, 28.133, 28.142 Art 1 �����������������������������������������������������24.10 Art 2 ���������������������5.15, 6.31n67, 29.65n149 Art 2(1)������������������������������������6.17, 6.19n42 Art 3 �����������������������������5.15, 6.31n67, 29.65 Art 3(1)(a)�����������������������������������������������6.21 Art 3(1)(d)�����������������������������������������������6.22 Art 3(2)������������������������������������6.23n50, 6.57 Art 4 ��������������������5.15, 6.31n67, 6.40, 24.08 Art 5 �������������������������������������������������������5.15 Art 6(1)���������������������������������������������������6.53 Art 6(4)������������������������������������������6.74, 6.78 Art 6(5)�������������������������������������������6.78n160 Art 7 ��������������������������������������6.78, 6.85n174 Art 8 �������������������������������������������������������6.82 Art 9(1)�������������������������������������������6.59n126 Art 11(1)�������������������������������������������������6.91 Art 11(2)�����������������������������������������6.92n186 Art 11(3)�������������������������������������������������6.94 Art 12 �����������������������������������������������������6.96 Art 13(2)��������������������������������6.82, 6.94n190 Art 20 �������������������������������������������29.65n149 Art 41(2)�����������������������������������������������26.59 Art 44(2)�������������������������������������������������9.17 Art 45 ���������������������������������������������������12.06 art 45(5)�����������������������������������������12.06n8 art 45(6)��������������������������������������7.11, 7.13 Art 46 ����������������������������������������24.08, 26.44 art 46(1)��������������������������������24.80, 24.118 art 46(3)�������������������������������������������24.156 art 46(4)�������������������������������������������24.165 Art 53(3)����������������������������������������9.13, 9.22 Art 58(1)�����������������������������������������26.35n70 Ch II ����������������������������������������5.15, 6.25n57 International Centre for Settlement of Investment Disputes Arbitration Rules 1968���������������������������������24.47 International Centre for Settlement of Investment Disputes Arbitration Rules 1984 r 39(6)�������������������������������������������������24.164 International Centre for Settlement of Investment Disputes Arbitration Rules 2003 r 32(2)���������������������������������������������������9.136 International Centre for Settlement of Investment Disputes Arbitration Rules 2006����������������������������������1.07, 2.50, 3.05, 3.06, 3.38, 6.03, 6.19n42, 6.64, 8.63, 8.67, 9.08, 9.29, 9.40, 9.77–​9.107,

RULES AND REGULATIONS American Arbitration Association-​ International Centre for Dispute Resolution Arbitration Rules 2014������������������������������������������24.32 Art 20(3)�������������������������������������������������7.16 Art 30(3)�������������������������������������������9.40n73 Hong Kong International Arbitration Centre Guidelines on the Use of a Secretary to the Arbitral Tribunal 2014 ���������������������������8.106 para 3.2 �����������������������������������������8.106n210 International Bar Association Rules on the Taking of Evidence in International Commercial Arbitration 2010 �������������� 8.111n211 Art 3 �����������������������������������������������������26.59 International Court of Justice Rules of Procedure 1978 Art 80 ���������������������������������������������������17.14 International Centre for Settlement of Investment Disputes (ICSID) Administrative and Financial Regulations 2003��������������������6.02n3, 6.44n91, 6.100n197 reg 12�����������������������������������������������6.78n160 reg 14�������������������������������������������������������5.18 reg 14(1) ���������������������������������������������3.56 reg 14(3)(a)(i)�����������������������������������3.57 reg 14(3)(a)(ii)���������������������������������3.57 reg 14(3)(d)����������������3.57, 3.58, 24.85, 27.09n20 reg 22����������������������������������������������3.45, 5.23 reg 23�������������������������������������������������9.21n32 reg 23(1) ���������������������������������������������3.45 reg 25��������������������������������������������3.11, 8.105 reg 26�������������������������������������������������������3.42 reg 26(1) ���������������������������������������������3.71 reg 34�����������������������������������������������������6.19n41 International Centre for Settlement of Investment Disputes Arbitration

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International Legislation 9.121, 9.136–​9.143, 9.158, 12.22, 17.05, 17.44, 24.02, 26.22, 27.25, 27.77 r 1 �����������������������������������������������������������5.13 r 1(1)�������������������������������������������6.59n125 r 1(2)���������������������������������������������������6.57 r 1(4)�������������������������������������������6.78n160 r 2 �����������������������������������������������������������6.58 r 2(1)�������������������������������������������6.58n123 r 2(3)�������������������������������������������6.59n126 r 3 ������������������������������������������5.25, 6.60n128 r 4 ������������������������������������������5.25, 6.73n147 r 5(1)������������������������������������������3.31, 6.91 r 5(2)�������������������������������������������6.92n186 r 5(3)���������������������������������������������������6.94 r 6(1)���������������������������������3.26, 3.66, 6.98 r 6(2)�����������������������3.45, 3.66, 3.67, 6.82, 6.94n190 r 7 ��������������������������������������������������3.33, 6.96 r 8 ��������������������������������������������������3.33, 8.12 r 9 �����������������������������������������������������������3.33 r 10 ���������������������������������������������������������3.33 r 11 ���������������������������������������������������������3.33 r 12 ������������������������������������������������3.33, 3.68 r 13(1)��������������������������������������������3.24, 5.27 r 18 ���������������������������������������������������������3.70 r 19 �������������������������3.70, 12.04n3, 12.28n55 r 20 ���������������������������������������������������������5.27 r 20(1)�������������������������������������������������5.29 r 28 �������������������������������������������������������24.85 r 30 ���������������������������������������������������������6.98 r 31(1)����������������������������������������5.13, 5.40 r 31(3)�������������������������������������������������5.13 r 32 ���������������������������������������������������5.44n40 r 32(2)����������������������������3.45, 5.23, 9.138, 9.139, 9.141, 9.143 r 32(3)�������������������������������������������������5.47 r 34 �����������������������������������������������24.66n105 r 34(2)(a)�������������������������������������������26.59 r 37(2)�������������������������������������������3.45, 5.23, 9.81, 9.84, 9.92, 9.99, 9.105, 9.109, 9.117 r 38 ���������������������������������������������������������5.51 r 39 ���������������������24.07, 24.08, 24.38, 24.44, 24.97, 24.134, 24.148, 24.150 r 39(1)�������������������������24.20, 24.93, 26.44 r 39(2)���������������������������������������������24.118 r 39(3)�����������������������������������������������24.93 r 39(4)���������������������������������������������24.153 r 39(5)������������������������������������3.38, 24.118 r 39(6)�������������������������������������������������3.10 r 40 ��������������������������������������17.12, 17.21n63 r 41 ��������������������������������������������10.84, 24.05 r 41(3)���������������������12.04, 12.04n4, 12.05 r 41(5)���������������������3.28, 7.01, 7.11, 7.15, 7.23, 7.24, 7.26, 7.30, 12.12, 12.29, 26.13 r 43(1)�����������������������������������������������������6.39 r 44 ���������������������������������������������������������6.39

r 45 ���������������������������������������������������������6.59 r 47 ���������������������������������������������������������5.53 r 47(2)�������������������������������������������������3.49 r 47(3)�������������������������������������������������3.49 r 48(4)��������������������3.45, 5.23, 9.22, 9.40n73 r 48(5)�����������������������������������������������������9.13 r 49 ���������������������������������������������������������3.51 r 51(3)�����������������������������������������������������3.52 r 54(2)������������������������������������������3.54, 27.55 r 54(3)���������������������������������������������������27.55 r 54(4)���������������������������������������������������27.56 International Centre for Settlement of Investment Disputes (ICSID) Institution Rules�����������������������6.02n3 r 1 ���������������������������������������������������6.78n160 r 1(1)������������������������������������6.17, 6.19n42 r 1(2)���������������������������������������������6.17n27 r 2 ��������������������������������������������5.13, 6.25n57 r 2(1)���������������������������������������������������6.21 r 2(1)(c)�����������������������������������������6.24n52 r 2(1)(d)(ii) �����������������������������������6.28n64 r 2(1)(d)(iii)�����������������������������������6.28n65 r 2(1)(e)��������������������������������������6.22, 6.26 r 2(1)(f )�����������������������������������������6.28n65 r 2(2)���������������������������������������������6.24n52 r 2(3)���������������������������������������������6.29n66 r 2(b)���������������������������������������������6.28n63 r 2(c) ���������������������������������������������6.28n63 r 3 �����������������������������������������������������6.23n50 r 6 ��������������������������������������������������3.26, 3.27 r 6(1)(b)��������������������������������6.44, 6.44n91 r 6(2)���������������������������������3.25, 5.13, 6.39 r 7(e) �������������������������������������������������6.46n98 r 8 �����������������������������������������������������������6.39 International Chamber of Commerce (ICC) Rules of Arbitration 1998 Art 25(5)�����������������������������������������������26.59 Art 31(1)�����������������������������������������������26.41 International Chamber of Commerce (ICC) Rules of Arbitration 2012�������������������������3.05, 3.65, 6.03, 8.34, 8.34n57, 8.105, 11.22, 12.09–​12.10, 24.32, 26.40, 28.11, 29.03 Art 1(1)���������������������������������������������������3.15 Art 2 �����������������������������������������������������12.09 Art 4 �������������������������������������������������������3.31 art 4(1)����������������������������������������3.25, 6.17 art 4(2)�������������������������3.25, 3.66, 6.38n76 art 4(2)(g) �������������������������������������������6.61 Art 4(3)���������������������������������������������������6.24 art 4(3)(c)���������������������������������������6.22n46 art 4(3)(f )���������������������������������������6.22n46 art 4(3)(g) �������������������������������������6.23n50 Art 4(5)���������������������������������������������������6.40 Art 5 �������������������������������������������������������6.41 art 5(1)(e)���������������������������������������������6.61

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International Legislation Art 6(3)���������������������������������������������������3.30 Art 6(4)���������������������������������������������������3.30 art 6(4)(i)���������������������������������������������6.45 Art 6(6)������������������������������������3.30, 6.45n97 Art 7(1)���������������������������������������������������6.21 Art 8 �������������������������������������������������������3.25 Art 10 �����������������������������������������������������3.40 Art 11 ������������������������������������6.83, 6.83n170 art 11(2)��������������������������������������8.26, 8.40 art 11(3)�����������������������������������������������8.40 art 11(4)��������������������������������������8.35, 8.38 art 11(6)�����������������������������������������������6.53 Art 12 �����������������������������������������������������6.77 art 12(1)�����������������������������������������������3.34 art 12(2)���������������������������������������6.62n132 art 12(6)���������������������������������������6.66n136 art 12(7)���������������������������������������6.66n136 Art 13 ���������������������������3.34, 6.77, 6.93n187 art 13(1)�����������������������������������������������6.93 art 13(2)�����������������������������������������������6.93 art 13(3)�����������������������������������������������3.34 art 13(5)�����������������������������������������������6.80 Art 14 ������������������������������������3.35, 6.83n170 art 14(1)�����������������������������������������������8.39 Art 15(2)����������������������������������������3.35, 6.90 Art 15(3)�������������������������������������������������3.35 Art 15(4)�������������������������������������������������3.35 Art 16 �����������������������������������������������������6.98 Art 17 �����������������������������������������������6.19n42 Art 18 �����������������������������������������������������3.42 art 18(2)�����������������������������������������������3.43 Art 20 �����������������������������������������������������3.42 Art 21 �����������������������������������������������������3.42 art 21(3)�����������������������������������������������3.43 Art 22 �����������������������������������������������������7.20 art 22(2)�����������������������������������������������7.16 art 22(3)�����������������������������������������9.40n71 Art 23 �����������������������������������������������������3.18 Art 25(4)�������������������������������������������������3.44 Art 26(3)���������������������������������������9.149n236 Art 28 �����������������������������������������������������3.38 Art 31 �����������������������������������������������������3.47 Art 32(2)�������������������������������������������������3.47 Art 34 �����������������������������������������������������3.47 Art 36 �����������������������������������������������������3.50 Art 37(1)��������������������������������������3.58, 26.41 Art 38(2)�������������������������������������������������3.58 Art 38(4)�������������������������������������������������3.60 Art 38(6)�������������������������������������������������3.58 Art 812(4)�����������������������������������������������3.34 App I art 6���������������������������������������������������������3.46 App II ���������������������������������������������������������3.17 art 1���������������������������������������������������������3.46 App III������������������������������������������������3.31, 3.58 art 1(1)�����������������������������������������������6.40n83 art 1(11)�������������������������������������������3.58n138

art 5���������������������������������������������������������3.60 art 7���������������������������������������������������������3.60 art 9���������������������������������������������������������3.60 art 10�������������������������������������������������������3.60 App IV�������������������������������������������������������12.09 London Court of International Arbitration (LCIA) Rules 1998������������8.47, 29.03 Art 30(1)�������������������������������������������9.40n74 London Court of International Arbitration (LCIA) Rules 2014�����������������3.65, 8.46, 8.51 Art 10.1������������������������������������������8.47, 8.48 art 10.1(iii)�������������������������������������������8.49 Art 10.2���������������������������������������������������8.48 Art 14(2)�������������������������������������������������7.16 Art 22 ���������������������������������������������������25.20 Permanent Court of Arbitration (PCA) Rules 2012��������������������������8.22–​8.26 Art 11 �����������������������������������������������������8.24 Art 12(1)�������������������������������������������������8.22 Art 12(2)�����������������������������������������������8.104 Art 12(3)����������������������������������������8.22, 8.26 Art 34(5)�������������������������������������������9.40n71 Singapore Arbitration Centre Rules (SIAC) Arbitration Investment Rules 2017�����������������8.52–​8.55,  9.05 r 11(1)�������������������������������������������������8.53 r 13(4)�������������������������������������������������8.55 r 24(l)�������������������������������������������������26.55 r 26 ���������������������������������������������������������7.19 r 29 ���������������������������������������������������9.05n10 r 37 ���������������������������������������������������9.05n10 r 38(3)�������������������������������������������������8.55 Singapore Arbitration Centre Rules (SIAC) Arbitration Rules 2016��������������������������8.52–​8.55 r 14.1�������������������������������������������������������8.53 r 29 ���������������������������������������������������������7.19 Stockholm Chamber of Commerce (SCC) Arbitration Rules 2017����������������������������������3.05, 3.40, 3.65, 6.03, 8.43–​8.46, 9.04, 9.40, 9.40n70, 9.158, 11.22, 17.56n172, 19.17, 19.21, 28.11, 28.117, 28.133, 28.142, 28.160 Art 3 ����������������������������������������������3.46, 9.04 art 3(2)�������������������������������������������������3.46 art 3(4)�������������������������������������������������3.46 Art 4(1)���������������������������������������������������3.46 Art 4(2)���������������������������������������������������3.46 Art 5(2)���������������������������������������������������3.22 Art 6 �������������������������������������������������������3.22 art 6(1)(i)���������������������������������������������6.21 art 6(1)(ii) �������������������������������������������6.22 art 6(1)(iv)�������������������������������������������6.24 art 6(1)(v) ����������������������������6.23n50, 6.61 Art 7 �������������������������������������������������6.40n83

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International Legislation art 7(2)�������������������������������������������������3.31 Art 8 �������������������������������������������������6.38n76 Art 9 �������������������������������������������������������6.41 art 9(1)����������������������������������������3.29, 6.40 art 9(1)(iv)�������������������������������������������6.61 Art 11(i)���������������������������������������������������6.45 Art 12 �����������������������������������������������������3.29 art 12(2)�����������������������������������������������3.61 art 12(i)�����������������������������������������������7.18 Art 13(3)�������������������������������������������������6.21 Art 15 �����������������������������������������������������3.39 art 15(1)�����������������������������������������������8.43 Art 16 �����������������������������������������������������3.36 art 16(1)�����������������������������������������������6.53 art 16(2)�����������������������������������������������6.62 Art 17 �����������������������������������������������������3.36 art 17(1)�����������������������������������������������6.53 art 17(2)�����������������������������������������������3.36 art 17(5)���������������������������������������6.66n136 art 17(6)�����������������������������������������������6.80 art 17(7)��������������������������������������3.36, 6.77 Art 18 �����������������������������������������������������6.83 art 18(2)������������������������������6.83n170, 8.44 art 18(3)�����������������������������������������������8.44 Art 19(1)��������������������������������3.37, 6.83n170 Art 20 �����������������������������������������������������3.37 art 20(1)(iii)�����������������������������������������6.90 Arts 21(1)-​(2)�����������������������������������3.37 Art 22 �����������������������������������������������������6.98 art 22(1)�������������������������������������17.54n169 Art 25 �����������������������������������������������������3.41 art 25(2)�����������������������������������������������3.43 Art 26 �����������������������������������������������������3.41 Art 27 �����������������������������������������������������3.41 art 27(1)����������������������������������19.04, 19.16 art 27(3)�����������������������������������������������3.43 Art 34 �����������������������������������������������������3.44 Art 37 �����������������������������������������������������3.38 Art 39 �����������������������������������������������������7.18 Art 42(3)�������������������������������������������������3.48 Art 42(5)�������������������������������������������������3.48 Art 43 ������������������������������������������3.48, 12.11 Art 44 ���������������������������������������������������12.11 Art 46 �����������������������������������������������9.40n72 Art 47 �����������������������������������������������������3.50 Art 48 �����������������������������������������������������3.50 Art 49 �����������������������������������������������������3.60 art 49(6)�����������������������������������������������3.60 Art 50 �����������������������������������������������������3.60 Art 51(3)�������������������������������������������������3.61 Art 51(5)�������������������������������������������������3.61 Art 51(7)�������������������������������������������������3.61 Annex III art 2(2)�������������������������������������������������6.62 App I art 1�����������������������������������������������������3.20 art 2�����������������������������������������������������3.20

art 3�����������������������������������������������������3.21 art 4�����������������������������������������������������3.21 art 7��������������������������������������������3.21, 3.61 art 8�����������������������������������������������������3.21 App II �����������������������������������������������������3.22 App III���������3.22, 3.46, 9.04, 9.40n72, 12.11 art 3(1)�����������������������������������������������9.108 App IV art 1(1)�������������������������������������������6.40n83 art 2�����������������������������������������������8.31n46 Swiss Rules of International Arbitration 2012��������������������������������������������3.65 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules 1976����������������������������������3.63, 6.03, 8.62, 8.82, 9.03, 9.55, 17.05n10, 17.06, 17.68, 17.82–​17.87, 17.82–​17.93, 24.11–​24.13, 24.30–​24.31, 24.103–​24.104, 24.108, 24.140, 24.168, 29.03 Art 1 �����������������������������������������������������17.86 Art 1(2)�������������������������������������������������24.15 Art 3.3(d)�����������������������������������������������17.82 Art 3(2)���������������������������������������������������5.14 Art 3(3)���������������������������������������������������5.13 Art 3(4)���������������������������������������������������8.30 Art 3.3(d)�����������������������������������������������17.82 Art 6(2)���������������������������������������������������5.25 Arts 7(2)-​(3)�����������������������������������������5.25 Art 9(3)�������������������������������������������6.71n146 Art 10(1)�������������������������������������������������8.27 Art 13(2)����������������������������������������8.26, 8.28 Art 15 �������������������������������������������������24.126 art 15(2)�����������������������������������������5.44n40 Art 18 �����������������������������������������������������5.13 Art 19(2)�����������������������������������������������17.84 Art 19(3)�����������������������������������17.08, 17.09, 17.10, 17.71, 17.75, 17.78, 17.79–​17.80, 17.82, 17.84, 17.86, 17.87n248, 17.90–​17.91,  17.95 Art 19(4)����������������������������17.08, 17.74n222 Art 21(2)�����������������������������������������������17.82 Art 21(3)������������������������������������17.08, 17.74 Art 21(4) Art 12.09n13 Art 25(4)����������������������������������������5.23, 5.46 Art 25(5)�������������������������������������������������5.46 Art 26 ����������������������������24.12, 24.30, 24.32, 24.88, 24.125–​24.126, 24.130 art 26(1)��������������������������������24.95, 24.127 art 26(2)�������������������������������������������24.158 art 26(3)�������������������������������������������24.166 art 26(5)�������������������������������������������24.159 art 26(9)������������������������������24.160, 24.166 Art 29 �����������������������������������������������������5.51 Art 32 �������������������������������5.53, 5.55, 24.125 Art 33(1)�����������������������������������������19.16n32

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International Legislation Art 38 �����������������������������������������������������5.20 Art 39 ��������������������������������������������5.18, 5.20 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules 2010�������������������������8.22, 8.23, 8.82, 12.08, 17.05n10, 17.06, 17.58, 18.60, 24.14–​24.16, 24.32–​24.34, 24.70, 24.81–​24.83 Art 1 �����������������������������������������������������17.69 art 1(2)����������������������������17.68n213, 24.11 art 1(3)�����������������������������������������������24.15 Art 2 ������������������������������������������������ 6.17n39 Art 3(1)���������������������������������������������6.17n39 Art 3(4)���������������������������������������������������8.30 Art 5 �������������������������������������������������6.19n42 Art 12(1)�������������������������������������������������8.27 Art 12(3)�������������������������������������������������8.28 Art 17(1)���������������������������������������������24.126 Art 21(3)������������������������17.17, 17.18, 17.69, 17.70, 17.92, 17.93 Art 23(2)�������������������������������������������������7.17 Art 23(3)����������������������������������������7.17, 7.26 Art 26 ���������������������������24.14, 24.90, 24.129 art 26(1)����������������������������������24.33, 24.95 art 26(2)��������������������������������24.34, 24.111 art 26(2)(a)�������������������������������������24.58 art 26(2)(b) ������������������������24.63, 24.83 art 26(2)(c)�������������������������������������24.88 art 26(2)(d) ������������������������24.67–​24.68 art 26(3)����������������������24.61, 24.89, 24.91, 24.111, 26.44 art 26(3)(b) ��������������������24.108, 24.110 art 26(4)���������������������������������������������24.69 Art 40(e) �����������������������������������������������26.40 Art 42 ���������������������������������������������������26.35 United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules 2013��������������1.07, 1.98, 1.113, 3.02, 3.05, 3.62–​3.82, 4.84, 8.49, 8.57, 8.67, 9.40, 9.109, 9.125, 9.134, 10.21, 11.22, 11.57, 11.58, 11.60, 12.07–​12.08, 17.03, 17.17n47, 17.68–​17.93, 19.17, 24.02, 27.77, 27.95, 28.11, 28.26, 28.35, 28.45, 28.57, 28.88, 28.160, 29.07 Art 1(4)����������������3.72, 8.29, 9.33, 17.05n10 Art 2 �������������������������������������������������������3.66 Art 3 �������������������������������3.66, 5.13, 6.22n48 art 3(2)����������������������������������������5.14, 6.38 art 3(3)(b) ���������������������������������������6.21 art 3(3)(d) ���������������������������������������6.24 art 3(3)(e)�����������������������������������������6.21 art 3(4)�������������������������������������������6.23n50 Art 4 �������������������������������������������������6.41n84 art 4(2)�������������������������������������������������8.30 Art 6(1)���������������������������������������������������6.75

Art 6(2)���������������������������������2.50, 3.64, 6.75 Art 6(7)���������������������������������������������������6.79 Art 7(1)�������������������������6.53, 6.62, 6.62n134 Art 7(2)���������������������������������������������������2.50 Art 8(1)���������������������������������������������������5.25 Art 8(2)����������������������������������6.68n142, 6.76 Art 9 ��������������������������������������6.56n119, 6.75 art 9(2)����������������������������������������5.25, 6.76 art 9(3)����������������������������������������5.25, 6.76 Art 10(1)�����������������������������������������6.66n136 Art 11 �����������������������������������������������������6.83 Art 12 �����������������������������������������������������3.68 art 12(1)��������������������������������������6.83, 8.27 art 12(3)������������������������������������8.28, 8.104 Art 14 �����������������������������������������������������3.68 Art 15 �����������������������������������������������������3.68 art 15(1)�����������������������������9.54, 9.56, 9.64 Art 16 �����������������������������������������������������3.69 Art 17 �����������������������������������������������������3.70 art 17(1)������������������������12.07n11, 19.01n3 art 17(3)�����������������������������������������5.44n40 Art 18 �����������������������������������������������������5.13 Art 19(3)�����������������������������������������17.28n82 Art 20 ��������������������������������������������3.71, 5.13 Art 21 �����������������������������������������������������3.71 Art 22 �����������������������������������������������������3.71 Art 23(3)�����������������������������������������������12.08 Art 24 �����������������������������������������������������3.71 Art 25(4)������������������������������������9.122, 9.144 Art 26 �����������������������������������������������������3.78 Art 27 �����������������������������������������������������3.71 art 27(2)�����������������������������������������������5.46 art 27(3)���������������������������������������������26.59 Art 28(2)�������������������������������������������������5.46 Art 28(3)�����������������������������������������3.75n174 Art 30 �����������������������������������������������������3.79 Art 31 �����������������������������������������������������5.51 Art 32(5)�����������������������������������������3.75n176 Art 33 �������������������������������������������17.54n169 Art 34 ��������������������������������������������5.53, 5.55 art 34(2)�����������������������������������������������3.79 art 34(5)��������������������������������������9.13, 9.35 Art 35(1)���������������������������3.70, 19.04, 19.16 Art 36 �����������������������������������������������������3.79 Arts 37-​39�����������������������������������������������3.79 Art 40 ��������������������������������������������3.80, 5.20 Art 41 ��������������������������������������������5.18, 5.20 Art 52(d)�������������������������������������������������3.04 United Nations Commission on International Trade Law (UNCITRAL) Rules on Transparency in Treaty-​based Investor-​State Arbitration 2014������������������������3.72, 3.75, 5.13n2, 8.29, 8.31, 9.02, 9.03, 9.08, 9.32–​9.37, 9.38, 9.118, 9.121, 17.05n10, 17.17n47, 26.22

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International Legislation Art 1 ����������������������������������������������5.23, 9.33 art 1.1 �������������������������������������������������9.32 art 1.3 �������������������������������������������������9.32 Art 2 ����������������������������������������������3.72, 8.30 Art 3 ����������������������������������������������3.72, 9.36 art 3(1)�������������������������������������������������8.30 art 3(2)�������������������������������������������������8.30 Art 4 ��������������������������������������������3.73, 9.110 Art 5 ��������������������������������������������3.73, 9.110 Art 6 ��������������������������������������������3.72, 9.148 Art 7 �������������������������������������3.72, 8.30, 9.36 GUIDELINES, CODES AND STATUTORY INSTRUMENTS International Bar Association Guidelines on Conflicts of Interest in International Arbitration 2014������������������������8.56–​8.59,  26.52 Art 1.2�������������������������������������������26.57n150 Art 1.4�������������������������������������������26.57n151 Art 3.1.3 �����������������������������������������������26.57 Art 3.1.5 �����������������������������������������������26.57 Art 3.3.8 ���������������������������������������26.58n154 Art 4.1.1 �������������������������������������������������8.94 General Standard 6(b) ������������26.56, 26.58 General Standard 7�����������������������������26.56 Pt II�������������������������������������������26.58n153 International Bar Association International Principles on Social Media Conduct for the Legal Profession 2014 ������������������������������������������ 8.110 para 4.4.4�����������������������������������������������8.114 International Chamber of Commerce Guidelines on Conflicts of Interest in International Arbitration 2016 �����������������������26.52 International Chamber of Commerce Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration 2017 para 3.3 �������������������������������������������������8.106 para 3.4 �������������������������������������������������8.106 para 11�����������������������������������������������������8.36 para 12�����������������������������������������������������8.38 para 13�����������������������������������������������������8.38 para 18�����������������������������������������������������8.40 para 19��������������������������������������������8.41, 8.42 para 27�����������������������������������������������������8.39 para 85���������������������������������������������������8.105 International Law Commission Draft Articles on Diplomatic Protection 2006��������������14.28, 14.39 Art 2 �����������������������������������������������������14.67 Art 4 ���������10.05, 14.33–​14.34, 14.43, 14.66 Art 5 ������������������������������14.29, 14.32, 14.35,

14.40, 14.42n139, 14.44, 14.48, 14.56, 14.84 Art 6 �����������������������������������������������������14.29 Art 7 ������������10.05, 14.69, 14.29, 14.81n259 Art 8 �����������������������14.29, 14.34, 14.42n139 Art 9 �����������������������10.25, 14.29, 14.41n135 Art 10 ���������������������������������������������������14.29 Art 11 ����������������������������������������10.31, 14.29 art 11(b)����������������������������������10.31, 10.33 International Law Commission Draft Articles on Most-​Favoured-​ Nation Clauses 1978 ����������������23.09, 23.23–​23.24,  23.34 Art 4 �����������������������������������������������������23.13 Art 5 ������������������������������������������23.12–​23.15 art 5(4)������������������������������������23.16, 23.21 art 5(6)�����������������������������������������������23.20 Art 8 �����������������������������������������������������23.16 art 8(1)�����������������������������������������������23.20 Art 9 �����������������������������������������������������23.18 Art 10 ���������������������������������������������������23.18 art 10(6)���������������������������������������������23.55 International Law Commission Draft Articles on Responsibility of States for Internationally Wrongful Acts 2001������������������14.08, 18.44, 25.07n8 Art 3 ������������������������������������������14.21, 19.30 Art 4 ������������������������������14.08, 14.10–​14.15, 14.25, 15.33 Art 4(1)��������������������������������������14.11, 14.13 Art 4(2)����������������14.13, 14.17, 14.19, 14.21 Art 5 �������������������������������14.10, 14.18, 14.25 Art 6 �����������������������������������������������������14.10 Art 7(1)�������������������������������������������������14.10 Art 8 �����������������������������������������������������14.08 Art 15 ���������������������������������������������������21.51 Art 15(1)�����������������������������������������������25.39 Art 25(1)(b)�������������������������������������������25.47 Art 25(2)(a)�������������������������������������������25.47 Art 25(2)(b)�������������������������������������������25.47 Art 31 �����������������������������25.08, 25.27, 25.44 Art 36 ���������������������������������������������������25.28 art 36(1)���������������������������������������������25.35 art 36(2)���������������������������������������������25.35 Art 39 ���������������������������������������������������25.41 Art 45(b)�����������������������������������������������18.40 Pt 1, ch II (arts 4-​11)������������������14.08n15, 24.146 International Law Commission Model Rules on Arbitral Procedure 1958 Art 11 �����������������������������������������������4.84n34 North American Free Trade Agreement Free Trade Commission’s Interpretations and Guidelines 2001��������������������������������������������9.02

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International Legislation Permanent Court of Arbitration Optional Rules for Arbitrating Dispute between Two Parties of Which Only One is a State 1993�������������8.22 Permanent Court of Arbitration Optional Rules for Arbitrating Disputes between Two States 1992�������������8.22 Permanent Court of Arbitration Optional Rules for Arbitration between International Organizations and Private Parties 1996���������������������8.22 Permanent Court of Arbitration Optional Rules for Arbitration between International Organizations and States 1996�����������������������������������8.22 MULTILATERAL TREATIES AND TRADE AGREEMENTS Association of Southeast Asian Nations Agreement 1987���������������9.51, 9.156, 24.151n270 Art 1(2)���������������������������������������������2.20n29 Art 6(4)�����������������������������������������������23.116 Art V�����������������������������������������������2.85n126 Agreement Establishing the ASEAN-​ Australia-​New Zealand Free Trade Area 2009 Art 6(2)���������������������������������������������1.45n25 Art 26 �����������������������������������������������������9.51 Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India 2014 Art 20(11)(b)�������������������������������������������8.74 Art 20(11)(c)�������������������������������������������8.68 Art 20(11)(e)�������������������������������������������8.72 Art 20(17)�����������������������������������������������9.51 Art 20(18)�����������������������������������������������9.51 Central American Free Trade Agreement see Dominican Republic-​Central America Free Trade Agreement Investment Agreement for the COMESA Common Investment Area 200717.47 Art 30 ���������������������������������������������6.55n117 Comprehensive and Progressive Agreement for Trans-​Pacific Partnership 2018�����������������������������������8.33, 8.64 Art 9.22(6)�����������������������������������������������8.64 Art 28.10(1)(d) ���������������������������������������8.64 Dominican Republic-​Central America-​ United States Free Trade Agreement 2004��������2.30, 2.39, 2.86, 7.22–​7.25, 9.153, 9.157

Art 10.3���������������������������������������������2.42n65 Art 10.5.3 �����������������������������������������2.37n58 Art 10.12.1 ����������������������������2.30n46, 10.84 Art 10.12(2)�������������������������������������������10.43 Art 10.15�������������������������������������������6.10n26 Art 10.16.4 ���������������������������3.25, 6.22, 6.37 Art 10.16.6 ���������������������������������������6.23n51 Art 10.18.1 ���������������������������������������������6.15 Art 10.18.2 ���������������������������������������6.24n55 art 10.18.2(b)���������������������������������������2.56 art 10.18.2(b)(ii) ���������������������������6.43n88 Art 10.19�����������������������������������������6.71n146 art 10.19.1�����������������������������������6.56n119 art 10.19.3�����������������������������������6.55n116 art 10.19.4�����������������������������������6.86n177 Art 10.20.4 ������������������������������������7.22, 7.23 Art 10.20.5 ���������������������������������������������7.22 Art 10.20.5 ������������������������������������7.22, 7.23 Art 10.21�������������������������������������������������9.44 art 10.21(2)���������������������������������������9.152 Art 10.25������������������������������������3.41, 10.123 Art 10.26�������������������������������������������������2.51 art 10.26.1�������������������������������������������2.52 Art 10.28�������������������������������������������11.10n5 Annex 10-​C�����������������������������������������2.43 Energy Charter Treaty 1998���������������2.01–​2.89, 3.64, 6.15n34, 8.101, 10.09, 10.55n97, 10.62, 10.80, 11.11, 11.61, 11.63, 11.72n115, 13.37, 14.05, 16.67, 17.56n172, 17.60, 18.25, 19.22, 22.02, 22.37, 22.71–​22.72, 24.24, 25.20, 28.03, 28.36, 28.38, 28.40–​28.41, 28.83, 28.133, 28.151, 28.160, 29.43 Art 1 ����������������������������������������������2.05, 2.21 art 1(5)�������������������������������������������������2.12 art 1(6)������������������������������2.11–​2.12, 2.17, 2.64, 2.66, 2.70, 2.71, 11.07–​11.08, 11.12, 11.60, 28.87 art 1(6)(b) ���������������������������������������2.14 art 1(6)(c)������������������������������2.13, 28.85 art 1(6)(f )������������������������������2.13, 28.85 art 1(7)�����������������������������2.18–​2.19,  13.60 art 1(7)(a)(ii) ������������������������2.20, 10.44 Art 1(10)�������������������������������������11.101n181 Art 2 ���������������������������������������������10.82n185 Art 5 �������������������������������������������������������2.52 Art 6 ��������������������������������������2.52, 13.37n78 Art 7(a)(ii)�����������������������������������������������2.85 Art 7(b)���������������������������������������������������2.85 Art 10(1). . . . . . . . . . . . . . . 2.31–​2.35, 2.49, 2.52, 16.13, 16.13n19, 16.77, 21.91 Art 10(2). . . . . . . . . . . . . . . . . . . . . . . . 2.39 Art 10(4). . . . . . . . . . . . . . . . . . . . . . . . 2.40 Art 10(7). . . . . . . . . . . . . 2.39, 21.13, 23.07

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International Legislation Art 13 �������������������������������������������2.41, 2.43, 22.26, 25.15n24 Art 17 ���������������������������������������������������10.44 art 17(1)�������2.05, 2.21–​2.30, 10.82, 10.83 Art 19 �����������������������������������������������������2.52 Art 21 �����������������������������������2.05, 2.85–​2.88 art 21(1)�����������������������������������������������2.86 art 21(7)�����������������������������������������������2.87 Art 22(1)�����������������������������������������������16.69 Art 22(3)�����������������������������������������������14.34 Art 24 �������������������������������������������������21.103 Art 25 �����������������������������������������������������2.50 Art 26 �������������������������2.05, 2.47, 2.48, 2.63, 11.101, 29.27 art 26(1)��������������������������������������2.47, 6.07 art 26(2)��������������������������������2.49, 6.10n22 art 26(3)(B)(i) �����������������������2.05, 2.49, 2.53–​2.55,  2.57 art 26(3)(c)����������������������16.13, 2.38n59 art 26(4)�����������������������������������������������2.50 art 26(4)(b) �������������������������������������6.55 art 26(4)(c)���������������������������������������5.17 art 26(5)���������������������������������������29.07n17 art 26(5)(a)�������������������������������29.10n29 art 26(6)���������������������������������������������19.10 art 26(8)�����������������������������������������������2.51 Art 27 ��������������������������������������������2.05, 2.52 art 27(2)������������������������������2.38n59, 16.13 Art 28 �����������������������������������������������������2.52 Art 44 �����������������������������������������������������2.66 Art 45 �����������������2.05, 2.58–​2.59, 2.62, 2.64 art 45(1)�����������2.65, 2.67, 2.72–​2.79, 2.81 art 45(2)��������������������������������������2.67, 2.73 art 45(3)(a)��������������������������������2.83, 28.44 Annex IA����������������������������������2.38, 16.13 Annex ID���������������������������������������������2.54 Annex NI���������������������������������������������2.12 Annex PA���������������������������������������������2.60 Annex VC �������������������������������������2.42n64 Pt III ��������������������������������2.21, 2.23–​2.25, 2.31, 2.48, 2.53, 2.56, 11.101, 13.60, 16.69 Pt V�����������������������������������������������������2.75 Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union and its Member States 2014. . . . . . . . . . . . . 1.03, 1.24, 1.30, 1.41, 1.51, 1.55, 1.72, 1.118, 3.85, 6.51n104, 10.122, 11.14n13, 20.11, 26.02, 26.21, 27.73, 27.83 Art 8.1��������������������1.43, 10.10, 10.51, 11.14 Art 8.2.4 . . . . . . . . . . . . . . . . . . . . . 6.07n17 Art 8.7.4 . . . . . . . . . . . . . . . . . . 6.47, 23.114 Art 8.15. . . . . . . . . . . . . . . . . . . . . . . . . 1.26 Art 8.16. . . . . . . . . . . . . . . . . . . . . . . . 10.45

Art 8.22. . . . . . . . . . . . . . . . . . . . . . . 10.119 art 8.22(4). . . . . . . . . . . . . . . 6.34, 10.120 Art 8.23.2 . . . . . . . . . . . . . . . . . . . . . . 27.84 Art 8.23.5 . . . . . . . . . . . . . . . . . . . . . . . 6.55 Arts 8.23(6)-​(7). . . . . . . . . . . . . . . . . . 27.84 Art 8.24. . . . . . . . . . . . . . . . . . . . . . . 10.120 Art 8.26. . . . . . . . . . . . . . . . . . . . . . . . 26.55 Arts 8.27-​ art 8.27.4. . . . . . . . . . . . . . . . . . . . . . . 6.89 art 8.27.9. . . . . . . . . . . . . . . . . . . . . . . 6.55 art 8.27.11. . . . . . . . . . . . . . . . . . . . . . 6.89 Art 8.28. . . . . . . . . . . . . . . . . . . . . . . . . 8.80 art 8.28(9)(a). . . . . . . . . . . . . . . . . . . 27.84 Art 8.29. . . . . . . . . . . . . . . . . . . . . . . . 27.85 Art 8.30(1). . . . . . . . . . . . . . . . . . . 8.58, 8.69 Art 8.30(2). . . . . . . . . . . . . . . . . . . . . . 27.86 Art 8.32. . . . . . . . . . . . . . . . . . . . . . . . . 7.05 Art 8.33. . . . . . . . . . . . . . . . . . . . . . . . . 7.05 Art 8.34. . . . . . . . . . . . . . . . . . . . . . . . 24.18 Art 8.36. . . . . . . . . . . . . . . . . . . . . . . . . 9.06 Art 8.39(5). . . . . . . . . . . . . . . . . . . . . . . 7.07 Art 8.43. . . . . . . . . . . . . . . . . . . . . . . . 1.102 Art 27.1. . . . . . . . . . . . . . . . . . . . . . . . . 1.75 Art 28.3. . . . . . . . . . . . . . . . . . . . . . . . . 1.71 Ch 21. . . . . . . . . . . . . . . . . . . . . . . . . . 1.79 Ch 27. . . . . . . . . . . . . . . . . . . . . . . . . . 1.74 Annex 8-​A . . . . . . . . . . . . . . . . . . . . . 22.34 Annex 8-​A(2)(c). . . . . . . . . . . . . . . . . . 1.60 Annex 8-​A(2)(d). . . . . . . . . . . . . . . . . . 1.62 Section F (Arts 8.18-​8.45). . . 1.112, 1.113 European Energy Charter 1991. . . . . . 2.07–​2.08 European Union-​Singapore Free Trade Agreement 2018. . . . . . 8.33n56 Art 9.1.1 . . . . . . . . . . . . . . . . . . . . . . . 11.13 Art 9.16(1)(a). . . . . . . . . . . . . . . . . . . . . 8.65 Art 9.18. . . . . . . . . . . . . . . . . . . . . . . . . 8.61 art 9.18(6). . . . . . . . . . . . . . . . . . . . . . 8.72 art 9.18(7). . . . . . . . . . . . . . . . . . . . . . 8.73 Art 9.20(4). . . . . . . . . . . . . . . . . . . . . . 24.18 Art 9.22. . . . . . . . . . . . . . . . . . . . . . . . . 9.06 Annex 9-​F . . . . . . . . . . . . . . . . . . . . . . . 8.63 para 2. . . . . . . . . . . . . . . . . . . . . . . . . . 8.67 para 13. . . . . . . . . . . . . . . . . . . . . . . . . 8.69 para 18. . . . . . . . . . . . . . . . . . . . . . . . . 8.73 Annex 9-​G. . . . . . . . . . . . . . . . . . . . . . . 9.06 art 1(1). . . . . . . . . . . . . . . . . . . . . . . . . 9.47 art 3���������������������������������������������������9.118 Annex  15-​A art 32. . . . . . . . . . . . . . . . . . . . . . . . . 9.151 r 32 �����������������������������������������������9.51n98 European Union-​Vietnam Free Trade Agreement 2016. . . . . . 3.85, 11.13n9, 27.73 Art 4(6). . . . . . . . . . . . . . . . . . . . . . . 23.114 Arts 12-​13. . . . . . . . . . . . . . . . . . . . . . . 8.80 Art 22 ���������������������������������������������������26.50 Section 3 . . . . . . . . . . . . . . . . . 23.115, 26.55

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International Legislation International Energy Charter 2015. . . . 2.03, 2.04 s 4 �����������������������������������������������������������2.03 Protocol of Colonia for the Promotion and Reciprocal Protection of Investments within MERCOSUR 1994 Art 1(2). . . . . . . . . . . . . . . . . . . . . . 2.20n29 North American Free Trade Agreement 1994. . . . . . . . . . . . . 1.09, 1.23, 1.29, 1.69, 1.84, 1.95, 2.30, 2.39, 2.86, 3.64, 9.34, 9.65–​9.76, 9.157, 10.100, 10.105, 10.119, 11.26, 11.106, 11.107, 13.29, 13.45, 14.05, 15.27, 19.22, 20.11, 20.19, 20.46, 20.100, 21.34, 22.02, 22.24, 22.37, 23.61n136, 24.02, 28.03 Art 201 �������������������������������������������������10.09 Art 1101 �����������������������������������������������13.22 art 1101(1)���������������������������������������11.101 Art 1102 ������������������������21.15, 21.30, 21.41, 21.56, 21.63, 21.67, 21.72, 21.74, 21.76n134, 21.84, 21.86–​21.87, 21.92, 21.104, 28.66–​28.67 art 1102(1)����������������������21.12n26, 21.100 Arts 1102(2)�������������21.12n26, 21.90, 21.100 Art 1102(3)�����������������21.85, 21.100, 21.102 Art 1103 ������21.87, 21.93n170, 23.07, 28.66 art 1103(1)�����������������������������������23.09n10 Art 1105 ����������������������������1.48, 2.34, 20.15, 20.16, 20.18, 20.64, 20.66, 20.94, 28.66–​28.67, 28.71, 30.15 art 1105(1)�������������������1.48n27, 20.09n14, 20.12, 20.17, 22.27 Art 1106 ������������������������������������28.66–​28.67 Art 1108 ���������������������������������������21.98n180 Art 1110 �������������������������6.32n68, 15.39n64, 22.27, 22.58, 22.82, 25.15n24, 28.66 art 1110(1)�����������������������������������������22.86 Art 1113(1)���������������������������������������2.30n46 Art 1116 �������������������6.07, 13.22, 17.40n127 art 1116(1)���������������������������������������5.15n9 art 1116(2)�������������������������������������������6.15 Art 1117 �����������������13.22, 17.40n127, 24.28 art 1117(1)�������������������������������������6.32n68 art 1117(2)�������������������������������������������6.15 Art 1118 �����������������������������������������������13.22 Art 1119 ��������������������������������������6.10, 13.22 Art 1120 �����������������6.10n22, 6.32n68, 13.22 art 1120(2)�������������������������������������������9.19 Art 1121 �������������������������10.119n280, 13.22, 24.164, 24.167 art 1121(1)���������������������������������������5.15n9 art 1121(1)(b) ������������������������2.55, 2.56 art 1121(2)(b) ���������������������������������2.56

art 1121(3)�������������������������������������6.24n55 Art 1122 �������������������������������������������������6.33 Art 1123 �����������������������������������������6.55n110 Art 1124 �����������������������������������������6.55n114 art 1124(3)�����������������������������������6.55n115 Art 1125 �����������������������������������������6.85n174 Art 1126 ���������������������������������������������10.122 art 1126(1)���������������������������������������10.123 art 1126(2)�������������������������������������������6.08 art 1126(4)�����������������������������������6.66n138 art 1126(10)�����������������������������������������9.13 art 1126(13)�����������������������������������������9.13 Art 1128 ����������������������3.75n175, 9.55, 9.58, 9.64n114, 9.65, 21.102 Art 1131(1)�������������������������������������������19.10 Art 1131(2)���������������������������������������������9.19 Art 1132(2)�������������������������������������������10.43 Art 1134 ������������������������24.09, 24.17, 24.28, 24.70, 24.80, 24.157, 24.158, 24.164, 24.168 Art 1135 ��������������������������������������2.51, 24.28 art 1135(1)�������������������������������������������2.52 Art 1136(7)�������������������������������������29.07n17 Art 1139 �����������������1.40, 2.14, 11.11–​11.12, 11.28, 22.13 Art 1502(3)(a)������������14.34n108, 14.53n180 Art 1503(2)����������������14.34n108, 14.53n180 Art 1802 �����������������������������������������������20.47 Art 1803 �������������������������������������������2.30n46 Arts 1901(c)�������������������������������������������13.22 Art 2001 �������������������������������������������������9.19 Art 2004 �������������������������������������������������2.52 Art 2006 �������������������������������������������2.30n46 Art 2101 ��������������������������������21.102, 21.104 Art 2102 �������������������������������������������������9.19 Art 2105 �������������������������������������������������9.19 Art 2106 ����������������������������������21.95, 21.105 Ch 11���������������������������������������������1.33, 1.46, 1.80, 1.81, 3.75n177, 7.03, 9.02, 9.08, 9.12–​9.20, 9.23, 9.52, 9.54–​9.64, 9.70, 9.121, 9.122, 9.125, 9.127, 9.134, 11.28, 11.28n30, 15.73, 16.45, 20.33, 21.12, 21.18, 21.38, 21.63, 21.74, 22.57, 22.85n152, 26.20, 28.50, 28.155, 29.39 Ch 21�������������������������������������������������������2.52 Annex I �������������������������������������������������21.98 Annex II-​U-​6�����������������������������������������21.96 Annex 1137.4������������������������������������������9.13 Annex 2106�����������������������������������������21.105 Agreement on Promotion, Protection and Guarantee of Investments amongst the Member States of the Organization of the Islamic Conference 1981������������17.17, 18.35

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International Legislation Art 9 �����������������������������������������������������17.17 Art 17 ���������������������������������������������������17.17 Pacific Agreement on Closer Economic Relations 2001�����������������������������1.03 Regional Comprehensive Economic Partnership (draft) 2015���������������1.03 Art X.33(4) ���������������������������������������������7.10 Transatlantic Trade and Investment Partnership (draft) 2016��������������1.03, 8.33, 27.73 Art 7(3)���������������������������������������������������8.73 Art 8 �����������������������������������������������������26.55 Ch II �����������������������������������������������������11.14 § 4�������������������������������������������������������8.08 art 9(2)�������������������������������������������������8.76 art 9(4)�������������������������������������������������8.76 art 9(4)(3) ���������������������������������������8.76 art 9(12)�����������������������������������������������8.79 art 10(4)(3) �������������������������������������8.76 art 10(7)�����������������������������������������������8.77 art 10(13)���������������������������������������������8.79 Annex II, art 3(1)������������������������8.61, 8.63 s 3, art 6(2)(a) �������������������������������������8.65 s 3, art 10(7) ���������������������������������������8.72 Annex II art 5(4)�������������������������������������������������8.70 art 5(5)�������������������������������������������������8.69 Trans-​Pacific Partnership 2015�����������1.03, 1.30, 1.43, 1.45, 1.54, 1.64, 1.85, 1.118, 2.04, 7.26, 10.122, 20.11 Art 9.1���������������������������������������������������11.14 Art 9.6���������������������������������������������������20.31 Art 9.12���������������������������������������������������1.25 Art 9.19(4)(a)�������������������������������������������8.65 Art 9.21�������������������������������������������������1.107 Art 9.23�������������������������������������������������9.114 arts 9.23(4)-​(5)����������������������������1.99, 7.04 Art 9.24������������������������������������������9.44, 9.51 art 9.24(2)�����������������������������������������9.156 Art 9.28�������������������������������������������������1.102 Art 10.19(5)�������������������������������������������1.100 Ch 9�������������������������������������������������������27.81 art 9.23(11). . . . . . . . . . . . . . . . . . . . 27.82 Ch 26 1.79 Annex 9-​B . . . . . . . . . . . . . . . . . . . . . . 22.34 Annex 9-​B(3)(a)(ii) . . . . . . . . . . . . . . . . 1.60 Annex 9-​H. . . . . . . . . . . . . . . . . . . . 1.85n50 United States-​CAFTA-​DR FTA. . . . . . 7.22–​7.25 Art 10.12(2). . . . . . . . . . . . . . . . . . . . . 10.43 Art 10.20. . . . . . . . . . . . . . . . . . . . . 9.44n77 arts 10.20(4)-​(5). . . . . . . . . . . . . 7.22, 7.23 Art 10.28. . . . . . . . . . . . . . . . . . . . . 11.10n5 Annex 10-​C. . . . . . . . . . . . . . . . . . . . . 22.33 Annex 10-​C(2). . . . . . . . . . . . . . . . . . . 22.13 Annex 10-​F . . . . . . . . . . . . . . . . . . . . . 27.76

BILATERAL TREATIES AND TRADE AGREEMENTS Note: The following abbreviations are used throughout: Bilateral Investment Treaties –​BIT, Foreign Investment Protection Agreement –​  FIPA. Albania-​Lithuania BIT 2007 Art 8(2). . . . . . . . . . . . . . . . . . . . . . 6.08n18 Algiers Accords 1981. . . . 10.07n8, 15.22, 22.39 Art II.1.. . . . . . . . . . . . . . . . . . . . 17.73n218 Anglo-​Greek Treaty of Commerce and Navigation 1886 . . . . . . . . . . . . 23.43 Art X�����������������������������������������������������23.44 Anglo-​Greek Treaty of Commerce and Navigation 1926 . . . . . . . . . 23.43n94 Argentina-​Chile BIT 1991. . . . . . . . . . . . 23.104 Argentina-​Germany BIT 1991. . . . . . . . . 23.104 Art 10(3). . . . . . . . . . . . . . . . . . . . . 6.11n28 Argentina-​Italy BIT 1990. . . . . . . . . . . . . . 11.34 Argentina-​New Zealand BIT 1999 Art 12 �������������������������������������������������6.05n9 Argentina-​Panama BIT 1996. . . . . . . . . . . 23.54 Argentina-​Spain BIT 1992. . . . . . . 23.49, 23.57, 23.104, 23.60, 23.71–​23.73 Art 2(2). . . . . . . . . . . . . . . . . . . . . . . . . 6.15 Art X�����������������������������������������������������17.16 Argentina-​United States BIT 1991 Art 12 �����������������������������������������������������6.07 Art II(1). . . . . . . . . . . . . . . . . . . . . . . . 21.11 Art II(2). . . . . . . . . . . . . . . . . . . . . 21.11n22 Armenia-​Austria BIT 2001 Art 13(1). . . . . . . . . . . . . . . . . . . . . . . . 6.11 Art 13(2). . . . . . . . . . . . . . . . . . . . . . . . 6.11 Australia-​Chile Free Trade Agreement 2008 Art 10.20(2). . . . . . . . . . . . . . . . . . . . . 9.120 Art 10.22(1). . . . . . . . . . . . . . . . . . . . . . 9.50 Art 10.22(2). . . . . . . . . . . . . . . . . . . . . 9.154 Australia-​China Free Trade Agreement 2015 Art 9.15(8). . . . . . . . . . . . . . . . . . . . . . . 8.68 Art 9.15(15). . . . . . . . . . . . . . . . . . . . . . 8.69 Art 9.15(16). . . . . . . . . . . . . . . . . . . . . . 8.69 Art 9.16(3). . . . . . . . . . . . . . . . . . . . . . 9.120 Art 9.17(3). . . . . . . . . . . . . . . . . . . . . . 9.154 Art 9.17(4). . . . . . . . . . . . . . . . . . . . . . . 9.50 Annex 9-​A . . . . . . . . . . . . . . . . . . . . . . . 8.63 pars 12. . . . . . . . . . . . . . . . . . . . . . . . . 8.70 pars 13. . . . . . . . . . . . . . . . . . . . . . . . . 8.71 Australia-​Hong Kong BIT 1993. . . . . 10.79n171 Australia-​India BIT 2000 Art 1(c) . . . . . . . . . . 11.96n166, 11.101n179 Australia-​Korea Free Trade Agreement 2014. . . . . . . . . . . . . . . . . . .19.13n28 Art 11.18(2). . . . . . . . . . . . . . . . . . . . 10.119 Art 11.20(5). . . . . . . . . . . . . . . . . . . . . 9.120

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International Legislation Art 11.21(1). . . . . . . . . . . . . . . . . . . . . . 9.50 Art 11.21(2). . . . . . . . . . . . . . . . . . . . . 9.154 Australia-​Republic of Korea Free Trade Agreement 2014 Art 11.19.3 . . . . . . . . . . . . . . . . . . 6.84n172 Art 11.19.4 �������������������������������������6.86n177 Austria-​Bangladesh BIT 2001 Art 5(1)(d)���������������������������������������25.14n22 Austria-​Chile BIT 1997 Art 2 �����������������������������������������������������16.20 Austria-​Czech Republic BIT 1991 Art 1(1)��������������������11.96n166, 11.101n179 Austria-​Guatemala BIT 2006 Art 12(1)(c)���������������������������������������������6.56 Austria-​Kyrgyzstan BIT 2016�����������������16.04n8 Austria-​Lebanon BIT 2002 �����������������������10.42 Austria-​Libya BIT 2004�����������������������������10.42 Austria-​Mexico BIT 1998 �������������������������16.20 Austria-​Slovenia BIT 2001 Art 5(1)(d)���������������������������������������25.14n22 Belgium-​Luxembourg Economic Union –​ Algeria BIT 1991���������������20.82n172 Belgium-​Luxembourg Econonomic Union –​Burundi BIT 1957 ���������������������������������������17.15, 19.08 Art 8.1��������������������������17.15n40, 17.52n162 Art 8.3���������������������������������������������17.15n40 Belgium-​Luxembourg Economic Union-​ Czech Republic BIT 1989���������28.57 Art 3 ������������������������������������������28.58–​28.59 art 3(1)�����������������������������������������������28.64 art 3(3)�����������������������������������������������28.64 Art 8 �������������������������������28.58–​28.59,  28.64 art 8(1)������������������������������������28.60, 28.61 Belgium-​Luxembourg Economic Union-​ Philippines BIT 2003�����������������10.49 Belgium-​Luxembourg Economic Union-​ Republic of Korea BIT 2006 Art 8 �������������������������������������������������������6.07 Belgium-​Luxembourg Economic Union-​ Russia BIT 1989 �����������������������23.90 Belgium-​Luxembourg Economic Union-​ Saudi Arabia BIT 2004 �������������10.36 Art 7(2)�������������������������������������������������16.61 Belgium-​Luxembourg Economic Union-​ South Africa BIT 1998���������������21.96 Belgium-​Luxembourg Economic Union-​Venezuela BIT 2008 Art 1(2)���������������������������������������11.101n179 Brazil Model BIT 2015 ���������������������������10.121 Brazil-​Angola BIT 2015�������������������10.121n290 Brazil-​Mozambique BIT 2015���������10.121n290 Bulgaria-​Cyprus BIT 1987��������������23.82–​23.84 Art 3(1)�������������������������������������������������23.86 Canada-​Argentina FIPA 1993 �������������������10.09 Canada-​Benin FIPA 2013 Art 16 ����������������������������18.103n153, 18.106

Art 23(1)�������������������������������������18.103n153 art 23(1)(a)���������������������������������������18.106 Art 24(3)(e)(ii)�����������������������������������������6.13 Art 24(3)(f )(ii)�����������������������������������������6.13 Art 28(2)�������������������������������������������������8.72 Art 33(1)�������������������������������������������������9.45 Art 24(3)(e)(ii)�����������������������������������������6.13 Art 24(3)(f )(ii)�����������������������������������������6.13 Art 28(2)�������������������������������������������������8.72 Canada-​Burkina Faso FIPA 2015����������������7.08, 18.105 Art 16 �������������������������������������������������18.102 Art 17(b)�������������������������������������������������8.68 Art 21(1)���������������������������������������������18.103 Art 32 �����������������������������������������������������9.45 Canada-​Cameroon FIPA 2014 Art 15(2)������������������������18.103n153, 18.106 Arts 20(1)-​(2)(a)��������������18.103n153, 18.106 Canada-​Chile FTA1996 Art G-​13 �����������������������������������������������10.43 Canada-​China FIPA 2012 Art 21 �����������������������������������������������������6.33 Art 24(2)�����������������������������������������6.88n180 art 24(2)(b) ���������������������������������6.84n171 art 24(2)(c)�����������������������������������6.84n171 Art 24(3)�����������������������������������������6.88n180 Art 24(5)�����������������������������������������6.84n172 Art 25(b)�����������������������������������������6.86n177 Art 28 ��������������������������������������������9.06, 9.45 art 28(2)���������������������������������������������9.150 Annex C.21���������������������������������������������6.33 Annex C.29���������������������������������������������9.06 Canada-​China Free Trade Agreement 2015 Art 29 ���������������������������������������������������9.115 Annex C.29�������������������������������������������9.115 Canada-​Colombia Free Trade Agreement 2009 Art 830(1)�����������������������������������������������9.45 Art 831 �������������������������������������������������9.115 Annex 8.31��������������������������������������������9.115 Canada-​Costa Rica FIPA 1998 Art XII(1)�����������������������������������������15.24n33 Canada-​Côte d’Ivoire FIPA 2014 Art 15(2)������������������������18.103n153, 18.106 Art 20(a) ������������������������18.103n153, 18.106 Art 30(1)�������������������������������������������������9.45 Canada-​Czech Republic FIPA 2009 Annex B, para I �������������������������������������9.150 Annex B, para I(3)�����������������������������������9.45 Canada-​Ecuador FIPA 1997 Art I(g)�������������������������������������������11.96n166 Art XII(1)�������������������������������������������������2.87 Canada-​Guinea FIPA 2015 �������������������������7.08 Art 16 ����������������������������18.103n153, 18.106 Art 23(1)������������������������18.103n153, 18.106 Art 31 �����������������������������������������������������9.45 Canada-​Honduras Free Trade Agreement 2013 Art 10.16������������������������18.103n153, 18.106

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International Legislation Art 10.19(1)(a)����������������18.103n153, 18.106 Art 10.35(3)���������������������������������������������9.45 Canada-​Hong Kong FIPA 2016�������������16.04n8 Art 29 �����������������������������������������������������9.45 Canada-​Jordan FIPA 2009 Art 38 ���������������������������������������������������9.150 art 38(3)�����������������������������������������������9.45 Canada-​Republic of Korea Free Trade Agreement 2015 Art 8.16��������������������������18.103n153, 18.106 Art 8.18��������������������������18.103n153, 18.106 Art 8.19(1)����������������������18.103n153, 18.106 Art 8.22(1)(2) �������������������������������������10.119 Art 8.34���������������������������������������������������7.08 Art 8.35(1). . . . . . . . . . . . . . . . . . . . . . . 9.45 Art 8.36. . . . . . . . . . . . . . . . . . . . . . . . 9.115 Annex 8-​D. . . . . . . . . . . . . . . . . . . . . . 9.115 Canada-​Kuwait FIPA 2011 Art 30(1). . . . . . . . . . . . . . . . . . . . . . . . 9.45 Art 30(2). . . . . . . . . . . . . . . . . . . . . . . 9.150 Canada-​Latvia FIPA 2009 Annex C, para I(3). . . . . . . . . . . . . . . . . 9.45 Canada-​Mali FIPA 2014 Art 15(3). . . . . . . . . . . . 18.103n153, 18.106 Art 20(1). . . . . . . . . . . . 18.103n153, 18.106 art 20(2)(a). . . . . . . . . . . 18.103n153, 18.106 Art 25(2). . . . . . . . . . . . . . . . . . . . . . . . 8.72 Canada-​Mongolia BIT 2016 Art 14 18.103n153, 18.106 Art 20(1)(1). . . . . . . . . . 18.103n153, 18.106 Canada-​Nigeria BIT 2014 Art 15(2). . . . . . . . . . . . . . . . . . 18.103n153 Art 16 18.106 Arts 21(1)-​(2)(a). . . . . . . . . . . . . 18.103n153, 18.106 Canada-​Panama Free Trade Agreement 2010 Art 9.30(1). . . . . . . . . . . . . . . . . . . . . . . 9.45 Art 9.31. . . . . . . . . . . . . . . . . . . . . . . . 9.115 Annex 9.31. . . . . . . . . . . . . . . . . . . . . . 9.115 Canada-​Peru FIPA 2006 Art 26 6.34 art 26(3). . . . . . . . . . . . . . . . . . . . . 6.24n55 Art 38(1). . . . . . . . . . . . . . . . . . . . . . . 9.150 Art 38(3). . . . . . . . . . . . . . . . . . . . . . . . 9.45 Art 39 9.116 Annex B.4 . . . . . . . . . . . . . . . . . . 23.54n116 Canada-​Peru Free Trade Agreement 2008. . . . . . . . . . . . . . . . 9.117, 9.150 Art 835(1). . . . . . . . . . . . . . . . . . . . . . 9.150 Art 835(2). . . . . . . . . . . . . . . . . . . . . . 9.150 Art 835(3)(8). . . . . . . . . . . . . . . . . . . . . 9.45 Art 836 . . . . . . . . . . . . . . . . . . . . . . . . 9.116 Annex 804(1). . . . . . . . . . . . . . . . . . . 23.116 Canada-​Romania FIPA 2009 Annex C, para I(3)�����������������������������������9.45 Pt I�����������������������������������������������������9.150

Canada-​Senegal BIT 2014 Art 16 ����������������������������18.103n153, 18.106 Art 21(1)������������������������18.103n153, 18.106 Art 21(2)(a)��������������������18.103n153, 18.106 Canada-​Serbia FIPA 2014 Art 16 ����������������������������18.103n153, 18.106 Arts 21(1)-​(2)(a)��������������18.103n153, 18.106 Art 31(1)�������������������������������������������������9.45 Canada-​Slovak Republic FIPA 2010 Annex B, para I(1)���������������������������������9.150 Annex B, para I(3)�����������������������������������9.45 Canada-​Tanzania FIPA 2013 Art 30(1)�������������������������������������������������9.45 Canada-​Venezuela FIPA�����������������������������10.73 Art XII���������������������������������������������������25.19 art XII(9)�������������������������������������������25.18 Canadian Model FIPA 2004���������������������1.102, 1.116, 9.45, 9.150, 10.37, 10.40, 16.14, 16.87, 22.33 Art 1 �����������������������������������������������10.35n62 Art 3(1)�������������������������������������������������21.12 Art 3(2)�������������������������������������������������21.12 Art 5 �����������������������������������������������������20.09 Art 10(2)�������������������������������������������������1.92 Art 11 �����������������������������������������������������1.66 Art 13 ���������������������������������������������25.14n22 art 13(2)���������������������������������������25.15n24 Art 14(6)�������������������������������������������������1.92 Art 17(1)�������������������������������������������������1.92 Art 17(2)�������������������������������������������������1.92 Art 18 ���������������������������������������������������10.43 Art 19 �����������������������������������������������������1.74 Art 26(1)(e)�����������������������������������������10.119 Art 26(2)(e)�����������������������������������������10.119 Art 28(2)(b)�������������������������������������29.10n29 Art 29(1)�����������������������������������������6.55n110 Art 29(2)(b)�������������������������������������6.84n171 Art 30(2)�����������������������������������������6.55n115 Art 31 �����������������������������������������������������6.86 Art 32 ������������������������������������6.08, 6.66n138 Art 37 �����������������������������������������������������7.08 Art 38(3)�������������������������������������������������9.45 Art 39 ����������������������������������������1.118, 9.115 Art 44 ���������������������������������������������������25.20 Annex C.39�������������������������������������������9.116 Chile-​Colombia Free Trade Agreement 2006 Annex 9.3��������������������������������������������23.116 Chile-​Croatia BIT 1994�����������������������������23.49 Chile-​Denmark BIT 1993�������������������������23.49 Chile-​Malaysia BIT 1992���������������������������23.49 Chile-​Peru BIT 2000���������������������������������27.34 Art 2 �����������������������������������������������������27.34 Chile-​South Korea Free Trade Agreement 2004 Art 10.9���������������������������������������������������1.26 Art 10.18�������������������������������������������������1.70 Art 10.36�������������������������������������������������1.92 Chile-​Spain BIT 1991��������������������23.57, 23.60

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International Legislation Chile-​United States FTA Art 10.17(2)(b) ���������������������������������2.56n89 Art 10.19(2)�������������������������������������3.75n175 Art 10.19(4)���������������������������������������������3.28 Art 10.19(5)���������������������������������������������3.28 Art 10.19(6)���������������������������������������������3.28 Annex 10-​D���������������������������������������1.58n34 China-​Barbados BIT 1998 Art 9 �������������������������������������������������������6.07 China-​Colombia BIT 2013 Art 9(12)������������������������������������7.07n9, 7.09 China-​Germany BIT 2003 Art 9(1)���������������������������������������������������6.10 China-​Korea BIT 2007 Art 3(3)����������������������������������23.111–​23.113 Art 3(5)����������������������������������23.111, 23.113 Art 9(4)���������������������������������������������������6.12 Art 9(7)�����������������������������������������������23.112 China-​Lao Peoples Democratic Republic BIT 1993����������������������28.98, 28.104 Art 1(2)(b)�������������������������������������������28.100 Art 8 �����������������������������������������������������28.99 art 8(1)���������������������������������������������28.103 art 8(2)��������������������������������28.101, 28.103 art 8(3)�������������������28.102, 28.109, 28.116 Art 12(2)���������������������������������������������28.113 China-​Peru Free Trade Agreement 2009 Art 132(2)�����������������������������������������1.45n25 China-​Russia BIT 2006���������������������������28.107 China-​Switzerland BIT 2009 Art 11(2)�������������������������������������������������6.10 China-​Uzbekistan BIT 2011 ���������������19.13n28 Colombia Model BIT 2009 Art IX.13�������������������������������������������������7.09 Colombia-​Japan BIT 2011 Art 26(3)�������������������������������������������6.10n26 Art 27(8)�������������������������������������������6.23n51 Art 29(5)�������������������������������������������6.24n55 Art 30(2)�����������������������������������������6.70n144 Art 30(3)�����������������������������������������6.84n173 Art 30(5)�����������������������������������������6.70n144 Colombia-​Turkey BIT 2014 Art 12(7)�������������������������������������������������6.12 Art 12(17)�����������������������������������������������8.72 art 12(17)(b) ���������������������������������������8.67 Colombia-​United Kingdom BIT 2014 Art 9(12)������������������������������������7.07n9, 7.09 Cyprus-​Hungary BIT 1989 Art 6(5)�������������������������������������������19.26n47 Art 7 �����������������������������������������������������19.26 art 7(1)�������������������������������������������6.07n16 Czech Republic-​Germany BIT 1992 Art 1(1)�����������������������������������������11.96n166 Czech Republic-​Kuwait BIT 1997�������������10.36 Czech Republic-​Netherlands BIT 1991�����21.82 Art 5 �����������������������������������������������������22.61 Czech Republic-​Switzerland BIT 1990�������11.58

Denmark-​Russia BIT 1993 Art 8 ����������������������������������������23.77, 28.121 Dutch Model BIT 2004 Art 9 �������������������������������������������������6.05n10 Egypt-​Poland BIT 1995���������������������������10.117 Egypt-​United Arab Emirates BIT Art 10(4)����������������������������10.70, 10.70n144 Egypt-​United Kingdom BIT 1976������������11.55, 16.35n47, 19.24 Ethiopia-​Sudan BIT 2000 �������������������������25.15 Art 4 �����������������������������������������������������25.14 Finland-​Czech Republic BIT 1991 Art 8(1)�����������������������������������������17.79n237 art 8(1)(b) ���������������������������������17.68n211 Finland Model BIT 2004���������������������16.21n30 France-​Albania BIT 1993 Art 9 �������������������������������������������������������6.07 France-​Argentina BIT 1993�����������������������20.23 Art 8 �����������������������������������������������������15.60 France-​Dominican Republic BIT 2003 �������������������������������������10.113, 17.60 Art 7 ���������������������������������������������17.54n168 France-​Iran BIT 2003 Art 8(2)���������������������������������������������������5.17 France-​Kenya BIT 2009�����������������������10.46n90 France-​Libya BIT 2006 �����������������������10.46n90 France-​Peru BIT 1993�����������������������10.78n165 France Model BIT 2006�����������������������������16.87 Art 2 �������������������������������������������������14.05n9 Art 3 �����������������������������������������������20.09n13 Gambia-​Turkey BIT 2013�������������������19.13n28 Germany Model BIT 1994 Art 8 �����������������������������������������������16.21n30 Art IX������������������������������������������������������6.07 Germany Model BIT 1998 Art 2(1)�������������������������������������������20.08n12 Germany Model BIT 2008 Art 3(a) �������������������������������������������������10.37 Germany-​Argentina BIT 1991�����������������23.106 Art 3 �����������������������������������������������������23.66 art 3(1)�����������������������������������������������23.63 art 3(2)�����������������������������������������������23.63 Art 10(4)�������������������������������������������������5.17 Germany-​Bulgaria BIT 1986�������������������23.106 Germany-​China BIT 2005�������������������������10.46 Germany-​Ghana BIT 1995 ������������17.52, 17.60 Germany-​Israel BIT 1976 Art 1(3)(b)���������������������������������������������10.09 Germany-​Lebanon BIT 1997 Art 9(3)�������������������������������������������6.55n110 Arts 10(2)-​(9)�����������������������������������6.55n110 Germany-​Pakistan BIT 1959�����������������������1.16 Art 7 �����������������������������������������������������16.08 Germany-​Philippines BIT 2000 Art 1(1)��������������������������������4.48, 11.96n166 Germany-​Russian Federation BIT 1989�����28.18 Art 1(c) �������������������������������������������28.22n35

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International Legislation Greece-​Albania BIT 1993 Greece-​Georgia BIT 1996 Greece-​Romania BIT 1991 �����������������������17.44 Art 9 ����������������������������17.12n34, 17.44n137 art 9(1)���������������������������17.12, 17.42n132, 17.44n135, 17.44n139 art 9(2)���������������������������������������17.44n139 art 9(4)����������������������17.12n35, 17.56n172 Greece-​Serbia BIT 1997�����������������������������11.62 Greece-​Slovakia BIT 1992 Art 1(1)��������������������������������������11.09, 11.34 Greece Model BIT 2001 ���������������������16.21n30 Art 11(2)�����������������������������������������������16.61 Hungary-​Norway BIT 1991�����������������������23.87 Art V�������������������������������������������������6.07n16 Art VI �����������������������������������������������6.07n16 Art XI������������������������������������������������6.07n16 India Model BIT 2015���������������6.05, 6.47n102, 9.49, 11.15n17, 16.14, 16.87, 22.34 Art 1.4���������������������������������������������������11.15 Art 1.6�����������������������������������������10.121n288 Art 3 ������������������������������������20.11n23, 20.31 Art 22 �����������������������������������������������������9.49 India-​United Arab Emirates BIT Arts 10.7(a)-​(b) ���������������������������������������8.74 Treaty of amity, residency and commerce between Iran and Denmark 1934�������������������������������23.37–​23.38 Treaty of amity and recidency and legal cooperation between Iran and Switzerland 1934�����������������������23.37 Treaty of Saadabad (Iran-​Turkey Treaty) 1937������������������������������������������23.37 Israel-​Myanmar BIT 2014 Art 8(5)���������������������������������������������������8.74 Israel-​Uzbekistan BIT 1994 Art 1(1)�������������������������������������������������18.06 Italy-​Algeria BIT 1991������������16.46, 20.82n172 Italy-​Egypt BIT 1994���������������������������������10.19 Art 1 �������������������������������������������������11.09n4 Italy-​Jordan BIT 1996�������������������������������14.88 Art 2(4)�������������������������������������������������16.19 Art 9(2)�����������������������������������������14.88n274 Art 9(3)�����������������������������������������14.88n275 Italy-​Jordan BIT 1999�������������������������������23.76 Italy-​Lebanon BIT 1997 ������������6.32n68, 16.48 Italy-​Lithuania BIT 1997 Art 1(1)���������������������������������������11.101n179 Italy-​Morocco BIT 2000 Art 1(1)�����������������������������������������11.96n166 Italy-​Pakistan BIT 1997�����������������������������16.70 Art 9(1)�������������������������������������������15.24n34 Italy-​South Africa BIT 1997�����������������������21.96 Italy-​United Arab Emirates BIT 1995 �������10.16 Art 9 �������������������������������������������������������6.07 Japan-​Cambodia BIT 2007 �����������������������18.99 Art 10 �������������������������������������������18.89n145

Art 17(1)�����������������������������������������������18.91 Japan-​Colombia BIT 2011 Art 8 ����������������������������������18.89n145, 18.94 Art 27(2)(a)(i) ���������������������������������������18.94 Japan-​Lao People’s Democratic Republic BIT 2008�����������������������������������18.99 Japan-​India Economic Partnership Agreement 2011�������������������������18.93 Art 7 �����������������������������18.89, 18.95, 18.101 Art 96 ��������������������������������18.89n146, 18.95 Japan-​Iran BIT 2016�����������������������������16.04n8 Japan-​Iraq BIT 2012 Art 9 �����������������������������18.88, 18.97, 18.110 Art 15(1)������������������������������������18.90, 18.97 Japan-​Israel BIT 2017 Art 5(c) ���������������������������������������������������6.22 Art 24(2)�������������������������������������������������6.32 Art 25(5)�������������������������������������������������6.37 Japan-​Kazakhstan BIT 2014 Art 10 �������������������������������������������18.89n145 Art 17(1)���������������������������������������18.91n147 Japan-​Kuwait BIT 2012 Art 9 ���������������������������������������������18.89n145 Art 16(1)���������������������������������������18.91n147 Japan-​Lao Peoples Democratic Republic BIT 2008�����������������������������������18.99 Art 10 �������������������������������������������18.89n145 Art 17(1)�����������������������������������������������18.91 Japan-​Mexico Free Trade Agreement 2012 Art 96 �����������������������������������������������������1.40 Japan-​Mongolia Economic Partnership Agreement 2016 Art 1.7��������������������������������18.89n145, 18.93 Art 7 �����������������������������������������������������18.96 Art 10.13(1)(f )����������������������������18.92, 18.93 Japan-​Mozambique BIT 2013 Art 10 �������������������������������������������18.89n145 Art 17(1)���������������������������������������18.91n147 Japan-​Myanmar BIT 2013 Art 11 �������������������������������������������18.89n145 Art 18(1)���������������������������������������18.91n147 Japan-​Oman BIT 2015 Art 8 ���������������������������������������������18.89n145 Art 15(1)���������������������������������������18.91n147 Japan-​Papua New Guinea BIT 2011 Art 9 ���������������������������������������������18.89n145 Art 16(1)���������������������������������������18.91n147 Japan-​Peru BIT 2008 Art 10 �������������������������������������������18.89n145 Japan-​Ukraine BIT 2015 Art 11 �������������������������������������������18.89n145 Art 18(1)���������������������������������������18.91n147 Japan-​Uruguay BIT 2015���������������������19.13n28 Art 14 �������������������������������������������18.89n145 Art 21(1)���������������������������������������18.91n147 Art 21(7)���������������������������������������������10.119 Japan-​Uzbekistan BIT 2008�����������������������18.99

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International Legislation Art 9 ���������������������������������������������18.89n145 Art 16(1)�����������������������������������������������18.91 Japan-​Vietnam BIT 2004�����������������������������1.68 Art 6 �������������������������������������������������������1.25 Jordan-​Turkey BIT 2006 Art 2 �������������������������������������������������11.09n4 Republic of Korea Model BIT 2001 Art 8(1)���������������������������������������������6.07n12 Republic of Korea-​United States Free Trade Agreement 2007 Art 11.18(2)(b) ���������������������������������������6.14 Annex 11-​E ���������������������������������������������6.14 Lithuania-​Ukraine BIT 1995����������10.59–​10.60 Art 1(1)�����������������������������������������11.96n166 Mauritius-​India BIT 1998���������������������������8.95 Mexico-​Bahrain BIT 2012 Art 27 �����������������������������������������������������6.15 Mexico-​Japan Free Trade Agreement 2004�20.09 Mexico-​United Kingdom BIT 2006 Art 13(2)�����������������������������������������6.55n116 Art 14(1)�����������������������������������������6.66n138 Art 14(5)�����������������������������������������6.66n138 Morocco-​Nigeria BIT 2016 Art 27(2)�������������������������������������������������6.55 Netherlands Model BIT 2004 �������������16.21n30 Netherlands-​Bolivia BIT 1994������������������10.50, 10.50n93 Art 1(b)�������������������������������������������������10.74 Art 3(1)�������������������������������������������21.11n19 Netherlands-​Czech Republic BIT 1991�����������������������10.72, 17.74, 28.46–​28.47 Art 3.1���������������������������������������������������28.45 Art 8 �����������������������������������������������������17.08 art 8(6)����������������������������17.54n168, 19.12 Netherlands-​Paraguay BIT 1992 ���������16.41n65 Netherlands-​Romania BIT 1994 ��������������10.61, 10.61n111 Netherlands-​Turkey BIT 1989 Art 2(2)����������������������������������������11.97n169, 11.99n173 Netherlands-​Venezuela BIT 1993������������10.116, 11.52, 16.03 Art 1(a) ���������������������������������������������11.09n4 Art 3 �������������������������������������������������16.03n5 Netherlands-​Zimbabwe BIT 1998 Art 1(1)���������������������������������������������11.09n4 Art 9(3)�������������������������������������������19.13n28 New Zealand-​Australia Closer Economic Relations Trade Agreement Investment Protocol 2011 Art 12(1)�������������������������������������������1.45n25 Norway Model BIT 2015������������������9.48, 16.87 Art 17 ���������������������������������������������������25.20 Art 19(3)�������������������������������������������������9.48 Art 21(2)�����������������������������������������������9.155 Art 21(3)�����������������������������������������������9.119

Norway-​Russia BIT 1995 Art 8 �������������������������������������������������������5.17 Oman-​Austria BIT 2001 Art 10 �����������������������������������������������������5.17 Oman-​Yemen BIT 1998 ���������������������������18.47 Romania-​Turkey BIT 1996 Art 6 �������������������������������������������������6.11n27 Russia-​Moldova BIT 2001 Art 1(2)���������������������������������������11.101n179 Russia-​Mongolia BIT 1995 Art 6 ���������������������������������������������17.79n237 Russia-​Spain BIT 1990 ���������������������������28.117 Art 5(2)���������������������28.121, 28.125–​28.126 Art 6 ��������������������������������������28.118, 28.124 Art 10 �����������������������������������28.118, 28.120, 28.122–​28.124,  28.126 Russia-​United Kingdom Implementation Agreement 2005 Art 9 ���������������������������������������������14.63n217 Spain-​Venezuela BIT 1997 Art 10.1���������������������������������������11.101n179 Sweden-​India BIT 2001 Art 1 �����������������������������������������������������10.48 Switzerland Model BIT 1995���������������16.21n30 Art 4(1)�������������������������������������������20.08n12 Switzerland-​Kuwait BIT 1998 Art 3 �����������������������������������������������16.21n30 Switzerland-​Pakistan BIT 1995 ������������������2.39, 15.25n37, 16.21, 16.23, 16.33, 16.70 Art 9 ������������������������������������������15.19, 15.25 Art 11 ����������������������������������16.23n36, 16.33 Switzerland-​Paraguay BIT 1992�����������16.41n65 Art 11 ���������������������������������������������������16.58 Switzerland-​Philippines BIT 1997��16.22, 16.39 Art VIII���������������������15.25n37, 15.26–​15.27 Switzerland-​Slovak Republic BIT 1990 �����10.87 Switzerland-​Tunisia BIT 1961 Art 1(2)�������������������������������������������������10.10 Switzerland-​Uruguay BIT 1988�����������������16.68 Art 11 �������������������������������������������16.68n116 Switzerland-​Uzbekistan BIT 1993 Art 1(2)�������������������������������������������������11.57 Treaty of Amity and Commerce between the United States and France1788 �����������������������������1.02n1 Treaty of Paris 1857�����������������������������������23.37 Turkey-​Turkmenistan BIT 1992���������������28.107 Arts II-​VI�������������������������������������������5.26n22 Ukraine-​Moldova BIT 1995������������28.83–​28.84 United Kingdom Model BIT 1991 Art 2 �����������������������������������������������������16.61 art 2(2)���������������������������������������14.78n252 United Kingdom Model BIT 2008����������������������������������23.85n175 Art 2(1)�������������������������������������������21.12n25 Art 3(2)�������������������������������������������������21.13

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International Legislation United Kingdom-​Albania BIT 1994 Arts 1-​11�����������������������������������������������23.53 Art 3(3)�������������������������������������������������23.53 Art 7 �����������������������������������������������������23.17 Art 8 �����������������������������������������������������23.53 United Kingdom-​Argentina BIT 1990�������������23.95, 28.76, 28.82 Art 2(2)�������������������������������������������������28.79 Art 5 �����������������������������������������������25.14n22 Art 8(2)(a)���������������������������������������������28.77 Art 9 �����������������������������������������������������28.81 United Kingdom-​Colombia BIT 2010 Art III(2)�����������������������������������������������23.17 United Kingdom-​Croatia BIT 1997 Art 5 �����������������������������������������������25.14n22 United Kingdom-​Czech Republic BIT 1990��������������������������������28.149n228 Art 3 ��������������������������������������23.109–​23.110 Art 8(1)����������������������������������23.109–​23.110 United Kingdom-​El Salvador BIT 2001�����10.39 United Kingdom-​Lebanon BIT 1999 Art 10 ���������������������������������������������������16.61 United Kingdom-​Malaysia BIT 1981���������13.38 United Kingdom-​Poland BIT 1988�����������10.39 United Kingdom-​Sri Lanka BIT 1980��������������������19.06, 19.23, 19.24 United Kingdom-​Turkey BIT 1997 Art 3 �����������������������������������������������������23.48 United Kingdom-​Russian Federation BIT 1991 Art 1(e) ���������������������������������������11.102n182 Art 3 �����������������������������������������������������23.80 Art 5 �����������������������������������������������������23.80 Art 8 ������������������������������������������23.79–​23.80 United Kingdom-​Uzbekistan BIT 1993 Art 8(1)�������������������������������������������������17.18 United States Model BIT 1984 �����������������22.25 United States Model BIT 1994 �������������11.10n5 United States Model BIT 1998 �������������11.10n5 United States Model BIT 2004 ���������7.01, 7.03, 7.15, 9.114, 10.08, 11.10n5, 11.13, 15.36, 17.48, 20.09, 21.102, 22.25n38 Art 1 �����������������������������������������������10.35n62 Art 5(2)a �����������������������������������������������20.31 Art 24(1)�����������������������������������������������16.15 Art 25(2)�����������������������������������������29.10n29 Art 26 ���������������������������������������������������16.15 Art 29(1)�������������������������������������������������9.42 Art 29(2)�����������������������������������������������9.152 Art 29(3)�������������������������������������������������9.43 Annex D �����������������������������������������������27.75 United States Model BIT 2012 ������������1.66n40, 1.75, 7.04, 7.22, 7.26, 10.37, 11.10, 11.10n5, 11.11, 11.13, 11.64, 15.36, 16.87, 17.61n189, 22.25n38, 24.18, 27.75, 27.81n188

Art 1 ������������������������������������� 5.26n22, 10.40 Art 3(1)�������������������������������������������������21.12 Art 3(3)�����������������������������������������������21.101 Art 6(1)(c)���������������������������������������25.14n22 Art 6(2)�������������������������������������������25.15n24 Art 17 ���������������������������������������������������10.43 Art 18 �����������������������������������������������������9.43 Art 19 �����������������������������������������������������9.43 Art 24(1)�����������������������������������������������16.15 art 24(1)(a)(i)(C)���������������������������������6.07 Art 24(3)�������������������������������������������������5.17 Art 24(6)�������������������������������������������6.23n51 Art 26 ���������������������������������������������������16.15 art 26(2)(b) �������������������������������������10.119 Art 27(1)�����������������������������������������6.55n110 art 27(4)(b) �����������������������������������������6.86 art 27(4)(c)�������������������������������������������6.86 Art 28.4���������������������������������������������������7.02 Art 28.5���������������������������������������������������7.02 Art 28(3)�����������������������������������������������9.114 Art 29(1)�������������������������������������������������9.42 Art 29(2)�����������������������������������������������9.152 Art 29(3)�������������������������������������������������9.43 Art 33 ������������������������������������6.08, 6.66n138 Art 34 ���������������������������������������������������25.20 Annex B(4)(b) �����������������������������������������1.60 United States-​Albania BIT 1995 Art IX����������������������������������������������15.35n57 United States-​Argentina BIT 1991��������������8.95, 10.103, 10.104n241, 15.75, 16.37, 16.43, 16.71, 19.24, 22.63, 23.49, 23.72, 30.17 Art I.1(a)���������������������������������������������10.107 Art II(1)�������������������������������������������������21.77 Art II(2)�������������������������������������������������20.54 art II(2)(b)�����������������������������������������21.77 art II(2)(c)�����������������������������������������16.57 Art VII(1)������������������������������15.35n57, 16.55 Art VII(2)�����������������������������������������������27.68 Art XI����������������������������������������������������25.50 United States-​Australia Free Trade Agreement 2005��������������20.09, 22.13 Art 11.5������������������������������������������1.46, 1.47 Art 11.12�����������������������������������������������10.43 Art 11.17.4 ���������������������������������������11.10n5 Annex 11.B ���������������������������������������������1.47 art 4(b)�����������������������������������������������22.33 United States-​Bolivia BIT 1998�����������������10.85 United States-​Canada Free Trade Agreement 1987��������������1.40, 21.105 United States-​Canada United States-​ Canada Agreement regarding the continued use of land adjacent to certain leased bases 1966 �����������14.63 United States-​Canada Softwood Lumber Agreement 2006�������������������������21.39

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International Legislation United States-​Chile Free Trade Agreement 2003��������������15.35n57, 20.09, 22.13 Art 10.11�����������������������������������������������10.43 Art 10.19.4 �����������������������������������������7.04n6 Art 10.19.5 �����������������������������������������7.04n6 Art 10.19(3)�����������������������������������9.114n196 Art 10.20�������������������������������������������������9.44 Art 10.20(2)���������������������������������������9.152 Annex 10.D�������������������������������������������22.33 Annex 10-​H�������������������������������������������27.75 United States-​Colombia Free Trade Agreement 2006��������15.35n57, 22.13 Art 10.12�����������������������������������������������10.43 Art 10.20(3)�����������������������������������9.114n196 Art 10.21�������������������������������������������������9.44 Art 10.21(2)���������������������������������������9.152 Annex 10-​D�������������������������������������������27.75 United States-​Czech Republic BIT 1991���������������������������������10.115 Art II(1)�������������������������������������������������21.80 Art II(2)(b)���������������������������������������������21.80 United States-​Ecuador BIT 1993��������������20.53, 21.44, 24.41n43, 28.26, 28.88–​28.93,  29.34 Art IV ���������������������������������������������17.26n73 Art VI ����������������������������������������28.96–​28.97 art VI(2)�������������������������������������17.59n182 art VI(3)�������������������������������������17.79n237 art VI(7)�������������������������������������17.48n152 Art X�����������������������������������������������������28.28 Art XII����������������������������������������28.96–​28.97 United States-​Egypt BIT 1986����������������� 10.18, 10.117, 21.37 United States-​Estonia BIT 1994���������17.61n190 United States-​Kazakhstan BIT 1992�����������11.71 United States-​Korea Free Trade Agreement 2007�������������������������15.35n57, 22.13 Art 11.20(5)�����������������������������������9.114n196 Art 11.21�������������������������������������������������9.44 Art 11.21(2)���������������������������������������9.152 Annex 11-​D�������������������������������������������27.75 United States-​Mexico Treaty Respecting Utilization of Waters of the Colorado and Tijuana Rivers and the Rio Grande 1944����������28.49n73, 28.51 United States-​Morocco Free Trade Agreement 2004��������������20.09, 22.13 Art 10.11�����������������������������������������������10.43 Art 10.19.4 �����������������������������������������7.04n6 Art 10.19.5 �����������������������������������������7.04n6 Art 10.19(3)�����������������������������������9.114n196 Art 10.20�������������������������������������������������9.44 Art 10.20(2)���������������������������������������9.152 Annex 10.B �������������������������������������������22.33

Annex 10-​D�������������������������������������������27.75 United States-​Morocco Treaty of Peace 1836������������������������������������������23.41 United States-​Oman Free Trade Agreement 2006������������������������������������������22.13 Art 10.5. . . . . . . . . . . . . . . . . . . . . . 2.39n58 Art 10.19.4 �����������������������������������������7.04n6 Art 10.19.5 �����������������������������������������7.04n6 Art 10.19(3)�����������������������������������9.114n196 Art 10.20�������������������������������������������������9.44 United States-​Panama Free Trade Agreement 2007 Art 10.12�����������������������������������������������10.43 Art 10.20(3)�����������������������������������9.114n196 Art 10.21�������������������������������������������������9.44 Art 10.21(2)���������������������������������������9.152 United States-​Panama Trade Promotion Agreement 2012 Art 10.20.4 �����������������������������������������7.04n6 Art 10.20.5 �����������������������������������������7.04n6 United States-​Peru Free Trade Agreement 2004��������������������20.09, 22.13, 22.33 Art 10.12�����������������������������������������������10.43 Art 10.21(2)�������������������������������������������9.152 Annex 10-​D�������������������������������������������27.75 United States-​Peru Free Trade Agreement 2007������������������������������������������1.111 Art 10.21�������������������������������������������������9.44 United States-​Peru Trade Promotion Agreement 2006����������������7.26, 9.153 Art 10.19(3)�������������������������������������6.55n116 Art 10.20.4 ���������������������������������������������7.26 Art 10.20.5 ���������������������������������������������7.26 Art 10.20(3)�����������������������������������9.114n196 United States-​Romania BIT 1992�������������������������������21.77, 21.78 art II(2)(c)���������������������������������������������16.42 United States-​Rwanda BIT 2008 Art 28(3)���������������������������������������9.114n196 Art 28(4)���������������������������������������������7.04n6 Art 28(5)���������������������������������������������7.04n6 Art 29 ��������������������������������������������9.06, 9.44 art 29(2)���������������������������������������������9.152 United States-​Singapore Free Trade Agreement 2003������������ 20.09, 22.13, 22.33, 27.75 Art 15.15�������������������������������������������������1.85 Art 15.19���������������������������������������9.114n196 Art 15.19.4 �������������������������������������7.04n6 Art 15.19.5 �������������������������������������7.04n6 Art 15.20�������������������������������������������������9.44 Art 15.20(2)���������������������������������������9.152 United States-​Ukraine BIT 1994 Art 1(2)�������������������������������������������������10.81

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International Legislation Art VI ���������������������������������������������15.35n57 United States-​Uruguay BIT 2005���������������17.60 Art 24(7)�����������������������������������������������17.48 Art 29 �������������������������������������������9.114n196 Annex E�������������������������������������������������27.75 United States-​Uruguay Free Trade Agreement 2004�������������������15.35n57 Art 28.4�����������������������������������������������7.04n6 Art 28.5�����������������������������������������������7.04n6

Art 29(2)�����������������������������������������������9.152 United States-​Zaire BIT 1984 Art I(b)(ii)�����������������������������������������2.30n46 Uruguay-​United States BIT 2005������1.78, 10.08 Art 10 �����������������������������������������������1.74n44 Art 15.2���������������������������������������������1.74n45 Art 17 �����������������������������������������������2.30n46 Art 29 ��������������������������������������������9.06, 9.44 Venezuela-​Spain BIT 1995�������������������������10.21

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NATIONAL LEGISLATION ARGENTINA

NETHERLANDS

Emergency Economic Law Nº 25561 2002. . . . . . . . . . . 10.104n241, 25.48

Dutch Code of Civil Procedure Art 1065(1)(a)���������������������������������������28.93

AUSTRALIA

PHILIPPINES

Foreign States Immunities Act 1985�����������29.49

Constitution of the Philippines 1987���������18.54

CANADA

RUSSIA

State Immunity Act 1982���������������������������29.49

Russian Federal Law on International Treaties 1995 Art 23(1)�������������������������������������������������2.82

ECUADOR Hydrocarbon Act 2010������24.52n66, 24.75n121 Law 42�������������������������������������������������������24.57

SINGAPORE

Investment Law of the Republic of Georgia 1996 Art 16.2�������������������������������������������15.29n48

Civil Law Amendment Bill 2017 Art 5(B)(8)���������������������������������������������26.25 Civil Law (Third Party Funding) Regulations 2016�����������������26.08n19 Draft Civil Law (Amendment) Bill 2016 �����������������������������������26.08 International Arbitration Act 2002 s 10 �����������������������������������������������������28.104 s 10(3)(a)�����������������������������������������28.105

GERMANY

SOUTH AFRICA

Code of Civil Procedure s 1041(2)���������������������������������������������24.155

Institution of Legal Proceedings Against State Organs Act No. 40 2002 s 1(vii)���������������������������������������������������14.16 Protection of Investment Act 2015�����������10.120 South Africa Constitution Act No. 117 1996 s 239 �����������������������������������������������������14.16

EGYPT Egyptian Civil Code�����������������������������19.20n41 GEORGIA

HONG KONG SAR Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016�������������������������26.08n18, 26.25 KAZAKHSTAN Law on Foreign Investments 1994�������������15.29 Art 27(1)�����������������������������������������15.29n48 Art 27(2)�����������������������������������������15.29n48 KYRGYZSTAN Foreign Investment Law 2003 ������������������28.35, 28.38, 28.41 MONGOLIA Foreign Investment Law 2013 ����������2.39, 16.67

SWEDEN Swedish Arbitration Act 1929��������������28.19n29 Swedish Arbitration Act 1999���������������������8.45, 28.19–​28.21, 28.19n29 s 8 �����������������������������������������������������������8.45 s 34 ��������������������������������28.142, 28.150n232 s 36 ����������������������������������28.36, 28.150n232 s 51 �����������������������������������������������������28.142 SWITZERLAND Federal Statute on Private International Law 1987 Art 183(2)�������������������������������������������24.155

lxxxix

National Legislation UNITED KINGDOM

UNITED STATES

Arbitration Act 1950 �����������������������������������4.68 Arbitration Act 1996 �����������������������������������8.59 s 59 �������������������������������������������������������26.41 s 67 ��������������������������������������������28.28, 28.30 s 67(1)�����������������������������������������������28.61 ss 100-​104�������������������������������������������������29.11 Arbitration (International Investment Disputes) Act 1966 s 3(2)�����������������������������������������������������29.70 Criminal Attempts Act 1981 �������������������4.14n4 Human Rights Act 1998 s 6 ���������������������������������������������������14.26n75 State Immunity Act 1978���������������������������29.49 §13(4) ���������������������������������������������������29.52 §13(3) �������������������������������������������29.64n141 §14(4) ���������������������������������������������������29.78

Bipartisan Congressional Trade Priorities and Accountability |Act 2015�������21.09n14 Federal Arbitration Act 1925 9 U.S.C. § 11�������������������������������������������������������28.80 § 10(a)���������������������������������������������������28.80 Federal Reserve Act 1913 12 U.S.C. 248�������14.23 Foreign Corrupt Practices Act (USFCPA) 1977������������������������������������������18.72 Foreign Sovereign Immunities Act 1976 28 U.S.C.�������������������������29.52 § 1330���������������������������������������������������29.49 § 1604���������������������������������������������14.23n64 § 1610����������������������������������������29.52, 29.77 Freedom of Information Act 1966 5 U.S.C. § 552����������������������������������������������9.15, 9.17 Immigration and Nationality Act 1965 Title III �������������������������������������������������10.08 United States Trade Act 2002���������������������27.75

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LIST OF CONTRIBUTORS Katia Yannaca-​Small is an independent counsel and arbitrator advising and representing states and companies on commercial and investor-​state arbitration and public international law issues. Previously, she was Counsel with the International Arbitration and Public International Law Groups of Shearman & Sterling LLP in Washington, D.C. Prior to joining the private sector, Katia was the Senior Legal Adviser on International Investment with the Organization for Economic Co-​operation and Development (OECD) in charge of all the OECD work on international investment agreements and arbitration. The results of this work have been used as reference by governments and included in several OECD publications. Katia also served as Senior Counsel with ICSID, where she administered large investor-​ state arbitrations, and proposed and developed ICSID’s first course on ICSID procedure for government officials and practitioners. She is Lecturer in Law at the University of Southern California’s Gould School of Law, teaching international investment law and arbitration. Katia is a frequent speaker and has written extensively in the field of investment arbitration. Jawad Ahmad is an associate at Mayer Brown International LLP, London. He was previously a private law clerk for Judge Charles N. Brower, 20 Essex Street Chambers, London, and was physically based in Washington, D.C., where he acted as a tribunal assistant in both investor-State and commercial arbitrations. He was previously Judge Brower’s Legal Adviser at the Iran-United States Claims Tribunal in The Hague where he worked on State-to-State arbitrations. Prior to The Hague, Jawad was an associate at a leading law firm in Singapore where he practiced international arbitration. He is an Editor of Arbitration International and an Associate Editor of the Kluwer Arbitration Blog. Jawad co-authored the Chapter in this book prior to joining Mayer Brown International LLP. The opinions expressed in the Chapter are those of the author, and they do not reflect in any way that of the law firm to which he is affiliated. Stanimir A Alexandrov works as an arbitrator in treaty-​based investor-​state disputes and international commercial arbitrations. Mr Alexandrov serves as an arbitrator in numerous cases and has been appointed to the panels of arbitrators of various arbitral institutions. He has been designated by the Chairman of ICSID’s Administrative Council to serve on ICSID’s Panel of Arbitrators. Mr Alexandrov has more than twenty years of experience in investor-​state and international commercial arbitration. Until August 2017, he was co-​ leader of the international arbitration practice at Sidley Austin LLP. Mr Alexandrov is consistently listed as a leader in the field of international arbitration in publications including The Best Lawyers in America, Chambers, The Legal 500: United States, The Legal 500: Latin America, and The International Who’s Who Legal, and has been recognized as ‘Lawyer of the Year International Arbitration—​Governmental’ and ‘Lawyer of the Year International Arbitration—​Commercial’. Before he entered private practice, Mr Alexandrov was Vice Minister of Foreign Affairs of Bulgaria, where he managed Bulgaria’s relations with the European Union (EU), the United Nations, the Organization for Security and Cooperation in Europe (OSCE), and NATO, worked on Bulgaria’s EU and WTO accession, and was responsible for all legal work of the Foreign Service. Aurélia Antonietti serves as Senior Legal Adviser at the International Centre for Settlement of Investment Disputes (ICSID). She has served as Secretary of the Tribunal in various arbitral proceedings in the field of investment arbitration. She has previously worked in the field of commercial and investment arbitration as an associate with the law firm of Gide Loyrette Nouel in Paris, France, Schellenberg Wittmer, and Lévy Kaufmann-​Kohler in Geneva,

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List of Contributors Switzerland. She holds degrees from Université Paris II Panthéon-​Assas (DEA), University College, London (LL.M.), and The George Washington University Law School (LL.M.). She is admitted to the Paris Bar and to practise law in the State of New York and as a solicitor in England and Wales. Yas Banifatemi is a partner and deputy practice leader in Shearman & Sterling’s International Arbitration Group and leads the firm’s Public International Law Practice. Yas advises and represents states, state-​owned entities, and companies on both public international law and international arbitration issues, and acts as counsel and arbitrator in arbitrations conducted pursuant to ICSID, UNCITRAL, LCIA, SCC, CRCICA, DIS, and Swiss Arbitration Rules, with particular focus on investment protection, oil & gas, and general commercial matters. She is a Vice-​President of the ICC Court of Arbitration, a member of the LCIA Court of Arbitration and of the ICSID Panel of Arbitrators, appointed by the Chairman of ICSID’s Administrative Council. She is a Lecturer at University of Panthéon-​Sorbonne (Paris I) and a Visiting Lecturer in Law at Yale Law School. Yas has been repeatedly praised in all leading professional directories and earns ‘acclaim for her excellent track record in arbitration’. Andrea K Bjorklund is a Full Professor and the L.  Yves Fortier Chair in International Arbitration and International Commercial Law at McGill University Faculty of Law. In 2017 she was named one of McGill’s Norton Rose Scholars in International Arbitration and International Commercial Law. In addition to serving as an adviser to the American Law Institute’s project on restating the US law of international commercial arbitration, she is a member of the Advisory Board of the Investment Treaty Forum of the British Institute for International and Comparative Law. She is on the panel of arbitrators of the AAA’s International Centre for Dispute Resolution and on the roster of NAFTA Chapter 19 arbitrators. Professor Bjorklund has a J.D. from Yale Law School, an M.A. in French Studies from New York University, and a B.A. (with High Honours) in History and French from the University of Nebraska. Nigel Blackaby is a Partner and Global Head of International Arbitration at Freshfields Bruckhaus Deringer US LLP, Washington, D.C. and Adjunct Professor of Law at American University in Washington. He has acted as counsel and arbitrator in over 100 ad hoc and institutional arbitrations, both commercial and investor-​state under BITs, with a focus on Latin America. He is co-​author of Redfern and Hunter on International Arbitration and was recently named as one of the US’s most prominent eight arbitration practitioners by Who’s Who Legal 2018. Charles N Brower has been a Judge of the Iran–​United States Claims Tribunal for thirty-​five years, has served as Judge ad hoc of the Inter-​American Court of Human Rights, and currently sits as Judge ad hoc of the International Court of Justice. He is a member of 20 Essex Street Chambers in London and has served as Distinguished Visiting Research Professor of Law at George Washington University Law School. Previously, Judge Brower served as Acting Legal Adviser to the United States Department of State, as Deputy Special Counsellor to the President of the United States, and as a partner at White & Case LLP, where he co-​founded the firm’s Washington, D.C. office. Among other honours, Judge Brower has been awarded the American Society of International Law’s Manley O. Hudson Medal (2009), the American Bar Association Section of International Law’s Lifetime Achievement Award (2013), and the Global Arbitration Review’s Lifetime Achievement Award (2015). Mark Clodfelter has more than thirty-​five years of private and public practice experience involving investor-​state, state-​to-​state, and commercial disputes before numerous international arbitration fora. He has represented a wide range of governmental and private parties before ICSID, PCA (UNCITRAL Arbitration Rules), ICC, and SCC tribunals, as well

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List of Contributors as before the UN Compensation Commission and the Iran–​US Claims Tribunal. He has also served as arbitrator in numerous cases under the major arbitration rules and ad hoc arbitrations. Previously, Mr Clodfelter was in charge of International Claims and Investment Disputes for the US Government, providing diplomatic protection of US citizens and companies abroad and representing the United States in international arbitration proceedings. He is a former White House Fellow and, as a member of the Senior Executive Service, received the Presidential Rank Award for Meritorious Service. He also taught International Commercial Arbitration at Georgetown Law Center in Washington, D.C. David Earnest is with the International Arbitration Group of Shearman & Sterling LLP in Washington, D.C. He has broad experience in investment treaty arbitration and international commercial arbitration, where he has acted as counsel and advised private clients and governments in disputes under the auspices of various arbitral institutions and rules, as well as ad  hoc arbitrations under the UNCITRAL Arbitration Rules and the English Arbitration Act. Before joining Shearman & Sterling, David was with leading international law firms in Brussels and London and has spent time on secondment to the London Court of International Arbitration as legal counsel. He is admitted in New York and Washington, D.C. as an attorney and in England and Wales as a solicitor-​advocate. Roberto Echandi is the Global Lead on Investment Policy & Promotion of the Macro Economics, Trade, and Investment Global Practice of the World Bank Group (WBG). He is also a Member of Faculty of Masters in International Economic Law and Policy (IELPO) of the University of Barcelona, non-​resident Fellow at the World Trade Institute, University of Bern, and at the Academia de Centroamerica in Costa Rica, and Contributing Expert of the James Baker III Institute for Public Policy, Rice University. He is a Member of the Editorial Board of the Journal of International Economic Law, and of the Editorial Advisory Board of the Journal of World Investment and Trade. Roberto was the Former Ambassador of Costa Rica to Belgium, Luxembourg, and the European Union. Nils Eliasson is a partner in Shearman & Sterling’s International Arbitration Group based in Hong Kong. He has acted as counsel or arbitrator in commercial and investment treaty disputes conducted under most major arbitration rules, including ICSID, UNCITRAL, ICC, LCIA, HKIAC, SIAC, and SCC. Nils’ experience includes disputes related to joint ventures, mergers and acquisitions, energy, oil and gas, infrastructure, construction, engineering, licence disputes, telecommunications, and real estate, as well as investment treaty arbitrations under various BITs and the Energy Charter Treaty. Nils is a member of the HKIAC Council and the Chairman of the HKIAC Proceedings Committee. He has written and spoken extensively on investment law and investment treaty arbitration, including the investment treaty programme of the People’s Republic of China. Nils holds a Ph.D. in law from the University of Lund. Chad Farrell is an associate in the Washington, D.C. office of White & Case LLP, where he practises international arbitration. He was an Associate Legal Officer at the International Court of Justice from 2011 to 2015. He is a 2007 graduate of the University of Virginia School of Law. Timothy (Tim) Foden is Counsel with LALIVE. His practice focuses on investor-​treaty and complex commercial arbitrations in the mining and energy sectors, with additional experience in technology licensing, commodities, and hospitality. He has represented dozens of investors against states under the Energy Charter Treaty and various bilateral investment treaties and also has extensive commercial arbitration experience, having represented, inter alia, international chemical engineering firms and global mining concerns. He has acted in proceedings under the major arbitration rules and has extensive experience in the enforcement

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List of Contributors of commercial and ICSID arbitration awards in the courts of the United States, England, and Belize. Tim acted as co-​Chair of Young ICCA (2011–​2014), deputy editor of the European International Arbitration Review (2011–​2016), and currently serves as a board member of American Qualified Lawyers in London. He speaks regularly on international arbitration matters and has been recognized by  Global Arbitration Review  and  Who’s Who Legal  as a ‘Rising Star in International Arbitration’ for 2017 and 2018. Emmanuel Gaillard is a partner at Shearman & Sterling LLP and heads the firm’s International Arbitration practice. He also is a Visiting Professor of Law at Yale Law School. Emmanuel Gaillard represents corporations, states, and state-​owned entities in commercial and investment arbitrations. He also regularly acts as arbitrator or expert. He was appointed by France to the ICSID Panel of Arbitrators. He has written extensively on all aspects of arbitration law. His publications include Fouchard Gaillard Goldman on International Commercial Arbitration, a leading treatise in the field; the first published essay on the legal theory of international arbitration, based on his course at The Hague Academy of International Law. The volume was published in French (Aspects philosophiques du droit de l’arbitrage international), English (Legal Theory of International Arbitration), and other languages; two volumes on ICSID case law (La Jurisprudence du CIRDI). He also co-​authored the UNCITRAL Secretariat Guide on the New York Convention and chairs the International Arbitration Institute (IAI). Eckhard Hellbeck is a Counsel with White & Case LLP in Washington, D.C. His practice focuses on complex international arbitration and litigation involving sovereign parties across a broad range of industry sectors. He has particular experience with investment law, issues under international law, and the enforcement of foreign judgments and arbitral awards. Before joining White & Case, Mr Hellbeck was a lawyer and diplomat with the German Foreign Service, where he participated in negotiating treaties with the then Soviet Union in the context of German unification. He also represented Germany at the United Nations in New York. Mr Hellbeck studied law at the Free University of Berlin, Germany, The Hague Academy of International Law, and American University Washington College of Law, from which he graduated with a Master of Laws in International Legal Studies and an Outstanding Graduate Award. Kaj Hobér is professor of international investment and trade law at Uppsala University and Chairman of the SCC Institute at the Stockholm Chamber of Commerce. He is an associate member of 3 Verulam Buildings, Gray’s Inn, London. Professor Hobér has more than thirty-​ five years’ experience of international arbitration as counsel and arbitrator in commercial cases, as well as in treaty cases. He has written several books and numerous articles on international arbitration and international law. Dimitrios Katsikis is an Associate in Shearman & Sterling LLP’s International Arbitration Group, based in Paris. He is a graduate of University College, London (LLB)  and the University of Oxford (BCL), where he focused on private international law, public international law, and arbitration. When at the University of Oxford,  Dimitrios  completed a thesis on Fair and Equitable Treatment as a mandate for tribunals to determine disputes ex aequo et bono, under the supervision of Dr Martins Paparinskis. Dimitrios  is qualified in New York and England and Wales and is registered as a foreign lawyer in Paris. His practice encompasses investment and commercial arbitration, as well as court litigation related to arbitration. Gabrielle Kaufmann-​Kohler is a partner in Lévy Kaufmann-​Kohler in Geneva, Professor in Geneva University, Director of the Geneva LL.M. in International Dispute Settlement (MIDS), and Co-​Director, Center for International Dispute Settlement (CIDS) (Geneva University and Graduate Institute). She teaches international arbitration and practised in

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List of Contributors over 220 international commercial and investment arbitrations, mainly as arbitrator and in particular as president. She appears on numerous arbitration panels, including ICC, ICSID, AAA, LCIA, SIAC, and CIETAC. Mrs Kaufmann-​Kohler is President-​elect of ICCA; Honorary President of the Swiss Arbitration Association (ASA); Chair of the Board of Trustees; and co-​founder of the Foundation for International Arbitration Advocacy (FIAA). She has published widely in the area of her specialization (list available at www. lk-​k.com). Milanka Kostadinova is a Senior Legal Adviser at the Front Office of the Secretary-General of the International Centre for Settlement of Investment Disputes (ICSID). She is responsible for matters relating to States’ participation in the ICSID Convention and specializes in public international law, the law of international organizations, investment treaty law and international investment arbitration. Apart from her primary responsibilities for providing advice on the institutional and legal affairs of an intergovernmental organization with 153 Member States, she administers international arbitration proceedings under the ICSID Convention and Rules. She served as Managing Editor of the ICSID Review—Foreign Investment Law Journal for six years (2003–2008) and prior to that was a Member of its Editorial Board (1997–2002). She is also past General Editor of ICSID’s collections of Investment Laws of the World and Investment Treaties (OUP). Barton Legum is a partner in Dentons’ Paris office and head of the firm’s investment treaty arbitration practice. He has over thirty years’ experience in litigating complex cases and has argued before numerous international arbitration tribunals, the International Court of Justice, and a range of trial and appeals courts in the United States. Bart is a past Chair of the American Bar Association’s Section of International Law, a Member of the Board of the Arbitration Institute of the Stockholm Chamber of Commerce, and on the ICSID roster of conciliators for investment disputes. He served as Chief of the NAFTA Claims Division in the Office of the Legal Adviser, US State Department. He is the editor of The Investment Treaty Arbitration Review  (2nd edn 2017), and founding editor of  International Litigation Strategies and Practice (1st edn 2005; 2nd edn 2014), a book published by the American Bar Association. Loretta Malintoppi is an arbitrator with 39 Essex Chambers, based in Singapore. Loretta specializes in international commercial arbitration, investment arbitration, and public international law. She sits as arbitrator in proceedings under a variety of arbitration rules and appears as counsel and advocate in state-​to-​state disputes before the International Court of Justice and in ad hoc arbitrations. She was a Member for Italy of the ICC International Court of Arbitration (2000–​2009) and Vice-​President of the ICC Court (2009–​2015). She is currently a member of the Governing Board of ICCA. Loretta is one of the co-​authors of The ICSID Convention: A Commentary published by Cambridge University Press in 2009, a member of the editorial board of The Law and Practice of International Courts and Tribunals, editor of the International Litigation in Practice Series, and a member of the editorial advisory board of the Journal of World Investment and Trade. Irmgard Marboe is Professor of International Law at the Department of European, International, and Comparative Law at the Faculty of Law of the University of Vienna. She is the author of Calculation of Compensation and Damages in International Investment Law published by Oxford University Press (1st edn 2009, 2nd edn 2017). As associate editor of the online journal Transnational Dispute Management (TDM), she edited a special issue on ‘Compensation and Damages in International Investment Arbitration’. Since 2016, she has been Co-​Editor-​in-​Chief of The Journal of Damages in International Arbitration. She is a member of various research and interest groups in the area of damages and acts as consultant

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List of Contributors in investor-​state arbitrations. She is a frequent speaker at international conferences and teaches international law at various European, US, and Australian universities. Mark McNeill is a partner in the International Arbitration practice of Shearman & Sterling and is based in London. For nearly two decades, he has acted as advocate in numerous commercial and investment treaty arbitrations, including in matters involving intellectual property, technology, nuclear construction, pharmaceuticals, mergers and acquisitions, oil and gas, taxation, mining, and insurance. Since 2014, he has lectured on International Investment Arbitration at Sciences Po Law School in Paris. He is admitted to practise in New York, is an Avocat at the Paris Bar and a Solicitor of the Supreme Court of England and Wales. Before joining Shearman & Sterling, Mark was an Attorney-​Adviser in the Office of the Legal Adviser of the US Department of State, where he represented the US Government in investment arbitrations submitted under the North American Free Trade Agreement. Andrea Menaker is a partner at White & Case, and serves as counsel in complex international arbitration cases, with a focus on investment treaty arbitration. Prior to joining White & Case, Andrea was Chief of the NAFTA Arbitration Division for the US State Department, where she was lead counsel for the United States in investor-​state arbitrations under the investment chapter of the North American Free Trade Agreement (NAFTA), and participated in the drafting of investment and dispute resolution provisions in United States’ bilateral investment treaties and investment chapters of free trade agreements. Ucheora Onwuamaegbu is an International Attorney with Arent Fox LLP, Washington, D.C. focused on international investment law. For about ten years, he was Senior Counsel at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) and, prior to ICSID, was a lawyer with the United Nations Compensation Commission in Geneva, Switzerland, having been in private law practice in the UK and in Nigeria. Jan Paulsson is a past President of the London Court of International Arbitration and the International Council for Commercial Arbitration and has served as a Vice-​President of the ICC International Court of Arbitration.  He is a founding partner of Three Crowns LLP, resident in the firm’s Washington office. He was previously based for three decades in Paris. He has acted as advocate or arbitrator in hundreds of arbitrations in all familiar venues. A graduate of Harvard College, Yale Law School (where he was an editor of the Yale Law Journal), and the University of Paris (Sorbonne), he holds the Michael Klein Distinguished Scholar Chair as professor of law at the University of Miami. He has written a number of well-​known textbooks on international arbitration. Georgios Petrochilos is a founding partner of Three Crowns LLP, based in Paris. Georgios has a broad practice covering inter-​state, investment, and commercial disputes. He has represented states, international organizations, and private parties in some 100 disputes, including the largest maritime delimitation case to date in the International Court of Justice (Peru v Chile), the ground-​breaking ‘Black Economic Empowerment’ case before ICSID (Foresti and Ors v South Africa), and some of the most critical cases in the European energy industry in the past decade. He also regularly sits as an arbitrator in a broad spectrum of cases and applicable Arbitration Rules. He has published extensively on international law and international arbitration, including the well-​known monograph Procedural Law in International Arbitration and (with Jan Paulsson) UNCITRAL Arbitration. Georgios represents a Member State at UNCITRAL since 2007; is a visiting professor at the Universities of Berne and Fribourg; and the current rapporteur of the ILA International Arbitration Committee. Petr Polášek is a partner with White & Case LLP’s International Arbitration Group. He specializes in investment treaty arbitration, international commercial arbitration, and public

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List of Contributors international law and has a successful track record of advising clients in complex international disputes concerning a variety of industry sectors. Petr was educated in the Czech Republic and the United States, has written and spoken on topics relating to international arbitration, and is a member of numerous respected professional organizations. Michele Potestà is an attorney at Lévy Kaufmann-​Kohler in Geneva, where he specializes in international commercial and investment arbitration. Over the past ten years, Michele has participated in over twenty-​five international investment and commercial arbitrations as counsel, arbitrator, and secretary of the tribunal, under all major arbitral rules and in different jurisdictions. Michele’s areas of expertise include energy and natural resources (oil, gas, mining, and solar energy), pharmaceuticals, telecommunications, international sales, banking and finance, services, real estate, and construction, among others. Michele has also advised sovereign states on their investment treaty programmes. He is a senior researcher at the Geneva Center for International Dispute Settlement (CIDS) where he co-​leads a research project on the reform of ISDS, in cooperation with UNCITRAL. Prior to joining Lévy Kaufmann-​Kohler, he was a lecturer at the Geneva Master in International Dispute Settlement (MIDS), where he taught investment and commercial arbitration. August Reinisch has been a professor of international and European law at the University of Vienna since 1998. He currently serves as Head of the Section of International Law and International Relations and as Director of the LL.M. Programme in International Legal Studies. He is a Member of the International Law Commission, a membre associé of the Institut de droit international, President of the Austrian Branch of the ILA and President of the German Society of International Law. August Reinisch has served as arbitrator in investment cases, mostly under ICSID and UNCITRAL Rules. Abby Cohen Smutny is a Partner of White & Case LLP. She is recognized as one of the world’s leading practitioners of international arbitration and has represented clients in arbitrations before all major arbitral forums, including ICSID, the ICC, the Vienna International Arbitral Centre, the LCIA, and the ICDR, as well as in ad hoc UNCITRAL Rules arbitrations. She handles both commercial contract disputes as well as disputes arising under investment treaties. She is Chair of the Institute of Transnational Arbitration, President of LCIA’s North American User’s Council, a member of the International Advisory Committee of the AAA, and a member of the Advisory Board of the Journal of International Arbitration. Previously, she served as Vice-​President of the American Society of International Law and a member of its Executive Committee and Executive Council, Vice-​Chair of the Arbitration Committee of the IBA and Chair of its Investment Treaty Sub-​Committee, and Chair of the International Law Section of the DC Bar. She also formerly was a co-​Editor-​in-​Chief of the World Arbitration and Mediation Review and member of the Editorial Board of the Yearbook on International Investment Law and Policy. Diana Tsutieva is with the International Litigation and Arbitration Department of Foley Hoag in Washington, D.C. She was named a ‘Future Leader’ in international arbitration by Who’s Who Legal 2018. Ms Tsutieva focuses her practice on international investment, commercial arbitration, and public international law matters. She is dual-​qualified in common law and civil law, admitted to practise in several jurisdictions in the United States and in Paris, France. She has represented governmental and private parties in arbitration proceedings before ICSID, PCA (the UNCITRAL Rules), and ICC tribunals and other institutions. She has counselled clients in matters involving regulatory actions in the oil and gas industry, mining, financial services and healthcare; environmental claims; and issues of corruption and bribery. Diana served as a judicial clerk to the Honorable Judith M Barzilay at the US Court of International Trade in New York.

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List of Contributors Baiju Vasani is a partner in Jones Day’s London and Washington, D.C. offices. He serves as counsel and arbitrator across a range of sectors and industries under all major arbitral rules involving treaties (BITs), the Energy Charter Treaty, NAFTA, DR–​CAFTA, and public international law. He also advises states on the negotiation and drafting of treaties. He is Co-​Head of the Legal Task Force for the creation of an international arbitration centre for the Horn of Africa. Baiju is a Senior Fellow of SOAS University of London, a Fellow of the Chartered Institute of Arbitrators, and on the arbitrator panels of various institutions worldwide, including on the ICSID Panel of Arbitrators. He has regularly been ranked by Best Lawyers in America, Chambers USA, Chambers UK, Who’s Who of International Commercial Arbitration, Guide to the World’s Experts in Commercial Arbitration, and Reuters, Super Lawyers, and in 2011 was named in Global Arbitration Review’s list of leading arbitration practitioners worldwide under the age of 45. Sarah Vasani leads Addleshaw Goddard’s Investor State Dispute Resolution practice in London. She has appeared as counsel for investors from more than twenty countries on five continents, and before all key arbitral institutions. Sarah is qualified in England and Wales, the District of Columbia, and Texas, and is a Solicitor-​Advocate of the Higher Courts of England and Wales. She has vast experience in energy, oil and gas, mining, and other large-​ scale project disputes. Who’s Who Legal and Global Arbitration Review recognized Sarah as a ‘Future Leader in International Arbitration’, noting she is ‘a persuasive and effective counsel who possesses particularly commendable expertise in energy’ and ‘ranks prominently for her energy, enthusiasm and strong background in treaty claims’. Sarah is a visiting Professor at Canterbury Christ Church University, where she supervises doctoral theses in investment arbitration. She has spoken and published extensively on topics relating to international arbitration and cross-​border issues. Alex Wilbraham is Counsel in the International Arbitration Group at Freshfields Bruckhaus Deringer US LLP, Washington, D.C. An English solicitor by training, he acts as counsel and arbitrator in both commercial and investor-​state arbitrations under BITs. Most of his work involves Latin America with a particular focus on large commercial disputes involving Brazil. He was named one of the top arbitration practitioners by Who’s Who Legal 2018. Alvin Yap is a senior associate in Eversheds Harry Elias LLP’s Singapore office, where he regularly acts as counsel in state-​to-​state and investor-​state disputes. He has represented states in proceedings before the ICJ and the Iran–​US Claims Tribunal, and arbitrations administered by ICSID and PCA. Alvin has also acted as counsel and tribunal secretary in commercial arbitrations administered by SIAC, ICC, and FOSFA. He is an adjunct lecturer at the National University of Singapore, where he teaches the course ‘The International Litigation and Procedures of State Disputes’. He has published articles and contributed chapters to books on commercial and investment arbitration. Alvin graduated from the National University of Singapore in 2012. After graduation, he joined a NGO monitoring trials at the ECCC (Khmer Rouge Tribunal) in Cambodia. Hafsa Zayyan is an associate in Quinn Emanuel’s London office. Her practice focuses on international arbitration and litigation. She has acted in proceedings under the ICSID, ICC, SIAC, UNCITRAL, LCIA, and GCC Commercial Arbitration Centre arbitration rules, representing clients operating in Europe, Africa, Asia, and the Middle East. Hafsa has had significant exposure to investor-​state disputes and other public international law matters.

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Part I INVESTMENT TREATIES AND THE SETTLEMENT OF INVESTMENT DISPUTES: THE FRAMEWORK

1 BILATERAL INVESTMENT TREATIES AND INVESTMENT PROVISIONS IN PREFERENTIAL TRADE AGREEMENTS Recent Developments in Investment Rule-​making Roberto Echandi*

I. Introduction  II. BITs and Investment Provisions in PTAs: The Gradual Shift from Investment Protection to the Promotion of Liberalization of Investment Flows 

A. The Investment Protection Rationale of BITs 

B. Investment Protection and Liberalization in ‘New Generation’ BITs and Investment Chapters of RTAs  1.23 C. Impact of Investor-​state Dispute Settlement Experience on Investment Rule-​making: A New Generation of IIAs  1.28 III. Conclusion  1.120

1.01

1.12 1.12

I. Introduction Given that no widely adhered to multilateral legal framework on investment exists, a signifi- 1.01 cant part of the legal disciplines to date that address the relationship between host states and international investors has been developed at a bilateral and regional level, that is, through bilateral investment treaties (BITs) and investment chapters included in preferential trade agreements (PTAs), collectively referred to as international investment agreements (IIAs). Agreed rules establishing minimum guarantees applicable to the treatment of foreign invest- 1.02 ment have existed for more than two centuries.1 However, BITs are the first international agreements to focus on the treatment of foreign investment. BITs are negotiated between two states to protect and promote investments by investors of one party in the territory of the other party. These treaties date back to 1959 and, until recently, had not changed markedly. Traditionally, they have had a relatively uniform content, with the exception of provisions on investor-​state dispute resolution introduced in the 1960s. The number of BITs negotiated worldwide increased dramatically in the mid-​1990s. Although the number

*  The author is grateful to Daniela Gomez and Yago Aranda for their collaboration in the preparation of this chapter. 1  The Treaty of Amity and Commerce between the United States and France, signed in 1788, contained provisions in effect addressing treatment of foreign investment, i.e. MFN treatment regarding commerce, navigation, duties, and taxes and the right of U.S. nationals to own and dispose of property in France without certain duties and restrictions that might otherwise apply.

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements negotiated yearly has declined over the last decade, more than 2,926 had been negotiated by the end of 2017.2 1.03 A  second group of IIAs consists of investment chapters included in PTAs. Over the last

decade, the number of PTAs worldwide has grown steadily, reaching more than 345 by the end of 2017.3 PTAs are usually negotiated among countries of the same region to facilitate the cross-​border movement of goods, services, capital, or people. PTAs vary enormously and range from agreements that provide only for economic cooperation to agreements that create a common market. Such agreements may be bilateral, plurilateral, regional, interregional or more broadly multilateral. They may involve states at the same or distinct levels of economic development. Examples of recent or on-​going negotiations are Trans-​Pacific Partnership (TPP),4 the Canada–​EU Comprehensive Economic and Trade Agreement (CETA),5 the Transatlantic Trade and Investment Partnership (TTIP),6 the Regional Comprehensive Economic Partnership (RCEP),7 and the Pacific Agreement on Closer Economic Relations (PACER) Plus.8 Together, they involve close to ninety countries worldwide.

1.04 This chapter is not intended to describe the contents of the obligations included in BITs

and investment chapters of PTAs, which has been undertaken elsewhere in detail.9 Rather, it focuses on the dynamism of investment rule-​making over the last two decades in the context of BITs and investment chapters in RTAs. Contrary to other areas of public international law, over the last twenty years, the negotiation of international rules and disciplines in investment has been responsive to changing international economic and political context. Two trends are evident in this regard.

1.05 First, investment rule-​making has responded to the deep transformation and ‘globalization’ of

the international economy. The old paradigm where investment was visualized as a substitute for trade has long been overcome. Today, the positive interaction between trade and investment is not only evident and well documented, but it has become evident that both trade and investment are complementary strategies at the hand of international enterprises to serve an increasingly competitive and globalized international market. With the dramatic growth in international trade in services and the disaggregation of production on a global scale, governments in both developed and developing countries have become increasingly aware of the

2  See United Nations Conference on Trade and Development (UNCTAD), International Investment Policy Hub (2017), http://​investmentpolicyhub.unctad.org/​IIA . 3  Id. 4 Trans-​ Pacific Partnership (TPP), currently being renegotiated after the United States’ withdrawal as Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP) between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. 5  Canada–​ European Union Comprehensive Economic and Trade Agreement (CETA), http://​ec.europa. eu/​trade/​policy/​in-​focus/​ceta/​ceta-​chapter-​by-​chapter/​ (last visited Dec. 12, 2017). 6  Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States, currently under negotiation, https://​ustr.gov/​ttip (last visited Dec. 12, 2017). 7  Regional Comprehensive Economic Partnership (RCEP), FTA under negotiation between the states of the Association of Southeast Asian Nations (ASEAN) and the six states with which ASEAN has existing FTAs (Australia, China, India, Japan, South Korea, and New Zealand), http://​asean.org/​?static_​post=rcep-​regional-​ comprehensive-​economic-​partnership (last visited Dec. 12, 2017). 8  Pacific Agreement on Closer Economic Relations (PACER) Plus is an FTA signed on June 14, 2017 by Australia, New Zealand, and eight Pacific island countries—​Cook Islands, Kiribati, Nauru, Niue, Samoa, Solomon Islands, Tonga, and Tuvalu. Vanuatu signed in Apia in Samoa on September 7, 2017, http://​dfat. gov.au/​trade/​agreements/​pacer/​Pages/​documents.aspx (last visited Dec. 12, 2017). 9  See, inter alia, United Nations Conference on Trade and Development (UNCTAD), Bilateral Investment Treaties 1995–​2006: Trends in Investment Rulemaking (2007); UNCTAD, International Investment Arrangements: Trends and Emerging Issues (2006); R. Dolzer & M. Stevens, Bilateral Investment Treaties (1995).

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I. Introduction key role that foreign investment plays in positioning their national economies in an interdependent world economy. Investment rule-​making over the last decade has been responsive to this evolving international context, which explains the main distinctions between BITs and investment chapters in PTAs. Despite minor specificities, the main distinction between most BITs and investment chap- 1.06 ters in PTAs is the breadth of their respective underlying rationales. While all BITs contain obligations aimed at providing investment protection for established investments, the overwhelming majority do not provide guarantees for the establishment of new investments. The logic behind the majority of investment chapters in PTAs is to provide not only protection to existing investment, but also guarantees regarding the conditions under which foreign investment may be established in the host country. Such evolution in the rationale of IIAs is, to a great extent, a side effect of the evolution of the historical context in which international investment flows have taken place over the last fifty years. The other important factor shaping investment rule-​making over the last decade has been 1.07 the tremendous increase in the number of investor-​state dispute settlement (ISDS) cases. Provisions concerning investor-​state dispute settlement have been included in BITs since the 1960s. However, these provisions were rarely used to institute arbitral proceedings until the last two decades. From 1987, when the first investor-​state dispute based on a BIT was recorded under the arbitral proceedings of the International Centre for Settlement of Investment Dispute (ICSID) of the World Bank, until April 1998, only fourteen BIT-​related cases had been brought before ICSID, and only two awards and two other settlements were issued.10 However, since the late 1990s the cumulative number of treaty-​based cases has risen to at least 696 as of 1 January 2016, with 62 per cent of all known cases filed under the ICSID Convention or ICSID Additional Facility Rules and the rest under other arbitration rules and fora, for example the United Nations Commission on International Trade Law (UNCITRAL) Rules, the Stockholm Chamber of Commerce (SCC), the International Chamber of Commerce, and others.11 A creative dynamic has been generated between investment negotiation and adjudication, as 1.08 the latter, in the context of actual disputes, interprets and tests the breadth of the concepts and obligations assumed by contracting parties to IIAs. Over the past two decades, many countries have concluded a ‘new generation’ of RTAs that liberalize trade in goods and services, while also containing investment protection provisions similar to those that have traditionally appeared in BITs. This new generation of RTAs, like the ‘new generation’ of BITs, has generated important innovations in IIA practice. Although not yet the majority of existing IIAs, these new generation agreements represent the 1.09 most significant innovation in investment rule-​making over the last decades. They are mostly new BIT models and investment chapters negotiated in the context of RTAs by states party to the North-​American Free Trade Agreement (NAFTA) and other countries in the Americas, the Asia-​Pacific Rim, and North Africa. This chapter asserts that investment disputes and, in particular, those that have arisen in 1.10 the context of the implementation of the NAFTA, have influenced the refinement of the

10 Source:  ICSID webpage, https://​icsid.worldbank.org/​en/​Pages/​cases/​ConcludedCases.aspx?status=c (last visited Nov. 1, 2017). 11  United Nations Conference on Trade and Development (UNCTAD), Investor-​State Dispute Settlement:  Review of Developments in 2015, IIA Issues Note No. 2, International Investment Agreements (United Nations, 2016).

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements provisions of this new generation of IIAs, as well as the inclusion of a series of procedural and substantive innovations. 1.11 The chapter addresses the main distinction between BITs and investment chapters in PTAs,

focusing on the evolution of their respective rationales. It looks at the main features of the new generation of IIAs and explains how such features respond to challenges derived from the interpretation of substantive and procedural provisions included in previous agreements. The discussion is organized under two themes: (i) moving from the original exclusive focus on investment protection towards also promoting liberalization of investment flows; and (ii) the impact of ISDS on investment rule-​making. The second addresses five issues: greater precision in drafting definitions in respect to the coverage of the treaty; greater precision in specifying the normative content of investment treaty obligations; balancing regulatory autonomy and investment protection; fostering transparency in investment rule-​making; and developments in ISDS.

II.  BITs and Investment Provisions in PTAs: The Gradual Shift from Investment Protection to the Promotion of Liberalization of Investment Flows A. The Investment Protection Rationale of BITs 1.12 From a legal perspective, the structure and content of the BITs tend to be strikingly similar

worldwide. Core elements found in all such treaties include provisions dealing with the scope of application, admission of investment, fair and equitable treatment, national treatment and most favoured nation treatment (MFN), expropriation and compensation, transfers of payments, and dispute settlement, both between contracting parties and between a contracting party and an investor.12

1.13 One of the key distinctive features of traditional BITs is that they only protect investment

which has been established and admitted in the territory of the host country in accordance with the latter’s domestic legislation. The main implication of this ‘admission clause’ is that it limits the scope of application of the agreement to the established investment. Traditional BITs do not grant any protection to the investor in what is known in the investment jargon as protection in the ‘pre-​establishment’ phase.

1.14 This allows the host country to apply any screening mechanism for foreign investment it

may have in place and, therefore, to determine freely the conditions under which foreign investment, if any, would be allowed. Further, the admission clause allows the host country to maintain existing discriminatory legislation which may affect the entry of foreign investment into any sphere of economic activity. Domestic legislation that allows for the existence of state monopolies or reserves certain economic activities to national investors or even to foreign investors of a particular nationality is part of the legal context in which foreign investment is admitted.

1.15 Clearly, traditional BITs have not been conceived as instruments to provide foreign invest-

ment with the right of establishment in the host countries. They focus on providing a set of guarantees to protect the property of foreign investors only in those economic activities where they have been permitted to invest.

  For a detailed analytical description of each of these provisions, see references cited in note 9 supra.

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II.  BITs and Investment Provisions in PTAs The nature and objectives of BITs can be better understood by looking at the historical con- 1.16 text from which they emerged. The first BIT was signed between the Federal Republic of Germany and Pakistan in 1959.13 During the 1960s and 1970s, other European countries followed the same path, and an important number of BITs with developing countries were also concluded. From a political economy perspective, two fundamental systemic factors explain the emer- 1.17 gence of BITs during this period. First, with the decolonization movement in full sway, many former European colonies became newly independent states. Foreign entrepreneurs with investments in these countries were confronted not only with the loss of the legal protection granted by existing legislation and administration of the former colonial power but also by the rising trend of economic nationalism promoted by the new governing élites. Governments in many newly independent states were hostile to what they considered long-​ standing exploitation of their economies by foreign interests and consequently geared their political and economic policies towards asserting national sovereignty, particularly over their natural resources. In this context, capital-​exporting countries had a clear incentive to negotiate investment regimes which would set a minimum standard of protection for their nationals’ investments abroad. The second systemic factor that explains the emergence and character of BITs is the pattern 1.18 of production and international division of labour that prevailed in the world during the 1950s and 1960s. During this period, foreign direct investment (FDI) in developing countries tended to focus either on the extraction and processing of raw materials, in the mining and agricultural sectors for example, or on manufacturing industries promoted by import-​ substitution industrialization (ISI) policies. These two factors explain why traditional BITs were originally conceived as instruments to 1.19 protect the private property that foreign investors owned abroad. In this historical juncture, economic nationalism was rife and the risk of being subject to expropriation or nationalization appeared to be always present. This explanation is further supported by the fact that the overwhelming majority of the approximately 400 BITs concluded worldwide by the 1980s were negotiated between a developed capital exporting country and a developing capital importing country,14 usually between a European country and a country from the African or Asian region.15 The historical context in which the BITs were originally conceived has changed.16 We are 1.20 living in a world in which patterns of international production of manufactures as well as

 UNCTAD, Bilateral Investment Treaties in the Mid-​1990s (1998).   The explosion in South–​South negotiation of BITs started in the late 1980s and prevailed throughout the 1990s. To date, BITs have not tended to be negotiated between two developed countries, although this trend is changing and PTAs including investment chapters are now negotiated between developed countries. 15  For many reasons, most Latin American countries refrained from negotiating BITs until the 1980s. One reason was the Calvo Doctrine, according to which a foreign investor was required to rely solely on local remedies to solve any potential investment-​related dispute with the host state. 16 An analysis of the BITs negotiated worldwide during the last two decades shows three prevailing trends: first, the total number of BITs negotiated has proliferated significantly. Since the end of the 1980s and up to 2014, more than 2,800 additional BITs were negotiated. Secondly, during this period there was a deviation from the North–​South pattern which had characterized the negotiations of these agreements in the past. After the 1980s, an increasing number of BITs began to be negotiated between developing countries as well as by economies in transition. Thirdly, it was during this period that most of the countries of the Western hemisphere engaged in negotiations of BITs. By mid-​1999, the total number of BITs concluded by the countries of the Western hemisphere was approximately 58, 55 of which were in fact negotiated after 1990. See UNCTAD, supra notes 9 & 11. 13 14

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements international trade in services, most of which need commercial presence to be effectively provided, have become key not only to better standards of living, but also to providing the domestic economy of both developed and developing countries with the competitive edge required to increase and diversify their exports to the world market. The role of global value chains (GVCs) has been extremely relevant over the last decade but new consumption trends, more and easier access to market information, and a much tougher international competitive environment have also affected the way countries negotiate investment treaties. 1.21 Within this context, greater market access through market presence, and not just protection for

private property, is gradually becoming part of the main interest of international investors when seeking to benefit from an IIA. International investment rules have increasingly been adopted as part of bilateral and PTAs that address and seek to facilitate trade and investment transactions. IIAs are increasingly being formulated as part of agreements that encompass a broader set of issues including, notably, trade in goods and services and other factors of production. These agreements, in addition to a variable range of trade liberalization and promotion provisions, contain commitments to liberalize, protect, and/​or promote investment flows between the parties. As explained above, the number of such agreements, now reaching more than 345 PTAs, has been growing steadily over the last fifteen years; more than 85 per cent were concluded since the mid-​1990s. Further, BITs negotiated by the United States and Canada have traditionally applied not only to established investment, but also in the pre-​establishment phase.

1.22 As explained, this new and continuously evolving international economic context has led to

the negotiation of the recent wave of mega-​regional agreements. Investment is now more connected than ever before to trade in both goods and services and that is why these agreements are no longer only about protection, but also about promotion and connection (through the aforementioned GVCs).

B. Investment Protection and Liberalization in ‘New Generation’ BITs and Investment Chapters of RTAs 1.23 New generation IIAs, both BITs and investment chapters of PTAs, provide not only for

investment protection but also gradual liberalization. That is the case of IIAs concluded by countries such as Canada, Chile, Japan, Mexico, Peru, Colombia, Central American countries, Singapore, Morocco, Australia, and the United States. These IIAs are more comprehensive, more detailed, and, for the most part, more rigorous than any agreement previously concluded. While they address many of the same topics, they also deal with additional issues or modify the approach taken in the NAFTA on the basis of accumulated experience. This trend has been followed by the most recent wave of mega-​regional agreements.

1.24 New generation IIAs grant covered foreign investors national and most favoured nation treat-

ment with respect to the right of establishment in the host state. This is generally qualified by a provision allowing the host state to specify economic sectors or activities in which the right does not apply, the so-​called ‘negative list’ approach. This approach was pioneered by the United States in its BITs but, in the late 1990s and early 2000s, started to be employed by Canada and Japan in their BITs and by various countries of Latin America and the Asia-​ Pacific region in their RTAs. European countries adopted this approach for the first time in the CETA and the PTA between the European Union and Vietnam. These treaties also follow a negative list approach and include a series of reservations and exceptions and specifying articles of the PTA investment chapter that do not apply to sectors, subsectors, or activities listed in one of its Annexes.

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II.  BITs and Investment Provisions in PTAs As more agreements using this approach started to be concluded in the 2000s, the annexes 1.25 became somewhat more complex. One annex includes a list of existing laws and regulations that are inconsistent with one or several of the obligations in respect of which contracting parties may take reservations. The effect of an annex of non-​conforming measures is to lock in the level of conformity existing between the domestic legislation of the contracting parties and the obligations of the IIA at the time of conclusion of the agreement. Once the IIA enters into force, the parties may amend a non-​conforming measure included in this annex only if the amendment does not decrease the conformity of the measure with the obligation concerned. Article 6 of the Japan–​Vietnam BIT illustrates this approach,17 as does Article 9.12 of the recently negotiated TPP, which treats the subject in substantially more detail.18 Most new generation IIAs also have a second kind of annex, a list of economic activities 1.26 or sectors where the contracting parties may maintain or adopt measures inconsistent with one or several of the obligations of the IIA. In the areas or sectors included in this annex, contracting parties do not enter into binding commitments but reserve their right to adopt new non-​conforming measures, which may have not existed at the time of negotiations. This kind of annex is often known as an annex of ‘future measures’. Article 10.9 of the Investment Chapter of the Chile–​South Korea FTA illustrates this approach,19 as does Article 8.15 (Reservations and Exceptions) of the CETA.20

  Japan–​Vietnam BIT, entered into force on December 19, 2004, art. 6:

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1. Notwithstanding the provisions of Article 2 or 4, each Contracting Party may maintain any exceptional measure, which exists on the date on which this Agreement comes into force, in the sectors or with respect to the matters specified in Annex II to this Agreement. 2. Each Contracting Party shall, on the date on which this Agreement comes into force, notify the other Contracting Party of all existing exceptional measures in the sectors or with respect to the matters specified in Annex II. Such notification shall include information on the following elements of each exceptional measure: (a) sector and sub-​sector or matter; (b) obligation or article in respect of the exceptional measure; (c) legal source of the exceptional measure; (d) succinct description of the exceptional measure; and (e) purpose of the exceptional measure. 3. Each Contracting Party shall endeavour to progressively reduce or eliminate the exceptional measures notified pursuant to paragraph 2 above. 4. Neither Contracting Party shall, after the entry into force of this Agreement, adopt any new exceptional measure in the sectors or with respect to the matters specified in Annex II.  TPP, supra note 4 art. 9.12: Non-​Conforming Measures, provides, inter alia: 1. Article 9.4 (National Treatment), Article 9.5 (Most-​Favored-​Nation Treatment), Article 9.10 (Performance Requirements) and Article 9.11 (Senior Management and Boards of Directors) shall not apply to:

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(a) any existing non-​conforming measure that is maintained by a Party at: (i) the central level of government, as set out by that Party in its Schedule to Annex I; (ii) a regional level of government, as set out by that Party in its Schedule to Annex I; or (iii) a local level of government; (b) the continuation or prompt renewal of any non-​conforming measure referred to in subparagraph (a); or (c) an amendment to any non-​conforming measure referred to in subparagraph (a), to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Article 9.4 (National Treatment), Article 9.5 (Most-​Favored-​Nation Treatment), Article 9.10 (Performance Requirements) or Article 9.11 (Senior Management and Boards of Directors).   Chile–​South Korea FTA art. 10.9: Reservations and Exceptions 2. Articles 10.3 [national treatment], 10.7 [Performance Requirements] and 10.8 [Senior Management and Boards of Directors] shall not apply to any measure that a Party adopts or maintains with respect to sectors, subsectors or activities, as set out in its Schedule to Annex II . . . 20 CETA, supra note 5. 19

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements 1.27 The use of the negative list approach combined with the increased sophistication of the an-

nexes evidences that signatories of new generation IIAs had not suffered from any regulatory ‘chilling effect’ from the increase in investment disputes over the last decades. Further, governments negotiating new generation IIAs and the new wave of mega-​regional agreements have not responded by ignoring the importance of promoting and protecting international investment flows. The negative list approach tends to have a greater liberalizing effect than other existing approaches.

C. Impact of Investor-​state Dispute Settlement Experience on Investment Rule-​making: A New Generation of IIAs 1.28 The significant increase in the number of ISDS claims over the last two decades has clearly

had an impact on the process of investment rule-​making. ISDS practice has led numerous countries to realize that the specific wording of IIA provisions does matter. Thus, it is no coincidence that several countries recently revised their model BITs as well as investment chapters in PTAs and updated their wording, content, and structure to incorporate the lessons learned from investment-​related litigation.

1.29 In the 1990s, a new generation of IIAs gradually emerged. This ‘new generation’ of IIAs fell

mainly into two groups: The first group consists of PTAs containing a chapter on investment. Originally influenced by the NAFTA, such treaties have been concluded mainly by the United States with an increasing number of countries such as Chile, Singapore, the five Central American countries and the Dominican Republic, Colombia, Peru, South Korea, Morocco, and Australia. A second group of IIAs comprises BITs incorporating important innovations, and which are exemplified by the new model BITs of the United States and Canada and, to a lesser degree, those of Mexico.

1.30 Over the last couple of years, mega-​regional agreements, which have investment chapters,

are a key priority on the global trade and investment agenda and have increasingly attracted public attention. The TPP and CETA negotiations21 renewed attention to the potential for treaty parties to frame the substantive obligations in new investment treaties in a manner that is more supportive of regulatory autonomy than earlier treaties.

1.31 The normative evolution in these IIAs has five main features. 1.32 First, some recent IIAs have deviated from the traditional open-​ended, asset-​based definition

of investment. They have attempted to strike a balance between maintaining a comprehensive definition of investment and excluding assets the parties do not intend to be covered investments.

1.33 Secondly, the wording of various substantive treaty obligations has been revised. Learning

from the technical intricacies faced in the implementation of the NAFTA’s Chapter 11 and other agreements, new IIAs clarify the meaning of provisions dealing with absolute standards of protection, in particular, the international minimum standard of treatment in accordance with international law and indirect expropriation.

1.34 Thirdly, these IIAs address a broader scope of issues—​not only specific economic aspects

like investment in financial services, but also other kinds of issues where more room for host country regulation is sought. They include specific language aimed at clarifying that the investment promotion and liberalization objectives of IIAs must not be pursued at the

21 TPP, supra note 4; CETA, supra note 5. Substantial portions of the CETA entered into force provisionally on September 21, 2017.

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II.  BITs and Investment Provisions in PTAs expense of these other key public policy goals such as protection of health, safety, the environment, and the promotion of internationally recognized labour rights. Fourthly, recent IIAs include transparency provisions, which represent an important quali- 1.35 tative innovation. From an earlier conception of transparency as an obligation to exchange information between states, these IIAs tend to establish transparency also as an obligation with respect to the investor. Further, transparency obligations are no longer exclusively geared towards fostering exchange of information, but also to transparency in the domestic process of rule-​making, aiming to enable interested investors to participate. Fifthly, new IIAs contain significant innovations regarding ISDS procedures. Greater trans- 1.36 parency in arbitral proceedings, including open hearings, publication of related legal documents, and the possibility for representatives of civil society to submit ‘amicus curiae briefs to arbitral tribunals is foreseen. In addition, other very detailed provisions on ISDS are included to provide for a more legally oriented, predictable, and orderly conduct of the different stages of the ISDS process. These five kinds of innovations have something in common. They aim to provide more 1.37 certainty regarding the scope and extent of the IIA obligations and a more transparent and predictable ISDS process. Each of these trends is further explained in the following section.

1. Greater precision in the scope of the definition of investment For over a decade from the mid-​1990s, one aspect that generated concern in some countries 1.38 was the interpretation by some arbitral tribunals of the concept of ‘investment’ under the applicable IIA. It had been considered that some of these interpretations were too broad, and went beyond what the contracting parties conceived as ‘investment’ when negotiating the IIA. For instance, in the case of Pope & Talbot v Canada,22 the tribunal found that a market share through trade could be regarded as part of the assets of an investment; and in S.D. Myers v Canada,23 the arbitral tribunal held that the establishment of a sales office and commitment of marketing time formed a sufficient investment. Investments can take many forms. This explains why most IIAs use the traditional broad 1.39 asset-​based definition of investment. However, the ISDS experience has shown the risks of having an extremely broad and unqualified definition of investment. One approach to avoiding an over-​reaching definition of investment, which, however, has 1.40 not been frequently used in recent negotiations, is called a ‘closed-​list’ definition. This approach consists in an ample but finite list of tangible and intangible assets. Originally envisaged as an ‘enterprise-​based’ definition used in the context of the US-​Canada Free Trade Agreement (FTA), this approach evolved towards the definition used in Article 1139 of the NAFTA. Subsequently, several APEC member countries have frequently used the ‘closed-​list’ approach in the definition of investment in their IIAs. Article 96 of the Japan–​Mexico FTA illustrates this approach. From the mid-​1990s onwards, the ‘closed-​list’ definition of investment was used in the con- 1.41 text of some BIT negotiations. In 2004, Canada abandoned the asset-​based definition of ‘investment’ in its FIPAs and opted for a relatively detailed ‘closed-​list’ definition of ‘investment’’. In addition to being finite, the list contained a series of specific clarifications to avoid applying the agreement to certain kinds of assets that otherwise would fall under

22  Pope & Talbot, Inc. v. Government of Canada, UNCITRAL, Interim Award on Merits (June 26, 2000); Award on Merits (Apr. 10, 2001); Award on Damages (May 31, 2002); Award on Costs (Nov. 26, 2002). 23  S.D. Myers, Inc. v. Canada, UNCITRAL, First Partial Award (Nov. 13, 2000).

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements the investment definition. However, Canada replaced the ‘closed list’ approach in its CETA negotiations with the European Union. 1.42 As the Canadian experience evidenced, the difficulty with the ‘closed list’ approach was not

how ample the definition of investment should be. Countries still prefer a comprehensive definition of investment in their IIAs, but they are similarly eager to include clarifications and additional language to make the definition of investment more precise.

1.43 Another approach used to make the definition of investment more accurate was to qualify

an otherwise very broad definition. Beginning in the early 2000s, numerous IIAs incorporated a definition of ‘investment’ in economic terms, that is, they cover, in principle, every asset that an investor owns and controls, but add the qualification that such assets must have the ‘characteristics of an investment’. For this purpose, they refer to criteria developed in ICSID practice, such as ‘the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk’. This approach is complemented by explicit exclusions of several kinds of assets, which are not to fall within the category of covered investments under the agreement. Most of the investment chapters included in PTAs negotiated by the United States since the early 2000s, as well as the TPP, follow this approach, as does Article 8.1 of the CETA negotiated between Canada and the European Union.24

2. Clarification of the meaning of several key obligations 1.44 A second trend in investment rule-​making derived from the ISDS experience over the last

decades relates to the revision of the wording of various substantive IIA obligations. New BITs and investment chapters in RTAs negotiated with various countries by Canada, the United States, the EU, and the Pacific countries have tended to clarify the meaning of several substantive provisions, in particular, those dealing with absolute standards of protection, such as the international minimum standard of treatment and expropriation.

(a)  International minimum standard of treatment

1.45 A  new generation of BITs25 and PTAs, such as the TPP and the CETA, tends to include

a provision that explicitly clarifies that the obligation undertaken by the contracting parties is to accord covered investments treatment in accordance with customary international law. According to these IIAs, this includes the notions of fair and equitable treatment and full protection and security. These standards are also explicitly defined in the text of these agreements.

1.46 It is evident that the negotiators of these agreements have taken into account the issues discussed

in NAFTA Chapter 11 arbitrations. An example is Article 11.5 of the US–​Australia FTA: Article 11.5: Minimum Standard of Treatment

1. Each Party shall accord to covered investments treatment in accordance with the customary international law minimum standard of treatment of aliens, including fair and equitable treatment and full protection and security. 2. For greater certainty, the concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by that standard, and do not create additional substantive rights. The obligation in paragraph 1 to provide:

  See CETA, supra note 5 , art. 8.1.   See, e.g., art. 12(1) of the New Zealand–​ Australia Closer Economic Relations Trade Agreement Investment Protocol ((Jan. 3, 2013); art. 132(2) of the China–​Peru FTA; and art. 6(2) of the ASEAN–​ Australia–​New Zealand FTA. 24 25

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II.  BITs and Investment Provisions in PTAs (a) ‘fair and equitable treatment’ includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world; and (b) ‘full protection and security’ requires each Party to provide the level of police protection required under customary international law. 3. A determination that there has been a breach of another provision of this Agreement, or of a separate international agreement, does not establish that there has been a breach of this Article.

This provision is complemented by an Annex that clarifies the understanding of the contracting 1.47 parties regarding the concept of ‘customary international law’: The Parties confirm their shared understanding that ‘customary international law’ generally and as specifically referenced in Article 11.5 and Annex 11.B results from a general and consistent practice of States that they follow from a sense of legal obligation. With regard to Article 11.5, the customary international law minimum standard of treatment of aliens refers to all customary international law principles that protect the economic rights and interests of aliens.26

Such language seems to be partly a result of the experience with Article 1105 of the NAFTA.27 1.48 The fair and equitable treatment clause in Chapter 11 of the NAFTA and in some BIT disputes could be broad enough to apply to virtually any adverse circumstance involving an investment, making the fair and equitable treatment provision among those most frequently invoked and most often successfully argued standard of investment protection.28 The inclusion of language clarifying the meaning of customary international law provides 1.49 important guidance as to how to interpret the fair and equitable treatment standard properly. Some recent arbitration panels have found that the content of the fair and equitable treatment standard no longer requires bad faith or ‘outrageous’ behaviour on behalf of the host state, which had the effect of equating the minimum standard under customary international law with the plain meaning approach to the text. However, it is not self-​evident that customary international law has evolved to such a degree. The clarification in new generation IIAs that the minimum standard of treatment comprises 1.50 two different concepts, that is, the fair and equitable standard and the standard of full protection and security, is useful to counterbalance some recent arbitral decisions that merged the two standards into one. For instance, in Occidental Exploration and Production Company v Ecuador, the standard was found to be breached despite the non-​existence of any physical violence or damage.29 The CETA fair and equitable treatment clause takes a novel approach, framing states’ obligations 1.51 as a list of proscribed behaviours. While specifying the types of conduct that would violate fair and equitable treatment and the threshold of gravity that would, in some circumstances, establish a breach, both clauses provide a mechanism enabling the parties to adopt further elements of fair and equitable treatment. In an attempt to provide more clarity in relation to the threshold

  US–​Australia Free Trade Agreement signed on May 18, 2004, Annex 11-​A.   Article 1105(1) of NAFTA (1994): ‘Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security’. 28 UNCTAD, Fair and Equitable Treatment: A Sequel 1 (2012). See also K. Yannaca-​Small, Fair and Equitable Treatment Standard, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 20 (K. Yannaca-​Small ed., 2018). 29  Award (July 1, 2004), London Court of International Arbitration, Case No. UN 346, ¶ 18. After finding that Ecuador, by revoking previous decisions regarding a contract with the state-​owned oil company, had frustrated the legitimate expectations of the investor when the investment was made, the tribunal found that 26 27

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements for breach of the fair and equitable treatment, the CETA has expanded on specific concepts, including (i) manifest arbitrariness and (ii) legitimate expectations. 1.52 First, when deciding on fair and equitable treatment, tribunals have looked at bad faith as a ne-

cessary element of arbitrary conduct.30 Following this trend, under the CETA, the legal test for a claim relating to regulatory conduct includes establishing that such governmental conduct was manifestly arbitrary. Yet, because ‘manifestly’ and ‘arbitrary’ are subjective concepts, arbitral tribunals might interpret them in a broad or narrow way.

1.53 Secondly, the term ‘legitimate expectations’ has been interpreted by recent tribunals to require

that there must be a specific and enforceable legal right vested in the claimant or that the government had made specific representations or assurances to the claimant.31 Moreover, tribunals have held that a host state may legally depart from the course of conduct that had given rise to the legitimate expectation of the investor where the state’s action was reasonable in the circumstances, for example. by making reasonable regulatory changes.32

1.54 The TPP fair and equitable treatment clause, in a more traditional way, refers to expectations

held by an investor, stating that ‘the mere fact that a Party takes or fails to take an action that may be inconsistent with an investor’s expectations does not constitute a breach even if there is loss of damage to the covered investment as a result’.

1.55 The CETA goes beyond this. When determining whether challenged state conduct frustrated a

legitimate expectation, a tribunal may take into account whether the government made a specific representation to an investor to induce a covered investment that created a legitimate expectation upon which the investor relied in deciding to make or maintain the investment. It can be argued that the CETA approach of holding governments only to actual representations made to induce investment is less likely to have systemic implications for public administration than holding them to expectations arising from a broad regulatory environment.

(b) Expropriation

1.56 Lack of clarity concerning the degree of interference with the rights of ownership required

for an act or series of acts to constitute an indirect expropriation has been one of the most controversial issues during the last decade.33

1.57 Only a small number of ISDS cases have found that an indirect expropriation has occurred.

Nonetheless, parts of civil society in some countries have expressed fears that the prospect of investors bringing arbitration claims state based on alleged regulatory takings could result in

Ecuador had breached its obligations to accord fair and equitable treatment. It went on to state: ‘In the context of this finding the question of whether in addition there has been a breach of full protection and security under this Article becomes moot as treatment that is not fair and equitable automatically entails an absence of full protection and security of the investment’. The approach used in the Occidental case has been followed by other arbitral tribunals, e.g., Azurix v. Arg., ICISD Case No. ARB/​01/​02, Award (July 26, 2006). That tribunal also merged the full protection and security standard with the fair and equitable treatment principle. 30  See, e.g., Metalpar S.A. & Buen Aire S.A. v. Argentine Republic, ICSID Case No. ARB/​ 03/​5, Award (June 6, 2008), ¶ 187; AES Summit Generation Limited & AES-​Tisza Erömü Kft v. Republic of Hungary, ICSID Case No. ARB/​07/​22, Award (Sept. 23, 2010), ¶ 9.3.40. 31  See, e.g., LG&E Energy Corp., LG&E Capital Corp. & LG&E Int’l Inc. v. Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006), ¶¶ 130–​39; BG Group Plc. v. Argentine Republic, UNCITRAL, Final Award (Dec. 24, 2007), ¶ 308. 32  See M. Potestà, Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the limits of a Controversial Concept, 28 ICSID Rev. 1 (2013). 33  For a detailed analysis on this subject, see K. Yannaca-​ Small, Indirect Expropriation and the Right to Regulate:  How to Draw the Line?, in Arbitration under International Investment Agreements:  A Guide to the Key Issues ch. 22 (Katia Yannaca-​Small ed., 2018); UNCTAD, Investor-​State Dispute Settlement and Impact on Investment Rulemaking 58 (2007).

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II.  BITs and Investment Provisions in PTAs a ‘regulatory chill’, that is, that concern over liability exposure might lead some host countries to abstain from necessary regulation. Within this context, new generation BITs and investment chapters in RTAs contain pro- 1.58 visions clarifying two specific aspects. First, they make it explicit that the obligations regarding expropriation are intended to reflect the level of protection granted by customary international law. Secondly, they set out guidelines and criteria for determining whether, in a particular situation, an indirect expropriation has in fact taken place. They clarify that an adverse effect on the economic value of an investment, as such, does not by itself establish that an indirect expropriation has occurred. They also state that, except in rare circumstances, non-​discriminatory regulatory actions by a party aimed at protecting legitimate public welfare objectives, such as public health, safety, and the environment do not constitute indirect expropriation.34 It could be argued that such provisions provide some important guidance for future cases. 1.59 Another significant role of such clarifying provisions may be to assure those concerned about a ‘regulatory chill’ of potential ISDS proceedings that IIAs are not intended to put in question the regulatory power of host states. Recent IIAs including the TPP and CETA have expanded on this issue, based on the US 1.60 Model BIT, which further clarifies that ‘except in rare circumstances, non-​discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives such as public health, safety and the environment, do not constitute indirect expropriation’’.35 Both the TPP36 and the CETA37 refer to the extent of interference with the claimant’s ‘distinct, reasonable investment-​backed expectations' as a relevant consideration. The TPP clause considers the nature and extent of governmental regulation or the potential 1.61 for government regulation in the relevant sector and whether the government provided the claimant with a binding written assurance.38 This clarification might suggest that an expectation would be unlikely to be regarded as reasonable where the purported assurance was informal or where the relevant sector was subject to regular regulatory changes or becoming increasingly regulated. The CETA, however, leaves open the possibility that the subjective

  Annex 10-​D of the Chile–​U.S. FTA illustrates this approach. In relevant part, it states: The Parties confirm their shared understanding that: 1. Article 10.9(1) is intended to reflect customary international law concerning the obligation of States with respect to expropriation.  . . .  4. The second situation addressed by Article 10.9(1) is indirect expropriation . . . (a) The determination of whether an action or series of actions by a Party, in a specific fact situation, constitutes an indirect expropriation, requires a case-​by-​case, fact-​based inquiry that considers, among other factors: (i) the economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred; (ii) the extent to which the government action interferes with distinct, reasonable investment-​ backed expectations; and (iii)  the character of the government action. (b) Except in rare circumstances, non-​discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations. 35  U.S. Model BIT, Annex B(4)(b). 36 TPP, supra note 4, Annex 9-​B(3)(a)(ii). 37 CETA, supra note 5, Annex 8-​A(2)(c). 38 TPP, supra note 4, Annex 9-​B(3)(a)(ii), fn. 36. 34

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements expectations of the claimant are relevant to the determination of whether an expropriation has taken place. 1.62 The CETA clause suggests, moreover, that tribunals might take into account the duration

of the measure as part of determining its impact on the investor. The provision also refers to the measure’s ‘object, context and intent’39 when ascertaining and considering the character of the measure, suggesting that the parties intend to place extra emphasis on the measure’s objective in determining whether an expropriation has taken place.

(c)  National treatment

1.63 As part of their non-​discrimination obligations, investment treaties typically include a clause

on national treatment requiring states to accord treatment to foreign investors and investments no less favourable than that provided to domestic investors and investments ‘in like circumstances’.

1.64 To clarify the normative content of the national treatment obligation, the recently concluded

TPP states, for greater certainty, that whether treatment is accorded in ‘like circumstances’ depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments based on legitimate public welfare objectives. This suggests that only intentionally discriminatory measures would breach national treatment and that measures implemented based on legitimate objectives would not breach such an obligation.

(d) Clarification that investment protection should not be pursued at the expense of other public policy objectives 1.65 In addition to the features already mentioned, some new BITs and investment chapters in RTAs include language clarifying that the investment promotion and liberalization objectives of IIAs must not be pursued at the expense of other key public policy objectives, such as the protection of health, safety, cultural identity, the environment, and the promotion of internationally recognized labour rights. Different techniques have been used for that purpose. While some BITs and investment chapters of RTAs have included general treaty exceptions, other treaties have opted for positive language in order to reinforce commitments of the contracting parties to safeguard certain values. Some IIAs have combined the two. 1.66 Examples of IIAs including exceptions to safeguard flexibility for regulation are the new US

and Canadian model BITs. The latter includes a series of exceptions to preserve a wide range of public policy objectives, such as the protection of human, animal, or plant life and health, the integrity and stability of the financial system, cultural industries, and essential security interests. Further, the 2004 Canadian model FIPA includes the following Article 11: Health, Safety and Environmental Measures The Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion or retention in its territory or an investment of an investor. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party and the two Parties shall consult with a view to avoiding any such encouragement.40

1.67 Countries have not only opted to use exceptions, but have also incorporated positive language

into the IIAs to protect other public policy objectives, notably protection of the environment

 CETA, supra note 5, Annex 8-​A(2)(d).   The new U.S. Model BIT contains similar provisions on investment and environment and investment and labour. 39 40

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II.  BITs and Investment Provisions in PTAs and respect for core labour rights. Once more, the legal techniques used for such purpose vary among the different IIAs. One approach has been to make reference to these values in the preamble of the agreement. 1.68 For instance, the preamble of the Japan–​Vietnam BIT explicitly provides that the objective of promoting investment can be achieved ‘without relaxing health, safety and environmental measures of general application . . .’. Other IIAs have included ‘side agreements’ to protect labour and environmental standards. 1.69 For instance, the parties to the Trans-​Pacific Strategic Economic Partnership Agreement between Brunei Darussalam, Chile, New Zealand, and Singapore,41 negotiated side agreements on environment,42 and labour cooperation.43 They make clear, inter alia, that investment promotion and liberalization will not impair the capacity of the contracting parties to protect the environment or labour rights in their respective territories. The same technique can be observed in the NAFTA and in the free trade agreement between Canada and Chile. Other BITs and RTAs, in the investment chapter as well as in additional sections, have in- 1.70 corporated specific provisions on labour and the environment. This is the case with several free trade agreements negotiated by the United States with countries such as Australia, Chile, Central America, Colombia, Singapore, and Peru. The investment chapters in these IIAs include a provision on environmental measures similar to Article 10.18 of the South Korea–​ Chile FTA, which states: 1. Nothing in this Chapter shall be construed to prevent a Party from adopting, maintaining or enforcing any measure otherwise consistent with this Chapter that it considers appropriate to ensure that an investment activity in its territory is undertaken in a manner sensitive to environmental concerns. 2. The Parties recognize that it is inappropriate to encourage investment by relaxing domestic health, safety or environmental measures. Accordingly, a Party should not waive or otherwise derogate from, or offer to waive or otherwise derogate from, such measures as an encouragement for the establishment, acquisition, expansion or retention in its territory of an investment of an investor. If a Party considers that the other Party has offered such an encouragement, it may request consultations with the other Party and the Parties shall consult with a view to avoiding any such encouragement.

Recently concluded treaties more frequently contain these clauses. For instance, the CETA 1.71 contains an exception clauses provision, which reads as follows: Article 28.3 Exception clauses [s]‌ubject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between the Parties where like conditions prevail, or a disguised restriction on trade in services, nothing in this Agreement shall be construed to prevent the adoption or enforcement by a Party of measures necessary: (a) to protect public security or public morals or to maintain public order; (b) to protect human, animal or plant life or health; or

  This agreement applies to investment in services only.  Environment Cooperation Agreement among the Parties to the Trans-​Pacific Strategic Economic Partnership Agreement, https://​www.mfat.govt.nz/​assets/​FTAs-​agreements-​in-​force/​P4/​Full-​text-​of-​P4-​ agreement.pdf (last visited Dec. 12, 2017). 43 Memorandum of Understanding on Labour Cooperation among the Parties to the Trans-​ Pacific Strategic Economic Partnership Agreement, http://​www.sice.oas.org/​Trade/​CHL_​Asia_​e/​Side_​Agreements/​ Labor_​e.pdf (last visited Dec. 12, 2017). 41 42

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements (c) to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement including those relating to: (i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on contracts; (ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts; or (iii) safety. 1.72 Although relatively few investment cases have been decided on the basis of an exception

clause, the CETA goes further and elaborates on the meaning of some of the permissible objectives of the exception clause. For example, the CETA states that the measures necessary to protect human, animal, or plant life and health include environmental measures and that measures relating to the conservation of exhaustible natural resources apply to both the conservation of living and non-​living exhaustible natural resources.

1.73 The inclusion of provisions clarifying that the protection and liberalization of investment

should not be pursued at the expense of other key public policy objectives may be more of an indirect rather than a direct result of ISDS practice over the last decade. These normative developments seem to reflect the intent of contracting parties to address the concerns of labour unions and environmental non-​governmental organizations (NGOs) regarding investment agreements through a fail-​safe provision giving greater assurance that public welfare measures will be shielded from liability.

(e) Promotion of greater transparency between the contracting parties and in the process of domestic rule-​making 1.74 A fourth feature of new generation BITs and investment chapters in PTAs is the qualitative evolution in the conception of their transparency obligations. In addition to the obligation of the contracting parties to publish their laws,44 new approaches include the investors in transparency regulations, providing them not only with rights, but also with obligations vis-​à-​vis the host state.45 Secondly, this new method broadens transparency beyond the traditional notion of publication of laws and regulations. It also focuses on the process of rule-​making,   For instance, art. 10 of the BIT between Uruguay and the U.S. (2005) provides the following: Article 10: Publication of Laws and Decisions Respecting Investment 1. Each Party shall ensure that its: (a) laws, regulations, procedures, and administrative rulings of general application; and (b) adjudicatory decisions respecting any matter covered by this Treaty are promptly published or otherwise made publicly available. 2. For purposes of this Article, ‘administrative ruling of general application’ means an administrative ruling or interpretation that applies to all persons and fact situations that fall generally within its ambit and that establishes a norm of conduct but does not include: (a) a determination or ruling made in an administrative or quasi-​judicial proceeding that applies to a particular covered investment or investor of the other Party in a specific case; or (b) a ruling that adjudicates with respect to a particular act or practice.

44

45 Thus, e.g., art. 15.2 of the Uruguay–​U.S. BIT obliges the investor to provide information on its investment to the host government in certain circumstances:

2. Notwithstanding Articles 3 and 4, a Party may require an investor of the other Party, or its covered investment, to provide information concerning that investment solely for informational or statistical purposes. The Party shall protect any confidential business information from any disclosure that would prejudice the competitive position of the investor or the covered investment. Nothing in this paragraph shall be construed to prevent a Party from otherwise obtaining or disclosing information in connection with the equitable and good faith application of its law. This same approach with very minor differences regarding the reasonability of the information to provide and the timeframe of the exercise can be found in the recently negotiated CETA.

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II.  BITs and Investment Provisions in PTAs attempting to use it as an instrument to promote the principle of due process. Thus, in addition to enabling investors to know and understand the applicable rules and disciplines affecting their investments, it is a tool to enable interested persons to participate in the process of investment-​related rule-​making. An example of this approach is Article 19, on transparency, of the 2004 Canadian Model FIPA.46 This same approach is duplicated, with minor changes, in the CETA’s Chapter 27 on Transparency. This approach applies transparency not only to existing legislation, but also to draft bills and 1.75 regulations. In this respect, both Article 19.2 of the 2004 Canadian model FIPA and Article 27.1 of the CETA provide that, to the extent possible, the contracting parties shall publish in advance any proposed measure of general application that affects investments and ‘provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures’. This approach, which is also used in the latest US model BIT, represents a qualitative leap in the content and rationale of transparency provisions in IIAs. Under this approach, transparency no longer means merely information, but also participa- 1.76 tion in investment rule-​making. Secondly, the obligation does not provide an exclusive right to a foreign investor vis-​à-​vis the host country. Rather, the obligation is to provide a reasonable opportunity to all interested persons to comment on proposed investment-​related measures, not only the investors of the other contracting party, but also its own citizens. It is true that, for some countries, developing the mechanisms to comply effectively with 1.77 principles of due process may entail legal reforms and financial costs. However, if those adjustments are necessary, it is because the developing countries concerned lack a modern body of administrative law and implementation procedures, a sine qua non not only for the modernization of the administration of justice but also for strengthening democratic institutions in general. Within this context, transparency provisions in IIAs may be significant not only for the generation of a more predictable business climate in favour of foreign investors but, more important from a development perspective, to foster a more legalistic and rule-​oriented administrative practice, which is in the general interest of the population of the host country. The emphasis of some IIAs on using transparency provisions to strengthen the principle of 1.78 due process of law is also evidenced by some additional obligations. An example is the US–​ Uruguay BIT (2005), which includes within the transparency provision additional explicit obligations on administrative procedures and the right of an impartial review and appeal of administrative decisions on investment-​related matters. Once more, these kinds of obligations matter not only because of the more predictable investment climate they tend to generate, but also because of the institutional strengthening that their full compliance may entail for the entire citizenry of the countries concerned.

  Article 19 of the 2004 Canadian Model FIPA provides:

46

1. Each Party shall, to the extent possible, ensure that its laws, regulations, procedures, and administrative rulings of general application respecting any matter covered by this Agreement are promptly published or otherwise made available in such a manner as to enable interested persons and the other Party to become acquainted with them. 2. To the extent possible, each Party shall: (a) publish in advance any such measure that it proposes to adopt; and (b) provide interested persons and the other Party a reasonable opportunity to comment on such proposed measures. 3. Upon request by a Party, information shall be exchanged on the measures of the other Party that may have an impact on covered investments.

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements 1.79 Further elaborating on transparency provisions, both the TPP and the CETA include a sep-

arate transparency-​related chapter. Chapter 26 on Transparency and Anti-​corruption of the TPP47 requires contracting parties: (i) to ensure that, to the extent possible, their laws, regulations, and administrative rulings related to any matters covered by the TPP Agreement are publicly available and that regulations are subject to notice and comment; and (ii) to ensure certain due process rights for TPP stakeholders in connection with administrative proceedings, including prompt review of any administrative action through independent and impartial judicial or administrative tribunals or procedures. The CETA also incorporates in Chapter 21 the obligation of interagency cooperation to foster transparency in rule-​making.

3. Innovations in ISDS procedures 1.80 New generation BITs and investment chapters in PTAs also regulate ISDS procedures in more detail, providing greater guidance, both to the disputing parties and tribunals, with respect to the conduct of the arbitration proceedings. During the first part of the last decade, Chapter  11 of the NAFTA significantly influenced the features of the investor-​state dispute settlement provisions in many other IIAs. More recently, it is the experience with the increasing number of investment disputes that has triggered innovations in new IIAs. 1.81 Traditionally, most IIAs have had very few general provisions on ISDS procedures. This

changed with the NAFTA, which, for the first time, regulated a series of aspects of arbitration proceedings. NAFTA’s Chapter 11 devotes a whole section to ISDS procedures. New generation BITs and investment chapters in RTAs have continued with this development and have even taken the evolution in rule-​making one step further. In fact, ISDS procedures are one of the areas where significant developments in IIAs have taken place over the last decade.

1.82 New generation IIAs have incorporated various innovative provisions directed to foster four

general objectives: First, they have purported to provide greater control by the contracting parties over arbitration procedures; secondly, they promote the principle of judicial economy in investment-​related disputes; thirdly, they seek to ensure consistency among arbitral awards; and, fourthly, they promote greater legitimacy of ISDS within civil society. These objectives are derived from the experience on investment disputes that several countries of the region have gathered over the last decade.

(a)  Greater control of the contracting parties over arbitration procedures 

1.83 New generation IIAs contain innovations promoting greater control of the contracting parties

over arbitration procedures. The rationale is to diminish the degree of discretion arbitral tribunals have in deciding how to conduct the arbitration proceedings, thereby making the proceedings more predictable. This objective has been pursued through two different techniques.

1.84 First, several countries have opted to increase the level of detail of procedural aspects of ISDS

in order to clarify in advance certain issues that otherwise would have to be decided by arbitral tribunals. New generation IIAs draw from the experience of the NAFTA and contain more detailed ISDS provisions.48 These agreements even go beyond the NAFTA and contain

47  A key development in this area worth mentioning is the one related to provisions aimed at combating corruption. A new development brought by the TPP in its chapter on Transparency and Anti-​corruption is that parties must commit to eliminate corruption by adopting the necessary measures. This is the first attempt in the international trade and investment arena to introduce such measures. 48  Examples include, inter alia, the specific procedures to apply when submitting a notice of intent for arbitration, provisions to avoid the same dispute from being simultaneously addressed in more than one legal forum, specific procedures for the appointment of arbitrators and expert review groups, specification of the place of arbitration, measures for interim injunctive relief, preliminary objections, conduct of arbitral proceedings, and enforcement of awards.

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II.  BITs and Investment Provisions in PTAs clauses that clarify particular procedural aspects that have been subject to debate in ISDS practice over the last decade. For instance, one of the issues that has been discussed in the context of the application of 1.85 other IIAs is whether treaty-​based arbitral tribunals have jurisdiction to deal with claims based solely on an investment contract. The investment chapter of the US–​Singapore FTA explicitly addresses this in its Article 15.15.49 Similarly, the TPP provides for ISDS procedures not only regarding substantive obligations under the agreement but also under investment authorizations (i.e. an authorization that a TPP member state’s foreign investment authority grants to an investor of another TPP member state or a covered investment) and investment agreements (i.e. a written agreement between a central government authority of a TPP member state and an investor of another TPP member state or covered investment, which the investor or covered investment relies upon to establish or acquire a covered investment).50 Another manner by which contracting parties have sought to increase their control over arbi- 1.86 tration proceedings has been to limit the kinds of dispute subject to ISDS. Some IIAs apply ISDS to all kinds of disputes arising between an investor of one party and 1.87 the other contracting party. Although the most likely scenario would be that the difference relates to an investment matter, one might also think of interpreting this provision in such a way that it would not be strictly necessary for the conflict to fall within that category. Another group of IIAs include ISDS that applies to disputes directly related to a covered in- 1.88 vestment. This approach is by far the most common. Under this category, IIAs provide that the ISDS procedures apply to disputes arising ‘in connection with’, ‘arising out of ’, ‘with respect to’, ‘concerning’, or ‘related to’ an investment. These formulations might be sufficiently broad to include disputes not involving an alleged violation of the IIA. A third category of IIAs apply the ISDS clause to disputes involving a violation of a specific 1.89 provision of the agreement. For example, some IIAs stipulate that the ISDS procedures apply to disputes ‘concerning an obligation’ of contracting parties under the IIA. Other IIAs provide that the dispute has to relate to ‘interpretations or applications of the agreement’, while yet others state that these procedures shall apply to disputes which arise ‘within the terms’ of the agreement. A variation of this approach limits the application of the ISDS procedures to one or a very few obligations in an IIA. A  fourth, and most recently used, category of ISDS clause requires more than an alleged 1.90 breach of an obligation in the IIA for the ISDS mechanism to be activated. This approach also requires that the investor has incurred loss or damage as a result of the violation. The requirements of this approach are threefold: (i) a claim of a breach of an obligation under the IIA; (ii) the existence of a loss or damage for the investor; and (iii) a causal link between the two. This approach reinforces the notion that arbitral procedures are mainly geared to addressing conflicts related to property rights. The ISDS provision under the TPP uses this approach.

49 Article 15.15 of the Singapore–​ United States FTA provides, inter alia:  1. In the event that a disputing party considers that an investment dispute cannot be settled by consultation and negotiation: (a) the claimant, on its own behalf, may submit to arbitration under this Section a claim: (i) that the respondent has breached . . . (B) an investment authorization, or (C) an investment agreement . . . 50  However, four TPP member states (Australia, Canada, Mexico, and New Zealand) have expressly excluded a number of specific investment review and investment approval processes under their domestic legislation from the ISDS mechanism of TPP (TPP Annex 9-​H).

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements 1.91 New generation BITs or investment chapters in RTAs include provisions ensuring the in-

volvement of the contracting parties in arbitration proceedings which address specific subject matters, such as financial services, the interpretation of non-​conforming measures, or taxation measures. In all these cases, these IIAs grant specialized competent authorities of the contracting parties concerned the right to make agreed interpretations of certain matters or provisions of the treaty, which will be binding for the arbitral tribunal.

1.92 For example, Article 10.36 of the South Korea–​Chile FTA provides that, when a respondent

invokes a non-​conforming measure as a defence to a claim, it will be, in principle, the Commission (comprised by the ministers of both contracting parties) and not the arbitral tribunal that will interpret the non-​conforming measure.51 Another example is Article 17(1) and (2) of the 2004 Canadian Model FIPA, which provides that, where an investor submits a claim to arbitration related to financial services and the disputing contracting party, as a defence, invokes the general exception based on prudential reasons included in Articles 10(2) or 14(6) of the agreement, the arbitral tribunal: [s]‌hall, at the request of that Party, seek a report in writing from the Parties on the issue of whether and to what extent the said paragraphs are a valid defense to the claim of the investor. The tribunal may not proceed pending receipt of a report under this Article . . . The Parties shall proceed . . . to prepare a written report, either on the basis of agreement following consultations, or by means of an arbitral panel. The consultations shall be between the financial services authorities of the Parties. The report shall be transmitted to the Tribunal, and shall be binding on the Tribunal.52

1.93 The two examples cited evidence a pattern in new generation IIAs pursuant to which the con-

tracting parties enhance their control over the interpretation of certain key provisions of the agreements. The underlying assumption is that the contracting parties are better suited than an arbitral tribunal to assess certain specific matters such as, inter alia, the interpretation of non-​conforming measures or prudential measures for financial services.

(b)  Promotion of judicial economy 

1.94 To defend a case in ISDS proceedings properly entails a significant amount of time and

resources for the party involved. Therefore, some countries have recently included various procedural innovations in their IIAs that may be instrumental in fostering judicial economy in ISDS procedures.

1.95 Three particular mechanisms illustrate this. One is a specific provision dealing with poten-

tially ‘frivolous claims’ submitted by an investor. Another is the possibility to consolidate separate claims having a question of law or fact in common, and arising out of the same events or circumstances. The third mechanism fostering judicial economy prevents a particular investment dispute from being addressed in more than one adjudication forum at the same time. While the first of these represents an innovation in recent IIAs, the other two mechanisms were originally included in the NAFTA and have become a common feature among new

  Article 10.36 of the South Korea–​Chile FTA states: 1. Where a disputing Party asserts as a defence that the measure alleged to be a breach is within the scope of a reservation or exception set out in Annex I or Annex II, upon request of the disputing Party, the Tribunal shall request the interpretation of the Commission on the issue. The Commission, within 60 days of delivery of the request, shall submit in writing its interpretation to the Tribunal. 2. Further to paragraph 2 of Article 10.35, a Commission interpretation submitted under paragraph 1 shall be binding on the Tribunal. If the Commission fails to submit an interpretation within 60 days, the Tribunal shall decide the issue. 52  2004 Canadian Model FIPA (2004) art. 17, ¶¶ 1 and 2. 51

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II.  BITs and Investment Provisions in PTAs generation agreements negotiated by the United States. Each of these is explained in the next section in more detail.

(c)  Mechanism to avoid ‘frivolous claims’  The significant increase in investment disputes over the last decade has raised the concern 1.96 that investors may abuse the system. As in domestic litigation, investors may be eager to claim as many violations of the applicable IIA as possible in order to increase their chances of succeeding. This may take a high toll in terms of time, effort, fees, and other costs, not only for the parties to the dispute, but also for the arbitral tribunal. It is within this context that several countries have advocated a procedure to avoid ‘frivolous 1.97 claims’ in investment-​related disputes, that is, claims that evidently lack a sound legal basis.53 Thus, several new generation IIAs include a provision introducing the possibility for the arbitral tribunal to apply an ‘admissibility test’ to the claims submitted. Under this innovative approach, an arbitration tribunal shall address and decide as a preliminary question any objection raised by the respondent that, as a matter of law, a claim submitted is not a claim for which an award in favour of the claimant may be rendered. In deciding upon an objection under this procedure, the arbitration tribunal shall assume that the claimant’s factual allegations in support of the claims are true, and shall issue a decision or award on the objection on an expedited basis. The experience from the dispute in Methanex v United States had an important influence on 1.98 this particular innovation in investment rule-​making. In that case, the tribunal addressed the distinction between the concepts of admissibility and jurisdiction.54 The United States challenged the admissibility of Methanex’s claims on the basis that, even assuming that all facts alleged by Methanex were true, there could never be a breach of the substantive obligation provisions pleaded by the claimant. Hence, according to the US, Methanex’s claims were bound to fail. The tribunal found that the UNCITRAL Arbitration Rules do not grant arbitral tribunals the authority to reject claims on the basis that they are not admissible.55 Consequently, the tribunal concluded that it had no express or implied power to reject claims based on this type of objection. The introduction of a specific provision empowering arbitral tribunals to reject claims as 1.99 inadmissible if lacking a legal basis is one of the significant innovations of new IIAs. Article 9.23(4) and (5) of the investment chapter of the TPP illustrates this approach. It has also been included in other investment chapters of several FTAs recently negotiated between the United States and other countries worldwide.56 The objective of the expedited procedure is to enable arbitral tribunals, as a preliminary 1.100 matter, to reject a claim as inadmissible, thereby avoiding expenditure of time and resources in adjudicating a dispute based on claims lacking any sound legal foundation. The desire of the contracting parties to promote judicial economy is further evidenced by the inclusion

53 For a more detailed discussion, see K. Yannaca-​ Small & D. Earnest, The Fate of Frivolous and Unmeritorious Claims, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 7 (K. Yannaca-​Small ed., 2018). 54  Although numerous ISDS tribunals tend to consider the two concepts as being essentially synonymous, international legal doctrine has made a distinction between admissibility and jurisdiction. While ‘jurisdiction is the power of the tribunal to hear the case; admissibility is whether the case itself is defective —​whether it is appropriate for the tribunal to hear it’. Waste Management, Inc. v. Mexico, Dissenting Opinion of Keith Highet, ICSID Case No. ARB(AF)/​98/​2 (June 2, 2000), ¶ 58. 55  It could be said that the same applies to arbitration under ICSID. 56  Such a provision is included in the FTAs between the United States and Singapore, Colombia, Peru, Central America, and Morocco.

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements in these Articles of specific timeframes provided as in Article 10.19(5) of the investment chapter of the TPP. It should also be noted that, under these provisions, not all claims that are inadmissible are necessarily frivolous. Such determination will fall under the discretion of the tribunal. Presumably, if a claim is found to be frivolous, this would have an impact on the award concerning costs and legal costs.

(d)  Consolidation of claims 

1.101 Another mechanism included in new generation IIAs to foster judicial economy, as well as to

diminish the risk of inconsistent results, is a provision allowing the consolidation of separate claims that have a question of law or fact in common and which arise out of the same events or circumstances. It can spare a contracting party from simultaneously facing several disputes as a result of multiple challenges against the same contested measure.

1.102 Most IIAs concluded by Mexico during the last decade, as well as the IIAs recently negotiated

by the United States and the 2004 Canadian Model FIPA, include provisions that authorize the formation of a special tribunal to assume jurisdiction over separate claims having these features.57 Similarly, Article 9.28 of the TPP and Article 8.43 of the CETA include specific provisions on consolidation, with detailed rules on procedure.

(e) Mechanism to avoid a dispute being submitted to more than one dispute settlement forum: improving the ‘fork in the road’  1.103 The increase in the number of investment disputes shows the importance of preventing a particular investment dispute from being addressed in more than one dispute settlement forum at the same time. Otherwise, the host state would be required to respond to the same claims more than once and there would be the risk of inconsistent decisions. Of special concern is the possibility that the investor submits a dispute to the domestic courts of the host state and simultaneously or subsequently to international arbitration. ‘Fork in the road’ provisions intend to avoid this risk. However, ISDS practice over the last decade has shown some weaknesses in these particular clauses. 1.104 Given the multiplicity of existing IIAs, and considering that the same set of measures imple-

mented by the host state may affect numerous foreign investors, it is not uncommon that the same facts and circumstances are litigated by different investors in different tribunals. The contradictory outcomes in the Lauder cases are often cited as an illustration of this potential problem.58 In these disputes, two different arbitration tribunals held that parallel proceedings relating to the same facts were admissible on grounds that nominally the parties and the two BITs involved were different.59 The Lauder cases illustrate the risk that host countries could lose arbitration proceedings several times and thus be subject to multiple awards.

1.105 Most IIAs lack specific provisions addressing the possibility of consolidating different dis-

putes arising from the same set of facts or measures. Given that under arbitration proceedings the parties to the dispute enjoy considerable discretion to agree on procedural matters,

  See, e.g., art. 83 of the Mexico–​Japan FTA.   These disputes involved a common set of facts and measures, i.e., an alleged improper interference of the Czech government in the investors’ investments in the television business. One such investor lost its case, but the other won an award of over U.S.$300 million. See K. Yannaca-​Small, Who is Entitled to Claim? The Definition of Nationality in Investment Arbitration, in Arbitration under International Investment Agreements:  A Guide to the Key Issues ch. 10 (K. Yannaca-​Small ed., 2018); UNCTAD, Investor-​ State Disputes Arising from Investment Treaties:  A Review, UNCTAD Series on International Investment Policies for Development 19 (2005). 59  See Ronald S.  Lauder v.  Czech Republic, UNCITRAL, Final Award (Sept. 3, 2001); CME Czech Republic v.  Czech Republic, UNCITRAL, Partial Award (Sept. 13, 2001); and Czech Republic v.  CME Czech Republic B.V., Court of Appeal, Stockholm, Sweden, Case No. T-​8735-​01, 42 I.L.M. 919 (2003). 57 58

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II.  BITs and Investment Provisions in PTAs nothing would, in principle, prevent them from agreeing on consolidating two or more disputes in a single proceeding. However, once a dispute is submitted to arbitration, the acrimony between the parties involved in the dispute may inhibit them from agreeing on this kind of procedure. Prevailing ISDS jurisprudence is that lis pendens exists only in case of identity of parties, 1.106 object, and cause of action.60 Thus, arbitral awards have interpreted the ‘fork in the road’ provision as resulting in a loss of access to international arbitration only where the dispute and the parties before the domestic courts are identical with the dispute and the parties in the international proceeding. This interpretation has made ‘fork in the road’ provisions very difficult to invoke. For instance, it is easy to envisage a situation in which a shareholder initiates an arbitration to protect its rights under the IIA, while the investment (i.e. the subsidiary) initiates a domestic dispute to protect its contract or other legal rights, including those derived from the IIA.61 New generation BITs and investment chapters in RTAs do not use ‘fork in the road’ clauses. 1.107 Instead, to fulfil the same objective in a more effective manner these agreements use an approach known in the investment literature as the ‘no U-​turn’, which focuses on the measure that has triggered the dispute. The ‘no-​U-​turn’ concept allows the investor to opt for international arbitration even after the investor has submitted it to the administrative or judicial tribunals of the host country, as long as domestic tribunals have not rendered a final judgment on the dispute. Article 9.21 of the TPP illustrates this technique and provides that an investor may submit a dispute to arbitration only if: [t]‌he investor has waived its right to initiate or continue any other proceedings in relation to the measure that is alleged to be in breach of this Agreement before the courts or tribunals of the Contracting Party concerned or in a dispute settlement procedure of any kind.

The approach illustrated also forecloses another situation in which the same dispute could be 1.108 submitted to multiple fora, that is, an investor first submits the dispute to investor-​state arbitration and, depending on the outcome, then opts to submit it to local courts. Such a result would be prevented under this type of clause.

4. Promotion of a consistent and sound jurisprudence on international investment law A  third category of innovations in investor-​state arbitration provisions in new generation 1.109 IIAs is geared towards ensuring a consistent and correct application of international law in arbitral awards. As previously explained, new generation IIAs have been negotiated in the context of a significant increase in investor-​state disputes. These disputes have yielded awards that have not always been consistent and, in some cases, have rendered controversial legal interpretations of the terms of the investment agreements and of international law in general. As investor-​state arbitration is likely to continue increasing in the future, some new generation BITs and RTAs have included innovative provisions to foster a consistent and sound development of jurisprudence. This objective has been pursued mainly through two different means.

60  See, in this regard, Canfor Corp. v. United States of America, Terminal Forest Products Ltd. v. United States of America & Tembec Inc. et al. v. United States of America, Order of the Consolidation Tribunal (Sept. 7, 2005). 61  Furthermore, under the prevailing interpretation of ‘fork in the road’ provisions, as ISDS jurisprudence has shown, it is also easy to envisage situations under which an investor may submit a claim under ISDS procedures despite the existence of a ‘domestic forum’ clause in an investment contract between the investor and the host country.

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements 1.110 One has been to include in IIAs more detailed provisions on several key substantive issues,

the interpretation of which has been controversial in arbitration proceedings. For example, the United States and Canada modified the language of their model BITs and RTAs to clarify the content of the fair and equitable treatment standard and the concept of indirect expropriation. Both changes intend to limit the scope that arbitral tribunals might otherwise give to the relevant IIA provisions.

1.111 Another innovation aimed at preventing incorrect or inconsistent jurisprudence has been

the proposal that arbitral awards be subject to appeal. For example, the investment chapter of the US–​Peru FTA provides that, within three years after entry into force of the agreement, the parties shall consider whether to establish an appellate body to review awards.

1.112 The CETA breaks the most new ground in this area, significantly modifying an important

aspect of the traditional logic of investor-​state arbitration. Inspired by the WTO Dispute Settlement Understanding, the CETA introduces a two-​stage investor-​state dispute settlement mechanism, establishing an investment tribunal with an appellate review mechanism.62 This two-​stage mechanism, however, maintains the traditional ISDS nature and function of compensating for damages resulting from violations of the investment chapter, rather than requiring elimination of a measure inconsistent with the CETA.

1.113 Under the CETA, the tribunal will be composed of fifteen members (five from the EU, five

from Canada, and five from third countries) appointed for five years, renewable once, and their remuneration will be paid by the contracting parties. The tribunal will have a president and vice president who will oversee administrative matters and will be appointed for two years by lottery of the non-​members. The ICSID Secretariat will operate as the Secretariat of the tribunal. Further, in all those matters regulated by Section F of the CETA, the ICSID, or UNCITRAL rules will operate by default. The CETA does not clarify how many members the appellate tribunal will have, but states that it will be established by the CETA Joint Committee at the same time as it establishes the first tribunal.

1.114 Other than establishing an appellate tribunal, the CETA maintains most of the features of

the traditional investor-​state arbitration, although it incorporates much more detailed rules of procedure and establishes much more detailed admissibility requirements. It mandates consultations that require very specific claims on violations and estimated damages, which cannot be modified at a later stage of the process, requirements that can deter potential claimants from submitting a dispute to the tribunal.

1.115 The establishment of appellate mechanisms raises many issues that require profound dis-

cussion. There is currently no clarity regarding the particular features of such an appeal mechanism and its interaction with the existing arbitration conventions or IIAs negotiated by the parties concerned. Furthermore, if the main purpose of an appellate mechanism is to ensure consistency in arbitral awards and in the development of international investment law, it should bring under its umbrella most, if not all, the existing IIAs. Such an outcome could not be achieved by an appellate mechanism established by one or a couple of BITs.

5. Promotion of legitimacy of investor-​state arbitration within civil society 1.116 A fourth category of innovations that has emerged in a new generation of IIAs aim towards improving the legitimacy of investor-​state arbitration within civil society by responding to concerns that have been raised over the years by some NGOs. One such concern relates to the limited transparency of these proceedings. In response to such concerns, the 2004 Canadian

 CETA, supra note 5, arts. 8.18–​8.45.

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II.  BITs and Investment Provisions in PTAs Model FIPA as well as the IIAs recently negotiated by the United States include provisions enhancing transparency. For instance, the IIAs negotiated between the United States, on the one hand, and Chile, Peru, 1.117 Colombia, Central America, and Singapore, on the other hand, require the respondent in an investment dispute to transmit to the home state and to make available to the public certain documents, including the notice of arbitration, the memorials, the transcripts of hearings, and the awards of the tribunal. Transparency provisions in these IIAs also require that the hearings be open to the public, although provisions are made for the protection of confidential business information. However, these rules do not require the parties to make public any settlement discussions; nor do they interfere with the confidentiality of the tribunal’s deliberations. The enhancement of transparency in ISDS procedures goes beyond allowing the public to be 1.118 informed about the different stages of the arbitral proceedings. Several new IIAs, such as the 2004 Canadian Model FIPA and IIAs negotiated by the United States, including the TPP and the CETA, also allow non-​disputing parties, including civil society, to submit briefs and authorize arbitral tribunals to consider their submissions. As a result, the contracting parties had to regulate in detail the procedures under which amicus curiae briefs could be submitted and administered, attempting to prevent these submissions from negatively affecting the conduct of the arbitration. This explains, for instance, the screening mechanism included in Article 39 of the 2004 Canadian Model BIT. It first establishes certain criteria under which the arbitral tribunal would decide whether a non-​disputing party may file a submission and, if the authorization is granted, provide guidance to the tribunal as to the weight that such submission should have in the proceedings.63 Transparency provisions serve important goals; however, they may also increase the burden 1.119 on the parties to the dispute and limit their discretion. For example, parties may feel the need to submit additional materials responding to arguments made in the amicus curiae

  In its relevant parts, art. 39 provides: 1. Any non-​disputing party that is a person of a Party, or has a significant presence in the territory of a Party, that wishes to file a written submission with a Tribunal (the “applicant”) shall apply for leave from the Tribunal to file such a submission . . . 2. The applicant shall serve the application for leave to file a non-​disputing party submission and the submission on all disputing parties and the Tribunal. 3. The Tribunal shall set an appropriate date for the disputing parties to comment on the application for leave to file a non-​disputing party submission. 4. In determining whether to grant leave to file a non-​disputing party submission, the Tribunal shall consider, among other things, the extent to which: (a) the non-​disputing party submission would assist the Tribunal in the determination of a factual or legal issue related to the arbitration by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties; (b) the non-​disputing party submission would address a matter within the scope of the dispute; (c) the non-​disputing party has a significant interest in the arbitration; and (d) there is a public interest in the subject-​matter [sic] of the arbitration. 5. The Tribunal shall ensure that: (a) any non-​disputing party submission does not disrupt the proceedings; and (b) neither disputing party is unduly burdened or unfairly prejudiced by such submissions. 6. The Tribunal shall decide whether to grant leave to file a non-​disputing party submission. If leave to file a non-​disputing party submission is granted, the Tribunal shall set an appropriate date for the disputing parties to respond in writing to the non-​disputing party submission. By that date, the non-​ disputing Party may, pursuant to Article 34 (Participation by the Non-​Disputing Party), address any issues of interpretation of this Agreement presented in the non-​disputing party submission. 7. The Tribunal that grants leave to file a non-​disputing party submission is not required to address the submission at any point in the arbitration, nor is the non-​disputing party that files the submission entitled to make further submissions in the arbitration . . .

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements briefs. Public knowledge of the disputes may result in public pressure on the parties to settle or to refuse to settle certain disputes. Such pressure may undermine one of the main objectives of investor-​state dispute settlement procedures:  to foster a rule-​oriented adjudication mechanism, where politics interfere as little as possible with the development of a sound international legal investment regime.

III. Conclusion 1.120 Contrary to other areas of public international law, there has been a significant dynamism

of investment rule-​making over the last decade in the context of BITs and investment chapters in PTAs. The negotiation of international rules and disciplines in investment has been responsive to changing international economic and political context. The evolution in investment rule-​making has occurred at two different levels.

1.121 First, there is a gradual evolution in the rationale behind BITs, and, more evident in investment

chapters of PTAs, towards providing international investment not only with the traditional guarantees of investment protection and treatment, such as national treatment, MFN, fair and equitable treatment, protection against unlawful expropriation, transfers, key managerial personnel, and dispute settlement, both state-​to-​state as well as investor-​state, but also rights regarding the right of establishment into the host economy. The overwhelming majority of BITs negotiated over the last decade still refrain from giving any right of entry to international investors into the host country and subject it to the existing domestic legislation through the admission clause. However, the number of IIAs applied in the pre-​establishment phase, together with the number of countries starting to follow this approach in their negotiations, has significantly increased over the last decade. In fact, most investment chapters negotiated in the context of PTAs now tend to provide international investors with national and MFN treatment in the pre-​establishment phase. The evolution of IIAs towards promoting liberalization of investment flows stems from the deep transformations experienced by the world economy over the last fifty years, where investment has become the vehicle for international production and another mode to serve more integrated markets of goods and services.

1.122 Secondly, it is evident in the normative evolution of BITs and investment chapters in PTAs

that ISDS practice has had a significant impact in adjusting and refining investment provisions. In the development of a new generation of IIAs, several governments, observing how previous IIAs have been interpreted and applied by arbitral tribunals, have come up with new provisions and language that address most of the problems evidenced in the context of investment disputes. It could be said that new generation IIAs represent the response on the part of those governments to the various procedural and substantive issues raised in the context of ISDS practice over the period.

1.123 New generation BITs and investment chapters in PTAs have made the definition of invest-

ment more precise, have redrafted and clarified several provisions dealing with standards of protection, have improved and redefined the concept of transparency in the context of investment agreements, have clarified that investment protection and liberalization must not be pursued at the expense of other key public policy objectives, and have updated and modernized ISDS procedures, thereby, inter alia, fostering increased information and participation of civil society in those proceedings. Regardless of the particular merits of these modifications, the surge of new generation IIAs demonstrates a trend which is even more important from a systemic perspective, that is, that governments are being responsive to the challenges posed by new realities.

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III. Conclusion The increase in the number of investment disputes is often associated with challenges for 1.124 developing countries. It is true that developing countries are confronted with important challenges as a result of the increase in investment-​related litigation. However, the existence of such challenges should not obscure the fact that the intensification of ISDS is symptomatic of two extremely positive trends for developing countries. One of them is the legalization of investment dispute resolution. Indeed, the fact that, 1.125 until the last decade, there were a limited number of ISDS cases does not mean that previously there were no investment-​related disputes: international investment-​related disputes have existed for a very long time. What is new is the fact that investors are increasingly relying on international law to resolve their grievances with host governments. In perspective, this is a remarkable development in the path towards a more stable, fair, and balanced international order. Indeed, nowadays, the use of ‘gunboat diplomacy’ to deal with investment-​related disputes seems barbarian. However, civil society tends to forget that just one century ago that was the means through which investment-​related disputes were often solved. The legalization of the international investment system obviously serves the interests of all 1.126 the involved parties:  investors, developed, and developing countries. However, given that developing countries lack the economic, political, or military might of industrial nations, they should be most interested in pursuing the legalization of the international investment system, as the only means at their disposal to defend their interests in a world prone to conflict lies in the strengthening of the rule of law at the international level. A  second positive aspect evidenced by the increase in ISDS activity is that it is gradually 1.127 motivating developing host countries to improve domestic administrative practices in order to avoid future cases. Indeed, the ISDS experience shows that, in addition to fostering the rule of law at the international level, it fosters it on the domestic front as well. Fostering greater rigour, discipline, and due process in the application of legislation is a goal which should be pursued in every country, developing as well as developed. ISDS procedures are instrumental in promoting this objective. Of course, to make that happen, important capacity-​ building initiatives must be undertaken, particularly in developing countries. In this regard, further work is required on four different fronts. Governments of developing countries must learn how to use the international investment 1.128 adjudication system. International investment law is a complex and specialized subject, with multiple sources and in constant evolution. Thus, developing the domestic capacities of governments and the private sector of developing countries is paramount. The current level of dependence on foreign assistance for these countries to defend their interests in international arbitration cases adequately is not fair or advisable for the health of the international investment system as a whole. Further, having more capable and informed government officials in developing countries, 1.129 who fully understood the content and implications of IIAs, is in the best interest not only of developing countries but also of foreign investors and developed countries as well. Better-​ prepared officials would probably increase the possibility of a better administration of domestic law and diminish the need for foreign investors to invoke ISDS procedures to defend their interests. IIAs are important for developing countries not only because of their potential international 1.130 impact in terms of attracting FDI or sending positive signals to foreign investors but, equally, because of the domestic impact these IIAs can have. IIAs can be instrumental in fostering key domestic reforms in developing economies, which are often postponed in order to promote

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Bilateral Investment Treaties and Investment Provisions in Trade Agreements the modernization of their institutions and, in this way, to create incentives for fair and sustainable economic development. Although, in the short term, investment disputes may entail a significant financial burden for developing countries, it is important not to overlook the potential beneficial effect of ISDS in fostering domestic reform. 1.131 Countries might benefit from IIAs if implemented correctly. For instance, recently, coun-

tries have started to implement internal mechanisms to detect systemic issues arising from governmental conduct that could potentially escalate to an investor-​state dispute.64 This type of ‘early alert’ mechanism essentially provides the minimum institutional infrastructure that enables governments to identify, track, and manage grievances arising between investors and public agencies as early as possible. This mechanism ensures that the government responds to investor grievances in a suitable manner and in accordance with the country’s IIAs and domestic laws and regulations.

1.132 In this way, IIAs could serve countries as a tool to persuade public agencies that generate

investor grievances to consider whether their actions are in fact in conformity with the applicable investment frameworks well before those grievances escalate into a legal dispute. From a transparency perspective, this mechanism helps identify specific cases of violation of transparency obligations (i.e. through individual investor complaints), the tangible amount of investment impacted by the violation, and any other impact on the investor owing to the violation. It enables governments to provide an effective and timely response to resolve a specific case. While a single investor’s complaint helps to identify instances of lack of transparency, the proposed solution would typically involve a systemic improvement.

1.133 To a great extent, promotion of transparency, due process, and a strict application of the rule

of law is the best way to avoid investment disputes. Indeed, for a developing country, the best way to win an investment dispute is not to have it in the first place. Further, the role of the rule of law in fostering economic development has been widely acknowledged in the international economic literature. Through appropriate capacity building, developing countries could improve their discipline in the administration of investment-​related laws and regulations and, in this way, not only avoid the possibility of being subject to investment disputes, but also improve the general investment climate.

1.134 Another front of action is clearly civil society. It is likely that the interaction between national

investment policies and IIAs will undergo a broader political debate. This would be a positive development in the sense that more awareness and information about the importance and role of IIAs in general and ISDS in particular could yield stronger and more coherent policies in the long run.

1.135 Interaction between foreign investors and host states will probably continue to increase in

the future. Within this context, rather than resisting the development of international regimes, there is a need to make civil society understand the importance of those regimes in promoting a more rule-​oriented and predictable international order and, as a result, a more stable, fair, and peaceful world.

64  For example, Korea’s Office of Foreign Investment Ombudsman (OFIO); and Bosnia and Herzegovina’s Collaborative Network on Investment.

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2 THE ENERGY CHARTER TREATY Emmanuel Gaillard and Mark McNeill

I. Introduction  2.01 II. The Making of the Energy Charter Treaty  2.06 III. ‘Investments’ and ‘Investors’ Covered by the Energy Charter Treaty  2.10 IV. Denial of Benefits  2.21

V. Substantive Investment Protections  VI. Dispute Settlement  VII. Fork in the Road  VIII. Provisional Application  IX. Taxation Carve-​out  X. Conclusion 

2.31 2.47 2.53 2.58 2.85 2.89

I. Introduction Since the publication of the first edition of this book, the landscape of investment arbitra- 2.01 tion has shifted dramatically, with Europe—​and the Energy Charter Treaty (ECT or Treaty) itself—​playing important roles in that transition. As the number of investment treaty arbitrations continues to mount,1 the ECT remains the most frequently invoked investment agreement, with over 100 publicly known arbitrations filed to date. EU Member States have increasingly featured as respondents (with Spain alone having been named in over thirty cases), particularly in respect of claims arising from the reduction or elimination of incentives offered to renewable energy producers.2 Moreover, most of these claims have been brought by investors from other EU Member States—​an awkward fact at a time when the European Commission has been seeking to dismantle the network of intra-​EU bilateral investment treaties on the basis that they are incompatible with EU law. More generally, investment treaty claims have increasingly come to be viewed by critics as 2.02 a threat to sovereign rights to regulate in the public interest. The Vattenfall case under the ECT relating to Germany’s phase-​out of nuclear power is an oft-​cited example. As a result, investor-​state dispute settlement (ISDS) has faced unprecedented opposition from politicians in Europe and the United States, with calls to reform or entirely replace the system. Amidst this turmoil, the ECT, acceded to by fifty-​two member states, the European Union, 2.03 and Euratom remains a treaty of great geopolitical and economic importance.3 Notably, on 20 May 2015, the International Energy Charter (IEC) was formally adopted and signed

1 Nearly 800 known cases have been filed to date. See UNCTAD Investment Policy Hub, http://​ investmentpolicyhub.unctad.org/​News/​Database/​Home/​537 (last visited Nov. 2, 2017). 2  See Charles A. Patrizia, Joseph Profaizer, Samuel W. Cooper & Igor V. Timofeyev, Investment Disputes Involving the Renewable Energy Industry under the Energy Charter Treaty, in The Guide to Energy Arbitrations (J. William Rowley QC, Doak Bishop & Gordon Kaiser eds., 2017). 3  Energy Charter, The Energy Charter Treaty: A Reader’s Guide, 5 OGEL 19 (2004).

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The Energy Charter Treaty at the Ministerial Conference hosted by the government of the Netherlands. The IEC is a non-​binding declaration of political intention aiming at strengthening energy cooperation between signatory states. Its Section 4 (Promotion and Protection of Investment) provides in pertinent part: In order to promote the international flow of investments, the signatories will make every effort to remove all barriers to investment in the energy sector and provide, at national level, for a stable, transparent legal framework for foreign investment, in conformity with the relevant international laws and rules on investment and trade. 2.04 China signed the IEC and is reportedly taking steps in preparation towards a possible accession

to the ECT. ECT membership for China would protect Chinese investments in key regions, including states bordering the so-​called belt and road routes and in Central Asia, where Russia—​ which announced in August 2009 that it would no longer apply the ECT—​long held sway over hydrocarbon resources and facilities. It is also notable that three partner states of the East African Community—​Burundi, Tanzania, and Uganda—​signed the IEC, taking an important step towards preparing that region to attract much-​needed energy investment, and perhaps eventually expanding the ECT’s scope to a new continent. Accordingly, at a time when ISDS is under broad ideological assault, and the Trans-​Pacific Partnership has all but failed, the ECT is poised to expand its reach geographically, and has readily adapted to the shift in the types of disputes most commonly arising in the global energy sector.

2.05 The first section of this chapter presents some brief remarks on the genesis of the ECT. Each subse-

quent section focuses on a different aspect of the Treaty’s investment-​related features, including the definitions of ‘investor’ and ‘investment’ in Article 1 of the ECT, the denial of benefits provision in Article 17(1), the Treaty’s substantive investment protections in Part III, the dispute resolution mechanisms in Articles 26 and 27, the so-​called fork-​in-​the-​road provision in Article 26(3)(B)(i), the provision on provisional application in Article 45, and the carve-​out for taxation in Article 21.4 Where useful, this chapter compares the Treaty’s text with analogous provisions in other investment agreements and addresses relevant arbitral decisions under the ECT.

II.  The Making of the Energy Charter Treaty 2.06 The end of the Cold War heralded an unprecedented opportunity for Western European

states to forge stronger economic bonds with Eastern Europe and the Union of Soviet Socialist Republics (USSR) and to support those states in their transition to market economies. Western European states were concerned over the security of their energy supplies. Eastern European states were in dire need of capital and technology to exploit their rich energy sources, particularly in Russia, Kazakhstan, and Azerbaijan.5

2.07 Against this backdrop, at the June 1990 meeting of the European Council in Dublin, the

Dutch Prime Minister, Ruud Lubbers, proposed the idea of a ‘European Energy Community’ to promote East–​ West cooperation in the energy sector.6 The European Commission

4  This chapter does not purport exhaustively to address the provisions of the ECT, which have been the subject of intensive academic scrutiny. See, in particular, the seminal work edited by the late Professor Thomas Wälde, The Energy Charter Treaty: An East-​West Gateway for Investment and Trade (1996) [hereinafter Walde, The Energy Charter Treaty]; see also Graham Coop & Clarisse Ribeiro, Investment Protection and the Energy Charter Treaty (2011) [hereinafter Coop & Ribeiro]. 5  See, e.g., R.  Lubbers, Foreword, in Walde, The Energy Charter Treaty, supra note 4, xiii–​ xvii; R. Happ, Energy Charter Treaty, in International Investment Law 240–​60 (M. Bungenberg et al. eds., 2015). 6  Final Act of the European Energy Charter Conference.

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III.  ‘Investments’ and ‘Investors’ Covered by the Energy Charter Treaty undertook a study of how to implement this idea, proposing a ‘European Energy Charter’ in February 1991. The Charter, which is essentially a non-​binding declaration of principles, was negotiated among more than fifty states (including some non-​European states such as Canada, the United States, Australia, and Japan) and the European Communities. It was signed at The Hague on December 17, 1991. Before the Charter was even signed, however, the Charter Conference had already begun nego- 2.08 tiating a ‘basic agreement’—​which became the ECT—​to implement the principles and objectives of the European Energy Charter on a binding basis.7 A primary goal of the ECT was to foster a market economy approach for the reform and restoration of the energy sector in the former communist states, and to strengthen the rule of law to attract necessary foreign investment. The negotiations faced numerous hurdles, however, both between Eastern and Western states and among OECD members.8 The negotiations came to a close in mid-​1994, and the ECT was signed in Lisbon on December 17, 1994, with the objective ‘to ensure the creation of a “level playing field” for energy sector investments throughout the Charter’s constituency, with the aim of reducing to a minimum the non-​commercial risks associated with energy-​sector investments’. Although the United States wielded significant influence over the contents of the ECT, it was one of only two signatories to the 1991 European Energy Charter, with Canada, which did not sign the ECT.9 The resulting treaty is a Byzantine collection of eight ‘Parts’, fourteen ‘Annexes’, five 2.09 ‘Conference Decisions’, and numerous ‘Understandings’, ‘Declarations’, and interpretative statements that were made by the chairman of the ECT Conference at the time of the Treaty’s adoption.10 Several of the Treaty’s provisions are significantly more complex, or less clear, than analogous provisions in other investment agreements—​a by-​product of the competing interests among more than fifty negotiating parties and the compromises that were necessary to bring the fragile negotiating process to a successful close.

III.  ‘Investments’ and ‘Investors’ Covered by the Energy Charter Treaty Treaties that provide for the protection of foreign investment as a rule define the investments 2.10 and investors that qualify for that protection. These definitions are key to determining the

7  See C. Bamberger et al., The Energy Charter Treaty in 2000, in Energy Law in Europe: National, EU and International Law and Institutions section II.1 (M. Roggenkamp et al. eds., 2001) [hereinafter Roggenkamp et al., Energy Law in Europe); see also T. Wälde, International Investment under the 1994 Energy Charter Treaty—​Legal, Negotiating and Policy Implications for International Investors within Western and Commonwealth of Independent States/​Eastern European Countries, 29(5) J. World Trade 5 (1995); Walde, The Energy Charter Treaty, supra note 4, 251, 271 ff. 8  See Bamberger et  al., supra note 7, at section II.2; K. Hobér, Investment Arbitration and the Energy Charter Treaty, 1(1) JIEL 154 (2010). 9  On why the United States ultimately declined to sign the Treaty, see W. Fox, The United States and the Energy Charter Treaty: Misgivings and Misperceptions, in Walde, The Energy Charter Treaty, supra note 4, at 194 ff.; Emmanuel Gaillard, How Does the So-​called ‘Fork-​in-​the-​Road’ Provision in Article 26(3)(b)(i) of the Energy Charter Treaty Work? Why Did the United States Decline to Sign the Energy Charter Treaty?, in Coop & Ribeiro, supra note 4, at 215 ff. [hereinafter Gaillard, Fork in the Road]. 10  See, e.g., C. Bamberger, The Negotiation of the Energy Charter Treaty, presentation at the ‘Investment Protection and the Energy Charter Treaty Conference’, Washington, D.C., May 18, 2007 (describing the Treaty as ‘user-​unfriendly’).

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The Energy Charter Treaty scope of application of the Treaty’s rights and obligations, as well as determining the jurisdiction ratione materiae and ratione personae of arbitral tribunals.11 2.11 The arbitral tribunal in RREEF v Spain aptly described the ECT’s definition of ‘investment’ in

Article 1(6) as ‘open, general and not restricted’, and declined to apply any limiting criteria that were not expressly stated in the treaty.12 Article 1(6) of the ECT thus provides: ‘Investment’ means every kind of asset, owned or controlled directly or indirectly by an Investor and includes: (a) tangible and intangible, and movable and immovable, property, and any property rights such as leases, mortgages, liens, and pledges; (b) a company or business enterprise, or shares, stock, or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise; (c) claims to money and claims to performance pursuant to contract having an economic value and associated with an Investment; (d) Intellectual Property; (e) Returns; (f) any right conferred by law or contract or by virtue of any licenses and permits granted pursuant to law to undertake any Economic Activity in the Energy Sector. A change in the form in which assets are invested does not affect their character as investments and the term ‘Investment’ includes all investments, whether existing at or made after the later of the date of entry into force of this Treaty for the Contracting Party of the Investor making the investment and that for the Contracting Party in the Area of which the investment is made (hereinafter referred to as the ‘Effective Date’) provided that the Treaty shall only apply to matters affecting such investments after the Effective Date. ‘Investment’ refers to any investment associated with an Economic Activity in the Energy Sector and to investments or classes of investments designated by a Contracting Party in its Area as ‘Charter efficiency projects’ and so notified to the Secretariat.13

2.12 The limiting factor in Article 1(6) of the ECT that distinguishes it from other investment

agreements is that it covers only investments ‘associated with an Economic Activity in the Energy Sector’. Article 1(5) defines economic activity in the energy sector as ‘an economic activity concerning the exploration, extraction, refining, production, storage, land transport, transmission, distribution, trade, marketing, or sale of Energy Materials and Products except those included in Annex NI, or concerning the distribution of heat to multiple premises’.14 What it means to be ‘associated with’ such activity, however—​and the necessary degree of such association that must exist for a dispute to fall under the ECT’s dispute resolution

11  See generally K. Yannaca-​Small, Definition of Investor and Investment, in International Investment Agreements (K. Yannaca-​Small ed., 2008); see also K. Yannaca-​Small & D. Katsikis, The Meaning of ‘Investment’ in Investment Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 11 (K. Yannaca-​Small ed., 2018); B. Legum, Defining Investment and Investor: Who is Entitled to Claim?, 22 Arb. Int’l 521 (2006); Emmanuel Gaillard, Investments and Investors Covered by the Energy Charter Treaty, in Investment Arbitration and the Energy Charter Treaty 66 ff. (C. Ribeiro ed., 2006) [hereinafter Gaillard, Investors and Investments]. 12  RREEF Infrastructure (G.P.) Ltd. & RREEF Pan-​European Infrastructure Two Lux S.à.r.l. v. Kingdom of Spain, ICSID Case No. ARB/​13/​30, Decision on Jurisdiction (June 6, 2016), ¶¶ 156–​57. 13  ECT, Pt I art. 1(6). 14  The Final Act of the European Energy Charter Conference provides the following examples of ‘economic activity in the energy sector’: (i) prospecting and exploration for, and extraction of, e.g., oil, gas, coal and uranium; (ii) construction and operation of power generation facilities, including those powered by wind and other renewable energy sources;

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III.  ‘Investments’ and ‘Investors’ Covered by the Energy Charter Treaty provisions—​is not clearly articulated in the Treaty.15 The tribunal in Amto v Ukraine held that the phrase ‘associated with’ demonstrates that ‘any alleged investment must be energy related, without itself needing to satisfy the definition of Article 1(5)’.16 Article 1(6) does expressly distinguish between investments and ordinary sales transactions as 2.13 clearly as some other treaties. Article 1(6)(c) extends the definition of investment to ‘claims to money or claims to performance pursuant to a contract’ that are ‘associated with an investment’,17 and Article 1(6)(f ) covers any ‘right conferred by  . . .  contract’ to undertake economic activities in the energy sector. Applying this broad definition, the arbitral tribunal in Petrobart Ltd. v Kyrgyz Republic readily concluded that the claimant’s claim for payment under an ordinary sales agreement for gas condensate constituted a covered investment under the Treaty.18 Similarly, the tribunal in Energoalians v Moldova held that the right to claim money for an unpaid debt for the supply of electricity was an investment under the broad definition of Article 1(6) of the ECT, although that decision was set aside by the Paris Court of Appeal in April 2016.19 In contrast, Article 1139 of the NAFTA expressly qualifies ‘claims to money or claims to 2.14 performance under a contract’ by excluding claims ‘that arise solely from commercial contracts for the sale of goods or services’ or the extension of credit in connection with such sales contracts.20 Thus, in the Canadian Cattlemen for Fair Trade case, the NAFTA Chapter Eleven tribunal dismissed claims challenging the United States’ imposition of a ban on the importation of cattle due to concerns over bovine spongiform encephalopathy (BSE, or mad cow disease) on the basis that ‘NAFTA Chapter Eleven was not intended to cover simple cross-​ border trading interests’ and that ‘something more permanent—​such as a commitment of capital or other resources in the territory of a Party to economic activity in such territory—​is necessary for a contractual claim for money based on cross-​border trade to rise to the level of an investment’.21 The tribunal in the three arbitrations brought by the majority shareholders of the Yukos Oil 2.15 Corporation against the Russian Federation interpreted Article 1(6)(b) of the ECT as containing the widest possible definition of an interest in a company with no indication that the drafters of the ECT intended to limit ownership to ‘beneficial’ ownership, as suggested by

(iii) land transportation, distribution, storage and supply of Energy Materials and Products, e.g., by way of transmission and distribution grids and pipelines or dedicated rail lines, and construction of facilities for such, including the laying of oil, gas, and coal-​slurry pipelines; (iv) removal and disposal of wastes from energy related facilities such as power stations, including radioactive wastes from nuclear power stations; (v) decommissioning of energy related facilities, including oil rigs, oil refineries and power generating plants; (vi) marketing and sale of, and trade in Energy Materials and Products, e.g., retail sales of gasoline; and (vii) research, consulting, planning, management and design activities related to the activities mentioned above, including those aimed at Improving Energy Efficiency.   See Gaillard, Investors and Investments, supra note 11, at 66 ff.  Limited Liability Company AMTO v.  Ukraine, Case No. 080/​2005, Arbitration Institute of the Stockholm Chamber of Commerce, Final Award (Mar. 26, 2008), ¶ 42. 17  ECT, Pt I art. 1(6)(c). 18  Petrobart Ltd. v. Kyrgyz Republic, Case No. 126/​2003, Arbitration Institute of the Stockholm Chamber of Commerce, Award (Mar. 29, 2005). 19  Energoalians v.  Moldova, UNCITRAL, Award (Oct. 23, 2013), ¶¶ 225–​ 52; Paris Court of Appeal (Apr. 12, 2016), 13/​22531. 20  NAFTA art. 1139. 21  Canadian Cattlemen for Fair Trade v. United Sates, NAFTA Chapter Eleven/​UNCITRAL, Award on Jurisdiction (Jan. 28, 2008), ¶¶ 142, 144. 15 16

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The Energy Charter Treaty Russia. The tribunal thus rejected Russia’s arguments that the shareholdings in Yukos did not qualify as a protected ‘investment’.22 Also, in Stati and Ascom v Kazakhstan, the tribunal held that loans and reinvested funds clearly fell within the ‘extremely broad definition’ of investment in Article 1(6). That tribunal explained that the criteria identified by the tribunal in Salini v Morocco for the determination of the existence of a protected investment under Article 25(1) of the ICSID Convention, ‘even if applied as a flexible guideline rather than as a strict jurisdictional requirement, cannot be used for the definition of investment under the ECT’.23 2.16 In the Yukos arbitrations, the tribunal also noted that ‘the definition of investment in Article

1(6) of the ECT does not include any additional requirement with regard to the origin of capital or the necessity of an injection of foreign capital’.24 Similarly, the tribunal in RREEF v Spain, held that the ECT lacks any ‘requirement for funds to be brought into a State from overseas in order for a national of one State to have an investment in another State’.25

2.17 Nonetheless, arbitral tribunals have been willing to find some limitations to the definition

of investment under Article 1(6) of the ECT. In State Enterprise Energorynok v Moldova, for example, the tribunal rejected the notion that a claim to money arising from a court judgment against the Moldovan Ministry of Energy was a covered investment, observing that the claimant was not a party to the underlying electricity supply agreement and had played no role in the energy investment.26 Similarly, the Paris Court of Appeal’s decision to set aside the award in Energoalians v Moldova on the basis that there was no covered investment (agreeing with the dissent by the chairman of the tribunal, Dominic Pellew) suggests that future ECT tribunals may think twice before assuming jurisdiction over disputes that are based on ordinary sales transactions.27

2.18 Like other investment treaties, the ECT also defines the type of ‘investor’ who qualifies for

the Treaty’s benefits. Article 1(7) provides: ‘Investor’ means:

(a) with respect to a Contracting Party: (i) a natural person having the citizenship or nationality of or who is permanently residing in that Contracting Party in accordance with its applicable law; (ii) a company or other organization organized in accordance with the law applicable in that Contracting Party; (b) with respect to a ‘third state’, a natural person, company or other organization which fulfils, mutatis mutandis, the conditions specified in subparagraph (a) for a Contracting Party.

22  See, e.g., Hulley Enterprises Ltd. (Cyprus) v. Russian Federation, Interim Award on Jurisdiction and Admissibility (Nov. 30, 2009) (Hulley Interim Award), ¶ 429. 23 Anatolie Stati, Gabriel Stati, Ascom Group S.A. & Terra Raf Trans Traiding Ltd. v.  Kazakhstan, Arbitration Institute of the Stockholm Chamber of Commerce, Case No. 116/​2010, Award (Dec. 19, 2013), ¶ 806 [hereinafter Stati Award]; see also Energoalians SARL v. Republic of Moldova, UNCITRAL, Award (Oct. 23, 2013), ¶¶ 225–​52, where the tribunal equally affirmed the broad concept of investment under the ECT and rejected the application of the Salini test. 24  Hulley Interim Award, supra note 22, ¶ 431. 25  RREEF Infrastructure (G.P.) Ltd. & RREEF Pan-​European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/​13/​30, Decision on Jurisdiction (June 6, 2016), ¶¶ 157–​58 [hereinafter RREEF Decision]. 26 State Enterprise Energorynok v.  Moldova, SCC Arbitration No. V (2012/​ 175), Final Award (Jan. 29, 2015). 27  Paris Court of Appeal (Apr. 12, 2016), 13/​22531.

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IV.  Denial of Benefits Accordingly, for a natural person to benefit from the Treaty, he or she must either be a citizen, 2.19 national, or permanent resident of a contracting party. For a corporation to qualify for Treaty benefits, it need only be organized under the laws of a contracting state. Article 1(7) imposes no further requirements with respect to shareholding, management, siege social, or location of its business activities. As the tribunal in the Yukos arbitrations noted, for example, ‘[o]‌n its face, Article 1(7)(a)(ii) 2.20 of the ECT contains no requirement other than that the claimant company be duly organized in accordance with the law applicable in a Contracting Party’.28 Similarly, in Plama v Bulgaria, the ECT tribunal held that ‘[t]he Claimant is an “Investor of another Contracting Party” within the definition provided by Article 1(7)(a)(ii) ECT, being a company organized in accordance with the law applicable in Cyprus’, and that it was ‘irrelevant who owns or controls the Claimant at any material time’.29 The tribunal in Energoalians v Moldova similarly held that the ECT imposes no requirement that an investor be wholly owned by a national of a contracting party.30 Given the limited scope for application of the denial-​of-​ benefits clause in the ECT (as discussed in the next section), the ECT will continue to have liberal nationality requirements that allow investors from non-​ECT member states to access the Treaty’s broad protections by incorporating an investment vehicle in a member state.

IV.  Denial of Benefits The protections afforded to legal entities in Article 1 of the ECT are potentially qualified 2.21 by the ability of a contracting party to exclude certain claims under Article 17(1). Article 17(1), entitled ‘Non-​Application of Part III in Certain Circumstances’, contains the ECT’s so-​called denial of benefits provision. It ‘reserves the right’ of the contracting parties to deny the substantive treaty protections in Part III to ‘a legal entity if citizens or nationals of a third state own or control such entity and if that entity has no substantial business activities in the Area of the Contracting Party in which it is organized’. This provision, which derives from the US treaty context, is intended to enable states which so desire to prevent nationals of a

  Hulley Interim Award, supra note 22, ¶ 411.  Plama Consortium Limited v.  Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Decision on Jurisdiction (Feb. 8, 2005), 20(1) ICSID Rev. 262 (2008), ¶¶ 124 and 128. Similarly, in its partial award of March 17, 2006, the tribunal in Saluka Investments BV (Netherlands) v. Czech Republic noted that it had ‘some sympathy for the argument that a company which has no real connection with a State party to a BIT . . . should not be entitled to invoke the provisions of that treaty’, but that the treaty ‘required only that the claimant-​investor should be constituted under the laws of the . . . The Netherlands, and it is not open to the Tribunal to add other requirements which the parties could themselves have added but which they omitted to add’. In contrast, some other multilateral treaties, such as the ASEAN Agreement and the Colonia Protocol of the MERCOSUR Agreement, expressly limit their coverage to companies that are controlled or owned by investors in a contracting state. See Agreement among the Government of Brunei Darussalam, The Republic of Indonesia, Malaysia, The Republic of the Philippines, The Republic of Singapore, and the Kingdom of Thailand for the Promotion and Protection of Investments (1987) (ASEAN Agreement) art. 1(2) (where company means ‘a corporation, partnership or other business association, incorporated or constituted under the laws in force in the territory of any Contracting Party wherein the place of effective management is situated’); Protocol of Colonia for the Promotion and Reciprocal Protection of Investments in MERCOSUR art. 1(2) (unofficial translation) (‘The term “investor” shall mean:  . . .  b) any legal person incorporated in accordance with the laws and regulations of one Contracting Party, and with its seat in the territory of said Contracting Party. c) all legal persons established in the territory where the investment is made, and which are effectively controlled, directly or indirectly, by legal or natural persons as defined . . .’). 30  Energoalians TOB v. Republic of Moldova, UNCITRAL, Award (Oct. 23, 2013), ¶¶ 144–​45. 28 29

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The Energy Charter Treaty non-​contracting party from opportunistically incorporating a ‘mailbox’ company in a contracting party . . . so as to indirectly benefit from the protection of the ECT.31 2.22 The tribunal in the Plama case shed important light on the operation of this provision. In

considering Bulgaria’s jurisdictional objections, the tribunal held that Article 17(1) contains a reservation of rights mechanism which needs to be exercised to be effective: In the Tribunal’s view, the existence of a ‘right’ is distinct from the exercise of that right . . . [A]‌ Contracting Party has a right under Article 17(1) ECT to deny a covered investor the advantages under Part III; but it is not required to exercise that right; and it may never do so. The language of Article 17(1) is unambiguous. . . . The Tribunal has also considered whether the requirement for the right’s exercise is inconsistent with the ECT’s object and purpose. The exercise would necessarily be associated with publicity or other notice so as to become reasonably available to investors and their advisers. . . . By itself, Article 17(1) ECT is at best only half a notice; without further reasonable notice of its exercise by the host state, its terms tell the investor little; and for all practical purposes, something more is needed.32

2.23 The tribunal further held that the invocation of the right in Article 17(1) operates only pro-

spectively from the date of invocation and not retrospectively. The tribunal relied on both the text and the object and purpose of the Treaty, noting as follows: The covered investor enjoys the advantages of Part III unless the host state exercises its right under article 17(1) ECT; and a putative covered investor has legitimate expectations of such advantages until that right’s exercise. A putative investor therefore requires reasonable notice before making any investment in the host state whether or not that host state has exercised its right under Article 17(1) ECT. . . . In the Tribunal’s view, therefore, the object and purpose of the ECT suggest that the right’s exercise should not have retrospective effect.33

2.24 The tribunal thus concluded that Bulgaria’s exercise of its right under Article 17(1) only af-

fected the claimant’s rights under Part III prospectively from the date of invocation. The tribunal thus proceeded to hear the merits of the case, reserving other issues relating to Article 17(1) to that phase.34

2.25 The Yukos tribunal agreed with the core propositions in Plama. It first clarified that Article

17(1) does not implicate the tribunal’s jurisdiction because it provides for the denial of the advantages of the substantive provisions in Part III of the ECT, and not the provisions for dispute settlement in Part V. The tribunal considered the issue to be one of ‘merits’, although it addressed the application of Article 17(1) as a preliminary issue in light of the fact that both parties treated the issue as one of admissibility.35

2.26 The tribunal next determined that ‘Article 17(1) does not deny simpliciter the advantages of

Part III of the ECT—​as it easily could have been worded to do’. Rather, Article 17(1) merely ‘ “reserves the right” of each Contracting Party to deny the advantages of that Part to such an entity’, which right must be exercised to be effective.36 31  A. Sinclair, Investment Protection for ‘Mailbox Companies’ under the 1994 Energy Charter Treaty, 2 TDM 5 (2005). 32  Plama, Decision on Jurisdiction, supra note 29, ¶¶ 155, 157. 33  Id. ¶¶ 161–​62. 34  After the hearing of the case on the merits, the Plama tribunal held that Bulgaria could not rely on art. 17(1) of the ECT because the claimant was owned and controlled by a national of a contracting party to the ECT. Plama, Award, supra note 29 (Aug. 27, 2008), ¶ 95. 35  Hulley Interim Award, supra note 22, ¶¶ 440–​42. In Khan Resources, the tribunal similarly confirmed that art. 17(1) ‘cannot affect the Tribunal’s jurisdiction over [the Claimant’s] claims under the ECT’. Khan Resources Inc., Khan Resources B.V., & Cauc Holding Co. Ltd. v. Government of Mongolia, UNCITRAL, Decision on Jurisdiction (July 25, 2012), ¶¶ 411–​13 [hereinafter Khan Resources Decision]. 36  Hulley Interim Award, supra note 22, ¶ 455.

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IV.  Denial of Benefits Referring to the statements made by the respondent in its written submissions, the arbitral 2.27 tribunal considered that, to the extent the statements in the respondent’s memorial could be considered an exercise of the Russian Federation’s right under Article 17(1), it could only have prospective effect from that date. To treat the denial as retrospective, the tribunal opined, would be incompatible with the Treaty’s object and purpose of promoting and protecting investments.37 Tribunals in subsequent cases have also held that Article 17(1) cannot be invoked with retro- 2.28 spective effect. According to the tribunal in Liman Caspian Oil v Kazakhstan, the requirement under Article 17(1) for a state positively to exercise its right to deny benefits ‘can only lead to the conclusion that this notification has prospective but no retrospective effect’.38 The tribunal held that the respondent’s denial of benefits was ineffective ‘since it was more than a year after the Claimants had filed their Request for Arbitration’.39 The tribunal in Khan Resources v Mongolia followed the same reasoning, and emphasized that it would be contrary to the ECT’s object and purpose ‘to create a predictable legal framework in the energy field’ if an investor ‘could be denied the benefit of the Treaty at any moment after it had invested in the country’.40 In the Yukos arbitration, the Russian Federation argued that control of the claimants resided 2.29 with individuals of Russian nationality, and that Russia was a ‘third state’ for purposes of Article 17(1).41 Although the issue was moot given the tribunal’s rulings noted previously, the tribunal found that ‘[t]‌he Treaty clearly distinguishes between a Contracting Party (and a signatory), on the one hand, and a third State, which is a non-​Contracting Party, on the other’, a conclusion that it found was supported by the travaux préparatoires, which ‘demonstrate that the term “third state” was substituted for the term “non-​Contracting Party” ’.42 In Libananco v Turkey, the tribunal similarly observed that ‘ “third state” has a well recognised ordinary meaning in treaty law . . . the expression means simply “state not party to the treaty in question” ’.43 It accordingly held that the respondent’s attempt to deny benefits to an investor controlled by nationals of Turkey, an ECT member state, was ineffective.44 Similar to the ECT, a number of investment treaties or free trade agreements with invest- 2.30 ment chapters provide that the state party ‘may’ deny the benefits of the treaty to an investor of another Party that is an enterprise of such Party where the enterprise has no substantial business activities in the territory of the party in which it is incorporated, and persons of a non-​party, or of the denying party, own or control the enterprise.45 Unlike Article 17(1) of the ECT, however, the denial of benefits provision in the NAFTA, CAFTA, and many US BITs subjects the right to deny treaty benefits to the requirement that the denying party first

37  Id. ¶ 457. The ECT tribunal in AMTO similarly confirmed that a state seeking to exercise its right to deny benefits under art. 17(1) of the ECT would need to prove ‘the factual prerequisites’ of that article. The AMTO tribunal further noted that the ‘substantial business activities’ prerequisite ‘means “of substance, and not merely of form”. It does not mean “large”, and the materiality not the magnitude of the business activity is the decisive question’. See also AMTO v. Ukraine, supra note 16, Final Award, ¶ 69. 38  Liman Caspian Oil B.V. and NCL Dutch Investment B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/​07/​14, Excerpts of the Award (June 22, 2010) [hereinafter Liman Caspian Award], ¶ 225. 39  Id. ¶ 226. 40  Khan Resources Decision, supra note 35, ¶ 426. 41  Hulley Interim Award, supra note 22, ¶ 537. 42  Id. ¶ 543. 43  Libananco Holdings Co. Ltd. v.  Republic of Turkey, ICSID Case No. ARB/​ 06/​8, Award (Sept. 2, 2011), ¶ 553. 44  Id. ¶¶ 551–​54. 45  Prior to the 1990s, denial of benefits provisions in U.S. BITs provided, like art. 17(1) of the ECT, that each party ‘reserves the right’ to deny the treaty benefits to certain enterprises.

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The Energy Charter Treaty notify and consult with the other party or parties, adding yet another hurdle to its effective invocation.46

V.  Substantive Investment Protections 2.31 Part III of the ECT sets out the substantive rights and protections that contracting par-

ties are obligated to accord to foreign investors and their investments. Article 10, entitled ‘Promotion, Protection and Treatment of Investments’, contains some of the Treaty’s most important and broad-​reaching investment protections. Paragraph (1) of that article provides as follows: Each Contracting Party shall, in accordance with the provisions of this Treaty, encourage and create stable, equitable, favourable and transparent conditions for Investors of other Contracting Parties to make Investments in its Area. Such conditions shall include a commitment to accord at all times to Investments of Investors of other Contracting Parties fair and equitable treatment. Such Investments shall also enjoy the most constant protection and security and no Contracting Party shall in any way impair by unreasonable or discriminatory measures their management, maintenance, use, enjoyment or disposal. In no case shall such Investments be accorded treatment less favourable than that required by international law, including treaty obligations. Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party.47

2.32 The protections in Article 10(1)—​ particularly the duty to refrain from unreasonably

impairing an investor’s enjoyment of its investment—​are exceptionally broad in their formulation. Under the literal terms of this provision, contracting parties are not only forbidden from taking unreasonable actions to harm foreign investors and their investments, they may be affirmatively obligated to create and maintain the conditions necessary for those investments to exist and to thrive.

2.33 Debate has surrounded how the fair and equitable treatment standard in paragraph (1) differs

from ‘constant protection and security’ and ‘unreasonable or discriminatory measures’. The arbitral tribunal in Stati, for example, considered that a breach of the constant protection and security standard ‘leads to no further relief than that resulting from [a]‌FET breach’ and that these two standards of protection ‘overlap’.48 Article 10(1) lists these obligations separately, however, suggesting that the drafters considered them to have some distinct meaning

46  See NAFTA art. 1113(1) (‘Subject to prior notification and consultation in accordance with Articles 1803 (Notification and Provision of Information) and 2006 (Consultations), a Party may deny the benefits of this Chapter to an investor of another Party that is an enterprise of such Party and to investments of such investors if investors of a non-​Party own or control the enterprise and the enterprise has no substantial business activities in the territory of the Party under whose law it is constituted or organized’); see also CAFTA art. 10.12(1); Treaty Between the United States of America and the Oriental Republic of Uruguay Concerning the Encouragement and Reciprocal Protection of Investment (signed Nov. 2005) art. 17; Treaty Between the United States of America and the Republic of Zaire Concerning Reciprocal Encouragement and Protection of Investment (signed Aug. 1984) art. I(b)(ii); Treaty between the United States of America and the Arab Republic of Egypt concerning the Reciprocal Encouragement and Protection of Investments (signed Mar. 1986) Protocol. 47  ECT art. 10(1). 48  Stati Award, supra note 23, ¶ 1256. See also Petrobart v. Kyrgyz Republic, supra note 18, Award, at 76 (‘The Arbitral Tribunal does not find it necessary to analyse the Kyrgyz Republic’s action in relation to the various specific elements in Article 10(1) of the Treaty but notes that this paragraph in its entirety is intended to ensure a fair and equitable treatment of investments’).

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V.  Substantive Investment Protections and effect, at least conceptually, even if they overlap in substantial part.49 Thus, the Electrabel tribunal applied the principle of effet utile in concluding that the FET obligation cannot be redundant with these other terms, and that each gives rise to an independent, albeit related, set of obligations.50 A further issue of debate is whether the FET standard in Article 10(1) is equivalent to, or 2.34 broader than, the minimum standard of treatment of aliens under customary international law.51 In Liman Caspian Oil v Kazakhstan, the tribunal set in opposition NAFTA Article 1105 (as interpreted by the NAFTA Free Trade Commission in 2001) and ECT Article 10(1), and concluded that the latter ‘provide[d]‌a protection which goes beyond the minimum standard of treatment under international law’.52 The Electrabel tribunal, by contrast, considered that the content of the minimum standard of treatment under customary international law ‘is, at the present time, similar to the other standards expressly mentioned in Article 10(1) ECT’.53 Protection of an investor’s ‘legitimate expectations’ has been interpreted as part of the fair 2.35 and equitable treatment standard under Article 10(1). In Al-​Bahloul v Tajikistan, the tribunal held that an investor seeking to establish a breach of its legitimate expectations must demonstrate three factors, namely ‘the nature of the expectation, the reliance on the expectation and the legitimacy of that reliance’.54 Rejecting the claimant’s FET claim, the tribunal held there was insufficient evidence of claimants’ alleged reliance on the respondent’s commitment to issue energy exploration licences, despite its contractual assurance to do so. In addition, the tribunal concluded that the respondent had satisfied the claimant’s expectations by issuing one of the licences in a reasonable time, and that there was no evidence that other licence applications were filed at all. The tribunal further considered that the claimant could not have any legitimate expectation that licences would be issued prior to its full payment of capital contributions to its investment vehicles.55 In Charanne v Spain, the tribunal held that the claimants’ legitimate expectations were not 2.36 violated by the removal of subsidies in the country’s renewable energy sector, as neither the subsidies nor literature distributed by the Spanish government to encourage investment in renewables amounted to specific commitments. In the tribunal’s view, a specific commitment could have been in the form of a stabilization clause in the regulations, or a declaration for

49 Electrabel S.A.  v.  Republic of Hungary, ICSID Case No. ARB/​ 07/​19, Decision on Jurisdiction, Applicable Law and Liability (Nov. 30, 2012), ¶ 7.83 [hereinafter Electrabel Decision], where the tribunal held that since the ‘constant protection and security’ and FET standards are ‘distinct . . . under the ECT, they must have, by application of the legal principle of “effet utile”, a different scope and role’. 50  Electrabel Decision, supra note 49, ¶ 7.83. 51  On fair and equitable treatment generally, see K. Yannaca-​Small, Fair and Equitable Treatment Standard in International Investment Law, in International Investment Law:  A Changing Landscape 73 (K. Yannaca-​Small ed., 2005) and Fair and Equitable Treatment: An Evolving Standard?, in Arbitration under International Investment Agreements:  A Guide to the Key Issues ch. 20 (K. Yannaca-​Small ed., 2018); M. Jacob & S. Schill, Fair and Equitable Treatment:  Content, Practice, Method, in International Investment Law 700 (M. Bungenberg et al. eds., 2015). On the relationship between fair and equitable treatment and the minimum standard of treatment under customary international law, see J. Sharpe, The Minimum Standard of Treatment, Glamis Gold, and Neer’s Enduring Influence, in Building International Investment Law—​The First 50 Years of ICSID 269 (M. Kinnear et al. eds., 2015). 52  Liman Caspian Award, supra note 38, ¶ 263. 53  Electrabel Decision, supra note 49, ¶ 7.158. 54  Mohammad Ammar Al-​Bahloul v. Republic of Tajikistan, SCC Case No. V064/​2008, Partial Award on Jurisdiction and Liability (Sept. 2, 2009), ¶ 200 [hereinafter Al-​Bahloul Partial Award]. 55  Id. ¶¶ 215–​17. However, the tribunal later held that the respondent had breached the umbrella clause in art. 10(1) because it had ‘a clear and unconditional obligation’ pursuant to various state contracts to issue the four exploration licences, and ‘[t]‌he licenses were not forthcoming’. Id. ¶¶ 263–​64.

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The Energy Charter Treaty the benefit of the investors that the regulatory framework would not be modified, neither of which had occurred in that case.56 2.37 Also noteworthy is the obligation to accord investments treatment in accordance with

international law, ‘including treaty obligations’. An understanding in the Final Act of the European Energy Charter Conference clarifies that this reference excludes ‘decisions taken by international organizations, even if they are legally binding, or treaties which entered into force before 1 January 1970’. Read literally, this provision seemingly allows an investor or a contracting party to submit a claim under the ECT based on the alleged breach of an entirely different treaty, such as a trade agreement or a human rights convention, so long as the alleged breach implicates the ‘treatment’ of an investment (and the relevant treaty postdates 1969).57 In this respect, the ECT is distinguishable from some other treaties that expressly limit the treatment obligations to those accorded under customary—​but not conventional—​international law.58

2.38 The last sentence of Article 10(1) of the ECT contains what is often referred to as an ‘um-

brella clause’, and obliges a Contracting Party to observe ‘any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party’. This provision permits a breach of an ordinary contract to be treated as a breach of the ECT. This particular umbrella clause is unusual in that it allows Contracting Parties, at the time of signing, to withhold their consent to arbitrate disputes arising under this provision by listing themselves in Annex IA.59

2.39 It has been suggested that the reference in Article 10(1) to ‘any obligations . . . entered into’

limits this clause’s coverage to contractual obligations, whereas umbrella clauses in other treaties that refer more generally to all obligations ‘assumed’ by the state may extend to unilateral undertakings, such as obligations under foreign investment legislation.60 The tribunal in SGS v Pakistan, however, considered the similar language ‘commitments entered into’ in the Switzerland–​Pakistan BIT to be broad enough to embrace unilateral administrative acts.61 Consistent with that decision, the phrase ‘entered into’ in Article 10(1) of the ECT does not necessarily limit the state’s obligation to contracts but rather extends to all types

56  Charanne and Construction Investments v. Spain, Arbitration Institute of the Stockholm Chamber of Commerce, Case No. 062/​2012, Award (Jan. 21, 2016), ¶ 490. 57 A. Newcombe & L. Paradell, Law and Practice of Investment Treaties:  Standards of Treatment 254 (2009). 58  Such is the case, for instance, with the NAFTA and the CAFTA. Article 1105(1) of the NAFTA requires the host state to accord investments of investors of another Party ‘treatment in accordance with international law, including fair and equitable treatment and full protection and security’. In July 2001, the NAFTA Free Trade Commission, which comprises cabinet-​level representatives from each of the three NAFTA Parties, clarified that art. 1105(1) requires treatment in accordance with customary international law but does not permit an investor to file a claim based on the alleged breach of ‘a separate international agreement’. See Statement on NAFTA Article 1105 and the Availability of Arbitration Documents, July 31, 2001, B(3) (‘A determination that there has been a breach of another provision of the NAFTA, or of a separate international agreement, does not establish that there has been a breach of Article 1105(1)’). The CAFTA includes a similar clarification in art. 10.5(3). 59  See ECT Annex IA (‘List of Contracting Parties Not Allowing an Investor or Contracting Party to Submit a Dispute Concerning the Last Sentence of Article 10(1) to International Arbitration (in Accordance with Articles 26(3)(C) and 27(2))’). Only three contracting parties, Australia, Hungary, and Norway, have exercised that option. Although Canada is listed in Annex IA, it did not sign the ECT. 60  See, e.g., K. Yannaca-​Small, Interpretation of the Umbrella Clause in Investment Agreements (OECD 2006), 10-​1 and Chapter 16 of the present book: What about This ‘Umbrella Clause’? in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 16 (K. Yannaca-​Small ed., 2018). 61  SGS Société Générale de Surveillance, S.A.  v.  Pakistan, ICSID Case No. ARB/​ 01/​13, Decision on Jurisdiction, (Aug. 6, 2003), 18 ICSID Rev.FILJ. 307, 361 ff. (2003).

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V.  Substantive Investment Protections of general arrangements that may be ‘entered into’ in a general sense, including investment authorizations, licences, and permits. This view was confirmed in Khan Resources, where the tribunal observed that the reference to ‘any obligations’ includes ‘the statutory obligations of the host state’ and in that case, Mongolia’s obligations under its Foreign Investment Law.62 Article 10(7) of the ECT establishes the better of national or most-​favoured-​nation (MFN) treatment.63 Article 10(2) clarifies that national treatment and MFN treatment obligations apply only with respect to investments that have already been made in the territory of a Contracting Party. With respect to the ‘Making of Investments’ (defined as ‘establishing new investments, acquiring all or part of existing investments or moving into different fields of Investment activity’), however, contracting parties need only ‘endeavour’ to accord the better of national treatment or MFN. This type of obligation is often referred to as a ‘soft law’ or ‘best efforts’ obligation.64 In contrast, the NAFTA, CAFTA, and several US BITs apply binding national treatment and MFN treatment obligations to the entire life-​cycle of an investment, starting with its ‘establishment’ or ‘acquisition’.65 Article 10(4) of the ECT envisioned that a supplementary treaty would extend binding na- 2.40 tional treatment and MFN obligations to the pre-​investment phase. This compromise solution was necessitated by, on the one hand, the insistence by the United States that investors have pre-​establishment rights, and on the other hand, objections by Russia and other transitional states that did not yet have pre-​investment laws in place and felt disadvantaged by OECD countries that were seeking to ‘grandfather’ their own exceptions to national treatment. Negotiations on this supplementary treaty began in 1996 but were halted in 2002 pending the outcome of discussions in the World Trade Organization regarding a multilateral framework for foreign direct investment.66 Article 13 of the ECT contains protections against unlawful expropriations or nationalizations. 2.41 Paragraph (1) of that article provides: Investments of Investors of a Contracting Party in the Area of another Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation . . . except where such Expropriation is: (a) for a purpose which is in the public interest; (b) not discriminatory; (c) carried out under due process of law; and (d) accompanied by the payment of prompt, adequate and effective compensation.

Article 13 adopts the familiar ‘Hull Formula’ for prompt, adequate, and effective compensa- 2.42 tion, first articulated in 1936 by US Secretary of State Cordell Hull in response to Mexico’s

  Khan Resources Decision, supra note 35, ¶ 438.   ECT art. 10(7) (‘Each Contracting Party shall accord to Investments in its Area of Investors of other Contracting Parties, and their related activities including management, maintenance, use, enjoyment or disposal, treatment no less favourable than that which it accords to Investments of its own Investors or of the Investors of any other Contracting Party or any third state and their related activities including management, maintenance, use, enjoyment or disposal, whichever is the most favourable’). 64  Paragraph (6)(b) allows a contracting party at any time to ‘make a voluntary commitment to accord to Investors of other Contracting Parties, as regards the Making of Investments in some or all Economic Activities in the Energy Sector in its Area’, the better of national treatment or MFN treatment by listing such commitments in Annex VC of the Treaty. To date, no contracting party has listed any such commitments in Annex VC. 65  NAFTA arts. 1102(1), 1103(1); CAFTA art. 10.3, 10.4; Treaty between the Government of the United States of America and the Government of the Republic of Rwanda Concerning the Encouragement and Reciprocal Protection of Investments (signed Feb. 2008) arts. 3, 4. 66  See Energy Charter Secretariat website, section on ‘Supplementary Treaty’. 62 63

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The Energy Charter Treaty nationalization of US petroleum companies. By referring to ‘measures having effect equivalent to naturalization or expropriation’, Article 13 also protects against ‘indirect’ or ‘regulatory’ expropriations, or interferences by the state that have the effect of gradually eroding the investor’s property interests. 2.43 Article 13 of the ECT is not distinguishable in any significant respect from the expropriation

provision in Article 1110 of NAFTA. The CAFTA, however, reflects a more cautious approach with respect to foreign investors’ rights to challenge a host state’s non-​discriminatory regulatory actions that are ostensibly taken in the public interest. Annex 10-​C of the CAFTA provides that:  ‘[e]‌xcept in rare circumstances, nondiscriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety, and the environment, do not constitute indirect expropriations’.67

2.44 Investors have brought successful claims under Article 13 for both direct and indirect expro-

priation. In Kardassopoulos v Georgia, the tribunal held that a government decree cancelling and dispossessing the claimant of ‘all rights’ in its investment vehicle ‘present[ed] a classic case of direct expropriation’.68 It noted that it was ‘clear on the record’ that an expropriation of these rights was planned even before the decree was issued.69 In the 2014 Yukos award, the tribunal held that the measures taken by Russian Federation in respect of the claimants’ investment had an effect ‘equivalent to nationalization or expropriation’ and that none of the cumulative conditions set out in Article 13 was present. Notably, it concluded that the destruction of the Yukos oil company may have been in the interest of Rosneft, the Russian Federation’s largest state-​owned oil company, but it was ‘profoundly questionable’ that it served the interests of the Russian ‘economy, polity and population’; that the expropriation was not ‘carried out under the due process of law’ given the harsh treatment accorded to Yukos’ former executives and its legal counsel; and that the expropriation was not accompanied by ‘any compensation whatsoever’, let alone ‘the payment of prompt, adequate and effective compensation’.70

2.45 Claims for expropriation have been unsuccessful in other cases. In Electrabel, the tribunal

dismissed the claimants’ claim that the respondent’s termination of a power purchase agreement held by its local affiliate had not sufficiently deprived it of the use of its investment to amount to an indirect expropriation, since its local affiliate continued to operate following the agreement’s termination.71 In Al-​Bahloul, the tribunal rejected the claimant’s argument that the respondent’s refusal to issue licences pursuant to energy exploration agreements amounted to an indirect expropriation, as there was no evidence that the underlying agreements were terminated by either party.72

2.46 In Charanne v Spain, the tribunal noted that ‘indirect expropriation under international law

implies a substantial effect on the property rights of the investor’.73 Similarly, the tribunal

67  Annex 10-​C of the CAFTA further provides that the economic impact of a regulation alone does not establish that an indirect expropriation has occurred, and that consideration must be given as well to the character of the government action at issue. The annex also clarifies that: ‘[a]‌n action or a series of actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in investment’. 68  Ioannis Kardassopoulos v. Georgia, ICSID Case No. ARB/​05/​18, Award (Mar. 3, 2010), ¶¶ 387–​88. 69  Id. 388. 70  Hulley Enterprises Ltd. (Cyprus) v.  Russian Federation, Final Award (July 18, 2014)  (Hulley Final Award), ¶¶ 1581–​84. 71  Electrabel Decision, supra note 49, ¶¶ 6.53, 6.63–6.64. 72  Al-​Bahloul, Partial Award, supra note 54, ¶¶ 282. 73  Charanne and Construction Investments v. Spain, Arbitration Institute of the Stockholm Chamber of Commerce, Case No. 062/​2012, Award (Jan. 21, 2016), ¶ 461.

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VI.  Dispute Settlement in Mamidoil v Albania held that ‘expropriation describes a specific effect on property itself ’ in the form of ‘a loss of one or several attributes of ownership’ and not merely ‘a damage inflicted to property’.74

VI.  Dispute Settlement Article 26 of the ECT sets out the procedures for an investor of a contracting party to submit 2.47 a dispute to arbitration under the Treaty relating to an investment in the area of another contracting party. Article 26(1) specifies that it applies to: Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably . . .

If the dispute cannot be settled amicably, the investor may submit it to binding dispute 2.48 resolution pursuant to the remainder of Article 26. By specifying that a dispute must concern a breach of an investment protection in Part III, Article 26 is potentially narrower than some other arbitration agreements that cover, for example, ‘all disputes arising out of an investment’.75 Under Article 26(2), the investor may choose between submitting its claim (i) ‘to the courts 2.49 or administrative tribunals of the Contracting Party to the dispute’, (ii) ‘in accordance with any applicable, previously agreed dispute settlement procedure’, or (iii) in accordance with the remainder of Article 26. The provision for ‘any applicable, previously agreed dispute settlement procedure’ leaves open the possibility that an investor and a state might enter into an ad hoc agreement that would embrace disputes arising out of the ECT as well as other instruments or agreements, although the umbrella clause in Article 10(1) will render the use of that mechanism limited in practice.76 Article 26(3)(b)(i) contains a so-​called fork-​in-​the-​road provision that potentially bars an investor’s claim that was previously submitted to the local courts or administrative tribunals, or in accordance with any applicable, previously agreed dispute settlement procedure. That provision is addressed in further detail in the following section. The investor is also afforded a wide choice under Article 26(4) of submitting the dis- 2.50 pute to (i) the International Centre for Settlement of Investment Disputes (ICSID), (ii) the ICSID Additional Facility, (iii) an ad hoc tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL), or (iv) an arbitral proceeding under the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). The investor’s choice among these institutions and rules can have a significant impact on its claim. For example, an investor that chooses ICSID arbitration must satisfy the requirements of the Washington Convention (including the requirement under Article 25 that there exists a legal dispute arising directly out of an investment), and any challenge to the arbitral award must be made before an ad hoc committee and cannot be made before the local courts of the state in which the arbitration takes place. The

74  Mamidoil Jetoil Greek Petroleum Products Societe Anonyme S.A. v. Albania, ICSID Case No. ARB/​ 11/​24, Award (Mar. 30, 2015), ¶¶ 568–​69. 75  For further discussion of this point, see Emmanuel Gaillard, ‘Treaty-​ based Jurisdiction: Broad Dispute Resolution Clauses’, (234)68 N.Y. L. J. (2005). 76  See T. Roe & M. Happold, Settlement of Investment Disputes under the Energy Charter Treaty 144 (2011).

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The Energy Charter Treaty ECT does not designate an appointing authority in the event the claimant opts for ad hoc arbitration under the UNCITRAL rules. As a result, pursuant to the UNCITRAL rules themselves, the secretary-​general of the Permanent Court of Arbitration must nominate the appointing authority.77 2.51 Finally, Article 26(8) provides that ‘[a]‌n award of arbitration concerning a measure of a

sub-​national government or authority of the disputing Contracting Party shall provide that the Contracting Party may pay monetary damages in lieu of any other remedy granted’. No similar option is accorded with respect to measures taken at the national level. This provision suggests that Contracting Parties may be bound to comply with any award for ‘other remedies’—​including the remedy of specific performance—​with respect to government measures taken at the national level.78 In theory, then, an ECT tribunal could order the repeal of national legislation or of a judicial decision taken at the national level.79 This contrasts with NAFTA and CAFTA, which do not distinguish between national and sub-​national measures, and both provide that a tribunal may ‘make a final award against a Party’ only for ‘monetary damages and any applicable interest’, or for ‘restitution of property, in which case the award shall provide that the disputing Party may pay monetary damages and any applicable interest in lieu of restitution’.80

2.52 Article 27 contains the Treaty’s state-​to-​state dispute resolution mechanism. It provides

for UNCITRAL arbitration in the event Contracting Parties cannot settle their differences through diplomacy. Paragraph (2), however, removes from the purview of Article 27 any dispute concerning the interpretation or application of Article 6 (Competition) or Article 19 (Environmental Aspects), as well as any claims under the umbrella clause in Article 10(1) with respect to states that opted not to apply that clause. Two additional exceptions are found in Article 28: ‘A dispute between Contracting Parties with respect to the application or interpretation of Article 5 [Trade-​Related Investment Measures] or 29 [Interim Provisions on Trade-​Related Matters] shall not be settled under Article 27 unless the Contracting Parties parties to the dispute so agree’. Accordingly, while Article 27 may in principle be broader than Article 26 in that it is not expressly limited to investment-​ related disputes, it contains several noteworthy exceptions to its scope of application. In contrast, there are very few exceptions to the state-​to-​state dispute resolution mechanism contained in Chapter 21 of NAFTA, the most notable being for anti-​dumping and countervailing duty matters, which are subject to a dedicated dispute resolution regime in a separate chapter of the treaty.81

  See UNCITRAL arts. 6(2), 7(2).   In the Al-​Bahloul case, the tribunal held that the remedy of specific performance was available under the ECT since, first, the treaty does not preclude it and, secondly, this power is implied in arts. 10(1) and 26(8). See Mohammad Ammar Al-​Bahloul v. Republic of Tajikistan, supra note 54, Final Award, ¶¶ 48–​49, 54, 62. 79  Arbitral tribunals constituted under similarly worded BITs have confirmed their belief that they are empowered to order such relief. In Enron v. Argentina, for example, the tribunal stated that ‘[a]‌n examination of the powers of international courts and tribunals to order measures concerning performance or injunction and of the ample practice that is available in this respect, leaves this tribunal in no doubt about the fact that these powers are indeed available’. Enron Corp. and Ponderosa Assets, LP v. Argentine Republic, ICSID Case No. ARB/​01/​3, Decision on Jurisdiction (Jan. 14, 2004), ¶ 79; see also Goetz et al. v. Burundi, ICSID Case No. ARB/​95/​3, Award (Feb. 10, 1999), 15 ICSID Rev.-​FILJ 457, 516 (2000); Ioan Micula, Viorel Micula et al. v. Romania, ICSID Case No. ARB/​05/​20, Decision on Jurisdiction and Admissibility (Sept. 24, 2008), ¶¶ 166–​68. 80  NAFTA art. 1135(1); CAFTA art. 10.26(1). 81  NAFTA art. 2004. 77 78

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VII.  Fork in the Road

VII.  Fork in the Road Like many treaties containing investment protections, the ECT includes a ‘fork-​in-​the-​road’ 2.53 provision that may require a claimant to make an irrevocable choice of forum for its claim.82 Specifically, Article 26(3)(b)(i) potentially bars an investor from submitting its claim to arbitration if the following conditions can be cumulatively demonstrated: (i) ‘the Investor party to the dispute’83 (ii) ‘concern[ing] an alleged breach of an obligation of the [Contracting Party to the dispute] under Part III’ of the ECT84 (iii) has ‘previously submitted the dispute’85 (iv) ‘to the courts or administrative tribunals of the Contracting Party to the dispute’ or to ‘any applicable, previously agreed dispute settlement procedure’.86 Article 21(3)(b)(i), however, is not available to all contracting parties but only those that 2.54 made a declaration that they wish to be listed in Annex ID, entitled ‘List of Contracting Parties not allowing an Investor to Resubmit the same dispute to International Arbitration at a later stage under Article 26 (in accordance with Article 26(3)(b)(i))’. Contracting parties not listed in Annex ID have extended their unconditional consent to arbitrate a dispute under the Treaty, even if the same dispute has already been submitted elsewhere.87 Under Article 26(3)(b)(i), the mere ‘submission’ of the dispute to the relevant forum can re- 2.55 sult in a forfeiture of the arbitral claim. In contrast, certain other treaties, including NAFTA and CAFTA, contain so-​called no U-​turn provisions that allow the prior submission of the dispute to another forum but require the investor to irrevocably waive the right to ‘continue’ that proceeding as a condition to submitting a claim to treaty arbitration.88 Finally, Article 26(1) defines the relevant ‘dispute’ narrowly as one that ‘concern[s]‌an alleged 2.56 breach of an obligation of the [respondent] under Part III’ of the ECT. Accordingly, it bars only a prior dispute in which the claimant alleged a breach of the ECT itself and not some other source of law. In contrast, the NAFTA and CAFTA require the claimant broadly to waive all proceedings referring to the same ‘measure’ at issue in the treaty arbitration.89 In  Gaillard, Fork in the Road, supra note 9.   ECT art. 26(2). 84  Id. art. 26(1). 85  Id. art. 26(3)(b)(i). 86  Id. art. 26(2)(a) & (b). 87  The arbitral tribunal in Petrobart Ltd. v Kyrgyz Republic for example, confirmed that the claimant could not be barred from submitting a claim to arbitration under the ECT by virtue of the ‘fork-​in-​the-​road’ provision in art. 26(3)(b)(i) because ‘the Kyrgyz Republic chose not to be listed in Annex ID of the Treaty’. See Petrobart Ltd. v. Kyrgyz Republic, supra note 18, Final Award, at 56. Slightly fewer than half of the Energy Charter Treaty’s signatories opted to retain their rights under art. 26(3)(b)(i) and are listed in Annex ID. Those signatories are Australia, Azerbaijan, Bulgaria, Croatia, Cyprus, the Czech Republic, the European Union and Euratom, Finland, Greece, Hungary, Ireland, Italy, Japan, Kazakhstan, Norway, Poland, Portugal, Romania, the Russian Federation, Slovenia, Spain, and Sweden. 88  NAFTA art. 1121(1)(b); CAFTA art. 10.18(2)(b). 89  NAFTA art. 1121(1)(b) & 2(b) (providing that a claimant may submit a claim to arbitration only if it waives its right to pursue ‘any proceeding with respect to the measure of the disputing Party that is alleged to be a breach [of the NAFTA]’); CAFTA art. 10.18(2)(b) (similarly requiring waiver of ‘any proceeding with respect to any measure alleged to constitute a breach [of the CAFTA]’). As the NAFTA tribunal in Waste Management explained with respect to pending domestic proceedings, ‘when both legal actions have a legal basis derived from the same measures, they can no longer continue simultaneously’. Waste Management, Inc. v. United Mexican States, Case No. ARB(AF)/​98/​2, Award (June 2, 2000) ICSID Rev.-​FILJ 214, 235–​36 (2003). The United States–​Chile Free Trade Agreement arguably contains an even broader waiver requirement, conditioning jurisdiction on the investor’s forfeiture of its right to pursue any claim ‘with respect to the events alleged to give rise to the claimed breach’ of the Treaty. See United States–​Chile FTA art. 10.17(2)(b) (emphasis added). 82 83

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The Energy Charter Treaty practice, given the narrow scope of Article 26(1) of the ECT, it will likely be rare that contracting parties will successfully invoke that article to bar a claim. 2.57 In the Yukos arbitrations, for example, the tribunal rejected the Russian Federation’s argument

that the claimants’ claims were barred under 26(3)(b)(i) of the ECT because various other proceeding had been brought by other entities before the Russian courts and the European Court of Human Rights. The tribunal held that the Russian Federation has failed to satisfy the so-​ called triple identity test under 26(3)(b)(i), which requires a claimant to demonstrate ‘identity of parties, cause of action and object of the dispute’.90 The tribunal also rejected the Russian Federation’s argument that the tribunal should look beyond the triple identity test in this case because accepting jurisdiction would effectively mean that the tribunal would sit in judgment over the various Russian courts seized of the proceedings referred to by the respondent. The tribunal held that the purpose of the claim was not to review any decisions by Russian courts, but rather ‘to determine whether Respondent breached Claimant’s rights under the ECT’.91 The tribunal in Khan Resources v Mongolia similarly rejected the respondent’s argument that the claimants were prevented by Article 26(3)(b)(i) from bringing ECT claims by virtue of litigation initiated by their Mongolian subsidiary in local administrative courts. The tribunal considered that there was ‘no reason to go beyond the triple identity test’, which was not satisfied in that case as the parties, causes of action, and objects of the arbitration and the local administrative proceedings were different.92 Finally, the arbitral tribunal in Charanne v Spain held that the fact that companies may be part of the same corporate group was insufficient to establish that there was a ‘substantial identity of the parties’.93

VIII.  Provisional Application 2.58 Provisional application has become one of the most widely discussed provisions in the ECT,

particularly in the wake of Yukos award and the ongoing proceedings before the Dutch courts. Provisional application is a widely used device in international treaty practice by which states give effect to a treaty before it has entered into force.94 Initially, two states applied the ECT provisionally, namely the Russian Federation and Belarus. Provisional application under Article 45 of the ECT was open only to the states that signed the Treaty when it was initially open for signature between 14 December 1994 and 16 June 1995.

2.59 Article 45 of the ECT provides, in pertinent part:

(1) Each signatory agrees to apply this Treaty provisionally pending its entry into force for such signatory in accordance with Article 44, to the extent that such provisional application is not inconsistent with its constitution, laws or regulations. (2) (a)  Notwithstanding paragraph (1)  any signatory may, when signing, deliver to the Depository a declaration that it is not able to accept provisional application. The obligation contained in paragraph (1) shall not apply to a signatory making such a declaration.

  Hulley Interim Award, supra note 22, ¶ 592.   Id. ¶¶ 598–​99. 92  Supra note 35, Khan Resources Decision, ¶¶ 392–​96. 93  Charanne and Construction Investments v. Spain, Arbitration Institute of the Stockholm Chamber of Commerce, Case No. 062/​2012, Award (Jan. 21, 2016), ¶ 490. 94  Article 25(1) of the Vienna Convention on the Law of Treaties 1969 allows for the provisional application of treaties in stipulating: ‘A treaty or a part of a treaty is applied provisionally pending its entry into force if: (a) the treaty itself so provides; or (b) the negotiating states have in some other manner so agreed’. On provisional application generally, see Y. Banifatemi, Provisional Application of the Energy Charter Treaty: The Negotiating History of Article 45, in Coop & Ribeiro, supra note 4, at 191. 90 91

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VIII.  Provisional Application Any such signatory may at any time withdraw that declaration by written notification to the Depository. (b) Neither a signatory which makes a declaration in accordance with sub-paragraph (a) nor Investors of that signatory may claim the benefits of provisional application under paragraph (1). (3) (a) Any signatory may terminate its provisional application of this Treaty by written notification to the Depository of its intention not to become a Contracting Party to the Treaty. Termination of provisional application for any signatory shall take effect upon the expiration of 60 days from the date on which such signatory’s written notification is received by the Depository. (b) In the event that a signatory terminates provisional application under sub-​paragraph (a), the obligation of the signatory under paragraph (1) to apply Parts III and V with respect to any Investments made in its Area during such provisional application by Investors of other signatories shall nevertheless remain in effect with respect to those Investments for twenty years following the effective date of termination, except as otherwise provided in sub-paragraph (c). (c) Sub-paragraph (b) shall not apply to any signatory listed in Annex PA. A signatory shall be removed from the list in Annex PA effective upon delivery to the Depository of its request therefor.

Accordingly, any contracting party wishing to apply the ECT provisionally was required to 2.60 make a declaration at the time of signing that it was ‘unable to accept’ provisional application. Norway, Iceland, and Australia, for example, each signed the Treaty but filed a declaration of non-​acceptance of provisional application. In the absence of such a declaration, however, a signatory state ‘agrees’ to apply the Treaty provisionally. Accordingly, Parties that did not make such a declaration, including Russia and Belarus, agreed to provisionally apply the Treaty.95 Signatories may terminate provisional application by giving written notification to the de- 2.61 pository, and termination then becomes effective sixty days later. As an indication of the importance of provisional application, any terminating party is still bound to honour the Treaty’s investment protections and dispute resolution obligations with respect to existing investments for an additional twenty years, unless the signatory opts out of that obligation by listing itself in Annex PA.96 To date, four arbitral tribunals have addressed Article 45 of the ECT. In its Decision on 2.62 Jurisdiction of February 8, 2005, the arbitral tribunal in Plama, for example, clarified that the application of the ECT on a provisional basis extends to the investor-​state mechanism in Article 26: In its final award of March 29, 2005, the tribunal in Article 45(1) ECT provides that each signatory agrees to apply the treaty provisionally pending its entry into force for such signatory; and in accordance with Article 25 of the Vienna Convention, it follows that Article 26 ECT provisionally applied from the date of a state’s signature, unless that state declared itself exempt from provisional application under Article 45(2)(a) ECT.97

Petrobart addressed the issue whether a company incorporated in Gibraltar could submit 2.63 a claim against the Kyrgyz Republic where the United Kingdom had not listed Gibraltar

95  Since the end of the signature period on June 16, 1995, any new member wishing to be bound by the ECT had to accede to the Treaty. Accession does not entail signing the Treaty and the question of provisional application does not arise. 96  The only states listed in Annex PA include the Czech Republic, Germany, Hungary, Lithuania, Poland, and Slovakia. 97  Plama, Decision on Jurisdiction, supra note 29, ¶ 140.

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The Energy Charter Treaty as a territory applying the Treaty provisionally at the time the United Kingdom ratified it (although it had done so at the time it signed the ECT).98 The tribunal concluded that provisional application nonetheless continued in Gibraltar and that an investor from a state such as Gibraltar that applies the Treaty provisionally is entitled to submit a claim to arbitration under Article 26 of the ECT.99 2.64 In its decision on jurisdiction of July 6, 2007, the tribunal in Ioannis Kardassopoulos v

Georgia100 shed further light on Article 45 of the ECT. The respondent relied on Article 1(6) of the ECT, which accords jurisdiction only over matters affecting investments after the ‘effective date’, which is defined as the later of the dates on which the ECT entered into force for Greece or Georgia. In both cases, that was the date the Treaty itself entered into force, April 16, 1998.101 The respondent argued, inter alia, that because, on the claimant’s own case, the alleged expropriation was consummated before the effective date, the tribunal lacked jurisdiction ratione temporis over the claims.102

2.65 The tribunal first rejected the respondent’s contention that provisional application was merely

‘aspirational’ in nature. While recognizing that provisional application was ‘not the same as entry into force’, the tribunal held that provisional application under Article 45(1) of the ECT obliged signatories to apply the whole Treaty as if it had entered into force: It is ‘this Treaty’ which is to be provisionally applied, i.e., the Treaty as a whole and in its entirety and not just a part of it; and use of the word ‘application’ requires that the ECT be ‘applied’. Since that application is to be provisional ‘pending its entry into force’ the implication is that it would be applied on the same basis as would in due course result from the ECT’s (definitive) entry into force, and as if it had already done so. It follows that the language used in Article 45(1) is to be interpreted as meaning that each signatory State is obliged, even before the ECT has formally entered into force, to apply the whole ECT as if it had already done so.103

2.66 The tribunal observed that, in the context of provisional application, interpreting ‘entry into

force’ (and therefore the ‘effective date’) in Article 1(6) literally to refer only to definitive entry into force under Article 44 of the ECT would ‘strike at the heart of the clearly intended provisional application regime’.104 The tribunal resolved this seeming conundrum by ascribing an ‘effective date’ to provisional application—​i.e., the later of the dates on which the ECT became provisionally applicable in both Georgia and Greece.105

2.67 The tribunal next rejected the claimant’s argument that Georgia’s failure to make a declar-

ation under Article 45(2) is an acknowledgment that provisional application is consistent with its laws.106 The tribunal noted that a contracting party may have reasons other than an inconsistency between provisional application and its domestic law for making an Article 45(2) declaration. It also held that a state that had such an inconsistency was entitled to rely on the ‘to the extent’ clause in Article 45(1) without the need to make a declaration under Article 45(2), and indeed that there was no definitive link between Article 45(1) and 45(2):

  Petrobart Ltd. v. Kyrgyz Republic, supra note 18, Final Award (Mar. 29, 2005).   Id. 62–​63. 100 Ioannis Kardassopoulos v.  Georgia, ICSID Case No. ARB/​ 05/​18, Decision on Jurisdiction (July 6, 2007). 101  Id. ¶ 72. 102  Id. ¶¶ 71–​73. 103  Id. ¶¶ 210–​11. 104  Id. ¶ 222. 105  Id. ¶ 223. The tribunal noted that the parties’ arguments concerning reciprocity were irrelevant and that the need to consider the laws of both states arises directly from art. 1(6). Id. ¶ 226. 106  Id. ¶¶ 22–​28. 98 99

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VIII.  Provisional Application There is no necessary link between paragraphs (1) and (2) of Article 45. A declaration made under paragraph (2) may be, but does not have to be, motivated by an inconsistency between provisional application and something in the State’s domestic law; there may be other reasons which prompt a State to make such a declaration. Equally, a State whose situation is characterized by such inconsistency is entitled to rely on the proviso to paragraph (1) without the need to make, in addition, a declaration under paragraph (2). The Tribunal is therefore unable to read into the failure of either State to make a declaration of the kind referred to in Article 45(2) any implication that it therefore acknowledges that there is no inconsistency between provisional application and its domestic law.107

The tribunal nevertheless rejected the respondent’s position that provisional application of the 2.68 ECT was inconsistent with Georgian law. Specifically, the tribunal rejected the respondent’s attempt to rely on a domestic law addressing provisional application that had come into force after the actions at issue and two other laws that provide simply that international treaties must enter into force to prevail over domestic Georgian law.108 The negotiating history to the ECT, however, suggests that the negotiators recognized the 2.69 potential conflict between provisional application in Article 45(1) and the ‘effective date’ in Article 1(6). On November 8, 1994, the head of the legal sub-​group circulated an internal memorandum to the rest of the sub-​group proposing that the following understanding be included in the Treaty to clarify that provisional application was effective from the date of signature and was therefore not subject to any ‘effective date’: WITH RESPECT TO ARTICLES 1(6) AND 45(1) With regard to matters affecting Investments, it is intended, notwithstanding the provisions of Article 1(6) with respect to Effective Date, that the Treaty apply provisionally under Article 45(1) for a signatory which has not made a declaration in accordance with Article 45(2)(a), as if that signatory and the other signatories were Contracting Parties and the dates of their respective signatures were the dates of the Treaty’s entry into force for them.

Subsequently, on November 29, 1994, the legal sub-​group issued a final report to the Charter 2.70 Conference (distributed as Message 278L) stating its belief that no understanding was necessary because the language in Article 45 made it sufficiently clear that the ‘effective date’ in Article 1(6) was not applicable to provisional application: We were asked to consider the need for a new Understanding to avoid any doubt that the ECT is intended to apply to investment during the period of provisional application in accordance with Article 45(1), notwithstanding the ‘Effective Date’ in Article [1(6)]. A recently published law review article that was based on an early draft of the ECT questioned whether the ‘Effective Date’ would preclude such application. Since that article was written, however, paragraph (3)(b) has been added to Article 45; in our opinion, the addition of paragraph (3)(b) to Article 45 eliminates any doubt that the drafters of the ECT intended it to apply provisionally to investment in accordance with Article 45(1), notwithstanding the ‘Effective Date’.

This aspect of the travaux préparatoires should make clear in any future disputes in which a 2.71 similar issue arises that the drafters did not intend provisional application of the ECT to be subject to the ‘effective date’ provision in Article 1(6).109

  Id. ¶ 228.   Id. ¶¶ 229–​39. 109  See, e.g., AES Award, ¶ 6.4.1 (‘in accordance with Article 1(6), the investments protected by the ECT include those made before the entry into force of this Treaty, provided that it shall only apply to matters affecting such investments after the Effective Date’). 107 108

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The Energy Charter Treaty 2.72 Finally, in its interim award on jurisdiction and admissibility of November 30, 2009, the

tribunal in the Yukos arbitrations rejected the Russian Federation’s challenge to jurisdiction based on Article 45(1) of the ECT.

2.73 The tribunal first concluded that a signatory state’s reliance on the ‘to the extent’ language in

Article 45(1)—​labelled the ‘limitation clause’ by the tribunal—​did not require the submission of a declaration under Article 45(2): Article 45(1), while establishing a binding obligation for each signatory to apply the ECT provisionally, on its face limits the scope of that obligation through the Limitation Clause beginning with ‘to the extent’. Nothing in the language of Article 45 suggests that the Limitation Clause in Article 45(1) is dependent on the mandatory making of a declaration under Article 45(2). To the contrary, as argued by Respondent, the use of the word ‘may’ rather than ‘shall’ in relation to the making of a declaration makes clear that a declaration under Article 45(2)(a) is permissive, not obligatory. Furthermore, the use of the word ‘[n]‌otwithstanding’ to introduce Article 45(2) plainly suggests that the declaration in Article 45(2)(a) can be made whether or not there in fact exists any inconsistency between ‘such provisional application’ of the ECT and a signatory’s constitution, laws or regulations.110

2.74 In this regard, the tribunal found significant the fact that six states (Austria, Luxembourg,

Italy, Romania, Portugal, and Turkey) relied on Article 45(1), or the ability to opt out of provisional application for inconsistency with their domestic legal regime, without delivering a formal declaration to the Depository under Article 45(2).111 The tribunal ‘acknowledge[d]‌ that the preparatory work of the Treaty could lead to a finding of linkage between Article 45(1) and 45(2)’, but concluded that the Vienna Convention on the Law of Treaties permits recourse to such supplementary means of interpretation only where the application of the general rule of interpretation leaves the treaty’s meaning ambiguous or obscure or leads to a result that is manifestly absurd or unreasonable—​which the tribunal concluded was not the case here.112 Finally, the tribunal noted that its interpretation was in harmony with the conclusion reached by the ICSID tribunal in Kardassopoulos.113

2.75 The tribunal next concluded that the Russian Federation could rely on Article 45(1) of the

ECT even though it had never served any prior notice under that provision that it could not apply the Treaty provisionally, and indeed had supported provisional application during the Treaty negotiations: The Tribunal accepts that, throughout the ECT negotiations, great emphasis was put on transparency by different actors, including the Russian Federation. However, the fact remains that, at the end of the day, when the negotiations were concluded and the ECT signed by the Russian Federation, Article 45(1) did not expressly require any form of declaration or notification in order to allow a signatory to invoke the Limitation Clause. Transparency did not trump the clear inconsistency provision of Article 45(1) [ . . . ] [T]‌he Tribunal cannot read into Article 45(1) of the ECT a notification requirement which the text does not disclose and which no recognized legal principle dictates. The Tribunal therefore concludes . . . that the Russian Federation may, even after years of stalwart and unqualified support for provisional application and, until this arbitration, without ever invoking the Limitation Clause, claim an inconsistency between the provisional application of the ECT and its internal laws in order to seek to avoid the application of Part V of the ECT.114

  Hulley Interim Award, supra note 22, ¶ 262.   Id. ¶ 265. 112  Id. ¶¶ 266–​68. 113  Id. ¶ 269. 114  Id. ¶¶ 282–​84. 110 111

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VIII.  Provisional Application Applying the standard established by the International Court of Justice (ICJ) in the North Sea 2.76 Continental Shelf Cases, the tribunal concluded that the Russian Federation was not estopped from relying on Article 45(1) by virtue of its support for provision application of the ECT during the negotiations because that support ‘never “clearly” excluded the possibility that Respondent was in fact relying on its interpretation of the operation of the Limitation Clause in Article 45(1) which would in any event exclude or limit provisional application of the Treaty’.115 The tribunal, however, rejected the Russian Federation’s position that the ‘to the extent’ lan- 2.77 guage in Article 45(1) required a ‘piecemeal’ approach calling for an analysis of the consistency of each provision of the ECT with the Constitution, laws, and regulations of the Russian Federation. The tribunal held that, ‘by signing the ECT, the Russian Federation agreed that the Treaty as a whole would be applied provisionally pending its entry into force unless the principle of provisional application itself were inconsistent “with its constitution, laws or regulations.” ’116 The tribunal analysed the text of Article 45(1) as follows:

2.78

[T]‌he key to the interpretation of the Limitation Clause rests in the use of the adjective ‘such’ in the phrase ‘such provisional application’. ‘Such’ . . . means ‘that or those; having just been mentioned’, . . . [or] ‘of the character, quality, or extent previously indicated or implied’. The phrase ‘such provisional application’, as used in Article 45(1), therefore refers to the provisional application previously mentioned in that Article, namely the provisional application of ‘this Treaty’.117

The tribunal concluded that ‘the provisional application of this Treaty’ must mean the 2.79 provisional application of the ‘entire Treaty’ and not ‘some parts of the Treaty’, and that the ‘to the extent’ language in Article 45(1) therefore presented an ‘all-​or-​nothing’ proposition.118 According to the tribunal, the alternative interpretation advanced by the Russian Federation 2.80 was contrary to the object and purpose of the ECT, the public international law principle of pacta sunt servanda, and indeed the very purpose of provisional application: The alternative—​that the question hinges on whether, in fact, each and every provision of the Treaty is consistent with a signatory’s domestic legal regime—​would run squarely against the object and purpose of the Treaty, and indeed against the grain of international law. Under the pacta sunt servanda rule and Article 27 of the VCLT, a State is prohibited from invoking its internal legislation as a justification for failure to perform a treaty. In the Tribunal’s opinion, this cardinal principle of international law strongly militates against an interpretation of Article 45(1) that would open the door to a signatory, whose domestic regime recognizes the concept of provisional application, to avoid the provisional

  Id. ¶¶ 286–​88. The ICJ noted in ¶ 30 of the North Sea Continental Shelf Cases:

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[I]‌t appears to the court that only the existence of a situation of estoppel could suffice to lend substance to [the contention that the Federal Republic was bound by the Geneva Convention on the Continental Shelf ] . . .,—​that is to say if the Federal Republic were now precluded from denying the applicability of the conventional régime, by reason of past conduct, declarations, etc., which not only clearly and consistently evidence acceptance of that régime, but also had caused Denmark or the Netherlands, in reliance on such conduct, detrimentally to change position or suffer some prejudice.   Id. ¶ 301 (emphasis in original).   Id. ¶ 304 (emphasis in original). 118  Id. ¶¶ 308, 311. 116 117

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The Energy Charter Treaty application of a treaty (to which it has agreed) on the basis that one or more provisions of the treaty is contrary to its internal law. Such an interpretation would undermine the fundamental reason why States agree to apply a treaty provisionally. They do so in order to assume obligations immediately pending the completion of various internal procedures necessary to have the treaty enter into force. Allowing a State to modulate (or, as the case may be, eliminate) the obligation of provisional application, depending on the content of its internal law in relation to the specific provisions found in the Treaty, would undermine the principle that provisional application of a treaty creates binding obligations.119 2.81 The tribunal’s conclusion was further supported by state practice. In particular, the tribunal

noted that the six states referenced that had expressly relied on the ‘to the extent’ language in Article 45(1) all declared that they could not apply the entire Treaty. As the tribunal remarked, ‘not one of [them] relied on the Limitation Clause in Article 45(1) for the interpretation now posited by Respondent, namely the selective or partial provisional application of the ECT based on the non-​application of only those individual provisions that are claimed to be inconsistent with a signatory’s domestic law’.120

2.82 Finally, the tribunal concluded that the principle of provisional application per se was con-

sistent with Russian law, a point that was hardly challenged by the respondent.121 The tribunal in particular relied on Article 23(1) of the Russian Federal Law on International Treaties of 1995, which states that ‘[a]‌n international treaty or a part thereof may, prior to its entry into force, be applied by the Russian Federation provisionally if the treaty itself so provides or if an agreement to such effect has been reached with the parties that have signed the treaty’.122 Finally, the tribunal observed that there are currently some 45 treaties being applied provisionally by the Russian Federation, which again was not disputed.123

2.83 On 20 August 2009, the Russian Federation notified the Portuguese Republic, as the ECT

depository, of its intention not to become a party to the ECT by invoking Article 45(3)(a) of the Treaty. Article 45(3)(a) provides that termination of provisional application takes effect

119  Id. ¶¶ 312–​14. Interestingly, the tribunal also relied on principles of transparency and predictability—​ noting in particular the unfair surprise that would result were a signatory state allowed to raise alleged ‘inconsistencies’ after an arbitral dispute has arisen—​notwithstanding its conclusion that such considerations did not prevail in respect of the broader question whether formal notice was required to invoke the ‘to the extent’ clause: Provisional application as a treaty mechanism is a question of public international law. International law and domestic law should not be allowed to combine, through the deployment of an “inconsistency” or “limitation” clause, to form a hybrid in which the content of domestic law directly controls the content of an international legal obligation. This would create unacceptable uncertainty in international affairs. Specifically, it would allow a State to make fluctuating, uncertain and un-​notified assertions about the content of its domestic law, after a dispute has already arisen. Id. ¶ 315. 120  Id. ¶ 321. The tribunal further observed that the preliminary lists maintained by the ECT Secretariat to identify states that intended to opt out of provisional application describes the listed states as those ‘which will not apply the Treaty provisionally in accordance with Article 45(1)’—​again suggesting an all-​or-​nothing proposition for provisional application. Id. ¶ 322. 121  Id. ¶ 330. The tribunal held that this determination ‘must be made in the light of the constitution, laws and regulations at the time of signature of the ECT’ on the basis that ‘[a]‌ny other interpretation would allow a State to modify its laws after having signed the ECT in order to evade an obligation that it had assumed by agreeing to provisional application of the Treaty’. Id. ¶¶ 343–​44 (emphasis in original). 122  Id. ¶ 332. 123  Id. ¶ 337. The tribunal also noted that the Russian Federation had confirmed that provisional application was consistent with Russian law in response to a question posed in the context of a study commissioned by the Committee of Legal Advisers on Public International Law of the Council of Europe. Id. ¶ 336.

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IX.  Taxation Carve-out sixty days after notification, or on 19 October 2009.124 Accordingly, the tribunal held that the Russian Federation was bound to accord treaty protections to qualifying foreign investments for a period of twenty years from that date: [P]‌ursuant to Article 45(3)(b) of the Treaty, investment-​related obligations, including the obligation to arbitrate investment-​related disputes . . . remain in force for a period of 20 years following the effective date of termination of provisional application. In the case of the Russian Federation, this means that any investments made in Russia prior to 19 October 2009 will continue to benefit from the Treaty’s protection for a period of 20 years–​i.e., until 19 October 2029.125

In April 2016, The Hague District Court vacated the Yukos awards, finding that the arbitral 2.84 tribunal lacked jurisdiction because dispute resolution through arbitration was inconsistent with Russian law and therefore was not part of Russia’s provisional application of the ECT. That decision is being appealed. In the meantime, some arbitral tribunals have determined that they are not bound by the district court’s decision and have confirmed their own jurisdiction over claims against the Russian Federation under Article 45 of the ECT.

IX.  Taxation Carve-​out Like other investment treaties, the ECT contains a carve-​out to the Treaty’s coverage for 2.85 taxation. Article 21 of the ECT is remarkable, first of all, for its complexity. It runs for two and a half pages and distinguishes between several categories of taxation, including ‘Taxation Measures other than those on income or on capital’, ‘Taxation Measures aimed at ensuring the effective collection of taxes’, and ‘advantages accorded by a Contracting Party pursuant to the tax provisions of any convention, agreement, or arrangement described in subparagraph 7(a)(ii)’. By comparison, tax exclusions in other treaties tend to be simple affairs. Article 7(b) of the UK–Belarus BIT, for example, provides in a single sentence that the treaty’s national treatment and MFN provisions do not extend to any treatment, preference, or privilege arising under ‘any international agreement or arrangement relating wholly or mainly to taxation or any domestic legislation relating wholly or mainly to taxation’.126 Article 21’s signature feature is its definition of the ‘Taxation Measures’ that are excluded 2.86 from the Treaty’s coverage. Paragraph (1) of the article contains the basic exclusion for ‘taxation measures’: Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.

‘Taxation measures’ are then defined in paragraph (7)  as ‘provisions’ of domestic tax law or tax conventions. By limiting the scope of the exclusion in paragraph (1) to ‘provisions’, Article 21 preserves each Contracting Party’s right to enact tax legislation but does not apply to the implementation or enforcement of such legislation or treaties. It also ensures the primacy of provisions of tax conventions over potentially conflicting provisions of the ECT. In contrast, some other investment treaties accord the term ‘taxation measure’ a significantly   Id. ¶ 338.   Id. ¶ 339. 126  See also ASEAN Agreement art. V (‘The Provision of this Agreement shall not apply to matters of taxation in the territory of the Contracting Parties. Such matters shall be governed by Avoidance of Double Taxation between Contracting Parties and the domestic laws of each Contracting Party’). 124 125

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The Energy Charter Treaty broader definition. NAFTA and CAFTA, for example, both define ‘measures’ to include ‘any law, regulation, procedure, requirement or practice’. That definition appears to govern the term ‘taxation measure’ in the respective taxation provisions. 2.87 This distinction between a narrow and broad definition of ‘taxation measure’ appears to have

been of significance for the arbitral tribunal in EnCana Corporation v Republic of Ecuador. The treaty at issue in that case, the Canada–​Ecuador BIT, defined ‘taxation measures’ broadly to include any ‘law, regulation, procedure, requirement, or practice’. The tribunal expressly noted that ‘[h]‌aving regard to the breadth of the defined term “measure”, there is no reason to limit Article XII(1) to the actual provisions of the law which impose a tax’.127 Rather, the tribunal concluded that such term should be interpreted broadly to include ‘any executive act . . . implementing’ those provisions. Based on that interpretation, the tribunal excluded part of the claimant’s claim under Article XII(1) of the BIT. In light of the tribunal’s observations concerning the scope of Article XII(1), it is very possible the tribunal would have allowed the excluded claim to proceed had that article been limited to taxation ‘provisions’, like Article 21 of the ECT.128

2.88 The parties to the Yukos arbitration extensively briefed the issues concerning the scope of

Article 21 of the ECT, whether the measures at issue fell within that article, and whether the article relates to jurisdiction or admissibility. The tribunal concluded that ‘the background to, and motivation behind, the Russian Federation’s measures that gave rise to the present arbitration, be they ‘taxation measures’ or not, go to the heart of the present dispute’, and it could not ‘rule on this crucial issue in a vacuum’, and joined those issues to the merits phase of the arbitration.129 In its final award, the tribunal held that the claimants’ claims were not carved out by Article 21. The tribunal reasoned that it would have ‘indirect’ jurisdiction over the claimant’s expropriation claims since ‘any measures excluded by the carve-​out . . . would be brought back within the Tribunal’s jurisdiction by the claw-​ back of Article 21(5) of the ECT’.130 The tribunal further held that the tax carve-​out in the ECT can apply only to actions motivated by the purpose of raising state revenue.131 According to the tribunal, since the tax measures at issue were aimed at paralysing the Yukos oil company rather than collecting taxes, they could not fall within the scope of Article 21.

X. Conclusion 2.89 Critics of the ECT often focus on the Treaty’s perceived textual flaws. One leading commen-

tator has referred to it as ‘everything but a model of clarity’.132 One need only consider, however, the failure of all other efforts—​most notably the Multilateral Agreement on Investment—​to create multilateral investment rules to understand what a remarkable achievement is the ECT. Moreover, the potential geographical expansion to China and Africa of a treaty originally intended to integrate the former Soviet Union’s energy sector into the European market, and its ready adaption to new types of energy disputes suggest an important ongoing role for the ECT in setting the standards for global governance in the energy sector. 127 EnCana Corporation v.  Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL (Canada/​ Ecuador BIT), Award (Feb. 3, 2006), ¶ 142. 128  Id. ¶¶ 141–​43 (emphasis added). 129  Hulley Interim Award, supra note 22, ¶¶ 583–​84. Similarly, the RREEF tribunal decided that the issue of whether certain measures challenged by the claimant fell within the tax carve-​out should be joined to the merits of the dispute. See RREEF Decision, supra note 25, ¶ 232. 130  Hulley Final Award, supra note 70, ¶ 1406. 131  Id. ¶ 1408. 132  Thomas Wälde, Energy Charter Treaty Based Investment Arbitration, 1(3) TDM (2004).

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3 INTERNATIONAL INVESTMENT DISPUTE SETTLEMENT MECHANISMS Ucheora Onwuamaegbu

E. Tribunal’s Experts  3.44 F. Transparency and Third-​party Participation  3.45 G. The Award and Post-​award Remedies  3.47 H. Costs  3.55

I. Introduction  3.01 II. Institutionally Supported Arbitration  3.03 A. Overview  B. International Centre for Settlement of Investment Disputes  C. International Court of Arbitration of the International Chamber of Commerce, Paris  D. The Arbitration Institute of the Stockholm Chamber of Commerce 

III. Selected Procedural Issues 

3.03 3.06

IV. Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules 

3.62 A. Overview of UNCITRAL  3.62 B. Commencement of Proceedings under the UNCITRAL Arbitration Rules  3.66 C. Appointment and Disqualification of Arbitrators  3.67 D. Proceedings  3.70 E. Transparency  3.72 F. Other Provisions  3.76 G. Other UNCITRAL Texts  3.81 V. Conclusion  3.83

3.14 3.20 3.24

A. Commencement of Proceedings and the Role of the Institution in the Initial Determination of Jurisdiction  3.24 B. Appointment and Disqualification of Arbitrators  3.32 C. Interim Measures  3.38 D. Seat/​Place of Arbitration, Language of Proceedings, and Applicable Law  3.42

I. Introduction The first part of this chapter introduces the three institutions under whose auspices treaty-​ 3.01 based investor-​state arbitration proceedings have most commonly been conducted:  the International Centre for Settlement of Investment Disputes (ICSID or the Centre), the International Court of Arbitration of the International Chamber of Commerce (ICC), and the Arbitration Institute of the Stockholm Chamber of Commerce (SCC).1 Following a general overview of the three institutions, the chapter examines certain procedural issues that may be considered by parties in deciding among them, assuming that consent exists.

1  See, e.g., UNCTAD Investment Dispute Settlement Navigator, according to which the top three most commonly used arbitration institution rules for investment treaty arbitration proceedings (as at March 2017) have been the ICSID (495), the SCC (36), and the ICC (6).While the Permanent Court of Arbitration (PCA) has increasingly been involved in the administration of investor-​state arbitration proceedings, the institution’s Arbitration Rules are yet to gain similar popularity, http://​investmentpolicyhub.unctad.org/​ ISDS/​FilterByRulesAndInstitution (last visited Dec. 10, 2017).

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International Investment Dispute Settlement Mechanisms The intention is not to identify all the differences between the institutions but to highlight certain provisions in their arbitration rules that best demonstrate the main differences between them.2 3.02 Finally, the chapter examines the Rules of the United Nations Commission on International

Trade Law (UNCITRAL) under which the majority of ad hoc investor-​state arbitrations have so far been conducted and draws certain contrasts between them and the rules of the institutions earlier discussed.3

II.  Institutionally Supported Arbitration A. Overview 3.03 Over the decades, international arbitration has evolved as the preferred alternative method to

domestic court litigation for resolving disputes arising from cross-​border investments, particularly those involving states. Such arbitration could be ad hoc, typically under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) or institutional, under the auspices of one of the various institutions that administer international arbitration. Owing to the confidential nature of the proceedings, it is not always easy to identify how many investor-​state disputes are in arbitration at any given time. From available information, however, ICSID is by far the forum of choice for institutionally supported investor-​state arbitration.4 Other institutions that administer international proceedings relating to investment or commercial disputes include the ICC, the SCC, the London Court of International Arbitration (LCIA), the International Centre for Dispute Resolution (ICDR) of the American Arbitration Association (AAA), and the Permanent Court of Arbitration (PCA) in The Hague.5 These disputes could equally be administered or otherwise conducted with the help of the numerous other arbitration institutions that exist today, some of which are more national or regional than international in the types of cases they handle.6

2  Institutions routinely amend their arbitration rules, but the rules herein discussed are the versions in effect as at March 2017. 3  For another comparison of arbitration mechanisms under the ICSID Convention, the SCC Rules, and the UNCITRAL Rules, see J. Blanch et al., Access to Dispute Resolution Mechanisms under Article 26 of the Energy Charter Treaty, in Investment Protection and the Energy Charter Treaty 1 ff. (G. Coop and C. Ribeiro eds., 2008). 4  See supra note 2. 5  See R. Doak Bishop et al., Foreign Investment Disputes: Cases, Materials and Commentary 12 (2005), for a discussion of other bodies that from time to time have to deal with investment disputes, including some public international institutions such as the International Court of Justice, the Inter-​ American Commission and Court on Human Rights, and the European Court of Human Rights. With regard to the latter institution, see, e. g., the February 19, 2009 Judgment of the Grand Chamber of the ECHR in Kozacioǧlu v. Turkey (No. 2334/​03). See also A. Reinisch & L. Malintoppi, Methods of Dispute Resolution, in The Oxford Handbook of International Investment Law 691 (2008). 6  A sample of such institutions include Cairo Regional Centre for International Commercial Arbitration (CRCICA), China International Economic and Trade Arbitration Commission (CIETAC), Commercial Arbitration Centre for the States of the Co-​operation Council for the Arab States of the Gulf (GCC Commercial Arbitration Centre) in Bahrain, Lagos Regional Centre for International Commercial Arbitration (LRCSCA), Singapore International Arbitration Center (SIAC), Kuala Lumpur Regional Centre for Arbitration (KLRCA), Swiss Chambers’ Court of Arbitration and Mediation, International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC), and Arbitration Center of the American Chamber of Commerce for Brazil. For a comprehensive list of international and national arbitral and ADR institutions, see Related Arbitration Links website of the International Council for Commercial Arbitration, http://​www.arbitration-​icca.org/​related-​links.html#04 (last visited Dec. 10, 2017).

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II.  Institutionally Supported Arbitration Arbitration institutions provide the structural framework within which proceedings are con- 3.04 ducted. They do this through their respective sets of arbitration rules, which govern parties and tribunals in the conduct of the proceedings. The arbitration rules of the different institutions cover matters from the filing of the request for arbitration to the issuance of an award and its correction. Arbitral institutions generally help move the process forward through the labyrinth of procedural steps that parties encounter in the arbitration process. In particular, arbitration institutions may be involved in the appointment and replacement of arbitrators. They control the finances of the cases, manage the transmittal of documents between and among the parties and tribunals, and generally ensure that the proceedings are conducted in accordance with the procedural rules agreed upon by the parties.7 This could in some instances entail providing advice to tribunals on procedure and jurisprudence or assistance with the drafting and review of decisions and awards or portions thereof. The breadth of the services provided varies widely and could depend on the rules and policies of the institution and, even within an institution, could vary from case to case depending on the agreement of the parties, the available resources, and competencies of the participants. The extent to which resort is had to a particular institution for investor-​state arbitration is in 3.05 great part dependent on the number of investment instruments in which the institution is agreed as a forum. From available statistics, most of the investment-​related treaties in existence today provide for the possibility of arbitration under the auspices of the ICSID or ad hoc under the UNCITRAL Rules.8 Indeed, of the 855 international investment agreement-​based cases known to have been commenced as at March 2018, 521 were filed under the ICSID Rules,9 262 were filed under the UNCITRAL Rules, forty-​five under the SCC Rules,10 and fourteen under the ICC Rules.11

B. International Centre for Settlement of Investment Disputes The International Centre for Settlement of Investment Disputes (ICSID), based in 3.06 Washington, D.C., is one of the five international organizations that make up the World Bank Group.12 Established by a multilateral treaty, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which came into effect in 1966, ICSID primarily administers the resolution by conciliation or arbitration of investment disputes between one of its member governments and a foreign investor who is a national of another member.13 Since 1978, ICSID, through its Additional Facility Rules, has

7  The importance of this function is exemplified in art. 52(d), which provides that ‘serious departure from a fundamental rule of procedure’ can be a basis for annulment of an award. 8  Latest Developments in Investor-​State Dispute Settlement, IIA Monitor No. 2 (2015), International Investment Agreements, UNCTAD/​WEB/​DIAE/​PCB/​2015/​2 (UN Conf. on Trade and Dev.). 9  The ICSID Convention Rules and the ICSID Additional Facility Rules. See also List of ICSID Cases, http://​icsid.worldbank.org (last visited Mar. 14, 2018). 10  According to the SCC website, the statistics on investment cases at the end of 2008 were as follows: 19 BIT cases, 5 ECT cases, and 3 by agreement of the parties. See SCC Statistics 2008, http://​www.sccinstitute. com (last visited Nov. 10, 2017). It is possible that some of the cases may have been filed on the basis of different sources of consent. 11  See UNCTAD Investment Policy Hub, http://​investmentpolicyhub.unctad.org/​ISDS/​FilterByRules AndInstitution (last visited Mar. 14, 2018). 12  The others are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA). ICSID and MIGA are the only non-​lending arms of the group. For detailed background on ICSID, see A.R. Parra, The History of ICSID (2d ed. 2017). 13  By the end of the first quarter of 2017, ICSID had only registered 10 conciliation cases (two of them under the Additional Facility Rules) in its over 51 years of existence, as compared to 606 arbitration cases. The discussion here will therefore focus on arbitration proceedings at the Centre.

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International Investment Dispute Settlement Mechanisms also been able to administer the arbitration of disputes between parties, of which one is neither an ICSID member nor a national of such a state, or disputes which do not arise directly out of an investment. ICSID is also permitted by these Additional Facility Rules to administer conciliation proceedings in similar circumstances to those described for additional facility arbitration and also to administer fact-​finding proceedings.14 3.07 While membership of ICSID is open to all governments that are members of the International

Bank for Reconstruction and Development (IBRD),15 not all such governments have ratified the Convention to become its contracting parties. As of the first quarter of 2017, ICSID had a membership of over 153 countries.16

3.08 The Centre has an Administrative Council, made up of a representative of each member

country and chaired by the President of the World Bank and a Secretariat, headed by a Secretary-​General. The Administrative Council performs such functions as approving the Centre’s budget, approving changes to its regulations and rules, and electing the Secretary-​ General and Deputy Secretary-​General. The Council is otherwise not involved in the day-​ to-​day functioning of the Centre, except that its chairman may be called upon to perform functions specified by the Convention. These typically relate to the appointment and disqualification of arbitrators. The Secretariat, with its staff of experienced lawyers and assistants, is responsible for the administration of the proceedings brought to the Centre.

3.09 In addition to the ICSID Convention and the Rules of Procedure for Arbitration

Proceedings, ICSID arbitration is also conducted in accordance with the Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings and the Administrative and Financial Regulations.17

3.10 Unlike proceedings before other fora, ICSID proceedings are free from the interference of

courts in the locality where they are conducted, except that the parties may, for example, by agreement seek provisional or interim measures from domestic fora.18 Similarly, remedies applicable to ICSID awards are all provided for in the Convention and Rules.19 Whereas other forms of arbitration may rely for the same effect on the application of other instruments, such as the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), the Convention provides for automatic recognition of ICSID awards in member countries upon the presentation of a copy of the award certified by the Secretary-​General.20

3.11 The role of the ICSID Secretariat in the arbitration process is generally considered to be ex-

tensive in comparison to what is available at other institutions. Most notably, the Centre’s Administrative and Financial Regulation 25 provides for the appointment of a secretary in

14  No additional facility fact-​finding proceeding had been presented to the Centre as at the end of the first quarter in 2017. Those rules are not addressed in this chapter. 15  Indeed, membership of each of the other World Bank organizations, that is, the IDA, IFC, and MIGA is conditioned upon membership of the IBRD. However, pursuant to its art. 67, the ICSID Convention is also open for signature, albeit by invitation of the Administrative Council, to non-​IBRD member states which are also parties to the Statute of the International Court of Justice. 16 See the information on the ICSID member states, http://​icsid.worldbank.org (last visited Dec. 10, 2017). 17  The Rules of the Centre are available in English, French, and Spanish, all texts being equally authentic. 18  ICSID Arbitration Rule 39(6) allows disputing parties to request ‘any judicial or other authority to order provisional measures, prior to or after the institution of the proceeding’ provided that ‘they have so stipulated in the agreement recording their consent’. 19  See generally ICSID Convention arts. 49–​55. 20  Id. art. 54.

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II.  Institutionally Supported Arbitration each case by the Secretary-​General and specifies in broad terms the role of the secretary in assistance to the tribunal.21 The specific functions of the secretary otherwise vary from case to case. The tribunal may, for instance, rely on the secretary for advice on jurisprudence and practice of the Centre, as well as for routine correspondence with the parties and administrative arrangements for its sessions. The secretary also administers the finances of the case, which involves assessing the needs for the case in consultation with the tribunal president, routinely obtaining payment from the parties and disbursing the same and rendering a final account to the parties at the end of the proceeding. A few other unique aspects of the ICSID system, which differentiate it from the other insti- 3.12 tutions, deserve particular mention. Some commentators consider that the perception that comes with ICSID’s membership in the World Bank Group could make most countries comply with their ICSID obligations ‘so as not to give offense to the World Bank’.22 In reality, however, there is no structural link between a country’s participation in ICSID and its relationship with the World Bank. The operational guidelines of the World Bank that restrict lending in extreme cases of financial default or expropriation could well apply to any form of arbitration, not just ICSID.23 Indeed, in such cases, the World Bank limits its role to ‘improving communications between the disputing parties’24 and ‘may seek to promote prompt and adequate settlements, either negotiated between the parties on a mutually satisfactory basis or arrived at through mediation, conciliation, arbitration, or judicial determination’.25 In this regard, the bank may remind the parties of the availability of ‘the various internationally recognized forms of conciliation or arbitration, including conciliation or arbitration under the auspices of [ICSID]’.26 The Status, Immunities, and Privileges provisions of the ICSID Convention provide that 3.13 members of the Centre, as well as arbitrators, parties and their agents, counsel, advocates, witnesses, and experts, shall enjoy immunity from legal process with respect to acts performed in the exercise of their functions. They are also to enjoy certain travel and tax-​ free privileges.27 Finally, the primary purpose of the Convention is said to be ‘to provide additional inducement and stimulate a larger flow of private international investment’.28 Hence, the jurisdiction of the Centre extends only to legal disputes ‘arising directly out of an investment’.29

21  According to Regulation 25: ‘[t]‌he Secretary-​General shall appoint a Secretary for each Commission, Tribunal and Committee. The Secretary may be drawn from among the Secretariat from the Centre, and shall in any case, while serving in that capacity, be considered as a member of its staff. He shall (a) represent the Secretary-​General and may perform all functions assigned to the latter by these Regulations or the Rules with regard to individual proceedings or assigned to the latter by the Convention, and delegated by him to the Secretary; (b) be the channel through which the parties may request particular services from the Centre; (c) keep summary minutes of hearings, unless the parties agree with the Commission, Tribunal or Committee on another manner of keeping the record of the hearings; and (d) perform other functions with respect to the proceeding at the request of the President of the Commission, Tribunal or Committee, or at the direction of the Secretary-​General’. 22  See Doak Bishop et al., supra note 5, at 11. 23  See generally World Bank Operational Manual Op.  7.40—​ Disputes over Defaults on External Debt, Expropriation, and Breach of Contract (July 2001). 24  Id. 25  Id. 26  Id. 27  See ICSID Convention arts. 18–​24. 28  Report of the World Bank Executive Directors on the ICSID Convention, ¶ 12. 29  ICSID Convention art. 25.

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International Investment Dispute Settlement Mechanisms C. International Court of Arbitration of the International Chamber of Commerce, Paris 3.14 The International Chamber of Commerce, based in Paris, France, was established in 1919

with the stated aim of promoting trade and investment and opening markets for goods and services and the free flow of capital: ‘The objective of its founders was to create an institution that would foster reconciliation and peace [after the First World War] through the promotion of international commerce. But in order to achieve that goal, the ICC’s founders recognized the need for the gradual harmonization of international trade practices and legislation and the development of internationally recognized commercial instruments and mechanisms, including mechanisms for the resolution of international disputes’.30

3.15 The International Court of Arbitration (the ICC Arbitration Court) is the arbitration body

attached to the ICC.31 Founded in 1923, the Court is independent of the ICC. Its function is ‘to ensure the application of the Rules of Arbitration of the [ICC] and it has all the necessary powers for that purpose’.32 It was founded ‘in order to place at the disposal of financiers, manufacturers and business men of all countries an international organization capable of settling international commercial disputes ‘without recourse to formal legal procedure’.’33 The ICC Arbitration Court is also empowered to administer under its rules disputes that are not of an international nature.34 Indeed, only a small fraction of the cases administered by the ICC are formally identified as disputes between foreign investors and governments.35 Such cases are more likely to concern and invoke provisions in a contract rather than a treaty.

3.16 The ICC Arbitration Court is composed of a chairman, vice-​chairmen, and other members

and alternate members who are appointed by the ICC World Council for renewable terms of three years.36 The Court functions in committees comprising the chairman and at least two other members of the Court and in plenary sessions once per month to which all Court members are invited.

3.17 The Court is assisted in its work by a Secretariat composed of a Secretary-​General, a deputy

Secretary-​General, and case administration teams of counsel, deputy counsel, and administrative support staff. The Secretariat provides day-​to-​day case management services, functioning as the link between the parties, the arbitrators, and the Court. It issues notes and other documents for the information of the parties and arbitrators ‘or as necessary for the proper conduct of proceedings’.37

3.18 With the assistance of the Secretariat, the Court has a general oversight function in the

arbitration process. In particular, its functions extend to the appointment of arbitrators

 Y. Derains & E.A. Schwartz, A Guide to the ICC Rules of Arbitration (2005).   ICC Arbitration Rules art. 1(1). 32  Statutes of the International Court of Arbitration art. 1(1). 33  Id. 34  ICC Rules of Arbitration art. 1(1). 35  See generally International Court of Arbitration, Dispute Resolution Services, https://​iccwbo.org/​ dispute-​resolution-​services/​arbitration/​ (last visited Dec. 10, 2017). Only in 10.7 per cent of the 663 requests for arbitration filed with the ICC Court in 2008 was a state or parastatal entity a party. 36  According to the ICC: ‘[t]‌he ICC World Council is the equivalent of the general assembly of a major intergovernmental organization[, t]he big difference being that the delegates are business executives and not government officials. There is a federal structure, based on the Council as ICC’s supreme governing body. National committees name delegates to the Council, which normally meets twice a year. Ten direct members—​from countries where there is no national committee—​may also be invited to participate in the Council’s work’. How ICC Works website, http://​www.iccwbo.org/​id96/​index.html (last visited Dec. 10, 2017). 37  ICC Arbitration Rules App. II; Internal Rules of the International Court of Arbitration art. 5(2). 30 31

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II.  Institutionally Supported Arbitration and determination of challenges, as required. For appointments, it is assisted by one of the approximately ninety ICC national committees in existence in different countries, whose recommendations it may or may not accept. It does not have to appoint arbitrators from a pre-​existing list. The Court fixes the fees of arbitrators at the end of the proceedings, on the basis of a published scale, calculated with reference to the amount in dispute. In fixing the arbitrators’ fees, the Court also considers the diligence of the arbitrators, the time spent, the speed of the proceedings, and the complexity of the dispute. The Court also scrutinizes and approves all awards to be issued by ICC arbitral tribunals. It may require modifications of form or draw the arbitrators’ attention to points of substance, but in doing so, the Court does not interfere with the arbitrators’ liberty of decision.38 Another specific aspect of the ICC Rules is the requirement for the tribunal to draw up terms of reference at the outset of the proceeding.39 This document typically will set out the procedural parameters for the case, including such issues as the place of arbitration, names and addresses of the parties, and their representatives, etc.40 In addition, it will also include ‘a list of the issues to be determined’, unless the tribunal considers it inappropriate. The ICC Rules of Arbitration of March 2017 contain forty-​two articles covering definitions 3.19 and the commencement of the arbitration; the arbitral tribunal; the arbitral proceedings; awards, costs, and miscellaneous provisions; and six appendixes containing the Statutes of the International Court of Arbitration and its Internal Rules, as well as provisions on the arbitration costs and fees, case management techniques, emergency arbitrator rules, and expedited procedure rules.41

D. The Arbitration Institute of the Stockholm Chamber of Commerce The Arbitration Institute of the Stockholm Chamber of Commerce (SCC Institute) is a part 3.20 of the Stockholm Chamber of Commerce, although independent, which provides administrative services in relation to the settlement of disputes.42 Based in Stockholm, Sweden, it is empowered to administer domestic and international disputes in accordance with its own rules or other procedures or rules agreed by the parties.43 The structure of the SCC is more similar to that of the ICC than to the structure of ICSID. 3.21 The SCC is composed of a board of directors and a Secretariat. The Secretariat is responsible for the day-​to-​day administration of arbitrations, including taking decisions delegated to it by the board.44 The board, which is appointed by the board of directors of the Stockholm Chamber of Commerce, is composed of a chairperson, a maximum of three vice-​chairpersons, and a maximum of twelve other members. It takes its decisions by majority, with the chairperson having the deciding vote in the event of a tie, and a quorum is formed by only two members. The chairperson or a vice-​chairperson may take decisions on behalf of the board in urgent matters, but a committee of the board may otherwise be appointed to take specific decisions on its behalf.45

38  See generally International Chamber of Commerce:  The world business organization, http://​www. iccwbo.org/​(last visited Dec. 10, 2017). 39  ICC Arbitration Rules art. 23. 40  In ICSID cases, such information will normally be found in the minutes of the first session of the tribunal. 41  The ICC Rules are available in Arabic, Brazilian Portuguese, Chinese, Czech, Dutch, English, French, German, Polish, Russian, Spanish, Thai, and Turkish. In case of conflict, the English and French texts prevail. 42  SCC Arbitration Rules 2017 App. I art. 1. 43  Id. art. 2. 44  Id. art. 8. 45  Id. arts. 3, 4, 7.

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International Investment Dispute Settlement Mechanisms 3.22 The SCC Arbitration Rules of 1 January 2017, contain forty-​eight articles and four appen-

dices.46 Appendix III, dedicated to investment treaty disputes, contains four articles dealing, respectively, with scope of application [of the Appendix], number of arbitrators, submission by a third person, and submission by a non-​disputing party to the Treaty.47 The provisions in Appendix II supplement the general rules, which otherwise apply to all disputes brought before the Centre. The SCC Rules have tended to be more regularly updated than those of ICSID and the ICC and, as a result, would typically be more reflective of current trends and practices. Article 5(2), for instance, refers to the possibility of service of process by email in recognition of the fact that this is now a popular mode of communication in modern society.48

3.23 In addition to its regular arbitration rules, the SCC also has a special set of rules for exped-

ited arbitration proceedings, the latest version of which also came into effect on 1 January 2017. The expedited rules are designed to offer a speedy and cost-​efficient process for ‘minor disputes regarding less complex issues and involving a smaller amount in dispute’.49 In those proceedings, the tribunal consists of a sole arbitrator and has to render its award, which need not be reasoned unless requested by a party, within three months. The schedule and extent of written submissions are also limited, and a hearing will only be held if requested by a party and deemed necessary by the tribunal.

III.  Selected Procedural Issues A. Commencement of Proceedings and the Role of the Institution in the Initial Determination of Jurisdiction 3.24 Unlike the ICC and SCC Rules, the ICSID Convention and Rules draw a distinction be-

tween the institution of proceedings and commencement of proceedings. This is noteworthy since, under the ICSID Rules, the deadlines for certain procedural steps, including for the constitution of the arbitral tribunal, are calculated from the date of institution of proceedings, whereas other deadlines, including those related to the first session of the tribunal, are calculated from the commencement of the proceeding.50 Also, the nationality eligibility requirement for an individual party is determined not only with reference to the date of the consent to arbitration of the disputing parties but also as of the date that the request for arbitration is registered.51

3.25 Under the ICC Rules, an arbitral proceeding is deemed to be commenced on the day that a

request for arbitration is submitted to the Secretariat by the party seeking to have recourse to arbitration under those Rules.52 Similarly, the SCC Rules provide that the arbitration is deemed to commence on the date the SCC receives the request for arbitration.53 On the 46  The SCC Rules are available in Arabic, Chinese, English, French, German, Russian, and Swedish. In case of conflict, the English text prevails. 47  There is no mention of the application of those provisions to other types of investor-​state disputes, especially, arising under contracts and/​or domestic laws. 48  Article 6 requires that address, telephone number. and email address of the parties and their counsel, as well as of the arbitrator appointed by the claimant, where applicable, be included in the request for arbitration. Service of process by email already occurs in practice in ICSID proceedings, by agreement of the parties, but has yet to be recognized by the Rules. 49  See generally http://​www.sccinstitute.com (last visited Dec. 10, 2017). 50  ICSID Arbitration Rule 13(1). 51  ICSID Convention art. 25(2)(a). 52  ICC Arbitration Rules art. 4(1), (2). 53  Id. art. 8

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III.  Selected Procedural Issues other hand, an ICSID arbitration proceeding is only deemed to have been instituted on the day that the request for arbitration is registered by the Centre.54 This is to be distinguished from the date of commencement of the proceeding, which is deemed to be the date on which the Secretary-​General notifies the parties that all members of the tribunal have accepted their appointments.55 The process leading up to ICSID’s registration of a request for arbitration consists of a review 3.26 or screening process during which an assessment is made by the ICSID Secretariat to determine whether the dispute is not manifestly outside the jurisdiction of the Centre and thus is eligible for registration under Article 36 of the Convention and ICSID Institution Rule 6. During the screening process, the Secretariat may pose written questions to the requesting 3.27 party regarding information contained in or missing from the request, and the responses received will be considered to be supplemental to the request as originally filed.56 Although the Centre sends to the responding party copies of the request and of all correspondence exchanged with the requesting party, the decision whether or not to register the request is taken only ‘on the basis of the information contained in the request’.57 Although not required to do so, the Centre may invite the requesting party to address any issues raised by the responding party prior to registration of the request for arbitration, and any pertinent response would equally be considered supplemental to the request. This exchange of communications between the parties and the Centre during the registration phase does not entail an adversarial proceeding. There is no appeal or other recourse available in regard to the ICSID Secretary-​General’s 3.28 decision to refuse registration of a request for arbitration. The lodging fee paid upon the filing of a request for arbitration is not refundable even in the event of non-​registration.58 A requesting party may, however, resubmit a previously rejected request upon the payment of another lodging fee, although this would only make sense if the request is modified to address the problematic aspects. A responding party that considers that a request was erroneously registered by ICSID, or that it would not have been registered had the Secretary-​ General been able to consider issues of legal merit in the decision process, may apply for summary dismissal of the case under Arbitration Rule 41(5) introduced with the April 2006 amendments to the ICSID Rules.59 Thus, in addition to the determination of prima facie jurisdictional threshold by the Centre prior to the registration of a request for arbitration at ICSID, Arbitration Rule 41(5) also provides for the summary dismissal of a case found to be manifestly without legal merit. Independently of the Arbitration Rules, parties may provide for such mechanism on their own, for example, in the instrument recording their consent to arbitration.60

54  ICSID Institution Rule 6(2). The parties may however agree on a different event as constituting the institution of proceedings. See, e.g., CAFTA art. 10.16.4, which provides that the proceeding shall be deemed to be initiated on the day that the request for arbitration is received by the Centre. 55  ICSID Arbitration Rule 6(1). 56  All such communications are copied to the responding party. 57  See ICSID Convention art. 36; ICSID Institution Rule 6. 58  The fees paid upon the filing of a request for arbitration under the Arbitration Rules of the ICC and SCC are similarly non-​refundable in any event. Under both sets of rules, however, such sums may be credited to the claimant against its share of advance payments in the course of the proceeding. The ICSID Rules are silent in this regard. See infra section on Costs. 59  See K. Yannaca-​Small & D. Earnest, The Fate of Frivolous and Unmeritorious Claims, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 7 (K. Yannaca-​Small ed., 2018). 60  See, e.g. art. 10.19:4-​6 of the United States–​Chile Free Trade Agreement, which entered into force on January 1, 2004.

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International Investment Dispute Settlement Mechanisms 3.29 While the SCC Rules do not provide for a formal process of review to determine whether the

case could be instituted, Article 9(1) provides that a copy of the request for arbitration is to be sent to the respondent, who is then required to file an answer. The SCC board may, however, request additional information concerning the request from the claimant and may dismiss the case if the request for further details is not complied with. Similarly, the board may, after the request for arbitration and the answer have been filed, decide to dismiss the case, in whole or in part if, ‘(i) the SCC Institute [manifestly] lacks jurisdiction over the dispute; or (ii) the Advance on Costs is not paid. . . ’.61 The decision on the SCC Institute’s manifest lack of jurisdiction over the dispute relates to the question of whether or not the parties have agreed to arbitrate their disputes under its auspices.62

3.30 Similarly, under the ICC Rules, if the respondent does not file an answer, or if any of the

parties raises any objection as to the existence, validity, or scope of the arbitration agreement, ‘the arbitration shall proceed and any question of jurisdiction or of whether the claims may be determined together in that arbitration shall be decided directly by the arbitral tribunal unless the Secretary General refers the matter to the Court’. In that event, the ICC Court may decide that the arbitration shall proceed if ‘it is prima facie satisfied that an arbitration agreement under the Rules may exist’.63 This is without prejudice to the power of the arbitral tribunal to determine its own jurisdiction.64 If the Court determines that the arbitration cannot proceed, any party has the right to apply to a court with jurisdiction to determine that a binding arbitration agreement exists.65 In effect, therefore, the Secretary-​General is permitted by Articles 6(3) and 6(4) to conduct an initial screening of the request for arbitration if an objection is made as to the existence, validity, or scope of the arbitration agreement.

3.31 Aside from the previously discussed basis for dismissal of requests, under both the ICC and

SCC Rules, a request for arbitration will be dismissed if the relevant filing fee is not received by the institution after the expiration of a deadline set for the purpose.66 Under the ICSID Rules, beyond sending an acknowledgment to the requesting party, nothing else is to be done with respect to the request until the prescribed lodging fee has been received.67 Consequently, the Centre will not even send the request to the respondent if the payment is not received.68

B. Appointment and Disqualification of Arbitrators 3.32 Pursuant to the ICSID Convention and Rules, the arbitral tribunal shall consist of a sole

arbitrator or any other uneven number of arbitrators. In the absence of agreement of the parties on the number of arbitrators and the method of their appointment, the tribunal will consist of three arbitrators, one appointed by each side, and the third, who presides over the tribunal, appointed by agreement of the parties. Any arbitrator not appointed by the parties shall, upon the application of either party, be appointed by the chairman of the ICSID Administrative Council. Such appointments by the Centre are required to be made from the

  SCC Arbitration Rules art. 12.   See A. Magnusson & P. Shaughnessy, The 2007 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, 3 Stockholm Int’l Arb. Rev. 46, 47 (2006). 63  ICC Arbitration Rules arts. 6.3 & 6.4. 64 Id. 65  ICC Arbitration Rules art. 6(6). 66  ICC Arbitration Rules art. 4 and App. III; SCC Arbitration Rules art. 7(2). 67  ICSID Institution Rule 5(1)(b). 68 As at April 2017, the fees for filing requests for arbitration under the different systems were ICSID: US$30,000; SCC: €3,000; and ICC: US$5,000. 61 62

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III.  Selected Procedural Issues Centre’s panel of arbitrators, consisting mostly of persons designated by contracting states of ICSID.69 An application for disqualification of an arbitrator is to be decided by the other arbitrators 3.33 or by the chairman of the ICSID Administrative Council. Vacancies on the tribunal are to be filled in the same manner as the original appointment, except that where the vacancy is created by a resignation, and the resignation is not accepted by the remaining arbitrators, the vacancy shall be filled by the chairman of the ICSID Administrative Council.70 The ICC Rules only envisage the possibility of a tribunal consisting of a sole arbitrator or 3.34 of three arbitrators, unless the parties have agreed otherwise.71 If the parties had previously agreed on a three-​member tribunal, each party shall nominate an arbitrator in the request and answer, respectively. The chairman shall be appointed by the ICC Court unless the parties had agreed on another procedure.72 Nominations made by the parties to the arbitral tribunal shall be subject to confirmation by the Secretary-​General of the ICC. If the Secretary-​General considers that a nominee should not be confirmed or if there is an objection by one of the parties, the matter is submitted to the ICC Court for decision.73 Otherwise, where the parties fail to make a nomination pursuant to a previously agreed method or fail to reach agreement on the constitution of the tribunal, the appointments are made by the ICC Court upon proposals made by the ICC national committees.74 The Court may reject the nomination from a national committee or seek another proposal from the same or other national committee that it deems appropriate.75 Challenges to ICC arbitrators are decided by the ICC Court after the parties and arbitrators 3.35 have been afforded the opportunity to comment.76 The Court may also, of its own initiative, replace an arbitrator who it decides ‘is prevented de jure or de facto from fulfilling his functions’ or that is ‘not fulfilling his functions in accordance with the Rules or within the prescribed time limits’.77 In replacing an arbitrator, the Court may at its discretion decide not to follow the original nomination process. It may also decide not to replace an arbitrator if the proceeding has been closed.78 Like the ICSID and ICC Rules, the SCC Rules allow the parties freedom to agree on the 3.36 number of arbitrators and the method of their appointment. If the parties are not able to agree, the tribunal shall consist of three arbitrators, but the SCC board, considering the complexity of the case, could decide for it to be submitted to a sole arbitrator.79 The rules provide for the board to be the appointing authority in the event that either party fails to appoint an arbitrator or if they fail jointly to appoint a sole arbitrator, where applicable.80 In the event

69  ICSID Convention Article 13. Each contracting state may designate to the panel up to four persons, who need not be its nationals, and the chairman of the Administrative Council may designate up to ten persons of differing nationalities. Article 14 of the Convention provides that the members of the Panel shall be persons of high moral character and recognized competence, especially in the field of law, or also in the fields of commerce, industry, or finance, who may be relied upon to exercise independent judgment. 70  ICSID Convention art. 57; ICSID Arbitration Rules 7–​12. 71  ICC Arbitration Rules art. 12(1). 72  Id. art. 812(4). 73  Id. art. 13. See also Derains & Schwartz, supra note 30, at 168. 74  The Court may also make appointments from a country with no national committee if it deems it appropriate and the parties do not object. 75  ICC Arbitration Rules art. 13(3). 76  Id. art. 14. 77  Id. art. 15(2). 78  Id. art. 15(3), (4). 79  SCC Arbitration Rules art. 16. 80  Id. art. 17.

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International Investment Dispute Settlement Mechanisms that the parties have not agreed on a time period to make the appointments, the time period shall be set by the board. If the parties fail to make an appointment within the time period set by the board, the appointment is made by the latter.81 In making appointments, the board is required to take into account the circumstances of the case, the applicable law, the seat and language of the arbitration, and the parties’ nationality.82 3.37 Under the SCC Rules, an arbitrator may be challenged by a party if ‘circumstances exist

which give rise to justifiable doubts as to the arbitrator’s impartiality or independence or if he/​she does not possess qualifications agreed by the parties’.83 An arbitrator must resign if the challenge is agreed by both parties. Otherwise, the challenge is to be decided by the SCC board. Article 20 of the SCC Rules provides the possibility for the board to release an arbitrator from appointment in the event of a resignation or a successful challenge or where the arbitrator is ‘otherwise prevented from fulfilling his/​her duties or fails to perform his/​her functions in an adequate manner’.84 Arbitrators are to be replaced in the same manner of their appointment, unless otherwise deemed appropriate by the Board. The board may also decide that the remaining members of a three-​person tribunal could continue hearing the case after a member is released or has died.85

C. Interim Measures 3.38 Under Article 37 of the SCC Rules, the tribunal may, at the request of a party, grant ‘any

interim measures it deems appropriate’. In so doing, the tribunal may also require the requesting party to provide ‘appropriate security in connection with the measure’. The rules equally recognize that parties may also apply to judicial authorities for interim measures. Similarly, Article 28 of the ICC Rules provides that upon the application of a party, a tribunal may ‘order any interim or conservatory measure it deems appropriate’, possibly on condition of a security being provided. Applications for the granting or implementation of such measures could also be made to a competent judicial authority, either before the file is transmitted to the tribunal or ‘in appropriate circumstances even thereafter’. Under the ICSID Convention and Rules, interim measures are only available from the tribunal, unless the parties had agreed otherwise in their instrument of consent. It is therefore not uncommon for arbitration clauses in recent investment-​related treaties to contain provisions in this regard. Such measures may be recommended by the tribunal upon the application of a party or on its own initiative. Indeed, the tribunal may recommend measures outside of those requested by the parties, but the measures will in any event be for the preservation of the rights of the parties.86 An interim measures application may be filed with the ICSID Secretariat prior to the constitution of a tribunal. In such instances, the Secretary-​General will establish a schedule for the filing of observations by the parties, which, together with the request will be considered by the tribunal ‘promptly upon its constitution’.87

3.39 Article 15 of the SCC Rules provides the SCC board may, at the request of a party and after

consulting the parties and the tribunal, decide to consolidate a newly commenced arbitration with one that is already pending. This can be done by agreement of the parties; if all the claims are made under the same arbitration agreement or where, under more than one

  Id. art. 17(2).   Id. art. 17(7). 83  Id. art. 19(1). 84  Id. art. 20. 85  Id. art. 21(1), (2). 86  See generally ICSID Convention art. 47; ICSID Arbitration Rule 39. 87  ICSID Arbitration Rule 39(5). 81 82

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III.  Selected Procedural Issues agreement, ‘the relief sought arises out of the same transaction or series of transactions and the Board considers the arbitration agreements to be compatible’.88 The ICC Rules allow for consolidation of proceedings under similar circumstances as pro- 3.40 vided by the SCC Rules, except that where the claims are made under more than one arbitration agreement, ‘the arbitrations are between the same parties, the disputes in the arbitrations arise in connection with the same legal relationship’ in addition to the ICC Court finding the arbitration agreements to be compatible. The ICC Rules also allow for the possibility of the older arbitration to be consolidated into the newer, if agreed by the parties. Otherwise, the assumption is that the newer proceeding will be consolidated into the old, as with cases under the SCC Rules.89 The ICSID Rules, on the other hand, do not contain specific provisions for consolidation of 3.41 proceedings, but consolidation is not prohibited by the Convention or Rules and, therefore, may nevertheless occur by agreement of the parties. Indeed, provisions are increasingly being introduced into the various arbitration systems through procedural provisions in treaties.90 In any event, there are instances in which de facto consolidation can occur in ICSID cases.91

D. Seat/​Place of Arbitration, Language of Proceedings, and Applicable Law Under all three sets of rules, the seat or place of arbitration and the language of proceedings 3.42 are left to the agreement of the disputing parties. However, in the absence of agreement of the parties, the SCC Rules provide that the ‘seat’ of the arbitration is to be determined by the SCC Board, while the language of the arbitration and the applicable law is to be determined by the tribunal.92 Under the ICC Rules, in the absence of agreement of the parties, the place of arbitration is fixed by the ICC Court and the language is determined by the tribunal, consideration being given to the language of the contract among other factors.93 The applicable law is determined by the tribunal where no agreement exists between the parties, taking into account ‘the provisions of the contract and the relevant trade usages’.94 For ICSID proceedings, in the absence of agreement of the parties, the seat of the Centre in Washington, D.C., shall be the place of proceedings,95 it being understood that the place of an ICSID proceeding does not have the same implications as for ICC and SCC cases owing to the self-​contained nature of the ICSID process. Proceedings could be conducted in any one or two of the Centre’s three languages, namely English, French, and Spanish;96 and the applicable law shall be the law of the state party to the dispute and any applicable rules of international law.97 All three sets of rules permit the tribunal to decide ex aequo et bono but only if expressly 3.43 authorized to do so by the parties.98 They also permit proceedings to take place at locations outside of the seat of arbitration, if the parties do not disagree.99 It is also usually permissible for tribunals to meet alone at locations they decide.   This is one of the provisions first introduced when the SCC Rules were amended in 2006.   ICC Rules art. 10. 90  See, e.g., Dominican Republic–​Central American Free Trade Agreement (CAFTA) art. 10.25. 91  See U. Onwuamaegbu, Using Treaties to Define Rules of Procedure in Investor-​State Arbitration, in The Future of Investment Arbitration 82–​83 (C. Rogers & R. Alford eds., 2009). 92  SCC Arbitration Rules arts. 25, 26, 27. 93  ICC Arbitration Rules arts. 18, 20. 94  Id. art. 21. 95  ICSID Convention art. 63; Administrative and Financial Regulation 26; Arbitration Rule 13. 96  ICSID Arbitration Rule 22. 97  ICSID Convention art. 42. 98  ICSID Convention art. 42; ICC Arbitration Rules art. 21(3); SCC Arbitration Rules art. 27(3). 99  ICSID Convention art. 63 and ICSID Arbitration Rule 13(3); ICC Arbitration Rules art. 18(2); SCC Arbitration Rules art. 25(2). 88 89

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International Investment Dispute Settlement Mechanisms E. Tribunal’s Experts 3.44 The SCC Rules in Article 34 provide that the tribunal may of its own accord, and after con-

sulting the parties, seek expert opinion on specific issues it would have identified in writing. Similarly, Article 25(4) of the ICC Rules allows tribunals to appoint experts after having consulted the parties. Under both rules, the parties have a right to examine the experts appointed by the tribunal. The ICSID Rules contain no such express authorization for tribunals to consult experts of their own accord. This has, however, been done by different tribunals, but only upon prior consultation with, and approval of, the parties.100

F. Transparency and Third-​party Participation 3.45 The fact of the existence of a case at ICSID is public information. ICSID Administrative

and Financial Regulation 22 provides that information about the registration of all requests for arbitration and an indication of the date and method of termination of each proceeding shall be published. The Centre does this in part by maintaining lists of pending and concluded cases on its public website. The lists include such information as the subject matter of the dispute, date of constitution of the tribunal, identity of tribunal members and their appointing authority, identity of counsel and representatives of parties on record, and the status or outcome of the proceeding.101 Typically, more detailed information is available in the separate register required to be maintained for each case and open for inspection by the public, with excerpts available for a fee determined on a case-​by-​case basis by the Centre.102 Otherwise, arbitrators undertake in the declarations that they sign at the beginning of the proceeding to keep confidential all information they acquire in the course of participation in the proceeding.103 The Centre will not publish the award in a case, except with the consent of the parties.104 It is, however, required to ‘promptly include in its publications excerpts of the legal reasoning of the Tribunal’.105 The parties are not particularly bound by any specific confidentiality rules but are generally expected to refrain from doing anything that could aggravate or exacerbate the dispute or otherwise undermine the integrity of the process.106 ICSID hearings may, at the discretion of the tribunal, be open to the public ‘[u]‌nless either party objects’.107 The tribunal may also accept written submissions from third parties ‘[a]fter consulting both parties’.108

3.46 Neither the ICC Rules nor those of the SCC provide for the level of public access seen in

ICSID proceedings. Therefore, except where agreed by the parties or required by law, for example, in mandatory filings required of companies in different jurisdictions, the fact of

100  See, e.g., LG&E Energy Corp., LG&E Capital Corp. & LG&E International Inc. v.  Argentine Republic, ICSID Case No. ARB/​02/​1, Award (July 25, 2007), ¶ 6. 101  Similar information is also published in the Centre’s quarterly newsletter and in its Annual Report. 102  ICSID Administrative and Financial Regulation 23(1) provides that each Register shall contain ‘all significant data concerning the institution, conduct and disposition of each proceeding, including in particular the method of constitution and the membership of each Commission, Tribunal and Committee . . . [A]‌lso . . . with respect to each award, all significant data concerning any request for the supplementation, rectification, interpretation, revision or annulment of the award, and any stay of enforcement’. 103  ICSID Arbitration Rule 6(2). 104 ICSID Convention art. 48(5); ICSID Administrative and Financial Regulation 22(2)(b); ICSID Arbitration Rule 48(4). 105  ICSID Arbitration Rule 48(4). 106  See generally M. Stevens, Confidentiality Revisited, 17(1) News from ICSID 1 (2000); A. Menaker & E. Hellbeck, Piercing the Veil of Confidentiality:  The Recent Trend Toward Greater Public Participation and Transparency in Investor-​ State Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 9 (K. Yannaca-​Small ed., 2018). 107  ICSID Arbitration Rule 32(2). 108  Id. Rule 37(2).

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III.  Selected Procedural Issues the existence of a particular dispute before either forum would remain confidential as would details and outcome of the proceeding.109 The ICC Rules provide that the ‘work of the [ICC] Court is of a confidential nature which must be respected by everyone who participates in that work in whatever capacity’.110 Article 3 of the SCC Rules provides that: ‘[u]‌nless otherwise agreed by the parties, the SCC, the Arbitral tribunal and any administrative secretary of the Arbitral Tribunal shall maintain the confidentiality of the arbitration and the award’. While the ICC Rules remain silent on participation of non-​disputing parties in the proceedings, the SCC Rules in 2017 introduced specific provisions in that regard, which apply only to investment treaty disputes. Appendix III to the SCC Rules provides in its Article 3(2) that ‘[a]ny person that is neither a disputing party nor a non-​disputing Party (“Third Person”) may apply to the Arbitral Tribunal for permission to make a written submission in the arbitration’. The rules in Appendix III also provide for the tribunal to be able, of its own accord, after consulting the parties, to invite such submissions from a third person ‘on a material factual or legal issue’ (Article 3(4)) or from a non-​disputing treaty party ‘on issues of treaty interpretation that are material to the outcome of the case’ (Article 4(1)); or on ‘other material issues in the arbitration’ (Article 4(2)).

G. The Award and Post-​award Remedies Under the ICC Rules, the final award of the tribunal is to be rendered within six months 3.47 from the date of terms of reference.111 The deadline may be extended by the ICC Court of its own accord or upon a reasoned request from the tribunal. Where there is more than one arbitrator on the tribunal, the award is to be made by majority or, failing a majority, by the chairman of the tribunal alone.112 No award shall be rendered until it has been approved by the Court as to its form. Thus, before signing the award, the tribunal is to submit it in draft to the Court, which ‘may lay down modifications as to the form of the award and, without affecting the Arbitral Tribunal’s liberty of decision, may also draw its attention to points of substance’.113 Similarly, under the SCC Rules, the final award is to be made within six months from the 3.48 date on which the arbitration was referred to the tribunal.114 The deadline may also be extended by the board of its own accord or upon ‘a reasoned request’ from the tribunal. The fact that an award is not signed by all members of the tribunal shall not be fatal to the award so long as the reason for the omission of the signature is stated in the award.115 Neither will the failure of an arbitrator to participate in deliberations on an issue without valid cause preclude the other members of the tribunal from deliberating.116 Article 48 of the ICSID Convention makes it possible for the award of an ICSID tribunal to 3.49 be issued by majority decision. Indeed, the award only needs to be signed by those arbitrators that voted for it, while an arbitrator may attach a separate opinion or statement of dissent to the award.117

109  Details of arbitration cases could, otherwise, enter into the public domain in instances where applications are made in national courts, for instance, for provisional measures or execution of an award. 110  ICC Arbitration Rules, App. I art. 6. See also App. II art. 1. 111  ICC Arbitration Rules art. 31. 112  Id. art. 32(2). 113  Id. art. 34. 114  SCC Arbitration Rules art. 43. 115  Id. art. 42(3). 116  Id. art. 42(5). 117  ICSID Convention art. 48(4); Arbitration Rule 47(2)–​(3).

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International Investment Dispute Settlement Mechanisms 3.50 In terms of post-​award remedies, the ICC Rules provide for correction and interpretation of

the award. A tribunal may, within thirty days of its award, of its own initiative or upon the application of a party, make a correction to the award to address clerical, computational, or typographical errors. It can also issue an interpretation of its award upon the application of a party within thirty days of the award. The decision to correct or interpret the award will also be submitted in draft to the ICC Court for scrutiny and approval prior to its issuance.118 The SCC Rules also contain provisions on correction and interpretation of awards.119 They also provide for the tribunal, at the request of a party made within thirty days of the award, to issue an additional award in respect of ‘claims presented in the arbitration but not determined in the award’.120

3.51 The post-​award remedies available under the ICSID Convention from the same tribunal that

issued the award include supplementation and rectification of the award. These remedies are available for deciding any issues omitted in the award or for rectifying any clerical, arithmetical, or similar errors in the award. These remedies are available upon the application of the parties, which must be accompanied by a lodging fee and be made within 45 days of the award.121

3.52 The other post-​award remedies available under the ICSID Convention are interpretation, re-

vision, and annulment, which can be invoked by a party upon the payment of the prescribed fee. Interpretation is available for disputes between the parties as to the meaning or scope of the award. Revision is available on the basis of discovery of some fact of such a nature as decisively to affect the award, provided that the fact was unknown to the applicant or the tribunal when the award was rendered, and the applicant’s ignorance was not due to negligence. Where possible, the application for interpretation or revision will be submitted to the same tribunal that rendered the award. Otherwise, a tribunal will be constituted in accordance with the same method as the initial tribunal.122 There is no deadline for applications for interpretation, but an application for revision must be filed within ninety days of the discovery of the fact and, in any event, within three years of the rendering of the award.123

3.53 Either party may seek annulment of an ICSID award,124 in whole or in part, on the basis that

(a) the tribunal was not properly constituted, (b) the tribunal manifestly exceeded its powers, (c) there was corruption on the part of a tribunal member, (d) there has been a departure from a fundamental rule of procedure, or (e) the award failed to state the reason on which it was based. The application must be made within 120 days of the rendering of the award, but in the case of corruption of a tribunal member, the 120 days start to run from the discovery of the corruption. Annulment is decided by a three-​member ad hoc committee appointed by the chairman of the ICSID Administrative Council from the ICSID panel of arbitrators, whose members cannot be of the same nationality as the disputing parties or the arbitrators that rendered the award and cannot have been designated to the Panel by the state party to the dispute or the state whose national is a party to the dispute.125

  ICC Arbitration Rules art. 36.   SCC Arbitration Rules art. 47. 120  Id. art. 48. 121  ICSID Convention art. 49(2); Arbitration Rule 49. 122  ICSID Arbitration Rule 51(3). 123  ICSID Convention arts. 50–​51. 124  See K. Yannaca-​Small, Annulment of ICSID Awards Is it Enough or is Appeal around the Corner?, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 27 (K. Yannaca-​Small ed., 2018). 125  ICSID Convention art. 52. 118 119

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III.  Selected Procedural Issues Enforcement of the award may be stayed pending determination of an application for in- 3.54 terpretation, revision, or annulment.126 Indeed, if requested, the Secretary-​General will provisionally stay enforcement of the award pending the reconstitution of the tribunal or constitution of the ad hoc committee.127

H. Costs Apart from the initial fee paid to file the request for arbitration, the cost of the arbitration 3.55 proceeding would normally consist of the fees and administrative charges of the institution, the fees and expenses of the arbitrators, and the cost of legal representation of the parties, including the cost of expert witnesses. The ICSID Convention provides that the charges for the use of the Centre’s facilities will be 3.56 determined by the Secretary-​General,128 while the fees and expenses of the tribunal members are determined in line with the Centre’s published schedule of fees and expenses. The tribunal may, however, reach a different agreement with the parties over the rate of remuneration of its members,129 except that any request by arbitrators to the parties for a higher amount than the prevailing rate of remuneration must be made through the Secretary-​General.130 The ICSID Secretariat levies a flat administrative charge upon the registration of a request for 3.57 arbitration and annually thereafter. Following the constitution of the tribunal, the Centre, typically in the person of the designated secretary of the tribunal, in consultation with the president of the tribunal, estimates the expenses to be incurred in the proceedings during the ensuing three to six months and requests initial payment from the parties.131 Additional advance payments are requested as necessary in the course of the proceedings.132 Unless otherwise agreed by the parties or decided by the tribunal, advance payments for running the proceedings are to be paid in equal shares by the parties,133 without prejudice to the tribunal’s final decision on the cost of the proceedings pursuant to Article 61(2) of the Convention.134 A proceeding will be discontinued if payment is not made by the parties for the conduct of the case.135 Under the ICC Rules, the claimant is responsible for a provisional advance payment which 3.58 may be requested by the Secretary-​General to cover the costs of the arbitration until the terms of reference have been drawn up.136 The Court is required, as soon as practicable, to fix the advance on costs in an amount ‘likely to cover the fees and expenses of the arbitrators and the ICC administrative costs’ using a scale provided in Appendix III to the Rules, which depends on the amount of the claim.137 The amount, which is to be paid in equal shares by the parties,

  ICSID Convention arts. 50(2), 51(4), 52(5).   ICSID Arbitration Rule 54(2). 128  ICSID Convention art. 59. 129  ICSID Convention art. 60(2). 130  ICSID Administrative and Financial Regulation 14(1). 131  Id. 14(3)(a)(i). 132  Id. 14(3)(a)(ii). 133  Id. 14(3)(d). 134  Article 61(2) provides that, unless otherwise agreed by the parties, the tribunal assesses the expenses incurred by each party with respect to the proceeding and decides how and by whom those expenses, the fees, and expenses of the tribunal and the charges of the Centre are to be paid. 135  ICSID Administrative and Financial Regulation 14(3)(d). 136  ICC Rules art. 37(1). 137  Article 38(2) of the ICC Rules allows the Court in exceptional circumstances to fix the fees of the arbitrators higher or lower than would have been assessed using the scale. 126 127

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International Investment Dispute Settlement Mechanisms may be readjusted at any time during the arbitration.138 In the event of non-​payment, the Secretary-​General may direct the tribunal to suspend its work for a period, at the end of which the claims shall be considered withdrawn.139 3.59 It is possible for bank guarantees to be posted in lieu of immediate payment of the portion

of advances exceeding a limit that is predetermined by the Court or to cover the advances not paid by the other side. The terms governing the bank guarantees are established by the Secretariat.140 Other than fees and expenses of the arbitrators, which are fixed by the Court, the tribunal, in the final award, fixes the cost of the arbitration and determines which side bears the cost burden.141

3.60 In the case of the SCC, aside from the costs incurred separately by the parties, a topic

addressed under Article 50 of the SCC Arbitration Rules, Article 49 defines the costs of the arbitration as consisting of the fees of the arbitral tribunal,142 the administrative fee of the SCC Institute, and the expenses of the arbitral tribunal and the SCC Institute. Unless otherwise agreed, the tribunal apportions the costs of the arbitration between the parties, ‘having regard to the outcome of the case and other relevant circumstances’.143 The same considerations are also relevant when the tribunal is deciding whether one party is to pay ‘any reasonable costs incurred by another party, including costs for legal representation’.144

3.61 The SCC board makes an estimate of the costs of the arbitration, that is, the fees and ex-

penses of the tribunal and the SCC Institute, as well as the administrative fee of the SCC. The parties are required to pay an advance on the costs in equal shares, except where counterclaims or set-​offs are submitted, in which case payment may be assessed in different proportions.145 In the course of the proceedings, additional advances may be assessed by the tribunal and ordered by the board. Article 51(7) authorizes the board to receive part of the advance payment in the form of a bank guarantee or other form of security. A case may be dismissed in whole or in part for failure of the parties to make advance payments as requested.146 The board’s decisions on advances on costs, dismissal for non-​payment of registration fee, and fixing of arbitration costs may be delegated to the Secretariat, and such decisions are final.147

138  Pursuant to App. III art. 1(11), the readjustments could be to take into account factors such as fluctuation in the amount in dispute, changes in the amount of the estimated expenses of the arbitrators or the evolving difficulty or complexity of the proceeding. 139  ICC Rules art. 38(6). 140  ICC Rules, App. III arts. 5, 7, 9, 10. 141  ICC Arbitration Rules art. 38(4). 142  Pursuant to App. IV art. 2, of the SCC Rules, the board determines the fees of the chairperson or sole arbitrator, based on the amount in dispute, calculated in accordance with the formula in a table annexed to the appendix to the rules; and the co-​arbitrators each receive 60 per cent of the total fee paid to the chairperson, unless the board, after consulting the tribunal, decides on a different apportionment of the fees between the arbitrators. The board, in exceptional circumstances, may deviate from the amounts set out on the schedule of costs. 143  SCC Arbitration Rules art. 49(6). 144  Id. art. 50. 145  SCC Rules art. 51(3). 146  Id. arts. 12(2), 51(5). 147  Id. App. I art. 7.

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IV.  Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules

IV.  Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules A. Overview of UNCITRAL The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary 3.62 organ of the United Nations General Assembly,148 established in 1966 by Resolution of the General Assembly, with the stated objective of ‘promotion of the progressive harmonization and unification of the law of international trade’.149 The Commission was created as a vehicle for reducing or removing disparities in national laws governing international trade. Such disparities are deemed to create obstacles to the flow of trade and can be eroded by the harmonization and unification of the law of international trade.150 It was considered that the Commission could achieve its international trade law harmonization and unification objective by, inter alia, ‘[p]‌reparing or promoting the adoption of new international conventions, model laws and uniform laws. . . ’.151 According to the Commission, ‘harmonization’ could be understood as ‘the process through which domestic laws may be modified to enhance predictability in cross-​border commercial transactions’, while ‘unification’ would be ‘the adoption by States of a common legal standard governing particular aspects of international business transactions’.152 Since its inception, the Commission has worked in different areas, including international commercial arbitration and conciliation, international sale of goods and related transactions, insolvency, international payments, international transport of goods, electronic commerce, procurement and infrastructure development, and penalties and liquidated damages.153 On 28 April 1976, the Commission adopted a set of arbitration rules (the UNCITRAL 3.63 Arbitration Rules). The rules were drafted by member countries of UNCITRAL but with ‘extensive consultation with arbitral institutions and centres of international commercial arbitration’. In its ensuing resolution recommending the use of the Rules, the UN General Assembly stated its conviction that ‘the establishment of rules for ad hoc arbitration that are acceptable in countries with different legal, social and economic systems would significantly contribute to the development of harmonious international economic relations’.154 A revised set of the rules came into effect in 2010, including provisions that reflect modern practices and some designed to enhance efficiency of the arbitral process. A  further slight amendment was introduced with effect from April 2014 to incorporate the stand-​alone Rules on Transparency in Treaty-​based Investor-​State Arbitration, which came into effect in 2013.

148  The UNCITRAL Arbitration Rules have served as a model for the rules of various institutions. Initially adopted in 1976, they were amended in 2010 to meet changes in arbitral practice and improve efficiency, and in 2013 to incorporate the 2013 UNCITRAL Rules on transparency applicable to investment treaty disputes. The process for amending the UNCITRAL Rules is much more public than for the rules of the institutions discussed in the preceding part of this chapter. Amendments resulting from such a process are of benefit to arbitration institutions, which could ultimately adopt similar changes, as they see fit, without the need to go through the same process. 149  UN General Assembly Resolution 2205(XXI) of December 17, 1966. 150  See generally Origin, Mandate and Composition of UNCITRAL, http://​www.uncitral.org/​uncitral/​en/​ about/​origin.html (last visited Dec. 10, 2017). 151  UN Resolution 2205(XXI), (n 149) art. II(8)(c). 152  See generally FAQ—​ Origin, Mandate and Composition of UNCITRAL, http://​www.uncitral.org/​ uncitral/​en/​about/​origin_​faq.html (last visited Dec. 10, 2017). 153  The Commission is composed of member states appointed by the General Assembly for periods of six years, with the terms of half of the members expiring every three years, representing different geographical areas and legal systems of the world. 154  UN Resolution 31/​98 of December 15, 1976.

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International Investment Dispute Settlement Mechanisms 3.64 The UNCITRAL Rules are the most popular arbitration rules for ad hoc international ar-

bitration proceedings, but they have also, by agreement of the parties, been employed in various administered proceedings.155 The rules were originally intended for the arbitration of disputes arising out of commercial relationships.156 They have, however, been used for disputes from other forms of endeavor, including international investments. They have been used especially in investor-​state arbitrations, mostly as a result of their inclusion in numerous investment-​related treaties, both bilateral and multilateral, including the North American Free Trade Agreement (NAFTA) and the Energy Charter Treaty (ECT). Indeed, the latest amendments to the rules are said to have been inspired, at least in part, by the need to address peculiarities of investor-​state arbitration and to adapt them for use in such cases.157

3.65 The UNCITRAL Arbitration Rules have also been adopted by standing tribunals, such

as the Iran–​US Claims Tribunal, and formed the basis for the rules of others, such as the United Nations Compensation Commission. Other sets of arbitration rules that have been identified as having been inspired by the UNCITRAL Rules include the London Court of International Arbitration (LCIA) Rules, as adopted in 1981; the Stockholm Chamber of Commerce (SCC) Arbitration Rules, as adopted in 1988; and the Arbitration Rules of the Singapore Arbitration Centre (SIAC), as adopted in 1997.158 In July 2004, the Swiss Chambers of Commerce and Industry of Basel, Bern, Geneva, Ticino, Vaud, and Zurich adopted Rules of International Arbitration based on the UNCITRAL Arbitration Rules, subject to two main types of changes and additions, which are said to have been purposely kept at a minimum. These changes and additions were ‘required to adapt the UNCITRAL Arbitration Rules to institutional arbitration’ and to reflect ‘modern practice and comparative law in the field of international arbitration’.159

B. Commencement of Proceedings under the UNCITRAL Arbitration Rules 3.66 An arbitration proceeding under the UNCITRAL Arbitration Rules is initiated by the

claimant sending a Notice of Arbitration to the respondent, at his habitual residence, place of business, mailing address, or, if none of these can be found after making reasonable inquiry, then at the addressee’s last-​known residence or place of business. The proceeding is deemed to commence on the day the notice is delivered to the respondent.160 By contrast, the ICC Rules provide that the date of commencement of the proceeding is the date on which the request for arbitration is received by the ICC Secretariat.161 The ICSID Rules, on the other hand, consider the date of the registration of the request by the Secretary-​General to be the date of institution of the proceeding.162 ICSID proceedings are otherwise deemed to commence upon the constitution of the tribunal.163

155  See, e.g., Glamis Gold. Ltd. v.  United States of America (An Arbitration Under Chapter  11 of the North American Free Trade Agreement), http://​www.state.gov/​s/​l/​c10986.htm ((last visited Dec. 10, 2017), which, although a proceeding conducted under the UNCITRAL Rules, was, by agreement of the disputing parties and the tribunal, taken to ICSID to administer. 156  UN Resolution 31/​98 (n 154). 157  See J. Paulsson & G. Petrochilos, Revision of the UNCITRAL Arbitration Rules, https://​www.uncitral. org/​pdf/​english/​news/​arbrules_​report.pdf (last visited Dec. 10, 2017). 158  Id. at 2. 159 Swiss Rules of International Arbitration, https://​www.swissarbitration.org/​Arbitration/​Arbitration-​ Rules-​and-​Laws (last visited Dec. 10, 2017). 160  UNCITRAL Arbitration Rules arts. 2, 3. 161  ICC Arbitration Rules art. 4(2). 162  ICSID Institution Rule 6(2). 163  Id. Rule 6(1).

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IV.  Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules C. Appointment and Disqualification of Arbitrators The UNCITRAL Arbitration Rules provide for the possibility of one or three arbitrators and 3.67 specify the method of their appointment in the absence of prior agreement by the parties. In contrast to the ICSID, ICC, and SCC Rules, the UNCITRAL Arbitration Rules do not designate an appointing authority; rather, the Secretary-​General of the Permanent Court of Arbitration at The Hague is designated as the authority to whom the parties could apply to designate the appointing authority where none has been agreed by the parties.164 An arbitrator can be challenged under the UNCITRAL Rules ‘if circumstances exist that give 3.68 rise to justifiable doubts as to the arbitrator’s impartiality or independence’.165 Challenges are to be decided by the authority that appointed the arbitrator or by an appointing authority designated in the same manner as provided for the appointment of arbitrators.166 Any hearings held prior to the replacement of a sole or presiding arbitrator shall be repeated but, if it is any other arbitrator that is replaced, repetition of the hearing shall be at the discretion of the tribunal.167 By virtue of Article 16 of the UNCITRAL Rules, to the extent permitted by law, the parties 3.69 are deemed to have waived any claim against arbitrators, appointing authority, or other persons appointed by the tribunal, except in cases of intentional wrongdoing.

D. Proceedings The UNCITRAL Arbitration Rules stress the principle of equality of treatment of the par- 3.70 ties and allow them a full opportunity to present their case.168 The tribunal, in the absence of agreement by the parties, determines the language of the proceedings and also determines the place of arbitration, having regard to the circumstances of the case.169 In this regard, the Rules differentiate between the ‘place where the arbitration is to be held’ and the particular places at which different aspects of the work of the tribunal may be carried out. The place of arbitration does not necessarily determine the applicable law. In the absence of agreement by the parties, the tribunal ‘shall apply the law which it determines to be appropriate’.170 The Rules provide for a written procedure comprised of a statement of Claim and a statement 3.71 of Defence, including a counterclaim or set-​off, and allow the tribunal to decide on other submissions it considers necessary.171 They also contain provisions on evidence and burden of proof, which rests on the party putting forward a claim or defence.172 Also specified in Rule 28 is the possibility of hearings, although there is no express requirement for the tribunal to consult with the parties prior to scheduling a hearing. The tribunal is only required to ‘give the parties adequate advance notice of the date, time and place’ of the hearing.173   UNCITRAL Arbitration Rules art. 6(2).   Id. art. 12. 166  Id. art. 14. 167  Id. art. 15. Note that under ICSID Arbitration Rule 12, a newly appointed arbitrator ‘may . . . require that the oral procedure be recommenced, if this had already been started’. 168  Id. art. 17. 169 See id. Rules 18 and 19. For detailed considerations of a tribunal in determining the place of arbitration in the absence of agreement of the parties, see United Parcel Service of America Inc. v. Gov’t of Canada (An Arbitration Under Chapter 11 of the North American Free Trade Agreement), Decision of the Tribunal on the Place of Arbitration (Oct. 17, 2001), http://​www.state.gov/​documents/​organization/​6032.pdf (last visited Dec. 10, 2017). 170  UNCITRAL Arbitration Rules art. 35(1). 171  Id. arts. 20–​22, 24. 172  Id. art. 27. 173  By contrast, ICSID hearings are held in Washington, D.C., unless the parties agree otherwise. See ICSID Convention art. 62; ICSID Administrative and Financial Regulation 26(1). 164 165

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International Investment Dispute Settlement Mechanisms E. Transparency 3.72 Although there are no express provisions requiring confidentiality of proceedings under the

UNCITRAL Arbitration Rules, a new set of UNCITRAL Rules on Transparency in Treaty-​ based Investor-​State Arbitration, came into effect on 1 April 2014. These rules were incorporated into the UNCITRAL Arbitration Rules by reference through a new paragraph 4, added to Article 1, which reads: For investor-​State arbitration initiated pursuant to a treaty providing for the protection of investments or investors, these Rules include the UNCITRAL Rules on Transparency in Treaty based Investor-​State Arbitration (‘Rules on Transparency’), subject to article 1 of the Rules on Transparency.

The Rules on Transparency provide for hearings to be held in public subject to adequate arrangements being made for logistics and for protection of confidential information (Article 6). Further, Article 2 provides for the prompt publication of information regarding the name of the disputing parties, the economic sector involved and the treaty under which the claim is made. They provide, in Article 3, for the publication of the notice of arbitration and response thereto, the statement of claim, statement of defence, and other documents filed in the proceeding, including witness statements and expert reports. ‘Confidential’ or ‘protected’ information shall be excluded from publication as determined by the tribunal upon application of the parties in accordance with Article 7 of the Transparency Rules. 3.73 Pursuant to Article 4, the tribunal after consulting the parties may allow submissions by a third

person, described as ‘a person that is not a disputing party, and not a non-​disputing Party to the treaty’, on a matter within the scope of the dispute. The tribunal may also, under Article 5, allow submissions on issues of treaty interpretation from a non-​disputing party to the treaty, or it may, after consulting the parties, invite such submissions. In either case, the tribunal shall ensure that the submission does not disrupt or unduly burden the proceedings or unfairly prejudice the parties and that the parties are given the opportunity to present observations on the submissions.

3.74 The Secretary-​General of the United Nations, acting through the UNCITRAL Secretariat, is

the repository of the information required to be made public under the Rules and publication of the relevant information shall be through the UNCITRAL website.

3.75 For cases not covered by the Transparency Rules, that is, disputes arising under pre-​1 April

2014 treaties where the parties to the treaty or the disputing parties have not agreed to adopt the rules, or those disputes under contracts or under investment laws, the old provisions continue to apply. In those cases, hearings are to be held in camera unless otherwise agreed by the parties. The rules also provide specifically that the tribunal may require the exclusion of a witness during the testimony of other witnesses.174 Apart from what is allowed in the Transparency Rules, there are no provisions in the UNCITRAL Rules for participation of non-​disputing parties in the proceedings, although this may be agreed separately by the parties.175 Similarly, the award may only be publicized with the consent of both parties.176 There

174  UNCITRAL Arbitration Rules art. 28(3). In ICSID proceedings, it is common practice for most witnesses to be allowed to attend or observe the hearing after their testimony. It is also not uncommon for a witness who himself is also the claimant or its owner, if a juridical person, to be allowed to remain in the hearing all through the proceeding. 175  See, e.g., NAFTA art. 1128 (providing for submissions by other NAFTA Parties, which are not party to the dispute in question). See also art. 10.19:2 of the United States–​Chile FTA (providing that ‘[t]‌he non-​ disputing Party may make oral and written submissions to the tribunal regarding the interpretation of this Agreement’). 176  UNCITRAL Arbitration Rule 32(5). This is different from the ICSID Convention and Rules, which expressly impose such confidentiality obligations on the tribunal and the Centre, but not on the parties.

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IV.  Ad Hoc Dispute Settlement: UNCITRAL Arbitration Rules are, however, numerous treaties in existence which make it mandatory for awards to be made public, as well as for pleadings and other material from the proceeding to be made available to the public.177 Hence, even in cases where the Rules on Transparency do not expressly apply, similar provisions could be incorporated into the proceeding by agreement of the parties.

F. Other Provisions The tribunal may, at the request of either party, grant interim measures as defined in the 3.76 Rules. As under the ICC and SCC Rules, there is express provision under the UNCITRAL Rules allowing such applications also to be addressed to judicial authorities.178 The tribunal is entitled, in any event, to require security for the costs of interim measures.179 Pursuant to Article 29 of the rules, the tribunal may appoint its own experts after consulting 3.77 with the parties. The parties are required to cooperate with such expert by providing to the expert, information, documents, or goods that they require to inspect in the course of their work. The parties shall have the right to express their opinion in writing on the expert report and to examine the expert in a hearing. A  proceeding under the UNCITRAL Rules may be terminated upon the default of the 3.78 claimant to prosecute its case or if the parties reach settlement or the proceeding otherwise becomes unnecessary or impossible.180 With regard to post-​award remedies specified in the UNCITRAL Rules, either party may, 3.79 within thirty days of receipt of the award, request its interpretation by the tribunal; request the correction of any computational, clerical, typographical, or other similar errors; or request the tribunal to make an additional award addressing claims omitted in the award.181 In adopting the UNCITRAL Rules for their proceeding, the disputing parties thereby also ‘undertake to carry out the award without delay’.182 Pursuant to Article 42 of the UNCITRAL Rules, the costs of the arbitration are in principle 3.80 to be borne by the unsuccessful party.183 However, the tribunal may in its discretion apportion the costs between the parties. The costs of the proceeding are specified to include the fees of the arbitrators, which are to be determined in accordance with the provisions of the rules. The costs are otherwise said to include the expenses of the arbitrators, costs of expert advice and other assistance required by the tribunal, reasonable legal and other costs of the parties, fees and expenses of the appointing authority, and expenses of the Secretary-​General of the PCA.184

G. Other UNCITRAL  Texts Alongside the arbitration rules are other texts of UNCITRAL designed to facilitate the arbi- 3.81 tral process. Such texts include the 1982 Recommendations to assist arbitral institutions and other interested bodies with regard to arbitrations under the UNCITRAL Arbitration Rules

177 NAFTA Chapter  11 proceedings provide good examples of this. See, e.g., NAFTA Claims, www. naftaclaims.com (last visited Dec. 10, 2017). 178  UNCITRAL Arbitration Rules art. 26. 179  Id. 180  Id. arts. 30, 36. 181  Id. arts. 37–​39. 182  Id. art. 34(2). 183  See, e.g., S.D. Myers, Inc. v. Gov’t of Canada (A NAFTA Arbitration Under the UNCITRAL Arbitration Rules), Final Award (concerning the apportionment of costs between the disputing parties) (Dec. 30, 2002), https://​www.italaw.com/​sites/​default/​files/​case-​documents/​ita0754.pdf (last visited Mar. 14, 2018). 184  UNCITRAL Arbitration Rules art. 40.

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International Investment Dispute Settlement Mechanisms (1982, as revised in 2010); the Recommendation regarding interpretation of Article II, paragraph 2, and Article VII, paragraph 1 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10 June 1958 (2006); the UNCITRAL Notes on Organizing Arbitral Proceedings (2016); and the UNCITRAL Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (2016). Also worthy of note is the UNCITRAL Model Law on International Commercial Arbitration (1985, as amended in 2006). 3.82 The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards

(commonly known as the New York Convention) is a product of UNCITRAL. Although it predates the Arbitration Rules, the Convention has come to play an important role in the enforcement of international arbitral awards of tribunals operating under different arbitration rules, whether ad hoc or institutional. This excludes, of course, ICSID Convention awards which rely only on the Convention for their enforcement. In 2006, UNCITRAL adopted a recommendation regarding the interpretation of Article II (2) (agreement in writing) and Article VII (1), of the New York Convention (reliance on other laws and treaties for award enforcement), to promote non-​restrictive readings of those provisions.

V. Conclusion 3.83 The choice facing disputing parties between ad hoc and institutional arbitration, or between

the different arbitration institutions, is often severely restricted by the parameters of their prior written consent. Each of the arbitration institutions has its distinguishing aspects and it is for parties and counsel to consider these carefully, in the context of the particular circumstances of the case, in deciding which institution to select. As different sets of arbitration rules continue to evolve, it is likely that the main differences between them will continue to diminish. Indeed, the UNCITRAL Rules on Transparency, which apply to disputes arising Investment treaties, have gone a long way to blunt some of these differences. The transparency that they bring to proceedings applies even in the event that the rules of the institution continue to remain silent on those issues.

3.84 In the meantime, since 2015, the European Commission has been working to establish a

multilateral investment court. If successful, this would present a huge departure from the current system of settling investor-​state disputes. Primarily, there would be a shift away from the system in which disputing parties are able to select the arbitrators that adjudicate their disputes to one where the disputes are submitted to tenured judges in a standing court comprised of a first instance tribunal and an appeal tribunal.

3.85 Starting with the EU–​Canada Comprehensive Economic Trade Agreement (CETA) and the

EU–​Vietnam Free Trade Agreement, the EU now includes provisions for a standing court in all its investment treaty negotiations, along with references to a permanent multilateral mechanism.

3.86 Even if a multilateral investment court were to be successfully set up, it would, in the short

to medium term probably exist in parallel with the present system, which would still cater for disputes that remain outside the universe of European Union investment treaties, especially those disputes that arise under investment contracts and investment legislation of various countries.

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4 THE ROLE OF PRECEDENT IN INVESTMENT TREATY ARBITRATION Jan Paulsson

I. Introduction  II. The Anti-​arbitrariness Vaccine  III. Limitations  IV. The Legal Status of Precedents  V. The Core Concepts 

VI. Life and Death of Precedent in a Decentralized System  VII. Reconsidering the Value of Precedents  VIII. Towards More Rigorous Reasoning by Precedent  IX. Concluding Thoughts: Is a Synthesis Possible? 

4.01 4.13 4.18 4.22 4.34

4.53 4.57 4.63 4.82

I. Introduction There is no point in trying to stop international practitioners from using the word ‘precedent’; 4.01 rather, let us agree that it is not a legal term of art. Non-​lawyers understand perfectly well that the legitimacy of the resolution of disputes depends on deciding similar cases in the same way. It is the opposite of ‘making up the rules as you go along’. It is a useful word, but too general to yield significant insights. Technical rules of precedent are practice rules developed within legal systems. They vary from 4.02 one to the other, and are subject to change. Above all, a system that enforces the rule of precedent requires a supreme court authorized both to impose a rule on inferior courts and to modify it when it sees fit. There is nothing like it in the international realm, and even less so in the context of arbitra- 4.03 tion. However, it is possible to imagine the development of an international ‘law on investment protection’ by something akin to the common law process of developing authoritative rules by case-​by-​case accretion, although this type of precedent must be qualified by the word ‘persuasive’ rather than ‘binding’.1 It seems worthwhile to consider how arbitrators might perceive their role in such a process. In the Decision on Jurisdiction in Burlington Resources Inc. v Ecuador, two arbitrators who 4.04 have sat on numerous arbitral tribunals under investment treaties, Professors Gabrielle

1  See Frederic G. Sourgens, Law’s Laboratory:  Developing International Law on Investment Protection as Common Law, 34 Northwestern J. Int’l L. & Business 181 (2014); Frederic G. Sourgens, A Nascent Common Law: The Process of Decision-​Making in International Legal Disputes Between States and Foreign Investors (2015).

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The Role of Precedent in Investment Treaty Arbitration Kaufmann-​Kohler and Francisco Orrego Vicuña, stated their conception (which Professor Kaufmann-​Kohler has articulated on other occasions2) as follows: The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it must pay due consideration to earlier decisions of international tribunals. The majority believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a series of consistent cases. It also believes that, subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to contribute to the harmonious development of investment law, and thereby to meet the legitimate expectations of the community of States and investors towards the certainty of the rule of law.3 4.05 The arbitrator in the minority (on this point) was Professor Brigitte Stern, also a highly ex-

perienced arbitrator in investment treaty cases. Her view was set out in the following final sentence of the same paragraph: ‘Arbitrator Stern does not analyze the arbitrator’s role in the same manner, as she considers it her duty to decide each case on its own merits, independ­ ently of any apparent jurisprudential trend’.

4.06 The second conception could be stated simply: each case on its merits. The problem with this

approach is that it leads to unpredictability, which (since the words ‘on its merits’ are hardly self-​defining) seems to ignore an essential feature of legitimacy in decision-​making: that like cases are treated alike.

4.07 The first conception might be translated as a duty to presume the applicability of the rule

that emerges from ‘a series of consistent cases’ in the interest of the harmonious development of the law and the satisfaction of legitimate expectations. The problems with this approach are that: (a) the existence of such a ‘duty’ seems to be based on a postulate rather than on a provision of the document which created the arbitrators’ authority (the relevant treaty); (b) it seems to compel arbitrators to ensure that they are aware of ‘consistent series’ of other cases, irrespective of whether they have been invoked by the parties and irrespective of any debate as to whether they indeed stand for a particular and relevant rule; and, above all, (c) it requires them to have recourse to some highly subjective threshold of what constitutes ‘compelling contrary grounds’ that allow them not to ‘adopt’ the ‘solutions’ to which they supposedly lead.

4.08 It should be clear, however, that each of these two approaches may result in the same out-

come. Professor Stern’s idea of ‘the merits’ of a case may well be based (how could it not?) on some notion of what is right in the circumstances, which naturally flows from some understanding of what good arbitrators should decide in cases such as this—​as to which reference to respected examples seems inevitable. The majority’s formulation similarly allows arbitrators to give weight to ‘specific circumstances’ and to the presence of what they call ‘compelling grounds’.

4.09 It is striking that neither formulation explicitly considers the arbitral duty to hear and respond

to the parties. One might get the (perhaps mistaken) impression that the tribunal operates in a vacuum, investigates the facts, and, in its wisdom, decides what the consequences should be, irrespective of the parties’ pleadings. No matter how many prior decisions an arbitral tribunal may know of, they simply do not constitute ‘law’ outside a national legal system, where

2  E.g. as arbitrator in Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No. ARB/​ 05/​07, Decision on Jurisdiction and Recommendation on Provisional Measures (Mar. 21, 2007), ¶ 67; and as commentator, in her 2006 Freshfields Lecture, published as G. Kaufmann-​Kohler, Arbitral Precedent:  Dream, Necessity, or Excuse?, 23 Arb. Int’l 357 (2007). 3  ICSID Case No. 08/​5, ¶ 99 (2010).

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II.  The Anti-arbitrariness Vaccine the rule perceived by the highest court binds all others. How confident can a tribunal be that it has considered an adequate sample of prior decisions? What are arbitrators to do if the parties have done a poor job of research or, worse, if one has been diligent and the other not? Perhaps the rule could be this: to the extent that any party’s case places central reliance on a 4.10 proposition derived from previously decided cases, arbitrators are required to give consideration to them and to express their assessment of the persuasiveness of that reliance. This is a matter of due process, and would not differ materially if the words ‘scholarly commentary’ were to replace ‘previously decided cases’. What if the arbitrators are aware of pertinent prior decisions not invoked on either side? Is 4.11 it proper to call them to the parties’ attention, and give them an opportunity to comment on their relevance? May the arbitrators thereafter acknowledge those decisions as persuasive (and thus decisive)? There is, in sum, more than one way to look at the problem, and while all conceptions may 4.12 lead to the same outcome in cases where there is overwhelming support for an established rule, the same is unlikely to be true when it is necessary to ‘find’ a concrete rule of decision in order to apply abstractions such as the duty to accord ‘fair and equitable treatment’.

II.  The Anti-​arbitrariness Vaccine Consistency in arbitral decision-​making is conducive to the development of norms, but 4.13 saying that it is indispensable would be an overstatement. Each international tribunal has the responsibility to decide the particular case before it, but no duty to be bound by what was decided in another case involving different parties. There is no international rule of stare decisis. In the improbable event that a World Civil Code were to see the light of day, it would more plausibly contain something like Article 5 of the French model, which explicitly forbids judges from laying down general rules when making a decision, than embrace the common law tradition. Moreover, to say that prior awards may be considered for their persuasiveness carries the 4.14 corollary implication that unconvincing awards may be discounted. Indeed, they are. (Discounted, as we shall see, should not mean ignored.) Even in national legal systems that recognize the binding character of cases decided by higher courts, ways are found to marginalize judgments that do not stand the test of time, with the effect that they are consigned to oblivion, sometimes with surprising speed.4 Inconsistent decisions are not excluded from playing a role in the development of the law. 4.15 Especially in the international realm, issues arise that are the subject of intense and legitimate debate. Reasonable judges and arbitrators may differ. Yet cases mature for decision and cannot wait indefinitely until someone—​who?—​announces that a particular proposition has emerged victorious. Collegial judgments and awards are often more valuable than personal commentary, which may be brilliant but also excessive and idiosyncratic, distorted by the tendency to oversimplify competing analyses or, indeed, to misrepresent them. Intensely well-​argued cases show the true complexity of the debate; well-​reasoned decisions following full deliberations reveal the fine balances to be struck; and, in due course, the thousand voices of the sea of international criticism—​including most notably those of future

4  The House of Lords’ decision in Anderton v. Ryan [1985] A.C. 560, interpreting the Criminal Attempts Act 1981, survived but a single year before the self-​overruling case of R. v. Shivpuri [1987] A.C. 1.

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The Role of Precedent in Investment Treaty Arbitration decision-​makers—​provide the ultimate test of worthiness. The first decision to be made is not necessarily the right one; it is fortunate that no coercive rule of precedent holds sway.5 4.16 But the importance of the pursuit of consistency is undeniable in rendering justice in the

individual case. Recurring controversies in connection with the merits of claims brought in investment arbitration involve the evaluation of facts. If similar facts have been considered by a number of prior tribunals, and their decisions are subsequently invoked by a party, a tribunal cannot ignore the prior awards without running the risk of seeming arbitrary. This does not mean that the same outcome is mandated; the later tribunal may well explain that supposed precedents, upon analysis, have critical distinguishing features—​or, more starkly, that they are unconvincing (for reasons which merit being articulated).6

4.17 And so attention to prior decisions may be viewed as a type of anti-​arbitrariness vaccine. The

observation that there is no international rule of stare decisis should not be given exaggerated effect. For the maxim—​literally ‘maintain what has been decided’7—​has universal appeal, no less so in countries where it is sought to be achieved by comprehensive codes rather than by the rule of precedent. Even in the country where that rule has historically been the most rigid, as the authors of Precedent in English Law put it: ‘it must not be forgotten that the rules of precedent are subsidiary to, and far less important than, the obligation of judges to consider case-​law’. Cross and Harris immediately go on to assert that if it came to be accepted that judges could disregard case law, ‘the English legal system would have undergone a revolution of the highest magnitude’.8 This is not a matter of treating precedents as a source of law, but of the duty as a matter of due process to consider putative authorities which parties have invoked to support their case.

III. Limitations 4.18 But of course cases are rarely identical. The facts are often different. The sets of relevant legal

texts are seldom the same—​and a single word may change everything. The applicable law may be different. In investment arbitration, international law alone does not hold sway; national law may be decisive; and even in cases where the relevant national law may be the same, a particular statute or regulation may be applicable in one case but not the other.

4.19 Even if the relevant instruments, facts, and law were identical, no two cases are ever articu-

lated in an identical fashion. Those who present the case may have different inspirations and

5  This refers not only to reversal or repudiation but also to the more nuanced mechanisms of refinement and limitation. Karl Llewellyn preferred to speak of a ‘distinction between the ratio decidendi, the court’s own version of the rule of the case, and the true rule of the case, to wit, what it will be made to stand for by another later court’. Karl Llewellyn, The Bramble Bush 50 (2008). Rules, it seems, may thus become truer and truer yet never—​like Zeno’s arrow—​come to rest. (Indeed, the precise paradox whereby Zeno ‘abolished motion’ may be seen as applying to the common law: ‘What is in motion moves neither in the place it is nor in the one in which it is not’.) 6  In matters of jurisdiction and treaty interpretation the ratio decidendi is less likely to be fact-​specific; disregard of prior awards will therefore probably be more obvious and give rise to greater disquiet. 7  No fundamental insight is produced by refining the expression to stare rationibus decidendis (‘follow the decisive principle of past decisions’). True, it may be cited as an explanation for upholding past judgments. But in countries of the code, where judgments tend to be elliptical, it will equally be said that the best way to ensure consistency with the general body of judgments is to give primacy to the unifying code, rather than to individual judgments. In any event, the short expression stare decisis cannot be understood literally lest it be confused with the rule of res judicata, which binds only the particular litigants in the prior case. 8  Sir Rupert Cross & J.W. Harris, Precedent in English Law 7 (4th edn 1991).

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IV.  The Legal Status of Precedents limitations—​not to mention different access to evidence. (Even if the lawyers and witnesses are the same persons, their presentations on different occasions and before different tribunals will not be the same.) And so, in the second case, the decision-​makers may scratch their heads as much as they will; they may still find themselves simply incapable of understanding how their predecessors came to a particular outcome. They would violate their convictions, and the trust which has been placed in them, if they align themselves mechanically with an alleged precedent. A more obvious limitation is that with respect to the most difficult issues—​which is precisely 4.20 where the need to demonstrate an absence of arbitrariness is particularly acute—​the body of prior cases is likely to include cases that are ambiguous or contradictory. The reality of investment arbitration is that the quality of advocacy varies greatly from case 4.21 to case. Some speculative claims are inexpertly advanced by inexperienced pleaders, perhaps hoping to startle the other side into a quick settlement rather than truly intending to go through with the arduous task of presenting a substantive case before an international tribunal. Such parties may find themselves confronting knotty and fundamental issues which they do not have the resources to deal with. There are limits to jura novit curia. Silk purses are not readily produced from a sow’s ears. And so major issues may be decided in the context of a mediocre debate. Once the decision is handed down, the disappointed party may lose heart and decline to pursue the available means of recourse (such as the ICSID ad hoc Committee mechanism). What is left may be a decision by an inexpert sole arbitrator further handicapped by artless pleadings. This is a matter of reality, which commentators often ignore when they express concerns about perceived inconsistencies of awards. Arbitrators do not answer tidily articulated exam questions; they decide cases as they are presented, whatever the imperfections of the pleadings and the inconvenient messiness of the factual record.

IV.  The Legal Status of Precedents The status of precedents in international law is a matter of considerable delicacy. Jealous sov- 4.22 ereign states tend to resist any suggestion that arrangements other than those to which they have consented may be invoked against them. This explains their disinclination to submit to the elaboration of international law by anything resembling the accretion of binding precedents known as the common law. And so even the judgments of the International Court of Justice are expressly subject to the caveat of Article 59 of that Court’s Statute, which reads: ‘The decision of the Court has no binding force except as between the parties and in respect of that particular case’. Similarly, the drafters of the Statute defined the sources of international law with great cau- 4.23 tion. Treaties—​the pre-​eminent source of international law—​may be invoked against a state only if they establish rules ‘expressly recognized’ by that state. This formulation, which all international lawyers recognize as part of the definition of the first of the sources of international law acknowledged by Article 38 of the ICJ’s Statute,9 reflects the reluctance of states to 9

  Article 38, Statute of the International Court of Justice (Oct. 24, 1945): 1. The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: a. international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; b. international custom, as evidence of a general practice accepted as law; c. the general principles of law recognized by civilized nations;

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The Role of Precedent in Investment Treaty Arbitration consider themselves bound by compacts made by other states. This is why the very notion of ‘law-​making treaties’ is controversial; like resolutions of the UN General Assembly or those of other gatherings of states, even treaties are unlikely to assume the status of law unless they can be said to reflect or conform to ‘international custom’, or ‘general principles of law’. These are indeed two other sources of applicable norms recognized by Article 38. But they are woolly categories—​enshrined in paragraphs (b) and (c) of Article 38(1)—​and, in many cases, unlikely to produce specific answers to precise questions. Lawyers naturally search for more precise authority. And so we come to Article 38(1)(d): [s]‌ubject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law. 4.24 Is this fourth category of sources of law the poor cousin in the list of Article 38(1)? Such a

possibility springs naturally to mind, given that paragraph (d) both begins and ends with a qualification, the first being (by the reference to Article 59) that decisions have no binding effect on third parties, and the second that this fourth category is but a ‘subsidiary means for the determination of rules of law’. Indeed, one might say that the very wording of the second qualification includes a third limiting factor, as it refers to the determination of norms rather than their establishment.

4.25 It is perhaps more accurate to recognize the in-​built limitations of sub-​paragraph (d) as a

tribute to its potential potency. Treaties do not affect non-​signatories, and ‘customs’ and ‘general principles’ mostly evolve with glacial speed and at a level of considerable generality. The first three paragraphs of Article 38(1) are therefore relatively unthreatening. Precedents and commentary, on the other hand, may provide immediate and bold answers to highly specific questions. That is why, no doubt, they are regarded with circumspection.

4.26 And so we find that even judgments of the ICJ do not, as such, create binding jurisprudence,

but only a ‘subsidiary means’ to determining the norms of international law.

4.27 International arbitral awards, it would seem, are of an equal—​and equally limited—​dignity,

as the functional if not terminological equivalent of ‘judicial decisions’. And in many cases, depending on the composition of the tribunal, they are also exceptionally well-​considered pronouncements of ‘the most highly qualified publicists’ (assisted, one might add, by detailed and skilled legal argument).

4.28 So much for the theory. The reality, of course, is that effective advocates before the ICJ, and

indeed before the ever-​expanding variety of other international courts and tribunals, must be steeped in the precedents of the World Court; it is fundamental to their art, because international adjudicators themselves rely on other international judgments. Advocates must also be familiar with important arbitral awards. One of the most often quoted international awards was rendered by a sole arbitrator, Max Huber, whose decision in the Islands of Palmas case

d. subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law. 2. This provision shall not prejudice the power of the Court to decide a case ex aequo et bono, if the parties agree thereto. Article 38 binds only the ICJ; the international community can devise other approaches outside the domain of cases before the ICJ. Yet ICSID arbitrators, who are authorized to apply international law under the 1965 Washington Convention, find in ¶ 40 of the Report of the Executive Directors of the World Bank the explicit statement that the term ‘international law’ as used in art. 42(1) of that Convention should be ‘understood in the sense given to it by Article 38(1) of the ICJ Statute’.

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IV.  The Legal Status of Precedents was referred to by the Permanent Court of International Justice itself in the Eastern Greenland case. And it raised no eyebrows when the ICJ, in the Gulf of Maine case, quite naturally referred to the prior analysis of the tribunal in the UK–​France Continental Shelf arbitration, which had faced similar quandaries of maritime geography.10 It is thus a fact of life before international courts and tribunals that precedents generate 4.29 norms of international law. What is more pertinent is to understand that the influence of international awards and judgments—​even those emanating from the same court—​is highly variable. This is quite unlike the traditional concept of some common law systems, where the precedent of the highest court is binding, no matter how unpersuasive it may seem to lower court judges, until it is abandoned above. International courts and tribunals, on the other hand, are not part of a hierarchical system. This may result in some untidiness; there is no catalogue where one might locate a reference to the judgment of the PCIJ in the Lotus case and see at a glance the word ‘reversed’ beside it; one must simply know that it has long been discredited.11 And much in the same way, while hierarchically undistinguishable, there are awards and awards, some destined to become ever brighter beacons, others flicker and die near-​instant deaths.12 In his introductory chapter on ‘Sources of the Law’, Professor Brownlie put it concisely:

4.30

The literature of the law contains frequent reference to decisions of arbitral tribunals. The quality of arbitral tribunals has varied considerably, but there have been a number of awards which contain notable contributions to the development of the law by eminent jurists sitting as arbitrators, umpires, or commissioners.13

This passage echoes the words of Hersch Lauterpacht, written half a century ago, in the revised 4.31 edition of his classic monograph The Development of International Law by the International Court, where he wrote: It is in the interest of international justice that its continuity should not be confined to the jurisprudence of the Court itself. International arbitral law has produced a body of precedent which is full of instruction and authority. Numerous arbitral awards have made a distinct contribution to international law by reason of their scope, their elaboration, and the conscientiousness with which they have examined the issue before them.14

The corpus of decided cases in the field of international investment arbitration is of recent 4.32 vintage, but it has developed with remarkable speed. Its legal status as a source of law is in theory equal to that of other types of international courts or tribunals. In practice, it will also doubtless turn out to be subject to the same Darwinian imperative: the unfit will perish.

  See generally Mohamed Shahabuddeen, Precedent in the World Court 35–​39 (1996).   As should be clear from the discussion above, international arbitral tribunals are just as free to resist the influence of judgments of the World Court. Thus, investment arbitration tribunals have been unenthusiastic about extending Barcelona Traction to deny the standing of foreign shareholders seeking to recover derivatively on account of prejudice suffered by local corporations; see CMS Gas Transmission Company v.  Argentine Republic, ICSID Case No. ARB/​01/​8, Decision on Jurisdiction (July 17, 2003)  and GAMI Investments, Inc. v. Mexico, Final Award (Nov. 15, 2004). 12  This is not the place to discuss the considerable difficulties of the proposals, much discussed just after the turn of the century, of a standing body with plenary authority to review investment awards. See J. Paulsson, Avoiding Unintended Consequences, in Appeals Mechanism in International Investment Disputes 241 (K. Sauvant ed., 2008). 13  Ian Brownlie, Principles of Public International Law 19 (6th edn 2003). 14  Hersch Lauterpacht, The Development of International Law by the International Court 17–​18 (1958). 10 11

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The Role of Precedent in Investment Treaty Arbitration 4.33 Against this background, one can hardly fail to remark that among the most frequently

appointed members to international investment tribunal panels may be found former presidents of the International Court of Justice (Guillaume, Schwebel, Bedjaoui), a former president of the WTO Appellate body and member of his country’s Supreme Court (Feliciano), a former president of the UN Security Council (Fortier), the Rapporteur of the International Law Commission’s draft Articles on State Responsibility (Crawford), and the present and immediate past presidents of the leading international arbitral institution: the International Court of Arbitration of the International Chamber of Commerce (Briner, Tercier). Indeed, the immediate past president of the International Court of Justice (Higgins) chaired the oft-​ cited ICSID tribunal which decided the second Amco v Indonesia case. The list could be extended to include numerous scholars and practitioners of international renown, but no more is needed, it seems, to conclude that among the authors of these awards are those who must surely qualify for consideration as ‘the most highly qualified publicists of the various nations’.

V.  The Core Concepts 4.34 The passage quoted from Lauterpacht’s Development of International Law contains an implicit

message of ever greater pertinence, given the accelerating pace of developments in international arbitration:  if ‘numerous’ awards make a ‘distinct contribution’, others evidently do not. As arbitral practice expands, and as the field of international law itself expands in breadth of coverage and complexity, its calibre of output is liable to greater unevenness. What is it that makes one award influential—​and another best forgotten?

4.35 It is surely essential to read putative precedents with critical discernment and to study the

difference between rationes decidendi and incidental observations. The decision-​making function is exercised when a tribunal upholds or denies a claim. The normative basis of that decision is of particular interest because that is where judges or arbitrators carry out their responsibility. The rejection of a claim on the grounds that the plaintiff has failed to take an obvious step to avert prejudice is a clear precedent for the proposition that there is a duty to mitigate. But if a claim is upheld, the basis is a finding of liability. An incidental statement to the effect that ‘recovery to claimants may be compromised if they fail to mitigate damages, but no proof of such failure was presented here’ is not the basis for the decision. It may be persuasive of the existence of the norm, but it is of lesser weight—​and not at all, properly speaking, a precedent.15

4.36 To take another example:  an investment award may say that claimants before the ICSID

must cumulatively satisfy the ICSID Convention definition as well as any bilateral investment treaty (BIT) definition of the notion of ‘investment’, but that is not the ratio of the decision if the tribunal decides that both definitions are satisfied. The ratio is rather that both definitions are in fact satisfied; the outcome would be the same without considering what would happen if only one definition were met. The proposition that both must be satisfied is properly understood as a ratio only in a case where a claimant is sent packing because it failed under one definition, and the tribunal said it did not matter if it could have succeeded under the second.

15  For an illustration of a curt and proper dismissal of a party’s reliance on an incidental remark found in Loewen, see Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/​06/​3, Decision on Respondent’s Preliminary Objections on Jurisdiction and Admissibility (Apr. 18, 2008), ¶ 109.

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V.  The Core Concepts The preceding paragraph may not immediately have won the reader’s assent. It must indeed 4.37 be admitted that there is no fixed definition of ratio decidendi—​the reason for deciding—​that would lead everyone to the same conclusion. Lawyers tend to be confident about their ability to zero in on it, but this conceit may be no less vain than pride in being able to hold one’s liquor or to achieve amorous exploits. Ask a number of lawyers to define the ratio of a complex case (the exercise is uninteresting if the case is simple), and a number of answers emerge. However, it may be observed that it is relatively easy to determine what is not the ratio by focusing on a proposition endorsed in the course of the exposition and asking whether it would have made any difference if that proposition had been put in the negative. If the outcome would be the same, that proposition obviously is not the ratio.16 We are, however, still left to ponder the difficulty of a positive identification of the ratio. We 4.38 can agree that it must be the factor which is necessary to the outcome; yet reasonable—​even astute—​lawyers will not see it in the same way. Perhaps some observations on the periphery of the problem will assist. The general speed limit in a town may be 50 km/​h, yet a court could find that a defendant 4.39 was negligent in careering through a particularly narrow blind curve at 35 km/​h. This is not a precedent; no legal principle was involved, merely an evaluation of factual circumstances. The next case may involve a different curve, different conditions of illumination, a driver of a different age, a vehicle having different characteristics, and who knows what else. The first decision is not a precedent for anything at all, save perhaps the proposition that the existence of a higher general speed limit does not insulate a negligent driver from liability. That proposition was not decisive; it was not the ratio. The reason for the outcome was not a principle but a finding of fact: the driver was negligent. In some cases, the distinction between pronouncements of law and findings of fact is diffi- 4.40 cult. Cross and Harris17 give the example of an employer’s duty to provide a safe working environment. If a court determines that it is not enough to make protective clothing available, but necessary to ensure that it is worn, does it establish a principle to be followed in subsequent cases? In Qualcast Ltd v Haynes,18 the House of Lords made clear that it was pointless to search for the ratio of such cases; they are not general propositions of law applicable to future cases. That case concerned a moulder who was injured by a splash of molten metal. His employers 4.41 had made available protective spats which would have prevented the injury but did not order them to be worn. He therefore sued for negligence. The county court judge who decided the case at first instance stated that, in his view, the work experience of the moulder was such that there was no negligence on the part of the employer in failing to insist, but that he nevertheless felt constrained by precedent to decide otherwise. The House of Lords held that this was a misunderstanding of the rule of precedent: ‘In the 4.42 sphere of negligence where circumstances are so infinite in their variety it is rarely, if ever, that one case can be binding precedent for another’. Their lordships observed that modern negligence cases tended to be decided by judges, which made analysis less convenient than in the past, since findings of jurors were by definition not normative: ‘One jury would attribute to the reasonable man a greater degree of prescience than would another. The jury’s decision did not become part of our law citable as precedent’. As Lord Somervell archly put it: ‘[i]‌f

16  An example of this test is given in note 25 infra in relation to a putative stream of precedents dealing with ICSID jurisdiction. 17  See Cross & Harris, supra note 8, at 40. 18  [1959] A.C. 743.

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The Role of Precedent in Investment Treaty Arbitration the reasons given by a judge for arriving at the conclusion previously reached by a jury are to be treated as ‘law’ and citable, the precedent system will die from a surfeit of authorities’. 4.43 For his part, Lord Denning observed that a judicial pronouncement to the effect that ‘if a

person rides in the dark he must ride at such a pace that he can pull up within the limits of his vision’ had once been viewed in subsequent cases as a proposition of law; but that view had since been properly and firmly rejected on appeal. Agreeing with Lord Somervell, Lord Denning too warned of being ‘crushed under the weight of our own reports’.

4.44 Does the English discipline of the rule of precedent suggest any useful insights for the field

of investment arbitration? Even if it were possible to draw a red line between findings of fact and propositions of law, have we not seen that, even in England, all materials relied upon by a party must be given consideration? Does this not mean that even prior awards dominated by factual determinations may turn out to be decisive when another case presents a highly similar fact pattern?

4.45 To this last question one must, it seems, answer in the affirmative. Arbitrators are very likely

to consider a factual determination to be decisive, without even having to identify, let alone resolve, a controversy as to legal principle. In international arbitration, the sole duty of a tribunal is to decide a particular case in accordance with its mandate—​not to develop a ‘common law’ for international investments. Yet it is natural for arbitrators to be influenced by factors which in prior cases have proved decisive, and this means that the treatment by one tribunal of certain facts as outcome-​determinative may inspire subsequent tribunals to rationalize the prior decision by deducing an explanatory rule.

4.46 The key word is ‘decisive’. The essential distinction is between decisive considerations and

incidental observations. The difference between ratio and obiter endures with undiminished importance. Obiter dicta are nothing more than opinions which happen to find themselves in a judgment or an award rather than in a scholarly publication; they are a species of legal literature, not a source of law.

4.47 Arbitrators’ opinions are no more or less interesting than opinions of commentators. Of

course, there have been instances where unique insights offered by way of dictum or academic commentary have commanded great respect and become lodestars for future decision-​ makers. But, in most cases, the reader of an alleged precedent is most likely to be influenced by the reasons which he understands as decisive with respect to the outcome for which arbitrators have taken personal responsibility ex officio. That is where, one reasonably surmises, they exhibit particular care. And so, while future arbitrators may and do consider everything put before them, it is clear that the greater weight they intend to signify when they prefer to ‘precedents’ should be limited to matters of ratio.19

4.48 An example may be useful. The BIT entered into by Germany and the Philippines pro-

vides in Article 1(1) that: ‘[t]‌he term “investment” shall mean any kind of asset accepted in accordance with the respective laws and regulations of either Contracting State’. This provision of law cannot be the ratio decidendi of a subsequent precedent because it is what it is: an abstract rule to be respected now and until it is abrogated. The value of a precedent

19  There are further refinements beyond the scope of this short exposition, such as the role of so-​ called ‘judicial dicta’ (decisions on points fully argued, especially if they would have been decisive if different facts had been found; these might as well be called quasi-​rationes) or that of judicial interpretation by which prior rationes are extended or restricted in scope.

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V.  The Core Concepts is that it may provide authority for how such a rule is to be understood. Accordingly, a ratio can be understood as a syllogism in which the rule (or some contextually useful rephrasing of it) is the major premise, leaving the reader to discern the minor premise which leads to the conclusion. The minor premise comprises the finding or findings which the decision-​maker considered 4.49 to be material in reaching the conclusion. To reconstruct the minor premise is often a matter of some difficulty. The original decision-​makers seldom articulate the propositions they consider as decisive in the form of a handy syllogism, because their duty is to decide their case, not to imagine themselves as legislators. And even if they did set down their ratio, that formulation would not be the precedent unless the beholder agrees with it. A precedent stands for the ratio later seen to be decisive given the premises and the conclusion, not for what the original decision-​maker declares as decisive. It is thus with full awareness that the formulation is open for discussion that the syllogism of 4.50 Fraport v Philippines may be described as the following: Major premise: Investments effected in a manner contrary to the laws and regulations of the host signatory State are not entitled to protection under the BIT. Minor premise: The investor improperly structured its investment in such a way as to evade mandatory provisions of the law of the host State pertaining to minimum local ownership of certain businesses. Conclusion:  The claim must be dismissed because the investor is not entitled to invoke the BIT.

These formulations (imperfect as they may be) illustrate the evolutionary potential of pre- 4.51 cedents. This potential is inherent both in considering how the examined decision may be distinguished or how it may be refined (whether by extension or restriction). For example, it may be suggested that the Fraport outcome should be different if the illegality arose not when the investment was made (leading to forfeiture of the BIT protection, including access to the ICSID) but in the performance of operations subsequent to the investment (being a matter for the merits—​whether leading to a denial of liability or a reduction in quantum—​rather than jurisdiction). That would be a matter of distinguishing. Or it may be suggested that an illegality should not be given weight if the law violated had in fact fallen into desuetude, or was implemented in an arbitrary or discriminatory fashion. That would be a matter of refinement. With these considerations in mind, it should not be difficult to see the importance of the use 4.52 of the word ‘solutions’—​and not ‘reasoning’—​in the oft-​quoted sentence from paragraph 67 of the Saipem v Bangladesh decision on jurisdiction, to the effect that the tribunal ‘believes that subject to compelling grounds, it has a duty to adopt solutions established in a series of consistent cases’. By contrast, the WTO Appellate Body, which cited Saipem with approval and in all likelihood was intending to send the same message, was less sure of its language when it stated, in U.S.–​Final Anti-​Dumping Measures on Stainless Steel,20 that ‘absent cogent reasons, an adjudicatory body will resolve the same legal questions in the same way in a subsequent case’.

  WT/​DS344/​AB/​R (Apr. 30, 2008).

20

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VI.  Life and Death of Precedent in a Decentralized System 4.53 One must be aware of the perils of conflating the learning to be derived from the great variety

of courts and tribunals which coexist in the modern world. This is not the place to consider the complex issue of cross-​fertilization between areas of international law where great issues overlap, such as the notion of ‘discrimination’ in WTO parlance and in bilateral investment treaties. To take another particularly salient example, property rights are protected under human rights conventions as well as under BITs. Yet one must surely recognize a potential difference between treaties intended to promote investments and to cause investors to rely on undertakings made with the direct and explicit intent of creating incentives, on the one hand, and, on the other, the minimum treatment as understood in terms of human rights, applying even to investments which the state may not have desired.

4.54 An important question appears not yet to have been considered in the depth it obviously de-

serves: whenever they are created by treaties which refer to the applicability of international law, are international tribunals in investment disputes organs of the international legal system and therefore bound to apply international law, whether or not it is pleaded by the parties? The parallel with the ICJ and Article 38 of its Statute is obvious, and the implications are equally clear, as the ICJ put it in the Fisheries Jurisdiction cases: The Court . . . as an international judicial organ, is deemed to take judicial notice of international law, and is therefore required . . . to consider on its own initiative all rules of international law which may be relevant to the settlement of the dispute. It being the duty of the Court itself to ascertain and apply the relevant law in the given circumstances of the case, the burden of establishing or proving rules of international law cannot be imposed upon any of the parties for the law lies within the judicial knowledge of the Court.21

4.55 In other words, a tribunal in an investment dispute which views itself as an international ju-

dicial organ cannot content itself with inept pleadings and simply uphold the least implausible of the two. Furthermore, as the PCIJ put it in Brazilian Loans, an international tribunal ‘is deemed itself to know what [international] law is’,22 and this thought should be a sobering one to parties making appointments of arbitrators, and to arbitrators accepting appointment. There have indeed been some questionable decisions in investment arbitrations, which suggest that the arbitrators had an insufficient grounding in international law. Yet this comment must be seen in perspective; the PCIJ and the ICJ themselves have authored discredited judgments, and the normative influence of those judgments simply dissipates over time. We are in an early phase of dramatic extension of investment arbitration, and the fact that so many investment arbitrators are of a premier rank as international lawyers—​as indicated by the very partial enumeration at the end of the ‘General Considerations’ section—​suggests that there is no cause for alarm. The intense attention of the international community of scholars and practitioners will undoubtedly have a salutary effect: good awards will chase the bad and set standards which will contribute to a higher level of consistent quality.

4.56 To overrule a decision is a serious matter; to say that a lower-​tier decision-​maker decided

wrongly is likely to undercut general confidence in that tier. This concern is all the greater in the field of investment arbitration, where the levels of jurisdiction are limited and where full appellate review is at any rate generally unavailable. Those who examine applications for

21  Fisheries Jurisdiction (U.K. v. Ice.), Interim Protection Order, 1972 I.C.J. 12 (Aug. 17, 1974) at 3, 9 (¶ 17) & 175, 181 (¶ 18). 22  Brazilian Loans Case (Braz. v. Fr.) 1929 P.C.I.J. (ser. A) No. 21, at 124.

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VII. Reconsidering the Value of Precedents the annulment of investment awards would do well to reflect on the attitude towards overruling precedents exhibited by the highest court of the country, where the rule of precedent has always been the most coercive, as exemplified by this pronouncement of Lord Reid in Ross-​Smith v Ross-​Smith:  ‘Before holding that the decision should be overruled I  must be convinced not only that the ratio decidendi is wrong but that there is no other possible ground on which the decision can be supported’.23 In other words, a precedent was allowed to stand as law, although the House of Lords disagreed with its reasoning, on the footing that the outcome could be justified on other grounds. By a parity of reasoning, it would seem even more appropriate to allow a decision to stand as outcome even if the proper ratio must be supplied by the higher reviewing authority. To do otherwise unnecessarily undermines the perceived legitimacy of the system.

VII.  Reconsidering the Value of Precedents It might be said that precedents command respect only when the propositions they uphold 4.57 are so clear that they would have carried the day in any event—​with the result that precedents are useless. Yet the meaningful test is perhaps not so much that a precedent commands respect but rather 4.58 that a precedent is useful. Even when it is controversial, perhaps especially when it is controversial, a well-​reasoned judgment or award by respected jurists can be of immense benefit as subsequent decision-​makers, working against time and in the fog produced by crafty partisan pleaders, seek to discern the crucial elements of intricate balances. In other words, the interesting inquiry is not whether precedents are norms in and of 4.59 themselves (in the international field the debate may be cut short by answering with one word: ‘no’) but how they may contribute to the development of norms—​generation as well as refinement. Moreover, the practice of extensive references to alleged precedents seems to be here to stay, and those references cannot be ignored by a tribunal paying proper respect to due process. Above all, attention to precedents is commanded by the basic objective of doing justice in 4.60 the particular case and to be seen as doing so. It might be acceptable to rely on first principles and the basic instruments of international law (such as the text of relevant treaties or compacts) without referring to past awards if none have been invoked by the parties—​but that is seldom so. Tribunals owe it to the litigants to explain how their arguments fared with respect to decisive matters. A discrete objective relates to the ‘recognition function’ (sustaining belief in the system’s le- 4.61 gitimacy), which has been well described by Tai-​Heng Cheng24 and will not be further examined, except to make the following observation. It is often suspected that after considering the facts, judges and arbitrators yield to a temp- 4.62 tation to proceed immediately to take a view of the intuitively appealing outcome, and only afterwards seek to justify it by ratiocination and references to authority. What is perhaps less

  Ross-​Smith v. Ross-​Smith [1963] A.C. 280, at 294.   Tai-​Heng Cheng, Precedent and Control in Investment Treaty Arbitration, 30 Fordham Int’l L. J. 1014 (2007). It need hardly be recalled that the great expositor of the notion of rules of recognition called for the examination of those features of a proposed rule (e.g., one appearing as the ratio of a decision) which indicate that it is a rule of law; H.L.A. Hart, The Concept of Law (1961). 23 24

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The Role of Precedent in Investment Treaty Arbitration often appreciated is that there is nothing scandalous here—​as long as the view is provisional. Experienced and trusted arbitrators frequently rise from deliberations with the comment ‘let us see if it writes’, only to report to their colleagues later: ‘I thought we were on the right path, but it just won’t write’. This is where sustained perusal of legal principle comes to exercise its dominion over intuition. This is where arbitrators should earn their reputation, properly analysing the authorities before them so as to confront their provisional views, rather than producing an array of cherry-​picked quotations designed solely to confirm them.

VIII.  Towards More Rigorous Reasoning by Precedent 4.63 Awards come in many forms, which may affect their degree of persuasiveness. There are

awards which have been annulled and awards which have resisted annulment applications. There are awards which have not been tested at all. There are awards by three-​member tribunals and awards rendered by sole arbitrators. There are awards rendered by eminent persons careful of their reputation in the field and awards rendered by one-​time arbitrators who might be surprised by their nomination, and go through the experience like curious tourists without a realistic expectation of ever returning. There are awards rendered by a majority and awards rendered unanimously. Some awards record the merest indication of disagreement, while others are rendered over an impressive dissent. Some dissents are powerful and elegant and make the majority look fragile; others are partisan diatribes with quite the opposite effect. Some awards are linguistic horrors; others are textbook models of drafting. Some are highly disciplined texts which avoid any excursions from what is strictly necessary to decide the dispute; others bring to mind Shakespeare’s loquacious Polonius. There are awards which seem to be the product of inexorable reasoning and others which seem nothing but the result of a vote. There are awards signed by arbitrators who maintain impressive consistency from one case to the next, and awards signed by arbitrators who seem not to remember what they put their names to the previous year. Even Homer nods, so even arbitrators entitled to the greatest respect occasionally find themselves in cases where, one might say, the particularities of the matter seem to defeat their acumen and their patience.

4.64 Awards are there to be evaluated and criticized—​relentlessly criticized—​in the interest of

improving international legal systems. Without criticism, the law becomes hostage to power, influence, clientelism. Clear thinking and robust debate is the sole path not only to a jurisprudence constante, but to a jurisprudence légitime.

4.65 So how do we separate the wheat from the chaff? The normative influence of an award can be

due, it appears, either to cumulative effect or inherent persuasiveness.

4.66 The cumulative effect is the less interesting. If a constant stream of cases have articulated

the same proposition—​such as the relevance of the Vienna Convention to the interpretation of BITs; or the idea that if sunken costs are recouped, they must be deducted from any award of lost future income in order to avoid double recovery—​the odds are that the conclusions would have been the same, even if no participant in the arbitration had spotted any precedents.25 25  Any alleged cumulative effect should naturally be examined critically. An ICSID award (Malaysian Historical Salvors, SDN, BHD v.  Malaysia), ICSID Case No. ARB/​05/​10 (UK/​Malaysia BIT), rendered in 2007 and annulled in 2009, declared that there were seven ‘decided cases of importance’ supporting the proposition that a claimant must cumulatively satisfy a so-​called ‘objective’ definition of investment under the ICSID Convention, as well as a so-​called ‘subjective’ definition in a relevant contract or BIT. (Why the ICSID Convention’s famous non-​definition should be called ‘objective’ while the BIT’s explicit definition is

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VIII.  Towards More Rigorous Reasoning by Precedent With respect to the matter of inherent persuasiveness, it is important to bear in mind an im- 4.67 portant exception to the rule of stare decisis, namely that decisions rendered per incuriam are not entitled to binding effect. A judgment is defective in this sense if a statute or a binding precedent was not put before the court, and if the force of that ignored authority was such that it would have commanded another outcome. If this is an exception even in systems which uphold the rule of binding precedents, so a fortiori are international awards rendered in ignorance of decisive authorities. The per incuriam exception has a cousin: a prior decision bereft of a discernible explanation of 4.68 a proposition inherent in the outcome. An illustration was provided by the English Court of Appeal in 1975, when it was faced with the issue whether the Arbitration Act 1950 entitled a judge to appoint an arbitrator in circumstances where the appointing authority specified in the arbitration clause (the Confederation of British Industry) declined to make the appointment.26 A similar situation had arisen in a prior case in which the Court of Appeal by inference assumed that the judge did have such a power.27 The necessity of this premise was evident from the fact that the first-​instance judge had agreed to appoint an arbitrator upon the refusal of the appointing authority to do so, and his order was upheld. But ‘the only issue raised in the appeal’ was whether there had been an arbitration agreement at all. (There was a difficulty with respect to the incorporation of a standard-​form arbitration clause.) There was no discussion of the specific point being frontally challenged in the second case, and so the High Court judge there denied that he was bound by precedent and refused to make the appointment as a matter of construing the Arbitration Act 1950, which he found to create judicial authority to appoint only if the parties had agreed to make joint appointment and had failed to do so. The Court of Appeal agreed: ‘Although a decision could not have been arrived at unless the court had been prepared to assume a certain view of the law, it does not

called ‘subjective’ is something of a mystery.) Apparently, this award considered itself the eighth precedent in an irresistible stream of cases. The fact is that there are other arbitral pronouncements that go the other way. (See, e.g., the succinct statements by the ICSID tribunals in Generation Ukraine (¶ 8.2) and Fraport (¶ 305); and by the ad hoc Committee in CMS v. Argentina (¶ 71).) Moreover, the purported stream of precedents, if one actually consults those cases, turns out to include no less than five cases where jurisdiction was upheld. That means that comments found in those decisions about restrictions on jurisdiction are pure obiter dicta. And that is only literature. They might persuade, like any literature, but could not bind courts even in systems where the undiluted rule of precedent reigns supreme. The general proposition which the sole arbitrator in MHS conceived of as supported by his analysis of the seven ‘decided cases of importance’ may be stated as follows: An objection to jurisdiction is valid if the claim fails to satisfy either of the definitions of investment contained respectively in the ICSID Convention and in the relevant BIT. For that proposition to have been the ratio of the prior decisions, the claim must have failed at least one of the two tests. That did not happen in five of these cases. Since the tribunals went on to examine the merits, there was no need for them to examine the consequences of a hypothetical failure of compliance with one of the definitions. Under this straightforward analysis, only one case cited in MHS v. Malaysia (namely Joy Mining) may be said to have been founded on this ratio. The English case of Re State of Norway’s Application (No. 2) [1990] A.C. 723, is illustrative of proper mental discipline. There, the Court of Appeal was considering an appeal by a witness who resisted an order to give oral evidence before an examiner in London with respect to a tax case pending in Norway. The witness argued that the order was improper for two reasons: (i) lack of statutory jurisdiction; and (ii) overbroadness of the request. The Court of Appeal initially concluded that there had been a jurisdictional basis for the order but that it was overbroad. The Norwegian request was resubmitted with greater specificity. It was heard again by the Court of Appeal, this time composed of different judges. The amended request was specific enough. The Court of Appeal generally regards itself as bound by its own prior judgments. However, the second panel felt free to contradict the previous decision, thus finding for the witness on ground (i), on the footing that the jurisdictional finding made in the prior decision was unnecessary since the request had in any event been overbroad. Indeed, the prior decision was obviously not made because the Court had jurisdiction—​how can an acknowledgement of jurisdiction be the ratio for dismissal?—​but because of the overbroad request. 26  National Enterprises v. Racal Communications [1974] 3 All E.R. 1010. 27  Davies Middleton & Davies Ltd. v. Cardiff Corp. (1964) 62 L.G.R. 134.

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The Role of Precedent in Investment Treaty Arbitration follow that the latter was a ground of the decision’. The sense of the Act was thus held to be that a party who agrees to possible arbitration by someone named by a specific appointing authority in which it has confidence should not be deemed to have accepted arbitration, even if that authority declines to appoint. 4.69 An issue which would be within the purview of the trier of fact (archetypically the jury in the

common law system) cannot be disposed of in a way which creates a precedential norm.28 Inconsistent outcomes may be regrettable but do not evidence a disregard of precedent.

4.70 Another exception to stare decisis may be relevant in the field of international arbitration,

namely obsolescence. When the environment which commended a certain ratio has been significantly altered, a departure from precedent may be warranted. In one conception of common law systems, which is still that of England, this is a possibility open only to the highest court. Since an international tribunal has no higher court, the restrictions in this respect on lower or intermediary courts have no relevance in the international context. (Equally, one can hardly expect that a tribunal looking at the complex environment and a well-​established body of decided cases will be quick to conclude that the world has changed.)

4.71 To conclude this topic of reasoning by precedent, it seems worthwhile to consider in some de-

tail the potential effect of dissenting opinions on the weight of awards as putative precedents.

4.72 Why is it that we have no difficulty with judicial dissents, while arbitral dissents immediately

put us on guard? The answer is that judges are not named by the parties, so if a judge dissents, it will not be because he has a bias in favour of the unsuccessful party. That is not true in arbitration; as Alan Redfern noted in his 2003 Freshfields lecture, of twenty-​two dissenting opinions submitted in ICC arbitrations in 2001 where it was possible to identify the dissenter, the dissent on every occasion favoured the party having nominated that arbitrator. As Redfern commented dryly: ‘It would have been comforting if one or two of the dissenting opinions had gone against the appointing party’. And the last words of his lecture asked whether ‘the present leniency towards dissenting opinions . . . has gone too far’.29

4.73 Eduardo Silva Romero was interested in Redfern’s report, so he verified the ICC statistics for

2003. It turned out that there had been thirty-​one dissenting opinions, thirty of which had been submitted by the arbitrator nominated by the losing party.30 (The thirty-​first was a presiding arbitrator in what Silva Romero referred to as a ‘rather pathological’ case.)

4.74 Owing to the fact that investment arbitrations tend to generate precedents in a way quite

unfamiliar to routine commercial arbitration, is there a greater justification for dissenting opinions in the former?

4.75 There have certainly been instances of worthwhile dissenting opinions which present a le-

gitimate point of view. ‘Worthwhile’ does not mean ‘necessarily correct’, but ‘intellectually unavoidable’. An astute dissent should, it seems, actually benefit the majority; if the other

28  The prior Lauder v. Czech Republic decision (Sept. 3, 2001) could not have been regarded by the arbitrators who issued the CME Czech Republic B.V. v. Czech Republic Award (Partial Award, Sept. 13, 2001), rendered ten days later following extraordinary maneuvers on the part of a dissenting arbitrator, as a precedent which they chose to ignore. The second tribunal took a different view of the factual reality of causation—​but so may two juries. And it is hardly satisfactory to think that the winners of a race to finalize an award thereby trump other arbitrators. 29  Alan Redfern, Dissenting Opinions in International Commercial Arbitration: The Good, the Bad and the Ugly, 20 Arb. Int’l 223, 234 (2004). 30  Eduardo Silva Romero, Brèves observations sur l’opinion dissidente, in Les Arbitres Internationaux 179 (J. Rosell ed., 2005).

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VIII.  Towards More Rigorous Reasoning by Precedent arbitrators maintain their views in the face of such opposition, their reasoning ought to be improved, and their confidence in making the decision strengthened. Such high-​quality dissents do not detract from the legitimacy of the process. To the contrary, they constitute a transparent exposition of the emergence of an issue about which irreducibly opposed views may legitimately be maintained. Most adults know that such questions exist. It does not mean that the law is a farce. It means that the law deals with subjects which make reasonable people hesitate, and it means that it is applied by human beings. Now for the counterargument. If the culture of any system of arbitration gives rise to habits 4.76 or expectations of individual expression of disagreement at every turn, the practice may degenerate and the legitimacy of the process suffer. This is true even with respect to jurisdictions where no decision-​maker is appointed by individual parties, such as national courts. An institution’s ethos, whether it is one of easy tolerance of dissents, or to the contrary of 4.77 ingrained resistance to them, has a profound effect on the psyche not only of the doubter, but also of the majority. Consider the experience of the World Bank Administrative Tribunal (WBAT), comprised of seven judges from various continents, which has rendered nearly 400 judgments since its creation in 1980 without a single dissent. This is not because its judges are notoriously diffident. Two of them were former presidents of the ICJ. The cases are sufficiently complex that each judge would doubtless have written a quite different text if he or she had been alone. Yet this tribunal has invariably decided by consensus. This does not mean that each judge agrees with every aspect of any particular judgment. The experience of the WBAT should make one doubt that dissents are more appropriate in 4.78 investment arbitrations than in commercial arbitration. It is said that the former are more likely to be invoked as precedents, and therefore an arbitrator who believes that a legal principle is being misstated has a very good reason to express dissent. This is a respectable position to take, but the dynamic of decision-​making suggests another approach which for thirty years avoided a single dissenting opinion in the WBAT. Although WBAT judges are explicitly allowed to issue dissents, and although their own judgments are constantly cited to them as precedent for the simple reason that it is their task to interpret the Bank’s Staff Rules, which are the principal normative source for decisions, and there is no other source of precedent as to the interpretation of those rules, there was doubtless some pressure not to be the first judge since 1980 to dissent, and also pressure on the majority not to push other judges into an intellectual corner where they see no other way out but to dissent. The solution does not lie in unprincipled compromise. The fruitful approach is rather to use familiar techniques of accommodation, such as seeking the narrowest possible point that will resolve the particular grievance and avoiding unnecessary pronouncements, which are likely to be divisive.31 In sum, there are circumstances where a sober and thoughtful dissent contributes to a mature 4.79 understanding of the law; it enables both parties to see that their arguments were fully heard, and lawyers and scholars to realize that a particular issue will continue to merit close attention and perhaps refinement or, indeed, reconsideration. But arbitrators should not quickly conclude that they find themselves in this situation. Nor should the majority spare any effort at intellectual accommodation, by judicious employment of the deliberative methods just mentioned.

31  There is naturally a significant distinction between standing organs such as the WBAT (or, more notably, the WTO Appellate Body) and more ephemeral arbitral tribunals. But this difference should not be exaggerated. Standing bodies experience significant turnover, and some investment arbitrators achieve de facto tenure well in excess of that of the ‘permanent’ bodies.

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The Role of Precedent in Investment Treaty Arbitration 4.80 In most commercial arbitrations, there is no reason for dissent. Arbitrators’ signatures on the

award certify no more than that they participated in the deliberations and now confirm that this is the decision of the tribunal. There is no need to indicate that there was a 2:1 vote, if that was the case. Certainly, there is no assumption that each arbitrator has agreed to every observation or logical construct set down in the award. In many if not most investment arbitrations, there is no reason to take a different approach.

4.81 This discussion should serve to underscore the importance of the ratio/​obiter distinction. A unani-

mous award may contain incidental observations which have sprung from the mind of the drafter and been more tolerated than embraced by the other arbitrators; their joint endorsement may be assumed only with respect to what was decisive.

IX.  Concluding Thoughts: Is a Synthesis Possible? 4.82 Alain Pellet’s authoritative 115-​page contribution on Article 38 in the Oxford University Press

Commentary on the Statute of the International Court of Justice contains the following important observation: ‘in practice, Art. 38, while a useful directive, has not prevented the Court from deciding on the basis of other sources of international law, the theory of which it has greatly advanced’.32

4.83 It would be fatuous to quarrel with the words ‘useful directive’, and to insist that Article 38 lays

down a mandatory restriction. For there is no appeal from the decisions of the ICJ; nor is there from most international tribunals. This observation underscores the importance of self-​restraint on the part of international adjudicators. The judicious application of evolving sources of law is at the heart of the process of building an international system where perceptions of legitimacy are often more important than the elusive ‘proof’ of abstract legal propositions.

4.84 One of the reasons for the inescapable fuzziness of the formal sources of law identified in

Article 38(1) is that it was intentionally worded in such a way as to give the World Court sufficient flexibility to avoid non liquet.33 This proposition should apply to ICSID tribunals as well; and there is every reason to presume that a BIT which gives an option to select either ICSID or another mechanism (such as the UNCITRAL Rules) is intended to create a uniform regime in this regard.34 The ICJ Statute does not allow the judges to conclude that they cannot reach a decision because they have not found an applicable norm. Such a duty to decide, in the public international law field, is inconceivable unless international adjudicators are free to devise new solutions within the interstices35 of established norms which are too general or too abstract to yield a definite answer. When the PCIJ was created, it should

32  The Statute of the International Court of Justice 700 (Andreas Zimmermann, Christian J. Tomuschat & Karin Oellers-​Frahm eds., 2006). 33  Hersch Lauterpacht, The Function of Law in the International Community 134–​35 (1933). 34  The Model Rules on Arbitral Procedure adopted by the ILC in 1958 (reprinted in [1956-​ II] YBILC 83) expressly precluded the possibility of non liquet: art. 11. It was thought that this rule itself reflected a mandatory general principle of law; see ILC Secretariat, Commentary on the Draft Convention on Arbitral Procedure 49–​52 (1955) and the references cited therein. 35 Thus said the incomparable Holmes J., in Southern Pacific Co. v.  Jensen (244 U.S. 205, at 221 (1917)): ‘I recognise without hesitation that judges do and must legislate, but they can do so only interstitially; they are confined from molar to molecular motion. A common law judge could not say, I think the doctrine of consideration a bit of historical nonsense and shall not enforce it in my court’.

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IX.  Concluding Thoughts: Is a Synthesis Possible? be noted, a respectable minority was not opposed to non liquet.36 Had they won the day, judicial creativeness would have been curtailed and international law deprived of room for development.37 Jurisprudence is all the more likely to evolve in a realm where historical precedents tend to be 4.85 both rarefied and outdated. As Francisco Orrego Vicuña observed in his Lauterpacht Lectures in 2001, ‘questions relating to major areas of international law, such as those dealing with trade, finance and investments, are never brought’ before the International Court of Justice.38 ‘Never’ was perhaps too strong a word, since international lawyers working in the economic field will immediately think of Barcelona Traction (1970), Elsi (1989), and Diallo (2012), but in fact those exceptions serve to make the point even stronger: three cases in seventy-​five years is a starvation diet.39 Based on the experience of the last decade, it is hardly an understatement that major disputes between investors and states are being resolved by adjudication every month. This pace requires resources beyond those of a single world court, and expertise of quite a different kind. The notion of leading cases in specialized areas of international law seems likely to become an 4.86 ever more familiar element of our mindset, regardless of the fact that tribunals which render such decisions are not bodies formally constituted by treaties. (In that sense, investment awards may be said to occupy a higher, perhaps intermediate, level, for they are frequently rendered pursuant to a treaty.) The expression ‘leading case’ is routinely used in relation to the de Merode judgment of the World Bank Administrative Tribunal, in which the scope of review of the administrative acts of an international organization were defined.40 The same, to give just one additional example, may be said of the award rendered under the rules of the Court of Arbitration for Sport in Aanes,41 often cited for its approach to the fundamental distinction between disqualification and suspension in relation to the policing of doping offences by international sports federations. These inquiries will continue to challenge us. The effort is worthwhile, as suggested by the 4.87 concluding words of the chapter on ‘Law Applicable by International Tribunals’ in Manley Hudson’s International Tribunals: Past and Future, written in 1944, which are perhaps more plausible today than they were in the bitter wake of global war:  ‘[i]‌nternational tribunals applying the law which regulates the conduct of States can play an important role in world affairs. More than this, the judgments of such tribunals tend to become important sources for the development of international law’.42

36  A leading member of this group, the former U.S. Secretary of State Elihu Root, explained his position by stating that: ‘the Court must not have the power to legislate’; see Procès-​Verbaux of the Proceedings of the Advisory Committee of Jurists (1920), Annexe No. 3, at 309. 37  Hersch Lauterpacht wrote of ‘the animated, but highly unreal, controversy as to whether judges create the law or whether they merely reveal the rule already contained in gremio legis’ and ‘the paradoxical assertion that judges are at the same time docile servants of the past and tyrants of the future’. His point was that: ‘the distinction between the evidence and the source of many a rule of law is more speculative and less rigid than is commonly supposed’. See Hersch Lauterpacht, The Development of International Law by the International Court 21 (rev. edn 1958) (first published as The Development of International Law by the Permanent Court of International Justice in 1934). 38  Francisco Orrego Vicuña, International Dispute Settlement in an Evolving Global Society 19 (2004). 39  Most cases that predate the foundation of the ICJ—​ from Oscar Chinn to Chorzów Factory—​are a mixed bag, of little use today except with respect to the most general of propositions. 40  De Merode, WBAT Decision No. 1 (1981)—​ the very first judgment of that body—​was decided by the tribunal sitting in a noteworthy plenary formation, presided over by Judge Jiménez de Aréchaga and also including Judges Elias, Weil, Lauterpacht, Abul-​Magd, Gorman, and Kumarayya. 41  Aanes v. FILA, CAS 2000/​A/​317. 42  Manley O. Hudson, International Tribunals: Past and Future 107 (1944). Hudson was a judge of the Permanent Court of International Justice (elected in 1936).

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The Role of Precedent in Investment Treaty Arbitration 4.88 In the end, there is no contradiction between the task of deciding an individual case—​in

principle the sole duty of ephemeral tribunals—​and consciousness of contributing to the accretion of international norms. The drafter of an award should resist any temptation to cite stray observations, found when perusing the literature, only because they seem to lend support for a decision already taken. And arbitrators asked to give weight to a prior award should be discerning enough to see that such passages are unlikely to be authoritative.

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Part II GUIDE TO KEY PRELIMINARY AND PROCEDURAL ISSUES

5 AN OVERVIEW OF PROCEDURE IN AN INVESTMENT TREATY ARBITRATION Barton Legum

I. Introduction  II. Overview of the Overview  III. Preparation of the Case 

A. The Beginning  B. Initial Case Assessment  C. The Request for Arbitration  D. Selection of Arbitration Rules 

E. Selection of the Arbitrators  F. The First Session with the Tribunal 

5.24 5.27 IV. The Written Submissions  5.40 V. The Hearing  5.44 A. Post-​hearing Activity  5.49 B. The Decision or Award and Its Aftermath  5.53 VI. Conclusion  5.59

5.01 5.04 5.07 5.08 5.11 5.13 5.17

I. Introduction What is the procedure in this treaty arbitration? What should I expect? Whether the client is 5.01 a high-​ranking official in a Ministry of Justice or General Prosecutor’s office, a businessman, or a member of a multinational corporation’s legal department, these questions are inevitably among the first posed in a case. There is tremendous variability in the procedure of investment arbitrations. Arbitrations 5.02 range from cases that take many years to conclude to cases that are heard within a year or two. The experience in one case may not hold for another. However, there are a number of common elements and fixed variables. An understanding of 5.03 these elements and variables allows the reader to draw conclusions as to how a specific arbitration will probably play out. This is the understanding that this chapter attempts to convey, with a practical focus on the principal strategic decisions in such a case.

II.  Overview of the Overview As is the case with other forms of international arbitration, investment treaty arbitration is a 5.04 hybrid of civil law and common law procedure. Like many civil law systems, investment arbitration places great emphasis on the written submissions that precede the hearing. Each party makes its case in the written submissions, which present all of the evidence it relies upon to establish its case. Similar to civil law proceedings, the oral hearing in many ways merely supplements these written submissions. However, as in common law proceedings, the hearings are often multi-​day affairs that feature 5.05 cross-​examination of witnesses by counsel and active questioning by the arbitral tribunal. The

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An Overview of Procedure in an Investment Treaty Arbitration nature and variety of these hearings resemble more those of common law proceedings than civil law ones. 5.06 From a practical perspective, the activity in an investment-​treaty arbitration can be div-

ided into five sequential phases: (1) the preparation of the case; (2) the written submissions; (3) the hearing; (4) post-​hearing activity; and (5) the decision and its aftermath.

III.  Preparation of the Case 5.07 For present purposes, preparation of the case includes the period from the inception of the

dispute to the first procedural session with the arbitral tribunal. It is in many respects the most important phase of the case. During this time, the parties select the counsel to represent them, conduct an initial analysis of the case, select the arbitrators, and decide on the specific procedure for the arbitration. Each of these decisions is critical. Many parties make the mistake of devoting insufficient resources to this period of the case and these decisions. This mistake is difficult to overcome later in the procedure.

A. The Beginning 5.08 The preparation period begins for the claimant when it realizes that there is a serious

problem—​or potential problem—​with a foreign investment and that an investment treaty may either provide a possible solution or assist in a political or negotiated resolution of the issue. In some instances, the investor recognizes the problem years before a dispute emerges and seeks early advice on international investment law. The advice at this stage may help to resolve the dispute before arbitration ever becomes necessary. In other cases, the advice may help to prepare the case for arbitration better. In still other cases, the problem with the foreign investment develops suddenly, and the investor seeks advice only shortly before the arbitration is commenced.

5.09 For the respondent state, the preparation period commences—​ or at any rate should

commence—​when the relevant ministry receives the first communication that identifies a potential dispute under an investment treaty. In some instances, this will occur when a high-​ ranking official of the government receives a letter from the investor or its counsel. In others, this will occur when a formal notice of intention to submit a claim to arbitration is communicated. In many instances, the preparation period for the state will begin only once the request for arbitration is received.

5.10 Because investment-​treaty arbitration is a relatively recent development, many states do not

have internal procedures for dealing with these cases. It is still perhaps more the rule than the exception for there to be lack of clarity as to which ministry is responsible for the file, where funding for defence of the case will come from, what procedures must be followed to retain competent counsel, and what budget will pay for any eventual adverse award. Long periods of apparent inactivity on the state side of the case often result while these issues are sorted out internally. The resultant delays can leave the state with a compressed period for preparation. Unless the state retains highly experienced counsel, this compressed preparation time can place the state at a significant disadvantage.

B. Initial Case Assessment 5.11 After counsel is retained, each party generally conducts a legal and factual assessment of

the case. The principal documents relevant to the case are collected and, often, translated. Witnesses are interviewed. A chronology of events is prepared, and the facts are analysed in terms of the substantive and jurisdictional standards of the investment treaty. If time permits,

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III.  Preparation of the Case counsel will often prepare a confidential memorandum setting out initial views on the case and prospects for success for discussion with the client. For the claimant, this initial case assessment serves as the basis for its strategy in deciding 5.12 whether to bring the claim at all, framing its claim in the request for arbitration, selecting arbitration rules (if the treaty provides a choice of rules), deciding whom to appoint as the first arbitrator, and negotiating detailed procedures with the respondent. For the respondent, the case assessment serves as the basis for its strategy in appointing the second arbitrator and agreeing on the presiding arbitrator, deciding whether to propose multiple phases for jurisdiction, liability, and damages, and determining what detailed procedures to negotiate with the other side and propose to the tribunal. The higher the quality and accuracy of the case assessment, the better-​founded these crucial decisions by each party will be.

C. The Request for Arbitration The document that commences the arbitration proceedings is referred to as the Request for 5.13 Arbitration under the ICSID Rules1 and the Notice of Arbitration under the UNCITRAL Rules.2 In neither case is this document a definitive and complete statement of the claims asserted: in the ICSID system, that function is reserved for the claimant’s memorial3 and, in the UNCITRAL system, for the statement of claim.4 Instead, the request or notice provides certain basic information about the claims, the parties, and the basis for arbitral jurisdiction.5 Because it is the first document concerning the case that the arbitral tribunal will see, however, many claimants devote time and energy to making this document as persuasive as possible. UNCITRAL arbitrations begin as soon as the notice of arbitration is received by the re- 5.14 spondent.6 ICSID arbitrations, by contrast, commence only when the Secretary-​General of ICSID registers the request.7 There are a number of substantive and formal requirements for requests for arbitration under 5.15 the ICSID Rules.8 Some investment treaties impose additional formal preconditions to arbitration.9

1  Convention on the Settlement of Investment Disputes Between States and Nationals of Other States art. 36 [hereinafter ICSID Convention]; ICSID Rules of Procedure for Arbitration Proceedings 1 [hereinafter ICSID Rules]. 2  United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules art. 3 [hereinafter UNCITRAL Rules] (1976 and 2013). The 1976 UNCITRAL Rules were materially revised in 2010 and revised again in 2013 to include a paragraph referring to the new UNCITRAL Transparency Rules. The 1976 Rules, however, continue to apply to disputes under investment treaties that entered into force before August 15, 2010. This chapter provides references to each of the 2013 and 1976 versions where possible. 3  ICSID Rule 31(1), (3). 4  UNCITRAL Rules art. 20 (2013). See also UNCITRAL Rules art. 18 (1976). 5  ICSID Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings 2 [hereinafter ICSID Institution Rules]; UNCITRAL Rules art. 3(3) (1976 and 2013). 6  UNCITRAL Rules art. 3(2) (1976 and 2013). 7  ICSID Institution Rule 6(2). 8  See generally ICSID Institution Rules, ICSID Arbitration (Additional Facility) Rules, chapter II, arts. 2 to 5. 9  See, e.g., NAFTA art. 1121(1) (entitled ‘Conditions Precedent to Submission of a Claim to Arbitration’) (‘A disputing investor may submit a claim under Article 1116 to arbitration only if: (a) the investor consents to arbitration in accordance with the procedures set out in this Agreement; and (b) the investor and, where the claim is for loss or damage to an interest in an enterprise of another Party that is a juridical person that the investor owns or controls directly or indirectly, the enterprise, waive their right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Party that is alleged to be a breach referred to

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An Overview of Procedure in an Investment Treaty Arbitration 5.16 ICSID today registers requests for arbitration in a few weeks, with some exceptional cases

requiring longer.

D. Selection of Arbitration Rules 5.17 Many investment treaties allow the investor a choice of which arbitration rules will govern the

arbitral procedure. The most common choice is between the ICSID Rules and the UNCITRAL Rules,10 although a minority of treaties alternatively provide a choice of the ICC or SCC Rules.11 A detailed comparison of these rules is beyond the scope of this chapter, but the principal practical differences will now be summarized.

1. Cost 5.18 Arbitration under the ICSID Rules is significantly less expensive, in general, than arbitration

under the UNCITRAL Rules. ICSID has a set fee schedule that establishes hourly fees for tribunal members at a rate that is one-​half to one-​third of market rates for top arbitrators.12 The UNCITRAL Rules allow the arbitrators to set their own fees, and they understandably tend to do so based on market rates. 13

5.19 In addition, the ICSID Secretariat provides a range of services at nominal cost. These include

hearing rooms at World Bank buildings with facilities for simultaneous interpretation, case scheduling, and docket maintenance, and substantial case management and general secretarial services.14

5.20 UNCITRAL arbitrations, by contrast, are ad hoc in the sense that there is no institution that ad-

ministers the arbitration.15 All of the services mentioned above must be organized and paid for by the parties in UNCITRAL arbitrations, and these costs add to the expense of the proceedings.16

2. Jurisdictional requirements 5.21 The ICSID Convention provides jurisdiction only over the class of disputes delimited in Article 25 of that Convention.17 For an arbitration to proceed, it must satisfy not only the jurisdictional requirements of the investment treaty but also the additional requirements of the ICSID Convention.18 By contrast, the UNCITRAL Rules impose no additional requirements for jurisdiction, with the result that a tribunal will have jurisdiction over any claim meeting the requirements of the investment treaty. A  claimant anticipating a substantial in Article 1116, except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Party’). 10  E.g., 2012 US Model BIT art. 24(3); Germany and Argentina Bilateral Investment Treaty art. 10(4); France and Iran Bilateral Investment Treaty art. 8(2). 11  E.g., Oman and Austria Bilateral Investment Treaty art. 10; Norway and Russia Bilateral Investment Treaty art. 8; Energy Charter Treaty art. 26(4)(c). 12  ICSID Administrative and Financial Regulations reg. 14; ICSID Schedule of Fees (effective as of July 1, 2016), http://​icsid.worldbank.org (follow ‘Cases’ then ‘Schedule of Fees’ in left-​hand navigation panel). 13  See UNCITRAL Rules art. 41 (2013). See also UNCITRAL Rules art. 39 (1976). 14  See ICSID ‘Dispute Settlement Facilities’, http://​icsid.worldbank.org (follow ‘About ICSID’, then ‘Dispute Settlement Facilities’ in left-​hand navigation pane). 15  UNCITRAL Rules preface (1976) (stating in part that the rules are ‘for ad hoc arbitration . . . acceptable in countries with different legal, social and economic systems’). A number of institutions routinely administer UNCITRAL arbitrations for a fee, including ICSID, the Permanent Court of Arbitration, and others. 16  See UNCITRAL Rules arts. 40, 41 (2013). See also UNCITRAL Rules 38, 39 (1976). 17  ICSID Convention art. 25(1) (‘The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre’). 18  See id.; Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (Mar. 18, 1965), ¶¶ 22–​33 (describing the ICSID jurisdictional

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III.  Preparation of the Case jurisdictional objection may prefer the UNCITRAL Rules to those of ICSID—​for merely by selecting the UNCITRAL Rules, the claimant eliminates all jurisdictional objections based on the requirements of Article 25 of the ICSID Convention.

3. Enforcement and review mechanisms The ICSID Convention has a unique system for review and enforcement of arbitral awards. 5.22 Under the Convention, a special arbitral tribunal called an ‘ad hoc committee’ decides on applications for annulment of an award.19 An ICSID award is not subject to any review in national courts.20 Instead, the national courts of contracting states are obligated to enforce ICSID awards as if they were a judgment of a court of first instance.21 By contrast, UNCITRAL awards are subject to annulment or set-​aside proceedings in the national courts of the place of arbitration and to limited review in proceedings to enforce the award elsewhere.22 4. Transparency The ICSID Rules provide for a public docket describing the cases registered and significant 5.23 case developments.23 They also provide for publication of at least excerpts of the reasoning of ICSID awards and set a presumption that amicus curiae submissions will be accepted and that hearings will be open to the public.24 The 2013 UNCITRAL Rules subject investor-​state arbitrations to the requirements of the UNCITRAL Transparency Rules, which apply if the underlying treaty was concluded after April 2014 or if the parties otherwise agree.25 By contrast, the 1976 UNCITRAL Rules provide a presumption that hearings will be private and do not address other questions of transparency.26 E. Selection of the Arbitrators ‘Tant vaut l’arbitre, tant vaut l’arbitrage’, the French international arbitration community 5.24 aptly observes: ‘an arbitration is worth no more than the arbitrator’. Selection of arbitrators is one of the most important decisions in the case. In investment treaty arbitration, the claimant names the first arbitrator, the respondent 5.25 names the second arbitrator, and then either the two parties or the two arbitrators agree on the third and presiding arbitrator.27 If the tribunal is not constituted within a stated period of time, then the ICSID Secretariat or another designated authority may appoint the remaining arbitrator or arbitrators.28 There are a number of different approaches to selection of arbitrators in investment treaty 5.26 cases. Some practitioners believe that all that matters is appointing seasoned and respected

requirements of consent, nature of the dispute, parties to the dispute, notification by contracting states, arbitration as exclusive remedy, and claims by the investor’s state). 19  ICSID Convention art. 52(3). 20  Id. art. 53(1). 21  Id. art. 54(1). 22  United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (The New York Convention), arts. III, V, & VI (June 10, 1958). 23  ICSID Administrative and Financial Regulations reg. 22. 24  ICSID Rules 32(2), 37(2), 48(4). 25  UNCITRAL Rules art. 1(4) (2013); UNCITRAL Transparency Rules art. 1 (2014). 26  See UNCITRAL Rules art. 25(4) (1976). 27  See ICSID Convention art. 37(2); ICSID Rules 3 & 4; UNCITRAL Rules art. 9 (2013); UNCITRAL Rules art. 7 (1976). 28  ICSID Convention, art. 38. See also UNCITRAL Rules, arts. 8(1), 9(2)–​(3) (2013). See also UNCITRAL Rules arts. 6(2), 7(2)–​(3) (1976).

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An Overview of Procedure in an Investment Treaty Arbitration arbitrators. Others take a more nuanced approach, attempting to match the arbitrator appointed to the specific needs of the case. For example, if a party considered that the case depended upon an understanding of the commercial realities of the investment, an arbitrator with a commercial background might be desirable. If, instead, the party considered the case to depend upon intimate familiarity with how government works, an arbitrator with significant government experience might be helpful. For practitioners taking this approach, an arbitrator appropriate for one case might not be desirable for another case.

F. The First Session with the Tribunal 5.27 The first session with the arbitral tribunal usually takes place six to twelve weeks after the

tribunal has been constituted, that is, after the date when all of the arbitrators confirm their appointment.29 It is at this session that the procedure for the arbitration is organized.30 The counsel for the two parties generally attempt to agree on as many aspects of the procedure as possible before the first session, reserving the discussion at that session only for disputed items. It is possible later to change the procedure decided at the first session, but it is not easy.

5.28 It is widely said, and it is true, that arbitration is a flexible process. The advantage of this

flexibility is that it is possible to design a procedure that is perfect for the specific needs of the case at hand. The difficulty is that if a party does not have a clear idea of what those needs are, the party can end up agreeing to a procedure at the first session that does not suit its needs for proving its case at all.31 A party that has performed a comprehensive and thoughtful case assessment, and is assisted by experienced counsel, will not find itself in such a position.

5.29 The principal procedural issues that arise at the first session are (1)  language of the pro-

ceedings; (2) place of arbitration; (3) confidentiality of information relating to the arbitration; (4)  scheduling of written submissions; (5)  collection of documentary evidence; and (6) how to organize testimonial evidence, both before and at the evidentiary hearing.32 A detailed treatment of each of these issues is beyond the scope of this chapter, and they are discussed in more detail in Chapter 6. Of these, scheduling, document production, and the hearing—​items 4, 5, and 6—​are the issues that are disputed recurrently and will now be briefly discussed.

29  See ICSID Rule 13(1) (‘The Tribunal shall hold its first session with 60 days after its constitution or such other period as the parties may agree’). 30  ICSID Rule 20. 31  Example: a respondent state plans to defeat an investment treaty claim based on an allegation that the investment was made illegally. The investor proposes a simple procedure, where each side provides the other with the documents it intends to rely on, followed rapidly by a memorial, a counter-​memorial, and the main hearing. The respondent agrees. In preparing its counter-​memorial, however, the respondent realizes that, under the applicable law, it must show bad faith by the investor to support a finding of illegality. The documents in the respondent’s possession suggest that the investor was ill-​informed, but they do not show bad faith. The documents that might support such a finding would be in the investor’s files—​but the agreed procedure does not provide the respondent with access to any documents in those files, other than those that the investor will rely on at the hearing. If the respondent proceeds under the agreed procedure, the result is fairly clear: the respondent has little chance of proving its case. If the agreed procedure had contemplated requests for documents along the lines of the IBA Rules on the Taking of Evidence in International Commercial Arbitration, the situation might be different. But it will be difficult, if not impossible, to add in a document request procedure, given the tight timetable the respondent has agreed to. The procedure the respondent agreed to, in this example, does not serve its case. 32  See ICSID Rules 20(1); UNCITRAL Notes on Organizing Arbitral Proceedings ¶¶ 20–​26, 27–​31, 50–​ 54, 65–​66, 86–​136 (2016).

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III.  Preparation of the Case 1. Multiple-​phase  cases In investment treaty arbitration, the principal issue is often whether the case will be heard 5.30 in multiple phases. It is possible for a case to be briefed in a single phase, where all issues in the case—​jurisdiction, admissibility of the claim, liability, and damages—​are determined at once. The advantage of this approach is that it is often the most rapid and cost-​effective way to resolve the dispute. However, this observation will not hold true if the respondent can successfully assert a challenge to the tribunal’s jurisdiction or if a decision on one issue in the case can simplify or eliminate later proceedings.33 Jurisdictional issues in investment treaty cases tend to be complex. Clever counsel can 5.31 often devise a potential objection to jurisdiction. Moreover, the abstraction of consent to arbitration without any pre-​existing contract with the investor—​aptly called ‘arbitration without privity’34—​is difficult for officials in ministries of justice to accept. There is often a strong political imperative for respondents to treat claims as frivolous. The combination of these factors explains the fact that objections to jurisdiction are commonplace in investor-​state cases. The objections are rarely successful. A recent, broad-​based survey finds the objections to be 5.32 successful in one out of every four cases in which they are advanced.35 The prevalence and lack of success of jurisdictional objections, combined with the current prevailing practice to hold a separate phase on jurisdiction, means that investment arbitrations are often multiple-​ phase proceedings. Multiple-​phase proceedings are costlier and take longer to resolve than single-​phase proceed- 5.33 ings. A  study of investment treaty cases resolved in 2007 concluded that most cases were resolved in three to four years or less. However, one-​third of the cases took four years or more to resolve.36 Each of these longer cases, I would venture, was a case heard in multiple phases. Time and cost aside, there can be attractive intellectual and strategic reasons to opt for sep- 5.34 arate liability and damages phases. Damages often involve issues distinct from the merits, with relatively little overlap in witnesses, evidence, or argument. Often expert evidence is required to prove damages. Expert evidence is expensive. And many arbitrators and counsel do not find damages to be particularly interesting. Some will readily agree to a separate damages phase in the hope and expectation that the parties will negotiate a settlement if the tribunal rules that the respondent is liable.

2. Disclosure of evidence The other scheduling issue that frequently receives heated debate at the first session is dis- 5.35 closure of evidence. When a party believes that evidence important to its case may be found in the files of the other party, it will sometimes press for a period of disclosure of evidence before the first written submission is made.37 The advantage of this approach is that it allows

  See, e.g., UNCITRAL Notes on Organizing Arbitral Proceedings ¶¶ 69–​70 (2016).   Jan Paulsson, Arbitration without Privity, 12 ICSID Rev.-​FILJ 232. 35 ICSID, The ICSID Caseload—​Statistics, Issue 2017-​1, at 15 (finding that jurisdictional objections were successful in 25 per cent of cases decided by tribunals). 36  Linda A. Ahee & Richard E. Walck, Investment Arbitration Update as of December 31, 2007, 6 TDM (2008), stating that, of 29 cases resolved in 2007, 5 were resolved in under 1 year; 1 was resolved in 1–​2 years; 4 were resolved in 2–​3 years; 8 were resolved in 3–​4 years; 5 were resolved in 4–​5 years; and 6 were resolved in more than 5 years (http://​www.gfa-​llc.com/​images/​Investment_​Arbitration_​Update_​12-​31-​07.pdf ) (last visited Oct. 30, 2017). 37  See UNCITRAL Notes on Organizing Arbitral Proceedings ¶¶ 76–​78 (2016). 33 34

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An Overview of Procedure in an Investment Treaty Arbitration the written submissions to be made on a fully formed factual record. The disadvantage of this approach is that disclosure of evidence in investment treaty cases is often a messy affair that gives rise to frequent procedural disputes and delays. 5.36 In my experience, governments—​even ones in developed countries—​are not particularly

good at record keeping. Clerical staff are not as well paid or trained as in private enterprise. There are often few internal incentives for them to take time away from overwhelming existing duties to access what records there are.

5.37 Investors often have little appreciation of how bad the conditions for record keeping and

retrieval are in many government agencies. The investor’s typical reaction to a paltry production in response to a disclosure request is suspicion and a demand for relief from the tribunal. Intervention by the tribunal requires time. More time still is required for the respondent to respond to the tribunal’s order. Delay, cost, and frustration are the typical results of disclosure requests in investment arbitrations. Occasionally, however, disclosure results in critical evidence that would not otherwise be available.

5.38 In many cases, there is no disclosure as such but merely the submission by each party of evi-

dence supporting its case. In others, there is disclosure but only between the regularly scheduled written submissions of the parties.

5.39 After the first session, the tribunal enters a procedural order (sometimes in the form of min-

utes of the session) that sets out the procedure for the rest of the case (or at least the next phase of the case). The next act, save in those cases where there is an initial period of disclosure, is the written submissions.

IV.  The Written Submissions 5.40 The written submissions in investment treaty arbitrations generally take the form of four sub-

stantial pleadings: the memorial, the counter-​memorial, the reply, and the rejoinder.38 The arbitral rules require only the first two of these pleadings to be submitted.39 The majority of investment treaty cases, however, deploy all four of the pleadings.

5.41 The practice is for the memorial and counter-​memorial to present the entirety of the argu-

ments and the evidence offered by each party in support of its case in chief. The pleadings are often lengthy, ranging on average from 75 to 150 pages in length or more. They are typically accompanied by annexes containing multiple witness statements and documentary evidence, as well as copies of the legal authorities on which the pleading relies.

5.42 The reply and the rejoinder are responsive pleadings, limited in content to responding to the

points and evidence offered in the immediately preceding pleading. They are accompanied by responsive witness statements, documentary evidence, and legal authorities.

5.43 Because of the substantial effort required to prepare these pleadings, it is common for several

months to be allocated to each party for preparation of the memorial and counter-​memorial and a number of weeks for the reply and rejoinder.

  ICSID Rule 31(1).   Id. (‘[a]‌nd, if the parties so agree or the Tribunal deems it necessary’, the reply and the rejoinder will also be required). 38 39

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V.  The Hearing

V.  The Hearing The hearing is the occasion for the parties to engage the tribunal with respect to the essential 5.44 issues in the case and for witnesses to be cross-​examined in a manner that tests the accuracy of their testimony.40 Hearings are typically multiple-​day affairs. They range from one or two days (typically for jurisdictional hearings in cases where there are no complicated legal or factual issues) to two or, in rare cases, three weeks for highly complex ones. The average hearing is probably three to five days in length. It is difficult to generalize concerning hearings in investment treaty cases. The hearing on 5.45 the merits in some cases consists entirely of argument by counsel for the parties based on evidence introduced into the record during the written submissions. In some cases, however, argument by counsel constitutes only a small part of the hearing, with the great majority consisting of cross-​examination of witnesses. Many hearings fall between these two extremes. The one constant is that witness statements are generally considered to be the direct testimony 5.46 of the witness, meaning that the witness need not repeat orally his or her written testimony for it to be fully considered by the tribunal.41 Examination of witnesses at the hearing tends to be concentrated on cross-​examination, although increasingly tribunals permit counsel for the witness to conduct a brief direct examination at the hearing to remind the tribunal of the main points of the witness’ testimony and put the witness more at ease in the unfamiliar and stressful environment of an international arbitration hearing. The tribunal members listen carefully to the arguments and evidence presented at the hearing. 5.47 They do, however, interrupt counsel to ask questions about the arguments presented and pose questions directly to the witnesses brought before them.42 These interventions tend to occur less frequently than in typical common law proceedings and more frequently than in typical civil law ones. Much, however, depends on the specific character of the arbitrators and, to some extent, counsel in the case in question. The hearing is a critical part of the case. As a practical matter, this is when the arbitrators will 5.48 focus the most on the case and begin their deliberations on its outcome. Many arbitrators read the pleadings shortly before the hearing. It is the parties’ best opportunity to explain the case that they have made in the pleadings.

A. Post-​hearing Activity After the hearing, the arbitrators retire to deliberate and prepare the decision or award. The 5.49 deliberations are secret. In many cases, the parties have nothing to do but wait during the period between the hearing and the decision or award. Often, however, the tribunal requests additional submissions from the parties in the period 5.50 between the hearing and the decision. In some cases, this results from an issue raised at the hearing that the parties had not previously addressed in detail. In others, the tribunal’s 40  See ICSID Rule 32 (stating that ‘[t]‌ he oral procedure shall consist of the hearing by the Tribunal of the parties, their agents, counsel and advocates, and of witnesses and experts’); UNCITRAL Rules art. 17(3) (2013) (stating that ‘[i]f at an appropriate stage of the proceedings any party so requests, the arbitral tribunal shall hold hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral argument’). See also UNCITRAL Rules art. 15(2) (1976). 41  ICSID Rules 35–​36; UNCITRAL Rules arts. 27(2), 28(2) (2013). See also UNCITRAL Rules 25(4)–​(5) (1976). 42  See ICSID Rule 32(3).

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An Overview of Procedure in an Investment Treaty Arbitration deliberations will identify a discrete point on which clarification is useful for purposes of its decision, and the arbitrators will request production of evidence or a small submission on that question. In still others, tribunal members, believing it to be useful as a general proposition to have the parties’ reflected views on the issues presented at the hearing, will request post-​hearing submissions as a matter of course. Depending on their length, post-​hearing submissions can substantially add to the cost of the proceedings for the parties. 5.51 The arbitration rules generally provide the tribunal the authority after the hearing to close

the proceedings to further submissions.43 After a closure order, the parties can make further submissions only with a showing of good cause to do so.

5.52 Depending on the complexity of the issues presented and whether there is need for a trans-

lation, it can take between three months and a year for a tribunal to issue a decision on jurisdiction. Subject to the same considerations, a decision or award on liability or damages can take between six and eighteen months for a tribunal to prepare. The mean is probably around six months for preparation of a decision on jurisdiction and a year for an award on the merits.

B. The Decision or Award and Its Aftermath 5.53 Decisions and awards in investment treaty cases are substantial documents. They typically

describe the parties, the procedure, the facts, and the arguments advanced by the parties. They also, of course, set out the tribunal’s analysis of the issues presented, the decision, and its operative part.44 Decisions and awards range in length from fifty to over 150 pages.

5.54 Statistical studies on investment treaty arbitration do not indicate a bias in either direction

in the numbers of wins and losses by states and investors. However, it has been found that, in those cases that investors win, the damages awarded are on average only about one-​third of the amounts claimed by them.45 Reimbursement to the winning party of the legal costs of the arbitration is awarded in only about one-​sixth of the cases.46

5.55 Awards are final, binding, and not subject to appeal.47 Awards of monetary relief may be en-

forced against available assets through national court systems.

5.56 After the award is rendered, different strategic questions naturally present themselves to the

parties depending on whether the award favours or disfavours them. For the losing party, the main question is whether the award is infirm in a manner subject to correction or annulment. For parties winning affirmative relief, the question is how to enforce the award.48 Both of these subjects are covered in great depth in later chapters of this book.49

5.57 For purposes of this overview, it is worth noting that the losing party has essentially two very

restricted options: it can ask the same tribunal to correct the decision on limited grounds, or

  ICSID Rule 38; UNCITRAL Rules art. 31 (2013). See also UNCITRAL Rules art. 29 (1976).   See generally ICSID Rule 47; UNCITRAL Rules, art. 34 (2013). See also UNCITRAL Rules art. 32 (1976). 45  See Ahee and Richard Walck, supra note 36, at 6. 46  Id. at 15. 47  ICSID Convention art. 53; UNCITRAL Rules art. 34 (2013). See also UNCITRAL Rules art. 32 (1976). 48  In UNCITRAL arbitrations, it is common practice for tribunals to issue their decisions on jurisdiction and liability as partial awards that finally dispose of those issues without putting an end to the proceedings. In the ICSID system, however, there is no provision for partial awards; the only document entitled ‘award’ is the one that puts an end to the proceeding. Because of this feature, in the ICSID system decisions on jurisdiction and liability in favour of the investor are decisions, not awards, and the post-​award relief described is not formally available, at least until the final award is rendered. 49  See chs. 27, 28, and 29 of this volume. 43 44

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VI. Conclusion it can ask a national court or, in the ICSID Convention system, another arbitration tribunal to annul the decision on limited grounds.50 The applicable standards are demanding in either case, and requests for correction or annulment are rarely successful.51 On the subject of enforcement of investment treaty arbitration awards, there is as yet rela- 5.58 tively little experience. One respected author concludes that this is so because states have generally observed their obligation to pay the awards against them.52

VI. Conclusion The procedure in investment treaty arbitrations resembles that of international commercial 5.59 arbitration in many respects. But the presence of a state as party, the applicability of public international law as the rule of decision, and the inevitable incorporation of some elements of inter-​state dispute resolution mechanisms have combined to create a procedure that in a number of respects is distinct. Navigating these procedures requires care and experience. But the first step to doing so is understanding what lies ahead. I hope that this chapter has made a small contribution to that end.

  See ICSID Convention art. 52(1); New York Convention, art. V.  ICSID, The ICSID Caseload—​Statistics, Issue 2017-​1, at 18 (16 annulment petitions succeeded in part out of 78 filed in the history of ICSID, or about one in five). 52  See Antonio R. Parra, The Enforcement of ICSID Arbitral Awards, in Enforcement of Arbitral Awards Against Sovereigns 136–​37 (R. Doak Bishop ed., 2009). 50 51

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6 ASPECTS OF PROCEDURE FOR INSTITUTION OF PROCEEDINGS AND ESTABLISHMENT OF TRIBUNALS IN INVESTMENT TREATY ARBITRATION Milanka Kostadinova*

I. Introduction  II. The Initiation of Proceedings 

A. The Issue of Consent  B. ‘Gate-​keeping’ Provisions in Treaties  C. The Request for Arbitration 

III. The Establishment of the Arbitral Tribunal 

6.01 6.04 6.04 6.09 6.17

A. Preliminary Remarks  B. Composition of the Tribunal  C. Appointment of the Arbitral Tribunal 

IV. Conclusion 

6.50 6.50 6.52 6.65 6.100

I. Introduction 6.01 The institution of treaty-​based proceedings in a particular forum or under a particular set of ar-

bitration rules depends on the consent provisions of the underlying investment treaty. Some 855 arbitration cases have been initiated so far under the total of 3,324 bilateral investment treaties (BITs) and other international investment agreements (IIAs) signed by the end of 2017.1 The majority of these instruments contain provisions expressing the unilateral pre-​dispute consent of the treaty parties to investor-​state arbitration, provisions that may differ significantly from instrument to instrument. While some BITs contain simple arbitration clauses incorporating by reference pre-​existing procedural rules,2 provisions in more recent BITs and other IIAs are elaborate and complemented by detailed prescriptions on eligibility, scope, and preconditions for their use. Modern treaties address matters related to initiation of proceedings and constitution of tribunals as part of a comprehensive set of provisions on investor-​state dispute settlement (ISDS).

6.02 A growing number of IIAs provide for several arbitration options. Traditionally, they offer ar-

bitration based on the 1965 Convention on the Settlement of Investment Disputes between states and Nationals of Other States (the ICSID Convention)3 and the ICSID Additional

  The views expressed in this chapter are those of the author and should not be attributed to ICSID.   See UNCTAD, Investment Dispute Settlement Navigator (update, Mar. 12, 2018); see also UNCTAD, World Investment Report 2017, 111. Of that total, approximately 700 signed IIAs are not in force. Id. at 128. 2  A. Parra, The Institution of Proceedings and Constitution of Tribunals in Investment Treaty Arbitrations, in Arbitration Under International Investment Agreements: A Guide to the Key Issues 105 (K. Yannaca-​Small ed., 2010). 3  The initiation of proceedings  is governed by the Rules of Procedure for Institution of Conciliation and Arbitration Proceedings [hereinafter ICSID Institution Rules]. The Rules of Procedure for Arbitration Proceedings [hereinafter ICSID Arbitration Rules] apply to the establishment of the arbitral tribunals and the * 1

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II.  The Initiation of Proceedings Facility Rules.4 Roughly 70 per cent of all known investor-​state cases have been brought under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).5 The arbitration choices available in treaties have expanded over time to include a variety of other rules. Some treaties provide for agreement between the disputing parties to access one of several specified arbitration fora once the dispute has arisen or agree on an alternative forum. Absent agreement, a treaty may either specify a default forum or give the choice to the investor.6 The choice of the arbitral forum and rules has important implications on the arbitration as a whole, particularly in its early stages. This chapter provides an overview of the technical and complex procedures for initiating pro- 6.03 ceedings and constituting tribunals in investment treaty arbitration. It examines the prevalent practices from the perspective of the ICSID Convention and Rules and other leading sets of international arbitration rules such as the UNCITRAL Arbitration Rules (2013), the Rules of Arbitration of the International Chamber of Commerce (ICC) (2017), and the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) (2017), which are among the non-​ICSID Rules more commonly referenced in investment treaties.

II.  The Initiation of Proceedings A. The Issue of Consent Investment treaty arbitration, as for most other types of arbitration, requires the consent of 6.04 the disputing parties. Under general international law a state is under no obligation to submit a dispute for arbitration without agreement7 and it may impose conditions upon its consent.8 The terms in which states consent to investor-​state arbitration vary amongst treaties.9 For 6.05 example, the Dutch Model BIT provides consent to ICSID Convention arbitration without

conduct of proceedings. The ICSID Administrative and Financial Regulations complement both of these sets of rules. The references in this chapter are to the 2006 version of the ICSID Regulations and Rules, which at the time of writing are in the process of amendments. For a comprehensive historical analysis of the ICSID system, see A. Parra, The History of ICSID (2d ed. 2017). 4  The ICSID Additional Facility Rules and the annexed Conciliation, Arbitration and Fact-​Finding Rules are reproduced in Doc. ICSID/​11 (April 2006). 5   See ICSID, Annual Report (2016), at 5. 6   J. Pohl, K. Mashigo & A. Nohen, Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey, in OECD Working Papers on International Investment 2012/​2 20–​24 (2012) [hereinafter Pohl et al.]. 7   M.C.I. Power Group L.C. & New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/​03/​6, Award (July 31, 2007), ¶ 323. 8   See, e.g., ICSID Convention art. 26, which states that: ‘A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention’ (emphasis added). However, arbitration under the ICSID Convention was intended as an exclusive remedy at the international level. Article 26 of the Convention therefore establishes a presumption of waiver of the local remedy rule by the ICSID Contracting States. An ICSID Contracting State wishing to keep the requirement must explicitly provide so in the instrument containing that state’s consent to ICSID Convention arbitration. For a commentary of this provision, see C. Schreuer with L. Malintoppi, A. Reinisch & A. Sinclair, The ICSID Convention: A Commentary, Article 26, 348–​413 (2d ed. 2009). 9  Not all IIAs contain consent of the treaty parties to international arbitration. For example, art. 12 of the Argentina–​New Zealand BIT (1999) provides for ICSID Convention and UNCITRAL Rules arbitration ‘if both parties to the dispute agree’ and clarifies that this provision ‘shall not constitute, by itself, the consent of the Contracting Party [required by Article 25(1) of the ICSID Convention]’. For an overview of the various types of consent provisions in IIAs, see A. Parra, Provisions on the Settlement of Investment Disputes in Modern Investment Laws, Bilateral Investment Treaties and Multilateral Instruments on Investment, 12 ICSID Rev.—FILJ 287 ff. (1997).

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Aspects of Procedure for Institution of Proceedings conditions, procedural or other, that the investor must fulfil prior to commencing arbitration.10 In contrast, the 2015 Indian Model BIT prescribes a complex, multi-​step procedure before an investor can elevate a claim to international arbitration.11 6.06 States’ commitments to investment protection standards in treaties are typically counter-​

balanced by controls over the qualified investors’ ability to initiate claims such as: time limits for bringing a claim and other time periods; initial procedures according to which a claimant may commence the arbitration; local remedy requirements prior to the initiation of international arbitration; relation of court proceedings to the arbitration process; arbitration systems or rules that may apply in the arbitration; and the choice between different arbitral fora and how it is to be structured.

6.07 The scope of disputes covered by IIAs varies. Under some, the state’s pre-​dispute consent

may extend broadly to ‘any’ dispute12 or ‘all’ investment disputes, without limiting the basis of claims.13 Consent under others extends only to breaches of (i)  traditional substantive treaty standards; (ii) an ‘investment agreement’; or (iii) an ‘investment authorization’.14 In most multilateral treaties the state parties’ consent only covers claims arising from breaches of the treaties’ own substantive protections.15 Older IIAs are even more restrictive, limiting states’ consent to disputes relating to expropriation, the amount of compensation for expropriation, or procedures for payment and transfer obligations.16 Sometimes claims with respect to certain obligations are expressly excluded from the scope of the dispute settlement provisions of the treaty.17

6.08 In the majority of the treaties, the right to initiate arbitration is vested only in the investor.

Occasionally, however, IIAs stipulate that the host state and the investor may bring a claim.18 Whether a particular investor is entitled to initiate a claim depends on the provisions of the underlying treaties.19 In addition, a treaty may provide advance consent to arbitration

10  Dutch Model BIT art. 9.  However, many Dutch BITs prescribe cooling-​ off periods before arbitration may commence, as pointed out by N. Schrijver & V. Prislan, The Netherlands, in Commentaries on Selected Model Investment Treaties 583 (Chester Brown & Devashish Krishan eds., 2013) [hereinafter Brown & Krishan]. 11  See G. Hanessian & K. Duggal, The Final 2015 Indian Model BIT: Is This Change the World Wishes to See?, 32(1) ICSID Rev.—​FILJ 216, 221–​25. 12  See, e.g., China–​ Barbados BIT (1998) art. 9. See also the 2001 Model BIT of the Republic of Korea art. 8(1). 13  See, e.g., France–​Albania BIT (1993) art. 9; Italy–​United Arab Emirates BIT (1995) art. 9. 14  See, e.g., 2012 U.S. Model BIT art. 24(1)(a)(i)(C); Argentina–​U.S. BIT (1991) art. VII; 1994 Model BIT of Germany art. IX. 15  See, e.g., North American Free Trade Agreement (NAFTA) (1992) art. 1116; Energy Charter Treaty (ECT) (1994) art. 26(1); Belgium–​Luxembourg Economic Union–​Republic of Korea BIT (2006) art. 8. 16  See, e.g., Cyprus–​ Hungary BIT (1989) art. 7(1) (providing for arbitration of ‘[a]‌ny dispute . . . concerning expropriation of an investment’). See also Hungary–​Norway BIT (1991) art. XI (‘This Article shall apply to any legal dispute . . . concerning the amount or payment of compensation under Article V and VI of the present Agreement . . .’). 17  See, e.g., Comprehensive Economic and Trade Agreement (CETA) (entered into force provisionally, September 21, 2017) art. 8.2.4 (excluding claims with respect to obligations under Section B (‘Establishment of investments’). 18  See, e.g., Albania–​Lithuania BIT (2007) art. 8(2). The practical application of such treaty provisions is, however, limited since the initiation of the arbitration by the state party will always depend on the consent of the investor, which investors may choose to withhold. 19  See K. Yannaca-​Small, Who Is Entitled to Claim: The Definition of Nationality in Investment Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 10 (K. Yannaca-​Small ed., 2018).

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II.  The Initiation of Proceedings of disputes involving multiple claimants or for coordination of multiple parties through a consolidation of related claims.20

B. ‘Gate-​keeping’ Provisions in  Treaties Modern IIAs frequently place various conditions on the submission of a claim to inter- 6.09 national arbitration.

1. Cooling-​off periods The vast majority of treaties follow the traditional pattern, requiring a waiting or cooling-​off 6.10 period or a written request for amicable settlement prior to initiation of arbitration proceedings.21 A treaty may direct the claimant to deliver a written ‘notice of intent’ to submit a claim to arbitration. The cooling-​off period may apply both to recourse to international arbitration and to local courts or administrative tribunals.22 The length of the period differs amongst treaties. In most, it is three to six months from the date the party raised the dispute,23 the date of the investor’s notice of the dispute to the host state,24 or from its written request for consultations.25 Increasingly, IIAs link cooling-​off periods to alternative dispute settlement procedures or other mechanisms for dispute prevention. Modern IIAs usually call for ‘negotiations’ and ‘consultations’ and for non-​binding third party procedures such as ‘good offices’, ‘conciliation’, and ‘mediation’.26 2. Exhaustion or pursuit of local remedies Modern IIAs make recourse to arbitration contingent upon prior exhaustion of local judicial 6.11 or administrative remedies only in limited circumstances.27 More often, treaties require the investor to pursue judicial remedies before local courts for a certain period.28 Under certain

20  See, e.g., NAFTA art. 1126(2); 2012 U.S. Model BIT art. 33; 2003 Canadian Model FIPA art. 32. See generally C. Lamm, H. Pham & A. Meise Bay, Consent and Due Process in Multiparty Investor-​State Arbitration, in International Investment Law for the 21st Century: Essays in Honor of Christoph Schreuer 54–​75 (C. Binder, U. Kriebaum, A. Reinisch & S. Wittich eds., 2009) [herineafter Binder et al.]. 21  See Pohl et al., supra note 6, at 17. 22  See, e.g., ECT art. 26(2). In contrast, the six-​ month waiting period under NAFTA art. 1120 applies exclusively to recourse to international arbitration. 23  See, e.g., China–​Germany BIT (2003) art. 9(1). 24  See, e.g., NAFTA art. 1119. 25  See, e.g., China–​Switzerland BIT (2009) art. 11(2). 26  See, e.g., CAFTA art. 10.15 (providing for the use of non-​binding third party procedures such as conciliation and mediation); Colombia–​Japan BIT (2011) art. 26(3) (‘As one of the non-​binding and third-​ parties procedures . . . the disputing parties may agree to submit the dispute to conciliation’ under the ICSID Convention or ICSID Additional Facility Rules). 27  See, e.g., Romania–​ Turkey BIT (1996) art. 6 (providing that the investor may submit the dispute to ICSID arbitration ‘at any time after the exhaustion of domestic remedies or after the expiry of one year from the date when the dispute has been submitted by the concerned investor to the tribunals of the Contracting Party that is Party to the dispute’). This provision was interpreted by the tribunal in Ömer Dede and Serdar Elhüseyni v. Romania, ICSID Case No. ARB/​10/​22, Award (Sept. 5, 2013). For a most recent overview of the practice, see M.D. Brauch, Exhaustion of Local Remedies in International Investment Law, International Institute for Sustainable Development (January 2017), https://​www.iisd.org/​sites/​default/​files/​publications/​ best-​practices-​exhaustion-​local-​remedies-​law-​investment-​en.pdf (last visited Mar. 18, 2018). 28  See, e.g., Argentina–​ Germany BIT (1991) art. 10(3) (requiring an 18-​month period for pursuit of local remedies). Some ICSID tribunals found the requirement to be jurisdictional in nature. See Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/​04/​14, Award (Dec. 8, 2008), ¶ 162 (reasoning that the 18-​month requirement to pursue local remedies was ‘part and parcel of Argentina’s integrated “offer” for ICSID arbitration; this “offer” must be accepted by the investor on the same terms’ (emphasis added). For an analysis of the Wintershall Award, see Pierre-​Marie Dupuy, Preconditions to Arbitration and Consent of States to ICSID Jurisdiction, in Building International Investment Law: The First 50 Years of ICSID 219–​35 (M. Kinnear, G. Fisher, J. Mínguez Almeida, L. Fernanda Torres & M. Uran Bidegain eds., 2016) [hereinafter Kinnear et al.].

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Aspects of Procedure for Institution of Proceedings treaties, recourse to arbitration is available as long as no final judgment has been rendered in the local litigation.29 A treaty may also explicitly renounce the exhaustion of local remedies requirement.30 6.12 Some treaties adopt a ‘fork-​in-​the-​road’ approach to avoid duplicative claims and prevent

claimants from relitigating disputes. A typical ‘fork-​in-​the-​road’ provision directs the investor to make a final and exclusive forum choice.31 Once an investor has chosen recourse to domestic litigation, for example, it may not subsequently seek a resolution of the same dispute by international arbitration and vice-​versa.

6.13 IIAs may also contain a ‘no U-​turn’ provision, requiring the investor, as a precondition to

international arbitration, to discontinue any existing proceedings regarding the measure concerned and waive the right to initiate them in municipal courts or other fora.32 However, investors are not usually precluded by the treaty from seeking interim injunctive relief from competent courts.

6.14 Sometimes treaties incorporate both the ‘fork-​in-​the-​road’ and the ‘no U-​turn’ approaches.

For instance, the Republic of Korea–​US FTA applies the ‘fork-​in-​the-​road’ when the Republic of Korea is the respondent and the ‘no U-​turn’ approach when the US is the respondent.33

3. Temporal conditions 6.15 Treaty provisions preclude investors’ access to arbitration after a certain period of time has

elapsed, typically from the date on which the investor has acquired, or should have acquired, knowledge of the alleged breach or of the resulting damage.34 Treaties may limit protections only to investments made after its entry into force. Further, a treaty that applies to investments made before it entered into force may specify that the dispute must originate after that date.35 While there is a sizable body of case law considering ‘continuing acts’ whose occurrence spans a period before and after that date, the arbitration practice is still not fully settled.

4. Practice of investment tribunals 6.16 There is a long-​standing debate over the precise legal nature of various treaty preconditions to arbitration and their impact on the jurisdiction of arbitral tribunals. Noncompliance by investors with such preconditions has been seen variously as (i) a jurisdictional issue limiting the host state consent to arbitration; (ii) an issue of bringing to arbitration a claim that is premature or inadmissible; or (iii) a mere procedural formality, which may be waived.36 Some tribunals have allowed waiting periods and local remedy requirements to be bypassed where there was no available or adequate domestic remedy and the recourse would have been futile. Claimants have also in some cases successfully used the most favoured nation (MFN) clause in the base treaty to avoid application of certain preconditions to arbitration.

  See, e.g., Armenia–​Austria BIT (2001) art. 13(1).   Id. art. 13(2). 31  See, e.g., Colombia–​Turkey BIT (2014) art. 12(7); see also China–​Korea BIT (2007) art. 9(4). 32  See, e.g., Canada–​Benin FIPA (2014) art. 24(3)(e)(ii) and (f )(ii). 33  See Republic of Korea–​U.S. FTA (2007) art. 11.18(2)(b) and Annex 11-​E. 34  See, e.g., NAFTA arts. 1116(2) and 1117(2); CAFTA art. 10.18.1. No time limit is provided in the ECT. For a review of several landmark decisions, see A. Bjorklund, Waiver of Local Remedies and Limitation Periods, in Kinnear et al., supra note 28, at 244–​50. 35  See, e.g., Argentina–​Spain BIT (1991) art. 2(2); Mexico–​Bahrain BIT (2012) art. 27. 36  For a review of the practice, see Dupuy, supra note 28. See also C. Schreuer, Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses, and Fork in the Road, 5 JWIT 231 (2004); M. Polasek, The Consultation Period Requirement in Investment Treaties as a Matter of Jurisdiction, Admissibility or Procedure, 23/​1 News from ICSID 14–​17 (2006). 29 30

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II.  The Initiation of Proceedings C. The Request for Arbitration Investment treaty arbitration is initiated by a written instrument requesting (or demanding) 6.17 the arbitration.37 In institutionally administered arbitration, a request for arbitration must be addressed to the arbitral institution.38 A party initiates arbitration under the UNCITRAL Rules by serving a notice of arbitration to the other party or parties.39 IIAs may refer to the instrument by a different designation.

1. Form In ISDS, the investor’s consent to the arbitration is normally expressed in the request for 6.18 arbitration. Thus, the formal validity of the request is sometimes closely linked to the issue of whether the parties have actually consented to the arbitration. The investor must comply with any treaty conditions regarding the form of the request, whether stated directly or by reference to the forum’s rules. Requirements for form may also apply to statements, waivers, notices, disclosures, or supporting documents to be submitted with the request for arbitration. The ICSID Rules lay out a comprehensive and exhaustive set of requirements for form. The 6.19 request for arbitration must be ‘in writing’,40 drawn in an official language of the Centre,41 dated, and signed.42 The validity of the request will be assessed on the basis of the requirements of Article 36 of the ICSID Convention and the ICSID Institution Rules or, in the case of Additional Facility arbitration, on the basis of Chapter II of the ICSID Arbitration (Additional Facility) Rules.

37  The request for arbitration is unilateral in nature but some international arbitration rules allow the disputing parties to file the request jointly. See, e.g., ICSID Institution Rule 1(2). A joint request for arbitration may also be lodged by multiple claimants. 38  See, e.g., ICSID Convention art. 36(1); ICSID Institution Rule 1(1); ICSID Arbitration (Additional Facility) Rules art. 2(1); ICC Rules art. 4(1). For a commentary on the 2012 version of the ICC Rules, see J. Fry, S. Greenberg & F. Mazza, The Secretariat’s Guide to ICC Arbitration (ICC Publication No. 729E, 2012) [hereinafter Fry et al.]. 39  As revised in 2010, art. 3(1) of the UNCITRAL Rules states that the claimant ‘shall communicate the notice of arbitration to the other party or parties’ (emphases added). These revisions were intended to account for multiparty proceedings and to ensure consistency with art. 2 of the 2010 UNCITRAL Rules, which provides for electronic communication. See D. Caron & L. Caplan, The UNCITRAL Arbitration Rules: A Commentary 160–​61 (2d ed. 2013). 40  Article 36(1) of the ICSID Convention states that the party wishing to ‘institute arbitration proceedings shall address a request to that effect in writing to the Secretary-​General’ (emphasis added). On the relationship of the requirement for written form of the request (art. 36(1)) and the requirement for consent in writing to submit a dispute before the Centre (art. 25(1)), see Ambiente Ufficio S.p.A. and others (Case formerly known as Giordano Alpi and others) v. Argentine Republic, ICSID Case No. ARB/​08/​9, Decision of Jurisdiction and Admissibility (Feb. 8, 2013), ¶¶ 206–​18 [hereinafter Ambiente v. Argentina]. According to the Ambiente v. Argentina Tribunal, the jurisdictional requirement of art. 25(1) of the ICSID Convention of providing consent ‘in writing’ is realized by the very act of submission of the request for arbitration in written form to the Centre. Id. ¶ 208. 41 The official languages of ICSID are English, French, and Spanish. See ICSID Administrative and Financial Regulation 34. 42  The ICSID Rules expressly provide that the request be signed either directly by the requesting party or by its duly authorized representative. The signature for a juridical person may be affixed by a qualified officer. If the request is signed by a representative, the request must enclose proof of the authorization to institute ICSID proceedings on behalf of the Claimant (e.g., a power of attorney, a letter of engagement, or a board of directors’ resolution). See ICSID Institution Rule 1(1); ICSID Arbitration (Additional Facility) Rules art. 2(1). See also Ambiente v. Argentina, supra note 40, ¶¶ 229–​78. Under the ICC Rules art. 17, proof of authority of any party representatives may be requested by the tribunal or the ICC Secretariat ‘at any time after the commencement of the arbitration’. See also UNCITRAL Rules art. 5 (similar provision).

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Aspects of Procedure for Institution of Proceedings 2. Common requirements for content 6.20 The major international arbitration rules list the elements which must be included in a valid request for arbitration. Some of these are common. 6.21 It is uniformly required, for instance, that the request clearly identify the parties and provide

their contact details.43 In treaty-​based arbitration, the request must come from a party eligible to bring a claim under the respective treaty. In addition, an arbitration initiated against the wrong respondent (e.g., a state or its constituent subdivisions or agencies) can lead to rejection of jurisdiction. Under the ICSID Rules, a new party is unlikely to be able to join the proceeding after the registration of the request.44 The ICC and SCC Rules also provide that a request for joinder of additional parties may only be filed until the proceedings have reached a certain procedural stage.45

6.22 Arbitration rules typically require a brief description of the issues in dispute46 and a state-

ment of the relief sought,47 but differ as to the level of detail needed. Certain rules distinguish between a request for arbitration and the more substantial statement of claim; others allow the claimant to decide whether its request for arbitration is to be treated as its statement of claim.48 Some IIAs set their own level of information required at commencement of proceedings. For example, the statement of claim must be submitted together with the notice of arbitration in CAFTA proceedings under the UNCITRAL Rules.49

6.23 A request for non-​ICSID Convention arbitration is usually to indicate the seat of arbitra-

tion, if it is not already determined by the applicable treaty. It is also to include comments or a proposal regarding the number of arbitrators, if the parties have not agreed in advance.

43   ICSID Convention art. 36(2); ICSID Institution Rule 2(1); ICSID Arbitration (Additional Facility) Rules art. 3(1)(a); UNCITRAL Rules art. 3(3)(b); SCC Rules art. 6(1)(i); ICC Rules art. 4(3)(a). As a matter of practice, the arbitration institutions usually communicate exclusively with designated counsel, unless a party requests otherwise. 44   International Bank for Reconstruction and Development, Report of the Executive Directors on the Convention States and Nationals of Other States (Mar. 18, 1965), ¶ 24 (‘Consent of the parties must exist when the Centre seized.’). See also Churchill Mining Plc and Planet Mining Pty Ltd., formerly ARB/​12/​14 v. Republic of Indonesia, ICSID Case No. ARB/​12/​14 & 12/​40, Procedural Order No. 2 (Feb. 5, 2013), ¶¶ 20–​28; Tulip Real Estate and Development Netherlands B.V.  v.  Republic of Turkey, ICSID Case No. ARB/​11/​28, Award (Mar. 10, 2016), ¶ 228. 45  See ICC Rules art. 7(1); SCC Rules art. 13(3). 46  See, e.g., ICSID Convention art. 36(2); ICSID Institution Rule 2(1)(e); ICSID Arbitration (Additional Facility) Rules art. 3(1)(d); UNCITRAL Rules art. 3(3)(e); SCC Rules art. 6(1)(ii); ICC Rules art. 4(3)(c). A brief description should be sufficient, but the request should indicate the facts, the claims, and the legal basis upon which the claims have been brought. When the request is based on more than one instrument, the claimant may be required to indicate which claims fall under which instrument. See ICC Rules art. 4(3)(f ). As of December 31, 2017, there had been a total of 70 ICSID cases in which two jurisdictional bases were invoked and 5 cases in which the claimants relied on three. 47  Information concerning the amount involved is not required for requests for arbitration under the ICSID Convention, but is mandatory under other rules. See, e.g., ICSID Arbitration (Additional Facility) Rules art. 3(1)(d); UNCITRAL Rules art. 3(3)(e); ICC Rules art. 4(3)(e); SCC Rules 6(1)(iii). 48  For example, the UNCITRAL Rules maintain a distinction between the notice of arbitration pursuant to art. 3 and the statement of claim, pursuant to art. 20, which the claimant files after receiving the response to the notice of arbitration from the respondent. ICSID tribunals have also highlighted the distinction between these two types of instruments. See, e.g., Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/​09/​12, Decision on the Respondent’s Preliminary Objections under CAFTA Articles 10.20.4 and 10.20.5 (Aug. 2, 2010), ¶ 99 (finding that the notice of arbitration ‘cannot be equated to the fine-​tuned instrument which emerges at a later stage of ICSID arbitration proceedings’ and that the notice of arbitration may not be judged by ‘a formalistic standard more appropriate to a later pleading’). 49  CAFTA art. 10.16.4. See also, Japan–​Israel BIT (2017) art. 5(c).

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II.  The Initiation of Proceedings Arbitration rules may require the claimant to make an appointment or to propose a name if a sole arbitrator is preferred. This information is mandatory under certain sets of arbitration rules and optional under others.50 Again, treaties may expressly mandate certain content requirements in this regard.51 A reference to the IIA’s arbitration clause or to the separate agreement containing the consent 6.24 to arbitration is also uniformly required and institutional rules may require appending the legal instrument for the request to be effective. For instance, under the ICSID Institution Rules, the claimant must submit evidential documents to demonstrate the existence of the parties’ consent to the arbitration.52 A similar requirement is contained in the ICC Rules.53 Under the UNCITRAL and SCC Rules, a description of arbitration agreement or clause might be sufficient.54 In treaty-​based arbitration, this requirement should not create difficulties for the investor since the host state’s consent is in treaty and the investor’s consent will be supplied with the request. IIAs may explicitly demand that the investor’s consent be ‘in writing’. As noted above, a waiver of the right to other proceedings may also be required. Some treaties include standardized consent and waiver forms.55

3. ICSID-​specific requirements In ICSID arbitration, the request for arbitration, in addition to informing the respondent 6.25 state of the arbitration, serves as a basis for the Secretary-​General’s decision with respect to the registration of the case.56 The formal requirements for content,57 while obligatory, do not impose undue burden on the claimant. The request for institution of arbitration proceedings under the ICSID Convention must 6.26 provide adequate information to show that the necessary conditions for ICSID jurisdiction under Article 25 of the Convention are met, including that the matter qualifies as a legal dispute arising directly out of an investment.58 A legal dispute is understood as ‘the existence or scope of a legal right or obligation, or the extent of the reparation to be made for breach of a legal obligation’, as opposed to a mere conflict of interests.59 The second part of the

50 This information is optional under the ICSID Rules. See ICSID Institution Rule 3 and ICSID Arbitration (Additional Facility) Rules art. 3(2). But see UNCITRAL Rules art. 3(4) (requiring ‘a proposal as to the number of arbitrators’); SCC Rules art. 6(1)(v) (requiring ‘comments on the number of arbitrators’); ICC Rules art. 4(3)(g) (requiring ‘all relevant particulars and any observations or proposals concerning the number of arbitrators and . . . any nomination of an arbitrator required thereby’). 51  See, e.g., CAFTA art. 10.16.6 (‘The claimant shall provide with the notice of arbitration; (a) the name of the arbitrator that the claimant appoints; or (b) the claimant’s written consent for the Secretary-​General [of ICSID] to appoint such arbitrator’). See also Colombia–​Japan BIT (2011) art. 27(8); 2012 U.S. Model BIT art. 24(6) (identical provisions). 52  ICSID Institution Rule 2(1)(c) and 2(2). When the state’s consent is in a treaty, the request must enclose a copy and evidence that the treaty is in force (e.g., an extract from a government website showing the date or a copy from a state’s collection of laws). 53  ICC Rules art. 4(3). 54  UNCITRAL Rules art. 3(3)(d); SCC Rules art. 6(1)(iv). 55  See, e.g., CAFTA art. 10.18.2; NAFTA art. 1121(3) (requiring that the waiver not only be attached to the Notice of Arbitration, but also be delivered to the respondent state). See also Columbia–​Japan BIT (2011) art. 29(5); Canada–​Peru BIT (2006) art. 26(3) (‘A consent and waiver required by this Article shall be in the form provided for in Annex C.26, shall be delivered to the disputing Party and shall be included in the submission of a claim to arbitration’). 56  ICSID Convention art. 36(3). The Secretary-​General’s decision regarding registration must be based on the ‘information contained in the request for arbitration’. 57  See art. 36(2) of the ICSID Convention and ICSID Institution Rule 2; and ch. II of the ICSID Arbitration (Additional Facility) Rules. 58  ICSID Convention art. 25(1); ICSID Institution Rule 2(1)(e). 59  See supra note 44, ¶ 26.

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Aspects of Procedure for Institution of Proceedings phrase includes two further distinct jurisdictional aspects: (i) whether there is an investment involved;60 and (ii) the dispute’s relationship to the investment.61 6.27 It should be noted that, under Article 25(4), ICSID member states may file notifications to

include or exclude a class or classes of disputes from the coverage of the Convention.62 The notification does not amount to consent to ICSID jurisdiction nor does it bar the notifying state to consent to ICSID jurisdiction either prior to or after the notification. In case of discrepancies between the Article 25(4) notification and the consent to ICSID jurisdiction in the applicable IIA, the latter will prevail.

6.28 The information should indicate that all the named parties are covered by the jurisdictional

requirements of Article 25. A request for arbitration may only be brought against an ICSID Contracting State or a constituent subdivision or agency of the state that has been designated to ICSID by that state for jurisdictional purposes.63 The ICSID Convention refers to a national of another contracting state when describing the investor party or parties to the dispute. The request for arbitration must therefore provide information indicating that the disputing parties have the requisite nationalities. The requirements for content of the request in this regard differ when the claimant is a natural person64 and when it is a juridical person.65

6.29 Finally, the request must also indicate the date of each disputing party’s consent to ICSID

jurisdiction.66 In IIA arbitration, the requesting party’s consent will probably be given in the request.

60  This can be a complicated matter. For a discussion of the meaning of ‘investment’, see K. Yannaca-​Small & D. Katsikis, The Meaning of Investment in Investment Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 11 (K. Yannaca-​Small ed., 2018). 61  ICSID tribunals have held that the ‘directness’ requirement between the investment and the dispute must not be interpreted too restrictively and must be considered as satisfied when the dispute and investment are ‘reasonably closely connected’. See, e.g., Ahmonseto, Inc. and others v. Arab Republic of Egypt, ICSID Case No. ARB/​02/​15, Award (June 18, 2007), ¶ 184, 23 ICSID Rev.—​FILJ 356 ff. (excerpts). 62  See ‘Measures Taken by Contracting States for the Purposes of the Convention’, ICSID Doc. No. ICSID/​8-​D. 63  When one of the parties is a constituent subdivision or agency of an ICSID Contracting State, a statement that it has been designated to the Centre by that state pursuant to art. 25(1) of the Convention is required. The request for arbitration must enclose documentation concerning the subdivision’s or agency’s consent to ICSID arbitration and the approval of such consent by the state, unless the state has notified the Centre that no such approval is required. See art. 25(3) of the ICSID Convention and ICSID Institution Rule 2(b) and (f ). ICSID maintains a list of sub-​divisions and agencies designated by ICSID Contracting States. See ‘Measures Taken by Contracting States for the Purposes of the Convention’, ICSID Doc. No. ICSID/​8-​C. 64  ICSID Institution Rule 2(1)(d)(ii) requires that the request indicate the nationality of the individual both on the date of his/​her consent to arbitration and on the date of the request for arbitration, if different and that the individual did not have the nationality of the contracting state party to the dispute on either date. See also art. 25(2)(a) of the ICSID Convention. 65  When a party is a juridical person, Institution Rule 2(1)(d)(iii) requires that the request state the party’s nationality on the date of consent. If the juridical person is a foreign controlled national of the contracting state party to the dispute on the date of the consent, the request must state and, pursuant to Institution Rule 2(2), provide documentation that the disputing parties have agreed to treat the entity as a national of another ICSID Contracting State. See also art. 25(2)(b) of the Convention. A juridical person must also state and provide supporting evidence that it has taken all necessary internal actions to authorize the request. The evidence may include a written approval by an authorized representative of the judicial person or minutes of the board of directors authorizing the request. See ICSID Institution Rule 2(1)(f ). For a detailed description, see E. Obadia & F. Nitschke, Institutional Arbitration and the Role of the Secretariat [hereinafter Obadia & Nitschke], in Litigating International Investment Disputes: A Practitioner’s Guide 80–​144 (C. Giorgetti ed., 2014). A practical guide on ‘How to File a Case’ is also available on the ICSID website, https://​ icsid.worldbank.org. 66  ICSID Institution Rule 2(3). The date of consent is the date on which the parties to the dispute have consented in writing to submit it to the Centre; if both parties did not act on the same day, the date of the consent is the date on which the second party acted.

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II.  The Initiation of Proceedings As already indicated, the elements of the request that require supporting documentation 6.30 are: (i) written consent of the parties; (ii) approval by the contracting state of the consent given by a constituent subdivision or agency (if named as party); (iii) agreement of the parties to treat a foreign controlled juridical person that has the same nationality as the contracting state party to the dispute as a national of another contracting state; and (iv) authorization to file the request when the requestor is a juridical person. The ICSID Additional Facility Rules set out a separate two-​step procedure for the institution 6.31 of arbitration proceedings that includes, first, the Secretary-​General’s approval of access to the Additional Facility and, second, submission of the request to institute proceedings. In treaty-​based arbitration, these two distinct requests are usually presented in a single document lodged with ICSID.67

4. Submission of a request for arbitration There must be a legal dispute at the time of the request for arbitration. Whether that is 6.32 the case is a matter to be determined by the tribunal with reference to the applicable law.68 However, requests are unlikely to be registered at ICSID, and registration has, in fact, been declined if there is a manifest absence of a legal dispute at the time of the request. While certain investment treaties require that a wrongful act has been committed and that loss or damage to the investor or its investment has occurred, other treaties may not clearly stipulate a requirement for such a causal relation.69 International arbitration rules do not indicate when a dispute may be submitted to arbi- 6.33 tration. However, limitation periods may be imposed by the underlying treaty itself or be governed by general norms of limitation of actions in the applicable law. Furthermore, some treaties provide conditions precedent restricting the host state’s consent to ‘arbitration in accordance with the procedures set forth in the treaty’.70 As noted above,71 the submission of a claim to arbitration may be subject to various procedural and other ‘gate-​keeping’ requirements.72 At the time of submitting the request, the claimant should have fulfilled the procedural con- 6.34 ditions, especially when the underlying treaty provides that failure to meet the prescribed 67  ICSID Additional Facility Rules arts. 2 and 4.  These provisions deal with approval of access to the Additional Facility. The requirements for the contents of a request for arbitration are contained in ICSID Arbitration (Additional Facility) Rules art. 3. For details see Obadia & Nitschke, supra note 65, at 94–​98. 68  See, e.g., Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/​07/​12, Award (June 7, 2012), ¶ 63 (the Toto Tribunal distinguished between the notions of a breach, a problem and a dispute in the evolution of parties’ disagreement when determining the ratione temporis jurisdiction under the Italy–​Lebanon BIT). 69  See, e.g., Japan–​ Israel BIT (2017) art. 24(2) (the respondent must have breached a treaty obligation and the claimant must have suffered ‘loss or damage by reason of, or arising out of, that breach’). See also, Metalclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/​97/​1, Award (Aug. 30, 2000), ¶ 66 (providing that, under NAFTA art. 1120, a claim ‘may not be initiated on the basis of an anticipated breach’). See also Glamis Gold v. United States, UNCITRAL, Award (June 8, 2009), ¶ 328 (‘Through the language of Article 1117(1), the State Parties conceived of a ripeness requirement in that a claimant needs to have incurred loss or damage in order to bring a claim for compensation under Article 1120. Claims only arise under NAFTA Article 1110 when actual confiscation follows, and thus mere threats of expropriation or nationalization are not sufficient to make such a claim ripe’ (emphasis in the original)). But see Achmea B.V. v. Slovak Republic, UNCITRAL, PCA Case No. 2913-​12 (No. 2), Award on Jurisdiction and Admissibility (20 May 2014), ¶ 180 (reasoning that an international wrongful act is not required for a legal dispute to exist since the allegation of a treaty breach is not a constitutive element of the notion of legal dispute but rather a requirement for liability to arise). 70  See, e.g., NAFTA art. 1122. 71  See supra ¶¶ 6.09–​6.15. 72  See, e.g., Canada–​China BIT (2012) art. 21 and Annex C.21.

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Aspects of Procedure for Institution of Proceedings manner of commencing the arbitration nullifies the host state’s consent to arbitration.73 A  treaty may also direct the tribunal to decline jurisdiction in such instances.74 However, the majority of treaties lack similar strict conditions precedent and, in practice, arbitration proceedings are initiated even if the  claimant has not fully complied with all procedural preconditions. 6.35 Where no particular form of communication is specifically required, the request may be sub-

mitted by mail, email, or fax, or may occasionally be hand-​delivered at the administering institution’s headquarters or at another place provided by applicable procedural rules. In institutional arbitration, the request must be accompanied by a prescribed lodging fee.

6.36 In ICSID practice, requests for arbitration are frequently sent to the ICSID Secretariat’s email

account. If a full request has been submitted, the lodging fee has been paid, and email addresses of the respondent are provided in the request itself, the ICSID Secretariat will acknowledge receipt and transmit a copy to the respondent state by email, copying in its embassy in Washington, D.C. The date of receipt of the request by the ICSID Secretariat will be the date of receipt of the full electronic copy. However, the ICSID Secretariat will also notify the request to the respondent(s) by sending a complete set of the request and supporting documentation in hard copy by courier service. A treaty may name an authority for service of notices and other documents on the state relating to the arbitration.

6.37 The date of submission of a request for arbitration is usually the relevant date for compliance

with limitation periods. In practice, it is within the power of the tribunal to determine whether the requirement has been complied with. Investment treaties may provide specific rules on the events that mark the initiation of the arbitration for these and other purposes, including for the calculation of time periods for the further procedural steps. Thus, for instance, a CAFTA claim is deemed to be submitted to arbitration on the date on which the request has been received by the ICSID Secretary-​General, irrespective of whether the claim has been initiated under ICSID or UNCITRAL Rules.75

6.38 The meaning of ‘commencement of the arbitration’ can vary. For example, according to the ICC

and SCC Rules, receipt of the request for arbitration marks the formal commencement of the arbitration. 76 The date of ‘commencement of the arbitration’ under the UNCITRAL Rules is the date the respondent receives the notice of arbitration.77 Under ICSID’s Rules, ‘commencement of the arbitration’ signifies that a tribunal has been constituted with jurisdiction to determine the matters in dispute and the date of commencement is therefore the date of the Secretary-​General’s notice to the parties that all arbitrators have accepted their appointments.

6.39 In ICSID, an arbitration proceeding is deemed to have been instituted on the date the request

for arbitration is registered by the Secretary-​General.78 That date has special legal significance. For instance, the claimant may unilaterally withdraw its request for arbitration before that date,79 but the opposing party must agree to the withdrawal thereafter.80 Also, the standing

  See, e.g., Canada–​Peru BIT (2006) art. 26.   See, e.g., CETA art. 8.22.4. 75  CAFTA, art. 10.16.4. See also, Japan–​Israel BIT (2017), art. 25(5). 76  ICC Rules art. 4(2) (‘The date on which the Request is received by the Secretariat shall, for all purposes, be deemed to be the date of the commencement of the arbitration’ (emphasis added)). See also SCC Rules art. 8. 77  UNCITRAL Arbitration Rules art. 3(2) (‘Arbitral proceedings shall be deemed to commence on the date of which the notice of arbitration is received by the respondent’). 78  ICSID Institution Rule 6(2). 79  Id. Rule 8. 80  See ICSID Arbitration Rules 43(1) and 44. 73 74

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II.  The Initiation of Proceedings of a natural person as claimant depends upon his or her nationality on both the date of the consent to arbitration and the date of institution of the proceedings (i.e., the date of registration).81 Registration also marks the start of the time period for constituting the tribunal and determines the applicable version of the arbitration rules, unless parties agree otherwise.

5. Notification and screening of the request In institutional arbitration, the institution will relay the request to the named respondent 6.40 state.82 The arbitral institutions typically require the claimant to submit a specified number of copies and pay a non-​refundable fee.83 When the documentation is complete and the filing fee has been paid, the institution will send the request to the respondent. The SCC Institute and ICC Court of Arbitration will invite the respondent to send an an- 6.41 swer to the request.84 In principle, the respondent may accept the institution’s jurisdiction and establish prorogated jurisdiction after the commencement of the arbitration, unless the institution raises jurisdictional issues to administer the dispute. This approach does not have a parallel in the ICSID Rules. The specific jurisdictional limi- 6.42 tations on the eligibility of parties to pursue ICSID Convention arbitration are binding as a matter of international law and may not be overridden by parties’ consent to arbitrate under the ICSID Convention. It was to avoid the application of the doctrine of forum prorogatum,85 as well as to avoid setting the ‘machinery of the Centre . . . in motion in cases . . . obviously outside the jurisdiction of the Centre’86 that the drafters of the ICSID Convention adopted the screening procedure in Article 36(3), providing for the Secretary-​General to decide on the registration of a request solely on the basis of the information presented by the requesting party.87 While ICSID practice allows the respondent to submit a prompt answer if so demanded, its 6.43 jurisdictional arguments challenging registration of the request may not determine the outcome of the registration process.88 Occasionally, respondent’s answer may provoke comments

  ICSID Convention art. 25(2)(a).   See, e.g., ICSID Convention art. 36(1); ICSID Arbitration (Additional Facility) Rules art. 4; ICC Rules art. 4(5); SCC Rules art. 9(1). 83  The fee for filing of a request for arbitration of the SCC Institute and ICC Court of Arbitration are currently set at €3,000 and US$5,000, respectively. See SCC Rules art. 7 and App. IV: Schedule of Costs art. 1(1); ICC Rules App. III: Arbitration Costs and Fees art. 1(1). ICSID’s non-​refundable registration fee for filing of an initial request for arbitration is US$25,000. See ICSID Schedule of Fees. 84  SCC Rules art. 9; ICC Rules art. 5. See also UNCITRAL Rules art. 4 (requiring a response to the notice of arbitration). 85  The doctrine of forum prorogatum permits the parties, after the institution of proceedings, to perfect jurisdiction which was lacking in whole or in part before. In the Genocide Case, before the International Court of Justice, Judge Lauterpacht gave the following definition: ‘[Forum prorogatum] is the possibility that if State A commences proceedings against State B on a non-​existent or defective jurisdictional basis, State B can remedy the situation by conduct amounting to an acceptance of the jurisdiction of the Court’. ICJ, Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosnia and Herzegovina v. Serbia and Montenegro), Order of September 13, 1993 (Further Requests for the Indication of Provisional Measures), Separate Opinion of Judge ad hoc Lauterpacht, ¶ 24. 86  See explanation in Report of the Executive Directors, supra note 44, ¶ 20. 87  See A. Broches, Convention on the Settlement of Investment Disputes: Some Observations on Jurisdiction, 5 Columbia J. Transnat’l L. 261, 273 (1966). See also Schreuer et al., supra note 8, Article 36, ¶ 29. For a summary of the drafting history of the screening power of the Secretary-​General, see A. R. Parra, The Screening Power of the Secretary-​General, 2/​2 News from ICSID 10 ff. (1985). 88  See Parra, supra note 2, at 112 and fn. 47 and the case cited therein. For a more recent case example, see Commerce Group Corp. & San Sebastian Gold Mines, Inc. v. El Salvador, ICSID Case No. ARB/​09/​17, Award (Mar. 18, 2011). The case was brought under CAFTA. El Salvador objected to registration of the request for arbitration, alleging inter alia that the claimants had not terminated local court proceedings in 81 82

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Aspects of Procedure for Institution of Proceedings from the claimant which will be integrated into the screening process before the decision on the registration is taken.89 In addition, if decisive information is missing from the request for arbitration or what is provided is insufficient or unclear, the ICSID Secretariat may request further details from the claimant.90 6.44 The Secretary-​General must register the request ‘unless [s]‌he finds on the basis of the information

provided in the request that the dispute is manifestly outside the jurisdiction of the Centre’.91 The review prior to registration is mandatory in each case and a decision of the Secretary-​General not to register must contain the reasons for refusal.92 The stated reasons may assist the claimant to cure defects, as long as they are not fatal, and submit a new request.93 The Secretary-​General’s action is non-​reviewable.94

6.45 The SCC and the ICC have discretionary authority to carry out a preliminary prima facie

assessment of jurisdiction when a party has failed to file a timely answer to a request or when a jurisdictional challenge has been raised during the initial exchange of pleadings. These institutions will not allow arbitration to proceed when prima facie satisfied that the arbitration agreement does not refer the dispute to arbitration under their rules. The SCC Rules provide that the SCC Board may decide whether the ‘SCC manifestly lacks jurisdiction over the dispute’.95 Under the ICC Rules, ‘[t]‌he arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist’.96 The decision on whether and to what extent the arbitration should proceed is considered administrative in nature. Reasons may or may not be provided under the different sets of rules and a negative decision could be final.97 violation of the waiver provision of CAFTA. Id. ¶ 18. The tribunal held in favour of El Salvador finding, inter alia, that while complying with the ‘form’ requirement of art. 10.18.2(b)(ii) of CAFTA, the claimants had failed to comply also with the ‘material’ requirement to discontinue the domestic court proceedings. Id. ¶ 113. 89  See A. Parra, The Institution of ICSID Arbitration Proceedings, 20/​2 News from ICSID 12, 13 (2003). 90  See Obadia & Nitschke, supra note 65, at 93, fn. 40. The authors suggest that the respondent’s observations would thus be available in the screening process, but confirm that in the few instances where the Secretary-​General has refused to register the request, the refusal had been based on the request itself. See also M. Polasek, The Threshold for Registration of a Request for Arbitration under the ICSID Convention, 5 Disp. Resol. Int’l 181 (2011) (stating that ‘I‌CSID has never refused to register a request on the basis of an objection from a respondent’). See also generally S. Puig & C. Brown, The Secretary-​General’s Power to Refuse to Register a Request for Arbitration Under the ICSID Convention, 27/​1 ICSID Rev.—FILJ 172–​91 (2012). 91  ICSID Convention art. 36(3) (emphasis added). See also Explanatory Note C to ICSID Institution Rule 6(1)(b), Annotated Notes accompanying the ICSID Regulations and Rules of 1968, Doc. ICSID/​4/​Rev. 1 (May 1975)  (explaining that ‘manifest’ means ‘beyond reasonable doubt whatever evidence or argument might be produced subsequently—​that the Centre has no jurisdiction’). 92  ICSID Institution Rules 6(1)(b). 93  See Obadia & Nitschke, supra note 65, at 94. As indicated earlier, pursuant to ICSID Institution Rule 8, a claimant may unilaterally withdraw its original request until registration. Upon receiving the Secretary-​ General’s inquiries, the claimant may decide to do so partially regarding a claim, a party, or a jurisdictional ground invoked to avoid a refusal of registration. 94  A. Broches, A Guide for Users of the ICSID Convention, 8/​1 News from ICSID 5, 7 (1991); see also Ambiente v. Argentina, Decision, supra note 40, ¶ 266, citing Schreuer, supra note 8, Article 36, ¶ 43 and the cases cited therein (‘Once the request is registered, deficiencies in the request can no longer be raised and cannot operate as a bar to the Tribunal’s jurisdiction’). 95  SCC Rules art. 11(i) (emphasis added). See A. Magnusson & P. Shaughnessy, The 2007 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, 3 Stockholm Int’l Arb. Rev. 33, 45–​46 (2006) (confirming that the SCC Board will be prompted to make a decision when the respondent, in its answer, has expressly challenged ‘the existence of the arbitration agreement, or its validity, or its applicability’). See also SCC Rules art. 9(1)(i). 96  ICC Rules art. 6(4)(i) (emphases added). 97  Following the 2017 amendments to the ICC Rules, the ICC Court will provide reasons for its prima facie jurisdictional decisions if so requested by a party. Article 6(6) of the ICC Rules permits a party to seek

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II.  The Initiation of Proceedings The underlying constant of these screening mechanisms is that all institutions will leave any 6.46 arguable jurisdictional questions to the arbitral tribunal.98 However, the nature of the inquiry is different: the ICSID Secretary-​General’s review is not limited to whether mutual consent exists, but includes all elements of the ICSID jurisdiction. While the parties’ consent is a critical prerequisite for the jurisdiction of the Centre, consent alone will not suffice to bring a dispute within ICSID jurisdiction. Jurisdiction is further defined by the nature of the dispute and the disputing parties. If any of these elements of ICSID jurisdiction is found to be manifestly (or obviously) unfulfilled, the Secretary-​General will refuse to register the request for arbitration.99 In treaty-​based arbitration, the ICSID Secretary-​General must consider the jurisdictional re- 6.47 quirements of the ICSID Convention and of the IIA providing the host state’s consent to arbitration. The dispute and the parties identified in the request must fall within the scope of both treaties. Under such ‘dual review’, if a treaty precondition to the host state’s consent to the arbitration or a requirement for coverage of the parties and the dispute—​either under the ICSID Convention or the invoked investment treaty, is manifestly lacking—​ICSID will be prevented from registering the request, unless a plausible argument has been made in the request that the requirement need not be met. For instance, a claimant may assert that a treaty prerequisite, such as compliance with a waiting period or exhaustion of local remedies, is inapplicable because it would have been ineffective or futile.100 A claimant may also maintain that it is entitled to access a more favourable procedural condition in another treaty through the MFN clause in the base treaty.101 Registration will probably not be refused in such circumstances, unless the investment treaty explicitly excludes ISDS from the MFN obligation.102 The registration does not, however, guarantee that the arbitral tribunal will assume jurisdiction. The tribunal may find a particular precondition mandatory and decline jurisdiction. The investment treaty invoked may cover disputes or parties that are outright excluded from 6.48 ICSID jurisdiction. A registration request by such a party or for such a dispute will be rejected. With respect to the jurisdictional requirements of Article 25 of the ICSID Convention, Aaron Broches wrote that: This provision defines the outer limits within which parties can put its mechanisms into operation. A compromissory clause which extends beyond those limits will have no effect.

a court decision on whether and among which parties the arbitration may proceed in case of refusal of the ICC Court to administer the arbitration with respect to some or all of the parties or claims. See A. Carlevaris, Preliminary Matters: Objections, Bi-​furcation, Request for Provisional Measures, in Giorgetti ed., supra note 65, 173–​205, 180. 98  ICSID Institution Rule 7(e) provides that the notice of registration ‘reminds the parties that the registration of the request is without prejudice to the powers of the . . . Arbitral Tribunal in regard to jurisdiction, competence and the merits’. See also Ambiente v. Argentina Decision, supra note 40, ¶ 267 (‘omissions, errors and other deficiencies in the request are not an independent basis for the tribunal to decline jurisdiction’). 99  Report of the Executive Directors, supra note 44, ¶ 25. The ICSID Secretary-​General has refused registration of roughly 20 requests for arbitration during ICSID’s entire history. See Obadia & Nitschke, supra note 65, at 93. 100  If the case is registered, the tribunal is likely to place the burden of proof of futility on the claimant. See, e.g., Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/​10/​1, Award (July 2, 2013), ¶ 8.1.10 (‘[R]‌ecourse would be futile or ineffective, requires tendering of probative evidence that goes to the specificity of the issues in dispute. It is not enough to make generalized allegations about ineffectiveness of the State’s legal system’). 101  See, e.g., Emilio Augustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/​ 97/​7, Decision of the Tribunal on Objections to Jurisdiction (Jan. 25, 2000), ¶¶ 38–​64. The ‘Maffezini doctrine’ holds that the MFN clause in the investment treaties could extend to cover dispute settlement. For a discussion of the application of MFN to dispute settlement, see ch. 23 in this volume. 102  See, e.g., CETA art. 8.7.4. Some treaties do not contain a MFN clause (e.g., the 2015 Indian Model BIT).

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Aspects of Procedure for Institution of Proceedings This is true for the investment protection treaties . . . as for an investment agreement between a host State and a foreign investor.103 6.49 In practice, the Secretary-​General will refuse registration when it is easily recognizable from

the request that no sets of facts and no legal argument could possibly sustain jurisdiction. For instance, registration will be rejected if no legal dispute exists or arises out of the covered investment, if the request has been brought by an investor who manifestly fails to meet the nationality requirements of the ICSID Rules, if neither the home or the host state of the investor is an ICSID Contracting State, if the dispute is between two private entities, or if a party has obviously not consented to the arbitration. If the Secretary-​General has doubts, the request for arbitration will be registered.

III.  The Establishment of the Arbitral Tribunal A. Preliminary Remarks 6.50 One aspect specific to investment treaty arbitration is that the parties’ agreement to arbitrate

typically coincides with the initiation of proceedings under a particular set of arbitration rules offered in the treaty. Thus, the arbitration rules become part of the agreement to arbitrate, along with any mode for constituting the tribunal specified in the treaty. These may or may not be fully compatible.

6.51 The relationship between investment treaty law and international arbitration frameworks has

received increasing attention in the context of the ‘court system’ proposal advanced in several European Union draft treaties and adopted in the signed Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada.104 One issue raised is how the CETA’s innovation for submitting claims under the ICSID Convention and the ICSID Additional Facility Rules to a ‘first instance Tribunal’ would work in conjunction with the ICSID Convention and Rules. The ICSID Rules place no limitations on party freedom to create a method for constitution of the tribunal. Commentators have noted that ‘Article 37(2)(b) of the ICSID Convention, regarding the number of arbitrators and the method of their appointment, is so broad and flexible that it might accommodate the court system proposal in these respects.’105

B. Composition of the Tribunal 6.52 The phase of constituting the tribunal is critical. It relates to the very foundation of

the arbitration process: improper constitution of the tribunal is a ground for annulment of an ICSID Convention award 106 and may jeopardize the enforceability of an award under the New York Convention. 107

103  A. Broches, Bilateral Investment Treaties and Arbitration of Investment Disputes, in The Art of Arbitration: Essays on International Arbitration: Liber Amicorum Pieter Sanders 63 (J. Schultz & J. van den Berg eds., 1982). 104   See CETA, supra note 17, art. 8.27. See also EU–Singapore Free Trade Agreement (text as of April 2018), art. 3.9; EU–Mexico Global Agreement (text as of April 2018), art. 11. Under these treaties ICSID has been named Secretariat to permanent First Instance and Appellate Tribunals. 105  See Parra, The History of ICSID, supra note 3, at 293. 106  See ICSID Convention art 52(1)(a). The ICSD Secretariat closely monitors the constitution of tribunals for procedural irregularities. As a result, challenges of an award on the ground of improper constitution of a tribunal are extremely rare in ICSID practice. Of the five annulment cases in which the issue had been raised, four ad hoc Committees rejected the application on that ground and one did not address it. See ICSID, Background Paper on Annulment for the ICSID Administrative Council, ¶¶ 77–​80. 107  Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) art. V(1)(d), 330 U.N.T.S. 38; 21 U.S.T. 2517; 7 I.L.M. 1046 (1968).

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III.  The Establishment of the Arbitral Tribunal Whether the arbitral tribunal has been validly constituted depends on whether the agreement 6.53 of the parties has been complied with or, in the absence of agreement, whether the relevant provisions of the arbitration rules and, if applicable, the laws of the arbitration seat have been properly applied. ICSID ad hoc Committees have found that if the procedures for the constitution of the tribunal, including the procedure for challenging arbitrators for manifest lack of quali­ties required by Article 14(1) of the ICSID Convention have been properly complied with, the tribunal will be properly constituted for the purposes of Article 52(1)(a) of the ICSID Convention.108 International arbitration rules all endorse party autonomy and, to the extent possible, give effect to party agreements on the number and the procedure for appointment of arbitrators.109 Consequently, the rules for constituting the tribunal will largely depend on whether or not the disputing parties are in agreement on them.

1. Investment treaty provisions as party agreement prior to the institution of proceedings In treaty-​based arbitration, relevant provisions, if any, will be contained in the underlying 6.54 treaty offering the state party’s consent to arbitration that the investor has accepted. The investment treaty may stipulate how the tribunal is to be constituted, either by specifying particular procedures or by reference to existing arbitration rules. Thus, for instance, the treaty may stipulate fall-​back rules on the number of arbitrators and 6.55 the method of their appointment.110 Treaty designations of this type usually call for three-​ member tribunals.111 Although rare, some investment treaties also mention the option of a sole arbitrator.112 Sometimes, treaties provide a predetermined formula for constituting the tribunal.113 In addition, a treaty may name an appointing authority to make arbitrator appointments.114 IIAs may impose nationality or other conditions on the appointing authority’s selection of a sole arbitrator or a president of the tribunal.115 Some treaties authorize the appointing authority to exercise discretion when selecting arbitrators not yet appointed;116 108  See, e.g., Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Decision on the Annulment Application of the Argentine Republic (Sept. 1, 2009), ¶ 279. 109  See, e.g., ICSID Convention art. 37(2)(a); ICSID Arbitration (Additional Facility) Rules art. 6(1); UNCITRAL Rules art. 7(1); SCC Rules arts. 16(1) and 17(1); and ICC Rules art. 11(6). 110  See, e.g., NAFTA art. 1123 (‘[u]‌nless the disputing parties otherwise agree, the Tribunal shall comprise three arbitrators, one arbitrator appointed by each of the disputing parties and the third, who shall be the presiding arbitrator, appointed by agreement of the disputing parties’). Similar provisions are found in the 2012 U.S. Model BIT (art. 27(1)) and in the 2003 Canadian Model FIPA (art. 29(1)). See also Germany–​Lebanon BIT (1997) art. 9(3) and art. 10(2)–​(9) (providing that, unless the parties agree otherwise, the dispute shall be referred to a three-​member tribunal, each party appointing one arbitrator and the two party-​appointed arbitrators nominating a chair who must be a citizen of a third state). 111  See Pohl et al., supra note 6, at 26. 112  See, e.g., ECT art. 26(4)(b); CETA art.8.23.5 and art. 8.27.9. 113  See, e.g., Morocco–​Nigeria BIT (2016) (not yet in force) art. 27(2)). 114  See, e.g., NAFTA art. 1124 (designating the ICSID Secretary-​ General as appointing authority in all investor-​state cases under NAFTA Chapter  11, including non-​ICSID proceedings. CAFTA has a similar provision (art. 10.19.2). In contrast, the ECT does not designate an appointing authority. See also Germany–​ Lebanon BIT (1997) art. 10(3) (designating the president of the ICC International Court of Arbitration as appointing authority in arbitration proceedings conducted either under ICSID or UNCITRAL Rules). 115  See, e.g., 2003 Canadian Model FIPA art. 30(2) (providing that the ‘presiding arbitrator shall not be national of either party’). See also NAFTA art. 1124(3) and (4) (requiring that, in addition, the presiding arbitrator be appointed from a ‘roster of presiding arbitrators’ appointed by the states ‘by consensus and without regard to nationality’). Such panel is still to be established. 116  See, e.g., CAFTA art. 10.19.3 (‘If the tribunal has not been constituted within 75 days from the date that a claim is submitted to arbitration under this Section, the Secretary-​General [of ICSID], on the request of a disputing party, shall appoint, in his or her discretion, the arbitrator of arbitrators not yet appointed’ (emphasis added)). See also United States–​Peru Trade Promotion Agreement (2006) art. 10.19(3); Mexico–​U.K. BIT (2006) art. 13(2) (similar provisions).

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Aspects of Procedure for Institution of Proceedings others specifically limit all arbitrator appointments, including those made by the parties, to a roster of qualified arbitrators.117 6.56 Sometimes a treaty defines the method for constituting the tribunal by designating the ar-

bitral institution(s) to administer the arbitration, whose rules will set out the number of the members of the tribunal and the appointment procedures.118 Consulting the applicable instruments carefully is important since specific treaty prescriptions may work in tandem with the applicable arbitration rules, but may also vary or override them.119

6.57 In arbitration proceedings under the ICSID Rules, the parties have a duty to communicate

any previously agreed terms on the number of arbitrators and the method of their appointment to the Secretary-​General ‘as soon as possible’.120 The role of the Secretary-​General in such case is to ensure that the parties’ agreement is properly implemented.121 In practice, to expedite the process, claimants indicate any prior agreement or make a proposal on the appointment procedure and often name their party-​appointed arbitrator in the request for arbitration.

2. Party agreement following the institution of proceedings under the ICSID Rules 6.58 Absent prior agreement on the composition of the tribunal, the ICSID Rules provide a procedure to assist the parties reach agreement.122 ICSID Arbitration Rule 2 implicitly gives the parties sixty days from registration to agree on the number of arbitrators and the method of constituting the tribunal.123 The rule also outlines a process and timeline  that the parties may use unless they decide to employ another technique for reaching agreement. The ICSID Secretariat’s practice is to support the disputing parties in reaching consensus within timeframes provided by the ICSID Rules.124 6.59 Determining the method of constituting the tribunal is central to the ICSID appointment

mechanism. Under ICSID Rules, establishment of the tribunal is a matter for the parties.125 ICSID may appoint an arbitrator only on application of a party and, in any event, not before the number of arbitrators and the appointment method have been established, either by party 117  See, e.g., Investment Agreement for the COMESA Common Investment Area (2007) art. 30 (‘The COMESA Secretariat shall maintain a roster of qualified arbitrators from which the parties to an arbitration under this Agreement may select arbitrators’). During negotiation of the ICSID Convention, a proposal to restrict all appointments to persons on the ICSID Panel of Arbitrators, unless the parties had reached an agreement on the tribunal’s constitution, was considered but rejected. See Schreuer et al., supra note 8, Article 40, ¶ 2. 118  See, e.g., Austria–​Guatemala BIT (2006) art. 12(1)(c). 119  For example, art. 9 of the UNCITRAL Rules provides for the appointment of a three-​ member tribunal with each party appointing one arbitrator and the third appointed ‘by mutual agreement between the two party-​appointed arbitrators’. Article 10.19.1 of CAFTA pre-​empts the default rule in the UNCITRAL Rules by providing that the third, presiding, arbitrator shall be appointed ‘by agreement of disputing parties’. 120  ICSID Arbitration Rule 1(2) and ICSID Arbitration (Additional Facility) Rules art. 3(2). 121  As a matter of normal practice, the Centre will ask the parties to clarify any ambiguity concerning the agreed method and will communicate to them any potential issues under the ICSID Rules. 122  ICSID Arbitration Rule 2. 123  This period is not mandatory and can be shortened or extended by agreement of the parties. This flexibility allows the parties to agree on an expedited or protracted process of constituting the tribunal that suits their needs. The ICSID Secretary-​General does not have power to extend these time limits. Therefore, if one party asks for modification of the agreement, this must be approved by the other party and not by ICSID. It is also noteworthy that the parties are not limited by the number of proposals and counter-​proposals provided in ICSID Arbitration Rule 2(1). See Obadia & Nitschke, supra note 65, at 110. 124 M. Kinnear, Appointment to Arbitral Tribunals at ICSID, 1 ABA SIL Int’l Arb. Committee Newsletter 35 (2013). 125  See ICSID Arbitration Rule 1(1) (directing ‘the parties . . . [to] proceed to constitute a Tribunal, with due regard to Section 2 of Chapter IV of the Convention’ (emphasis added)). In her notice of registration of a request for arbitration, the Secretary-​General invites the parties to constitute an arbitral tribunal as soon as possible in accordance with arts. 37 to 40 of the ICSID Convention. See also ICSID Institution Rule 7(e).

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III.  The Establishment of the Arbitral Tribunal agreement or by the operation of the default formula in the ICSID Rules, which either party may activate after a specified time.126 If both parties remain inactive and take no steps to constitute the tribunal within a certain period of time, a legal presumption is created that the parties have lost interest in a decision of their dispute and the proceedings may be discontinued.127 To ensure that the tribunal is constituted notwithstanding a refusal of one of the parties to 6.60 cooperate, the ICSID Convention equally authorizes the parties, in the absence of agreement, to invoke the default formula and appointment mechanism set out in its Articles 37(2)(b) and 38. In such circumstances, the dispute is to be referred to a three-​member tribunal: one member appointed by each party and the third presiding arbitrator appointed by agreement of the parties. The ICSID Arbitration Rules provide a process by which the parties appoint the individual members of the tribunal.128 If the tribunal is not constituted in the time provided, the default provisions of Article 38 can be invoked by a party.129

3. Party agreement following the institution of proceedings under non-​ICSID rules As indicated above, under  non-​ICSID rules, the claimant is typically required to make a 6.61 proposal regarding the number of arbitrators and/​or the process of their appointment in the request for arbitration, which the respondent may decide to accept or decline in its answer to the request.130 Unless the parties have been able to agree on these issues, and have, in fact, appointed the arbitrators within the specified timelines, the default number of arbitrators will be determined by the institution. 4. Institutional discretion in determining the number of arbitrators Under the 2017 SCC Rules applicable to international investment disputes, in the absence 6.62 of party agreement, three arbitrators will be appointed, unless the SCC Board determines that the matter shall be referred to a sole arbitrator having regard to ‘the complexity of the case, the amount in dispute or other relevant circumstances’.131 The ICC Court will appoint a sole arbitrator, unless the Court determines that the dispute ‘is such as to warrant the appointment of three arbitrators’.132 Under the UNCITRAL Rules, when the parties have not agreed on the number, the arbitral tribunal is to be composed of three arbitrators.133 A new mechanism introduced in the 2010 UNCITRAL Rules provides a limited exception for the appointment of a sole arbitrator at the discretion of the appointing authority.134   ICSID Arbitration Rule 2(3); ICSID Arbitration (Additional Facility) Rules art. 9(1).   See ICSID Arbitration Rule 45 and Explanatory Note B to ICSID Arbitration Rule 45, Annotated Notes Accompanying the ICSID and Rules of 1968, Doc. ICSID/​4/​Rev. 1 (May 1975). 128  According to ICSID Arbitration Rule 3, the first party is to appoint an arbitrator and also to propose a candidate to serve as president of the tribunal. The other party then appoints an arbitrator and either agrees to the appointment of the arbitrator proposed for president or proposes another candidate. If a counter-​ proposal is made, the party making the first appointment then indicates whether it agrees to the new proposal for president. The parties are not limited in the number of proposals or counter-​proposals that can be made. 129  See infra ¶¶ 6.73–​6.74. 130  See, e.g., ICC Rules arts. 4(2)(g) and 5(1)(e); see also SCC Rules arts. 6(1)(v) and 9(1)(iv). For a commentary on the constitution of tribunals under the 2010 SCC Rules, see C. Salinas Quero, Appointment of Arbitrators under the SCC Rules, 1 ABA SIL Int’l Arb. Committee Newsletter 1, 53 ff. (2013). See also Magnusson & Shaughnessy, supra note 95, at 37–​41. 131  SCC Rules Annex III art. 2(2). See also SCC Rules art. 16(2). 132  ICC Arbitration Rules art. 12(2). The ICC Arbitral Court considers the arbitration agreement, the parties’ comments, the nature of the dispute, the amount in dispute, the presence of a state or a state entity, and any other relevant factors. If the case involves a state, the tribunal will normally consist of three arbitrators. See V. Orlowski & A. Masson, Your Way or the ICC Way: Constituting an Arbitral Tribunal under the ICC Rules of Arbitration, 1 ABA SIL Int’l Arb. Committee Newsletter 26 (2013). See also Fry et al., supra note 38, at 138–​42. 133  UNCITRAL Rules art. 7(1). 134  Id. art. 7(2). The rule stipulates that where a party has failed to respond to a proposal on the number of arbitrators within 30 days after the submission of the notice of arbitration, the appointing authority, at the 126 127

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Aspects of Procedure for Institution of Proceedings 6.63 The option to allow a sole arbitrator where the parties have been unable to agree on the number

of arbitrators avoids the risk of a respondent escalating the costs of the arbitration by refusing to a sole arbitrator where the claim is relatively small and does not warrant a three-​member tribunal.135 However, this is rarely the case in treaty-​based arbitration.

6.64 Under the ICSID Rules, determining the number of arbitrators is not open to institutional dis-

cretion. A sole arbitrator will be appointed only if the disputing parties so agree.

C. Appointment of the Arbitral Tribunal 6.65 Where the disputing parties have not agreed on the mechanism for appointing the arbitrators,

the arbitration rules that may come into play in treaty-​based arbitrations diverge widely over issues such as (i) who is to appoint the arbitrators; (ii) which arbitrators can be selected; and (iii) how arbitrators are appointed, challenged, or replaced.

1. Appointment by the parties 6.66 In the most common composition of a three-​member tribunal in IIA arbitration, each party

will appoint at least one arbitrator, except in the case of multi-​party arbitration.136 The parties may choose instead to appoint each arbitrator by mutual agreement or may devolve the task to a third party. Presiding arbitrator appointments are frequently made by the two party-​appointed arbitrators137 or by a designated appointing authority. The appointing authority may act either unconditionally or only when the parties fail to make certain appointments. Where the IIA provides for requests for consolidation of related proceedings, a designated appointing authority may be authorized to establish the entire consolidation tribunal.138 Parties may also agree to appoint the same arbitrators and set up identically composed tribunals to hear cases that share a similar factual and/​or legal background (‘de facto consolidation’).139 In such instances, the individual arbitral proceedings remain separate.140

request of the claimant, may appoint a sole arbitrator if it determines that, in view of the circumstances of the case, this is more appropriate. 135  See J. Paulsson & G. Petrochilos, Revision of the UNCITRAL Arbitration Rules: A Report Prepared for the UNCITRAL Secretariat, at 35–​36, http://​www.uncitral.org/​pdf/​english/​news/​arbrules_​report.pdf (last visited Mar. 18, 2018). 136  In the case of a three-​member tribunal in multi-​party arbitration, the multiple claimants or multiple respondents will either have to agree on a single nominee or the arbitrator will be appointed by the institution under default rules. See, e.g., ICC Rules art. 12(6) and (7); see also SCC Rules art. 17(5); UNCITRAL Rules art. 10(1). Similarly, the parties must agree on the nomination of a single nominee, where the dispute is to be referred to a sole arbitrator. 137  See Pohl et al., supra note 6, at 26 (noting that two-​thirds of the treaties, which specify rules on the composition of the tribunal, require the party-​appointed arbitrators to designate the president). 138  See, e.g., NAFTA art. 1126(4). The NAFTA provides for a mandatory consolidation if a special consolidation tribunal determines that it should assume jurisdiction over some or all the related claims. The proceedings are governed by the UNCITRAL Rules, but all arbitrators are to be appointed and the consolidation tribunal established by the Secretary-​General of ICSID. See also 2012 U.S. Model BIT art. 33; the 2003 Canadian Model FIPA art. 32. Similar provision is contained in the Mexico–​U.K. BIT (2006) art. 14(1) and (5) (the consolidation tribunal must be established under the PCA Rules of Arbitration, except as modified by the treaty, by the Secretary-​General of ICSID). 139  See G. Kaufmann-​Kohler, L. Boisson de Chazournes, V. Bonnin & M. Moїse Mbengue, Consolidation of Proceedings in Investment Arbitration:  How Can Multiple Proceedings Arising from the Same or Related Situations Be Handled Efficiently, 21 ICSID Rev.—​FILJ 59, 74–​75; K. Yannaca-​Small, Parallel Proceedings, in The Oxford Handbook of International Investment Law 1008, 1037–​38 (P. Muchlinski, F. Ortino & C. Schreuer eds., 2008) [hereinafter Muchlinski et al.); M. Waibel, Coordinating Adjudication Processes, in The Foundations of International Investment Law: Bringing Theory into Practice 526–​27 (Z. Douglas, J. Pauwelyn & J.E. Viñuales eds., 2014). 140  See, e.g., Bernhard von Pezold and others v.  Republic of Zimbabwe, ICSID Case No. ARB/​ 10/​15, Award (July 28, 2015), ¶¶ 5, 15–​16. See also Flughafen Zürich A.G.  and Gestión e Ingeniería IDC

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III.  The Establishment of the Arbitral Tribunal Parties are free to select the individual arbitrators within the agreed method of appointment; 6.67 however, they still have to comply with any mandatory rules for minimum qualifications of arbitrators and with due process principles. As mentioned above, to prevent a recalcitrant party from obstructing or delaying the proceedings, parties are given a limited period for their appointments. Arbitral institutions will not generally interfere with a party’s choice. A few limitations may apply regarding nationality and requisite qualities of independence and impartiality of the arbitrators. In ICSID’s practice, arbitrator appointments have been made directly by the parties or party-​ 6.68 appointed arbitrators in roughly three-​quarters of the cases.141 Sometimes parties resort to a list procedure or a ballot assisted by ICSID to attain party agreement on an appointee.142

2. Appointment by a designating appointing authority Arbitrator appointments by an appointing authority may result from the operation of de- 6.69 fault provisions on the tribunal constitution in the underlying treaty. When institutional arbitration has been chosen, the predetermined default appointing authority is usually the institution itself. As touched upon above, a third party, different from the administering institution, may be precisely identified in the underlying investment treaty to act as an appointing authority and/​or to have functions in resolving problems concerning the challenges and replacement of arbitrators. 3. ICSID’s practice IIAs frequently designate the ICSID Secretary-​General or the Chairman of the ICSID 6.70 Administrative Council, a post held ex officio by the President of the World Bank Group (‘Chairman’), to act as appointing authority of arbitrators. Such provisions form part of the parties’ agreed method of tribunal constitution and pre-​empt relevant provisions of the ICSID Rules. Consequently, selection of arbitrators for appointment will not be limited to persons on the ICSID Panel of Arbitrators143 unless the applicable IIA specifically so requires.144

S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​10/​19, Award (Nov. 18, 2014), ¶¶ 399–​400 (distinguishing between consolidation and a joined proceeding); Salini Costruttori SpA and Italstrade SpA v. Kingdom of Morocco, ICSID Case No. ARB/​00/​4; Consortium RFCC v. Kingdom of Morocco, ICSID Case No. ARB/​00/​6. In ICSID practice, a number of arbitrations that arose in the context of the Argentine crisis of 2001 were de facto consolidated. 141  See ICSID, 2016 Annual Report, at 35. 142  In ICSID practice, the parties may simultaneously exchange lists of candidates and each party informs the other party of the candidate(s) whom it accepts or rejects. The same nominee appearing on both lists may or, depending on the parties’ agreement, will be selected. Lists may be exchanged until there are sufficient matches. Another option is similar to the default list procedure set out in art. 8(2) of the UNCITRAL Rules. The parties may jointly request the ICSID Secretariat to provide them with a list of potential arbitrators. Each party will usually be permitted to strike a certain number of candidates and rank the remaining ones in order of preference. The parties send their confidential ranking to the Centre without copying each other in. If two or more candidates have the same ranking, the ICSID Secretariat is usually asked to select one of them. A coin-​toss has been used as a tie-​breaker between two candidates. ICSID also uses a ‘ballot’ procedure, which is described in the section dealing with default procedures for appointment of arbitrators. 143  The ICSID Panel of Arbitrators is composed of up to four designated potential candidates of each of the ICSID Contracting States and up to 10 designated potential candidates of the Chairman of the ICSID Administrative Council. The ICSID Secretariat makes a significant effort to maintain the Panel designations current. If a state has vacant or expired positions on the Panels, the ICSID Secretariat sends a letter reminding the state of its right to make designations and of the legal and practical qualities required of ICSID arbitrators. During the past five years, 88 states designated 379 individuals to the ICSID Panels. See ICSID, Annual Report (2012–​2016). 144  See, e.g., Colombia–​Japan BIT (2011) art. 30(2) (requiring the Secretary General to appoint the arbitrator or arbitrators not yet appointed from the ICSID Panels of Arbitrators. The treaty further allows each

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Aspects of Procedure for Institution of Proceedings 6.71 As a first step, the parties are invited to submit their views on the desired qualifications, ex-

perience, and profile of the potential candidates for appointment.145 The appointment will be based on the best available candidates who meet the criteria of the parties and the arbitration agreement reflected in the applicable legal instrument. If the IIA designating the Chairman or the Secretary-​General as appointing authority establishes a method for the appointment of arbitrators, or the parties have reached an agreement, ICSID will follow that method. Otherwise, the Chairman or the Secretary-​General must determine what appointing process to use since he or she is not bound in such circumstances to follow the default provisions of the ICSID Rules. The process will vary depending on the type of appointment requested. In practice, a strike-​and-​rank list procedure is normally used, especially in cases in which the Secretary-​General acts as an appointing authority, or when ICSID administers the arbitration, under the UNCITRAL Rules.146 If the parties do not agree on any of the potential appointees proposed through the list procedure, an arbitrator will be selected and appointed by ICSID, following consultations with the parties.

4. Appointment by institutions under default arbitration rules 6.72 Default provisions of the applicable arbitration rules apply when a party has failed to appoint an arbitrator or when the parties, or the party-​appointed arbitrators, have been unable to agree on the presiding arbitrator in a three-​member tribunal, unless the parties have contracted out of such rules, in which case the parties’ agreement will prevail. (a)  ICSID Rules 

6.73 Pursuant to Article 38 of the ICSID Convention, if all appointments are not made within

ninety days after the notice of registration for any reasons, or within such other shorter or longer period as the parties may agree, the Chairman will, at the written request of either party, appoint the arbitrator or arbitrators not yet appointed and designate an arbitrator as presiding arbitrator, if appropriate.147 The Chairman may not intervene sua sponte in the appointment of arbitrators and is further required to exercise his or her appointing authority functions ‘after consulting both parties as far as possible’.148 In practice, until completion of the default process, the parties may still appoint the missing arbitrator(s), either under the established method or as they may agree subsequently.

6.74 When a party requests the Chairman to appoint the sole arbitrator or the president of an

ICSID tribunal, a two-​step process is typically followed in practice. The first involves a ballot procedure, introduced by the ICSID Secretariat in 2009 as an extra step to bring about party consensus on a candidate. ICSID provides the parties with a ballot form containing the names and curricula vitae of several potential arbitrators, who may or may not be members of the ICSID Panel of Arbitrators. The parties have five to ten days to complete the simple ‘yes/​no’ ballot. Each party is invited to advise the Secretary-​General of the candidates it accepts or rejects. If the parties wish to retain more control over the appointment process, they may share their selections. When the parties agree on an arbitrator from the ballot,

of the disputing parties to exclude up to three nationalities; the Secretary-​General may not appoint persons from these excluded nationalities). Id. art. 30(5). 145  See, e.g., Poštová banka, a.s. & ISTROKAPITAL SE v. Hellenic Republic, ICSID Case No. ARB/​13/​8, Award (Apr. 9, 2015), ¶¶ 9–​17. 146  For a description of the procedure for the appointment of the presiding arbitrator by the ICSID Secretary-​General, acting as an appointing authority pursuant to art. 9(3) of the UNCITRAL Rules (1976) and art. 10.19 of CAFTA, see Spence International Investments and others v. Republic of Costa Rica, ICSID Case No. UNCT/​13/​2, Interim Award (Oct. 25, 2016), ¶¶ 12–​14. 147  ICSID Convention art. 38; ICSID Arbitration Rule 4. The same procedure applies if the parties have agreed that the co-​arbitrators shall select the presiding arbitrator and they have failed to do so. 148  Id.

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III.  The Establishment of the Arbitral Tribunal the arbitrator will be deemed to have been appointed by agreement of the parties.149 If the ballot procedure fails, the appointment is made by the Chairman from the ICSID Panel of Arbitrators. Arbitrators not on the ICSID Panel may only be appointed by the Chairman if the proceeding is conducted under the ICSID Additional Facility Rules.150 ICSID consults with the parties, as far as possible, before the Secretary-​General makes a recommendation to the Chairman for the appointment.151 On average, the outlined procedures are completed within six weeks or less from the date of the request for appointment.

(b)  UNCITRAL Rules  The UNCITRAL Rules provide a different regime. The default rule of Article 9 stipulates 6.75 that, for a three-​member tribunal, ‘each party shall appoint one arbitrator’ and the two party-​appointed arbitrators ‘shall choose the third [presiding] arbitrator’. If a party fails to appoint an arbitrator within thirty days of being notified of the other party’s appointment, then the first-​appointing party may request the agreed ‘appointing authority’ to appoint the second arbitrator. Similarly, when there is no agreement on the presiding arbitrator within thirty days after appointment of the second arbitrator, the presiding arbitrator is to be appointed by the appointing authority.152 Under the 2010 revision of the UNCITRAL Rules, absent prior agreement on an appointing authority, a party may propose that the Secretary-​ General of the Permanent Court of Arbitration (PCA) act as the appointing authority.153 If that proposal has not been accepted within thirty days of its receipt by the other party or parties, any party may request the Secretary-​General of the PCA to designate the appointing authority.154 When performing appointments, the appointing authority may use a list procedure set forth 6.76 in Article 8(2) of the UNCITRAL Rules or exercise discretion. A sole arbitrator or a president of the tribunal is to be appointed by a list procedure, unless the parties object to the use of this method or when the appointing authority deems the use of a list procedure would not be appropriate for the case.155 The process involves three steps: (i) first, the appointing authority provides the parties an identical list of at least three names for their consideration; (ii) within fifteen days after receipt, each party returns the list after deleting the name(s) to which it objects and numbering the remaining names in order of preference; and (iii) the appointing authority appoints the sole arbitrator or tribunal president from the names approved on the list in the order of preference. If the list procedure fails, the appointing authority will appoint the sole arbitrator or tribunal president at its discretion. The second arbitrator is also appointed at the discretion of the appointing authority since the list procedure is not required for such an appointment.156

149  If the parties agree on more than one proposed candidate, the ICSID Secretariat selects one of them and informs the parties of the selection. 150  ICSID Arbitration (Additional Facility) Rules art. 6(4). 151  As a matter of normal practice, the ICSID Secretariat performs a preliminary conflict check and consults with the candidate before appointing an arbitrator. ICSID also gives parties the opportunity to raise any circumstance showing that the candidate manifestly lacks the required qualities under art. 14(1) of the ICSID Convention. If a party raises a conflict of interest issue, which the candidate or the Centre is not aware of, the Secretary-​General would invite observations from the opposing party and make inquiries to confirm whether the circumstances as alleged give rise to a conflict that would preclude that candidate from acting as an arbitrator. A proposed candidate may be replaced by another person and the decision of the Secretary-​General on whether there is a conflict of interest would not be accompanied by written reasons. 152  UNCITRAL Rules art. 9. 153  Id. art. 6(1). 154  Id. art. 6(2). 155  Id. arts. 8(2) & 9(3). 156  Id. art. 9(2).

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Aspects of Procedure for Institution of Proceedings (c)  SCC and ICC Rules 

6.77 Where a three-​member tribunal is to be constituted under the SCC Rules, and absent party

agreement otherwise, each party appoints an arbitrator and the SCC Board appoints the tribunal president. The Board also appoints a co-​arbitrator if a party fails to do so.157 When making its appointments, the Board considers ‘the nature and circumstances of the dispute, the applicable law, the seat and language of the arbitration and the nationality of the parties’.158 Similarly, under the ICC Rules, when the dispute is referred to a three-​member tribunal, the presiding arbitrator will be appointed by the ICC Court of Arbitration, unless the parties have agreed on an alternative procedure, in which case the nomination will be subject to confirmation by the ICC Court. If, under such agreed procedure, the parties fail to reach an agreement within prescribed time limits, the presiding arbitrator is appointed by the ICC Court. The Court also appoints when a party fails to nominate a co-​arbitrator.159

5. Considerations in the selection of arbitrators (a)  Nationality, impartiality, and independence requirements under arbitration rules  6.78 Neutrality of arbitrators under the ICSID Rules is ensured, inter alia, through nationality restrictions on the composition of the tribunal.160 The general rule is that the majority of the arbitrators on the tribunal may not be nationals or co-​nationals of the parties unless each member of the tribunal is appointed by agreement of the parties.161 In practice, a sole arbitrator may not have the same nationality as either party, unless the parties so agree. In a three-​member tribunal, if each party has appointed a person of an excluded nationality, with the agreement of the other party, then the parties must also agree on the appointment of the tribunal president. In other words, all parties must agree on all arbitrators. As indicated above, the appointed arbitrator must be of a nationality different from that of a party, when the Chairman appoints any arbitrators in default proceedings under Article 38 of the ICSID Convention.162 6.79 The UNCITRAL Rules place no restrictions on nationality; however, the appointing au-

thority is to take into account ‘the advisability of appointing an arbitrator of nationality other than the nationalities of the parties’ when endeavouring to secure the appointment of an independent and impartial arbitrator.163

6.80 Where a sole arbitrator or tribunal president is appointed under default provisions of the

SCC or ICC Rules, the institution will, in principle, appoint a person of a nationality other than those of the parties.164 The appointment of the other two arbitrators in a three-​member tribunal is not subject to any nationality restrictions.

157  In treaty-​based arbitration, the respondent state would be required to appoint an arbitrator when submitting the answer to the request for arbitration, within a time limit fixed by the SCC Secretariat (usually 4–​6 weeks). The time limit may be extended. If the respondent fails to appoint its arbitrators within that period, the SCC board will make the appointment. 158  See SCC Rules art. 17(7). See also, SCC Policy: Appointment of Arbitrators (June 20, 2006). 159  See ICC Rules arts. 12 & 13. 160  ICSID’s Rules also address the incompatibility resulting from an earlier involvement as a conciliator or arbitrator in the dispute. See ICSID Arbitration Rule 1(4); ICSID Arbitration (Additional Facility) Rules art. 6(5). The rule is based on the general principle that no person should twice take part in an impartial investigation of the same dispute. In addition, the Secretary-​General, the Deputy Secretaries-​General and ICSID staff may not serve on any tribunals. See ICSID Administrative and Financial Regulation 12. See also Explanatory Notes I and J to ICSID Institution Rule 1, Annotated Notes Accompanying the ICSID Regulations, and Rules of 1968, Doc. ICSID/​4/​Rev. 1 (May 1975). 161  See ICSID Convention art. 39 and ICSID Arbitration (Additional Facility) Rules art. 7. For a discussion, see Schreuer et al., supra note 8, Article 39, at 498–​506. 162  See ICSID Convention art. 38; ICSID Arbitration (Additional Facility) Rules art. 6(4). 163  See UNCITRAL Rules art. 6(7). 164  See ICC Rules art. 13(5); SCC Rules art. 17(6).

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III.  The Establishment of the Arbitral Tribunal As a matter of practice, when institutions are to appoint an arbitrator of a nationality different 6.81 than those of the parties, determining nationality can be a complicated issue. Arbitration institutions, including ICSID, typically determine an arbitrator’s nationality by his or her citizenship and the passport(s) held, as opposed to other criteria such as current residence, former nationality, or country of birth. Arbitrators with dual or multiple nationalities are considered nationals of all relevant countries. All institutions require the arbitrators to disclose their nationality or nationalities during the appointment procedures. In ICSID arbitration, the nationality of the individual investor or judicial entity submitting a claim must be indicated in the request for arbitration. Nonetheless, when the nationality of a party is a disputed issue, uncertainties may persist until later in the proceedings. Article 40(2) of the ICSID Convention specifies that, while the parties are free to appoint 6.82 arbitrators outside the ICSID Panels, the selected arbitrators must possess the qualities required of persons serving on the ICSID Panel of Arbitrators. Consequently, all ICSID arbitrators must be ‘persons of high moral character, with recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment’.165 The limitation may not be waived by party agreement. In essence, all tribunal members must be independent and impartial at all the times and decide the case solely on the basis of the facts before them and the applicable law. In ICSID arbitration, a party may propose that an arbitrator be disqualified on the basis of ‘any fact indicating a manifest lack’ of these qualities.166 In addition, arbitrators in ICSID proceedings, whether or not appointed by the parties, are subject to broad and continuing disclosure requirements.167 Continuing disclosure obligations are also embedded in the UNCITRAL, ICC, and SCC 6.83 Rules.168 The UNCITRAL Rules use the twin concept of ‘impartiality and independence’ in the context of disclosure requirements relating to arbitrator appointments and arbitrator challenges.169 The test for removing an arbitrator under the UNCITRAL Rules is the existence of any circumstances that give rise to justifiable doubts as to the arbitrator’s impartiality or independence. The respective provisions in the SCC and ICC Rules are similar to those of the UNCITRAL Rules.170

(b)  Nationality, impartiality, and independence requirements under investment treaties  Certain investment treaties explicitly provide that the arbitrators must be independent and 6.84 comply with additional ethical standards prescribed by the treaty.171 Given that an arbitrator’s nationality is still perceived as a likely source of bias, many investment treaties exclude 165 ICSID Convention art. 14(1); ICSID Arbitration (Additional Facility) Rules art. 8.  See generally Schreuer et al., supra note 8, Article 14 and Article 40. See also A. Shepard, Arbitrator Independence in ICSID Arbitration, in Binder et al., supra note 20, 131 ff.; L. Malintoppi, Independence, Impartiality and the Duty of Disclosure of Arbitrators, in Muchlinski et al., supra note 139. 166  ICSID Convention art. 57. See M. Kinnear & F. Nitschke, Disqualification of Arbitrators under the ICSID Convention and Rules, in Challenges and Recusal of Judges in International Courts and Tribunals 34–​79 (C. Giorgetti ed., 2015). 167  ICSID Arbitration Rule 6(2); ICSID Arbitration (Additional Facility) Rules art. 13(2). 168  See, e.g., UNCITRAL Rules art. 11; ICC Rules art. 11; SCC Rules art. 18. 169  UNCITRAL Rules arts. 11 and 12(1). 170  SCC Rules arts. 18(2) and 19(1). A specific additional ground for a challenge under art. 19(1) of the SCC Rules is lack of ‘the qualifications agreed by the parties’. See also ICC Rules arts. 11 and 14. The requirement for lack of impartiality was added by the 2012 amendment of the ICC Rules. See ICC Arbitration Commission Report on Arbitration Involving States and State Entities under the ICC Rules of Arbitration ¶¶ 431–​43. 171  See, e.g., 2004 Canadian Model FIPA art. 29(2)(b) and (c)  (providing that the arbitrators shall ‘be independent of, and not be affiliated with or take instructions from, either Party or disputing parties’. The provision also specifies that the arbitrators must ‘comply with any Code of Conduct for Dispute Settlement as agreed by the Commission’). See also Canada–​China BIT art. 24(2)(b) and (c).

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Aspects of Procedure for Institution of Proceedings individuals who have the nationality of the home or host states from appointment as presiding arbitrators by the appointing authority.172 The exclusion may extend to permanent residents.173 6.85 Investment treaties generally do not impose nationality restrictions on appointments by the

parties themselves. Thus, for instance, disputing parties in NAFTA Chapter 11 arbitration may appoint co-​nationals irrespective of any contrary provisions of potentially applicable arbitration rules, if they so wish.174 The 2012 US Model BIT also expressly permits the disputing parties to appoint their own nationals in cases under the ICSID Convention and the ICSID Additional Facility Rules, thereby avoiding possible difficulty in reaching party agreement when an ICSID arbitration is initiated.175

6.86 This is achieved by specific treaty provisions requiring that the requisite consent of the claimant

to the appointment of each individual member of the tribunal be expressed ‘in writing’. The US Model BIT makes this a mandatory condition precedent to a claimant’s submission or continuation of a claim under the ICSID Convention and the ICSID Additional Facility Rules.176 Similar provisions are contained in Canada’s Model Foreign Investment Promotion and Protection Agreement (FIPA), CAFTA, and other treaties.177

6.87 In recent years, the party-​appointment system of tribunals in investment arbitration has

been criticized for lacking diversity and hence legitimacy.178 Although neither IIAs nor arbitration rules mandate it, gender diversity and representation of developing country nationals on the tribunals are being addressed proactively in the practice of the ICSID Secretariat. As a result, the pool of arbitrators in ICSID proceedings has continued to expand in recent years. In 2016, 13 per cent of the appointees served on an ICSID tribunal for the first time and women represented 23 per cent of this group. The year also marked the most diverse spread of nationalities in ICSID history, with 119 individuals from forty different countries of origin appointed as arbitrators. About 21 per cent of the new appointees were nationals of low and middle-​income countries and about 10 per cent of these were women.179

172  Id. Canada–​China BIT (2012) art. 24(5); see also Australia–​Republic of Korea Free Trade Agreement (2014) art. 11.19.3. 173  See, e.g., Colombia–​Japan BIT (2011) art. 30(3) (‘Unless the disputing parties agree otherwise the presiding arbitrator shall not be national of either Contracting Party, nor have his or her usual place of residence in the territory of either Contracting Party, nor be affiliated with either of the disputing parties, nor have dealt with the investment dispute in any capacity’ (emphasis added)). 174  NAFTA art. 1125 requires that the disputing parties agree to the appointment of each individual member of the tribunal, so nationals of NAFTA parties may form the majority of the tribunal in proceedings under the ICSID Convention and the ICSID Additional Facility Rules. This provision is intended to circumvent the limitations of art. 39 of the ICSID Convention and art. 7 of the ICSID Additional Facility Rules, which would otherwise apply. See A. Bjorklund, NAFTA Chapter 11, in Brown & Krishan, supra note 10, at 512–​13. 175  See K. Kizer & J. Sharpe, Reform of Investor-​State Arbitration: The U.S. Experience, in Reshaping the Investor-​State Dispute Settlement System:  Journey for the 21st Century 179 (J. Kalicki & A. Joubin-​Bret eds., 2015). 176  2012 U.S. Model BIT art. 27(4)(b) and (c). For a commentary, see L. Kaplan & J. Sharpe, United States, in Brown & Krishan, supra note 10, 830–​31. 177  See, e.g., 2004 Canadian Model FIPA art. 31. See C. Lévesque & A. Newcombe, Canada, in Brown & Krishan, supra note 10, at 112–​14. See also CAFTA art. 10.19.4; Australia–​Republic of Korea Free Trade Agreement (2014) art. 11.19.4; Canada–​China BIT (2012) art. 25(b). 178  For an overview of the debate, see C. Giorgetti, Who Decides Who Decides in International Investment Arbitration, 35 U. Pa. J. Int’l L. 431 (2013–​2014). 179  See ICSID, 2016 Annual Report, at 35–​36.

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III.  The Establishment of the Arbitral Tribunal (c)  Other necessary qualifications  In non-​ICSID proceedings, the applicable lex arbitri of the seat of arbitration may set out 6.88 specific requirements for an individual to serve as arbitrator. Some IIAs therefore expressly identify requirements for the education, occupation, technical competence, and experience in a specific subject matter for arbitrators to serve on a tribunal for a dispute under the particular treaty.180 International arbitration rules increasingly emphasize availability of the arbitrator to devote suffi- 6.89 cient time to the case and to ensure that the arbitration is conducted efficiently. A treaty may also expressly impose an obligation on the arbitrator to ensure sufficient availability and to be able to perform the duties.181 Given the nature of the treaty-​based arbitration, knowledge of public international law, including international investment law, experience in investment treaty arbitration, and language proficiency are highly desirable qualities frequently required of arbitrators in practice. While the rules may not specify it, persons appointed as a sole or presiding arbitrators typically have legal training. Some recent treaties mandate that the arbitrators ‘possess the qualifications required in their respective countries for appointment to judicial office, or be a jurist of recognized competence’.182 Unsatisfactory performance may cause the removal of an arbitrator from the tribunal. For in- 6.90 stance, the ICC and SCC Rules provide each institution with powers, on its own initiative, to remove an arbitrator if it determines removal to be in the parties’ best interest.183

6. Appointment formalities and constitution of the tribunal The formal appointment procedures under the ICSID Rules commence after the parties notify 6.91 the Secretary-​General of the agreed method for constitution of the tribunal or when a party invokes the default formula of Article 37(2)(b) of the ICSID Convention. Until one of these events has occurred, the Secretary-​General will take no formal action to seek acceptance from an arbitrator if a party has named one in advance.184 In comparison, as indicated above, the ‘appointment’ or ‘nomination’ of arbitrators under international commercial arbitration rules usually starts with the submission of the request for arbitration. (a)  Appointment procedures  International arbitration rules usually contain formal procedures for the appointment 6.92 of arbitrators. In institutional arbitration, the communication between the parties before the constitution of the tribunal is typically carried out through the institution. For example, ICSID’s Rules require the parties to either transmit through the Secretary-​ General any communication concerning the process of appointment of arbitrators or copy the Secretary-​ General on the communication exchanged between them.185 The parties must notify the Secretary-​General of the appointment of each arbitrator.186 Arbitrator

180  See, e.g., Canada–​China BIT (2012) art. 24(2) (the arbitrators must be experts in ‘public international law, international trade or international investment rules, or the resolution of disputes arising under international trade or international investment agreements’). In addition, the arbitrators must have ‘expertise or experience in financial services law or practice’ if the dispute involves a measure relating to financial service. Id. art. 24(3). 181  Id. art. 8.27.11. 182  CETA art. 8.27.4. 183  See ICC Rules art. 15(2); SCC Rules art. 20(1)(iii). 184  See ICSID Arbitration Rule 5(1); ICSID Arbitration (Additional Facility) Rules art. 11(1). 185  ICSID Arbitration Rule 2(2) and 3(2). 186  ICSID Arbitration Rule 5(2); ICSID Arbitration (Additional Facility) Rules art. 11(2). The parties should provide the ICSID Secretariat the following information: complete name, nationality or nationalities, contact information (i.e. mailing address, telephone, and fax numbers, email), and a current curriculum vitae of the appointee.

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Aspects of Procedure for Institution of Proceedings appointments are in practice effected on behalf of the parties by their counsel; a letter from a duly authorized counsel is sufficient. 6.93 Procedures for confirmation and appointment of arbitrators on nomination of the parties or

the party-​appointed arbitrators are specific to certain sets of international arbitration rules, including the ICC Rules.187 The institution may also retain the power to refuse to appoint an arbitrator who is not adequately able or available to conduct the arbitration.188

6.94 The ICSID Rules oblige the ICSID Secretariat to seek the appointee’s formal acceptance

of appointment.189 In addition, the Secretariat must invite the appointee to provide a declaration.190 A disclosure statement may be attached to the declaration. The letter includes a request to the arbitrator to confirm his or her nationality and the dates the arbitrator is available within a certain period. The ICSID Secretary-​General is required to notify the parties of the appointee’s acceptance or refusal to accept the appointment.191 If an arbitrator refuses or fails to accept the appointment within fifteen days, the Centre invites the appointing party to name another arbitrator. An arbitral tribunal is not ‘constituted’ until all arbitrators have accepted their appointments. Under the ICSID Rules, disputing parties have the flexibility to extend by agreement the timeframes determined by the rules for the procedural steps for constitution of the tribunal. Such party-​agreed extensions can, however, delay the constitution of the tribunal and prolong the proceedings significantly.

6.95 (b)  Factors affecting the process of constituting the tribunal 

6.96 In addition, it may become necessary to replace an arbitrator prior to the constitution of the

tribunal in a number of circumstances. For instance, the arbitrator may withdraw his or her acceptance; a party may wish to replace an arbitrator it had appointed; the disputing parties may decide by mutual agreement to remove an arbitrator; or replacement might become necessary in case of an arbitrator’s disability or death. In such circumstances, the ICSID Rules allow for the replacement of arbitrators.192 Once the tribunal has been constituted and proceedings have begun, ‘its composition shall remain unchanged’, provided that vacancies do not arise requiring replacement, such as resignation, disability and death or, most frequently, disqualification of arbitrators.193

6.97 The rules guiding the procedures for challenges and replacement of arbitrators differ signifi-

cantly among the international arbitration rules and a comparison goes beyond the scope of this chapter. It is however important to note that, while proposals for disqualification of

187  The ICC Rules foresee that an arbitrator once ‘nominated’ by a party or the two party-​appointed arbitrators must be ‘confirmed’ pursuant to art. 13 of the ICC Rules. Otherwise, the arbitrators may not act under the ICC Rules. Where the ICC Court is to appoint an arbitrator, it may appoint directly an arbitrator whom it regards as suitable in cases in which ‘one or more of the parties is a state or claims to be a state entity’ (art. 13(4)). See Fry et al., supra note 38, at 116, 165. 188  See ICC Rules art. 13(1) and (2). 189  See ICSID Arbitration Rule 5(3); ICSID Arbitration (Additional Facility) Rules art. 11(3). 190  The text of the declaration is provided in the ICSID Rules. See ICSID Arbitration Rule 6(2); ICSID Arbitration (Additional Facility) Rules art. 13(2). In its communication to the appointee, the ICSID Secretariat provides basic information about the parties, their counsel, a brief description of the facts, the legal basis of the claim, and the procedural background to enable the appointee to make an informed decision on accepting the appointment. Although ICSID’s Rules provide that the signed declaration is due by the end of the first session, in practice it is typically attached to the appointee’s acceptance letter and transmitted, together with the appointee’s CV, to the parties immediately upon receipt by the ICSID Secretariat. 191  See ICSID Arbitration Rule 5(3). 192  See ICSID Arbitration Rule 7; ICSID Arbitration (Additional Facility) Rules art. 12. 193  See ICSID Convention arts. 56–​58.

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IV. Conclusion arbitrators have occasionally been raised before the constitution of the tribunal, acting upon such proposal is possible under the ICSID Rules only after the tribunal has been constituted.

(c)  Constitution of the tribunal  The constitution of the tribunal marks the end of the arbitrator appointment process. The 6.98 ICSID Rules require the Secretary-​General to send a formal notice to the parties that all arbitrators have accepted their appointments. The tribunal is deemed constituted and proceedings begin on the date of the notice.194 The ICSID Secretariat dispatches the file to the members of the tribunal.195 Under other sets of institutional rules, the institution will transmit the file to the arbitrators only after the requested provisional advance on costs has been paid.196 The file contains a copy of the request for arbitration, its accompanying documentation and all correspondence between the institution and the parties relating to the proceeding up to that point. In the case of ICSID arbitration, a copy of the Secretary-​General’s notice of registration will also be included. Certain sensitive information about arbitrator appointments may be omitted. The international arbitration rules may attach various procedural consequences to the date 6.99 on which the proceedings begin before the tribunal. The most important among them is that the tribunal starts discharging its functions in conducting the arbitration under the applicable procedural rules.

IV. Conclusion Investment treaty arbitration practice has yet to develop a more homogeneous approach to 6.100 matters relating to the institution of proceedings and the establishment of the arbitral tribunals. The early stages of an arbitration have traditionally involved complex procedures of critical importance to the ensuing arbitration. The proliferation of procedural mechanisms over time and the striking differences among instruments require special caution in applying procedural law embedded in treaty provisions and international arbitration rules, which are rapidly evolving. At the time of writing, the ICSID Rules are being reviewed with the objective of simplifying the dispute settlement procedure and making it more cost and time effective.197 One safe expectation is that the ongoing review will lead to modernization of the procedures for initiation of proceedings, a streamlined arbitrator appointment process, and accelerated procedures for the constitution of arbitral tribunals.

  ICSID Arbitration Rule 6(1).   Id. Rule 30. 196  See, e.g., ICC Rules art. 16; SCC Rules art. 22. 197  See Amendment of the ICSID’s Rules and Regulations, https://​icsid.worldbank.org/​en/​Pages/​about/​ Amendment-​of-​ICSID-​Rules-​and-​Regulations.aspx (last visited Mar. 18, 2018). See also M. Kinnear, Speech on Procedure, Policy and Progress: Seeking Consensus in ISDS Rules Reform, Sixth Annual Charles N. Brower Lecture on International Dispute Resolution (April 5, 2018, ASIL Annual Meeting). 194 195

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7 THE FATE OF FRIVOLOUS AND UNMERITORIOUS CLAIMS Katia Yannaca-​Small and David Earnest

I. Introduction  II. Treatment of Frivolous Claims under International Investment and Trade Agreements 

A. ICSID  B. Other International Arbitration Rules 

7.01

IV. Investor-​state Cases that Address Preliminary Objections to Frivolous Claims 

7.02

A. The United States Model Bilateral Investment Treaty  7.02 B. The Comprehensive Economic and Trade Agreement (CETA)  7.05 C. Other International Investment Agreements  7.08

III. Summary Disposition under Institutional Rules 

A. Cases under the Dominican Republic–​ United States–​Central American Free Trade Agreement  B. Cases under the United States–​Peru Trade Promotion Agreement  C. Cases Applying ICSID Rule 41(5) 

IV. Conclusion 

7.11

7.11 7.16

7.21 7.22 7.26 7.27 7.31

I. Introduction 7.01 The term ‘frivolous’ is sometimes used to describe a claim which is filed with knowledge that

it has little or no chance of succeeding. To have a claim found frivolous in this sense, it may be necessary to establish that it was brought with improper motives.1 This chapter examines the procedures available under international investment agreements and international arbitration rules to address on a preliminary and expedited basis claims that are frivolous in the sense of being baseless and unmeritorious, regardless of the claimant’s motives. Treatment of this kind of claim can be traced back to the establishment of the European Court of Human Rights, which is required to declare inadmissible any application that is ‘manifestly ill-​founded’.2 The current trend towards preliminary and expedited consideration of a request that a claim in an investor-​state arbitration be dismissed as frivolous is rooted in the 2004 US Model BIT and the 2006 amendment to the ICSID Rule 41(5). There is also an emerging focus on the summary disposition of frivolous claims in international arbitration rules traditionally concerned with commercial arbitration.

1  Commerce Group Corp. & San Sebastian Gold Mines, Inc. v. Republic of El Salvador, ICSID Case No. ARB/​09/​17, Award (Mar. 14, 2011), ¶ 137 (The tribunal declined to conclude that claimants’ claims were ‘frivolous’ since there was no indication that the claimants were not serious about the claims they asserted nor were they pursued in bad faith). 2  Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature November 4, 1950, 213 U.N.T.S. 221 (entered into force September 3, 1953) art. 35, § 3.

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II.  Treatment of Frivolous Claims

II.  Treatment of Frivolous Claims under International Investment and Trade Agreements A. The United States Model Bilateral Investment Treaty The 2004 US Model BIT and 2012 US Model BIT (US Model BIT), which are the starting 7.02 point for United States investment negotiations, both provide procedures to address, as a preliminary question, any objection that, as a matter of law, a claim submitted is not one for which an award in favour of the claimant may be made. Such objection is to be decided on an expedited basis, with the tribunal suspending any proceedings on the merits and issuing its decision not later than 180 days after the objection was made (150 days if no hearing is held). Articles 28.4 and 28.5 of the US Model BIT provide, in relevant part: 4. Without prejudice to a tribunal’s authority to address other objections as a preliminary question, a tribunal shall address and decide as a preliminary question any objection by the respondent that, as a matter of law, a claim submitted is not a claim for which an award in favor of the claimant may be made under Article 34. (a) Such objection shall be submitted to the tribunal as soon as possible after the tribunal is constituted, and in no event later than the date the tribunal fixes for the respondent to submit its counter-​memorial . . . (b) On receipt of an objection under this paragraph, the tribunal shall suspend any proceedings on the merits, establish a schedule for considering the objection consistent with any schedule it has established for considering any other preliminary question, and issue a decision or award on the objection, stating the grounds therefor. (c) In deciding an objection under this paragraph, the tribunal shall assume to be true claimant’s factual allegations in support of any claim in the notice of arbitration . . . [or] the statement of claim . . . The tribunal may also consider any relevant facts not in dispute. (d) The respondent does not waive any objection as to competence or any argument on the merits merely because the respondent did or did not raise an objection under this paragraph or make use of the expedited procedure set out in paragraph 5. 5. In the event that the respondent so requests within 45 days after the tribunal is constituted, the tribunal shall decide on an expedited basis an objection under paragraph 4 and any objection that the dispute is not within the tribunal’s competence. The tribunal shall suspend any proceedings on the merits and issue a decision or award on the objection(s), stating the grounds therefor, no later than 150 days after the date of the request. However, if a disputing party requests a hearing, the tribunal may take an additional 30 days to issue the decision or award . . . [A]‌tribunal may, on a showing of extraordinary cause, delay issuing its decision or award by an additional brief period, which may not exceed 30 days.

The inclusion of these procedures in the 2004 US Model BIT enhanced the powers available 7.03 to a respondent state to address frivolous claims in an investor-​state arbitration. The genesis of this development is largely attributed to the United States’ experience in a NAFTA Chapter 11 arbitration, Methanex Corp v United States.3 There, the United States failed to convince the Methanex tribunal that it had authority to rule on its preliminary objection that the claims should be dismissed for lack of legal merit.4 It then took the tribunal three years to determine it did not have jurisdiction and the claims did not have legal merit.5 3  Methanex Corporation v. United States of America, UNCITRAL, Partial Award (Aug. 7, 2002) [hereinafter Methanex v. United States). See A. Menaker, Benefiting from Experience: Developments in the United States’ Most Recent Investment Agreements, 12 U.C. Davis J.I.L.P. 121, 127 (2005). 4  Methanex v. United States, supra note 3, ¶¶ 109, 126. 5  Methanex v. United States (UNCITRAL, Final Award of the Tribunal on Jurisdiction and the Merits (Aug. 3, 2005), Part VI).

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The Fate of Frivolous and Unmeritorious Claims 7.04 Following Methanex, in ‘all of its subsequent investment agreements . . . the United States has

negotiated expedited review mechanisms that permit a respondent State to assert preliminary objections in an efficient manner’.6 This includes the recent Trans-​Pacific Partnership agreement, which provides procedures similar to those in the US Model BIT.7 As discussed later in this chapter, several of the United States’ international investment and trade agreements provide a basis for preliminary objections and early dismissal procedures relating to allegedly frivolous claims in investor-​state arbitration.

B. The Comprehensive Economic and Trade Agreement (CETA) 7.05 The 2016 Comprehensive Economic and Trade Agreement between Canada and the

European Union and its Member States (CETA)8 also provides expedited procedures. The CETA Article 8.32 addresses ‘claims manifestly without legal merit’ and Article 8.33 addresses ‘claims unfounded as a matter of law’.

7.06 Under the CETA, as under the US Model BIT, if a respondent state makes a preliminary

objection the tribunal must suspend any merits proceedings to address the objection as a preliminary issue and, in making its decision, the CETA tribunal will assume the facts alleged to be true. Unlike the US Model BIT, there is no specified time limit for the tribunal to issue its decision on the objection, but it must do so at its first session or promptly thereafter.

7.07 Additionally, Article 8.39(5) of the CETA takes a relatively unique approach to discouraging

frivolous claims by providing that the tribunal ‘shall’ order the costs of the proceeding be borne by the unsuccessful party. International investment and trade agreements, usually provide that a tribunal ‘may’ require the unsuccessful party to pay the costs.9

C. Other International Investment Agreements 7.08 At the time the 2004 US Model BIT was introduced Canada also introduced its 2004 model

Foreign Investment Protection Agreement, which provides that ‘[w]‌here issues relating to jurisdiction or admissibility are raised as preliminary objections, a Tribunal shall, wherever possible, decide the matter before proceeding to the merits’.10 Canadian international investment and trade agreements have not, however, uniformly applied this text. For example, the CETA and the 2015 Canada–​Korea FTA provide for preliminary objections,11 while other recent Canadian international investment agreements make no such provision.12

7.09 Article IX(13) of Colombia’s 2009 Model BIT refers to a tribunal ruling before the merits on

preliminary questions of competence and admissibility, including consideration of ‘whether the claim of the claimant is frivolous . . . In the event of a frivolous claim the tribunal shall

6  The Renco Group Inc. v. Republic of Peru, ICSID Case No. UNCT/​13/​1, Non-​Disputing State Party Submission of the United States of America (Sept. 10, 2014), ¶ 3. See, e.g., United States–​Singapore FTA (2003) arts. 15.19.4 & 15.19.5; United States–​Chile FTA (2003) arts. 10.19.4 & 10.19.5; United States–​ Uruguay BIT (2004) arts. 28.4 & 28.5; United States–​Morocco FTA (2004) arts. 10.19.4 & 10.19.5; US–​ Oman FTA (2006) arts. 10.19.4  & 10.19.5; US–​Panama TPA (2012) arts. 10.20.4  & 10.20.5; and the US–​Rwanda BIT (2012) arts. 28.4 & 28.5. 7  Trans–​Pacific Partnership (TPP) Agreement (2016, not yet in force) arts. 9.23(4) and (5). 8  CETA, signed on October 30, 2016, entered into force provisionally on September 21, 2017. 9  But compare Colombia–​ UK BIT (Aug. 10, 2014) art. 9(12); and China–​Colombia BIT (July 2, 2013) art. 9(12). 10  Canada’s 2004 model Foreign Investment Protection Agreement (FIPA) art. 37, Preliminary Objections to Jurisdiction or Admissibility. 11  Free Trade Agreement between Canada and the Republic of Korea (Jan. 1, 2015) art. 8.34. 12  See Burkina Faso–​Canada BIT (Apr. 20, 2015); and Canada–​Guinea BIT (May 27, 2015).

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III.  Summary Disposition under Institutional Rules award costs against the claimant’.13 Similar language is found in the 2014 Colombia–​United Kingdom BIT and 2013 China–​Colombia BIT.14 Finally, the proposed Regional Comprehensive Economic Partnership, a free trade agreement 7.10 between the ten member-​States of the Association of Southeast Asian Nations (ASEAN) and Australia, China, India, Japan, South Korea, and New Zealand, also provides an expedited procedure to address frivolous claims.15 The procedure is very similar to that contained in the US Model BIT and the CETA.

III.  Summary Disposition under Institutional Rules A. ICSID A claim in ICSID arbitration may be subject to two procedural mechanisms allowing for sum- 7.11 mary disposition of claims. The first mechanism is the ICSID Secretary-​General’s screening power over a request for arbitration under Article 36(3) of the ICSID Convention.16 The second mechanism is ICSID Rule 41(5),17 which empowers an ICSID tribunal to dismiss a claim in expedited proceedings during the initial phase of arbitration. While Article 36(3) and Rule 41(5) serve complementary functions, how each achieves its end are procedurally and substantively different.18

1. The screening power of the ICSID secretariat Under Article 36(3), the ICSID Secretary-​General is required to register a request for arbitra- 7.12 tion, ‘unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre’.19 In deciding whether the ‘dispute is manifestly outside the jurisdiction of the Centre’20 the Secretary-​General may consider, for example, whether a claim manifestly does not concern an investment or whether there is a manifest absence of government consent, but cannot consider the merits of the claim, even if it is manifestly frivolous. The threshold for denying registration for manifest lack of jurisdiction is quite high and, in circumstances where there is the ‘slightest doubt’, the Secretary-​General ‘should . . . register the request and leave the decision as to jurisdiction to the arbitral tribunal’.21

  Colombia 2009 Model BIT art. IX.13.   See Colombia–​UK BIT (Aug. 10, 2014) art. 9(12); and China–​Colombia BIT (July 2, 2013) art. 9(12). 15  Regional Comprehensive Economic Partnership, Draft Text as of October 2015 art. X.33(4) and (5), https://​rceplegal.files.wordpress.com/​2016/​08/​rcep-​draft-​investment-​text-​china.pdf (last visited Oct. 31, 2017). 16  ICSID Convention art. 36(3). 17  ICSID Arbitration Rules, Rule 41(5); see also ICSID Additional Facility Rules art. 45(6). 18  See C. Brown & S. Puig, The Secretary-​General’s Power to Refuse to Register a Request for Arbitration under the ICSID Convention, 27 ICSID Rev. Foreign Investment L. J. 1, 172, 173 (2012) [hereinafter Brown and Puig]. 19  ICSID Convention art. 36(3). 20  ICSID Convention art. 36(3); the ‘manifest’ nature of the lack of jurisdiction has been interpreted during the travaux préparatoires of the ICSID Convention as meaning ‘beyond a reasonable doubt’. See Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Documents Concerning the Origin and the Formation of the Convention (1968) 772. 21  See Brown & Puig, supra note 18, at 181, quoting A. Broches, Selected Essays:  World Bank, ICSID, and Other Subjects of Public and Private International Law 437 (1995). 13 14

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The Fate of Frivolous and Unmeritorious Claims 2. ICSID Rule 41(5) 7.13 ICSID Rule 41(5) (like its counterpart in Additional Facility Arbitration Rule 45(6)) was adopted to ‘make it clear . . . that the tribunal may at an early stage of the proceedings be asked on an expedited basis to dismiss all or part of a claim on the merits’.22 Rule 41(5) provides as follows: Unless the parties have agreed to another expedited procedure for making preliminary objections, a party may, no later than 30 days after the constitution of the Tribunal, and in any event before the first session of the Tribunal, file an objection that a claim is manifestly without legal merit. The party shall specify as precisely as possible the basis for the objection. The Tribunal, after giving the parties the opportunity to present their observations on the objection, shall, at its first session or promptly thereafter, notify the parties of its decision on the objection. The decision of the Tribunal shall be without prejudice to the right of a party to file an objection pursuant to paragraph (1) or to object, in the course of the proceeding, that a claim lacks legal merit. 7.14 While Rule 41(5) is capable of producing a summary procedure, in practice, the process of

deciding the objection may involve multiple rounds of written statements from the parties on the objection and an oral hearing. Additionally, while the text of Rule 41(5) contemplates an objection to the ‘legal merit’ of a claim, where the merits and jurisdiction are closely connected, a Rule 41(5) objection may also address jurisdictional objections. But even if a tribunal rejects an objection under Rule 41(5), this does not foreclose a party’s right to raise a similar objection later in the arbitration, potentially creating redundancies with additional time and costs.

7.15 The development and introduction of the procedures to address frivolous claims in Rule

41(5) began in 2004 in parallel with the development of similar procedures in the 2004 US Model BIT.23 As a result, the two regimes are well aligned, with ICSID Rule 41(5) providing that it can be triggered ‘[u]‌nless the parties have agreed to another expedited procedure for making preliminary objections’, thus avoiding possible confusion with overlapping procedures in the applicable international investment agreement.

B. Other International Arbitration Rules 7.16 Most international arbitration rules do not contain expedited procedures to address frivolous

claims. Even where the rules may empower a tribunal to do so,24 the respondent’s ability to obtain an expedited disposition will depend on the tribunal’s inclination to entertain such a request.25 Some arbitral institutions have, however, started to include express procedures in their rules to address manifestly unmeritorious claims or defences.

7.17 The UNCITRAL Arbitration Rules, which are the second most relied upon rules in investor-​

state arbitrations,26 do not contain a provision on addressing, as a preliminary question,

22  Working Paper of the ICSID Secretariat, Suggested Changes to the ICSID Rules and Regulations (May 12, 2005), at 7. 23  See Possible Improvements of the Framework for ICSID Arbitration, ICSID Secretariat, Discussion Paper (Oct. 22, 2004), at 3–​4, ¶ 6. 24  See, e.g., ICC Arbitration Rules (2012) art. 22(2); LCIA Arbitration Rules (2014) art. 14(2); AAA ICDR Arbitration Rules art. 20(3). 25  See G. Born & K. Beale, Party Autonomy and Default Rules:  Reframing the Debate Over Summary Disposition in International Arbitration, 21 ICC Bull. 19 (2010). 26 UNCTAD, IIA Issues Note, Investor-​State Dispute Settlement: Review of Developments in 2015, Nos. 2, 4 (June 8, 2016).

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III.  Summary Disposition under Institutional Rules allegations that a claim is frivolous on its merits. The rules do, however, provide that the ‘arbitral tribunal may rule on a plea referred to in paragraph 2 [a jurisdictional challenge] either as a preliminary question or in an award on the merits’.27 The Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce 7.18 (SCC), the third most relied upon set of rules for investor-​state arbitrations in 2015,28 have recently sought to provide protection against frivolous claims, although still at the discretion of the tribunal. Under Article 39 of the revised 2017 SCC Arbitration Rules, an arbitral tribunal may ‘decide one or more issues of fact or law by way of summary procedure, without necessarily undertaking every procedural step that might otherwise be adopted for the arbitration’. This ‘may concern issues of jurisdiction, admissibility or the merits’, including inter alia, whether an allegation of fact or law is ‘manifestly unsustainable’.29 Additionally, Article 12(i) of the 2017 SCC Rules provides that a case may be dismissed by the SCC board of directors (i.e. before the tribunal is constituted), in whole or in part, if the SCC manifestly lacks jurisdiction over the dispute.30 This latter procedure is similar to the ICSID Secretary-​General’s screening powers under ICSID Convention Article 36(3). The Singapore International Arbitration Centre (SIAC), which has traditionally focused on 7.19 commercial arbitration, now also provides procedures to address frivolous claims on a preliminary basis. The 2016 amendments to the SIAC Arbitration Rules created a new Rule 29 that provides for the early dismissal of claims that are ‘manifestly without legal merit’ or ‘manifestly outside the jurisdiction’ of the tribunal.31 Additionally, Rule 26 of SIAC’s new 2017 Investment Arbitration Rules provides for an early dismissal of claims and defenses in circumstances where a claim is ‘manifestly without legal merit’, ‘manifestly outside the jurisdiction of the Tribunal’, or ‘manifestly inadmissible’.32 Additionally, the 2017 Rules of Arbitration of the International Chamber of Commerce 7.20 (ICC Arbitration Rules) also provide for the expeditious determination of manifestly unmeritorious claims or defences. Although this power is not expressly stated in the ICC Arbitration Rules, in October 2017 the ICC Court of Arbitration updated its ‘Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration’ to note expressly that Article 22 of the ICC Arbitration Rules provides for expedited procedures to determine the existence of one or more manifestly unmeritorious claims or defences.33 In particular, an application can be made by any party, as soon as possible in the arbitration, ‘on grounds that such claims or defenses are manifestly devoid of merit or fall manifestly outside the arbitral tribunal’s jurisdiction’.34

  UNCITRAL Arbitration Rules (2010) art. 23(2) and (3).  UNCTAD, IIA Issues Note, Investor-​State Dispute Settlement: Review of Developments in 2015, Nos. 2, 4 (June 8, 2016). 29  SCC Arbitration Rules (2017) art. 39(1) and 39(2)(i). 30  Id. art. 12(i). 31  SIAC Arbitration Rules (6th edn Aug. 1, 2016). 32  SIAC Investment Arbitration Rules (1st edn Jan. 1, 2017). 33  See ICC Court of Arbitration, Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (Oct. 30, 2017) 10, https://​cdn.iccwbo.org/​content/​uploads/​sites/​3/​2017/​ 03/​icc-​note-​to-​parties-​and-​arbitral-​tribunals-​on-​the-​conduct-​of-​arbitration.pdf (last visited Mar. 28, 2018). 34  Id. 27 28

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The Fate of Frivolous and Unmeritorious Claims

IV.  Investor-​state Cases that Address Preliminary Objections to Frivolous Claims 7.21 Investor-​state arbitrations involving a preliminary objection to an allegedly frivolous claim

have, to date, largely focused on the standard of review to be applied under the relevant agreement or rules, and whether the scope of the preliminary objection extends to both the merits of the claim and the tribunal’s jurisdiction.

A. Cases under the Dominican Republic–​United States–​Central American Free Trade Agreement 7.22 The Dominican Republic–​United States–​Central American Free Trade Agreement (CAFTA)

provides an expedited procedure to address frivolous claims, in line with the US Model BIT.35 In the first three arbitrations under CAFTA, the respondent states invoked these procedures to challenge the claims against them. The first of these arbitrations was Railroad Development v Guatemala,36 wherein Guatemala invoked CAFTA Article 10.20.5 to request that its objection to the tribunal’s jurisdiction be considered on an expedited basis. Accordingly, the tribunal suspended the proceedings and the parties agreed a timetable for their submissions in respect of the objection. 172  days after Guatemala invoked Article 10.20.5, the Railroad Development tribunal dismissed Guatemala’s preliminary objection to jurisdiction.37 However, in its Decision, the tribunal noted an inconsistency with the intended efficiency of Article 10.20.5, stating that, ‘by filing an objection to jurisdiction under the expedited procedure, the Respondent is not foregoing its right under CAFTA to submit other objections in the future as permitted under Article 10.20.4, and the Respondent has expressly reserved its right in this respect’.38 Thus, approximately seven months after the tribunal rejected Guatemala’s preliminary objection under Article 10.20.5, Guatemala filed a notice of intent to raise preliminary objections under Article 10.20.4. Although this new objection arose one month after the claimant filed its memorial on the merits, the Railroad Development tribunal was obliged once again to suspend the merits proceedings. Approximately ten months after its second preliminary objection, the tribunal rejected most of Guatemala’s argument and resumed the merits phase.39

7.23 Shortly thereafter, the tribunal in Pac Rim Cayman LLC v El Salvador issued a Decision on

El Salvador’s preliminary objections under CAFTA Articles 10.20.4 and 10.20.5.40 The tribunal held that the standard of review under Article 10.20.4 was not ‘limited to “frivolous” claims or “legally impossible” claims’, since the implied use of ‘these or similar words would significantly restrict the arbitral remedy under Article 10.20.4, when the structure of this provision permits a more natural and effective interpretation consistent with its object and purpose’.41 The tribunal also rejected comparisons with the ‘legal impossibility of the claim’ 35 Dominican Republic–​ United States–​ Central American Free Trade Agreement (CAFTA) (Aug. 5, 2004), arts. 10.20.4 & 10.20.5. 36  Railroad Development Corporation v. Republic of Guatemala, ICSID Case No. ARB/​07/​23, Decision on Objection to Jurisdiction CAFTA Article 10.20.5 (Nov. 17, 2008) [hereinafter Railroad Development v. Guatemala]. 37  Id. ¶¶ 76–​78. 38  Id. ¶ 44. 39 Railroad Development v.  Guatemala, Second Decision on Objections to Jurisdiction (May 18, 2010), ¶ 6. 40 Pac Rim Cayman LLC v.  Republic of El Salvador, ICSID Case No ARB/​ 09/​12, Decision on the Respondent’s Preliminary Objections under CAFTA Articles 10.20.4 and 10.20.5 (Aug. 2, 2010) [hereinafter Pac Rim v. El Salvador]. 41  Id. ¶ 108.

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IV.  Investor-state Cases standard contained in ICSID Rule 41(5) on the basis that those provisions contain language very different from CAFTA Articles 10.20.4 and 10.20.5, and the two regimes do not share the same object and purpose.42 The tribunal chose to apply its own textual interpretation of Article 10.20.4, concluding that: to grant a preliminary objection, a tribunal must have reached a position, both as to all relevant questions of law and all relevant alleged or undisputed facts, that an award should be made finally dismissing the claimant’s claim at the very outset of the arbitration proceedings, without more. Depending on the particular circumstances of each case, there are many reasons why a tribunal might reasonably decide not to exercise such a power against a claimant, even where it considered that such a claim appeared likely (but not certain) to fail if assessed only at the time of the preliminary objection.43

Under this standard of review, the objecting party potentially faces a high burden to establish 7.24 that the claim appears to be ‘certain’ to fail at the outset of the proceeding.44 Some commentators have assessed the tribunal’s interpretation as more permissive than the ‘manifestly without legal merit’ standard in ICSID Rule 41(5).45 The Pac Rim tribunal ultimately concluded that El Salvador did not satisfy this standard and rejected the objection.46 The third and most recent case is Commerce Group v El Salvador.47 It is the only CAFTA case in 7.25 which a respondent state’s preliminary objections were successful.48 There, El Salvador raised a preliminary objection that the dispute was not ‘within the tribunal’s competence’ under CAFTA Article 10.20.5 since the claimants’ had not adhered to the waiver requirement in CAFTA, which was a condition of El Salvador’s consent to arbitration under CAFTA and the ICSID Convention.49

B. Cases under the United States–​Peru Trade Promotion Agreement The US–​Peru Trade Promotion Agreement (PTPA) provides expedited review procedures 7.26 for allegedly frivolous claims akin to those in the US Model BIT.50 Renco v Peru was the first investor-​state arbitration to consider the scope of the PTPA’s expedited procedures under Article 10.20.4,51 namely, whether an objection could relate to both the merits of the claims and the tribunal’s competence. The Renco tribunal concluded that ‘the plain language of Article 10.20.4 . . . clearly shows that objections as to competence are not included within the scope of Article 10.20.4 objectives’.52 Although this finding was limited to the scope of preliminary objections under the PTPA, it potentially carries broader implications for the analogous text of Article 10.20.4 of the US Model BIT, which is incorporated into numerous

  Id. ¶ 118.   Id. ¶ 110. 44  M. Potestà & M. Sobatt, Frivolous Claims in International Adjudication: A Study of ICSID Rule 41(5) and of Procedures of Other Courts and Tribunals to Dismiss Claims Summarily, 3 J. Int’l Disp. Settl’t 1, 161 (2010). 45  J. Crook, ICSID’s Rule 41(5)–​ Breakthrough or Backwater?, in 4 Investment Treaty Law Current Issues, ‘The Future of ICSID and the Place of Investment Treaties in International Law’ 228 (N. Jansen Calamita, David Earnest & Markus Burgstaller eds., 2013). 46  Pac Rim v. El Salvador, supra note 40, ¶¶ 244–​58. 47  Commerce Group v. El Salvador, supra note 1. 48  Id. ¶¶ 35–​47, 140. 49  Id. ¶ 66. 50  US–​Peru PTPA (Apr. 12, 2006) arts. 10.20.4 & 10.20.5. 51  The Renco Group Inc. v. Republic of Peru, ICSID Case No. UNCT/​13/​1, Decision as to the Scope of the Respondent Preliminary Objections Under Article 10.20.4 (Dec. 18, 2014) [hereinafter Renco v. Peru]. 52  Id. ¶¶ 181–​213; see also ¶¶ 188, 250 (objections to the tribunal’s competence could however be brought at a later stage of the proceedings under the applicable UNCITRAL Arbitration Rules). 42 43

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The Fate of Frivolous and Unmeritorious Claims other US international investment agreements.53 This finding contrasted with the remedies available under ICSID Rule 41(5), which ICSID tribunals have held encompasses a challenge to jurisdiction as a preliminary objection.54 Ultimately, the Renco tribunal did decide it had authority to consider a challenge to its jurisdiction, albeit under Article 23(3) of the applicable 2010 UNCITRAL Arbitration Rules, and subsequently dismissed Renco’s claims for lack of jurisdiction.55

C. Cases Applying ICSID Rule 41(5) 7.27 The tribunal in Trans-​Global v Jordan was the first to face a preliminary objection under

ICSID Rule 41(5),56 and to decide how to interpret the phrase ‘manifestly without legal merit’. In considering the word ‘manifest’, the Trans-​Global tribunal concluded that: ‘the ordinary meaning of the word [manifest] requires the respondent to establish its objection clearly and obviously, with relative ease and dispatch. The standard is thus set high’.57 Put another way, the tribunal stated that ‘as a basic principle of procedural fairness, an award under Rule 41(5) can only apply to a clear and obvious case, i.e. . . . “patently unmeritorious claims” ’.58 The Trans-​Global v Jordan tribunal did not, however, choose to define the meaning of ‘without legal merit’, but accepted that, in applying Rule 41(5), ‘the tribunal need not accept at face value any factual allegation which the tribunal regards as (manifestly) incredible, frivolous, vexatious or inaccurate or made in bad faith’.59 Under these standards, the tribunal ultimately rejected Jordan’s preliminary objections to two of the three claims as being ‘manifestly without legal merit’, but found that the third claim could be dismissed under Rule 41(5).

7.28 The tribunal in Brandes v Venezuela, which was the second to consider a preliminary objec-

tion under Rule 41(5), endorsed the views of the Trans-​Global v Jordan tribunal on the phrase ‘manifestly without legal merit’.60 For its part, the Brandes v Venezuela tribunal was the first to consider, and decide affirmatively, that Rule 41(5) applies to both jurisdictional and merits objections.61 Nevertheless, the tribunal rejected Venezuela’s preliminary objections, holding that they ‘necessitate the examination of the complex legal and factual issue which cannot be raised in the summary proceedings’.62

7.29 The inability of respondent states to mount a successful preliminary objection briefly changed

course in late 2010 when two different ICSID tribunals dismissed claims pursuant to Rule 41(5). The first was in Global Trading v Ukraine,63 where the tribunal dismissed all of the

  See, e.g., TPP Agreement, supra note 7.   Brandes Investment Partners, LP v.  Bolivarian Republic of Venezuela, ICSID Case No. ARB/​08/​3, Decision on the Respondent’s Objection Under Rule 41(5) of the ICSID Arbitration Rules (Feb. 2, 2009), ¶ 62 [hereinafter Brandes v. Venezuela]. 55  Renco v. Peru, supra note 51, Partial Final Award on Jurisdiction (July 15, 2016), ¶ 193. 56  Trans-​Global Petroleum, Inc. v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/​07/​25, Decision on the Respondent’s Objection Under Rule 41(5) of the ICSID Arbitration Rules (May 12, 2008), ¶¶ 108–​ 17 [hereinafter Trans-​Global v. Jordan]. 57  Id. ¶ 88. 58  Id. ¶ 92, citing A. Parra, The Development of the Regulations and Rules of the International Centre for Settlement of Investment Disputes, 41 Int’l L. J. 47 (2007). 59  Id. ¶ 105. 60  Brandes v. Venezuela, supra note 54, ¶ 62. 61  Id. ¶ 55. 62  Id. ¶¶ 71–​73. The tribunal ultimately dismissed the case for lack of jurisdiction following a subsequent jurisdictional phase. See Brandes Investment Partners LP v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​08/​3, Award (Aug. 2, 2011). 63  Global Trading Resource Corp. & Globex International, Inc. v. Ukraine, ICSID Case No. ARB/​09/​11, Award (Dec. 1, 2010) [hereinafter Global Trading v. Ukraine]. 53 54

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IV.  Investor-state Cases claims after it concluded that the commercial transactions at issue were not investments within the meaning of Article 25 of the ICSID Convention and thus, those claims were ‘manifestly without legal merit’ pursuant to Rule 41(5).64 Nine days later, the tribunal in RSM v Grenada also dismissed the claimants’ claims pursuant to a Rule 41(5) preliminary objection.65 RSM was also the first case under Rule 41(5) in which a tribunal awarded costs against the unsuccessful claimant, indemnifying Grenada for all its costs.66 Notwithstanding the respondent states’ success in Global Trading v Ukraine and RSM v Grenada, in the eight Rule 41(5) decisions issued since no ICSID tribunal has dismissed all of a party’s claims on a preliminary basis.67 Finally, ICSID ad hoc committees have confirmed that Rule 41(5) also applies in annulment 7.30 proceedings.68 In an interesting role reversal and application of Rule 41(5), the claimant in Elsamex v Honduras invoked Rule 41(5) in ICSID annulment proceedings initiated by Honduras.69 As an issue of first impression, the ad hoc Elsamex committee held that Rule 41(5) could be invoked in an ICSID annulment proceeding since, under ICSID Rule 53, it applied mutatis mutandis.70 Nevertheless, the committee rejected the claimant’s objection,71 finding that the standard to accept an objection made under this provision is higher in the context of an annulment.72 ICSID Rule 41(5) arose in another annulment proceeding, Venoklim v Venezuela, wherein Venezuela objected that the annulment application contained insufficient detail to establish grounds for annulment.73 Despite affirming the application of Rule 41(5) to annulment proceedings, the Venoklim v Venezuela committee rejected the objection in its entirety.74

  Id. ¶¶ 58–​59.   Rachel S. Grynberg, Stephen M. Grynberg, Miriam Z. Grynberg, & RSM Production Corporation v. Grenada, ICSID Case No. ARB/​10/​6, Award (Dec. 10, 2010) [hereinafter RSM v. Grenada]. 66  Id. ¶ 8.3.4. 67  See Rafat ali Rizvi v. Indonesia, ICSID Case. No. ARB/​11/​13, Award on Jurisdiction (July 16, 2013); Accession Mezzanine Capital L.P. and Danubius Kereskedohaz Vagyonkezelo v. Hungary, ICSID Case No. ARB/​12/​3, Decision on Respondents Objection Under Arbitration Rule 41(5) (Jan. 16, 2013); Emmis International Holding, B.V., Emmis Radio Operating, B.V., & MEM Magyar Electronic Media Kereskedelmi és Szolgáltató Kft. v. Hungary, ICSID Case No. ARB/​12/​2, Decision on Objection under ICSID Arbitration Rule 41(5) (Mar. 11, 2013); Pan American Energy LLC v. Plurinational State of Bolivia, ICSID Case No. ARB/​10/​8, Decision on the Respondent’s preliminary objections pursuant to ICSID Arbitration Rule 41(5) (Apr. 26, 2013); Vattenfall AB and Others v. Federal Republic of Germany, ICSID Case No. ARB/​12/​12, Decision on the Respondent’s preliminary objections pursuant to ICSID Arbitration Rule 41(5) (July 2, 2013); MOL Hungarian Oil and Gas Company Plc v. Republic of Croatia, ICSID Case No. ARB/​13/​32, Decision on Respondent Application under ICSID Arbitration Rules 41(5) (Dec. 2, 2014); Álvarez y Marín Corporación S.A. and Others v. Republic of Panama, ICSID Case No. ARB/​15/​14, Decision on Respondent Preliminary Objections pursuant to ICSID Arbitration Rule 41(5) (Apr. 4, 2016); Lion Mexico Consolidated L.P.  v.  United Mexican States, ICSID Case No. ARB(AF)/​15/​2, Decision on Respondent’s Preliminary Objection Under Art. 45(6) of the ICSID Arbitration (Additional Facility) Rules (Dec. 12, 2016). 68 In Micula v. Romania, the ad hoc Committee dismissed the application under 41(5) because it found that the 2006 Arbitration Rules did not apply to that case. See Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/​05/​20, Decision on Annulment (Feb. 26, 2016), ¶¶ 14–​20 [hereinafter Micula v. Romania]. 69  Elsamex v. Republic of Honduras, ICSID Case. No. ARB/​09/​4, Decision on Elsamex S.A.’s Preliminary Objections (Jan. 7, 2014). 70  Id. ¶ 89. 71  Id. ¶ 147. 72  Id. ¶¶ 124–​25. 73  Venoklim Holding B.V v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​12/​22, Decision on the Respondent’s Preliminary Objection under ICSID Arbitration Rule 41(5) (Mar. 8, 2016), ¶ 9 [hereinafter Venoklim v. Venezuela]. 74  Id. ¶ 100. 64 65

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V. Conclusion 7.31 The concern of governments about being subjected to long and costly arbitrations that appear

to them to be manifestly unfounded is demonstrated by the increasing inclusion in agreements and investment arbitration rules of texts expressly allowing or, in some cases, requiring consideration of such issues as a preliminary matter. Since failure to win dismissal in a preliminary procedure does not rule out raising the issue again at a later stage of the proceedings, this can produce redundancies and increase the time and cost of investor-​state arbitration, a consideration that may have influenced Canada’s changing practice in this regard.75 In a few instances, the provisions concerning manifestly unfounded or frivolous claims will mandate allocation of costs to the party making the claim. Despite the increasing number of agreements and rules allowing preliminary proceedings on allegations that a claim is manifestly unfounded or inadmissible, a review of the cases indicates that tribunals are very reluctant to dismiss a claim in such preliminary proceedings and that the standards for preliminary dismissal are, and will probably remain, high.

  See supra para 7.08.

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8 CHALLENGES OF ARBITRATORS IN INVESTMENT ARBITRATION Still Work in Progress? Loretta Malintoppi and Alvin Yap

I. Introduction  II. The Role of Institutions and Professional Associations 

G. Singapore International Arbitration Centre (SIAC)  H. The IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) 

8.01

A. International Centre for Settlement of International Disputes (ICSID)  B. Permanent Court of Arbitration (PCA)  C. United Nations Commission on International Trade Law (UNCITRAL)  D. International Chamber of Commerce (ICC)  E. Stockholm Chamber of Commerce (SCC)  F. London Court of International Arbitration (LCIA) 

8.10 8.10 8.22

III. Innovations in International Investment Agreements  IV. Selected Decisions on Challenges 

8.27

A. ‘Issue Conflicts’  B. Administrative Secretaries  C. Social Media 

8.34 8.43

V. Conclusion 

8.47

8.52 8.56 8.60 8.81 8.86 8.99 8.109 8.115

I. Introduction An important aspect of the criticism of investor-​state dispute settlement (ISDS) concerns 8.01 the qualities of arbitrators and their independence and impartiality. Amongst the detractors of the system is US Senator Elizabeth Warren who warned inter alia that ‘ISDS could lead to gigantic fines, but it wouldn’t employ independent judges. Instead, highly paid corporate lawyers would go back and forth between representing corporations one day and sitting in judgment the next’.1 While Senator Warren’s remarks appear to be based on a misunderstanding of the system, 8.02 her views merit attention, at least to the extent that the diligence, independence, and impartiality of arbitrators are essential in ensuring the integrity and validity of the arbitral process. Moreover, perceptions are important, particularly at a time when ISDS and its main players are under growing public scrutiny. Parties and their counsel perform careful due diligence in selecting the individuals who will 8.03 hear and decide their case at the outset of the arbitration. Arbitral institutions also play a key

1  Elizabeth Warren, The Trans-​Pacific Partnership Clause that Everyone Should Oppose, Wash. Post (Feb. 25, 2015), https://​www.washingtonpost.com/​opinions/​kill-​the-​dispute-​settlement-​language-​in-​the-​trans-​pacific​partnership/​2015/​02/​25/​ec7705a2-​bd1e-​11e4-​b274-​e5209a3bc9a9_​story.html?utm_​term=.0728c496e988 (last visited Dec. 10, 2017).

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Challenges of Arbitrators in Investment Treaty Arbitration role in this regard, particularly when the parties have not agreed on a method of selection of the arbitral tribunal, or if they fail to agree on the presiding arbitrator. At the same time, individuals who sit as arbitrators increasingly choose not to act as counsel in investment disputes, and some have severed ties with large international law firms in order to avoid connections with corporations or states and minimize conflicts of interests. 8.04 Not unlike judges in municipal judicial systems, arbitrators play an essential role in the le-

gitimacy of ISDS. It is often said that justice must not only be done, but that it must also be seen to be done. A public perception that arbitrators decide a case in a timely manner and purely on its merits strengthens the legitimacy of ISDS. To that end, arbitral institutions have procedures and mechanisms in place to allow parties to challenge or replace arbitrators who may fall short of prescribed standards of impartiality or independence.

8.05 Nonetheless, the debate on the independence and impartiality of arbitrators continues to

be lively, also due to the perceived opaqueness and inconsistency of challenge decisions and the uncertainty relating to the standards to be applied to those challenges. This has in turn elicited responses on three fronts, each of which is addressed in this chapter.

8.06 Firstly, arbitral institutions have recently either revised their rules and practices or introduced

more innovative approaches to challenges of arbitrators. This is mirrored by the adoption of dedicated guidelines by professional associations on issues relating to conflicts of interests of arbitrators.

8.07 Secondly, some states have been introducing their own codes of conduct for arbitrators in

bilateral and multilateral investment treaties and in the investment chapters of free trade agreements (these instruments will collectively be termed in this chapter as investment agreements), which are designed to take precedence over the institutional rules governing the arbitration.2 There thus appears to be a trend on the part of states to take ownership of the standards and rules governing issues relating to the independence and impartiality of arbitrators, rather than leaving these to arbitral institutions. Moreover, in some instances, states seek to bypass some of the criticisms faced by ISDS by creating entirely new bodies, such as the investment court system (complete with a court of appeal) proposed by the EU Commission and included in the Transatlantic Trade and Investment Partnership Agreement.3

8.08 At the same time, changes in the way challenges are being decided by arbitrators and ap-

pointing authorities have also emerged. In particular, a more concerted effort to develop consistency in challenge decisions can be discerned. This effort extends beyond developing consistency within individual arbitral institutions. Rather, there seems to be a growing desire to create a sense of uniformity and harmonization in the entire sphere of ISDS, across the various arbitral institutions. While such efforts have resulted in increased clarity for some issues, some thorny matters remain and continue to pose challenges to the legitimacy of ISDS.

8.09 In section II, recent innovations by the main arbitral institutions will be reviewed. This will

be followed by an overview of rules on independence and impartiality of arbitrators contained in recent investment agreements (section III). Section IV will provide a review of some of the issues raised by recent cases and section V will offer some concluding remarks.

2  See, e.g., Comprehensive and Progressive Agreement for Trans-​ Pacific Partnership (CPTPP) Agreement art. 9.19(6). See https://​www.mfat.govt.nz/​en/​trade/​free-​trade-​agreements/​free-​trade-​agreements-​concluded-​ but-​not-​in-​force/​cptpp/​ ((last visited Mar. 13, 2018); see also the draft text of the Transatlantic Trade and Investment Partnership (TTIP) art. 6(3) in s. 3, ch. II, http://​trade.ec.europa.eu/​doclib/​docs/​2015/​november/​ tradoc_​153955.pdf ((last visited Mar. 13, 2018). At the date of writing, the TTIP is still under negotiation. 3  See the draft TTIP ch. II, Sub-​Section 4.

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II.  The Role of Institutions and Professional Associations

II.  The Role of Institutions and Professional Associations A. International Centre for Settlement of International Disputes (ICSID) Article 57 of the ICSID Convention sets out the two main grounds for disqualification of 8.10 ICSID arbitrators: (i) the arbitrator manifestly lacks the qualities required by Article 14(1) of the ICSID Convention; or (ii) the arbitrator is ineligible for appointment under Articles 37 to 40 of the ICSID Convention.4 Article 38 requires arbitrators appointed by the ICSID Administrative Council chairman not 8.11 to be nationals of the home state of the claimant investor(s) or the respondent state, while Article 39 requires the majority of the arbitrators on the tribunal to be nationals of states other than the state party to the dispute and the state whose national is a party to the dispute. In Eudoro Armando Olguín v Paraguay,5 an arbitrator resigned upon receiving Paraguay’s proposal for his disqualification on the basis that he and the claimant both held the same nationality.6 A third, and rarely invoked, basis for disqualification is provided under Rule 8 of the ICSID 8.12 Arbitration Rules, which refers to a situation when an arbitrator has become incapacitated or unable to perform the duties of his or her office. A manifest lack of Article 14(1) qualities is invoked most frequently as a ground for dis- 8.13 qualification. Article 14(1) requires ICSID arbitrators to possess three qualities: (i) ‘high moral character’; (ii) ‘recognized competence in the fields of law, commerce, industry or finance’; and (iii) the fact that the arbitrator ‘may be relied upon to exercise independent judgment’.7 In actual practice, only the third quality has been invoked as a basis for disqualification 8.14 requests.8 While the English version of Article 14(1) refers only to the independence of arbitrators, the equally authentic Spanish version of Article 14(1) requires impartiality of judgment (imparcialidad de juicio).9 It is now well settled that standards of independence and impartiality are both included within the qualities that an ICSID arbitrator must possess.10 In the context of Article 14(1) of the ICSID Convention, it is generally accepted

  ICSID Convention art. 57.  Mr. Eudoro Armando Olguín v.  Republic of Paraguay, ICSID Case No. ARB/​98/​5, Award (July 26, 2001). 6  Id. ¶¶ 15–​16. 7 It should be noted that ICSID launched a rule amendment process in October 2016 and invited governments and the general public to submit suggestions for amendments. At the time of writing, the Secretariat has collected these comments and is preparing background papers on topics that have been identified for potential rule amendment. For more information, see https://​icsid.worldbank.org/​en/​Pages/​about/​ Amendment-​of-​ICSID-​Rules-​and-​Regulations.aspx (last visited Mar. 14, 2018). 8 C. Schreuer, with L. Malintoppi, A. Reinisch & A. Sinclair, The ICSID Convention:  A Commentary 1202 (2d ed. 2009). 9  The relevant part of the Spanish version of art. 14(1) refers to a person who ‘inspira[r]‌plena confianza en su imparcialidad de juicio’. 10  Suez, Sociedad General de Aguas de Barcelona S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​ 17, Decision on Proposal for Disqualification (Oct. 22, 2007), ¶¶ 28–​30 [hereinafter Suez v. Argentina]; M. Kinnear & F. Nitschke, Disqualification of Arbitrators under the ICSID Convention and Rules, in Challenges and Recusals of Judges and Arbitrators in International Courts and Tribunals 50 (C. Giorgetti ed., 2015); Fábrica de Vidrios Los Andes, C.A. and Owens-​Illinois de Venezuela, C.A. v. Venezuela, ICSID Case No. ARB/​12/​21, Reasoned Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (Mar. 28, 2016), ¶ 28 [hereinafter Owens-​Illinois v. Venezuela]. 4 5

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Challenges of Arbitrators in Investment Treaty Arbitration that independence means the ‘absence of external control’,11 while impartiality refers to the ‘absence of bias or predisposition towards a party’.12 The purpose of these requirements is to ‘protect parties against arbitrators being influenced by factors other than those related to the merits of the case’.13 8.15 Article 57 of the ICSID Convention requires a challenging party who alleges that an arbitrator

lacks the qualities set out in Article 14(1) of the ICSID Convention to establish that there was a ‘manifest lack’14 of those qualities. The meaning of ‘manifest’ has given rise to varying interpretations, which have inhibited the development of a clear standard of disqualification under Article 57 of the ICSID Convention.15 The heart of the debate is whether the standard of disqualification under ICSID is the ‘justifiable doubts’ test, or some higher standard.

8.16 Before the ruling in the ICSID case Blue Bank v Venezuela, it was thought that a higher standard

than ‘justifiable doubts’ was necessary.16 However, in deciding a challenge brought against the majority of the tribunal in Blue Bank v Venezuela, the chairman of the World Bank applied a lower threshold than in previous cases. He noted in his decision that ‘Articles 57 and 14(1) of the ICSID Convention do not require proof of actual dependence or bias; rather it is sufficient to establish the “appearance of dependence or bias” ’.17 Regarding the word ‘manifest’, the chairman of the World Bank noted that it means ‘evident’ or ‘obvious’.18 In that light, ‘manifest’ is merely a rule of evidence, not a qualitative modifier to the standard for disqualification.

8.17 Subsequent challenge decisions within the ICSID context followed the approach adopted

in the Blue Bank ruling and held that the ‘appearance of dependence or bias’ is sufficient to result in disqualification.19 However, there have also been challenge decisions that did not adopt this standard.

11  İçkale İnşaat Limited Şirketi v. Turkmenistan, ISCID Case No. ARB/​ 10/​24, Decision on Claimant’s Proposal to Disqualify Professor Phillipe Sands (July 11, 2014), ¶ 116 [hereinafter İçkale İnşaat v. Turkmenistan]; Owens-​Illinois v. Venezuela, supra note 10, ¶ 29. 12  Id. 13  ConocoPhillips Company et  al. v.  Bolivarian Republic of Venezuela, ICSID Case No. ARB/​ 07/​30, Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (Feb. 27, 2012), ¶ 55 [hereinafter ConocoPhillips v. Venezuela]. 14  Article 57 provides: ‘A party may propose to a Commission or Tribunal the disqualification of any of its members on account of any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14. A party to arbitration proceedings may, in addition, propose the disqualification of an arbitrator on the ground that he was ineligible for appointment to the Tribunal under Section 2 of Chapter IV’. 15  See, e.g., Amco Asia Corporation et al. v. Republic of Indonesia, ICSID Case No. ARB/​81/​1, Decision on Jurisdiction (Sept. 25, 1983), ¶ 2: ‘manifest lack’ means ‘not a possible lack of the quality, but a quasi-​ certain, or to go as far as possible, a highly probable one’. A standard more akin to reasonable doubts was suggested in Compania de Aguas del Aconquija S.A. & Vivendi v. Argentina, ICSID Case No. ARB/​97/​3, Decision on the Challenge to the President of the Committee (Oct. 3, 2001), ¶ 20. In EDF International S.A., SAUR International S.A. & Leon Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​23, Challenge Decision Regarding Professor Gabrielle Kaufmann-​Kohler (June 25, 2008), ¶¶ 65–​68, ‘manifest’ relates ‘not to the seriousness of the allegation but to the ease with which it may be perceived’. 16  M. Lalonde, Quo Vadis Disqualification?, in Building International Investment Law: The First 50 Years of ICSID 645 (M. Kinnear et al. eds., 2015). 17  Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. Arb/​12/​20, Decision on the Parties’ Proposal to Disqualify the Majority of the Tribunal (Nov. 12, 2013), ¶ 59 [hereinafter Blue Bank v. Venezuela]. See also the analysis of this case in Lalonde, supra note 16, at 641–​53. In the interest of full disclosure, it should be noted that one of the authors of this chapter sat as arbitrator appointed by the respondent in this case following the resignation of Mr. Santiago Torres Bernardez. 18  Blue Bank v. Venezuela, supra note 17, ¶ 61. 19  Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/​08/​5, Decision on the Proposal for Disqualification of Professor Francisco Orrego Vicuña (Dec. 13, 2013), ¶ 66 [hereinafter Burlington v.  Ecuador]; Abaclat and Others v.  Republic of Argentina, ICSID Case No. ARB/​07/​5, Decision on the

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II.  The Role of Institutions and Professional Associations In Total v Argentina,20 Argentina argued that the standard of disqualification under the 8.18 ICSID Convention is the appearance of dependence or predisposition or bias.21 The claimant disagreed, arguing that the ‘manifest standard implies that it does not suffice to prove the appearance of dependence or bias, but rather that the existence of bias or dependence must be evident or obvious, in the sense that it can be discerned with little effort and without deeper analysis’.22 The remaining members of the ad hoc Committee who decided the challenge did not expressly endorse or reject the ‘appearance of dependence or bias’ test. However, they appear to have accepted the claimant’s position, holding that the challenging party must demonstrate that it is ‘manifest, obvious, that the person challenged cannot exercise independent judgment’.23 It remains to be seen whether the ruling in Blue Bank will be the last word on the standard 8.19 required for disqualification under the ICSID Convention. In any event, Blue Bank remains a landmark decision to the extent that it represents a shift in the standard for disqualification under the ICSID Convention. This shift to an ‘appearance of dependence or bias’ test for disqualification under ICSID is significant. In particular, it may have the effect of aligning the standard of disqualification under the ICSID Convention with the ‘justifiable doubts’ test commonly applicable under other arbitral rules. However, it should be noted that the word ‘manifest’ in Article 57 of the ICSID Convention still leaves it open for a party to argue that proof of actual dependence or bias is required. After all, the decision in Blue Bank is not binding on non-​parties to the case, although, of course, the chairman of World Bank can be expected to maintain the same position in future decisions. It may be that the only way to resolve definitively the issue of the standard for disqualification is to amend Article 57 of the ICSID Convention. However, amending the Convention is a highly ambitious, if not an altogether unrealistic, undertaking, since any amendment requires the approval of the majority of two-​thirds of the members of the ICSID Administrative Council and all member states of the Convention.24 Apart from the apparent change in the standard for disqualification under the ICSID 8.20 Convention, ICSID introduced several new features to its website in December 2014,25 some of which may potentially impact issues of independence and impartiality of arbitrators. The new website contains a list of all ICSID arbitrators and conciliators. It also publishes their CVs (when they have been submitted by the arbitrator or conciliator) in a standard format, and sets out all the ICSID cases they have acted in, whether as arbitrator or as counsel. The new website also allows parties to see real-​time updated information on specific cases, such as the subject matter of the dispute, the parties, the arbitrators and who appointed them, and the outcome of the case.

Proposal to Disqualify a Majority of the Tribunal (Feb. 4, 2014), ¶ 76; Caratube International Oil Company LLP & Mr. Devincci Salah Hourani v.  Republic of Kazakhstan, ICSID Case No. ARB/​13/​13, Decision on the Proposal for Disqualification of Mr. Bruno Boesch (Mar. 20, 2014), ¶ 57 [hereinafter Caratube v. Kazakhstan]; ConocoPhillipsPetrozuata B.V. and Others v. Bolivarian Republic of Venezuela, Decision on the Proposal to Disqualify a Majority of the Tribunal (May 5, 2014), ¶ 52; İçkale İnşaat v. Turkmenistan, supra note 11, ¶ 117; ConocoPhilips v. Venezuela, Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (July 1, 2015), ¶ 83; Id. Decision on the Proposal to Disqualify L.  Yves Fortier, Q.C., Arbitrator (July 26, 2016), ¶ 12(a). 20 Total S.A.  v.  Argentine Republic, ICSID Case No. ARB/​ 04/​01, Decision on Argentine Republic’s Proposal to Disqualify Ms. Teresa Cheng (Aug. 26, 2015) [hereinafter Total v. Argentina]. 21  Id. ¶ 31. 22  Id. ¶ 60. 23  Id. ¶ 105. 24  ICSID Convention art. 66(1). 25  See http://​livestream.com/​ICSID/​events/​3666176 (last visited Dec. 10, 2017).

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Challenges of Arbitrators in Investment Treaty Arbitration 8.21 This kind of information may form, and on occasion did form, the basis for challenges,

including in connection with repeat appointments of an arbitrator by a particular party, ‘double-​hat’ issues arising out of an arbitrator’s acting as counsel in another arbitration involving similar issues, and ‘issue conflict’ arising out of an arbitrator’s appointment as an arbitrator in another case. Thus far, it does not appear that the recent availability of such information via the new website has led to an increase in the number of challenges to arbitrators.

B. Permanent Court of Arbitration (PCA) 8.22 The PCA Arbitration Rules 2012,26 which consolidated, but did not replace, four other sets

of procedural rules,27 are based on the 2010 version of the UNCITRAL Arbitration Rules.28 The PCA Arbitration Rules 2012 contain substantially identical grounds for challenge as the UNCITRAL Arbitration Rules, namely, ‘justifiable doubts as to the arbitrator’s impartiality or independence’,29 an arbitrator’s failure to act30 or ‘de jure or de facto impossibility of his or her performing his or her functions’.31 Further, Article 11 of the PCA Arbitration Rules 2012 requires potential arbitrators to disclose any circumstance ‘likely to give rise to justifiable doubts as to his or her impartiality or independence’.32

8.23 A novel feature in the PCA Arbitration Rules 2012 not found in the four previous versions

of the PCA Rules and the UNCITRAL Arbitration Rules 2010 are the model statements of impartiality and independence. A potential arbitrator may adopt either of the following model statements: No circumstances to disclose: I am impartial and independent of each of the parties and intend to remain so. To the best of my knowledge, there are no circumstances, past or present, likely to give rise to justifiable doubts as to my impartiality or independence. I shall promptly notify the parties and the other arbitrators of any such circumstances that may subsequently come to my attention during this arbitration. Circumstances to disclose: I am impartial and independent of each of the parties and intend to remain so. Attached is a statement made pursuant to article 11 of the PCA Arbitration Rules 2012 of (a) my past and present professional, business and other relationships with the parties and (b) any other relevant circumstances. [Include statement] I confirm that those circumstances do not affect my independence and impartiality. I shall promptly notify the parties and the other arbitrators of any such further relationships or circumstances that may subsequently come to my attention during this arbitration.

8.24 As these are models, an arbitrator may use them as a reference and ultimately deviate from

them. However, it is reasonable to assume that a statement that takes this form is more likely to be regarded by the PCA and the parties as satisfying the disclosure requirement laid out in Article 11 of the PCA Arbitration Rules.

26  See https://​pca-​cpa.org/​wp-​content/​uploads/​sites/​175/​2015/​11/​PCA-​Arbitration-​Rules-​2012.pdf (last visited Dec. 10, 2017). 27  PCA Optional Rules for Arbitrating Disputes between Two States (1992); PCA Optional Rules for Arbitrating Dispute between Two Parties of Which Only One is a State (1993); PCA Optional Rules for Arbitration between International Organizations and States (1996) and PCA Optional Rules for Arbitration between International Organizations and Private Parties (1996). 28 M. Indlekofer, International Arbitration and the Permanent Court of Arbitration 344 (2013). 29  PCA Arbitration Rules 2012 art. 12(1). 30  Id. art. 12(3). 31  Id. 32  Id. art. 11.

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II.  The Role of Institutions and Professional Associations In addition, any party may request from the arbitrator to supplement the statement of im- 8.25 partiality and independence as follows: I confirm, on the basis of the information presently available to me, that I can devote the time necessary to conduct this arbitration diligently, efficiently and in accordance with the time limits in the Rules.

This additional statement should be read in the light of Article 12(3) of the PCA Arbitration 8.26 Rules 2012, which applies the challenge procedures in the event an arbitrator fails to act or if there is ‘de jure or de facto impossibility of his or her performing his or her functions’. According to an article by a senior legal counsel of the PCA, in an unreported case submitted under a similar provision, Article 13(2) of the UNCITRAL Arbitration Rules 1976, the challenging party sought to remove an arbitrator arguing that the arbitrator’s ‘huge case load in investment arbitrations’ and other adjudicatory and academic commitments constituted a case of de facto impossibility to perform arbitral functions.33 It was reported that one of the reasons for rejecting the challenge was a statement from the arbitrator regarding the arbitrator’s commitment to the case.34 Viewed in this light, the model additional statement in the PCA Arbitration Rules 2012 underscores the importance of an arbitrator’s availability and commitment in performing the arbitral function. At the same time, such a statement may assist in resisting a potential challenge under Article 12(3) of the PCA Arbitration Rules 2012. It follows that it may be advisable for an arbitrator to include this statement even if it is not expressly requested.35

C. United Nations Commission on International Trade Law (UNCITRAL) The provisions relating to challenges of arbitrators in all three versions of the UNCITRAL 8.27 Arbitration Rules (1976, 2010, and 2013) are identical. They provide that an arbitrator may be challenged if circumstances exist that ‘give rise to justifiable doubts’ as to her or his impartiality or independence.36 Mere doubt as to the arbitrator’s independence or impartiality is not sufficient. The challenging party must demonstrate that the doubt is justifiable.37 The test is ‘whether a reasonable, fair-​minded and informed person has justifiable doubts as to the arbitrator’s [independence] or impartiality’,38 having considered all of the relevant facts and circumstances.39 Further, under all three versions of the UNCITRAL Arbitration Rules, an arbitrator may 8.28 also be challenged if he or she fails to act, or in the event of de jure or de facto impossibility of performing the arbitrator’s functions.40 This ground has been unsuccessfully invoked to challenge arbitrators on the basis that they failed to devote time to the arbitration41 or that

33 S. Grimmer, The Determination of Arbitrator Challenges by the Secretary-​General of the Permanent Court of Arbitration, in Challenges and Recusals , supra note 10, at 113. 34  Id. 35  Such a statement of availability is routinely included by arbitrators under the ICC Rules. See ICC Rules of Arbitration 2012 art. 11(2). 36 UNCITRAL Arbitration Rules 1976  art. 10(1); UNCITRAL Arbitration Rules 2010 and 2013) art. 12(1). 37  Vito G. Gallo v. Government of Canada, Decision on the Challenge to Mr. J. Christopher Thomas, QC (Oct. 14, 2009), ¶ 19 [hereinafter Gallo v. Canada]. 38  National Grid Plc v. Republic of Argentina, London Court of International Arbitration Case No. UN 7949, Decision on the Challenge to Mr Judd L. Kessler (Dec. 3, 2007), ¶ 80. 39  Gallo v. Canada, supra note 37, ¶ 19; see Grimmer, supra note 33, at 96. 40 UNCITRAL Arbitration Rules 1976 art. 13(2); UNCITRAL Arbitration Rules 2010  art. 12(3); UNCITRAL Arbitration Rules 2013 art. 12(3). 41  See Grimmer, supra note 33, at 112.

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Challenges of Arbitrators in Investment Treaty Arbitration their other professional commitments created a de facto impossibility for them to perform their functions as arbitrators.42 8.29 While the rules relating to challenges of arbitrators have remained the same through all

three versions of the UNCITRAL Arbitration Rules, the 2013 version introduced a new Article 1(4), which applies the UNCITRAL Rules on Transparency in Treaty-​based Investor-​ State Arbitration43 (UNCITRAL Transparency Rules) to investor-​state arbitrations in the following instances: (a) where the investor-​State arbitration was initiated under the UNCITRAL Arbitration Rules pursuant to a treaty providing for the protection of investments or investors concluded on or after 1 April 2014, unless the parties to that treaty have agreed otherwise;44 (b) for investor-​State arbitrations initiated under the UNCITRAL Arbitration Rules pursuant to a treaty providing for the protection of investments or investors concluded before 1 April 2014: (i) where the parties to the arbitration agree to their application in respect of that arbitration; or (ii) where the parties to that treaty or, in the case of a multilateral treaty, the State of the claimant and the respondent State, have agreed after 1 April 2014 to their application;45 (c) in an investor-​State arbitration in which the respondent is a party to the United Nations Convention on Transparency in Treaty-​based Investor-​State Arbitration (Transparency Convention) that has not made a relevant reservation under article 3(1)(a) or (b) of the Transparency Convention, and the claimant is of a State that is also a party46 that has not made a relevant reservation under article 3(1)(a) of the Transparency Convention; or (d) in an investor-​State arbitration in which the respondent is a party that has not made a reservation relevant to that arbitration under article 3(1) of the Transparency Convention, and the claimant agrees to the application of the UNCITRAL Transparency Rules.

8.30 The UNCITRAL Transparency Rules do not directly address challenges to arbitrators.

However, some of the provisions merit further discussion to the extent that they may potentially impact this issue. In particular, under Article 2 of the UNCITRAL Transparency Rules, the name of the disputing parties, the economic sector involved and the treaty under which the claim is made will be made public. Further, the notice of arbitration, the response to the notice of arbitration, the statement of claim, the statement of defence, any further written statements or written submissions by any disputing party,47 expert reports and witness statements48 are to be disclosed unless they contain ‘confidential or protected information’ as defined in Article 7 of the UNCITRAL Transparency Rules. Under the UNCITRAL Arbitration Rules, the notice of arbitration and the response to the notice of arbitration may contain the names of the arbitrators appointed by each party.49 As a consequence, the names of the arbitrators appointed by each party may also be made public.

8.31 Thus, in an arbitration where the UNCITRAL Transparency Rules are applicable, parties

may rely on such public information to challenge arbitrators, particularly on the grounds of

  Id. at 113.   See http://​www.uncitral.org/​uncitral/​en/​uncitral_​texts/​arbitration/​2014Transparency.html (last visited Dec. 10, 2017). 44  Id. art. 1(4), read with UNCITRAL Transparency Rules art. 1(1). 45  UNCITRAL Transparency Rules art. 1(2). 46  Id. art. 2(1), http://​www.uncitral.org/​pdf/​english/​texts/​arbitration/​transparency-​convention/​TransparencyConvention-​e.pdf (last visited Dec. 10, 2017). 47  UNCITRAL Transparency Rules art. 3(1). 48  Id. art. 3(2). 49  UNCITRAL Arbitration Rules 1976 art. 3(4); UNCITRAL Arbitration Rules 2010 and 2013 art. 3(4) and art. 4(2). 42 43

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II.  The Role of Institutions and Professional Associations repeat appointments by the same party or counsel and ‘issue conflict’ arising from an arbitrator’s involvement in multiple arbitrations concerning the same, or a similar, subject matter. In May 2015, Algeria put forward a proposal for UNCITRAL to consider the establishment 8.32 of a code of conduct or ethics for arbitrators in investor-​state arbitration.50 The UNCITRAL Secretariat, which was requested to assess the feasibility of work in that area, found that there is currently a variety of sources on ethics for arbitrators, such that arbitrators could be concurrently bound by more than one standard depending on the circumstances.51 The note prepared by the UNCITRAL Secretariat requested the Commission to consider several questions in determining whether to undertake future study in this area, such as whether there is a need for a harmonized and authoritative source on ethics in international arbitration.52 In this regard, UNCITRAL noted that views were expressed that ‘the wide array of existing norms and standards on ethics would make it superfluous for [UNCITRAL] to undertake work on the topic’.53 After discussion at the forty-​ninth session, UNCITRAL requested the Secretariat to continue working on this matter and to report at a future session on the possible approaches to developing a code of ethics.54 Interestingly, UNCITRAL also requested the Secretariat to explore the topic in ‘close cooperation’ with experts, including those from other organizations, thus signalling the intention of collaborating, inter alia, with arbitral institutions.55 The development of a code of ethics for arbitrators might contribute positively to the legit- 8.33 imacy of ISDS. There is a growing demand for more specific guidelines concerning what arbitrators may and may not do, as reflected in the introduction of codes of ethics and conduct in recently concluded investment agreements.56 Moreover, as will be discussed in section III, while a growing consensus has been reached on some issues concerning this topic, there remain some outstanding questions that would benefit from a clarification of the relevant rules and standards. To allay any concern that such a code of conduct may be superfluous, it should be noted that the law and practice on issues of independence and impartiality of arbitrators is evolving rapidly as a result of the initiatives and changes introduced by arbitral institutions, as well as from the rules introduced by states in their investment agreements.

D. International Chamber of Commerce (ICC) Article 14(1) of the ICC Rules of Arbitration 201257 provides that a challenge of an arbitrator 8.34 may be introduced for ‘an alleged lack of impartiality or independence, or otherwise’. As indicated by the use of the terms ‘or otherwise’, the grounds which can be invoked as a basis of a challenge appear to be open-​ended.58 One commentary observed that the standard for

  Forty-​eighth session of the UNCITRAL (June 29–​July 16, 2015), UN Doc. No. A/​CN.9/​855 at 2.   Forty-​ninth session of the UNCITRAL (June 27–​July 15, 2016), UN Doc. No. A/​CN.9/​800 at 6–​7. 52  Id. at 7. 53  Report of the forty-​ ninth session of the UNCITRAL (June 27–July 15, 2016), UN Doc. No. A/​71/​17, at ¶ 185. See https://​documents-​dds-​ny.un.org/​doc/​UNDOC/​GEN/​V16/​048/​29/​PDF/​V1604829.pdf? OpenElement (last visited Mar. 13, 2018). 54  Id. ¶ 186. 55  Id. 56  See, e.g., Comprehensive and Progressive Agreement for Trans-​ Pacific Partnership (CPTPP); Transatlantic Trade and Investment Partnership Agreement (TTIP); EU–​Singapore Free Trade Agreement. 57  See http://​internationalarbitrationlaw.com/​about-​arbitration/​international-​arbitration-​rules/​2012-​icc-​ arbitration-​rules/​ (last visited Mar. 13, 2018). It should be noted that this section does not address the latest version of the ICC Rules of Arbitration, which entered into force on 1 March 2017, after this section was completed. 58  L.  Malintoppi & A.  Carlevaris, Challenges of Arbitrators, Lessons from the ICC, in Challenges and Recusals, supra note 10, at 143. 50 51

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Challenges of Arbitrators in Investment Treaty Arbitration challenge under the ICC Rules of Arbitration 2012 is ‘broad and vague’—​‘broad’ because of the possibility to challenge an arbitrator for any reason considered appropriate, and ‘vague’ because ‘lack of impartiality or independence or otherwise’ is not defined.59 8.35 Article 11(4) of the ICC Rules of Arbitration 2012 prohibits the reasons for the decisions

of the International Court of Arbitration (the ICC Court) on appointment, confirmation, challenge, or replacement of an arbitrator to be communicated, which makes it difficult to discern the standard required for a successful challenge under the ICC system. However, against the backdrop of a growing call for transparency, in October 2015, the ICC Court announced that it would, upon the request of all the parties, communicate the reasons for decisions made on challenges and replacement of arbitrators.60 This practice was implemented with immediate effect.

8.36 In the most recent (22 September 2016) version61 of the ICC Note to Parties and Arbitral

Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration (ICC Note),62 the relationship between Article 11(4) of the ICC Rules of Arbitration and the announcement by the ICC Court in October 2015 is clarified. Paragraph 11 of that ICC Note states: Article 11(4) provides that the Court shall not communicate the reasons for its decisions on the appointment, confirmation, challenge or replacement of an arbitrator. However, upon request of all the parties, the Court may communicate the reasons for (i) a decision made on the challenge of an arbitrator pursuant to Article 14, and (ii) a decision to initiate replacement proceedings and subsequently to replace an arbitrator pursuant to Article 15(2). The Court may also, upon request of all the parties, communicate the reasons for decisions pursuant to Articles 6(4) and 10.

8.37 The ICC Court, however, maintains to date ‘full discretion to accept or reject a request for

communication for reasons’,63 and it ‘may subject the communication to an increase in the administrative expenses, normally not exceeding US$5,000’.64

8.38 Parties may agree to request reasons for the ICC Court’s decisions in their arbitration agree-

ment, in the terms of reference, or at any stage of the proceedings, as long as the request is made in advance of the relevant decision in respect of which reasons are sought.65 In this regard, it should be recalled that a report of the ICC Commission on Arbitration and ADR Task Force on Arbitration Involving States or State Entities suggested that states resorting to investment arbitration and seeking greater transparency may consider derogating from Article 11(4) of the ICC Rules of Arbitration 2012 and include in their BITs, multilateral investment treaties, investment chapters of their FTAs, or domestic investment law the following language:

59 K. Daele, Challenge and Disqualification of Arbitrators in International Arbitration 5-​ 044 (2012). 60  See http://​www.iccwbo.org/​News/​Articles/​2015/​ICC-​Court-​to-​communicate-​reasons-​as-​a-​new-​serviceto-​users/​ (last visited Dec. 10, 2017). 61  At the time of writing this section, this was the latest version of the ICC Note to Parties and Arbitral Tribunal on the Conduct of Arbitration under the ICC Rules of Arbitration. A new Note concerning the 2017 ICC Rules was issued on 30 October 2017 and is available at https://​iccwbo.org/​publication/​note-​ parties-​arbitral-​tribunals-​conduct-​arbitration (last visited Mar. 14, 2018). 62  See http://​www.iccwbo.org/​products-​and-​services/​arbitration-​and-​adr/​arbitration/​practice-​notes,-​ forms,-​checklists/​ (last visited Dec. 10, 2017). 63  Id. ¶ 13. 64  Id. 65  Id. ¶ 12.

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II.  The Role of Institutions and Professional Associations The Parties agree that the ICC International Court of Arbitration shall communicate the reasons for its decisions on the disputed communication, non-​confirmation, challenge and replacement of arbitrators, in derogation of Article 11(4) of the ICC Rules of Arbitration.66

It should be noted that the communication of the reasons of the Court’s decisions, if any, 8.39 is made to the parties and arbitrators, not to the public at large. However, to the extent the ICC Secretariat publishes periodic surveys of such decisions in the ICC Bulletin, this may serve to shed light on the ICC Court’s practice in applying Article 14(1) of the ICC Rules of Arbitration 2012. It is interesting to mention in this regard paragraph 27 of the latest version of the ICC Note, which states: The Court endeavours to make the arbitration process more transparent in ways that do not compromise expectations of confidentiality that may be important to parties. Transparency provides greater confidence in the arbitration process, and helps protect arbitration against inaccurate or ill-​informed criticism.

In the ICC system, the ICC Court considers issues of arbitrator’s independence and impar- 8.40 tiality at two stages of the proceedings: at the time of confirmation or appointment of the arbitrator and, as necessary, during the course of the arbitration.67 All prospective arbitrators are required to complete and sign a statement of acceptance, availability, impartiality, and independence and disclose ‘any facts or circumstances which might be of such a nature as to call into question the arbitrator’s independence in the eyes of any of the parties, as well as any circumstances that could give rise to reasonable doubts as to the arbitrator’s impartiality’.68 Any doubt must be resolved in favour of disclosure.69 This duty of disclosure is a continuing one, and applies throughout the duration of the arbitral proceedings.70 In February 2016, the ICC Court adopted a Guidance Note for the disclosure of conflicts 8.41 by arbitrators,71 which has been incorporated in the latest version of the ICC Note. It is now clear that, while a failure to disclose is not in itself a ground for disqualification, a lack of disclosure will be considered by the ICC Court in assessing whether an objection to confirmation or a challenge is well founded.72 Further, the ICC stated that the standard for disclosure under the ICC Rules of Arbitration is a subjective one and it is for each arbitrator to assess whether a disclosure should be made.73 To assist an arbitrator’s or a prospective arbitrator’s assessment of whether to disclose a fact or circumstance, the ICC Note listed nine non-​ exhaustive circumstances which an arbitrator or a prospective arbitrator should pay particular attention to: (a) The arbitrator or prospective arbitrator or his or her law firm represents or advises, or has represented or advised, one of the parties or one of its affiliates.

66  Available at:  http://​w ww.iccwbo.org/​Advocacy-​C odes-​a nd-​Rules/​Document-​c entre/​2 012/​I CC-​ Arbitration-​Commission-​Report-​on-​Arbitration-​Involving-​States-​and-​State-​Entities-​under-​the-​ICC-​Rules-​ of-​Arbitration/​ (last visited Dec. 10, 2017). 67  L. Malintoppi, Arbitrator’s Independence and Impartiality, in The Oxford Handbook of International Investment Law 808 (P. Muchlinski et al. eds., 2008). 68  ICC Rules of Arbitration 2012 art. 11(2). 69  ICC Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration (Sept. 22, 2016), ¶ 18. 70  ICC Rules of Arbitration 2012 art. 11(3). 71  See https://​iccwbo.org/​media-​wall/​news-​speeches/​icc-​court-​adopts-​guidance-​note-​on-​conflict-​disclosures​by-​arbitrators/​ (last visited Dec. 10, 2017). 72  ICC Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration, supra note 69, ¶ 19. 73  See supra note 71.

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Challenges of Arbitrators in Investment Treaty Arbitration (b) The arbitrator or prospective arbitrator or his or her law firm acts or has acted against one of the parties or one of its affiliates. (c) The arbitrator or prospective arbitrator or his or her law firm has a business relationship with one of the parties or one of its affiliates, or a personal interest of any nature in the outcome of the dispute. (d) one of the parties or one of its affiliates as director, board member, officer, or otherwise. (e) The arbitrator or prospective arbitrator or his or her law firm is or has been involved in the dispute, or has expressed a view on the dispute in a manner that might affect his or her impartiality. (f ) The arbitrator or prospective arbitrator has a professional or close personal relationship with counsel to one of the parties or the counsel’s law firm. (g) The arbitrator or prospective arbitrator acts or has acted as arbitrator in a case involving one of the parties or one of its affiliates. (h) The arbitrator or prospective arbitrator acts or has acted as arbitrator in a related case. (i) The arbitrator or prospective arbitrator has in the past been appointed as arbitrator by one of the parties or one of its affiliates, or by counsel to one of the parties or the counsel’s law firm. 8.42 The ICC Note appears to include a wider range of circumstances than those contemplated

by the IBA Guidelines. Moreover, unlike the IBA Guidelines, which impose a time limit for the tracing of certain relationships, the ICC Note does not specifically contain such time limits. In addition, unlike the IBA Guidelines which organizes circumstances based on their severity along a traffic-​light spectrum, the ICC Note makes no such distinction. Further, when completing his or her statement and identifying whether a disclosure should be made, an arbitrator or prospective arbitrator is obliged to ‘make reasonable enquiries in his or her records, those of his or her law firm and, as the case may be, in other readily available materials’.74 Thus, under the ICC Note, arbitrators are well-​advised to make more comprehensive disclosures out of an abundance of caution, sometimes a tall order for those who practice in large international law firms.

E. Stockholm Chamber of Commerce (SCC) 8.43 Under the 2017 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of

Commerce75 (SCC Arbitration Rules), a party may challenge an arbitrator if circumstances exist which give rise to justifiable doubts as to the arbitrator’s impartiality or independence or if he/​she does not possess qualifications agreed to by the parties.76 No amendment was made to the SCC Arbitration Rules regarding challenges to arbitrators from the previous version of the rules.77

8.44 Further, a prospective arbitrator shall ‘disclose any circumstances which may give rise to justi-

fiable doubts as to [his/​her] impartiality or independence’78 and, upon appointment, submit a signed statement of impartiality and independence disclosing ‘any circumstance that may give rise to justifiable doubts as to the arbitrator’s impartiality or independence’.79

74  ICC Note to Parties and Arbitral Tribunals on the Conduct of Arbitration under the ICC Rules of Arbitration, supra note 69, ¶ 19. 75  2017 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce, http://​ sccinstitute.com/​media/​169838/​arbitration_​rules_​eng_​17_​web.pdf (last visited Mar. 13, 2018). 76  Id. art. 19(1). 77  2010 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce art. 15(1). 78  2017 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce art. 18(2). 79  Id. art. 18(3).

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II.  The Role of Institutions and Professional Associations Also, of particular note is the Swedish Arbitration Act (SFS 1999:116) (SAA), which applies 8.45 to arbitration proceedings seated in Stockholm governed by SCC Rules.80 Moreover, the Swedish Supreme Court clarified in 2010 that the SAA will apply as long as the parties agree that the proceedings are to take place in Sweden, even if the arbitrators are not from Sweden or if their duties have been carried out in another country.81 Section 8 of the SAA sets out a list of non-​exhaustive circumstances that will always be considered as diminishing confidence in the arbitrator’s impartiality, such as where the arbitrator or a person closely associated to him/​her is a party, or otherwise may ‘expect notable benefit or detriment’ as a result of the outcome of the dispute.82 Under the SCC Rules, if a party decides to challenge an arbitrator, the decision is decided by 8.46 the SCC board.83 The SCC board does not provide reasons for its decisions on challenges of arbitrators, regardless of the outcome of the challenge.84 It remains to be seen whether the SCC board will change its practice in the light of the LCIA’s and ICC’s decisions to change their policies in this matter. It would be useful, for example, for parties to be aware of the extent to which challenges to arbitrators are decided on the basis of Swedish law.

F. London Court of International Arbitration (LCIA) The 2014 version of the LCIA Rules of Arbitration (2014 LCIA Rules) contains several 8.47 changes relating to the revocation of the appointment of an arbitrator from the 1998 version of the Rules. Article 10.1 of the 2014 LCIA Rules consolidates the grounds for challenge in one provision, as follows: The LCIA Court may revoke any arbitrator’s appointment upon its own initiative, at the written request of all other members of the Arbitral Tribunal or upon a written challenge by any party if: (i) that arbitrator gives written notice to the LCIA Court of his or her intent to resign as arbitrator, to be copied to all parties and all other members of the Arbitral Tribunal (if any); (ii) that arbitrator falls seriously ill, refuses or becomes unable or unfit to act; or (iii) circumstances exist that give rise to justifiable doubts as to that arbitrator’s impartiality or independence.

The 2014 LCIA Rules provide that the LCIA Court may revoke any arbitrator’s appointment 8.48 upon its own initiative, at the written request of all other members of the tribunal or upon a written challenge by any party on the grounds of ‘justifiable doubts’ as to the arbitrator’s impartiality or independence, or if the arbitrator falls seriously ill, refuses, or becomes unable or unfit to act.85 Further, the 2014 LCIA Rules set out three situations where an arbitrator may be determined as ‘unfit to act’: (i) if the arbitrator acts in deliberate violation of the parties’ arbitration agreement; (ii) if the arbitrator does not act fairly or impartially as between the parties; or (iii) does not conduct or participate in the arbitration with reasonable efficiency, diligence, and industry.86

80 N. Lindström, Challenges to Arbitrators—​Decisions by the SCC Board During 2008-​–​2010, 1, 4, http://​ www.sccinstitute.com/​media/​93825/​challenges-​to-​arbitrators-​decisions-​by-​the-​scc-​board-​during-​2008.pdf (last visited Dec. 10, 2017). 81  See the discussion of RosInvestCo U.K. Ltd. v. Russian Federation, Case No. Ő 2301-​09 in Lindström, supra note 80, at 2, n. 3. 82  Id. 83  Id. 84 H. Jung, SCC Practice: Challenges to Arbitrators, SCC Board Decisions 2005–​ 2007, at 4, http://​www. sccinstitute.com/​media/​61992/​04-​art32-​jung.pdf (last visited Dec. 10, 2017). 85  LCIA Rules of Arbitration 2014 art. 10.1. 86  Id. art. 10.2.

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Challenges of Arbitrators in Investment Treaty Arbitration 8.49 In 2006, the LCIA voted to publish abstracts of its decisions on challenges to arbitrators. The

first digest of these decisions was published in 2011.87 The digest has cast light on how challenges to arbitrators at the LCIA are determined. It is interesting to note that, while Article 10(1)(iii) of the 2014 LCIA Rules uses the same language as the UNCITRAL Arbitration Rules, challenges to arbitrators under the 2014 LCIA Rules may be determined on the basis of a different legal standard than that under the UNCITRAL Arbitration Rules. Where the arbitrations are seated in England, the LCIA Court will apply the standards of independence and impartiality under the applicable statutes and jurisprudence of English law.88 It remains an open question what standards will be applicable in a challenge to an arbitrator in a LCIA arbitration not seated in England, since this scenario had yet to arise at the time the digest was published.89

8.50 Further, in some cases, the LCIA Court has recognized that all the circumstances considered

in accumulation may result in a successful challenge, even though each circumstance considered in isolation may not.90 For instance, while the failure to disclose facts or circumstances ‘likely to give rise to any justifiable doubts’ is unlikely per se to be a sufficient basis for a challenge to be upheld, it may be considered by the LCIA Court as a factor that weighs towards the removal of an arbitrator.91 In this regard, LCIA measures a failure to disclose by the same standard as other allegations of bias, which is whether ‘a fair-​minded and informed observer, having considered the facts, would conclude that there is a real possibility that an arbitrator appears to be dependent on a party or is partial to a party’.92

8.51 Since 2014, the LCIA’s Registrar’s reports also contain information on challenges to arbitra-

tors. According to the Registrar’s reports in 2014 and 2015, a total of ten challenges were made to arbitrators who had been appointed under the LCIA Rules of Arbitration,93 out of which two challenges were upheld, four were rejected, and four resulted in a resignation.94 These numbers reflect a relatively high success rate, given that 60 per cent of the challenges result in a change in the composition of the tribunal. However, given the small sample size, it would be hasty to draw any concrete conclusions about the ease of challenging an arbitrator in a LCIA arbitration.

G. Singapore International Arbitration Centre (SIAC) 8.52 In early 2017, the Singapore International Arbitration Centre (SIAC) issued the SIAC

Investment Arbitration Rules.95 The SIAC is the first arbitral institution to have parallel rules of arbitration that govern commercial and investment arbitrations, respectively.

8.53 Under the SIAC Investment Arbitration Rules, an arbitrator may be challenged if ‘circumstances

exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence or if the arbitrator does not possess any requisite qualification on which the parties have

87  T. Walsh & R. Teitelbaum, The LCIA Court Decisions on Challenges to Arbitrators: An Introduction, in Arbitration International Special Edition on Arbitrator Challenges 282–​313 (William W. Park ed., 2011). 88  Id. at 286. 89  Id. at 286. 90  Id. at 287. 91  Id. at 288. 92  Id. at 288–​89. 93  LCIA Registrar’s Report 2014 and LCIA Registrar’s Report 2015), http://​www.lcia.org/​LCIA/​reports. aspx (last visited Dec. 10, 2017). A 2016 report was published on the LCIA website after this section was finalized and can be found at http://​www.lcia.org/​LCIA/​reports.aspx (last visited Mar. 14, 2018). 94  LCIA Registrar’s Report 2014, at 5; LCIA Registrar’s Report 2015, at 4. 95  See http://​www.siac.org.sg/​our-​rules/​rules/​siac-​ia-​rules-​2017 (last visited Mar. 13, 2018).

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II.  The Role of Institutions and Professional Associations agreed’.96 This provision is identical to the equivalent provision under the 2016 version of the SIAC Arbitration Rules,97 envisaged to apply to commercial arbitration after coming into force on 1 August 2016. In most respects, the provisions on qualifications and challenges to arbitrators are substan- 8.54 tially identical under both the SIAC Investment Arbitration Rules and the SIAC Arbitration Rules 2016. Under the SIAC Investment Arbitration Rules, decisions on challenges are to be reasoned 8.55 and issued to the parties.98 Further, these decisions may be published with the parties’ consent.99 As these decisions are published, they will no doubt help to elucidate how decisions on challenges under the SIAC Investment Arbitration Rules are made and whether they are in line with decisions under other institutional rules.

H. The IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines) While not binding100 and not adopted by an arbitral institution, but by a professional associ- 8.56 ation, the IBA Guidelines have become a very important tool and are regularly referred to in decisions on challenges to arbitrators as indicative for assessing whether a conflict of interest may exist. The majority of the ad hoc Committee in Total v Argentina considered that the IBA Guidelines were ‘a very useful tool, insofar as they reflect a transnational consensus on their subject matter, and therefore have been used as reference for handling issues related to conflicts of interest in international arbitration’.101 In one case, Perenco v Ecuador, the parties agreed ex post facto that the challenge to the 8.57 arbitrator in that case was to be resolved by applying the 2004 IBA Guidelines.102 In the decision on that challenge, the Secretary-​General of the PCA, appointed by the parties, did not express any difficulty in applying the 2004 version of the IBA Guidelines to resolve the challenge. He held that the relevant question was whether the circumstances, ‘from a reasonable third person’s point of view having knowledge of the relevant facts, give rise to justifiable doubts as to the arbitrator’s impartiality or independence’,103 which represents a substantively identical legal standard as the UNCITRAL Arbitration Rules. While there appears to be no other case where the parties have agreed to adopt the same, or a 8.58 similar, approach to date, there is at least one example of a treaty where the contracting parties provided that the arbitrators should comply with the IBA Guidelines: the Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA).104 Contrary to this trend, a number of decisions have cast doubt over the applicability of 8.59 the IBA Guidelines as the legal standard for the determination of arbitrators’ challenges,

  Id. art. 11(1).  SIAC Arbitration Rules 2016 art. 14.1, http://​www.siac.org.sg/​our-​rules/​rules/​siac-​rules-​2016 (last visited Dec. 10, 2017). 98  Id. art. 13.4. 99  Id. art. 38(3). 100  Total v. Argentina, supra note 20, ¶ 98. 101  Id. 102  Perenco Ecuador Ltd. v. Republic of Ecuador & Empresa Estatal Petróleos del Ecuador (Petroecuador), PCA Case No. IR-​2009/​1, Decision on Challenge to Arbitrator (Dec. 8, 2009), ¶ 2 [hereinafter Perenco v. Ecuador]. 103  Id. ¶ 4. 104  CETA art. 8.30(1). The full text of the CETA is available at http://​trade.ec.europa.eu/​doclib/​docs/​ 2014/​september/​tradoc_​152806.pdf (last visited Dec. 10, 2017). 96 97

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Challenges of Arbitrators in Investment Treaty Arbitration at least in the context of ICSID arbitration.105 For instance, the non-​challenged members of the Tidewater v Venezuela tribunal distinguished the standard of disqualification under Article 57 of the ICSID Convention from the ‘justifiable doubts’ test formulated in the IBA Guidelines.106 Further, the majority of the ad hoc Committee in Total v Argentina observed that the IBA Guidelines relate mainly to standards applicable to the duty to disclose and not to the standards applicable to a disqualification request.107 The same view was echoed by the unchallenged members of the Caratube v Kazakhstan tribunal, which referred to the 2004 version of the IBA Guidelines.108 More recently, in March 2016, the English High Court, in an application to challenge an arbitration award under the English Arbitration Act 1996,109 held that there are [W]‌eaknesses in the 2014 IBA Guidelines in two inter-​connected respects. First, in treating compendiously (a) the arbitrator and his or her firm, and (b) a party and any affiliate of the party, in the context of the provision of regular advice from which significant financial income is derived. Second, in this treatment occurring without reference to the question whether the particular facts could realistically have any effect on impartiality or independence (including where the facts were not known to the arbitrator).110

III.  Innovations in International Investment Agreements 8.60 States have recently also taken steps to tackle the issue of independence and impartiality of

arbitrators, driven in part by the growing voices of criticism of ISDS. A particularly noticeable trend is the introduction of more specific and detailed rules relating to the qualities, independence, and impartiality of arbitrators in investment agreements. These rules can be highly specific and detailed, which may explain why states have labelled them ‘codes’ of conduct or ethics for arbitrators.

8.61 The rules contained in such investment agreements are usually intended to impose a higher

standard of impartiality or independence than those established under the various institutional rules. For instance, under the investment chapter of the EU–​Singapore Free Trade Agreement111 (EU–​Singapore FTA), an arbitrator may be challenged112 if he or she failed to ‘disclose any past or present interest, relationship or matter that is likely to affect his or her independence or impartiality or that might reasonably create an appearance of impropriety

105  In an entirely different context, that of the maritime sovereignty in a state-​ to-​state dispute between Mauritius and the United Kingdom, the tribunal had occasion to observe that the IBA Guidelines (which had been relied upon by the party moving to challenge an arbitrator) were ‘private law sources’, or rules developed in the context of commercial disputes, which could not apply to inter-​state arbitrations. The tribunal concluded that the applicable standard was art. 10 of the PCA Optional Rules, according to which an arbitrator may be successfully challenged if ‘circumstances exist that give rise to justifiable doubts as to the arbitrator’s impartiality or independence’. Chagos Marine Protected Area Arbitration (Mauritius v.  U.K.), Reasoned Decision on Challenge (Nov. 30, 2011), ¶ 138. 106  Tidewater Inc. et al. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​ 10/​5, Decision on Claimant’s Proposal to Disqualify Professor Brigitte Stern, Arbitrator (Dec. 23, 2010), ¶ 43 [hereinafter Tidewater v. Venezuela]. 107  Total v. Argentina, supra note 20, ¶ 98. 108  Caratube v. Kazakhstan, supra note 19, ¶ 59. 109  W Limited v. M Sdn Bhd [2016] E.W.H.C. 422 (Comm). 110  Id. ¶ 34. 111  Text of the EU–​Singapore Free Trade Agreement as of May 2015 is available at http://​trade.ec.europa. eu/​doclib/​press/​index.cfm?id=961 ((last visited Dec. 10, 2017). At the date of writing, the EU–​Singapore Free Trade Agreement has not come into force. 112  Id. art. 9.18, ¶ 8.

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III.  Innovations in International Investment Agreements or bias in the proceedings’.113 The Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators of the latest draft text of the Transatlantic Trade and Investment Partnership (TTIP), and the Code of Conduct for the Australia–​China Free Trade Agreement, contain a substantially identical provision.114 Under these treaty provisions, a failure to disclose per se would violate the Code of Conduct and may consequently lead to disqualification in parallel provisions of arbitral rules. Under Article 57 of the ICSID Convention, a failure to disclose does not per se result in dis- 8.62 qualification.115 Similarly, under the IBA Guidelines, a failure to disclose does not in itself demonstrate that an arbitrator is partial or lacks independence; only the facts and circumstances not disclosed can do so.116 It is worth noting in this regard that the Secretary-​General of the PCA held in a challenge decision in the case of Belokon v Kyrgyz Republic,117 in the context of the UNCITRAL Arbitration Rules 1976, that in certain cases, a failure to disclose circumstances may in itself give rise to justifiable doubts as to the arbitrator’s independence and impartiality.118 However, the decision does not further specify what these circumstances may be. Moreover, in the investment agreements mentioned, where a failure to disclose can in itself 8.63 result in disqualification, the parties also require arbitrators to take all reasonable efforts to become aware of any interests, relationships, or matters that should be disclosed prior to her or his selection as an arbitrator119 and after he or she has been selected.120 Such provisions may be viewed in the light of the fact that the ICSID Arbitration Rules do not specifically require an arbitrator to investigate possible compromising circumstances, and they do not prescribe standards as to the extent and nature of such investigation.121 Another example where the parties to an investment agreement intend to impose a more 8.64 onerous standard on arbitrators is provided by the Comprehensive and Progressive Agreement for Trans-​Pacific Partnership (CPTPP). A code of conduct for arbitrators will apparently be issued by the Trans-​Pacific Partnership Commission as part of the Rules of Procedure prior to

 Emphasis added.   See the draft text of the Transatlantic Trade and Investment Partnership (TTIP) art. 3, ¶ 1 of Annex II of ch. II, http://​trade.ec.europa.eu/​doclib/​docs/​2015/​november/​tradoc_​153955.pdf ((last visited Dec. 10, 2017); at the date of writing, the TTIP is still under negotiation; paragraph 2 of Annex 9-​A of the Free Trade Agreement between the Government of Australia and the Government of the People’s Republic of China, available at:  https://​dfat.gov.au/​trade/​agreements/​chafta/​official-​documents/​Documents/​chafta-​agreement-​ text.pdf (last visited Dec. 10, 2017). 115  Tidewater v. Venezuela, supra note 106, ¶ 40; Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/​07/​16, Decision on Challenge to Arbitrator (Mar. 19, 2010), ¶ 64 [hereinafter Alpha v. Ukraine]; ConocoPhillips v. Venezuela, supra note 13, Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (July 26, 2016), ¶ 12(d). 116  Tidewater v. Venezuela, supra note 106, ¶ 43; ConocoPhillips v. Venezuela, supra note 13, Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator (Feb. 27, 2012), ¶ 60. 117  Valeri Belokon v.  Kyrgyz Republic, PCA Case No. AA518, Decision on Challenges to Arbitrators Professor Kaj Hobér and Professor Jan Paulsson (Oct. 6, 2014) [hereinafter Belokon v. Kyrgyz Republic]. 118  Id. ¶ 68. 119  Code of Conduct of the Australia–​China Free Trade Agreement Annex 9-​A, ¶ 2,; EU–​Singapore Free Trade Agreement, Code of Conduct for Arbitrators and Mediators, Annex 9-​F, ¶ 3; Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators, draft text of the TTIP Annex II, art. 3(1). 120  Code of Conduct of the Australia–​China Free Trade Agreement, Annex 9-​A, ¶ 3; Code of Conduct for Arbitrators and Mediators, EU–​Singapore Free Trade Agreement, Annex 9-​F, ¶ 5; Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators, draft text of the TTIP, Annex II, art. 3, ¶ 3. 121  Suez, Sociedad General de Aguas Barcelona S.A. and Vivendi Universal S.A. v. Argentina and other cases, ICSID Case Nos. ARB/​03/​19 and ARB/​03/​17, Decision on a Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (May 12, 2008), ¶ 47 [hereinafter Second Suez v. Argentina Challenge]. 113 114

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Challenges of Arbitrators in Investment Treaty Arbitration the CPTPP’s entry into force.122 At the date of writing, a draft text of such a code of conduct is not publicly available (assuming that such a draft exists at this stage). However, it is significant that the CPTPP requires arbitrators to comply with the Code of Conduct ‘in addition to the applicable arbitral rules regarding independence and impartiality of arbitrators’.123 On that basis, it appears that the CPTPP negotiators intended to set a more stringent standard for arbitrators, and wished to lower the bar for successful challenges compared with Article 57 of the ICSID Convention. 8.65 Arbitration under ICSID is an option for investor-​state dispute settlement under the invest-

ment agreements mentioned.124 Given the difference in standards prescribed under these investment agreements and under Article 57 of the ICSID Convention, it will be interesting to see how the different standards will be reconciled in challenge decisions arising out of these investment agreements.

8.66 Moreover, an increasing number of recent investment agreements require that arbitrators sit-

ting in investor-​state arbitration should possess specific qualities. These add further grounds of challenge to arbitrators in cases arising out of those agreements to what is provided in the relevant arbitration rules.

8.67 Unlike the ICSID Convention and Rules and the UNCITRAL Arbitration Rules, these

treaties also specify the circumstances in which the arbitrators can be regarded as lacking independence and impartiality. Some recent investment agreements expressly provide that an arbitrator should not take instructions from the disputing parties125 or from any organization or government with regard to matters before a tribunal.126 For instance, paragraph 2 of the EU–​Singapore FTA Code of Conduct provides: Throughout the proceedings, every candidate and arbitrator shall avoid impropriety and the appearance of impropriety, shall be independent and impartial, shall avoid direct and indirect conflicts of interests and shall observe high standards of conduct so that the integrity and impartiality of the dispute settlement mechanism is preserved. Arbitrators shall not take instructions from any organisation or government with regard to matters before a tribunal. Former arbitrators must comply with the obligations established in paragraphs 15, 16, 17 and 18 of this Code of Conduct.127

8.68 Other investment agreements require an arbitrator not to be ‘affiliated with’128 the disputing

parties or the home state of the disputing investor. No further clarification is usually provided 122  See CPTPP final text arts. 9.22(6) and 28.10(1)(d), https://​ www.mfat.govt.nz/​en/​trade/​free-​trade-​ agreements/​free-​trade-​agreements-​concluded-​but-​not-​in-​force/​cptpp/​ (last visited Mar. 13, 2018). 123  Id. (emphasis added). 124  EU–​Singapore FTA art. 9.16(1)(a); TTIP art. 6(2)(a) of s. 3 of ch. II; CPTPP art. 9.19(4)(a). 125  See, e.g., Agreement between the Government of the Republic of Colombia and the Government of the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments art. 12, ¶ 17(b); Australia–​China FTA art. 9.15(8); Agreement between the Government of Canada and the Government of the Republic of Benin for the Promotion and Reciprocal Protection of Investments art. 28(2); Agreement between Canada and the Federal Republic of Nigeria for the Promotion and Protection of Investments art. 26(2). 126  See, e.g., Australia–​ China FTA art. 9.15(8); Code of Conduct for the EU–​Singapore FTA, ¶ 2; Agreement between the Slovak Republic and the Islamic Republic of Iran for the Promotion and Reciprocal Protection of Investments art. 18(5); draft text of the TTIP art. 11(1). 127 Emphasis added. 128  See, e.g., Australia–​China FTA art. 9.15(8); Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India art. 20)(11)(c); Agreement between the Government of Canada and the Government of Burkina Faso for the Promotion and Protection of Investments art 27(2); Agreement between the Government of the Republic of Colombia and the Government of the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments art. 17(b).

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III.  Innovations in International Investment Agreements as to the nature and extent of the affiliation that would fall foul of such a requirement. There are however some exceptions, such as the Australia–​China Free Trade Agreement, which specifies that an individual who is on the panel of potential arbitrators established by the Committee on Investment, which is set up by the two state parties, shall not, by virtue of that fact alone, be deemed to be affiliated with the government of either state party.129 An interesting example is the CETA, which states that the fact that a person receives remu- 8.69 neration from a government does not in itself make that person ineligible as an arbitrator.130 This might be seen as contradictory since, when an individual receives remuneration from a government, there is at least the appearance of financial dependence on that government. By contrast, the Australia–​China Free Trade Agreement and the TTIP require arbitrators to avoid ‘entering into any relationship or acquiring any financial interest that is likely to affect their impartiality or that might reasonably create an appearance of impropriety or bias’.131 The EU–​Singapore FTA, Australia–​China FTA, and the draft text of the TTIP require an 8.70 arbitrator not to allow past or existing financial, business, professional, family, or social relationships or responsibilities to influence his or her conduct or judgment.132 This seems to suggest that it may not be sufficient for the challenging party to demonstrate that an offending relationship exists, but that party must also show that the relationship influences the arbitrator’s conduct or judgment. Apart from arbitrators’ relationships, some recent investment agreements also specify other 8.71 possible sources of improper influence on the arbitrators. For instance, some agreements require arbitrators not to be influenced by ‘self-​interest, outside pressure, political considerations, public clamour, loyalty to a Party or disputing party or fear of criticism’,133 or to ‘incur any obligation or accept any benefit that would in any way interfere or appear to interfere, with the proper performance of their duties’.134 A  significant number of recent investment agreements further require arbitrators to have 8.72 expertise or experience in public international law, international trade, or international investment law, or experience in dispute resolution under international investment agreements.135 Under the TTIP, members of the appeal tribunal in the investment court system ‘shall possess the qualifications required in their respective countries for appointment to be the highest judicial offices, or be jurists of recognised competence’.136 This type of provision

  Australia–​China FTA art. 9.15(8).   CETA art. 8.30(1) n. 10. 131  Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators, draft text of the TTIP, Annex II, art. 5(5)of ; Australia–​China FTA art. 9.15(16). 132  Australia–​China FTA art. 9.15(15); Code of Conduct for Arbitrators and Mediators, EU–​Singapore FTA, Annex 9-​F, ¶ 13; draft text of TTIP, Annex II art. 5(4). 133  Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators, draft text of the TTIP, Annex II art. 5(1); Code of Conduct for Arbitrators and Mediators, EU–​Singapore FTA, Annex 9-​F, ¶ 10; Code of Conduct, Australia–​China FTA, Annex 9-​A,¶ 12. 134  Code of Conduct for Members of the Tribunal, the Appeal Tribunal and Mediators, draft text of the TTIP, Annex II art. 5(2); Code of Conduct for Arbitrators and Mediators, EU–​Singapore FTA, Annex 9-​F, ¶ 11; Code of Conduct, Australia–​China FTA, Annex 9-​A, ¶ 13. 135  See, e.g., Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India art. 20(11)(e); Australia–​China FTA art. 9.15(8); Agreement between the Government of Canada and the Government of the Republic of Benin for the Promotion and Reciprocal Protection of Investments art. 28(2); Agreement between Canada and Mali for the Promotion and Protection of Investments art. 25(2); Agreement between the Government of the Republic of Colombia and the Government of the Republic of Turkey Concerning the Reciprocal Promotion and Protection of Investments art. 12(17); EU–​Singapore FTA art. 9.18(6). 136  See the draft text of the TTIP art. 10(7), section 3. 129 130

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Challenges of Arbitrators in Investment Treaty Arbitration may have the undesired result of limiting the pool of potential candidates for arbitrators’ positions, and encouraging parties to select the same individuals with tried and tested expertise in order to reduce the risk of possible challenges. 8.73 Recent investment agreements also provide that an arbitrator who breaches the confidentiality

of deliberations may be disqualified. For instance, under the EU–​Singapore FTA Code of Conduct, an arbitrator and former arbitrator ‘shall not at any time disclose the deliberations of a tribunal, or any arbitrator’s view regarding the deliberations’.137 If an arbitrator fails to do so, he or she may be open to challenge under the EU–​Singapore FTA.138 Similar provisions can be found in the draft text of the TTIP, the Australia–​China FTA, and the CETA.139

8.74 Another development in recent investment agreements is the inclusion of more specific and

detailed rules concerning the nationality of the arbitrators. For instance, the Agreement on Investment under the Framework on Comprehensive Economic Cooperation between ASEAN and India not only requires the arbitrator to be of a different nationality than the investor but also not to have his or her usual place of residence in the territory of the investor’s home state or the respondent state.140 Under the bilateral investment agreement between Israel and Myanmar, arbitrators are required to be nationals of states having diplomatic relations with both Israel and Myanmar.141 The bilateral investment agreement between India and the United Arab Emirates (UAE) provides that the presiding arbitrator and the appointing authority be a national of a country (apart from India and UAE) which has diplomatic or consular relations with both India and UAE.142

8.75 This recent practice shows an effort by states to provide greater clarity and certainty in

defining the qualities of arbitrators and the contours of the notions of independence and impartiality. While questions persist as to the compatibility of these provisions with existing arbitration rules and possible limitations to the pool of  talent from which arbitrators are drawn, they clearly signal the importance of achieving predictability and a certain consistency when it comes to issues relating to arbitrators’ qualities and the duties inherent in their office.

8.76 A  more drastic response to the question of arbitrators’ impartiality and independence is

found in the EU’s proposal to overhaul the entire model of arbitral tribunals hearing investment arbitrations and replace it with a standing investment court, staffed by judges or members appointed by state parties.143 The latest draft of the TTIP envisages the creation of an investment court system, comprising a permanent tribunal of first instance and a permanent appeal tribunal.144 The former is to be composed of fifteen judges selected by a specialized committee established under the TTIP: five nationals of an EU Member State, five nationals of the United States and five nationals of third countries.145 The TTIP prescribes stringent requirements for their qualifications, providing as follows:   Code of Conduct for Arbitrators and Mediators, EU–​Singapore FTA, Annex 9-​F, ¶ 18.   EU–​Singapore FTA art. 9.18(7). 139  See the draft text of the TTIP art. 7( 3); Code of Conduct of the Australia–​China FTA, Annex 9-​A, ¶ 20; Code of Conduct for Arbitrators and Mediators, CETA, Annex 29-​B, ¶ 19. 140  Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of Southeast Asian Nations and the Republic of India art. 20(11)(b). 141  Agreement between the Government of the State of Israel and the Government of the Republic of the Union of Myanmar for the Reciprocal Promotion and Protection of Investments art. 8(5). 142  Agreement between the Government of the Republic of India and the Government of the United Arab Emirates on the Promotion and Protection of Investments art. 10, ¶¶ 7(a) and 7(b). 143  European Union, DG Trade, Concept Paper, ‘TTIP and Beyond—​The Path for Reform: Enhancing the Right to Regulate and Moving from Current Ad Hoc Arbitration towards an Investment Court’ (May 6, 2015) at 11. 144  See ch. II of the draft text of the TTIP art. 9(4)(3) and art. 10(4)(3). 145  Id. art. 9(2). 137 138

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IV.  Selected Decisions on Challenges The Judges shall possess the qualifications required in their respective countries for appointment to judicial office, or be jurists of recognised competence. They shall have demonstrated expertise in public international law. It is desirable that they have expertise in particular, in international investment law, international trade law and the resolution of disputes arising under international investment or international trade agreements.146

The permanent appeal tribunal will hear appeals from the awards issued by the tribunal of first 8.77 instance. It is to be made up of six members: two nationals of an EU Member State, two nationals of the United States, and two nationals of third countries. The qualifications required for selection to the permanent appeal tribunal are largely the same as those required for selection to the tribunal of first instance except that the judges shall possess the qualifications ‘required in their respective countries for appointment to the highest judicial offices’.147 The TTIP prescribes stringent requirements concerning the independence and impartiality of 8.78 judges on the first instance tribunal and members of the appeal tribunal and require them to comply with a code of conduct. These requirements have been discussed and bear similarities with provisions found in other investment agreements. The creation of a permanent investment court system might address some of the concerns sur- 8.79 rounding the independence and impartiality of arbitrators in ISDS. However, the judges and members of the appeal tribunal, including those from third countries, will be paid a monthly retainer fee by the state parties to the TTIP.148 This may invite questions as to the judges’ financial dependence on the state parties. Moreover, the establishment of such a permanent investment court removes one of the key advantages of arbitration, which is the ability of a party, in this case the investor, to select its own arbitrator. In that light, one might consider whether such a permanent investment court system is sufficiently different from the domestic courts of the host state, and whether it is a truly viable alternative to investor-​state arbitration. Furthermore, under this model, it would appear that, for each investment treaty entered 8.80 into, a separate investment court structure will be created. For instance, the EU–​Vietnam Free Trade Agreement also envisages the establishment of a permanent first instance tribunal and a permanent appeal tribunal.149 The same is the case under the CETA between the EU and Canada.150 If this model is replicated across more investment agreements, it will result in the multiplication of investment courts, all of which are to be staffed by members who are highly qualified, as required under those investment agreements. This would lead to a quickly depleting supply of suitable candidates, creating difficulties in staffing the investment courts with qualified and competent individuals. In addition, as the investment courts will be autonomous to each other, their decisions will not be binding on one another, thus creating the potential for inconsistent, or even contradictory, decisions emanating from different investment courts.

IV.  Selected Decisions on Challenges According to a study co-​authored by the Secretary-​General of ICSID in 2015,151 since 8.81 the first challenge to an arbitrator in Amco v Indonesia in 1982, there have been fifty-​nine

  Id. art. 9(4).   Id. art. 10(7) (emphasis added). 148  Id. art. 9(12) & art. 10(13). 149  EU–​Vietnam FTA arts. 12 & 13, section 3. 150  CETA arts. 8.27 & 8.28. 151  Kinnear & Nitschke, supra note 10, at 34. 146 147

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Challenges of Arbitrators in Investment Treaty Arbitration decisions issued on challenges to ICSID arbitrators and ad hoc Committee members, out of which only four challenges were upheld.152 Notwithstanding the low success rate of challenges, it is significant that the composition of tribunals changed in 30 per cent of the cases where a request for disqualification was brought.153 This reflects the fact that many challenged arbitrators resign before the decision on the challenge is issued, thus signalling the psychological impact of challenges regardless of their outcome.154 The same study records that as of 1 September 2014, eighty-​four ICSID arbitrators and ad hoc Committee member appointments have been subject to challenges.155 This represents only 5.2 per cent of all appointments of ICSID arbitrators and ad hoc Committee members.156 8.82 In a similar study on challenges submitted to the Secretary-​General of the PCA published

in 2015, since 1976, twenty-​six challenges have been submitted to the Secretary-​General of the PCA for determination under the 1976 or 2010 UNCITRAL Arbitration Rules.157 In that same study, it was found that 61 per cent of the challenges submitted to the Secretary-​ General of the PCA were rejected, 25 per cent of them were accepted and 11 per cent of them resulted in a resignation.158

8.83 Consistent decisions on challenges on the same issues have resolved some questions on what

constitutes a lack of independence and impartiality of arbitrators. For instance, it is now clear that repeat appointments by a party are, in and of themselves, unlikely to result in disqualification under the ICSID Convention.159 Rather, the overall circumstances are to be considered, and in particular, if either (a) the prospect of continued and regular appointment, with the attendant financial benefits, might create a relationship of dependence or otherwise influence the arbitrator’s judgment; or (b) there is a material risk that the arbitrator may be influenced by factors outside the record in the case as a result of his or her knowledge derived from other cases.160 However, the question remains: how many repeat appointments is too many?

8.84 Similarly, it now seems to be uncontroversial that an adverse ruling by an arbitrator against a

party does not in and of itself establish a lack of impartiality.161 In the first Abaclat v Argentina challenge,162 one of the grounds raised by Argentina was the ‘manifest arbitrariness’ in the challenged arbitrators’ rejection of Argentina’s urgent request for provisional measures.163 In the second Abaclat v Argentina challenge,164 Argentina challenged the arbitrators on the basis that the procedural decisions on the briefing calendar demonstrated a lack of equality of treatment of the parties.165 Similarly, in the first ConocoPhillips v Venezuela challenge,166

  Id. 37.   Id. 154  Id. For the views of a well-​known arbitrator on this point, see Lalonde, supra note 16, at 641–​53. 155  Kinnear &Nitschke, supra note 10, at 34. 156  Id. 157  See Grimmer, supra note 33, at 82. 158  The remaining 3% of challenges were withdrawn: see Grimmer, id. at 84, Table 3.1. 159  Kinnear & Nitschke, supra note 10, at 57; Grimmer, supra note 33, at 98. 160  See Kinnear & Nitschke, supra note 10, at 58–​59. 161  Id. at 55. 162 Abaclat v.  Argentina, supra note 19, Recommendation Pursuant to the Request by ICSID Dated November 18, 2011 on the Respondent’s Proposal for the Disqualification of Professor Pierre Tercier and Professor Albert Jan van den Berg dated September 15, 2011 (Dec. 19, 2011). 163  Id. ¶ 71. 164  Abaclat v. Argentina, supra note 19, Decision on the Proposal to Disqualify a Majority of the Tribunal (Feb. 4, 2014). 165  Id. ¶ 48. 166  ConocoPhillips v. Venezuela, supra note 13, Decision on the Proposal to Disqualify a Majority of the Tribunal (May 5, 2014). 152 153

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IV.  Selected Decisions on Challenges Venezuela sought to disqualify the arbitrators on the basis of their refusal to entertain an application to reconsider the tribunal’s decision on jurisdiction and merits.167 These challenges were all rejected, showing that a mere adverse ruling is not sufficient to constitute a successful ground for challenge on the basis of lack of impartiality or independence, at least in the context of the ICSID Convention. There remain, however, unresolved questions that require further clarity. This section will dis- 8.85 cuss three of these questions, selected in the light of their growing relevance and importance in recent years.

A. ‘Issue Conflicts’ As a reflection of the uncertainty surrounding this issue, there has yet to be a settled definition 8.86 of the notion of ‘issue conflict’.168 A narrow definition was suggested in Schreuer’s Commentary to denote a situation where ‘an arbitrator is also involved as counsel in another pending case’.169 This type of situation has also been described as ‘role confusion’170 or the ‘dual role scenario’.171 A broader definition of ‘issue conflict’ that has been suggested is ‘actual bias, or an appearance of bias, arising from an arbitrator’s relationship with the subject matter of, as opposed to the parties to, a dispute’.172 The American Society of International Law–​International Council for Commercial Arbitration established in 2013 a Task Force (ASIL–​ICCA Task Force) on issue conflicts in investor-​state arbitration. The task force issued a report on 17 March 2016 but was unable to offer a satisfactory alternative to the expression ‘issue conflict’ and acknowledged that there is no settled definition of the term.173 Indeed, it may be premature at the present time to define this concept before its full extent and significance is understood. The Report of the ASIL–​ICCA Task Force indicates that some members of the arbitration 8.87 community hold the view that ‘issue conflict’ is ‘perhaps the most significant matter affecting the credibility of investor-​state arbitration’.174 One commentator wrote that: ‘[i]‌t is surely only a matter of time before “role confusion” and “issue conflict” raise a serious concern’.175 It is beyond the scope of this section to give the topic of ‘issue conflict’ thorough treatment. 8.88 Moreover, a considerable amount of literature has been written on the matter.176 Thus, this section will only touch upon a few key points that warrant further consideration.

  Id. ¶ 17.   Id. ¶ 11. 169  Schreuer et al., supra note 8, at 1206. 170  P. Sands QC, Conflict of Interest for Arbitrators and/​or Counsel, in Kinnear et al., supra note 16, at 655. 171 R. Zamour, Issue Conflicts and the Reasonable Expectation of an Open Mind: The Challenge Decision in Devas v. India and its Impact, in Challenges and Recusals, supra note 10, at 227–​46. 172 G. Griffith & D. Kalderimis, ‘Pure’ Issue Conflict in Investment Treaty Arbitration, in Practising Virtue: Inside International Arbitration 607 (David Caron et al. eds., 2015). 173  Report of the ASIL–​ ICCA Task Force on Issue Conflicts in Investor-​State Arbitration, ¶ 16, http://​ www.arbitration-​icca.org/​publications/​ASIL-​ICCA_​Report.html. 174  Id. ¶ 11. 175  See Sands, supra note 170, at 655. 176  See, e.g., id., supra note 170, at 655–​ 68; Griffith & Kalderimis, supra note 172, at 607–​ 25; L. Malintoppi, Independence, Impartiality, and Duty of Disclosure of Arbitrators, in Muchlinski et al., supra note 66, at 789–​829; A. Sheppard, Arbitration Independence in ICSID Arbitration, in International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer 131–​56 (Christina Binder et al. eds., 2009); J. Levine, Dealing with Arbitrator ‘Issue Conflicts’ in International Arbitration, 61 Disp. Resol. J. 60 (2006); M. Gearing & A.C. Sinclair, Partiality and Issue Conflicts, 5(4) TDM (2008); M. Hwang & K. Lim, Issue Conflict in ICSID Arbitrations, in Selected Essays on International Arbitration 474–​544 (Michael Hwang ed., 2013); J.R. Brubaker, The Judge Who Knew Too Much: Issue Conflicts in International Adjudication, 26(1) Berk J. Int’l L. 111 (2008). 167 168

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Challenges of Arbitrators in Investment Treaty Arbitration 8.89 It may be thought that ‘issue conflict’ is not about an arbitrator’s relationship with a party or

a counsel since it arises ‘without the overlay of any external relationship’.177 However, while it may be convenient to discuss this type of situation as a distinct category separate from challenges that are based on the arbitrator’s relationship with a party or counsel, the reality may be that this type of challenges can only be fully understood in the context of and in connection with other categories of challenges.

8.90 The same set of facts may give rise to multiple bases for the same challenge, based on the

arbitrator’s relationship with a party or counsel and also on the separate grounds of ‘issue conflict’. For instance, in Caratube v Kazakhstan,178 the claimant challenged the arbitrator on the basis of his repeat appointment by the same counsel or party in three other cases179 and because his appointment in one of those three cases, Ruby Roz, allegedly caused an ‘issue conflict’.180 The challenge was eventually upheld on the ground of ‘issue conflict’. The remaining members of the Caratube tribunal held: Based on a careful consideration of the Parties’ respective arguments and in the light of the significant overlap in the underlying facts between the Ruby Roz case and the present arbitration, as well as the relevance of these facts for the determination of legal issues in the present arbitration, the Unchallenged Arbitrators find that—​independently of Mr. Boesch’s intentions and best efforts to act impartially and independently—​a reasonable and informed third party would find it highly likely that, due to his serving as arbitrator in the Ruby Roz case and his exposure to the facts and legal arguments in that case, Mr. Boesch’s objectivity and open-​ mindedness with regard to the facts and issues to be decided in the present arbitration are tainted. In other words, a reasonable and informed third party would find it highly likely that Mr. Boesch would prejudge legal issues in the present arbitration based on the facts underlying the Ruby Roz case.181

8.91 The challenge based on the arbitrator’s repeat appointment by the same counsel or party was

similarly rejected.182 In reaching this conclusion, the decision cited the following passage from Tidewater v Venezuela: In the view of the Two Members, there would be a rationale for the potential conflict of interest which may arise from multiple arbitral appointments by the same party if either (a) the prospect of continued and regular appointment, with the attendant financial benefits, might create a relationship of dependence or otherwise influence the arbitrator’s judgment; or (b) there is a material risk that the arbitrator may be influenced by factors outside the record in the case as a result of his or her knowledge derived from other cases.183

8.92 In considering point (b) in the cited passage from Tidewater v Venezuela, that is, whether

there was a material risk that the arbitrator may be influenced by factors outside the record in the case as a result of his or her knowledge derived from other cases, the decision noted that this point has been ‘dealt with’ in the section concerning the discussion on ‘issue conflict’.184 This reasoning suggests that ‘issue conflict’ is part of the consideration of whether a challenge based on repeat appointments should be upheld. One might argue, on the basis of the Caratube tribunal’s reasoning, that, where a challenge is based on repeat appointments, the risk of ‘issue conflict’ should always be considered.

  Griffith & Kalderimis, supra note 172.   Caratube v. Kazakhstan, supra note 19. 179  Id. ¶ 100. 180  Id. 181  Id. ¶ 90 (emphasis added). 182  Id. ¶ 107. 183  Tidewater v. Venezuela, supra note 106, ¶ 47. 184  Caratube v. Kazakhstan, supra note 19, ¶ 105. 177 178

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IV.  Selected Decisions on Challenges The viability of such an argument is open to discussion, but it may not be advisable to pre- 8.93 judge the issue whether ‘issue conflict’ is a distinct and separate category of challenge unrelated to other grounds. It may be the case that ‘issue conflict’ can only be fully understood in relation to, in connection with, and in the context of, other grounds of challenges. It has also been suggested that views expressed on similar legal issues are less likely to result 8.94 in this type of challenge compared to views about factual matters specific to the case.185 The 2014 IBA Guidelines treat the expression of a legal opinion concerning an issue that also arises in the arbitration as falling within the Green List and not giving rise to justifiable doubts as to the arbitrator’s impartiality.186 One commentator also observed that an arbitrator should not be successfully challenged for expressing ‘abstract views on how the applicable law in an investment treaty arbitration must be understood and interpreted’.187 However, it is doubtful whether an arbitrator’s views of legal issues should be accorded 8.95 greater latitude by virtue of the mere fact that they concern issues of law, as opposed to facts. In CC/​Devas v India,188 an arbitrator was successfully disqualified on the basis of his views on legal issues. In that arbitration, India sought to rely on an ‘essential security interests’ clause in the Mauritius–​India BIT to justify its alleged breaches of that BIT.189 India argued that in three other ICSID arbitrations chaired by the disqualified arbitrator,190 all subsequently annulled,191 the tribunals had decided that the ‘essential security interests’ provisions in the US–​Argentina BIT incorporated the ‘state of necessity’ defence under customary international law.192 India pointed out that, in two of the other arbitrations, the awards were annulled because of the original tribunal’s ruling on the relevant legal issue, and the third award was annulled because the original tribunal erred in its interpretation of the ‘state of necessity’ defence.193 Subsequent to, and notwithstanding the annulments, the disqualified arbitrator maintained and affirmed his position on the relevant legal issue in an academic article.194 The claimant argued that ‘a prior decision of law or other opinion on a legal issue cannot 8.96 serve as a basis for a challenge’.195 The then president of the International Court of Justice, Judge Peter Tomka, who decided the challenge as the appointing authority, disagreed with the claimant and upheld the challenge, stating: In my view, being confronted with the same legal concept in this case arising from the same language on which he has already pronounced on the four aforementioned occasions could raise doubts for an objective observer as to [the arbitrator’s] ability to approach the question with an open mind. The later article in particular suggests that, despite having reviewed the analyses of the three different annulment committees, his view remained unchanged. Would a reasonable observer believe that the Respondent has a chance to convince him to change his mind on the same legal concept? [The arbitrator] is certainly entitled to his

  Report of the ASIL-​ICCA Task Force on Issue Conflicts in Investor-​State Arbitration, ¶¶ 173–​75.   2014 IBA Guidelines § 4.1.1. 187  S.W. Schill, Arbitrator Independence and Academic Freedom, 15 J. World Inv. & Trade 1, 6 (2015). 188  CC/​Devas (Mauritius) Ltd. and Others v. India, PCA Case No. 2013-​09, Decision on the Respondent’s Challenge to Hon. Marc Lalonde as Presiding Arbitrator and Professor Francisco Orrego Vicuña as Co-​ Arbitrator (Sept. 30, 2013) [hereinafter CC/​Devas v. India]. 189  Id. ¶ 18. 190  Id. India challenged both Mr. Marc Lalonde and Professor Francisco Orrego Vicuña. Only Professor Francisco Orrego Vicuña was successfully disqualified. 191  Id. ¶ 19. 192  Id. 193  Id. 194  Id. ¶ 62. 195  Id. ¶ 56. 185 186

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Challenges of Arbitrators in Investment Treaty Arbitration views, including to his academic freedom. But equally the Respondent is entitled to have its argument heard and ruled upon by arbitrators with an open mind. Here, the right of the latter has to prevail. For this reason, I agree with the Respondent that [the arbitrator] should withdraw from this arbitration.196 8.97 Judge Tomka’s decision in CC/​Devas v India shows that an arbitrator may run the risk to

be disqualified on the basis of his or her views on a legal issue. Indeed, in principle, there is no reason why the positions expressed by arbitrators in their academic writings should be immune from challenges based on ‘issue conflict’. There remain concerns, however, that exposing opinions on legal issues to challenges might result in a chilling effect on academic writing. Judge Tomka’s view, as expressed above, seems to be that the key question is whether a reasonable observer would believe that the challenging party has a chance to convince the arbitrator to change his or her mind on a legal issue on which the arbitrator repeatedly voiced a consistent position. Thus, not only the challenging party must show that the arbitrator expressed certain views on a particular legal issue, but also that the arbitrator is not willing to change her/​his mind on that matter. This is a high threshold for the challenging party to meet.

8.98 Moreover, it is accepted that an arbitrator’s freedom of expression does not render him or

her immune from a challenge where prejudgment on factual issues in a particular case can be shown. It is difficult to maintain that a different position should be accorded to prejudgment on legal, rather than factual, issues, when the arbitrator may potentially cause the same degree of prejudice to the parties and the legitimacy of the arbitral process. In the context of investment arbitration, claims may be dismissed on the basis of a legal ruling. Serious prejudice may thus also result from an arbitrator’s inability, if proven, to consider certain legal issues with an open mind.

B. Administrative Secretaries 8.99 While not strictly a matter related to the independence and impartiality of arbitrators, re-

cent challenges have shown that the role of administrative secretaries, if misused, can have a significant impact on the legitimacy of arbitral tribunals and the integrity of the arbitration process.

8.100 The debate about the propriety of using an administrative secretary to assist the tribunal in

some of its tasks has taken a different dimension in ISDS, particularly in connection with a challenge raised in Yukos v Russian Federation Arbitration,197 where the tribunal’s secretary was accused of going beyond merely administrative functions in the exercise of his duties, thus risking the annulment of the award.

8.101 In the Yukos award, the tribunal found that Russia violated the Energy Charter Treaty and

awarded the former shareholders of Yukos more than US$50 billion in damages. Russia applied to set aside the award in The Hague District Court. One of the grounds Russia relied on for its setting aside request was the fact that the arbitrators allegedly did not perform their mandate, but had delegated it to the administrative secretary to the tribunal.198 Russia argued that the secretary’s recorded hours were between 40 per cent to 70 per cent more than each of the arbitrators.199 Further, Russia produced a linguistic expert export to show that there was a

  Id. ¶ 64.   Yukos Universal Ltd. v. Russian Federation, PCA Case No. AA 227, Final Award (July 18, 2014). 198  Judgment of The Hague District Court (Apr. 20, 2016), ¶ 4.2(3). 199  Writ of Summons filed in The Hague District Court (Nov. 10, 2014), ¶ 497. 196 197

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IV.  Selected Decisions on Challenges 95 per cent likelihood that the assistant drafted important sections of the award. Russia also pointed out the fact that there was no disclosure obligation for the assistant and that he did not make any statement regarding his impartiality and independence.200 While The Hague District Court set aside the award on other grounds and ultimately did 8.102 not deal with this matter, Russia’s arguments nevertheless raised questions regarding the legitimacy of the arbitral proceedings in that case, as well as more general concerns about the proper use of a tribunal secretary. It is common practice in complex international arbitrations for a tribunal secretary to be ap- 8.103 pointed to assist the president of the tribunal. In a survey of a cross-​section of international arbitration practitioners, users, and providers conducted by Young ICCA in 2012, 95 per cent of respondents approved the use of arbitral secretaries.201 The 2012 survey also revealed that in practice an arbitral secretary not only performs administrative tasks, but also non-​administrative tasks, which may include drafting parts of the award and analysing the parties’ submissions.202 In fact, the role of administrative secretaries has occasionally expanded to such an extent that some commentators have referred to the tribunal’s secretary as the ‘fourth arbitrator’.203 However, it is clear that arbitrators should not delegate their decision-​making to the tribunal 8.104 secretary since the mandate of the arbitrator is intuitu personae.204 While an improper delegation of decision-​making is not explicitly provided as a ground for challenge under any existing arbitration rules for the time being, it might arguably amount to a ‘failure to act’ by the arbitrator, which is a ground for challenge under most arbitration rules.205 There are relatively few guidelines or standards governing tribunal secretaries. Regulation 8.105 25 of the ICSID Administrative and Financial Regulations provides that an ICSID tribunal secretary shall perform functions at the request of the President of the tribunal or at the direction of the ICSID Secretary-​General, but does not specify what these functions are. The ICC Rules of Arbitration 2012 are silent on tribunal secretaries, or ‘administrative secretary’ (term used by the ICC).206 However, the ICC Note to the Parties and Arbitral Tribunals on the Conduct of the Arbitration provides that an administrative secretary may perform ‘organisation and administrative tasks’ such as transmitting documents and communications on behalf of the arbitral tribunal, organizing and maintaining the arbitral tribunal’s file and locating documents, conduct legal or similar research, and attending hearings, meetings, and deliberations.207 The ICC Note also clearly provides as follows:

  Id. ¶¶ 485 & 487.   Young ICCA Guide on Arbitral Secretaries, The ICCA Report No. 1, at 2, https://​pca-​cpa.org/​wp-​content/​uploads/​sites/​175/​2016/​01/​ICCA-​Reports-​No.-​1_​Young-​ICCA-​Guide-​on-​Arbitral-​Secretaries.pdf (last visited Dec. 10, 2017). 202  Id. 203  L.W. Newman & D. Zaslowsky, The Fourth Arbitrator: Contrasting Guidelines on Use of Law Secretaries, 248(104) N.Y. L.J. (2012); C. Partasides, The Fourth Arbitrator? The Role of Secretaries to Tribunals in International Arbitration, 18 Arb. Int’l 147 (2002). 204  Young ICCA Guide, supra note 201, at 6. 205  See, e.g., UNCITRAL Arbitration Rules 2013 art. 12(3)and PCA Arbitration Rules 2012 art. 12(2). 206  Nothing has changed in this regard in the 2017 ICC Rules. 207  See ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration, supra note 69, ¶ 84. The Note regarding conduct of the arbitration under the 2017 ICC Rules contains similar language, see https://​cdn.iccwbo.org/​content/​uploads/​sites/​3/​2017/​03/​icc-​note-​to-​parties-​ and-​arbitral-​tribunals-​on-​the-​conduct-​of-​arbitration.pdf (last visited Mar. 14, 2018). 200 201

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Challenges of Arbitrators in Investment Treaty Arbitration Under no circumstances may the arbitral tribunal delegate decision-​making functions to an Administrative Secretary. Nor should the arbitral tribunal rely on the Administrative Secretary to perform any essential duties of an arbitrator.208 8.106 However, in spite of its strong language drafted in mandatory terms, the ICC Note does not

specify what are the ‘decision-​making functions’ or ‘essential duties’ that cannot be delegated by an arbitral tribunal. Similar guidelines issued by the Hong Kong International Arbitration Centre (Guidelines on the Use of a Secretary to the Arbitral Tribunal) contain detailed provisions on the functions that an arbitral secretary may perform,209 but they do not identify the activities that an administrative secretary may not perform.210

8.107 The question of what constitutes the decision-​making functions or essential duties of an arbi-

trator touches on more fundamental issues about arbitration as a mode of dispute settlement. Further questions may be asked concerning whether and to what extent an administrative secretary should assist the arbitrator in the performance of decision-​making functions, participate in the tribunal’s deliberations or perform other essential duties. Should a research note prepared by a tribunal secretary be treated no differently than an academic article read by the arbitrator, or can a meaningful distinction be drawn between what constitutes permissible and impermissible influence?

8.108 There are no easy answers to these questions. The fact remains that, although the use of ad-

ministrative secretaries is not per se objectionable, it needs to be transparent and regulated, in order not to undermine the legitimacy of the arbitration process.

C. Social  Media 8.109 With the rapid development of communications technology and the ever-​expanding role of

social media, there is now an unprecedented number of channels for arbitration practitioners to advertise their skills and express their views in real time, with the potential to reach an extremely large audience. Social media also threatens to blur the line between private and public information with a touch of a button, or more likely, a virtual button.

8.110 In May 2014, the IBA adopted a set of guiding principles on social media conduct for the

legal profession.211 These principles reflect the impact that social media may have on the perceived independence and impartiality of arbitrators. In particular, the IBA principles state the following: Social media creates a context in which lawyers may form visible links to clients, judges and other lawyers. Before entering into an online ‘relationship’, lawyers should reflect upon the professional implications of being linked publicly. Comments and content posted online ought to project the same professional independence and the appearance of independence that is required in practice.

8.111 In that light, a challenge to an arbitrator made on the basis of an online ‘relationship’ is not

a fanciful possibility. Indeed, such a challenge was made by Venezuela in Fábrica de Vidrios

  Id. ¶ 85.   See ¶¶ 3.3 & 3.4. 210 Paragraph 3.2 of the HKIAC Guidelines on the Use of a Secretary to the Arbitral Tribunal provides: ‘The arbitral tribunal shall not delegate any decision-​making functions to a tribunal secretary, or rely on a tribunal secretary to perform any essential duties of the tribunal’. 211  IBA International Principles on Social Media Conduct for the Legal Profession, adopted on May 24, 2014 by the International Bar Association, http://​www.ibanet.org/​Publications/​publications_​IBA_​guides_​ and_​free_​materials.aspx (last visited Dec. 10, 2017). 208 209

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V. Conclusion Los Andes v Venezuela,212 on the basis of the arbitrator’s ties to a law firm, whom Venezuela argued is hostile to its interests as a result of its merger with another firm, which acted against Venezuela in numerous matters. Although the arbitrator left the first firm before the merger, Venezuela repeatedly challenged him on the basis of his alleged ties with that firm. In a challenge brought in July 2016, Venezuela pointed out that one of the arbitrator’s assistants was described on her LinkedIn profile as ‘working since August 2013 until the present day as an attorney in the international arbitration practice at [the relevant firm]’. On that basis, Venezuela complained that the arbitrator’s assistant had access to the case file for Fábrica de Vidrios Los Andes v Venezuela. The unchallenged members of the tribunal said that a ‘serious question’ would arise over the 8.112 integrity of the proceedings if Venezuela’s assertions were true. Thus, they held that it was ‘legitimate and proper’ for Venezuela to seek clarifications from the arbitrator over this matter. The arbitrator clarified that his assistant’s description on her LinkedIn profile was ‘inaccurate’ and that she was not a member of the firm in question. The remaining members of the tribunal accepted the arbitrator’s explanation and rejected Venezuela’s challenge on that basis. This challenge is a timely reminder that members of the arbitration community should be 8.113 mindful that the information uploaded on social media profiles may be used against them or others. It also raises difficult questions about the evidential weight to be accorded to online profiles and actions more generally. In this case, the information on the assistant’s LinkedIn profile appears to have been simply rebutted by the arbitrator’s explanation that the profile was inaccurate. However, it is not difficult to imagine that, in a similar situation, further and actual proof of the assistant’s lack of involvement with the relevant law firm might be necessary, such as a statement from the firm confirming that the assistant was in fact not an employee. Related questions come to mind. Can being ‘Friends’ on Facebook or a connection on 8.114 LinkedIn be used as evidence of a close relationship between an arbitrator and a party or counsel which may affect the arbitrator’s impartiality?213 Can the fact that an arbitrator has ‘liked’ or ‘shared’ a post on Facebook be used as evidence of her/​his approval of the contents of the post in support of a challenge based on ‘issue conflict’? For the time being, all of this may appear to be far-​fetched, but as demonstrated by the challenge in Fábrica de Vidrios Los Andes v Venezuela, these questions may surface again and may need to be answered at some point.

V. Conclusion In recent years, new measures have been taken from different quarters to defend and 8.115 strengthen the legitimacy of ISDS. Issues relating to the independence and impartiality of arbitrators and their commitment to make themselves available and resolve disputes efficiently remain at the forefront of the reform process. The lack of a centralized rule-​making authority means that every user of the system, be it arbitral institution, professional association, arbitrator, or state negotiating an investment agreement, is at liberty to devise the

212  Fábrica de Vidrios Los Andes v. Venezuela, ICSID Case No. ARB/​12/​21, Decision on the Proposal to disqualify L. Yves Fortier, Q.C., Arbitrator (May 5, 2017), https://​www.italaw.com/​sites/​default/​files/​case-​ documents/​italaw8815.pdf. (last visited Dec. 10, 2017). 213  Paragraph 4.4.4 of the IBA Guidelines 2014 states that where ‘[t]‌he arbitrator has a relationship with one of the parties or its affiliates through a social media network’, this situation falls under the Green List.

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Challenges of Arbitrators in Investment Treaty Arbitration best method to confront and counter the backlash against ISDS. As a variety of different approaches emerges, it remains to be seen whether certain ‘best practices’ will be recognized and, if so, whether uniform standards will be developed. 8.116 The effects of the steps taken so far and their impact on future challenges can only be meas-

ured in time. Provisions inserted by states into their investment agreements and new codes of conduct for arbitrators will be tested when these agreements enter into force, if and when challenges are raised. In the meantime, it is significant, and encouraging, that arbitral institutions and international organizations such as UNCITRAL appear to be increasingly collaborating in an effort to achieve a greater harmonization of applicable standards and rules.

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9 PIERCING THE VEIL OF CONFIDENTIALITY The Recent Trend towards Greater Public Participation and Transparency in Investment Treaty Arbitration Andrea J Menaker and Eckhard Hellbeck

C. Third-​party Submissions in ICSID Cases  9.77 D. Treatment of Third-​party Submissions by Other Arbitral Rules  9.108 E. Treatment of Third-​party Submissions by Other Investment Treaties  9.113

I. Introduction  II. Public Access to Documents 

9.01 9.09 A. The NAFTA Approach  9.12 B. ICSID’s Disclosure Regime  9.21 C. The UNCITRAL Rules on Transparency  9.32 D. The Mauritius Convention  9.38 E. Mandating Disclosure Through Investment Treaty Provisions  9.41 III. Third-​party Written Submissions  9.52 A. NAFTA Chapter 11: The Beginning of Modern Third-​party Participation in Investment Arbitration  9.54 B. The NAFTA Free Trade Commission Interpretation and Guidelines and Subsequent NAFTA Practice  9.65

IV. Public Access to Arbitral Hearings 

9.121 A. The NAFTA Experience: The First Open Hearings  9.122 B. Open Hearings Under the ICSID Arbitration Rules: Still Subject to the Parties’ Consent  9.136 C. Open Hearings: Recent Developments 9.144 V. Conclusion  9.157

I. Introduction One of the advantages that disputing parties traditionally sought when choosing arbitra- 9.01 tion over litigation was confidentiality. The potentially far-​reaching policy implications of investment arbitration and the intense public interest generated by investment disputes, however, have caused arbitral organizations, tribunals, and disputing parties alike to rethink the precise nature and extent of the disputing parties’ confidentiality obligations or lack thereof. Developments in NAFTA Chapter  11 arbitrations, including the NAFTA Free Trade 9.02 Commission’s Interpretations and Guidelines, the 2006 Amendments to the ICSID Rules, the UNCITRAL Rules on Transparency, and the Mauritius Convention, along with corresponding developments in NAFTA, ICSID, and UNCITRAL jurisprudence, point towards the establishment of greater transparency and openness in investment arbitration. Underlying this evolution is the expectation that increased public awareness will allay suspicions that arbitral secrecy allows ‘backroom dealings’ in matters of great public concern, and will augment the legitimacy of investment arbitration by enhancing public confidence in the fairness and integrity of the arbitral process.

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Piercing the Veil of Confidentiality 9.03 Seizing the opportunity presented by UNCITRAL revising its Arbitration Rules for the

first time in thirty years, certain governments and organizations proposed amendments to provide greater transparency in investment arbitrations under the rules,1 which are increasingly utilized in investment arbitrations.2 While there were reservations about including such provisions in the generic rules,3 UNCITRAL made transparency in investor-​state treaty-​ based arbitration a matter of priority for the period after completing the revision of the UNCITRAL Arbitration Rules.4 In 2013, UNCITRAL adopted Rules on Transparency in Treaty-​based Investor-​State Arbitration (UNCITRAL Rules on Transparency), which apply to arbitrations based on investment treaties concluded on or after April 1, 2014.5 To make these rules applicable to arbitration based on earlier treaties, it prepared the Convention on Transparency in Treaty-​based Investor-​State Arbitration (Mauritius Convention).6

9.04 In early 2016, the Stockholm Chamber of Commerce (SCC) released for public consultation

a draft revision of its Arbitration Rules.7 While the revision, which entered into effect on January 1, 2017, keeps intact the obligation of confidentiality,8 it contains a new appendix for treaty-​based investor-​state disputes that permits third parties to apply to the tribunal for permission to make written submissions.9

9.05 The new Investment Arbitration Rules of the Singapore International Arbitration

Centre (SIAC), which also entered into effect on January 1, 2017, similarly provide by default for confidentiality, but allow third parties to seek the tribunal’s permission to make written submissions.10

9.06 Additionally, over the past few years, the United States, Canada, and the European Union

have incorporated ‘transparency’ provisions into their investment treaties.11 Arbitration under those treaties thus will not be confidential, regardless of the arbitral rules governing them.12 1  See, e.g., International Institute for Sustainable Development (IISD), Revising the UNCITRAL Arbitration Rules to Address Investor-​State Arbitrations (December 2007), http://​www.iisd.org/​pdf/​2007/​investment_​revising_​uncitral_​arbitration.pdf (last visited Mar. 17, 2018). 2  See UNCTAD, Investor-​State Dispute Settlement: Review of Developments in 2015, IIA Issues Note No. 2, June 2016, at 2, Figure 1. 3 UNCITRAL Working Group on Arbitration and Conciliation, Report of the Working Group on Arbitration and Conciliation on the Work of its Forty-​Eighth Session (Feb. 4–​8, 2008) 69, U.N. Doc. A/​CN.9/​646 (Feb. 29, 2008). 4  Id. 5  UNCITRAL Rules on Transparency in Treaty-​based Investor-​State Arbitration [hereinafter UNCITRAL Rules on Transparency]. 6  United Nations Convention on Transparency in Treaty-​based Investor-​State Arbitration, G.A. Res. 69/​ 116, U.N. Doc. A/​Res/​69/​116 (Dec. 18, 2014) [hereinafter Mauritius Convention]. 7  SCC Draft Rules 2017 in Focus (May 13, 2016). 8  See 2017 Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce [hereinafter 2017 SCC Arbitration Rules] art. 3 (‘Unless otherwise agreed by the parties, the SCC, the Arbitral Tribunal and any administrative secretary of the Arbitral Tribunal shall maintain the confidentiality of the arbitration and the award’). 9  Id. Appendix III (Investment Disputes) art. 3(1). 10  See Investment Arbitration Rules of the Singapore International Arbitration Centre (Jan. 1, 2017) [hereinafter SIAC Investment Arbitration Rules], Rule 21.4 (‘Unless otherwise agreed by the Parties, all meetings and hearings shall be in private, and any recordings, transcripts, or documents used in relation to the arbitral proceedings shall remain confidential’), Rule 29 (Third-​Party Submissions), Rule 37 (Confidentiality). 11  See, e.g., Canada–​ China FIPA (Sept. 1, 2012)  art. 28 (Public Access to Hearings and Documents), art. 29 and Annex C.29 (Submissions by a Non-​Disputing Party); U.S.–​Uruguay BIT (Nov. 4, 2005) art. 29 (Transparency of Arbitral Proceedings); U.S.–​Rwanda BIT (Feb. 19, 2008)  art. 29 (Transparency of Arbitral Proceedings); Trans-​Pacific Partnership Agreement (Feb. 4, 2016) art. 9.24 (Transparency of Arbitral Proceedings); EU–​Singapore FTA (Authentic Text as of May 2015) art. 9.22, Annex 9-​G (Rules on Public Access to Documents, Hearings and the Possibility of Third Persons to Make Submissions). 12  Notably, the Comprehensive Economic and Trade Agreement Between Canada, on the One Part, and the European Union and its Member States (CETA), which provides for investor-​state dispute settlement by

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II.  Public Access to Documents By contrast, Russia’s 2016 regulation for the negotiation of investment treaties recommends 9.07 excluding application of the UNCITRAL Rules on Transparency and expressly providing for confidentiality of the arbitration, including the award, unless both parties consent in writing to disclose information.13 This chapter, which traces the development of public disclosure and participation in in- 9.08 vestment arbitration, is divided into three sections:  public access to arbitral documents, third-​party written submissions, and public access to arbitration hearings. Each section first addresses developments under NAFTA Chapter 11, followed by the evolution of the practice under the ICSID Arbitration Rules, the approach taken by the new UNCITRAL Rules on Transparency, the status of other arbitration rules, and the practice of certain states as shown in their recent treaties.

II.  Public Access to Documents Whether parties to an investment arbitration may release to the public documents gener- 9.09 ated during that arbitration is a threshold issue, which involves competing interests. The fact that a state has been subject to a claim under an investment treaty and the outcome of the resulting arbitration certainly are matters of public concern. The public also may have an interest in the positions advanced by its government in the proceeding. That information, moreover, may prove critical for third parties wishing to make amicus submissions. It is widely accepted that the disputing parties have a legitimate interest in protecting all 9.10 commercially sensitive, privileged, or otherwise protected information exchanged during the arbitration, although the parameters of any privilege and its invocation with respect to any particular document may be disputed. Even where there is no claim of protected information, public disclosure of documents may raise legitimate concerns for parties, as public reporting may exacerbate the dispute, affect witnesses’ willingness to testify, and have other negative repercussions. How tribunals and states have dealt with these issues, and the approaches they have taken 9.11 with respect to document disclosure in investment arbitrations, is the subject of this section.

A. The NAFTA Approach The NAFTA contains few provisions regarding public access to information in investor-​state 9.12 arbitrations under Chapter  11 other than the filing of the request for arbitration and the publication of the ensuing award. The fact that a request for arbitration under NAFTA Chapter 11 has been filed is a matter of 9.13 public record. Notices of (or Requests for) Arbitration are filed with the NAFTA Secretariat which must maintain them in a public register.14 The publication of NAFTA Chapter 11 awards is addressed by Annex 1137.4. In cases in which the United States or Canada is a a standing court system, rather than arbitration, expressly adopts the UNCITRAL Rules on Transparency. See CETA (Oct. 30, 2016) art. 8.36. 13  Government of the Russian Federation, Decision No. 992 on the Conclusion of International Treaties of the Russian Federation on the Promotion and Protection of Investments (Sept. 30, 2016), Appendix No. 2, ¶ 53(e), http://​pravo.gov.ru/​proxy/​ips/​?docbody=&prevDoc=102071479&backlink=1&&nd=102412234 (last visited Mar. 17, 2018); see also J. Dahlquist, Russia Sets Out New Guidelines for Contents of Future Investment Treaties, IAReporter (Oct. 26, 2016). 14  North American Free Trade Agreement (NAFTA) (Dec. 17, 1992) art. 1126(10) & (13).

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Piercing the Veil of Confidentiality respondent, either disputing party may publish the award. When Mexico is a respondent, however, the issue is governed by the applicable arbitration rules, which, in the case of the UNCITRAL Arbitration Rules (unless the new Rules on Transparency apply), provide that an award may be made public only with the consent of both parties (or where necessary to protect or pursue a legal right or in relation to legal proceedings).15 9.14 In early Chapter 11 cases—​governed in some cases by the ICSID Additional Facility Rules

and in others by the UNCITRAL Arbitration Rules—​the parties frequently disagreed as to whether, absent any confidentiality agreement or order, a party was entitled to publicize aspects of the dispute and documents generated during the arbitration. In some cases, it was the respondent state that sought to publish the information, while in other cases the claimant sought to do so.

9.15 While tribunals generally recognized the parties’ obligations to comply with domestic dis-

closure laws, such as the Freedom of Information Act in the United States (FOIA),16 some tribunals ordered the parties to refrain from publishing arbitration materials where there was no legal duty to do so, while others permitted disclosure.

9.16 In response to a complaint that the claimant had disclosed information pertaining to the ar-

bitration in a conference call with shareholders, the Metalclad v Mexico tribunal noted that: [t]‌hough it is frequently said that one of the reasons for recourse to arbitration is to avoid publicity, unless the agreement between the parties incorporates such a limitation, each of them is free to speak publicly of the arbitration.17

The tribunal, however, went on to state that: it still appears to the Arbitral tribunal that it would be of advantage to the orderly unfolding of the arbitral process and conducive to the maintenance of working relations between the Parties if during the proceedings they were both to limit public discussion of the case to a minimum, subject only to any externally imposed obligation of disclosure by which either of them may be legally bound.18

The Loewen v United States tribunal similarly rejected the notion that the arbitration was cloaked in confidentiality, but concurred with the Metalclad v Mexico tribunal that the parties should limit disclosure of information pertaining to the case to what was necessary.19 9.17 In Mondev v United States, the tribunal issued an order directing that the United States could

not publish on its website a tribunal order and interim decision. It reasoned that because, pursuant to Article 44(2) of the then-​existing ICSID Arbitration (Additional Facility) Rules,

15  UNCITRAL Arbitration Rules, G.A. Res. 68/​ 109, U.N. Doc. A/​RES/​68/​109 (Dec. 16, 2013)  art. 34(5). The ICSID and ICSID Additional Facility Rules provide that the Secretariat may not publish the award absent the consent of both parties. ICSID Arbitration Rules art. 48(5), as amended and effective April 10, 2006; ICSID Arbitration (Additional Facility) Rules, art. 53(3), as amended and effective April 10, 2006. In many cases where that consent has not been forthcoming, one of the parties has published the award elsewhere. 16  The U.S. Freedom of Information Act, 5 U.S.C. § 552 (2002), imposes a statutory obligation on U.S. federal government agencies to comply with requests for information contained in government records, subject to specific, enumerated exceptions. 17  Metalclad Corp. v. United Mexican States, ICSID Case No. ARB(AF)/​97/​1, Procedural Order No. 1 (Oct. 27, 1997) ¶ 9. 18  Id. 19 The Loewen Group, Inc. & Raymond L.  Loewen v.  United States of America, ICSID Case No. ARB(AF)/​98/​3, Decision on Hearing of Respondent’s Objection to Competence and Jurisdiction (Jan. 5, 2001) ¶¶ 25–​26.

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II.  Public Access to Documents minutes of hearings could not be published absent consent of the parties, the tribunal’s order and interim decision, which reflected the outcome of that hearing, similarly could not be published.20 A few months later, the tribunal issued another order directing that, absent any statutory obligation to disclose documents (such as, for example, under FOIA), neither party could publish any documents filed in the proceedings other than those which were being maintained on a public register (e.g. the Notice of Arbitration).21 Those restrictions were lifted once the final award was issued.22 The S.D. Myers v Canada tribunal similarly concluded from the fact that the hearing in 9.18 the case was closed to the public that written submissions made by the parties, both in advance of the hearing and in post-​hearing briefs, were also to be maintained as confidential.23 In other cases, such as Methanex v United States, the parties agreed that documents could be made publicly available, with protections for confidential or otherwise protected information.24 The issue of public access to documents in NAFTA Chapter 11 arbitrations ultimately was set- 9.19 tled by an Interpretation by the NAFTA Free Trade Commission (NAFTA FTC),25 which provides, in relevant part: 1. Nothing in the NAFTA imposes a general duty of confidentiality on the disputing parties to a Chapter Eleven arbitration, and, subject to the application of Article 1137(4), nothing in the NAFTA precludes the Parties from providing public access to documents submitted to, or issued by, a Chapter Eleven tribunal. 2. In application of the foregoing: (a) In accordance with Article 1120(2),26 the NAFTA Parties agree that nothing in the relevant arbitral rules imposes a general duty of confidentiality or precludes the Parties from providing public access to documents submitted to, or issued by, Chapter Eleven tribunals, apart from the limited specific exceptions set forth expressly in those rules. (b) Each Party agrees to make available to the public in a timely manner all documents submitted to, or issued by, a Chapter Eleven tribunal, subject to redaction of: (i) confidential business information; (ii) information which is privileged or otherwise protected from disclosure under the Party’s domestic law; and (iii) information which the Party must withhold pursuant to the relevant arbitral rules, as applied. [ . . . ]

20  Mondev Int’l Ltd. v. United States of America, ICSID Case No. ARB(AF)/​99/​2 [hereinafter Mondev v. United States], Interim Decision Regarding Confidentiality of Documents (Nov. 13, 2000). 21  Mondev v. United States, supra note 20, Order and Further Interim Decision Regarding Confidentiality (Feb. 27, 2001). 22  Mondev v. United States, supra note 20, Final Award (Oct. 11, 2002) ¶¶ 28–​29. 23  S.D. Myers, Inc. v. Government of Canada, NAFTA/​UNCITRAL, Procedural Order No. 11 (Nov. 11, 1999) ¶¶ 12–​13. 24  Methanex Corp. v. United States, NAFTA/​ UNCITRAL, Procedural Order No. 1 (June 29, 2000) § 15:2 (allowing the dissemination of certain pleadings); id. Minutes of Second Procedural Meeting (Sept. 7, 2000), Item 4 (memorializing the confidentiality agreement between the parties). 25  NAFTA Free Trade Commission, Notes on Interpretation of Certain Chapter 11 Provisions, § A (July 31, 2001). The NAFTA FTC is comprised of the trade ministers of each of the three NAFTA Parties and has the authority to issue interpretations of provisions of the Treaty which are binding on NAFTA Chapter 11 tribunals. See NAFTA arts. 2001, 1131(2). 26  NAFTA art. 1120(2) provides that: ‘[t]‌he applicable arbitration rules shall govern the arbitration except to the extent modified by this Section’.

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Piercing the Veil of Confidentiality 3. The Parties confirm that nothing in this interpretation shall be construed to require any Party to furnish or allow access to information that it may withhold in accordance with Articles 2102 or 2105.27 9.20 In the aftermath of the NAFTA FTC’s interpretation, the public has nearly unfettered access

to the relevant documents generated in NAFTA Chapter 11 arbitrations. Each NAFTA party maintains a website (each linked to the other parties’ sites)28 where tribunal orders, awards, and submissions of the parties are posted.29 In most cases, transcripts of hearings are also published.30 Where confidential or otherwise protected information is referenced in a submission, the disputing party generally creates both redacted and unredacted versions of that document. The unredacted versions are transmitted to the tribunal and the non-​disputing NAFTA parties, while the redacted version is posted to the party’s website. In some cases, redactions have been made to the tribunal’s award before it was made publicly available.31

B. ICSID’s Disclosure Regime 9.21 Once registered, the ICSID Secretariat publishes the fact that a request for arbitration has

been filed. Additional information published by ICSID on its website includes the subject matter of the dispute; the identity of the arbitrators; and the procedural status of the case, including, for example, dates of hearings, whether an award has been issued, and whether the proceedings have been discontinued at the request of the parties.32 Links to many decisions and awards that have been published by ICSID are also provided.33

27  NAFTA arts. 2102(a) and 2105 provide that a NAFTA party is not required to disclose information where doing so would be contrary to its essential security interests, would impede law enforcement, or would be contrary to legal obligations to protect privacy or financial information. 28  The United States’ website is maintained at http://​www.state.gov/​s/​l (last visited Mar. 17, 2018); Canada’s website is maintained at http://​www.international.gc.ca/​trade-​agreements-​accords-​commerciaux/​topics-​ domaines/​disp-​diff/​nafta.aspx?lang=eng (last visited Mar. 17, 2018); and Mexico’s website is maintained at http://​www.gob.mx/​se/​acciones-​y-​programas/​comercio-​exterior-​solucion-​de-​controversias?state=published (last visited Mar. 17, 2018). 29  See Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/​05/​22 [hereinafter Biwater v. Tanzania], Proc. Order No. 3 (Sept. 29, 2006) ¶ 131 (‘NAFTA arbitration has probably achieved the highest level of transparency in this field. Memorials, procedural orders and other decisions, as well as awards, are now made public on a routine basis, and can be consulted for example on the U.S. Department of State website . . .’). See also Canfor Corporation v. United States of America; Tembec Inc. et al. v. United States of America and Terminal Forest Products Ltd. v. United States of America, UNCITRAL, Order of the Consolidation Tribunal (Sept. 27, 2005) ¶¶ 138–​40 (rejecting confidentiality concerns as an argument against consolidating proceedings in light of the NAFTA FTA interpretation). 30  In one case, in a ruling made after the NAFTA FTC Interpretation had been issued, the Pope & Talbot v. Canada tribunal ordered that hearing transcripts could not be published because the hearing itself had been closed to the public. The tribunal reasoned that the NAFTA FTC’s Interpretation did not foreclose its ruling because hearing transcripts were not ‘documents submitted to, or issued by, a Chapter Eleven tribunal’ and, thus, were not within the purview of documents that each Party had agreed to make public. See Pope & Talbot, Inc. v. Canada, UNCITRAL/​NAFTA, Interim Order of Confidentiality (Mar. 11, 2002) ¶ 15. 31  See, e.g., Fireman’s Fund Ins. Co. v. United Mexican States, ICSID Case No. ARB(AF)/​ 02/​1, Award (Redacted) (July 17, 2003); Archer Daniels Midland Co. v.  United Mexican States, ICSID Case. No. ARB(AF)/​04/​05, Award (Redacted) (Nov. 21, 2007); Mobil Investments Canada Inc. & Murphy Oil Corp. v. Canada, ICSID Case No. ARB(AF)/​07/​4), Award (Redacted) (Feb. 20, 2015). 32  See https://​icsid.worldbank.org (last visited Mar. 17, 2018). Regulation 23 of the ICSID Administrative and Financial Regulations obliges the ICSID Secretary-​General to maintain an ‘Arbitration Register’, ‘open for inspection by any person’, which contains ‘all significant data concerning the institution, conduct and disposition of each proceeding, including in particular the method of constitution and the membership of each Commission, Tribunal and Committee’ and ‘any request for the supplementation, rectification, interpretation, revision or annulment of the award, and any stay of enforcement’. 33  Detailed information about the first ICSID case, Holiday Inns S.A. and Others v. Morocco, ICSID Case No. ARB/​72/​1, was not published until 1993, and it only became known to practitioners after one of the counsel involved, the late Pierre Lalive, wrote an article, some 15 years after the arbitration settled in

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II.  Public Access to Documents Article 48(4) of the ICSID Arbitration Rules, and Article 53(3) of the ICSID Additional Facility 9.22 Rules provide that ICSID shall not publish the award without the consent of the parties. This rule applies only to ICSID, however, and parties have published the award elsewhere, even when consent from the other party was not forthcoming. In addition, in cases where the parties do not consent to ICSID publication, the ICSID Arbitration Rules provide that ICSID ‘shall [] promptly include in its publications excerpts of the legal reasoning of the tribunal’.34 Prior to the 2006 amendments, these rules provided only that ICSID ‘may’ include in its publications excerpts ‘of the legal rules applied by the tribunal’.35 In 2010, ICSID initiated a project to ‘make more ICSID jurisprudence publicly available’. Its Secretariat proposed to contact parties in concluded cases to seek their authorization to publish decisions, orders, and awards not yet published by the Centre. It announced that this case law would be posted on ICSID’s website if both parties agreed to publication, and, in the event one or both parties expressed concerns about confidentiality, ICSID would seek to publish the rulings with appropriate excerpts or in the form of a general description. As part of an ongoing rules amendment process initiated by the ICSID Secretariat in October 2016, consideration is being given to expand the scope of the rule beyond awards to include tribunal decisions and orders. The ICSID Arbitration Rules contain no other provisions concerning the disclosure of docu- 9.23 ments. Thus, nothing in the rules prohibits a party from publishing documents generated during the arbitration; similarly, the rules do not mandate disclosure. ICSID practice, however, suggests that, unlike NAFTA Chapter 11 arbitrations, publication of the parties’ submissions will not become commonplace. In one of the earliest ICSID cases, Amco v Indonesia, the tribunal rejected a request for a 9.24 provisional measure enjoining a party from providing details of the ongoing dispute to the press. That tribunal noted that neither the rules nor the ICSID Convention prevented the parties from disclosing such information; it did, however, warn that the parties ‘should refrain, in their own interests, to do anything that could aggravate or exacerbate the dispute’.36 The World Duty Free v Kenya tribunal concurred, stating that ‘[t]‌hough it is frequently said that one of the reasons for recourse to arbitration is to avoid publicity, unless the agreement between the parties includes such a restriction, each of them is still free to speak of the arbitration’, as long as the party’s statements are ‘factually accurate’ and do not ‘aggravate or exacerbate the dispute’.37 The Biwater v Tanzania tribunal, for its part, had directed that pleadings and written me- 9.25 morials not be disclosed to the public.38 Nonetheless, Tanzania subsequently published certain documents, including a tribunal order, on a website and indicated its intention to publish others, such as the claimant’s memorial. The claimant, in turn, objected and sought an order prohibiting such disclosure. The tribunal found that ‘the risks to the integrity of the proceedings, and the danger of an aggravation or exacerbation of this dispute have yet to manifest themselves in concrete terms’,39 but, given the high level of media attention to the case, the

1978. See Pierre Lalive, The First World Bank Arbitration (Holiday Inns v. Morocco)—​Some Legal Problems, 1 ICSID Rep. 645 (1993). 34  ICSID Arbitration Rules art. 48(4), as amended and effective April 10, 2006; ICSID Additional Facility Rules art. 53(3), as amended and effective April 10, 2006. 35  ICSID Arbitration Rules (2003) art. 48(4); ICSID Additional Facility Rules (2003) art. 53(3). 36 Amco Asia Corp. and Others v.  Republic of Indonesia, ICSID Case No. ARB/​ 81/​1, Provisional Measures (Dec. 9, 1983), 1 ICSID Rep. 410, 412. 37 World Duty Free Co. Ltd. v.  Republic of Kenya, ICSID Case No. ARB/​ 00/​7, Award (Sept. 25, 2006) ¶ 16. 38  Biwater v. Tanzania, supra note 29, Procedural Order No. 3 (Sept. 29, 2006). 39  Id. ¶ 144.

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Piercing the Veil of Confidentiality tribunal was ‘satisfied that there exists a sufficient risk of harm or prejudice, as well as aggravation, in this case to warrant some control [over the public disclosure of documents]’.40 It thus ordered that, while the parties could discuss the case publicly so long as they avoided aggravating the dispute and could publish awards, as had been previously agreed, neither party could publish tribunal decisions or orders without obtaining the tribunal’s prior consent.41 It also prohibited disclosure of the records or minutes of hearings, documents produced by the parties in the arbitration, and the parties’ pleadings and submissions and documents appended thereto, including expert reports. The tribunal emphasized that its decision was predicated on preserving the procedural integrity of the arbitration, and not on any general implied duty of confidentiality of the proceedings.42 9.26 More recently, the United Utilities v Estonia tribunal directed the parties to refrain from

publishing any arbitration documents, including the parties’ written submissions, witness statements, expert reports, and documents produced, or any excerpt or extract of these documents.43 The tribunal cited Biwater, stating that ‘[i]‌n the absence of any agreement between the parties on this issue, there is no provision imposing a general duty of confidentiality in ICSID arbitration, whether in the ICSID Convention, any of the applicable rules or otherwise. Equally, however, there is no provision imposing a general rule of transparency or non-​ confidentiality in any of these sources’.44

9.27 The tribunal then noted that there is a right to procedural integrity and non-​aggravation of

the dispute in the arbitral proceedings,45 and observed that, although other tribunals had found that publication of documents would exacerbate the dispute, it does not follow that publication in every case would do so.46 In the circumstances of the case at hand, however, the tribunal found that there was a connection between publicity related to the arbitration and harm, not only to the proceedings, but also to the parties’ underlying interests and rights,47 because the basis for one of the alleged violations of the bilateral investment treaty (BIT) was a purported negative media campaign.48 The tribunal accordingly prohibited publication of certain arbitral documents, but permitted the parties to engage in general discussion concerning the case.49

9.28 Similarly, in Telefónica v Mexico, the tribunal disallowed publication of arbitral documents

where the parties had not reached an agreement on the confidentiality of the proceeding, in order to preserve the integrity of the proceeding and protect information subject to confidentiality concerns.50 The tribunal, however, did not prohibit general discussion of the case in

  Id. ¶ 146.   Id. ¶ 153. 42  Id. ¶ 121. 43  United Utilities (Tallinn) B.V. & Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/​ 14/​24, Decision on Respondent’s Application for Provisional Measures (May 12, 2016) ¶ 114. 44  Id. ¶ 81. 45  Id. ¶ 91. 46  Id. ¶ 93. 47  Id. ¶ 95. 48  Id. ¶ 94. 49  Id. ¶ 114. 50 Telefónica S.A.  v.  United Mexican States, ICSID Case No. ARB(AF)/​ 12/​4 [hereinafter Telefónica v. Mexico], Procedural Order No. 1 (July 8, 2013) ¶¶ 32–​41. In his dissenting opinion, Arbitrator Ricardo Ramírez Hernández criticized the majority’s presumption of confidentiality, without providing an adequate basis. The dissent suggests that the party requesting confidentiality should have to prove the existence of a reasonable risk that the dispute will be exacerbated if information about the case is disclosed. Telefónica v. Mexico, supra, Dissenting Opinion in respect to Procedural Resolution No. 1 on Confidentiality (July 8, 2013) ¶¶ 3–​10. 40 41

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II.  Public Access to Documents public, as long as such discussions were not used ‘as an instrument to circumvent the terms’ of the tribunal’s order.51 Tribunals have taken different approaches in response to requests for arbitral documents 9.29 from third parties that have been permitted to make submissions in the arbitration. In three cases, Vivendi v Argentina, Biwater v Tanzania, and United Utilities v Estonia, ICSID tribunals denied the third-​parties’ requests when the disputing parties objected to the disclosure of their submissions. Those tribunals found that the third parties had sufficient information concerning the dispute and could make submissions on issues within their areas of expertise without access to the disputing parties’ submissions.52 While none of the three tribunals found that it lacked the authority to order such disclosure if circumstances had so warranted, in an earlier decision, the Suez tribunal hinted at a reluctance to allow such disclosure when it noted that a ‘broad request for all documentation in the case raises difficult and delicate questions because of certain constraints in the ICSID Convention and Rules and in the practice of the Centre’.53 In AES v Hungary, the tribunal granted the European Commission permission to file a sub- 9.30 mission, but denied its request for documents, including the parties’ written submissions, because the disputing parties had not reached an agreement on the issue of confidentiality.54 By contrast, in Infinito Gold v Costa Rica, the tribunal allowed a third party making an amicus 9.31 curiae submission to have access to the arbitral documents, over the claimant’s objection.55 The absence of any general presumption of confidentiality in the ICSID Rules, the lack of a confidentiality agreement between the parties, and the desire to enable the amicus to prepare an effective submission, which would not contain either redundant or useless information, formed the basis for the tribunal’s decision. Similar reasoning was applied by the tribunals in Foresti v South Africa56 and Electrabel v Hungary,57 both of which granted non-​parties access to arbitral documents in order to prepare amicus submissions.

C. The UNCITRAL Rules on Transparency The UNCITRAL Rules on Transparency apply to arbitrations governed by the UNCITRAL 9.32 Arbitration Rules that are initiated pursuant to treaties concluded on or after April 1, 2014. The rules may apply to an UNCITRAL arbitration initiated under an earlier-​concluded treaty only if the parties to the arbitration agree to apply the rules.58 The Rules on Transparency also are available for arbitrations initiated under other rules if the treaty parties or the parties to the arbitration so agree.59   Telefónica v. Mexico, supra note 50, Procedural Order No. 1 (July 8, 2013) ¶ 33.   Suez, Sociedad General de Aguas de Barcelona, S.A. & Vivendi Universal, S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​19 [hereinafter Vivendi v.  Argentina], Order in Response to a Petition by Five Non-​Governmental Organizations for Permission to Make an Amicus Curiae Submission (Feb. 12, 2007) ¶¶ 24, 25; Biwater v. Tanzania, supra note 29, Procedural Order No. 5 (Feb. 2, 2007) ¶ 65. 53  See Vivendi v.  Argentina, supra note 52, Order in Response to a Petition for Transparency and Participation as Amicus Curiae (May 19, 2005) ¶ 30; Biwater v. Tanzania, supra note 29, Procedural Order No. 5 (Feb. 2, 2007) ¶ 66. 54  AES Summit Generation Ltd. & AES-​ Tisza Erömü Kft. v.  Republic of Hungary, ICSID Case No. ARB/​07/​22 [hereinafter AES v. Hungary], Award (Sept. 23, 2010) ¶ 3.22. 55  Infinito Gold Ltd. v. Republic of Costa Rica, ICSID Case No. ARB/​ 14/​5 [hereinafter Infinito Gold v. Costa Rica], Procedural Order No. 2 (June 1, 2016) ¶ 43. 56  Piero Foresti, Laura de Carli and Others v. Republic of South Africa, ICSID Case No. ARB(AF)/​07/​1 [hereinafter Foresti v. South Africa], Letter Regarding Non-​Disputing Parties (Oct. 5, 2009). 57  Electrabel S.A. v. Hungary, ICSID Case No. ARB/​07/​19 [hereinafter Electrabel v. Hungary], Procedural Order No. 4 (Apr. 28, 2009). 58  UNCITRAL Rules on Transparency art. 1.1. 59  Id. art. 1.3. 51 52

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Piercing the Veil of Confidentiality 9.33 The Rules on Transparency were incorporated into the revised UNCITRAL Arbitration

Rules, adopted in December 2013, through an amended Article 1(4), which states: ‘[f ]‌or investor-​State arbitration initiated pursuant to a treaty providing for the protection of investments or investors, these Rules include the UNCITRAL Rules on Transparency in Treaty based Investor-​State Arbitration (“Rules on Transparency”), subject to article 1 of the Rules on Transparency’.60

9.34 Preceding this development, one source of frustration for advocates of greater transparency

in investor-​state arbitrations had been the increasing use of the UNCITRAL Arbitration Rules. Many investment treaties, unlike the NAFTA and some more modern treaties, do not address issues such as publication of notices of arbitration, awards, and submissions made to tribunals. In such circumstances, the tribunal will be guided only by the applicable arbitration rules themselves.

9.35 Unless the new Rules on Transparency apply, UNCITRAL arbitrations are not routinely

recorded in any public registry, as they are not necessarily administered by any institution. While the commencement of many investor-​ state arbitrations under the UNCITRAL Arbitration Rules is now publicized, this is not required under the pre-​existing UNCITRAL Arbitration Rules, and the public cannot ascertain with certainty whether a specific claim has been filed or the number of investor-​state arbitrations initiated under the UNCITRAL Arbitration Rules. Furthermore, Article 34(5) of those rules provides that ‘[t]‌he award may be made public only with the consent of both parties’.

9.36 Article 3 of the UNCITRAL Rules on Transparency is dedicated to publication of docu-

ments. Subject to Article 7, which protects confidential information, Article 3 requires the following documents to be made available to the public: the notice of arbitration, the response to the notice of arbitration, the statement of claim, the statement of defence, and any further written statements or written submissions by any disputing party; a table listing all exhibits, expert reports and witness statements, if such a table has been prepared for the proceedings; any written submissions by the non-​disputing party (or parties) to the treaty and by third persons; transcripts of hearings, where available; and orders, decisions and awards of the arbitral tribunal.61 Article 3 also provides, again subject to Article 7, that expert reports and witness statements shall be made available to the public upon request.62

9.37 The UNCITRAL Rules on Transparency were applied for the first time in 2015, in an

UNCITRAL arbitration administered by the Permanent Court of Arbitration (PCA) and initiated under the Spain–​Bolivia BIT, Iberdrola v Bolivia.63 That case, however, was soon settled, so only a few case materials existed that were published on the PCA’s website.64 The UNCITRAL Rules on Transparency also were applied, by agreement of the disputing parties, in BSG Resources v Guinea, an ICSID arbitration initiated on the basis of foreign investment legislation.65 The parties’ written submissions and the tribunal’s orders in that case are publicly available on the ICSID website.66   UNCITRAL Arbitration Rules (2013) art. 1(4).   UNCITRAL Rules on Transparency art. 3.1. 62  Id. art. 3.2. 63  Iberdrola, S.A. & Iberdrola Energía, S.A.U. v. Plurinational State of Bolivia, PCA Case No. 2015-​05, Procedural Order (Aug. 7, 2015) ¶ 14. 64  See https://​pcacases.com/​web/​view/​115 (publishing the claimants’ Notice of Arbitration and the tribunal’s Procedural Order and Order of Termination) (last visited Mar. 17, 2018). 65  BSG Resources Ltd., BSG Resources (Guinea) Ltd. & BSG Resources (Guinea) SÀRL v. Republic of Guinea, ICSID Case No. ARB/​14/​22, Procedural Order No. 2 (Sept. 17, 2015). 66  See https://​icsid.worldbank.org/​en/​Pages/​cases/​casedetail.aspx?CaseNo=ARB/​14/​22 (last visited Mar. 17, 2018). 60 61

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II.  Public Access to Documents D. The Mauritius Convention The Mauritius Convention obligates its parties to apply the UNCITRAL Rules on Transparency 9.38 to arbitrations based on pre-​existing investment treaties (to which the UNCITRAL Rules on Transparency otherwise would not apply).67 The Convention entered into force on October 18, 2017 and, as of March 17, 2018, had been signed by twenty-​two states and ratified by three: Mauritius, Canada, and Switzerland.68 Under its Article 3, a party may declare that the Convention does not apply to a specific invest- 9.39 ment treaty—​thus choosing under which of their investment treaties arbitrations will be transparent. Depending on the extent to which states make such reservations, this may significantly narrow the breadth of the Convention.69 The ICSID and UNCITRAL Arbitration Rules remain the most commonly used for investor-​ 9.40 state arbitrations; the SCC Arbitration Rules are the third most commonly used, and have been used in several high-​profile investment disputes.70 Many arbitration rules are silent on the topic of public disclosure of certain documents.71 Others, like the ICSID Arbitration Rules, prohibit the institution from publishing an award absent consent of the parties, but are silent regarding the parties’ ability to publish awards.72 Like ICSID, the ICDR cannot publish awards absent the parties’ consent, but retains the ability to publish sanitized versions of those awards.73 Still other arbitration rules, including the recently amended LCIA Arbitration Rules, prohibit disclosure of documents, including awards, absent consent of the parties.74   See Mauritius Convention, supra note 6, arts. 1, 2.   For the current status of signatures and ratification, see Status page, at https://​treaties.un.org/​Pages/​ ViewDetails.aspx?src=TREATY&mtdsg_​no=XXII-​3&chapter=22&clang=_​en (last visited Mar. 17, 2018). 69  At the time of this writing, no reservation has been declared. See Status page, supra note 68 (last visited Mar. 17, 2018). 70  See, e.g., Quasar de Valores SICAV S.A.  et  al. v.  Russian Federation, SCC Case No. V024/​ 2007; RosInvestCo UK Ltd. v.  Russian Federation, SCC Case No. V079/​2005; Vladimir Berschader & Moïse Berschader v.  Russian Federation, SCC Case No. 080/​2004. In 2015, the SCC administered 12 investment treaty arbitrations under the SCC Arbitration Rules. See SCC Arbitration Institute, A Great Year for Investment Treaty Disputes, at http://​www.sccinstitute.com/​statistics/​investment-​disputes-​2017/​ (last visited Mar. 17, 2018). 71  See ICC Rules of Arbitration art. 22(3), effective January 1, 2013 (‘Upon the request of any party, the arbitral tribunal may make orders concerning the confidentiality of the arbitration proceedings or of any other matters in connection with the arbitration and may take measures for protecting trade secrets and confidential information’); Permanent Court of Arbitration Rules 2012 art. 34(5), effective December 17, 2012 (‘An award may be made public with the consent of all parties or where and to the extent disclosure is required of a party by legal duty, to protect or pursue a legal right in relation to legal proceedings before a court or other competent authority’). 72  See SCC Arbitration Institute Arbitration Rules art. 46, effective January 1, 2017 (providing that the SCC Institute and tribunal shall maintain the confidentiality of the arbitration, unless otherwise agreed by the parties, but not addressing a party’s ability to make public certain documents); see also id. Appendix III (maintaining the confidentiality obligation, but adding a new appendix that permits third parties in treaty-​ based investment arbitrations to apply to the tribunal for permission to make written statements and in that connection to obtain access to the parties’ submissions and documents filed in the arbitration). 73  ICDR International Arbitration Rules art. 30(3), effective June 1, 2014 (‘An award may be made public only with the consent of all parties or as required by law, except that the Administrator may publish or otherwise make publicly available selected awards, orders, decisions, and rulings that have become public in the course of enforcement or otherwise and, unless otherwise agreed by the parties, may publish selected awards, orders, decisions, and rulings that have been edited to conceal the names of the parties and other identifying details’); ICSID Arbitration Rules, Rule 48(4) (‘The Centre shall not publish the award without the consent of the parties. The Centre shall, however, promptly include in its publications excerpts of the legal reasoning of the Tribunal’). 74  See LCIA Arbitration Rules art. 30(1), effective October 1, 2014 (providing that, unless the parties agree otherwise in writing, they undertake to keep confidential all awards and other materials in the proceedings, 67 68

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Piercing the Veil of Confidentiality E. Mandating Disclosure Through Investment Treaty Provisions 9.41 In their recent investment treaties, the United States, Canada, and the European Union have

provided for the public disclosure of documents relating to the investment arbitrations proceeding thereunder. These provisions will govern regardless of the arbitration rules utilized in the arbitration.

9.42 The 2012 US Model BIT, and previously the 2004 US Model BIT, for example, contain a

separate provision on ‘Transparency of Arbitral Proceedings’, which requires the respondent to transmit to the non-​disputing party and publish: (a) the notice of intent; (b) the notice of arbitration; (c) pleadings, memorials, and briefs submitted to the tribunal by a disputing party and any written submissions submitted pursuant to Article 28(2) [Non-Disputing Party submissions] and (3) [Amicus Submissions] and Article 33 [Consolidation]; (d) minutes or transcripts of hearings of the tribunal, where available; and (e) orders, awards, and decisions of the tribunal.75

9.43 The provision clarifies, however, that it does not require the respondent ‘to disclose protected

information or to furnish or allow access to information that it may withhold in accordance with Article 18 [Essential Security Article] or Article 19 [Disclosure of Information Article].’76

9.44 This provision has been incorporated into a number of United States BITs and free trade

agreements (FTAs).77 The same provision is also found in the Investment chapter of the Trans-​Pacific Partnership Agreement (TPP).78

9.45 Canada’s 2004 Model Foreign Investment Promotion and Protection Agreement (FIPA)

similarly contains a provision for disclosure of documents. It provides that ‘[a]‌ll documents submitted to, or issued by, the tribunal shall be publicly available, unless the disputing parties otherwise agree, subject to the deletion of confidential information’.79 This provision appears in Canada’s FIPAs and FTAs since that time.80 The provision tends to appear as part except to the extent disclosure may be obligated as a matter of law or to protect or pursue a legal right to enforce or challenge an award in a legitimate legal proceeding). 75  2012 U.S. Model BIT art. 29(1); 2004 U.S. Model BIT art. 29(1). 76  2012 U.S. Model BIT art. 29(3); 2004 U.S. Model BIT art. 29(3). 77  U.S.–​Singapore FTA (May 6, 2003) art. 15.20; U.S.–​Chile FTA (June 6, 2003) art. 10.20 (in lieu of the term ‘protected information’ that appears in the Model BIT and other agreements, this FTA contains the phrase ‘confidential business information or information that is privileged or otherwise protected from disclosure under a Party’s law’); U.S.–​Morocco FTA (June 15, 2004) art. 10.20; Dominican Republic–​Central America–​United States FTA (Aug. 5, 2004) [hereinafter DR–​CAFTA) art. 10.21; U.S.–​Uruguay BIT (Nov. 4, 2005) art. 29; U.S.–​Oman FTA (Jan. 19, 2006) art. 10.20; U.S.–​Peru TPA (Apr. 12, 2006) art. 10.21; U.S.–​Colombia FTA (Nov. 22, 2006) art. 10.21; U.S.–​Panama FTA (June 28, 2007) art. 10.21; U.S.–​Korea FTA (June 30, 2007) art. 11.21; U.S.–​Rwanda BIT (Feb. 19, 2008) art. 29. 78  Trans-​Pacific Partnership Agreement (Feb. 4, 2016) art. 9.24. 79  Agreement between Canada and _​_​_​_​_​for the Promotion and Protection of Investments (2004) [hereinafter Canada 2004 Model FIPA] art. 38(3). 80  Canada–​Peru FIPA (Nov. 14, 2006) art. 38(3); Canada–​Latvia FIPA (May 5, 2009) Annex C ¶ I(3); Canada–​Czech Republic FIPA (May 6, 2009) Annex B ¶ I(3); Canada–​Romania FIPA (May 8, 2009) Annex C ¶ I(3); Canada–​Jordan FIPA (June 28, 2009)  art. 38(3); Canada–​Slovak Republic FIPA (July 20, 2010)  Annex B ¶ I(3); Canada–​Kuwait FIPA (Sept. 26, 2011)  art. 30(1); Canada–​Benin FIPA (Jan. 9, 2013) art. 33(1); Canada–​Tanzania FIPA (May 17, 2013) art. 30(1); Canada–​Serbia FIPA (Jan. 9, 2014) art. 31(1); Canada–​Côte d’Ivoire FIPA (Nov. 30, 2014) art. 30(1); Canada–​China FIPA (Sept. 9, 2012) art. 28 (with some modification); Canada–​Burkina Faso FIPA (Apr. 20, 2015) art. 32; Canada–​Guinea FIPA (May 27, 2015) art. 31; Canada–​Hong Kong FIPA (Feb. 10, 2016) art. 29 (with some modification); Canada–​Peru FTA (May 29, 2008) art. 835(3)(8); Canada–​Colombia FTA (Nov. 21, 2008) art. 830(1); Canada–​Panama

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II.  Public Access to Documents of a broader section addressing the access of the general public to hearings and documents in the arbitration, and was the subject of a recent procedural decision in EuroGas and Belmont v Slovak Republic.81 The respondent in that case sought to include in the procedural order a reference to Section 1 of Annex B of the Canada–​Slovakia FIPA, which requires hearings to be open to the public and requires all documents submitted to, or issued by, the tribunal to be made publicly available, subject to the redaction of confidential information.82 The claimants objected for two reasons. First, they contended that, while the Canada–​Slovakia FIPA applied to Belmont, a Canadian investor, it did not apply to EuroGas, a US investor proceeding in the arbitration jointly under the US–​Slovakia BIT.83 The tribunal dismissed this objection, reasoning that if EuroGas did not wish to be impacted by the Canada–​Slovakia FIPA, then it should not have filed its arbitration with Belmont jointly.84 Secondly, the claimants submitted that, by virtue of the most favoured nation provision of the Canada–​Slovakia FIPA, Belmont was entitled to the allegedly more favourable treatment under the ICSID regime (hearings will not be open to the public if either party objects), as compared to the case under the Canada–​Slovakia FIPA (hearings shall be open to the public).85 The tribunal was not convinced, finding: The basis for the Tribunal’s jurisdiction over the dispute between Belmont and the Slovak Republic lies in the Treaty between Canada and the Slovak Republic. The Treaty’s provisions addressing the exercise of such jurisdiction therefore bind the Tribunal. The possibility offered by the Treaty to investors to bring their claims against one of the Parties before an ICSID Tribunal cannot be understood as having the effect of setting aside, whenever such a choice is made by claimants, its own express provisions regarding publicity.86

Moreover, in the tribunal’s view, ‘the possibility under the ICSID Arbitration Rules for either 9.46 party to object to public access to hearings does not constitute per se a regime more favourable to the investor than one in which public access is imposed. It can even result in the State objecting to public access, where the investor would want public access to be imposed’.87 The Free Trade Agreement negotiated by the European Union and Singapore, Annex 9-​G, con- 9.47 tains express provisions on transparency that, inter alia, require all pleadings, hearing transcripts, orders and awards to be made available to the public, while the tribunal may decide to make other documents publicly available as well.88 A further illustration is Norway’s Model BIT, which, since 2007, has contained an article 9.48 entitled ‘Transparency of Proceedings’.89 That article provides for the public disclosure of

FTA (May 14, 2010) art. 9.30(1); Canada–​Honduras FTA (Nov. 5, 2013) art. 10.35(3); but see Canada–​ Korea FTA (Sept. 23, 2014) art. 8.35(1) (following the U.S. model). 81  EuroGas Inc. & Belmont Resources Inc. v. Slovak Republic, ICSID Case No. ARB/​14/​14 [hereinafter EuroGas & Belmont v. Slovak Republic], Procedural Order No. 2 (Apr. 16, 2015). 82  Id. ¶ 1; Canada–​Slovak Republic FIPA (July 20, 2010) Annex B. 83  EuroGas & Belmont v. Slovak Republic, supra note 81, Procedural Order No. 2 (Apr. 16, 2015) ¶ 3. 84  Id. ¶ 5. 85  Id. ¶¶ 3–​4. 86  Id. ¶ 6. 87  Id. 88  EU–​Singapore FTA (Authentic Text as of May 2015), Annex 9-​G (Rules on Public Access to Documents, Hearings and the Possibility of Third Persons to Make Submissions) art 1(1). 89 Agreement between the Kingdom of Norway and _​ _​ _​ _​ _​for the Promotion and Protection of Investments, Draft Version 130515 [hereinafter Norway 2015 Model BIT] art. 19; Agreement between the Kingdom of Norway and _​_​_​_​_​for the Promotion and Protection of Investments, Draft Version 191207 art. 19.

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Piercing the Veil of Confidentiality all documents submitted to, or issued by, a tribunal, excepting information designated as confidential.90 9.49 India’s 2015 Model BIT contains a similar provision, stating that ‘subject to applicable

law regarding protection of confidential information’, the respondent state shall ‘make available to the public’ the notice of dispute and arbitration, the pleadings and other written submissions, transcripts of hearings and decisions, orders, and awards issued by the tribunal.91

9.50 Australia, for its part, has since 2008 incorporated into the investment chapters of several of

its free trade agreements a transparency provision which provides that the respondent shall make available to the non-​disputing state-​party to the treaty and to the public documents ranging from the notice of intent and notice of arbitration to the transcripts of hearings and the orders and decisions of the tribunal.92 This is subject to restrictions where disclosure would impede law enforcement, would be contrary to the respondent-​state’s law regarding treatment of official information or matters relating to personal privacy, or would be contrary to the state’s essential security interests.93

9.51 Finally, Singapore and the regional grouping of which it is a member, the Association of

South-​East Asian Nations, or ASEAN, have in some of their international investment agreements included transparency provisions for arbitral proceedings. For example, the ASEAN Comprehensive Investment Agreement provides that the respondent-​state may, in its discretion, choose to make publicly available all awards and decisions of the tribunal. It further provides that the tribunal is bound to observe any designation by a party that the information or document it submits in the arbitration is to be treated as confidential, and not to be disclosed to the public.94 This type of provision has carried over into subsequent ASEAN investment agreements, such as its agreement with Australia and New Zealand,95 and its agreement with India.96 For Singapore the first example of a transparency-​related provision appeared in its free trade agreement with the US. It has since been carried over in abridged form in multilateral agreements involving ASEAN, and then, more recently, in the signed TPP97 and EU–​Singapore FTA.98

90  Norway’s Model BIT also contains a procedure for challenging the designation of information as confidential and a mechanism for addressing such disputes. See Norway 2015 Model BIT, supra note 89, art. 19(3). 91  Model Text for the Indian BIT art. 22. 92  Australia–​Chile FTA (July 20, 2008) art. 10.22(1); Australia–​Korea FTA (Apr. 8, 2014) art. 11.21(1); Australia–​China FTA (June 17, 2015) art. 9.17(2). 93  Australia–​Chile FTA (July 20, 2008) art. 10.22(3); Australia–​Korea FTA (Apr. 8, 2014) art. 11.21(3); Australia–​China FTA (June 17, 2015) art. 9.17(4). 94  ASEAN Comprehensive Investment Agreement (Feb. 26, 2009) art. 39. The ASEAN member states are: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. 95  Agreement Establishing the ASEAN–​Australia–​New Zealand Free Trade Area (Feb. 27, 2009) art. 26. 96  Agreement on Investment under the Framework Agreement on Comprehensive Economic Cooperation between the Association of South East Asian Nations and the Republic of India (Dec. 11, 2014) art. 20(17) & (18). 97  Trans-​Pacific Partnership Agreement (Feb. 4, 2016) art. 9.24. 98  EU–​Singapore FTA (Authentic Text as of May 2015), Annex 15-​A ¶ 39 (‘The Parties and their advisers shall maintain the confidentiality of the arbitration panel hearings where the hearings are held in closed session, in accordance with Rule 32 of this Annex, the deliberations and interim panel report, and all written submissions to, and communications with the panel’).

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III.  Third-party Written Submissions

III.  Third-​party Written Submissions Beginning with a series of NAFTA Chapter 11 cases, the practice of allowing third parties to 9.52 file written submissions has gained substantial ground in investor-​state arbitration. In 2004, the NAFTA parties confirmed that such participation was permissible under the NAFTA; ICSID did the same in 2006, when it amended its Arbitration Rules. Parties and tribunals continue to address how best to determine the appropriateness of third-​ 9.53 party petitions and how to strike a balance between enabling the petitioners to be of assistance to the tribunal and ensuring that their participation does not unduly burden either the parties or the tribunal.

A. NAFTA Chapter 11: The Beginning of Modern Third-​party Participation in Investment Arbitration The first recent investment arbitration case to confront the question of third-​party submis- 9.54 sions was the Methanex case,99 which concerned a challenge to California executive action and regulations banning the use of a gasoline additive in gasoline that contaminated groundwater. Citing the public issues in the case, including its potential impact on states’ willingness to adopt environmental legislation, four NGOs filed petitions to participate as amici.100 The 1976 UNCITRAL Arbitration Rules, which governed that arbitration, are silent on the 9.55 issue of third-​party participation (the UNCITRAL Rules on Transparency did not exist when the Methanex arbitration was initiated). NAFTA Chapter 11 provides expressly only for the participation of non-​disputing state parties to the NAFTA.101 Faced with the NGOs’ petitions, the United States argued that Article 15(1) of the 9.56 UNCITRAL Arbitration Rules, which grants the tribunal authority to conduct the arbitration in the manner it deems appropriate, provided the tribunal with the necessary authority to accept third-​party submissions.102 Canada, in a submission made pursuant to Article 1128, similarly supported the tribunal’s authority to accept such petitions.103 Mexico and the claimant, on the other hand, both rejected the notion that the tribunal 9.57 had such authority. Methanex argued that accepting amicus submissions was beyond the

99  The question of amicus participation had arisen before the Iran–​U.S. Claims Tribunal. That tribunal, however, had the benefit of an interpretive note to the UNCITRAL Arbitration Rules agreed upon by the state parties to govern those proceedings, which expressly provided for third-​party participation. Iran–​ U.S. Claims Tribunal, Tribunal Rules of Procedure (May 3, 1983), Note 5 to art. 15(1) of the UNCITRAL Arbitration Rules (stating, in relevant part, that ‘[t]‌he arbitral tribunal may, having satisfied itself that the statement of one of the two Governments—​or, under special circumstances, any other person—​who is not an arbitrating party in a particular case is likely to assist the arbitral tribunal in carrying out its task, permit such Government or person to assist the tribunal by presenting oral or written statements’). 100  Methanex Corp. v. United States, NAFTA/​UNCITRAL, Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001). 101  See NAFTA art. 1128 (‘On written notice to the disputing parties, a Party [to NAFTA] may make submissions to a tribunal on a question of interpretation of this Agreement’). 102  Methanex Corp. v. United States, NAFTA/​ UNCITRAL, Statement of Respondent United States of America Regarding Petitions or Amicus Curiae Status (Oct. 27, 2000), at 7; Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶¶ 17–​19. In its submission, the United States cited in support the practice of the WTO Appellate Body, which accepts amicus submissions, as well as decisions of domestic courts that had rejected the notion that arbitration was inherently confidential. 103  Methanex Corp. v. United States, NAFTA/​UNCITRAL, Submission of the Government of Canada (Nov. 10, 2000); Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶ 10.

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Piercing the Veil of Confidentiality tribunal’s jurisdiction, would have a disruptive effect on the orderly conduct of the proceedings, would increase the parties’ costs, and would be unfair to it.104 Mexico’s main objections were twofold. First, it argued that Article 1128 governed the nature and full extent of permissible third-​party participation in NAFTA Chapter 11 disputes.105 Allowing other third parties to make submissions whose scope may extend beyond treaty interpretation, it argued, circumvented the Treaty’s limited inclusion of third parties in the arbitral process and granted non-​signatories more extensive rights than those enjoyed by the NAFTA parties themselves. Secondly, Mexico contended that the establishment of third-​party practice in NAFTA arbitration would distort the balance the Treaty is supposed to strike between the legal systems of the signatory states, some of which permit amicus participation (such as the United States) and others that do not (such as Mexico).106 9.58 The tribunal ruled that allowing a third party to make an amicus submission fell within its

broad discretion to oversee the proceedings, since it did not affect in any way the procedural or substantive rights of the disputing parties or state parties participating under Article 1128.107

9.59 The tribunal also determined that the participation of amici through written submissions

would not violate the parties’ right to be treated equally and not to be burdened unfairly, noting the fact that either party could choose to incorporate amicus arguments into the presentation of its case, in which event the opposing party would have had to respond even if the source of the additional arguments were not the amicus submission, but extraneous sources.108

9.60 Finally, the Methanex v United States tribunal recognized the public interest in the arbitration,

which arose from the arbitration’s subject matter, and observed that amicus participation would increase transparency, which could prove beneficial for public acceptance of arbitration under NAFTA Chapter 11.109

9.61 Nine months after the Methanex v United States decision, another NAFTA Chapter 11 tri-

bunal in UPS v Canada, also governed by the UNCITRAL Rules, made a similar ruling. That dispute concerned a challenge to Canada Post’s activities, and petitioners for amicus status included the Canadian Union of Postal Workers and the Council of Canadians, a civic organization focused on a broad array of issues, including fair business practices within Canada.

104  See generally Methanex Corp. v. United States, NAFTA/​ UNCITRAL, Submissions of the Claimant Respecting the Petition of [IISD] (Aug. 31, 2000); Further Submissions of the Claimant to the [Amicus Petitions] (Oct. 27, 2000); Rejoinder of Claimant to the Petitions (Nov. 22, 2000); Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶¶ 11–​15. 105  Methanex Corp. v. United States, NAFTA/​ UNCITRAL, Submission of Mexico Pursuant to Article 1128 (Nov. 10, 2000) ¶¶ 2–​7; Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶ 9. 106  Methanex Corp. v. United States, NAFTA/​ UNCITRAL, Submission of Mexico Pursuant to Article 1128 (Nov. 10, 2000) ¶¶ 11–​14; Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶ 9. 107  The tribunal noted, in this regard, that the state parties have a right under the Treaty to make submissions on issues of treaty interpretation, while participating non-​parties would ‘acquire . . . no rights at all’. Methanex Corp. v. United States, NAFTA/​UNCITRAL, Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶ 30; accord, Submission of Respondent United States of America Regarding Petitions for Amicus Curiae Status (Oct. 27, 2000). 108  Methanex Corp. v. United States, NAFTA/​UNCITRAL, Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶ 36. 109  Id. ¶¶ 47–​52.

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III.  Third-party Written Submissions The amici in UPS grounded their petition on their interest in the outcome of the arbitration, 9.62 which they claimed would directly affect their membership, as well as on their concern over the broader public policy consequences of the tribunal’s decision. In addition, petitioners noted that they had an interest in addressing the ‘lack of transparency that has historically attended international arbitral processes’.110 The NAFTA parties, not surprisingly, took the same positions before the UPS tribunal that 9.63 they had taken before the Methanex tribunal: Canada and the United States supported the tribunal’s authority to accept the petitions, while Mexico rejected that contention.111 Unlike Methanex, UPS posited that the tribunal might have jurisdiction to grant amicus status under appropriate circumstances, although it argued that such status should not be granted at that time.112 The UPS v Canada tribunal effectively adopted the reasoning of Methanex v United States, 9.64 finding that it had authority under Article 15(1) of the UNCITRAL Arbitration Rules to accept the amicus submissions113 and determined it would accept written amicus submissions, which would be limited and otherwise regulated to protect the procedural and substantive rights of the disputing parties.114

B. The NAFTA Free Trade Commission Interpretation and Guidelines and Subsequent NAFTA Practice In October 2004, the NAFTA FTC issued the following interpretation:

9.65

1. No provision of the [NAFTA] limits a Tribunal’s discretion to accept written submissions from a person or entity that is not a disputing party (a ‘non-​disputing party’). 2. Nothing in this statement by the [FTC] prejudices the rights of NAFTA Parties under Article 1128 of the NAFTA.115

At the same time, it issued non-​binding guidelines setting out the criteria to be considered by 9.66 a tribunal in evaluating amicus petitions: In determining whether to grant leave to file a non-​disputing party submission, the Tribunal will consider, among other things, the extent to which:

110  United Parcel Service of America, Inc. v. Government of Canada, NAFTA/​UNCITRAL [hereinafter UPS v. Canada], Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae (Oct. 17, 2001) ¶ 3. 111  Id. ¶¶ 5–​10. 112  UPS v. Canada, supra note 110, Investor’s Response to the Petition of the Canadian Union of Postal Workers and the Council of Canadians (May 28, 2001). 113  UPS v. Canada, supra note 110, Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae (Oct. 17, 2001) ¶ 61. 114  The tribunal agreed with the position taken by all the NAFTA parties, as well as the claimant, that it lacked authority to grant the petitioners’ request to be added as parties to the arbitration. Id. ¶¶ 35–​43; UPS v. Canada, supra note 110, Canada’s Submission on the Amicus Petitions (May 21, 2001); Investor’s Submission on the Amicus Petitions (May 21, 2001); Mexico’s NAFTA Article 1128 Submission on the Amicus Petitions (June 11, 2001); United States’ NAFTA Article 1128 Submission on the Amicus Petitions (June 11, 2001); Investor’s Response to the Petition of the Canadian Union of Postal Workers and the Council of Canadians (May 28, 2001). In rejecting the petitioners’ request, the tribunal held that art. 15(1) of the UNCITRAL Arbitration Rules deals with matters of arbitral procedure, not jurisdiction, and that the ‘NAFTA itself does not provide any support of the addition as parties of persons such as the Petitioners in this matter’. UPS v. Canada, supra note 110, Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae (Oct. 17, 2001) ¶¶ 36, 38–​39. 115 NAFTA Free Trade Commission, Statement of the Free Trade Commission on Non-​ Disputing Party Participation (Oct. 7, 2004) § A(1)–​(2).

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Piercing the Veil of Confidentiality (a) the non-​disputing party submission would assist the Tribunal in the determination of a factual or legal issue related to the arbitration by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties; (b) the non-​disputing party submission would address matters within the scope of the dispute; (c) the non-​disputing party has a significant interest in the arbitration; and (d) there is a public interest in the subject-​matter of the arbitration.116 9.67 Additionally, the guidelines direct tribunals to ‘ensure that (a) any non-​disputing party sub-

mission avoids disrupting the proceedings; and (b) neither disputing party is unduly burdened or unfairly prejudiced by such submissions’.117

9.68 The NAFTA FTC also provided guidance for the form and content of an amicus petition, in

particular that it should:

(a) be made in writing, dated and signed by the person filing the application, and include the address and other contact details of the applicant; (b) be no longer than five typed pages; (c) describe the applicant, including, where relevant, its membership and legal status (e.g. company, trade association, or other non-​governmental organization), its general objectives, the nature of its activities, and any parent organization (including any organization that directly or indirectly controls the applicant); (d) disclose whether or not the applicant has any affiliation, direct or indirect, with any disputing party; (e) identify any government, person or organization that has provided any financial or other assistance in preparing the submission; (f ) specify the nature of the interest that the applicant has in the arbitration; (g) identify the specific issues of fact or law in the arbitration that the applicant has addressed in its written submission; (h) explain, by reference to the factors specified in paragraph 6, why the tribunal should accept the submission; and (i) be made in a language of the arbitration.118 9.69 The guidelines further suggest parameters for the proposed amicus submission itself, namely,

that it should be attached to the petition and:

(a) be dated and signed by the person filing the submission; (b) be concise, and in no case longer than 20 typed pages, including any appendices; (c) set out a precise statement supporting the applicant’s position on the issues; and (d) only address matters within the scope of the dispute.119 9.70 The first NAFTA Chapter 11 tribunal to receive amicus petitions after the adoption of the

NAFTA FTC’s Interpretation and Guidelines, in Glamis v United States, applied the FTC’s guidelines.120 That case, which concerned a challenge to both federal and state action regarding the claimant’s unpatented mining claims, gave rise to petitions from numerous sources. In

  Id. § B(6).   Id. § B(7). 118  Id. § B(2). 119  Id. § B(3). 120  See Glamis Gold, Ltd. v. United States of America, NAFTA/​UNCITRAL [hereinafter Glamis v. United States], Decision on Application and Submission by Quechan Indian Nation (Sept. 16, 2005) ¶¶ 8–​11. After issuing this decision, the Glamis tribunal granted petitions for participation as amici of other non-​parties, such as the Friends of the Earth and the National Mining Association. 116 117

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III.  Third-party Written Submissions addition to non-governmental organizations (NGOs), the petitioners included the Quechan Indian Nation as well as the National Mining Association. Those petitions may dispel the widespread but erroneous assumption that amicus submis- 9.71 sions will necessarily favour the respondent. Because NGOs were the first petitioners in investment arbitration to seek amicus status and were perceived as favouring the positions advanced by the state, some claimants argued that permitting amicus submissions would unduly burden claimants and place them at an unfair advantage.121 In the Glamis v United States case, however, the National Mining Association filed a petition for amicus status and its position clearly favoured the claimant.122 Similarly, the petitions expose the fallacy in assuming that an amicus merely parrots the views of the party whose position it favours. The Quechan Indian Nation, for instance, while objecting to Glamis’s claims, advanced arguments that were not adopted by the United States.123 More recent NAFTA cases have continued to allow amicus submissions, but have done so in 9.72 a more deliberate fashion. The tribunals have begun to analyse whether these submissions will enhance the public interest in transparency, assist the tribunal on factual or legal issues, and whether the third party has a significant interest in the arbitration. Now that the proceedings have become more transparent, tribunals are grappling with ways to deal with the more extensive submissions resulting from the participation of third parties. In Apotex v United States, for instance, the tribunal rejected two amici submissions from Mr 9.73 Barry Appleton and BNM, a management consulting firm. The tribunal first noted that: ‘[i]‌n matters of public interest, the Tribunal considers that the requirement of a different expertise, experience or perspective from that of the Disputing Parties ought to be construed broadly, so as to allow the Tribunal access to the widest possible range of views. By ensuring that all angles on, and all interests in, a given dispute are properly canvassed, the arbitral process itself is thereby strengthened’.124 The tribunal found that Mr Appleton’s submissions would address matters in dispute and 9.74 within the scope of the arbitration, while BNM sought to address an issue no longer in dispute. Citing Vivendi v Argentina it also found that neither would probably provide the tribunal a different perspective and particular insight since counsel for the disputing parties had already fully briefed the tribunal on the relevant issues125 and BNM had no special knowledge or relevant expertise or experience that would provide the tribunal with a material perspective or insight different from that of the disputing parties.126 Finally, the tribunal concluded that Mr Appleton and BNM did not have significant inter- 9.75 ests in the dispute. Mr Appleton’s interest in the arbitration consisted only in having the tribunal adopt his preferred legal interpretations of the NAFTA that would assist his clients

121  See, e.g., Methanex Corp. v. United States, Decision of the Tribunal on Petitions from Third Persons to Intervene as ‘Amici Curiae’ (Jan. 15, 2001) ¶¶ 35–​37; id. Submission of the Claimant Respecting Petition of [IISD] (Aug. 31, 2000) ¶¶ 16–​17. 122  See Glamis v.  United States, supra note 120, Application for Leave to File a Non-​ Disputing Party Submission by the National Mining Association (Oct. 13, 2006). 123  Glamis v. United States, supra note 120, Quechan Indian Nation Amicus Application and Submission (Aug. 19, 2005). 124  Apotex Holdings Inc. & Apotex Inc. v. United States, ICSID Case No. ARB(AF)/​ 12/​1 [hereinafter Apotex v. United States], Procedural Order No. 2 (Oct. 11, 2011) ¶ 22. 125  Apotex v. United States, supra note 124, Procedural Order on the Participation of Applicant Mr Barry Appleton as a Non-​Disputing Party (Mar. 4, 2013) ¶¶ 32–​34. 126  Apotex v.  United States, supra note 124, Procedural Order on the Participation of the Applicant, BNM, as a Non-​Disputing Party (Mar. 4, 2013) ¶ 24.

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Piercing the Veil of Confidentiality in other cases. The tribunal found that this was not a significant interest under the FTC Interpretation.127 As to BNM, the tribunal found that its stated interest in narrowing the scope of drug manufacturers’ intellectual property rights also was not significant.128 9.76 More recently, in Eli Lilly v Canada, the tribunal admitted six amici curiae petitions and re-

jected three others. It found that all nine applicants would address matters within the scope of the dispute, they all had a significant interest in the arbitration, and there was a public interest in the subject matter of the arbitration.129 The main issue, however, was whether the petitioners would assist the tribunal with factual or legal issues by bringing a perspective that was different from that of the disputing parties.130 The tribunal also considered that the submissions must not disrupt the proceedings, and that neither disputing party should be unduly burdened or unfairly prejudiced by the submissions.131

C. Third-​party Submissions in ICSID Cases 9.77 The first published case in which an ICSID tribunal engaged in substantial discussion of a

third ​party’s right to participate as amicus curiae was Aguas del Tunari v Bolivia.132 That dispute arose out of the Bolivian government’s privatization of the sewage and water system of Cochabamba, the country’s third-​largest city. A few hundred health, safety and environmental organizations, represented by several organizations and individuals, filed a petition requesting the right to make written and oral submissions.133

9.78 The third-​party petitioners supported their broad request by citing to (i) the direct interest

each petitioner had in the subject matter of the claim (the provision of water and sewage services to a large city); (ii) each petitioner’s interest in protecting and fostering transparency during a proceeding that ‘may have far-​reaching impacts on a broad diversity of non-​ party interests’; and (iii) petitioners’ ‘unique expertise and knowledge’ that could assist the tribunal.134

9.79 The parties opposed the participation of amici in the proceedings, and the tribunal rejected

the petitioners’ requests, finding that they were ‘beyond the power or the authority of the tribunal to grant’.135 The tribunal premised its decision on the fact that its authority was based on the parties’ consent.136

9.80 In its letter to the petitioners, the tribunal hinted at an additional constraint to third-​party

participation—​confidentiality. While remarking on the careful manner in which it reviewed the amicus petition, the tribunal noted that it could only go so far in communicating with non-​parties to the arbitration for fear it would ‘breach the undertakings in our declarations as arbitrators . . . to maintain the confidentiality of the proceedings’.137 127  Apotex v. United States, supra note 124, Procedural Order on the Participation of Applicant Mr Barry Appleton as a Non-​Disputing Party (Mar. 4, 2013) ¶ 40. 128  Apotex v.  United States, supra note 124, Procedural Order on the Participation of the Applicant, BNM, as a Non-​Disputing Party (Mar. 4, 2013) ¶ 33. 129  Eli Lilly & Co. v. Government of Canada, Case No. UNCT/​ 14/​1 [hereinafter Eli Lilly v. Canada], Procedural Order No. 4 (Feb. 23, 2016) ¶ H. 130  Id. ¶¶ I, 6, 9. 131  Id. ¶ J. 132  Aguas del Tunari, S.A. v. Republic of Bolivia, ICSID Case No. ARB/​02/​3 [hereinafter Aguas del Tunari v. Bolivia], NGO Petition to Participate as Amici Curiae (Aug. 29, 2002). 133  Id. 134  Id. ¶ 2. 135  Aguas del Tunari v. Bolivia, supra note 132, Letter from Tribunal President David D. Caron to Amicus Petitioner J. Martin Wagner (Jan. 29, 2003), at 1. 136  Id. 137  Id. at 2.

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III.  Third-party Written Submissions A  2004 ICSID Secretariat Discussion Paper, entitled ‘Possible Improvements of the 9.81 Framework for ICSID Arbitration’, included third-​party practice. The Secretariat noted that two recent investor-​state tribunals (i.e. Methanex and UPS) had confirmed that they had broad authority to accept and consider submissions from third parties138 and suggested that it might be useful to make clear that the ICSID tribunals have the authority to do so.139 The discussion paper did not specify the form of the third-​party submissions, that is, whether they would be written, oral, or both. After receiving comments from member states, arbitration specialists, and business and civil society groups, the ICSID Secretariat published a second Discussion Paper in May 2005, entitled ‘Suggested Changes to the ICSID Rules and Regulations’.140 It included draft amendments and accompanying notes regarding third-​party practice that the Discussion Paper reported had elicited disagreement among commentators, some of whom had expressed concerns that third-​party participation would unduly burden the disputing parties.141 Draft rule 37(2), on written submissions, was adopted and became effective on April 10, 2006. It provides: 2. After consulting both parties, the tribunal may allow a person or entity that is not a party to the dispute (in this Rule called the ‘non-​disputing party’) to file a written submission with the tribunal regarding a matter within the scope of the dispute. In determining whether to allow such a filing, the tribunal shall consider, among other things, the extent to which: (a) the non-​disputing party submission would assist the tribunal in the determination of a factual or legal issue related to the proceeding by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties; (b) the non-​disputing party submission would address a matter within the scope of the dispute; (c) the non-​disputing party has a significant interest in the proceeding. The tribunal shall ensure that the non-​disputing party submission does not disrupt the proceeding or unduly burden or unfairly prejudice either party, and that both parties are given an opportunity to present their observations on the non-​disputing party submission.

Certain aspects of new Rule 37(2) merit close attention. In particular, the rule establishes firmly an ICSID tribunal’s authority to accept third-​party 9.82 written submissions, even where the consent of the disputing parties is lacking. Furthermore, the rule does not restrict the type of third party that may make a submission, since it refers to any ‘person or entity’ that meets the rule’s requirements. This broad wording could include, for instance, private citizens, civic and business organizations, or local and national governments. The rule also incorporates procedural safeguards which aim to ensure that the disputing are 9.83 treated with equality and accorded due process. Thus, the parties are permitted to respond to the third-​party submissions, while the tribunal must ensure that these submissions do not disrupt the proceedings or unduly prejudice or burden any of the parties. The wording of the enacted Rule 37(2) differs somewhat from the one proposed in 2005. The 9.84 2005 draft required the tribunal to consult with the disputing parties ‘as far as possible’. This phrase has been omitted from the rule as adopted. Moreover, the enacted rule’s first sentence requires that the proposed written submission concern ‘a matter within the scope of the dispute’, an element also in the list of the non-​exclusive factors that the tribunal must consider

138 ICSID Secretariat, Possible Improvements for the Framework for Investor-​ State Arbitration (Oct. 22, 2004), at 9. 139  Id. 140  ICSID Secretariat, Suggested Changes to the ICSID Rules and Regulations (May 12, 2005), at 4. 141  Id.

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Piercing the Veil of Confidentiality in determining whether to allow third parties to file written submissions. A plausible reason for this repetition is to make relevance a sine qua non of any third-​party petition under the rule, not simply one of the non-​exhaustive list of factors to be considered in what some tribunals may interpret as a ‘balancing test’. 9.85 At the same time that the ICSID Secretariat circulated the draft amendments to the ICSID

Arbitration Rules, the ICSID tribunal in Vivendi v Argentina ruled on a petition by five NGOs to participate in the proceedings before it as amici curiae.142 The case arose from yet another water concession, this one granted by Argentina to a consortium of companies. The third-​party petitioners in Vivendi v Argentina asserted similar reasons warranting their participation to those asserted by the petitioners in Aguas del Tunari v Bolivia. Specifically, they referred to the ‘basic public interest’ implicated in the case, and the ‘fundamental rights of people living in the area affected by the dispute’.143

9.86 The tribunal ruled that it had the procedural power to determine whether to accept such sub-

missions under Article 44 of the ICSID Convention, which provides, in relevant part: ‘[i]‌f any question of procedure arises which is not covered by this Section or the Arbitration Rules or any rules agreed by the parties, the tribunal shall decide that question’.144 Exercising this residual procedural power, the tribunal established the following criteria by which it would evaluate an amicus petition: (i) the appropriateness of the subject matter of the case, (ii) the suitability of the petitioning third party to act as amicus in a given case, and (iii) the procedure by which the amicus submission is made and considered.145 The tribunal then proceeded to apply this three-​pronged test to the amicus petition before it.

9.87 The tribunal found that the subject matter of the case was appropriate for the participation

of the petitioning third parties, given the public interest in the water distribution and sewage systems of a large metropolitan area.146 It noted that other courts and tribunals faced with matters of public interest of a similar nature had been receptive towards amicus submissions from suitable third parties.147 Such submissions, it said, probably would assist the tribunal in its work, since they would ‘afford the tribunal perspectives, arguments, and expertise that will help it arrive at a correct decision’.148 In addition, like the Methanex v United States tribunal, it observed that the participation of third parties would enhance the transparency of the proceedings, which in turn would vest any award by the tribunal with additional legitimacy.149

9.88 With respect to the petitioners’ suitability, the tribunal opined that it would accept submis-

sions only from parties that could demonstrate to the tribunal’s satisfaction that they had the expertise, experience, and independence to be of assistance.150

9.89 Finally, the tribunal stated that if it chose to grant the petitioners permission to file an amicus

submission, it would establish appropriate procedures that would allow the third parties to present their views, while safeguarding the procedural and substantive rights of the disputants and the fair and efficient administration of the proceedings.151

142  Vivendi v. Argentina, supra note 52, Order in Response to a Petition for Transparency and Participation as Amicus Curiae (May 19, 2005). 143  Id. ¶ 1. 144  Id. ¶¶ 10–​16. 145  Id. ¶ 17. 146  Id. ¶ 19. 147  Id. ¶ 20. 148  Id. ¶ 21. 149  Id. ¶ 22. 150  Id. ¶ 24. 151  Id. ¶¶ 27, 29.

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III.  Third-party Written Submissions Ultimately, the tribunal found that the petitioners’ request to make written submissions was 9.90 premature, because the tribunal was confronted with questions of jurisdiction, which the disputing parties had addressed thoroughly; additional submissions by the petitioners were not likely to be helpful or probative.152 On December 1, 2006, the same five NGOs filed a new petition with the tribunal, asking 9.91 to make a single, joint written amicus submission. The claimants objected to the application, while Argentina did not. In its decision,153 the tribunal noted that, in the time elapsed between its 2005 decision on 9.92 jurisdiction and the current one, ICSID had enacted amendments to its Arbitration Rules, including Rule 37(2). Recognizing that the new rules did not apply to the dispute before it, since the parties had agreed to arbitrate under the old Arbitration Rules, the tribunal nevertheless observed that Rule 37(2) was compatible with its prior decision.154 The tribunal found that the petitioners had supplied sufficient information to demonstrate 9.93 that they were respected organizations with particular expertise in the relevant fields of human rights, water services, and the environment.155 It affirmed its earlier ruling that the subject matter of the dispute was appropriate for amicus petitions, and, in particular, it noted the potential impact of its decision ‘on how governments and foreign investor operators of the water industry approach concessions and interact when faced with difficulties’.156 The tribunal rejected the claimants’ argument that the petitions were inappropriate because 9.94 they would not provide new factual information but only legal argumentation. Observing that third parties could offer arguments, perspectives, and expertise that the disputing parties did not or could not provide, the tribunal noted, in this regard, that the text of the new Rule 37(2) supported a flexible approach towards the role of amici because it contemplates amici assisting the tribunal ‘in the determination of a factual or legal issue’.157 The tribunal thus ordered that (i) the petitioners file by a certain date a single joint amicus 9.95 submission; (ii) the submission comply with certain page limitations and formatting requirements; (iii) the submission be prepared in both English and Spanish; and (iv) the submission be unaccompanied by supporting documents, which the tribunal would request as necessary. The tribunal reiterated its earlier holding that all disputing parties would have the opportunity to comment on the amicus submission.158 Finally, while the tribunal accepted the general proposition that an amicus needs to have suffi- 9.96 cient information about the case to provide a helpful submission, it determined that the petitioners had sufficient access to information about the case through various sources, including the tribunal’s award on jurisdiction. Consequently, it denied the petitioners’ request to access documents or pleadings and declined to opine on the general question whether, and under

152  Id. ¶ 28; see also Aguas Provinciales de Santa Fe S.A., Suez, Sociedad General de Aguas de Barcelona S.A. & InterAguas Servicios Integrales del Agua S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​17, Order in Response to a Petition for Participation as Amicus Curiae (Mar. 17, 2006) ¶ 27 (dismissing for the same reasons a similar petition by an NGO and individuals in a parallel case involving the same water concession before an identically composed tribunal). 153 Vivendi v.  Argentina, supra note 52, Order in Response to a Petition by Five Non-​ Governmental Organizations for Permission to Make an Amicus Curiae Submission (Feb. 12, 2007). 154  Id. ¶¶ 14–​15. 155  Id. ¶ 16. 156  Id. ¶ 18. 157  Id. ¶ 20. 158  Id. ¶ 27.

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Piercing the Veil of Confidentiality what circumstances, third parties may access some or all documentary evidence in an arbitration case.159 9.97 At about the same time, five NGOs filed a petition for amicus status with the Biwater tri-

bunal. This dispute also concerned a water concession, this time involving an investment made by a British company in Tanzania. As justification for their request, the petitioners posited the paramount importance of water and sanitation services for the ‘basic human rights’ and overall well-​being of the Tanzanian people, as well as the case’s potential political ramifications, since it raised ‘a wide range of potential issues of concern to developing countries . . . that have privatized, or are contemplating a possible privatization of, water or other infrastructure services’.160

9.98 The petitioners also emphasized the procedural feasibility of their participation, citing to the

developing history of amicus interventions in investment arbitrations since Methanex, as well as to the fact that ‘there is no recorded instance of the abuse of [the arbitral] process by any petitioner or accepted amicus curiae’.161 Finally, the petitioners pled that the participation of amici in the arbitration would increase ‘the credibility of the arbitration process in the eyes of the public’.162

9.99 The claimant opposed the participation of amici, while Tanzania did not.163 The parties in

Biwater agreed that the ICSID Arbitration Rules, as amended, would apply to the arbitration as of the date of their enactment.164 Consequently, the Biwater tribunal evaluated the amicus petition before it under new Rule 37(2) and granted it. The tribunal held that (i) a submission by the petitioners had ‘the reasonable potential to assist the Arbitral Tribunal by bringing a perspective, particular knowledge or insight that is different from that of the disputing parties. . . ’; (ii) it would accept prima facie the petitioners’ assurance that they would address matters within the scope of the dispute, while reserving the right to reject any submission that did not do so; and (iii) each petitioner had demonstrated it had a sufficient interest in the proceeding.165 In granting the petition, the tribunal also cited with approval the findings of the tribunals in Methanex and Vivendi with respect to the public interest implicated in investment arbitration and the increased transparency that the participation of amici brings to otherwise ‘closed’ arbitral proceedings.166

9.100 To address the procedural fairness concerns raised by the claimant, the tribunal established a

two-​stage process for the petitioners to file their joint submission. In the first stage, the amici curiae would file their submission, which would have to comply with specific length and formatting limitations (fifty pages, double-​spaced) and could not include any exhibits.167 The tribunal scheduled the filing three weeks before the hearing on the merits to give the parties time to decide whether and how they wished to respond. The second stage would take place after the hearing, when the tribunal would issue additional procedural directions, depending on whether the parties wished to comment further on the amicus submission and whether the tribunal sought any additional submissions or evidence from the amici.168

  Id. ¶¶ 24–​25.   Biwater v. Tanzania, supra note 29, Petition for Amicus Curiae Status (Nov. 27, 2006), at 7–​8. 161  Id. at 13. 162  Id. at 14. 163  Biwater v. Tanzania, supra note 29, Procedural Order No. 5 (Feb. 2, 2007) ¶¶ 31–​37, 42–​45. 164  Id. ¶ 16. 165  Id. ¶ 50. 166  Id. ¶¶ 51–​55. 167  Id. ¶ 60. 168  Id. 159 160

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III.  Third-party Written Submissions After the hearing, the parties agreed that no further submissions from the amici would be 9.101 necessary.169 In its final award, the tribunal discussed at length facts and arguments raised by the amici,170 and concluded that their submissions had been useful and informative.171 More recent cases also have accepted amici submissions. After Vivendi v Argentina and Biwater 9.102 v Tanzania, tribunals have looked at the relevant factors set out in Rule 37(2), including whether the non-​disputing party submission would bring a different perspective to a factual or legal issue, whether the submission would address a matter within the scope of the dispute, whether the non-​disputing party had a significant interest in the proceeding, and whether accepting the submission would disrupt the proceeding or unduly burden or unfairly prejudice one of the parties. In addition to these factors, tribunals also have analysed the public interest involved in the case and the need to safeguard the integrity of the arbitral process.172 In Infinito Gold, for instance, the tribunal accepted a submission from the NGO, 9.103 APREFLOFAS, that was a litigation adversary to both the claimant and the respondent.173 The tribunal found that this unique position would allow the NGO to provide a different perspective on issues within the scope of the dispute.174 The tribunal also gave APREFLOFAS access to the arbitral documents in order to assist the NGO in preparing an effective brief.175 In three cases involving claims by investors from one Member State of the European Union 9.104 against another Member State, ICSID tribunals have allowed the European Commission to make amicus submissions concerning the relationship between European Community law and the relevant investment treaty and other European Community law issues.176 As is reflected in the published decisions in one of those cases, Electrabel v Hungary, the European Commission in that case apparently understood its role to extend beyond that of a non-​ disputing party given that the European Union is a Contracting party to the Energy Charter Treaty, on the basis of which the arbitration was initiated, and played a leading role in the formation of that Treaty.177 The tribunal found that, by raising ‘important and extensive issues of jurisdiction and applicable law’, which even Hungary did not raise, but which Electrabel   Biwater v. Tanzania, supra note 29, Award (July 24, 2008) ¶ 83.   Id. ¶¶ 370–​91. 171  Id. ¶ 392. 172  See, e.g., Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) & Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Procedural Order No. 3 (Feb. 17, 2015) ¶¶ 21–​31, and Procedural Order No. 4 (Mar. 24, 2015) ¶¶ 29–​31 (allowing amicus submission after considering the public interest in the case and supporting the transparency of the proceeding, while also ensuring that the non-​disputing party would not disrupt the proceedings, unduly burden or unfairly prejudice either party). 173  Infinito Gold v. Costa Rica, supra note 55, Procedural Order No. 2 (June 1, 2016) ¶ 37. 174  Id. ¶¶ 32–​ 35. In Eli Lilly v. Canada, an arbitration conducted under NAFTA Chapter 11, the tribunal allowed Canadian Generic Pharmaceuticals Association, which stood to benefit from Eli Lilly’s patent invalidation, to make a submission. Eli Lilly v. Canada, supra note 129, Procedural Order No. 4 (Feb. 23, 2016) ¶ 3. 175  Infinito Gold v. Costa Rica, supra note 55, Procedural Order No. 2 (June 1, 2016) ¶ 43. 176  See AES v. Hungary, supra note 54, Award (Sept. 23, 2010) ¶ 3.22 (allowing the European Commission to submit a brief addressing the relationship between European Community law and the Energy Charter Treaty, and denying the Commission’s request for copies of the parties’ written submissions because the parties did not consent); Electrabel v. Hungary, supra note 57, Procedural Order No. 4 (Apr. 28, 2009) ¶¶ 22–​27 (permitting the European Commission to make submissions on European Community law and the Energy Charter Treaty, the State Aid investigation concerning the Power Purchase Agreement signed by Hungary, and the effect of Community Decisions on Hungary as an EU Member State); Ioan Micula, Viorel Micula and Others v. Romania, ICSID Case No. ARB/​05/​20, Award (Dec. 11, 2013) ¶ 27 (allowing the European Commission to participate as a non-​disputing party because it could bring a factual or legal perspective that could assist the tribunal in the adjudication of the parties’ rights). 177  Electrabel v. Hungary, supra note 57, Decision on Jurisdiction, Applicable Law and Liability (Nov. 30, 2012) ¶ 4.92. 169 170

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Piercing the Veil of Confidentiality had to address in its submissions, the European Commission, ‘far from exercising the traditional role of an “amicus curiae”, . . . became a second respondent more hostile to Electrabel than Hungary itself ’.178 The tribunal further found that, ‘[o]‌verall, the Commission’s participation in this arbitration was a hugely complicating factor’, for which ‘Electrabel bore by far the greatest burden’.179 This was one of the reasons for the Electrabel tribunal to order each party to bear its own costs, rather than shift the costs to the losing party (the claimant), which was not responsible for the significant additional costs resulting from having to respond to the European Commission’s submission.180 9.105 Separately, the Electrabel case appears to be the first investment arbitration in which a tri-

bunal ordered the parties, without their consent, to disclose their written submissions to an amicus.181 The tribunal explained that the European Commission’s ‘significant’ interest as an amicus in these proceedings is not limited to pure legal questions but may extend to hybrid issues (i.e., issues of mixed fact and law) and that, in order properly to address the latter, the Commission may need access, in material part, to the substance of the Parties’ memorials in this case. The Tribunal is concerned that, without such access, the European Commission would be restricted to what could be regarded as a pure legal moot of academic interest only and thus deprive it of any effective role as an amicus in this case under ICSID Arbitration Rule 37(2).182

9.106 Shortly thereafter, a tribunal under the auspices of ICSID’s Additional Facility, in Foresti

v South Africa, similarly decided that ‘the [non-​disputing parties] must be allowed access to those papers submitted to the tribunal by the parties that are necessary to enable the [non-​disputing parties] to focus their submissions upon the issues arising in the case and to see what positions the parties have taken on those issues’. At the same time, the tribunal made clear that amicus participation was ‘intended to enable [non-​disputing parties] to give useful information and accompanying submissions to the Tribunal, but is not intended to be a mechanism for enabling [non-​disputing parties] to obtain information from the Parties’.183

9.107 ICSID tribunals also have sometimes rejected amici petitions based upon the same prin-

ciples discussed. In Pezold v Zimbabwe, for example, the tribunal rejected third-​party submissions after finding circumstances giving rise to legitimate doubts as to the independence or neutrality of one petitioner, and whether the other had sufficient interest in the dispute, and because the tribunal considered that the petitioners proposed to make submissions on legal and factual issues that were unrelated to the matters before the tribunal. In light of this, the tribunal concluded that the claimants would be unfairly prejudiced by their participation.184

  Electrabel v. Hungary, supra note 57, Award (Nov. 25, 2015) ¶ 234.   Id. 180  Id. ¶ 236. 181  Electrabel v. Hungary, supra note 57, Procedural Order No. 4 (Apr. 28, 2009) ¶ 28. 182  Id. ¶ 29. 183  Foresti v. South Africa, supra note 56, Letter from the Tribunal to the Legal Resources Centre and the International Commission of Jurists (Oct. 5, 2009), at 1. 184  Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​15, and Border Timbers Ltd., Border Timbers International (Private) Ltd. & Hangani Development Co. (Private) Ltd. v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​25, Procedural Order No. 2 (June 26, 2012) ¶¶ 62–​64; see also RREEF Infrastructure (G.P.) Ltd. & RREEF Pan-​European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/​13/​30, Decision on Jurisdiction (June 6, 2016) ¶¶ 20, 32 (referring, without further explanation, to unpublished procedural orders by which the tribunal rejected two successive amicus petitions by the European Commission). 178 179

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III.  Third-party Written Submissions D. Treatment of Third-​party Submissions by Other Arbitral Rules Until recently, none of the other arbitration rules commonly used for investment arbitrations 9.108 contained express provisions for third-​party participation. As mentioned, the 2017 revision of the SCC Arbitration Rules and the new SIAC Investment Arbitration Rules permit third parties to apply to the tribunal for permission to make written submissions.185 Although the UNCITRAL Arbitration Rules were silent on the issue, the first investor-​ 9.109 state cases where amici submissions were accepted—​Methanex and UPS—​were both governed by the UNCITRAL Arbitration Rules.186 Nevertheless, to avoid any doubt whether the UNCITRAL Arbitration Rules permitted third-​party submissions, proposals were made recommending adoption of an additional provision making explicit tribunals’ authority under the UNCITRAL Arbitration Rules to accept submissions from third parties, similar to ICSID Arbitration Rule 37(2).187 The new UNCITRAL Rules on Transparency specifically address submissions by a third 9.110 party188 (and, distinct therefrom, submissions by a non-​disputing state party to a treaty189). Article 4 requires that the tribunal consult with the disputing parties, and only allows for written submissions from third parties. In determining whether to accept a third-​party written submission, the tribunal must consider (a)  whether the third party has a significant interest in the arbitral proceedings, and (b) the extent to which the submission would help the tribunal by bringing a perspective, particular knowledge, or insight that is different from the disputing parties. Other requirements include that the submission (a) be dated and signed, (b) be concise, (c) set out a precise statement of position, and (d) address only matters within the scope of the dispute. The tribunal also is to ensure that the submission does not disrupt or unduly burden the proceedings or unfairly prejudice any disputing party. Recent cases initiated under the UNCITRAL Arbitration Rules prior to the adoption of the 9.111 UNCITRAL Rules on Transparency appear to continue the trend of allowing amici submissions if the disputing parties do not object. Achmea v Slovak Republic presents a unique example because it was the tribunal that, at the conclusion of oral hearings on jurisdiction, consulted with the parties about the possibility of approaching the government of the Netherlands and the European Commission for written observations.190 An issue in the case was whether the BIT between the Netherlands and the Slovak Republic remained legally valid in light of the latter’s accession to the European Union, and, if so, what the relationship was between that treaty and relevant commitments the Slovak Republic assumed under the Treaty Establishing the European Community.191 With the agreement of the parties, the tribunal extended invitations to the European Commission and the Netherlands to submit their observations, which the tribunal considered at length in its decision, together with the parties’ comments on them.192

185 2017 SCC Arbitration Rules, supra note 8, Appendix III (Investment Disputes) art.  3(1); SIAC Investment Arbitration Rules, supra note 10, Rule 29. 186  Decisions on third-​party participation in those two cases were also rendered prior to the NAFTA FTC’s issuance of its Interpretation and guidelines addressing the issue. 187  See Jan Paulsson & Georgios Petrochilos, Revisions of the UNCITRAL Arbitration Rules (2006), at 71–​ 72; International Institute for Sustainable Development and Center for International Environmental Law, Revising the UNCITRAL Arbitration Rules to Address State Arbitrations (February 2007), at 12. 188  UNCITRAL Rules on Transparency art. 4. 189  Id. art. 5. 190 Achmea B.V. (formerly Eureko B.V.) v.  Slovak Republic [I]‌ , PCA Case No. 2008-​13, Award on Jurisdiction, Arbitrability and Suspension (Oct. 26, 2010) ¶ 154. 191  Id. ¶¶ 8–​9. 192  Id. ¶¶ 155–​211.

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Piercing the Veil of Confidentiality 9.112 In Chevron v Ecuador II, the tribunal rejected amici curiae petitions, exercising its discretion

under Article 15(1) of the UNCITRAL Arbitration Rules.193 Neither the tribunal nor the parties favoured the petitions because they did not consider that the petitioners’ submissions would be helpful to the tribunal during the jurisdictional phase of the arbitration, in which the issues to be decided were primarily legal and, by that time, had been extensively addressed by the parties.194

E. Treatment of Third-​party Submissions by Other Investment Treaties 9.113 Recent investment treaties concluded, among others, by the United States, Canada, and the

European Union specifically allow for third-​party submissions, regardless of the applicable arbitration rules and subject only to the tribunal’s discretion.

9.114 The 2012 US Model BIT, and the prior 2004 US Model BIT, contains an express provision

granting the tribunal authority to accept submissions from non-​parties,195 and provisions of this nature appear in all of the United States’ recent BITs and FTAs.196 The signed TPP empowers the tribunal, after consultation with the disputing parties, to accept and consider written amicus curiae submissions ‘regarding a matter of fact or law within the scope of the dispute that may assist the tribunal’, as long as ‘the submissions do not disrupt or unduly burden the arbitral proceedings, or unfairly prejudice any disputing party’.197 This power of the tribunal applies regardless of whether the arbitration is governed by the ICSID, UNCITRAL, or any other arbitration rules.

9.115 Article 39 of the Canada Model FIPA similarly allows for the filing of written submissions

by third parties.198 That article incorporates language from the NAFTA FTC’s guidelines. The provision also provides that, to protect fairness and safeguard the integrity of the arbitral process, the tribunal must ensure that any non-​disputing party submission does not disrupt the proceedings, and neither disputing party is unduly burdened or unfairly prejudiced by such submissions.199

9.116 Additionally, Annex C.39 of Canada’s Model FIPA outlines the procedure by which a pro-

spective amicus (third-​party) can petition the tribunal to file a submission, and contains form and content requirements for the submission itself. This procedure is reflected in annexes to Canada’s recent treaties and in the text itself of Canada’s treaties with Peru.200 193  Chevron Corporation (U.S.A.) & Texaco Petroleum Corporation (U.S.A.) v. Republic of Ecuador [II], PCA Case No. 2009-​23, Procedural Order No. 8 (Apr. 18, 2011) ¶ 20. 194  Id. ¶¶ 18–​20. 195  2012 U.S. Model BIT art. 28(3). 196  See U.S.–​ Singapore FTA (May 6, 2003)  art. 15.19 (providing that the ‘tribunal shall have the authority to accept and consider amicus curiae submissions from any persons and entities in the territories of the Parties and from interested persons and entities outside the territories of the Parties’); U.S.–​Chile FTA (June 6, 2003)  art. 10.19(3) (also providing that the ‘submissions shall be provided in both Spanish and English, and shall identify the submitter and any Party, other government, person, or organization, other than the submitter, that has provided, or will provide, any financial or other assistance in preparing the submission’); U.S.–​Morocco FTA (June 15, 2004)  art. 10.19(3); DR–​CAFTA (Aug. 5, 2004)  art. 10.20(3); U.S.–​Uruguay BIT (Nov. 4, 2005)  art. 29; U.S.–​Oman FTA (Jan. 19, 2006)  art. 10.19(3); U.S.–​Peru TPA (Apr. 12, 2006) art. 10.20(3); U.S.–​Colombia FTA (Nov. 22, 2006) art. 10.20(3); U.S.–​Panama FTA (June 28, 2007) art. 10.20(3); U.S.–​Korea FTA (June 30, 2007) art. 11.20(5); U.S.–​Rwanda BIT (Feb. 19, 2008) art. 28(3). 197  Trans-​Pacific Partnership Agreement (Feb. 4, 2016) art. 9.23. 198  Canada 2004 Model FIPA, supra note 79, art. 39 (defining the term ‘non-​disputing party’ broadly to include ‘a person of a Party’ or a person that ‘has a significant presence in the territory of a Party’). 199  As adopted in Canada–​ Colombia FTA (Nov. 21, 2008)  art. 831  & Annex 8.31; Canada–​Panama FTA (May 14, 2010) art. 9.31 & Annex 9.31; Canada–​China FIPA (Oct. 1, 2014) art. 29 & Annex C.29; Canada–​Korea FTA (Jan. 1, 2015) art. 8.36 & Annex 8-​D. 200  See the treaties cited in note 199, supra; see also Canada–​Peru FIPA art. 39; Canada–​Peru FTA art. 836.

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IV.  Public Access to Arbitral Hearings Applying the specific criteria for amicus submissions contained in the Canada–​Peru FTA, in 9.117 addition to ICSID Arbitration Rule 37(2), the tribunal in Bear Creek v Peru denied a request by the Columbia Center on Sustainable Investment to file a written submission. Specifically, the tribunal found that, because both parties were represented by distinguished international law firms with extensive experience in international investment arbitration, and, accordingly, had filed detailed written submissions regarding every aspect of the case, it was very unlikely that the petitioner could contribute any further information or arguments that would assist the tribunal.201 The tribunal, however, permitted submissions by a local NGO and a local lawyer, finding that their combined ‘legal expertise and . . . local knowledge of the facts may add a new perspective that differs from that of the Parties’.202 The negotiated text of the Free Trade Agreement between the European Union and Singapore 9.118 permits the tribunal, after consulting the disputing parties, to allow a third party to make a written submission based on the same criteria set forth in the UNCITRAL Rules on Transparency.203 Norway’s draft Model BIT provides that the tribunal has authority to accept written sub- 9.119 missions from third parties ‘provided that the tribunal has determined that they are directly relevant to the factual and legal issues under consideration’.204 Australia’s free trade agreement with Chile vests the tribunal with the authority to accept 9.120 and consider amicus curiae written submissions ‘that may assist the tribunal in evaluating the submissions and arguments of the disputing parties’.205 Notably, it does not prescribe that the petitioner should have a significant interest, or that its submissions will assist by providing a different perspective or particular insight. Australia’s later agreements with Korea and China, however, require the tribunal to consult with the parties in determining whether to allow amicus submissions, and to consider the extent to which the petitioner has a significant interest in the proceedings, its submissions would assist the tribunal by ‘bringing a perspective, particular knowledge or insight that is different from that of the disputing parties’, and addresses a matter within the scope of the dispute.206

IV.  Public Access to Arbitral Hearings Along with access to documents and third-​party participation, constituencies have clamoured 9.121 for open hearings in investor-​state arbitrations. The fact that hearings in investor-​state proceedings are typically closed to the public has given rise to criticism that the arbitral process is secret and suspect.207 To date, there have been open hearings in some NAFTA Chapter 11 cases, although opening those hearings to the public is not mandatory. Similarly, the revisions to the ICSID Arbitration Rules also contemplate open hearings, but the parties retain

201  Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/​14/​21 [hereinafter Bear Creek v. Peru], Procedural Order No. 6 (July 21, 2016) ¶¶ 31–​39. 202  Bear Creek v. Peru, supra note 201, Procedural Order No. 5 (July 21, 2016) ¶ 40. 203  EU–​Singapore FTA (Authentic Text as of May 2015) Annex 9-​G art. 3. 204  Norway 2015 Model BIT, supra note 89, art. 21(3). 205  Australia–​Chile FTA (July 20, 2008), art. 10.20(2). 206  Australia–​Korea FTA (Apr. 8, 2014) art. 11.20(5); Australia–​China FTA (June 17, 2015) art. 9.16(3). 207  See, e.g., NOW with Bill Moyers:  Trading Democracy (PBS television broadcast Feb. 1, 2002)  (proclaiming that NAFTA Chapter 11 claims ‘are being decided not in open court, but in what has become a system of private justice, in secret tribunals . . . Nothing is open to the public’), transcript, http://​www.pbs. org/​now/​printable/​transcript_​tdfull_​print.html (last visited Mar. 17, 2018).

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Piercing the Veil of Confidentiality discretion to keep their hearings closed. In some recent BITs and FTAs, and under the new UNCITRAL Rules on Transparency, by contrast, opening hearings to the public is compulsory. A small but increasing number of open hearings have been held under those agreements. The experience gained with these open hearings may prove useful for future open hearings.

A. The NAFTA Experience: The First Open Hearings 9.122 As with the other transparency initiatives in investor-​state arbitration, the first petitions

for public access to hearings occurred in NAFTA Chapter 11 arbitrations governed by the UNCITRAL Arbitration Rules. Article 25(4) of those rules provides that ‘[h]‌earings shall be held in camera unless the parties agree otherwise’.

9.123 Unlike the case with access to documents and amicus submissions where the governing rules

as well as the NAFTA’s text were silent, the issue of presence at hearings was addressed by the governing rules and, therefore, not amenable to any interpretation by the NAFTA parties. With this in mind, on the same day in October 2003 that the NAFTA FTC announced the parties’ interpretation regarding amicus submissions and guidelines for amicus participation, the United States and Canada issued public statements granting their consent to open all Chapter 11 hearings to the public: Having reviewed the operation of arbitration proceedings conducted under Chapter Eleven of the North American Free Trade Agreement, the [United States] [Canada] affirms that it will consent, and will request the consent of disputing investors and, as applicable, tribunals, that hearings in Chapter Eleven disputes to which it is a party be open to the public, except to ensure the protection of confidential information, including business confidential information. [The United States] [Canada] recommends that tribunals determine the appropriate logistical arrangements for open hearings in consultation with disputing parties. These arrangements may include, for example, use of closed-​circuit television systems, Internet webcasting, or other forms of access.208

9.124 In that same statement, the United States and Canada announced that they ‘will continue to

work with Mexico on this matter’.209

9.125 One year later, and coinciding with the first open NAFTA Chapter 11 hearing, the NAFTA

FTC issued a statement acknowledging that Mexico had joined the United States and Canada in granting its consent to open hearings.210

9.126 Although the NAFTA states now have consented to open hearings, the consent of the

claimant still is necessary. This consent has been granted in several cases, while in several more the consent has been withheld and the hearings, accordingly, have remained closed to the public. In each of the NAFTA Chapter 11 cases where the hearings were open, the arbitration was governed by the UNCITRAL Arbitration Rules or the ICSID Additional Facility Rules. Most, but not all those cases, were administered by either ICSID or the PCA.

208  Statement on Open Hearings in NAFTA Chapter Eleven Arbitrations (Oct. 7, 2003), https://​ustr. gov/​archive/​assets/​Trade_​Agreements/​Regional/​NAFTA/​asset_​upload_​file143_​3602.pdf (last visited Mar. 17, 2018); Statement of Canada on Open Hearings in NAFTA Chapter Eleven Arbitrations, http://​www. international.gc.ca/​trade-​agreements-​accords-​commerciaux/​agr-​acc/​nafta-​alena/​open-​hearing.aspx?lang=en. (last visited Mar. 17, 2018). 209  Press Release, NAFTA Free Trade Comm’n, NAFTA Commission Announces New Transparency Measures (Oct. 7, 2003), https://​ustr.gov/​about-​us/​policy-​offices/​press-​office/​press-​releases/​archives/​2003/​october/​ nafta-​commission-​announces-​new-​transparen (last visited Mar. 18, 2018). 210 Press Release, U.S.T.R.–​ NAFTA, NAFTA Free Trade Commission Joint Statement—​A Decade of Achievement (July 16, 2004).

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IV.  Public Access to Arbitral Hearings In every open NAFTA Chapter 11 hearing, the hearing was broadcast to a separate room for 9.127 public viewing or streamed on the internet.211 In no case were members of the public present in the hearing room itself. Granting access in this manner avoids the disruption associated with opening the hearing room to the public. It also avoids issues that may arise concerning the arbitrators’ ability to eject disruptive persons from the hearing room and potential attend­ ant consequences from their having taken such action. In each case, the public viewing room was situated in an area that allowed members of 9.128 the public to come and go as they pleased, without obtaining building passes in advance. Observers have reported that attendance at these hearings was at first large and then quickly dissipated. Attendees have included reporters, students, and, in at least one case, opposing counsel who had a pending arbitration against the respondent state in a nearly identical case. With one exception, amici have not been granted any special access to the hearings, beyond that which has been provided to every member of the public. The first NAFTA Chapter 11 hearing to be open to the public was the Methanex hearing on 9.129 the merits, in June 2004. Later that year, in December, the Canfor jurisdictional hearing was broadcast to the public in the same manner. The following year, in December 2005, the UPS hearing was opened to the public. When business confidential information was discussed during that hearing, the cameras broadcasting the hearing to the public room were shut off. The Glamis merits hearing, held in two phases in August and September 2007, was open to 9.130 the public and posed unique challenges. There, the confidential information at issue was not commercially sensitive but, rather, information concerning the precise location of Native American sites that the United States has a legal obligation to keep secret. One of the amici in the case, the Quechan Indian Nation, wished to attend arguments con- 9.131 cerning these issues. Because the information that the United States was obliged to keep confidential was obtained from the Quechan Nation, there was no legal impediment to the Quechan hearing this portion of the argument and testimony. To accommodate the Quechan, ICSID arranged two public hearing rooms—​one for members of the general public and one restricted to members of the Quechan Nation and their counsel. When confidential information concerning the location of Native American sites was discussed, the camera to the public hearing room was shut off, while the one to the Quechan’s room remained on. In contrast, in Detroit International Bridge, the tribunal did not even allow non-​disputing 9.132 state parties to attend the hearings.212 There was a confidentiality order in place in that case, which provided that ‘all hearings shall be held in camera’.213 The tribunal also held that the NAFTA does not provide for the ‘physical participation of non-​disputing parties’ and, therefore, did not require that the United States be permitted to make an oral submission at the hearing.214 Moreover, as the claimant was engaged in parallel domestic litigation against the United States, the tribunal concluded that it should maintain the confidentiality of the hearing in order to allow the claimant to plead freely at the hearing.215

211  See two recent examples in Eli Lilly v.  Canada, supra note 129, Procedural Order No. 5 (Apr. 29, 2016) ¶¶ 6–​9; Mercer International Inc. v. Gov’t of Canada, ICSID Case No. ARB(AF)/​12/​3, Confidentiality Order (Jan. 24, 2013) ¶ 19; id. Procedural Order No. 1 (Jan. 24, 2013) ¶ 76. 212  Detroit International Bridge Company v. Government of Canada, NAFTA/​UNCITRAL, Procedural Order No. 8 (May 12, 2014). 213  Id. ¶ 23. 214  Id. ¶ 2. 215  Id. ¶ 28.

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Piercing the Veil of Confidentiality 9.133 In NAFTA Chapter 11 cases administered by the PCA, the hearings may be streamed live to

a specific location, whether within the premises of the venue of the hearing or otherwise, and/​ or a recording of the hearing may be maintained on the website of the PCA. For example, live video stream of an October 2014 hearing in Mesa Power was transmitted to a room near the hearing room, while live video stream of a February 2016 hearing in Windstream was transmitted to a location in Toronto which was open to the public.

9.134 The consolidated case brought by the Canadian cattlemen against the United States under

the UNCITRAL Arbitration Rules, however, was not administered by any institution. Claimants, who numbered more than 100, expressed an interest in observing the jurisdictional hearing, which was held in October 2007 at a private club in Washington, D.C. The parties therefore arranged for the hearing to be transmitted via video to a location in Canada that was most convenient for the claimants.

9.135 Even where the hearings in NAFTA Chapter 11 cases have remained closed to the public,

in many cases transcripts of those hearings have been posted to the state party’s website or otherwise published.216

B. Open Hearings Under the ICSID Arbitration Rules: Still Subject to the Parties’ Consent 9.136 Until 2003, the ICSID Arbitration Rules addressing attendance at hearings remained un-

changed. Rule 32(2) of the 2003 ICSID Arbitration Rules provided as follows:

The tribunal shall decide, with the consent of the parties, which other persons besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the tribunal may attend the hearings. 9.137 The Vivendi v Argentina tribunal interpreted this provision in considering the petition of five

NGOs seeking access to the hearings. Referring to the tribunal’s inherent power to conduct the procedure, the NGOs contended that ‘hearings in the present case should be opened to the public, citing the NAFTA cases of [Methanex] and [UPS]’.217 The tribunal found that Rule 32(2) was clear—​that no persons except those specifically named in the rule may attend hearings unless both the claimant and the respondent ‘affirmatively agree’ to their attendance.218 Consent was the touchstone of the approach to this issue, and it could not be overridden by the exercise by the tribunal of its inherent powers relating to arbitral procedure.219 In this instance, the claimant refused to admit the petitioners into the hearing, and in this way prevented the hearing from being opened to the public. The tribunal relied on this circumstance to distinguish Methanex and UPS, where both parties specifically consented to allow the public to observe the hearings.220

216  See, e.g., Grand River Enter. Six Nations Ltd. et al. v. United States of America, NAFTA/​UNCITRAL, Transcripts of the Hearing on Jurisdiction (Mar. 23–​25, 2006), http://​www.state.gov/​s/​l/​c11935.htm (last visited Mar. 17, 2018); Int’l Thunderbird Gaming Corp. v. Mexico, NAFTA/​UNCITRAL, Transcripts of Hearings (June 26–​29, 2004), http://​www.naftaclaims.com/​disputes-​with-​mexico.html (last visited Mar. 17, 2018); but see Pope & Talbot, Inc. v. Canada, UNCITRAL/​NAFTA, Decision and Order (Mar. 11, 2002) ¶¶ 15, 24 (directing that hearing transcripts may not be made public when the hearing was held in camera). 217  Vivendi v. Argentina, supra note 52, Order in Response to a Petition for Transparency and Participation as Amicus Curiae (May 19, 2005) ¶¶ 4, 6. 218  Id. ¶ 6. 219  Id. ¶¶ 6–​7. 220  Id.

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IV.  Public Access to Arbitral Hearings In advance of the 2006 Amendments to the ICSID Arbitration Rules, the ICSID Secretariat 9.138 proposed draft Rule 32(2).221 The Secretariat helpfully presented the proposed text in ‘track changes’ format comparing the proposed rule with the existing rule: After consultation with the Secretary-​General and with the parties as far as possible, The the tribunal shall decide, with the consent of the parties, which may allow other persons, besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the tribunal may, to attend or observe all or part of the hearings. The tribunal shall for such cases establish procedures for the protection of proprietary information and the making of appropriate logistical arrangements.

The rule in its proposed form was not adopted. Rather, Rule 32(2), as amended, provides:

9.139

Unless either party objects, the tribunal, after consultation with the Secretary General, may allow other persons, besides the parties, their agents, counsel and advocates, witnesses and experts during their testimony, and officers of the tribunal, to attend or observe all or part of the hearings, subject to appropriate logistical arrangements. The tribunal shall for such cases establish procedures for the protection of proprietary or privileged information.

While the proposed rule would have granted the tribunal discretion to open the hearings 9.140 after taking into account the parties’ views on the matter, the amended rule places the ultimate determination in the hands of the parties: Any party wishing to resist open hearings can raise an objection and prevent the tribunal from exercising its discretion to open them. Like the proposed rule, the amended subsection (2) of Rule 32 also ensures that third-​party 9.141 attendance or observation poses few, if any, logistical difficulties by requiring the tribunal to consult with the ICSID Secretary-​General prior to opening the hearing. In addition, the tribunal must oversee all necessary arrangements for the seamless conduct of the hearing.222 Finally, the rule addresses confidentiality concerns by requiring the tribunal to extend protection over proprietary or privileged information that the disputing parties may use during the proceedings. It does not appear that any ICSID hearings were made open to the public before 2010.223 9.142 Since then, there been several cases in which the parties have consented to open hearings.224 This has tended to take the form of live streaming on the internet, sometimes with a delay to ensure that, at the prompting of the parties, confidential or sensitive information can be omitted.225 In addition, with the consent of the parties, recordings of the hearings may be maintained on the ICSID website.226 For example, in a recent case, Vattenfall, the parties agreed that the October 2016 hearing on jurisdiction, merits, and quantum would be streamed online, with a four-​hour delay to ensure that confidential or sensitive

  ICSID Secretariat, Suggested Changes to the ICSID Rules and Regulations (May 12, 2005), at 4.   The ICSID facilities provide multi-​language streaming for public hearings. See Facilities in Washington, D.C., ICSID. The public can also watch certain public cases live streamed online or watch archived videos of the hearings. 223  The hearing on Preliminary Objections in PacRim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/​09/​12, apparently was the first; see Press Release, ICSID, Pac Rim Cayman LLC v. Republic of El Salvador (ICSID Case No. ARB/​09/​12): Public Hearing (Mar. 23, 2010) (‘ICSID webcast a hearing live for the first time on 31 May and 1 June 2010’). 224  See Commerce Group Corp. & San Sebastian Gold Mines, Inc. v. Republic of El Salvador (ICSID Case No. ARB/​09/​17), Public Hearing (Nov. 17, 2010), Railroad Development Corporation v. Republic of Guatemala (ICSID Case No. ARB/​07/​23), Public Hearing (Nov. 18, 2011). 225  See, e.g., Vattenfall A.B. and Others v. Federal Republic of Germany (ICSID Case No. ARB/​12/​12), Public Hearing (Sept. 29, 2016). 226  See https://​livestream.com/​ICSID. 221 222

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Piercing the Veil of Confidentiality information was omitted.227 Recordings of the first and last day of the hearing, containing the parties’ opening and closing statements, were made available by ICSID on the internet. 9.143 Nevertheless, the consent of the parties remains the touchstone. Since 2010, in one of the

ICSID decisions to address the issue of open hearings, the Biwater tribunal rejected summarily third-​party petitioners’ pleas to address the tribunal during the hearing and to open the hearing to the public. The tribunal noted that Rule 32(2) required the tribunal to obtain the parties’ consent before taking the action requested by petitioners, and because the claimant had objected, the tribunal was obligated to deny the petitioners’ requests.228 Similarly, the tribunals in von Pezold229 and Infinito Gold230 noted that they did not have the discretion to grant a third party’s request to attend the hearings in a proceeding if one of the disputing parties objects under Rule 32(2) of the ICSID Arbitration Rules.

C. Open Hearings: Recent Developments 9.144 As previously noted, the UNCITRAL Arbitration Rules provide that hearings shall be held

in camera, unless the parties otherwise agree. Thus, in Chevron v Ecuador II, the tribunal denied the amicus curiae’s request to attend the oral arguments under Article 25(4) of the UNCITRAL Arbitration Rules, which requires that hearings be held in camera.231

9.145 A proposal was made in 2006 to retain the language of Article 25(4) in the UNCITRAL

Arbitration Rules, while adding the following sentence immediately following:

After consulting the parties and having regard to the circumstances and article 15, paragraph 1, the Arbitral Tribunal may allow a third party to attend all or part of the hearings, subject to appropriate logistical arrangements. The Arbitral Tribunal shall for such cases issue necessary directions under article 15, paragraph 1 for the protection of proprietary or privileged information.232 9.146 Even if this proposal had been adopted, it would probably have had little effect on the fre-

quency of open hearings in UNCITRAL arbitrations, as the parties would have retained the ability to oppose having the hearings made public. That the controlling factor is the consent of the parties has been subject to criticism. For example, in a dispute between a Canadian mining firm and Romania, a local NGO has criticized the parties for, among other things, refusing to consent to open the hearings to the public.233

9.147 Another proposal called for a revision of the default approach in line with that adopted by

the United States in its post-​NAFTA agreements. Its proposed revision to the UNCITRAL Arbitration Rules, with changes from the original shown in italics, reads as follows: Rule 25(4): Except in disputes involving a State as a party, hearings shall be held in camera unless the parties agree otherwise . . . 25(4) bis: In disputes involving a State as a party, hearings shall be open to the public. The tribunal shall establish appropriate logistical arrangements, including procedures for the protection

227  Vattenfall A.B.  and Others v.  Federal Republic of Germany (ICSID Case No. ARB/​ 12/​12), Public Hearing (Sept. 29, 2016). 228  Biwater v. Tanzania, supra note 29, Procedural Order No. 5 (Feb. 2, 2007) ¶¶ 69–​72. 229  Bernard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​15, and Border Timbers Ltd., Border Timbers International (Private) Ltd. & Hangani Development Co. (Private) Ltd. v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​25, Procedural Order No. 2 (June 26, 2012) ¶ 63. 230  Infinito Gold v. Costa Rica, supra note 55, Procedural Order No. 2 (June 1, 2016) ¶¶ 47–​48. 231  Chevron Corporation (U.S.A.) & Texaco Petroleum Corporation (U.S.A.) v. Republic of Ecuador [II], PCA Case No. 2009-​23, Procedural Order No. 8 (Apr. 18, 2011) ¶ 17. 232  See Jan Paulsson & Georgios Petrochilos, Revisions of the UNCITRAL Arbitration Rules (2006) ¶ 200. 233 Law360, Citizen Group Says Romania Mine Row Should Be More Public (Oct. 7, 2016).

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IV.  Public Access to Arbitral Hearings of confidential business information and information which is privileged or otherwise protected from disclosure under a party’s domestic law.234

The new UNCITRAL Rules on Transparency specifically address access to hearings in Article 9.148 6.  The rules provide that, subject to the need to protect confidential information and logistical issues, hearings shall be public. The tribunal shall make logistical arrangements to facilitate public access to hearings (including, where appropriate, by video or other means). Further, the tribunal ‘may, after consultation with the disputing parties, decide to hold all or part of the hearings in private where this becomes necessary for logistical reasons, such as when the circumstances render any original arrangement for public access to a hearing infeasible’.235 Like the UNCITRAL Arbitration Rules, other arbitration rules also provide for closed hearings, 9.149 unless the parties and/​or the tribunal otherwise agree.236 Turning to the treatment of this issue in treaties, Canada revised its model FIPA in 2004 to pro- 9.150 vide for open hearings and has incorporated this provision into its subsequent agreements.237 Recently, pursuant to the Canada–​Peru FTA, the hearing on jurisdiction and merits in Bear Creek v Peru was made available by live-​streaming.238 The EU–​Singapore FTA takes a different approach: it stipulates that hearings shall be open to the 9.151 public unless the parties decide they should be partially or completely closed. In the event of an open hearing, the agreement sets out the precise logistical procedure that should be employed.239 Notably, this may be varied if the ‘Parties agree otherwise’.240 In its revised 2012 Model BIT and subsequent agreements, the United States indicated its in- 9.152 tention for investor-​state arbitral hearings under its agreements to be open to the public by including Article 29(2), which provides: The tribunal shall conduct hearings open to the public and shall determine, in consultation with the disputing parties, the appropriate logistical arrangements. However, any disputing party that intends to use information designated as protected information in a hearing

234  International Institute for Sustainable Development and Center for International Environmental Law, Revising the UNCITRAL Arbitration Rules to Address State Arbitrations (February 2007), at 9. 235  UNCITRAL Rules on Transparency art. 6.3. 236  See ICC Rules of Arbitration, effective Mar. 1, 2017, art. 26(3) (providing that third persons be admitted to hearings only with the permission of the parties and the tribunal); SCC Arbitration Rules, effective January 1, 2017, art. 32(3) (‘Unless otherwise agreed by the parties, hearings will be held in private’); LCIA Arbitration Rules, effective Oct. 1, 2014, art. 19.4 (‘All hearings shall be held in private, unless the parties agree otherwise in writing’); ICDR International Arbitration Rules, effective June 1, 2014, art. 23(6) (‘Hearings are private unless the parties agree otherwise or the law provides to the contrary’). 237  Canada 2004 Model FIPA, supra note 79, art. 38 (‘Hearings held under this Section shall be open to the public. To the extent necessary to ensure the protection of confidential information, including business confidential information, the tribunal may hold portions of hearings in camera’); Canada–​Peru FIPA (Nov. 14, 2006)  art. 38(1); Canada–​Peru FTA (May 29, 2008)  art. 835(1)–​(2); Canada–​Czech Republic FIPA (May 6, 2009) Annex B ¶ 1; Canada–​Jordan FIPA (June 28, 2009) art. 38; Canada–​Romania FIPA (May 8, 2009) Annex C, Pt I; Canada–​Slovak Republic FIPA(July 20, 2010) Annex B ¶ 1; Canada–​Kuwait FIPA (Sept. 26, 2011) art. 30(2); Canada–​China FIPA (Sept. 9, 2012) art. 28(2). 238  Bear Creek Mining Corporation v.  Republic of Peru (ICSID Case No. Arb/​ 14/​21, Public Hearing (Aug. 15, 2016). See also Gabriel Resources Ltd. & Gabriel Resources (Jersey) Ltd. v. Romania (ICSID Case No. ARB/​15/​31), Public Hearing (Sept. 12, 2016) (live streaming of the hearing on provisional measures in an arbitration under the Canada–​Romania BIT). 239  EU–​Singapore FTA (Authentic Text as of May 2015) Annex 15-​A (Rules of Procedure for Arbitration) art. 32. 240  Id.

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Piercing the Veil of Confidentiality shall so advise the tribunal. The tribunal shall make appropriate arrangements to protect the information from disclosure.241 9.153 ICSID has administered proceedings in which, pursuant to the DR–​CAFTA and the US–​

Peru TPA, hearings have been opened to the public via live-​streaming on the internet, and video recordings of the same remain available through ICSID’s website with the parties’ consent.242

9.154 Australia also has incorporated this provision in its agreements with China, Korea, and

Chile.243

9.155 Norway’s draft Model BIT similarly calls for open hearings, providing, in relevant part, ‘The

tribunal shall conduct hearings open to the public and shall determine, in consultation with the disputing parties, the appropriate logistical arrangements’.244 The commentary to the draft Model BIT affirms that hearings should be public and elaborates on some of the logistical arrangements that could accommodate this requirement: Public hearings may be held by providing places for spectators, by providing separate auditoriums, by televising the hearings, by means of webcasting, etc. The most appropriate methods will vary from case to case and from location to location, and the logistics are therefore to be clarified by the tribunal in consultation with the parties.245

9.156 The signed TPP also provides for open hearings.246 Other multilateral agreements, such as the

ASEAN Comprehensive Investment Agreement or intra-​ASEAN agreements, by contrast, do not do so.

V. Conclusion 9.157 There have been great strides over the past decade in increasing the transparency of investor-​

state arbitrations. Today, it is far more common than not for awards to be published. While publication of awards is sometimes required under the governing treaty, in other cases, one or both of the parties publishes the award. Moreover, where there is no requirement of publication and disputing parties do not seek to publish the award, arbitral institutions sometimes publish redacted versions of the awards. Public access to documents other than the award remains far less common. Except for arbitrations taking place under the NAFTA, DR–​CAFTA, or a few select other treaties, the parties’ submissions and documentary evidence generally remain confidential.

241  U.S. 2012 Model BIT art. 29(2). This provision has been incorporated in the U.S.–​ Singapore FTA (May 6, 2003) art. 15.20(2); U.S.–​Chile FTA (June 6, 2003) art. 10.20(2); U.S.–​Morocco FTA (June 15, 2004) art. 10.20(2); DR–​CAFTA (Aug. 5, 2004) art. 10.21(2); U.S.–​Uruguay BIT (Nov. 4, 2005) art. 29(2); U.S.–​Peru TPA (Apr. 12, 2006) art. 10.21(2); U.S.–​Colombia FTA (Nov. 22, 2006) art. 10.21(2); U.S.–​ Panama FTA (June 28, 2007) art. 10.21(2); U.S.–​Korea FTA (June 30, 2007) art. 11.21(2); U.S.–​Rwanda BIT (Feb. 19, 2008) art. 29(2). 242  See The Renco Group, Inc. v.  Republic of Peru, Case No. UNCT/​ 13/​1, Public Hearing (Oct. 6, 2015); Corona Materials, LLC v.  Dominican Republic, ICSID Case No. ARB(AF)/​14/​3, Public Hearing (Mar. 15, 2016); TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/​10/​23, Public Hearing (Sept. 15, 2016); Spence International Investments et al. v. Republic of Costa Rica, Case No. UNCT/​13/​2, Public Hearing (Apr. 14, 2015). 243  Australia–​China FTA (June 17, 2015) art. 9.17(3); Australia–​Korea FTA (Apr. 8, 2014) art. 11.21(2); Australia–​Chile FTA (July 20, 2008) art. 10.22(2). 244  Norway 2015 Model BIT, supra note 89, art. 21(2). 245  Government of Norway, Comments on the [Norwegian] Model for Future Investment Agreements (Dec. 19, 2007), at 38, http://​www.italaw.com/​sites/​default/​files/​archive/​ita1029.pdf. (last visited Mar. 17, 2018). 246  Trans-​Pacific Partnership Agreement (Feb. 4, 2016) art. 9.24(2).

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V. Conclusion Public access to awards and information concerning the filing of claims has led to calls 9.158 for third-​party participation in these arbitrations, which is increasingly accepted. Several treaties expressly provide for such participation, as do the most recent revisions to the ICSID Arbitration Rules and the SCC Arbitration Rules, as well as the new UNCITRAL Rules on Transparency. Even in the absence of express provisions, arbitral tribunals have found that they have the authority to accept third-​party submissions in appropriate circumstances. Tribunals generally, with a few recent exceptions, have not granted amici any greater access to information generated during the arbitration than that which is otherwise provided to the public. Finally, open hearings have been rare, but appear to occur with increasing frequency. While 9.159 some hearings have been broadcast to a public location, others have been live-​streamed over the internet. In a few cases, video recordings of hearings have been made permanently available on the internet. Several recent treaties require open arbitral hearings, subject to appropriate logistical arrangements. In most instances, however, the parties retain the ability to determine whether to open the hearings to the public.

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Part III GUIDE TO KEY JURISDICTIONAL ISSUES

10 WHO IS ENTITLED TO CLAIM? The Definition of Nationality in Investment Arbitration Katia Yannaca-​Small

I. Introduction  II. Natural Persons as Investors 

III. Legal Persons as Investors 

10.01 10.03 A. Customary International Law  10.04 B. State Practice/​Investment Agreements  10.08 C. Jurisprudence under the ICSID Convention  10.11

A. Customary International Law  B. State Practice/​Investment Agreements  C. Jurisprudence 

IV. Conclusion

10.22 10.24 10.34 10.52 10.129

I. Introduction Among the main elements setting the scope of application ratione persona of international 10.01 investment agreements is the definition of the investor. An investment agreement applies only to investors who qualify for coverage under its relevant provisions; only they can submit a claim against the host state. The definition identifies the group of investors whose foreign investment the home country is seeking to protect through the agreement as its ‘nationals’, as well as the ‘clients’ and the investments the host country wishes to attract. In addition, it identifies ways in which the investment might be structured in order to attract better protection under investment treaties.1 This chapter deals with the nationality of the investor, whether a natural or legal person; the 10.02 criteria used by investment agreements to attribute this nationality, and the arbitral awards that support this qualification. For natural persons, the issues are usually not problematic, although some may arise in particular with regard to dual nationality. For legal persons, the debate remains far more complex.2

1  The broader the definition, the greater the number of persons or entities who may benefit from the host state’s admission policies and the wider class the of investors who could claim coverage under the agreement. 2  See generally, R. Dolzer & C. Schreuer, Principles of International Investment Law (2012) [hereinafter Dolzer & Schreuer]; K. Yannaca-​Small & L. Liberti, The Definition of Investor and Investment in International Investment Law, in International Investment Law:  Understanding Concepts and Tracking Innovations ch. 1 (2008); A. Sinclair, ICSID’s Nationality Requirements, in Investment Treaty Arbitration and International Law (T. Weiler ed., 2008); C. McLachlan, L. Shore & M. Weiniger, International Investment Arbitration, Substantive Principles (2d ed. 2017).

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Who Is Entitled to Claim?

II.  Natural Persons as Investors 10.03 The right to grant and withdraw nationality of natural persons is part of a state’s reserved

domain. International law and practice on questions of nationality developed primarily in the context of diplomatic protection before becoming part of the investment agreement universe. The question before tribunals has been whether and to what extent a state can refuse to recognize the nationality of a claimant. Even in the context of diplomatic protection, there was no consensus among international courts and tribunals as to how to establish nationality—​although the threshold for a state to be entitled to espouse its nationals’ claim was quite high, requiring a genuine link between the person and the state of the asserted nationality.

A. Customary International Law 10.04 The International Court of Justice (ICJ), in the Nottebohm case,3 dealing with diplomatic

protection, held that, although a state may decide on its own accord and in terms of its own legislation whether to grant nationality to a specific person, there must be a real connection between the state and the national for that to be a basis for international protection. The Court stated: Nationality is a legal bond having as its basis a social fact of attachment, a genuine connection of existence, interests and sentiments, together with the existence of reciprocal rights and duties. It may be said to constitute the juridical expression of the fact that the individual upon whom it is conferred, either directly by the law or as the result of an act of the authorities, is in fact more closely connected with the population of the State conferring nationality than with that of any other State. Conferred by a State, it only entitles that State to exercise protection vis-​à-​vis another State, if it constitutes a translation into juridical terms of the individual’s connection with the State which has made him its national.4

10.05 Today, it would often be impractical to prove effective nationality following the Nottebohm

considerations, that is, the person’s attachment to the state through tradition, interests, activities, or family ties.5 The International Law Commission (ILC) Report on Diplomatic Protection expressed skepticism about the Nottebohm test of nationality with respect to an individual claim: If the genuine link requirement proposed by Nottebohm was strictly applied, it would exclude millions of persons from the benefit of diplomatic protection as in today’s world of economic globalisation and migration there are millions of persons who have drifted away

3  The Nottebohm Case (Liechtenstein v. Guatemala), 2nd phase, Judgment of April 6, 1955, 1955 I.C.J. Reports 4 [hereinafter Nottebohm]. The case concerned a German national who had resided in Guatemala since 1905. In 1939, he traveled to Liechtenstein to visit his brother and obtained Liechtenstein nationality ‘in exceptional circumstances of speed and accommodation’ in order to gain the status of a national of a neutral state instead of a belligerent state. He returned to Guatemala in 1940 and remained there until his deportation to the United States in 1943. He then tried to rely on his Liechtenstein nationality to seek diplomatic protection against Guatemala. In these circumstances, the Court said he could not assert his Liechtenstein nationality against Guatemala, where he had settled for 34 years. 4  Id. at 23. 5  C.F. Amerasinghe comments that: ‘There is a distinction between diplomatic protection and jurisdiction for the purposes of the [ICSID] Convention . . . [E]‌ven if the Nottebohm Case were to be used as an applicable precedent, it is arguable that an effective link is relevant to negating the existence of nationality only in the particular circumstances of that case, or at any rate, in very limited circumstances’, in The Jurisdiction of the International Centre for Settlement of Investment Disputes, 19 Indian J. Int’l L. 166, 203 (1979) [hereinafter Amerasinghe].

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II.  Natural Persons as Investors from the State of nationality and made their lives in States whose nationality they never acquire or have acquired nationality by birth or descent from States with which they have a tenuous connection.6

However, this approach may still be useful in cases of dual or multiple nationality, when the na- 10.06 tionality of the claimant, to be accepted, must be ‘predominant’. Under customary international law, a state may exercise diplomatic protection on behalf of one of its nationals with respect to a claim against another state, even if its national also possessed the nationality of the other state, provided that the dominant and effective nationality of the person was of the state exercising diplomatic protection. In this respect, customary law evolved; under an earlier rule, diplomatic protection could not be exercised in those circumstances. The later rule is reflected in the ILC Draft Articles, which state: A State of nationality may not exercise diplomatic protection in respect of a person against a State of which that person is also a national unless the nationality of the former State is predominant, both at the time of the injury and the date of the official presentation of the claim.7

The Iran–​United States Claims Tribunal8 relied on the customary law rule of dominant 10.07 and effective nationality in Nasser Esphahanian v Bank Tejarat.9 The tribunal found that the claimant, a dual United States–​Iranian national, was to be regarded as US national for purposes of bringing a claim before the tribunal because his ‘dominant and effective nationality at all relevant times [was] that of the United States and the funds at issue in the present case related primarily to his US nationality, not his Iranian nationality’. Also in case No A/​18, the tribunal, considering another case of dual nationality, relied on Nottebohm and held that the international law rule was the one of ‘real and effective nationality’, involving ‘stronger factual ties between the person concerned and one of the States whose nationality is involved’.10

B. State Practice/​Investment Agreements Some BITs include a single definition of a national that applies to both parties. Other BITs 10.08 offer two definitions, one relating to one contracting party and the other to the second contracting party. For example, the US–​Uruguay BIT,11 based on the 2004 US Model BIT, defines ‘national’ to mean: (a) For the United States, a natural person who is a national of the United States as defined in Title III of the Immigration and Nationality Act. (b) For Uruguay, a natural person possessing the citizenship of Uruguay, in accordance with its laws. Some investment agreements introduce alternative criteria such as a residency or domicile re- 10.09 quirement. The Germany–​Israel BIT, Article 1(3)(b),12 for example, provides that the term ‘nationals’ means, with respect to Israel, ‘Israeli nationals being permanent residents of the State 6  International Law Commission (ILC), Draft Articles on Diplomatic Protection with Commentaries, in 2(2) Y.B. of the Int’l L. Comm’n, Commentary (5) to art. 4 (2006). 7  Id. art. 7. 8  The Algiers Accords resolved the hostage crisis between Iran and the United States. Pursuant to these Accords, the Iran–​U.S.  claims tribunal was established in 1981 to adjudicate claims by nationals of each country following the Iranian revolution. 9  Award No. 31-​157-​2 (Mar. 29, 1983), 2 Iran–​U.S. C.T.R. 157. 10  Iran–​ United States Claims Tribunal:  Decision in Case No. A/​18 concerning the Question of FT, 5 Iran–​U.S. Cl. Trib. Jurisdiction over Claims of Persons with Dual Nationality, No. 32-​A/​18 Rep. 251, 23 I.L.M. 489 (1984). 11  U.S.–​Uruguay BIT, entered into force November 1, 2006. 12  Germany–​Israel BIT, signed June 24, 1976, not yet entered into force.

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Who Is Entitled to Claim? of Israel’. According to the Canada–​Argentina BIT,13 the term ‘investor’ means ‘(i) any natural person possessing the citizenship of or permanently residing in a contracting party in accordance with its laws’. The Energy Charter Treaty (ECT)14 defines nationals by reference to each state’s domestic laws determining citizenship or nationality but also extends coverage to permanent residents: ‘Investor’ means: ‘(a) with respect to a contracting party: (i) a natural person having the citizenship or nationality of or who is permanently residing in that contracting party in accordance with its applicable law’. Similarly, NAFTA, in its Article 201, equally provides in part that ‘ “national” means a natural person who is a citizen or permanent resident of a Party’. 10.10 Recently concluded investment agreements increasingly refer to dual nationality.15 The

Comprehensive Trade and Economic Agreement between Canada and the European Union (CETA),16 Article 8.1, defines nationals: (a) in the case of Canada, a natural person who is a citizen or permanent resident of Canada; and (b) in the case of the European Union, a natural person having the nationality of one of the Member States of the European Union according to their respective laws . . .

A natural person who is a citizen of Canada and has the nationality of one of the Member States of the European Union is deemed to be exclusively a natural person of the party of his or her dominant and effective nationality. A natural person who has the nationality of one of the Member States of the European Union or is a citizen of Canada, and is also a permanent resident of the other party, is deemed to be exclusively a natural person of the party of his or her nationality or citizenship, as applicable. Under the Switzerland–​Tunisia BIT, Article 1(2):17 The term ‘investor’ means: (a) With regard to the: i. Swiss Confederation:  Individuals who, according to Swiss legislation, are regarded as nationals or have the status of permanent residents of that country, provided that, in the second case, they do not simultaneously possess the nationality of the other Contracting Party; ii. Republic of Tunisia: Individuals who, according to Tunisian legislation, are regarded as nationals of that country.

If an individual possesses the nationality of both contracting parties, he or she shall be considered to be a national of the contracting party in respect of which his or her nationality is dominant and effective.

C. Jurisprudence under the ICSID Convention 10.11 Article 25(1) of the ICSID Convention provides that ‘the jurisdiction of the Centre shall

extend to any legal dispute arising directly out of an investment between a Contracting State . . . and a national of another contracting State . . .’. With respect to natural persons, Article 25(2) of the Convention defines ‘National of another Contracting State’ to mean: (a) any natural person who had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to

  Canada–​Argentina BIT, entered into force April 29, 1993.   Energy Charter Treaty (ECT), entered into force provisionally December 17, 1994, entered into force April 16, 1998. 15  Dolzer & Stevens say that in the absence of treaty regulation, general principles of international law would apply, according to which the ‘effective’ nationality of the individual would govern. See R. Dolzer & M. Stevens, Bilateral Investment Treaties (1995). 16  Comprehensive Trade and Economic Agreement between Canada and the European Union (CETA), entered into force provisionally September 21, 2017. 17  Switzerland–​Tunisia BIT, entered into force July 8, 2014. 13 14

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II.  Natural Persons as Investors conciliation or arbitration as well as on the date on which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of Article 36  . . . 

The ICSID Convention excludes dual nationals, if one of the nationalities is that of the host 10.12 state, that is, it ‘[d]‌oes not include any person who on either date also had the nationality of the contracting State party to the dispute’.18 In this respect, it is stricter than the customary law rule on dual nationals, which allows a claim to be brought by the state of predominant nationality against the state of the other nationality. Even if an agreement between the host state and an investor specifically states his nationality, 10.13 this may not be conclusive if the nationality does not exist in an objective way and must be objectively determined.19 A certificate of nationality, although providing strong evidence, is not conclusive proof.20 Although an IIA may include permanent residents of a state party within its definition of 10.14 investors, that will not suffice to allow the permanent resident of that state to opt for arbitration under the ICSID Convention. Given the terms of Article 25(1),21 the extension of treaty rights to permanent residents cannot extend ICSID’s jurisdiction beyond nationals of contracting states to the ICSID Convention. In practice, a considerable number of ICSID and Additional Facility cases have involved 10.15 investors who were natural persons, although those that involved dual nationals have drawn most attention. In Soufraki v UAE, the claim was related to a port concession in Dubai. When a dis- 10.16 pute arose, Mr Soufraki, who asserted dual Italian and Canadian nationality, invoked the Italy–​United Arab Emirates BIT. The tribunal investigated and found that he had lost his Italian nationality when he spontaneously acquired Canadian citizenship and had not reacquired it. It took Mr Soufraki’s certificates of nationality only as prima facie evidence of his nationality22 and held that he was not entitled23 to bring a claim under the Italy–​U.A.E. BIT:24 [w]‌hen, in international arbitral or judicial proceedings, the nationality of a person is challenged, the international tribunal is competent to pass upon that challenge. It will accord great

18  Schreuer refers to the Report of the Executive Directors, which explains the provision of dual nationality as follows: ‘It should be noted that under clause (a) of Article 25(2) a natural person who was a national of the State party to the dispute would not be eligible to be a party in proceedings under the auspices of the Centre, even if at the same time he had the nationality of another State. This ineligibility is absolute and cannot be cured even if the State party to the dispute had given its consent’, 1 ICSID Rep. 29, in The ICSID Convention: A Commentary 667, 271 (2d ed. C. Schreuer with L. Malintoppi, A. Reinisch & A. Sinclair, 2009) [hereinafter Schreuer et al., A Commentary]. 19  Dolzer & Schreuer, supra note 2. 20 Hussein Nuaman Soufraki v.  United Arab Emirates, ICSID Case No. ARB/​ 02/​ 7, Decision on Jurisdiction (July 7, 2004) [hereinafter Soufraki v. UAE], discussed at ¶ 10.16 infra. 21  See supra ¶ 10.11. 22  Soufraki v. UAE, supra note 20, ¶ 63. 23  In a very interesting statement, the tribunal recognized the difference between the ease with which an investor may incorporate in a favorable jurisdiction to have advantageous BIT coverage and the difficulties Mr Soufraki faced as a natural person in proving his Italian nationality: ‘[h]‌ad Mr. Soufraki contracted with the United Arab Emirates through a corporate vehicle incorporated in Italy, rather than contracting in his personal capacity, no problem of jurisdiction would now arise. But the tribunal can only take the facts as they are and as it has found them to be’. See id. ¶ 83. 24  Another interesting argument was raised by the defendant, but was not addressed by the tribunal: if Mr Soufraki had qualified as an Italian national, would he, as a dual national, need to demonstrate that he had closer or more ‘effective’ ties with Italy, the ‘home’ state under whose BIT he sought to bring a claim, than with Canada?

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Who Is Entitled to Claim? weight to the nationality law of the State in question and to the interpretation and application of that law by its authorities. But it will in the end decide for itself whether, on the facts and law before it, the person whose nationality is at issue was not a national of the State in question and when, and what follows from that finding. Where as in the instant case, the jurisdiction of the international tribunal turns on an issue of nationality the international tribunal is empowered, indeed bound, to decide that issue.25

Mr Soufraki requested the annulment of the award, claiming, inter alia, that the tribunal manifestly exceeded its powers on this point. The ad hoc Committee confirmed the tribunal’s finding: [t]‌he principle is in fact well established that international tribunals are empowered to determine whether a party has the alleged nationality in order to ascertain their own jurisdiction, and are not bound by national certificates of nationality or passports or other documentation in making that determination and ascertainment.26  . . .  Certificates of nationality constitute prima facie—​not conclusive—​evidence, and are subject to rebuttal. In fine the Tribunal did not manifestly exceed its powers in deciding that it had to determine for itself Mr Soufraki’s nationality.27 10.17 In Pey Casado v Chile,28 the claimant had renounced his Chilean nationality in favour of his

Spanish one, but Chile argued that he was still a Chilean national.29 The tribunal agreed with the Soufraki tribunal regarding its obligation to determine the nationality of the investor and proceeded to its own investigation. After examining the Chilean Constitution, the Chilean jurisprudence on this matter as well as the Inter-​American Convention on Human Rights, the tribunal concluded that Pey Casado had indeed successfully renounced his Chilean nationality. In addition, based on Professor Schreuer’s analysis of the ICSID Convention on this point,30 the tribunal considered that a host state could not impose its nationality upon an investor to exclude the investor from its consent and thereby evade its obligation to submit a dispute to ICSID.

10.18 In Champion Trading v Egypt,31 US nationals who were also found to be Egyptian nationals

were denied the right to bring a claim against Egypt (based on the US–​Egypt BIT). The

  Id. ¶ 55.   Soufraki v. UAE, supra note 20, Decision on Annulment (June 5, 2007), ¶ 64. 27  Id. ¶ 76. 28  Pey Casado and Président Allende Foundation v. Chile, ICSID Case No. ARB/​98/​2, Award (Apr. 22, 2008 [hereinafter Pey Casado v. Chile]. 29  The claim arose out of Pinochet’s coup d’état. Following the coup, Pinochet’s government shut down the El Clarin newspaper and dissolved the company that owned it. One of the claimants, Victor Pey Casado, owned shares in that company. After fleeing to his native Spain, Mr Pey Casado joined with other former friends of Allende to establish the philanthropic Salvador Allende Foundation to promote freedom of the press and democratic values. When he returned to Chile in the late 1980s, he was unable to secure any remedies in Chilean courts and turned to the Chile–​Spain bilateral investment treaty. He was joined by the Salvador Allende Foundation, to which he had donated 90 per cent of his shares. The tribunal ordered Chile to pay over U.S.$10 million for breaching the BIT. 30  According to Schreuer: ‘The host State may not impose its nationality on a foreign investor for the purpose of withdrawing its consent. During the Convention’s drafting the problem of compulsory granting of nationality was discussed and the opinion was expressed that this would not be a permissible way for a State to evade its obligation to submit a dispute to the Centre (History, vol. II, pp 658, 705, 876). But it was decided that this question could be left to the decision of the Conciliation Commission or Arbitral Tribunal’. See Schreuer et al., A Commentary, supra note 18 at 274, ¶ 678. 31  Champion Trading Company, Ameritrade International Inc, James T. Wahba, John B. Wahba, Timothy T.  Wahba v.  Arab Republic of Egypt, ICSID Case No. ARB/​02/​9, Decision on Jurisdiction (Feb. 21, 2003) [hereinafter Champion Trading v. Egypt]. 25 26

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II.  Natural Persons as Investors individual claimants argued that the tribunal should employ the international law test of ‘real or effective nationality,’ which they contended would show that they ‘have not effectively acquired Egyptian nationality’. The tribunal found that the claimants had used their Egyptian nationality for the registration of their business and therefore were clearly excluded from ICSID arbitration.32 In the case of Siag and Vecchi v Egypt,33 Mr Siag and his mother, Ms Vecchi, former Egyptian 10.19 nationals, submitted a claim under the Italy–​Egypt BIT, as Italian nationals. Because the ICSID Convention does not allow persons to take their own state to arbitration, the tribunal extensively examined the Egyptian law to determine whether they had ceased to be Egyptian nationals. All three arbitrators held that Ms Vecchi had lost her Egyptian nationality on the date she reacquired her Italian nationality, but only two held that Mr Siag had lost his Egyptian nationality by virtue of his failure to take formal steps to retain it. The third arbitrator stated in his partial dissent: The drafting history of Article 25(2)(a) is unequivocal about the concern expressed by many countries that did not want to be taken to international arbitration by investors who were their nationals, even if holding the nationality of another Contracting Party as well . . . This conclusion is equivalent to the recognition that the prohibition in question is a kind of rule of jus cogens which does not admit derogation by consent, at any rate for the parties to the Convention . . .34

In Micula v Romania,35 the tribunal was faced with the situation in which the claimants had 10.20 renounced their Romanian nationality in favour of Swedish nationality, but Romania argued that the individuals should not be permitted to ‘oppose’ Romania in an international arbitration because their ‘effective’ nationality, as a matter of international law, was Romanian. The tribunal held that the test of ‘effective’ nationality—​which it characterized as disputed under public international law—​should not be utilized in the context of an ICSID case. It also stressed that, under public international law, there was a particular ‘reluctance’ to apply such a test where the individuals in question held only one nationality (as compared to situations where individuals might hold several nationalities, and adjudicators might inquire which of these was effective or genuine and which was more tenuous).36 It added that: It is also doubtful whether the genuine link test would apply pursuant to the BIT. The Contracting Parties to the BIT are free to agree whether any additional standards must be applied to the determination of nationality. Sweden and Romania agreed in the BIT that the Swedish nationality of an individual would be determined under Swedish law and included no additional requirements for the determination of Swedish nationality. The Tribunal concurs with the Siag tribunal that the clear definition and the specific regime established by the terms of the BIT should prevail and that to hold otherwise would result in an illegitimate revision of the BIT.37

32  After dismissing jurisdiction for the individual claims, the tribunal upheld jurisdiction for the claims brought by the two corporate entities, observing that there was no bar to ICSID claims by companies whose shares were held by dual nationals of the two parties engaged in the arbitration. 33  Waguih Elie George Siag & Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​15, Decision on Jurisdiction (Apr. 11, 2007) [hereinafter Siag and Vecchi v. Egypt]. Mr Siag and his mother, Ms Vecchi, claimed that Egypt confiscated a property which had been purchased by their Egyptian company and slated for development into a resort property. 34  Id. See Orrego Vicuña’s Dissenting Opinion at 63. 35 Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. & S.C. Multipack S.R.L.  v.  Romania, ICSID Case No. ARB/​ 05/​ 20, Decision on Jurisdiction and Admissibility (Sept. 24, 2008) [hereinafter Micula v. Romania]. 36  Id. ¶¶ 99–​100. 37  Id. ¶ 101.

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Who Is Entitled to Claim? 10.21 In Armas and Gruber v Venezuela, the tribunal upheld jurisdiction over a dispute brought

against Venezuela by two Spanish nationals who also held Venezuelan nationality. One of the claimants was born in Spain and later acquired Venezuelan nationality and the other was born in Venezuela and later acquired Spanish nationality. Although the case was under the UNCITRAL Rules, not the ICSID Convention, it is worth mentioning for the tribunal’s reasoning. The tribunal noted that the Venezuela–​Spain BIT does not explicitly exclude persons with dual nationality and that, when Venezuela or Spain wanted to exclude them, they have done so expressly.38 Relying on Article 31 on the Vienna Convention on the Law of Treaties (VCLT) and previous decisions of investment tribunals,39 it concluded that, if the treaty did not impose any express limitation on dual nationals, the tribunal could not: it was ‘not possible to devoid of effect the nationality granted freely by a State and accepted as valid by the other’.40 It also noted that the exclusion of dual nationals in Article 25(2) of the ICSID Convention did not apply to the case at hand as it was brought under the UNCITRAL Rules.41 Ultimately, the tribunal refused to apply the test of ‘dominant and effective nationality’, which it considered part of the law of diplomatic protection and not applicable in the context of investment treaties.42

III.  Legal Persons as Investors 10.22 Corporate nationality raises more complex issues than nationality of natural persons.

Companies today operate in ways that make it very difficult to determine nationality because of the several layers of shareholders, both natural and legal persons themselves, operating from and in different countries. Customary international law does not provide full guidance, since it developed in the context of diplomatic protection and its relevance to IIAs is at best limited. Investment treaties specifically define the objective criteria which make a legal person a national, or investor, of a party for purposes of the agreements and specify any additional requirements that the contracting States wish to apply to determine the standing of claimants. In some cases, treaties are openly-​worded and their broad definitions of investor or national give entities flexibility for nationality planning and corporate restructuring to achieve investment protection, though this may, in limited circumstances be rejected by tribunals as abusive. Finally, if the party does not wish to extend its treaty protection, it may include a ‘denial of benefit clause,’ allowing exclusion of investors in certain categories.

10.23 The ICSID Convention, which limits the jurisdiction of the Centre to disputes between one

contracting state and a national of another contracting state, provides specific rules on the nationality of the investors as legal persons in its Article 25(2).

A. Customary International Law 10.24 Under customary international law and in the context of diplomatic protection, a company is

a national of the state of incorporation, absent special circumstances. That state may espouse

38  Serafin García Armas and Karina García Gruber v. Bolivarian Republic of Venezuela (UNCITRAL), Decision on Jurisdiction (Dec. 15, 2014), ¶ 180 [hereinafter Armas and Gruber v. Venezuela]. 39  Id. ¶¶ 202–​205. 40  Id. ¶ 200. 41  Id. ¶¶ 193–​96. 42  Id. ¶ 170.

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III.  Legal Persons as Investors the claim for injury to the corporation, which must have had the nationality of that state at the time of the injury. Customary law also limits the extent to which the shareholders have a claim for injuries to the company in which they have invested that may be espoused by their state of nationality. The ICJ addressed corporate nationality and shareholder protection in Barcelona Traction,43 10.25 a case brought when the number of IIAs was very limited. It held that international law ‘attributes the right of diplomatic protection of a corporate entity to the state under the laws of which it is incorporated and in whose territory it has its registered office’.44 After acknowledging that, ‘in the particular field of the diplomatic protection of corporate entities, no absolute test of the “genuine connection” has found general acceptance’,45 it suggested that, in addition to incorporation and a registered office, there was a need for some ‘permanent and close connection’ between the state exercising diplomatic protection and the corporation.46 On the facts of this case, the Court found such a connection in the ‘manifold links’ of the company to Canada: the incorporation of the company in Canada for over fifty years, the maintenance of its registered office, accounts, and share register there, the holding of board meetings there for many years, its listing in the records of the Canadian tax authorities and the general recognition by other states of the Canadian nationality of the company.47 In this case, however, the Court did not face a situation in which a company incorporated in one state had a ‘close and permanent connection’ with another. The ILC responded by clarifying this point in its Draft Article 9 on Diplomatic Protection: For the purposes of the diplomatic protection of a corporation, the State of nationality means the State under whose law the corporation was incorporated. However, when the corporation is controlled by nationals of another State or States and has no substantial business activities in the State of incorporation, and the seat of management and the financial control of the corporation are both located in another State, that State shall be regarded as the State of nationality.48

The ICJ affirmed the limited role customary law plays in protecting shareholders in a land- 10.26 scape with an increasing number of investment agreements. Although recognizing the central role of shareholders as investors, the Court held that the state of nationality of the majority shareholders (Belgium) of a company incorporated in Canada was not entitled to pursue claims against Spain for damage done to the company: [t]‌he mere fact that damage is sustained by both company and shareholder does not imply that both are entitled to claim compensation . . . In such cases, no doubt, the interests of the aggrieved are affected, but not their rights. Thus, whenever a shareholder’s interests are

43  Case Concerning the Barcelona Traction, Light and Power Company, Limited (Belg. v. Spain) (Feb. 5, 1970) (1970), I.C.J. Reports 3, 35–​36, 9 I.L.M. 227. In this case, Belgium sought recovery from Spain for damages suffered by Barcelona Traction’s Belgian majority shareholders as a result of measures taken with regard to the company by various organs of Spain. The company was incorporated in Canada to develop an electric power production and distribution system in Spain. Spain challenged Belgium’s right to claim on behalf of the shareholders. The Court held that international law conferred the right of protection on the state of nationality of the company and did not confer a right of protection on the state of nationality of the shareholders, whose rights were to be protected through the company. 44  Id. at 42, ¶ 70. 45 Id. 46  Id. at 42, ¶ 71. 47 Id. 48  International Law Commission (I.L.C.), Draft Articles on Diplomatic Protection with Commentaries, in II Y.B. of the International Law Commission (2006).

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Who Is Entitled to Claim? harmed by an act done to the company, it is to the latter that he must look to institute appropriate action; for although two separate entities may have suffered the same wrong, it is only one entity whose rights have been infringed.49 10.27 The Court distinguished the situation in which the shareholders rights are directly af-

fected and, accordingly, a shareholder claim can be brought.50 It also suggested that international law may provide for two narrow exceptions in which shareholder claims may be brought for injury to the rights of the company:  (i) where the company has ceased to exist in the country of incorporation, or (ii) the state of incorporation lacks capacity to take action.51 The Court addressed, but did not decide on, a possible exception for reasons of equity:52 The Court addressed, but did not decide on, a possible exception: ‘[T]‌he Court considers that, in the field of diplomatic protection as in al1 other fields of international law, it is necessary that the law be applied reasonably. It has been suggested that if in a given case it is not possible to apply the general rule that the right of diplomatic protection of a company belongs to its national State, considerations of equity might cal1 for the possibility of protection of the shareholders in question by their own national State. This hypothesis does not correspond to the circumstances of the present case’.

10.28 The ICJ made clear it was deciding under customary international law of diplomatic pro-

tection and not ruling on the protection of shareholders outside of that context, under investment protection agreements, for instance. The Court was well aware of the contemporary trends in the protection of foreign investors under the Washington Convention and the growing web of bilateral investment treaties.53 It identified them as lex specialis—​allowing the conclusion that customary international law had not yet developed and recourse of shareholders could only be found in such international instruments: Considering the important developments of the last half-​century, the growth of foreign investments and the expansion of international activities of corporations and considering the way in which economic interests of States have proliferated, it may at first sight appear surprising that the evolution of law has not gone further and that no generally accepted rules in the matter have crystallized on the international plane . . . . Thus, in the present State of the law the protection of shareholders requires that recourse be to treaty stipulations or special agreements directly concluded between the private investors and the State in which the investment is placed.54

10.29 It should be noted that 1970 was only four years after the entry into force of the Washington

Convention and there were only a few hundred BITs in existence instead of the thousands that exist today.

  Barcelona Traction, supra note 43, at 36, ¶ 44.   Id. ¶ 47. 51  Id. at 41, ¶ 64. 52  Id. at 49, ¶ 93. 53  Judge Jessup, in his separate opinion, stated: ‘The International Court of Justice in the instant case is not bound by formal conceptions of corporate law. We must look at the economic reality of the relevant transactions and identify the overwhelmingly dominant feature’. The overwhelmingly dominant feature in the affairs of Barcelona Traction was ‘control which may constitute the essential link’. See Barcelona Traction, I.C.J. 3 (1970), Separate Opinion of Judge Jessup, 169–​70, 183; ¶¶ 17, 39. 54  Id. Judgment at 46–​47, ¶¶ 89, 90. 49 50

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III.  Legal Persons as Investors This decision55drew a considerable discussion56and constituted the basis for Argentina’s de- 10.30 fence57 in the numerous claims brought against it in recent years. The ILC, in Article 11 of its Draft Articles, addressed the question of shareholder claims for 10.31 injury to the company as follows: The State of nationality of shareholders in a corporation shall not be entitled to exercise diplomatic protection in respect of such shareholders in the case of an injury to the corporation unless: (a) The corporation has ceased to exist according to the law of the State of incorporation for a reason unrelated to the injury; or (b) The corporation had, at the date of injury, the nationality of the State alleged to be responsible for causing the injury, and incorporation in that State was required by it as a precondition for doing business there.

While Article 11 is quite limited, the Commission, in its Commentary to Article 11(b), asserted that: ‘[i]‌n these circumstances it would be possible to sustain a general exception on the basis of judicial opinion’. A few years later, when the landscape of investment protection agreements had somewhat 10.32 evolved, a Chamber of the ICJ, in the case concerning Elettronica Sicula S.p.A. (ELSI),58 permitted the United States to bring a claim against Italy on behalf of US shareholders with respect to their wholly owned Italian company, ELSI, whose plant and assets were requisitioned by local Italian authorities. They claimed that this interfered with shareholder rights to own and manage the company. However, unlike Barcelona Traction, the basis for action in ELSI was not customary law, but a Treaty of Friendship, Commerce and Navigation, which expressly provided for the protection of US shareholders in Italy. In a more recent case, when the web of investment agreements had become particularly 10.33 dense, Guinea v DR Congo,59 the ICJ again found that customary law had not yet recognized a general right of shareholders to claim for injuries to the company.60 However, the Court 55  For a discussion of the Barcelona Traction case, see I. Laird, A Community of Destiny—​ The Barcelona Traction case and the Development of Shareholder Rights to Bring Investment Claims, in International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law (T. Weiler ed., 2005) [hereinafter Laird, A Community of Destiny]; R. Higgins, Aspects of the Case Concerning the Barcelona Traction Company, 11 Va. J. Int’l L. 327 (1971). 56  Writings on the rights of shareholders in general, with comments on the Barcelona Traction case include C. Schreuer, Shareholder Protection in International Investment Law, 2 TDM 3 (2005); S. Alexandrov, The ‘Baby Boom’ of Treaty-​Based Arbitrations and the Jurisdiction of ICSID Tribunals: Shareholders as ‘Investors’ under Investment Treaties, 6 J. World Investment & Trade 3 (2005); Laird, A Community of Destiny, supra note 55; P. Dumberry, The Legal Standing of Shareholders Before Arbitral Tribunals: Has Any Rule of Customary International Law Crystallized?, 18 Michigan State J. of Intl L. 354 (2010); A. Cohen Smutny, Claims of Shareholders in International Investment Law, in International Investment Law for the 21st Century, Essays in Honor of Christoph Schreuer (C. Binder, U. Kriebaum, A. Reinisch, S. Wittich eds., 2009). 57  Argentina repeatedly stated in its defence that the shareholders are entitled to bring a claim only when their own rights have been infringed and not the rights of the corporation of which they are shareholders. 58  Elettronica Sicula S.p.A. (ELSI) (U.S. v. It.), I.C.J. Judgment (July 20, 1989), I.C.J. Rep. (1989) 15. 59 Ahmadou Sadio Diallo (Republic of Guinea v.  Democratic Republic of Congo) I.C.J. Judgment, Preliminary Objections (May 24, 2007), ¶¶ 88–​90, I.C.J. Rep. (2007). 60  Id. ¶ 89: ‘The Court, having carefully examined State practice and decisions of international courts and tribunals in respect of diplomatic protection of associés and shareholders, is of the opinion that these do not reveal—​at least at the present time—​an exception in customary international law allowing for protection by substitution, such as is relied on by Guinea’.

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Who Is Entitled to Claim? explicitly noted that it was not addressing the more limited exception found in Article 11(b) of the ILC Draft Articles on Diplomatic Protection, since the facts of the case did not correspond to it.61 The Court gave credit to multilateral and bilateral investment treaties and the contracts between investors and host states as the key sources of the protection of shareholders in contemporary international law and held that Guinea, as the home state, was not able to exercise diplomatic protection against the Congo—​the state of incorporation.

B. State Practice/​Investment Agreements 10.34 Which entities are usually entitled to claim? Only private or also public ones? All legal entities

or only those of certain forms? What is the link between the legal person and the contracting party that defines its nationality?

10.35 The US Model BIT and the Canadian Model FIPA make it clear that state-​owned or con-

trolled entities are also included. According to their Article 1, Definitions, ‘ “enterprise” means any entity constituted or organized under applicable law, whether or not for profit, and whether “privately or governmentally owned or controlled . . .” ’ [emphasis added].62

10.36 Some investment agreements, such as the Czech Republic–​Kuwait BIT63 and the Belgium–​

Saudi Arabia BIT,64 include the Government itself.

10.37 Some BITs include language indicating that all legal entities, regardless of form, may be

considered investors. The US Model BIT and the Canadian Model FIPA, for instance, provide that investors may consist of legal entities ‘including a corporation, trust, partnership, sole proprietorship, joint venture, association, or similar organization; and a branch of any such enterprise’.65 The German Model BIT, Article 3(a), defines ‘companies’ in respect of Germany to include ‘any juridical person as well as any commercial or other company or association with or without legal personality . . . irrespective of whether or not its activities are directed at profit’ [emphasis added].66

10.38 There is no single criterion or test used by investment treaties to define the link required

between a legal person seeking protection under the treaty and the contracting state under whose treaty the investor asks for protection. Under international law, there are essentially three criteria67 for determining nationality of legal persons: (i) incorporation, which is used often alone; (ii) the main seat (siège social), that is, where the place of administration is; and (iii) less frequently, control. Most investment treaties use a combination of these criteria.68 The

  Id. ¶ 91.   Both model agreements use the same language. 2012 U.S. Model BIT art. 1, Definitions, https://​ www.state.gov/​documents/​organization/​188371.pdf; 2004 Canada Model Foreign Protection Investment Agreement (FIPA), art. 1, Definitions, https://​www.italaw.com/​documents/​Canadian2004-​FIPA-​model-​ en.pdf (both last visited Nov. 27, 2017). 63  Czech Republic–​Kuwait BIT, entered into force January 21, 1997. 64  Belgium–​Saudi Arabia BIT, entered into force June 11, 2004. 65  2012 Model U.S. BIT, 2004 Canada FIPA, supra note 62. 66 2008 Model German BIT, http://​investmentpolicyhub.unctad.org/​Download/​TreatyFile/​2865 (last visited Nov. 27, 2017). 67  Judge Jessup, in his Separate Opinion in Barcelona Traction said: ‘[t]‌here are two standard tests of the “nationality” of a corporation. The place of incorporation is the test generally favoured in the legal systems of the common law, while the siège social is more generally accepted in the civil law systems’. These are the traditional tests found in the majority of international investment treaties. The test of control is found in a smaller sample of treaties. See supra note 43 at 70, ¶ 39. 68  Sinclair notes that ‘cultural, economic and political factors will influence which test a particular State will prefer to apply. No question arises as to the validity of the choices, nor is it appropriate to identify a general rule in the abstract because different states legitimately take different approaches to qualification for protection’. See A. Sinclair, The Substance of Nationality Requirements in Investment Treaty Arbitration, 6 ICSID Rev.-​FILJ 3 (2005) [hereinafter Sinclair, The Substance of Nationality Requirements]. 61 62

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III.  Legal Persons as Investors most common approach is a combination of place of incorporation and seat, although the combination of incorporation and control and the combination of all three tests is also found.

1. Incorporation The United Kingdom is one of the countries which, in the majority of its BITs, use the place 10.39 of incorporation as the sole test. The UK–​El Salvador69 BIT defines ‘investor’ as: (i) in respect of the United Kingdom:  physical persons deriving their status as United Kingdom nationals from the law in force in the United Kingdom; and corporations, firms and associations incorporated or constituted under the law in force in any part of the United Kingdom or in any territory to which this Agreement is extended in accordance with the provisions of Article 12; (ii) in respect of El Salvador: natural persons having the nationality of El Salvador in accordance with its laws; and juridical persons such as companies, public institutions, authorities, foundations, partnerships, firms, establishments, organisations, corporations or associations incorporated or constituted in accordance with the laws and regulations of El Salvador; . . .

The UK–​Poland BIT70 defines an investor of either party as: any corporations, firms, organisations and associations incorporated or constituted under the law in force in that Contracting Party or in any territory to which this Agreement is extended in accordance with the provisions of Article 11; . . .

Under the 2012 US Model BIT, ‘investors’ include enterprises of a party, which are defined 10.40 in terms of organization under applicable law: ‘enterprise’ means any entity constituted or organized under applicable law, whether or not for profit, and whether privately or governmentally owned or controlled, including a corporation, trust, partnership, sole proprietorship, joint venture, association, or similar organization; and a branch of an enterprise.71

The Canada Model FIPA72 similarly provides that ‘enterprise means: (i) any entity constituted or organized under applicable law . . .’. Because of its potential opening for treaty shopping, a clause incorporating this criterion may 10.41 be accompanied by a ‘denial of benefits’ clause, allowing the state party concerned, under certain circumstances, to deny treaty protection to a company controlled by nationals of a non-​party. This gives the host state the authority to deny treaty protection to ‘investor’ shell companies owned by nationals of a third country or the host state.73 The Austria–​Libya74 and Austria–​Lebanon75 BITs include a denial of benefits clause: A Contracting Party may deny the benefits of this Agreement to an investor of the other Contracting Party and to its investments, if investors of a Non-​Contracting Party own or   UK–​El Salvador BIT, entered into force December 1, 2001.   United Kingdom–​Poland BIT, entered into force April 14, 1988. 71  U.S. 2012 Model BIT art. 1. The definition of investor provides that ‘investor of a Party’ means a party or state enterprise thereof, or a national or an enterprise of a party, that attempts to make, is making, or has made an investment in the territory of the other party . . . . 72  See art. 1, Definitions, http://​www.international.gc.ca/​trade-​agreements-​accords-​commerciaux/​agr-​acc/​ fipa-​apie/​index.aspx (last visited Nov. 17, 2017). 73 B. Legum, Defining Investment and Investor: Who Is Entitled to Claim? Presentation at the Symposium ‘Making the most of international investment agreements:  a common agenda’, co-​organized by ICSID, OECD, and UNCTAD (Dec. 12, 2005), OECD, Paris http://​www.oecd.org/​daf/​inv/​internationalinvestme ntagreements/​36370461.pdf (last visited Nov. 17, 2017). 74  Austria–​Libya BIT, entered into force January 1, 2004. 75  Austria–​Lebanon BIT, entered into force September 20, 2002. 69 70

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10.42

Who Is Entitled to Claim? control the first mentioned investor and that investor has no substantial business activity in the territory of the Contracting Party under whose law it is constituted or organized. 10.43 The NAFTA in its Article 1132(2),76 the Model US77 BIT and Canada Model FIPA,78 the

US FTAs with Chile,79 CAFTA–​Dominican Republic,80 Australia,81 Colombia,82 Morocco,83 Panama,84 Peru,85 and the Canada–​Chile FTA86 contain similar language with some variations.

10.44 The ECT in its Article 1(7)(a)(ii) defines ‘investor’ with respect to a contracting party to in-

clude a ‘company or other organization organized in accordance with the law applicable in that contracting Party’.87 The denial of benefits clause is found in Part III, Article 17: Each Contracting Party reserves the right to deny the advantages of this Part to: (1) a legal entity if citizens or nationals of a third State own or control such entity and if that entity has no substantial business activities in the Area of the Contracting Party in which it is organized; . . .

The two qualifications of substantial business connection and ownership or control residing in the territory of an ECT contracting Party are cumulative. 10.45 The Comprehensive Economic and Trade Agreement between the European Union and

Canada (CETA),88 in its Article 8.16, provides that,

a Party may deny the benefits of this Chapter to an investor of the other Party that is an enterprise of that Party and to investments of that investor if: (a) an investor of a third country owns or controls the enterprise; and (b) the denying Party adopts or maintains a measure with respect to the third country that: (i) relates to the maintenance of international peace and security; and (ii) prohibits transactions with the enterprise or would be violated or circumvented if the benefits of this Chapter were accorded to the enterprise or to its investments.

  NAFTA art. 1113(2).   Article 17 of the U.S. BIT provides as follows:

76 77

1. A Party may deny the benefits of this Treaty to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if persons of a non-​Party own or control the enterprise and the denying Party: (a) does not maintain diplomatic relations with the non-​Party; or (b) adopts or maintains measures with respect to the non-​Party or a person of the non-​Party that prohibit transactions with the enterprise or that would be violated or circumvented if the benefits of this Treaty were accorded to the enterprise or to its investments. 2. A Party may deny the benefits of this Treaty to an investor of the other Party that is an enterprise of such other Party and to investments of that investor if the enterprise has no substantial business activities in the territory of the other Party and persons of a non-​Party, or of the denying Party, own or control the enterprise.   Canada 2004 Model FIPA art. 18.   U.S.–​Chile FTA art. 10.11, entered into force January 1, 2004. 80  U.S.–​ CAFTA–​Dominican Republic FTA art. 10.12(2), entered into force February 28, 2006 (U.S.), March 1, 2006 (El Salvador), April 1, 2006 (Honduras and Nicaragua), July 1, 2006 (Guatemala), March 1, 2007 (Dominican Republic), and January 1, 2009 (Costa Rica). 81  U.S.–​Australia FTA Article 11.12, entered into force January 1, 2005. 82  U.S.–​Colombia FTA art. 10.12, entered into force May 15, 2012. 83  U.S.–​Morocco FTA art. 10.11, entered into force January 1, 2006. 84  U.S.–​Panama FTA art. 10.12, entered into force October 31, 2012. 85  U.S.–​Peru FTA art. 10.12, entered into force February 1, 2009. 86  Canada–​Chile FTA art. G-​13, entered into force July 5, 1997. 87  This broad definition is somewhat qualified by art. 17 of the ECT, which calls for an inquiry into a company’s substantive connection with the state in which it is incorporated (denial of benefits clause). 88 CETA, supra note 16. 78 79

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III.  Legal Persons as Investors 2. Siège  social Some states require that, to qualify as an investor, a legal person should not only be incorp- 10.46 orated in the host country but should also have its ‘siège social’ and/​or effective management there. An example of a treaty using the company seat as the basis for attributing nationality is the Germany–​China BIT.89 The treaty defines ‘company’ to include, in respect of Germany, ‘any juridical person as well as any commercial or other company or association with or without legal personality having its seat in the territory of the Federal Republic of Germany . . .’. Most of the BITs concluded by France include the company seat as an additional basis for attributing nationality.90 3. Control It is less common that investment agreements use the test of control to justify coverage of 10.47 an investor under the treaty. This element can be found in some BITs concluded by Sweden, Belgium–​Luxembourg, and the Netherlands as well as the EU–​Canada CETA. Article 1 of the Sweden–​India BIT91 uses a combination of incorporation, ownership and 10.48 control tests and provides that: (d) ‘companies’ mean any corporations, firms and associations incorporated or constituted under the law in force in the territory of either Contracting Party, or in a third country if at least 51 per cent of the equity interest is owned by investors of that Contracting Party, or in which investors of that Contracting Party control at least 51 per cent of the voting rights in respect of shares owned by them.

The Belgium/​Luxembourg–​Philippines BIT92 does the same:

10.49

‘Investor’ shall mean . . . the ‘companies’, i.e. with respect to both Contracting Parties, a legal person constituted on the territory of one Contacting Party in accordance with the legislation of that Party having its head office on the territory of that Party, or controlled directly or indirectly by the nationals of one Contracting Party, or by legal persons having their head office in the territory of one Contracting Party and constituted in accordance with the legislation of that Party.

The Netherlands–​Bolivia BIT93 included the following additional language:

10.50

[l]‌egal persons constituted in accordance with the law of that Contracting Party . . . Legal persons controlled directly or indirectly, by nationals of that Contracting Party, but constituted in accordance with the law of the other Contracting Party.

CETA provides that, for the purpose of the definition of investor, an enterprise of a party is: 10.51 (a) an enterprise that is constituted or organised under the laws of that party and has substantial business activities in the territory of that party; or (b) an enterprise that is constituted or organised under the laws of that party and is directly or indirectly owned or controlled by a natural person of that party or by an enterprise mentioned under paragraph (a);94

  Germany–​China BIT, entered into force November 11, 2005.   See France–​Libya BIT, entered into force January 29, 2006; France–​Kenya BIT, entered into force May 26, 2009. 91  Sweden–​India BIT, entered into force April 1, 2001. 92  Belgium/​Luxembourg–​Philippines BIT, entered into force December 19, 2003. 93  The Netherlands–​Bolivia BIT was the basis for the case Aguas del Tunari v. Bolivia (see infra ¶ 10.74). It entered into force on November 1, 1994 and Bolivia denounced it on its expiration date in 2009, preventing its 10-​year extension by tacit renewal. Bolivia denounced all of its 21 BITs gradually until May 6, 2013. 94  CETA art. 8.1, supra note 16. 89 90

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Who Is Entitled to Claim? C. Jurisprudence 10.52 Arbitral tribunals in non-​ICSID cases have adopted the incorporation and siège social tests,

taking into account the criteria agreed upon by the contracting parties in the investment treaty at hand.

10.53 If a dispute is submitted to ICSID, it must qualify for coverage not only under the invest-

ment treaty but also under the ICSID Convention. That means that the Parties must be an ICSID Convention contracting state and a national95 of another contracting state and that their dispute must be a legal dispute arising directly out of an investment under both the ICSID Convention and the investment treaty in question.

10.54 With respect to legal persons, Article 25(2) of the ICSID Convention defines a national of

a contracting state as:

Any juridical person which had the nationality of a Contracting State other than the State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration and any juridical person which had the nationality of the Contracting State party to the dispute on that date and which, because of foreign control, the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention. 10.55 Article 25(2)(a) requires claimants to establish that they had the nationality of a contracting

state on the date on which the parties consented to ICSID’s jurisdiction, which for cases under most IIAs, is the date the claimant submits its claim, given that the state’s consent is normally given in advance in the treaty. Article 25(2)(b) allows parties to agree that a company that is a national of a state and, therefore, could not ordinarily bring an international claim against its own state, would be granted standing under the Convention. These narrowly circumscribed conditions of Article 25(2)(b)96 allow an exceptional departure from the principle of incorporation or siège social in favour of foreign control.97 As the Caratube v Kazakhstan tribunal defined it: 95  With the evolving legal order, the rule of nationality has, however, lost some of its importance. As A. Broches, one of the main drafters of the ICSID Convention, noted: ‘[T]‌he significance of nationality in traditional instances of espousal of a national’s claim should be distinguished from its relatively unimportant role within the framework of the Convention. In the former case, the issue of nationality is of substantive importance as being crucial in determining the right of State to bring an international claim, while under the Convention it is only relevant as regards the capacity of the investor to bring a dispute before the Centre’. A. Broches, Chairman’s Report on the Preliminary Draft of the Convention (July 9, 1964), Doc. Z11, reprinted in II Documents Concerning the Origin and Formulations of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 557, 579–​82 (1968). 96  As explained by Broches, the purpose of the control test in the second part of art. 25(2)(b) is to expand the jurisdiction of ICSID: ‘There was a compelling reason for this last provision. It is quite usual for host states to require that foreign investors carry on their business within their territories through a company organized under the laws of the host country. If we admit, as the Convention does implicitly, that this makes the company technically a national in the host country, it becomes readily apparent that there is need for an exception to the general principle that the Centre will not have jurisdiction over disputes between a Contracting State and its own nationals. If no exception were made for foreign-​owned but locally incorporated companies, a large and important sector of foreign investment would be outside the scope of the Convention’. See A. Broches, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 136 Recueil des Cours 331, 358–​59, 361 (1972). 97  The ECT, although using place of incorporation as a criterion for its application to investors, specifically provides the agreement required for the application of art. 25(2)(b) of the ICSID Convention. In its art. 26(7) it states that: ‘An Investor other than a natural person which has the nationality of a Contracting Party to the dispute on the date of the consent in writing referred to in paragraph (4) and which, before a dispute between it and that Contracting Party arises, is controlled by Investors of another Contacting Party, shall for the purpose of article 25(2)(b) of the ICSID Convention be treated as a “national of another Contracting State . . .” ’.

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III.  Legal Persons as Investors Article 25(2)(b) sets ‘foreign control’ as such ‘outer limit’, an objective requirement that cannot be replaced by an agreement. It is a floor below which the parties’ agreement cannot reach. On the other hand, it gives the parties flexibility within those ‘outer limits’ . . .98 The factual element of foreign control under Article 25(2)(b) of the ICSID Convention cannot be examined independently from the agreement on nationality contained in the applicable investment treaty, because it is the investment treaty that would normally contain the test by which such foreign control is established in the circumstances of the case. However, if the agreement plainly contradicts the meaning of the ICSID Convention, e.g. by stipulating that any locally incorporated company should be treated as a foreign national, the tribunal cannot go beyond the mandatory limits established by Article 25 of the Convention.99

The ICSID Convention does not refer to the tests of incorporation or siège social but only 10.56 sets out the ‘outer limits’ of the Centre’s jurisdiction.100 Arbitral tribunals have looked into the underlying instruments where the parties’ consent is found and more or less uniformly adopted these tests to determine corporate nationality. In cases where the relevant treaties provided for incorporation as the only relevant test, arguments related to the economic reality have not succeeded in preventing tribunals from applying the test that the contracting parties have included in their treaties.

1. Incorporation as the defining element—​the relevance (or irrelevance) of the origin of capital and control In the majority of cases, with only a few exceptions, tribunals have refused to lift the cor- 10.57 porate veil to look at the origin of capital and have respected the agreement of the parties in the underlying instrument including the incorporation test. (a)  When the legal person is controlled by nationals of the host state  In the cases which follow, the tribunals had to decide on the nationality of a company incorp- 10.58 orated under the law of one contracting state but controlled by nationals of the host state. In the landmark decision on this issue, Tokios Tokelés v Ukraine,101 the majority of the tri- 10.59 bunal held that a company incorporated in Lithuania was entitled to bring a claim against Ukraine under the Lithuania–​Ukraine BIT, which defined corporate nationality by incorporation,102 although it was controlled, and 99 per cent owned by, Ukrainian nationals. The tribunal held: According to the ordinary meaning of the terms of the Treaty, the Claimant is an ‘investor’ of Lithuania if it is a thing of real legal existence that was founded on a secure basis in the territory of Lithuania in conformity with its laws and regulations. The Treaty contains no additional requirements for an entity to qualify as an ‘investor’ of Lithuania.103

Ukraine had argued that the tribunal should deny jurisdiction on the ground that the 10.60 Ukrainian owners had incorporated the company in Lithuania for the sole purpose of availing themselves of the protection of the Lithuania–​Ukraine BIT. The majority of the tribunal acknowledged that a number of investment agreements provide for the denial of benefits to entities controlled by the host state’s own nationals, but noted that the Ukraine–​Lithuania

98  Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/​08/​12, Award (June 5, 2012), ¶ 336 [hereinafter Caratube v. Kazakhstan]. 99  Id. ¶ 337. 100  See Broches, supra note 96, at 331, 359–​61. 101  Tokios Tokelés v. Ukraine, ICSID Case No. ARB/​02/​18, Decision on Jurisdiction (Apr. 29, 2004). 102  The language in the BIT was: ‘Any entity established in the territory of the Republic of Lithuania in conformity with its laws and regulations’. 103  Tokios Tokelés v. Ukraine, supra note 101, ¶ 28.

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Who Is Entitled to Claim? BIT did not and stated that: ‘it is not for tribunals to impose limits on the scope of BITs not found in the text nor evident from negotiating history sources’.104 The majority held that, consistent with the ICJ’s ruling in Barcelona Traction,105 the clear treaty language could only be avoided, and the corporate veil doctrine applied, if there was a showing of ‘abuse’ or ‘fraud’.106 It ultimately found that there was no such abuse or fraud as the founding of Tokios Tokelés predated the Lithuania–​Ukraine BIT. The President of the tribunal, Professor P. Weil, issued a strong dissenting opinion, expressing the view that the ICSID mechanism was not meant for investments made in the state by its own citizens with domestic capital through the channel of a foreign entity. He stated: [w]‌hen it comes to mechanisms and procedures involving States and implying, therefore, issues of public international law, economic and political reality is to prevail over legal structure, so much so that the application of the basic principles and rules of public international law should not be frustrated by legal concepts and rules prevailing in the relations between private economic and juridical players.107 10.61 In Rompetrol v Romania,108 the tribunal decided along the same lines. Rompetrol, a Dutch

company controlled by a Romanian national, brought a claim against Romania under the Netherlands–​Romania BIT. The tribunal upheld jurisdiction, dismissing objections raised by Romania to the effect that the Dutch company was a mere shell company used by Romanian interests to qualify as ‘foreigners’ entitled to bring a claim against the Romanian State under international law. It held that the ICSID Convention left it to states to decide for themselves what kind of nationality tests to apply:109 In the Tribunal’s view, the latitude granted to define nationality for purposes of Article 25 must be at its greatest in the context of corporate nationality under a BIT, where, by definition, it is the Contracting Parties to the BIT themselves, having under international law the sole power to determine national status under their own law, who decide by mutual and reciprocal agreement which persons or entities will be treated as their ‘nationals’ for the purposes of enjoying the benefits the BIT is intended to confer.110

In the particular case, the tribunal noted that incorporation was the nationality criterion chosen by the parties to the BIT, without requiring in addition an examination of ownership or control of the source of investment funds or the effective seat.111 It added:

  Id. ¶ 36.   Barcelona Traction, supra note 43. 106 In Barcelona Traction, the ICJ indicated that:  ‘[t]‌ he wealth of practice already accumulated on the subject in municipal law indicates that the veil is lifted, for instance, to prevent the misuse of the privileges of legal personality, as in certain cases of fraud or malfeasance, to protect third persons such as a creditor or purchaser, or to prevent the evasion of legal requirements or of obligations’. Barcelona Traction, supra note 43, ¶ 58. 107  Tokios Tokelés, Dissenting Opinion, supra note 101, ¶ 24. 108  Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/​06/​3, Decision on Jurisdiction (Apr. 18, 2008) [hereinafter Rompetrol v. Romania]. 109  The arbitrators expressly noted that Prof. Weil’s dissenting opinion in the Tokios Tokelés v.  Ukraine case was not ‘widely approved in the academic or professional literature, or generally adopted by subsequent tribunals’. 110  Id. ¶ 82. 111  It is worth noting that the Netherlands–​Romania BIT included the criterion of control in addition to the one of incorporation: (b) the term ‘investors’ shall comprise with regard to either Contracting Party: (ii) legal persons constituted under the law of that Contracting Party; (iii) legal persons owned or controlled, directly or indirectly, by natural persons as defined in (i) or by legal persons as defined in (ii). 104 105

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III.  Legal Persons as Investors Incorporation in a given jurisdiction is a widely used criterion internationally for determining the nationality of corporate bodies, and States determine corporate nationality by a wide variety of criteria in a wide variety of contexts, as indeed the Respondent acknowledged at the oral hearing. This is a matter of free choice between the pair of States Parties to the BIT under consideration. Hence the question becomes simply, what did these two States themselves agree to of their own free will in concluding the BIT? The Tribunal therefore holds that the definition of national status given in The Netherlands–​Romania BIT is decisive for the purpose of establishing its jurisdiction.112

In Charanne v Spain,113 the claimants, two companies established in the Netherlands and 10.62 Luxembourg, initiated arbitration proceedings under the ECT and UNCITRAL Rules. The respondent argued that the claimants were not covered investors under the ECT since the real owners/​beneficiaries of the claimants’ companies were Spanish nationals and this was a sufficient reason to pierce the corporate veil.114 The UNCITRAL tribunal held that the grounds to pierce the corporate veil were limited to fraudulent behaviour by the investor and determined that the claimant, as a company which was properly constituted under the laws of another signatory country of the ECT, was a covered investor that had access to arbitration.115 However, in TSA v Argentina,116 an ICSID arbitration under the Netherlands–​Argentina 10.63 BIT, two of the three arbitrators declined jurisdiction on the grounds that the claimant, incorporated in Argentina, could not be considered a national of the Netherlands due to an absence of ‘foreign control’ as required under the ICSID Convention. TSA had acquired the rights to manage Argentina’s radio broadcasting spectrum but fell into a dispute over alleged mismanagement of the assets in question. It brought a claim against Argentina as a ‘foreign’ investor by virtue of being owned by a Dutch firm and evoked Article 25(2)(b) of the ICSID Convention. The majority deemed the ‘foreign control’ requirement of the second clause of Article 25(2)(b) to be an objective one that imposed a limit beyond which ICSID jurisdiction could not extend, even by a side agreement.117 In application of that objective requirement, the tribunal had to pierce the veil of the corporate entity so as to determine whether it was genuinely foreign controlled.118 In doing so, they did not stop at either the first or the second layer of ownership but inquired as to the ultimate control,119 and determined that it was exercised by an Argentine citizen.120 The third arbitrator disagreed and held that the criteria set forth in the BIT—​i.e., that the Argentine company was a Dutch affiliate and was more than 49 per cent Dutch-​owned—​should be sufficient for purposes of establishing that the claimant was Dutch-​controlled. He stated that: It is axiomatic that a treaty is to be ‘interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty . . .’. Read in that light the language of Article 25 flatly contradicts the majority’s claim that the Convention imposes an ‘objective’ limit

  Id. ¶ 83.   Charanne B.V. & Construction Investments S.a.r.l. v. Kingdom of Spain (PCA Case No. 2009-​04), Award on Jurisdiction and Liability (Mar. 17, 2015), ¶¶ 225–​0 [hereinafter Charanne v. Spain]. 114  Id. ¶¶ 225–​30. 115  Id. ¶¶ 414–​18. 116  TSA Spectrum de Argentina, S.A. v. Argentine Republic, ICSID Case No. ARB/​05/​5, Award (Dec. 19, 2008) [hereinafter TSA v. Argentina]. 117  The tribunal used as a basis of its interpretation of foreign control the second part of art. 25(2)(b), which was destined for locally incorporated companies under foreign control, not foreign incorporated companies under local control, as was the situation in that case. 118  Id. ¶ 160. 119  Id. ¶ 161. 120  Id. ¶ 162. 112 113

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Who Is Entitled to Claim? on the Centre’s jurisdiction121 and that arbitrators should ‘vindicate, rather than ignore, the agreements reached by two states’.122 10.64 Similarly, the majority of the tribunal in Venoklim v Venezuela,123 echoed Professor Weil’s dis-

senting opinion in Tokios Tokelés v Ukraine by reiterating the principle that the ICSID system was created exclusively to resolve disputes between states and foreign investors.124 It found that Venoklim was not an ‘international investor’ because it did not effectively control the five Venezuelan companies that were the subject of the dispute, Venoklim being controlled by a Venezuelan company that in turn was owned by Venezuelan nationals.125 The dissenting arbitrator criticized this decision ‘as reviving the criteria of reality over formal criteria’ such as incorporation.126

(b) When the legal person is a national of the host state but is controlled by nationals of the other contracting state—​ICSID Article 25(2)(b)  10.65 In the following cases, the tribunals dealt with the issue of control from a different angle—​ when the company is incorporated in the host state but is, or deemed to be, controlled by nationals of another contracting state. 10.66 The second part of Article 25(2)(b) of the ICSID Convention allows these companies to be

treated as foreign nationals through an agreement between the host state and the investor. Such an agreement cannot, however, create a nationality that does not exist. An agreement on nationality was very useful in the case MINE v Guinea.127 An agreement between the parties providing for the settlement of their dispute by ICSID arbitration stated that the parties specified that the investor is Swiss (incorporated in Liechtenstein, a non-​ICSID party but under Swiss control).128

10.67 Amco v Indonesia,129 Klockner v Cameroon,130 and AMT v Zaire131 involved a local subsidiary

incorporated in the host state. The protection was granted to the foreign investor for investments made through a local company in the host state.132 In Amco v Indonesia, for instance, the tribunal looked at the first instance of control133 and held that:

  Dissenting opinion by Grant Andonas, ¶ 7.   Id. ¶ 34. 123  Venoklim Holding B.V.  v.  Bolivarian Republic of Venezuela, ICSID Case No. ARB/​ 12/​22, Award (Apr. 3, 2015) [hereinafter Venoklim v. Venezuela]. 124  Id. ¶ 154. 125  Id. ¶ 148. 126  Id. Dissenting Opinion of E. Gómez-​Pinzón (Spanish original text: revive el criterio de realidad sobre las formas), ¶ 34. 127  Maritime International Nominees Establishment (MINE) v.  Republic of Guinea, ICSID Case No. ARB/​84/​4 as discussed in Schreuer et al., A Commentary, supra note 18. 128  According to Professor Schreuer: ‘An agreement on the investor’s nationality need not be made in the form of an express stipulation. Consent to ICSID’s jurisdiction expressed in a direct agreement between the parties implies an understanding that the investor fulfills the Convention’s nationality requirements. This would hold true only if two conditions are fulfilled: the host State must have expressed its consent specifically with respect to the particular investor . . . and the parties must have been fully aware of the circumstances surrounding the investor’s nationality’: see Schreuer et al., A Commentary, supra note 18. 129 Amco Asia Corporation, Pan American Development Ltd. and PT Amco Indonesia v.  Republic of Indonesia, ICSID Case No. ARB/​81/​1, Decision on Jurisdiction (Sept. 25, 1983 [hereinafter Amco v. Indonesia]. 130 Klöckner Industrie-​ Anlagen GmbH and Others v.  United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/​81/​2 Award (Oct. 21, 1983). 131  American Manufacturing & Trading Inc. (AMT) v. Republic of Zaire, ICSID Case No. ARB/​ 93/​1, Award (Feb. 32, 1997). 132  For a detailed analysis of these decisions and commentaries, see E. Gaillard, La Jurisprudence du CIRDI (2004); Schreuer et al., A Commentary, supra note 18. 133  Professor Schreuer points out that there was no need to go further since the determination of the controlling nationality was of no relevance, given that all the parties involved were Contracting states. 121 122

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III.  Legal Persons as Investors [t]‌he concept of nationality is there a classical one, based on the law under which the juridical person has been incorporated, the place of incorporation and the place of the social seat. An exception is brought to this concept in respect of juridical persons having the nationality, thus defined, of the contracting State Party to the dispute, where said juridical persons are under foreign control . . .134

In Vacuum Salt v Ghana135 the claimant was incorporated in Ghana. An agreement between 10.68 the parties contained an ICSID clause which the tribunal considered as implying that they agreed to treat the claimant as a foreign national. However, the tribunal did not rely solely on the parties’ agreement and considered that it had to examine the existence of foreign control separately:  . . . the parties’ agreement to treat Claimant as a foreign national ‘because of foreign control’ does not ipso jure confer jurisdiction. The reference in Article 25(2)(b) to ‘foreign control’ necessarily sets an objective Convention limit beyond which ICSID jurisdiction cannot exist . . .136

The tribunal ultimately found that there was no foreign control and declined jurisdiction.137 In Millicom and Sentel v Senegal,138 Senegal challenged Sentel’s claim that it was a foreign 10.69 national for the purposes of the ICSID Convention. It argued that Sentel, a Senegalese company, could not bring claims against it. The tribunal noted that Article 25(2)(b) of the ICSID Convention allows locally incorporated companies to claim ‘foreign’ nationality based on them being ‘controlled’ by foreign investors when the contracting state party to the dispute has agreed. The tribunal found that Senegal knew at the time that it agreed to ICSID jurisdiction, that Sentel was controlled by companies incorporated in Luxembourg and the Netherlands, and thus was entitled to claim non-​Senegalese nationality based on such ‘foreign control’.139 It held that Senegal had, thus, also agreed that Sentel was a ‘foreign’ investor for purposes of the ICSID Convention and therefore retained jurisdiction. In National Gas v Egypt,140 the claimant was an Egyptian company, whose majority shares (90 10.70 per cent) were owned by CTIP Oil & Gas International Limited (CTIP), a legal person incorporated in the United Arab Emirates (UAE). CTIP, in turn, was wholly owned by another legal person, REGI, equally incorporated under UAE law. The only shareholder in REGI was a dual national of Egypt and Canada. The tribunal declined jurisdiction based on the claimant’s failure to establish that it met the requirements for the respondent’s consent under the terms of the agreements concerned.141 In the tribunal’s view, the limitation to ‘a national of another contracting State’ in Article 25 of the ICSID Convention excluded from jurisdiction dual nationals of the respondent contracting state and of another state.142 According to the tribunal: [t]‌here is a significant difference under Article 25(2)(b) between (i)  control exercised by a national of the Contracting State against which the Claimant asserts its claim and (ii)

  Amco v. Indonesia, supra note 129 at 396.   Vacuum Salt Products Ltd. v. Republic of Ghana, ICSID Case No. ARB/​92/​1, Award (Feb. 16, 1994), 4 ICSID Rep. 329. 136  Id. ¶ 36. 137  Id. ¶¶ 35–​55. 138  Millicom International Operations B.V. and Sentel GSM S.A. v. Senegal, ICSID Case No. ARB/​08/​ 20, Decision on Jurisdiction (July 16, 2010) [hereinafter Millicom and Sentel v. Senegal]. 139  Id. ¶¶ 111–​14. 140  National Gas S.A.E. v. Arab Republic of Egypt, ICSID Case No. ARB/​ 11/​7, Award on Jurisdiction (Apr. 3, 2014) [hereinafter National Gas v. Egypt]. 141  Id. ¶¶ 116 ff. 142  Id. ¶¶ 122–​23. 134 135

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Who Is Entitled to Claim? control by a national of another Contracting State. The latter situation violates no principle of international law and is consistent with the text of the ICSID Convention. On the other hand, the former situation violates the general limitation in Article 25(1) and the first part of Article 25(2)(b) of the ICSID Convention in regard to both Contracting States and nationals (including dual nationals). In other words, the latter is consistent with the object and purpose of the ICSID Convention; but the former is inconsistent: it would permit the use of the ICSID Convention for a purpose for which it was clearly not intended and it would breach its outer limits. [As already noted], Article 25(2)(b) operates only as a qualified exception to the general limitation to ICSID jurisdiction in Article 25: a sardine cannot swallow a whale [emphasis added].143

The tribunal considered the two complementary tests of jurisdiction under the Egypt–​UAE BIT and the ICSID Convention, one subjective and the other one objective: The subjective test is raised by the words ‘the parties have agreed should be treated as a national of another Contracting State for the purposes of this Convention’. In the Tribunal’s view, this subjective test is met by Article 10(4) of the [Egypt–​UAE BIT]144 by treating the Claimant as a national of the UAE, the latter being a contracting State to the ICSID Convention. Article 10(4) refers expressly to Article 25(2)(b) of the Convention; the Claimant is a juridical person registered or established in accordance with the laws of Egypt; and CTIP owns a majority of the Claimant’s shares.145 The objective test is raised by the words ‘because of foreign control’; and it is not met simply by meeting the subjective test: these two tests are not the same. As was decided in Vacuum Salt, ‘[t]‌he parties’ agreement to treat Claimant as a foreign national “because of foreign control” does not ipso jure confer jurisdiction. The reference in Article 25(2)(b) to “foreign control” necessarily sets an objective Convention limit beyond which ICSID jurisdiction cannot exist and parties therefore lack power to invoke same no matter how devoutly they may have desired to do so . . .’. As was likewise decided in Autopista: ‘[l]ocally incorporated companies may agree to ICSID arbitration subject to two requirements: [t]he parties have agreed to treat the said company as a national of another Contracting State for the purposes of this Convention; and [t]he said company is subject to foreign control’. Accordingly, the Tribunal decides that this objective test is not satisfied by mere agreement of the Parties in this case: ‘foreign control’ must be established objectively.146

The tribunal concluded that CTIP is a shell company of UAE nationality wholly owned by REGI, which is also a shell company of UAE nationality wholly owned by an Egyptian (and Canadian) national. It followed, therefore, that this was not a claim by a qualifying UAE investor against Egypt, but actually a claim by an Egyptian national against Egypt.147

(c) When the legal person is controlled by nationals of a non-​contracting state—​corporate restructuring/​abuse of process and denial of benefits  10.71 In cases where the company is incorporated in a contracting state but is controlled by third country nationals, tribunals have been equally reluctant to pierce the corporate veil. This applies also when the underlying investment treaty is openly worded to include direct or

  Id. ¶ 136.   According to art. 10(4) of the Egypt–​UAE BIT: ‘In case of the existence of a juridical person that has been registered or established in accordance with the law in force in a region following a Contracting State, and an investor from the other Contracting State owns the majority of the shares of that juridical person before the dispute arises, then such a juridical person shall, for the purposes of the Convention, be treated as an investor of the other Contracting State, in accordance with Article 25(2)(B) of the[ICSID] Convention’. 145  Id. ¶ 132. 146  Id. ¶ 133. 147  The tribunal did acknowledge that share ownership is not conclusive proof of control, but in this case concluded that it was clear that, in fact, the controller of both CTIP and REGI was the Egyptian national. See id. ¶ 144. 143 144

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III.  Legal Persons as Investors indirect control as a test for the qualification of a protected investor. Nationality planning and corporate restructuring to achieve treaty coverage before the adverse measures are taken by the host state usually does allow the tribunal to retain jurisdiction; inversely, nationality planning after the adverse measures usually guarantee a rejection of jurisdiction rationae temporis. However, tribunals walk a fine line between accepting jurisdiction and rejecting it for abuse of process.148 Some agreements include a ‘denial of benefits’ clause which allows the state party concerned to deny treaty protection to a company, under certain circumstances, if it is controlled by nationals of a non-​contracting state, therefore constraining corporate restructuring.

(i)  Corporate structure/​restructuring/​abuse of process In Saluka v Czech Republic,149 a non-​ICSID case, a claim arose out of the reorganization and 10.72 privatization of the Czech bank system. Saluka Investments BV, a Dutch Company that had acquired shares of the Czech State-​owned bank IPB, claimed violations of the BIT. According to the Czech Republic, the real investor was not Saluka but an English-​registered company, Nomura Europe (a subsidiary of the Japanese investment Bank). It asserted that Saluka was merely a shell company with no real economic interest in the IPB shares and therefore failed to meet the definition of an investor under the BIT, because, as an agent for the parent corporation Nomura, it could not benefit from the BIT. The tribunal rejected these arguments and based its decision on the language of the treaty, which defined ‘investors’ as ‘legal persons constituted under the law of one of the Contracting Parties’. The tribunal considered the disadvantages of the formalistic test, in particular the risk of ‘treaty shopping’, but respected the contracting parties’ agreed definition of ‘investor’.150 In the same vein, in Gold Reserve v Venezuela, the Canada–​Venezuela BIT defined as pro- 10.73 tected investor an enterprise incorporated or duly constituted in accordance with applicable laws of the contracting states. Venezuela argued that, despite being a duly incorporated Canadian company, Gold Reserve should not be entitled to the protections of the BIT because its management was headquartered in the United States (and it was essentially one and the same as the US based Gold Reserve Corp.). It therefore characterized the Canadian entity as a ‘shell company’. The tribunal held that Gold Reserve was a Canadian entity within the definition of investor provided in the BIT: As many previous ICSID tribunals have found, where the test for nationality is ‘incorporation’ as opposed to control or a ‘genuine connection’, there is no need for the tribunal to enquire further unless some form of abuse has occurred. Such abuse might be found where the company has been incorporated in a given State after the dispute arose so as to take advantage of a treaty concluded by that State. This is clearly not the case here.151 . . . The Parties could have chosen to include a ‘genuine link’ test or a ‘management’ test, but did not. The Tribunal cannot read these criteria into the BIT and is therefore satisfied that Claimant falls within the definition of ‘investor’, so far as it is a company incorporated in Canada.152

148  See E.  Gaillard, Abuse of Process in International Arbitration, 32 ICSID Rev. 1 17–​ 37 (2017); S. Jagush, A. Sinclair, et  al.,:  Restructuring Investments to Achieve Investment Treaty Protection, in Building International Investment Law: The First 50 Years of ICSID ch. 13 175–​90 (M. Kinnear, G. Fischer, et al. eds., 2015), [hereinafter Jagush, Sinclair: Restructuring Investments]. 149  Saluka Investments B.V. v. Czech Republic (UNCITRAL), Partial Award of March 17, 2006 [hereinafter Saluka v. Czech Republic]. 150  Id. ¶¶ 240–​41. 151  Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​09/​1, ¶ 252. 152  Id. ¶ 255.

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Who Is Entitled to Claim? 10.74 In Aguas del Tunari (AdT) v Bolivia,153 the company initiated ICSID arbitration proceed-

ings alleging that several acts of Bolivia amounted to an expropriation of its investment in violation of the Netherlands–​Bolivia BIT. The majority of the tribunal dismissed Bolivia’s objections to jurisdiction, essentially that it did not consent to an arrangement by which a company registered in Bolivia such as AdT could, at any time, restructure itself as a Dutch company in an ex post facto attempt to claim the benefit of the Netherlands–​Bolivia BIT. It argued that the claimant was ‘controlled’ by the US-​based Bechtel Corporation, and the Netherlands shareholders were merely ‘shell’ companies which did not exert any real ‘control’. Article 1(b) of the BIT includes ‘legal persons controlled directly or indirectly, by nationals of that Contracting Party, but constituted in accordance with the law of the other Contracting Party’. The tribunal, after a lengthy analysis of the meaning of the phrase ‘controlled directly or indirectly’ in the treaty, concluded that Bolivia’s interpretation would frustrate the treaty’s purpose. It concluded ‘that the phrase “controlled directly or indirectly” means that one entity may be said to control another entity (either directly, that is without an intermediary entity, or indirectly) if that entity possesses the legal capacity to control the other entity’:154 [I]‌t is not uncommon in practice and—​absent a particular limitation—​not illegal to locate one’s operations in a jurisdiction perceived to provide a beneficial regulatory and legal environment in terms, for example, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.155  . . .  . . . Although titled ‘bilateral’ investment treaties, this case makes clear that which has been clear to negotiating States for some time, namely, that through the definition of ‘national’ or ‘investors’, such treaties serve in many cases more broadly as portals through which investments are structured, organized, and, most importantly, encouraged through the availability of a neutral forum.156

10.75 In Mobil v Venezuela, the claimants were incorporated in the US and in the Bahamas but

had inserted a Netherlands entity into their ownership structure for the specific purpose of obtaining the protection of a BIT between the Netherlands and Venezuela, in the context of the deteriorating investment climate in Venezuela. The tribunal acknowledged that the ‘[m]‌ain, if not the sole purpose of the restructuring was to protect Mobil investments from adverse Venezuelan measures in getting access to ICSID arbitration through the Dutch-​ Venezuela BIT’.157 However, whether the restructuring was ‘legitimate corporate planning’ as contended by the claimant, or ‘abuse of right’ as submitted by Venezuela, depended on

153  Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/​02/​03, Decision on Jurisdiction (Oct. 21, 2005). The background of the dispute concerns Bolivia’s international tender process to privatize water, sewage services, and an electricity generation license in 1998. Aguas del Tunari (AdT) is the locally incorporated Bolivian entity for a consortium led by International Water, Ltd., incorporated in the Cayman Islands, and 100 per cent owned by Bechtel Enterprise Holding, a U.S. company. A concession agreement between the Bolivian government and AdT took effect in 1999, and provided for a 40-​year relationship between AdT and the Bolivian water and electricity authorities. The concession agreement resulted in significant public controversy in Bolivia, especially among labor organizations and civil society groups. 154  One of the arbitrators, José Luis Alberro-​Semerena, issued a declaration of dissent in which he maintained that Bolivia could not have consented to face arbitration from an unlimited ‘universe of beneficiaries’ and that the tribunal should have undertaken further inquiry as to the ‘motivations and the timing’ of Bechtel’s decision to restructure the corporate ownership of the claimant company. 155  Id. ¶ 330(d). 156  Id. ¶ 332. 157  Mobil Corporation, Venezuela Holdings B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petroleos Holdings, Inc., Mobil Cerro Negro, Ltd., & Mobil Venezolana de Petroleos, Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​07/​27, Decision on Jurisdiction (June 10, 2010), ¶ 19 [hereinafter Mobil v. Venezuela].

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III.  Legal Persons as Investors the circumstances under which it happened. The tribunal considered it important that the claimant notified Venezuela of the restructuring and held that, the restructuring was ‘a perfectly legitimate goal as far as it concerned future disputes’.158 However, a restructuring to obtain BIT protection for pending disputes would be ‘an abusive manipulation of the system of international investment protection under the ICSID Convention and the BITs’.159 The tribunal found jurisdiction only with respect to disputes that arose from measures taken after the restructuring. Similarly, the tribunal in Pac Rim v El Salvador160 had to consider if the claimant had abused 10.76 the provisions of the Central American Free Trade Agreement (CAFTA) and the international process by changing Pac Rim Cayman’s nationality from the Cayman Islands to a CAFTA party (the United States) in order to bring a pre-​existing dispute to arbitration. To determine whether the restructuring constitutes abuse of process, the tribunal went beyond the line of demarcation between pre-​existing and future disputes. It included foreseeable high probability future disputes: [T]‌he dividing-​line occurs when the relevant party can see an actual dispute or can foresee a specific future dispute as a very high probability and not merely as a possible controversy . . . [B] efore that dividing-​line is reached, there will be ordinarily no abuse of process; but after that dividing-​line is passed, there ordinarily will be. The answer in each case will, however, depend upon its particular facts and circumstances . . .161 [emphasis added]

The tribunal rejected the respondent’s objection to jurisdiction since the basis of the claim occurred after Pac Rim Cayman’s change of nationality in 2007, a time when the dispute could not have been foreseen by the claimant.162 The tribunal’s focus on a foreseeable specific high probability future dispute seems to imply that a general deterioration of the investment climate would not be sufficient.163 The tribunal’s test became a guide for subsequent tribunals considering whether a restructuring constituted abuse of process.164

  Id. ¶ 204.   Id. ¶ 205. 160 Pac Rim Cayman LLC v.  Republic of El Salvador, ICSID Case No. ARB/​ 09/​12, Decision on Jurisdiction (June 1, 2012), ¶¶ 2.16–​2.17 [hereinafter Pac Rim v. El Salvador]. 161  Id. ¶ 2.99. 162  Id. ¶ 2.109. 163  See Jagush, Sinclair: Restructuring Investments, supra note 148. 164  After commenting that it is legitimate for an investor to seek to protect itself from the general risk of future disputes, the tribunal in Tidewater v. Venezuela went on to say: ‘At the heart, therefore, of this issue is a question of fact as to the nature of the dispute between the parties, and a question of timing as to when the dispute that is the subject of the present proceedings arose or could reasonably have been foreseen . . . [I]‌f the Respondent’s submissions on the course of events are correct, then there may be a real question of abuse of treaty . . . But the same is not the case in relation to pre-​existing disputes between the specific investor and the [S]tate. Thus, the critical issue remains one of fact: was there such a preexisting dispute?’, Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., Twenty Grand Offshore, L.L.C., Point Marine, L.L.C., Twenty Grand Marine Service, L.L.C., Jackson Marine, L.L.C. & Zapata Gulf Marine Operators, L.L.C. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​10/​5, Decision on Jurisdiction (Feb. 8, 2013), ¶¶ 145–​46 and 184. See also Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/​12/​6, Decision on Jurisdiction (Feb. 21, 2014), ¶ 70: ‘The Tribunal considers that it is clearly an abuse for an investor to manipulate the nationality of a company subsidiary to gain jurisdiction under an international treaty at a time when the investor is aware that events have occurred that negatively affect its investment and may lead to arbitration. In particular, abuse of process must preclude unacceptable manipulations by a claimant acting in bad faith who is fully aware prior to the change in nationality of the “legal dispute”, as submitted by the Respondent’. 158 159

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Who Is Entitled to Claim? 10.77 Although a similar reasoning was adopted by the tribunals in Levy and Gremcitel v Peru and

Phillip Morris v Australia, a different outcome was reached.

10.78 The Levy and Gremcitel v Peru tribunal denied jurisdiction due to abuse of process by

the claimants.165 It held that, although corporate restructuring for the purpose of obtaining treaty benefits is not illegitimate per se, corporate restructuring with the purpose of seeking treaty protection when a dispute is foreseen may constitute an abuse of process.166 It went on to say that ‘the threshold for a finding of abuse of process is high, as a court or tribunal will obviously not presume an abuse, and will affirm the evidence of an abuse only “in very exceptional circumstances” ’.167 After assessing the facts (such as the proximity in time between the dispute and the corporate restructuring, the lack of a credible explanation concerning the motives of the restructuring), the tribunal concluded that the claimants had shown ‘a pattern of manipulative conduct that cast a bad light on their actions’,168 that the ‘only reason for the sudden transfer of the majority of the shares in Gremcitel to Ms Levy was her nationality’ and that the ‘only purpose of the transfer was to obtain access to ICSID/​BITR arbitration, which was otherwise precluded’.169

10.79 In Philips Morris v Australia, Australia objected to the tribunal’s jurisdiction that Philips Morris

abused its rights in changing its corporate structure to bring an arbitration claim under the Hong Kong–Australia BIT.170 At issue was the timing and motivation for the claimant’s acquisition of Philip Morris (Australia) Limited, a tobacco company operating within Australia and neighbouring countries.171 Australia argued that the claim was an abuse because the corporate restructuring had been motivated wholly or partly by a desire to gain access to protection under the Australia–​Hong Kong SAR BIT in order to bring a claim in respect of the ‘plain packaging’ legislation.172 The tribunal observed that ‘the mere fact of restructuring an investment to obtain BIT benefits is not per se illegitimate’,173 although ‘it may amount to an abuse of process to restructure an investment to obtain BIT benefits in respect of a foreseeable dispute’.174 As to the meaning of ‘foreseeable’, the tribunal followed earlier arbitral 165  The dispute arose out of the parties’ disagreement on the legal effect of three sales contracts of land for a development project. The government of Peru issued a resolution delimiting the boundaries of an area of historic relevance, adjacent to the claimants’ parcels, which purportedly rendered the claimants’ proj­ect pointless. Claimants initiated ICSID arbitration under the France–​Peru BIT. Although the tribunal found that Ms Levy had met the nationality test and had discharged the burden to prove that she acquired her direct shareholding in Gremcitel on October 9, 2007, i.e., shortly before the challenged act occurred on October 18, 2007 (therefore satisfying the requirements ratione personae and ratione temporis under the ICSID Convention and the BIT), it dismissed the case on grounds of abuse of process and ordered the claimants to partially cover the respondent’s fees and expenses. Renée Rose Levy and Gremcitel S.A. v. Republic of Peru, ICSID Case No. ARB/​11/​17, Award (Jan. 9, 2015) [hereinafter Levy and Gremcitel v. Peru]. 166  Id. ¶ 184. 167  Id. ¶ 186. 168  Id. ¶ 194. 169  Id. ¶ 191. 170  Philip Morris Limited v. Commonwealth of Australia, (UNCITRAL), PCA Case No. 2012-​12, Award on Jurisdiction and Admissibility (Dec. 17, 2015) [hereinafter Philip Morris v. Australia]. 171  For a number of years, the Australian government had been publicly considering legislation to mandate the ‘plain packaging’ of cigarettes sold in Australia, legislation which the Philip Morris companies argued would substantially diminish the value of their investment in the country. Philip Morris Asia Limited, incorporated in Hong Kong, had become the owner of Philip Morris (Australia) in February 2011 through a corporate restructuring undertaken by the global parent of both companies, Philip Morris International (United States). As a consequence of the restructuring, the claimant, as the owner of Philip Morris (Australia), initiated proceedings under the BIT between Australia and Hong Kong Special Administrative Region (SAR) after Australia’s adoption of ‘plain packaging’ legislation in November 2011. 172  Philip Morris v. Australia, supra note 170, ¶ 536. 173  Id. ¶ 540. 174  Id. ¶ 545.

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III.  Legal Persons as Investors decisions (such as Pac Rim v El Salvador, Tidewater v Venezuela, and Levy and Gremcitel v Peru) and concluded that ‘a dispute is foreseeable when there is a reasonable prospect [ . . . ] that a measure which may give rise to a treaty claim will materialise’.175 On the facts before it, the tribunal concluded that at the time of the restructuring, the dispute was foreseeable to the claimant and as a result, declined jurisdiction.

(ii)  Denial of benefits As mentioned,176 investment planning and corporate restructuring may be constrained by 10.80 a denial of benefits clause in the investment treaty, which allows the contracting party to deny treaty protection, under certain circumstances, to a company controlled by nationals of a non-​party.177 However, the invocation of this clause by respondent states has so far had limited success, particularly in the context of the ECT. ECT tribunals tend to place a significant condition on the denial of benefits: once invoked, some tribunals have found that the clause has only prospective effect. Non-​ECT, tribunals have taken a different approach.178 In Generation Ukraine v Ukraine,179 the claimant was a company registered in the United 10.81 States with a subsidiary in Ukraine. Ukraine invoked Article 1(2) of the US–Ukraine BIT to deny the claimant the advantages of the BIT because the claimant had no substantial business in the United States and was in fact controlled by Canadians.180 The tribunal concluded that ‘this [the denial of benefits clause] is not, as the Respondent [Ukraine] appears to have assumed, a jurisdictional hurdle for the Claimant to overcome in the presentation of its case; instead, it is a potential filter on the admissibility of claims which can be invoked by the respondent State’.181 This meant that the Respondent had the burden of proof. It failed, however, to produce sufficient evidence to support the assertion and therefore its invocation of the denial clause failed. The tribunal in the jurisdictional phase of Plama v Bulgaria182 offered a detailed analysis 10.82 of the ECT’s denial of benefits clause. In this case, upon receipt of the request for arbitration, Bulgaria sent ICSID a letter by which, pursuant to Article 17(1) of the ECT, it denied ECT protection to the claimant on the grounds that the latter, a Cypriot company, was a ‘mailbox’ company with no substantial business activities in Cyprus and that it was not owned or controlled by a national of an ECT state. In Bulgaria’s opinion, the ECT’s drafters intended to confer on a host state a direct and unconditional right of denial, which may be

  Id. ¶ 554.   See supra ¶ 10.41. 177  According to Sinclair: ‘Just as investors might structure their legal arrangements in their favour, States may also seek in advance to avoid claims from certain entities to whom they did not intent to offer treaty protection. The right-​to-​deny-​benefits provisions inserted in some investment treaties appear designed to limit Host State’s exposure to claims from “mailbox” companies, which are understood not to contribute to the development goals underpinning an investment treaty’. See Sinclair, The Substance of Nationality Requirements, supra note 68. 178  See L. Gastrell & P. J. Le Cannu: Procedural Requirements of ‘Denial of Benefits’ Clauses in Investment Treaties: A Review of Arbitral Decisions, 30 ICSID Rev.-​FILJ 78 (2015). 179 Generation Ukraine Inc. v.  Ukraine, ICSID Case No. ARB/​ 00/​9 (Sept. 16, 2003)  [hereinafter Generation Ukraine v. Ukraine]. 180  Article 1(2) of the U.S.–​Ukraine BIT provides: ‘Each Party reserves the right to deny to any company the advantages of this Treaty if nationals of any third country control such company and, in the case of a company of the other Party, that company has no substantial business activities in the territory of the other Party or is controlled by nationals of a third country with which the denying Party does not maintain normal economic relations’. 181  Generation Ukraine v. Ukraine, supra note 179, ¶ 15.7. 182 Plama Consortium Limited v.  Republic of Bulgaria, ICSID Case No. ARB/​ 03/​24, Decision on Jurisdiction (Feb. 8, 2005) [hereinafter Plama v. Bulgaria]. 175 176

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Who Is Entitled to Claim? exercised at any time and in any manner would operate as a complete bar to the jurisdiction of any ECT tribunal over such claims.183 One issue was whether the denial of benefits under Article 17(1) operates automatically and requires no further action from the host state, as argued by the respondent, or whether, as argued by the claimant, it requires host state to take positive actions to deny benefits. The tribunal adopted the latter approach, on the grounds that the existence of a ‘right’ is distinct from the exercise of that right.184 More significantly, the tribunal found that denial of investment protection benefits under Article 17(1) could only be prospective and that it had jurisdiction to hear the merits of Plama’s claims, which had arisen prior to the time the investor was notified of the denial of benefits.185 10.83 In Khan Resources v Mongolia,186 Mongolia invoked the denial of benefits clause of the ECT in

relation to a claimant incorporated in the Netherlands but owned and controlled by Canadian nationals, that did not engage in substantial business activities in the Netherlands. Along the lines of the Plama v Bulgaria tribunal, the Khan tribunal found that the denial of benefits under Article 17(1) of ECT did not automatically exclude such companies from treaty coverage but gave the respondent state the right to actively exercise it,187 and that a state could not exercise this right toward an investor retroactively, after the latter started proceedings against it because there would be no predictability for the foreign investor. Such predictability would only exist if investors know in advance whether they are entitled to the protections of the Treaty.188

10.84 A different opinion was held by the tribunal in Pac Rim Cayman v El Salvador, which was

called to apply the denial of benefits clause of a different agreement, CAFTA, for the first time. The tribunal sustained this defence, dismissing all CAFTA claims on the basis that the claimant had no ‘substantial business activities’ in any treaty state (other than in the respondent) and that claimant was owned by a ‘person of a non-​Party’, namely its Canadian parent corporation. On this point, the tribunal held that the requirement of substantial business activities ‘relates not to the collective activities of a group of companies, but to activities attributable to the “enterprise” itself ’.189 It found that this requirement was not met because the claimant ‘was and is not a traditional holding company actively holding shares in subsidiaries but more akin to a shell company with no geographical location for its nominal, passive, limited and insubstantial activities’.190 The tribunal went on to consider whether there was

183  See E. Gaillard, Energy Charter Treaty: International Centre for Settlement Decision, 66 N.Y. L. J. 72, 33 (2005); E. Gaillard, Investment and Investors Covered by the Energy Charter Treaty, and S. Jagusch & A. Sinclair, The Limits of Protection for Investments and Investors under the Energy Charter Treaty, both in Investment Arbitration and the Energy Charter Treaty 67–​73 & 89–​103 (C. Ribeiro ed., 2006); Sinclair, The Substance of Nationality Requirements, supra note 68; and W. Ben Hamida, La notion d’investisseur, in Investissements Internationaux et Arbitrage (2005). 184  Plama v. Bulgaria, supra note 182, ¶¶ 155–​65. 185  Similarly, the tribunal in Yukos v. Russia held that: ‘[T]‌ o treat denial as retrospective would, in the light of the ECT’s “Purpose” as set out in Article 2 of the Treaty, be incompatible “with the objectives and principles of the Charter”. Paramount among those objectives and principles is “Promotion, Protection and Treatment of Investments” as specified by the terms of Article 10 of the Treaty. Retrospective application of a denial of rights would be inconsistent with such promotion and protection and constitute treatment at odds with those terms’. See Yukos Universal Limited (Isle of Man) v. the Russian Federation, (UNCITRAL) PCA Case No. AA227, Interim Award on Jurisdiction and Admissibility (Nov. 30, 2009), ¶ 458. 186 Khan Resources Inc., Khan Resources B.V. & Cauc Holding Company Ltd. v.  Government of Mongolia and Monatom Co., Ltd. (UNCITRAL, PCA Case No. 2011-​09), Decision on Jurisdiction (July 25, 2012). 187  Id. ¶¶ 417–​24. 188  Id. ¶ 426. The ECT tribunal in Liman Caspian v. Kazakhstan gave a similar interpretation of the art. 17(1) of the ECT and came to the same conclusion; Liman Caspian Oil BV and NCL Dutch Investment v. Republic of Kazakhstan, ICSID Case No. ARB/​07/​14, Excerpts of the Award (June 22, 2010). 189  Pac Rim v. El Salvador, supra note 160, ¶ 4.66. 190  Id. ¶ 4.75.

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III.  Legal Persons as Investors any time limit for denying benefits under CAFTA Article 10.12.1. In the tribunal’s view, the time limits for raising jurisdictional objections under ICSID Arbitration Rule 41 were incorporated by reference into CAFTA 10.12.1, and the objection:  . . . shall be made as early as possible [and] no later than the expiration of the time limit fixed for the filing of the counter-​memorial . . . Any earlier time limit could not be justified . . . and further, it could create considerable practical difficulties for CAFTA Parties inconsistent with this provision’s object and purpose . . . 191

In the same vein, the tribunal in Guaracachi v Bolivia192 declined jurisdiction over the claims 10.85 brought by one of two claimants against Bolivia under the US–​Bolivia BIT. Bolivia invoked the denial of benefits provision in its response to the statement of claim. The tribunal found, first, that the claimant was controlled by nationals of a third state and had no substantial business activity in the territory of the US. It then went on to determine whether Bolivia had invoked the right to deny the benefits of the BIT in a timely manner, that is, whether the clause had retroactive effect. As had the tribunal in Pac Rim v Ecuador, the Guaracachi tribunal found that: ‘Whenever a BIT includes a denial of benefits clause, the consent of the host state to arbitration itself is conditional and thus may be denied by it, provided that some objective requirements concerning the investor are fulfilled’.193 It considered that any US investor claiming under the US–​Bolivia BIT should be aware of the existence of the denial of benefits clause and its potential invocation by the host state if the requirements contained therein are satisfied.194 As to the retroactive application, the tribunal held: ‘The very purpose of the denial of benefits is to give the respondent the possibility of withdrawing the benefits granted under the BIT to investors who invoke those benefits’ adding that ‘it is proper that the denial is “activated” when the benefits are being claimed’.195 It concluded that, ‘as a jurisdictional issue, [the denial of benefits objection] must be raised at the latest in the respondent’s statement of defense’.196

2. The Definition of the Company’s Seat (siège social) Tribunals called upon to determine whether the company investor had the purported nation- 10.86 ality based on its company seat have stepped in to define ‘seat’ when the investment treaty at hand did not do so. In Alps Finance v Slovak Republic, the claimant met the requirement of incorporation. 10.87 However, the tribunal declined jurisdiction on the basis that it did not meet two of the conditions for rationae personae jurisdiction in the Switzerland–Slovak Republic BIT: that the claimant had its ‘seat’ in Switzerland and performed ‘real economic activities’ there. The tribunal defined the business seat as follows: Proof of a ‘business seat’, in the meaning of an effective center of administration of the business operations, requires additional elements, such as the proof that: the place where the company board of directors regularly meets or the shareholders’ meetings are held is in Swiss territory; there is a management at the top of the company sitting in Switzerland; the company has a certain number of employees working at the seat; an address with phone and fax numbers are offered to third parties entering in contact with the company; certain general expenses or overhead costs are incurred for the maintenance of the physical location of the

  Id. ¶ 4.85.   Guaracachi America, Inc. and Rurelec PLC v. Plurinational State of Bolivia, (UNCITRAL), PCA Case No. 2011/​17, Award (Jan. 31, 2014). 193  Id. ¶ 372. 194  Id. ¶ 383. 195  Id. ¶ 376. 196  Id. ¶¶ 381–​82. 191 192

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Who Is Entitled to Claim? seat and related services, which would be a clear indication that a business entity is effectively organized at a given Swiss place.197 10.88 In CEAC v Montenegro,198 the majority of the tribunal similarly declined jurisdiction under

the Cyprus–​Montenegro BIT, which required the claimant to have its seat199 in the home country, in this case, Cyprus. It did not rely on the certificate of registered office issued by the Cypriot authorities, but proceeded with its own determination under international law.200 In a jurisdictional hearing dedicated exclusively to the issue of the ‘seat’, it found that: the Claimant has not proven . . . that [the office building] is accessible to the public for purposes of inspecting the company’s registers, that CEAC is amenable to service at that address, that the company’s records are kept there or that the address bears a plate with CEAC’s name . . . 201

10.89 In Tenaris and Talta v Venezuela I, the tribunal dealt with a treaty definition of ‘investor’ that

included two elements: (i) any legal person constituted in accordance with the laws of the (sending state) and (ii) having its siège sociale or seat there.202 The tribunal found that, while siège sociale and seat can have either a merely formal or a substantive meaning in international law,203 in the treaties at issue, the doctrine of ‘effet utile’ mandated that ‘siège social’ be given a substantive meaning. The tribunal stated:204 [I]‌f “siège social” and “sede” are to have any meaning, and not be entirely superfluous, each must connote something different to, or over and above, the purely formal matter of the address of a registered office or statutory seat. And this leads one to apply the other well-​accepted meaning of both terms, namely “effective management”, or some sort of actual or genuine corporate activity.205

10.90 In assessing whether Tenaris’ and Talta’s actual or effective management was located in

Luxembourg and Portugal respectively, the tribunal considered it critical to examine the actual nature of each company and its activities. In this case, the companies were ‘holding companies’ whose day-​to-​day management was limited and so were its physical links with the corporate seat. The tribunal found that ‘it would be entirely unreasonable to expect a mere holding company, or a company with little or no operational responsibility, to maintain extensive offices or workforce, or to be able to provide evidence of extensive activities, at its corporate location’.206 After noting that these holding companies have ‘management’ and are not excluded from the treaty’s coverage,207 it ultimately decided that the claimants met the test of ‘actual or effective management’ since they had premises in both Luxembourg and Portugal, held annual meetings and had other ties.208

  Alps Finance and Trade AG v. Slovak Republic (UNCITRAL), Award (Mar. 5, 2011), ¶ 217.   Central European Aluminium Company (CEAC) v. Montenegro, ICSID Case No. ARB/​14/​8. 199  Id. Procedural Order No. 2 (Mar. 1, 2015). The tribunal instructed the parties to submit ‘with their written pleadings all evidence and arguments that pertain to the issue of the “seat”, in particular the definition, scope and content of the term “seat” as used in the [BIT]’. 200  Id. Award (July 26, 2016), ¶ 155. 201  Id. ¶ 199. 202 Tenaris S.A.  and Talta—​ Trading e Marketing Sociedade Unipessoal Lda v.  Bolivarian Republic of Venezuela (I) ICSID Case No. ARB/​11/​26, Award (Jan. 12, 2016), ¶ 115. 203  Id. ¶ 144. 204  Id. ¶ 151. 205  Id. ¶ 150. 206  Id. ¶ 199. 207  Id. 208  Id. ¶¶ 201–​26. 197 198

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III.  Legal Persons as Investors In a second ICSID case between the same disputing parties, Tenaris and Talta v Venezuela (II), 10.91 a different tribunal also found that, in the treaty at hand, ‘seat’ meant effective not merely statutory seat.209 To find whether the seat was ‘effective’, this tribunal utilized three criteria: i) where shareholder and board administration meetings took place, ii) where the management activities (establishing contacts with clients, conclusion of the principal contracts, main financial activities) took place, and finally iii) where the books and accounts were located.210 It found that the claimants fulfilled these criteria.211

3. Nature of the company—​public entities as investors Investor state arbitration mechanisms were designed with the primary function of allowing 10.92 foreign private investors to challenge sovereign states’ measures that violate treaty and contractual clauses that protect them and their investments. However, the increasing share of state-​owned enterprises (SOEs) and Sovereign Wealth Funds (SWFs) in foreign direct investment flows212 has started to generate the need for SOEs to have recourse to investor state arbitration to protect their investments. Since the investor-​state dispute settlement system (ISDS) was established to deal with disputes between private foreign investors and host states and was not intended to be another venue to resolve disputes between two states, this transformation may appear paradoxical and distortive. However, as seen,213 an increasing number of investment agreements (IIAs) specifically in- 10.93 clude SOEs in their definition of an investor, as well as non-​profit entities or the government itself. A number of other IIAs, although not specifically mentioning them, make no distinction between state-​owned and privately-​owned entities. The ICSID Convention is not explicit as to whether eligibility is limited to investors who 10.94 are private entities or whether they could be state-​controlled.214 Aaron Broches, who was one of the brains behind the ICSID Convention as General Counsel of the World Bank at

209 Tenaris S.A.  and Talta—​ Trading e Marketing Sociedade Unipessoal Lda. v.  Bolivarian Republic of Venezuela (II), ICSID Case No. ARB/​12/​23, Award (Dec. 12, 2016), ¶¶ 188–​89. 210  Id. ¶ 193. 211  Id. ¶ 230. 212  As of 2017, there were at least 1,500 state-​ owned enterprises with more than 86,000 foreign affiliates. According to UNCTAD, the internationalization of SOEs from a wide range of countries constitute an important component of foreign direct investment (FDI), UNCTAD, World Investment Report (2017) 30.http://​unctad.org/​en/​PublicationsLibrary/​wir2017_​en.pdf (last visited Nov. 21, 2017). 213 See supra ¶¶ 10.35–​ 10.37. See also Y.  Shima, The Policy Landscape for International Investment by Government-​controlled Investors: A Fact Finding Study, OECD Working Papers on International Investment, 2015/​01, http://​www.oecd.org/​daf/​inv/​investment-​policy/​WP-​2015-​01.pdf (last visited Nov. 21, 2017). According to this study, SOEs are most frequently referred to in the definition of investor of the surveyed IIAs—​287 (16%) IIAs specify that SOEs are covered and 3 specify that SOEs are not covered. The IIAs of Australia, Canada, and the United States most frequently refer to SOEs. Approximately 6% of the total IIAs surveyed include a contracting party or a government of a party themselves in the investor definition. Kuwait, Qatar, United Arab Emirates (UAE) and Saudi Arabia are the countries which most frequently include their governments in the scope of investors under the IIAs. Very few treaties mention state-​owned investment funds such as SWFs specifically—​less than 1% of the surveyed IIAs contain an explicit reference to these investors in the investor definition. These include IIAs concluded by Saudi Arabia, Kuwait, and the United Arab Emirates. 214  See discussion by S. Manciaux in Investissements étrangers et arbitrage entre États et ressortissants d’autres États: Trente années d’activité du CIRDI, in 24 Travaux du Centre de Recherche sur les Droits des Marchés et des Investissements Internationaux (Université de Bourgogne-​CNRS, Litec 2004); M. Nolan, Report of the ‘Roundtable on States and State-​Controlled Entities as Claimants in International Investment Arbitration’, organized by the Vale Columbia Center on Sustainable International Investment (Mar. 19, 2010); M. Nolan and F. Sourgens, State Controlled Entities as Claimants in International Investment Arbitration:  An Early Assessment 32 Columbia FDI Perspectives 2 (2010); M. Feldman State-​owned Enterprises as Claimants in International Investment Arbitration, 31 ICSID Rev.-​FILJ 1, 24–​35 (2016).

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Who Is Entitled to Claim? that time, stated that ‘there was general agreement’ from the outset of the negotiations that private v private and state v state disputes should be excluded from the jurisdiction of the Centre [ . . . ] and that the intended role of the ICSID Convention was a means for bridging the procedural gap that existed between state-​to-​state disputes and disputes between private entities.215 However, recognizing that foreign investment can also result from SOEs, Broches, in 1972, formulated a test, the so-​called ‘Broches Test’ to determine whether there is jurisdiction over claims submitted by SOEs against contracting states under the ICSID Convention: [i]‌t was recognized in the discussions leading up to the formulation of the Convention that in today’s world the classical distinction between private and public investment, based on the source of the capital, is no longer meaningful, if not outdated. There are many companies which combine capital from private and governmental sources and corporations all of whose shares are owned by the government, but who are practically indistinguishable from the completely privately owned enterprise both in their legal characteristics and in their activities. It would seem, therefore, that for purposes of the Convention, a mixed economy company or government-​owned corporation should not be disqualified as a ‘national of another Contracting State’ unless it is acting as an agent for the government or is discharging an essentially governmental function. I believe that it is fair to say that there was a consensus on this point among those participating in the preparation of the Convention. (emphasis supplied)216 10.95 Several claims have been submitted to ICSID arbitration by SOEs217 but tribunals have ad-

dressed the Broches Test in only two concluded cases, CSOB v Slovakia and BUCG v Yemen.

10.96 In CSOB v Slovakia, the respondent raised a jurisdictional objection, arguing that the dispute

was in fact between two states, the Czech Republic and the Slovak Republic, since CSOB was a state-​owned bank (the state retained 65 per cent of the capital).218 The tribunal and the parties identified the Broches formulation as the ‘accepted test’ and noted that the parties

215 A. Broches, Selected Essays, World Bank, ICSID and Other Subjects of Public and Private International Law 167 (1995). 216  A. Broches, The Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 136 Recueil des Cours 331, 354–​55 (1972). 217 There have been 8 cases filed by SOEs to date:  Československá Obchondni Banka, A.S. (CSOB) v. Slovak Republic, ICSID Case No. ARB/​97/​4, Decision on Jurisdiction (May 24, 1999) [hereinafter CSOB v. Slovakia]; Telenor Mobile Communications AS v. Hungary, ICSID Case No. ARN/​04/​15, Award (June 22, 2006)  [In this case, although Telenor was 75 per cent owned by the Kingdom of Norway, Hungary did not raise a jurisdictional objection under art. 25(1) of the ICSID Convention and the tribunal did not address it in its award]; Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/​05/​24 Decision on the treaty interpretation issue (June 12, 2009) [In this case, the tribunal focused on the terms of an Agreement (‘2001 Agreement’) concluded between Croatia and Slovenia to govern the operations of the power plant and found that the issue of whether HEP could bring its claim against Slovenia was ‘readily settled’ by the dispute resolution provisions of the 2001 Agreement. It did not address whether the dispute was between two Contracting states, i.e., Croatia and Slovenia]; CDC Group plc v. Republic of Seychelles, ICSID Case No. ARB/​02/​14, Award (Dec. 17, 2003) [In this case, CDC was the UK’s wholly-​owned governmental agency for investing in developing countries which invested in the Seychelles into the upgrading of two power stations. The claim was based on contractual breaches and the only jurisdictional objection by the Seychelles—which was ultimately withdrawn—​concerned the notion of ‘investment’ under 25(1) and not whether CDC had ius standi under the Convention]; Rumeli Telecom AS & Telsim Mobil Telekomunikasyon Hizmetleri AS v.  Republic of Kazakhstan, Award (July 21, 2008)  [the claim was brought by two private telecommunication companies over which the Turkish State had seized control; the tribunal found that the presence of such an entity as manager of the company in accordance with the law is no bar to the jurisdiction of the Centre, ¶ 327; Beijing Urban Construction Group Co. Ltd. v. Republic of Yemen, ICSID Case No. ARB/​14/​30 [hereinafter BUCG v. Yemen]; Hanocal Holding B.V. & IPIC International B.V. v. Republic of Korea, ICSID Case No. ARB/​15/​17, Order of the Tribunal discontinuing the proceedings (Oct. 5, 2016); State General Reserve Fund of the Sultanate of Oman v. Republic of Bulgaria, ICSID Case No. ARB/​15/​43, proceedings ongoing. 218  CSOB v. Slovakia, supra note 217, ¶ 15.

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III.  Legal Persons as Investors considered it ‘determinative’ whether an entity partially or wholly owned by a government qualifies as a national under Article 25(1).219 It found that CSOB had acted on behalf of the state for at least ‘much of its existence’.220 The tribunal did not disqualify CSOB on this basis, but turned to the second part of the test, whether CSOB was discharging an essentially governmental function. Considering only the nature and not the purpose of CSOB’s activities (loans which gave rise to non-​performing loan portfolio receivables),221 the tribunal found that even if CSOB’s activities ‘were driven by’ and ‘implemented State policies’, these policies did not cause CSOB’s lending transactions to ‘lose their commercial nature’.222 Therefore, CSOB qualified as a ‘national’ under Article 25(1) of the ICSID Convention. In BUCG v Yemen, the tribunal affirmed its jurisdiction and dismissed Yemen’s objections 10.97 that People’s Republic of China (PRC) SOEs were precluded from bringing claims under the ICSID Convention since, under PRC law, SOE’s are under the direction and administration of the PRC government.223 The tribunal agreed with the claimants that the Broches Test must be considered in the specific context of the investment which gives rise to the dispute and that any structural links BUCG may have with the RPC government are irrelevant to BUCG’s standing as an investor at ICSID.224 It held that ‘the assertion that ‘the Chinese State is the ultimate decision maker’ for BUCG is too remote from the facts of the Sana’a International Airport project to be relevant’.225 Turning to the second part of the Broches test, the tribunal found that there was no evidence to suggest that, in respect of the construction of an airport terminal in Sana’a, ‘BUCG was discharging a PRC governmental function rather than a commercial function’226 (participating in the airport project as a general contractor). It noted that, moreover, BUCG’s contract had not been terminated for reasons associated with ‘the PRC’s decisions or politics,’ but for reasons associated with BUCG’s performance of its ‘commercial services on the airport site’.227 Given the increasing importance of SOEs and SWFs as investors, it is to be expected that the 10.98 volume of claims brought by these investors will rise in the future. In addition, although the determination of the SOEs as ‘nationals’ under the ICSID Convention depends on a case-​ by-​case examination and a factual analysis, the positive outcome of the two cases where the Broches Test was applied may increase the number of these claims.

4. Rights of shareholders to bring claims Investment protection treaties, in their definitions, very often include shares or participa- 10.99 tion in companies as forms of investment. Investors under these treaties may therefore include shareholders—​controlling or non-​controlling, majority or minority, direct or indirect through another company. These treaties and the related jurisprudence accepting the right of shareholders to be claim- 10.100 ants with respect to the portion of shares they own or control228 are a marked departure from   Id. ¶ 17.   Id. ¶ 20. 221  Id. ¶ 21. 222  Id. 223  BUCG v. Yemen supra note 217, ¶ 29. 224  Id. ¶ 42. 225  Id. ¶ 43. 226  Id. ¶ 42. 227  Id. ¶ 40. 228 Schreuer et al., A Commentary supra note 18. See also Alexandrov, supra note 56: ‘it is beyond doubt that shareholders have standing in ICSID to submit claims separate and independent from the claims of the corporation. . . this principle applies to all shareholders, no matter whether or not they own the majority of 219 220

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Who Is Entitled to Claim? the diplomatic protection rules set out in the ICJ’s decision on Barcelona Traction.229 These shareholders are permitted to bring claims not only for direct injury (for instance to their voting rights as shareholders) but also for losses they incur as a result of injury to the company, that is, for reflective loss, sometimes in addition to the claims brought by the company itself. Due to the great number of BITs and other IIAs, governments increasingly run the risk of being respondents in multiple (and often simultaneous) arbitration claims filed by different entities included in the increasingly sophisticated and complex corporate structure of foreign investors. Such multiple/​parallel claims result in very high legal costs for respondent states, may increase the likelihood of inconsistent and even conflicting arbitral decisions as well as the award of double compensation. Some governments have addressed this issue through a waiver. Canada, Mexico, and the US did so in the NAFTA in their investment agreements mirroring NAFTA. Other governments recently started including relevant provisions in newly negotiated IIAs, although these are not yet in force. For cases arising under treaties without such provisions, other tools could be envisaged to prevent or minimize any negative effects of parallel proceedings.230

(a)  Minority shareholders 

10.101 Minority shareholders231 may rely on the inclusion of shares as part of the definition of quali-

fying investments in the investment treaty concerned and submit a claim.232

10.102 In Lanco v Argentina,233 an 18.3 per cent shareholding was sufficient to find jurisdiction over

the shareholder’s claim as an investor whose shares constituted the investment. It was the first time an ICSID tribunal expressly recognized a minority shareholder’s right to assert a claim under an investment treaty.234 The tribunal noted that there was nothing in the treaty that required an investor in capital stock to have either control over the administration of the company, or a majority share, in order to qualify as an investor for the purposes of the treaty.235 The tribunal further noted, inter alia, that Lanco was liable for all contractual obligations ‘to the extent of its equity share’ and concluded that Lanco was a party to the agreement at issue in the case ‘in its own name and right’.236

10.103 In CMS v Argentina, the CMS Gas Transition Company (CMS) purchased shares of an

Argentine company, Transportadora de Gas del Norte (TGN), pursuant to Argentina’s privatization program in 1995. Argentina argued that CMS lacked standing to file its claim

the shares or control the corporation’. See also M. Valasek & P. Dumberry, Developments in the Legal Standing of Shareholders and Holding Corporations in Investor-​State Disputes, 26 ICSID Rev.-​FILJ 1 (2011). 229  Barcelona Traction, supra note 43. 230  K. Yannaca-​Small, Parallel Proceedings, in The Oxford Handbook of International Law 1008–​45 (P. Muchlinski, F. Ortino & C Schreuer eds., 2008). 231  The possibility of claims by minority shareholders was first recognized in AAPL v. Sri Lanka. The claim referred to the destruction by Sri Lankan security forces of a farm owned by Serendib, a Sri Lankan company and was brought by the Hong-​Kong-​based company AAPL, a minority shareholder (48%). Sri Lanka did not challenge AAPL’s standing to claim compensation and the tribunal held that shares were a protected investment. Asian Agricultural Products Ltd. v. Sri Lanka, ICSID Case No. ARB/​87/​3, Award (June 27, 1990). 232  See E. Gaillard, Le Concours des procédures arbitrales dans le droit des investissements, in Mélanges en l’honneur du Professeur Pierre Mayer 225–​39 (2015): ‘C’est en effet de manière généralement simpliste qu[e]‌la jurisprudence en vertu de traités d’investissement] considère que l’actionnaire doit être traité comme la société elle-​même, au pro-​rata de sa participation. En d’autres termes, un actionnaire à 80% aurait subi 80% du dommage de la société et un actionnaire à 3%, 3% de ce dommage. Sur ce point une appréciation plus fine serait la bienvenue . . .’. 233  Lanco Int’l Inc. v. Republic of Argentina, Preliminary Decision on Jurisdiction (Dec. 8, 1998), 40 I.L.M. 457, 463 (2001) [hereinafter Lanco v. Argentina]. 234 Alexandrov, supra note 56. 235  Lanco v. Argentina, supra note 233, ¶ 10. 236  Id. ¶¶ 12, 14.

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III.  Legal Persons as Investors because it was merely a minority non-​controlling shareholder and thus did not have standing to claim damages suffered by TGN.237 The tribunal ruled that the ICSID Convention does not bar a claim brought by a minority non-​controlling shareholder such as CMS, observing that previous ICSID tribunals, in also finding jurisdiction, had ‘not been concerned with the question of majority [ownership] or control but rather whether shareholders can claim independently from the corporate entity’.238 In affirming the acceptance of this concept, the tribunal referred to the ‘approach now prevailing in international law in respect of claims arising out of foreign investments’.239, 240 In Sempra v Argentina, the tribunal made findings in line with these. Based on the definition of 10.104 investment and investor in the US–Argentina BIT, it held that, ‘in the light of the very terms of the provision, [the definition] encompasses not only the majority shareholders but also the minority ones, whether they control the company or not’.241, 242 In GAMI v Mexico,243 GAMI, a US company held a 14 per cent equity interest in Grupo 10.105 Azucarero Mexico S.A. de C.V. (GAM). After the Mexican government expropriated five of GAMI’s sugar mills, GAMI initiated a NAFTA claim against Mexico. The tribunal held that

237  CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/​ 01/​8, Decision on Jurisdiction (July 17, 2003) [hereinafter CMS v. Argentina], as reproduced in 42 I.L.M 788–​810, ¶ 36. The only claim that CMS could make, argued Argentina, was one regarding direct damages to its shares in TGN (infringement of voting rights), not for its proportionate share of TGN’s damages (¶ 38). Because the ICSID Convention does not provide a definition of the term ‘investment’, the tribunal analyzed both the pre-​ Convention commentary on ownership of shares and a line of cases dealing with the issue of majority ownership of control (¶¶ 43–​48). The tribunal ruled that the Convention did not require control over a locally incorporated company in order to qualify under the Convention (¶¶ 49–​56). For an analysis of the CMS Tribunal’s decision, see G. Bottini, Indirect Shareholder Claims, in The First 50 years of ICSID 203–​18 (M. Kinnear et al. eds., 2015). 238  Id. ¶ 55. 239  Id. ¶ 49. 240  Argentina was ordered to pay compensation of U.S.$132.2 million and subsequently submitted an application for annulment. The ad hoc Committee specifically approved the reasoning of the tribunal on the standing of minority shareholders to submit claims under the BIT: (‘The Committee observes in particular that, as regard shareholder equity, the BIT contains nothing which indicates that the investor in capital stock has to have a majority of the stock or control over the administration of the company. Investments made by minority shareholders are covered by the actual language of the definition, as also recognised by ICSID arbitral tribunals in comparable cases. One must add that whether the locally incorporated company may itself claim for the violation of its rights under contracts, licenses or other instruments, in particular under art. 25(2)(b) of the ICSID Convention, does not affect the right of action of foreign shareholders under the BIT in order to protect their own interests in a qualifying investment, as recognised again in many ICSID awards’); CMS v. Argentina, Decision on Annulment (Sept. 25, 2007), ¶¶ 73–​74. 241  Sempra Energy International v.  Republic of Argentina, ICSID Case No. ARB/​ 02/​16, Decision on Jurisdiction (May 11, 2005), ¶ 93. Sempra participated in Argentina’s privatization of the gas sector, a program beginning in 1989. It owned 43.09 per cent share capital of Sodigas Sur S.A. (Sodigas Sur) and Sodigas Pampeana S.A. (Sodigas Pampeana), Argentine companies that have licenses granted by Argentina to supply and distribute natural gas in several Argentine provinces. It maintained that the suspension of licensee companies’ tariff increases that were based on the U.S. producer index and the subsequent pesification of these tariffs pursuant to Law No. 25561, gave rise to a breach of investment protections afforded under the BIT. 242  At the same time, the majority shareholders, Camuzzi (from Luxembourg), holding 56.91 per cent of the same two companies, (Sodigas Sur and Sodigas Pampeana) submitted a separate claim arising from the same set of events. The two investors agreed with Argentina that a single tribunal would hear both claims. In both cases, the Tribunal concluded that minority shareholders could submit their own claims under the respective BITs. See Camuzzi International S.A. v. Republic of Argentina, ICSID Case No. ARB/​03/​2, Decision on Jurisdiction (May 11, 2005), ¶ 60. 243  GAMI Investments, Inc. v. United Mexican States, Final Award (Nov. 15, 2004) [hereinafter GAMI v. Mexico].

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Who Is Entitled to Claim? GAMI had an independent right to seek redress for damages to its investment and the fact that it was ‘only a minority shareholder does not affect its right’.244, 245

(b)  Indirect shareholders 

10.106 In some cases, the claimant is not the immediate shareholder of the affected company. This

raises the issue whether an investor can claim for damages to a company of which it owns shares only indirectly, through an intermediary company.246

10.107 In Azurix v Argentina, a case in which Argentina objected to jurisdiction on the grounds that

an indirect shareholder did not qualify as an investor, the tribunal found that, ‘given the wide meaning of investment in the definition in Article I.1(a), the provisions of the BIT [US–​ Argentina] protect indirect claims’.247

10.108 In Gas Natural SDG S.A. v Argentina,248 Argentina also maintained that, pursuant to the BIT

between Argentina and Spain, the claimant could not qualify as an investor as it was only an indirect shareholder of the Argentine company.249 The tribunal found the claimant qualified, unequivocally stating: ‘[t]‌he assertion that a claimant under a bilateral investment treaty lacked standing because it was only an indirect investor in the enterprise that had a contract with or a franchise from the state party to the BIT has been made numerous times, never, so far as the tribunal has been made aware, with success’.250

10.109 In Siemens v Argentina,251 the claim was brought by Siemens A.G., a German company that

wholly owned SNI A.G, another German company, and, through SNI, owned SITS S.A., an Argentine company. In its bid for a government project, SITS indicated that it was fully integrated into Siemens. Argentina asserted that indirect claims could only be brought if there were express authorization to do so in the treaty. The tribunal rejected Argentina’s argument and concluded that the shareholder was allowed to bring proceedings for a wrong inflicted upon an indirect subsidiary: The plain meaning of this provision [Article 1(1)(b) of the Treaty] is that shares held by a German shareholder are protected under the Treaty. The Treaty does not require that there be no interposed companies between the investment and the ultimate owner of the company.

  Id. at15, ¶ 37.   The U.S., in its submission, argued that ‘[a]‌minority non-​controlling shareholder may not bring a claim under the NAFTA for loss or damages incurred directly by an enterprise. A minority non-​controlling shareholder has standing to bring a claim only for loss or damage to itself proximately caused by a breach’. See Gami v. Mexico, Submission of the United States of America (June 30, 2003). 246  See also CEMEX Caracas Investments B.V.  and CEMEX II Caracas Investment B.V.  v.  Bolivarian Republic of Venezuela, ICSID Case No. ARB/​08/​15, Decision on Jurisdiction (Dec. 30, 2010), ¶¶ 156, 157; Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Republic of Argentina, ICSID Case No. ARB/​09/​1, Decision on Jurisdiction (Dec. 21, 2012), ¶ 235. 247  Azurix Corp. v. Republic of Argentina, ICSID Case No. ARB/​01/​12, Decision on Jurisdiction (Dec. 8, 2003), ¶ 73. 248  Gas Natural SDG S.A. v. Republic of Argentina, ICSID Case No. ARB/​03/​10, Decision on Jurisdiction (June 17, 2005). Gas Natural was a corporation organized under Spanish law and had its principal place of business in Spain. In 1992, the claimant took part in a tender offer by the Argentine government as part of the privatization of its gas sector. It then participated in a consortium that purchased 70 per cent of the shares of an Argentine corporation and formed an Argentine company. According to the claimant, it invested in Argentina in reliance on the Argentine peso being pegged with the U.S. dollar. The claimant alleged that the measures taken by the Argentine government pursuant to the emergency law breached the guarantees set out in the BIT. 249  Id. ¶ 18. 250  Id. ¶ 50. 251  Siemens A.G.  v.  Argentine Republic, ICSID Case No. ARB/​ 02/​8, Decision on Jurisdiction (Aug. 3, 2004). 244 245

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III.  Legal Persons as Investors Therefore, the literal reading of the Treaty does not support the allegation that the definition of investment excludes indirect investments.252

Several tribunals have been faced with claims submitted by shareholders who were not only 10.110 indirect but also involved several layers of ownership. In most of these cases, although the tribunals acknowledged that this may be an issue of concern and reflected on whether to impose a cut-​off point for these layers, they nevertheless decided to accept jurisdiction over the claims of all claimants. In Enron v Argentina,253 the claimants owned 35.2 per cent of the shares in TGS, an Argentine 10.111 corporation. Enron’s shareholdings in the affected local company TGS were not only indirect but involved a number of other locally registered companies and several layers of ownership. Argentina again argued that the governmental measures affected only TGS. The tribunal upheld the ‘concept that shareholders may claim independently from the corporation concerned, even if those shareholders are not in the majority or in control of the company’.254 However, the tribunal did see cause for concern, in particular since several intermediate companies were also involved.255 Instead of relying on the reasoning of prior tribunals to allow the indirect shareholder to claim, it sought and found a solution in Argentina’s consent to arbitration—​Enron had been specifically invited by Argentina to make its investment and the investors had decision-​making powers in the management of TGS.256 Therefore, Enron had jus standi to pursue its claim. In Noble Energy v Ecuador,257 the tribunal concurred with previous tribunals that a share- 10.112 holder can bring a claim under the ICSID Convention and under a BIT in respect of a direct and an indirect investment. The tribunal reflected on the number of layers of corporations that could exist between the direct shareholders and the indirect investor.258 After looking at the two intermediate levels in the case at hand, it held that, although there might be a cut-​off point, such a point was not reached in the particular case because the relationship between the investment and the direct shareholder on the one hand, and the indirect shareholder on the other, was not too remote. At all relevant times, Noble Energy had been the ultimate parent of all of the subsidiary companies involved in the arbitration, and these subsidiaries were wholly owned either directly or indirectly by Noble Energy.259 In Société Générale v Dominican Republic,260 the tribunal dismissed an argument by the gov- 10.113 ernment that the unusually complex and multi-​layered corporate structure used by Société Générale to hold its investments in EDE Este should disqualify the company’s treaty claim.

  Id. ¶ 137.   Enron Corp. and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/​01/​3, Decision on Jurisdiction (Jan. 14, 2004). 254  Id. ¶ 39. 255  The tribunal held that: ‘[T]‌ he Argentine Republic has rightly raised a concern about the fact that if minority shareholders can claim independently from the affected corporation, this could trigger an endless chain of claims, as any shareholder making an investment in a company that makes an investment in another company, and so on, could invoke a direct right of action for measures affecting a corporation at the end of the chain . . . There is indeed a need to establish a cut-​off point beyond which claims would not be permissible as they would have only a remote connection to the affected company’. See id. ¶¶ 50, 52. 256  See analysis by C. Schreuer, Shareholder Protection in International Investment Law, supra note 56. 257  Noble Energy Inc. & Machala Power Cía. Ltd. v.  Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/​05/​12, Decision on Jurisdiction (Mar. 5, 2008). 258  Id. ¶ 80. 259  Id. ¶ 82. 260  Société Générale In respect of DR Energy Holdings Limited and Empresa Distribuidora de Electricidad del Este, S.A. v. Dominican Republic, UNCITRAL, LCIA Case No. UN 7927 (France–​Dominican Republic BIT), Award on Preliminary Objections to Jurisdiction (Sept. 19, 2008). 252 253

259

Who Is Entitled to Claim? The government argued that the tribunal should consider a cut-​off point, after which claims by indirect investors are too tenuous or remote in terms of their connection to the affected company at issue.261 The tribunal, in exploring whether there should be some limits to the chain of investors who might invoke the BIT, stressed that the France–​DR treaty does cover indirect and minority forms of equity interest, thus implying that there may be one or several layers of intermediate companies or interests intervening between the claimant and the investment.262 Notwithstanding the complex structuring, the tribunal was of the view that the indirect investments by Société Générale should fall under the treaty.263

(c)  Risks associated with claims by multiple shareholders 

10.114 As discussed, investment agreements do not usually distinguish between majority and mi-

nority shareholders and generally protect indirect investments made through multiple layers of intermediate corporations. In these situations, each shareholder or company in a long chain of ownership could file its own separate claim against the host state for the same treaty breach. This creates an option to bring multiple claims, through different companies in a group, regarding the same investment and against the same measures of the host state. In general, tribunals have not found it legally objectionable that all shareholders receive legal protection under an investment agreement that does not expressly distinguish between them or, for that matter, expressly cover them. The risks for states having entered into a considerable number of BITs and other IIAs, discussed above,264 are significant and potentially costly.

10.115 The CME and Lauder cases against the Czech Republic are an example of such a situation.

The Czech Republic was subject to two different UNCITRAL proceedings concerning certain governmental measures with regard to a local company that owned a TV licence. The claims were brought almost simultaneously by the ultimate controlling shareholder, Lauder, a US investor, under the US–Czech Republic BIT, in London, and under the Netherlands–​ Czech Republic BIT, in Stockholm, by a Dutch company, CME Czech Republic, that held shares in the local company. The Czech Republic prevailed against Lauder265 but was ordered to pay a substantial compensation to CME.266 The Lauder tribunal acknowledged the potential problem of conflicting awards, noting that ‘damages [could] be concurrently granted by more than one court or arbitral tribunal . . . ’. Nevertheless, it reasoned that ‘the second deciding court or arbitral tribunal could take this fact into consideration when assessing the final damage’.267 The CME tribunal addressed the ramifications of the parties’ parallel proceedings but found no bar to adjudicating the same dispute.268

10.116 More recently, OI European Group prevailed in its claim against Venezuela269 brought under

the Netherlands–​Venezuela BIT, while a local company, Fabrica de Vidrios Los Andes, had brought a claim against Venezuela270 on the same facts under the US–​Venezuela BIT. The latter case is still pending in its initial stage.

  Id. ¶ 19.   Id. ¶ 51. 263  Id. ¶ 52. 264  See ¶ 10.100. 265  Lauder v. Czech Republic (UNCITRAL), Final Award (Sept. 2, 2001). 266  CME Czech Republic B.V. v. Czech Republic, Final Award (Mar. 14, 2003). 267  Lauder v. Czech Republic, supra note 265, ¶ 172. 268  CME v. Czech Republic, supra note 266, ¶ 419. 269  OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​11/​25, Award (Mar. 10, 2015). 270  Fábrica De Vidrios Los Andes, CA and Owens-​ Illinois de Venezuela, CA v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​12/​21, Notice of Arbitration (Aug. 10, 2012). 261 262

260

III.  Legal Persons as Investors Also, two claims were brought against Egypt by Mr Yosef Maiman, the first by Ampal-​ 10.117 American Israel Corporation (Ampal),271 a company controlled by Mr Maiman, under the US–Egypt BIT and the ICSID Convention, and the second by Mr Maiman in his own name and in the name of other companies in the same chain of ownership,272 under the Egypt–​Poland BIT and the UNCITRAL Rules.273 In the ICSID case, the respondent argued that it had not consented to be subject to multiple, duplicative derivative claims brought by different levels of holding companies in respect of the same alleged loss to the same underlying shareholding and that ‘accepting the duplicative use of derivative claims would require the most extreme caution as it gives the Claimants duplicative chances to prevail and creates risks of treaty shopping, double recovery and inconsistent outcomes’274 and that the parallel claims constituted a ‘complete abuse of the arbitral process’.275 The UNCITRAL tribunal retained jurisdiction first. Subsequently, in its decision on jurisdiction, the ICSID tribunal acknowledged that: [t]‌his is tantamount to double pursuit of the same claim in respect of the same interest. In the Tribunal’s opinion, while the same party in interest might reasonably seek to protect its claim in two fora where the jurisdiction of each tribunal is unclear, once jurisdiction is otherwise confirmed, it would crystallize in an abuse of process for in substance the same claim is to be pursued on the merits before two tribunals. However, the Tribunal wishes to make it very clear that this resulting abuse of process is in no way tainted by bad faith on the part of the Claimants as alleged by the Respondent. It is merely the result of the factual situation that would arise were two claims to be pursued before different investment tribunals in respect of the same tranche of the same investment.276[emphasis added]

Having recognized that the abuse of process had been crystallized, the tribunal invited the claimant Ampal to elect to pursue the portion of the claim that was duplicated, in the ICSID proceedings alone by a certain date, and, in light of Ampal’s response, the tribunal would revisit the question of abuse.277 Ampal elected to pursue that portion of the claim in the context of the ICSID arbitration only, therefore curing the abuse of process.278

(d)  Tools to address parallel and multiple proceedings  Possible tools available to reign in parallel and multiple proceedings include i) treaty pro- 10.118 visions to limit their occurrence, such as waiver, limitation of investor’s rights and of the definition of investment, ii) treaty and arbitral institution provisions on the consolidation of proceedings and ii) guidance on existing procedural regulating rules such as lis pendens.279

271  Ampal-​American Israel Corporation and Others v. Arab Republic of Egypt, ICSID Case No. ARB/​12/​ 11, Decision on Jurisdiction (Feb. 1, 2016) [hereinafter Ampal-​American v. Egypt]. 272  Yosef Maiman, Merhav (Mnf ) Ltd., Merhav Ampal Group Ltd. & Merhav Ampal Energy Holdings Limited Partnership v. Arab Republic of Egypt, PCA Case No. 2012-​26. 273  At the same time, one of the companies, EMG, pursued two parallel commercial arbitrations in which it asserted the exact same claims. According to Egypt, the claimants sought the same relief in relation to their claims as that which EMG sought in the commercial arbitrations. See Ampal-​American v. Egypt, supra note 271, Decision on Jurisdiction (Feb. 1, 2016), ¶ 313(vii). 274  Id. ¶ 313(v). 275  Id. ¶ 327. 276  Id. ¶ 331. 277  Id. ¶ 339. 278 Ampal-​American v. Egypt, supra note 271, Decision on Liability and Heads of Loss (Feb. 21, 2017), ¶¶ 11–​22. 279  See discussion in K.  Yannaca-​ Small, Parallel Proceedings, supra note 230; A. Reinisch, The Use and Limits of Res Judicata and Lis Pendens as Procedural Tools to Avoid Conflicting Settlement Outcomes, 3 The Law and Practice of International Courts and Tribunals 1 (2004); see also UNCITRAL, Possible Future Work in the Field of Dispute settlement: Concurrent Proceedings in International Arbitration, Note by the Secretariat (Mar. 24, 2017), discussed in UNCITRAL Fiftieth Session (Vienna, July 3–​21, 2017).

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Who Is Entitled to Claim? (i)  Waivers and limitations of investor’s rights

10.119 NAFTA was the first investment agreement to include a waiver280 precluding an investor

from bringing a claim against the other party (or parties in the case of NAFTA) while he/​ she or an enterprise that he/​she owns or controls, directly or indirectly, simultaneously brings another claim arising from the same governmental measure under a related contract or a BIT.281 Similar language is included in a number of IIAs including the 2012 US Model BIT, Article 26(2)(b); the 2004 Canada Model FIPA, Article 26(1)(e) and (2)(e); treaties concluded by the NAFTA parties, such as the Canada–Korea FTA282 Article 8.22(1)(2); CETA283 and others.284

10.120 In addition to the waiver, CETA contains provisions that exclude the availability of concur-

rent claims or overlapping claims by related entities. It requires the arbitral tribunal to decline jurisdiction, inter alia, when an investor or a company fails to withdraw or discontinue any existing domestic or international proceedings and waive the right to initiate any new ones regarding the same measures.285 Further, when a claim under another agreement being considered by another forum could result in overlapping compensation or impact the claim before it, the CETA tribunal must stay its own proceedings or take into account in its decision the proceedings and decisions of the other.286

10.121 The majority of the first generation of international investment agreements include an open-​

ended definition of investment, allowing any shareholders to bring claims against the host state. Some new generation investment agreements take a different approach. Some treaties exclude certain shareholdings from the definition of investment.287 For instance, India’s new model BIT equates investment with an enterprise incorporated in the host state.288 South Africa’s new Protection of Investment Act289 also defines the protected investment as ‘enterprise based’ and does not cover short-​term portfolio investments. Brazil’s new model treaty also excludes portfolio investments.290

280  NAFTA art. 1121 requires as ‘a condition precedent to submission of a claim to arbitration’ that ‘investors and, in certain circumstances enterprises owned or controlled by them:  . . . waive their right to initiate or continue before any administrative tribunal or court under the law of any Party, or other dispute settlement procedures, any proceedings with respect to the measure of the disputing Party that is alleged to be a breach . . . except of proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of eth disputing Party’. 281  However, as the tribunal in Azinian v. Mexico held, jurisdiction in one forum, does not ‘exclude recourse to other courts or arbitral tribunals . . . having jurisdiction on another foundation’, Robert Azinian, Kenneth Davitian & Ellen Baca v. United Mexican States, Case No. ARB(AF)/​97/​2, Award (Nov. 1, 1999), ¶ 86. 282  Entered into force January 1, 2015. 283 CETA, supra note 16. 284  Japan–​Uruguay BIT art. 21(7) (signed January 26, 2015, not yet in force); Australia–​Korea FTA art. 11.18(2) (entered into force December 12, 2014); CETA, supra note 16, art. 8.22. 285 CETA, supra note 16. art. 8.22(4). 286  Id. art. 8.24. 287  See OECD, The Impact of Investment Treaties on Companies, Shareholders and Creditors, in OECD Business and Finance Outlook 223–​53 (2016). 288  India 2016 Model BIT art. 1.6:  ‘ “Investment” means an Enterprise in the Host state, constituted, organised and operated in compliance with the Law of the Host State and owned or controlled in good faith by an Investor’: https://​www.mygov.in/​sites/​default/​files/​master_​image/​Model%20Text%20for%20the%20 Indian%20Bilateral%20Investment%20Treaty.pdf (last visited Nov. 26, 2017). 289  South Africa Protection of Investment Act (2015) http://​investmentpolicyhub.unctad.org/​ InvestmentLaws/​laws/​157 (last visited Nov. 26, 2017). 290 See Brazil–​ Mozambique and Brazil–​Angola Cooperation and Investment Facilitation Agreements (2015) http://​www.iisd.org/​sites/​default/​files/​publications/​comparison-​cooperation-​investment-​facilitation-​ agreements.pdf (last visited Nov. 26, 2017).

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III.  Legal Persons as Investors (ii)  Consolidation of claims Starting with NAFTA Article 1126, the NAFTA parties have included consolidation provi- 10.122 sions in all their free trade agreements with investment chapters and in their model BITs. A growing number of other international investment agreements, such as CETA and TPP, include consolidation provisions. Consolidation of claims is a procedural device, common in commercial arbitration, that 10.123 can be used when there are multiple arbitration proceedings arising from the same dispute with ‘common questions of law or fact’291 or with ‘common questions arising out of the same events or circumstances’292 and is usually based on the parties’ consent. It is a process by which two or more claims are united into a single procedure concerning all parties and all disputes.293 When there is request for consolidation in full, the new arbitral tribunal will hear the claims, and the tribunals previously constituted to hear each of the claims cease to function.294 The guidance provided to arbitral tribunals in certain investment treaties is that the tribunal must rule in the interest of fair and efficient resolution of the claims when considering whether to consolidate. Consolidation can be an effective tool to reduce or avoid parallel proceedings. Consolidation has been used in several cases by arbitral tribunals, either following the provi- 10.124 sions of an agreement such as NAFTA (consolidation ‘stricto sensu’)295 or by appointing the same arbitrators upon agreement of the parties when two or more claims were brought by different investors against the same host state for similar actions taken by that state (‘de facto consolidation’).296

(iii)  Lis pendens Parallel litigation, when arising in courts of the same system, is viewed generally, in both 10.125 civil and common law countries, as a non-​acceptable litigation tactic and is subject to rules, such as lis alibi pendens, remedying the situation. The lis pendens rule bars a second procedure during the pendency of another by suspending or staying the second. The rule does not prohibit the initiation of new proceedings elsewhere after the end of the first proceedings. However, international law does not provide clarity with regard to cross-​boundary parallel 10.126 litigation or arbitration. Very few international tribunals have expressed an opinion on parallel proceedings and the applicability of the lis pendens principle and none of them has agreed to apply it, mainly because of the requirements of its application that the proceedings must involve: i) the same parties; ii) the same grounds; iii) the same relief and iv) must be conducted before courts or tribunals in the same legal order. In the Lauder case, the tribunal rejected the argument by the Czech Republic that lis pen- 10.127 dens should apply to prevent the parallel proceedings from going forward, holding that the

  NAFTA art. 1126.2.   CAFTA–​DR, art. 10.25. 293  K. Yannaca-​Small, Consolidation of Claims: A Promising Avenue for Investment Arbitration, in OECD, International Investment Perspectives (2006). 294  If partial consolidation is ordered, then these tribunals have no jurisdiction over the part over which the consolidation tribunal has assumed jurisdiction; id. 295  See, e.g., Corn Products International, Inc v.  United Mexican States and Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, Order of the Consolidation Tribunal (May 20, 2005). 296 See, e.g., Salini Construttori S.p.A.  and Italstrade S.p.A.  v.  Kingdom of Morocco, ICSID Case No. ARB/​00/​4 and Consortium; RFCC v.  Kingdom of Morroco, ICSID Case No. ARB/​00/​6; Sempra v. Argentina, supra note 241, and Camuzzi v. Argentina, supra note 242. 291 292

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Who Is Entitled to Claim? requirements for its application were not present.297 The Southern Pacific Properties v Egypt tribunal, in accepting jurisdiction, explicitly stated that it did not consider itself bound by the lis alibi pendens rule.298 In contrast, the tribunal in Benvenuti v Congo did not rule out the potential applicability of the lis pendens rule but held that, in the specific circumstances of the case, the requirements had not been met.299 10.128 Given the uncertainty in this matter, the ILA Committee on International Commercial

Arbitration issued a report with accompanying Recommendations, in 2009, on the application of lis pendens in commercial arbitration,300 to assist arbitral tribunals. The Committee considered that, when there are two parallel arbitrations raising the same, or substantially the same issues, the second tribunal should, upon request by a party and when there is no material prejudice to the party opposing the request, give consideration to case management issues and stay the arbitration. These case management powers of the tribunal should be exercised even when all the traditional criteria are not met. These Recommendations could be used as guidance by investment arbitration tribunals when faced with parallel proceedings and may constitute a step towards recognition and more regular and less formalistic application of the lis pendens principle in investment arbitration.

IV. Conclusion 10.129 Investment agreements apply only to investors who qualify for coverage under the relevant

provisions of the treaty concerned and to the investments made by those investors. Only they can submit a claim against the host state. The definition is a key element for both identification and jurisdictional purposes.

10.130 For natural persons, the issues are usually not problematic although some may arise in par-

ticular when dual nationality is involved. In such cases, investment tribunals employ the concept of predominant nationality, essentially inquiring into which of the connections is factually stronger. Where it is alleged that a claimant is a dual national and one of the dual nationalities is that of the respondent state, ICSID tribunals must follow the ICSID Convention, which bars suits against a state of which the investor holds nationality, and determine whether the claimant has lost or effectively renounced the nationality of the respondent state. An investor’s nationality must be objectively determined. A  certificate of nationality, though providing strong evidence, is not conclusive proof, and the tribunals have usually recourse to their own test to determine nationality of natural persons. The ICSID Convention sets some additional requirements for establishing jurisdiction rationae personae and requires the claimants to establish that they have the nationality of a contracting state on the date of the Parties’ consent to ICSID’s jurisdiction.

10.131 For legal persons, the nationality debate remains by far more complex. Customary inter-

national law, developed in the context of diplomatic protection, does not provide much

  Lauder v. Czech Republic, supra note 265, ¶ 171.   Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​84/​3, Decision on Preliminary Objections to Jurisdiction (Nov. 27, 1985), 1 ICSID Rep. 112 and 129. Although it did not decline jurisdiction, the SPP tribunal held in case of parallel proceedings, ‘in the interest of international judicial order, either of the tribunals may, in its discretion and as a matter of comity, decide to stay the exercise of its jurisdiction pending a decision by the other tribunal’, ¶ 84. 299  S.a.r.l. Benvenuti & Bonfant v. People’s Republic of Congo, ICSID Case No. ARB/​77/​2, Award (Aug. 8, 1980), 1 ICSID Rep. 330, 340 (1982). 300  International Law Association (I.L.A.) Final Report on Lis Pendens and Arbitration, F. De Ly, Chairman, A. Sheppard, Rapporteur, 25 Arb. Int’l 1, 3–​34 (2009). 297 298

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IV. Conclusion guidance. Investment treaties specifically define the objective criteria which make a legal person an investor of a Party—​traditionally incorporation, siège social and control. This may facilitate treaty/​forum shopping, or corporate restructuring, which is generally accepted except in cases of abuse. If a Party does not wish to extend the treaty provisions in certain circumstances, it may include a ‘denial of benefits clause’ in its treaties. Arguments related to the economic reality have not succeeded in dissuading tribunals from applying the test that the contracting parties have agreed upon and included in their treaties. Tribunals, in their majority, have been very reluctant to pierce the corporate veil in order to reveal and give legal effect to the ultimate underlying nationality of the investors. Arbitral tribunals have regularly accepted jurisdiction rationae personae for claims of mi- 10.132 nority and/​or indirect shareholders, which may be the source of multiple claims and proceedings. Multiple claims clearly result in very high legal costs for respondent states, may involve abuses of process, and increase the likelihood of inconsistent arbitral decisions as well as the award of double compensation. Several tools may be used to reign in parallel and multiple proceedings, including procedures already included in IIAs, such as waivers, and consolidation of claims or principles emanating from domestic legal systems, such as lis pendens, which could be applied with greater flexibility.

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11 THE MEANING OF ‘INVESTMENT’ IN INVESTMENT TREATY ARBITRATION Katia Yannaca-​Small and Dimitrios Katsikis

I. Introduction  II. The Definition of ‘Investment’ in International Agreements  A. The Definition of ‘Investment’ in Investment Treaties  B. The Notion of ‘Investment’ in the ICSID Convention 

III. Arbitral Jurisprudence on the Definition of ‘Investment’ 

A. Types of Assets Constituting an ‘Investment’  11.23 B. The Interpretation of ‘Investment’ by Arbitral Tribunals  11.47 C. The Requirement that an Investment Be Made ‘In Accordance with the Host State’s Law’  11.96 D. The Requirement that an Investment Be ‘In the Territory of the Host State’ 11.101 IV. Conclusion 11.116

11.01 11.06 11.06 11.16 11.23

I. Introduction 11.01 Under customary international law, the duty to protect the property of foreign nationals

covered all types of property in general and thus did not raise difficult issues of definition. The era of decolonization, however, brought with it a wave of expropriations and challenges to aspects of customary law that led to the development of treaties focusing on the protection of a subset of property: foreign investments. This posed the question of what constitutes an investment, a question that continues to elicit a complex, and at times uncertain, answer.

11.02 The complexity derives in part from the evolution of new forms of investment, in which the

investor does not establish an entity or own a tangible asset in the host state. Broad definitions of investment, covering a great variety of assets, have appeared in national investment laws and international instruments. The complexity also derives from the fact that, as noted by one scholar, the notion of ‘investment’ is dynamic; it is not the static notion of ‘property’ with which customary international law had dealt.1 Further, the legal definition of investment depends on the objective of the different investment instruments, which is not always the same.2

11.03 Earlier agreements followed a narrow approach, aimed at the gradual liberalization of capital

movements, and enumerated the transactions covered. Today, most international investment

1  See P. Juillard, L’évolution des sources du droit des investissements, VI Recueil des Cours 24 (1994): (‘[l]‌a notion d’investissement, notion dynamique, a fait son apparition dans la langue du droit international, et s’est substituée à la notion de bien, notion statique. La notion d’investissement est, en effet une notion dynamique, en ce sens qu’elle ne peut se concevoir que dans la durée et dans le mouvement . . .’). 2 D. Carreau & P. Juillard, Droit International Economique (2d ed. 2005).

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II.  The Definition of ‘Investment’ in International Agreements instruments start with a broad definition of investment that may, in a second step, be circumscribed. These definitions do not purport to be exhaustive, often using an illustrative list of assets. Some instruments employ a ‘definition’ that is explicitly circular, stating that the listed assets are within the definition only when they have the character of investments. The general question of what are the characteristics of investment was raised acutely by the ICSID Convention, which limits the jurisdiction of ICSID tribunals to investments, but intentionally does not define the term. The question can arise in ICSID arbitrations just as it can arise in disputes submitted to resolution under other rules. Despite the growing number of investor-​state arbitrations and resulting jurisprudence, there 11.04 is still no fully agreed list or understanding of the criteria of investment. As a result, tribunals may bring to bear an intuitive element in distinguishing between an investment and a commercial transaction. In addition, there may be cases in which an asset or endeavour is an investment but, for policy reasons, is not covered by the relevant investment agreement, for example, investments not made in conformity with host state law. The following sections of this chapter first examine the way ‘investment’ is ‘defined’ in BITs 11.05 and other IIAs, as well as the meaning of investment in the ICSID Convention. They then examine aspects of the arbitral jurisprudence on certain types of assets constituting an investment; the ‘objective’ and ‘subjective’ approach to interpreting definitions of ‘investment’; the characteristics that have been considered to be criteria of an investment; and the requirements that, to be protected, an ‘investment’ must be (i) made in accordance with the host state’s law and (ii) in the territory of the host state.

II.  The Definition of ‘Investment’ in International Agreements A. The Definition of ‘Investment’ in Investment Treaties It is standard in international investment agreements to define ‘investment’ as ‘every kind 11.06 of asset’ directly or indirectly controlled by investors of the home state, followed by an illustrative but usually not exhaustive list of covered assets.3 Most of these definitions are open-​ended and cover both direct and portfolio investment. Their approach is to give the term ‘investment’ a broad, non-​exclusive definition, in recognition of the constantly evolving forms of investment. An apt example of a broad definition is the relevant part of the definition of ‘investment’ in 11.07 Article 1(6) of the ECT, which provides as follows: ‘Investment’ means every kind of asset, owned or controlled directly or indirectly by an investor and includes: (a) tangible and intangible, and movable and immovable, property, and any property rights such as leases, mortgages, liens, and pledges; (b) a company or business enterprise, or shares, stock, or other forms of equity participation in a company or business enterprise, and bonds and other debt of a company or business enterprise; (c) claims to money and claims to performance pursuant to contract having an economic value and associated with an Investment; (d) Intellectual Property;

3 R. Dolzer & M. Stevens, Bilateral Investment Treaties 26–​27 (1995) [hereinafter Dolzer and Stevens, Bilateral Investment Treaties]; J. Salacuse, The Law of Investment Treaties 176 (2015) and, more generally, at 174–​96.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration (e) Returns; (f ) any right conferred by law or contract or by virtue of any licences and permits granted pursuant to law to undertake any Economic Activity in the Energy Sector. 11.08 Thus, in the example of the ECT, the enumeration of assets covered by the term ‘investment’

is not exhaustive, as can be seen from the term ‘includes’, as well as the language ‘every kind of asset’. In addition, the types of assets enumerated in the definition are wide-​ranging, covering ‘intellectual property’, without distinction as to different types of intellectual property rights, as well as ‘any right conferred by law or contract’, alongside the more conventional assets such as ‘shares, stock, or other forms of equity participation in a company’.

11.09 Many bilateral treaties define ‘investment’ in a similarly broad manner. Thus, the Czech

Republic–​Greece BIT defines investment as follows:

‘Investment’ means every kind of asset and in particular, though not exclusively, includes: (a) movable and immovable property and any other property rights such as mortgages, liens or pledges, (b) shares in and stock and debentures of a company and any other form of participation in a company, (c) loans, claims to money or to any performance under contract having a financial value, (d) intellectual property rights, goodwill, technical processes and know-​how, business concessions conferred by law or under contract, including concessions to search for, cultivate, extract or exploit natural resources.4 11.10 There are investment agreements that take a narrower approach in their definition of ‘in-

vestment’. The US Model BIT has traditionally provided for a more narrow definition of ‘investment’, with more recent versions expressly stipulating that ‘investment’ is ‘every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk’.5 The underlying idea, explored further below, is that an ‘investment’ has certain inherent features which not all assets possess.6

4  Agreement between the Government of the Hellenic Republic and the Government of the Czech and Slovak Federal Republic for the Promotion and Reciprocal Protection of Investments (signed June 3, 1991, entered into force December 31, 1992) art. 1(1) [hereinafter Greece–​Slovakia BIT]. For similar examples, see Agreement on encouragement and reciprocal protection of Investments between the Republic of Zimbabwe and the Kingdom of the Netherlands (signed December 11, 1996, entered into force May 1, 1998)  art. 1(1); Agreement between the Hashemite Kingdom of Jordan and the Republic of Turkey concerning the Reciprocal Promotion and Protection of Investments (signed August 2, 1993, entered into force January 23, 2006) art. 2; Agreement on encouragement and reciprocal protection of Investments between the Kingdom of the Netherlands and the Republic of Venezuela (signed October 22, 1991, entered into force November 1, 1993) art. 1(a) [hereinafter Netherlands–​Venezuela BIT]; Agreement for the Promotion and Protection of Investments between the Republic of Italy and the Arab Republic of Egypt (signed March 2, 1989, entered into force May 1, 1994) art. 1 [hereinafter Italy–​Egypt BIT]. 5  This definition appears in both the 2004 and 2012 versions of the U.S. Model Bilateral Investment Treaty [hereinafter U.S. Model BIT]. The earlier 1994 and 1998 versions of the U.S. Model BIT defined ‘investment’ as ‘every kind of investment owned or controlled directly or indirectly by that national or company, and includes investment consisting or taking the form of ’, and then providing for a list of assets. The difference between the earlier (1994 and 1998) and later (2004 and 2012) versions is that the latter define ‘investment’ as an asset which has a particular set of characteristics, as opposed to defining ‘investment’ as ‘every kind of investment’. It is doubtful that the change narrows the definition. For examples of concluded treaties adopting the current U.S. Model BIT approach, see the United States–​Australia Free Trade Agreement (adopted May 18, 2004, entered into force January 1, 2005) art. 11.17.4; Dominican Republic—​Central America—​United States Free Trade Agreement (adopted August 5, 2004, entered into force March 1, 2006) art. 10.28. 6  See infra ¶¶ 11.64–​11.95.

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II.  The Definition of ‘Investment’ in International Agreements NAFTA takes an even narrower approach. Its Article 1139 includes a list of covered assets 11.11 which is intended to be exhaustive. Unlike the ECT, or even the US Model BIT, there is no language indicating that ‘every asset’ can constitute an ‘investment’: if an asset falls outside the ones enumerated in Article 1139, it is not protected by the treaty. In addition, NAFTA Article 1139 offers more limited definitions even for the assets that it 11.12 does list as falling within the definition of ‘investment’. While Article 1(6) of the ECT refers to ‘bonds and other debt of a company or business enterprise’, NAFTA Article 1139 takes a more circumscribed approach, accepting loans as ‘investment’ only when funds flow within a business group or when debt is issued on a relatively long-​term basis (more than three years).7 Equally, under NAFTA Article 1139, contract rights not falling under other categories of investment are covered only if they involve a ‘commitment of capital or other resources in the territory of a party . . . to economic activity in such territory’. NAFTA complements its exhaustive list of investment categories with a negative definition, establishing that certain types of property are not ‘investments’, such as money claims arising solely from commercial contracts for the sale of goods or services.8 Recent international investment agreements favour this more restrictive approach to the def- 11.13 inition of ‘investment’. Thus, akin to the 2004 and 2012 US Model BIT, the 2015 EU–​ Singapore Free Trade Agreement defines ‘investment’ as ‘every kind of asset which has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, the assumption of risk or a certain duration’.9 At the same time, the EU–​Singapore FTA strikes a balance between assets that fall to be protected as ‘investments’ and those that do not: claims to money or other assets as well as claims to contractual performance fall within the assets protected by the treaty,10 whereas orders or judgments in judicial or administrative proceedings do not.11 Even then, it is unclear whether every claim for contractual performance would fall within the definition of ‘investment’: arguably, a claim for performance arising out of a purely commercial contract would not be covered by the definition since it does not have the overarching characteristics of an ‘investment’ that the definition mandates. The EU–​Canada Comprehensive Economic and Trade Agreement (CETA) takes a similar 11.14 approach, setting out the overarching characteristics that an asset must possess to qualify as an ‘investment’, and providing illustrations of the forms that such an investment may take.12 Contrary to the EU–​Singapore FTA, however, Article 8.1 of CETA specifically excludes claims to money ‘that arise solely from commercial contracts for the sale of goods

7  North American Free Trade Agreement (signed December 17, 1992, entered into force January 1, 1994) art. 1139(d) [hereinafter NAFTA]. 8  For a juxtaposition of treaties which contain narrow definitions of ‘investment’, like NAFTA or the U.S. BITs, and others which boasted broad, open-​ended definitions, see Mytilineos Holdings SA v. State Union of Serbia & Montenegro and Republic of Serbia, Partial Award on Jurisdiction (Sept. 8, 2009), ¶¶ 102–​108 [hereinafter Mytilineos v. Serbia]. 9  EU–​Singapore Free Trade Agreement (signed October 17, 2014, pending approval) art. 9.1.1 [hereinafter EU–​Singapore FTA]. See similarly EU–​Vietnam Free Trade Agreement (signed Feb. 1, 2016, pending approval) ch. 8, 4–​5. 10  EU–​Singapore FTA, supra note 9, art. 9.1.1(f ). 11  Id. art. 9.1.1(h). 12  Comprehensive Economic and Trade Agreement between Canada and the European Union (adopted on October 30, 2016, pending approval) [hereinafter CETA] art. 8.1 (‘investment means every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. Forms that an investment may take include . . .’).

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The Meaning of ‘Investment’ in Investment Treaty Arbitration or services’.13 A similar structure can be found in the Trans–​Pacific Partnership Agreement (TPP),14 as well as the Transatlantic Trade and Investment Partnership (TTIP), which is still in draft form at the time of writing.15 11.15 So far, this chapter has proceeded on the premise that an ‘investment’ is an asset, whether

having certain inherent characteristics or simply an asset enumerated in the text of the international investment agreement in question. However, this is not always the case. For instance, the 2015 India Model BIT defines ‘investment’ as an ‘enterprise’ which the investor must have incorporated in the host state and which, together with its assets, must have ‘the characteristics of an investment such as the commitment of capital or other resources, certain duration, the expectation of gain or profit, the assumption of risk and a significance for the development of the Party in whose territory the investment is made’.16 The Model BIT then proceeds to list the assets that an enterprise must ‘possess’ if it is to qualify as an ‘investment’.17

B. The Notion of ‘Investment’ in the ICSID Convention 11.16 Regardless of the definition that an investment treaty may adopt, an aggrieved investor

bringing his claim before an arbitral tribunal constituted pursuant to the ICSID Convention will need to show that the ‘investment’ meets not only the definition of the investment agreement per se but also the requirements of the ICSID Convention.

11.17 The outer limits of the jurisdiction ratione materiae of the ICSID are set out in Article 25(1)

of the Convention, which provides as follows:

The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the centre by that State) and a national of another Contacting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally. 11.18 The term ‘investment’ was not defined in the Convention, in order to accommodate new and

emerging forms of investment. The relevant passage of the World Bank Executive Directors’ Report accompanying the Convention states:

13  CETA takes the additional step of excluding ‘any order, judgment or arbitral award’ but only when that ‘order, judgment or arbitral award’ is related to a claim to money arising solely from a commercial contract for the sale of goods or services or the domestic financing of such a contract. 14  Trans–​Pacific Partnership Agreement (signed February 4, 2016, pending approval) art. 9.1. 15  Internal EU Document on the Transatlantic Trade and Investment Partnership, Chapter II (x2), http://​ trade.ec.europa.eu/​doclib/​docs/​2015/​september/​tradoc_​153807.pdf (last visited Nov. 2, 2017). 16  Model Indian Bilateral Investment Treaty, http://​investmentpolicyhub.unctad.org/​Download/​ TreatyFile/​3560 (last visited Oct. 30, 2017) art. 1.4 [hereinafter Indian Model BIT]. 17  By defining ‘investment’ as an ‘enterprise’, the Indian Model BIT appears at first to take a drastically different approach to the definition of ‘investment’. A closer examination of the provision, however, suggests that this definition of ‘investment’ is not particularly different from the restrictive definitions examined previously, other than in requiring the investor to incorporate a company in the host State and requiring the enterprise in question to have ‘significance for the development of the Party in whose territory the investment is made’. The draft Indian Model BIT was much more restrictive in defining ‘investment’ as an ‘enterprise’ which ‘(i) made a substantial and long term commitment of capital in the Host State; (ii) engaged a substantial number of employees in the territory of the Host State; (iii) assumed entrepreneurial risk; (iv) made a substantial contribution to the development of the Host State through its operations along with transfer of technological knowhow, where applicable; and (v) carried out all its operations in accordance with the Law of the Host State’. This more restrictive definition was not incorporated in the text of the final Indian Model BIT.

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II.  The Definition of ‘Investment’ in International Agreements No attempt was made to define the term “investment” given the essential requirement of consent by the parties, and the mechanism through which Contracting States can make known in advance, if they so desire, the classes of disputes which they would or would not consider submitting to the Centre (article 25(4)).

This might lead to the conclusion that the Convention’s use of the term ‘investment’ is, 11.19 absent a definition, a renvoi to the parties’ investment agreement, with the result that whatever the parties have agreed as constituting an investment is the only criterion for an ICSID tribunal’s jurisdiction. Indeed, the tribunal in Fedax v Venezuela, the first case where there was a jurisdictional objection on the basis that the claimant’s asset did not amount to an ‘investment’, suggested that this was the correct approach to take.18 A. Broches’ account of the negotiations which led to the ICSID Convention does not sup- 11.20 port this approach unconditionally. Broches remarked that the drafters’ intention was to give great freedom to states in how they defined ‘investment’ when concluding investment treaties, but was careful to state that such agreements ‘would not be controlling’: During the negotiations, several definitions of ‘investment’ were considered and rejected. It was felt in the end that a definition could be dispensed with ‘given the essential requirement of consent by the parties’. This indicates that the requirement that the dispute must have arisen out of an ‘investment’ may be merged into the requirement of consent to jurisdiction. Presumably, the parties’ agreement that a dispute is an ‘investment dispute’ will be given great weight in any determination of the Centre’s jurisdiction, although it would not be controlling.19

In order to accept jurisdiction under the ICSID Convention, tribunals have generally adopted 11.21 a dual approach:20 they consider whether there is an ‘investment’ under both Article 25(1) of the Convention and the relevant investment agreement—​called by some the ‘double keyhole approach’21 or the ‘double barrelled test’.22 This approach gives parties to ICSID arbitration wide discretion to describe a particular transaction as investment, but not the unlimited freedom to do so, and any such description would not be conclusive for a tribunal deciding on its competence.23 18 Fedax N.V.  v.  Venezuela, ICSID Case No. ARB/​ 96/​3, Decision of the Tribunal on Objections to Jurisdiction (July 11, 1997), ¶ 31 [hereinafter Fedax v. Venezuela]. For a fuller discussion of Fedax on this point, see infra, ¶ 11.52. 19  A. Broches, The Convention on the Settlement of Investment Disputes: Some Observations on Jurisdiction, 5 Col. J. Transnat’l L. 261, 268 (1966). Professor C. Schreuer, taking into account the travaux préparatoires, also indicates that a concerted effort was made to define the term but that the effort failed. See C. Schreuer, The ICSID Convention: A Commentary (with L. Malintoppi, A. Reinisch & A. Sinclair, 2d ed. 2009). [hereinafter Schreuer et al., A Commentary]. For a thorough review of the travaux préparatoires leading to the lack of a definition of ‘investment’, see Ambiente Ufficio S.p.A. and Others v. Argentina, ICSID Case No. ARB/​08/​9 Decision on Jurisdiction and Admissibility (Feb. 8, 2013), ¶¶ 449–​54 [hereinafter Ambiente Ufficio v. Argentina]. 20  Československá Obchondni Banka, A.S. v. Slovak Republic, ICSID Case No. ARB/​97/​ 4 Decision of the Tribunal on Objections to Jurisdiction (May 24, 1999), ¶ 251 [hereinafter CSOB v. Slovakia) (‘A two-​fold test must therefore be applied in determining whether this Tribunal has the competence to consider the merits of the claim: whether the dispute arises out of an investment within the meaning of the Convention and, if so, whether the dispute relates to an investment as defined in the Parties’ consent to ICSID arbitration, in their reference to the BIT and the pertinent definitions contained in Article 1 of the BIT’). 21  R. Dolzer & C. Schreuer, Investors and Investment, in Principles of International Investment Law 61–​62 (2d ed. 2012) [hereinafter Dolzer & Schreuer]. 22 Malaysian Historical Salvors, SDN, BHD v.  Malaysia, ICSID Case No. ARB/​ 05/​ 10 Award on Jurisdiction (17 May 17, 2007), ¶ 55 [hereinafter MHS v. Malaysia (Award)]. 23  It is worth noting that, pursuant to art. 41 of the ICSID Convention, a tribunal may examine on its own motion whether the requirements of jurisdiction are met (Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (concluded March 18, 1965, entered into force October 14, 1966)  [hereinafter ICSID Convention]. As the tribunal in the Joy Mining Machinery Ltd.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 11.22 This double-​barrelled test is absent from arbitrations conducted pursuant to the International

Chamber of Commerce (ICC) or the Stockholm Chamber of Commerce (SCC), or to ad hoc arbitration under the UNCITRAL Rules: these Rules do not ‘filter claims through their own autonomous notion of investment as a condition of jurisdiction ratione materiae’,24 and the tribunals applying these Rules have to consider whether there is an investment according to the relevant investment agreement. Indeed, as mentioned above, many investment treaties are drafted in an open-​ended fashion so as to protect all assets. The majority of tribunals hearing alleged treaty breaches in cases governed by non-​ICSID arbitration rules rely on the four corners of the investment treaty—​and its definition of investment—​without resorting to other criteria or tests to determine whether a given asset should qualify as an investment under the treaty.

III.  Arbitral Jurisprudence on the Definition of ‘Investment’ A. Types of Assets Constituting an ‘Investment’ 11.23 As seen in the previous section of this chapter, definitions of ‘investment’ in international

investment agreements often set the meaning of ‘investment’ by reference to a (usually non-​ exhaustive) list of assets. Disputes concerning the precise meaning of these assets arise very frequently, and this has resulted in voluminous arbitral jurisprudence on the typology of assets constituting an ‘investment’.

11.24 Until the tribunal in Fedax v Venezuela was faced with an objection to jurisdiction on the

ground that the underlying transactions—​promissory notes—​did not meet the requirements of an investment under the ICSID Convention, the term ‘investment’ had been broadly understood in the ICSID practice and decisions as well as in scholarly writings. Before this case, ICSID tribunals had, on their own initiative and with little investigation, examined the question whether an investment was present without considering any specific criteria,25 and in each case, reached the conclusion that the ‘investment’ requirement of the Convention had been met.

11.25 Arbitral tribunals today have become much more exacting in their analysis. As a matter of

methodology, arbitral tribunals will generally consider the entirety of the venture embarked on by the investor in determining whether or not it constitutes an ‘investment: tribunals will

v. Egypt case held: ‘The parties to a dispute cannot by contract or treaty define as investment, for the purposes of ICSID jurisdiction, something which does not satisfy the objective requirements of Article 25 of the ICSID Convention. Otherwise, Article 25 and its reliance on the concept of investment, even if not specifically defined, would be turned into a meaningless provision’. See Joy Mining Machinery Ltd. v. Egypt, ICSID Case No. ARB/​03/​11 Award on Jurisdiction (Aug. 6, 2004) [hereinafter Joy Mining v. Egypt]. 24  S. Jagusch & A. Sinclair, The Limits of Protection for Investments and Investors under the Energy Charter Treaty, in Investment Arbitration and the Energy Charter Treaty 73, 75 (C. Ribeiro ed., 2006). 25  Some of the best-​known cases of this early period are Liberian Eastern Timber Corporation v. Liberia, ICSID Case No. ARB/​83/​2 Award (Mar. 31, 1986), 2 ICSID Rep (1994) 346; Société Ouest Africaine des Bétons Industriels v. Senegal, ICSID Case No. ARB/​82/​1 Decision on Jurisdiction (Aug. 1, 1984) (Summary), 2 ICSID Rep (1994) 165; Kaiser Bauxite Company v. Jamaica, ICSID Case No. ARB/​74/​3 Decision on Jurisdiction (July 6, 1975), 1 ICSID Rep. 296 (1993); Alcoa Minerals of Jamaica Inc. v. Jamaica, ICSID Case No. ARB/​74/​2 Preliminary Award (July 6, 1975) (Extract), in IV Yearbook of Commercial Arbitration 206 (Pieter Sanders ed., 1979); Holiday Inns S.A., Occidental Petroleum Corporation et  al. v.  Morocco, ICSID Case No. ARB/​72/​1 Decision on Jurisdiction (May 12, 1974), 1 ICSID Rep 645 [hereinafter Holiday Inns v. Morocco] as discussed in Pierre Lalive, The First “World Bank” Arbitration (Holiday Inns v. Morocco)—​ Some Legal Problems, 51(1) BYBIL 123 (1980) [hereinafter Lalive].

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ be reluctant to dissociate different parts of an investor’s venture in order to determine whether each part individually constitutes an ‘investment’, ignoring the totality of the enterprise.26

1. Trade agreements Although ICSID tribunals have been hesitant to recognize contracts related to trade in goods 11.26 as investment, non-​ICSID tribunals have been more inclined to do so. In the NAFTA context, for instance, tribunals have shown some readiness to accept the interrelation between trade and investment and to retain jurisdiction even when the governmental measures of the host state affect trade rather than investment. In Pope and Talbot v Canada,27 the claimant challenged the implementation of the Canada–​ 11.27 US Softwood Lumber Agreement and the allocations of export quota that had been made under that Agreement and alleged multiple breaches of the NAFTA. The respondent claimed that ‘softwood lumber’ is a ‘good’ and therefore the dispute related to trade in goods. The tribunal disagreed and, without analysing the nature of the economic activity, qualified Pope and Talbot as an investor and its Canadian subsidiary as an investment. It added that ‘there is no provision to the express effect that investment and trade in goods are to be treated as wholly divorced from each other’.28 In S.D. Myers v Canada,29 the US company alleged that Canada violated NAFTA’s Chapter 11 11.28 by banning the export of PCB waste to the United States where S.D. Myers operated a PCB remediation facility. S.D. Myers claimed that the promulgation of the export ban by Canada was done in a discriminatory and unfair manner. Unlike the Pope & Talbot tribunal, the one in S.D. Myers looked first at the definition of ‘investment’ contained in NAFTA and found that the Canadian subsidiary was an ‘enterprise’ and therefore among the assets enumerated

26  MNSS B.V. & Recupero Credito Acciaio N.V. v. Montenegro, ICSID Case No. ARB(AF)/​12/​8 Award (May 4, 2016), ¶¶ 201–​202 [hereinafter MNSS v. Montenegro] (‘In the view of the Tribunal, the acquisition of the shares of MN by MNSS and the investment obligations of MNSS should be viewed as a whole. The loans are part of the fulfilment by MNSS of its obligations under the Privatization Agreement and the Assignment Agreement. It was an overall transaction, parts of which would be implemented over a period of time’); İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No. ARB/​10/​24 Award (Mar. 8, 2016), ¶ 293 [hereinafter Sirketi v.  Turkmenistan); Tenaris v.  Venezuela, ICSID Case No. ARB/​11/​26 Award (Jan. 29, 2016), ¶ 284 [hereinafter Tenaris v. Venezuela]; Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Albania, ICSID Case No. ARB/​11/​24 Award (Mar. 30, 2015), ¶ 288 [hereinafter Mamidoil v. Albania]; Mytilineos v. Serbia, supra note 8, ¶ 120 (‘Even if one doubted whether the Agreements looked at in isolation would constitute investments by themselves, [it] seems clear that the combined effect of these agreements amounts to an investment’); ADC Affiliate Limited and ADC & ADMC Management Limited v. Hungary, ICSID Case No. ARB/​03/​16 Award (Oct. 2, 2006), ¶ 331 (‘In considering whether the present dispute falls within those which “arise directly out of an investment” under the ICSID Convention, the Tribunal is entitled to, and does, look at the totality of the transaction as encompassed by the Project Agreements’). For a practical application of this notion, see Bernhard von Pezold and Others v. Zimbabwe, ICSID Case No. ARB/​10/​15 Award (July 28, 2015), ¶ 315 [hereinafter von Pezold v. Zimbabwe) (‘Finally, in relation to the Forrester Water Rights, these rights constitute part of the investment, as an asset held by the von Pezold Claimants, as both a right in rem and a business concession under public law. The Tribunal notes, in this regard, that the very nature of the von Pezold Claimants’ investments in Zimbabwe to which their water rights are connected, being large scale agricultural operations, require access to water for irrigation purposes’ (emphasis added)); CSOB v. Slovakia, supra note 20, ¶ 72 (‘[A]‌dispute that is brought before the Centre must be deemed to arise directly out of an investment even when it is based on a transaction which, standing alone, would not qualify as an investment under the Convention, provided that the particular transaction forms an integral part of an overall operation that qualifies as an investment’). 27  Pope & Talbot, Inc. v. Canada, Ad Hoc UNCITRAL Preliminary Award (Jan. 29, 2000). 28  Id. ¶ 26. 29  S.D. Myers, Inc. v. Canada, Ad Hoc UNCITRAL Partial Award (Nov. 13, 2000).

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The Meaning of ‘Investment’ in Investment Treaty Arbitration in Article 1139. In addition, the tribunal held that the trade and investment sections of NAFTA impose cumulative obligations on the parties.30

2. Loans 11.29 There is early authority for the proposition that loans will constitute an ‘investment’.31

Not all loans, however, will constitute an ‘investment’, at least for purposes of the ICSID Convention. According to the Fedax v Venezuela tribunal, a ‘short-​term, occasional financial arrangement’ would not amount to an ‘investment’.32 In finding that they amounted to ‘investments’ under the BIT and the ICSID Convention, the tribunal considered it important that the promissory notes in question had been issued under Venezuela’s Law on Public Credit, which had as its purpose the raising of funds so that the state could ‘undertake productive works, attend to the needs of national interest and cover transitory needs of the treasury’.33

11.30 In deciding whether a loan is an ‘investment’, tribunals will examine the role of that loan in

the overall transaction. Thus, the CSOB v Slovakia tribunal noted that nothing in the BIT or the ICSID Convention excluded loans from being ‘investments’, but then held that this was not sufficient to find that all loans would be protected.34 Although, it did not set out criteria for determining which types of loans would be worthy of protection, the CSOB tribunal concluded that the claimant’s loan constituted an ‘investment’ because individual transactions may meet the requirements of an investment under the Convention provided the overall operation qualifies as an investment.35

11.31 This holistic approach has been followed in subsequent jurisprudence. In Tenaris v Venezuela,

the tribunal expressly adopted the claimants’ ‘holistic approach’, asking itself whether the alleged ‘investment’ would not have occurred had one of the elements to the transaction been absent.36 It was by examining the loan through this perspective that the tribunal felt 30  Id. ¶¶ 292–​94 (‘The chapters of the NAFTA are part of a “single undertaking.” There appears to be no reason in principle for not following the same preference as in the WTO system for viewing different provisions as “cumulative” and complementary. The view that different chapters of the NAFTA can overlap and that the rights it provides can be cumulative except in cases of conflict, was accepted by the decision of the Arbitral Tribunal in Pope and Talbot. The reasoning in the case is sound and compelling. There is no reason why a measure which concerns goods (Chapter 3) cannot be a measure relating to an investor or an investment (Chapter 11)’). 31  Fedax v. Venezuela, supra note 18, ¶¶ 37, 45; CSOB v. Slovakia, supra note 20, ¶ 77. See also Holiday Inns v. Morocco, as discussed in Lalive, supra note 25. In CSOB v. Slovakia, the respondent argued that the transaction underlying the claimant’s case, a loan, did not involve a transfer of resources into the Slovak Republic and therefore, did not constitute an investment. Although loans were not expressly mentioned under the Czech Republic–​Slovakia BIT, the tribunal found that the term ‘assets’ and ‘monetary receivables or claims’ was broad enough to encompass loans. For an interesting review of financial products as ‘investments’, see David W. Rivkin & Mark W. Friedman, Financial Products as Investments under Bilateral Investment Treaties and Other Multilateral Instruments with Consents to Arbitration, in International Financial Disputes 117–​ 44 (J. Golden and C. Lamm eds., 2015). 32  Fedax v. Venezuela, supra note 18, ¶ 43. 33  Id. ¶ 42. 34  CSOB v. Slovakia, supra note 20, ¶ 77 (‘Loans as such are therefore not excluded from the notion of an investment under Article 1(1) of the BIT. It does not follow therefrom, however, that any loan and, in particular, the loan granted by CSOB to the Slovak Collection Company meets the requirements of an investment under Article 25(1) of the Convention or, for that matter, under Article 1(1) of the BIT, which speaks of an ‘asset invested or obtained by an investor of one Party in the territory of the other Party’), and ¶ 79. 35  CSOB v. Slovakia, supra note 20, ¶¶ 82, 91. 36  Tenaris v. Venezuela, supra note 26, ¶ 285, accepting the claimants’ submissions that: ‘The combination of all that, together obviously with the Supply Agreement . . . all of these were linked together. If you took one away, if there was no loan, then there would have been no money to bring these elements together and the Off-​take agreement was essentially something that was of fundamental interest to them because that was then a market for what was occurring’.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ able to conclude that the loan in question was an ‘investment’ on its own right and that, in any event, ‘if that were wrong, the Tribunal is satisfied that it was an essential element of Claimants’ “investment” in Matesi’.37 A recent iteration of this trend is MNSS v Montenegro, where the tribunal held that ‘[t]‌o be 11.32 considered as an investment, [a loan] must contribute to an economic venture consisting of an investment’.38 In its decision that the loans in that case constituted an ‘investment’ the tribunal emphasized that it was considering the loans as part of the overall transaction concerning the privatization of a state-​owned steel mill.39

3. Bonds The issue of whether bonds constitute an ‘investment’ has attracted much interest in re- 11.33 cent years, following the decisions in Abaclat v Argentina,40 Ambiente Ufficio v Argentina,41 Alemanni v Argentina,42 and Poštová Banka v Greece.43 These four cases have an important common feature: the claimants in each case were bond- 11.34 holders, and argued that their bonds amounted to an ‘investment’ under the relevant BIT. In addition, the claimants in Abaclat, Ambiente Ufficio and Alemanni v Argentina brought their claim pursuant to the same instruments, the Argentina–​Italy BIT and the ICSID Convention.44 Nonetheless, the four tribunals did not reach the same result. While the Abaclat, Ambiente Ufficio, and Alemanni v Argentina tribunals held that bonds constituted an ‘investment’ because they fell within the provision for ‘bonds, private or public financial instruments or any other right to performances or services having economic value, including capitalized revenues’,45 the tribunal in Poštová Banka v Greece reached a different conclusion. It held that ‘the list of examples of Article 1(1) of the Greece–​Slovakia BIT, and particularly the sections invoked by Claimants in support of their interpretation of the relevant BIT, are substantially different from the ones invoked by the Abaclat and Ambiente Ufficio v Argentina tribunals under the Argentina–​Italy BIT’.46

  Id. ¶ 289.   MNSS v. Montenegro, supra note 26, ¶ 196. 39  Id. ¶¶ 201–​202. See also Sempra Energy International v. Argentina, ICSID Case No. ARB/​02/​16 Award (Sept. 28, 2007), ¶¶ 214–​15. 40  Abaclat and Others v. Argentina, ICSID Case No. ARB/​07/​5 Decision on Jurisdiction and Admissibility (Aug. 4, 2011) [hereinafter Abaclat v. Argentina]. 41  Ambiente Ufficio v. Argentina, supra note 19. 42  Giovanni Alemanni and Others v. Argentina, ICSID Case No. ARB/​07/​8 Decision on Jurisdiction and Admissibility (Nov. 17, 2014) [hereinafter Alemanni v. Argentina]. 43  Poštová Banka, A.S. and Istrokapital Se v. Hellenic Republic, ICSID Case No. ARB/​13/​8 Award (Apr. 9, 2015) [hereinafter Poštová Banka v. Greece]. Although not discussed in any of the four bond cases, another issue that arose as a result of the global financial crisis was whether the use of bail-​ins, where States resort to converting a percentage of deposits made in bank accounts, would constitute a violation of bilateral or multilateral investment treaties. For that to be the case, deposits in a bank would have to be considered an ‘investment’. For an interesting discussion on this point, see M. Mendelson QC and M. Paparinskis, Bail-​ins and International Investment Law: In and Beyond Cyprus, in International Investment Law and the Global Financial Architecture 193–​210 (C. Tams, S. Schill & R. Hofmann eds., 2017). 44  Another similarity between the two cases (Abaclat v. Argentina and Ambiente Ufficio v. Argentina) was that they were both class actions, albeit at different scales (60,000 claimants in the former and 90 claimants in the latter). 45  Agreement between Italy and Argentine Republic for the Promotion and Protection of Investments (signed May 22, 1990, entered into force October 14, 1993) art. 1(1); Abaclat v. Argentina, supra note 40,¶¶ ¶¶ 354, 365–​67. 46  Poštová Banka v.  Greece, supra note 43, ¶ 331. The Greece–​ Slovakia BIT, supra note 4, art. 1.1(c), provided that ‘investment’ included ‘loans, claims to money or to any performance under contract having a financial value’. 37 38

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 11.35 It would be a mistake, however, to consider that the only reason for the tribunals’ contrasting

conclusions was a disparity of treaty text, for there were also fundamental differences of approach. Importantly, the Abaclat and Ambiente Ufficio v Argentina tribunals, with whose analysis the Alemanni v Argentina tribunal agreed, regarded the economic operation pursuant to which the claimants acquired their rights as ‘one whole’, leading them to conclude that the acquisition of the bonds had contributed to the host state.47 This is in contrast with the finding of the Poštová Banka v Greece tribunal, which specifically held that the bonds could not constitute ‘loans’ or ‘claims to money or to any performance under a contract’ because there was no privity of contract between the borrower, that is, the host state, and the lender, that is, the investor.48

11.36 Thus, although the preponderance of authority suggests that bonds will be ‘investments’

under certain circumstances, jurisprudence is not unanimous on the point. In his dissenting opinion in Abaclat v Argentina, Professor Georges Abi Saab raised an additional issue of interest. In his view, bonds purchased in the secondary market could never qualify as ‘investments’:  their trading in the secondary market meant that the sovereign debtor—​here, Argentina—​had no direct involvement and, further, that the bonds had no territorial nexus with the host state.49 According to Professor Abi Saab, in deciding whether a bond constitutes an investment, one should employ rules of private international law as well as arbitral precedent in determining the situs of the debt which the bondholder has the right to recover.50 The majority of the tribunal in Abaclat v Argentina focused instead on whether bonds were an asset covered by the definition of investment in the BIT and, if so, whether they had been issued for the benefit of the host state.51 The tribunal in Ambiente Ufficio v Argentina shared the same approach,52 while the Alemanni v Argentina tribunal did not tackle that point in its decision on jurisdiction.53

4. Awards and settlement agreements 11.37 Several tribunals have considered arbitral awards and settlement agreements as forming part of an investor’s overall investment and, therefore, worthy of protection.54 Tribunals have thus considered that dispute resolution processes, arbitral awards and settlement agreements

47  Ambiente Ufficio v. Argentina, supra note 19, ¶ ¶¶ 426–​ 29; Abaclat v. Argentina, supra note 40, ¶¶ 365–​67. See also Poštová Banka v. Greece, supra note 43, ¶¶ 482, 487, 493; Alemanni v. Argentina, supra note 42, ¶ 296. 48  Poštová v. Greece, supra note 43 ¶¶ 336–​49. 49 Abaclat v.  Argentina, supra note 40, Dissenting Opinion, Georges Abi Saab (Oct. 28, 2011), ¶¶ 70–​71, 78. 50  Id. ¶¶ 70–​71, 82. 51  Id. ¶¶ 374–​75. 52  Ambiente Ufficio v. Argentina, supra note 19, ¶¶ 499–​501. 53  Alemanni v. Argentina, supra note 42, ¶ 297. 54 Chevron Corporation and Texaco Petroleum Company v.  Ecuador, PCA Case No. 34877 Interim Award (Nov. 1, 2008), ¶¶ 181, 184; Chevron Corporation and Texaco Petroleum Corporation v. Ecuador, PCA Case No. 2009-​23, Third Interim Award on Jurisdiction and Admissibility (Feb. 27, 2012), ¶ 4.19 [hereinafter Chevron and Texaco v. Ecuador]; White Industries Australia Limited v. India, Ad Hoc UNCITRAL Final Award (Nov. 30, 2011), ¶ 7.6.10 [hereinafter White Industries v. India]; Frontier Petroleum Services Ltd. v. Czech Republic, PCA Final Award (Nov. 12, 2010), ¶ 231 [hereinafter Frontier Petroleum v. Czech Republic]; Saipem S.p.A.  v.  Bangladesh, ICSID Case No. ARB/​ 05/​ 07 Decision on Jurisdiction and Recommendation on Provisional Measures (Mar. 21, 2007), ¶ 114 [hereinafter Saipem v. Bangladesh]. It is unclear whether the identification of an award with the overall investment was the reason behind the Romak v. Uzbekistan tribunal’s decision that an award, in and of itself, cannot constitute an ‘investment’: see Romak S.A. v. Republic of Uzbekistan, PCA Case No. AA280 Award (Nov. 26, 2009), ¶ 187 [hereinafter Romak v. Uzbekistan].

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ undertaken in relation to an investment constitute a continuation of the original investment in another form.55 The ATA v Jordan tribunal arguably went further when it specifically remarked that ‘the 11.38 right to arbitration is a distinct “investment” within the meaning of the BIT’,56 although it based its finding on the language of the definition of ‘investment’ in the BIT which included ‘claims to . . . any other rights to legitimate performance having financial value related to an investment’, presupposing that some other investment must already be in place.57 The tribunal in GEA v Ukraine reached a different conclusion, specifying that a settlement 11.39 agreement and an award in an ICC arbitration could not, in and of themselves, amount to ‘investments’.58 The tribunal did so despite a provision in the BIT stipulating that ‘Any change to the form in which assets are invested shall not affect their nature as investments’. The premise for the tribunal’s conclusion was that neither the settlement agreement nor the ICC award gave rise to any additional contribution or relevant economic activity.59

5. Real property, chattels, and intellectual property Rights over movable and immovable property have often been considered as ‘investments’. 11.40 The recent cases of von Pezold v Zimbabwe, Houben v Burundi, and Al Tamimi v Oman support the view that the ownership of land and the leasehold of premises, respectively, will qualify as an investment.60 The same holds true for rights in rem over water,61 while it is also accepted that property rights over chattels will constitute an investment.62 Intellectual property rights, such as trademarks, patents, copyrights and—​frequently—​ 11.41 know-​how and goodwill, have also been considered as ‘investments’.63

55  Characteristically, the Frontier Petroleum tribunal referred to the investment as having been ‘transformed’ into the arbitral award: (‘This Tribunal accepts that Claimant’s original investment consisted of the payments made to MA and Davidová between April 18, 2001 and August 14, 2001, which were transformed into an entitlement to a first secured charge in the Final Award . . . Accordingly, by refusing to recognise and enforce the Final Award in its entirety, the Tribunal accepts that Respondent could be said to have affected the management, use, enjoyment, or disposal by Claimant of what remained of its original investment’). See Frontier Petroleum v. Czech Republic, supra note 54, ¶ 231. The same approach appears to have been followed by the Petrobart Limited tribunal, which held that: ‘[C]‌ontract and the judgment are not in themselves assets but merely legal documents or instruments which are bearers of legal rights, and these legal rights, depending on their character, may or may not be considered as assets. The relevant question which requires consideration is therefore whether the rights provided for in the Contract and confirmed in the judgment constituted assets and were therefore an investment within the meaning of the Treaty’. See Petrobart Limited v. Kyrgyzstan, SCC Case No. 126/​2003 Arbitral Award (Mar. 29, 2005) at 71 [hereinafter Petrobart v. Kyrgyzstan]. See also Chevron Corporation and Texaco v. Ecuador, supra note 54, ¶ 4.19. 56  ATA Construction, Industrial and Trading Company v.  Jordan, ICSID Case No. ARB/​ 08/​2 Award (May 18, 2010), ¶ 117 [hereinafter ATA v. Jordan]. 57  Id. (emphasis added). 58  GEA Group Aktiengesellschaft v. Ukraine, ICSID Case No. ARB/​ 08/​16 Award (Mar. 31, 2011), ¶¶ 157, 161 [hereinafter GEA v. Ukraine]. 59  Id. ¶ 162. 60  Joseph Houben v. Burundi, ICSID Case No. ARB/​13/​7 Award (Jan. 12, 2016), ¶¶ 129–​30 [hereinafter Houben v. Burundi]; Adel A. Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/​11/​33 Award (Nov. 3, 2015), ¶ 278 [hereinafter Al Tamimi v. Oman]; von Pezold v. Zimbabwe, supra note 26, ¶ 288. 61  von Pezold v. Zimbabwe, supra note 26, ¶ 315. 62  Al Tamimi v. Oman, supra note 60, ¶ 280. 63  Philip Morris Brands Sàrl, Philip Morris Products S.A. & Abal Hermanos S.A.  v.  Uruguay, ICSID Case No. ARB/​10/​7 Decision on Jurisdiction (July 2, 2013), ¶¶ 183, 194, 209 [hereinafter Philip Morris v. Uruguay]; Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/​07/​16 Award (Nov. 8, 2010), ¶ 306 [hereinafter Alpha v. Ukraine].

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 6. Contractual  rights 11.42 In general, tribunals have held that contractual rights may amount to an ‘investment’,64 including with respect to contracts for provision of services.65 In doing so, tribunals have often observed that rights in personam will amount to ‘investments’ if the investment treaty definition so provides.66 11.43 At the same time, not every contract will satisfy that definition. Several tribunals have held

that purely commercial transactions will not amount to ‘investments’, regardless of the text of the investment treaty in question, a position that has on occasion been taken even by tribunals not constituted pursuant to the ICSID Convention.67 When a contract will graduate from an ‘ordinary commercial transaction’ to an ‘investment’, thereby being worthy of protection, is a question that has yet to receive a clear answer in the numerous investor-​state awards.

7. Pre-​investment expenditures 11.44 The Mihaly v Sri Lanka and Zhinvali v Georgia cases stand in support of the proposition that expenditures incurred in preparation of an investment will not, in and of themselves, constitute an ‘investment’.68

64  Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/​ 08/​8 Decision on Jurisdiction (Mar. 8, 2010), ¶ 84 [hereinafter Inmaris v. Ukraine]; Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Pakistan, ICSID Case No. ARB/​03/​29 Decision on Jurisdiction (Nov. 14, 2005), ¶ 255 [hereinafter Bayindir v. Pakistan]; Eureko B.V. v. Republic of Poland, Ad Hoc Partial Award (Aug. 19, 2005); Impregilo S.p.A. v. Pakistan, ICSID Case No. ARB/​03/​3 Decision on Jurisdiction (Apr. 22, 2005). 65  SGS Société Générale de Surveillance S.A. v. Philippines, ICSID Case No. ARB/​02/​6 Decision of the Tribunal on Objections to Jurisdiction (Jan. 29, 2004) [hereinafter SGS v. Philippines]; SGS Société Générale de Surveillance S.A.  v.  Pakistan, ICSID Case No. ARB/​01/​13 Decision of the Tribunal on Objections to Jurisdiction (Aug. 6, 2003) [hereinafter SGS v. Pakistan]. The disputes in both cases arose out of the non​payment by Pakistan and the Philippines of invoices allegedly due to SGS under contracts for the provision of pre–​shipment inspection and certification services. In both cases, the tribunals concluded that the contracts in question were qualified as an investment based on a broad definition included in the respective treaties. See also SGS Société Générale de Surveillance S.A. v. Paraguay, ICSID Case No. ARB/​07/​29, Decision on Jurisdiction (Feb. 12, 2010), ¶¶ 83–​90 [hereinafter SGS v. Paraguay]; Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V.  v.  Paraguay, ICSID Case No. ARB/​07/​9 Decision of the Tribunal on Objections to Jurisdiction Objections to Jurisdiction (May 29, 2009), ¶¶ 103–​105 [hereinafter BIVAC v. Paraguay]. 66  White Industries v. India, supra note 54, ¶ 7.3.8; Southern Pacific Properties (Middle East) Limited v. Egypt, ICSID Case No. ARB/​84/​3, Decision on Jurisdiction (Apr. 14, 1988). The tribunal in Petrobart held that a contract for the delivery of gas condensate amounted to an ‘investment’ for purposes of the ECT: see Petrobart v. Kyrgyzstan, supra note 55 at 69. 67  Global Trading Resources Corp. and Globex International, Inc. v. Ukraine, ICSID Case No. ARB/​09/​ 11 Award (Dec. 1, 2010), ¶ 56 [hereinafter Global Trading v. Ukraine] (‘In the present instance, the Tribunal considers that the purchase and sale contracts entered into by the Claimants were pure commercial transactions and therefore cannot qualify as an investment for the purposes of Article 25 of the Convention. When the circumstances of the present case are examined and weighed, it can readily be seen that the money laid out by the Claimants towards the performance of these contracts was no more than is typical of the trading supplier under a standard CIF contract. The fact that the trade in these particular goods was seen to further the policy priorities of the purchasing State does not bring about a qualitative change in the economic benefit that all legitimate trade brings in its train’). See also Tenaris v. Venezuela, supra note 26, ¶¶ 290–​93; SGS v. Paraguay, supra note 65, ¶ 93; Romak v. Uzbekistan, supra note 54, ¶¶ 184–​85, 187; Joy Mining Machinery v. Egypt, supra note 23, ¶¶ 54–​63. For an interesting perspective see Barton Legum, Of Definitions and Disregard: An Editorial, 30(2) ICSID Rev. 281 (2015). 68  See Zhinvali Development Ltd. v.  Georgia, ICSID Case No. ARB/​ 00/​1 Award (Jan. 24, 2003), 10 ICSID Reports 3 (2006) [hereinafter Zhinvali v. Georgia]; Mihaly International Corporation v. Sri Lanka, ICSID Case No. ARB/​00/​2 Award (Mar. 15, 2002)  and Individual Concurring Opinion by Mr David Suratgar (Mar. 7, 2002) [hereinafter Mihaly v. Sri Lanka]. In Zhinvali v. Georgia, Zhinvali claimed expenses incurred during negotiations with the government, but the tribunal held that these up-​front costs do not fall under the definition of investment as set out in the ICSID Convention. In Mihaly v. Sri Lanka, a case

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ The PSEG v Turkey tribunal reached a different conclusion, although the tribunal emphasized 11.45 the fact that the negotiations and preparatory work had led to the conclusion of a valid and binding contract.69 PSEG has been cited with approval by the Malicorp v Egypt tribunal, as well as commentators who have drawn a dividing line between cases where a contract has been concluded as a result of pre-​investment expenditure, with the result that pre-​investment expenditure will form part of the ‘investment’, and cases where there has been no contract, where pre-​investment expenditure will not be protected as an ‘investment’.70 Related to pre-​investment expenditures are contracts indicating an intention of future co- 11.46 operation on a particular project. These will not, in and of themselves, be protected as ‘investments’.71

B. The Interpretation of ‘Investment’ by Arbitral Tribunals In the half century that has elapsed from the first request for arbitration registered by ICSID,72 11.47 numerous arbitral tribunals have had to consider the meaning of ‘investment’ in investment treaties. Whether ownership or control of an asset meets the threshold of an investment treaty is a cardinal issue in almost every case brought by an aggrieved investor against a host state. Jurisprudence has not been uniform. One school of thought is that the term ‘investment’ has 11.48 an inherent meaning that states party to an investment treaty cannot depart from, try as they might. One could term this school of thought ‘objectivist’—​it arises most often in ICSID cases. Another group of tribunals treats the term ‘investment’ as a malleable notion that is subject to the will of the state parties as expressed in the investment treaty’s language. This ‘subjectivist’ approach has frequently been adopted by tribunals not constituted pursuant to the ICSID Convention. Accordingly, there are two distinct questions: (1) should a tribunal take the ‘objectivist’ or the 11.49 ‘subjectivist’ approach in deciding whether an ‘investment’ is present, and (2), if the former, what are the ‘objective’ criteria of an investment? involving expenses incurred in negotiations that were never finalized, the tribunal held that pre-​investment expenditure is not investment within the meaning of Article 25 of the ICSID Convention. It stated that the claimant had furnished no evidence of treaty interpretation or practice of states, ‘let alone that of developing countries . . . to the effect that pre–​investment and development expenditures in the circumstances of the present case could automatically be admitted as “investment” in the absence of the consent of the host state to the implementation of the project’. 69  PSEG Global, Inc., North American Coal Corporation, & Konya Ingin Electrik Üretim ve Ticaret Limited Sirketi v.  Turkey, ICSID Case No. ARB/​02/​5 Award (Jan. 19, 2007), ¶ 304 [hereinafter PSEG v. Turkey] (‘It is an accepted fact of the case that, except for a ground-​breaking ceremony, there was no mining undertaken or construction started, not even in terms of the necessary preparations to that effect. This, however, is not a reason sufficient in itself to rule out the existence of damages subject to compensation. An investment can take many forms before actually reaching the construction stage, including most notably the cost of negotiations and other preparatory work leading to the materialization of the Project, even in connection with pre–​investment expenditures, particularly when, like in this case, there is a valid and binding Contract duly executed between the parties’). 70  Malicorp Limited v.  Egypt, ICSID Case No. ARB/​ 08/​18 Award (Feb. 7, 2011), ¶ 113 [hereinafter Malicorp v. Egypt]; Schreuer et al., A Commentary supra note 19, ¶ 135. It is worth noting that Professor Schreuer’s view is given in the context of commentary to art. 25 of the ICSID Convention. 71  William Nagel v. Czech Republic, SCC Case No. 049/​2002 Final Award (Sept. 9, 2003), ¶¶ 304, 325–​ 29, finding that the agreement was of a purely preparatory nature with the result that the rights created did not have any financial value; Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/​00/​9 Award (Sept. 16, 2003), ¶¶ 18.5–​18.9, finding that the agreement did not give rise to any legally enforceable rights, albeit the tribunal’s finding was obiter, as the tribunal recognized at ¶ 18.5. For a similar finding that an agreement to agree will not give rise to binding undertakings and therefore not be protected as an ‘investment’, see Petrobart v. Kyrgyzstan, supra note 55, ¶ 69. 72 Lalive, supra note 25.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 1. The different approaches (a)  The objectivist approach  11.50 As noted earlier, tribunals constituted pursuant to the ICSID Convention require a claimant to show that the tribunal has jurisdiction pursuant to the terms of the investment treaty in question and pursuant to the terms of the ICSID Convention.73 11.51 This is significant because the ICSID Convention does not contain a definition of the term

‘investment’. Tribunals have viewed the absence of a definition in the Convention as an acknowledgment that an asset must meet the inherent characteristics of an ‘investment’, as that is commonly understood.

11.52 As noted above, early ICSID case law was not altogether clear on the point. Since Fedax v

Venezuela was the first case at ICSID where the respondent had raised a jurisdictional objection aimed specifically at the lack of an ‘investment’, that tribunal undertook a thorough analysis of the ICSID Convention on the point.74 Discussing the relationship between the ICSID Convention and the Netherlands–​Venezuela BIT, the tribunal concluded that it was the BIT that provided the outer limits of the definition of ‘investment’: It follows that, as contemplated by the Convention, the definition of ‘investment’ is controlled by consent of the Contracting Parties, and the particular definition set forth in Article 1 (a) of the Agreement is the one that governs the jurisdiction of ICSID.75

At the same time, the tribunal proceeded to examine whether what it considered to be relevant features of the term ‘investment’ were present in that case, and distinguished between the transaction before it and an ‘ordinary commercial transaction’, which it found would not meet the threshold of an ‘investment’.76 11.53 Two years after the Fedax v Venezuela decision, the CSOB v Slovakia tribunal became the first

clearly to espouse the ‘objectivist’ approach. It held that, although ‘investment as a concept should be interpreted broadly because the drafters of the Convention did not impose any restrictions on its meaning’, parties to an investment treaty did not have free reign to define ‘investment’ as they pleased.77 The tribunal stated: The Slovak Republic is correct in pointing out, however, that an agreement of the parties describing their transaction as an investment is not, as such, conclusive in resolving the question whether the dispute involves an investment under Article 25(1) of the Convention. The concept of an investment as spelled out in that provision is objective in nature in that the parties may agree on a more precise or restrictive definition of their acceptance of the Centre’s jurisdiction, but they may not choose to submit disputes to the Centre that are not related to an investment.78

It went on to indicate elements of the objective meaning of an ‘investment’, finding that an undertaking that did not involve any ‘expenditure of resources by CSOB in the Slovak Republic’ did not constitute an ‘investment’ pursuant to the ICSID Convention. It also stated:

  See ¶¶ 11.16–​11.21.   Fedax v. Venezuela, supra note 18, ¶¶ 21–​29. The tribunal noted that the case before it was the first in which a respondent State had objected to a tribunal’s jurisdiction on the basis that there was no ‘investment’ under the ICSID Convention. Id., supra note 18, ¶ 25. 75  Id. ¶ 31. 76  Id. ¶ 43, citing the first edition of Professor Schreuer’s commentary to the ICSID Convention, and ¶ 42. 77  CSOB v. Slovakia, supra note 20, ¶ 64. 78  Id. ¶ 68. 73 74

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ Tribunal considers that the broad meaning which must be given to the notion of an investment under Article 25(1) of the Convention is opposed to the conclusion that a transaction is not an investment merely because, as a matter of law, it is a loan. This is so, if only because under certain circumstances a loan may contribute substantially to a State’s economic development.79

Decisions of other investment tribunals following CSOB v Slovakia confirmed that an 11.54 ‘investment’ had a meaning independent of the specific agreement of the parties. Salini v Morocco went further into what the content of ‘investment’ may be for purposes of the ICSID Convention, identifying the relevant criteria as risk, duration, substantial commitment, and contribution to the economic development of the host state.80 The tribunal in Phoenix v Czech Republic added additional criteria: assets were ‘investments’ only if acquired in accordance with the laws of the host state and in good faith.81 The application of the ‘objectivist’ approach meant that tribunals declined to exercise juris- 11.55 diction over alleged investments even when those met the language of the investment treaty in question. Thus, the Joy Mining v Egypt tribunal declined jurisdiction when faced with a claim concerning a contract for the provision of mining equipment, despite the fact that the Egypt–​UK BIT’s definition of ‘investment’ included ‘every kind of asset’ and, in particular, a list of asset types that included ‘claims to money or to any performance under contract having financial value’.82 It held: The fact that the Convention has not defined the term investment does not mean, however, that anything consented to by the parties might qualify as an investment under the Convention. The Convention itself, in resorting to the concept of investment in connection with jurisdiction, establishes a framework to this effect: jurisdiction cannot be based on something different or entirely unrelated. In other words, it means that there is a limit to the freedom with which the parties may define an investment if they wish to engage the jurisdiction of ICSID tribunals. The parties to a dispute cannot by contract or treaty define as investment, for the purpose of ICSID jurisdiction, something which does not satisfy the objective requirements of Article 25 of the Convention. Otherwise Article 25 and its reliance on the concept of investment, even if not specifically defined, would be turned into a meaningless provision.83

Numerous tribunals have since adopted the objectivist approach in the context of ar- 11.56 bitrations pursuant to the ICSID Convention,84 including the majority in recent   Id. ¶¶ 69, 76.   Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco, ICSID Case No. ARB/​00/​4, Decision on Jurisdiction (Jan. 31, 2001), ¶ 52 [hereinafter Salini v. Morocco] (‘it would be inaccurate to consider that the requirement that a dispute be “in direct relation to an investment” is diluted by the consent of the Contracting Parties. To the contrary, ICSID case law and legal authors agree that the investment requirement must be respected as an objective condition of the jurisdiction of the Centre’). For more detailed discussion of the elements of the definition of ‘investment’, see infra ¶¶ 11.64–​95. 81  Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/​06/​05, Award, (Apr. 15, 2009), ¶ 114 [hereinafter Phoenix v. Czech Republic]. 82  Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Arab Republic of Egypt for the Promotion and Protection of Investments (signed June 11, 1975, entered into force February 24, 1976) art. I(a)(iii). 83  Joy Mining v. Egypt, supra note 23, ¶¶ 49–​50. 84  OI European Group B.V.  v.  Bolivarian Republic of Venezuela, ICSID Case No. ARB/​ 11/​25 Award (Mar. 10, 2015), ¶ 218 [hereinafter OIEG v. Venezuela]; KT Asia Investment Group B.V. v. Republic of Kazakhstan, ICSID Case No. ARB/​09/​8 Award (Oct. 17, 2013), ¶ 165 [hereinafter KT Asia v. Kazakhstan]; Quiborax S.A., Non Metallic Minerals S.A. & Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/​06/​2 Decision on Jurisdiction (Sept. 27, 2012), ¶ 214 [hereinafter Quiborax v.  Bolivia]; Global Trading v. Ukraine, supra note 67, ¶¶ 43, 45; Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/​ 07/​20 Award (July 14, 2010), ¶¶ 108–​10 at 121[hereinafter Saba Fakes v. Turkey]; Víctor Pey Casado and 79 80

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The Meaning of ‘Investment’ in Investment Treaty Arbitration years.85 They have adopted several variations of it, ranging from a strict cumulative application of the Salini criteria to a more flexible, pragmatic approach. While the objectivist approach found fertile ground in the ICSID Convention, taking root in the empty space left by the Convention’s drafters, arbitral tribunals outside the ICSID context have, on occasion, adopted this approach, arguably despite the parties’ express agreement in an investment treaty as to what ‘investment’ should mean. 11.57 In Romak v Uzbekistan, a case under the UNCITRAL Rules, the issue was whether the claim-

ants’ rights arising out of contract for the supply of wheat, and an ensuing arbitral award in the claimants’ favour, constituted an ‘investment’ for the purposes of the Switzerland–​ Uzbekistan BIT. The BIT broadly stated that ‘[t]‌he term “investment, shall include every kind of assets [including] . . . claims to money or to any performance having an economic value” and “all other rights given by law, by contract or by decision of the authority in accordance with the law” ’.86 The claimant argued that, for purposes of the tribunal’s jurisdiction, it sufficed that the rights at issue fell within one of the sub-​categories of the definition of ‘investment’ in the BIT. The tribunal rejected this contention, finding that: [t]‌he approach advanced by Romak deprives the term ‘investments’ of any inherent meaning, which is contrary to the logic of Article 1(2) of the BIT. Indeed, as already mentioned, the categories of investments enumerated in Article 1(2) of the BIT are not exhaustive, and do not constitute an all-​encompassing definition of ‘investment’ . . . Therefore, there may well exist categories different from those mentioned in the list which, nevertheless, could properly be considered investments protected under the BIT. Accordingly, there must be a benchmark against which to assess those non-​listed assets or categories of assets in order to determine whether they constitute an ‘investment’ within the meaning of Article 1(2). The term ‘investment’ has a meaning in itself that cannot be ignored when considering the list contained in Article 1(2) of the BIT.87

11.58 The tribunals in Nreka v Czech Republic and Alps Finance v Slovakia, two other UNCITRAL

Rules cases,88 also adopted the objectivist approach, importing the Salini89 test in their search

Président Allende Foundation v. Republic of Chile, ICSID Case No. ARB/​98/​2 Award (May 8, 2008) [hereinafter Pey Casado v. Chile]. 85  MNSS v. Montenegro, supra note 26, ¶ 196; Vestey Group Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​06/​4 Award (Apr. 15, 2016), ¶¶ 186–​87; Şirketi v. Turkmenistan, supra note 26, ¶ 289; Houben v. Burundi, supra note 60, ¶ 112; Lundin Tunisia v. Tunisian Republic, ICSID Case No. ARB/​ 12/​30 Award (Dec. 22, 2015), ¶¶ 139–​40; Société Civile Immobilière de Gaëta v.  Republic of Guinea, ICSID Case No. ARB/​12/​36 Award (Dec. 21, 2015), ¶ 205; von Pezold v. Zimbabwe, supra note 26, ¶ 284; OIEG v. Venezuela, supra note 84, ¶¶ 216, 219; Ambiente Ufficio v. Argentina, supra note 19, ¶ 470; Inmaris v. Ukraine, supra note 64 at 130. 86  Agreement between the Swiss Confederation and the Republic of Uzbekistan on the Promotion and Reciprocal Protection of Investments, art. 1(2). 87  Romak v. Uzbekistan, supra note 54, ¶ 180. The Romak tribunal accepted the theoretical possibility that parties to a treaty may extend the notion of ‘investment’ to even cover ‘one-​off sale transactions’ if they so wished but that, in such cases, the treaty language should leave ‘no room for doubt that the intention of the contracting States was to accord to the term “investment” an extraordinary and counterintuitive meaning’. Id. ¶ 205. 88  Alps Finance and Trade AG v. Slovak Republic, Ad Hoc UNCITRAL Award (Mar. 5, 2011), ¶¶ 239, 240 [hereinafter Alps Finance v. Slovakia]; Nreka v. Czech Republic Award, discussed in Luke Eric Peterson, Paris Court Declines to Set Aside Confidential 2007 Award Rendered in BIT Arbitration Between Croat Investor and Czech Republic, 1(11) IAReporter (2008), https://​www.iareporter.com/​pdf-​editions/​?edition=2008 (last visited Oct. 26, 2017) [hereinafter Nreka v. Czech Republic]. It is also worth mentioning that the tribunal in von Pezold opined that an objective notion of investment was to be followed even in non-​ICSID cases, but this was obiter dicta. See von Pezold v. Zimbabwe, supra note 26, ¶ 284. 89  Salini v. Morocco, supra note 80. See supra ¶ 11.54.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ for an ‘investment’. The Alps Finance v Slovakia tribunal noted that the Czech Republic–​ Switzerland BIT provided an investor with the option of bringing a claim under ICSID if both parties to the treaty became members of ICSID, which the tribunal considered as an indication of the parties’ intention to vest the term ‘investment’ with a meaning additional to that in expressly set out in their treaty.90

(b)  The subjectivist approach  Many tribunals have held that the task of a tribunal in interpreting the term ‘investment’ 11.59 in investment treaties is to follow the definition of ‘investment’ set out by the parties in the treaty itself. The majority of tribunals adopting this approach concern cases outside the context of the ICSID Convention. Hulley Enterprises Ltd, Yukos Universal Ltd and Veteran Petroleum Ltd were three cases against 11.60 the Russian Federation in relation to the Yukos saga. The tribunal had been constituted pursuant to the Energy Charter Treaty and the arbitration conducted under UNCITRAL Rules. The issue was whether the claimants’ shareholding in Yukos constituted an ‘investment’ for purposes of Article 1(6) of the ECT. The respondent objected to the tribunal’s jurisdiction, arguing that the claimants had not contributed anything towards the acquisition of their investment and, in particular, that they had not ‘invested foreign capital’. No such requirement being expressed in the text of the ECT, the respondent effectively was requesting the tribunal to imply it. The tribunal held that it was unable to impose requirements that found no support in the language of the treaty itself91 and that, accordingly, the claimants’ ownership of shares in the expropriated Russian company was an ‘investment’ because Article 1(6) of the ECT included shares in a company in its open-​ended list of assets constituting an ‘investment’. Other ECT cases have also confirmed that there is little scope for giving the term ‘invest- 11.61 ment’ an objective meaning.92 This has been so even in cases where the asset at the heart of the dispute was arguably far removed from an investment as that is typically understood. An example is Petrobart v Kyrgyzstan, where the tribunal was seised of a dispute concerning a contract for the delivery of gas condensate. Although the tribunal recognized that ‘in ordinary language investment is often understood as being capital or property used as a financial basis for a company or a business activity with the aim to produce revenue or income’, it also noted that investment treaties often provided wider definitions of the term.93 It concluded that when a treaty does provide such a definition, a tribunal will have to follow that definition and interpret its terms in accordance with the Vienna Convention on the Law of Treaties. Tribunals outside the context of the ECT have also held that primacy must be given to 11.62 the terms of the treaty, and not to an external understanding of the term ‘investment’. The tribunal in Mytilineos v Serbia, seized pursuant to the Greece–​Serbia BIT of a dispute concerning contracts for the provision of capital and raw materials to a metallurgical company, held that the contracts amounted to an ‘investment’ under the treaty. The respondent objected to the tribunal’s jurisdiction, arguing that the contractual rights complained of did not fall within the notion of ‘investment’ as commonly understood, citing various

90  Alps Finance v. Slovakia, supra note 88, ¶ 240. The Romak tribunal also employed a species of this reasoning. See Romak v. Uzbekistan, supra note 54, ¶¶ 193–​94. 91  Hulley Enterprises Limited (Cyprus) v. Russia, PCA Case No. AA 226 Final Award (July 18, 2014), ¶ 431 [hereinafter Hulley v. Russia]. 92  See, e.g., Energoalians TOB v.  Republic of Moldova, Ad Hoc UNCITRAL Award (Oct. 23, 2013), ¶ 237, and the cases discussed in the following paragraphs. 93  Petrobart v. Kyrgyzstan, supra note 55, at 69.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration ICSID decisions in support. The respondent’s objection was rejected by the tribunal, which held that: this latter ratione materiae test for the existence of an investment in the sense of Article of the 25 ICSID Convention is one specific to the ICSID Convention and does not apply in the context of ad hoc arbitration provided for in BITs as an alternative to ICSID.94 11.63 Even in the context of arbitrations pursuant to the ICSID Convention, tribunals have some-

times endorsed the subjectivist approach. In RREEF v Spain, an ECT arbitration conducted pursuant to the ICSID Convention, the respondent sought dismissal on the grounds that the claimant had not contributed anything, had not assumed any risk in the project, and had not satisfied the requirement of duration—​the defining features of an ‘investment’ pursuant to the Convention under the objectivist approach. The tribunal readily accepted the relevance of the double-​barrelled test commonly applied by ICSID tribunals but, nonetheless, held that ‘there is no textual or other basis’ for adding the criteria advanced by the respondent as parts of the definition of ‘investment’, whether under the ICSID Convention or under the ECT.95 Whether the RREEF decision will remain an outlier or breathe new life into the older understanding of the ICSID Convention, pursuant to which the absence of a definition in the ICSID Convention was taken as a renvoi to the specific bargain struck by the parties to the investment treaty, remains to be seen.96

2. The criteria of an ‘investment’ 11.64 A tribunal may decide to adopt an objectivist approach because it is constituted pursuant to the ICSID Convention, or seised of a BIT which does not define the term ‘investment’, contains a definition along the lines of the US Model BITs which requires an ‘investment’ to have the ‘characteristics of an investment’, or simply because the tribunal considers that the parties to a treaty intended term ‘investment’ to carry a certain meaning even if they did not express it on the treaty’s text. Once a tribunal decides to follow the ‘objectivist’ path, it will need to give the term ‘investment’ meaning. As indicated above,97 tribunals have advanced various interpretations. 11.65 The place to start this examination is ICSID jurisprudence. Although fleeting references

appear in Fedax v Venezuela and CSOB v Slovakia, the formulation of the Salini v Morocco tribunal, to the case in which a tribunal ventured a characterization of what constitutes an investment in the abstract for the first time, has since become a locus classicus of international investment arbitration: The doctrine generally considers that investment infers:  contributions, a certain duration of performance of the contract and a participation in the risks of the transaction

94  Mytilineos v. Serbia, supra note 8, ¶ 117. See also White Industries v. India, supra note 54, ¶ 7.4.8; Jan Oostergetel and Theodora Laurentius v.  Slovak Republic, Ad Hoc UNCITRAL Decision on Jurisdiction (Apr. 20, 2010), ¶¶ 159 & 161 [hereinafter Oostergetel and Laurentius v. Slovakia]; RosInvest Co UK Ltd. v. Russian Federation, SCC Arbitration V (079/​2005) Final Award (Sept. 12, 2010), ¶ 388. 95  RREEF Infrastructure (G.P.) Ltd. and RREEF Pan-​European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/​13/​30 Decision on Jurisdiction (June 6, 2016), ¶ 157 [hereinafter RREEF v. Spain]. See also Alasdair Ross Anderson v. Republic of Costa Rica, ICSID Case No. ARB(AF)/​07/​3 Award (May 19, 2010), ¶¶ 48–​50, in which the tribunal did not even consider whether the asset was an ‘investment’ pursuant to art. 25(1) of the ICSID Convention. 96  Fedax v. Venezuela, supra note 18, ¶ 31. See also Fraport A.G. Frankfurt Airport Services Worldwide v. Philippines, ICSID Case No. ARB/​03/​25 Award (Aug. 16, 2007), ¶ 305 (‘In bilateral investment treaties which incorporate an ICSID arbitration option, the word “investment” is a term of art, whose content in each instance is to be determined by the language of the pertinent BIT which serves as a lex specialis with respect to Article 25 of the Washington Convention’) [hereinafter Fraport v. Philippines]. For a less clear iteration of this approach, see Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/​06/​18 Decision on Jurisdiction and Liability (Jan. 14, 2010), ¶ 219 [hereinafter Lemire v. Ukraine]. 97  See supra ¶¶ 11.47–​63.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ (cf commentary by E. Gaillard, cited above, p. 292). In reading the Convention’s preamble, one may add the contribution to the economic development of the host State of the investment as an additional condition. In reality, these various elements may be interdependent. Thus, the risks of the transaction may depend on the contributions and the duration of performance of the contract. As a result, these various criteria should be assessed globally even if, for the sake of reasoning, the Tribunal considers them individually here.98

The first three criteria for an investment set out by the Salini v Morocco tribunal have been adopted in the vast majority of cases treating the ICSID Convention, as well as cases beyond ICSID.99 Despite their wide acceptance, these criteria are best regarded as interpretative tools or typical 11.66 characteristics of investments, and not as strict requirements that a tribunal must ensure are satisfied before deciding on whether investment is present.100 Unless the Salini criteria are expressly included in the instrument which vests the tribunal with jurisdiction over an investment dispute, a tribunal is free to determine for itself what the ordinary meaning of ‘investment’ may be. As noted in Chapter 4, decisions of prior tribunals, such as that in Salini, may have a significant normative influence, but cannot bind later tribunals.101 Endorsing the view that decisions of prior tribunals are not binding upon it, the tribunal in 11.67 Biwater Gauff v Tanzania took a cautious approach to applying the Salini test: In the Tribunal’s view, there is no basis for a rote or overly strict application of the five Salini criteria in every case. These criteria are not fixed or mandatory as a matter of law. They do not appear in the ICSID Convention . . . Given that the Convention was not drafted with a strict, objective, definition of “investment”, it is doubtful that arbitral tribunals sitting in individual cases should impose one such definition which would be applicable in all cases and for all purposes . . . the Salini Test itself is problematic if, as some tribunals have found, the “typical characteristics” of an investment as identified in that decision are elevated into a fixed and inflexible test, and if transactions are to be presumed excluded from the ICSID Convention unless each of the five criteria are satisfied. This risks the arbitrary exclusion of certain types of transaction from the scope of the Convention.102

The tribunal considered a more flexible and pragmatic approach to the meaning of investment, which ‘takes into account the features identified in Salini, but along with all the circumstances of the case, including the nature of the instrument containing the relevant consent to ICSID’; what ultimately matters is whether the asset as a whole is an ‘investment’ within the ordinary meaning of the term, and within the relevant treaty’s object and purpose.

98  Salini v.  Morocco, supra note 80, ¶ 52. The tribunal found that the project in question required heavy capital investment, services and other long commitments, involved an evident risk, had a duration of 36 months, and made a contribution to development; therefore, it was qualified as a protected investment. It also bears noting that, although the tribunal in Salini v.  Morocco was the first expressly to incorporate these elements as part of an ‘investment’, they had been referenced in academic literature previously. See D. Carreau, T. Flory & R. Juillard, Droit International Economique (3d ed. 1990). 99  See supra para. 11.65. 100  See Scheuer et al., A Commentary, supra note 19. 101  See ch 4 in this volume, J. Paulsson, Precedent in Investor-​State Arbitration. Although see El Paso Energy International Co. v. Argentine Republic, ICSID Case No. ARB/​03/​15 Decision on Jurisdiction (Apr. 27, 2006), ¶ 39; G. Kauffmann-​Kohler, Arbitral Precedent: Dream, Necessity or Excuse? (Freshfields Arbitration Lecture, 2006). 102  Biwater Gauff Ltd. v.  United Republic of Tanzania, ICSID Case No. ARB/​ 05/​22 Award (July 24, 2008), ¶¶ 312–​14. The Salini tribunal identified four criteria, not five. The Biwater tribunal mistakenly attributes regularity of profits as well to Salini. For a discussion of that criterion: see infra ¶ 11.89.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 11.68 This ‘flexible’ or ‘intuitive’ approach has been endorsed by a number of other tribunals.103

One recent tribunal, while remaining within the objectivist camp, cast doubt over the relevance of the Salini test altogether, noting that it finds no support in treaty language and that the many references to it in arbitral case law do not give rise to a ‘jurisprudence constante’ so as to constitute a ‘subsidiary means for the determination of rules of law’ within the meaning of Article 38(1)(d) of the ICJ Statute.104

11.69 Nevertheless, given many tribunals’ continued reliance on the Salini test, it is too early to

consider it obsolete. The intuitive approach may be helpful, but it remains useful to at least consider the various core and well-​established elements of the test: contribution, risk, and duration. There are additional elements that some tribunals have considered to be defining features of an investment, such as contribution to the economic development of the host state, good faith, and origin of capital.105 These are also discussed below.

(a) Contribution 

11.70 The criterion of contribution, like those of risk and duration, stems from an economic view of in-

vestments.106 It will suffice for a contribution to be made to the previous owner of the asset which the claimant alleges is an investment: e.g., the payment of money to a private person in return for shares of a company incorporated in the host state will be a qualifying contribution for purposes of alleging that the acquired shares constitute an ‘investment’. In this sense, the element of contribution is distinct from a requirement that the investor commit capital or other resources to the host state. Moreover, the element of contribution does not necessitate direct payment of funds for the acquisition of the asset. For instance, the OIEG v Venezuela tribunal held that a shareholder’s decision not to allow the company to retain and reinvest rather than distribute profits, amounted to ‘a contribution of cash to the company’.107 The same tribunal held that a contribution in the form of effort was also indicative of an investment, ‘since one of the main goals that is sought with foreign investment is to improve the management skills of domestic companies’.108

11.71 While contribution can take different forms, arbitral tribunals applying the Salini test have

considered nominal contribution as an indication that the asset is not an ‘investment’. In Caratube v Kazakhstan, based on the US–​Kazakhstan BIT, the claimant Kazakh company had acquired rights to explore oil for US$9.4 million. The claimant’s main shareholder was a US national who had acquired a 92 per cent interest in the claimant for US$6,500.109 The

103  OIEG v. Venezuela, supra note 84, ¶ 222; Ambiente Ufficio v. Argentina, supra note 19, ¶ 481; Abaclat v. Argentina, supra note 40, ¶ 364; M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/​03/​6 Award (July 31, 2007), ¶ 165. See also Schreuer et al., A Commentary, supra note 19, ¶¶ 128, 153. One of the first articles to perceive the difference of approach in the jurisprudence was Emmanuel Gaillard’s Identify or Define? Reflections on the Evolution of the Concept of Investment in ICSID Practice, in International Investment Law for the 21st Century:  Essays in Honour of Cristoph Schreuer 403, 407–​11 (Christina Binder et al. eds., 2009) [hereinafter Gaillard, Identify or Define]. 104  Philip Morris v. Uruguay, supra note 63, ¶¶ 204, 209. The tribunal in von Pezold v. Zimbabwe, supra note 26, also noted that there is a move away from Salini, but applied the characteristics of contribution, duration, and risk in any event. 105  For a thorough historical review of the Salini test, see E. Gaillard & Y. Banifatemi, The Long March Towards a Jurisprudence Constante on the Notion of Investment, in Building International Investment Law: The First 50 Years of ICSID 97 (M.N. Kinnear, G.R. Fischer, et al. eds., 2015) [hereinafter Gaillard & Banifatemi, The Long March Towards a Jurisprudence Constante on the Notion of Investment]. 106  Carreau, Flory & Juillard, Droit International Économique, supra note 98 at 940. 107  OIEG v. Venezuela, supra note 84, ¶ 241. 108  Id. ¶ 245. The well-​established position that a contribution need not be of a financial nature must be contrasted with the recent award in Capital Financial Holdings Luxembourg S.A. v. Republic of Cameroon, ICSID Case No. ARB/​15/​18 Award (June 22, 2017) [hereinafter Capital Financial v. Cameroon], ¶ 423, where the tribunal speaks of ‘substantial economic contribution’. 109  Caratube International Oil Company L.L.P. v. Republic of Kazakhstan, ICSID Case No. ARB/​08/​12 Award (June 5, 2012) [hereinafter Caratube v. Kazakhstan], ¶¶ 135–​139.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ tribunal held that a nominal contribution ‘must be seen as an indication that the investment was not an economic arrangement’ and, therefore, not covered by the term ‘investment’ as used in the BIT.110 Similarly, the tribunal in Saba Fakes v Turkey found that no investment had been made by the claimant, who had acquired a 67 per cent shareholding in a major Turkish mobile phone company for US$3,800, in circumstances where the damages claimed were US$19 billion.111 There are cases in which a claimant paid nothing in acquiring the asset at the heart of the dispute, 11.72 and yet the element of contribution was found to be present. In Rose Levy v Peru, the French claimant had acquired an interest in a Peruvian company by way of assignment from her father, without charge. Peru objected to the tribunal’s jurisdiction on the basis that the claimant had not made a contribution in acquiring the asset. The tribunal upheld its jurisdiction on the basis that ‘the persons from whom she acquired these shares and rights did . . . previously make very considerable investments of which ownership was transmitted’.112 In Pey Casado, one of the claimants was a foundation with a shareholding in a Chilean company. The lead claimant had used the majority of his shares in that company to set up the foundation; the foundation had paid nothing. The tribunal held that the absence of a contribution by the foundation did not mean that there was no investment, since a valid contribution had been made at the original acquisition of shares.113 Other similar situations can be envisaged, e.g., a company may have acquired shares as part of a corporate restructuring,114 or a lucky heir may have inherited an asset.115 In such cases, arbitral jurisprudence suggests that the requirement of contribution will be met as long as a contribution was made by the original investor. This conclusion appears to be confined to cases where there is no suspicion that the invest- 11.73 ment has been acquired by an illegality or abuse of process. KT Asia v Kazakhstan illustrates this point. The claimant in KT Asia was a Dutch company that had acquired shares in a Kazakh bank from another Kazakh company. Both the purchaser and the seller of shares in the bank were owned and controlled by a Kazakh national, Mr Ablyazov, through nominees. Although the claimant had not paid anything for the shares it acquired, it was undisputed that Mr Ablyazov had made a payment when, through his nominees, he first

  Id. ¶ 435.   Saba Fakes v. Turkey, supra note 84, ¶ 139. Not all tribunals have found it straightforward to determine when a contribution should be treated as nominal. The tribunal in Invesmart noted that having to determine whether a contribution was nominal ‘would necessitate the Tribunal undertaking an assessment of the value of the investment and the consideration paid with no criteria to guide it’: Invesmart v. Czech Republic, Ad Hoc UNCITRAL Award (June 26, 2009), ¶ 188. 112  Renée Rose Levy and Gremcitel S.A. v. Republic of Peru, ICSID Case No. ARB/​11/​17, Award (Jan. 9, 2015), ¶¶ 148, 154 [hereinafter Rose Levy v. Peru]. For a similar case where a tribunal found an assignment without charge to have not affected the existence of an investment, see Ryan, Schooner Capital L.L.C., Atlantic Investment Partners L.L.C. v. Republic of Poland, ICSID Case No. ARB(AF)/​11/​3, Award (Nov. 24, 2015), ¶¶ 201–​203. 113  Pey Casado v.  Chile, supra note 84, ¶ 542 (‘De l’avis du Tribunal arbitral, le fait que, dans le cas d’espèce, M. Pey Casado ait cédé les actions en vertu d’une donation ne change rien au fait que la Fondation a obtenu la qualité d’investisseur par cette cession. Tant que la cession d’actions qui constituent l’investissement initial est valable . . . elle transmet la qualité d’investisseur au cessionnaire’). 114  Although the tribunal stopped short of actually deciding that the original contribution of the company that first acquired the shares was sufficient: OIEG v. Venezuela, supra note 84, ¶ 240. 115  RREEF v. Spain, supra note 95, ¶ 158, where this was discussed in obiter (‘there is no requirement for any assumption of risk contained in the ECT or the ICSID Convention just as there is no requirement for funds to be brought into a State from overseas in order for a national of one State to have an investment in another State (for example, a national of one State who merely inherits property in another State nonetheless has an investment in that other State)’). 110 111

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The Meaning of ‘Investment’ in Investment Treaty Arbitration acquired an interest in the Kazakh bank.116 Following the same reasoning as that of the Rose Levy v Peru and Pey Casado v Chile tribunals, the tribunal considered that ‘the real issue’ was whether KT Asia could rely on Mr Ablyazov’s original contribution.117 Unlike the Rose Levy v Peru and Pey Casado v Chile tribunals, however, the KT Asia tribunal held that the claimant could not rely on the earlier contribution, because doing so would disavow the claimant’s legal personality.118 Neither in Pey Casado nor in Rose Levy was there a suggestion that the claimants lost their separate legal personality by virtue of relying on the original contribution of the person from whom they acquired the asset in question. It may be therefore more appropriate to see the difference in result between Pey Casado, Rose Levy and KT Asia as a consequence of the KT Asia tribunal’s reluctance to treat the various corporate vehicles employed by Mr Ablyazov as legitimate business ventures.119 In doing so, the KT Asia v Kazakhstan tribunal employed the element of contribution as a means of distinguishing between circumstances in which an investment has been validly made and those where it has been acquired through abuse or illegality, as some other tribunals have also done.120

(b) Risk 

11.74 Numerous tribunals have considered risk as a constitutive element of an ‘investment’.

However, despite frequent references to risk, few tribunals or commentators have provided an in-​depth analysis of risk in this context.121 For instance, the Fedax v Venezuela tribunal went as far as finding that the mere existence of a dispute relating to the endeavour or asset in question is sufficient evidence of risk.122 A short step away have been findings to the effect that an element of risk is inherent in any economic activity,123 or in any long-​term commercial contract.124

116  KT Asia v. Kazakhstan, supra note 84, ¶ 191. It bears noting that no evidence of that original contribution had been provided. 117  Id. ¶ 192. 118  Id. ¶ 205. 119  An indication of that reluctance can be gleaned from ¶ 204 of the Decision, even though this is precisely what the tribunal said that it was not doing: ‘The Tribunal’s purpose is not to pass judgment on the legality of these practices. There may be nothing unlawful in Mr. Ablyazov treating the assets of companies formally owned by other persons as his personal property’. See KT Asia v. Kazakhstan, supra note 84, ¶ 205. 120  Caratube v. Kazakhstan, supra note 109, ¶ 437; Phoenix v. Czech Republic, supra note 81, ¶ 119. 121  Tribunals have often offered a cursory analysis of the element of risk, finding it clearly present: Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/​07/​19 Decision on Jurisdiction, Applicable Law and Liability (Nov. 30, 2012), ¶ 5.45; Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​09/​2, Award (Oct. 23, 2012), ¶ 302 [hereinafter Deutsche Bank v.  Sri Lanka]; Quiborax v.  Bolivia, supra note 84, ¶ 234; Jan de Nul N.V.  and Dredging International N.V.  v.  Arab Republic of Egypt, ICSID Case No. ARB/​04/​13 Decision on Jurisdiction (June 16, 2006), ¶ 92 [hereinafter Jan de Nul v. Egypt]. Perhaps an archetypal example of this approach is Salini v. Morocco, supra note 80, ¶ 56: ‘A construction that stretches out over many years, for which the total cost cannot be established with certainty in advance, creates an obvious risk for the Contractor’. 122  Fedax v. Venezuela, supra note 18, ¶ 40 (‘Nor can the Tribunal accept the argument that, unlike the case of an investment, there is no risk involved in this transaction: the very existence of a dispute as to the payment of the principal and interest evidences the risk that the holder of the notes has taken’). See also Schreuer et  al. A  Commentary, supra note 19, ¶ art. 25, ¶ 163, which arguably does not add to the authority of Fedax v.  Venezuela. For an express rejection of this metric:  Nova Scotia Power Incorporated v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​11/​1 Award (Apr. 30, 2014), ¶ 105 [hereinafter Nova Scotia v. Venezuela]. 123  RREEF v. Spain, supra note 95, ¶ 158. However, this finding of the RREEF v. Spain tribunal must be considered as obiter, in light of its conclusion that there was no room for the introduction of the element of risk in the definition of ‘investment’. 124  Saipem v. Bangladesh, supra note 54, ¶ 109; Bayindir v. Pakistan, supra note 64, ¶ 136 (although unclear whether the tribunal finds the statement about the risks inherent in long-​term contracts decisive); Salini v. Morocco, supra note 80, ¶ 56.

288

III.  Arbitral Jurisprudence on the Definition of ‘Investment’ This very broad understanding of risk by a number of arbitral tribunals may have triggered a 11.75 reaction in others, who have sought to be more exacting in their analysis of the type of risk that indicates an investment has been made. The Romak v Uzbekistan tribunal rejected the claimant’s argument that its risk of non-​payment due to its contractual counterparty’s potential lack of finances was sufficient to point to the existence of an ‘investment’. While accepting that ‘[a]‌ll economic activity entails a certain degree of risk’, the tribunal distinguished between the types of risk inherent in a purely commercial transaction and those inherent in an investment.125 In the tribunal’s view, the only risk indicative of an investment was the risk that the investor may not make a return even if all contractual obligations were perfectly performed.126 The tribunals in Nova Scotia v Venezuela and Poštová Banka v Greece also sought to distinguish 11.76 between different types of risk, finding that a risk distinct to an investment ought to be present.127 In Nova Scotia v Venezuela, the tribunal rejected the contention that the risk of non-​ payment, or the risk of having to find an alternative buyer for the coal which the claimant had contracted to sell, were sufficient. Yet, in seeking to distinguish the previous cases of Salini v Morocco and Toto v Lebanon, which embraced a broad understanding of risk and on which the claimant had relied, the tribunal stopped at pointing out that ‘both Toto and Salini involved long term construction contracts’,128 without providing further explanation as to why this made them inapposite. In Poštová Banka v Greece, the tribunal held that an ‘investment’ risk had to be ‘an oper- 11.77 ational risk and not a commercial risk or a sovereign risk’.129 Thus, the risk of a contractual counterparty defaulting in its obligation, or the risk of interference from the host state, were discounted as irrelevant in determining whether the asset or endeavour constitutes an ‘investment’.130 Similarly to Nova Scotia, although the Poštová Banka v Greece tribunal concluded that the ‘specific operational risk that characterizes an investment’ was not present in the case, it did not elaborate further.131 However, in Ambiente Ufficio v Argentina, a case in which—​ like Poštová Banka—​the claimant’s investment was the acquisition of sovereign bonds, the tribunal held that, although non-​payment of the bond was a commercial risk, the risk of Argentina’s sovereign intervention meant that ‘what is at stake is not an ordinary commercial risk’, and that the asset qualified as an ‘investment’.132 There is greater certainty about whether a guarantee or even part-​payment will remove the 11.78 element of risk: tribunals have frequently rejected such arguments, finding that risk is present despite the existence of performance or payment guarantees, prepayment for services and claimants’ extensive due diligence.133   Romak v. Uzbekistan, supra note 54, ¶ 229.   Id. ¶ 230. 127  Poštová Banka v.  Greece, supra note 43, ¶¶ 369–​ 70; Nova Scotia v.  Venezuela, supra note 127, ¶¶ 105–​07. 128  Nova Scotia v. Venezuela, supra note 122, ¶ 110. 129  Poštová Banka v. Greece, supra note 43, ¶ 369. Other tribunals had used the label ‘operational risk’ before Poštová Banka, without, however, elaborating on what kind of risk that was: see Jan de Nul v. Egypt, supra note 121, ¶ 91; Bayindir v. Pakistan, supra note 64, ¶ 130. 130  Poštová Banka v. Greece, supra note 43, ¶¶ 369–​70. 131  Id. ¶ 371. Prior tribunals addressing the question had also reached the conclusion that the risk at stake was no different from the risk involved in a purely commercial contract without elaborating further as to what an ‘investment-​specific’ risk might be: see Joy Mining v. Egypt, supra note 23, ¶ 57. 132  Ambiente Ufficio v. Argentina, supra note 19, ¶ 485. 133  von Pezold v. Zimbabwe, supra note 26, ¶ 285; Anatolie Stati, Gabriel Stati, Ascom Group SA & Terra Raf Trans Traiding [sic] Ltd. v. Kazakhstan, SCC Case No. 116/​2010 Award (Dec. 19, 2013), ¶ 810 [hereinafter Anatolie Stati v. Kazakhstan]; Alpha v. Ukraine, supra note 63, ¶¶ 322–​23; SGS v. Paraguay, supra note 65, ¶ 105; Toto Costruzione Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/​07/​12 Decision 125 126

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The Meaning of ‘Investment’ in Investment Treaty Arbitration 11.79 Whether to use a broad understanding of risk or search for a type of risk specific to investment

is not an easy question. As a number of tribunals have observed, any human endeavour carries an element of risk, and risk arises in both purely commercial and investment transactions. Does this mean that tribunals should look for a more specific type of risk, particular to investment, accept any risk as meeting the test, or abandon this element as a criterion of investment at all? Despite these questions, it is, for the time being, well established that risk is an element of ‘investment’ under the objectivist approach. At the same time, tribunals will often side-​step the difficult question of the type of risk required and resolve the dispute by pointing out that the asset or endeavour in question is clearly not of a commercial character.134

(c) Duration 

11.80 The element of duration is clearly entrenched in the meaning of ‘investment’ under the

ICSID Convention and in those non-​ICSID cases in which the tribunal follows the objective approach. However, there are no clear guidelines as to how long an endeavour must last for in order to meet that feature of investment.

11.81 During the negotiation of the ICSID convention, a proposal to introduce a five-​year min-

imum as a cut-​off was rejected.135 Similarly rejected were proposals that, for an endeavour to constitute an ‘investment’, it had to be of indefinite duration.136 Nonetheless, some of the early decisions suggested that the duration of an endeavour before it could be characterized as an ‘investment’ was two to five years.137

11.82 Given the importance of the facts and circumstances of each case, the decisions of tribunals

on the facts before them give only limited guidance.

11.83 In KT Asia v Kazakhstan, the tribunal looked at the brief time the claimant intended to hold

the shares (three to four weeks) and found this duration to indicate that ownership of the shares was not intended to be a long-​term allocation of resources required to qualify as an investment. The tribunal also noted that, that even if the relevant metric was the actual, and not the intended, duration of the claimant’s ownership of the shares, the period of sixteen months during which the claimants held the shares was a ‘very short time’ compared to the five years ‘tentatively put forward’ in the drafting of the Convention.138 To the contrary, the on Jurisdiction (Sept. 11, 2009), ¶ 79 [hereinafter Toto v. Lebanon]. Although, for a suggestion to the contrary, see Nova Scotia v. Venezuela, supra note 122, ¶ 108. 134  von Pezold v. Zimbabwe, supra note 26, ¶ 285 and the authorities referred to in fn. 116. It is worthy of note that some tribunals have considered the element of risk as intertwined with contribution, so that no risk is present if no contribution has been made. See KT Asia v. Kazakhstan, supra note 84, ¶¶ 219–​21. 135 Malaysian Historical Salvors, SDN, BHD v.  Government of Malaysia, ICSID Case No. ARB/​ 05/​10 Decision on the Application for Annulment (Apr. 16, 2009), ¶ 71 [hereinafter MHS v.  Malaysia (Annulment)]. The proposal to include the requirement of a minimum five-​year term or unlimited duration for investments was initially put forward for consideration in the first draft of art. 30 (Z 12 (September 11, 1964), Draft Convention: Working Paper for the Legal Committee, in I History of the ICSID Convention 116 (1970)). As follows from the final text of the ICSID Convention, the idea did not gain sufficient support and was not approved (Z 12 (September 11, 1964), Draft Convention:  Working Paper for the Legal Committee, in I History of the ICSID Convention 110 (1970)). The representatives of various states indicated their disagreement to the inclusion of such requirement in the text of the Convention in the course of the Legal Committee meetings in 1964 (ID/​LC/​SR/​4 (December 21, 1964) Summary Proceedings of the Legal Committee meeting, November 25, afternoon, in II History of the ICSID Convention 699–​705 (1970)); (ID/​LC/​SR/​5 (December 21, 1964) Summary Proceedings of the Legal Committee meeting, November 27, morning, in II History of the ICSID Convention 708–​11 (1970)). 136  Id. 137  MHS v. Malaysia (Award), supra note 22, ¶ 110. 138  A better reading of the negotiating history of the ICSID Convention on this point may be that the ultimate decision of the negotiating parties not to stipulate a set duration for ‘investments’ shows that there is no such fixed requirement, and not that there is a ‘tentative’ requirement for a five-​year period. See supra note 135.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ tribunal in Deutsche Bank v Sri Lanka held that a hedging agreement for the duration of twelve months was sufficient to meet the duration element of an ‘investment’.139 In Romak v Uzbekistan, a non-​ICSID case that nonetheless examined the element of duration, the tribunal held that the claimant’s wheat deliveries spanning five months bore the hallmarks of a one-​off transaction, which did not reflect commitment on the part of the investor. In determining whether an endeavour’s duration meets the threshold, there is support for the 11.84 proposition that one must take into account not only the period during which the ‘investment’ is operational but, also, time spent in a negotiation or tender process.140 In some cases, the difference between the intended or actual duration of a project or en- 11.85 deavour may become an issue. In such a case, it is accepted that the intended duration will give a better indication of the nature of the transaction or enterprise than its actual duration. The actual duration may be longer because of delays or unforeseen circumstances, which would not change the nature of the activity. For example, the claimant in KT Asia v Kazakhstan argued that his holding of shares for sixteen months met the duration requirement for investment, though the intended period was only three to four weeks, but the tribunal looked to the intended period in finding that there was no investment.141 The actual duration may also be shorter than intended, but this too would not normally change the nature of the activity or enterprise in question.142 The variety of durations that have been accepted by tribunals, as well as the outcome of nego- 11.86 tiations leading to the ICSID Convention, indicate that no fixed minimum duration can or should be identified.143 On this point, the Deutsche Bank v Sri Lanka tribunal stated that it: [a]‌grees with Schreuer that ‘[duration] is a very flexible term. It could be anything from a couple of months to many years’ . . . Further, the Tribunal concurs with the statement made by the Tribunal in Romak SA v. Republic of Uzbekistan . . ., holding that ‘short-​term projects are not deprived of “investment” status solely by virtue of their limited duration. Duration is to be analysed in light of all the circumstances, and of the investor’s overall commitment’. As the ICSID Tribunal noted in MCI v. Ecuador, the ‘duration’ characteristic is not necessarily an element that is necessarily required for the existence of an investment, but is to be considered a mere example of a typical characteristic.144

The Romak v Uzbekistan tribunal categorically rejected the notion of a fixed minimum period: ‘The Arbitral Tribunal does not consider that, as a matter of principle, there is some fixed minimum duration that determines whether assets qualify as investments’.145 The view that there should be a substantial minimum period, as suggested by the Salini v 11.87 Morocco tribunal, based on prior doctrine,146 may be linked to the concept that an investment   Deutsche Bank v. Sri Lanka, supra note 121, ¶ 304.   Id. The same argument was raised in Jan de Nul v.  Egypt, but whether the tribunal accepted the claimant’s argument is not clear: see Jan de Nul v. Egypt, supra note 121, ¶¶ 94–​95. 141  KT Asia v. Kazakhstan, supra note 84, ¶¶ 210–​13. 142  Schreuer et al., A Commentary, supra note 19, ¶ 128. (The KT Asia tribunal, in obiter, stated: ‘As Prof. Schreuer writes “[despite] some break down at an early stage, the expectation of a long-​term relationship is clearly there” . . . The contrary could produce nonsensical results. It is indeed obvious that a long-​term project does not cease to meet the definition of investment solely because it is expropriated two months after its establishment’). 143  Cf MHS v. Malaysia (Award), supra note 22, ¶ 110, where the tribunal considered that Salini imposed a minimum duration requirement of 2 to 5 years. MHS v. Malaysia has not been followed on this point. 144  Deutsche Bank v. Sri Lanka, supra note 121, ¶ 303. 145  Romak v. Uzbekistan, supra note 54, ¶ 225, cited with approval in KT Asia v. Kazakhstan, supra note 84, ¶ 208. 146  Salini v. Morocco, supra note 80 (‘Although the total duration for the performance of the contract, in accordance with the CCAP, was fixed at 32 months, this was extended to 36 months. The transaction, 139 140

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The Meaning of ‘Investment’ in Investment Treaty Arbitration within the meaning of the ICSID convention must make a substantial contribution to the economic development of the host country. This, in any event, is the position of the tribunal in MHS v Malaysia, which found that a maritime salvage contract that was for a duration of 19 months (but took nearly four years to carry out) did not ‘qualitatively’ meet the required minimum duration.147 11.88 The differing decisions of tribunals on what constitutes sufficient duration can be brought to-

gether within the framework of a holistic approach, which does not focus on duration alone, but looks at the endeavour as a whole, as well as its purpose. Understandably, a lot will turn on the specific facts of each case.148

(d)  Additional criteria? 

11.89 Arbitral tribunals and academic literature have frequently considered the question of whether

additional elements exist that must be considered in determining whether an asset amounts to an ‘investment’. Economic development of the host state, regularity of profit and returns, good faith, legality, and origin of funds have all been put forward as additional features of the meaning of ‘investment’, some as early as Salini v Morocco.149 The preponderance of arbitral and academic authority suggests that these concepts are not constitutive parts of the notion of ‘investment’.150 However, they do arise with some frequency in arbitral jurisprudence.

(i)  Contribution to the host state’s economic development

11.90 This element was first mentioned by the tribunal in Salini v Morocco, which added it to the

elements of contribution, risk, and duration, ‘[i]‌n reading the Convention’s preamble’.151 The tribunal found the element to be present as the public highway to be constructed would ‘serve the public interest’ and because the Italian investors would be contributing know-​how in the process.152 In the few years immediately following Salini v Morocco, several tribunals recognized contribution to the host state’s economic development as a constituent element of an ‘investment’.153

11.91 The relevance of this element was cast in doubt in 2005 by the L.E.S.I.–​Dipenta v Algeria

tribunal, which held that contribution to the economic development of the host state was difficult to establish and, in any event, implicitly covered by the three other elements of

therefore, complies with the minimal length of time upheld by the doctrine, which is from 2 to 5 years (D. Carreau, Th. Flory, P. Juillard, Droit International Economique: 3rd ed., Paris, LGDJ, 1990, p. 558–​578, Schreurer [sic], Commentary on the ICSID Convention: ICSID Review-​FILJ, vol. II, 1996,2, p. 318–​493)’). 147  MHS v. Malaysia (Award), supra note 22, ¶¶ 110–​11. 148  KT Asia v. Kazakhstan, supra note 84, ¶ 213 (‘On the unusual facts of the present case, therefore, in the Tribunal’s view’); Deutsche Bank v. Sri Lanka, supra note 121, ¶ 303; Romak v. Uzbekistan, supra note 54, ¶ 227 (‘In light of the facts before it, the Arbitral Tribunal considers’). The distinction between ‘quantitative’ and ‘qualitative’ duration, which was drawn by the tribunal in MHS v. Malaysia, may also be seen as an expression of the same approach (MHS v. Malaysia (Award), supra note 22, ¶ 111). For the difficulty of drawing such a distinction, see Zachary Douglas, The International Law of Investment Claims 200 (2009) [hereinafter Douglas, The International Law of Investment Claims]. 149  Salini v. Morocco, supra note 80, ¶ 57. 150  Gaillard & Banifatemi, The Long March Towards a Jurisprudence Constante on the Notion of Investment, supra note 105; see also Gaillard, Identify or Define, supra note 103 at 413–​16. 151  Salini v. Morocco, supra note 80, ¶ 52. 152  Id. ¶ 57. 153  Ioannis Kardassopoulos v. Republic of Georgia, ICSID Case No. ARB/​05/​18 Decision on Jurisdiction (July 6, 2007), ¶ 117 [hereinafter Kardassopoulos v.  Georgia]; Saipem v.  Bangladesh, supra note 54, ¶ 99; Patrick H.  Mitchell v.  Democratic Republic of the Congo, ICSID Case No. ARB/​99/​7 Decision on Annulment (Nov. 1, 2006), ¶¶ 28–​30; Jan de Nul v. Egypt, supra note 121, ¶ 91; MHS v. Malaysia (Award), supra note 22, ¶ 132.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ contribution, risk, and duration.154 A  number of tribunals have followed the approach in L.E.S.I.–​Dipenta v Algeria that contribution to the economic development of the host state is not a necessary feature of an ‘investment’,155 often citing the inappropriateness of having an unelected, private forum, which has little or no connection to the host state, make subjective decisions about the host state’s advancement.156 However, it is not clear whether this element is, in fact, covered by the other Salini criteria: contribution, risk, and duration. In particular, the element of ‘contribution’ does not necessitate that a contribution be made to the host state—​it suffices that the claimant made a contribution to the previous owner of the asset which is alleged to be an ‘investment’.157

(ii)  Origin of capital Respondents have frequently argued that assets are not deserving of protection as ‘invest- 11.92 ments’ because they were not acquired through the claimant’s own funds or, in a more extreme scenario, were acquired through funds of a national of the host state. That was precisely the case in Tokios Tokelės v Ukraine, where the claimant was a Lithuanian company, owned and controlled by nationals of Ukraine. The respondent argued that the claimant’s shareholding was not an ‘investment’ because it had been acquired with capital originating in Ukraine. The majority of the tribunal unequivocally dismissed the objection, finding that the ICSID Convention did not require that an investment have ‘an international character in which the origin of the capital is decisive’.158 Tribunals and commentators have followed Tokios Tokelės, confirming that there is no requirement as to the origin of capital.159 However, the decisions in KT Asia v Kazakhstan and Capital Financial v Cameroon have considered the origin of the claimants’ alleged ‘investment’, piercing the veil between a corporate claimant holding an asset and its ultimate shareholder.160

154  Consortium Groupement L.E.S.I.–​DIPENTA v. République Algérienne Démocratique et Populaire, ICSID Case No. ARB/​03/​08 Award (Jan. 10, 2005), ¶ 13(iv) [hereinafter L.E.S.I.–​Dipenta v. Algeria]. 155  MNSS v. Montenegro, supra note 26, ¶ 189; Sirketi v. Turkmenistan, supra note 26, ¶ 291; KT Asia v. Kazakhstan, supra note 84, ¶ 171; Philip Morris v. Uruguay, supra note 63, ¶¶ 207–​208; Deutsche Bank v.  Sri Lanka, supra note 121, ¶¶ 295, 306–​307; Quiborax v.  Bolivia, supra note 84, ¶¶ 218–​25; Alpha v. Ukraine, supra note 63, ¶ 312; Saba Fakes v. Turkey, supra note 84, ¶ 111; Phoenix v. Czech Republic, supra note 81, ¶ 85; Pey Casado v. Chile, supra note 84, ¶ 232. Other decisions reject the element of contribution to the host State’s development implicitly, by not including it as a relevant feature of an ‘investment’: see, e.g., Nova Scotia v. Venezuela, supra note 122, ¶ 84. 156  See, in particular: Quiborax v. Bolivia, supra note 84, ¶¶ 218–​25; Alpha v. Ukraine, supra note 63, ¶ 312. For a similar sentiment, see Pantechniki S.A. Contractors & Engineers v. Republic of Albania, ICSID Case No. ARB/​07/​21 Award (July 30, 2009), ¶ 43. 157  For instance, commentators have suggested that the test for an ‘investment’ should include the ‘commitment of resources to the economy of the host State’, an element not taken up by the jurisprudence: see Douglas, The International Law of Investment Claims, supra note 148 at 189, 191. 158  Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18 Decision on Jurisdiction (April 29, 2004), ¶ 82. 159  RREEF v. Spain, supra note 95 ¶ 158; Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/​11/​23 Award (Apr. 8, 2013), ¶ 383; Caratube v.  Kazakhstan, supra note 109, ¶ 355; Lemire v. Ukraine, supra note 96, ¶¶ 56–​57; Schreuer et al., A Commentary, supra note 19, ¶¶ 136–​37 (‘It follows that the origin of the funds is irrelevant for purposes of jurisdiction. Whether investments are made from imported capital, from profits made locally, from payments received locally or from loans raised locally makes no difference to the degree of protection enjoyed. The decisive criterion for the existence of a foreign investment is the nationality of the investor’). Outside the context of the ICSID Convention, see Hulley v. Russia, supra note 91, ¶ 431, where the tribunal found that it was ‘not entitled’ to impose an ‘additional requirement with regard to the origin of capital or the necessity of an injection of foreign capital’. For a helpful analysis of the relevant authorities, see M. Ryan, Is There a ‘Nationality’ of Investment? Origin of Funds and Territorial Link to the Host State, in Jurisdiction in Investment Treaty Arbitration 97 (Y. Banifatemi ed., 2017). 160  Capital Financial v. Cameroon, supra note 108, ¶ 457; KT Asia v. Kazakhstan, supra note 84, ¶ 191. See Capital Financial v. Cameroon, ICSID Case No. ARB/​15/​18 Dissenting Opinion by Arbitrator Alexis Mourre (May 31, 2017), ¶ 45.

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The Meaning of ‘Investment’ in Investment Treaty Arbitration (iii)  Regularity of profits and returns

11.93 Early authority supported the view that, in order to have an ‘investment’, a claimant should be

able to show an expectation of regular profits and returns. Although this element was not included in Salini v Morocco, it found its way in the jurisprudence after being referred to in the first edition of Professor Schreuer’s seminal treatise on the ICSID Convention,161 which was followed by decisions of arbitral tribunals.162 More recent authority has expressly put the relevance of this element in question,163 and it is rarely considered by arbitral tribunals deciding on whether an asset or endeavour is an ‘investment’.

(iv) Good faith

11.94 The element of good faith was thrust to the debate by Phoenix v Czech Republic. Confronted

with a claimant who had acquired the alleged ‘investment’ after the dispute with the host state had arisen, the tribunal held that it did not have jurisdiction over the dispute because ‘[t]‌he purpose of the international mechanism of protection of investment through ICSID arbitration cannot be to protect investments made in violation of the laws of the host state or investments not made in good faith’.164 This element constitutes a marked departure from the economic criteria of contribution, risk, and duration, and even from the non-​criteria of contribution to the economic development of the host state, origin of capital, and regularity of profit and return. However, although subsequent tribunals have recognized the relevance of good faith, they have on the whole rejected its role as a self-​standing criterion that forms part of the definition of ‘investment’, often remarking that a bad faith investment remains an ‘investment’ nonetheless.165

(v) Legality

11.95 As discussed in the following section, the preponderance of authority has declined to treat

legality of an ‘investment’ as an inherent part of the meaning of ‘investment’.

C. The Requirement that an Investment Be Made ‘In Accordance with  the Host State’s Law’ 11.96 In many treaties, the treaty definition of ‘investment’ specifies that it must be ‘in accordance

with the host state’s law’.166 Other treaties include a legality provision in the treaty’s clause on

 C. Schreuer, The ICSID Convention: A Commentary 140 (1st ed. 2001).   Joy Mining v. Egypt, supra note 23 ¶ 53; Helnan International Hotels A/​S v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​19 Decision on Objection to Jurisdiction (Oct. 17, 2006), ¶ 77; OKO Pankki Oyj, VTB Bank (Deutschland) AG and Sampo Bank PLC v. Republic of Estonia, ICSID Case No. ARB/​04/​ 6 Award (Nov. 19, 2007), ¶ 203. 163 Ambiente Ufficio v.  Argentina, supra note 19, ¶ 486; Deutsche Bank v.  Sri Lanka, supra note 121, ¶¶ 295, 305 (noting that even ‘loss leader’ projects may qualify as ‘investments’); Schreuer et al., A Commentary, supra note 19, 128–​29. 164  Phoenix v. Czech Republic, supra note 81, ¶ 100, as well as ¶¶ 144–​47. 165  Metal-​Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/​10/​3 Award (Oct. 4, 2013), ¶ 127; Vannessa Ventures Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​04/​6, Award (Jan. 16, 2013), ¶¶ 113, 127 [hereinafter Vannessa v. Venezuela]; Quiborax v. Bolivia, supra note 84, ¶¶ 220, 225–​ 27; Saba Fakes v. Turkey, supra note 84, ¶ 112. The Vannessa Ventures tribunal’s approach is noteworthy due to the tribunal’s remark on the potential relevance of good faith as a matter of municipal law. 166  See Agreement between the Federal Republic of Germany and the Republic of the Philippines for the Promotion and Reciprocal Protection of Investments (signed April 18, 1997, entered into force February 1, 2000) art. 1(1); Agreement between the Government of the Italian Republic and the Government of the Kingdom of Morocco on the promotion and protection of investments (signed July 18, 1990, entered into force April 26, 2000) art. 1(1); Agreement between the Government of the Republic of Lithuania and the Government of Ukraine for the promotion and reciprocal protection of investments (signed February 8, 1994, entered into force March 6, 1995) art. 1(1) (cited in Tokios Tokelés v. Ukraine, supra note 158, ¶ 17; Italy–​Egypt BIT, supra note 4, art. 1(1); Agreement between the Government of Canada and the Government 161 162

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ scope of application.167 In a third type of treaties, the legality provision is found in a separate clause concerning the promotion and admission of investments.168 Despite the fact that this language often appears in provisions defining ‘investment’, tribunals 11.97 have held that the requirement that an ‘investment’ be made ‘in accordance with the host state’s law’ does not form part of the definition of ‘investment’. Rather, it has been seen as limiting the consent of the host state to give protection to an investment.169 In the words of the Saba Fakes v Turkey tribunal: an investment might be ‘legal’ or ‘illegal,’ made in ‘good faith’ or not, it nonetheless remains an investment. The expressions ‘legal investment’ or ‘investment made in good faith’ are not

of the Republic of Ecuador for the Promotion and Reciprocal Protection of Investments (signed April 29, 1996, entered into force June 6, 1997) art. I(g). Also see permutations of the phrasing ‘in accordance with the host State’s law’ in, for example, Agreement between the Republic of Austria and Czech and Slovak Federal Republic concerning the Promotion and Protection of Investments (signed October 15, 1990, entered into force October 1, 1991) art. 1(1) [hereinafter Austria–​Czech Republic BIT] (‘in accordance with its legislation’); Agreement between the Czech and Slovak Federal Republic and the Federal Republic of Germany over the Encouragement and Reciprocal Protection of Investments (signed October 2, 1990, entered into force August 2, 1992) art. 1(1) (‘in accordance with domestic legislation’); Agreement between the Government of Australia and the Government of the Republic of India on the Promotion and Protection of Investments (signed February 26, 1999, entered into force May 4, 2000) art. 1(c) [hereinafter Australia–​India BIT] (‘in accordance with the laws and investment policies’). 167  See, e.g., Agreement on Reciprocal Encouragement and Protection of Investments between the Kingdom of the Netherlands and the Republic of Turkey BIT (signed March 27, 1986, entered into force November 1, 1989) art. 2(2) (‘[t]‌he present Agreement shall apply to investments owned or controlled by investors of one Contracting Party in the territory of the other Contracting Party which are established in accordance with the laws and regulations in force in the latter Contracting Party’s territory at the time the investment was made’); Agreement between the Swiss Confederation and the Republic of Paraguay on the Promotion and Reciprocal Protection of Investments (adopted January 31, 1992, entered into force September 28, 1992) art. 2 (The BIT ‘shall apply to investments in the territory of one Contracting Party, made in accordance with its legislation, including possible admission procedures, prior or after the entry into force of the [BIT] by investors of the other Contracting Party’); Agreement between the Government of the Hellenic Republic and the Government of the Republic of Georgia on the Promotion and Reciprocal Protection of Investments (signed November 9, 1994, entered into force August 3, 1996) art. 12. 168  See, e.g., Agreement between the Government of the French Republic and the Government of the Argentine Republic on the Reciprocal Encouragement and Protection of Investments (signed July 3, 1991, entered into force March 3, 1993) art. 2 (‘Chacune des Parties contractantes admet et encourage, dans le cadre de sa législation et des dispositions du présent Accord, les investissements effectués par les investisseurs de l’autre Partie sur son territoire et dans sa zone maritime’); Agreement between the Government of the Hellenic Republic and the Government of the Republic of Albania for the Encouragement and Reciprocal Protection of Investments (signed February 20, 2000, entered into force September 21, 2007) art. 2 (‘Each Contracting Party shall in its territory promote, as far as possible, investments by investors of the other Contracting Party and admit such investments in accordance with its legislation’). 169  Saba Fakes v. Turkey, supra note 84, ¶¶ 112–​14 (‘As far as the legality of investments is concerned, this question does not relate to the definition of “investment” provided in Article 25(1) the ICSID Convention and in Article 1(b) of the BIT. In the Tribunal’s opinion, while the ICSID Convention remains neutral on this issue, bilateral investment treaties are at liberty to condition their application and the whole protection they afford, including consent to arbitration, to a legality requirement of one form or another. This is precisely the case of the Netherlands–​Turkey BIT, which contains such a requirement in its Article 2(2)’); L.E.S.I.–​ Dipenta v. Algeria, supra note 154 (‘[T]‌he reference by the provision to the requirement of the conformity to the applicable laws and regulations does not constitute a formal recognition of the notion of investment as defined by Algerian law in a restrictive manner, but in line with a standard and perfectly justified rule, the exclusion of the protection for all investments that have been made in violation of the fundamental principles that apply’ (unofficial English translation)); Salini v. Morocco, supra note 80, ¶ 411 (‘In focusing on the ‘categories of invested assets . . . in accordance with the laws and regulations of the aforementioned party’ this provision refers to the validity of the investment and not its definition. More specifically, it seeks to prevent the Bilateral Treaty from protecting investments that should not be protected, particularly because they would be illegal’).

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The Meaning of ‘Investment’ in Investment Treaty Arbitration pleonasms, and the expressions ‘illegal investment’ or ‘investment made in bad faith’ are not oxymorons.170 11.98 Arbitral jurisprudence is divided on whether the legality of an ‘investment’ limits consent

where the investment treaty in question does not contain an express legality provision.171 In such a case, the legality of an investment may still be relevant, although it would not constitute a bar to a tribunal’s jurisdiction. Indeed, there is support for the view that the legality of an ‘investment’ will only pertain to an arbitral tribunal’s jurisdiction if the consent to arbitration in the investment treaty itself is vitiated by the illegality in question.172

11.99 It is widely, if not unanimously, accepted that only illegalities committed during the making

or admission of the investment will deprive an investment of treaty protection. Once an investment is made or admitted, subsequent illegalities taking place during the life of the investment may have an impact on the merits of the investor’s claim, but will not deprive the investment of treaty protection. The source of this temporal limitation may be the language of a particular provision in the investment treaty itself,173 but this need not be the case.174

11.100 In addition to the temporal limitation, tribunals have sought to limit the kinds of breaches of

the host state’s law that will deprive an investment of protection, or even affect the merits of the investor’s claims. Commonly, tribunals have held that an investment must comply only with the fundamental laws of the host state, excluding minor violations.175 Some tribunals have   Saba Fakes v. Turkey, supra note 84, ¶ 112.   Several arbitral tribunals have considered that, in the absence of an express legality requirement, the legality of an ‘investment’ cannot affect the tribunal’s jurisdiction over it: Anatolie Stati v. Kazakhstan, supra note 133, ¶ 812; Plama Consortium Limited v.  Bulgaria, ICSID Case No. ARB/​03/​24 Award (Aug. 27, 2008), ¶¶ 77–​78 [hereinafter Plama v. Bulgaria]. On the other hand: SAUR International SA v. Republic of Argentina, ICSID Case No. ARB/​04/​4 Decision on Jurisdiction and Liability (June 6, 2012), ¶ 308 [hereinafter SAUR v. Argentina]; Fraport v. Philippines, supra note 96, ¶ 119. 172  Malicorp v. Egypt, supra note 70, ¶ 119 (‘The solution derives, first, from the principle of autonomy of the arbitration agreement, a principle so fundamental that it also has its place in investment arbitration. According to that principle, defects undermining the validity of the substantive legal relationship, which is the subject of the dispute on the merits, do not automatically undermine the validity of the arbitration agreement. Thus, an arbitral tribunal is competent to decide on the merits even if the main contract was entered into as a result of misrepresentation or corruption. Only defects that go to the consent to arbitrate itself can deprive the tribunal of jurisdiction’); Plama v. Bulgaria, Decision on Jurisdiction (Feb. 8, 2005), supra note 171, ¶ 130; Zachary Douglas, The Plea of Illegality in Investment Treaty Arbitration, 29(1) ICSID Rev. 155, 161–​62 (2014) [hereinafter Douglas, The Plea of Illegality in Investment Treaty Arbitration]. 173  For instance, ‘investments must be made in accordance with the law of the host State’. In support of the textual source for this temporal limitation, see Quiborax v. Bolivia, supra note 84, ¶ 266 (‘Additionally, under this BIT, the temporal scope of the legality requirement is limited to the establishment of the investment; it does not extend to the subsequent performance. Indeed, the Treaty refers to the legality requirement in the past tense by using the words investments “made” in accordance with the laws and regulations of the host State’); Saba Fakes v. Turkey, supra note 84, ¶ 120 (‘the Tribunal believes that a violation of the regulations in the telecommunication sector or of competition law requirements would not trigger the application of the legality requirement in Article 2(2) of the BIT. In the latter case, the violations of Turkish law, if established, are not covered by the language of Article 2(2) of the BIT according to which the BIT applies “to investments . . . established in accordance with the laws and regulations in force . . . at the time the investment was made” ’); Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/​07/​24 Award (June 18, 2010), ¶ 127; Fraport v. Philippines, supra note 96, ¶ 331 (‘For these reasons, the Tribunal disagrees with Claimant’ contentions that the phrase “accepted in accordance with the [host State’s] laws and regulations,” as used in Article 1(1), simply contemplates a potential regime for regulation of the admission of foreign investment. Rather, the Tribunal finds that the use of this phrase limits the scope of “investment” in the BIT to investments that were lawful under (i.e., “in accordance with”) the host State’s laws and regulation at the time the investments were made’). 174  See, e.g., Hulley v. Russia, supra note 91, ¶¶ 1354–​ 55; SAUR v. Argentina, supra note 171, ¶ 308; Oostergetel and Laurentius v. Slovakia, supra note 94, ¶¶ 176, 183. 175  Mamidoil v. Albania, supra note 26, ¶¶ 481, 483; ECE Projektmanagement v. Czech Republic, PCA Case No. 2010-​5 Award (Sept. 19, 2013), ¶¶ 3.166–​3.171; Quiborax v. Bolivia, supra note 84, ¶ 281 (‘the Tribunal believes that, even if the Claimants had breached a rule concerning the handling of the shareholders’ 170 171

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ interpreted the reference to ‘host state’s law’ as including general principles such as good faith, nemo auditur propriam turpitudinem allegans, and public policy.176 Others have held that the legality requirement is only concerned with the violations of the host state’s laws concerning the establishment and protection of foreign investments.177 It has also been suggested that the reference to the host state’s laws reflects the fact that the holding of an asset must be recognized by the laws of the host state before it can constitute an ‘investment’, since the relationship between the investor and the ‘investment’ will first and foremost be governed by the laws of the host state.178 The common purpose of these limitations is to avoid a far-​reaching requirement that, in order to qualify for protection, an investment must abide by every law of the host state.

D. The Requirement that an Investment Be ‘In the Territory of the Host State’ Treaties frequently require that investments be made ‘in the territory of the host state’. This may 11.101 form part of the definition of ‘investment’ in the treaty.179 In addition, or alternatively, it may appear in other clauses, e.g., clauses concerning the treaty’s scope of application,180 or the protection of investments. Dispute resolution provisions commonly state that they apply only to investments in the host state’s territory.181 Certain investment treaties define what is meant by the term ‘territory’.182 They generally define 11.102 it as including a state’s land and territorial sea, as well as the sea area over which it exercises sovereignty, such as the exclusive economic zone. It has been forcefully argued that the absence of an express territoriality requirement is 11.103 not material, whether in an ICSID case,183 or more generally,184 as it is difficult to see how registry, an admittedly internal document with scant intrinsic probative value, any such breach would have been trivial and thus beyond the subject matter scope of the legality requirement’); Alpha v. Ukraine, supra note 63, ¶ 297; Saba Fakes v. Turkey, supra note 84, ¶ 113; Desert Line Projects LLC v. Yemen, ICSID Case No. ARB/​05/​17 Award (Feb. 6, 2008), ¶ 104; L.E.S.I.–​Dipenta v. Algeria, supra note 154, ¶ 83(iii); Tokios Tokelés v. Ukraine, supra note 158, ¶ 86; SAUR v. Argentina, supra note 171, ¶ 308 (‘[l]‌a condition de ne pas commettre de violation grave de l’ordre juridique . . .’). 176  Inceysa Vallisoletane S.L. v. El Salvador, ICSID Case No. ARB/​03/​26 Award (Aug. 2, 2006), ¶¶ 184, 206. For an interesting analysis, see also Vannessa v. Venezuela, supra note 165, ¶¶ 113, 127. 177  Saba Fakes v. Turkey, supra note 84, ¶ 120 (‘The Tribunal also considers that it would run counter to the object and purpose of investment protection treaties to deny substantive protection to those investments that would violate domestic laws that are unrelated to the very nature of investment regulation’). 178 Douglas, The Plea of Illegality in Investment Treaty Arbitration, supra note 172 at 173–​74. 179  Agreement between the Kingdom of Spain and the Republic of Venezuela for the promotion and reciprocal protection of investments signed November 2, 1995, entered into force September 10, 1997) art. 10.1 [hereinafter Spain–​Venezuela BIT]; Agreement between the Belgo–​Luxembourg Economic Union and the Government of the Republic of Venezuela on the Reciprocal Promotion and Protection of Investments (signed December 6, 2007, entered into force August 13, 2008) art. 1(2); Agreement between the Government of the Russian Federation and the Government of the Republic of Moldova on encouragement and mutual protection of investments (signed March 17, 1998, entered into force July 18, 2001) art. 1(2); Australia–​India BIT, supra note 166, art. 1(c); Austria–​Czech Republic BIT, supra note 166, art. 1(1); Agreement between the Government of the Italian Republic and the Government of the Republic of Lithuania on the Promotion and Protection of Investments (signed December 1, 1994, entered into force April 15, 1997) art. 1(1). 180 NAFTA, supra note 7, art. 1101(1); Spain–​Venezuela BIT, supra note 179, art. 10.1. 181  ECT art. 26 is a prominent example (‘Disputes between a Contracting Party and an Investor of another Contracting Party relating to an Investment of the latter in the Area of the former, which concern an alleged breach of an obligation of the former under Part III shall, if possible, be settled amicably’). See ECT (concluded December 17, 1994, entered into force April 16, 1998) 2080 UNTS 95. 182  Id. art. 1(10); Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Union of Soviet Socialist Republics for the Promotion and Reciprocal Protection of Investments (adopted April 6, 1989, entered into force July 3, 1991), art. 1(e). 183  Abaclat v. Argentina, Dissenting Opinion, Georges Abi Saab, supra note 40, ¶ 74. 184  Zachary Douglas, Property, Investment and the Scope of Investment Protection Obligations, in Foundations of International Investment Law 373, 383–​87 (Zachary Douglas, Joost Pauwelyn & Jorge Vinuales eds., 2014) [hereinafter Douglas, Property, Investment and the Scope of Investment Protection Obligations].

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The Meaning of ‘Investment’ in Investment Treaty Arbitration a contracting party to an investment treaty may be under an obligation to protect and promote foreign investments in the territory of a third state. 11.104 An express territoriality requirement, particularly one that defines the meaning of ‘territory’,

would help in less clear cases—​for instance, where an investment is situated in a territory over which a state party to the treaty exercises de facto control, even though it does not exercise sovereignty over the situs of the investment.185

11.105 Regarding the content of the territoriality requirement, it is useful to distinguish between

tangible and intangible property, because determining the location of each type of property will differ greatly.

1. Tangible property 11.106 For tangible property, the location of the ‘investment’ has come into focus in a number of NAFTA cases. In Bayview v Mexico, the claimants had set up an irrigation system in the state of Texas, in the United States of America that used water of the Rio Grande river. Although the claimants’ installations were in Texas, they argued that Mexico’s use of Rio Grande water impaired their own water rights and, consequently, their investment. The tribunal held that the claimants had no rights to water in Mexico, and hence no investment in Mexico.186 The tribunal had no difficulty in finding that the claimants’ investments were in Texas, where the irrigation facilities were located.187 11.107 Similar results were reached in the NAFTA cases of Canadian Cattlemen v USA and Grand

River v USA. Canadian Cattlemen concerned measures taken by the United States to restrict the import of Canadian cattle, which the claimants argued affected their investment. The tribunal found that they had not made an investment in the territory of the United States.188 The tribunal in Grand River v USA, relying on Bayview and Canadian Cattlemen v USA, also held that it had no jurisdiction over a dispute concerning measures of the United States which impacted the claimants’ ability to export their cigarettes from Canada to the United States.189 In all three cases, the tribunals relied on the location of the tangible assets.

185  The extent of a treaty’s territorial application has assumed renewed importance in light of the Russian Federation’s occupation of the Crimea region, which has led a number of Ukrainian nationals to file investment treaty claims against the occupying power. Although the Russian Federation asserts sovereignty over the region, it has refused to participate in the arbitrations and has denounced the jurisdiction of the arbitral tribunals. At the time of writing, the tribunals in Aeroport Belbek LLC and Mr. Igor Valerievich Kolomoisky v. Russia, PCA Case No. 2014-​30 and PJSC CB PrivatBank and Finance Company Finilon L.L.C. v. Russia, PCA Case No. 2015-​21 have upheld jurisdiction over the claimants’ claims, although the decisions have not been made public. 186  Bayview Irrigation District et al. v. Mexico, ICSID Case No. ARB(AF)/​05/​1, Award (June 19, 2007), ¶¶ 105, 117, 122 [hereinafter Bayview v. Mexico]. 187  Id. ¶ 91. 188  The Canadian Cattlemen for Fair Trade v. United States of America, Ad Hoc UNCITRAL Award on Jurisdiction (Jan. 28, 2008), ¶¶ 126–​27, 233 [hereinafter Canadian Cattlemen v. U.S.A.]. 189  Grand River Enterprises Six Nations, Ltd., et al. v. United States of America, Ad Hoc UNCITRAL Award (Jan. 12, 2011), ¶ 89 [hereinafter Grand River v.  U.S.A.). The decisions in Bayview v.  Mexico, Canadian Cattlemen, and Grand River can also be understood as being based on the principle that when the investor’s asset is located in the investor’s home State, measures taken by another State which adversely affect the investment will not give rise to a dispute (see e.g., Bayview v. Mexico, supra note 186, ¶ 94). For a case confirming this principle in the context of intangible assets, see Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Case No. ARB(AF)/​12/​1 Award (Aug. 25, 2014), ¶¶ 151–​57, 175–​76, 235, 244.

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III.  Arbitral Jurisprudence on the Definition of ‘Investment’ 2. Intangible property Tribunals have adopted different approaches in cases where the situs of intangible property 11.108 has been at issue. (a)  Contracts for the provision of services  The location of the investment came sharply in focus in cases concerning the inspection of 11.109 goods to be imported in the host state.190 In these cases, pursuant to the contract that formed the basis of the investment, the inspection services were performed outside the host state. The respondents seized on this to argue that the territorial requirement had not been met. The SGS v Philippines tribunal, which tackled the issue first, disagreed with that argument. 11.110 According to the tribunal: SGS’s inspections abroad were not carried out for their own sake but in order to enable it to provide, in the Philippines, an inspection certificate on which BOC could rely to enter goods to the customs territory of the Philippines and to assess and collect the ensuing revenue.191

The tribunal also focused on the existence of an office established by the claimant in Manila, which had a number of employees and performed functions related to the inspection carried out abroad.192 The SGS v Paraguay and BIVAC v Paraguay tribunals made similar remarks in holding that the investment was located within the host state.193 Taken together, the decisions of the SGS v Paraguay and BIVAC v Paraguay tribunals sug- 11.111 gest that, for provision of services cases, the investment in question will be located where its benefit is to be derived. Indeed, the SGS v Philippines tribunal stated that: ‘[t]‌he fact that the bulk of the cost of providing the service was incurred outside the Philippines is not decisive. Nor is it decisive that SGS was paid in Switzerland’.194

(b)  Financial instruments and products  Cases involving financial instruments have also given rise to intense debate con- 11.112 cerning the situs of investments. The first case, Fedax v Venezuela, involved promissory notes issued by the host state. The tribunal identified the situs of the investment by looking at where the benefit of the ‘investment’ in question was to be derived, regardless of where the funds themselves were located, upholding its jurisdiction on this basis.195 Recent cases concerning sovereign bonds have confirmed the Fedax v Venezuela 190  SGS v. Philippines, supra note 65, ¶¶ 99–​ 112; BIVAC v. Paraguay, supra note 65, ¶¶ 97–​105; SGS v. Paraguay, supra note 65, ¶¶ 101–​103. Although the same issue arose in SGS v. Pakistan, the tribunal only addressed it in passing (SGS v. Pakistan, supra note 65, ¶¶ 135–​39). 191  SGS v. Philippines, supra note 65, ¶¶ 101–​102. 192  Id. ¶ 101. 193  SGS v. Paraguay, supra note 65, ¶¶ 113–​14 (‘SGS’s inspections abroad were not carried out for separate purposes, but rather in order to enable it to provide, in Paraguay, a final Inspection Certificate on which the Paraguayan authorities relied to enter goods into the customs territory of Paraguay and to assess and collect the resulting customs revenue  . . .  It is undisputed that as part of these intertwined operations under the Contract, SGS maintained several offices in Paraguay, including in particular a sizeable office in Asunción that employed a significant number of people’); BIVAC v. Paraguay, supra note 65, ¶¶ 101, 103 (‘The facts appear uncontested: a local company was established in Paraguay, and maintained at a professional level (apparently without criticism); training of local personnel took place in Paraguay; knowledge was transferred in Paraguay; and a local data base was established and equipped in Paraguay’), (‘Activities cannot be subdivided in a way as to distinguish between claims for non-​payment of services abroad and claims for services in Paraguay: in practice the services were treated as inseparable and the overall objective was to increase national State revenue and to transfer knowledge to Paraguay’). 194  SGS v. Philippines, supra note 65, ¶ 106. 195  Fedax v. Venezuela, supra note 18, ¶ 41 (‘It is a standard feature of many international financial transactions that the funds involved are not physically transferred to the territory of the beneficiary, but put at its disposal elsewhere . . . The important question is whether the funds made available are utilized by the beneficiary of the credit, as in the case of the Republic of Venezuela, so as to finance its various governmental needs’).

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The Meaning of ‘Investment’ in Investment Treaty Arbitration tribunal’s approach. Both Abaclat196 and Ambiente v Argentina197 concerned sovereign bonds issued by Argentina which were held by depositors outside Argentina, were expressed as governed by foreign law, and were subject to the exclusive jurisdiction of foreign courts. In both cases, Argentina, as the state benefiting from the funds, was found to be the situs of the investment.198 11.113 The ‘benefit’ test for determining the situs of an investment has also been adopted by tribu-

nals outside the context of bonds. Deutsche Bank v Sri Lanka concerned a hedging agreement which was governed by English law, subject to the jurisdiction of the English courts, and chiefly prepared by the claimant’s London office. Despite these characteristics, the tribunal held that the rights arising from the agreement constituted an ‘investment’ located in the territory of Sri Lanka. The tribunal reached this conclusion by expressly relying on the ‘benefit’ test as set out in Abaclat,199 further specifying that: The fact that various Deutsche Bank branches all over the world, including Singapore, participated in the preparation and finalization of the investment, does not alter this conclusion. Nor does the fact that the parties selected English law and English jurisdictions in their agreement.200

The ‘benefit’ test was also adopted by the tribunal in the Nova Scotia v Venezuela case, which concerned the situs of rights under a contract for the supply of coal.201 11.114 At the same time, it has been forcefully argued that the ‘benefit’ test is not appropriate for

determining the location of an alleged ‘investment’.202 In a dissenting opinion in the Abaclat v Venezuela case, Professor Abi-​Saab reasoned: A treaty claim is necessarily based on a right that has been allegedly violated; here, the debt that was not repaid. If this right is created by contract, it is the contract that governs its legal existence and the modalities of this existence, including the location of this right (and its reciprocal obligation) . . . The treaty claim cannot by-​pass or circumvent this right, or change its modalities of existence, including its situs according to its legal title—​the contract and the applicable law under which it exists—​as this right, in its fixed legal configuration, serves as the legal basis underlying the treaty claim.203

11.115 Once an ‘investment’ is defined as an ‘asset’, as is currently the case in the vast majority

of investment treaties, it becomes necessary to determine the location of the asset as such. Professor Douglas has suggested that this determination should be made by reference to the

  Abaclat v. Argentina, supra note 40, ¶ 374.   Ambiente Ufficio v. Argentina, supra note 19, ¶ 497. It is noteworthy that the Alemanni v. Argentina case concerned precisely the same asset. The tribunal there did not reach a decision on this question, postponing its determination to the merits (Alemanni v. Argentina, supra note 42, ¶ 297). The case was discontinued before a decision on the merits was made. 198  The same test appears to have been implicitly accepted by the tribunal in Poštová Banka v. Greece, supra note 43, ¶¶ 110–​12, 362–​63. 199  Deutsche Bank v. Sri Lanka, supra note 121, ¶¶ 288, 292 (‘In the present case, it is undisputed that the funds paid by Deutsche Bank in execution of the Hedging Agreement were made available to Sri Lanka, were linked to an activity taking place in Sri Lanka and served to finance its economy which is oil dependent. The Tribunal therefore decides that the condition of a territorial nexus with Sri Lanka is satisfied’). 200  Id. ¶ 291. 201  Nova Scotia v. Venezuela, supra note 122, ¶ 130 (‘the Tribunal agrees with the approach taken in several such cases, whereby tribunals have looked to whether the host State received a benefit’). The tribunal’s remark was obiter (id. ¶ 129). 202 Abaclat v.  Argentina, supra note 40, Dissenting Opinion, Georges Abi Saab; Douglas, Property, Investment and the Scope of Investment Protection Obligations, supra note 184 at 373, 383–​87. 203  Abaclat v. Argentina, Dissenting Opinion, Georges Abi Saab, supra note 49, ¶¶ 84–​85. 196 197

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IV. Conclusion municipal law of the host state, including its rules of private international law.204 When a state party to an investment treaty agrees that a right will constitute an asset and, therefore, an ‘investment’, such as a right in rem or a right to contractual performance, there is a strong argument to make that the state intends the existence and extent of such rights to be determined by reference to its own, municipal law. It may therefore be convincingly argued that the same law should be used in determining whether the asset in question is located ‘in the territory of the host state’.205

IV. Conclusion Given its key role under investment protection treaties and the ICSID Convention, a thor- 11.116 ough understanding of what ‘investment’ means is indispensable. Although the numerous awards since Salini have given a number of different interpretations, some broadly accepted approaches have emerged. In deciding how to interpret the term ‘investment’ in an investment treaty, tribunals generally turn to the definition provided in the treaty itself, without inserting additional language or requirements. When the arbitration is conducted pursuant to the ICSID Convention which does not define ‘investment’, tribunals resort to the economic definition of ‘investment’ as introduced by the Salini v Morocco tribunal and developed in subsequent jurisprudence. When the treaty’s definition itself limits investments to those listed assets ‘having the characteristics of investments’, as do treaties based on the 2004 or 2012 US Model BITs206 or list specific characteristics the assets must have, usually drawing on the core of the Salini test, the analysis draws on the ‘objectivist’ jurisprudence that was largely developed in the context of ICSID cases. Yet, as the analysis in the preceding pages illustrates, arbitral tribunals have not always fol- 11.117 lowed the same interpretative method, and have also reached different conclusions on issues such as the import of contribution, risk or duration for the existence of an ‘investment’, or the relevance of additional criteria occasionally put forth. On some of these questions, the veritable flood of arbitral jurisprudence has helped 11.118 crystallize nascent legal concepts into concrete rules within a very short time. Other questions still remain in flux. In light of the significant developments in arbitral jurisprudence and the high volume of cases, one can anticipate, or at least hope, that some of the most vexing questions will be answered by tribunals and commentators in the not-​so-​distant future.

204 Douglas, Property, Investment and the Scope of Investment Protection Obligations, supra note 184, 373, 387 (‘The test for whether or not the claimant has property is supplied by the law of the host state . . . the situs of property can readily be established either as an observation of fact (for tangible property) or by the rules of private international law (for intangible property)’). It is unclear why Professor Douglas does not advocate the application of private international law rules in the case of both tangible and intangible property. See also Douglas, The International Law of Investment Claims, supra note 148, ¶¶ 349–​52. For an equally interesting account of the role the host state’s law in deciding whether there an ‘investment’ has been made, see Campbell McLachlan QC, Lauren Shore & Matthew Weiniger QC, International Investment Arbitration: Substantive Principles 6.113–​6.116 (2d ed. 2017), and the authorities cited therein. 205  An alternative approach would be to determine the situs of an asset by reference to ‘well founded and established precedents and drawing on private international law rules’ (Abaclat and Others v.  Argentina, Dissenting Opinion, Georges Abi Saab, supra note 49, ¶ 82). While attractive, this approach sidelines the importance of the State’s municipal law in determining the existence of an asset, which is unlikely to have been the State’s intention when concluding an investment treaty. 206  See supra ¶ 11.10 and note 5.

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12 BIFURCATION OF INVESTMENT DISPUTES Baiju S Vasani and Sarah Z Vasani

I. Introduction  12.01 II. The Framework under Major Arbitral Rules  12.03 A. ICSID Convention/​Rules  B. ICSID Additional Facility Rules  C. UNCITRAL Rules  D. ICC Rules  E. SCC Rules 

III. The Standard 

A. Procedural Economy  B. Likelihood of Dismissal/​Reduction in the Scope of Case  C. Overlapping Issues 

12.03 12.06 12.07 12.09 12.11

IV. Bifurcation Procedure  V. Conclusion 

12.12 12.14 12.20 12.24 12.28 12.30

I. Introduction 12.01 Bifurcation refers to the technique of dividing arbitral proceedings into two or more separate

phases. Each phase might include some element of document production, submission of documentary and/​or witness evidence (both factual and expert), submission of written pleadings, conduct of oral hearings, and the rendering of an award by the tribunal determining either a single or multiple issues.

12.02 In practice, bifurcation most commonly involves the division of proceedings into separate

phases addressing jurisdiction/​admissibility and the merits and, less frequently, the division of the merits phase into liability and quantum phases. However, tribunals are not restricted to bifurcating proceedings along these lines. For example, some tribunals have bifurcated proceedings in order to hear certain jurisdictional objections as preliminary issues while reserving other jurisdictional objections to be heard with parties’ arguments on the merits. Others still have ‘trifurcated’ proceedings into separate phases dealing with issues of jurisdiction, liability, and quantum. While the most commonly used rules in investment arbitration universally permit bifurcation, none prescribes clear-​cut or exhaustive criteria regarding when it is appropriate to do so. Nevertheless, a number of decisions highlight key considerations analysed by tribunals when deciding whether or not to bifurcate. These considerations form the basis of this chapter.

II.  The Framework under Major Arbitral Rules A. ICSID Convention/​Rules 12.03 Article 41(2) of the Convention on the Settlement of Investment Disputes between States

and Nationals of Other States (ICSID Convention) grants tribunals the discretion to determine any jurisdictional objection ‘as a preliminary question or to join it to the merits of the

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II.  The Framework under Major Arbitral Rules dispute’. Upon the respondent having raised a jurisdictional objection, a tribunal will usually consider written (and less frequently, oral) submissions on bifurcation from the parties before making an order. It is usual practice in the conduct of ICSID proceedings for jurisdictional objections to be treated as preliminary questions. As Schreuer notes: ‘It does not make sense to go through lengthy and costly proceedings dealing with the merits of the case unless the tribunal’s jurisdiction has been determined authoritatively’.1 If a complex jurisdictional issue is raised and the tribunal decides to bifurcate, it usually will suspend proceedings on the merits.2 Nonetheless, the ICSID Rules (as amended in 2006) emphasize the discretion of the tribunal 12.04 in this respect.3 Under Rule 41(3),4 tribunals are permitted to deal with jurisdictional objections without mandatorily having to suspend merits proceedings (whereas under the previous version of the rules, suspension of the underlying merits proceedings was mandatory). A practical application of this was seen in Tulip Real Estate v Turkey,5 where the tribunal decided a preliminary jurisdictional issue without suspending the overall procedural timetable for the case.6 The tribunal did so ‘in the interest of procedural economy, taking into account the relatively uncomplicated nature of the objection and the arguments already presented on this point’.7 Rule 41(3) is thus useful in light of the busy schedules of tribunal members, parties, and 12.05 counsel, to avoid delays in what are already lengthy proceedings. It can also provide a safeguard against disingenuous applications for bifurcation of unmeritorious jurisdictional objections, made with the intention of delaying the arbitral process.

B. ICSID Additional Facility Rules Similarly, Article 45 of the ICSID Arbitration (Additional Facility) Rules (Additional Facility 12.06 Rules) provides tribunals with broad discretion as to whether to bifurcate proceedings.8 This was applied by the Apotex v United States tribunal, which, in determining the respondent’s bifurcation request, noted the parties’ agreement that Article 45 affords tribunals the power ‘to decide whether or not to order bifurcation as between jurisdiction and the merits, and if ordered, to what extent—​it being a matter for the Tribunal’s discretion taking into account the relevant circumstances of the particular case’.9 The tribunal also noted that the Additional

1  Christoph H. Schreuer, with Loretta Malintoppi, August Reinisch and Anthony Sinclair, The ICSID Convention: A Commentary 537 (2d ed. 2009) [hereinafter Schreuer et al.]. 2   See, e.g., Transglobal Green Energy, LLC & Transglobal Green Panama, S.A.  v.  Republic of Panama, ICSID Case No. ARB/​13/​28, Procedural Order No. 2 (Jan. 21, 2016). 3   See also the general discretion provided by Rule 19, which provides that ‘[t]‌he Tribunal shall make the orders required for the conduct of the proceeding’. Rules of Procedure for Arbitration Proceedings (Arbitration Rules) [hereinafter ICSID Arbitration Rules], rule 19. 4   ICSID Arbitration Rules rule 41(3): ‘Upon the formal raising of an objection relating to the dispute, the Tribunal may decide to suspend the proceeding on the merits. The President of the Tribunal, after consultation with its other members, shall fix a time limit within which the parties may file observations on the objection’. 5  Tulip Real Estate Investment and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/​11/​28, Decision on the Respondent’s Request for Bifurcation (Nov. 2, 2012) [hereinafter Tulip Bifurcation Decision]. 6  Id. ¶ 56. 7  Id. 8  Article 45(5) states that: ‘The Tribunal shall decide whether or not the further procedures relating to the objection made pursuant to paragraph (2) shall be oral. It may deal with the objection as a preliminary question or join it to the merits of the dispute. If the Tribunal overrules the objection or joins it to the merits, it shall once more fix time limits for the further procedures’. 9  Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID ARB(AF)/​12/​1, Procedural Order Deciding Bifurcation (Jan. 25, 2013), ¶ 4 [hereinafter Apotex Bifurcation Decision].

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Bifurcation of Investment Disputes Facility Rules provide tribunals with the power to ‘decide in regard to the merits whether or not to bifurcate liability and damages’.10

C. UNCITRAL  Rules 12.07 Although the Arbitration Rules of the United Nations Commission on International Trade

Law (UNCITRAL Rules) do not specifically mention bifurcation, they afford the arbitral tribunal the general power to conduct proceedings in a manner ‘it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case’.11

12.08 Article 23(3) of the UNCITRAL Rules further provides that a tribunal has full discretion to

rule on a plea concerning its jurisdiction ‘either as a preliminary question or in an award on the merits’. As noted by the Philip Morris v Australia tribunal, this can be seen as a departure from the previous position under the 1976 UNCITRAL Rules,12 which contained a (rebuttable) presumption in favour of bifurcating jurisdictional objections.13 Thus, just as under the ICSID system, the decision whether to bifurcate ultimately is a matter for the tribunal’s discretion. Whereas in cases conducted under the 1976 Rules some tribunals have found that bifurcation should only be refused where it is ‘very unlikely that there will be any savings in time or cost’,14 under the 2010 Rules tribunals appear more likely to take the view that their discretion should ‘be guided evenly by the overarching procedural imperatives of efficiency and fairness’.15 Or, as it was put somewhat tautologically by one tribunal, ‘under the general principles of management of an arbitration proceeding’.16

D. ICC  Rules 12.09 Some investment treaties provide for the possibility of arbitration under the Rules of

Arbitration of the International Chamber of Commerce (ICC Rules). Again, the ICC Rules themselves do not explicitly refer to bifurcation, although tribunals’ power to bifurcate proceedings is implicit in Article 2 of the ICC Rules, which defines the term ‘Award’ to include,

  Id.   UNCITRAL Rules art. 17.1 (‘Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as it considers appropriate, provided that the parties are treated with equality and that at an appropriate stage of the proceedings each party is given a reasonable opportunity of presenting its case. The arbitral tribunal, in exercising its discretion, shall conduct the proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient process for resolving the parties’ dispute’). 12  Philip Morris Asia Limited (Hong Kong) v.  Commonwealth of Australia, UNCITRAL, Procedural Order No. 8 Regarding Bifurcation of the Procedure (Apr. 14,Apr. 14, 2014), ¶ 109 [hereinafter Philip Morris PO8]; see also Van Zyl and Others v. Kingdom of Lesotho, UNCITRAL, PCA Case No. 2016-​21, Procedural Order No. 1 (Nov. 3, 2016), ¶ 43 [hereinafter Van Zyl PO1] (‘Article 23(3) of the current UNCITRAL Rules, which this Tribunal must apply, does not appear to contemplate any presumption, leaving the Tribunal with an even discretion to decide whether to bifurcate proceedings or not’). 13  See 1976 UNCITRAL Rules art. 21(4) (‘In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule on such a plea in their final award’); Mesa Power Group, LLC v. Canada, PCA Case No. 2012-​ 17, Procedural Order No. 2 (Jan. 18, 2014), ¶ 3 [hereinafter Mesa Power PO2]; Glamis Gold Ltd. v. United States of America (NAFTA Chapter 11, UNICTRAL), Procedural Order No. 2 (May 31, 2005) [hereinafter Glamis Gold PO2], ¶ 9; Resolute Forest Products Inc. v. Government of Canada, UNCITRAL, PCA Case No. 2016-​13, Procedural Order No. 4 (Nov. 18, 2016), ¶ 4.3 [hereinafter Resolute PO4]. 14  Glamis Gold PO2, supra note 13, ¶ 12(c). But see Clayton and Others v.  Government of Canada, UNCITRAL, PCA Case No. 2009-​04, Procedural Order No. 20 (Jan. 5, 2016), ¶ 37 [hereinafter Clayton PO20] (‘In the Tribunal’s view, the principal yardstick in dealing with Canada’s Motion is the principle of procedural efficiency’). 15  Van Zyl PO1, supra note 12, ¶ 46. 16  Aven et al. v. Republic of Costa Rica, UNCITRAL, UNCT/​ 15/​3, Procedural Order No. 2 (Feb. 4, 2016), ¶ 13. 10 11

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III.  The Standard inter alia, an ‘interim, partial or final award’. Appendix IV to the ICC Rules lists the following as one of the case management techniques that can be used by arbitral tribunals and parties: ‘Bifurcating the proceedings or rendering one or more partial awards on key issues, when doing so may genuinely be expected to result in a more efficient resolution of the case’.17 The ICC Commission Report on States, State Entities and ICC Arbitration confirms that the above reference is intended to cover, amongst other situations, serious jurisdictional objections raised by a state or state entity.18 As noted by Craig, Park, and Paulsson, when a tribunal exercises its discretion under the 12.10 ICC Rules it is ordinarily desirable ‘to determine all issues and decide all claims in a single award’.19 However, tribunals must have regard to ‘whether a preliminary award will aid or impede the administration of arbitral justice [taking] into account whether the making of such an award will delay the overall conduct of the proceedings, and if so, whether such delay is justified’.20 The factors a tribunal will take into account in making this determination are discussed later in this chapter.

E. SCC  Rules Finally, the Rules of the Stockholm Chamber of Commerce (SCC Rules) are more and more 12.11 frequently used in disputes arising under investment treaties. This is reflected by the inclusion of Appendix III in the revised 2017 SCC Rules, which contains provisions specifically applicable to investment treaty disputes. Article 44 of the SCC Rules, meanwhile, provides that ‘the Arbitral Tribunal may decide a separate issue or part of the dispute in a separate award’. The effect of this is similar to the equivalent definition of ‘Award’ contained in the ICC Rules, with the additional consideration that the default position under Article 43 of the SCC Rules is that the final award must be made no longer than six months from the date that the case was referred to the arbitral tribunal. This requirement may be abrogated, however, upon the SCC board giving permission for an extension of the time limit, upon a reasoned request from the arbitral tribunal. In practice, an extension is almost always likely to be granted in the context of complex international disputes.

III.  The Standard None of the rules discussed above sets out the circumstances in which a tribunal will 12.12 order bifurcation. Unsurprisingly, the most straightforward scenario is where the parties have agreed regarding bifurcation proceedings. Tribunals usually will acquiesce to such an agreement,21 although they are not obliged to do so. A tribunal may also request submissions from the parties on a particular jurisdictional issue of its own motion. For instance, in CEAC v Montenegro, having dismissed Montenegro’s preliminary objections under the summary procedure provided by Rule 41(5) of the ICSID Rules, the tribunal considered it appropriate to hold a separate phase of proceedings dedicated to the full pleading of a

  Rules of Arbitration of the International Chamber of Commerce, Appendix IV.   ICC Commission Report on States, State Entities and ICC Arbitration (ICC, 2012) 7. 19  W. Laurence Craig, William W. Park, & Jan Paulsson, International Chamber of Commerce Arbitration 359, 361 (3d ed. 2000). 20  Id. 21  See, e.g., LG&E v. Argentina, ICSID Case No. ARB/​02/​1, Decision on Jurisdiction (Apr. 30, 2004), ¶ 46; see also Al Tamimi v. Oman, ICSID Case No. ARB/​11/​33, Procedural Order No. 6 (Mar. 18, 2013), at Schedule 2, where the parties agreed not to bifurcate proceedings. 17 18

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Bifurcation of Investment Disputes distinct jurisdictional issue, and invited the parties to agree on a procedural calendar to this effect.22 12.13 Where a party has made a request for bifurcation and the other party objects, the juris-

prudence indicates that tribunals are guided by the overarching principles of fairness and procedural economy.23 In giving substance to these principles, tribunals have typically taken into account (1) issues of procedural economy; (2) the likelihood that the determination of distinct issues in a separate phase will result in the dismissal of the entire case or reduce significantly its scope and complexity,24 and the degree of overlap between the factual and legal issues to be examined in each proposed phase.25 These issues are considered below.

A. Procedural Economy 12.14 As stated above, investment arbitration proceedings are most commonly bifurcated along

lines of jurisdiction and merits, on the one hand, or liability and quantum, on the other. With respect to division of liability and quantum issues, bifurcation can often be desirable since quantification can be a lengthy, technical, and costly exercise for the parties, more often than not requiring substantial involvement of expert witnesses in compiling reports and providing oral testimony. Indeed, the Clayton v Canada tribunal bifurcated the damages phase of proceedings into separate phases dealing with preliminary questions as to availability of certain heads of loss, on the one hand, and actual quantification of those losses, on the other.26 Similarly, tribunals where appropriate have made multiple, separate awards on distinct jurisdictional issues, following consecutive bifurcations, where new claims only came to light following the conclusion of the first bifurcated jurisdictional phase.27

12.15 Regarding bifurcation of jurisdictional and merits issues, the interests of procedural economy

are typically served by bifurcating preliminary legal points that do not involve intensive factual inquiries. Where deciding a preliminary issue is likely to involve an extensive fact-​finding exercise and/​or voluminous document production, cost and efficiency considerations usually favour dealing with such issues simultaneously with the merits. Where possible, tribunals usually consider that, where it is appropriate to bifurcate proceedings for the purposes of hearing one jurisdictional objection, it is procedurally efficient where possible to hear all other jurisdictional objections at the same time.28

12.16 Decisions of arbitral tribunals often cite considerations of fairness, cost, and effi-

ciency as decisive factors. Articulation of these considerations may take various forms depending on the case. For instance, the Mesa Power v Canada tribunal considered it good practice under the 1976 UNCITRAL Rules to ‘let the parties “know where they stand” . . . at an early stage and not to impose the burden of full fledged proceedings on a party that disputes being subject to arbitration’.29 The tribunal in Canfor v United States, 22  Central European Aluminium Company v. Montenegro, ICSID Case No. ARB/​14/​8, Award (July 26, 2016), ¶ 10. 23  Accession Mezzanine Capital L.P.  and Danabius Kereskedohaz v.  Hungary, ICSID Case No. ARB/​ 12/​3, Decision on Respondent’s Notice of Jurisdictional Objections and Request for Bifurcation (Aug. 8, 2013), ¶ 38. 24  See Tulip Bifurcation Decision, supra note 5, ¶ 30. 25  See Glamis Gold PO2, supra note 13, ¶ 12(c), where the tribunal stated that bifurcation becomes impractical when ‘the jurisdictional issue identified is so intertwined with the merits that it is very unlikely that there will be any savings in time or cost’. 26  See Clayton PO20, supra note 14. 27 European American Investment Bank v.  Slovak Republic, UNCITRAL, PCA Case No. 2010-​ 17, Second Award on Jurisdiction (June 4, 2014). 28  Resolute PO4, supra note 13, ¶ 4.12. 29  Mesa Power PO2, supra note 13, ¶ 16.

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III.  The Standard meanwhile, was confronted with a request by the respondent that it deal with multiple jurisdictional objections in separate phases. It noted that: ‘[t]‌he Respondent may find a strategic advantage in presenting the Tribunal, at this stage, with one jurisdictional argument . . . However, the Tribunal should not be constrained, when conducting the arbitration, by any of the parties’ procedural and strategic choices’.30 The tribunal concluded that it would be treating the parties without equality if it were to allow the respondent to make piecemeal objections to its jurisdiction, which would ‘seriously impair . . .’ the efficiency of the arbitral procedure.31 Ultimately, tribunals’ assessment of the propriety of making an order for bifurcation in- 12.17 volves a balancing exercise between the risk of delay and extra cost caused by ordering bifurcation when the proceedings continue to the next stage, on the one hand, and the risk of delay and extra cost caused by dealing with unnecessary issues, on the other. For instance, by letting the parties plead the merits of the claim where the tribunal has no jurisdiction, or making lengthy submissions on quantum where liability cannot be established.32 A final collateral benefit of bifurcation to be considered by a tribunal is that where it intends to order security for costs, it need not do so in respect of the entire proceeding.33 It is thus important that requests for bifurcation be analysed on their own merits in the con- 12.18 text of each particular case. In each instance, tribunals should be wary of escalating time and costs, and consider imposing abridged timetables for submissions on bifurcated issues. The Emmis v Hungary tribunal articulated the problem in the following terms: The Tribunal has anxiously considered the issue of procedural efficiency  . . .  An order for bifurcation . . . will, in the event that Respondent is unsuccessful in its jurisdictional challenge, inevitably lead to a significant delay in any merits hearing . . . On the other hand, the Tribunal must balance that factor against the consideration that, if the Respondent were successful in its jurisdictional challenge, it would dispose of the entire case . . . The Tribunal has also considered the practicality of determining the nature of Claimants’ rights or investments at a preliminary stage and the risk of overlap or duplication with any subsequent merits phase were Respondent to be unsuccessful.34

The Emmis tribunal also noted the possibility of redressing prejudice suffered by the claimants 12.19 as a consequence of bifurcation of unmeritorious jurisdictional objections through making a suitable award on costs.35 Similarly, the Apotex tribunal, in refusing an application for bifurcation, confirmed it was minded to apply the ‘loser pays’ principle regarding additional costs borne by the respondent in addressing liability, when it could have succeeded earlier on jurisdictional issues had the procedure been bifurcated.36

30  See Canfor Corporation v.  United States of America; Terminal Forest Products v.  United States of America, UNCITRAL, Decision on the Place of Arbitration, Filing of a Statement of Defence and Bifurcation of the Proceedings (Jan. 23, 2004), ¶ 52. 31  Id. 32  As noted by a 2011 empirical study of publicly known ICSID awards, bifurcation does not necessarily result in increased efficiency or a tribunal issuing an award more promptly. See Lucy Greenwood, Does Bifurcation Really Promote Efficiency?, 28(2) J. Int’l Arb. 205 (2011). 33  See, e.g., Transglobal v. Panama, supra note 2, Decision on the Respondent’s Request for Provisional Measures Relating to Security for Costs (Jan. 21, 2016), ¶ 35. 34  Emmis International Holding B.V. and Others v. Hungary, ICSID Case No. Arb/​ 12/​2, Decision on Respondent’s Application for Bifurcation (June 13, 2013), ¶¶ 48–​49, 51 [hereinafter Emmis Bifurcation Decision]. 35  Id. ¶ 56. 36  Apotex Bifurcation Decision, supra note 9, ¶ 12.

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Bifurcation of Investment Disputes B. Likelihood of Dismissal/​Reduction in the Scope of Case 12.20 As alluded to above, the fundamental benefit of bifurcation is to save time and expense

where determination of certain issues as a preliminary matter is likely either to dispose of a case entirely or to significantly reduce its scope. In determining such a likelihood, tribunals must look at the substance of the issues which it proposes are to be dealt with in a distinct procedural phase. In particular, in the context of jurisdictional objections, tribunals must to some extent evaluate the strength of the applicant’s arguments on their face—​although in order to permit bifurcation, it need only be satisfied that the objections are not frivolous or vexatious.37 If an objection does appear to be aimed at derailing proceedings rather than reducing time and costs, the request should be rejected. This is notwithstanding the fact that, as recently confirmed by the Ballantine v Dominican Republic tribunal, a tribunal’s task in determining whether to bifurcate is not to decide on the merits of any underlying preliminary objection(s).38

12.21 In rejecting a request for bifurcation under the 1976 UNCITRAL Rules, the Glamis Gold v

United States tribunal held that, although under the 1976 Rules there was a presumption in favour of bifurcation,39 a tribunal should consider ‘whether the objection is substantial inasmuch as the preliminary consideration of a frivolous objection to jurisdiction is very unlikely to reduce the costs of, or time required for, the proceeding’.40 More recently, the Philip Morris tribunal noted that, in order to permit bifurcation, the purported jurisdictional objections must be ‘prima facie serious and substantial [and] if successful, dispose of all or an essential part of the claims raised’.41

12.22 In a case under the ICSID Rules, the AMC v Hungary tribunal granted bifurcation on

the grounds that the jurisdictional issues raised by Hungary were ‘significant’ and merited ‘focused examination in a separate phase that could either make a merits phase unnecessary or sharpen many factual issues should the Tribunal reach the merits’.42 Similarly, the Emmis tribunal granted bifurcation since the respondent’s jurisdictional objections, which required examination of issues of Hungarian law in relation to the claimant’s status as an investor under the BIT in that case, raised ‘a substantial question which requires clarification in the interests of both the parties and the Tribunal’.43

12.23 Similarly, in the context of a proposed bifurcation of the liability and quantum phases, the

tribunal should consider whether the claimant meets the prima facie test to succeed on liability, and whether the quantum phase is likely to be particularly complex and substantial. If success on liability appears dubious, and/​or the resolution of quantum issues appears

  Resolute PO4, supra note 13, ¶ 4.4.   Michael Ballantine & Lisa Ballantine v. Dominican Republic, UNCITRAL, PCA Case No. 2016-​17, Procedural Order No. 2 (Apr. 21, 2017), ¶ 16. 39  Glamis Gold PO2, supra note 13, ¶ 9; see also Mesa Power PO2, supra note 13, ¶ 16. 40  Id. ¶ 12(c). 41  Philip Morris PO8, supra note 12, ¶ 109; followed in Resolute PO4, supra note 13, ¶ 4.3. 42  Accession Mezzanine Capital L.P. and Danabius Kereskedohaz v. Hungary, ICSID Case No. ARB/​12/​3, Decision on Respondent’s Notice of Jurisdictional Objections and Request for Bifurcation (Aug. 8, 2013), ¶ 39(2). See also Emmis Bifurcation Decision, supra note 34, ¶ 47 (‘a substantial question which requires clarification in the interests of both the parties and the Tribunal’); United Utilities (Tallinn) B.V. et al. v. Republic of Estonia, ICSID Case No. ARB/​14/​24, Procedural Order No. 2 (June 17, 2015) (‘Without entering into a discussion of the merits of the jurisdictional objections which Respondent has indicated that it intends to raise, it suffices to note that the Tribunal is satisfied that those objections are genuine and, if they are in fact raised, will require serious consideration by the Tribunal’). 43  Emmis Bifurcation Decision, supra note 34, ¶ 47. 37 38

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III.  The Standard unusually costly and complex, the tribunal may wish to exercise its discretion to bifurcate the liability and quantum phases.

C. Overlapping  Issues Where substantial overlap exists in terms of the factual or legal issues to be considered in the 12.24 various proposed phases of an arbitration, bifurcation will not be appropriate. As Schreuer notes, ‘some jurisdictional questions are so intimately linked to the merits of the case that it is impossible to dispose of them in preliminary form’.44 One example of this includes where determination of a jurisdictional issue is only possible by examining testimony and other evidence that can only be obtained through a full hearing of the case.45 Tribunals have employed various formulations confirming this approach. For example, the 12.25 Thunderbird tribunal refused bifurcation since facts relating to a preliminary question concerning the claimant’s control over its investment were ‘closely interwoven with the merits of the case’.46 Similarly, the Glamis Gold tribunal noted that tribunals should consider ‘whether bifurcation is impractical in that the jurisdictional issue identified is so intertwined with the merits that it is very unlikely that there will be any savings in time or cost’.47 The Burimi v Albania tribunal considered that, while substantial questions on jurisdiction were raised in that case, they were ‘inextricably tied’ to issues of liability and were ‘best appreciated in that context’.48 Meanwhile, the Philip Morris tribunal considered it necessary to determine whether the jurisdictional objection could ‘be examined without prejudging or entering the merits’.49 In certain circumstances, tribunals may opt to grant an applicant’s bifurcation request par- 12.26 tially, on the grounds that, while some jurisdictional issues are inextricably intertwined with the merits of the dispute, other potentially dispositive issues can be dealt with preliminarily.50 For instance, in Tulip, the tribunal considered that Turkey’s first and second jurisdictional objections (that the investor’s claims were contractual rather than treaty-​based, and that they were premature since the underlying contractual dispute had to be resolved by the Turkish courts) were ‘intimately linked to the merits’ and that their determination was unlikely to be capable of significantly reducing the scope and complexity of the case.51 However, the tribunal agreed to hear Turkey’s third, narrow objection separately (relating to the claimant’s alleged failure to respect the mandatory negotiating period required by the relevant BIT), since it was ‘not intimately linked to the merits and is capable of preliminary determination’.52 The tribunal further noted that this would ‘avoid the possibility that the entire case is heard and that the Tribunal then finding that a precondition to arbitration was not satisfied’.53 In light of the relatively straightforward nature of this objection, the tribunal also decided not to suspend the merits proceedings in that case.

  Schreuer et al., supra note 1, at 537.   Id. at 547. 46 International Thunderbird Gaming Corporation v.  Mexico, Award, UNCITRAL (Jan. 26, 2006), Procedural Order No. 4 (Dec. 24, 2003). 47  Glamis Gold PO2, supra note 13, ¶ 23. 48  Burimi S.R.L. and Eagle Games S.A. v. Republic of Albania, ICSID Case No. ARB/​11/​18, Procedural Order No. 1 and Decision on Bifurcation (Apr. 18, 2012), ¶ 13.2. 49  Philip Morris PO8, supra note 12, ¶ 109. 50  See, e.g., Libananco Holdings Co. Ltd. v. Republic of Turkey, ICSID Case No. ARB/​06/​8, Procedural Order (Dec. 17, 2008). 51  Tulip Bifurcation Decision, supra note 5, ¶¶ 37–​38, 44. 52  Id. ¶ 55(a). 53  Id. ¶ 55(c). 44 45

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Bifurcation of Investment Disputes 12.27 Similarly, the Emmis tribunal found it appropriate to hear the respondent’s first jurisdic-

tional objection on a bifurcated basis since it was ‘primarily a question of law’, whereas the respondent’s second objection would involve ‘a close consideration of the factual evidence—​ both documentary and witness testimony—​as to Respondent’s conduct’.54

IV.  Bifurcation Procedure 12.28 In exercising the broad discretion to organize the procedure of the arbitration,55 tribunals

have taken various approaches when dealing with issues of bifurcation. If the parties agree at an early stage that there will be a bifurcated jurisdictional phase, appropriate provision can be made for this in an initial procedural timetable.56 Tribunals will often seek to streamline the procedure by asking the parties to confer and attempt to reach agreement on whether to hold separate phases.57 Where the parties cannot reach agreement, tribunals may nonetheless be able to make appropriate provision in the procedural timetable for multiple eventualities. For example, it is common practice in ICSID arbitration that, following the first session of the tribunal, the tribunal’s first procedural order will include two alternative timetables to account for the possibilities of bifurcation and non-​bifurcation.58 Such a timetable may include one or more rounds of written pleadings on bifurcation, and may also (but not always) include an oral hearing to be conducted either in person or by teleconference, depending on the importance attributed by the parties to the issue of bifurcation.59 In the event that provision for submissions on bifurcation has not been made in the original timetable, tribunals will usually seek to draw up the timetable with the consent of the parties and with the minimum disruption to the overall conduct of the case.

12.29 Typically, a respondent state will make its initial request for bifurcation of jurisdictional

issues at the same time as the filing of its counter-​memorial on jurisdiction and the merits.60 Often, when drawing up the procedural calendar, tribunals will order that requests for bifurcation are made at this time. By this point, the contours of the relevant issues are usually clear enough to allow the tribunal to make a properly informed decision on whether bifurcation is appropriate. Thus, the Philip Morris tribunal found that it was able to come to a conclusion as to bifurcation ‘only after both sides have had an opportunity to make first presentations of their factual and resulting legal arguments on the entire case’.61 That said, tribunals previously have ordered separate, fully pleaded phases of proceedings following the conclusion of

  Emmis Bifurcation Decision, supra note 34, ¶ 46.   See, e.g., ICSID Arbitration Rules r 19 (‘The Tribunal shall make the orders required for the conduct of the proceeding’). 56  See, e.g., B-​ Mex, LLC et  al. v.  United Mexican States, ICSID Case No. ARB(AF)/​16/​3, Procedural Order No. 1 (Apr. 4, 2017), ¶ 14.2. 57  See, e.g., RosInvestCo. UK Ltd. v. Russian Federation, SCC Case No. Arbitration V 079/​2005, Award on Jurisdiction (Oct. 5, 2007), ¶ 8. 58  See, e.g., Ampal-​American Israel Corp. et al. v. Arab Republic of Egypt, ICSID Case No. ARB/​12/​11, Decision on Jurisdiction (Feb. 1, 2016), ¶ 32, referring to Procedural Order No. 1 (Dec. 20, 2012). 59  See, e.g., Philip Morris Asia Limited (Hong Kong) v.  Commonwealth of Australia, UNCITRAL, Procedural Order No. 4 Regarding the Procedure until a Decision on Bifurcation (Oct. 26, 2012), ¶ 74 [hereinafter Philip Morris PO4]. 60 Note, however, that a claimant may also request bifurcation of a jurisdictional issue. See Railroad Development Corporation v. Guatemala, ICSID Case No. ARB/​07/​23, Second Decision on Objections to Jurisdiction dated May 18, 2010, ¶ 10. 61  See, e.g., Philip Morris PO4, supra note 59, ¶ 66; Hulley Enterprises Ltd. (Cyprus) v. Russian Federation, UNCITRAL, PCA Case No. AA 226, Final Award (July 18, 2014), ¶ 24, referring to Procedural Order No. 10 dated May 13, 2010. 54 55

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V. Conclusion the summary procedure under ICSID Rule 41(5) (i.e. prior to the filing of the respondent’s counter-​memorial), or indeed on discrete issues of jurisdiction or admissibility as and when they arise. Finally, having ordered bifurcation, tribunals may in certain circumstances even reopen and reverse an order for bifurcation.62

V. Conclusion The factors laid out in this chapter may provide guidance for parties in making arguments 12.30 either for or against bifurcation. Nonetheless, decisions as to bifurcation are not an exact science and attempts to distil a precise formula divorced from the facts of a particular case are unlikely to succeed. As one prominent arbitrator succinctly put it (without deeming it necessary to go into any further discussion of the issue), ‘a tribunal’s decision on whether to rule on a plea concerning its jurisdiction as a preliminary question or in its final award is dependent upon whether bifurcation will bring increased efficiency to the proceedings’.63 Tribunals exercise a broad discretion under all major arbitral rules with respect to arbitral procedure (whether in the commercial or investor-​state context), of which the decision to bifurcate is simply one facet. Where it is possible to reach agreement as to the procedure, parties are well advised to avoid incurring the extra costs associated with their applications for bifurcation and responses, as well as tribunal fees. Where it is not feasible to reach agreement, parties should tailor their arguments in light of the idiosyncrasies of any given case, and frame their arguments in terms of the overarching concerns of fairness and procedural efficiency.

62  See, e.g., Churchill Mining PLC and Planet Mining Pty Ltd. v. Republic of Indonesia, ICSID Case Nos. ARB/​12/​14 and 12/​40, Procedural Order No. 15 (Jan. 12, 2015), ¶ 23; Mesa Power Group, LLC v. Canada, UNCITRAL, PCA Case No. 2012-​17, Procedural Order No. 3 (Mar. 23, 2013), ¶ 77. 63 A.-​ J.  van den Berg, on behalf of the Arbitral Tribunal in Dunkeld International Investment Ltd. v. Government of Belize, UNICTRAL, PCA Case No. 2010-​13/​DUN-​BZ, Order No. 6 (Mar. 3, 2015), ¶ (EE).

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13 BURDEN AND STANDARD OF PROOF AT THE JURISDICTIONAL STAGE Baiju S Vasani, Timothy L Foden, and Hafsa Zayyan

A. The National Identity of the Natural Person Claimant is in Dispute  13.36 B. The Claim Does Not Arise out of an ‘Investment’  13.37 C. The Claimant is Not an ‘Investor’ Within the Meaning of the BIT/​Treaty  13.39 D. Consent to Arbitrate  13.40 E. Case Already Litigated Through Domestic Courts  13.41 F. Dispute Arose Prior to the Entry of the BIT into Force  13.44 G. Dispute Barred by a Provision of the BIT/​Treaty  13.45

I. General Principles Regarding Burdens of Proof  13.01 II. Distinguishing the Burden of Proof from the Standard of Proof  13.05 III. Who Bears the Burden of Proof at the Jurisdictional Phase?  13.06

A. The Claimant Bears the Burden of Proving the Tribunal’s Jurisdiction  13.06 B. Either Party Can Bear the Burden of Proving or Disproving the Tribunal’s Jurisdiction  13.14 C. The Respondent Bears the Burden of Proof  13.25 D. The Centrist Position: Neither Party Bears the Burden of Proving the Tribunal’s Jurisdiction  13.29

IV. Who Bears the Burden of Proof Regarding Specific Jurisdictional Objections? 

V. Once the Tribunal Determines Who Has the Burden of Proof, What Standard of Proof Is Applicable at the Jurisdictional Phase?  13.46 A. Prima Facie Standard  B. The Standard Depends on the Facts  C. Establishing a Prima Facie Case 

13.35

VI. Conclusion 

13.46 13.61 13.66 13.72

I.  General Principles Regarding Burdens of Proof 13.01 It is trite law to state that ‘he who asserts must prove’. A well-​established general principle

of law holds that an actor must prove the facts on which he relies in support of his claim—​ actori incumbit probatio.1 This maxim holds true regardless of whether the actor is a claimant asserting a claim for damages or a respondent seeking counterclaims, proffering defences or requesting interim or provisional measures, document discovery, and the like.

13.02 But while this maxim may be true for most issues, how does it affect a situation where a re-

spondent party argues that the tribunal is without jurisdiction to hear the claims or counterclaims in the first place? In this case, does the respondent party, as the ‘moving party’, have to prove the lack of jurisdiction? Or is it the claimant, who is in fact claiming jurisdiction, who has to prove its existence? Or in light of the fact that jurisdiction is a matter for the

1  See Mojtaba Kazazi, Burden of Proof and Related Issues:  A Study on Evidence Before International Tribunals 54, 221 (1996); Salini Costruttori S.p.A. et al. v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/​02/​13, Award (Jan. 31, 2006).

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III.  Who Bears the Burden of Proof at the Jurisdictional Phase? tribunal to decide for itself, even sua sponte, does neither party hold the burden of proof on this issue? Other legal truisms may sketch out a rough answer to this question. For instance, one prin- 13.03 ciple states that the burden of proof is on him who affirms, and not on him who denies—​ei qui affirmat non ei qui negat incumbit probatio.2 While almost all tribunals would apply these basic maxims, however, they do not explain whether they should be applied only in relation to the proof of specific facts or whether the reference is in relation to proof of a general allegation or issue. The distinction may be of importance, because if the maxim applies in relation to proof of a specific fact, the burden could be on either the claimant (for example, positively asserting the fact that he is a national), or the respondent (for example, positively asserting that the claimant acquired the nationality of the respondent state). However, if the maxim is in respect of the proof a particular allegation (i.e. that the tribunal has jurisdiction), the burden of proof will invariably rest with the claimant. Historically, many ICSID tribunals have reached the latter conclusion (that the claimant generally bears the burden of proof ) without necessarily stating the rationale behind their conclusions. However, an increasing number of tribunals are now focusing further on this issue and stating that either party can bear the burden. There have also been further developments in the standard of proof applied at the jurisdic- 13.04 tional stage. As discussed later, investment treaty tribunals are dealing more extensively with the extent to which a party must prove certain jurisdictional facts in establishing its case. This represents a break with the past when tribunals were largely content to cite to the prima facie standard set out in Judge Higgins’ opinion in the Oil Platforms3 case, notwithstanding its inapplicability to certain jurisdictional questions.

II.  Distinguishing the Burden of Proof from the Standard of Proof At the outset, it is helpful to refer to the tribunal’s award in Rompetrol v Romania, where 13.05 (although not in the context of jurisdiction specifically, but still relevant for our purposes) the tribunal set out the difference between the terms as follows: ‘the burden of proof defines which party has to prove what, in order for its case to prevail; the standard of proof defines how much evidence is needed to establish either an individual issue or the party’s case as a whole’.4

III.  Who Bears the Burden of Proof at the Jurisdictional Phase? A. The Claimant Bears the Burden of Proving the Tribunal’s Jurisdiction The vast majority of different international arbitral tribunals have determined that the 13.06 claimant bears the burden of showing that the arbitral tribunal has jurisdiction to consider the dispute.

  Id.   Case Concerning Oil Platforms (Iran v. United States), Judgment of Nov. 6, 2003, Separate Opinion of Judge Higgins, ¶¶ 30–​39, 1996 I.C.J. Reports 803 [hereinafter Oil Platforms]. 4  Rompetrol Group N.Y. v. Romania, ICSID Case No. ARB/​06/​3, Award (May 6, 2013), at ¶ 178 [hereinafter Rompetrol v. Romania]. 2 3

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Burden and Standard of Proof at the Jurisdictional Stage 13.07 Some ICSID tribunals have explained the claimant’s burden by reference to the principle

that the party who asserts there is jurisdiction must prove the facts to support that assertion. In Bayindir v Pakistan,5 for example, in discussing the ‘onus of establishing jurisdiction’, the tribunal said that ‘[i]‌n accordance with accepted international (and general national) practice, a party bears the burden of proving the facts it asserts’, concluding that the burden lay with the claimant.6

13.08 In Tulip v Turkey7 the tribunal said:

As a party bears the burden of proving the facts it asserts, it is for Claimant to satisfy the burden of proof required at the jurisdictional phase. Here, the Parties agree that whilst the [jurisdictional] Objection was raised by Respondent, the onus remains on Claimant to establish that the requirements of [the BIT] have been satisfied, and that the Tribunal has jurisdiction.8 13.09 The tribunal in National Gas v Egypt9 also explained the claimant’s burden by reference to

the same principle:

For present purposes, this approach means that the burden of establishing jurisdiction, including consent, lies primarily upon the Claimant. Although it is the Respondent which has here raised specific jurisdictional objections, it is not for the Respondent to disprove this Tribunal’s jurisdiction. Under international law, as a matter of legal logic and the application of the principle traditionally expressed by the Latin maxim ‘actori incumbit probatio’, it is for the Claimant to discharge the burden of proving all essential facts required to establish jurisdiction for its claims.10 13.10 In a number of other cases, tribunals have asserted that the claimant bears the burden of

proving the tribunal’s jurisdiction, without explicitly stating the reasoning behind this. In Emmis v Hungary,11 for example, the tribunal said: ‘The Claimants bear the burden of proof. If the Claimants’ burden of proving ownership of the claim is not met, the Respondent has no burden to establish the validity of its jurisdictional defences’.12 The tribunal in Mihaly v Sri Lanka13 said that in order ‘to succeed on the issue of jurisdiction, the Claimant must establish the existence of jurisdiction of the Centre and of the tribunal both ratione personae and ratione materiae’.14 5  Bayindir Insaat Turizm Ticaret ve Sanayi A v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​ 29 (Nov. 14, 2005), Decision on Jurisdiction [hereinafter Bayindir v. Pakistan]. 6  Id. ¶ 190. See also Saipem S.p.A.  v.  People’s Republic of Bangladesh, ICSID Case No. ARB 05/​ 07, Decision on Jurisdiction and Recommendation on Provisional Measures (Mar. 21, 2007), at ¶ 83 [hereinafter Saipem v. Bangladesh] (The onus of establishing jurisdiction—​in accordance with accepted international practice (and generally also with national practice), a party bears the burden of proving the facts it asserts). 7  Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/​11/​ 28, Decision on Bifurcated Jurisdictional Issue (Mar. 5, 2013). 8  Id. ¶ 48. 9  National Gas S.A.E. v. Arab Republic of Egypt, ICSID Case No. ARB/​11/​7, Award (Apr. 3, 2014) [hereinafter National Gas v. Egypt]. 10  Id. ¶ 118. 11  Emmis International Holding, B.V., Emmis Radio Operating, B.V., & MEM Magyar Electronic Media Kereskedelmi és Szolgáltató Kft. v. Hungary, ICSID Case No. ARB/​12/​2, Award (Apr. 16, 2014) [hereinafter Emmis v. Hungary]. 12  Id. ¶ 171. 13  Mihaly International Corporation v.  Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​00/​2, Award (Mar. 15, 2002) [hereinafter Mihaly v. Sri Lanka]. 14  Id. ¶ 30. See also Abaclat and Others (Case formerly known as Giovanna a Beccara and Others) v.  Argentine Republic, ICSID Case No. ARB/​07/​5, Decision on Jurisdiction and Admissibility (Aug. 4, 2011), ¶ 678 (stating that it is the claimants who bear the burden to prove that all conditions for the tribunal’s jurisdiction and for the granting of the substantive claims are met); Perenco Ecuador Limited v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador, ICSID Case No. ARB/​08/​6, Decision on Jurisdiction

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III.  Who Bears the Burden of Proof at the Jurisdictional Phase? In Caratube v Kazakhstan (II)15 the claimants brought a second ICSID arbitration under the 13.11 terms of a contract after a first ICSID arbitration under the terms of a BIT had been declined by a tribunal for want of jurisdiction. The claimants argued, based on certain statements that had been made by the tribunal in the first Caratube arbitration, that there was a ‘quasi-​irrefutable presumption’ in favour of the tribunal’s jurisdiction because, inter alia, there was an ICSID clause in the relevant contract. The tribunal rejected the claimant’s arguments and concluded that the burden of proving its jurisdiction remained with the claimant. The tribunal stated that the statements of the first Caratube tribunal that in many cases an ICSID arbitration clause contained in an investment contract has been held to imply an agreement to treat a locally incorporated company as a national of another Contracting State and that such an agreement has been considered to give that company standing in the dispute and unlike an investment contract, the acceptance of an offer to arbitrate contained in an investment treaty ‘cannot create an assumption that the claimant fulfils the conditions of that offer’16

were merely general statements and did not have the effect of shifting the burden of proof to the respondent. With respect to the broad proposition of establishing that there has been a breach of the treaty for the purposes of establishing jurisdiction, many tribunals have followed the approach of Judge Higgins in her separate opinion in the International Court of Justice (ICJ) in Oil Platforms.17 In that case, the Court had to address the question: what is the test by which the Court is to make its finding in face of the respondent’s preliminary objection to its jurisdiction on grounds that the claimant’s claims did not fall under the treaty invoked.18 Judge Higgins placed the burden of proof on the claimant (on a prima facie standard). Commenting on this case, the tribunal in Plama v Bulgaria noted: This approach has subsequently been followed by several international arbitration tribunals deciding jurisdictional objections by a respondent state against a claimant investor, including Methanex v USA, SGS v Philippines and Salini v Jordan. In the last of these cases, the tribunal decided that it was up to the claimant to present its own case as it saw fit; that, in doing so, the claimant must show that the alleged facts on which it relied were capable of falling within the provisions of the treaty.19

Subsequent cases following Judge Higgins’ approach with respect to the standard of proof 13.12 have all assumed that the claimant bears the burden of proof.20 The cases mentioned are authority for the proposition that when it comes to establishing that 13.13 the tribunal has jurisdiction, the burden lies with the claimant, who (in accordance with the relevant legal maxims) must then prove the facts that support the general allegation that the tribunal has jurisdiction. (June 30, 2011), ¶ 98 (‘The burden of proof to establish the facts supporting its claim to standing lies with the Claimant’). 15  ICSID Case No. ARB/13/13, Award, (Sept. 27, 2017). 16  Id. ¶ 312. 17  Oil Platforms, supra note 3. 18  See the description in Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​ 24, Decision on Jurisdiction (Oct. 28, 2005), at ¶ 11 [hereinafter Plama v. Bulgaria]. 19  Id. ¶ 119. 20  See Pan American Energy, LLC, et al. v. Argentine Republic, ICSID Case No. ARB/​03/​13, Decision on Preliminary Objections (July 27, 2006), ¶ 50–​51 [hereinafter Pan American v. Argentina]; Plama v. Bulgaria, supra note 16, ¶ 118; Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​3, Decision on Jurisdiction (Apr. 22, 2005), ¶ 79 [hereinafter Impregilo v. Pakistan]; Bayindir v. Pakistan, supra note 5, ¶¶ 189 ff.; Telenor Mobile Communications A.S.  v.  Republic of Hungary, ICSID Case No. ARB/​04/​15, Award (Sept. 13, 2006), ¶¶ 34, 80, 100 [hereinafter Telenor v. Hungary].

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Burden and Standard of Proof at the Jurisdictional Stage B. Either Party Can Bear the Burden of Proving or Disproving the Tribunal’s Jurisdiction 13.14 In Ambiente v Argentina,21 the tribunal noted that ICSID tribunals have applied ‘several rules

regarding the burden of proof concerning facts upon which the parties rely’, notably (1) ‘the general rule that the burden of proof is with the claimant’ and (2) ‘that the burden of proof lies with the party asserting a fact, whether it being the claimant or the respondent’.22 In that case, the jurisdictional issues related to the nationality and domicile of the claimant, an Italian national. The relevant bilateral investment treaty (BIT) prevented dual nationals and persons who were resident in Argentina for a period of two years prior to making the investment from claiming the protections of the BIT. Considering the legal regime of the ICSID Convention follows general international law, the tribunal drew from the findings of the ICJ in the Avena case, where the ICJ had emphasized ‘the well-​settled principle in international law that a litigant seeking to establish the existence of a fact bears the burden of proving it’. The tribunal concluded: the burden of proof that the Claimants are Italian nationals falls on the Claimants themselves, while the burden to disprove the negative elements—​i.e. of not being Argentine (or, for that matter, dual) nationals and of not having been domiciled in Argentina for more than two years—​would fall on the Respondent’s side.23

13.15 The Dissent of Santiago Torres24 took the broader approach that has been seen in the cases

cited in the preceding section. He said that:

In the present case, the Claimants are the Party which seeks to establish the fact of being ‘protected investors’ and, therefore, by the operation of international law, the burden of proof of all positive and negative relevant elements confirming in the case the nationality and domicile requirements set forth by the applicable law, as well as of the validity of their consent to ICSID arbitration and of being a ‘protected investor’ at the time of the filing of the Request for Arbitration at ICSID corresponds to them in the first place.25 13.16 The two Philip Morris26 tribunals have taken a similar approach to the majority in Ambiente

v Argentina.27 In Philip Morris v Uruguay,28 the tribunal said that in cases where jurisdiction rests on the satisfaction of certain conditions, such as the existence of an investment and of the parties’ consent, ‘the Tribunal must apply the standard rule of onus of proof actori incumbit probatio, except that any party asserting a fact shall have to prove it’.29 More recently, in Philip Morris v Australia,30 the tribunal found:

21 Ambiente Ufficio S.p.A.  et  al. (Case formerly known as Giordano Alpi and Others) v.  Argentine Republic, ICSID Case No. ARB/​08/​9, Decision on Jurisdiction and Admissibility (Feb. 8, 2013) [hereinafter Ambiente v. Argentina]. 22  Id. ¶ 309. 23  Id. ¶ 312. 24  Ambiente v. Argentina, Dissenting Opinion of Santiago Torres Bernardez (May 2, 2013). 25  Id. ¶ 141. 26  Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) & Abal Hermanos S.A. (Uruguay) v.  Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Decision on Jurisdiction (July 2, 2013)  [hereinafter Philip Morris v.  Uruguay] and Philip Morris Asia Limited v.  Commonwealth of Australia, PCA Case No. 2012-​12, Award on Jurisdiction and Admissibility (Dec. 17, 2015 [hereinafter Philip Morris v. Australia]. 27  See Ambiente v. Argentina, supra note 22. 28  Philip Morris v. Uruguay, supra note 24. 29  Id. ¶ 29. 30  See Philip Morris v. Australia, supra note 24.

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III.  Who Bears the Burden of Proof at the Jurisdictional Phase? Specifically, it is for the Claimant to allege and prove facts establishing the conditions for jurisdiction under the Treaty; for the Respondent to allege and prove the facts on which its objections are based; and, to the extent that the Respondent has established a prima facie case, for the Claimant to rebut this evidence.31

In Alemanni v Argentina,32 the claimants failed to follow the dispute escalation procedure set 13.17 out in the BIT. The tribunal said that where ‘it is the Claimants who are advancing a justifying excuse’ for their admitted failure to pursue literally the course of action foreseen in the BIT, it followed ‘on standard principles that the Claimants carry the burden of establishing to the Tribunal’s satisfaction the facts on which they base their justification’.33 In Pac Rim Cayman v El Salvador34 the tribunal said that ‘at all times during this exercise under 13.18 CAFTA Articles 10.20.4 and 10.20.5, the burden of persuading the tribunal to grant the preliminary objection must rest on the party making that objection, namely the respondent’.35 In the Decision on Jurisdiction,36 the tribunal confirmed its view that ‘the burden lies on a claimant who asserts a positive right and on a respondent who asserts a positive answer to the claimant’.37 In Bernhard von Pezold v Zimbabwe,38 the tribunal noted that the same principles applied 13.19 with respect to the burden of proof in the particular context of jurisdiction, as they did with respect to the merits.39 It said: The general rule is that the party asserting the claim bears the burden of establishing it by proof. Where claims and counterclaims go to the same factual issue, each party bears the burden of proof as to its own contentions. There is no general notion of shifting of the burden of proof when jurisdictional objections are asserted. The Respondent in this case therefore bears the burden of proving its objections. Conversely, the Claimants must prove any facts asserted in response to the Respondent’s objections and bear the overall burden of establishing that jurisdiction exists. The main exception to the above rule is where a rebuttable presumption exists. Although it is unclear, the Respondent appears to be arguing that a rebuttable presumption exists such that the production of ‘relevant facts’ will establish a prima facie case, to be affirmatively disproven by the Claimants. The Tribunal is not aware of any rebuttable presumption operating in relation to objections to jurisdiction, and the Respondent has not offered any authority for this proposition. The Tribunal therefore considers that no such presumption applies, and that the general principle applies to require the Respondent to produce sufficient evidence to establish its objections to jurisdiction.40   Id. ¶ 495.   Giovanni Alemanni et al. v. Argentine Republic, ICSID Case No. ARB/​07/​8, Decision on Jurisdiction and Admissibility (Nov. 17, 2014) [hereinafter Alemanni v. Argentina]. 33  Id. ¶ 313. The claimants’ justification for failing to follow the procedure set out in the BIT was that, first, that it is not compulsory to pursue those routes if it is sufficiently established that resort to them would be futile; second, in the alternative, that they are entitled to invoke, via the most favored nation clause in Article 3 of the BIT, the benefits of arbitration clauses in other Argentine BITs which do not contain the same preconditions. 34  Pac Rim Cayman LLC.  v.  Republic of El Salvador, ICSID Case No. ARB/​ 09/​12, Decision on the Respondent’s Preliminary Objections Under CAFTA Articles 10.20.4 and 10.20.5 (Aug. 2, 2010) [hereinafter Pac Rim v. El Salvador]. 35  Id. ¶ 111. 36  Pac Rim v. El Salvador, Decision on the Respondent’s Jurisdictional Objections (June 1, 2012). 37  Id. ¶ 2.13. 38  Bernhard von Pezold et al. v. Republic of Zimbabwe, ICSID Case No. ARB/​ 10/​15, Award (July 28, 2015) [hereinafter von Pezold v. Zimbabwe]. 39  Id. ¶ 173. 40  Id. ¶¶ 174–​76. 31 32

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Burden and Standard of Proof at the Jurisdictional Stage 13.20 The von Pezold v Zimbabwe tribunal made clear that the claimant bore the ‘overall burden’ of

establishing jurisdiction exists, but that the respondent bore the burden of proving its objections. Crucially, the tribunal rejected any notion of a ‘rebuttable presumption’ in objections to jurisdiction that would effectively shift the burden from the respondent to the claimant after a prima facie case has been established by the respondent.

13.21 In the first Caratube v Kazakhstan41 decision, the facts of the case allowed for a shift in the

burden of proof from the claimant to the respondent when it came to showing foreign control under the ICSID Convention. In that case, the respondent had seized evidence regarding the ownership of the claimant during a raid on the claimant’s premises. The tribunal found that the respondent was in control of this evidence42 and, accordingly, the burden of proof was placed on the respondent: The Tribunal concludes that the burden is on Claimant to show that it fulfils the criteria set out by Article 25(2)(b) of the ICSID Convention and Article VI(8) of the BIT. The burden may shift with regard to issues reflected in documents that have been seized by Respondent from [the Claimant].43

13.22 In Canfor v USA,44 a NAFTA case under the UNCITRAL Rules, the tribunal stated:

[w]‌ith respect to the burden of proof, a claimant must satisfy the tribunal that the requirements of Article 1101 are fulfilled, that a claim has been brought by a claimant investor in accordance with Article 1116 or 1117, and that all preconditions and formalities under Articles 1118–​1121 are fulfilled . . . However, where a respondent State invokes a provision in the NAFTA which, according to the respondent, bars the tribunal from deciding on the merits of the claim, the respondent has the burden of proof that the provision has the effect which it alleges. That means in the present case that the United States has the burden of proof that Article 1901(c) bars the submission of claims with respect to antidumping and countervailing duty law to arbitration under Chapter 11 of NAFTA.45 13.23 The tribunal cited a NAFTA panel decision on import restrictions stating that it had

been previously concluded that ‘a contracting party invoking an exception to the General Agreement bore the burden of proving that it had met  all of the conditions of that exception’.46

13.24 In Gallo v Canada,47 a Permanent Court of Arbitration (PCA) NAFTA case, the tribunal

took the same approach, basing its conclusion on the actori incumbit probatio maxim:

the principle actori incumbit probatio is a coin with two sides: the Claimant has to prove its case, and without evidence it will fail; but if the Respondent raises defences, of fraud or otherwise, the burden shifts, and the defences can only succeed if supported by evidence marshalled by the Respondent.48

41  Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/​ 08/​12, Award (June 5, 2012) [hereinafter Caratube v. Kazakhstan]. 42  Id. ¶ 394. 43  Id. ¶¶ 367–​68. 44 Canfor Corp. et  al. v.  United States of America (Consolidated NAFTA Arbitration, UNCITRAL Rules), Decision on Preliminary Question (June 6, 2006), at ¶ 176 [hereinafter Canfor v. USA]. 45  Id. at ¶ 176. 46  Id. at ¶ 184. 47 Vito G.  Gallo v.  Government of Canada, PCA Case No. 55798, Award (Redacted) (Sept. 15, 2011) [hereinafter Gallo v. Canada]. 48  Id. ¶ 277.

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III.  Who Bears the Burden of Proof at the Jurisdictional Phase? C. The Respondent Bears the Burden of Proof In Rompetrol Group NV v Romania,49 the respondent objected to the jurisdiction of the tri- 13.25 bunal on the grounds that the claimant was not a foreign investor, and the suit did not arise out of a foreign investment because the ‘investor’ was actually a Romanian national bringing his claim through a Dutch ‘shell company’. In considering this issue, the tribunal stated: It will be seen that the jurisdictional objection entails issues of fact (whether the investments were and are under [the claimant’s] dominant control; whether the origin of the investment funds was Romanian), and issues of law (what effect such factual circumstances would have on the Tribunal’s jurisdiction to hear a complaint by the investor). The issues of fact are ones which the Respondent bears the burden of proving according to the requisite standard, in order to sustain the claims of law it bases on them. The Parties are in dispute over both the issues of fact and the issues of law.50

The tribunal ultimately dismissed the respondent’s jurisdictional objections.51 The tribunal 13.26 based this dismissal on the relevant bilateral investment treaty and ICSID Convention law governing whether the claimant was an ‘investor’ within the meaning of the BIT.52 The tribunal found that the claimant was an investor as it was incorporated under the laws of the Netherlands and consequently ‘there was no need for the Tribunal to consider whether the Respondent [had] met its burden of establishing its factual allegations in respect of any of those issues’.53 In Desert Line v Yemen,54 the tribunal also appears to move towards a showing of proof by the 13.27 respondent: ‘Under these circumstances, the Respondent has not come close to satisfying the Arbitral Tribunal that the Claimant made an investment which was either inconsistent with Yemeni laws or regulations, or failed to achieve acceptance by the Respondent’.55 In Lao Holdings v Lao,56 the Lao government’s sole objection to jurisdiction was that the 13.28 claimant was not an investor at the time the dispute arose. The respondent accepted the burden of proving when the ‘legal dispute’ arose without argument. The tribunal only noted this point and did not provide further comment.57

D. The Centrist Position: Neither Party Bears the Burden of Proving the Tribunal’s Jurisdiction A few decisions have taken a centrist ground. In Grand River v USA,58 the parties differed 13.29 as to who bore the burden of proof on disputed facts that directly impacted the existence of jurisdiction under NAFTA. The claimants argued that the respondent, as the party objecting to the tribunal’s jurisdiction, bore the burden of proof on the matter. Conversely, the respondent argued that the claimants had to show that the tribunal had jurisdiction. Both parties presented significant amounts of evidence, which the tribunal considered. Ultimately,

  Rompetrol v. Romania, supra note 4, Decision on Jurisdiction and Admissibility (Apr. 18, 2008), ¶ 50.   Id. ¶ 75 (emphasis in original). 51  Id. ¶ 116. 52  Id. ¶ 110. 53  Id. 54 Desert Line Projects LLC v.  Republic of Yemen, ICSID Case No. ARB/​ 05117, Award (Feb. 6, 2008) [hereinafter Desert Lines v. Yemen]. 55  Id. ¶ 105. 56  Lao Holdings N.V. v. Lao People’s Democratic Republic [I]‌, ICSID Case No. ARB(AF)/​12/​6, Decision on Jurisdiction (Feb. 21, 2014) [hereinafter Lao Holdings v. Lao]. 57  Id. ¶¶ 64–​67. 58  Grand River Enterprises Six Nations, Ltd. et al. v. United States (NAFTA/​UNCITRAL Arbitration), Decision on Jurisdiction (July 20, 2006) [hereinafter Grand River v. USA]. 49 50

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Burden and Standard of Proof at the Jurisdictional Stage the tribunal stated that it was not necessary to determine which party had the burden of going forwards with the evidence because both parties had produced sufficient evidence to inform a decision.59 13.30 The centrist approach was also recently taken in Muhammet Cap v Turkmenistan,60 where the

tribunal said:

The Tribunal does not accept that the burden of proof in respect of jurisdiction is on either Party. Rather, the Tribunal must determine whether it has jurisdiction, and the scope of its jurisdiction, on the basis of all the relevant facts and arguments presented by the Parties. . . . in the first instance it is for Claimants to show that the relevant requirements for the Tribunal’s jurisdiction are present, including consent to arbitration. Consent cannot be presumed and its existence must be established. By corollary, in this case, where Respondent is challenging jurisdiction, it has to adduce evidence to support its objections. Accordingly, the Tribunal has to weigh the evidence and arguments from both Parties to determine on balance whether it has jurisdiction in this matter.61 13.31 In taking this approach, however, the cases did not follow the reasoning of the tribunal in

Saipem v Bangladesh, where the tribunal rejected the respondent’s argument, based on a line of ICJ authority, that neither party bore the burden of proof.62 The Court stated that, while it realized that it was indisputable that the tribunal determined its own jurisdiction without being bound by the arguments of the parties, the ICJ had no bearing on the required test that a claimant must prove the tribunal’s jurisdiction.63

13.32 In the case cited by the respondent in Saipem v Bangladesh, the ICJ stated that neither the

claimant nor the respondent has the burden of proof in showing that a tribunal does or does not have jurisdiction over a dispute.64 In that case, Spain argued that Canada, as the party objecting to the Court’s jurisdiction, had the burden of showing that a treaty reservation it claimed exempted the dispute between the parties from ICJ jurisdiction did in fact prohibit the ICJ from hearing the case.65 The Court pointed out: [e]‌stablishment or otherwise of jurisdiction [was] not a matter for the parties but for the Court itself. Although a party seeking to assert a fact must bear the burden of proving it . . . this has no relevance for the establishment of the Court’s jurisdiction, which is a ‘question of law to be resolved in the light of the relevant facts. That being so, there is no burden of proof to be discharged in the matter of jurisdiction. Rather, it is for the Court to determine from all the facts and taking into account all the arguments advanced by the Parties . . .66

13.33 In a separate and oft-​cited opinion in that case, Judge Koroma stated that it was not neces-

sary to delve into the various arguments regarding the burden of proof in the matter because the Court’s task remained the same, to determine its own jurisdiction in light of the relevant treaty provisions.67

  Id. ¶ 37.   Muhammet Cap & Sehil Insaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No. ARB/​ 12/​6, Decision on Jurisdiction under Article VII(2) (Feb. 13, 2015). 61  Id. ¶¶ 119–​20. 62  Saipem v. Bangladesh, supra note 6, ¶¶ 89–​90. 63  Id. ¶¶ 90–​91. 64  Fisheries Jurisdiction Case (Spain v. Canada), 1998 I.C.J. 432, 1998 WL 1797317. 65  Id. ¶ 36. 66  Id. ¶ 37 (emphasis added). 67  Id. Separate Opinion of Judge Koroma, ¶ 51. 59 60

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IV.  Who Bears the Burden of Proof Regarding Specific Jurisdictional Objections? A similar approach was taken by the ICJ in the Case Concerning Border and Transborder 13.34 Armed Actions (Nicaragua v Honduras),68 where the tribunal recognized the litigants’ respective arguments as to who bore the burden of proof in proving the Court’s jurisdiction but ultimately stated that ‘[t]‌he Court will therefore in this case have to consider whether the force of the arguments militating in favour of jurisdiction is preponderant, and to “ascertain whether an intention on the part of the Parties exists to confer jurisdiction upon it” ’.69

IV.  Who Bears the Burden of Proof Regarding Specific Jurisdictional Objections? A brief recitation of various jurisdictional issues in selected ICSID cases highlights any nu- 13.35 ances and anomalies.

A. The National Identity of the Natural Person Claimant is in Dispute In Soufraki v UAE,70 the tribunal placed the burden of proof on the claimant, but shifted the 13.36 burden to the respondent where the claimant produced prima facie evidence of nationality.71 In Siag v Egypt,72 the burden of proof was also on the claimant to prove his or her national identity, despite the claimant’s argument that those objecting have the burden of establishing the lack of a tribunal’s jurisdiction.73 In Caratube v Kazakhstan,74 the tribunal found the burden of proof in establishing foreign control under ICSID Article 25(2)(b) lay with the claimant, although noted that it could shift.

B. The Claim Does Not Arise out of an ‘Investment’ In Pan American v Argentina,75 Saipem v Bangladesh,76 Mihaly v Sri Lanka,77 Jan de Nul v 13.37 Egypt,78 and Plama v Bulgaria,79 the claimant had the burden of producing prima facie evidence that an ‘investment’ existed within the meaning of the BIT or the Energy Charter Treaty (ECT) respectively (in Plama v Bulgaria).80

68  Case Concerning Border and Transborder Armed Actions (Nicaragua v. Honduras), 1989 I.C.J. 68; 1988 WL 168500. 69  Id., 1989 I.C.J. 68, ¶ 16, 1988 WL 168500, at ¶ 76. 70  Soufraki v. United Arab Emirates, ICSID Case No. ARB/​02/​7 (June 5, 2007), Decision of the Ad Hoc Committee on the Application for Annulment of Mr. Soufraki [hereinafter Soufraki v. UAE]. 71  Id. ¶ 110. See infra, on the standard of proof. 72  Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​ 15, Decision on Jurisdiction, and Partial Dissenting Opinion of Professor Francisco Orrego Vicuña (Apr. 11, 2007) [hereinafter Siag v. Egypt]. 73  Id. ¶¶ 138–​40, 193, 200. 74  Caratube v. Kazakhstan, supra note 39. 75  See Pan American v. Argentina, supra note 18, ¶¶ 48–​51, 138–​39. 76  See Saipem v. Bangladesh, supra note 6, ¶ 1ll. 77  See Mihaly v. Sri Lanka, supra note 13, ¶¶ 29–​32. 78  See Jan de Nul NV, et al. v. Egypt, ICSID Case No. ARB/​ 04/​13, Decision on Jurisdiction (June 16, 2006), ¶¶ 69–​71, 95, 104 [hereinafter Jan de Nul v. Egypt]. 79  See Plama v. Bulgaria, supra note 16, ¶¶ 131–​32. 80  See also Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Government of Mongolia, Award on Jurisdiction and Liability (Apr. 28, 2011), ¶ 200 (‘the tribunal agrees with Respondent that Claimants bear the burden of the proof to demonstrate that their investment is protected by Article 6 of the Treaty’) and Emmis v. Hungary, supra note 11, ¶ 173.

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Burden and Standard of Proof at the Jurisdictional Stage 13.38 In MHS v Malaysia,81 the claimant had the burden of showing that the contract fell within

the definition of ‘investment’ as found under Article 25(1) of the ICSID Convention, as well as the definition of ‘investment’ as contained in the BIT.82 In SCB v Tanzania,83 the tribunal placed the burden of proof on the claimant when discussing the issue of who had control of a particular investment.84

C. The Claimant is Not an ‘Investor’ Within the Meaning of the BIT/​Treaty 13.39 In Maffezini v Spain, the claimant had the burden of proving that he was an Argentine

‘investor’ in a Spanish company, thus giving rise to diversity of citizenship.85 In Plama v Bulgaria, the claimants had the burden of proving that they were investors under the ECT.86 In Rompetrol v Romania, however, that burden fell on the respondent.87

D. Consent to Arbitrate 13.40 In National Gas v Egypt,88 the tribunal placed the burden of showing consent on the

claimant.89 In ICS Inspection v Argentina,90 a PCA case, the tribunal explained:

[a]‌State’s consent to arbitration shall not be presumed in the face of ambiguity. Consent to the jurisdiction of a judicial or quasi-​judicial body under international law is either proven or not according to the general rules of international law governing the interpretation of treaties. The burden of proof for the issue of consent falls squarely on a given claimant who invokes it against a given respondent. Where a claimant fails to prove consent with sufficient certainty, jurisdiction will be declined . . .91

E. Case Already Litigated Through Domestic Courts 13.41 In Jan de Nul v Egypt, the claimant had the burden of establishing that the instant ICSID

dispute was different from a dispute heard by the Egyptian courts where the respondent advanced defences of res judicata and argued that harms caused by any court decision arose before the entry of the most recent BIT into force.92

13.42 In Rompetrol v Romania, the respondent had the burden of proving that the dispute was es-

sentially domestic in character and should have been litigated through Romanian courts.93

81 Malaysian Historical Salvors, SON, BHD v.  Malaysia, ICSID Case No. ARB/​ 05/​10, Decision on Jurisdiction (May 17, 2007) [hereinafter MHS v. Malaysia]. 82  Id. ¶ 43. 83  Standard Chartered Bank v. United Republic of Tanzania, ICSID Case No. ARB/​10/​12, Award (Nov. 2, 2012) [hereinafter SCB v. Tanzania]. 84  Id. ¶ 264 (‘control on these facts forms part of an element necessary to establish jurisdiction, by showing that the Loans were an investment ‘of ’ Claimant and made by Claimant. Failure to demonstrate such control inevitably leads the tribunal to conclude that Claimant has been unable to demonstrate its active participation in the investing process with respect to the Loans’). 85  Emilio Augustin Maffezini v. Kingdom of Spain, ICSID Case No. ARB/​97/​7, Decision of the Tribunal on Objections to Jurisdiction (Jan. 25, 2000) ¶¶ 65, 68–​70 [hereinafter Maffezini v. Spain]. 86  See Plama v. Bulgaria, supra note 16, ¶ 128. See also Alasdair Ross Anderson et al. v. Republic of Costa Rica, ICSID Case No. ARB(AF)/​07/​3, Award (May 19, 2010), ¶ 44 (‘For the tribunal to have jurisdiction in this case, each of the Claimants, under Article XII(2) has the burden to demonstrate, inter alia that he or she is ‘an investor’ as defined in Article I(h) of the BIT’). 87  See Rompetrol v. Romania, supra note 4, ¶¶ 66, 71, 110. 88  National Gas v. Egypt, supra note 9. 89  Id. ¶¶ 117–​18. 90  ICS Inspection and Control Services Limited (United Kingdom) v. Argentine Republic, PCA Case No. 2010-​9, Award on Jurisdiction (Feb. 10, 2012) [hereinafter ICS Inspection v. Argentina]. 91  Id. ¶ 280. 92  See Jan de Nul v. Egypt, supra note 76, ¶¶ 69–​71, 114–​31. 93  See Rompetrol v. Romania, supra note 4, ¶¶ 50, 110.

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V.  Standard of Proof Applicable at the Jurisdictional Phase In Saipem v Bangladesh, the claimant had the burden of showing that Bangladesh had con- 13.43 sented to ICSID arbitration for claims based on decisions of its courts, but the tribunal appeared to opt out of deciding the matter at this stage of the proceedings.94

F. Dispute Arose Prior to the Entry of the BIT into Force In Jan de Nul v Egypt, the claimant had to prove that its claims arose after the entry into force 13.44 of the most recent BIT between the contracting states.95

G. Dispute Barred by a Provision of the BIT/​Treaty In Canfor v USA, in the NAFTA context, the respondent bore the burden of proof in 13.45 establishing that a particular treaty provision barred arbitration of particular claims.96

V.  Once the Tribunal Determines Who Has the Burden of Proof, What Standard of Proof Is Applicable at the Jurisdictional Phase? A. Prima Facie Standard There is much support for the proposition that a claimant need only show prima facie evi- 13.46 dence of the tribunal’s jurisdiction to prevail at this stage of the proceedings.97 A number of ICSID tribunals98 have relied on the test set forth by Judge Higgins in her sep- 13.47 arate opinion in the ICJ Oil Platforms:99 The Court should . . . see if, on the facts as alleged by [Claimant], the [Respondent’s] actions complained of might violate the Treaty articles  . . .  Nothing in this approach puts at risk the obligation of the Court to keep separate the jurisdictional and merits phases . . . and to protect the integrity of the proceedings on the merits . . . what is for the merits (and which remains pristine and untouched by this approach to the jurisdictional issue) is to determine what exactly the facts are, whether as finally determined they do sustain a violation of [the treaty] and if so, whether there is a defence to that violation . . . In short, it is at the merits that one sees ‘whether there really has been a breach’.100

  See Saipem v. Bangladesh, supra note 6, ¶¶ 137–​38.   See Jan de Nul v. Egypt, supra note 76, ¶¶ 69–​70, 110–​36. 96  See Canfor v. USA, supra note 42, ¶ 176. 97  See, e.g., Bayindir v. Pakistan, supra note 5, ¶¶ 193–​97; Telenor v. Hungary, supra note 18, ¶¶ 34, 68; Impregilo v. Pakistan, supra note 18, ¶ 79; Pan American v. Argentina, supra note 18, ¶ 50. See also AMCO v.  Indonesia, ICSID Case No. ARB 81/​1, Decision on Jurisdiction (Sept. 25, 1983), ICSID Reports 389, 405; Int’l Thunderbird Gaming Corp. (U.S.) v. Mexico (UNCITRAL), Procedural Order No. 4 (Dec. 24, 2003) (the decision in Thunderbird does not contradict AMCO: it appears that the factual determination will be performed by the tribunal at the merits phase; the jurisdictional requirement being satisfied by establishing a prima facie claim); Desert Line Projects LLC v. Yemen, ICSID Case No. ARB/​05/​17, Award (Feb. 6, 2008); Siag v.  Egypt, supra note 70; Saipem v.  Bangladesh, supra note 6; Helnan International Hotels A/​S v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​19, Decision on Jurisdiction (Oct. 17, 2006); Azurix v.  Argentine Republic, ICSID Case No. ARB/​01/​12, Award (July 14, 2006); El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/​03/​15, Decision on Jurisdiction (Apr. 27, 2006). 98  Cited in Siag v. Egypt, supra note 70, ¶ 139; see also Saipem v. Bangladesh, supra note 6, ¶ 85; United Parcel Service of America, Inc. v. Canada, Arbitration under Chapter 11 of the North American Free Trade Agreement (Nov. 22, 2002), Award on Jurisdiction, 35–​37 [hereinafter UPS v. Canada]; Jan de Nul v. Egypt, supra note 76, at 70. 99  Oil Platforms, supra note 3. 100  Id. ¶¶ 33–​34. 94 95

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Burden and Standard of Proof at the Jurisdictional Stage Further, The only way in which, in the present case, it can be determined whether the claims of [Claimant] are sufficiently plausibly based upon the . . . [t]‌reaty is to accept pro tem the facts as alleged by [Claimant] to be true and in that light to interpret [the relevant articles of the treaty] for jurisdictional purposes, that is to say, to see if on the basis of [Claimant’s] claims of fact there could occur a violation of one or more of them.101 13.48 However, Zachary Douglas QC102 argues that a prima facie standard is a ‘manifestly un-

sound’ approach to take outside of two specific situations, namely (1) in cases of requests for urgent or provisional measures, and/​or (2) where the legal foundation of the claim is being characterized (i.e. with respect to jurisdictional objections rationae materiae that question whether the claim is actually a breach of the substantive provisions of the treaty, i.e. whether the claims fall within the scope of the agreement to arbitrate). Douglas’ rationale is that the question of jurisdiction is a question of law that must be answered like any other by applying law to the facts, since once jurisdiction is upheld, there is no procedural imperative to revisit the question on the merits.

13.49 With respect to Douglas’ exceptions, he argues that in the case of urgent or provisional

measures, the circumstances may not permit the tribunal to make exhaustive enquiries into the law and facts in order to first establish it has jurisdiction. As regards the applicability of the prima facie standard with respect to jurisdiction rationae materiae, Douglas explains that the tribunal is not in a position to make a definitive ruling on the veracity of all the facts as pleaded by the claimant, and the issues to which the standard is applied are destined to be revisited in the tribunal’s examination of the merits of the case.

13.50 Douglas distinguishes, for example, the case where the claimant’s nationality is in issue. The

tribunal must determine definitively, by a full analysis of the facts, whether the claimant has the requisite nationality. In contrast, the tribunal can adopt a prima facie standard in cases where the argument concerns whether the claim is a treaty or a contract claim, and thus whether it falls within the scope of the agreement to arbitrate. He states that: Contrary to the approach that may be detected in many investment treaty precedents, the prima facie test advocated . . . is not a freestanding threshold of plausibility that, once satisfied, merely ensures the safe passage of claims to a hearing on the merits. Its deployment is rather linked to the assessment of the tribunal’s jurisdiction ratione materiae; it is a tool for the characterization of the claims in the preliminary phase of the arbitration at which point a full investigation of the evidentiary record is impractical and a definitive ruling on the merits of the substantive legal arguments impossible.103

13.51 Some decisions appear to reflect the distinction drawn by Douglas, although not explicitly.

In Telenor v Hungary,104 for example, while the tribunal stated that ‘any claimant resisting objections to jurisdiction’ must cross an ‘initial threshold’ by adducing facts ‘showing a prima facie case in favour of jurisdiction if the arbitration is to proceed to a hearing on the merits’,105 the only jurisdictional objections actually being made were with respect to alleged breaches of treaty. In UPS v Canada, the tribunal also adopted the prima facie standard by reference to Oil Platforms when discussing the ‘scope’ of the treaty.106 All of Canada’s jurisdictional

  Cited in Plama v. Bulgaria, supra note 16, ¶ 118.  Z. Douglas, The International Law of Investment Claims, (2010, reprinted 2012). 103  Id. 104  Telenor v. Hungary, supra note 18. 105  Id. ¶ 34. 106  See UPS v. Canada, supra note 96, ¶¶ 33–​36 and ¶ 4 for a summary of UPS’s jurisdictional objection. 101 102

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V.  Standard of Proof Applicable at the Jurisdictional Phase objections in that case related to breaches of treaty (with the exception of those related to UPS’s manner of pleading).107 In Impregilo v Pakistan,108 the tribunal stated that, with respect to the jurisdictional question 13.52 of whether the relevant actions were breaches or treaty or breaches of contract, it would determine its jurisdiction by assuming, pro tem, that the claimant could establish the facts upon which it relied and assess whether those facts established breaches of the BIT.109 In Phoenix v Czech Republic110 the tribunal came closer to outlining more clearly Douglas’ 13.53 distinction. The claimant, an Israeli investor, argued that the tribunal had to accept its allegations regarding jurisdiction as true.111 The tribunal stated that acceptance of factual allegations was only half of the test and employed a heightened pleading standard at the jurisdictional phase, which it referred to as a ‘double approach’: factual matters should provisionally be accepted at face value, since the proper time to prove or disprove such facts is during the merits phase. But when a particular circumstance constitutes a critical element for the establishment of the jurisdiction itself, such fact must be proven, and the Tribunal must take a decision thereon when ruling on its jurisdiction. In our case, this means that the Tribunal must ascertain that the prerequisites for its jurisdiction are fulfilled, and that the facts on which its jurisdiction can be based are proven.112

In other words, if jurisdiction rests on alleged facts that are in material dispute between the 13.54 parties, the tribunal cannot accept the facts as true and must decide upon the contested facts.113 In the annulment decision in Soufraki v UAE,114 the ad hoc Committee stated that the 13.55 claimant had the burden of proving his nationality and that, if he failed to do so, the tribunal would ‘not have jurisdiction to hear the case on the merits’.115 The original tribunal had found that the claimant’s presentation of certificates of Italian nationality (ordinarily prima facie evidence of nationality) was fraught with irregularities and did not shift the burden onto the respondent.116 The tribunal had had significant doubts as to the authenticity of the certificates, and, according to the ad hoc Committee, correctly required the claimant to prove his identity to the satisfaction of the tribunal under international rules of evidence regarding admissibility.117 The claimant was unable to do so.118 A number of more recent cases reflect Douglas’ distinction more explicitly. In Gallo v Canada, 13.56 the tribunal followed the Phoenix v Czech Republic approach, by explaining that ‘[i]‌f jurisdiction rests on the existence of certain facts, these must be proven at the jurisdictional

  Id. ¶¶ 118 –​22.   Impregilo v. Pakistan, supra note 18, ¶ 79. 109  Id. ¶¶ 263, 266. The standard of proof was not explicitly addressed in respect of Pakistan’s other objections. See also Bayindir v. Pakistan, supra note 5, where the standard of proof in respect of the non-​rationae materiae objections was not addressed (¶¶ 104 ff., 193 ff.); and Philip Morris v. Uruguay, supra note 24, ¶ 29 (‘it is commonly accepted that at the jurisdictional stage the facts as alleged by the claimant have to be accepted when, if proven, they would constitute a breach of the relevant treaty’). 110  Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/​05/​5 (Apr. 15, 2009), Award, ¶¶ 58–​ 64 [hereinafter Phoenix v. Czech Republic]. 111  Id. ¶ 58. 112  Id. ¶¶ 61–​64. 113  Id. ¶ 63. 114  Soufraki v. UAE, supra note 68, ¶¶ 78, 108–​109. 115  Id. ¶ 109. 116  Id. ¶¶ 16, 75, 109. 117  Id. ¶¶ 75, 109–​13. 118  Id. ¶¶ 113–​14. 107 108

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Burden and Standard of Proof at the Jurisdictional Stage stage—​only the alleged violations of the treaty affording jurisdiction (in this case the NAFTA) can be accepted pro tem’.119 13.57 In Planet Mining v Indonesia,120 the tribunal also explained the correct standard in the same

way as Douglas:

At the jurisdictional stage, the Claimant must establish (i) that the jurisdictional requirements of Article 25 of the ICSID Convention and of the Treaty are met, which includes proving the facts necessary to meet these requirements, and (ii) that it has a prima facie cause of action under the Treaty, that is, that the facts it alleges are susceptible of constituting a breach of the Treaty if they are ultimately proven. The Tribunal finds that this test strikes a proper balance between a more exacting standard which would call for examination of the merits at the jurisdictional stage, and a less exacting standard which would confer excessive weight to the Claimant’s own characterization of its claims.121 13.58 In Emmis v Hungary,122 describing the Phoenix Action approach as ‘accepted practice’, the

tribunal said that that there are ‘two types of jurisdictional proof ’:

The first relates to questions of fact that must be definitively determined at the jurisdictional stage. The second involves questions of fact that go to the merits, which the Tribunal must ordinarily not prejudge, unless they are plainly without foundation. This latter question necessarily involves assessing whether the alleged conduct of the Respondent is capable of constituting a breach of the substantive protections of the investment treaty so as to fall within the jurisdiction of the Tribunal ratione materiae but this has to be determined on a prima facie basis only. . . . the burden of proving that [the Claimants] owned an investment capable of expropriation . . . lies fully within the ambit of the jurisdictional phase. This burden is to be contrasted with the need to establish on a prima facie basis at the jurisdictional phase that the Respondent breached the treaty . . . Issues that are essential to establish jurisdiction, such as the existence or ownership of a covered investment, must be dealt with decisively in the jurisdictional phase.123 13.59 There are a number of other recent cases following the Phoenix/​Douglas distinction.124 13.60 While Douglas’ distinction appears to be the accepted approach, some older decisions

did not deal with the standard of proof in an in-​depth manner. For instance, in Plama v Bulgaria, for example, the claimant argued that the tribunal had jurisdiction under a BIT, the ECT, and the ICSID Convention.125 Stating in language that has since been quoted

  Gallo v. Canada, supra note 45, ¶ 277.   Planet Mining Pty Ltd. v. Republic of Indonesia, ICSID Case No. ARB/​12/​14 and 12/​40, Decision on Jurisdiction (Feb. 24, 2014) [hereinafter Planet Mining v. Indonesia]. 121  Id. ¶ 96. 122  Emmis v. Hungary, supra note 11. 123  Id. ¶¶ 172–​74. 124  See National Gas v.  Egypt, supra note 9, at ¶ 118 (‘jurisdictional facts are not here subject to any “prima facie” evidential test; and, in any event, that test would be inapplicable at this stage of the arbitration proceedings where the Claimant (as with the Respondent) had sufficient opportunity to adduce evidence in support of its case on the bifurcated jurisdictional issues and for the tribunal to make final decisions on all relevant disputed facts’); Khan Resources Inc., et al. v. Government of Mongolia, UNCITRAL, Decision on Jurisdiction (July 25, 2012), citing Phoenix v. Czech Republic (n 108) ¶ 322 (‘in the tribunal’s view, facts relevant only to the tribunal’s determination on jurisdiction must be proven at the jurisdictional stage. By contrast, facts relevant only to the merits need not be proven at this stage’); Société Générale de Surveillance S.A. v. Republic of Paraguay, ICSID Case No. ARB/​07/​29, Decision on Jurisdiction (Feb. 12, 2010), ¶¶ 52–​53; Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​12/​20, Award (Apr. 26, 2017), ¶¶ 66–​73. 125  Plama v. Bulgaria, supra note 16, ¶ 116. 119 120

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V.  Standard of Proof Applicable at the Jurisdictional Phase elsewhere, the tribunal said that it did ‘not understand that Judge Higgins’ approach [was] in any sense controversial’,126 and it applied the prima facie test to find, inter alia, that the claimant had presented sufficient facts to establish that (1) it was an ‘investor’ under Article 1(7) of the ECT that had legal identity in Cyprus despite the respondent’s argument that it was a mere ‘mail box company’, (2) the dispute related to an ‘investment’, and (3) the respondent’s actions might have violated the protection obligations imposed upon it by Part III of the ECT.127

B. The Standard Depends on the Facts A number of tribunals have suggested that different standards apply depending on whether 13.61 the facts alleged go to the merits of the case or to the jurisdiction of the tribunal. In a similar fashion to the line of authority supporting Douglas’ distinction as set out previously, the tribunal in Pac Rim v El Salvador128 explained that: factual matters should provisionally be accepted at face value, since the proper time to prove or disprove such facts is during the merits phase. But when a it is impermissible for the Tribunal to found its jurisdiction on any of the Claimant’s CAFTA claims on the basis of an assumed fact (i.e. alleged by the Claimant in its pleadings as regards jurisdiction but disputed by the Respondent). The application of that ‘prima facie’ or other like standard is limited to testing the merits of a claimant’s case at a jurisdictional stage; and it cannot apply to a factual issue upon which a tribunal’s jurisdiction directly depends, such as the Abuse of Process, Ratione Temporis and Denial of Benefits issues in this case. In the context of factual issues which are common to both jurisdictional issues and the merits, there could be, of course, no difficulty in joining the same factual issues to the merits. That, however, is not the situation here, where a factual issue relevant only to jurisdiction and not to the merits requires more than a decision by a tribunal.129

In Gustav Hamester v Ghana,130 the tribunal said:

13.62

For a jurisdictional objection to prosper, it has to be such a definitive impediment that the Tribunal has no right to entertain, or enquire into, the dispute. If, for example, one takes the jurisdictional requirements ratione personae as set out in Article 25 of the ICSID Convention, i.e. that the dispute is a legal dispute between a Contracting State of the ICSID Convention and investors of another Contracting State, the determinative criteria are clear and easily answered: the two Parties must respectively be a foreign investor from a Contracting State, and a Contracting State, for jurisdiction to exist. . . . If jurisdiction rests on the existence of certain facts, they have to be proven at the jurisdictional stage. However, if facts are alleged in order to establish a violation of the relevant BIT, they have to be accepted as such at the jurisdictional stage, until their existence is ascertained (or not) at the merits stage.131

For facts which go to both jurisdiction and merits, the tribunal acknowledged that the ques- 13.63 tion would not always be ‘clear-​cut’.132 In that case, the second jurisdictional objection was

  Id.; Siag v. Egypt, supra note 70, ¶ 140.   Plama v. Bulgaria, supra note 16, ¶¶ 31, 126, 128, 131–​32, 151. 128  Pac Rim v. El Salvador, supra note 34. 129  Id. ¶ 2.8. 130  Gustav F.W. Hamester GmbH & Co. K.G. v. Republic of Ghana, ICSID Case No. ARB/​07/​24, Award (June 18, 2010) [hereinafter Gustav Hamester v. Ghana]. 131  Id. ¶¶ 141, 143. 132  Id. ¶ 140. 126 127

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Burden and Standard of Proof at the Jurisdictional Stage based on the argument that the acts complained of were not attributable to Ghana. The tribunal concluded that it was necessary to take a ‘practical’ approach: [T]‌he question of ‘attribution’ does not, itself, dictate whether there has been a violation of international law. Rather, it is only a means to ascertain whether the State is involved. As such, the question of attribution looks more like a jurisdictional question. But in many instances, questions of attribution and questions of legality are closely intermingled, and it is then difficult to deal with the question of attribution without a full enquiry into the merits. In any event, whatever the qualification of the question of attribution, the Tribunal notes that, as a practical matter, this question is usually best dealt with at the merits stage, in order to allow for an in-​depth analysis of all the parameters of the complex relationship between certain acts and the State.133 13.64 This kind of practical distinction had been alluded to in an earlier case, PSEG v Turkey.134 In

that case, the respondent had raised a number of jurisdictional objections relating, inter alia, to whether there was an investment, the consent of the state to arbitration, and the claimant’s alleged failure to follow the correct procedure.135 The tribunal reasoned: The Tribunal is aware that the prima facie test has been applied in a number of cases, including ICSID cases such as Maffezini and CMS, and that as a general approach to jurisdictional decisions it is a reasonable one. However, this is a test that is always case-​specific. If, as in the present case, the parties have views which are so different about the facts and the meaning of the dispute, it would not be appropriate for the Tribunal to rely only on the assumption that the facts as presented by the Claimants are correct. The Tribunal necessarily has to examine the facts in a broader perspective, including the views expressed by the Respondent, so as to reach a jurisdictional determination, keeping of course separate the need to prove the facts as a matter pertaining to the merits. This is what the Tribunal will do.136

13.65 The tribunal in Libananco v Turkey,137 citing Phoenix v Czech Republic, said that it was ‘not

required to make a pro tem assumption of the truth of a fact if the evidence of that fact has been fully presented, and sufficient evidence exists for the tribunal to make an informed and dispositive finding at this stage’. It continued that it would not be right to adopt the prima facie standard in that case, where the proceedings had been bifurcated: The Tribunal agrees with the tribunal in PSEG that whether or not the prima facie test should be applied when deciding a jurisdictional challenge is case-​specific. In this case, the Tribunal made the decision for a bifurcation of proceedings to hear the Preliminary Jurisdictional Objections first, on the basis that any of these objections, if successful, would be dispositive of the case. Full evidence and argument on all factual and legal issues relating to the Preliminary Jurisdictional Objections has been received and heard by the Tribunal. It would wholly defeat the purpose of bifurcation if the Tribunal were to now assess only whether the Claimant has provided prima facie evidence of ownership of the share certificates, and allow the proceedings to move to the merits on that basis, leaving the question of the substantive ownership of the shares still to be determined.

  Id. ¶¶ 143–​44.   PSEG Global, Inc., North American Coal Corporation, and Konya Ilgin Elektrik Dretim ve Ticaret Limited Sirketi v. Turkey, ICSID Case No. ARB/​02/​5, Decision on Jurisdiction (June 4, 2004) [hereinafter PSEG v. Turkey]. 135  Id. ¶ 61. 136  Id. ¶¶ 64 and 65. 137  Libananco Holdings Co. Ltd. v.  Republic of Turkey, ICSID Case No. ARB/​ 06/​8, Award (Sept. 2, 2011) [hereinafter Libananco v. Turkey]. 133 134

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V.  Standard of Proof Applicable at the Jurisdictional Phase C. Establishing a Prima Facie Case The tribunal in the Continental Casualty v Argentina138 case explained what a prima facie 13.66 examination entailed in terms of the factual and legal foundation of the case. The tribunal concluded that the claimant’s presentation is decisive with respect to the facts, unless the respondent presents evidence to the contrary. In order to determine its jurisdiction, the Tribunal must consider whether the dispute, as presented by the Claimant, is prima facie, that is at a summary examination, a dispute that falls generally within the jurisdiction of ICSID and specifically within that of an ICSID Tribunal established to decide a dispute between a U.S. investor and Argentina under the BIT. The requirements of a prima facie examination for this purpose have been elucidated by a series of international cases. The object of the investigation is to ascertain whether the claim, as presented by the Claimant, meets the jurisdictional requirements, both as to the factual subject matter at issue, as to the legal norms referred to as applicable and having been allegedly breached, and as to the relief sought. For this purpose the presentation of the claim as set forth by the Claimant is decisive. The investigation must not be aimed at determining whether the claim is well founded, but whether the Tribunal is competent to pass upon it. As to the facts of the case, the presentation of the Claimant is fundamental: it must be assumed that the Claimant would be able to prove to the Tribunal’s satisfaction in the merits phase-​the facts that it invokes in support of its claim. This does not mean necessarily that the ‘Claimant’s description of the facts must be accepted as true’, without further examination of any type. The Respondent might supply evidence showing that the case has no factual basis even at a preliminary scrutiny, so that the Tribunal would not be competent to address the subject matter of the dispute as properly determined. In such an instance the Tribunal would have to look to the contrary evidence supplied by the Respondent and should dismiss the case if it found such evidence convincing at a summary exam.  . . .  As to the legal foundation of the case, in accordance with accepted judicial practice, the Tribunal must evaluate whether those facts, when established, could possibly give rise to the Treaty breaches that the Claimant alleges, and which the Tribunal is competent to pass upon. In other words those facts, if proved to be true, must be ‘capable’ of falling within the provision of the BIT and of having provoked the alleged breach.139

It is important to note, however, that for the claimant to discharge its prima facie burden to 13.67 prove that the tribunal has jurisdiction, it must more than merely ‘label’ its claims without any proof.140 In Pan American v Argentina, the tribunal explained this proposition:  ‘[f ]‌or if everything were to depend on characterizations made by a claimant alone, the inquiry to jurisdiction and competence would be reduced to naught, and tribunals would be bereft of the compétence de la compétence enjoyed by them under Article 41(1) of the ICSID Convention’.141 Moreover, the claimant must satisfy the tribunal that jurisdiction is evident for each pro- 13.68 vision of the BIT or convention under which the claimant seeks to invoke the tribunal’s jurisdiction.142

138  Continental Casualty Company v. Argentina, ICSID Case No. ARB/​ 03/​9, Decision on Jurisdiction (Feb. 22, 2006) [hereinafter Continental Casualty v. Argentina]. 139  Id. ¶¶ 60–​63. 140  See Pan American v. Argentina, supra note 18, ¶ 50. See also UPS v. Canada, supra note 96, ¶ 34 (mere assertions that a dispute is within the tribunal’s jurisdiction are not conclusive). 141  Pan American v. Argentina, supra note 18, ¶ 50. 142  UPS v. Canada, supra note 96, ¶ 34.

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Burden and Standard of Proof at the Jurisdictional Stage 13.69 Several cases do not explicitly state the standard of proof applicable but simply state that

the burden falls on the claimant (in most cases) or the respondent (in a limited number of cases).143

13.70 A number of tribunals, however, while adopting the prima facie standard, have stated that

under certain circumstances a more thorough inquiry is required. In SGS v Pakistan,144 the tribunal noted: [I]‌f the facts asserted by the Claimants are capable of being regarded as alleged breaches of the BIT consistently with the practice of ICSID tribunals, the Claimant should be able to have them considered on their merits . . . We do not exclude the possibility that there may arise a situation where the Tribunal may find it necessary at the very beginning to look behind the Claimant’s factual claims but this is not such a case.145

13.71 The tribunal in AES v Argentina146 discussed the burden of proof based on the prima facie

standard. However, when the respondent questioned the ‘probative value’ of the evidence submitted by the claimant to prove its ownership and control (which consisted of a collection of witness statements), the tribunal held: It is consequently for the Tribunal to appreciate whether it is satisfied at this stage that the material and information provided by AES is accurate for evidencing its ownership and control of all the companies concerned. In this respect, the Tribunal notes that production of expert and witnesses reports is common practice in international arbitration. . . . Without excluding the possibility of requiring Claimant, later in the course of proceedings, to produce further evidence of ownership and control of its subsidiaries in Argentina, pursuant to Rule 34 mentioned above as well as to Article 1 of the Protocol of the US-​ Argentina BIT, the Tribunal considers that it was so far sufficiently informed and has no reason to consider in essence the kind of material produced by AES in this respect to be inaccurate.147

VI. Conclusion 13.72 Recent decisions in international arbitration law demonstrate that the burden of proof at the

jurisdictional phase is an issue in flux. Despite a long line of decisions holding, perhaps simplistically, that the burden lies with the claimant, many recent cases have suggested that it can lie with either party, depending on which party is asserting the particular fact.

13.73 The question of the standard of proof is inextricably linked to the question of burden. If the

claimant is only required to demonstrate jurisdiction to a prima facie standard before the burden shifts to the respondent to disprove the claimant’s allegations, the next question is what standard must the respondent meet? Although not touched upon in any detail by ICSID tribunals, if the standard is higher than prima facie, which it probably would be, it is arguable that the burden being on the claimant is in reality illusory. Tribunals historically have relied on the Higgins framework that places a prima facie burden on the claimant to establish

143  See Mihaly v. Sri Lanka, supra note 13, ¶ 30; see Rompetrol v. Romania, supra note 4, ¶ 75; see Maffezini v. Spain, supra note 83, ¶ 69; see Canfor v. USA, supra note 42, ¶¶ 170–​76 (also referring to prima facie standard); see UPS v. Canada, supra note 96, ¶¶ 33–​37; see Siag v. Egypt, supra note 70, ¶¶ 138–​41. 144  SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​01/​ 13, Decision of the tribunal on Objections to Jurisdiction (Aug. 6, 2003). 145  Id. ¶ 145. 146  AES Corporation v. Argentine Republic, ICSID Case· No. ARB/​02/​17, Decision on Jurisdiction (Apr. 26, 2005). 147  Id. ¶¶ 83–​84.

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VI. Conclusion the tribunal’s jurisdiction, but there have been significant departures from this approach in recent years, suggesting that claimants prove facts crucial to the existence of jurisdiction.148 This approach would remove the question of what happens if or when the burden shifts back to the respondent, but there is no general consensus or consistent approach taken in modern investment arbitration decisions, underscoring the still dynamic nature of international investment arbitration as a jurisprudential system.

  See Phoenix v. Czech Republic, supra note 108, ¶¶ 62–​64.

148

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14 ATTRIBUTION State Organs and Entities Exercising Elements of Governmental Authority Georgios Petrochilos

I. Introduction  II. What Are State Organs? 

IV. Inexistence of ‘Non-justiciable’ Acts of state Organs  V. Attribution of Representations 

14.01 14.10

A. Internal Law is the Source of Legal Data, Not Classifications  14.16 B. Institutional Separateness or Lack Thereof  14.21 III. Para-​statal Entities  14.32 A. ‘Governmental Authority’  14.37 B. Acts in Exercise of Governmental Authority  14.44

14.58 14.67

A. Representations Frustrated by Later Conduct  14.68 B. Contractual breaches actionable under umbrella Clauses  14.78 VI. Conclusion  14.92

I. Introduction 14.01 Not all acts which occur within the jurisdiction of a state can engage its international respon-

sibility. The conduct in question must be that of the state. Attribution is the legal operation by which the allegedly wrongful deed is connected to the state as the doer. This is a necessary operation, serving as it does the needs of the unitary conception of the state in international law: the conduct of the multitude of persons and entities through whom the state in fact operates must be funnelled through the rules on attribution.1

14.02 Attribution is a legal, rather than simply factual, operation, because the connecting factors

rest on a legal characterization of the actor or the act, or both—​notably, whether the conduct identified is that of a state ‘organ’ or that of an entity exercising ‘elements of the governmental authority’. These characterizations reflect normative choices about the conduct which international law compels states to be answerable for.2 Nevertheless, attribution is not a legal fiction: the connecting factors must exist in fact. This distinguishes attribution from certain domestic law categories of imputed liability for acts of third parties, such as superior/​employee relationship, agency, and mandate. Attribution is different from imputation, in that it is concerned with identifying acts which are in fact those of the state.

1  It follows that the rules of attribution operate exclusively on the plane of international law. They cannot be relied upon either to create or to set aside legal personality on the plane of domestic law. 2  See Luigi Condorelli & Claus Kress, The Rules of Attribution:  General Considerations, in The Law of International Responsibility 221, 227 (J. Crawford, A. Pellet & S. Olleson eds., 2010); James Crawford, State Responsibility: The General Part 115 (2013) [hereinafter Crawford, State Responsibility].

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I. Introduction Although attribution is a necessary condition for international responsibility, it is not suffi- 14.03 cient. Responsibility for a wrongful act arises when the act is both attributable and in breach of an international obligation of the state. But identifying which acts are attributable to the state permits the cause of action to take shape. Particularly important in this context is whether the actionable conduct consists in an action or omission of the state itself, as distinct from a failure on the part of the state to exercise preventive ‘due diligence’, or after-​the-​ event remedial functions, or some other positive obligation. For example, if land owned by a foreign investor has been occupied without valid justification, the rules of attribution will determine whether the occupants are state actors such that the state can be said to be responsible for the occupation itself,3 rather than for a failure to avert the occupation or expel the non-​state occupants thereafter.4 Those are distinct causes of action, each involving separate legal duties on the part of the state.5 A caveat must be entered at the outset. There is nothing to prevent states from undertaking 14.04 obligations in respect of conduct that would not be attributable to them; nor is this a rare occurrence in treaty practice. Often, an obligation of this kind is expressed as a duty to ensure that any person involved in a certain activity will comply with certain standards.6 In other cases, the substantive obligation will more broadly call for the achievement (or the avoidance) of a specified result, by means left entirely to the discretion of the state. If, for example, the obligation is that certain production quotas be met, it is not a valid defence to say that the conduct of the entity that has been charged with meeting the quotas and failed to do so is not attributable to the state. What matters is only whether or not the promised result has been achieved.7 Similarly, if the obligation is to prevent a certain activity from occurring at all (e.g. an anti-​competitive practice, or the production of land mines), then it does not matter that the prohibited activity was undertaken by a person whose acts are not attributable to the state.8 Analytically, in all such cases the substantive law obligation on the part of the state consists in ensuring that third parties will take, or abstain from, certain action. In short, it is accurate to say that the rules of attribution are generally applicable in determining state

3  For example, on the basis that the land has been occupied by the of the state or by private persons incited by state officials. See Tradex Hellas SA v. Albania (1999), ICSID Case No. ARB/​94/​2, ¶¶ 116, 123–​25, 135–​36, 147, 165–​69, 175, 198; and cf. Yeager v. Iran (1987-​IV) 17 IUSCTR 92, ¶¶ 35–​36. 4   Cf. U.S. Diplomatic and Consular Staff in Tehran, I.C.J. Reports 1980, 3, ¶¶ 58 ff.; and Wena Hotels Ltd. v. Egypt, ICSID Case No. ARB/​98/​4, Award (Dec. 8, 2000), ¶¶ 85, 88, 99. 5   See further the examples discussed by R. Dolzer & C. Schreuer, Principles of International Investment Law 204–​205 (2008); and contrast the approach of the European Commission with that of the European Court of Human Rights in Costello-​Roberts v. UK, regarding the way in which disciplinary action by headmasters in private schools could result in responsibility of the state: see (1995) 19 EHRR 112, 119–​20 (Commission); and Series A, No. 247-​C (1993) ¶¶ 27–​28 (Eur. Ct. H.R.). Cf. also Concluding Observations of the Committee on Economic, Social and Cultural Rights: Iran, U.N. Doc. E/​C.12/​1993/​7 (1993) ¶ 7 (responsibility of state for not preventing issuance of fatwahs by religious authorities). 6  See U.N. Convention on the Law of the Sea (Dec. 10, 1982) 1833 U.N.T.S. 3, art. 139(1)–​(2) (responsibility for acts of non-​state actors and for persons ‘sponsored’ under art. 153(2)(b)); the examples from treaty practice in G. Christenson, Attributing Acts of Omission to the State, 12 Mich. J. Int’l L. 312, 356 (1990); and see infra note 108 in respect of the Energy Charter Treaty and the NAFTA Agreement. 7  Cf. GAMI Investments v. Mexico (2005), 44 I.L.M. 545, ¶¶ 52–​ 110 (sugar programme) [hereinafter GAMI]; United Parcel Service of America v. Canada, ICSID Case No. U.N.CT/​02/​1, Award (2007), ¶ 69; and EC Commission Communication to the Member States: Application of Articles 92 and 93 of the EC Treaty, [1993] OJ C307/​3, ¶ 21 and the references to case law (state aid: status of bodies administering aid and source of funding for such aid irrelevant). 8  See Young, James & Webster v. UK, Series A, No. 44 (1981) ¶ 49 (obligation of the U.K. was to prohibit closed-​shop employment arrangements; unnecessary to find whether acts of the British Railways Board engage the international responsibility of the U.K.).

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Attribution responsibility but incorrect to suggest that they are equally relevant in the same way in every case: much turns on the content of the substantive obligation that applies. 14.05 The vast majority of investment treaties do not contain special rules of attribution, so they

are to be read in the light of general international law in that respect.9 Arguably, however, exceptions setting forth a lex specialis may be found in the NAFTA Agreement, the ECT, and certain US BITs which contain provisions in respect of state enterprises and monopolies.10

14.06 In addition to their direct application to questions of responsibility, rules of attribution may

also be indirectly relevant to questions of standing and eligibility of state-​owned entities purporting to act as investors, under Article 25(2)(b) of the ICSID Convention11 and investment treaties. By contrast, attribution is not a necessary ingredient of a showing of corruption as a matter of international law. What is typically required is the corruption of a person who was a state official, not that the official was acting in an official capacity on behalf of the state.12

14.07 Because lack of attribution can dispose of any state responsibility without examination of the

legality of the relevant conduct, pleas of non-​attribution are on occasion framed as ratione personae jurisdictional objections—​for example on the footing that the investor’s pleaded case in reality involves a dispute with third parties, rather than the respondent state. Analytically, however, issues of attribution undeniably go to the merits, being a necessary component of any state responsibility. That is not of course to say that questions of attribution cannot be presented as threshold questions—​for instance as part of a defence that the facts as pleaded make out no colourable claim—​nor to deny that it may be procedurally efficient and just to determine them in preliminary proceedings. It is simply to say that even on the view that questions of attribution can be characterized as jurisdictional,13 they are capable of being determined preliminarily only if they present ‘fairly cut-​and-​dry’ legal and factual issues that are severable from the merits of the case.14

14.08 The rules of general international law on attribution have been codified by the International

Law Commission (ILC) in the Draft Articles on Responsibility of States for Internationally Wrongful Acts.15 The ILC Articles purport to codify custom, and several of their provisions

9  An exception is art. 2 of the 2006 prototype French BIT, reprinted in Dolzer & Schreuer, supra note 5 at 360, which deals with federated states of federal unions, regions, local bodies, and entities for whose international relations a contracting state is responsible. The provision restates parts of the general law of attribution but does not vary it. 10  See infra ¶ 14.34. 11  See Československá Obchondni Banka AS v. Slovak Republic, ICSID Case No. ARB/​97/​4 (Dec. 129, 2004), ¶¶ 17, 20, 23–​25; and cf. Peter Pázmány University, P.C.I.J, Series A/​B, No. 61, 207 (1933) 231–​32 [hereinafter Peter Pázmány University]. 12  Cf. World Duty Free Company v.  Republic of Kenya, ICSID Case No. Arb/​ 00/​7, Award (Oct. 4, 2006), ¶ 169. 13  See Flemingo Duty Free Shop Private Ltd. v.  Poland, Award (Aug. 12, 2016), ¶ 418 [hereinafter Flemingo v. Poland]. 14  Teinver S.A., Transportes de Cercanías S.A. & Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/​09/​1, Decision on Jurisdiction (Dec. 21, 2012), ¶¶ 271–​74; see to the same effect Gustav F. W. Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/​07/​24, Award (June 18, 2010), ¶ 143 [hereinafter Hamester v. Ghana]; Tulip Real Estate Investment and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/​11/​28, Award (Mar. 10, 2014), ¶ 278 [hereinafter Tulip v. Turkey]; Nordzucker v. Poland, Partial Award (Jurisdiction) (Dec. 10, 2008), ¶ 132 [hereafter Nordzucker v. Poland]. 15  I.L.C. Draft Articles on Responsibility of States for Internationally Wrongful Acts, Annex to U.N. GA Res 56/​83 (2001), reprinted with commentaries in [2001-​II(1)] YBI.L.C. 30 (which is the source for the ‘Second Reading Commentary’ cited to in this chapter). The I.L.C. Articles were adopted in their entirety on second reading in 2001, but the provisions on attribution (ch. II of Part One, arts. 4–​11) were initially adopted on first reading much earlier, in 1973–​74 (arts. 5–​15), with substantially the same content. The entirety of Part One (arts. 1–​35) was then adopted on first reading in 1980. The first reading of all provisions (arts. 1–​60, plus two annexes) was completed in 1996, and that text appears at [1996-​II(2)] YBI.L.C. 58.

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I. Introduction have been considered by international tribunals to do so. The ILC Articles provisions on attribution are formulated at a high level of abstraction and do not lend themselves to mechanical application. While they muster consensus as general propositions of law, their application in specific cases has led to inconsistent outcomes. Notably, there are well-​known difficulties in respect of the test of ‘direction or control’ in Article 8 (a matter not addressed at any length in this chapter).16 More directly relevant for present purposes, difficulties appear at the threshold, with the definition of the core concept of ‘State organ’ in Article 4. There is a need for clarity. The concept of organ, which was first thrust into the vocabulary of international law in the codification efforts of the 1930s, is fundamental to the categorizations in the ILC Articles in a number of ways: • The various categories or heads of attribution are mutually exclusive, and the initial question in every case is whether the conduct concerned is that of an organ. If the relevant conduct can be attributed to a state on the basis that it was committed by one of its organs, the inquiry stops after that gateway question. Any and all conduct by an organ of the state is attributable to the state, whatever its nature.17 By contrast, the remaining grounds of attribution are special cases requiring a particular nexus to be shown between the relevant act/​actor and the state. These special cases can apply only when the conduct concerned is not that of an organ.18 • The principle for acts of state organs is plenitude of attribution: all acts of any state organ are attributable because international law regards the state as a single unit (‘unity of the State’). Indeed, the notion of state is tautological with the notion of state organ.19 By contrast, the remaining cases of attributable conduct proceed on special rules, whereby the conduct in question has to be demonstrated to be attributable in the circumstances: conduct in the exercise of elements of the governmental authority (Article 5); conduct on instructions, direction, or control of the state (Article 8); conduct by ‘agents of necessity’ exercising, in fact, elements of the governmental authority; conduct by insurrectional movements (Article 10); and private conduct adopted by the state as its own (Article 11). These heads of attribution can be seen as alternative, and in fact are typically pleaded and decided as such. For example, an entity may be alleged to be a state organ, or in the alternative to have acted on instructions by a state organ, or in the further alternative for its conduct to have been ratified by the state.

While the ILC provisions on attribution may suffer from a degree of excessive conceptualiza- 14.09 tion and categorization,20 they were successful in introducing an analytical framework which has become the standard mode of pleading and adjudication. This chapter focuses on certain difficulties that arise with the rules of attribution in the context of investment treaties. It first examines the distinction—​fundamental in principle but not always clear in life—​between state organs and entities empowered to exercise elements of the governmental authority. That analysis is set out in two separate sections. Two further discrete issues are then discussed: the supposed category of non-​attributable or ‘non-​justiciable’ acts of state organs, and the question whether rules of attribution are relevant to representations and contractual obligations.

16  See, e.g., Antonio Cassese, The Nicaragua and Tadić Tests Revisited in Light of the ICJ Judgment on Genocide in Bosnia, 18(4) EJIL 649 (2007). 17  With the narrow exception of ‘private’ conduct manifestly unconnected with the exercise of the functions assigned to the organ. See I.L.C. art. 7 and Second Reading Commentary, ¶¶ (7)–​(8); and id. ¶ (13) to art. 4. 18  There is the exception of conduct by an organ which is not attributable to the state because the organ had been placed at the disposal of, and was acting for, another state (see I.L.C. art. 7) or an international organization. 19  Eduardo Silva-​Romero, Are States Liable for the Conduct of Their Instrumentalities?, in State Entities in International Arbitration 31, 33 (E. Gaillard & J. Younan eds., 2008). 20  See Ian Brownlie, Principles of Public International Law 445 (7th ed. 2008).

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II.  What Are State Organs? 14.10 ILC Article 4, ‘Conduct of organs of a State’, reads:

1. The conduct of any State organ shall be considered an act of that State under international law, whether the organ exercises legislative, executive, judicial or any other functions, whatever position it holds in the organization of the State, and whatever its character as an organ of the central Government or of a territorial unit of the State. 2. An organ includes any person or entity which has that status in accordance with the internal law of the State.

This text amalgamates and refines provisions which had been adopted on first reading in 1973–​1974 (Articles 5, 6, and 7(1)) and is reflective of customary international law.21 14.11 The primary purpose of Article 4 is to establish the cardinal principle of the unity of the state,

which it does in categorical terms in paragraph (1). It puts to rest disagreements, as late as in the 1920s, on whether acts of subordinate (‘minor’) officials and the independent judiciary were attributable to states.22 Practice, jurisprudence, and scholarship had been directed mainly to that matter of principle. The status of a given person or entity as an organ of the state had not caused difficulties in practice, and no comprehensive definition of organs had been proffered. Until the codification efforts of the 1930s, terms such as ‘agents and representatives’,23 ‘officials’, ‘officers’, and ‘public servants’24 were used without any attempt to rely on a general theory about organs.25 The need for introducing the notion of state organs in the ILC Articles arose because of the distinction there made between plenary (Article 4) and special (Articles 4 ff) attribution. As already noted, plenary attribution applies to organs; special attribution to non-​organs.

14.12 Given the pivotal role of the notion of state organs, it is at first surprising that the text of

Article 4 does not attempt to provide a concrete definition of it. The stated reason was to ‘avoid entering into theoretic problems concerning the definition of the notion of an organ itself ’.26 The notion of state organs appears thus to have been intentionally made broad, importing a correspondingly wide latitude of judgment in applying it in the broadest spectrum of circumstances. It seems, also, that little difficulty was foreseen in assessing whether a person or entity is to be regarded as an organ, given that little difficulty was recorded on that score in the classical jurisprudence and in the codification efforts early in the twentieth century.

21  Application of the Convention on the Prevention and Punishment of the Crime of Genocide, Judgment, I.C.J. Reports 2007, ¶ 38 [hereinafter Convention on the Prevention and Punishment of Genocide]; Difference Relating to Immunity from Legal Process of a Special Rapporteur of the Commission on Human Rights, I.C.J. Reports 1999, 62, 87 (‘According to a well-​established rule of international law, the conduct of any organ of State must be regarded as an act of that State. This rule . . . is of a customary character’). 22  See Ago Third Report [1971-​ II(1)] YBI.L.C. 199, ¶¶ 106–​35 [hereinafter Ago Third Report]; and Guerrero’s preparatory report for the 1930 Codification Conference (Oceana 1972)  118. The related question of ultra vires acts is dealt with in I.L.C.  art. 7 and further discussed by Christophe Fischer, La Responsabilité Internationale de l’État pour les Comportements Ultra Vires de ses Organes (1993); and C. F. Amerasinghe, Diplomatic Protection 241 (2008). 23  See Questions relating to Settlers of German Origin in Poland, P.C.I.J., Series B, No. 6 (1925) 22. 24  See Massey (1927), 4 R.I.A.A. 155, para 6 (U.S.–​Mexico General Claims Commission). 25  However, in Tay (1928), 4 R.I.A.A. 391, 400, the U.S.–​Mexico General Claims Commission referred to ‘persons concerned with the discharge of governmental functions, whatever their precise status may be under domestic law’. 26  I.L.C., First Reading Commentary, [1973-​II] YBI.L.C. 191, para (12) to art. 5.

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II.  What Are State Organs? Thus, Article 4 says that an organ is a person or entity with a ‘position . . . in the organization 14.13 of the State’ (paragraph (1)), and that in ascertaining a State’s organization the State’s own internal ‘law’ is highly relevant, although not dispositive (paragraph (2)). Although it is clear that the test to be employed is structural in nature, it might be fair to say that Article 4 is more in the nature of a description than a definition. The accompanying commentary is rather circular:27 ‘The reference to a “State organ” covers all the individuals or collective entities that make up the organization of the State and act on its behalf ’. Professor (later Judge) Ago, the Special Rapporteur primarily responsible for the formulation of the text that was adopted on ILC’s first reading, provided definitions of a similar kind, both at the ILC and judicially. He defined as organs: ‘the machinery of the State, through which it manifests its existence and performs its functions’;28 ‘persons or groups directly belonging to the State apparatus and acting as such’.29 One searches in vain for specific identifying features to determine whether an entity or person 14.14 belongs to the ‘organization’, ‘machinery’, or ‘apparatus’30 or ‘structural framework’ of the state. 31 Indeed, the ILC legislative history indicates no single criterion to serve this purpose. The problem is not ILC’s draftsmanship. There is a genuine conceptual difficulty, which re- 14.15 flects the inherent tension between two fundamental tenets of international law which stand behind ILC Article 4. The first tenet is that international law does not tell states how to structure themselves as organizations.32 The state as a subject of international law is distinct from each state’s individual conception (if any) of its legal personality on the domestic law plane.33 The second tenet is that states are as a rule accountable only for acts that can be attributed to them,34 and the principal basis of attribution is the one concerning state organs. The logical difficulty which ensues from these two tenets is that international law will attribute to a state all acts of those persons or entities that it has decided to endow with the status of an organ but, given that no two states are alike, no generally valid definition of an organ seems to be capable of formulation in concrete terms.35 As we will see, this difficulty is unavoidable to an extent, but principle and authority do help clarify a number of discrete points.

A. Internal Law is the Source of Legal Data, Not Classifications It is true generally that domestic law is a factual element from the perspective of inter- 14.16 national law,36 and the position cannot be different in respect of the characterization of a person or entity as an organ. The domestic law of a state is inherently unlikely to provide a

  I.L.C. Second Reading Commentary, ¶ (1) to art. 4.   Ago Third Report, supra note 22, para 116. 29  See Military and Paramilitary Activities (Merits) (Separate Opinion of Judge Ago), I.C.J. Reports 1984, 181, 188. 30  Ago Third Report, supra note 22, ¶¶ 106–​35. 31  I.L.C. Drafting Committee (quoted in full in ¶ 14.18 below). 32  With limited exceptions in treaty or customary law, for example, relating to diplomatic and consular envoys. 33  See Anzilotti, Cours de Droit International 53–​54 (1929, reprinted 1999). 34  I.L.C. art. 2 reads as follows: There is an internationally wrongful act of a State when conduct consisting of an action or omission: (a) is attributable to the State under international law; and (b) constitutes a breach of an international obligation of the State. 35  Cf. the difficulties encountered in the definition of ‘states’ for the purposes of the European Convention on State Immunity: Suy in L’Immunité de Juridiction et d’Exécution des États (1971) 257. 36  See Certain German Interests in Polish Upper Silesia (Merits), P.C.I.J., Series A, No. 7 (1926) 19. 27 28

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Attribution comprehensive definition of who can engage its responsibility on the international plane. Generally, that is not a question with which domestic law needs to concern itself.37 Where it does, the position in domestic law may well be utterly irrelevant to international law.38 Domestic law may classify persons or organs for constitutional, administrative, budgetary, or judicial review purposes. Thus, in South Africa, courts and judicial officers are excluded from the Constitution’s definition of organs;39 but, for the purposes of judicial review, an organ includes ‘any person for whose debt an organ of state contemplated [by the relevant statute] is liable’.40 Neither the former exclusion nor the latter inclusion appears germane to international law: courts are undeniably state organs in international law, while the state’s liability to cover an entity’s debts does not appear a decisive consideration in characterizing it as an organ. 14.17 Paragraph (2) of ILC Article 4 is to be understood accordingly. The status of a person or an entity

as an organ in domestic law is not a matter of simple labeling. Doubtless in many cases in practice it will be true that ‘[w]‌here the law of a State characterizes an entity as an organ, no difficulty will arise’.41 It is certainly correct to say that where the nature of a person or entity as an organ is clear in domestic law (for example, because domestic courts have so held), it is not open to the state to say otherwise to deny international responsibility. But as we have seen, internal law classifications can be positively misleading.

14.18 Rather, the role of domestic law is to provide the data necessary to answer the question

whether a person or entity has status such as to justify characterizing it as an organ in international law.42 Clearly, only internal law can provide the factual foundation for the legal assessment that international law is called upon to make. But it is equally clear that the characterization of an organ by international law does not and cannot rely on bare classifications in domestic law.43 International law is concerned with the reality of the status of the relevant person or entity, not with internal law labels. While this was clear both from Ago’s report and from the ILC commentary on first reading,44 the text of the relevant provision (defining as an organ ‘any State organ having that status under the internal law of that State’)45 had been misunderstood as a ‘formulaic’ renvoi to domestic law.46 This was one of the reasons which prompted Special Rapporteur Crawford to propose that paragraph (2) in Article 4 be eliminated altogether.47 Neither the General Assembly Sixth Committee nor the ILC thought this

37  ‘The internal law of a State may not classify, exhaustively or at all, which entities have the status of “organs” ’: I.L.C. Second Reading Commentary, ¶ (11) to art. 4. 38  Cf. Maritime Delimitation and Territorial Questions (Qatar v. Bahrain) (Jurisdiction), I.C.J. Reports 1994, 112, ¶¶ 26–​27 (Constitutional limitations on Foreign Minister’s power to conclude treaties). 39  See section 239 of the South Africa Constitution, Act No. 117 of 1996 ([1996] Government Gazette No. 17678). 40  See section 1(vii) of the Institution of Legal Proceedings Against State Organs Act No. 40 of 2002 ([2002] Government Gazette No. 24112). 41  I.L.C. Second Reading Commentary, ¶ (11) to art. 4. 42  Internal law is to be understood broadly, as encompassing not only black-​ letter rules but also ‘practice and convention’ in the relevant legal system: see Crawford First Report, U.N. Doc. A/​CN.4/​490/​Add.5 (1998) ¶ 167 [hereinafter Crawford First Report]. 43  Emilio Agustin Maffezini v. Spain, ICSID Case No. ARB/​97/​7, Decision of the Tribunal on Objections to Jurisdiction (Jan. 25, 2000), ¶ 82: ‘[A]‌domestic determination . . . while it is to be given considerable weight, is not necessarily binding on an international arbitral tribunal. Whether an entity is to be regarded as an organ of the State and whether this might ultimately engage its responsibility, is a question of fact and law to be determined under the applicable principles of international law’ (citations omitted). 44  See Ago Third Report, supra note 22, ¶ 120; and I.L.C. First Reading Commentary [1973-​II] YBI.L.C. 191, ¶ (10) to art. 5 (citations omitted). 45  Article 5 of the first-​reading provisions. 46  See, e.g., the observations of the U.S., U.N. Doc. A/​CN.4/​488 (1998) 36. 47  See Crawford First Report, supra note 42, ¶ 167; and id., U.N. Doc. A/​ CN.4/​490/​Add.6 (1998), 2 (n. 3 to revised art. 5).

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II.  What Are State Organs? was desirable,48 but it is debatable whether the revised paragraph (2) of Article 4 (‘[a]‌n organ includes any person or entity which has that status in accordance with the internal law of the State’), adopted after much debate, is a major improvement on the first-​reading text. The legislative intent in Article 4(2) was described as follows:49 Paragraph 2 of Article [4]‌recognized the significant role played by internal law in determining the status of a person or an entity within the structural framework of the State. That role was decisive when internal law affirmed that a person or an entity was an organ of the State . . . . The commentary would also explain the supplementary role of international law in situations in which internal law provided no classification or an incorrect classification of a person or an entity.

Thus, Article 4(2)—​in particular the term ‘includes’—​performs two separate but related func- 14.19 tions. The first is to indicate that there is a role for the actual practice, and not just the black-​ letter law, in the relevant state.50 Hence the distinction that seems to have taken hold in practice between de jure and de facto organs, the former being formally regarded as organs in domestic law, the latter actually operating as such in fact. The purpose of international law in the latter hypothesis is to have ‘reality . . . prevail over appearances’,51 in circumstances where the state exercises effective control over an entity completely dependent on it.52 The second and broader function of Article 4(2) is to make it plain that there can be no question of a mechanical renvoi to domestic law: the characterization of a person or entity as an organ is one to be performed in accordance with international law. Again, if domestic law regards a person or entity as an organ, in practice this will in most cases suffice for Article 4(2) purposes. Analytically, however, it would be wrong to think that international law will consider as an organ whatever entity may be called, for whatever purposes, an organ in domestic law. Characterization in international law is necessarily a more involved exercise, because the relevant classification on the domestic plane may serve entirely different purposes (for example, budgetary) from the attribution of international responsibility. There therefore seem to be three possibilities: ​• As noted, if an entity is expressly classified as an organ in internal law, this will be highly relevant in the analysis under international law, but it will not be dispositive. One will have to assess whether the purposes for which the domestic classification was made are germane to international responsibility. •​ Where internal law provides no classification, there will be nothing for international law to ‘correct’: the analysis proceeds unaided, examining the status and the functions of the putative organ. •​ International law has a ‘corrective’ role when internal law denies the status of an organ, not only as a simple matter of labeling but even as a matter of liability of the state or the government for acts of the relevant person or entity.53 A  good example is the Clayton case, where the tribunal characterized a statutorily established advisory body, empanelled by the federal and provincial governments, as a state organ (‘part of the apparatus of

48  The discussion in the Sixth Committee is summarized in U.N. Doc. A/​CN.4/​496 (1999) ¶¶ 118–​19. On the reactions within the I.L.C., see notably 2553d mtg., [1998-​I] YBI.L.C. 232, ¶ 29 (Pellet) and 239, ¶ 57 (Simma); 2555th mtg., [1998-​I] YBI.L.C. 243, ¶ 11 (Pellet). 49  Statement of the Chairman of the Drafting Committee (Simma), [1998-​ I] YBI.L.C. 289, ¶ 77 (emphasis added). 50  See Second Reading Commentary, ¶ 11 to art. 4; and further Crawford, State Responsibility, supra note 2 at 124–​26. 51  Convention on the Prevention and Punishment of Genocide, supra note 21, ¶¶ 204. 52  See Military and Paramilitary Activities in and against Nicaragua (Nicar. v. U.S.), Merits, I.C.J. Reports. 1986, 14, ¶ 109. 53  See Fireman’s Fund Insurance Company v. United Mexican States, ICSID Case No. ARB(AF)/​ 02/​1, Award (July 17, 2006), ¶¶ 149–​50; Flemingo v. Poland, supra note 13, ¶ 433.

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Attribution the Government of Canada’), notwithstanding the fact that it had no such status under domestic law for purposes of public law responsibility.54 14.20 As we will see in the following paragraphs, assertions of lack of status of organ are made in

most cases in respect of entities which on the domestic plane have separate legal personality and carry individual liability in some degree and manner.

B. Institutional Separateness or Lack Thereof 14.21 The state as a unitary entity is an abstraction of international law. Constitutional principles

of separation of powers and administrative and budgetary necessities mean that states are organized in discrete units at different levels of hierarchy and accountability. Some units have legal personality, some not. It would be wrong on principle and authority to regard separate legal personality as precluding the status of organ under international law. If separate legal personality in domestic law were decisive, that would directly contravene the cardinal rule that domestic law cannot be a defence to an international delict (ILC Article 3), as well as ILC Article 4(2), which requires that the reality of domestic practice be taken into account.

14.22 Although some investment tribunals seem to have suggested otherwise,55 authority for the

orthodox position abounds. Thus, Libya was unsuccessful in arguing that a concession granted by the Ministry of Oil and Gas did not create obligations on the part of the state because of the ministry’s separate legal personality. It was held, rightly, that to accept Libya’s argument would amount to denying the principle of the unity of the state.56 The Ukrainian State Committee on Geology and Utilization of Natural Resources, a body with separate legal personality, was without difficulty held to be an organ of Ukraine.57 In an immunity from execution case, the Russian Federation was unsuccessful in contending that it was not liable to pay on an award rendered against the government on the basis that the government and the federation were two separate legal persons in Russian law.58 And a separate agency with its own personnel, charged with preparing environmental policy and issuing environmental regulations as an órgano desconcetrado in Mexico’s Ministry of Environment, was without difficulty (or indeed opposition) held to be an organ of the state.59

14.23 Generally, the allocation of separate competences among discrete units with intersecting lines

of command or accountability, and the existence or not of separate legal personality, are ‘matter[s]‌of governmental machinery’60 which are irrelevant to international law. Thus, in Britain certain executive (as opposed to policy) units have agency status and no legal personality;61 while a host of other separate ‘non-​departmental public bodies’ may or may not have

54  See Clayton and Bilcon of Delaware, Inc. v. Canada, PCA Case No. 2009-​04, Award on Jurisdiction and Liability (2015), ¶¶ 305 ff. [hereinafter Clayton v. Canada]. 55  See notably Hamester v. Ghana, supra note 14, ¶¶ 182–​88; Ulysseas, Inc. v. Republic of Ecuador, Interim Award (Sept. 28, 2010); see also EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/​05/​13, Award (Oct. 8, 2009), ¶ 190 [hereinafter EDF v. Romania]. 56  See Texaco Overseas Petroleum Co v. Libya (Jurisdiction) (1975), 53 ILR 392, 413, ¶ 23(a); and Process and Industrial Developments Ltd. v. Ministry of Petroleum Resources of Nigeria, Part Final Award (July 3, 2014) (contract entered into by ministry, not being a juristic person, was on behalf of the government). 57  See JKX Oil & Gas plc v. Ukraine, PCA Case No. 2015-​11, Award (Feb. 6, 2017) ¶¶ 72, 406. 58  See Compagnie Noga d’Importation et d’Exportation SA v.  Russian Federation, 361 F.3d 676 (2d Cir. 2004). 59  See Tecmed SA v. Mexico, Award (May 29, 2003), ¶¶ 36, 151, and to the same effect, CME and Lauder, infra note 156; see also ¶ 14.44 infra. 60  See Baccus SRL v. Servicio Nacional del Trigo [1957] 1 Q.B. 438 (CA), 23 I.L.R. 160, 162–​ 63 (an immunity case relating to a unit with separate legal personality but within the Ministry of Agriculture, responsible for grain imports). 61  See Cabinet Office, Executive Agencies: A Guide for Departments 2–​3 (2006).

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II.  What Are State Organs? separate legal personality, depending on the appropriate degree of independence from central government and their specific function—​which may be regulatory, supervisory, advisory, (until recently) adjudicatory, or other.62 In America, the board of governors of the Federal Reserve System is able to perform regulatory functions in its own name and without approval from other agencies.63 It is impossible to see why separate legal personality should automatically disqualify such bodies from organ status in international law when it is plain that they are part of the machinery of state and have institutionally no separate, ‘private’ purpose of their own.64 It is also impossible to see how independence of action or decision-​making should exclude the 14.24 status of an organ. Acts of the judiciary are indisputably attributable to the state, even though the judiciary is independent from other branches of the state.65 The same may be said of ombudsmen and financial services and competition regulators, as it may also be said of regulatory or advisory bodies in which participate private persons representing private interests66 or the scientific community.67 Independence from government is part of the institutional characteristics of those entities, but it is not given in order for those entities to pursue purposes separate from those of the state. The opposite is true: independence is given better to serve purposes of the state such as improved decision-​making, separation of powers, and transparency. Hence, independence of this kind may not impede characterization as an organ. Nevertheless, it would be wrong simply to adopt a broad criterion of serving a ‘public func- 14.25 tion’. The status of organ reflects the fact that a person or entity has been created by the state as such—​that is, structurally—​not just the nature of the functions vested in that person or entity.68 That much is clear from the existence of ILC Article 5, which is not to be conflated with Article 4 and which is concerned with entities that are not organs but nevertheless are entrusted with state functions (‘elements of the governmental authority’). Such entities are not part of the structure of the state but do perform public functions. It is on this basis that the acts of a private arbitral tribunal69 or an ecclesiastical internal disciplinary body70 do not engage the responsibility of the state as organs of it. Conversely, there is no closed list of functions that can be entrusted to organs. If a state regards the dissemination of news, commodity   See Cabinet Office, Public Bodies: A Guide for Departments Ch. 2 (2006).   See Federal Reserve Act 1913 (as amended), in particular 12 U.S.C. 248. 64  It has been held on this basis that certain entities exercising ‘core state functions’ are not to be regarded as ‘agencies’ or ‘instrumentalities’ under the U.S. Foreign Sovereign Immunities Act, 28 U.S.C. 1604, notwithstanding their separate legal personality. See Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148, 153 (DC Cir. 1994): ‘We hold that armed forces are as a rule so closely bound up with the structure of the state that they must in all cases be considered as the ‘foreign state’ itself, rather than a separate “agency or instrumentality” of the state . . . [I]‌t is hard to see what would count as the “foreign state” if its armed forces do not. Any government of reasonable complexity must act through men organized into offices and departments. If a separate name and some power to conduct its own affairs suffices to make a foreign department an “agency” rather than a part of the state itself, the structure of section 1608 will list too far to one side’. Iran’s Ministry of Defence was held to be part of the state of Iran on that basis; see Ministry of Defense and Support for the Armed Services of Iran v. Cubic Defense Systems, Inc., 495 F.3d 1024, 1035–​36 (9th Cir. 2007). 65   See, e.g., Crawford, State Responsibility, supra note 2 at 121–​23 and the references; J. Paulsson, Denial of Justice in International Law 38–​43 (2005). 66   Thus, it appears not to have been doubted in GAMI that the Comité de la Agroindustria Azucarera, which was to implement objectives set out in a Decree and included in its composition representatives of sugarcane growers and mills, was an organ of Mexico; see GAMI, supra note 7, ¶¶ 53, 75. 67  See Clayton v. Canada, supra note 54, ¶¶ 305 ff. (¶ 318: ‘A [Joint Review Panel] is established, and its members appointed, by governmental authorities to contribute to government decision-​making, rather than pursuing its own mission’). 68  See Ago Third Report, supra note 22, ¶ 170. 69  See, e.g., Case 102/​81 Nordsee Deutsche Hochseefischerei v. Reederei Mond Hochseefischerei [1982] E.C.R. 1095, ¶ 12; KR v. Switzerland. App. No. 10881/​84, (1987) 51 DR 83. 70  Cf. Holy Monasteries v. Greece, Apps. Nos. 13092/​87, 13984/​88, Series A, No. 301-​A (1994) ¶ 49. 62 63

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Attribution trading, or the commercialization of railways as activities to be conducted by government bodies, their acts are attributable to the state.71 It is for that reason that ILC Article 4(1) states that attribution is not affected by ‘whether the organ exercises legislative, executive, judicial or any other functions’ (emphasis added). The provision is drafted in terms ‘of extension, not limitation’.72 There is no ‘a priori distinction between organs which can commit internationally wrongful acts and those which cannot’.73 If a state chooses to create an organ, for whatever reason or purpose, the conduct of that organ can engage its responsibility. 14.26 The picture that emerges is that an organ is an entity (or person) that institutionally belongs

to the state because (a) it has been created by the state; and (b) the functions assigned to it are regarded by the state as functions of the state, as opposed to functions to be pursued for the entity’s own account. In sum, if an entity has no institutional separateness, it should be considered as a state organ.74 While this cannot be a mechanical test given the divergences in the ways in which states organize themselves, it does not merely call for a preponderance-​of-​links analysis either. Relevant indications will include, notably: the manner in which the relevant body has been established and the manner in which it has been constituted; whether its functions are fully controlled by law (as opposed to being subject to freedom of contract); whether it is subject to judicial review and/​or governmental control or oversight; whether it has prerogatives of power that private individuals cannot lawfully exercise; or whether it is funded exclusively by the state. Although the inquiry is not reducible to a single factor, it does help to explain why, as part of a broader analysis, separate legal personality and independent decision-​ making in some instances matter, and in some instances do not. The reason why a regulatory agency with separate legal personality must be regarded as an organ while a church should not be so regarded is that the agency has no separate institutional purpose; while the church has its own, spiritual purpose, which it typically pursues for its own account, not on behalf of the state. Public functions that a church may exercise (such as the celebration of weddings, if entered into the public register) are typically ancillary to its primary institutional purpose.75

14.27 On this methodology, separate legal personality appears to be able to raise at most a presump-

tion of institutional separateness (rather than being dispositive of the issue), against characterization as a state organ.76 The issue arises most acutely in respect of corporations which are

71  And so TASS (the ‘Telegraph Agency of the Soviet Union at the USSR Council of Ministers’) was held to be an organ of the Soviet Union for purposes of state immunity; see Krajina v. TASS Agency [1949] 2 All E.R. 274; and Yessenin-​Volpin v. Novosti Press Agency, 443 F. Supp. 949, 852 (S.D.N.Y. 1978). See also the Baccus case, supra note 60; and British Rail International, Inc v. Office and Professional Employees International Union, 63 ILR 5 (National Labour Relations Board, 1967). Further examples from the jurisprudence on state immunity include a museum (Telkes v. Hungarian National Museum, 38 NYS (2d) 419 (S. Ct., 1942), 10 ILR 576) and a tourism board (Tribunal Civil Seine, Oct. 17, 1936, Société Viajes v. Office National du Tourisme Espagnol, 8 I.L.R. 277). 72  I.L.C. Second Reading Commentary, ¶ (6)  to art. 4.  See further Crawford First Report, supra note 42, ¶ 174. 73  I.L.C. First Reading Commentary [1973-​II] YBI.L.C. 191, ¶ (16) to art. 5. 74  Cf. the test of ‘institutional and operational independence’ developed by the European Court of Human Rights, initially in the context of art. 34 ECHR, which gives standing to ‘nongovernmental organization[s]‌’; see Radio France et al. v. France, App. No. 53984/​00, ECHR 2003-​X, ¶¶ 24 ff., in particular ¶ 26 (whether legal entity ‘participate[s] in the exercise of governmental powers or run[s] a public service under government control’). The test was subsequently extended to the question of state responsibility for acts of regional and local authorities and state-​owned enterprises; see Mykhaylenky et al. v. Ukraine, App. No. 35091/​02, ECHR 2004-​XII, ¶ 44; Lisyanskiy v. Ukraine, App. No. 17899/​02 (Apr. 4, 2006), ¶¶ 19–​20. 75  Cf. Parochial Church Council of the Parish of Aston Cantlow and Wilmcote v.  Wallbank [2003] U.K.H.L. 37 (a case about the notion of ‘public authority’ under s 6 of the UK Human Rights Act 1998). 76  Maffezini v. Spain, supra note 43, ¶¶ 40 ff., and Salini v. Morocco, ICSID Case No. ARB/​00/​4, Decision on Jurisdiction (July 31, 2001), ¶¶ 30–​35 appear to proceed on that basis [hereinafter Salini v. Morocco].

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II.  What Are State Organs? either wholly or majority-​owned by the state,77 because state capitalism only exceptionally is at the core of a state’s purposes and interests. In other words, the pursuit of commercial objectives through a corporation does in principle indicate that this is not a state organ, but rather an entity pursuing separate, commercial objectives for its own account. Thus, a state-​ owned corporation, especially if organized under private law, having a commercial purpose, should in principle be regarded as a separate entity pursuing goals of its own—​that is, to make profits for its shareholders.78 State ownership does not convert such a corporation into an organ.79 If the corporation neither is accorded immunity in its home state nor seeks immunity abroad, that would corroborate its non-​governmental status.80 However, it is also true that state-​owned corporations can be characterized as (de facto) or- 14.28 gans in exceptional cases.81 In one such case, Deutsche Bank v Sri Lanka, the tribunal placed reliance on a decision by the Supreme Court of Sri Lanka to the effect that the Ceylon Petroleum Corporation was ‘a Government creation clothed with juristic personality so as to give it an aura of independence’ and that there was ‘deep and pervasive State control’.82 Underneath the corporate garb was the systematic serving of state interests (rather than commercial purposes), under structural control by the state. Applying customary international law as codified in the ILC Articles, the Privy Council adopted the same kind of analysis in the Gécamines case, although apparently requiring more intense state presence in the corporation. The panel focused on whether the corporation has in fact a ‘separate existence’ and dismissed as irrelevant the exercise of any ‘sovereign functions’.83 The test in Gécamines was formulated as whether ‘the affairs of the entity and the State were so closely intertwined and confused that the entity could not properly be regarded for any significant purpose as distinct from the State and vice versa’; and for that purpose it was held that ‘constitutional and factual control’ do not suffice.84 It seems right to state the position as follows. The presumption of separateness from the 14.29 state arising from separate legal personality will hold other than in exceptional cases where convincing contrary evidence is available. What the evidence must show is that there is no separateness in fact; or stated conversely, a conflation or confusion of legal personality. (It is not necessary to go so far as to show that the purpose is to harm third parties, as one would have to show to lift the corporate veil.) That is a broad test and it should be approached as

77  Minority state ownership will in principle entail that the state has no control over the corporation: see Lao Holdings NV v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/​12/​6), Decision on the Merits (June 10, 2015), ¶¶ 67 ff. 78  See I.L.C. Second Reading Commentary, ¶ (6) to art. 8; and Amco Asia Corp v. Indonesia, ICSID Case No. ARB/​81/​1 (Nov. 20, 1984), ¶¶ 162–​63 (stressing the for-​profit purpose of the corporation). 79  See Tulip v. Turkey, supra note 14, ¶ 289. 80  Article 17(2) of the 1961 Harvard Draft Convention (Sohn & Baxter, 55 AJIL 545 (1961)) excludes from the definition of states ‘any . . . enterprise normally considered as commercial which is owned in whole or in part by a State . . . if such enterprise is, under the law of such State, a separate juristic person with respect to which the State neither accords immunity in its own courts nor claims immunity in foreign courts’. The explanatory notes (to be found in the final draft, 1974, in García-​Amador, Sohn & Baxter, Recent Codification of the Law of State Responsibility for Injuries to Aliens 135, 257 (1974), say that: ‘The word “enterprise” itself calls attention to the fact that the activity must be one normally considered to be of a commercial nature’. 81  See Wintershall A.G. v. Government of Qatar, Partial Award (1988), 23 I.L.M. 798 (Qatar General Petroleum Corporation characterized as an organ on grounds that its board consisted mostly of state officials, removed ‘at will’ by the Emir). 82  Deutsche Bank A.G. v. Sri Lanka, ICSID Case No. ARB/​09/​2, Award (Oct. 31, 2012), ¶ 405(a). 83  See La Générale des Carrières et des Mines v. F. G. Hemisphere Associates LLC (Gécamines) [2012] U.K.P.C. 27, ¶¶ 28 ff. & 70–​71. Cf. Salini v. Morocco, supra note 72. 84 Gécamines, supra note 83.

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Attribution such. Gécamines stands for the proposition that one single factor—​be it control by the state or the exercise of sovereign functions by the company—​may not suffice. Regard may be had to a multitude of relevant factors, equivalent or analogous to those to be found in ILC Articles 5–​11, with weight to be given according to the overall context. This seems justified on several grounds. First, while the various heads of attribution should not be conflated, all of them serve the objective of identifying what conduct counts as state conduct. It is therefore legitimate to take into account, for example, that a state corporation consistently receives and follows state instructions or recommendations, although direction and control are part of an ILC Article 8 inquiry. Secondly, the weight to be given to each factor will vary from one case to another. In Wintershall, it seems that the tribunal was impressed by the complete hold of the state over the management of a monopoly hydrocarbons producer which, in turn, brought in the lion’s share of the state’s revenues.85 Thirdly, and pragmatically, an overall assessment of whether there is conflation of the affairs of the company with the affairs of the state is likely to have to be made on the basis of an incomplete record and inferences that may be drawn from various perspectives. 14.30 Thus, the presumption of separateness appears to be rebuttable in the light of the following

considerations, which may in practice overlap:

• Overwhelming governmental purpose: Where a state-​owned corporation, even if its purpose is commercial, has been assigned considerable non-​commercial functions (e.g., to construct and run hospitals or schools, to build roads, etc.) such that the commercial activities can be seen essentially or simply as a way to fund the non-​commercial ones, it may be arguable that the corporation is no more than an arm of the state. Where the legal cloth of corporation is mere form, the reality being that the entity serves state purposes (exclusively or mainly) and is run by the state, such that it could just as well have been a government office or agency, the corporation is a fortiori to be characterized as a state organ. By contrast, in a case concerning Coal India, a state-​owned corporation which India admitted oversees the coal sector but was said to be primarily engaged in commercial activities for profit, the investor conceded that Coal India could not be characterized as a (de facto) organ.86 • Separateness ignored in internal law: There are cases where domestic law treats an entity as part of the organization of the state notwithstanding its separate legal personality and (possibly) commercial activities,87 in particular because the entity is structurally under the direction of the state.88 • Institutional insufficiency or weakness: When an entity is not self-​sufficient in terms of making and implementing decisions for its own account (for example, it has no management or supervisory organs of its own as a matter of law or fact) but rather has to rely on other state organs,89 its separate personality may also appear to be an artefact without legal significance. • Executive agency role: Where a company or other entity merely implements decisions that are taken by state organs but which would normally be within the province of the   See supra note 81.   See White Industries Australia Ltd. v. India, Award (Nov. 30, 2011). 87  See Saipem S.p.A. v. Bangladesh, ICSID Case No. ARB/​05/​07, Decision on Jurisdiction and Provisional Measures (Mar. 21, 2007), ¶¶ 145–​46. 88  See Sea-​ Land Service, Inc. v. Iran et al. (1984-​II) 6 IUSCTR 149 (‘Respondent Ports and Shipping Organization . . . is the government instrumentality in Iran charged with the administration and control of Iranian port facilities, and was . . . under the direction of the Ministry of Roads and Transportation’). 89  Contrast Jan de Nul NV and Dredging International NV v.  Egypt, ICSID Case No. ARB/​ 04/​13), Award (Nov. 6, 2008), ¶ 161 (statute creating the Suez Canal Authority as a public agency provided for independent budget and commercial purpose, ‘without any commitment of the governmental systems and conditions’; held that the authority was not part of the Egyptian state for I.L.C. art. 4 purposes). 85 86

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II.  What Are State Organs? implementing entity to take, it is possible to say that the implementing entity should be considered as part of the state apparatus.90 For example, when a corporation’s exclusive purpose is to administer public-​infrastructure contracts that are approved or negotiated by a supervising Ministry (or terminated at its behest),91 it is arguable that the corporation should have the status of an organ.92 That a government may wish to contain within a corporation economic liability resulting from such contracts is doubtless proper; but it does not seem to be relevant, or in any event decisive, for the purposes of attributing responsibility for breaches of international law. • Complete dependence: The test has been formulated by the ICJ as a ‘relationship . . . of dependence on the one side and control on the other’ to a degree that the dependent entity is to be ‘equated’ to an organ.93 When there is in fact, even if not in law, ‘strict control’ by the state and ‘complete dependence on the State’, which makes the entity’s ‘supposed independence . . . purely fictitious’, ‘it is appropriate to look beyond legal status alone, in order to grasp the reality of the relationship between the person taking action, and the state to which he is so closely related’.94 It appears that neither state supervision (even if strict95) nor support (financial or otherwise) is of itself constitutive of ‘strict control’.96 Rather, these forms of control would constitute ‘general’ control at a structural level, which while necessary is not sufficient. What will in addition be required is ‘specific control’,97 although this might not necessarily extend to specific operational decisions.98 Nevertheless, 90  See Phillips Petroleum Co. Iran v. Iran et al. (1989) 21 IUSCTR 79, ¶¶ 89–​100 (NIOC implementing Iranian State policies re oil production); Nykomb Synergetics Technology Holding AB v.  Latvia  (2003) 11 ICSID Rep.  158 (state-​owned company having no power to negotiate electricity prices but merely to administer them). 91  In LESI S.p.A. & ASTALDI S.p.A. v. Algeria (Merits) (2008) it was held, without reasoning, that the National Dams Agency was not an organ of Algeria in the sense of I.L.C. art. 4. The tribunal appears to have regarded as dispositive that the Agency had (as Algeria pleaded) financial autonomy and its own management organs; id. ¶¶ 97 ff., in particular ¶ 105. Yet the tribunal went on to find that the Agency had very limited decision-​making autonomy under the relevant texts of Algerian law, being an ‘instrument’ of implementation of projects and policies decided by a direction council consisting of various ministry officials (in which the agency’s director general had only a consultative role); id. ¶¶ 107–​109. See also Case 249/​81 Commission v.  Ireland [1982] E.C.R. 4005, ¶ 15, where Ireland was held responsible for the acts of the Irish Goods Council, an unincorporated body which relied mostly on public funds, whose management committee was appointed by the Irish government Ministers, and whose ‘aims and broad outline of [action]’ were fixed by the government. 92  Cf. Himpurna California Energy Ltd. v. PLN (Final Award) (2000) 25 Y.C.A. 11, ¶¶ 84–​112 (special governmental team comprising ministers created by decree to renegotiate state-​owned company’s contracts and generally oversee its operations; company could not plead governmental acts as events excusing liability for failure to perform agreement with foreign counterparty). 93  Military and Paramilitary Activities in and against Nicaragua (Nicar. v. U.S.), Merits, I.C.J. Reports 1986, 14, ¶ 109. 94  Convention on the Prevention and Punishment of Genocide, supra note 21, ¶¶ 391–​ 92, where the Court adopted the terminology of ‘de facto organs’. See to the same effect ICC 12913/​2005, Capital India Power Mauritius I v. Maharashtra Power Development Corp Ltd. et al., 20(5) Mealey’s Int. Arb. Rep. C-​ 1, 17 (2005) (state-​owned corporation was ‘agent-​in-​place’ of Indian federated state and electricity board, and ‘could not have and did not have any independence of objective or action’); and First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 629 (1983) (a state immunity case). 95   See Impregilo S.p.A.  v.  Pakistan, ICSID Case No. ARB/​03.3, Decision on Jurisdiction, (Apr. 22, 2005), ¶ 209. 96  See Convention on the Prevention and Punishment of Genocide, supra note 21, ¶ 388. 97  See Electrabel SA v.  Republic of Hungary, ICSID Case No. ARB/​ 07/​19), Award (Nov. 25, 2015) ¶¶ 7.69–​7.71. 98  See Venable (1927), 4 R.I.A.A. 219, ¶ 9 (U.S.–​ Mexico General Claims Commission) (conduct by Mexico’s National Railway’s attributable on the basis of ‘government control’); Human Rights Committee, Communication No. 61/​1979, U.N. Doc. CCPR/​C/​15/​D/​61/​1979 (1982) ¶ 9.1 (censorship by the Finnish Broadcasting Corporation held to engage responsibility of Finland on the basis that ‘the State holds a dominant stake (90  percent) and [the Corporation] is placed under specific government control’). Cf. Peter

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Attribution the Himpurna tribunal considered that Indonesia was responsible for an application by Pertamina in the Indonesian courts to enjoin arbitration proceedings between Indonesia and a foreign investor, on the footing that, given Pertamina’s ‘organic dependence’ from and ‘juridical subservience’ to the government, the relevant question was ‘not whether the Government does control Pertamina, but whether it is structurally in a legal position to do so’.99 • Special regimes of dependence: A state may place a company (whether state-​owned or not) under special restrictions or impositions of control. An example that has given rise to several decisions of the European Court of Human Rights is that of Serbian ‘socially-​owned companies’ (in simple terms, companies nominally owned by their employees) placed in a regime of restructuring pending privatization or liquidation. This regime entails close control by the Privatization Agency and the government. It has been held that Serbia is responsible for the debts of such companies on the basis that these ‘do not enjoy “sufficient institutional and operational independence from the State” to absolve the latter from its responsibility’.100 • Instruction: A corporation or other entity which unquestioningly adopts as its own and implements decisions taken by the state, without considering its own separate interests, may be regarded as a state organ. Although a finding to that effect would doubtless require a consistent record of such decisions being adopted when the state would choose to issue instructions, it would not require a showing of institutional insufficiency on the part of the corporation/​entity. The key point, as emphasized by the Deutsche Bank, EDF, and Yukos tribunals, is that the instructed entity decides on grounds other than its own interests; or conversely, that the state (as shareholder) issues directions which are based on its own interests rather than those of the corporation/​entity.101 In this connection one notes that the EDF tribunal asked whether the relevant texts were in fact given and perceived as instructions, rather than merely whether they were legally binding on their face.102 The answer to that question is inevitably fact-​specific.103 14.31 Again, the question in the foregoing cases is not whether separate legal personality has been

set up as an instrument of fraud or evasion. One does not seek to determine whether separate legal personality should be pierced. As noted, the existence of separate legal personality or the lack of it has never been regarded as dispositive of an entity’s status as an organ. The question is, rather, whether the entity concerned serves institutionally any ‘private’ purpose separate from that of government. If it does, and is therefore not to be regarded as a state organ, in many cases in the practice of investment law the subsequent question will be whether the

Pázmány University, supra note 11 at 231–​32 (whether control of state over university was so extensive for its distinct legal personality to disappear, preventing the state from espousing its claim as one of its ‘nationals’). The ‘effective authority or at least . . . decisive influence’ test articulated by the European Court of Human Rights in Ilașcu et al. v. Moldova and Russia, App. No. 48787/​99 (July 8, 2004), ¶ 392, may or may not relate to this inquiry. It is unclear whether the Court was proceeding on the basis that Transdniestrian authorities were to be regarded as organs of Russia rather than acting under the direction or control of Russia. 99  Himpurna California Energy Ltd. v.  Republic of Indonesia (Interim Award) (2000) 25 YCA 112, ¶¶ 118 ff., in particular ¶ 125 (emphasis in original). 100  Kačapor et al. v. Serbia, Apps. Nos. 2269/​06, ECHR 2008, ¶ 98. 101  See EDF v. Romania, Award, supra note 55,¶¶ 209–​210; Deutsche Bank, supra note 82, ¶¶ 405(c)–​(d); Yukos Universal Limited (Isle of Man) v. Russian Federation, PCA Case No. AA227, Final Award (2014), ¶ 1472 (Rosneft’s acquisition of Yukos publicly described by President Putin as ‘the state, resorting to absolutely legal methods . . . looking after its own interests’). 102  EDF v. Romania, Award, supra note 55, ¶¶ 202 ff. 103  Contrast the conclusions drawn in Electrabel, supra note 97, ¶¶ 7.88 ff. in respect of whether the state had directed the negotiating position of a state-​owned electricity wholesaler.

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III.  Para-statal Entities entity nevertheless has been empowered to exercise elements of the governmental authority. These are cases to which we now turn.

III.  Para-​statal Entities States (and international organizations104) often entrust some of their functions to autonomous 14.32 or separate entities. Such entities typically have the form of a special public-​law body, a statutory corporation organized under public or private law, a purely private corporation, a charity/​foundation, or an institute. In most cases, empowerment will be by way of delegation of a power that the state has hitherto exercised; or by way of exclusive conferment of a new power, which is not open to all to exercise under the general law. In some cases, however, empowerment will consist in recognition by the state of a function historically exercised by a separate entity (e.g. policy directives issued by the official state party, or civil status acts performed by the church). In all cases, exercise of the relevant function is only part of the entity’s activity or overall purpose—​or else the entity should ordinarily be characterized as an organ. But it does not matter whether the function has been delegated to advance the entity’s principal purpose (as is the case for a church with authority to levy taxes, or for a transport company with authority to police its stations105) or for the state’s own purposes of decentralization (as is the case for prison facilities run by private operators, or for privatized former monopolies with some vestiges of regulatory power). What matters is the empowerment to exercise authority normally reserved to the state (and not open to all under the general law), because a state ‘cannot avoid its obligations by delegating its authority to bodies outside the core government’.106 Such entities are dealt with in ILC Article 5 (corresponding to the first-​reading Article 7(2)), 14.33 entitled ‘Conduct of Persons or Entities Exercising Elements of Governmental Authority’, which reads as follows: The conduct of a person or entity which is not an organ of the State under article 4 but which is empowered by the law of that State to exercise elements of the governmental authority shall be considered an act of the State under international law, provided the person or entity is acting in that capacity in the particular instance.

Article 5 seeks to iron out inconsistencies of treatment that may result from Article 4: ‘If the same public function were performed in one State by organs of the State proper and in another by para-​State institutions, it would indeed be absurd if the international responsibility of the State were engaged in one case and not in the other’.107 The concept of ‘governmental authority’, which is central to Article 5, is also used in treaty 14.34 provisions requiring states to ensure, as a substantive obligation, that certain entities (e.g. monopolies or state enterprises) ‘act in a manner consistent with’ the obligations of the state under the treaty.108 A number of tribunals have had to grapple with the question whether

  See Case 18/​60 Worms v. High Authority [1962] E.C.R. 195.   These were the examples given by Germany in its response on Point VI of the Bases of Discussion drawn up by the Preparatory Committee of the 1930 Codification Conference; see League of Nations Doc. C.75.M.69.1929.V, 90–​91, reprinted in League of Nations Conference for the Codification of International Law [1930] (Rosenne ed., 1975). 106  United Parcel Service of America v. Canada, ICSID Case No. U.N.CT/​02/​1, Award on Jurisdiction (Nov. 22, 2002), ¶ 17. 107  I.L.C. 1251st mtg. [1974-​I] YBI.L.C. 8 (¶ 16) (Ago). 108  See art. 22(3) of the Energy Charter Treaty and arts. 1502(3)(a) and 1503(2) of the NAFTA Agreement. A number of U.S. BITs also contain equivalent provisions. 104 105

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Attribution these provisions establish substantive-​law obligations rather than (or in addition to) leges speciales on attribution which are narrower than and exclude the application of ILC Articles 4–​11. The case law is divided evenly.109 The importance of this issue is evident: if such provisions are indeed a lex specialis, they would closely parallel ILC Article 5 but would exclude other heads of attribution, in particular ILC Articles 4 (de facto organ) and 8 (direction or control). It is true that such provisions are couched in the language of positive obligations, namely that the state must take all appropriate measures to ensure certain conduct on the part of state enterprises or monopolies. This bespeaks a substantive law duty rather than a rule on attribution. It is also true that if the intention were to exclude various heads of attribution, one might expect to see express wording to that effect. On the other hand, the wording of such provisions seems so broad as to be difficult to give them substantive content that is actionable on a stand-​alone basis. 14.35 The exercise of attribution in respect of the so-​called ‘parastatal entities’ addressed by ILC

Article 5 has two steps: first, whether the person or entity is ‘empowered . . . to exercise elements of the governmental authority’; second, whether the ‘person or entity is acting in that capacity in the particular instance’. In the first step, it is clear that empowerment to exercise certain functions is the only relevant criterion: strictly, state participation in, control over, or support to the entity are irrelevant.110

14.36 The concept of ‘elements of the governmental authority’ (‘prérogatives de puissance publique’,

‘atribuciones del poder público’) is common to both steps and refers to the functions which the entity is empowered to exercise. Difficulties arise both in respect of its definition and in respect of the further requirement that the relevant conduct be taken ‘in that capacity’. These are discussed in turn below.

A. ‘Governmental Authority’ 14.37 Article 5 envisages an ‘empowerment’. It is therefore clear that the relevant authority must

derive from the special status of government and be specifically granted to the person or entity concerned. The authority conferred, in other words, must be one that is normally reserved to the state. Authority that private persons may exercise lawfully by virtue of the general law is not ‘governmental’.111

109  For the former view see Limited Liability Company Amto v.  Ukraine, SCC Case No. 080/​ 2005, Final Award (Mar. 26, 2008), ¶ 112; Mohammad Ammar Al-​Bahloul v. Tajikistan, SCC Case No. V (064/​ 2008), Partial Award on Jurisdiction and Liability (Sept. 2, 2009), ¶ 172; Bosh International, Inc. and B&P Ltd. Foreign Investments Enterprise v. Ukraine, ICSID Case No. ARB/​08/​11, Award (Oct. 25, 2012), ¶¶ 181–​83. For the latter view, see Genin v. Estonia, ICSID Case No. ARB/​99/​2, Award (June 25, 2001), ¶ 327; UPS v. Canada (Merits), supra note 7, ¶¶ 60–​63; Mesa Power v. Canada (U.N.CITRAL, PCA Case No. 2012-​17), ¶ 349; Adel A. Hamadi Al Tamimi v. Oman, ICSID Case No. ARB/​11/​13, Award, (Nov. 3, 2015), ¶¶ 319–​23. There also appears to be a view that such treaty provisions do set out rules of attribution but without excluding the application of the ordinary rules; see Ulysseas, Inc v. Ecuador, Final Award (June 12, 2012), ¶ 143. 110  I.L.C. First Reading Commentary, [1974-​II(1)] YBI.L.C. 277, ¶ (18) to art. 7. Curiously, this elementary point is not always reflected in the literature or practice on investment-​treaty claims; see Dupuy, in State Entities in International Arbitration 69, 79 (E. Gaillard & J. Younan eds., 2008) (the criterion is essentially functional ‘but it can also be one of control’); see also Salini v. Morocco, supra note 76, and LESI v. Algeria, supra note 91, both of which adopted a two-​pronged ‘structural’ and ‘functional’ test. Other cases, in particular Maffezini v. Spain, supra note 43, may be explicable on the basis that the tribunals were seeking to determine attribution on the basis of status either as a state organ or as a parastatal entity; for further references see Dolzer & Schreuer, supra note 5 at 204. 111  See Al Tamimi, supra note 109, ¶¶ 326–​27.

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III.  Para-statal Entities In many cases, such special authority will entitle the grantee to issue measures that are in 14.38 themselves binding and may be enforced by lawful compulsion. The existence of such prerogatives indicates of course the existence of a public function,112 because such prerogatives are normally reserved to the state. Awarding quotas, approving exports, collecting customs duties,113 and imposing fines are examples in an investment context. Nevertheless, governmental authority is not coextensive with prerogatives of compulsion.114 There are many instances where the grant of authority consists in entitling the entity, to the exclusion of any other person, to take some action, but where the action itself cannot be described as being binding or enforceable by compulsion. A prerogative to negotiate oil concessions on the part of the state,115 to float state bonds,116 or to issue policy directives117 will proceed from a special grant of authority: these are not activities open to all under the general law. Conduct in the performance of such activities, though not ‘binding’ in an ordinary sense, can be very relevant, particularly in an investment context. Similarly, if a body has an exclusive power to give guidance to a regulator, and it issues a policy recommendation that purports to change the existing regulatory framework, it may be crucial for the investor to be able to challenge the guidance (or the process through which it was arrived at) separately from or collaterally to any subsequent action by the regulator, as part of a composite act.118 A further but related issue here is whether what is ‘governmental’ in nature has a set meaning. 14.39 It is clear both from the prior texts on which the ILC relied119 and from the work within the ILC itself that regulatory, executive, and adjudicatory functions are to be regarded as

112  See Italy v.  Cuba, Award (Jan. 15, 2008), ¶ 163; Case C-​ 188/​89; Foster v.  British Gas plc [1990] E.C.R. I-​3313, ¶ 20. 113  See UPS v. Canada (Merits), supra note 7, ¶ 77. 114  Comments by governments on the I.L.C. first-​ reading text did not deal with the point in clear-​cut terms. See the observations of Chile ([1980-​II(1)] YBI.L.C. 95 (¶ 11)) and the U.K. (U.N. Doc. A/​CN.4/​488 (1998) 37), which stressed the exercise of ‘governmental prerogatives and powers’ or ‘a degree of authority’. But see Canada–​Measures Affecting the Importation of Milk and the Exportation of Dairy Products, WT/​ DS103/​AB/​R, WT/​DS113/​AB/​R (WTO Appellate Body, 1999) ¶ 97 (defining the concept of ‘governmental power’ as involving ‘the effective power to “regulate,” “control,” or “supervise” individuals, or otherwise “restrain” their conduct through the exercise of lawful authority’). 115  Petrolane, Inc. et al. v. Iran et al. (1991) 27 IUSCTR 64; EnCana Corp v. Ecuador, LCIA Case No. 3481 (Feb. 3 2006), 12 ICSID Rep. 427, ¶¶ 154–​61. 116  A  hypothesis left open in the Norwegian Loans case, where France contended that Norway was responsible for conduct by two state-​owned banks, but the claim was dismissed on unconnected jurisdictional grounds. France’s argument rested both on government control over the banks and the functions performed by them: Reply (1957), I Pleadings, 405–​407. Judges Lauterpacht and Read agreed with France, but the former did not give reasons and the latter relied on the Norwegian government’s ‘advice, instruction and approval’ in the acts complained of by France: I.C.J. Reports 1957, 36 (Separate Opinion, Lauterpacht) and 96 (Separate Opinion, Read). 117  See Ago Third Report, supra note 22, ¶ 165. 118  See Clayton v. Canada, supra note 54, concerning an environmental report that was a necessary precondition for the government’s ultimate decision in respect of an investment. Cf. the circumstances in Laker Airways Ltd. v. Department of Trade [1977] QB 643 (CA); and Christian Federation of Jehovah’s Witnesses in France v. France App. No. 53430/​99, ECHR 2001-​XI (‘pernicious effects’ of reports by parliamentary commissions of inquiry resulting in adverse tax and similar measures). 119  The 1927 Institut de Droit International text (reprinted in [1956-​II] YBI.L.C. 227) provided in art. II that: ‘The State is responsible for the act of corporate bodies exercising public functions in its territory’. Basis of Discussion No. 16 in the League of Nations 1930 Codification Conference (reprinted id. 222; quoted as part of the I.L.C. Second Reading Commentary, ¶ (4) to art. 5) provided: ‘A State is responsible for damage suffered by a foreigner as the result of acts or omissions of such corporate entities (communes, provinces, etc) or autonomous institutions as exercise public functions of a legislative or administrative character . . .’. Basis No. 16 was not discussed in the Conference, but it was prepared on the basis of observations received from governments to a questionnaire prepared by the Preparatory Committee, reprinted id. 221.

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Attribution governmental.120 But such functions do not necessarily exhaust the province of government. Special Rapporteur Ago spoke of ‘public functions which serve in the interests of the community’,121 which suggests that the analysis should take account of the conception of public functions in each particular country. However, in its first-​reading commentary, the ILC referred to entities ‘empowered, if only exceptionally and to a limited extent, to exercise specified functions which are akin to those normally exercised by organs of the State,’122 which might at first blush suggest an objectively fixed conception of what is ‘governmental’. 14.40 Such a reading would not accord with the practice of states, and it does not reflect the views, at

any rate the current views, of the ILC. To illustrate, independent commissions of inquiry, trading in certain restricted goods, and the provision of health services are, in some countries (although by no means all), regarded as governmental functions. True, certain functions are regarded as ‘inherently governmental’ in many countries,123 but in today’s pluralistic world that can hardly be used as a universal guide. The position is that Article 5 in principle encompasses certain ‘core’ functions that are traditionally or generally regarded as being governmental (regulatory, executive, adjudicative) and in addition it may also encompass functions that are regarded as governmental in the particular state concerned. The core functions are somewhat ‘intuitive’, in that they are based on ‘the functions governments have historically performed’.124 In respect of non-​core functions, which in some jurisdictions are regarded as governmental and in some not, the ‘history and traditions’ of the country concerned will play an important role.125

14.41 Core state functions include issuing currency, providing basic education,126 the celebra-

tion of acts affecting civil status, levying taxes, performing currency exchange controls,127 managing state-​owned property,128 adopting or implementing monetary policy, supervision of the banking sector,129 enforcing monetary judgments,130 administering natural resources,131 designing energy programmes and entering into contracts to manage the supply of electricity into the system,132 management or privatization of state-​owned

120  See I.L.C. 1253d mtg. [1974-​I] YBI.L.C. 16, ¶ 26 (Reuter); and Observations by the Chairman of the Drafting Committee (Hambro), [1974-​I] YBI.L.C. 152, ¶ 9. 121 Ago Third Report, supra note 22, ¶¶ 165, 170; and I.L.C. 1251st mtg. [1971-​ I] YBI.L.C. 5, ¶ 16: ‘tasks of common interest’, ‘specific services for the community or . . . functions considered to concern the community’ (Ago). 122  I.L.C. First Reading Commentary, [1974-​II(1)] YBI.L.C. 277, ¶ (18) to art. 7; reiterated in the I.L.C. Second Reading Commentary, ¶ (3) to art. 5 (emphasis added). 123  For the position in U.S. law, see Simon Chesterman, We Can’t Spy . . . If We Can’t Buy!’: The Privatization of Intelligence and the Limits of Outsourcing ‘Inherently Governmental Functions, 19 EJIL 1055, 1070 ff. (2008). 124  Crawford, State Responsibility, supra note 2 at 129. 125  See text to note 139 infra. 126  See Costello-​Roberts, supra note 5; and O’Keeffe v.  Ireland App. No. 35810/​ 09, 2014 ECHR 96, ¶¶ 150–​62. 127  See Cour de Cassation (Nov. 3, 1952), Époux Martin v. Banque d’Éspagne (1953) 80 JDI 654 (an immunity case). 128  E.g. Bosh v. Ukraine, supra note 109, ¶ 173. 129  See Genin v. Estonia, supra note 109, ¶ 327. 130  Cf. Aktau Petrol Ticaret A.Ş. v.  Kazakhstan, ICSID Case No. ARB/​ 15/​8, Award (Nov. 13, 2017), ¶¶ 102, 131, 152, 156, 264 (responsibility for both court bailiff’s conduct and failure of courts to supervise the bailiff); the Montano case, II Moore, International Arbitrations (1898) 1630, 1637 (Peru v. U.S., 1808); and the judgment of the Polish Constitutional Court in Case SK 26/​03 (Jan. 20, 2004), summarized at www.trybunal.gov.pl. By contrast, a bankruptcy-​estate administrator, operating subject to court supervision, was held not to exercise ‘judicial or State functions’: Plama Consortium Ltd. v. Bulgaria, ICSID Case No. ARB/​03/​24, Award (Aug. 27, 2008), ¶ 253; to the same effect see Venable, supra note 98, ¶ 22. 131  See Phillips Petroleum, supra note 90. 132  See Mesa Power v. Canada, supra note 109, ¶ 371.

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III.  Para-statal Entities assets,133 administration of expropriated assets,134 customs and immigration controls,135 supervision of regulated professions,136 setting social insurance contributions,137 and responsibility for public infrastructure projects (such as irrigation and road-​building).138 Non-​core functions may include, for example, promotion of investments, management of 14.42 non-​performing private sector loans, investing through sovereign wealth funds, the supply of social housing, the provision of health services, heating, transportation,139 airport or sea-​ port services,140 industrial planning,141 information-​systems management,142 sanitation, telecommunications, and specialized or tertiary education.143 There, in addition to each state’s conception of whether the relevant function is a state function, it seems that the reach of the entity’s authority will be of particular relevance. The entity may have power, for example, to handle bank accounts of third parties144 or to terminate a contract on grounds of public policy or on instructions by the government.145 In fact, both Special Rapporteur Crawford and the ILC took the view that in such cases the inquiry is more involved: It is another thing to identify precisely the scope of ‘governmental authority’ . . . and it is very doubtful whether article [5]‌itself should attempt to do so. Beyond a certain limit, what is regarded as ‘governmental’ depends on the particular society, its history and traditions. Of particular importance will be, not just the content of the powers, but the way they are conferred on an entity, the purposes for which they are to be exercised, and the extent to which the entity is accountable to government for their exercise. The commentary can give guidance on these questions, but they are essentially questions of the application of a general standard to particular and very varied circumstances.146

To illustrate, conduct by energy monopolies has been held to engage the responsibility 14.43 of the state, when such corporations operate in a highly regulated environment and have 133  See, e.g., Helnan International Hotels A/​ S v.  Egypt, ICSID Case No. ARB/​05/​19, Decision on Jurisdiction (Oct. 17, 2006), ¶ 93; Nordzucker v. Poland, supra note 14; Bosh, supra note 109; and the discussion in the text to notes 183 ff. infra. 134  See the case of Iran’s Foundation for the Oppressed, discussed at I.L.C. Second Reading Commentary, ¶ (2)  to art. 5, with reference to Iran–​U.S. Claims Tribunal authority; and Caron in The Iran-​United States Claims Tribunal: Its Contribution to the Law of State Responsibility 133–​34 (R. Lillich & D. Magraw eds., 1998). 135  See I.L.C. Second Reading Commentary, ¶ (2) to art. 5; Yeager v. Iran, supra note 3, ¶ 43; and William L. Pereira Associates, Iran v. Iran (1984-​I) 5 IUSCTR 198 (acts of revolutionary guards exercising immigration etc. functions at Tehran airport, held to be attributable to Iran as acts of agents of necessity (I.L.C. art. 9), which also requires a showing of exercise of governmental authority. 136  See Casado Coca v. Spain, Series A, No. 258-​A (1994), ¶ 39 (Barcelona Bar Council, a public-​law corporation, engaged responsibility of Spain). 137  See BdB v. Netherlands (Communication No. 273/​ 1989), Human Rights Committee, Report 1989, U.N. Doc. A/​44/​40 (1989) 286, ¶ 6.4; Nahlik v. Austria (Communication No. 608/​1995), Human Rights Committee, Report 1996, U.N. Doc. A/​51/​40 vol. II (1996) 259, ¶ 8.1. 138  See Salini v. Morocco supra note 76; and LESI v. Algeria, supra note 91. 139 In Liseytseva and Maslov v.  Russian Federation Apps. Nos. 39483/​ 05, 40527/​10, ECHR 2014, ¶¶ 205–​206, the European Court of Human Rights appeared to refuse that I.L.C. art. 5 might apply, considering such companies only under I.L.C. art. 8. 140  Cf. Flemingo v. Poland, supra note 13, ¶¶ 428 ff. (state-​ owned airport authority with separate legal personality considered a de facto organ of the state, given notably ‘strategic functions for the existence of the state’ with which it was charged); and Sea-​Land, supra note 88. 141  See Fedders Corp. v. Loristan Refrigeration Industries et al. (1986-​IV) 13 IUSCTR 97, 98. 142  See Computer Sciences Corp. v. Iran et al. (1986-​I) 10 IUSCTR 269, 278. 143  An affirmative answer was given in Bosh v. Ukraine, supra note 109, ¶¶ 168–​77, on grounds that in Ukraine only state-​owned or state-​funded institutions could be authorized to provide university education. 144  See Emilio Agustin Maffezini v. Spain, ICSID Case No. ARB/​97/​7), Award (Nov. 13, 2000), ¶ 78. 145  See LESI v. Algeria, supra note 91. 146 Crawford First Report, supra note 42, ¶ 193; reiterated in I.L.C. Second Reading Commentary, ¶ (6) to art. 5.

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Attribution responsibility for the maintenance or operation of the relevant infrastructure, security of supply, etc.147 A further example is the administration of bankruptcy estates: in some legal systems, the administrator is an ‘officer of the court’, while in others a person acting for the collective benefit of the creditors (under supervision of the court).148 That some legal systems’ conception of administrators as ‘officers of the court’ may lead to a classification of them as organs under ILC Article 4 does not mean that, in all other legal systems, administrators are to be regarded as exercising elements of the governmental authority.149

B. Acts in Exercise of Governmental Authority 14.44 The further inquiry called for by Article 5 is whether ‘the person or entity is acting in that cap-

acity in the particular instance’. This requires that the putatively attributable conduct be specifically authorized by internal law ‘as involving the exercise of governmental authority . . . [I]‌t is not enough that [internal law] permits activity as part of the general regulation of the affairs of the community’.150

14.45 Thus, managerial decisions by a state-​owned entity about treatment of staff which are taken

on the basis of general labour law cannot give rise to a claim for infringement of the freedom of association.151 In the same way, contractual and commercial activities not specifically mandated by the grant of authority as part of the entity’s special function, and conducted on terms no different from those of (or even in competition with) private actors, are not attributable.152 Such activities include notably the entering into and performance of contracts for profit,153 including negotiations and other commercial postures taken for purely commercial motives.154 They also include corporate decisions about the ‘establishment, expansion, management, conduct and operation of [a state-​owned corporation’s] overall business’.155 By contrast, pressure by an autonomous regulator on a television group to adopt a particular corporate structure, by indicating that the existing structure does not comply with the relevant regulatory regime (which the regulator had powers to enforce), was without difficulty held to be attributable to the state.156

14.46 The generally prevailing approach to determining whether or not an act was taken ‘in the cap-

acity’ of a person or entity authorized to exercise elements of the governmental authority is to place the act in its overall context and assess how closely it relates to governmental authority. Thus, conduct in respect of contracts for the supply of power into the electricity system has been considered attributable, on the basis that these contracts were entered into on the basis of authority conferred on a state corporation to manage the supply of electricity.157 By

147  See Foster, supra note 112; and Nykomb v. Latvia, supra note 90, section 4.2, on which see further K. Hobér, State Responsibility and Investment Arbitration, 25(5) J. Int’l Arb. 545, 560 (2008). 148  See Yukos v.  Russia, supra note 101, ¶ 1458; Kotov v.  Russia, App. No. 54522/​ 00, Eur. Ct. H.R. Judgment of April 3, 2012 (not reported). The question was left undecided in Frontier Petroleum Services v. Czech Republic, Final Award (Nov. 12, 2010); see ¶¶ 352 ff. and 416. 149  U.S. Commissioner Nielsen thought so in his dissent in Venable, supra note 98, 4 R.I.A.A. 244–​45, but he appears to have been wrong; see supra note 125. 150  I.L.C. Second Reading Commentary, ¶ (7) to art. 5. 151  See X v. Ireland, App. No. 4125/​69 (1971) 14 YBECHR 219. 152  See UPS v. Canada (Merits), supra note 7 ¶¶ 74–​78; EDF v. Romania, supra note 55, ¶¶ 196–​98; Case 18/​60 Worms v. High Authority, supra note 104. 153  See EDF v. Romania, supra note 55, ¶¶ 197–​98. 154  See Electrabel, supra note 97; Hamester v.  Ghana, supra note 14, ¶¶ 248, 253, 266, 288; Amto v. Ukraine, supra note 109, ¶ 107. 155  UPS v. Canada, supra note 7, ¶ 77. 156  See CME Czech Republic BV v. Czech Republic, Partial Award (Sept. 13, 2001), 9 ICSID Rep. 121, ¶¶ 189–​90, 539–​74; and Lauder v. Czech Republic, Final Award (Sept. 3, 2001), 9 ICSID Rep. 66. 157  See Mesa Power v. Canada, supra note 109.

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III.  Para-statal Entities contrast, conduct by a university in connection with contracts whereby it had leased state property was considered non-​attributable, on the basis that in concluding the contracts the University was engaged in an activity generally authorized by statute as commercial activity and that the contracts per se were intended to procure commercial benefits.158 There is, however, a contrary approach, which focuses narrowly on the relevant conduct 14.47 severed from its context. It is followed in six awards—​Amto, Almås, Jan de Nul, Intertrade, Hamester, and Ulysseas—​the last four of which were decided by tribunals which included Professor Stern. The approach consists in asking whether the relevant conduct was in itself an exercise (or a purported exercise) of special prerogatives of power, or prérogatives de puissance publique. As was put in Jan de Nul, ‘What matters is not the service public element, but the use of prérogatives de puissance publique or governmental authority’.159 Hamester reiterates this: ‘It is not enough for an act of a public entity to have been performed in the general fulfilment of some general interest, mission or purpose to qualify as an attributable act’.160 From this premise, all four decisions go on to hold that acts which may be seen as commercial/​private per se, such as the termination of a contract, are never attributable under ILC Article 5, even if they were taken in the context of powers specially conferred on the entity in question.161 The difficulty with these decisions is not that they import the notion of acta iure gestionis 14.48 from the law of state immunity162 but rather the narrowness of the notion of ‘acting in th[e]‌ capacity of exercise[ing] elements of the governmental authority’ that they actually seek to adopt. In Jan de Nul, the relevant conduct concerned tenders for contracts for the dredging of the Suez Canal, entered into by the Suez Canal Authority (SCA). It was acknowledged by the respondent, Egypt, that SCA had a number of delegated governmental powers,163 including (as a core function) the maintenance and improvement of the canal. The tribunal held: [T]‌he fact that the subject matter of the Contract related to the core functions of the SCA, i.e., the maintenance and improvement of the Suez Canal, is irrelevant. The Tribunal must look to the actual acts complained of. In its dealing with the Claimants during the tender process, the SCA acted like any contractor trying to achieve the best price for the services it was seeking. It did not act as a state entity. The same applies to the SCA’s conduct in the course of the performance of the Contract.164

The tribunal could have chosen to rely on the fact that SCA’s statute required it to ‘follow the appropriate methods of management and exploitation in accordance with what is being followed in the business enterprises’165 but it chose to use a different and broader ground. In Hamester, the entity whose conduct was in question was a cocoa company board, organ- 14.49 ized as a body corporate, called Cocobod. This had a number of delegated powers to regulate the cocoa market,166 but it was also able to trade in cocoa beans ‘on sound commercial lines and in such a manner as to ensure a reasonable return on its capital’.167 The conduct that   See Bosh, supra note 109, ¶¶ 176–​77.   Jan de Nul, Award, supra note 89, ¶ 170. 160  Hamester v. Ghana, supra note 14, ¶ 202. 161  This has been recently adopted by express reliance on Hamester as the authority in support, in the Al-​ Tamimi case, supra note 109, ¶ 323: ‘Purely commercial conduct (acta jure gestionis) cannot be attributed to the State under Article 5’. To the same effect, see Almås v. Poland, PCA Case No. 2015-​13, Award (June 27, 2016) ¶¶ 214–​67. 162  See art. 27(1)–​(2) of the European Convention on State Immunity (Basle, May 16, 1972), ETS No. 74 (referring to ‘acts performed by the entity in the exercise of sovereign authority (acta jure imperii)’). 163  See Jan de Nul, Award, supra note 89, ¶ 166. 164  Id. ¶ 169. 165  Id. ¶ 161. 166  Hamester v. Ghana, supra note 14, ¶ 190. 167  Id. ¶ 184. 158 159

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Attribution gave rise to the claim had to do with dealings in respect of a joint venture entered into with a private party. Again, the tribunal declined attribution by ‘concentrating on the utilisation of governmental power’ and concluding that ‘Cocobod acted like any contractor/​shareholder . . . rather [than] as a State entity enforcing regulatory powers’.168 14.50 Both in Jan de Nul and in Hamester attribution is likely to have been denied even on the ap-

proach, which is respectfully submitted is the correct approach, that the relevant conduct had to be examined in the light of the statutory mission of the relevant entities. In other words, it is submitted that the main question is not whether the relevant act, seen in the abstract and in isolation (i.e. dredging or joint venture negotiations), is or is not one that private parties could also undertake. Rather, the main question is whether the act that was in fact undertaken required special authority which private parties lacked and was committed in the course of the exercise of the entity’s special grant of authority. Two other cases show how focusing on the act alone is prone to lead to the wrong outcome.

14.51 In Intertrade, the relevant acts concerned the organization of tenders for logging and re-​

planting of public forests.169 That was part of the functions conferred on an entity called LČR, operating under the responsibility of the Ministry of Agriculture. The tribunal, by majority, dismissed the claim on grounds of non-​attribution, reasoning that commercial activities were inherently non-​attributable and that tendering out was an activity that any private party could have undertaken in respect of private forests.170 Arbitrator Alvarez issued a forceful dissent, in which he stressed that management of public forests is a state responsibility of high importance, and that the majority award’s ‘logical conclusion is that a State cannot be responsible for any dispute arising out of a contract or, in other words, an entity cannot exercise governmental authority through a contractual process’.171 That is the correct position, it is submitted. Even if it were true—​which it is not—​that conduct in connection with a contract can never amount to a breach of international law, that would be a substantive rule about the ingredients of the delict in substance, which has nothing to do with attribution.172 Indeed, the Jan de Nul tribunal appeared to recognize as much in its earlier ruling on jurisdiction.173 Contract-​related conduct remains attributable even if it does not ultimately amount to an international delict.174 And there are a number of circumstances in

  Id. ¶ 202.  The Almås case, supra note 161, concerned closely analogous facts: the lease of state property by the Polish Agricultural Property Agency and the subsequent termination of the lease contract by the Agency. 170  See Intertrade Holding GmbH v.  Czech Republic, PCA Case No. 2009-​ 12, Final Award (May 29, 2012), ¶¶ 155 and 181–​84. 171  Id. Separate Opinion of Henri Alvarez, ¶ 16. 172  See Impregilo v. Pakistan, supra note 95, ¶ 266(b) (‘the threshold for treaty claims [is] activity beyond that of an ordinary contracting party (“puissance publique”)’; and Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC BV v.  Paraguay, ICSID Case No. ARB/​ 07/​ 9, Further Decision on Jurisdiction (Oct. 9, 2012), ¶ 246 (‘All the characterizations that have been invoked to characterize unfair and unreasonable treatment in international law . . . arbitrariness, lack of transparency, negligence, inconsistency, bad faith, the frustration of legitimate expectations, the introduction of unreasonable measures –​occur in exercise of sovereign authority over and above acts that constitute mere breach of contract. Something more than mere breach of contract is needed’). But see also Bayindir Insaat Turizm Ticaret Ve Sanayi AS v. Pakistan, ICSID Case No. ARB/​03/​29, Decision on Jurisdiction (Nov. 14, 2005), ¶ 215 (‘One cannot seriously dispute that a State can discriminate against an investor by the manner in which it concludes an investment contract and/​or exercises the rights thereunder’). 173  See Jan de Nul, Decision on Jurisdiction (June 16, 2006), ¶ 80 (‘the fact that a dispute involves contract rights and contract remedies does not in and of itself mean that it cannot also involve treaty breaches and treaty claims’). 174  See paras 14.56–14.57 and section IV infra; and Condorelli (1984-​ VI) 189 RdC 9, 71–​76 and the authorities there. 168 169

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III.  Para-statal Entities which such conduct can be said to amount to an international delict,175 as also discussed in section IV below. In Ulysseas, the investor complained of (inter alia) the withdrawal by a regulator, CONELEC, 14.52 of permits to operate in the power market. The stated ground for the withdrawal was a breach (which the claimant disputed) of contracts for the supply of electricity. The claim was rejected in part on grounds of non-​attribution of CONELEC’s conduct that related to the contracts.176 The tribunal accepted that CONELEC’s grant of operating permits was conduct in exercise of governmental authority.177 The tribunal accepted the same in respect of CONELEC’s administration of technical and financial transactions in the wholesale electricity market.178 It is therefore easy to see how the contract-​related conduct was severed from its proper legal environment to reach the conclusion that this conduct was not attributable to the state. Indeed, the Ulysseas decision stands in stark contrast to the Mesa Power decision, which reached the opposite conclusion in analogous circumstances.179 In conclusion, and while one must acknowledge that it is a finely balanced exercise to de- 14.53 termine in what context exactly the relevant conduct was undertaken, there are two serious difficulties with the Jan de Nul line of decisions. The first is that it appears to endorse a view that the exercise of governmental authority requires a prerogative of imposing compulsion. Though in many cases governmental authority will involve such powers, exactly what powers a state sees fit specifically to grant to an entity for the accomplishment of its governmental functions is a matter for that state alone.180 As noted, the state performs many acts, such as providing administrative guidance for example, which are not ‘binding’ in the sense of being self-​executing or enforceable by administrative coercion. It is difficult to see a good reason for considering such acts as non-​attributable. Thus, failure by a state-​owned oil company, charged with the conduct of national oil policy, to assist a private contractor in exporting oil equipment has been considered an expropriatory act attributable to the state. The refusal to consent to exportation, in itself a purported exercise of a contractual right, was held to have been ‘undertaken in the governmental capacity granted . . . under internal law’, that capacity being the exclusive power to conclude oil contracts.181 In the same way, commercial management decisions by a private individual (not an official) charged with the task of administering enemy property have been held to be attributable,182 (but court-​appointed liquidators and the like appear unlikely to engage the responsibility of the state183). 175  See, e.g., Biwater Gauff Ltd. v. Tanzania, ICSID Case No. ARB/​ 05/​22, Award (Nov. 16, 2008), ¶¶ 460 (conduct ‘which exceeds the normal course of conduct of a state shareholder of a State-​owned company’); 501–​503 (occupation of company facilities with assistance by the police, and ‘usurpation of management control’); 696, 698 (repudiation of contract by state-​owned company on political motives). See also International Technical Products Corp v. Iran et al. (1985-​II) 9 IUSCTR 206, 239 (‘interference by the State with the operation of a private contract is capable of constituting a breach of treaty’). 176  See Ulysseas, supra note 109, ¶ 143. 177  Id. ¶¶ 137–​39. 178  Id. ¶ 140. 179  See Mesa Power, supra note 109. 180  In UPS v.  Canada, Merits, supra note 7, Canada argued that ‘governmental authority’ under arts. 1502(3)(a) and 1503(2) of the NAFTA Agreement ‘requires that the authority referred to is coercive, that is, that the exercise of the power has a binding effect simply through its exercise’. The tribunal thought that ‘the argument is certainly a strong one’, but, in the circumstances, it did not need to resolve it; id. ¶ 79. 181  See Petrolane, Inc. et al. v. Iran et al., supra note 115, ¶¶ 85–​97. The tribunal’s obiter observations in EnCana Corp. v. Ecuador, supra note 115, ¶¶ 154–​61 were made on a similar predicate. Cf. also Repsol YPF Ecuador SA v. PetroEcuador, ICSID Case No. ARB/​01/​10, Award (Feb. 20, 2004), ¶ 120 (‘primacy of public interest over private interest is reflected in the content of the contract’). 182  See Société Anonyme de Filatures de Schappe (1954), 13 R.I.A.A. 598, 606 (France–​Italy Conciliation Commission). 183  See supra note 141.

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Attribution 14.54 The second difficulty with the Jan de Nul approach is that it ignores that in the law of state im-

munity the existence vel non of puissance publique (sovereign authority) takes into account the necessary context to the conduct in question. The distinction between ‘sovereign’ and ‘commercial’ acts is purposive, because an act cannot be severed from its context: ‘It is not possible to classify the nature of any human activity without reference to its purpose’.184 To illustrate, it may be relevant that the diversion of a cargo of goods to a certain state served political purposes185 or that dissipation of assets was in pursuance of the government’s policy.186

14.55 Putting to one side the Jan de Nul line of decisions, the position seems to be as follows. The

renegotiation of an oil contract may be an act in exercise of governmental authority where the power to do so vests exclusively in a state-​owned oil company;187 so may the termination of a construction agreement on the basis of a general public-​law entitlement to do so;188 so, finally, may be a decision to prefer one type of project financing over another.189 All those acts could in isolation be seen as instances of garden-​variety transactional conduct; but what matters mostly is the specific and exclusive grant of authority to the national entity to take those acts as part of its ‘empowerment’ and functions.190 On that basis, it appears to be right to attribute to a state acts of a private law corporation formed by the state to handle the privatization of hotels, insofar as those acts—​including private law leases and the grading of hotels—​are acts which that corporation was exclusively authorized to undertake as part of the privatization regime.191

14.56 It would also be right to attribute to a state acts of a state ownership fund relating to the pri-

vatization of a state-​owned company as part of its statutory function.192 The Noble Ventures tribunal, which so held,193 proceeded on the basis (which appears to be wrong, for reasons discussed earlier in this chapter) that the separate personality of the Fund meant that it could not be regarded as an organ (most likely a de facto organ) and that its acts could be attributed to Romania only on the basis of ILC Article 5.194 The tribunal had no difficulty holding that the statutory function of carrying out privatizations was an empowerment to exercise governmental authority. On an analysis of Romanian law, ‘no relevant legal distinction is to be drawn between [the Fund], on the one hand, and a government ministry, on the other hand, when the one or the other acted as the empowered public institution under the Privatization Law’.195 A major component of the claim was that the fund had failed to exert ‘due diligence’ to secure the rescheduling of debts to various government bodies and that this had led to

  Australian Law Reform Commission, Foreign State Immunity (ALRC Report No. 24, 1984) 28, ¶ 49.   See I° Congreso del Partido [1983] A.C. 244 (H.L.), 64 ILR 307, 323 (Lord Wilberforce, dissenting). 186  Cf. Mobil Cerro Negro Ltd. v. Petroleos de Venezuela [2008] E.W.H.C. 532, ¶ 61. 187  See EnCana, supra note 115. 188  See LESI v. Algeria,, supra note 91, ¶¶ 113–​14. 189  Id. ¶ 115. 190  Cf. TOTO Costruzione Generali S.p.A.  v.  Lebanon, ICSID Case No. ARB/​ 07/​12, Decision on Jurisdiction (Sept. 11, 2009), ¶ 59. 191  That seems to be the basis for the holding that ‘EGOTH [the Egyptian General Company for Tourism and Hotels] was an active operator in the privatisation of the tourism industry on behalf of the Egyptian Government . . . Even if EGOTH had not been officially empowered by law to exercise elements of the governmental authority, its actions within the privatisation process are attributable to the Egyptian State’: Helnan v. Egypt, supra note 133 (Jurisdiction), ¶ 93 (but contrast the decision on the merits: Helnan v. Egypt, supra note 133, Award (July 3, 2008), ¶ 152). The one-​sentence holding to opposite effect in Wena Hotels Ltd. v. Egypt, supra note 4, Annulment, (Feb. 5, 2002), ¶ 35, seems to be wrong (and indeed beyond the original tribunal’s findings). 192  See also Nordzucker v. Poland, supra note 14. 193  See Noble Ventures Inc. v. Romania, ICSID Case No. ARB/​01/​11, Award (Oct. 12, 2005). 194  Id. ¶¶ 69–​70. 195  Id. ¶ 79. 184 185

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IV.  Inexistence of ‘Non-justiciable’ Acts of State Organs the bankruptcy of the company. This undertaking Romania characterized as commercial in nature. In consequence, Romania argued, the fund’s failure to abide by it did not constitute an exercise of governmental authority. The tribunal disagreed: With regard to the argument of the Respondent that a distinction has to be drawn between attribution of governmental and commercial conduct, the latter not being attributable, the following has to be said. The distinction plays an important role in the field of sovereign immunity when one comes to the question of whether a state can claim immunity before the courts of another state. However, in the context of responsibility, it is difficult to see why commercial acts, so-​called acta iure gestionis, should by definition not be attributable while governmental acts, so-​called acta iure imperii, should be attributable. The ILC-​Draft does not maintain or support such a distinction. Apart from the fact that there is no reason why one should not regard commercial acts as being in principle also attributable, it is difficult to define whether a particular act is governmental. There is a widespread consensus in international law, as in particular expressed in the discussions in the ILC regarding attribution, that there is no common understanding in international law of what constitutes a governmental or public act. Otherwise there would not be a need for specified rules such as those enunciated by the ILC in its Draft Articles, according to which, in principle, a certain factual link between the state and the actor is required in order to attribute to the state acts of that actor.196

This reasoning illustrates that, although commercial acts in principle are not taken in exercise 14.57 of governmental authority (but, rather, in pursuance of the entity’s own, non-​governmental goals), when the performance of such acts is part of the entity’s special grant of authority and statutory function, there is at least a presumption that they should be attributed to the state.197 Thus, if an entity organized as a private law corporation has been tasked with the administration of fisheries quotas secured under international treaties, contracts for the commercial exploitation of those quotas by subcontractors will fall within the scope of Article 5; but contracts for the lease of office space will not. In a similar way, the Iran–​US Claims Tribunal has held that the foreclosure on a mortgage by a state-​owned bank was not attributable to Iran, not because of its nature as a commercial act but because the bank had done so under the common law relating to mortgages, rather than a specific entitlement granted as part of special functions.198

IV.  Inexistence of ‘Non-​justiciable’ Acts of State Organs Attribution seeks only to determine whether a given act is one for which the state may be 14.58 held to account: ‘[t]‌o show that conduct is attributable to the State says nothing, as such, about the legality or otherwise of that conduct . . .’.199 Despite occasional assertions to the contrary,200 the nature of the conduct is immaterial for purposes of attribution when the conduct concerned is that of a state organ and therefore the principle of plenitude of attribution applies: ‘there is no basis for the idea that a State could evade international responsibility for one of its own acts by arguing, not that the act was committed by a private party, but that it could have been so committed’.201

  Id. ¶ 82.   Id. ¶ 70. 198  See International Technical Products Corp v. Iran et al. (1985-​II) 9 IUSCTR 206, 238–​39. 199  I.L.C. Second Reading Commentary, introductory ¶ (4) to ch. II of Part One of the I.L.C. Articles. 200  For example, Professor Reuter believed that ‘legal acts of a commercial nature, such as acts of exchange or sale were never attributable to the State, even if carried out by a State body’: I.L.C. 1253d mtg. [1974-​I] YBI.L.C. 16, ¶¶ 25–​26. 201  Crawford First Report, supra note 42, ¶ 176. 196 197

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Attribution 14.59 To illustrate, if a minister has refused to permit a foreign investor to acquire a stake in a com-

pany, for purposes of attribution it matters not whether the minister was representing the state as a shareholder in the company, rather than acting in exercise of regulatory powers.202 It is a wholly separate question—​one of substantive law—​whether international law places any limitations on a state from taking action as a shareholder to prevent a foreign investor from buying shares in a company.

14.60 Thus, the law of attribution cannot be used to erect a barrier of ‘non-​justiciable’ acts that may

never be attributable to state organs. The ILC put it as follows:

It is irrelevant for the purposes of attribution that the conduct of a State organ may be classified as ‘commercial’ or ‘acta iure gestionis’. Of course the breach by a State of a contract does not as such entail a breach of international law . . . But the entry into or breach of a contract is nonetheless an act of the State . . . and it might in certain circumstances amount to an internationally wrongful act.203 14.61 The General Assembly Sixth Committee, which the ILC had earlier specifically asked to con-

sider the matter,204 emphatically rejected any distinction in the law of attribution between iure gestionis and iure imperii acts, on the grounds that it was not reflected in ‘practice and jurisprudence’, was ‘extremely difficult’ to operate, and was wrong as a matter of principle.205

14.62 Thus, conduct by state organs that has been attributed to states includes several examples of

acts which did not involve the exercise of any governmental prerogative, such as:

• The organization of a campaign to promote domestic products in preference to imports from other European Community states.206 • The failure to ensure freedom of association for state employees in collective labour contracts or through the statutes of the relevant organizations.207 • As a litigant in domestic court proceedings, the failure to act expeditiously in order ‘to ensure that the dispute is speedily concluded,’208 or the failure to file memoranda in court proceedings between third parties to point out to the courts how to ensure compliance with the state’s international obligations.209

202  On the former hypothesis, see the Luxembourg government’s negative reaction to the hostile takeover of a Luxembourg company, in which the government held a shareholding, by a Dutch entity controlled by Indian shareholders, on grounds of protecting the workforce from future redundancies: International Herald Tribune, Feb. 1 and 2, 2006. (A few days later, draft legislation was tabled before Parliament to make the proposed takeover prohibitively expensive; see id. (Feb. 7, 2006).) On the latter hypothesis, see Dubai Ports’ proposed acquisition of terminals at six U.S.  ports, discussed by Malkawi, 7(3) J.W.I.T. 443 (2006). In Lalanne & Ledour (1903), 10 R.I.A.A. 17 (France–​Mexico Commission), the wrongful act was the prevention of export of goods. The Commission held that there was ‘an abuse of authority . . . by the president of the [federated] State of Guyana by refusing, in his capacity as an associate of [the private company that had an exclusive right to export by boat], and that this abuse was arbitrarily sustained by the chief of the customs . . .’. 203  I.L.C. Second Reading Commentary, ¶ (6) to art. 4 (citations omitted). 204 See [1998-​II(1)] YBI.L.C. 17, ¶ 35. 205  See U.N. Doc. A/​CN.4/​496 (1999) ¶ 117. 206  See Commission v. Ireland, supra note 91, ¶ 27 (practice amounted to potential quantitative restriction on imports, ‘comparable to that resulting from government measures of a binding nature’). 207  See the Swedish Engine Drivers’ Union case, Series A, No. 20 (1976) ¶ 37; and Schmidt & Dahlstrom v. Sweden, Series A, No. 21 (1976) ¶ 33. (Although in the latter case, the Commission, Series B, No. 19 (1974) at 34, took the view that the state’s responsibility could rest on its failure to take legislative measures to ensure freedom of association, the Court made no such finding, stating curtly that the relevant obligation was ‘binding upon “the State as an employer,” whether the latter’s relations are governed by public or private law’.) See further H. Dipla, La Responsabilité de l’État pour Violation des Droits de l’Homme: Problèmes d’Imputation 40 ff. (1994). 208  See X v. France, Series A, No. 234-​C (1992) ¶¶ 41–​44. 209  See Concessions des Phares de l’Empire Ottoman (1956), 12 R.I.A.A. 155, 233 (France v. Greece); Iran v. U.S. (Case No. A27), (1998) 34 IUSCTR 39, ¶ 67.

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IV.  Inexistence of ‘Non-justiciable’ Acts of State Organs • Taking purely material steps as part of exercising control over the operations of a company.210 • As a litigant in international proceedings, taking any act that could aggravate or exacerbate the dispute,211 providing administrative guidance212 or recommendations,213 or making adverse public statements214 (in an official capacity rather than as personal views).

There is a substantive law foundation for this position:  ‘there is no a priori limit to the 14.63 subject matters on which states may assume international obligations  . . .’.215 States often undertake international obligations whose performance does not involve the exercise of any special governmental power. Dissemination of information,216 or entering into a private law transaction217 (such as a sale or a lease of property218 or an agreement with a foreign investor governed by international law) are examples.219 Conversely, however, a private law right may afford a defence to a charge of breach of international law. To illustrate, the termination of a contract with a foreign investor may be a legitimate exercise of contract rights on the part of the state (and thus not an expropriatory act);220 and the temporary assumption of management rights over a foreign-​owned enterprise may be due to a force majeure situation or a mandate from the foreign investor (rather than intending to deprive the foreign investor of management of the enterprise).221 It follows that it would be unduly restrictive to limit, through the rules of attribution, pu- 14.64 tative breaches of international law to cases of exercise of governmental powers. By definition, governmental powers presuppose the existence of a public-​law predicate for taking the relevant action. Yet international law is not concerned only with actions that are actually or

  See, e.g., Tippetts et al. v. TAMS-​AFFA & Iran et al. (1984-​II) 6 IUSCTR 219, 220–​26.   E.g. Amco Asia Corp v. Indonesia, Decision on Request for Provisional Measures (Dec. 9, 1983), 1 ICSID Rep. 410. 212  See I.L.C. Second Reading Commentary, ¶ (6) to art. 4 and the references at note 115. 213  See Case 30/​77 Regina v. Bouchereau [1977] E.C.R. 1999, ¶¶ 21–​23 (executive recommendation was in the circumstances a necessary part of the process for the issuance of a deportation order). 214  See, e.g., Wena, Merits, supra note 4, ¶ 64 (ministerial ‘defamatory’ statements to the media); Biwater, supra note 175; Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/​99/​2, Award (Oct. 11, 2002), ¶ 64; and Case C-​470/​03 AGM-​COS.MET Srl v. Suomen valtio [2007] E.C.R. I-​ 2749 (public statements as ‘obstacles to free movement of goods’). 215  I.L.C. Second Reading Commentary, ¶ (9) to art. 12. 216  See, e.g., U.N. Human Rights Committee, CCPR General Comment No. 3, Implementation at the National Level (art. 2) (July 29, 1981), ¶ 2; id., CCPR General Comment No. 31, Nature of the General Legal Obligation Imposed on States Parties to the Covenant, U.N. Doc. CCPR/​C/​21/​Rev.1/​Add.13 (2004) ¶ 7 (‘educative’ measures ‘to raise levels of awareness about the Covenant’). 217  See, e.g., the Implementation Agreement between the U.K. and the Russian Federation (London, July 7, 2005 and Moscow, 12 July 12, 2005), TS No. 38 (2005) Cm 6684, art. 9: ‘ECGD [the Export Credits Guarantee Department] commits not to enter . . . into any market transaction that may affect in any way its economic or credit risk exposure to its Paris Club debt towards the Russian Federation’. 218  See, e.g., the U.S.–​Canada Agreement regarding the continued use of land adjacent to certain leased bases (Ottawa, June 15, 1966), U.N.T.S. No. 8595. 219  See generally Mann, 32 BYIL 20 (1957), reprinted in id., Studies in International Law 140 (1973). 220  See International Fisheries (1931), 4 R.I.A.A. 631, 691 (U.S.–​Mexico General Claims Commission); Robert Azinian, Kenneth Davitian & Ellen Baca v. United Mexican States, ICSID Case No. ARB (AF)/​97/​2 Mexico (1998), 5 ICSID Rep. 269, ¶¶ 97–​100; SGS v. Pakistan, ICSID Case No. ARB/​01/​13, Decision on Objections to Jurisdiction (Aug. 6, 2003), 8 ICSID Rep. 406, ¶ 161; and the case law regarding terminable-​ at-​will contracts cited by Burns H. Weston et al., International Claims: Their Settlement by Lump Sum Agreements, 1975–​1995 63 (1999). 221  Cf. Bulgaria’s arguments in Compagnie d’Électricité de Sofia et de Bulgarie v. Bulgaria (1923) 3 MAT 308, 315–​18 (Belgo-​German MAT), reprinted in Electricity Company of Sofia and Bulgaria, Pleadings, P.C.I.J, Series C, No. 88 (1939) 60; and Sedco, Inc v. NIOC & Iran (1987-​II) 15 IUSCTR 23, ¶¶ 27–​28 (allegation that possession of oil rigs was taken after the exercise of a purchase option under a preexisting contract). 210 211

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Attribution putatively lawful in domestic law.222 A foreign investor which is prevented from accessing and managing (say) an industrial plant may have a complaint under international law, whether the plant has been requisitioned by judicial or executive action223 or simply taken over by workers at the behest or with the tolerance of the official authorities.224 14.65 There should therefore be no confusion between the question of attribution and a defence that

the conduct fails to disclose a colorable claim for breach of international law. The latter defence may be made on the basis that the relevant conduct has no legal significance in international law (e.g. it was no more than a contract breach, rather than an expropriation);225 is causally or objectively unable to constitute the wrong complained of;226 or did not constitute a ‘measure’ in the sense of the relevant treaty.227 That kind of defence goes to the merits or, on a prima facie test, to the admissibility of a claim.228 That seems in fact to have been Poland’s position in the Eureko case, where it was argued that the relevant contracts between the claimant and the Polish Treasury ‘constituted civil law agreements . . . which fall within the sphere of the exercise of civil law rights and which are not at all connected with the exercise by the State Treasury of governmental powers’.229 The argument appears to have been that the relevant conduct could not be characterized as a breach of the applicable treaty (as contended by the claimant), not because it could not be attributed to Poland,230 but rather because it was in the nature of a contractual matter to be addressed through private law remedies. Yet curiously the tribunal addressed Poland’s submission purely in terms of attribution and rejected it.231

14.66 By contrast, Russia did argue in the Yukos case that the Tax Ministry’s participation in a

bankruptcy process was not attributable on grounds that the ministry participated as a commercial creditor rather than in exercise of governmental powers. The tribunal had no 222  Cf. the Fair American case, IV Moore, International Arbitrations (1898) 3369 (U.S. v. Mexico, 1841) (execution of confiscatory regulations adopted in breach of domestic law); Briegel v. Germany (1923) 3 MAT 358, 360–​61 (Anglo-​German MAT) (sequestrations unauthorized by law); and France’s pleadings in ‘Électricité de Beyrouth’ Company, I.C.J. Pleadings, 56 (charging Lebanon with breaches of concession by way of government’s failing to pay bills due, encouraging embargo on payment by other consumers, etc.). 223  See Elettronica Sicula Spa (ELSI), I.C.J. Reports 1989, 15. 224  Cf. Sohn & Baxter,55 AJIL 545, 559 (1961) (‘The alien may simply be forbidden to employ a certain portion of a building which he occupies, either on a wholly arbitrary basis or on the authority of some asserted requirement of the local law’); Aucoven v. Venezuela (2003), 10 ICSID Rep. 314, ¶¶ 125–​28 (where in the circumstances no final finding was made in that regard). 225  See, e.g., Waste Management Inc v. United Mexican States (II) (2004), 11 ICSID Rep. 362, ¶¶ 115 and 174; Joy Mining Machinery Ltd. v. Egypt, ICSID Case No. ARB/​03/​11, Award (Aug. 6, 2004), ¶ 78; EnCana, supra note 115, ¶ 194; and Jan de Nul, Award, supra note 89, ¶¶ 169–​70. 226  See, e.g., Kalogeropoulou v. Greece and Germany, App. No. 59021/​00, ECHR 2002-​X, 13–​14 (as a litigant in the Greek courts, Germany was not exercising ‘jurisdiction’ in the sense of art. I of the ECHR); Waste Management (II), supra note 225, ¶ 131 (a litigant cannot commit a denial of justice ‘unless its improper actions are endorsed or acted upon by the court, or unless the law gives it some extraordinary privilege which leads to lack of due process’); Saipem S.p.A. v. Bangladesh, supra note 87, Award (June 3, 2009), ¶ 131 (court interference with arbitration proceedings at request of state-​owned company; conduct of that company ‘cannot amount to expropriation’ as it is not in the nature of a governmental act). 227  Although the value of such an argument is at best debatable; see Waste Management (II), supra note 225, ¶ 174; Ethyl Corp v. Canada (Jurisdiction) (1999) 38 I.L.M. 708, ¶ 66 (official announcement of forthcoming law limiting imports); Fisheries Jurisdiction, I.C.J. Reports 1998, 12, ¶ 66 (‘in its ordinary sense the word [“measure”] is wide enough to cover any act, step or proceeding’); and United States–​Sunset Review of Anti-​Dumping Duties on Corrosion-​Resistant Carbon Steel Flat Products from Japan, WT/​DS244/​AB/​ R (WTO Appellate Body, 2003) ¶¶ 81–​82 (prospective statements of policy can affect ‘the security and predictability needed to conduct future trade’). 228  See, e.g., Salini & Italstrade v. Jordan (ICSID Case No. ARB/​02/​13), Decision on Jurisdiction (Nov. 9, 2004), ¶ 163. 229  Eureko BV v. Poland (Partial Award) (Aug. 9, 2005), 12 ICSID Rep. 335, ¶ 124. 230  Id. ¶ 123, n. 8. 231  Id. ¶¶ 125–​34. See the critique by Douglas, 22 Arb. Int’l 27, 37–​45 (2006).

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V.  Attribution of Representations difficulty dismissing the argument, stating that plenitude of attribution under ILC Article 4 comprises commercial acts.232 That reasoning would also have been a complete answer to Poland’s jurisdictional objection ratione personae in the Nordzucker case, which seems to have been based on an alleged lack of attribution for regulations issued by the Treasury for share offers in the context of privatization. But the tribunal preferred to dismiss the objection on the basis that the Treasury ‘did not act in a merely commercial capacity’ but rather ‘on the basis of its responsibility to supervise and to approve the privatization process’.233

V.  Attribution of Representations The rules of attribution relate to international responsibility for wrongful conduct, that is, a 14.67 breach of an international obligation.234 ‘Attaching to the State a manifestation of will which is valid, for example, in order to establish its participation in a treaty is . . . in no way identifiable with the operation which consists of attributing to the State particular conduct for the purpose of imputing to it an internationally wrongful act entailing international responsibility.’235 For example, special rules govern the conclusion of treaty relations236 and issuance of unilateral statements that are binding on the formulating state.237 Liability for injurious consequences of lawful acts may similarly follow special rules.238 The practical significance of that point arises especially in two situations, which merit discussion separately.

A. Representations Frustrated by Later Conduct The first situation is where there is a representation that is not in itself wrongful but none- 14.68 theless part of the predicate of the wrongful act—​for example, a representation on which reliance is placed by an investor as generating legitimate expectations of future conduct, which expectations are later frustrated by inconsistent conduct. The question is whether the rules of attribution apply not only to the subsequent inconsistent conduct, which is the allegedly wrongful conduct, but also to the initial representation. In part, the issue has arisen with respect to representations which are alleged by the state 14.69 to have been ultra vires under its law and retracted on that basis.239 The rule of attribution that comes closest to being apposite to such situations is that set out in ILC Article 7, which provides: The conduct of an organ of a State or of a person or entity empowered to exercise elements of the governmental authority shall be considered an act of the State under international law if the organ, person or entity acts in that capacity, even if it exceeds its authority or contravenes instructions.

  See Yukos v. Russia, supra note 101, ¶¶ 1478–​79.   Nordzucker v. Poland, supra note 14, ¶ 132. 234  See I.L.C. art. 2, quoted supra at note 34. 235  I.L.C. First Reading Commentary, [1973-​II] YBI.L.C. 189, introductory ¶ (5) to ch. II of Part One. 236  See Vienna Convention on the Law of Treaties, 1155 U.N.T.S. 331, arts. 7–​8. 237  See the I.L.C. Guiding Principles Applicable to Unilateral Declarations of States Capable of Creating Legal Obligations, U.N. Doc. A/​CN.4/​L.703 (2006), Principle 4. 238  See I.L.C. 1257th mtg. [1974-​ I] YBI.L.C. 29, ¶ 25 (Quentin-​Baxter); Quentin-​Baxter, Preliminary Report on International Liability for Injurious Consequences Arising out of Acts Not Prohibited by International Law, U.N. Doc. A/​CN.4/​334 and Add.1 & Corr.1 and Add.2, [1980-​II(1)] YBI.L.C. 247, ¶ 19. 239  See T. Meron, Repudiation of Ultra Vires State Contracts and the International Responsibility of States, 6 ICLQ 273 (1957). 232 233

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Attribution 14.70 On its face, this rule is concerned with attribution of conduct that itself constitutes a breach

of a state’s international obligations (e.g. unauthorized brutality by the police).240

14.71 In other cases, the initial representation is indisputably lawful under the law of the host state,

but the inquiry is about the extent of the legitimate expectation or other entitlement that it is said to have generated. The legitimate expectation is then relevant in determining whether a later, allegedly wrongful, act of retraction or variation is expropriatory, unfair and inequitable, or delictual on some other ground.

14.72 In respect of both types of cases, there is no great difficulty with applying the rules of at-

tribution to conduct that is not in itself wrongful. This may rest on the basis that the non-​ wrongful conduct is a necessary part of the wrong complained of: the wrongfulness lies in the frustration of a prior representation. This approach finds some support in the view of the ILC that ‘the entry into or breach of a contract by a State organ is . . . an act of the State for the purposes of [attribution], and it might in certain circumstances amount to an internationally wrongful act’.241

14.73 Admittedly, in the cases discussed here, attribution may be only the beginning of the inquiry.

Whether the representation so attributed entitles its recipient reasonably to expect a certain course of conduct is a matter of the merits. In other words, by operation of the rules of attribution one may answer only the question whether the representation has been issued by a state organ or other person or entity whose acts may engage the responsibility of the state. Attribution says nothing about the legal significance of the representation, that is, whether and to what extent it may be relied upon by its recipient or, conversely, varied or revoked by the state. To illustrate, that a technical department of government may endorse a paper identifying the precise location of a hypothetical boundary line cannot be taken as acceptance of that line as an international boundary by the department charged with foreign affairs.242 In the same way, one can see that a representation about the availability of a tax exemption could be relied upon if made by the prime minister’s office or the ministry of economy but not if made by the ministry of education.

14.74 This analysis appears to be tenable in the light of investment treaty case law. Thus, the tri-

bunal in ADF v US referred to ‘representations made by authorized officials’;243 and the tribunal in SPP v Egypt said that the acts on which the investor was held reasonably to have relied were ‘cloaked with the mantle of government authority and communicated as such’.244 In both cases, the investor’s ability to rely on the relevant representation (and therefore the legitimacy of the putative expectation itself ) rested, not on bare rules of attribution but rather on the position of the officials involved and the content and nature of the particular representation.245 Indeed, in a recent case, the principle was put as follows: ‘It is difficult for an organ or official who manifestly lacks competence to be able to induce reasonable reliance in a third party, such as the foreign investor . . . . In the end, everything depends on the

  See further Crawford, State Responsibility, supra note 2 at 119–​20.   I.L.C. Second Reading Commentary, ¶ (6) to art. 4 (citations omitted). 242  See Gulf of Maine, I.C.J. Reports 1984, 246, ¶¶ 131–​39. 243  ADF Group Inc v. United States, ICSID Case No. ARB (AF)/​00/​1, Award (Jan. 9, 2003), ¶ 189. 244  See Southern Pacific Properties (Middle East) Ltd. v. Egypt, ICSID Case No. ARB/​84/​3, Award (May 2, 1992), ¶¶ 81–​85, in particular ¶ 83. The tribunal referred to ‘expectations protected by established principles of international law’, referring in all likelihood to principles of estoppel. 245  See also Aboilard (1905), 11 R.I.A.A. 71 (France v. Haiti) (refusal to perform agreement with foreigner concluded by three ministers acting in the name of the government, and authorized so to act, constitutes a ‘frustration of legitimate expectations’). 240 241

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V.  Attribution of Representations particular circumstances surrounding the actions or statements at the heart of the estoppel allegations’.246 That the rules of attribution are necessary but not sufficient in the analysis of such situations 14.75 appears also to have been accepted in respect of two cognate issues: whether discussions with municipal authorities or state-​owned companies can satisfy the requirement of negotiations as a necessary prior step to arbitration,247 and whether endorsement of an investment by government officials can meet a treaty-​imposed requirement of obtaining a certificate approving the investment, as necessary for the investment to be protected by the treaty.248 On this analysis, the MTD case appears to be an outlier. There, the representation consisted 14.76 in acts by Chile’s Foreign Investment Commission. The Commission’s statutory function was to approve the ‘inflow of foreign capital . . . and to stipulate the terms and conditions of the corresponding contracts’. In that case, the Commission had approved the making of an investment by MTD, and an ‘investment contract’ was concluded between MTD and the Commission providing that MTD would develop ‘a real estate project on 600 hectares of Fundo El Principal de Pirque’.249 The Ministry of Housing and Urban Development later refused to assent to the amended zoning that was necessary in the circumstances, and this was the basis of MTD’s claim. Chile argued that the Commission’s function did not go beyond approval of importation of funds, and the contract was therefore incapable of giving rise to a legitimate expectation that rezoning would be forthcoming. Urban planning was a separate function which belonged to the Ministry alone. The tribunal disagreed, holding that ‘approval of an investment by the [Commission] for a 14.77 project that is against the urban policy of the Government is a breach of the obligation to treat an investor fairly and equitably’.250 The stated basis for that finding was that the ministry and the Commission ‘for purposes of the obligations of Chile under the BIT . . . represented Chile as a unit, as a monolith’.251 Although the reference to the concept of the unity of the state is redolent of the rules of attribution, the tribunal’s decision is better explained on a view that, as a matter of substantive law, coordination was required among the Commission and the ministry and that the investor was entitled to expect that such coordination would have taken place. (How that view accords with the separation of competences typical among government departments was not explained.)

B. Contractual breaches actionable under umbrella Clauses Where the wrong alleged is the breach of a contractual obligation actionable under an um- 14.78 brella or ‘specific undertakings’ clause, the question may be asked in the first place whether the contract is one that the host state is required to perform as a party to it. For example, where the relevant treaty provides that ‘Each Contracting Party shall observe any obligation it may have entered into with regard to investments of nationals or companies of the other Contracting

246  Duke Energy Int’l Peru Investments No. 1, Ltd. v. Peru, ICSID Case No. ARB/​03/​28, Award (Aug. 18, 2008), ¶¶ 249–​51; and see id. ¶¶ 320 ff. (whether representations made by State agencies in the context of a privatization process were binding on tax authorities). Cf. Fireman’s Fund Insurance, supra note 53, ¶¶ 153–​54 (representations by consultative working group given informally cannot found a legitimate expectation). 247  See Tokios Tokelės v. Ukraine, ICSID Case No. ARB/​02/​18, Decision on Jurisdiction (Apr. 29, 2004), ¶ 102; Salini v. Morocco supra note 76, ¶ 18. 248  See Desert Line Projects LLC v.  Yemen, ICSID Case No. ARB/​ 05/​17, Award (Feb. 6, 2008), ¶¶ 118–​21. 249  MTD v. Chile, ICSID Case No. ARB/​01/​7, Award (May 25, 2004), ¶ 54. 250  Id. ¶ 166. 251  Id.

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Attribution Party’,252 it is sometimes necessary to determine whether the entity that is signatory to the obligation ‘entered into’ is a ‘Contracting Party’ for the purposes of the clause. 14.79 The answer will be straightforward in the cases where the contract has been concluded by

(say) ‘the Government’ or ‘the Republic’, stated to be acting through an authorized entity (typically, a Ministry or a specialized agency). In those cases, either the state-​side signor will be an organ,253 or a public-​law delegation of authority or private-​law agency relationship under domestic law will be extant on any view.254 The matter is more complex when there is no delegation or agency, and the signatory entity has separate personality in domestic law and is able to undertake obligations in its own name and for its own account and perform them by its own means and through its own property. In essence, the question there may be stated as whether by operation of international law a state can become a party to a contract that in the domestic law sphere binds only its signatory, being a separate entity. If so, contractual breaches could potentially engage the international responsibility of the state in an action under an umbrella clause. The policy implications are substantial.

14.80 There is authority for the proposition that contractual obligations of entities separate from, or

subordinate to, the ‘central government’ in principle do not bind the state on the international plane.255 This would be a rule of substantive law, expressed by the ad hoc Committee in the Vivendi case as follows: ‘the State of Argentina is not liable for the performance of contracts entered into by [the federated province of ] Tucumán, which possesses separate legal personality under its own law and is responsible for the performance of its own contracts’.256 On this approach, the question that arises next is whether umbrella clauses may be read as requiring of the state observance of contractual obligations which under their proper (domestic) law bind only their signatory, being a body with separate legal personality. In answer, the view has been expressed that an umbrella clause does not ‘transform the obligation which is relied on into something else’,257 that is, into a substantive obligation of international law. On that view, the content and proper law of, and the parties to, the obligation remain unaffected 252 Article 2(2) of the UK Prototype Bilateral Investment Treaty (1991), 3 UNCTAD, International Investment Instruments: A Compendium 185 (1996); and art. 2(2) of the 2005 UK prototype text, reprinted in Dolzer & Schreuer, supra note 5 at 376. 253  See, e.g., JKX, supra note 57. 254  Although in Texaco v. Libya, supra note 56, the binding effect on the state of Libya of a contract signed by the Ministry of Oil and Gas was established on the basis of the rule of the unity of the state, which relates to attribution. In the Ulysseas case, supra note 55, ¶ 155, it was held that a contract entered into by a regulatory agency recorded there to be acting ‘in representation of ’ the state was not to be regarded as extending to the state as a contracting party, on grounds that the term ‘representation’ ‘simply highlights that [the agency] is acting in the capacity and within the powers granted to it by the law in question “[as the competent public body]” ’. The cases analyzed by K.-​H. Böckstiegel, Arbitration and State Enterprises 43–​46 (1984), under the headings of actual or apparent authority, functional identity with the state, and abuse of rights by misuse of corporate personality, would also fall within the broad category where the state’s participation in the contract may be established on agency theories. In Petrobart Ltd. v. Kyrgyz Republic, SCC Case No. 126/​ 2003, Award (Mar. 29, 2005), 13 ICSID Rep. 387, it was argued that a state-​owned company had acted as an agent for the state (‘for and on behalf of the Kyrgyz Republic’), but the tribunal did not enter the issue. 255  See the Harvard Law School Draft Convention on Responsibility of States for Damages Caused in their Territory to the Person or Property of Foreigners, 23 AJIL Spec. Supp. 132 (1929), arts. 3 and 8(b), and the commentary at pp 145 and 168; and the revised 1961 text [Sohn & Baxter, supra note 224], art. 12 and the commentary. 256 Compañia de Aguas del Aconquija SA and Universal v.  Argentina, ICSID Case No. ARB/​ 97/​3 Decision on Annulment (July 3, 2002), ¶ 96; quoted with approval in Generation Ukraine Inc v. Ukraine, ICSID Case No. ARB/​00/​9, Award (Sept. 16, 2003), ¶¶ 10.5–​10.6. 257  Crawford, 24 Arb. Int’l 351, 362, and 369 (2008) [hereinafter Crawford (2008)]; and CMS Gas Transmission Company v. Argentina, ICSID Case No. ARB/​01/​8, Decision on Annulment (Sept. 25, 2007), ¶ 95(c); Accord Nouvel, in Le Contentieux Arbitral Transnational relatif à l’Investissement 25, 46–​51 (C. Leben ed., 2006).

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V.  Attribution of Representations by the umbrella clause: these are matters governed by their proper law under ordinary conflicts rules; and the rules of attribution do not apply at all. There are several difficulties with that thesis, which appears to assume what must be dem- 14.81 onstrated. First, on its face an umbrella clause of the kind discussed here258 does seem to set out ‘a rule of international law imposing upon a State the duty to ensure the observance of a particular contract’.259 On any view, breach of an umbrella clause is not a breach of the underlying obligation whose observance the clause calls for; it is a breach of the umbrella clause itself. The only thing that umbrella clauses do not expressly say is that rules of attribution are to apply; but vanishingly few treaties say anything about attribution at all. Secondly, for the purposes of an umbrella clause, the relevant obligation must be referable to a ‘Contracting Party’, which is a notion of international law. As a rule, terms in international treaties are not dependent on domestic law for their interpretation. Thirdly, in domestic legal systems where there is no unitary legal person called ‘the state’,260 the umbrella clause would have no significance at all, which could hardly have been the intention of the parties to the treaty. Fourthly, one may doubt the wisdom or practicality of applying to umbrella-​clause claims rules different from those that apply where a contractual representation is pleaded as a predicate for the breach but not in itself the breach (as discussed above).261 Finally, it seems difficult to accept that the unilateral (say, legislative) annulment of (say) a tax holiday accorded in an investment contract signed by the Tax Administration Agency does not give rise to an umbrella-​clause claim on the theory that the Agency has separate legal personality. Historically, the umbrella clause was designed to counter precisely such conduct, that is, conduct that is not per se actionable as a breach under the proper law of the contract.262 (Indeed, on one view, ordinary contractual breaches of ‘ordinary commercial contract’ terms are never caught by an umbrella clause.263) In the light of those considerations, determination of whether the state has ‘entered into’ 14.82 the relevant obligation would call for an analysis under international law, not domestic law. Here, too, the rules of attribution may well be relevant. It is true that the implications of applying rules of attribution are considerable. But it is also true that, as noted, the scope of obligations imported by umbrella clauses is not settled, and a clarification of that scope—​a matter of substantive law, not attribution—​seems to be a more appropriate way to deal with the implications that arise. The case law relevant here comprises decisions on umbrella clause claims but also decisions 14.83 on cognate jurisdictional questions under the terms of particular treaties. One strand of cases is to the effect that rules of attribution apply to determine whether the state was an obligor under a contract signed by an entity with its own personality in domestic law. The

  See text to note 252 supra.   Observations by the Chairman of the Drafting Committee (Hambro), [1974-​I] YBI.L.C. 152, ¶ 10. See also I.L.C. First Reading Commentary, [1974-​II(1)] YBI.L.C. 277, ¶ (13) to art. 7 (‘[I]‌t has been often affirmed as a principle that the state cannot be held internationally responsible for the breach of contracts entered into by the organs of a territorial government entity . . . [I]t is necessary to determine whether or not, in the specific case in point, the State is under an international obligation, for example in virtue of a treaty, requiring that State . . . to honour certain contractual obligations under internal law . . .’). 260 Crawford, supra note 257 at 355 gives the example of Poland. 261 Leben, supra note 257 at 42 distinguishes between a contract that may be attributable to the state as a fact (‘fait étatique’) from a contract that binds a state contractually (‘engagement étatique’), but that is a classification proposed by that author and not a statement of positive law. 262  See generally, A. Sinclair, The Origins of the Umbrella Clause in the International Law of Investment Protection, 20 Arb. Int’l 411 (2004). 263  See, e.g., Pan American Energy LLC v.  Argentina, ICSID Case No. ARB/​ 03/​ 13, Decision on Preliminary Objections (July 27, 2006), ¶ 109; and Wälde, 1 TDM 31 (2004). 258 259

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Attribution most straightforward case appears to have been Eureko, where the relevant contract had been concluded by the Treasury, a government Ministry. The Treasury had separate personality in Polish law. This was held to be immaterial to Poland’s international responsibility.264 The conclusion appears justified on any view of the matter (i.e. under an international law or under a domestic law analysis), given that (albeit for the purposes of sovereign immunity) it is Poland’s own official position that the Treasury ‘does not hold property separately from the state’, and that its ‘core function—​to hold and administer property of the Polish state—​is indisputably governmental’.265 14.84 The Bosh tribunal had no difficulty applying rules of attribution (ILC Article 5) to determine

whether the conduct of a university in respect of a contract was actionable under the umbrella clause in the BIT.266

14.85 The SwemBalt tribunal also applied principles of attribution in respect of some acts that appear

to have been taken by (inter alios) municipal authorities and a specialized agency, in a contractual setting. The explanation given was that— the subdivisions of the state and the way in which each state chooses to divide the work between such subdivisions is without relevance. If the state delegates certain work to lower levels of government, be they federal, regional or municipal, it must be an obligation of the state under international law to ensure that its obligations under international law . . . are fulfilled by such subdivisions.267

14.86 Several other tribunals have followed the same approach, without much elaboration, both in

respect of specialized agencies268 and state-​owned companies.269

14.87 Another strand of cases, by contrast, appears to follow the approach adopted in Generation

Ukraine, to the effect that:

[T]‌he acts of [a municipal authority] may be imputable to Ukraine as a sovereign state for the purpose of the international law of responsibility . . . But such rules do not operate to join the central government of Ukraine to contractual relationships entered into by municipal authorities.270 14.88 Thus, the tribunal in Salini v Jordan held that ‘each state Party to the BIT between Italy and

Jordan remains bound by its contractual obligations’,271 which obligations it distinguished from contractual obligations of an entity with separate legal personality. The tribunal accepted that the Jordan Valley Authority was an ‘autonomous corporate body’ under the Jordanian government’s ‘strict control’,272 which body, given its public functions,273 was to be considered as an ‘entity of a Contracting Party’, but was not a ‘Contracting Party’ for

  See Eureko v. Poland, supra note 229, ¶¶ 115–​34.   See Garb et al. v. Republic of Poland, 207 F. Supp. 2d 16, 35 (E.D.N.Y. 2002). 266  See Bosh v. Ukraine, supra note 109, ¶ 241. 267  SwemBalt AB v. Latvia (2000) [2004:2] SAR 97, ¶ 36. 268  See Noble Ventures v. Romania, supra note 193, ¶¶ 68 ff.; LESI v. Algeria, supra note 91, ¶ 19; and SGS v. Pakistan (Jurisdiction), supra note 220, ¶ 166 (Water and Power Development Authority of Pakistan). 269  See Nykomb v. Latvia, supra note 90, section 4.2 (electricity company). 270 Generation Ukraine, supra note 256, ¶ 8.12. This holding related to the jurisdictional question whether, on the basis of its agreement with the municipal authority, the claimant had a claim under ‘(a) an investment agreement between [a Contracting] Party and [a]‌national or company [of the other Contracting Party]’ in terms of the applicable treaty. 271  Salini v. Jordan, supra note 228, ¶ 127. 272  Id. ¶ 84. 273  Id. ¶ 81. 264 265

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V.  Attribution of Representations jurisdictional purposes under the applicable treaty.274 The result of that analysis was that disputes under an investment agreement with the Authority were excluded from the tribunal’s jurisdiction.275 Nevertheless, the tribunal went on to discuss—​obiter—​whether the contract with the Authority could be said to bind the state of Jordan as a party. It answered that question in the negative, on the basis that ‘the contract at issue was entered into between the claimants and the Jordan Valley Authority, which under the laws of Jordan governing the contract, has a legal personality distinct from that of the Jordanian State’,276 citing in support the jurisdictional decisions in Salini v Morocco277 and RFCC v Morocco.278 The jurisdictional decision in Salini v Jordan is rightly cited for the proposition that it is for 14.89 domestic law to determine the identity of the obligor of a contractual obligation.279 Yet the tribunal’s award on the merits of the case casts doubt on that conclusion. It was alleged that the authority’s breaches of the contract constituted also (inter alia) unjust and inequitable treatment under the applicable treaty. The tribunal held that there was no colorable claim on the facts.280 For that reason it was unnecessary to take a view on whether the contractual breaches by the authority, when pleaded as distinct breaches of separate standards in the treaty, ought to be attributed to Jordan in accordance with the rules on attribution. The tribunal said: [T]‌he rules of attribution governing responsibility for the performance of contract obligations may differ from those governing responsibility for the performance of BIT obligations. In this respect, the Tribunal, in the present case, has no intention of taking a position on such a substantive issue at this stage. It will note, however, that under Jordanian law, the legal personality of the JVA [Jordan Valley Authority] is distinct from that of the Jordanian State; accordingly, it cannot be ruled out that Jordan might not be held responsible for JVA’s breaches of contract. Nevertheless, in public international law, a State may be held responsible for the acts of local public authorities or public institutions under its authority and it cannot be ruled out that the Jordanian State may be held responsible for the acts of the JVA.281

Whatever import Salini v Jordan may have, the Impregilo v Pakistan, Nagel v Czech Republic 14.90 and Amto v Ukraine tribunals also dismissed the proposition that contracts entered into by entities with separate legal personality could bind the state, whether such entities might be public corporations or agencies or state-​owned private law companies.282 The Ulysseas case may also belong in this line of authority, although it is not clear on the face of the decision that the tribunal performed an analysis under applicable domestic law. The key holding seems to have been arrived at by a priori reasoning: The effect of creating a public entity to regulate a specific sector of state activity, with the power to sign contracts with third parties in that sector, is to avoid the direct responsibility

274  Article 9(2) of the treaty provided that where an ‘investment agreement’ had been concluded between an investor and an ‘entity of the Contracting Parties, the [dispute-​resolution] procedure foreseen in such investment agreement shall apply’. 275  Id. ¶ 101: ‘Article 9(2) of the BIT makes it obligatory to refer such disputes to the dispute settlement mechanisms provided for in the contracts and, where such disputes are concerned, excludes recourse to the procedure set forth in Article 9(3) [of the treaty] for such disputes’ (internal cross-​reference omitted). 276  Id. ¶ 100 (emphasis added; internal cross-​reference omitted). 277  See Salini v. Morocco, supra note 76, ¶¶ 35, 60–​62. 278  See Consortium RFCC v. Morocco, ICSID Case No. ARB/​ 00/​6, Decision on Jurisdiction (July 16, 2001), ¶¶ 30, 34, 67–​69. 279  Thus Leben, supra note 257 at 48. 280  See Salini & Italstrade v. Jordan, Decision on Jurisdiction, (Jan. 31, 2006), supra note 228, ¶ 163. 281  Id. ¶ 157 (citing a passage from Vivendi (Annulment) quoted in the text to note 256 supra). 282  See Impregilo v. Pakistan (Jurisdiction), supra note 95, ¶¶ 212–​13; Nagel v. Czech Republic (2003), 13 ICSID Rep. 33, 162–​63 (where jurisdiction was held to be lacking on other grounds); and Amto v. Ukraine, supra note 109, ¶ 110.

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Attribution of the state for that sector’s activity. It would be contrary to this purpose to make the state party to contracts signed by the public entity with third parties, thereby assuming a direct responsibility towards those parties for the contract performance.283 14.91 In sum, the jurisprudence presents a fragmented picture which will, on occasion, exasperate

investors and their advisers. The task of future tribunals will be to contribute to a systematic and comprehensive analysis of the issues of principle involved.

VI. Conclusion 14.92 The following legal propositions are supported by authority and the analysis in this chapter:

(1) An organ of the state is any person or entity charged with functions, of whatever nature, that are overwhelmingly for the benefit and account of the state, as opposed to the benefit and account of the person or entity concerned. That calls for a structural analysis and is not a mechanical test, but the indications to be taken into account fall within recognizable categories. Their assessment in every case is to be made by application of international law, but the relevant data can only be found in the internal law of the state concerned. While a classification of a person or entity as an ‘organ’ in internal law may in practice often lead to the same conclusion under international law, this will not always be the case: ‘organ’ is not a classification that all domestic legal systems have; and where it exists, it may serve internal law purposes different from those of international law. (2) Existence of separate legal personality and liability in internal law is never dispositive of the status of the entity as an organ in international law. State-​owned corporations with a commercial purpose would not in principle be regarded as state organs, but that presumption could be overturned on a showing that, in fact or law, the relevant entity (a) overwhelmingly serves a different, governmental purpose, (b) has no decision-​making organs of its own, (c) is tasked merely with implementing decisions taken by the state, or (d) is subject to pervasive control or direction by the state. (3) Where the conduct in question is not that of an organ of the state but that of a person or entity said to be entitled to exercise, and to have in fact exercised, ‘elements of the governmental authority’, there are four salient points. First, while regulatory, adjudicatory, or executive functions (i.e., core state functions) are in principle to be regarded as ‘governmental’ in nature, it is possible that in the light of the conceptions prevailing in the state concerned other functions may also be regarded as governmental. Secondly, there is no reason of principle to say that lawful compulsion or binding force are necessary components of governmental authority. Thirdly, an exercise of governmental authority involves the taking of an act that the entity in question is specifically authorized to take as part of the functions assigned to it; an act taken on a legal basis that would be available to any private person is not predicated on any grant of governmental authority. It is irrelevant whether the act so taken is generically of a kind that in some circumstances a private person could take: the question is, rather, whether the act was in fact taken on a legal basis available specifically to the entity concerned, as a complement of its governmental functions. (4) The rule of plenitude of attribution, which applies to conduct of state organs, suffers no exceptions. Conduct that is justiciable in domestic law as ‘private’ conduct (e.g., commercial conduct) is no less attributable as a matter of international law. It is possible that such conduct is properly to be regarded as having no legal significance in the claim as

  Ulysseas v. Ecuador, supra note 55, ¶ 154.

283

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VI. Conclusion pleaded—​i.e., that it is objectively unable to constitute an international-​law delict. That kind of defence goes to the merits or (on a prima facie test) to the admissibility of the claim. It cannot be assessed under the rules of attribution. (5) Where the wrongful conduct is the frustration of a prior representation, the rules of attribution may be applied, on the basis that the representation is a necessary predicate of the wrongful act. Nevertheless, the question of the legal significance of the representation is one of the merits, not of attribution. (6) Where the claim is for a breach of an undertaking under an umbrella clause, the better view is that rules of attribution apply to determine whether the undertaking is attributable to the state and actionable as such in international law. The contrary view is premised on the argument that an umbrella-​clause claim is one for a breach of the underlying undertaking, rather than the umbrella clause itself. That argument is difficult to reconcile with the purpose of umbrella clauses and the proper role of domestic law in international treaties generally. The view here proposed as the better view is without prejudice to substantive rules of international law which limit the scope of breaches of undertakings that are actionable under an umbrella clause.

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15 BREACH OF TREATY CLAIMS AND BREACH OF CONTRACT CLAIMS When Can an International Tribunal Exercise Jurisdiction? Stanimir A Alexandrov

C. Provisions Granting Jurisdiction over Disputes Relating to ‘Investment Agreements’  15.35

I. Introduction  15.01 II. Treaty-​based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract  15.04

IV. Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims 

A. Contract Protection under Customary International Law  15.06 B. Contract Protection under Investment Treaties  15.11 C. Investment Treaty Claims Arising out of Contracts  15.17

III. Treaty-​based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims 

A. Umbrella Clause Provisions as a Basis for Jurisdiction over Contract Claims  B. Provisions Granting Jurisdiction over ‘Any Disputes’ 

A. The Power of Treaty-​based Tribunals to Interpret Contracts  B. The Difficulty (and Irrelevance) of Attempting to Identify Contract Claims ‘Dressed’ as Treaty Claims  C. The Impact of Contractual Forum Selection Clauses on the Jurisdiction of Treaty-​based Tribunals  D. The Role and Significance of ‘Fork-​in-​ the-​Road’ Provisions 

15.20 15.23 15.24

V. Conclusion 

15.38 15.44 15.48 15.57 15.72 15.80

I. Introduction 15.01 One of the ways in which foreign investors invest in a host state is by means of a contract

between the foreign investor and an entity or instrumentality of the host state. Disputes between investors and host states under investment treaties often arise out of breaches of these contracts. In such cases, international tribunals must assess whether the asserted claims rise to the level of a breach of a state’s international obligations. More than a decade ago, the decisions on jurisdiction in SGS v Pakistan and SGS v Philippines brought this issue into the spotlight. These decisions, often perceived as contradictory, deal with the jurisdiction of treaty-​based tribunals over claims for a breach of contract.1

15.02 Since the two SGS decisions, tribunals have carefully examined the issue and developed jur-

isprudence that has provided useful guidance for parsing out issues related to contract-​and

1  SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​01/​ 13, Decision on Jurisdiction (Aug. 6, 2003 [hereinafter SGS v.  Pakistan, Decision on Jurisdiction]; SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/​02/​6, Decision on Jurisdiction (2Jan. 29, 2004) [hereinafter SGS v. Philippines].

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II. Treaty-based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract treaty-​based claims. With the exception of the jurisprudence relating to the umbrella clause, discussed in Chapter 16, tribunals have generally analysed their jurisdiction over breach of treaty and breach of contract claims in a consistent manner: depending on the nature of the state’s act, a host state’s breach of a private contract might also breach the state’s treaty obligations. However, that conclusion does not end the analysis; a number of questions still arise. This chapter will review the seeming confusion regarding the interplay between treaty claims 15.03 and contract claims and discuss how to dispel that confusion.

II.  Treaty-​based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract It is indisputable (indeed tautological) that, assuming all jurisdictional requirements are met 15.04 (i.e. a foreign investor submits a legal dispute against a host state arising out of an investment and there is consent to arbitrate under an applicable investment treaty), a treaty-​based arbitral tribunal has jurisdiction over claims asserting a breach of the treaty. Should a tribunal adopt a different approach to assessing jurisdiction merely because the treaty claims arise out of an underlying contract? Tribunals have consistently answered this question in the negative. Contractual rights can be protected by a treaty in the same way as any other rights or interests. Regardless of whether the facts of the dispute revolve around a contract or some other obli- 15.05 gation, a treaty-​based arbitral tribunal has jurisdiction over claims asserting a breach of the treaty. A treaty obligation maintains its character whether or not a state, or an instrumentality of the state, enters into a contract with an investor. The contract may increase the obligations of the state to the investor, but it cannot decrease them—​it cannot somehow strip a tribunal of its ability to analyse and decide whether state conduct violates a treaty.

A. Contract Protection under Customary International Law It is well established under customary international law that the taking of a foreign investor’s 15.06 contractual rights constitutes expropriation or a measure having an equivalent effect. As Brice Clagett has put it: Customary international law has long regarded such elementary principles as respect for lawfully acquired property rights and respect for lawfully concluded agreements (pacta sunt servanda) as the cornerstones of relations between States and alien investors. It is believed that State liability for breach of these obligations has never been seriously questioned by any twentieth-​century arbitral tribunal or other international adjudicatory authority. To the contrary, international tribunals have repeatedly held, in decisions spanning the last hundred years, that under customary international law, when a State takes an alien investor’s property, the investor must be compensated.2

The Permanent Court of International Justice, in the landmark Chorzów Factory case, con- 15.07 cluded that Poland’s seizure of a factory and machinery also constituted an expropriation of the patents and contract rights of the company managing the factory.3

2  B. M. Clagett, Just Compensation in International Law: The Issues Before the Iran-​ United States Claims Tribunal, in IV The Valuation of Nationalized Property in International Law 31, 38 (Richard B. Lillich ed., 1987). 3  See Case Concerning German Interests in Polish Upper Silesia and the Factory at Chorzów (Ger. v. Pol.), 1926 P.C.I.J. (ser. A) No. 7, at 44 (May 25, 1926).

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Breach of Treaty Claims and Breach of Contract Claims 15.08 Even earlier arbitration decisions followed the same reasoning. For example, in Company

General of the Orinoco, the French–​Venezuelan Mixed Claims Commission determined that the Government of Venezuela owed compensation for its unilateral repudiation of a concession agreement, which was to be ‘commensurate to the damages caused by the act of the respondent Government [Venezuela] in denying efficacy to the contract’.4 In Shufeldt, the Government of Guatemala nullified a concession agreement that it had concluded with a US investor. In considering whether Shufeldt had ‘acquire[d]‌any rights of property under the contract’ for the purposes of pecuniary indemnification, the tribunal found that ‘[t]here can not be any doubt that property rights are created under and by virtue of a contract’.5

15.09 ICSID jurisprudence has followed the same reasoning. In SPP v Egypt, an ICSID tribunal

found that SPP was entitled to compensation for the Egyptian Government’s expropriation of its contractual rights. The tribunal noted that ‘it has long been recognized that contractual rights may be indirectly expropriated’,6 and that ‘contract rights are entitled to the protection of international law and that the taking of such rights involves an obligation to make compensation therefore’.7

15.10 The Iran–​US Claims Tribunal has also made numerous pronouncements to that effect. In

Phillips v Iran, for example, the tribunal found that ‘[e]‌xpropriation . . . of the property of an alien gives rise under international law to liability for compensation, and this is so whether the expropriation is formal or de facto and whether the property is tangible, such as real estate or a factory, or intangible, such as the contract rights involved in the present Case’.8

B. Contract Protection under Investment Treaties 15.11 Most modern investment treaties explicitly define protected investments to include con-

tractual rights, and those rights are generally entitled to all of the protections of the treaty. Accordingly, the taking of an investor’s contract rights could constitute a treaty violation under several different provisions, including but not limited to expropriation.

1. Expropriation 15.12 The tribunal in RFCC v Morocco noted that ‘any type of asset can be a priori subject to ex-

propriation and thus protected by the provisions of the treaty’.9 Contract rights, especially when specifically included in the treaty’s definition of investment, certainly are ‘assets’. In Impregilo v Pakistan, the tribunal relied on several cases for the notion that ‘the taking of

  Company General of the Orinoco Case (France v. Venezuela), 10 R.I.A.A. 250, 282 (1906).   Shufeldt Claim (U.S. v. Guatemala), 2 R.I.A.A. 1081, 1097 (1930). 6  Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​84/​3, Award (May 20, 1990), para 165 [hereinafter SPP v. Egypt Award]. 7  Id. ¶ 164. 8  Phillips Petroleum Company Iran v. Government of the Islamic Republic of Iran, Award 425-​39-​2 (June 29, 1989), 21 Iran–​U.S. C.T.R. 79, 106 [hereinafter Phillips v. Iran]; see also SeaCo, Inc. v. Government of the Islamic Republic of Iran, Award 531-​260-​2 (June 25, 1992), 28 Iran–​U.S. C.T.R. 198, 211 [hereinafter SeaCo v. Iran] (‘To prevail upon its contention that the Government of Iran expropriated contract rights . . . SeaCo must show that its contract rights were breached and that the breach resulted from “orders, directives, recommendations or instructions” of the Government of Iran’) (citing Flexi-​Van Leasing, Inc. v. Government of the Islamic Republic of Iran, Award No. 259-​36-​1 (Oct. 13, 1986), 12 Iran–​U.S. C.T.R. 335, 349); Starrett Housing Corporation v. Government of the Islamic Republic of Iran, ITL Award 32-​24-​1 (Dec. 19, 1983), 4 Iran–​U.S. C.T.R. 122, 154. 9  Author’s translation. The original quote in French says: ‘[T]‌out type d’actif peut être a priori l’objet d’une expropriation et donc protégé par les dispositions du traité’. Consortium RFCC v. Kingdom of Morocco, ICSID Case No. ARB/​00/​6, Award (Dec. 22, 2003) [hereinafter RFCC v. Morocco, Award], para 62. See also Eureko B.V. v. Republic of Poland, Partial Award (Aug. 19, 2005) para 240 [hereinafter Eureko v. Poland] (describing contractual rights as ‘assets’). 4 5

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II. Treaty-based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract contractual rights could, potentially, constitute an expropriation or a measure having an equivalent effect’.10

2. Fair and equitable treatment Investor-​state jurisprudence has also recognized that a state’s failure to observe its con- 15.13 tractual commitments to a foreign investor may constitute a violation of the international law standard of fair and equitable treatment. According to the European Communities’ Investment Protection Principles, the requirement of fair and equitable treatment is an ‘overriding concept’ that encompasses various investment protection principles, including the observance of undertakings.11 The United Nations Conference on Trade and Development also concluded that the fair and equitable treatment standard includes the legal rules of pacta sunt servanda and respect for contractual obligations.12 Thus, not surprisingly, investor-​state jurisprudence has recognized that a state’s failure to 15.14 observe its contractual commitments to a foreign investor may constitute a violation of the international law standard of fair and equitable treatment. The tribunal in Noble Ventures, for example, held that the fair and equitable treatment standard includes the obligation to abide by contracts, along with the obligation to provide full protection and security, and the prohibition of arbitrary and discriminatory treatment. It stated: [O]‌ne can consider this [the fair and equitable treatment standard] to be a more general standard which finds its specific application in inter alia the duty to provide full protection and security, the prohibition of arbitrary and discriminatory measures and the obligation to observe contractual obligations towards the investor.13

As several tribunals have found, repudiation of a contract by a State may violate the obligation 15.15 of fair and equitable treatment regardless of whether the repudiation was also expropriatory. In several cases, tribunals have concluded that state actions repudiating contractual obligations, while not amounting to an expropriation, breached the fair and equitable treatment standard under the relevant investment treaty.14 In other cases, tribunals have found that destruction of contractual rights amounted to both denial of fair and equitable treatment and expropriation.15 10  Impregilo SpA v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​3, Decision on Jurisdiction (Apr. 22, 2005), para 274 [hereinafter Impregilo v. Pakistan]. In drawing this conclusion, the Impregilo tribunal relied on Norwegian Shipowner’s Claims (Norway v. U.S.A.), 1 R.I.A.A. 307 (1922); SPP v. Egypt Award, supra note 6, Award, ¶¶ 42–​46; RFCC v. Morocco Award, supra note 9; Phillips v. Iran at 106; SeaCo v. Iran at 211. 11  See, e.g., 11(1) News from ICSID (Winter 1994) 5 (referring to the Investment Protection Principles adopted in 1992 by the Council of the European Community to provide details for the application of the investment promotion and protection principles contained in the Fourth Lomé Convention on cooperation between the group of Asian, Caribbean, and Pacific countries and the EC and its Member States). 12  See U.N. Conference on Trade and Development, Fair and Equitable Treatment, III UNCTAD Series on Issues in International Investment Agreements, at 34–​37, UNCTAD/​ITC/​IIT/​11 (1999). 13  Noble Ventures v. Romania, ICSID Case No. ARB/​01/​11, Award (Oct. 12, 2005), ¶ 182. 14  See CMS Gas Transmission Company v.  Argentine Republic, ICSID Case No. ARB/​ 01/​8, Award (May 12, 2005), ¶¶ 264, 281; Azurix Corp. v.  The Argentine Republic, ICSID Case No. ARB/​01/​12, Award (July 14, 2006, ¶¶ 322, 374 [hereinafter Azurix v. Argentina]; Enron Corp. & Ponderosa Assets, L.P v. Argentine Republic, ICSID Case No. ARB/​01/​3, Award (May 22, 2007), ¶¶ 246, 268; LG&E Energy Corp. v. Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006), ¶¶ 132, 200. Tribunals that found no breach of the fair and equitable treatment requirement in light of the circumstances of the specific case have also recognized that violations of contractual rights may amount to unfair and inequitable treatment. See, e.g., RFCC v. Morocco, Award, supra note 9, ¶ 51. 15  Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/​97/​3, Award (Aug. 20, 2007) [hereinafter Vivendi v. Argentina II, Award], ss 7.4, 7.5; Eureko v. Poland, supra note 9, ¶¶ 234, 243; Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/​02/​8, Award (Feb. 6, 2007), ¶¶ 273, 309.

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Breach of Treaty Claims and Breach of Contract Claims 3. Other treaty protections 15.16 Finally, tribunals have held that repudiating contractual rights also amounted to a breach of the treaty requirement to accord to investments full protection and security,16 or a breach of the prohibition against impairing the value of an investment through arbitrary or discriminatory measures.17 C. Investment Treaty Claims Arising out of Contracts 15.17 Assuming all other jurisdictional requirements are met, there should, therefore, be little

doubt that treaty-​based tribunals have jurisdiction to decide claims for breach of the treaty, regardless of whether those claims arise out of or relate to an underlying contractual relationship. As the tribunal in Eureko stated, it was required to ‘consider whether the acts of which Eureko complains, whether or not also breaches of [contract], constitute breaches of the Treaty’.18 It further held that ‘[t]‌here is an amplitude of authority for the proposition that when a state deprives the investor of the benefit of its contractual rights, directly or indirectly, it may be tantamount to a deprivation in violation’ of an investment treaty.19 The tribunal in Impregilo v Argentina, for example, examined whether the claimant’s ‘main claims in this arbitration concern acts that are alleged to constitute expropriation, unfair treatment and discrimination, which are all claims that go beyond mere contractual breaches even if the factual basis of the two types of claims may to a large extent coincide’.20 Treaty claims are analysed separately from any contractual claims; the mere existence of a contract or claim for breach of contract does not alter the separate treaty analysis.21 Other tribunals have also followed this line of reasoning and have found that the same contractual relationship might give rise to both contract and treaty claims.22 As another tribunal put it: ‘While the distinction between contract claims and treaty claims is undeniable and well established, the mere fact that there is a contractual remedy available to a claimant does not of itself rule out the existence of a treaty claim for actions by the State, in its capacity as such, that affect private rights in a way that implicates a treaty guarantee’.23

15.18 In fact, while the SGS v Pakistan and SGS v Philippines decisions are generally perceived as

inconsistent, both tribunals asserted jurisdiction over the respective treaty claims without hesitation, regardless of the fact that those claims arose directly out of underlying contracts. In line with ICSID jurisprudence, both SGS tribunals acknowledged the existence of

16  See Azurix v.  Argentina, supra note 14, ¶ 408; Vivendi v.  Argentina II, Award, supra note 15, ¶¶ 7.4.13–​7.4.17. 17  Id. ¶ 393. 18  Eureko v. Poland, supra note 9, ¶ 112. 19  Id. ¶ 241. 20  Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/​07/​17, Award (June 21, 2011), ¶ 182 [hereinafter Impregilo v. Argentina]. 21  Id. ¶ 292 (‘[T]‌he Arbitral Tribunal observes that the existence of legitimate expectations and the existence of contractual rights are two separate issues’). 22  See Gemplus SA and Others v. United Mexican States, ICSID Case Nos. ARB (AF)/​04/​3 & ARB (AF)/​ 04/​4), Award (June 16, 2010), ¶¶ 6–​25 (‘It is clear that a contractual breach cannot simply be converted judicially into a treaty breach, but equally it is clearly necessary for a claimant to recite the factual basis for a treaty breach which may, in appropriate cases, include allegations of fact amounting also to a contractual breach . . .’) and Bureau Veritas, Inspection, Valuation, Assessment and Control, BIVAC B.V. v. Republic of Paraguay, ICSID Case No. ARB/​07/​9, Decision on Jurisdiction (May 29, 2009), ¶ 127 [hereinafter BIVAC v. Paraguay, Decision on Jurisdiction] (‘We see no other bar to the admissibility of the claim . . . . It is well established that there is a significant distinction to be drawn between a treaty claim and a contract claim, even if there may be a significant interplay between the underlying factual issues’). 23 Giovanni Alemanni and Others v.  Argentine Republic, ICSID Case No. ARB/​ 07/​8, Decision on Jurisdiction and Admissibility (Nov. 17, 2014), ¶ 300 [hereafter Alemanni v. Argentina].

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III.  Treaty-based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims independent treaty claims, even though the treaty claims were based upon the same sets of facts as the contract claims. They first found jurisdiction over the treaty claims and only then addressed the separate issue of jurisdiction over the contract claims. The SGS v Pakistan tribunal stated that, if Article 9 of the Switzerland–​Pakistan bilateral 15.19 investment treaty (the dispute settlement provision) ‘relates to any dispute at all between an investor and a Contracting Party, it must comprehend disputes constituted by claimed violations of BIT provisions establishing substantive standards’.24 In other words, if the BIT dispute settlement mechanism is to have any meaning, which it obviously must, it must cover disputes where treaty breaches are alleged. The tribunal concluded: ‘Any other view would tend to erode significantly those substantive treaty standards of treatment’.25 It is hardly possible to disagree with this conclusion. The SGS v Philippines tribunal followed the same logic. It noted that a treaty-​based tribunal should assert jurisdiction where the claims presented involve ‘allegations which, if proved, [are] capable of amounting to breaches’ of the relevant BIT.26 The fact that treaty claims arise out of an underlying contract should not (and, in most cases, does not) alter a tribunal’s approach to determining jurisdiction over claims alleging a breach of the treaty.27

III.  Treaty-​based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims The more difficult question is whether treaty-​based tribunals also have jurisdiction to decide 15.20 claims that investors expressly assert as contractual claims, and not treaty claims. Can a tribunal assert jurisdiction if the investor claims only that the state breached the contract and not that the state breached an international treaty? According to one view, every breach by the state of a contract with an alien invokes the state’s 15.21 international responsibility. As Brownlie notes: ‘[t]‌here is a school of thought which supports the view that the breach of a state contract by the contracting government of itself creates international responsibility’.28 However, international tribunals have been more restrictive.29 Whether or not a contract breach falls within the jurisdiction of a treaty-​based tribunal is 15.22 a question of the interpretation of the relevant treaty, and therefore requires a textual analysis. There is no doubt that a treaty can provide a basis for consent to arbitrate ‘purely’ contractual claims. The Iran–​US Claims Tribunal provides one example: under the Claims Settlement Declaration, which is part of the Algiers Accords of 1981, private claimants

  SGS v. Pakistan, Decision on Jurisdiction, supra note 1, ¶ 150.   Id. 26  SGS v. Philippines, Decision on Jurisdiction, supra note 1, ¶ 158. 27  One possible exception may be where a tribunal has interpreted a forum selection clause in an underlying contract as an explicit waiver of treaty-​based jurisdiction and declined jurisdiction over a claim arising ‘essentially’ out of the contract, even though characterized as a treaty claim. See discussion at ¶15.38 ff. infra. 28 I. Brownlie, Principles of Public International Law 523 (6th ed. 2003). For authorities supporting this ‘maximalist approach’, see id. n. 136; see also P. Weil, Problèmes relatifs aux contrats passés entre un Etat et un particulier, 128 Recueil des Cours 95, 134–​37. 29  See, e.g., RFCC v. Morocco. Award, supra note 9, ¶¶ 38 ff. (finding that there is no principle of international law that automatically assimilates a breach of contract to a violation of an investment treaty); Impregilo v. Argentina, supra note 20, Award ¶ 177 (‘[A]‌s a general rule, a violation of a contract is not a violation of international law’). See also infra, ¶ 15.38 ff., discussion of distinguishing ‘pure’ contract claims from treaty claims. 24 25

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Breach of Treaty Claims and Breach of Contract Claims brought numerous contractual claims against Iran30 (resulting in awards enforceable under the New  York Convention). Similarly, several provisions in investment treaties have been invoked as a basis for jurisdiction over claims asserted only as contract claims, and many of these are discussed in the sections that follow.

A. Umbrella Clause Provisions as a Basis for Jurisdiction over Contract Claims 15.23 One such provision is the so-​called ‘umbrella clause’, a broad provision requiring that states

observe obligations or undertakings they have entered into with respect to foreign investors or investments. The question that a number of tribunals have confronted is whether the umbrella clause ‘elevates’ contractual breaches to the level of treaty breaches and, therefore, confers upon treaty-​based tribunals jurisdiction to decide contractual claims. At least one tribunal, while admitting that ‘legal opinion is divided’, held that the umbrella clause contained in the relevant BIT created ‘an international obligation for the parties to the BIT to observe contractual obligation [sic] with respect to investors’.31 A second tribunal agreed that an ‘umbrella clause claim is a Treaty claim, not a contract claim’.32 This question is discussed in greater detail in Chapter 16 of this book.

B. Provisions Granting Jurisdiction over ‘Any Disputes’ 15.24 Many investment treaties include a narrow jurisdictional clause that provides only for the

settlement of disputes relating to obligations under the treaty—​in other words, disputes based on claims for breach of the treaty.33 Some, however, contain a clause providing for the settlement of ‘[a]‌ny disputes arising between a Contracting Party and the investors of the other’ contracting party.34 An interpretation of such a clause ‘in accordance with the ordinary meaning to be given to [its] terms’, as required by Article 31(1) of the Vienna Convention on the Law of Treaties,35 seems to suggest that disputes arising from contract breaches fall within its purview. After all, the clause refers to ‘any disputes’ and makes no distinction between disputes arising from breaches of contract and disputes arising from breaches of the treaty. As Professor Christoph Schreuer has observed, ‘where a BIT provides for investor/​State arbitration in respect of all investment disputes rather than disputes concerning violations of the BIT, the tribunal is competent even for pure contract claims’.36

30  See C. N. Brower & J. D. Brueschke, The Iran-​United States Claims Tribunal 60–​72 (1998); The Iran-​United States Claims Tribunal and the Process of International Claims Resolution: A Study by the Panel on State Responsibility of the American Society of International Law 10–​11 (D. D. Caron & J. R. Crook eds., 2000). 31  BIVAC v. Paraguay, Decision on Jurisdiction, supra note 22, ¶ 141 (‘The words “any obligation” are all encompassing. They are not limited to international obligations, or non-​contractual obligations, so that they appear without apparent limitation with respect to commitments that impose legal obligations’). 32  Burlington Resources, Inc. v. Republic of Ecuador, ICSID Case No. ARB/​08/​5, Decision on Jurisdiction (June 2, 2010), ¶ 189. 33  See, e.g., Agreement between the Government of Canada and the Government of the Republic of Costa Rica for the Promotion and Protection of Investments (Mar. 18, 1998, art. XII(1) provides for the settlement of ‘[a]‌ny dispute between one Contracting Party and an investor of the other Contracting Party, relating to a claim by the investor that a measure taken or not taken by the former Contracting Party is in breach of this Agreement . . .’). 34  See, e.g., Agreement between the Government of the Italian Republic and the Government of the Islamic Republic of Pakistan on the Promotion and Protection of Investments (July 19, 1997) art. 9(1) (emphasis added). 35  Vienna Convention on the Law of Treaties (1980) art. 31(1). 36  C. Schreuer, Investment Treaty Arbitration and the Jurisdiction over Contract Claims—​The Vivendi Case Considered, in International Investment Law and Arbitration:  Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law 296 (Todd Weiler ed., 2005).

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III.  Treaty-based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims Nevertheless, the two SGS tribunals interpreted provisions similar to the ‘any dispute’ pro- 15.25 vision previously discussed and came to opposite conclusions, even though the two relevant treaties contained identically worded jurisdictional clauses.37 The tribunal in SGS v Pakistan found that it did not have jurisdiction over SGS’s claims for breach of contract, while the tribunal in SGS v Philippines held that it did. The SGS v Pakistan tribunal first appeared to accept the ordinary meaning of the jurisdictional clause found in Article 9 of the Switzerland–​ Pakistan BIT. The tribunal recognized ‘that disputes arising from claims grounded on alleged violation of the BIT, and disputes arising from claims based wholly on supposed violations of the [contract at issue in the case], can both be described as “disputes with respect to investments”, the phrase used in Article 9 of the [Switzerland–​Pakistan] BIT’.38 The tribunal, however, concluded that, despite the ordinary meaning, ‘we do not see anything in Article 9 or in any other provision of the BIT that can be read as vesting this Tribunal with jurisdiction over claims resting ex hypothesi exclusively on contract’, and, therefore, ‘without more, we believe that no implication necessarily arises that both BIT and purely contract claims are intended to be covered by the Contracting Parties in Article 9’.39 Based on this reasoning, the SGS v Pakistan tribunal declined to assert jurisdiction over SGS’s claims for breach of contract. By contrast, the tribunal in SGS v Philippines gave full effect to the ordinary meaning of the 15.26 phrase ‘disputes with respect to investments’ when it held that it had jurisdiction over SGS’s contract claims. Interpreting the jurisdictional clause in the Switzerland–​Philippines BIT, the tribunal concluded: Prima facie, Article VIII is an entirely general provision, allowing for submission of all investment disputes by the investor against the host State. The term ‘disputes with respect to investments’ . . . is not limited by reference to the legal classification of the claim that is made. A dispute about an alleged expropriation contrary to Article VI of the BIT would be a ‘dispute with respect to investments’; so too would a dispute arising from an investment contract such as the [contract at issue in the case].40

The SGS v Philippines tribunal listed several factors that supported its broad interpretation of 15.27 the jurisdictional clause in Article VIII. The tribunal found that the three fora available to resolve disputes under Article VIII—​the host state’s domestic courts, ICSID panels, and ad hoc UNCITRAL tribunals—​were all competent ‘to apply the law of the host State, including its law of contract’.41 Moreover, according to the tribunal, a foreign investor’s ability to choose where to have its contract claims addressed was entirely consistent with a BIT’s general purpose of promoting and protecting foreign investment.42 Further, the tribunal recognized that ‘investments are characteristically entered into by means of contracts or other agreements with the host State and the local investment partner’; therefore, ‘the phrase “disputes with respect to investments” naturally includes contractual disputes’.43 Finally, the tribunal noted that the state parties to the Switzerland–​Philippines BIT could have limited the jurisdictional clause only to ‘claims concerning breaches of the substantive standards contained in the BIT’,

37  The jurisdictional clauses in the Switzerland–​Pakistan BIT and the Switzerland–​Philippines BIT provide for the settlement of ‘disputes with respect to investments between a Contracting Party and an investor of the other Contracting Party’. Agreement between the Swiss Confederation and the Islamic Republic of Pakistan on the Promotion and Reciprocal Protection of Investments (July 11, 1995) art. 9(1); Agreement between the Swiss Confederation and the Republic of the Philippines on the Promotion and Reciprocal Protection of Investments (Mar. 31, 1997) art. VIII(1). 38  SGS v. Pakistan, Decision on Jurisdiction, supra note 1, ¶ 161. 39  Id.. 40  SGS v. Philippines, Decision on Jurisdiction, supra note 1, ¶ 131 (internal citation omitted). 41  Id. ¶ 132(a). 42  Id. ¶ 132(c). 43  Id. ¶ 132(d).

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Breach of Treaty Claims and Breach of Contract Claims as they did elsewhere in the BIT with respect to the settlement of disputes between the state parties,44 or that the state parties could have limited the clause to ‘claims brought for breach of international standards’, as was the case with NAFTA,45 but the state parties did not impose any such limits. 15.28 Although much of it is highly textual, the reasoning of the SGS v Philippines tribunal is per-

suasive and can be generalized to a broader context. There is no reason to decline jurisdiction in contravention of the clear language of a treaty simply because the grant of jurisdiction appears particularly broad and open-​ended. Broad and open-​ended consent is not unusual. For example, consent to arbitrate disputes with foreign investors can also be found in a state’s domestic legislation, where states extend a general offer, or a standing invitation, to all foreign investors to submit to international arbitration (including to ICSID tribunals) any disputes relating to their investments.

15.29 In one such example, the ICSID tribunal in SPP v Egypt assumed jurisdiction over SPP’s

claims based on consent to ICSID arbitration given by Egypt in its domestic legislation.46 Egyptian law provided that all investment disputes in respect of the implementation of the provisions of the Egyptian statute relating to foreign investment could be submitted by the investor to arbitration under the ICSID Convention.47 Kazakhstan’s 1994 Law on Foreign Investments provided an even broader scope of consent.48 A tribunal should not restrict the broad scope of such jurisdictional clauses without a textual mandate to do so.

15.30 Nevertheless, several tribunals have applied the logic of the SGS v Philippines tribunal more

narrowly. They have concluded that in cases of ‘purely’ contractual disputes the ‘any disputes’ provision covers only disputes with the state itself, that is, when the state is a direct party to the contract, and that the provision does not extend to situations where the contractual relationship is between the investor and another state entity.49 This interpretation of the ‘any disputes’ provision limits significantly the scope of its application: as a practical matter, the state itself, rather than its organs or other state entities, would rarely enter directly into a contract with a foreign investor. Not surprisingly, on the basis of this crucial limitation, tribunals have declined jurisdiction over ‘purely’ contractual claims when such jurisdiction has been sought pursuant to the ‘any disputes’ provision.

15.31 By contrast, the SGS v Philippines decision—​when giving effect to the ordinary meaning of

the ‘any disputes’ provision and finding jurisdiction over the contract claims at issue—​did not discuss the distinction between contracts entered into directly by the state and contracts

  Id. ¶ 132(b).   Id. ¶ 132(e). 46  See SPP v. Egypt, supra note 6, Decision on Jurisdiction (Nov. 27, 1985), ¶¶ 64–​87 [hereinafter SPP v. Egypt, Decision on Jurisdiction]. 47  Id. ¶ 70. 48  Law of the Republic of Kazakhstan on Foreign Investments (Dec. 27, 1994) art. 27(1)–​ (2) (The investor was entitled to submit to ICSID any ‘[d]‌isputes and disagreements arising in connection with foreign investments or activity connected therewith’). See also art. 16.2 of the 1996 Investment Law of the Republic of Georgia, providing that ‘disputes between a foreign investor and a government body, if the order of resolution is not agreed between them, shall be settled at the Court of Georgia or at the International Centre for the Resolution [sic] of Investment Disputes’. The Law of the Republic of Kazakhstan on Foreign Investments has served as a basis for asserting jurisdiction by at least one international arbitration tribunal. See, e.g., AIG Capital Partners, Inc. and CJSC Tema Real Estate Company v. Republic of Kazakhstan, ICSID Case No. ARB/​01/​6, Award (Oct. 7, 2003), ¶ 9.3.6. 49  See, e.g., Salini Costruttori S.p.A.  and Italstrade S.p.A.  v.  Kingdom of Morocco, ICSID Case No. ARB/​00/​4, Decision on Jurisdiction (July 23, 2001), ¶¶ 59–​64 [hereinafter Salini v. Morocco, Decision on Jurisdiction]; RFCC v. Morocco, supra note 9, Decision on Jurisdiction (July 16, 16 2001), ¶¶ 67–​69 [hereinafter RFCC v. Morocco, Decision on Jurisdiction]. 44 45

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III.  Treaty-based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims entered into by other state entities. The most logical conclusion to be drawn from the absence of such discussion is that the tribunal did not believe that the distinction was relevant to its analysis.50

1. Principle of Attribution Distinguished. It is important here to clarify the relationship between the principle of attribution on the one 15.32 hand, and the jurisdiction of treaty-​based tribunals to decide contractual disputes only when the contractual obligation is undertaken directly by the state, on the other. One tribunal found the two ‘inexorably intertwined’ under the specific facts of the case before it,51 but still considered the analysis to be distinct.52 Attribution and jurisdiction to decide the contract dispute are separate issues, although the factual application of the analysis may be similar. Attribution requires that the conduct of a number of categories of domestic entities be treated 15.33 as the conduct of the state for purposes of establishing state responsibility under international law.53 In many situations, for example with respect to the conduct of state organs as defined in Article 4 of the International Law Commission’s Articles on State Responsibility, the conduct of such domestic entities is attributable to the state whether or not it is characterized as iure imperii or iure gestionis. The International Law Commission’s Commentary of Article 4 states: It is irrelevant for the purposes of attribution that the conduct of a State organ may be classified as ‘commercial’ or ‘acta iure gestionis’ . . . the breach by a State of a contract does not as such entail a breach of international law . . . But the entry into or breach of a contract by a State organ is nonetheless an act of the State for the purposes of article 4, and it might . . . amount to an internationally wrongful act’.54 Thus, attribution operates when the question posed is whether a state is responsible for a breach of an international obligation, such as an obligation in an investment treaty.

By contrast, the question posed in cases where tribunals considered whether they could as- 15.34 sert jurisdiction over ‘pure’ contractual claims is a question of interpretation of the scope of consent, that is, the scope of the agreement to arbitrate.55 Where tribunals decided that their jurisdiction over contract disputes extended only to disputes under contracts entered into directly by the state, they did not base their conclusion on principles of attribution; rather, they reasoned that the scope of consent to arbitrate did not cover disputes under contracts with other entities. The Impregilo v Pakistan tribunal, for example, after noting that the claimant had argued based on ‘international law principles of state responsibility and attribution’,

50  Given the fact that the contract at issue was approved by the President of the Philippines, it could also be argued that the tribunal considered it to be a contract entered into directly by the state. If that were the case, however, one might expect that the tribunal would have mentioned this point in its analysis, but it did not. See SGS v. Philippines, supra note 1, Decision on Jurisdiction, ¶ 13. 51  See Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/​ 11/​28, Award (Mar. 10, 2014) [hereinafter Tulip v. Turkey, Award], ¶ 358 (determining that because the tribunal found that the actions alleged to violate the BIT were not attributable to the state, they also could not meet the test that the actions were carried out for a sovereign purpose, and therefore could only be classified as a contractual dispute). 52  Id. ¶ 360 (stating that even if the tribunal found attribution, it could not on the facts find that the claims were treaty-​based rather than contractual in nature). 53  See J. Crawford, Treaty and Contract in Investment Arbitration, 24 Arb. Int’l 351, 356 (2008). 54  International Law Commission, Commentary to Article 4, ¶ (6), in James Crawford, The International Law Commission’s Articles on State Responsibility:  Introduction, Text and Commentaries 96 (2002) (internal citations omitted). 55  See generally Crawford, supra note 53, 363.

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Breach of Treaty Claims and Breach of Contract Claims focused instead on ‘the scope of application’ of the BIT, which, it found, extended only to disputes between an investor and the state.56

C. Provisions Granting Jurisdiction over Disputes Relating to ‘Investment Agreements’ 15.35 A third type of provision in investment treaties that has been invoked as a basis for jurisdic-

tion over claims asserted only as contract claims is a provision that defines covered investment disputes as, inter alia, disputes relating to an ‘investment agreement’.57 When dealing with such provisions, tribunals face the task of determining whether the contract that the state has allegedly breached qualifies as an investment agreement. At least one tribunal, in Generation Ukraine v Ukraine, held that, under the relevant treaty, an investment agreement is only a contract with the state itself and that a contract with a separate entity, such as a municipal authority, does not qualify even though the actions of that entity may be attributable to the state for the purposes of international responsibility. The tribunal stated: In relation to category (a), an ‘investment agreement’ must be an agreement between the investor and one of the two State Parties to the BIT. The Claimant has never contracted directly with Ukraine as a ‘Party’ to the BIT. In the present case, the parties to the Lease Agreements and the Foundation Agreement are the Claimant and a municipal authority of Ukraine, the Kyiv City State Administration. True enough, the acts of the Kyiv City State Administration may be imputable to Ukraine as a sovereign state for the purposes of the international law of state responsibility. For this reason, the Claimant is entitled to bring a cause of action based on alleged expropriation of its investment by acts performed by Ukrainian municipal authorities. It is an international claim and international rules of attribution apply. But such rules do not operate to join the central government of Ukraine to contractual relationships entered into by municipal authorities.58

15.36 Thus, the Generation Ukraine v Ukraine tribunal invoked the same limitation that tribunals

have read into the ‘any disputes’ provision: if the claims are only contractual, the contractual relationship must be between the investor and the state itself. On the other hand, if the claims are for violations of the treaty, then the actions of political subdivisions, local authorities, organs, officials etc are attributable to the state for the purposes of liability under the treaty. This sets up the odd dichotomy wherein a tribunal could find the actions of a local entity

56  See Impregilo v. Pakistan, Decision on Jurisdiction, supra note 10, ¶¶ 210–​1.; See also Salini v. Morocco, Decision on Jurisdiction, supra note 49, ¶¶ 59–​61 (‘In the case where the State has organized a sector of activity through a distinct legal entity, be it a State entity, it does not necessarily follow that the State has accepted a priori that the jurisdiction offer contained in [the BIT] should bind it with respect to contractual breaches committed by this entity’) (translation taken from the Impregilo v. Pakistan tribunal’s Decision on Jurisdiction, ¶ 213, n. 95). 57  This provision is typical of bilateral investment treaties of the United States. See, e.g., Treaty Between the United States of America and the Government of the Republic of Albania Concerning the Encouragement and Reciprocal Protection of Investment (Jan. 11, 1995) art. IX (Settlement of Disputes Between One Party and a National or Company of the Other Party) (‘Article IX procedures apply to an “investment dispute”, which covers any dispute arising out of or relating to an investment authorization, an investment agreement, or an alleged breach of rights granted or recognized by the Treaty with respect to a covered investment’); Treaty Between United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (Nov. 14, 1991) art. VII(1) (‘For purposes of this Article, an investment dispute is a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company . . .’); Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment (4 Mar. 4, 1994) art. VI (State-​Investor Dispute Resolution) (‘Article VI procedures apply to an “investment dispute”, a term which covers any dispute arising out of or relating to an investment authorization, an agreement between the investor and host government, or to rights granted by the Treaty with respect to an investment’). 58  Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/​00/​9, Award (Sept. 16, 2003), ¶ 8.12.

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims breached the treaty because they resulted in, say, an expropriation of contractual rights, but that the tribunal has no jurisdiction to determine if the same local entity breached the same contract. The latter, purely contractual, claim would have to be heard in a separate forum. The significance of this precedent may be somewhat limited, however. Recent US BITs and 15.37 chapters on investment in US free trade agreements, as well as the 2004 and 2012 Model US BITs, broaden the definition of the term ‘investment agreement’. Under this definition, an investment agreement is an agreement in writing with a ‘national authority’, which, for the United States, includes ‘an authority at the central level of government’.59 In other words, while the definition excludes the states of the United States and local governments, it does include agreements entered into by federal government agencies and entities (rather than only agreements with the state itself ). At the same time, however, the definition in the Model BIT narrows the scope of an ‘investment agreement’ with respect to subject matter: it covers only certain sectors (natural resources, supply of services to the public, such as power, water, or telecommunications, and infrastructure projects). It remains to be seen how tribunals will interpret this definition.

IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims Given treaty-​based tribunals’ different treatment of treaty claims (over which they un- 15.38 doubtedly have jurisdiction) and contract claims (over which they may have jurisdiction), the distinction between these two categories of claims acquires critical importance. When faced with a treaty claim that arises out of an underlying contractual relationship, the state will often argue that the investor’s claims are in fact contractual claims rather than treaty claims, thereby calling the tribunal’s jurisdiction into question. Presumably, the tribunal would then face the task of distinguishing between ‘genuine treaty claims’ arising out of an underlying contract, and claims that, even though presented as treaty claims, are in fact contractual claims ‘disguised’ as claims for breach of the treaty. But is this question truly as critical as it seems at first blush? And, if so, should the tribunal address it at the jurisdictional phase? The difficulty is most acute when the state act can be characterized as both a breach of con- 15.39 tract and also a breach of an investment treaty obligation. This situation may occur, for example, when a state violates a contract in a manner that constitutes a ‘clear and discriminatory departure’ from the governing law of the contract or an ‘unreasonable departure from the principles recognized by the principal legal systems of the world’.60 Such a scenario

59  2012 U.S. Model BIT art. 1. This use of the defined term ‘national authority’ in the definition of ‘investment agreement’ can be found in such agreements as the U.S.–​Singapore Free Trade Agreement (defining ‘national authority’ as ‘(1) for Singapore, a ministry or other government body that is constituted by an Act of Parliament; and (2) for the United States, an authority at the central level of government’); the U.S.–​Chile Free Trade Agreement (defining ‘national authority’ as ‘(a) for the United States, an authority at the central level of government; and (b) for Chile, an authority at the ministerial level of government’ and noting that ‘ “[n]‌ational authority” does not include state enterprises’). The U.S.–​CAFTA–​DR Free Trade Agreement, the U.S.–​Uruguay BIT, the U.S.–​Korea Free Trade Agreement, and the U.S.–​Colombia Free Trade Agreement all define ‘national authority’ for both states as ‘an authority at the central level of government’. 60  L.B. Sohn & R.R. Baxter, Responsibility of States for Injuries to the Economic Interests of Aliens, 55 Am. J. Int’l L. 545 (1961), art. 12(1). See also III M. M. Whiteman, Damages in International Law 1558 (1943); K. Lipstein, The Place of the Calvo Clause in International Law, 22 Brit. Y.B. Int’l L. 130, 134 (1945); F.A. Mann, The Proper Law of Contracts Concluded by International Persons, 35 Brit. Y.B. Int’l L. 34, 41 (1959).

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Breach of Treaty Claims and Breach of Contract Claims would breach the contract and incur international responsibility. States also are internationally responsible when they terminate a contract in an untimely manner;61 or when a termination is effected ‘by the exercise of sovereign power instead of claimed contractual right’;62 or when they have frustrated the contractual dispute settlement mechanism, leaving the foreign investor with no recourse to contractual remedies to redress a contractual wrong. For example, both SGS tribunals agreed that there would be a viable treaty claim if the investor were prevented from submitting disputes to the dispute settlement mechanism enumerated in the contract.63 Similarly, the Waste Management tribunal stated that the availability and the viability of a contractual dispute settlement mechanism was critical to determining whether certain acts violated substantive provisions of the treaty.64 Thus, some (perhaps many) types of contractual breaches by the state could also trigger the state’s responsibility under customary international law and amount to a breach of an investment treaty. 15.40 As these examples show, in many cases where the claims for treaty breach arise out of an under-

lying contract, the same acts or omissions that result in breach of contract may also result in a breach of the relevant treaty. How should tribunals deal with such acts or omissions—​as breaches of contract or as breaches of the treaty? Should they seek to draw a line between contractual breaches that do not rise to the level of treaty violations and those that do?

15.41 The best solution to the problem was given by the Vivendi v Argentina I annulment com-

mittee, which stated:

[W]‌hether there has been a breach of the BIT and whether there has been a breach of contract are different questions. Each of these claims will be determined by reference to its own proper or applicable law—​in the case of the BIT, by international law; in the case of the Concession Contract, by the proper law of the contract . . .65

The Vivendi v Argentina I annulment committee explained that ‘[a]‌state may breach a treaty without breaching a contract, and vice versa’,66 and that ‘whether particular conduct involves a breach of a treaty is not determined by asking whether the conduct purportedly involves an exercise of contractual rights’.67 15.42 In other words, the fact that certain acts or omissions may have given rise to breach of con-

tract claims does not mean that the same acts or omissions could not also give rise to treaty claims. Therefore, jurisdiction over conduct alleged to breach a treaty cannot be affected by the potential for a breach of contract as well. The SGS v Pakistan tribunal, for example,

61  See, e.g., In the Matter of an Arbitration between the Government of the State of Kuwait and the American Independent Oil Co., Final Award (Mar. 24, 1982)  [hereinafter AMINOIL, Final Award], 21 I.L.M. 976, 1051 (1982) (dissenting opinion of Sir Gerald Fitzmaurice). 62  K.S. Carlston, Concession Agreements and Nationalization, 52 Am. J. Int’l L. 260, 261 (1958). 63  See SGS v.  Pakistan Decision on Jurisdiction, supra note 1, ¶ 172; SGS v.  Philippines Decision on Jurisdiction, supra note 1, ¶¶ 154–​55, 170. 64  Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/​00/​3, Award (Apr. 30, 2004). The Waste Management tribunal found that a contractual claim was not a violation of art. 1105 of the NAFTA, ‘provided that it does not amount to an outright and unjustified repudiation of the transaction and provided that some remedy is open to the creditor to address the problem’. See id. ¶ 115 (emphasis added). It also found that the contractual claim was not a violation of art. 1110 of the NAFTA because such a violation required a showing of ‘an effective repudiation of the [contractual] right, unredressed by any remedies available to the Claimant, which has the effect of preventing its exercise entirely or to a substantial extent’. See id. ¶ 175 (emphasis added). 65  Compañía de Aguas del Aconquija S.A. & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/​97/​3, Decision on Annulment (July 3, 2002), ¶ 96 (emphasis added) [hereinafter Vivendi v. Argentina I, Decision on Annulment]. 66  Id. ¶ 95. 67  Id. ¶ 110.

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims following the logic of the Vivendi v Argentina I annulment committee and, quoting extensively from its decision, saw no reason why it should decline jurisdiction over treaty claims simply because they arose out of the same set of facts as breach of contract claims. The SGS v Pakistan tribunal observed that ‘[a]‌s a matter of general principle, the same set of facts can give rise to different claims grounded on differing legal orders: the municipal and the international legal orders’.68 The tribunal in Impregilo v Pakistan articulated the same approach even more categorically: ‘[T]he fact that a breach may give rise to a contract claim does not mean that it cannot also—​and separately—​give rise to a treaty claim. Even if the two perfectly coincide, they remain analytically distinct, and necessarily require different enquiries’.69 It follows, then, that when tribunals have to deal with claims for treaty breaches arising out 15.43 of an underlying contract, they must engage in an inquiry into whether the alleged conduct constitutes a violation of a treaty obligation—​and they must conduct this inquiry regardless of and separate from whether the conduct might also constitute a breach of contract. The treatment of contract claims and treaty claims as legally and analytically distinct is the only logical and correct approach. This approach gives rise, however, to several additional important questions.

A. The Power of Treaty-​based Tribunals to Interpret Contracts Even if a tribunal has jurisdiction over a claim arising out of a contractual relationship, the 15.44 question arises whether treaty-​based tribunals have the power to interpret the underlying contract, if necessary to determine whether the state’s conduct breached the treaty. It may well be that a treaty-​based tribunal called upon to decide claims for treaty breaches arising out of a contractual relationship will first have to determine whether or not the conduct of the parties was consistent with the underlying contract. This may require the tribunal to engage in a detailed and elaborate review of the contract and the rights and obligations arising from it. Can a treaty-​based tribunal engage in such a review? The Vivendi v Argentina I annulment committee once again provided an unambiguous an- 15.45 swer: if necessary, the tribunal not only can, but must do so. As the committee noted, if the tribunal is called upon to decide treaty claims arising out of contractual breaches, the tribunal cannot abdicate its responsibility and refuse to rule simply because detailed contractual analysis may be required.70 In the words of the committee: ‘under . . . the BIT the Tribunal had jurisdiction to base its decision upon the Concession Contract, at least so far as necessary in order to determine whether there had been a breach of the substantive standards of the BIT’.71 The committee distinguished a detailed contractual analysis and interpretation from exercising contractual jurisdiction:  ‘[I]‌t is one thing to exercise contractual jurisdiction . . . and another to take into account the terms of a contract in determining whether there has been a breach of a distinct standard of international law’.72 The annulment committee’s conclusion is consistent with the long-​established practice of international tribunals of

  SGS v. Pakistan, Decision on Jurisdiction, supra note 1, ¶ 147.   Impregilo v. Pakistan Decision on Jurisdiction, supra note 10, ¶ 258; see also Bayındır Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​29, Decision on Jurisdiction (Nov. 14, 2005), ¶ 160 [hereinafter Bayindir v. Pakistan, Decision on Jurisdiction], where the tribunal found it ‘not surprising’ that the treaty claims and the contract claims arose out of the same set of facts. 70  The annulment committee annulled the relevant portion of the Vivendi I award because ‘the Tribunal declined to decide key aspects of the Claimants’ BIT claims on the ground that they involved issues of contractual performance or non-​performance’. See Vivendi v. Argentina I, Decision on Annulment, supra note 65, ¶ 108. 71  Id. ¶ 110. 72  Id. ¶ 105. 68 69

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Breach of Treaty Claims and Breach of Contract Claims interpreting contracts and national law when necessary to determine whether there has been a breach of international law.73 15.46 More recently, the Biwater Gauff v Tanzania tribunal was asked by the claimant not to evaluate

the ‘contractual performance’ of the parties in deciding the claims under the BIT. Yet, the tribunal held that: ‘in determining the treaty claims . . . it is impossible to disregard the way in which the Lease Contract was concluded, performed, renegotiated and terminated. The Lease Contract was, after all, the principal asset in question in this dispute’.74 In other words, the tribunal could not adequately analyse the treaty claims—​as is required—​without delving into the factual, contractual dispute at issue.

15.47 This clear imperative did not deter Argentina from advancing similar arguments at the merits

phase of the second, resubmitted Vivendi case. Argentina asserted that because of the forum selection clause in the concession contract, the Vivendi v Argentina II tribunal could not interpret or apply the contract when considering the merits of the treaty claims.75 The Vivendi v Argentina II tribunal, hearing the resubmitted Vivendi case, found that it was necessary to review and analyse the underlying contract as a part of the analysis of the treaty claim. According to the tribunal, it was required to interpret the contract if necessary to determine whether the treaty was breached and ‘come to a view as to whether either of the parties failed to live up to its terms’.76 By doing so, the tribunal held, it would not be deciding a contractual issue or granting relief under the contract; it would be ‘taking the contractual background into account in determining whether or not a breach of the treaty has occurred’.77 The tribunal concluded:  ‘[I]‌t is permissible for the Tribunal to consider such alleged contractual breaches, not for the purpose of determining whether a party has incurred liability under domestic law, but to the extent necessary to analyze and determine whether there has been a breach of the Treaty’.78

B. The Difficulty (and Irrelevance) of Attempting to Identify Contract Claims ‘Dressed’ as Treaty Claims 15.48 A second question arises in situations where a respondent state argues that claimants have

‘dressed’ their contractual claims as treaty claims only to gain jurisdiction that would otherwise not exist over claims solely for breach of contract. Should tribunals seek to distinguish between ‘genuine’ treaty claims and contract claims ‘dressed’ as treaty claims for the purposes

73  For example, even though art. 38(1) of the Statute of the International Court of Justice explicitly states that the Court’s function is to decide in accordance with international law, the Court has concluded that it must address questions of domestic law and contract interpretation when necessary to resolve a question of international law. See, e.g., German Settlers in Poland, Advisory Opinion, 1923 P.C.I.J. (ser. B) No. 6, at 6 (Sept. 10, 1923); The Mavrommatis Jerusalem Concessions (Greece v. U.K.), 1925 P.C.I.J. (ser. A) No. 5, at 6 (Mar. 26, 1925); German Interests in Polish Upper Silesia and the Factory at Chorzów (Ger. v. Pol.), 1926 P.C.I.J. (ser. A) No. 7, at 4 (May 25, 1926); Serbian Loans Case (Fr. v. Serb.), 1929 P.C.I.J. (ser. A.) Nos. 21–​22, at 5 (July 12, 1929); Payment in Gold of Brazilian Federal Loans Issued in France (Fr. v. Braz.), 1929 P.C.I.J. (ser. A) Nos. 21–​22, at 93 (July 12, 1929); Consistency of Certain Danzig Legislative Decrees with the Constitution of the Free City, Advisory Opinion, 1935 P.C.I.J. (ser. A/​B) No. 65, at 41 (Dec. 4, 1935); The Panevezys-​Saldutiskis Railway Case (Est. v. Lith.), 1939 P.C.I.J. (ser. A/​B) No. 76, at 4 (Feb. 28, 1939). See also C. Wilfred Jenks, The Prospects of International Adjudication 572–​73 (1964) (discussing international claims where contracts under domestic law were at issue). 74  Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/​ 05/​22, Award (July 4, 2008), ¶ 470 [hereinafter Biwater v. Tanzania]. 75  See Vivendi v. Argentina II, Award, supra note 15, ¶¶ 7.3.1.–​7.3.4. 76  Id. ¶ 7.3.9. 77  Id. 78  Id. ¶ 7.3.10.

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims of finding jurisdiction? At the jurisdictional stage, this may be an impossible task. The Joy Mining v Egypt tribunal emphasized the difficulty that tribunals face: To the extent that a dispute might involve the same parties, object and cause of action it might be considered to be a dispute where it is virtually impossible to separate the contract issues from the treaty issues and to draw any jurisdictional conclusions from a distinction between them.79

Undeterred, tribunals have analysed claims to determine if, in the words of the Crystallex 15.49 v Venezuela tribunal, the claimant has engaged in an exercise of ‘pure “labelling” ’.80 The Crystallex tribunal continued to say that, if the claimant had alleged treaty breaches that were in reality merely contractual breaches, then the tribunal would ‘have the duty to re-​characterize the alleged breaches’.81 The tribunal did not, however, espouse any rubric to distinguish between so-​called ‘true’ treaty breaches and so-​called ‘labelled’ treaty breaches, finding nonetheless that there was no evidence that the claimant had ‘disguised contract claims as treaty claims’.82 The main test that tribunals have utilized to determine whether a contract claim has been 15.50 disguised as a treaty claim is to assess whether the state has used its sovereign powers (puissance publique) or instead has engaged in conduct as a purely commercial actor. This test has been applied in various contexts:  to determine jurisdiction over contractual claims when an umbrella clause or an ‘any dispute’ clause has been invoked, to determine whether the asserted treaty claims are in fact contractual claims ‘dressed’ as treaty claims, or to determine the merits of such claims.83 A state action may rise to the level of a treaty violation if,

79  Joy Mining Machinery Limited v. Arab Republic of Egypt, ICSID Case No. ARB/​03/​11, Award (Aug. 6, 2004), ¶ 75 (internal citation omitted) [hereinafter Joy Mining v. Egypt, Award]. 80  Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​ 11/​2, Award (Apr. 4, 2016), ¶ 475 [hereinafter Crystallex v. Venezuela Award]. 81  Id. 82  Id. ¶ 476. The tribunal reached this conclusion despite the fact that the claimant had also alleged, factually, that the state had failed to comply with the terms of the contract. 83  See Joy Mining v. Egypt, Award, supra note 79, ¶ 72 (‘[A]‌basic general distinction can be made between commercial aspects of a dispute and other aspects involving the existence of some forms of State interference with the operation of the contract involved’); Tulip v. Turkey Award supra note 51, ¶ 354 (‘the determination of whether a claim arises under a BIT involves an inquiry into the “essential basis” or “normative source” of that particular claim. In order to amount to a treaty claim, the conduct said to amount to a BIT violation must be capable of characterisation as sovereign conduct, involving the invocation of puissance publique. This principle has been affirmed by numerous previous investment tribunals’); Toto Construzione Generali S.p.A. v. Republic of Lebanon, ICSID Case No. ARB/​07/​12, Decision on Jurisdiction (Sept. 11, 2009), ¶ 106 (‘[W]hen the State acts as an administrative authority, holder of the “puissance publique”, while performing obligations arising from the Contract, such State must be viewed both as a party to the contract and as a sovereign’); BIVAC v. Paraguay, Decision on Jurisdiction, supra note 22, ¶ 127 (‘The fundamental basis of the claim under art. 3(1) of the BIT, over which this Tribunal has jurisdiction, turns on the interpretation and application of that provision and alleged acts of Paraguay (as ‘puissance publique’), not on the interpretation and application of the Contract as such, although the Contract will necessarily be part of the overall factual and legal matrix’); Azurix v. Argentina Award, supra note 14, ¶ 315 (‘Whether one or series of such [contractual] breaches can be considered to be measures tantamount to expropriation will depend on whether the State or its instrumentality has breached the contract in the exercise of its sovereign authority, or as a party to a contract’); Impregilo v. Pakistan Decision on Jurisdiction, supra note 10, ¶ 278 (‘[A] Host State acting as a contracting party does not ‘interfere’ with a contract; it “performs” it. If it performs the contract badly, this will not result in a breach of the provisions of the Treaty relating to expropriation or nationalisation, unless it be proved that the State or its emanation has gone beyond its role as a mere party to the contract, and has exercised the specific functions of a sovereign authority’); RFCC v. Morocco Award, supra note 9, ¶ 51 (‘[Q]uand l’investissement a pour origine la conclusion d’un contrat, il est possible pour l’Etat d’accueil de faire usage, dans sa relation contractuelle avec l’investisseur, de pouvoirs que lui seul détient en vertu de sa qualité de puissance publique. Seul l’usage de tels pouvoirs sera examiné par le Tribunal qui y trouvera ou non une violation de l’obligation de traitement juste et équitable . . .’) and at ¶ 87 (‘Un manquement à l’exécution d’un contrat, de nature à léser les intérêts du cocontractant, ne peut s’analyser en une mesure d’expropriation.

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Breach of Treaty Claims and Breach of Contract Claims for example, the state uses its public power to cut off a claimant’s legal recourse,84 or if ‘the equilibrium of the contract and the provisions contained therein are unilaterally altered by a sovereign act of the Host State’.85 15.51 The problem of applying this test for jurisdictional purposes, however, is that it requires

that the tribunal inquire into the nature, or even into the motive or intent, of the alleged breach—​an inquiry that requires a review of the merits. Moreover, when the investor presents a prima facie case for a treaty claim, the inquiry is irrelevant because every violation of an international obligation by a state is itself a sovereign act. As the tribunal in Bayındır v Pakistan stated: In the Tribunal’s view, the test of ‘puissance publique’ would be relevant only if Bayındır was relying upon a contractual breach . . . in order to assert a breach of the BIT. In the present case, Bayındır has abandoned the Contract Claims and pursues exclusively Treaty Claims. When an investor invokes a breach of a BIT by the host State (not itself a party to the investment contract), the alleged treaty violation is by definition an act of ‘puissance publique’. The question whether the actions alleged in this case actually amount to sovereign acts of this kind by the State is however a question to be resolved on the merits.86

15.52 The tribunal in Abaclat v Argentina also distinguished between a ‘pure contract claim’ and a

treaty claim.87 The tribunal found it convincing that the dispute was not merely over payment of a contractually agreed sum, but rather centred around the state’s passing of a law that entitled it not to perform part of its contractual obligations, in other words an action ‘based on a sovereign decision of Argentina outside of a contractual framework’.88 In doing so, the tribunal restricted itself to the question of whether the allegations on their face stated a treaty claim or, in the words of the tribunal, ‘are susceptible of constituting a violation of provisions of the BIT’.89

15.53 This is notable because the real question that tribunals need to resolve in the context of a jur-

isdictional inquiry is whether the facts alleged, if proven, may amount to an act or omission that is in violation of a treaty obligation. As the annulment committee in Vivendi v Argentina I pointed out, the critical issue was that: ‘the conduct alleged by Claimants, if established, could have breached the BIT’.90 This test was applied by the tribunal in Impregilo v Pakistan, which ‘considered whether the facts as alleged by the Claimant in this case, if established, are capable of coming within those provisions of the BIT which have been invoked’,91 as well as

Une chose est de priver un investisseur de ses droits contractuels reconnus par la seule force de l’autorité étatique, autre chose est de contester la réalité ou l’étendue de ces droits par application du contrat’). 84  Malicorp Ltd. v. Arab Republic of Egypt, ICSID Case No, ARB/​08/​18, Award (Feb. 7, 2011), ¶ 103 (‘[I]‌t is up to the party claiming to have been injured by the breach of a contract to pursue its contracting partner using the avenues laid down for this purpose . . . It is hard to see how an investment treaty would be breached by the mere fact of a breach of contract, as long as the control mechanisms put in place by that contract are functioning normally’). 85 Abaclat and Others v.  Argentine Republic, ICSID Case No. ARB/​ 07/​5, Decision on Jurisdiction and Admissibility (Aug. 4, 2011), ¶ 318 [hereinafter Abaclat v.  Argentina, Decision on Jurisdiction and Admissibility]. See also Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​09/​02, Award (Oct. 31, 2012), ¶ 559 (‘The dispute does not derive from [a mere failure] to comply with its payment obligations to Deutsche Bank . . . but from the fact that Respondent intervened as a sovereign by virtue of its State power to modify its payment obligations . . .’). 86  Bayindir v. Pakistan Decision on Jurisdiction, supra note 69, ¶ 183. 87  Abaclat v. Argentina Decision on Jurisdiction and Admissibility, supra note 85, ¶ 318. 88  Id. ¶¶ 323–​26. 89  Id. ¶ 331. 90  Vivendi v. Argentina I Decision on Annulment, supra note 65, ¶ 112. 91  Impregilo v. Pakistan Decision on Jurisdiction, supra note 10, ¶ 254.

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims by a number of other tribunals.92 The tribunal in Azurix v Argentina elaborated on this test in the following terms: According to the Respondent, the dispute is of a contractual nature and related to the interpretation of and performance under the Concession Agreement. However, for purposes of determining its jurisdiction, the Tribunal should consider whether the dispute, as it has been presented by the Claimant, is prima facie a dispute arising under the BIT. The investment dispute which the Claimant has put before this Tribunal invokes obligations owed by the Respondent to Claimant under the BIT and it is based on a different cause of action from a claim under the Contract Documents. Even if the dispute as presented by the Claimant may involve the interpretation or analysis of facts related to performance under the Concession Agreement, the Tribunal considers that, to the extent that such issues are relevant to a breach of the obligations of the Respondent under the BIT, they cannot per se transform the dispute under the BIT into a contractual dispute.93

Therefore, the investor is free to state its claims as claims for breach of treaty and must, to 15.54 clear the jurisdictional hurdle, only pass a prima facie test: whether the claims as stated are capable of coming within the purview of the substantive protections of a treaty. Such claims will pass the test if they are capable of giving rise to treaty breaches. The investor cannot ‘dress up’ any claim as a treaty claim if the facts, as stated, cannot—​even if established—​constitute conduct in breach of the treaty. In such a case, jurisdiction cannot exist. The only analysis at the jurisdictional phase, then, is the same as for any claim, regardless of whether the claim arises out of a contract breach or not: has the investor alleged facts that, if proven, constitute a treaty breach. Other than this basic inquiry, the tribunal’s scrutiny of the claims for jurisdictional purposes 15.55 should be fairly limited. The tribunal in SGS v Pakistan articulated that conclusion as follows: At this stage of the proceedings, the Tribunal has, as a practical matter, a limited ability to scrutinize the claims as formulated by the Claimant. Some cases suggest that the Tribunal need not uncritically accept those claims at face value, but we consider that if the facts asserted by the Claimant are capable of being regarded as alleged breaches of the BIT, consistently with the practice of ICSID tribunals, the Claimant should be able to have them considered on their merits. We conclude that, at this jurisdiction phase, it is for the Claimant to characterize the claims as it sees fit.94

92  See, e.g., Alemanni v. Argentina, supra note 23, ¶ 300 (‘The Tribunal entertains no doubt that, simply on the admitted facts alone, and on the further assumption that the Claimants are indeed investors within the meaning of the BIT, the complaints raised by them in this arbitration are capable of constituting a breach of one or more of the provisions of the BIT referred to in the preceding paragraph. Whether in the specific circumstances they would in fact constitute a breach is pre-​eminently a matter for the merits, and has no impact as a matter of jurisdiction’). See also Salini v. Morocco, Decision on Jurisdiction, supra note 49 at ¶¶ 59–​64; United Parcel Service of America, Inc. v. Government of Canada, Award on Jurisdiction (Nov. 22, 2002), ¶ 37 (‘Accordingly, the Tribunal’s task is to discover the meaning and particularly the scope of the provisions which UPS invokes as conferring jurisdiction. Do the facts alleged by UPS fall within those provisions; are the facts capable, once proved, of constituting breaches of the obligations they state?’); Wena Hotels Ltd v. Arab Republic of Egypt, ICSID Case No. ARB/​98/​4, Decision on Jurisdiction (June 29, 1999) (‘Wena has raised allegations against Egypt . . . which, if proven, clearly satisfy the requirement of a “legal dispute” under Article 25(1) of the ICSID Convention’); RFCC v. Morocco Decision on Jurisdiction, supra note 9, ¶¶ 70–​71 (‘Le Consortium a expressément précisé dans ses écritures que “plusieurs violations se sont concrétisées comme violations d’autres provisions générales et spécifiques du Traité”. Il a ultérieurement indiqué que “toutes les demandes qui ont été soumises au Tribunal arbitral par RFCC se situent dans le domaine des violations du Traité bilateral  . . .”. [L]‌es demandes, ainsi formulées, entrent dans la compétence du Tribunal arbitral. Il appartiendra à la partie demanderesse d’en démontrer le bien fondé dans la suite de la procédure arbitrale’). 93  Azurix v. Argentina, Decision on Jurisdiction, supra note 14, ¶ 76. 94  SGS v. Pakistan, Decision on Jurisdiction, supra note 1, ¶ 145 (internal citations omitted).

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Breach of Treaty Claims and Breach of Contract Claims 15.56 As the Bayındır v Pakistan tribunal noted: ‘when the investor has a right under both the con-

tract and the treaty, it has a self-​standing right to pursue the remedy accorded by the treaty’.95

C. The Impact of Contractual Forum Selection Clauses on the Jurisdiction of Treaty-​based Tribunals 15.57 What about situations where a contract specifically designates the forum in which claims

arising from the contract will be heard? Does such a provision change the tribunal’s analysis? Tribunals have often been confronted with a situation where the treaty dispute arises out of an underlying contractual relationship, and the contract contains a forum selection clause in favour of local courts or another domestic forum. Again, distinguishing between contract claims and treaty claims has been an important part of tribunals’ analysis in such cases.

1. Jurisdiction over treaty claims 15.58 When investors have asserted treaty claims, tribunals have found that a contractual forum

selection clause does not preclude jurisdiction under the treaty to resolve such claims. This conclusion, and the underlying reasoning, are similar to that justifying a tribunal’s jurisdiction over treaty claims with contractual elements: the existence of a contract cannot abrogate a state’s responsibility to perform its international obligations. The treaty claim and the contract claim must be analysed separately.

15.59 The Lanco v Argentina tribunal was the first to address this situation. In that case, the treaty

claims arose, inter alia, out of conduct that was allegedly in breach of a concession contract. The concession contract required that all disputes under the contract must be submitted to Argentine courts. Argentina argued that the treaty-​based tribunal lacked jurisdiction because the parties had agreed to resolve their disputes in that different forum. The tribunal found jurisdiction and concluded that the parties had consented to submit to a treaty-​based tribunal (in particular, to an ICSID tribunal) claims for breach of treaty, and that a contractual forum selection clause could not negate or override such consent. The only way that the ICSID tribunal could be prohibited from exercising jurisdiction, the tribunal reasoned, would be if the forum selection clause required exhaustion of local remedies under Article 26 of the ICSID Convention. The tribunal determined that was not the case.96

15.60 The Vivendi v Argentina I tribunal endorsed the analysis and conclusions of the Lanco v

Argentina tribunal. In the Vivendi I case, Argentina argued that the underlying concession contract contained an exclusive forum selection clause in favour of the local courts and that this clause precluded ICSID jurisdiction over the dispute. The Vivendi v Argentina I tribunal determined that it had jurisdiction over the dispute, notwithstanding the exclusive forum selection clause in the concession contract. It held that the forum selection clause ‘does not divest this Tribunal of jurisdiction to hear this case because that provision did not and could not constitute a waiver by [Vivendi] of its rights under Article 8 of the BIT to file the pending claims against the Argentine Republic’.97 The tribunal reasoned that Vivendi was claiming treaty violations rather than claims for breach of the contract that contained the forum selection clause. It found that, while disputes relating to breaches of contract might belong in the local courts, claims for breaches of the treaty were properly before the ICSID tribunal.

  Bayındır v. Pakistan, Decision on Jurisdiction, supra note 69, ¶ 167.   Lanco International Inc. v.  Argentine Republic, ICSID Case No. ARB/​97/​6, Preliminary Decision on Jurisdiction (Dec. 8, 1998) ¶ 38 [hereinafter Lanco v. Argentina, Preliminary Decision on Jurisdiction]. 97  Compañía de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/​97/​3, Award (Nov. 21, 2000), ¶ 53 [hereinafter Vivendi v. Argentina I, Award]. 95 96

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims In reaching that conclusion, the Vivendi v Argentina I tribunal relied directly on the Lanco v Argentina decision.98 The Vivendi I annulment committee, rejecting Argentina’s challenge to the tribunal’s jur- 15.61 isdictional holding, upheld the tribunal’s determination that the tribunal had jurisdiction over Vivendi’s treaty claims. The forum selection clause in the contract referring contractual disputes to local courts ‘did not affect the jurisdiction of the Tribunal with respect to a claim based on the provisions of the BIT’.99 The Vivendi annulment committee therefore followed the Lanco ruling that treaty-​based arbitration is unaffected by a contractual forum selection clause. Notwithstanding its finding of jurisdiction, however, the Vivendi v Argentina I tribunal 15.62 stopped short of deciding the merits of Vivendi’s core treaty claims precisely because of the presence of the forum selection clause in the contract. According to the Vivendi v Argentina I tribunal, Argentina could not be held liable under the treaty unless it had first been established that the concession contract had been breached. To make such a determination, however, the tribunal ‘would have to undertake a detailed interpretation’ of the concession contract.100 The forum selection clause, the tribunal decided, divested the tribunal of authority to rule on breaches of contract, a task within the exclusive jurisdiction of the local courts.101 As a result, the Vivendi v Argentina I tribunal declined to decide the treaty claims. As noted earlier, the Vivendi v Argentina I annulment committee annulled this portion of the 15.63 tribunal’s award, concluding that the contractual forum selection clause could not in any way negate the tribunal’s obligation to decide Vivendi’s treaty claims. According to the committee, ‘where “the fundamental basis of the claim” is a treaty laying down an independent standard by which the conduct of the parties is to be judged, the existence of an exclusive jurisdiction clause in a contract between the claimant and the respondent state . . . cannot operate as a bar to the application of the treaty standard’.102 The key paragraph of the committee’s holding reads as follows: In the Committee’s view, it is not open to an ICSID tribunal having jurisdiction under a BIT in respect of a claim based upon a substantive provision of that BIT, to dismiss the claim on the ground that it could or should have been dealt with by a national court. In such a case, the inquiry which the ICSID tribunal is required to undertake is one governed by the ICSID Convention, by the BIT and by applicable international law. Such an inquiry is neither in principle determined, nor precluded, by any issue of municipal law, including any municipal law agreement of the parties.103

‘At most’, the committee noted, the contractual forum selection clause ‘might be relevant—​as municipal law will often be relevant—​in assessing whether there has been a breach of the treaty’.104 The Vivendi v Argentina I annulment committee concluded that if there were a breach of 15.64 the treaty, the existence of a forum selection clause in the contract could not prevent its characterization as a treaty breach because ‘[a]‌state cannot rely on an exclusive jurisdiction clause in a contract to avoid the characterisation of its conduct as internationally unlawful

  Id.   Vivendi v. Argentina I, Decision on Annulment, supra note 65, ¶ 76. 100  Vivendi v. Argentina I Award, supra note 97, ¶ 79. 101  Id. ¶¶ 79 and 81. 102  Vivendi v. Argentina I, supra note 65, ¶ 101. 103  Id. ¶ 102. 104  Id. ¶ 101. 98 99

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Breach of Treaty Claims and Breach of Contract Claims under a treaty’.105 Subsequent tribunals have continued to follow the reasoning of the Lanco and Vivendi I tribunals and the Vivendi annulment committee, and have uniformly declined to entertain objections to jurisdiction over treaty claims based on forum selection clauses contained in underlying contracts.106 As the tribunal in Jan de Nul v Egypt observed: ‘the fact that the dispute involves contract rights and contract remedies does not in and of itself mean that it cannot also involve Treaty breaches and Treaty claims’.107 15.65 The only possible exception to this consistent refusal to abrogate treaty jurisdiction in the face

of a contractual forum selection clause is where such a clause constitutes an explicit waiver by the investor of its rights to an international treaty-​based arbitration. In Aguas del Tunari v Bolivia, the tribunal reasoned that whether a contractual forum selection clause constitutes a waiver of the treaty-​based right to arbitration depends on the intent of the parties.108 The tribunal observed that if ‘the parties to an ICSID arbitration could jointly agree to a different mechanism for the resolution of their disputes other than that of ICSID, it would appear that an investor could also waive its rights to invoke the jurisdiction of ICSID’.109 However, the tribunal required an explicit waiver or other ‘specific indications’ of the common intention of the parties.110 It held that the mere fact that the forum selection clause confers upon the domestic forum exclusive jurisdiction to resolve contractual claims is not sufficient to affect a treaty-​based tribunal’s jurisdiction.111

15.66 The Aguas del Tunari v Bolivia approach was endorsed by the tribunal in Occidental v Ecuador.

That tribunal concluded: ‘Based on elementary principles of contract interpretation, any exception to the availability of ICSID arbitration for the resolution of disputes arising under [the relevant contract] requires clear language to this effect’.112 In reaching this conclusion, the Occidental v Ecuador tribunal relied heavily on the Aguas del Tunari v Bolivia decision, from which it quoted extensively. The Occidental tribunal noted further that the parties could have excluded certain disputes from ICSID jurisdiction but did not do so, and, therefore, the tribunal could not imply such an exclusion.113

15.67 Jurisprudence on this point is scarce and the significance of the Aguas del Tunari approach

may be limited:  it is unlikely that many investors will agree to include in an investment contract a provision by virtue of which they explicitly waive their rights to submit to international treaty-​based arbitration any disputes arising out of or relating to the contract, including claims for breaches of an investment treaty.

2. Jurisdiction over Contract Claims 15.68 While a contractual forum selection clause will not deprive a treaty-​based tribunal of juris-

diction over a treaty claim, the effect of a contractual forum selection clause may be different when the question is whether a treaty-​based tribunal may exercise jurisdiction over claims

  Id. ¶ 103.   See, e.g., Salini v. Morocco, Decision on Jurisdiction, supra note 49, ¶ 27; Eureko v. Poland, supra note 9, ¶¶ 94–​97, 112–​13. 107  Jan de Nul N.V. & Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/​04/​ 13, Decision on Jurisdiction (June 16, 2006), ¶ 80. 108  Aguas del Tunari v. Bolivia, ICSID Case No. ARB/​02/​3, Decision on Jurisdiction (Oct. 21, 2005), ¶ 115 [hereinafter Aguas del Tunari v. Bolivia, Decision on Jurisdiction]. 109  Id. ¶ 118. 110  Id. ¶ 119. 111  Id. ¶ 122. 112 Occidental Petroleum Corp. & Occidental Exploration and Production Company v.  Republic of Ecuador, ICSID Case No. ARB/​06/​11, Decision on Jurisdiction (Sept. 9, 2008), ¶ 71 [hereinafter Occidental v. Ecuador, Decision on Jurisdiction]. 113  See id. ¶ 73. 105 106

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims for a breach of the contract. The question then is whether a treaty-​based tribunal, which may otherwise have jurisdiction over ‘purely’ contractual claims (whether by virtue of an umbrella clause, or an ‘any dispute’ clause, or a grant of jurisdiction in a treaty over investment agreements as discussed earlier), should take jurisdiction in the presence of an exclusive contractual forum selection clause. Most tribunals have answered that question in the negative, holding that an exclusive contractual forum selection clause divests a treaty-​based tribunal of jurisdiction over contract claims.114 Further, some tribunals have treated contractual forum selection clauses as precluding a 15.69 treaty-​based tribunal’s consideration not only of ‘purely’ contractual claims, but also of claims where ‘the basis of the claim’ is a contract or the ‘essential basis’ for the claim is a breach of contract. For example, the SGS v Philippines tribunal stated: The question is whether a party should be allowed to rely on a contract as the basis of its claim when the contract itself refers that claim exclusively to another forum. In the Tribunal’s view the answer is that it should not be allowed to do so, unless there are good reasons, such as force majeure, preventing the claimant from complying with its contract.115

This approach was also articulated by the Vivendi v Argentina I annulment committee, which 15.70 held that: ‘[i]‌n a case where the essential basis of a claim brought before an international tribunal is a breach of contract, the tribunal will give effect to any valid choice of forum clause in the contract’.116 The Vivendi v Argentina I annulment committee relied, inter alia, on the Woodruff case, where it was stated: [T]‌he judge, having to deal with a claim fundamentally based on a contract, has to consider the rights and duties arising from that contract, and may not construe a contract that the parties themselves did not make, and he would be doing so if he gave a decision in this case and thus absolved [claimant] from the pledged duty of first recurring for rights to the Venezuelan courts, thus giving a right, which by this same contract was renounced, and absolve claimant from a duty that he took upon himself by his own voluntary action . . . [A]s the claimant by his own voluntary waiver has disabled himself from invoking the jurisdiction of this Commission, the claim has to be dismissed without prejudice on its merits, when presented to the proper judges.117

It is, however, not entirely clear what the difference is between a ‘pure’ contract claim and 15.71 ‘a claim fundamentally based on a contract’, or a case where ‘the essential basis of a claim . . . . is a breach of contract’. The Woodruff/​Vivendi I approach could be interpreted to apply beyond ‘pure’ contract claims, to claims presented or ‘dressed up’ as treaty claims but where the basis of the claim is a contract. This approach could be problematic for reasons previously discussed. It could allow a treaty-​based tribunal at the preliminary jurisdiction phase to decline jurisdiction before the parties can establish the ‘real’ or ‘essential basis’ of the claim—​an inquiry better suited for the merits rather than as a jurisdictional test. Even where questions of jurisdiction are joined to the merits, adherence to, or expansion of, an ‘essential basis’ test to deny jurisdiction does damage to the prevailing standard whereby jurisdiction may be exercised if the claimant can show a prima facie treaty breach. Could a tribunal find that low bar met, only to reject the claim(s) because the prima facie case had an ‘essential basis’ in a contract dispute? Such a situation may be unlikely but, in any event, no tribunal has elucidated or grappled with any ‘essential basis’ test in determining whether to exercise

  See, e.g., Joy Mining v. Egypt, Award, supra note 79, ¶¶ 89 ff.   SGS v. Philippines, Decision on Jurisdiction, supra note 1, ¶ 154. 116  Compañia de Aquas del Aconquija, S.A. and Compagnie Générale des Eaux v. Argentine Republic, ICSID Case No. ARB/​97/​3, Annulment Decision (July 3, 2002), ¶ 98 (emphasis added). 117  Woodruff Case (U.S. v. Venez.), 9 R.I.A.A. 213, 222–​23 (1903) (emphasis added). 114 115

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Breach of Treaty Claims and Breach of Contract Claims jurisdiction over treaty claims with the ‘essential basis of the claim’ grounded in a contract with a forum selection clause.

D. The Role and Significance of ‘Fork-​in-​the-​Road’ Provisions 15.72 Another contractual provision may also play a role in a tribunal’s jurisdictional analysis in

cases involving contractual obligations:  the ‘fork-​in-​the-​road’ provision. Older investment treaties often require the exhaustion of local remedies before international arbitration may be invoked. Some modern investment treaties require that efforts be made first to resolve the dispute in domestic courts for a certain period of time and, if no satisfactory resolution is found, the dispute can then be submitted to international arbitration. Most modern investment treaties, however, require that the investor must choose between litigation in the host state’s domestic courts and international arbitration, a provision generally referred to as the ‘fork-​in-​the-​road’. The choice between domestic and international fora belongs to the investor, but it is final and binding—​on both the state and the investor. In other words, it is the point of no return: once the investor submits a dispute to local courts, it cannot submit that dispute to international arbitration.

15.73 Investment treaties (of which Chapter Eleven of the NAFTA is a prominent example) may

similarly require that the investor waive its right to initiate or continue proceedings in local courts in order to submit the same dispute to international arbitration. This means that the investor does not forfeit its access to international arbitration by initiating local court proceedings, but if the investor resorts to local courts and then turns to international arbitration, it must discontinue the local court proceedings.

15.74 When considered in the context of fork-​in-​the-​road provisions, the distinction between

contract claims and treaty claims raises the question: will the investor lose access to international arbitration if it submits contractual claims to local courts? The answer is, of course, ‘it depends’.

15.75 The first logical step in the analysis is clear: a tribunal cannot decline jurisdiction because

of a fork-​in-​the-​road provision if the investor has not submitted the dispute to local courts. In Lanco v Argentina, Argentina argued that Lanco was precluded from submitting the dispute to arbitration under the US–​Argentina BIT because of a forum selection clause in the underlying concession agreement. In a sense, the argument was that the investor had already chosen the fork in the road by agreeing to the forum selection clause. The tribunal’s logic was compelling. The tribunal held that the forum selection clause could not be a bar to its jurisdiction over treaty claims. It noted that the investor had not chosen, simply by agreeing to a forum selection clause, to submit the dispute to the procedure agreed to in the concession agreement. Instead, by filing its claims before an international tribunal, the investor chose to submit the dispute to arbitration under the treaty.118 In other words, in the view of the Lanco tribunal, agreement to a contractual forum selection clause did not constitute the choice by the investor—​required by the fork-​in-​the-​road provision—​to submit the dispute to the contractual forum. Only the actual submission of the dispute to local courts would have constituted such a choice, thus satisfying the fork-​in-​the-​road provision and barring the tribunal’s jurisdiction.

15.76 The Vivendi v Argentina I tribunal took a further analytical step by making a distinction

between treaty claims and contract claims. The tribunal held that it had before it treaty claims, which could not be subject to the jurisdiction of local courts under the contractual

  See Lanco v. Argentina, Preliminary Decision on Jurisdiction, supra note 96, ¶¶ 28–​30.

118

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IV.  Distinguishing Between Breach of Treaty Claims and Breach of Contract Claims forum selection clause ‘if only because, ex hypothesi, those claims are not based on the Concession Contract but allege a cause of action under the BIT’.119 On that basis, the tribunal concluded that: a suit by Claimants [in local courts] for violation of the terms of the Concession Contract would not have foreclosed Claimants from subsequently seeking a remedy against the Argentine Republic as provided in the BIT and ICSID Convention’ because such a suit would not have been ‘the kind of choice by Claimants of legal action in national jurisdictions (i.e., courts) against the Argentine Republic that constitutes the ‘fork in the road’ under Article 8 of the BIT, thereby foreclosing future claims under the ICSID Convention.120

In the subsequent annulment proceeding, the Vivendi v Argentina I annulment committee agreed with the tribunal’s analysis and declined to annul the jurisdictional part of the award.121 Numerous tribunals have performed the same analytical exercise when approaching fork-​in-​ 15.77 the-​road provisions.122 As the CMS Gas tribunal noted, ‘[d]‌ecisions of several ICSID tribunals have held that as contractual claims are different from treaty claims[,] even if there had been or there currently was a recourse to the local courts for breach of contract, this would not have prevented submission of the treaty claims to arbitration’.123 The Enron v Argentina tribunal echoed that conclusion: ‘It has . . . been held that even if there was recourse to local courts for breach of contract this would not prevent resorting to ICSID arbitration for violation of treaty rights’.124 A fork-​in-​the-​road provision, therefore, would be triggered (and the investor would lose ac- 15.78 cess to international arbitration) only if the same dispute between the same parties had been submitted to local courts prior to its submission to international arbitration. The investor’s submission of contractual claims to local courts does not preclude its access to treaty-​based arbitration for the resolution of treaty claims. For the fork-​in-​the-​road provision to be triggered, then the parties to the local court proceeding and the international arbitration must be identical and the causes of action in the two proceedings must be identical.125 As a result, the fork-​in-​the-​road provision would act as a bar to jurisdiction in only two situ- 15.79 ations. First, it would bar jurisdiction where an investor has submitted breach of treaty claims against the state to local courts and then seeks to submit the same claims to international arbitration. This situation is highly unlikely for obvious reasons. Secondly, the fork-​in-​the-​road provision would bar jurisdiction if the investor has submitted claims for a breach of contract to local courts and then seeks to submit the same breach of contract claims (most likely

  Vivendi v. Argentina I, Award, supra note 97, ¶ 53.   Id. ¶ 55. 121  See Vivendi v. Argentina I, Decision on Annulment, supra note 65, ¶¶ 38–​39. 122  See, e.g., Lauder v. Czech Republic, UNCITRAL, Award (Sept. 3, 2001), ¶¶ 162–​ 63; Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/​99/​6, Award (Apr. 12, 2002), ¶ 71; Wena Hotels v. Egypt, supra note 92, Decision on Application for Annulment (Feb. 5, 2002), ¶ 36; Azurix v. Argentina Decision on Jurisdiction, supra note 14, ¶¶ 88–​92. 123  CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/​ 01/​8, Decision on Jurisdiction (July 17, 2003), ¶ 80 (citing Vivendi v. Argentina I, Award); Genin, Eastern Credit Limited, Inc. & A.S. Baltoil v. Estonia, ICSID Case No. ARB/​99/​2, Award (June 25, 2001) [hereinafter Genin v. Estonia, Award]; and Eudoro Olguín v. Republic of Paraguay (ICSID Case No. ARB/​98/​5), Decision on Jurisdiction (Aug. 8, 2000). 124  Enron Corp. v. Argentine Republic, ICSID Case No. ARB/​ 01/​3, Decision on Jurisdiction (Jan. 14, 2004), ¶ 97. 125  See Genin v.  Estonia, Award, supra note 123, ¶¶ 331–​ 33, and Professor Schreuer’s analysis in C. Schreuer, Travelling the BIT Route—​Of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 J.W.I.T. 2, 231, 244–​45 & 247–​48 (2004). 119 120

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Breach of Treaty Claims and Breach of Contract Claims together with treaty claims) to treaty-​based arbitration. In this second case, a tribunal—​even assuming it otherwise had jurisdiction over breach of contract claims—​would decline to exercise its jurisdiction over the contract claims because, by submitting the contract claims to local courts, the investor would have taken the fork-​in-​the-​road that led to domestic courts with respect to those claims. This, however, would not affect the tribunal’s jurisdiction over any treaty claims submitted by the investor.

V. Conclusion 15.80 The approach of treaty-​based tribunals to analysing jurisdiction over breach of treaty and

breach of contract claims has undergone significant clarification and refinement. Although some ambiguity remains as to whether tribunals have jurisdiction over ‘pure’ contract claims in spite of a contractual forum selection clause, tribunals have nonetheless consistently held that treaty claims, even those based on contract disputes, shall be heard by international tribunals. Contract claims and treaty claims are treated distinctly, but treaty claims must have an international forum, unless an investor has expressly waived that forum in an investment agreement—​an unlikely proposition. As tribunals build upon prior decisions, a clearly emerging jurisprudence establishes a framework for future tribunals to approach the jurisdictional analysis of treaty and contract claims in a consistent and analytically sound manner.

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16 THE UMBRELLA CLAUSE Is the Umbrella Closing? Katia Yannaca-​Small  *

I. Introduction  II. History of the Umbrella Clause and State Practice  III. Significance of the Umbrella Clause in Treaties 

IV. Effects, Scope, and Conditions of Application of the Umbrella Clause  16.23

16.01

A. The Effects of the Umbrella Clause  B. The Scope of the Umbrella Clause or the Conditions of Its Application 

16.06 16.16

V. Conclusion 

16.26

16.52 16.84

I. Introduction Investor-​state arbitration usually has its legal basis in an investment treaty—​bilateral (BIT), 16.01 regional, or multilateral—​or in an investor-​state contract.1 Some investment treaties cover only disputes relating to an ‘obligation under this agreement’, that is, only for claims of treaty violations. Others extend the jurisdiction to ‘any dispute relating to investments’. Some others create an international law obligation that a host state shall ‘observe any obligation it may have entered into’ in respect of investments or ‘constantly guarantee the observance of the commitments it has entered into’ or ‘observe any obligation it has assumed’ in this respect. These and other similar provisions are commonly called ‘umbrella clauses’, although other formulations have also been used: ‘mirror effect’, ‘elevator’, ‘parallel effect’, ‘sanctity of contract’, ‘respect clause’, and pacta sunt servanda.2

*  The author is grateful to Nadine Lavinal, Senior Counsel, Amsterdam & Partners LLP for assistance in research for the update of this chapter. 1  The issue of contract/​ treaty claims and the challenges they pose for investment arbitration has been examined in detail in ch. 15 of this volume. 2  For the literature and the debate on the umbrella clause, see A. Sinclair, The Origins of the Umbrella Clause in the International Law of Investment Protection, 20 Arb. Int’l 411 (2004); C. Schreuer, Travelling the BIT Route of Waiting Periods, Umbrella Clauses and Forks in the Road, 5 J. World Inv. & Trade 231 (2004); S. Alexandrov, Breaches of Contract and Breaches of Treaty—​The Jurisdiction of Treaty-​based Arbitration Tribunals to Decide Breach of Contract Claims in SGS v Pakistan, and SGS v Philippines, 5 J. World Inv. & Trade 555 (2004); V. Zolia, Effect and Purpose of ‘Umbrella Clauses’ in Bilateral Investment Treaties: Unresolved Issues, 2 TDM (2004); T. Wälde, The ‘Umbrella Clause’ in Investment Arbitration: A Comment on Original Intentions and Recent Cases, 6 J. World Inv. & Trade 183 (2005); T. Wälde, Contract Claims under the Energy Charter’s Umbrella Clause:  Original Intentions versus Emerging Jurisprudence, in Investment Arbitration and the Energy Charter Treaty (C. Ribeiro ed., 2006); W. Ben Hamida, La clause relative au respect des engagements dans les traités d’investissements, in Nouveaux Developpements Dans Le Contentieux Arbitral Transnational Relatif a l’Investissement International (C. Leben ed., 2006); H. Schramke, The Interpretation of Umbrella Clauses in Bilateral Investment Treaties, 4 TDM 1 (2007); K. Yannaca-​Small, Interpretation of the Umbrella Clause in International Investment Agreements, in International Investment Law, Understanding Concepts and Tracking Innovations (OECD, 2008); S. Schill, Enabling Private

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The Umbrella Clause: Is the Umbrella Closing? 16.02 Similar clauses were inserted in treaties to provide additional protection to investors and are

directed at covering investment agreements that host countries frequently conclude with foreign investors. Inclusion of umbrella clauses in investment treaties provides a mechanism to make host states’ promises ‘enforceable’ and comes as an additional protection of investor-​ state contracts,3 which raises the issue of whether the umbrella clause seeks to elevate contractual breaches to treaty breaches.

16.03 The umbrella clause has been known since the 1950s and its effects have been discussed

extensively in the literature and in arbitral opinions. The first ICSID case that addressed the umbrella clause arose in 1998: Fedax v Venezuela, based on the Netherlands–​Venezuela BIT.4 In this case, the tribunal was unaware that there was an umbrella clause and did not carry out any in-​depth examination of the clause or its application. It simply applied the ‘plain meaning’ of the provision, that commitments should be observed under the BIT,5 with respect to the promissory note contractual document.6 However, it was not until the two Société Générale de Surveillance SA (SGS)7 cases that it started to be tested.

16.04 Treaties are lex specialis, and states tailor them as they see fit. An umbrella clause frequently

figures in modern investment treaties but not always with the same language. Hence, it is not surprising that arbitral tribunals have interpreted it differently and sometimes reached opposite outcomes in cases with similar facts. Contemporary trends reveal, however, that states are moving away from the umbrella clause to avoid its potential overreach.8

16.05 For a better understanding of the clause, this chapter (i) gives an overview of its history, (ii)

briefly discusses the significance of the language included in a number of BITs, and (iii) looks at the effect, scope, and conditions of application of the umbrella clause as interpreted by arbitral tribunals.

Ordering-​Function, Scope and Effect of Umbrella Clauses in International Investment Treaties IILJ Working Paper 2008/​9 (Institute for International Law and Justice, NYU School of Law, 2008); C. Miles, Where’s my Umbrella? An “Ordinary Meaning” Approach to Answering Three Key Questions That Have Emerged from the “Umbrella Clause” Debate, in Investment Treaty Arbitration and International Law (T. Grierson Weiler ed., LLC 2008); L. Halonen, Containing the Scope of the Umbrella Clause, id.; J.-​C. Honlet & G. Borg, The Decision of the ICSID Ad Hoc Committee in CMS v Argentina Regarding the Conditions of Application of an Umbrella Clause: SGS v Philippines Revisited, 7 Law and Practice of Int’l Courts and Tribunals 1, 32 (2008). 3   See Schill, supra note 2. 4   Fedax NV v. Republic of Venezuela, ICSID Case No. ARB/​96/​3, Award (Mar. 9, 1998) [hereinafter Fedax v. Venezuela]. 5   The tribunal found that Venezuela was under the obligation to: ‘[h]‌onor precisely the terms and conditions governing such investment, laid down mainly in Article 3 of the Agreement, as well as to honor the specific payments established in the promissory notes issued’: id. at 29. 6  The merits of the case were partially settled between the parties. 7  See Société Générale de Surveillance S.A.  v.  Pakistan, ICSID Case No. ARB/​ 01/​13, Decision on Jurisdiction (Aug. 6, 2003)  [hereinafter SGS v.  Pakistan]; see also SGS Société Générale de Surveillance S.A.  v.  Republic of the Philippines, ICSID Case No. ARB/​ 02/​ 6, Decision on Jurisdiction (Jan. 29, 2004) [hereinafter SGS v. Philippines]. 8  See R. Pereira de Souza Fleury, Umbrella Clauses:  A Trend Towards Its Elimination, 31(4) Arb. Int’l 679, 688–​91 (2015) and Closing the Umbrella: A Dark Future for Umbrella Clauses?, in Kluwer Arbitration Blog (Oct. 13, 2017), http://​arbitrationblog.kluwerarbitration.com/​2017/​10/​13/​closing-​umbrella-​dark-​ future-​umbrella-​clauses/​ (last visited Nov. 13, 2017). According to the author, ‘[o]‌f the 54 new investment agreements signed since December 2015, only two (3.4%) contain an umbrella clause, namely, the Austria-​ Kyrgyzstan and Japan-​Iran BITs’. In addition, the latest BITs signed by Canada do not contain an umbrella clause. See the Canada–​Mongolia BIT signed on September 8, 2016, not yet in force; see also the Canada–​ Hong Kong China SAR, signed on February 2, 2016, entered into force on September 6, 2016.

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II.  History of the Umbrella Clause and State Practice

II.  History of the Umbrella Clause and State Practice The first occurrence of the ‘umbrella clause’9 as a distinct investment protection provision can 16.06 be traced to the 1956–​59 Abs Draft International Convention for the Mutual Protection of Private Property Rights in Foreign Countries [the Abs draft], Article IV(4): ‘In so far as better treatment is promised to non-​nationals than to nationals either under intergovernmental or other agreements or by administrative decrees of one of the High Contracting Parties, including most-​favoured nation clauses, such promises shall prevail (emphasis supplied)’.10 This approach was reformulated in the 1959 Abs-​Shawcross Draft Convention on Foreign 16.07 Investment (Article II): ‘Each Party shall at all times ensure the observance of any undertakings which it may have given in relation to investments made by nationals of any other party’.11 The clause appeared shortly afterwards in the first BIT between Germany and Pakistan in 16.08 1959 (Article 7): ‘Either Party shall observe any other obligation it may have entered into with regard to investments by nationals or companies of the other party’. The clause was also one of the core substantive rules of the 1967 OECD draft Convention on 16.09 the Protection of Foreign Property (Article 2),12 which provided that: ‘Each Party shall at all times ensure the observance of undertakings given by it in relation to property of nationals of any other Party’. The Notes and Commentaries accompanying the draft Convention describe this article as ‘an application of the general principle of pacta sunt servanda in favor of the property of nationals of another party, and their lawful successors in title, unless the undertaking expressly excludes such succession’.13 According to the Commentaries, ‘property’ includes, but is not limited to, investments which are defined in Article 9 as ‘all property, rights and interests whether held directly or indirectly, including the interest which a member of a company is deemed to have in the property of the company’.14 Property is to be understood ‘in the widest sense’. However, the commentary limits the scope of Article 2 by insisting that undertakings ‘must relate to the property concerned; it is not sufficient if the link is incidental’. These undertakings may include ‘consensual’ bargains, as well as ‘unilateral engagements’ by the host state. The understanding of commentators and drafters on the umbrella clause provision at the 16.10 time of the draft OECD Convention was that, while the clause probably did cover international obligations, its focus was contractual obligations accepted by the host state with regard to foreign property.15

9  For a complete history of the umbrella clause, see Sinclair, supra note 2. Sinclair’s research suggests that the origins can be traced to the advice provided by Sir Elihu Lauterpacht in 1953–​54 to the Anglo-​Iranian Oil Company regarding the settlement of the Iranian oil nationalization dispute. The so-​called ‘umbrella’ or ‘parallel protection’ treaty was again proposed in Lauterpacht’s advice given in 1956–​57 to a group of oil companies contemplating a trunk pipeline from Iraq through Syria and Turkey to the Eastern Mediterranean. 10  See H. Abs, Proposals for Improving the Protection of Private Foreign Investments, in Institut International d’Etudes Bancaires (1958), as cited by Sinclair, supra note 2. 11 The text of the Abs-​ Shawcross Draft is reprinted in UNCTAD, International Investment Instruments: A Compendium, V 395 (2000). 12  Draft Convention on the Protection of Foreign Property and Resolution of the Council of the OECD on the Draft Convention, OECD Publication No. 23081 (November 1967). 13  Id. 14  Id. 15  See Sinclair, supra note 2.

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The Umbrella Clause: Is the Umbrella Closing? 16.11 Commenting on the same provision, Brower raised the possibility that the article’s scope

ratione materiae may have been limited so as only ‘to apply specifically to large-​scale investment and concession contracts—​in the making of which the state is deliberately “exercising its sovereignty”—​and thus it might be argued that ordinary commercial contracts are an implied exception to the general rule set forth in Article 2’.16

16.12 Wälde noted that contracts related to investment—​at that time seen narrowly as ‘foreign direct

investment’—​did by their very nature always involve a governmental dimension. Treaties at that time also only provided for state-​to-​state arbitration, which was a screening mechanism against exorbitant and gratuitous use of treaties by private commercial operators.17

16.13 The Energy Charter Treaty18 takes a qualified approach to this. The final sentence of Article

10(1) requires that: ‘Each Contracting Party shall observe any obligations it has entered into with an Investor or an Investment of an Investor of any other Contracting Party’.19 This is, however, accompanied by derogation provisions in Articles 26(3)(c) and 27(2), which allow the contracting parties to opt out of binding investor-​state and state-​to-​state dispute settlement regarding the final sentence of Article 10(1) by listing themselves in Annex IA. Four ECT contracting parties have chosen to apply this derogation: Australia, Canada, Hungary, and Norway.

16.14 It is estimated that, of the approximately 2,671 international investment agreements (IIAs)

in force mapped by UNCTAD, about 42 per cent contain an umbrella clause.20 Treaty practice of states does not point to a uniform approach to these clauses. While Switzerland, the Netherlands, the United Kingdom, and Germany often include umbrella clauses in their BITs, France, Australia, and Japan include umbrella clauses in only a minority of their BITs. The most recent Canadian Model FIPA and Indian Model BIT do not contain umbrella clauses.

16.15 The treaty practice of the United States changed with its 2004 and 2012 Model BITs. While

the majority of the US BITs based on the former model contain a broadly worded umbrella clause, the 2004 and the 2012 Model BITs do not, but rather provide in their Article 24(1) for the submission to dispute settlement of disputes arising from specific investment protection articles of the treaty, as well as from an investment authorization or investment agreement but not from other contractual obligations. Further, in their Article 26, they require that an investor opting for such arbitration waive ‘any right to initiate or continue before any administrative tribunal or court under the law of either Party or other dispute settlement

16  C. Brower, The Future of Foreign Investment—​Recent Developments in the International Law of Expropriation and Compensation, in Private Investors Abroad: Problems and Solutions in International Business in 1975 (V. Cameron ed., 1976), as cited by Sinclair, supra note 2, at 93, 105 n. 27. According to Sinclair, ‘there is nothing to indicate such a limitation ratione materiae in the text of either the OECD or Abs-​ Shawcross Drafts. It is true, however, that the pressing general concern of the 1950s had been to protect the integrity of large concessions contracts from nationalization and abuse of governmental power and to ensure compensation for their expropriation’. 17  T. Wälde, The ‘Umbrella’ (or Sanctity of Contract/​Pacta Sunt Servanda) Clause in Investment Arbitration: A Comment on Original Intentions and Recent Cases, 1 Transnat’l Disp. Mgmt. 4 (2004). 18  The Energy Charter Treaty was signed on December 17, 1994. 19  The accompanying Secretariat document defines the scope of the provision as follows: ‘Article 10(1) has the important effect that a breach of an individual investment contract by the host state country becomes a violation of the ECT. As a result, a foreign investor and its home country may invoke the dispute settlement mechanism of the Treaty’, The Energy Charter Treaty: A Reader’s Guide, 5 OGEL 26 (2004). 20  According to the UNCTAD Database, of the 2,671 mapped IIAs, 1,107 contain an umbrella clause. See http://​investmentpolicyhub.unctad.org/​IIA/​mappedContent (last visited Feb. 19, 2018).

398

III.  Significance of the Umbrella Clause in Treaties procedures, any proceeding with respect to any measure alleged to constitute a breach referred to in Article 24 . . ’.

III.  Significance of the Umbrella Clause in Treaties Although umbrella clauses have common features, there is a certain disparity in language 16.16 leading to the question of the scope and effect of each particular clause, which must be interpreted according to its own terms. As Professor Crawford has noted, there is no such thing as ‘the’ umbrella clause,21 although when such clauses are identical or nearly identical, they should arguably be given similar meanings. As he put it, arbitral tribunals’ positions—​particularly on the question of umbrella clauses—​reflect a level of dissent that one may regard as disturbing: ‘the carpet looks very much as if different people have started from different ends without many common threads—​a crazy quilt rather than a Persian rug’.22 In most of the BITs that contain an umbrella clause, the language is clear, straightforward, 16.17 and unambiguous: ‘shall observe’ or ‘shall respect any obligation’. An analysis of the ordinary meaning of a ‘proper’ umbrella clause according to Article 31(1) of the Vienna Convention on the Law of Treaties23 was elucidated in the partial award rendered in Eureko v Poland. The tribunal stated: The plain meaning—​the ‘ordinary meaning’—​of a provision prescribing that a State ‘shall observe any obligations it may have entered into’ with regard to certain foreign investments is not obscure. The phrase ‘shall observe’ is imperative and categorical. ‘Any’ obligations is capacious; it means not only obligations of a certain type, but ‘any’—​that is to say, all—​ obligations entered into with regard to investments of investors of the other Contracting Party.24

In some other BITs, the language is, arguably, more ambiguous and may leave room for dif- 16.18 ferent interpretations. This is the case for instance with regard to the Switzerland–​Pakistan BIT (the basis for the SGS v Pakistan case),25 which provides that each contracting party ‘shall constantly guarantee the observance of the commitments’, or the Italy–​Jordan BIT, which was the basis for the Salini v Jordan case,26 which provides that ‘[e]‌ach contracting Party shall create and maintain in its territory a legal framework apt to guarantee to investors the continuity of legal treatment, including the compliance, in good faith, of all undertakings assumed with regard to each specific investor’ (emphasis added). In Salini v Jordan, the claimant requested the tribunal to recognize that Article 2(4) of the 16.19 Italy–​Jordan BIT contained a commitment to observe obligations from investor-​state contracts. The tribunal found that the only obligation Jordan had was to ‘create and maintain a legal framework apt to guarantee the compliance of undertakings’: [u]‌nder Article 2(4), each Contracting Party did not commit itself to ‘observe’ any ‘obligation’ it had previously assumed with regard to specific investments of investors of the other

  See J. Crawford, Treaty and Contract in Investment Arbitration, 24 Arb. Int’l 351 (2008).   Id. 23  Vienna Convention on the Law of Treaties, 1155 U.N.T.S. 331 (1969) art. 31(1) [hereinafter VCLT]. 24  Eureko B.V. v. Poland, Partial Award (Aug. 19, 2005), ¶ 246 [hereinafter Eureko v. Poland]. 25  SGS v. Pakistan, supra note 7. 26  Salini Costruttori SpA and Italstrade SpA v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/​02/​ 13, Decision on Jurisdiction (Nov. 29, 2004) [hereinafter Salini v. Jordan]. 21 22

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The Umbrella Clause: Is the Umbrella Closing? contracting Party as did the Philippines. It did not even guarantee the observance of commitments it had entered into with respect to the investments of the investors of the other Contracting Parties as did Pakistan. It only committed itself to create and maintain a legal framework apt to guarantee the compliance of all undertakings assumed with regard to each specific investor.27 16.20 Certain BITs provide greater specificity as to their scope of application by identifying more

precisely the types of obligations covered by the clause, for example, by referring to ‘written obligations’.28 Article 2 of the Austria–​Chile BIT 1997 refers to ‘contractual obligations’. The majority of BITs concluded by Mexico that contain an umbrella clause qualify Mexico’s guarantee of observance of ‘any other obligation it has assumed in writing, with regard to investments’, stating that ‘disputes arising from such obligations shall be settled under the terms of the contract underlying the obligation’.29

16.21 Another element which was given weight by some tribunals to limit the scope of the um-

brella clause—​but was dismissed or not referred to by others—​is the placement of the umbrella clause within the framework of the bilateral investment treaty.30 The tribunal in SGS v Pakistan31 was of the opinion that the placement of the clause near the end of the Swiss–​ Pakistan BIT, in the same manner as the Swiss Model BIT, was indicative of an intention on the part of the contracting parties not to provide a substantive obligation. The tribunal considered that, had the contracting parties intended to create a substantive obligation through the umbrella clause, it would logically have been placed alongside the other so-​called ‘first order’ obligations. The tribunal in Joy Mining v Egypt32 was of the same view on this point and stated that: ‘[i]‌n this context, it could not be held that an umbrella clause inserted in the treaty, and not very prominently, could have the effect of transforming all contract disputes into investment disputes under the Treaty . . .’.33

16.22 By contrast, the tribunal in SGS v Philippines34 opined that, while the placement of the clause

may be ‘entitled to some weight’, it did not consider it decisive. The tribunal stated that: ‘it is difficult to accept that the same language in other Philippines BITs is legally operative, but that it is legally inoperative in the Switzerland-​Philippines BIT merely because of its location’.35

  Id. at 126.   Australian BITs concluded with Chile, China, Papua New Guinea, and Poland. 29  E.g., the Austria–​Mexico BIT (1998). 30  The Netherlands Model BIT places the umbrella clause within an article detailing the substantive protections provided under the Treaty. This structure can also be seen in a number of BITs, including those concluded by the United Kingdom, New Zealand, Japan, Sweden, and the United States. By contrast, the Swiss Model BIT places the umbrella clause in a provision entitled ‘other commitments’ and separates it from the substantive provisions by two dispute resolution clauses and a subrogation clause. The majority of BITs concluded by Switzerland follow this format; a notable exception, however, is the 1998 Switzerland–​Kuwait BIT, which places the umbrella clause in art. 3 on protection of investments. The Swiss Model BIT format is also found in the Finnish and Greek Model BITs and BITs concluded by Mexico. A third variant is to place the umbrella clause in a provision separate from the substantive protections but before the dispute resolution clauses. This structure can be seen in the German Model BITs, which place the umbrella clause in art. 8. 31  SGS v. Pakistan, supra note 7. 32  Joy Mining Machinery Limited v. Arabic Republic of Egypt, ICSID Case No. ARB/​03/​11, Decision on Jurisdiction (Aug. 6, 2004) [hereinafter Joy Mining v. Egypt]. 33  Id. at 81. 34  SGS v. Philippines, supra note 7. 35  Id. at 124. 27 28

400

IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause

IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause As noted, the wording of the umbrella clauses is not always the same and such differences 16.23 understandably lead to different interpretations. But even when the wording is the same, the lack of any textual and interpretative guidance in investment treaties on the function, effect, and scope of the umbrella clauses can allow for differences of interpretation. In the aftermath of the SGS v Pakistan award, whose interpretation the Swiss government considered too narrow, the Swiss authorities issued a statement on their intent in including such a clause in the Switzerland–​Pakistan BIT. It will no doubt provide guidance for future claims based on this particular BIT.36 It remains, however, an isolated act, and no other government has as yet followed the Swiss example. In the first discussions among scholars on the umbrella clause and also in the period which 16.24 followed the two SGS decisions, the debate was essentially concentrated on the effects of the clause, in particular the questions of whether the clause elevates breaches of contract to breaches of treaty under international law or if it overrides a choice of forum in the agreement between an investor and the host state. More recently, it seems that the discussion has shifted to the scope, that is, the conditions of application of the clause and, in particular, around the nature of obligations covered (ratione materiae) and the persons bound by the obligations triggering the umbrella clause (ratione personae). There seem to be two lines of jurisprudence with respect to both the effect and the conditions 16.25 of application of the umbrella clause: the narrow interpretation, which restricts the function of the clause only to the breach of a certain type of obligations implicating sovereign conduct of the host state, and the broad interpretation, which allows foreign investors to claim under the treaty for any breach of the host state’s obligation, regardless of the nature of the obligations and the nature of the breach.

36  After the publication of the decision, the Swiss authorities explained in a letter their intention when entering into the Switzerland–​Pakistan BIT, as follows: [t]‌he Swiss authorities are alarmed about the very narrow interpretation given to the meaning of Article 11 by the Tribunal, which not only runs counter to the intention of Switzerland when concluding the Treaty but is quite evidently neither supported by the meaning of similar articles in BITs concluded by other countries nor by academic comments on such provisions . . . With regard to the meaning behind provisions such as Article 11 the following can be said: . . . They are intended to cover commitments that a host State has entered into with regard to specific investments of an investor, or investments of a specific investor, which played a significant role in the investor’s decision to invest or to substantially change an existing investment, i.e. commitments which were of such a nature that the investor could rely on them . . . It is furthermore the view of the Swiss authorities that a violation of a commitment of the kind described above should be subject to the dispute settlement procedures of the BIT. Note on the Interpretation of art. 11 of the Bilateral Investment Treaty between Switzerland and Pakistan in the light of the Decision of the Tribunal on Objections to Jurisdiction of ICSID in this case, attached to the letter of the Swiss Secretariat for Economic Affairs to the ICSID Deputy Secretary General dated Oct. 1, 2003, published in 19 Mealey’s: Int’l Arb. Rep. E3 (Feb. 2004), as referred to by E. Gaillard, Investment Treaty Arbitration and Jurisdiction Over Contract Claims—​the SGS Cases Considered, in International Investment Law and Arbitration:  Leading Cases from the Icsid, Nafta, Bilateral Treaties and Customary International Law (T. Weiler ed., 2005), and in K. Yannaca-​Small, supra note 2.

401

The Umbrella Clause: Is the Umbrella Closing? A. The Effects of the Umbrella Clause 16.26 The main effects of the umbrella clause are its influence on the substantive obligations of the

parties to an investment contract as well as on the forum selection clauses included in such an agreement. Although scholars have taken a somewhat similar approach, the tribunals have disagreed on these points.

16.27 According to Sinclair,37 Elihu Lauterpacht was the first to mention the possibility ‘that a

treaty can be used effectively to elevate a contract between an investor and a host state to the level of an interstate obligation’. He stated that: ‘[a]‌s proposed, the umbrella treaty would have two objects. The first would have been to ensure that the settlement was lifted out of the domain of the Iranian legal system so that it would not be governed exclusively by Iranian law and therefore vulnerable to unilateral variation . . .’ (emphasis added).

16.28 In his Hague lecture, Professor Weil presented the idea that an investment treaty would

transform a mere contractual obligation between state and investor into an international law obligation, particularly if the treaty included a clause obliging the state to respect such contract.38

16.29 Mann also was of the view that the umbrella clause in the BITs protects the investor against

a mere breach of contract:

This is a provision of particular importance in that it protects the investor against any interference with his contractual rights, whether it results from a mere breach of contract or a legislative or administrative act, and independently of the question whether or not such interference amounts to expropriation. The variation of the terms of a contract or license by legislative measures, the termination of the contract or the failure to perform any of its terms, for instance, by non-​payment, the dissolution of the local company with which the investor may have contracted and the transfer of its assets (with or without the liabilities)—​ these and similar acts the treaties render wrongful.39 16.30 Shihata, former Secretary-​General of ICSID, also recognized that ‘treaties may furthermore

elevate contractual undertakings into international law obligations, by stipulating that breach by one State of a contract with a private party from the other State will also constitute a breach of the treaty between the two States’.40

16.31 Along the same lines, Dolzer and Stevens state that:

these provisions seek to ensure that each Party to the treaty will respect specific undertakings towards nationals of the other Party. The provision is of particular importance because it protects the investor’s contractual rights against any interference which might be caused by either a simple breach of contract or by administrative or legislative acts and because it is not

  See Sinclair, supra note 2.   ‘Il y a en effet, pas de difficultés particulières [en ce qui concerne la mise en jeu de la responsabilité contractuelle de l’Etat] lorsqu’il existe entre l’Etat contractant et l’Etat national du co-​contractant un traité de “couverture” qui fait de l’obligation d’exécuter le contrat une obligation internationale à la charge de l’Etat contractant envers l’Etat national du cocontractant. L’intervention du traité de couverture transforme les obligations contractuelles en obligations internationales et assure ainsi, comme on l’a dit, “l’intangibilité du contrat sous peine de violer le traité”; toute inexécution du contrat, serait-​elle même régulière au regard du droit interne de l’Etat contractant, engage dès lors la responsabilité internationale de ce dernier envers l’Etat national du cocontractant’, 128 Recueil des Cours 132 ff. (1969-​III). 39  F. Mann, British Treaties for the Promotion and Protection of Investments, 52 British Y.B. Int’l L. 246 (1981). 40  I. Shihata, Applicable Law in International Arbitration: Specific Aspects in Case of the Involvement of State Parties, in The World Bank in a Changing World:  Selected Essays and Lectures (I. Shihata & J. Wolfensohn, eds., 1995), vol II, 601. 37 38

402

IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause entirely clear under general international law whether such measures constitute breaches of an international obligation.41

Schreuer states that:

16.32

Umbrella clauses have been added to some BITs to provide additional protection to investors beyond the traditional international standards. They are often referred to as ‘umbrella clauses’ because they put contractual commitments under the BIT’s protective umbrella. They add the compliance with investment contracts, or other undertakings of the host State, to the BIT’s substantive standards. In this way, a violation of such a contract becomes a violation of the BIT.42

1. A narrow interpretation The first time an arbitral tribunal evaluated the effect of an umbrella clause was in the SGS v 16.33 Pakistan case,43 based on the Pakistan–​Switzerland BIT. The tribunal rejected SGS’s contention that this clause elevated breaches of a contract to breaches of the treaty: The text itself of Article 11 does not purport to state that breaches of contract alleged by an investor in relation to a contract it has concluded with a State (widely considered to be a matter of municipal rather than international law) are automatically ‘elevated’ to the level of breaches of international treaty law.44

The tribunal added that ‘the legal consequences were so far-​reaching in scope and so burden- 16.34 some in their potential impact on the State’ that ‘clear and convincing evidence of such an intention of the parties’ would have to be provided. Such proof was not brought forward, according to the tribunal.45 It also argued that the claimant’s interpretation ‘would amount to incorporating by reference an unlimited number of state contracts’, the violation of which ‘would be treated as a breach of the treaty’.46 The tribunal in Joy Mining v Egypt47 interpreted the ‘umbrella clause’ in a way similar to the 16.35 SGS v Pakistan tribunal, that is, that the disputes at issue, which related to the release of bank guarantees, were commercial and contractual disputes to be settled through the mechanism set forth by contract. It held that: [i]‌n this context, it could not be held that an umbrella clause inserted in the treaty, and not very prominently, could have the effect of transforming all contract disputes into investment disputes under the Treaty, unless of course there would be a clear violation of Treaty rights and obligations or a violation of contract rights of such a magnitude as to trigger the Treaty protection, which is not the case. The connection between the Contract and the Treaty is the missing link that prevents any such effect. This might be perfectly different in other cases where the link is found to exist, but certainly it is not the case here.48

  R. Dolzer & M. Stevens, Bilateral Investment Treaties 81–​82 (1995).  Schreuer, supra note 2, at 231–​56. 43  SGS v. Pakistan, supra note 7. 44  Id. at 166. 45  Id. at 167 and 173. 46  Id. at 168. 47  Joy Mining v. Egypt, supra note 32. Joy Mining, a company incorporated under UK law, initiated an ICSID arbitration pursuant to the UK–​Egypt BIT. Joy Mining and the General Organization for Industrial Projects of the Arab Republic of Egypt entered into a contract provision of a mining systems and equipment. The dispute concerned performance tests of the equipment and the release of bank guarantees. Noting that bank guarantees are simply contingent liabilities, the tribunal concluded that they could not constitute assets under the BIT and were not protected investments. 48  Id. at 81. 41 42

403

The Umbrella Clause: Is the Umbrella Closing? 16.36 In El Paso v Argentina,49 the tribunal rejected the arguments advanced by the US-​based energy

firm El Paso that would have permitted contractual breaches to be considered as breaches of the US–​Argentina BIT under the treaty’s wide ‘proper’ umbrella clause provision that ‘each Party shall observe any obligation it may have entered into with regard to investments’. The tribunal took issue, specifically, with the SGS v Philippines tribunal, which had held that ambiguities in investment treaty terms should be resolved in favour of foreign investors. Instead, the El Paso v Argentina tribunal called for a balanced approach to investment treaty interpretation, one which takes into account ‘both State sovereignty and the State’s responsibility to create an adapted and evolutionary framework for the development of economic activities, and the necessity to protect foreign investment and its continuing flow’.50 The tribunal went on to say that the broad interpretation of the so-​called umbrella clause uses would have ‘far reaching consequences, quite destructive of the distinction between national legal orders and the international legal order’.51

16.37 In Pan American v Argentina,52 a tribunal presiding over a dispute brought by BPAmerica

and several subsidiaries of the energy firm Pan American, followed the approach laid down in the earlier El Paso arbitration. The tribunal, which included two of the three arbitrators of the El Paso tribunal, held that the contested provision in the US–​Argentina BIT could not be considered to be an ‘umbrella clause’ which would transform contract claims into breaches of international law. It observed that: It would be strange indeed if the acceptance of a BIT entailed an international liability of the State going far beyond the obligation to respect the standards of protection of foreign investments embodied in the Treaty and rendered it liable for any violation of any commitment in national or international law ‘with regard to investments’.53

2. A wide interpretation—​‘effet utile’ 16.38 Tribunals which opted for a wide interpretation often based their reasoning on the need to give a useful meaning to the clause, in accordance to the principle ut res magis valeat quam pereat, or the theory of effet utile. 16.39 At the same time as the SGS brought the claim against Pakistan, it brought another case

against the Philippines,54 based on the Philippines–​Switzerland BIT. The tribunal in this case examined the interpretation of the clause in the SGS v Pakistan decision and, although it recognized that the language of the clause was not the same, it found the decision unconvincing and highly restrictive55 and concluded that: Article X(2) makes it a breach of the BIT for the host State to fail to observe binding commitments, including contractual commitments, which it has assumed with regard to specific investments. But it does not convert the issue of the extent or content of such obligations into an issue of international law.56 . . . Article X(2) addresses not the scope of the

49  El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/​03/​15, Decision on Jurisdiction (Apr. 27, 2006) [hereinafter El Paso v. Arg.]. 50  Id. at 70. 51  Id. at 82. 52  Pan American Energy LLC and BP Argentina Exploration Company v.  Argentine Republic, ICSID Case No. ARB/​03/​13 [hereinafter Pan American v.  Argentina). See also BP America Production Co. and Others v. Argentine Republic, ICSID Case No. ARB/​04/​8, Decision on Jurisdiction (July 27, 2006). 53  Id. at 110. 54  SGS v. Philippines, supra note 7. 55  Id. at 119–​20. 56  Id. at 128.

404

IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause commitments entered into with regard to specific investments but the performance of these obligations, once they are ascertained.57

The tribunal in Sempra v Argentina58 noted that the dispute arose from ‘how the violation 16.40 of contractual commitments with the licensees [Sempra] . . . impacts the rights the investor claims to have in the light of the provisions of the treaty and the guarantees on the basis of which it made the protected investment’.59 It recognized that these contractual claims were also treaty claims and was reinforced in its view because: The fact that the Treaty also includes the specific guarantee of a general ‘umbrella clause’, [such as that of Article II(2)(c)], involving the obligation to observe contractual commitments concerning the investment, creates an even closer link between the contract, the context of the investment and the Treaty.60

Tribunals in Eureko v Poland, BIVAC v Paraguay, and SGS v Paraguay sought to give the 16.41 umbrella clause an effet utile. In its partial award, the tribunal61 in Eureko v Poland 62 stated: [I]‌t is a cardinal rule of the interpretation of treaties that each and every operative clause of a treaty is to be interpreted as meaningful rather than meaningless. It is equally well established in the jurisprudence of international law . . . that, treaties, and hence their clauses, are to be interpreted so as to render them effective rather than ineffective. It follows that the effect of Article 3.5 (umbrella clause) cannot be overlooked or equated with the Treaty’s provisions for fair and equitable treatment, most favored nation treatment, deprivation of investments and full protection and security. On the contrary, Article 3.5 must be interpreted to mean something in itself.63

In BIVAC v Paraguay, the tribunal considered ‘that the umbrella clause has to be interpreted in such a way as to give it some meaning and practical effect: Paraguay has not explained the purpose or effect of the umbrella clause if it was not that for which BIVAC argues’.64 The SGS v Paraguay tribunal agreed with the BIVAC tribunal and concluded that the umbrella clause before it ‘establishes an international obligation for the parties to the BIT to observe contractual obligation[s]‌with respect to investors’ and that this interpretation is necessary to give the umbrella clause purpose and effect.65 One analytical point in dispute before the tribunal in Noble Ventures v Romania was whether 16.42 contractual obligations also amounted to international obligations by virtue of the ‘umbrella

  In both cases, see the analysis by Schreuer, Wälde & Alexandrov, supra note 2.   Sempra Energy International v.  Republic of Argentina, ICSID Case No. ARB/​02/​16, Decision on Jurisdiction (May 11, 2005) [hereinafter Sempra v. Arg.]. 59  Id. at 100. 60  Id. at 101. 61  The decision was taken by two arbitrators. In a dissenting opinion, Professor Jerzy Rajski declared that the majority’s jurisdictional reasoning—​including its analysis of the umbrella clause—​might ‘lead to a privileged class of foreign parties to commercial contract who may easily transform their contractual disputes with State-​owned companies into BIT disputes’; id., Dissenting Opinion, ¶ 11. 62  Eureko v. Poland, supra note 24. 63  Id. at 248–​49. 64  Bureau Veritas, Inspection, Assessment and Control, BIVAC BV v. Republic of Paraguay, ICSID Case No. ARB/​07/​9, Decision on Jurisdiction (Oct. 9, 2012), ¶ 141 [hereinafter BIVAC v. Paraguay]. 65 SGS Société Générale de Surveillance S.A.  v.  Republic of Paraguay, ICSID Case No. ARB/​ 07/​29, Decision on Jurisdiction (Feb. 12, 2010), ¶ 170 [hereinafter SGS v. Paraguay]. The tribunal reached that conclusion acknowledging that the language of the umbrella clause before it (Switzerland–​Paraguay BIT) was not as broad or explicit as the Netherlands–​Paraguay BIT considered in BIVAC. Ultimately, the tribunal accepted both jurisdiction and admissibility of the claim despite the forum selection clause in the contract. See discussion in K. Yannaca-​Small, BIVAC BV v. Paraguay versus SGS v. Paraguay: The Umbrella Clause Still in Search of One Identity, 28 Foreign Investment L. J. 307 (2013). 57 58

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The Umbrella Clause: Is the Umbrella Closing? clause’ in the US–​Romania BIT. The tribunal, in a thorough discussion on this clause in which it expressed its view on all previous decisions on this matter, found that Article II(2)(c) of the BIT intended to create ‘obligations beyond those specified in other provisions of the BIT itself ’,66 and by doing so it referred clearly to investment contracts. In addition, it noted that such an interpretation was also supported by the object and purpose rule: Considering . . . that any other interpretation would deprive Article II(2)(c) of practical content, reference has necessarily to be made to the principle of effectiveness . . . An interpretation to the contrary would deprive the investor of any internationally secured legal remedy in respect of investment contracts that it has entered into with the host State. While it is not the purpose of investment treaties per se to remedy such problems, a clause that is readily capable of being interpreted in this way and which would otherwise be deprived of practical applicability is naturally to be understood as protecting investors also with regard to contracts with the host State generally in so far as the contract was entered into with regard to an investment.67

It added that, by the negotiation of a bilateral investment treaty, two states may create an exception to the general separation of states’ obligations under municipal and under international law: [i]‌n the interest of achieving the objects and goals of the treaty, the host state may incur international responsibility by reason of a breach of its contractual obligation . . . the breach of contract being thus ‘internationalized’, i.e. assimilated to a breach of a treaty. The ‘umbrella clause’ introduces this exception.68 16.43 The tribunal in LG&E v Argentina69 was also called to examine the umbrella clause included

in the US–​Argentine BIT. It characterized the umbrella clause as one which ‘creates a requirement by the host State to meet its obligations towards foreign investors, including those that derive from a contract; hence such obligations receive extra protection by virtue of their consideration under the bilateral treaty’.70

16.44 The tribunal in Continental Casualty v Argentina71 agreed with this statement and added that

‘the Parties provided in the BIT . . . for an additional guarantee to their investors, that is, ‘to observe any obligation’ that they have assumed specifically with regard to investments, irrespective of the law applicable to them’.72

16.45 Two tribunals, although not confronted with an umbrella clause, expressed their views on the

meaning of such a clause. In Waste Management v Mexico,73 the NAFTA tribunal observed that: ‘NAFTA Chapter 11—​unlike many bilateral and regional investment treaties, does not provide jurisdiction in respect of breaches of investment contracts such as [the Concession

66  Noble Ventures, Inc v. Romania, ICSID Case No. ARB/​01/​11, Award (Oct. 12, 2005), ¶ 51 [hereinafter Noble Ventures v. Romania]. Noble Ventures, Inc., a US-​based company, entered into a privatization agreement with the Romanian State Ownership Fund. A dispute arose regarding the acquisition, management, and operation of a Romanian steel mill and associated assets. Noble Ventures brought an ICSID arbitration alleging, inter alia, violation of the umbrella clause and the fair and equitable treatment provision, and actions tantamount to expropriation. 67  Id. at 52. 68  Id. 69  LG&E Energy Corp., LG&E Capital Corp., & LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006), ¶¶ 169–​75 [hereinafter LG&E v. Argentina]. 70  Id. at 170. 71  Continental Casualty v. Argentine Republic, ICSID Case No. ARB/​03/​9, Award (Sept. 5, 2008) [hereinafter Continental Casualty v. Argentina]. 72  Id. at 299. 73 Waste Management Inc. v.  United Mexican States, ICSID Case No. ARB (AF)/​ 00/​3, Award (Apr. 30, 2004).

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IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause Agreement]. Nor does it contain an “umbrella clause” committing the host state to comply with its contractual commitments’.74 Along the same lines, the tribunal in L.E.S.I. v Algeria,75 although it acknowledged that the 16.46 Italy–​Algeria BIT did not contain an umbrella clause, stated that ‘the effect of such clauses is to transform the violations of the State’s contractual commitments into violations of the treaty umbrella clause and by this to give jurisdiction to the tribunal over the matter . . .’76 (translation by the author).

3. Umbrella clause and forum selection clause Although the SGS v Philippines tribunal took a wider reading of the scope of the umbrella 16.47 clause than the SGS v Pakistan tribunal and found that it had jurisdiction over all claims, it decided that the contractual claim was not admissible. It held that, since the contract vested exclusive jurisdiction over disputes arising under its terms in another tribunal (domestic court or a contractual arbitral tribunal), that tribunal had the primary jurisdiction. The tribunal decided to suspend the proceedings indefinitely until the claimant obtained a judgment from the domestic courts and then return to it if he considered that such judgment was not satisfactory: In the Tribunal’s view, the principle is one concerning the admissibility of the claim, not jurisdiction in the strict sense . . . The question is whether a party should be allowed to rely on a contract as the basis of its claim when the contract itself refers that claim exclusively to another forum. In the Tribunal’s view the answer is that it should not be allowed to do so, unless there are good reasons, such as force majeure, preventing the claimant from complying with its contract . . .77

The tribunal in Toto v Lebanon78 held the view that ‘umbrella clauses may form the basis 16.48 for treaty claims, without transforming contractual claims into treaty claims’ and, citing Professor Crawford’s analysis of the different views surrounding an umbrella clause, agreed with the following:79 Finally, there is the view that an umbrella clause is operative and may form the basis for a substantive treaty claim, but that it does not convert a contractual claim into a treaty claim. On the one hand it provides, or at least may provide, a basis for a treaty claim even if the BIT in question contains no generic claims clause; on the other hand, the umbrella clause does not change the proper law of the contract or its legal incidents, including provisions for dispute settlement.80

  Id. at 73.  Consorzio Groupement L.E.S.I.-​ DIPENTA c.  République algérienne démocratique et populaire, ICSID Case No. ARB/​03/​08, Award (Jan. 10, 2005) [hereinafter L.E.S.I. v. Algeria]. 76  Id. at 25(ii):  ‘[C]‌ ette interprétation est confirmée a contrario par la rédaction que l’on trouve dans d’autres traités. Certains traités contiennent en effet ce qu’il est convenu d’appeler des clauses de respect des engagements ou “umbrella clauses”. Ces clauses ont pour effet de transformer les violations des engagements contractuels de l’Etat en violations de cette disposition du traité et, par là même, de donner compétence au tribunal arbitral mis en place en application du traité pour en connaître’. 77  SGS v. Philippines, supra note 7, ¶ 154. In a dissenting opinion, Prof. Crivellaro stated: ‘[SGS]’s claim seemed to me fully admissible before our Tribunal, without first being processed before the domestic courts as to quantum matters. If our jurisdiction derives from (also) Article X(2) as unanimously admitted, I see no reason why our Tribunal could not deal with and decide on the merits of the payment claim, including quantum, after proper examination of either party’s future arguments and defenses’, ¶¶ 178 ff. 78  Toto Costruzione Generali SpA v. Republic of Lebanon, ICSID Case No. ARB/​ 07/​12, Decision on Jurisdiction (Sept. 11, 2009) [hereinafter Toto v. Lebanon]. 79  Id. at 200. 80  See Crawford, supra note 21, at 351–​74. 74 75

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The Umbrella Clause: Is the Umbrella Closing? It finally concluded that: Although Article 9.2 of the Treaty [the observance of obligations clause] may be used as a mechanism for the enforcement of claims, it does not elevate pure contractual claims into treaty claims. The contractual claims remain based upon the contract; they are governed by the law of the contract and may be affected by the other provisions of the contract. In the case at hand that implies that they remain subject to the contractual jurisdiction clause and have to be submitted exclusively to the Lebanese courts for settlement. Because of this jurisdiction clause in favor of Lebanese courts, the Tribunal has no jurisdiction over the contractual claims arising from the contract referring disputes to Lebanese courts.81 16.49 The tribunal in BIVAC v Paraguay, following closely in the steps of the SGS v Philippines tri-

bunal to which it referred extensively, considered separately jurisdiction over the claim arising from non-​payment of contractual obligations and the admissibility of the claim in light of the dispute resolution agreed by the parties in the contract. Although it found jurisdiction, it declined admissibility.82 Invoking the SGS v Philippines tribunal’s reasoning, it concluded that, as a matter of admissibility, a party should not be allowed to rely on a contract as the basis of its claim when the contract itself refers that claim exclusively to another forum—​in this case the tribunals of the City of Asuncion—​unless there were good reasons, such as force majeure.83

16.50 Other tribunals have followed a different approach. The SGS v Paraguay tribunal, at about

the same time as the BIVAC tribunal, examined the umbrella provision in the Switzerland–​ Paraguay BIT but, after considering the BIVAC tribunal’s rulings, came to a different conclusion: it found the claim admissible. Both claims arose out of similar facts: contracts between the claimants, BIVAC, and SGS and the Ministry of Finance of Paraguay with a choice of forum clause.84 Mindful of the more general implications of the protection afforded to investors through investment treaties, the SGS tribunal was concerned that to dismiss umbrella clause claims as inadmissible on the ground that a forum selection clause is applicable to the parties’ commitments under the Contract will be, in effect, to read an implied waiver of BIT rights into every investment agreement that specifies a dispute resolution mechanism other than ICSID—​a result we would not embrace.85

It added that ‘given the significance of investors’ rights under the Treaty, and of the international law “safety net” of protections that they are meant to provide separate from and supplementary to domestic law regimes, they should not lightly be assumed to have been waived’.86 16.51 In Eureko v Poland, the tribunal accepted its jurisdiction based on an umbrella clause for a

dispute arising from the breach of an investor-​state agreement relating to the privatization of a state-​owned insurance company, although the agreement contained a forum selection clause in favour of Polish courts. It reasoned that, since the violation of the umbrella clause constituted a cause of action based on a treaty, the forum selection in a contract could not exclude treaty-​based arbitration.87

  Toto v. Lebanon, supra note 78, ¶ 202.   Yannaca-​Small, The Umbrella Clause Still in Search of One Identity, supra note 65. 83  BIVAC v. Paraguay, supra note 64, ¶¶ 145–​46, 153. 84  Yannaca-​Small, The Umbrella Clause Still in Search of One Identity, supra note 65. 85  SGS v. Paraguay, supra note 65, ¶ 177. 86  Id. ¶ 178. 87  Eureko v. Poland, supra note 24, ¶¶ 92–​114, 250. 81 82

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IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause B. The Scope of the Umbrella Clause or the Conditions of Its Application The main elements of the discussion of the scope of the umbrella clause among scholars and 16.52 in the decisions of the arbitral tribunals are the character of the government behaviour (jure imperii v jure gestionis), the nature of obligations covered, and the persons bound by the obligations triggering the umbrella clause.

1.  Jure imperii versus jure gestionis Different views have been expressed about the character of government behaviour covered 16.53 by an umbrella clause: breaches which are conduct based on the role of the state as sovereign (jure imperii) versus breaches of purely commercial conduct (jure gestionis). Wälde expressed the view that international law would only protect breaches and interference 16.54 with contracts made with government or subject to government powers, if the government exercised its particular sovereign prerogatives to escape from its contractual commitments or to interfere in a substantial way with such commitments. This would also apply to contracts concluded only with private parties in the host state if such contracts are destroyed by government powers: ‘[I]‌f the core or center of gravity of a dispute is not about the exercise of governmental powers . . . but about “normal” contract disputes, then the BIT and the umbrella clause has no role’.88 This distinction, however, generally does not appear in the text of umbrella clauses. The ar- 16.55 gument has been made by certain tribunals in an effort to circumvent the potentially broad effects of the clause and avoid an abuse of investment arbitration for the purpose of ‘enforcing mere contractual claims—​even the most minor ones’. As the tribunal in El Paso v Argentina put it: In view of the necessity to distinguish the State as a merchant, especially when it acts through instrumentalities, from the States as a sovereign, the Tribunal considers that the ‘umbrella clause’ in the Argentine-​US BIT . . . can be interpreted in the light of Article VII(1) which clearly includes among the investment disputes under the Treaty all disputes resulting from a violation of a commitment given by the State as a sovereign State, either through an agreement, an authorization, or the BIT . . . Interpreted this way, the umbrella clause read in conjunction with Article VII, will not extend the Treaty protection to breaches of an ordinary commercial contract entered into by the State or a State-​owned entity, but will cover additional investment protections contractually agreed by the State as a sovereign—​such as a stabilization clause—​inserted in an investment agreement.89

Along the same lines, the tribunal in Sempra v Argentina90 was of the view that:

16.56

the decisions dealing with the issue of the umbrella clause and the role of contracts in a Treaty context have all distinguished breaches of contract from Treaty breaches on the basis of whether the breach has arisen from the conduct of an ordinary contract party, or rather involves a kind of conduct that only a sovereign State function or power could effect.91

The tribunal in CMS v Argentina,92 in its final award, found Argentina internationally respon- 16.57 sible pursuant to the umbrella clause contained in the Article II(2)(c) of the US–​Argentina

  See Wälde, supra notes 2 & 17.   El Paso v. Argentina, supra note 49, ¶ 81. 90  Sempra v. Argentina, supra note 58, Award (Sept. 28, 2007). 91  Id. ¶ 310. 92  CMS Gas Transmission Company v. Republic of Argentina, ICSID Case No. ARB/​01/​8, Award (May 12, 2005) [hereinafter CMS v. Argentina]. 88 89

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The Umbrella Clause: Is the Umbrella Closing? BIT. However, it expressed the view that the application of this ‘proper’ umbrella clause was restricted to contracts concluded between an investor and the state acting as sovereign: The standard of protection of the treaty will be engaged only when there is a specific breach of treaty rights and obligations or a violation of contract rights protected under the treaty. Purely commercial aspects of a contract might not be protected by the treaty in some situations, but the protection is likely to be available when there is significant interference by governments or public agencies with the rights of the investor.93 16.58 The distinction between the host state’s commercial acts and sovereign acts was criticized by

commentators and other tribunals because they have been seen to disregard the fact that the substantive rights included in the treaty (fair and equitable treatment, expropriation, non-​discrimination) already concern obligations of the host state, which are not otherwise dealt with in investor-​state contracts. In this case, if the umbrella clause were to apply only to sovereign conduct, it would have been superfluous. In SGS v Paraguay, the tribunal rejected Paraguay’s argument that a mere breach of contract cannot rise to the level of a breach of Article 11 (observance of commitments) unless it is coupled with additional ‘sovereign’ action.94

16.59 Several other tribunals rejected this distinction and, although most cases involved sover-

eign conduct, this was not considered an imperative requirement. Hence, the tribunal in Burlington v Ecuador, relying on Duke Energy v Ecuador,95 stated that ‘umbrella clauses may apply even if there is no exercise of sovereign powers involved’.96

16.60 Similarly, the tribunal in Eureko v Poland asserted that international law does not recognize

the distinction between state action and commercial activity engaged in by an organ of the state.97 The tribunal in Noble Ventures v Romania equally disagreed with the proposition that a distinction should be made between the host state’s governmental acts and commercial acts with respect to the application of the umbrella clause.98

2. Contractual commitments versus legislative and administrative acts 16.61 Drafting differences make umbrella clauses refer either to ‘commitments’99 or ‘any obligation’.100 Additionally, while some umbrella clauses mention obligations ‘entered into’101 by a state, others refer to obligations ‘assumed’102 by the state. These variations raise the question whether the obligation referred to is a contractual obligation between the state and the investor or whether it could extend to unilateral obligations undertaken by the state through, inter alia, promises, legislative acts, or administrative measures. It has been suggested that the words ‘obligations entered into’ may be interpreted as confining the obligations in question to those undertaken vis-​à-​vis the other contracting party.103 Conversely,

  Id. ¶ 299.   SGS v. Paraguay, supra note 65, Award (Feb. 10, 2012), ¶ 72. 95  Duke Energy Partners and Electroquil S.A.  v.  Republic of Ecuador, ICSID Case No. ARB/​ 04/​19, Award (Aug. 18, 2008), ¶¶ 317–​25. 96  Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/​08/​5, Decision on Jurisdiction (June 2, 2010), ¶ 190 [hereinafter Burlington v. Ecuador]. 97  Eureko v.  Poland, supra note 25, ¶ 130. On this point it quoted Professor J.  Crawford as Special Rapporteur on State Responsibility of the International Law Commission: ‘It is irrelevant for the purposes of attribution that the conduct of a State organ may be classified as “commercial” or as “act jure gestionis” ’. 98  Noble Ventures v. Romania, supra note 66, ¶ 82. 99  Belgium/​Luxembourg-​Saudi Arabia BIT (2002) art. 7(2). 100  Greek Model BIT (2001) art. 11(2). 101  UK Model BIT art. 2. 102  UK–​Lebanon BIT (1999) art. 10: ‘Other obligations’. 103  See Ben Hamida, supra note 2. 93 94

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IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause the tribunal in SGS v Pakistan found the language ‘commitments entered into’ broad enough to encompass unilateral obligations, including municipal acts and administrative measures.104 There is sufficient authority in support of the position that the plain text of the umbrella 16.62 clause, ‘any obligation’ and ‘commitments’, does not restrict its application to contractual undertakings and may encompass specific promises that the host state made in, for instance, national legislation or administrative action aimed at the investment. It is argued that, as long as the administrative or legislative promise was intended to induce such investment and was the main reason the investment was made, it should be qualified as commitment for the application of the umbrella clause. The commitment should be specific enough105 to serve as a ‘functional substitute’ for an investor-​state contract.106 Along these lines, the tribunal in SGS v Philippines held that: For [the umbrella clause] to be applicable, the host State must have assumed a legal obligation, and it must have been assumed vis-​à-​vis the specific investment—​not as a matter of the application of some legal obligation of a general character.107

Similarly, according to the ad hoc Committee in CMS v Argentina, the umbrella clause covers 16.63 only consensual and specific obligations: In speaking of ‘any obligations it may have entered into with regard to investments’ it seems clear that [the umbrella clause] is concerned with consensual obligations arising independ­ ently from the BIT itself (i.e. under the law of the host State or possibly international law). Further, they must be specific obligations concerning the investment. They do not cover general requirements imposed by the law of the host State.108

The Eureko v Poland tribunal was of the view that even legislative undertakings would be 16.64 covered by the umbrella clause.109 Similarly, the Enron v Argentina tribunal stated: ‘Under its ordinary meaning the phrase “any obligation” refers to obligations regardless of their nature. Tribunals interpreting this expression have found it to cover both contractual obligations such as payment as well as obligations assumed through law or regulation’.110 The tribunal in LG&E v Argentina went even further in considering the failure to observe 16.65 undertakings of a unilateral nature as a violation of the umbrella clause. It had to decide whether the abrogation of the guarantees under the statutory framework (Gas Law)—​ calculation of the tariffs in dollars before conversion to pesos, semi-​annual tariff adjustments, and no price controls without indemnification—​violated Argentina’s obligations to LG&E’s investments. It concluded that they did, and also that the provisions of the Gas Law

  SGS v. Pakistan, supra note 7, ¶¶ 163–​66.   See Mann, supra note 39: ‘the provision only covers an obligation arising from a particular commitment either of the Contracting Parties may have entered into . . . Such obligations may arise from contract with the State or from the terms of the license granted by it. It may be express or implied, it may be in writing or oral. But it must clearly be ascertainable as an obligation of the State itself arising from its own commitments’. It follows therefore that: ‘where the contract is made with a private person, then the provision only applies if and in so far as an obligation of the State arising from its own particular commitment (as opposed to existing general legislation) may be discerned’. 106  See Schill , supra note 2. 107  SGS v. Philippines, supra note 7, ¶ 121. 108  CMS v. Argentina, supra note 92, Decision on Annulment (Sept. 25, 2007), ¶ 95(a). 109  Eureko v. Poland, supra note 24, ¶ 251. 110  Enron Corporation Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/​01/​3, Award (May 22, 2007), ¶ 274. 104 105

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The Umbrella Clause: Is the Umbrella Closing? obligations were not legal obligations of a general nature but were very specific in relation to LG&E’s investment in Argentina. It stated that: Argentina made these specific obligations to foreign investors, such as LG&E, by enacting the Gas Law and other regulations, and then advertising these guarantees in the Offering Memorandum to induce the entry of foreign capital to fund the privatization program in its public service sector. These laws and regulations became obligations within the meaning of Article II(2)(c), by virtue of targeting foreign investors and applying specifically to their investments, that gave rise to liability under the Umbrella Clause.111 16.66 Along the same lines, in Sempra v Argentina, the tribunal considered that:

[s]‌pecific obligations undertaken not to freeze the tariffs or subject them to price controls, to compensate for any resulting differences if such actions were in fact taken, and not to amend the License without the licensee’s consent are among the obligations that typically come under the protection of the umbrella clause.112 16.67 The tribunal in Khan Resources v Mongolia examined the umbrella clause of the ECT, which

requires the contracting states to observe ‘any obligations’113 entered into with a covered investment and considered whether it covered statutory obligations of the host state and in particular Mongolia’s Foreign Investment Law. It held that ‘a breach by Mongolia of any provision of the Foreign Investment law would constitute a breach’ of the ECT’s umbrella clause.114 Having found that Mongolia’s actions breached the Foreign Investment Law, the tribunal concluded that the same conduct breached ECT’s umbrella clause.

16.68 In Phillip Morris v Uruguay, the claimants argued that Uruguay had committed to ensure ‘the

full range of rights that trademark holders enjoy in Uruguay’115 and that it violated the umbrella clause of the Switzerland–​Uruguay BIT116 by breaching those commitments when it enacted measures restricting the claimants’ packaging of their cigarette products.117 The tribunal held that the content of the umbrella clause of the BIT referring to ‘commitments’ does not ‘cover general obligations imposed by the law of the host State’.118 It added that: Unlike the case of an authorisation or a contract, where the host State may undertake some specific obligations, Uruguay entered into no commitment ‘with respect to the investment’ by granting a trademark. It did not actively agree to be bound by any obligation or course of conduct; it simply allowed the investor to access the same domestic IP system available to anyone eligible to register a trademark. While the trademark is particular to the investment, it stretches the word to call it a ‘commitment’.119

Ultimately, the claim failed.

  LG&E v. Argentina, supra note 69, paras ¶¶ 174–​75.   Sempra v. Argentina, supra note 58, ¶ 313. 113  See supra note 19. 114 Khan Resources Inc., Khan Resources B.V.  & Cauc Holding Company Ltd. v.  Government of Mongolia & Monatom Co., Ltd., UNCITRAL PCA Case No. 2011-​09, Decision on Jurisdiction (July 25, 2012), ¶ 438. 115  Philip Morris Brand Sarl (Switzerland), Philip Morris Products S.A. (Switzerland) & Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Award (July 8, 2016), ¶ 450 [hereinafter Philip Morris v. Uruguay]. 116  Switzerland–​Uruguay BIT (1988) art. 11, providing that each party would ‘constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the other Contracting Party’. 117  Philip Morris v. Uruguay, supra note 115, ¶ 473. 118  Id. at 478. 119  Id. at 480. 111 112

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IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause 3. Does the umbrella clause apply if the party to the investment contract is an entity distinct from the host state? If there is a provision in the treaty which specifically makes it an obligation for the sub-​ 16.69 state entities to respect the obligations of the host state, such as the Energy Charter Treaty Article 22(1),120 then a breach by these entities of their obligations vis-​à-​vis foreign investments may engage the state itself. However, in Amto v Ukraine,121 where the contractual obligations vis-​à-​vis Amto were undertaken by a separate entity wholly owned by Ukraine, but not Ukraine itself, the tribunal decided that the umbrella clause had no application.122 In considering the possible application of the umbrella clause in conjunction with Article 22(1), it held that: Article 22 does not go so far as to impose liability on the State in the event that a state-​owned legal entity does not discharge its contractual obligations in relation to an ‘Investment’, i.e. a subsidiary of the foreign investor. Rather, it imposes on the state a general obligation to ‘ensure’ that state-​owned entities conduct activities which, in general terms of governance, management and organization, make them capable of observing the obligations specified under Part III of the ECT. It does not constitute an obligation of the state to assume liability for any failing of a state-​owned legal entity to discharge a commercial debt in a given instance.123

If there is no such specific wording in the text of the investment agreement, it would 16.70 be more difficult for a tribunal to retain jurisdiction. This was the case in Impregilo v Pakistan.124 Impregilo initiated arbitration based on the Italy–​Pakistan BIT, which did not include an umbrella clause. However, Impregilo resorted to the most favoured nation (MFN) clause to import the umbrella clause from the Switzerland–​Pakistan BIT. The tribunal held that a precondition for invoking an umbrella clause in order to raise contract claims in a treaty arbitration is that the host state itself be a contracting party to the contract at stake. In that case, it was a separate entity (the Pakistan Water and Power Development Authority, WPDA), not the state, which had entered into an agreement with the investor. The tribunal stated: In the Tribunal’s view, given that the contracts were conducted by Impregilo with WPDA, and not with Pakistan, Impregilo’s reliance upon Article 3 of the BIT takes the matter no further. Even assuming arguendo that Pakistan, through the MFN clause and the Swiss-​ Pakistan BIT has guaranteed the observance of the contractual commitments into which it has entered together with Italian investors, such a guarantee would not cover the present Contracts—​since these are agreements into which it has not entered. On the contrary, the contracts were concluded by a separate and distinct entity.125

The same approach was taken in Azurix v Argentina.126 In this case, ABA, a local subsidiary 16.71 wholly owned by the US investor Azurix, had entered into a concession agreement for the distribution of water with the Province of Buenos Aires. Azurix brought a claim under the US–​ Argentina BIT for breach of the umbrella clause, alleging that measures taken by the province 120  Article 22(1) of the ECT provides: ‘Each Contracting Party shall ensure that any state enterprise which it maintains or establishes shall conduct its activities in relation to the sale or provision of goods and services in its Area in a manner consistent with the Contracting Party’s obligations under Part III of this Treaty’. 121  Limited Liability Company Amto v. Ukraine, SCC Case No. 080/​2005, Final Award (Mar. 26, 2008). 122  Id. at 110. 123  Id. at 111. 124  Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​3, Decision on Jurisdiction (Apr. 22, 2005). 125  Id. at 223. 126  Azurix v. Argentine Republic, ICSID Case No. ARB/​01/​12, Award (July 14, 2006) [hereinafter Azurix v. Argentina].

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The Umbrella Clause: Is the Umbrella Closing? are attributable to Argentina itself. The tribunal disagreed and found that ‘there is no undertaking to be honored by Argentina to Azurix other than the obligation under the BIT . . . it was ABA, and not Azurix which was party to the Agreement’.127 16.72 Hence, this discussion is twofold. First, it requires an analysis of whether the umbrella clause

requires privity and, secondly, it raises the question of attribution.

16.73 The first issue is whether the umbrella clause requires privity of contract. The tribunal in

Burlington v Ecuador held that it did:

the umbrella clause cannot transform a contract obligation of the State towards an investor’s subsidiary into an obligation to the investor itself . . . The umbrella clause requires privity. The protection granted under the umbrella clause requires privity between the investor and the host State . . . For these reasons, the majority concludes that the Tribunal has no jurisdiction over Burlington’s umbrella clause claims according to which Ecuador would have failed to adjust the contractor’s oil production share and to guarantee the contractor’s participation in oil production.128 16.74 The second issue is whether the state-​owned entity’s conduct could be attributed to the host

state itself in order to invoke the umbrella clause. In Bosh v Ukraine, the tribunal held that the state-​owned university’s conduct could not be attributed to Ukraine. Therefore, it cannot be said that Ukraine, as a ‘party’ (to the BIT between the United States and Ukraine), has entered into any obligations with regard to investments.129

16.75 A different approach was followed by the tribunal in Noble Ventures v Romania. In this case,

the tribunal concluded that the measures taken by two Romanian agencies that signed an agreement with Noble Ventures, a US investor, were attributable to Romania. The tribunal examined the question of attribution and concluded that: [B]‌oth entities were clearly charged with representing the Respondents in the process of privatizing State-​owned companies and, for that purpose, entering into privatization agreements and related contracts on behalf of the Respondent. Therefore, the Tribunal cannot do otherwise than conclude that the respective contracts, in particular the SPA, were concluded on behalf of the Respondent and are therefore attributable to the Respondent for the purposes of [the umbrella clause].130

16.76 Similarly, in BIVAC v Paraguay, the tribunal attributed to Paraguay the actions of one of its

entities and held that: ‘[Umbrella clauses] are undoubtedly capable of being read to include a contractual agreement entered into by BIVAC and the Ministry of Finance of Paraguay, whereby the alleged breaches of the Ministry are attributable to the State’.131

4. Shareholders’ and parent companies’ rights 16.77 The Energy Charter Treaty’s Reader’s Guide gives guidance on the application of the umbrella clause to contracts entered into by a subsidiary of the foreign investor and remains to date the only interpretation as to the extent of the umbrella clause’s application with respect to this aspect of ratione personae. It states: According to Article 10(1), last sentence, each [Contracting Party] shall observe any obligations it has entered into with an investor or an investment of any other [Contracting Party].

  Id. at 384.   Burlington v. Ecuador, supra note 96, Award (Dec. 14, 2012), ¶¶ 231, 233–​34. 129  Bosh International, Inc. & B &P Ltd. Foreign Investment Enterprise v. Ukraine, ICSID Case No. ARB/​08/​11, Award (Oct. 25, 2012), ¶ 245. 130  Noble Ventures v. Romania, supra note 66, ¶ 86. 131  BIVAC BV v. Paraguay, supra note 64, ¶ 141. 127 128

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IV.  Effects, Scope, and Conditions of Application of the Umbrella Clause This provision covers any contract that a host country has concluded with a subsidiary of the foreign investor in the host country, or a contract between the host country and the parent company of the subsidiary.132

However, divergent views arise from tribunals interpreting BITs with regard to shareholders’ 16.78 or parent companies’ rights. Two tribunals, Azurix v Argentina and Siemens v Argentina, decided that contract-​based claims under umbrella clauses belong only to the contracting party, and the clause does not confer the same rights on shareholders or parent companies. In Azurix v Argentina, where it was not Azurix itself but its subsidiary, ABA, which had en- 16.79 tered a concession agreement with the Province of Buenos Aires, the tribunal held that: Even if for argument’s sake it would be possible under [the umbrella clause] to hold Argentina responsible for the alleged breaches of the Concession Agreement by the Province, it was ABA and not Azurix which was party to the Agreement.133

In Siemens v Argentina, the tribunal agreed with the Azurix tribunal that a parent company 16.80 cannot claim under the umbrella clause for the breach of a contractual obligation owed to its subsidiary: Whether an arbitral tribunal is the tribunal which has jurisdiction to consider that breach [of the umbrella clause] or whether it should be considered by tribunals of the host State of the investor is a matter that this Tribunal does not need to enter. The Claimant is not a party to the Contract and SITS is not a party to these proceedings.134

Other tribunals took a different view and based their reasoning on the fact that the umbrella 16.81 clause of the BITs in question applied to ‘investments’ and not to ‘investors’. Of course, interpreting the language of the treaty is crucial in this regard. In CMS v Argentina, the tribunal held that CMS could base its claim on the application of 16.82 the umbrella clause despite the fact that CMS was not a party to the licence but rather an indirect minority shareholder of the Argentine company that signed the licence. This interpretation, however, was not upheld by the CMS ad hoc Committee and constituted the basis for partial annulment of the award. The ad hoc Committee suggested ‘major difficulties’ with any holding that the umbrella clause protected CMS from alteration of legal provisions affecting TCN (its subsidiary) but to which CMS was not a party. In its view, the umbrella clause covered only obligations between the state and the claimant: (b) Consensual obligations are not entered into erga omnes but with regard to particular persons. Similarly, the performance of such obligations or requirements occurs with regard to, and as between, obligor and obligee. (c) The effect of the umbrella clause is not to transform the obligation which is relied on into something else; the content of the obligation is unaffected, as is its proper law. If this is so, it would appear that the parties to the obligation (i.e., the persons bound by it and entitled to rely on it) are likewise not changed by reason of the umbrella clause.135

The tribunal in Continental v Argentina agreed with the CMS tribunal, and with the LG&E 16.83 and Enron tribunals, and held that: The covered obligations must have been entered ‘with regard to’ investments. Thus, they must concern one or more investments and, moreover, must address them with some degree

  The Energy Charter Treaty, A Reader’s Guide, supra note 19, at 26.   Azurix v. Argentina, supra note 126, ¶ 384. 134  Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/​02/​8, Award (Feb. 6, 2007), ¶ 204 [hereinafter Siemens v. Argentina]. 135  CMS v. Argentina, supra note 92, Decision on Annulment, ¶ 95. 132 133

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The Umbrella Clause: Is the Umbrella Closing? of specificity. They are not limited to obligations based on a contract. Finally, provided that these obligations have been entered ‘with regard’ to investments, they may have been entered with persons or entities other than foreign investors themselves, so that an undertaking by the host State with a subsidiary such as CNA is not in principle excluded.136

V. Conclusion 16.84 The umbrella clause has been a regular, although not universal, feature of investment agree-

ments since the 1950s. For a number of years, it had only retained the attention of scholars, the majority of whom considered it as a clause elevating contractual obligations to treaty obligations. No arbitral tribunal considered the issue until the SGS v Pakistan and SGS v Philippines cases. Since then, it has attracted considerable discussions by both arbitral tribunals and scholars.

16.85 There is disparity in the way the umbrella clause is formulated in investment agreements.

Therefore, the proper interpretation of the clause depends on the specific wording of the particular treaty, its ordinary meaning, its context, and the object and purpose of the treaty, as well as on the treaty’s negotiating history, or on any other indications of the parties’ intent. The analysis of the language of this clause included in a representative sample of treaties indicates that, although there are some disparities, the ordinary meaning of ‘shall observe’ ‘any commitments/​obligations’ seems to point towards an inclusive, wide interpretation, which would cover all obligations assumed/​entered into by the contracting states, including contracts, unless otherwise stated. A different wording such as ‘shall guarantee the observance’ or ‘shall maintain a legal framework apt to guarantee the continuity of legal treatment’ might lead to a narrower interpretation.

16.86 In the first discussions among scholars on the umbrella clause and also in the period which

followed the two SGS decisions, the debate was essentially concentrated on the effects of the clause, in particular the questions of whether the clause elevates breaches of contract to breaches of treaty under international law or if it overrides a choice of forum in the agreement between an investor and the host state. In the last few years, however, the discussion has shifted to the scope, that is, conditions of application of the clause and in particular the nature of obligations covered (ratione materiae) and the persons bound by the obligations triggering the umbrella clause (ratione personae).

16.87 Arbitral tribunals have been called upon to decide on whether or not and under what circum-

stances an investor may refer a dispute to investment arbitration by relying on an umbrella clause in a BIT. They have reached different conclusions, in particular with respect to the effect of the umbrella clause and its scope, that is, does it transform all or only certain kinds of contract claims into treaty claims; does it cover obligations only undertaken by the state or also by other entities under state control; and does it cover only specific obligations concerning the investment or include general requirements imposed by law? The results vary, and prudence requires recognition that no general conclusions can be drawn. However, because of the different interpretations and the sweeping effects of an umbrella clause, states increasingly seek to exclude the umbrella clause from their model BITs.137

  Continental Casualty v. Argentina, supra note 71, ¶ 297.   See the US, France, Canada, Colombia, Norway, and India Model BITs. See also Pereira de Souza Fleury, supra note 8, at 680. 136 137

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17 COUNTERCLAIMS IN INVESTMENT TREATY ARBITRATION Mark A Clodfelter and Diana Tsutieva

I. Introduction  II. Milestone Cases  III. Counterclaims under the ICSID Convention 

IV. Counterclaims Under the UNCITRAL Rules 

17.01 17.06

A. Introduction to Article 46  B. Counterclaims Arising Directly out of the Subject Matter of the Dispute  C. Counterclaims Within the Scope of the Parties’ Consent  D. Counterclaims Otherwise Within ICSID’s Jurisdiction  E. Conclusion 

A. Introduction  B. Ipso Facto Importation of Consent  C. The 1976 UNCITRAL Rules: Implied Modification by State Parties  D. The Connection Requirement under the New and Old UNCITRAL Rules  E. Conclusion 

17.19 17.20 17.25 17.37

V. Moving Forward: Greater Expectations in Counterclaim Practice 

17.65 17.67

17.68 17.68 17.73 17.82 17.88 17.94

17.95

I. Introduction Counterclaims were once a rare feature of investment treaty arbitration. But the last decade 17.01 has seen an unmistakable upward trend in the endeavours of respondent states to have their own claims against investor-​claimants heard in the investor-​state proceedings commenced against them. Thus, the suitability and availability of such proceedings for the adjudication of respondent states’ counterclaims has become an increasingly serious issue in the field. Counterclaims are generally allowed in legal proceedings in most national systems,1 and have 17.02 been imported into the practice of virtually all international courts and tribunals.2 For example, the Permanent Court of International Justice, the International Court of Justice, and the International Tribunal for the Law of the Sea have all adopted procedural rules for the adjudication of counterclaims, despite the silence of their constitutive instruments on this right.3 In investment arbitration, the procedural mechanism for bringing counterclaims has drawn significant attention as a potential tool to counterbalance the general asymmetry

1  D. Atanasova, C.A. Martínez Benoit & J. Ostřanský, Counterclaims in Investor–​State Dispute Settlement (ISDS) under International Investment Agreements (IIAs) (Geneva Centre for Trade and Economic Integration’s Trade and Investment Law Clinic Papers 2012) 1 [hereinafter Atanasova, Martínez Benoit & Ostřanský (2012)]. 2  See Z. Douglas, The International Law of Investment Claims 256 (2012) [hereinafter Douglas (2012)]. 3 C. Antonopoulos, Counterclaims before the International Court of Justice 7 (2011). For example, while the Statute of the International Court of Justice does not contain any provision on counterclaims, the I.C.J. rules expressly provide for admission of counterclaims subject to specified conditions. See International Court of Justice, Rules of Court (1978), sub-​section 3 ‘Counterclaims’, art. 80.1 (‘The

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Counterclaims in Investment Treaty Arbitration in the investor-​state dispute settlement (ISDS) procedures provided for in bilateral investment agreements (BITs), and other international investment agreements (IIAs),4 which are primarily designed to address foreign investors’ grievances against host state conduct.5 Counterclaims have been hailed as capable of facilitating equality between disputing parties in access to arbitration and making investor-​state dispute resolution more efficient.6 Policy reasons for allowing respondent state counterclaims are also frequently cited,7 and respondent states have shown a growing interest in this mechanism.8 17.03 However, a vast majority of the states’ counterclaims have failed for lack of jurisdiction or on

the merits, resulting in what one commentator called ‘thirty years of failure’.9 In this regard, the applicable procedural rules have been used inconsistently in arbitral practice. While most widely used procedural systems in investment arbitration—​the ICSID Convention and the arbitration rules issued thereunder, and the UNCITRAL Arbitration Rules—​envision the possibility of counterclaims by host states, most tribunals have treated these rules, at best, as auxiliary tools. Few tribunals have addressed the function of the applicable procedural rules and their relevance in allowing or disallowing counterclaims in a particular case. Instead, most arbitral tribunals that have asserted authority to adjudicate counterclaims have done so on the basis of general principles.

17.04 The investment arbitration case law has revealed a host of legal and practical difficulties in

admitting counterclaims. Most of these difficulties arise from the core requirement that the parties must consent to submit their differences to investment arbitration. Irrespective of the applicable procedural rules, arbitral tribunals have recognized that a state’s ability to assert a counterclaim is contingent upon whether or not the parties have agreed to arbitrate counterclaims as delineated by the applicable arbitration agreement. This determination has most often been considered to depend on the treaty’s language regarding the scope of ISDS and standing to invoke arbitration. But it has also frequently been considered that counterclaims must enjoy a requisite level of connection to the primary claims; arbitral practice has varied on this count as well, sometimes relying upon general principles of connectivity and other times applying the particular terms of the applicable procedural rules.

17.05 The applicable arbitration rules have also been cited as a bar to counterclaims. But their ap-

plication has not been consistent, and this is an area where arbitral practice would benefit from a more coherent approach. This chapter explores the functionality of the applicable procedural rules as bases for an investment tribunal’s authority to hear counterclaims under the two main investment law regimes, the ICSID Convention and Arbitration Rules and the

Court may entertain a counter-​claim only if it comes within the jurisdiction of the Court and is directly connected with the subject-​matter of the claim of the other party . . .’). 4  For ease of reference, the authors will refer to all multilateral investments agreements, trade agreements, and bilateral investment treaties as ‘BITs’. 5  I. Popova & F. Poon, From Perpetual Respondent to Aspiring Counterclaimant? State Counterclaims in the New Wave of Investment Treaties, 2(2) BCDR Int’l Arb. Rev.223 (2015) [hereinafter Popova & Poon]. 6  Y. Kryvoi, Counterclaims in Investor-​State Arbitration, 21 Minn. J. Int’l L. 218 [hereinafter Kryvoi]. 7  A. Bjorklund, The Role of Counterclaims in Rebalancing Investment Law, 17(2) Lewis & Clark L. Rev. 475, 475–​77 (2013) [hereinafter Bjorklund]. 8  For a discussion of various pros and cons of allowing counterclaims from the policy perspective, see Bjorklund, supra note 7 at 475–​77. The main drawbacks include siphoning off from domestic courts disputes that might otherwise have been resolved locally and letting the tribunals grapple with domestic law issues. 9  A. Vohryzek-​Griest, State Counterclaims in Investor-​ State Disputes: A History of 30 Years of Failure, 15 Revista Colombiana de Derecho Int’l 86 (2009); J.A. Rivas, ICSID Treaty Counterclaims: Case Law and Treaty Evolution, 11(1) TDM 1 (2014) [hereinafter Rivas].

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II. Milestone Cases UNCITRAL Arbitration Rules.10 A review of the milestone cases under these two regimes reveals the major problems that have arisen.

II.  Milestone Cases Since the first ICSID case involving a counterclaim,11 there have been over twenty other 17.06 ICSID cases in which a state respondent has raised counterclaims against an investor.12 Arbitral practice under the UNCITRAL Rules has seen many fewer such instances, with only three publicly available decisions under the 1976 UNCITRAL Rules13 and two under the 2010 UNCITRAL Rules.14 The majority of all cases have been resolved on the merits without addressing the question of jurisdiction.15 The focus here will be on the cases where tribunals have addressed conditions for bringing counterclaims and dealt expressly with jurisdiction in a significant manner. Klöckner v Cameroon was the first case where the ICSID tribunal dealt with the conditions for 17.07 bringing counterclaims.16 The claimant brought a contract-​based claim against Cameroon under the terms of a joint venture project to build a fertilizer plant. Several contracts were concluded in regard to the fertilizer project, both between the claimant and the government of Cameroon, and also between the joint venture company and the government. Claimant Klöckner initiated ICSID arbitration based on its own contract with Cameroon, which thereupon counterclaimed against the investor on the basis of two other, related contracts, including one with the joint venture company. The ICSID tribunal considered its jurisdiction

10  United National Commission on International Trade Law (UNCITRAL), UNCITRAL Arbitration Rules (1976), General Assembly Resolution 31/​ 98 [hereinafter 1976 UNCITRAL Rules]. The 1976 UNCITRAL Rules were designed to provide procedural rules for ad hoc arbitrations arising out of commercial relationships and cover all aspects of the arbitral process: they provide a model arbitration clause, set out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings, and establish rules with respect to the form, effect and interpretation of the award. The UNCITRAL Rules were significantly revised in 2010. See UNCITRAL Arbitration Rules (as revised in 2010) (effective August 15, 2010)  [hereinafter the 2010 UNCITRAL Rules]. The 2010 UNCITRAL Rules modified the 1976 UNCITRAL Rules to accommodate investment arbitration proceedings and contain a number of new features, including revised procedures for the replacement of an arbitrator and a review mechanism regarding the costs of arbitration. In 2013, a new art. 1(4) was added to the text of the 2010 UNCITRAL Rules to incorporate the UNCITRAL Rules on Transparency in Treaty-​based Investor-​State Arbitration for arbitrations initiated pursuant to an investment treaty concluded on or after April 1, 2014. See UNCITRAL Arbitration Rules (with new art. 1(4), as adopted in 2013), UNCITRAL Rules on Transparency in Treaty-​based Investor-​ State Arbitration. 11  See Adriano Gardella S.p.A. v. Republic of the Ivory Coast, ICSID Case No. ARB/​74/​1, Award (Aug. 29, 1977), 1 ICSID Rep. 283 (1993). 12  See the case chart in Popova & Poon, supra note 5, Annex A. 13 Sergei Paushok and Others v.  Government of Mongolia, UNCITRAL, Award on Jurisdiction and Liability (Apr. 28, 2011); Zeevi Holdings v. Republic of Bulgaria and the Privatization Agency of Bulgaria, UNCITRAL Case No. UNC39/​DK, Award (Oct. 25, 2006). See also Balkan Energy Company v. Republic of Ghana, UNCITRAL, Award (Apr. 1, 2014). 14  Hesham Talaat M. Al-​ Warraq v. Republic of Indonesia, UNCITRAL, Award (Dec. 15, 2014); Oxus Gold plc v. Republic of Uzbekistan, UNCITRAL, Award (Dec. 17, 2015). 15  See, e.g., S.A.R.L. Benvenuti & Bonfant v.  People’s Republic of the Congo, ICSID Case No. ARB/​ 77/​2, Award (Aug. 8, 1980), 1 ICSID Rep. 330 (1993); Atlantic Triton Company v. People’s Revolutionary Republic of Guinea, ICSID Case No. ARB/​84/​1, Award (Apr. 21, 1986), 3 ICSID Rep. 13 (1995); Amco Asia Corporation and Others v. Republic of Indonesia (Resubmitted Case), ICSID Case No. ARB/​81/​1, Decision on Jurisdiction (May 10, 1988); Maritime International Nominees Establishment (MINE) v. Republic of Guinea, ICSID Case No. ARB/​84/​4, Final Award (6 Jan. 6, 1988), 4 ICSID Rep. 61 (1997). 16  Klöckner Industrie-​Anlagen GmbH and Others v. Republic of Cameroon, ICSID Case No. ARB/​81/​2, Award (Oct. 21, 1983), 2 ICSID Rep. 4 (1993). The case was later annulled on different grounds.

419

Counterclaims in Investment Treaty Arbitration to adjudicate a counterclaim arising out of a contract other than the one underlying the principal claim. Without expressly tying its reasoning to the terms of Article 46 of the ICSID Convention that governs counterclaims, the tribunal found that such a counterclaim could be brought under the related agreement because the contracts ‘constitute[d]‌an indivisible whole’.17 17.08 While counterclaims were subsequently considered in a number of ICSID cases following the

Klöckner decision,18 the most comprehensive consideration of arbitral jurisdiction over counterclaims in ISDS was made by the UNCITRAL Rules tribunal in Saluka v Czech Republic.19 The Saluka tribunal, the first investor-​state tribunal to consider this question under the 1976 UNCITRAL Rules, began by addressing whether it had jurisdiction ‘in principle’ over counterclaims under the Netherlands–​Czech Republic BIT. The tribunal agreed with the parties that ‘the jurisdiction conferred upon it by Article 8 [of the BIT], particularly when read with Articles 19.3, 19.4, and 21.3 of the [1976] UNCITRAL Rules, is in principle wide enough to encompass counterclaims’.20 In particular, the language of Article 8 of the BIT, in referring to ‘[a]‌ll disputes’, was ‘wide enough to include disputes giving rise to counterclaims’.21 It also observed that the BIT’s requirement for a dispute ‘to be ‘between one Contracting Party and an investor of the other Contracting Party’ carries with it no implication that Article 8 applies only to disputes in which it is an investor which initiates claims’.22 However, it dismissed a portion of the counterclaims because, among other reasons, they were based on a contract which contained a mandatory arbitration clause.

17.09 As to the remainder of the counterclaims—​all based on domestic law—​the tribunal queried

whether they ‘satisf[ied] those conditions which customarily govern the relationship between a counterclaim and the primarily claim . . . In particular, a legitimate counterclaim must have a close connexion with the primary claim to which it is a response’.23 The tribunal did not address the specific language of Article 19(3) of the 1976 UNCITRAL Rules, which governs counterclaims, but rather looked at the decisions of the Iran–​US Claims Tribunal, which operated under a modified version of the UNCITRAL Rules, as well as at a number of decisions under the ICSID Convention, including Klöckner. It concluded that there was ‘a general legal principle as to the nature of the close connexion which a counterclaim must have with the primary claim if a tribunal with jurisdiction over the primary claim is to have jurisdiction also over the counterclaim’.24 The tribunal dismissed the remainder of the counterclaims because they did not constitute ‘an indivisible whole’ with the primary claim and did not ‘invok[e]‌ obligations which share with the primary claim “a common origin, identical sources, and an operational unity” or which were assumed for the “accomplishment of a single goal, [so as to be] interdependent” ’.25

17  Id. at 17. In the merits discussion, the tribunal also explained that the three contracts were ‘bound together by a close connecting factor: agreement was reached for the supply of a fertilizer factory, and its technical and commercial management, in return for payment of a price and for certain investment guarantees. The reciprocal obligations had a common origin, identical sources, and an operational unity. They were assumed for the accomplishment of a single goal, and are thus interdependent’. Id. at 65. 18  See the Case Chart in Popova & Poon, supra note 5. 19  Saluka Investments B.V.  v.  Czech Republic, UNCITRAL, Decision on Jurisdiction over the Czech Republic’s Counterclaim (May 7, 2004). 20  Id. ¶ 39 (emphasis added). 21  Id. 22  Id. 23  Id. ¶ 61 (emphasis added). 24  Id. ¶ 76 (emphasis added). 25  Id. ¶ 79, citing Klöckner, supra note 16 at 17, 65 and ¶ 70 (analyzing Klöckner and some decisions of the Iran–​U.S. Claims Tribunal and emphasizing ‘[t]‌he interdependence and essential unity of the instruments

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II. Milestone Cases The tribunal in a subsequent UNCITRAL Rules case, Paushok v Mongolia, fully endorsed 17.10 the Saluka tribunal’s approach, and accepted ‘a general principle as to the nature of the close connection which a counterclaim must have with the primary claim if a tribunal with jurisdiction over the primary claim is to have jurisdiction also over the counterclaim’.26 There, the respondent state submitted seven counterclaims, including claims for unpaid taxes, for alleged violations of obligations under the licence agreements involved, and for alleged violations of environmental protection obligations towards Mongolia. In addressing Mongolia’s counterclaims for windfall profits taxes and other taxes, for fees and levies that the claimants’ local company, GEM, was alleged to have evaded in violation of domestic law, and for unpaid foreign worker fees, the tribunal did invoke Article 19(3) of the 1976 UNCITRAL Rules governing counterclaims and held that ‘[u]‌nlike the situation expressly covered by the wording of Article 19(3) of the UNCITRAL Arbitration Rules, [these] counterclaims . . . do not arise out of an investment contract or other contract to which the foreign investors are a party and that the foreign investors would have breached’.27 The tribunal underscored that these counterclaims ‘arise out of Mongolian public law and exclusively raise issues of non-​ compliance with Mongolian public law, including the tax laws of Mongolia’.28 However, the tribunal held that the remaining counterclaims, including those arising under the claimants’ licensing agreements to extract gold and under environmental protection obligations, ‘cannot be seen as having a “close connection with the primary claim to which (they are) a response” ’.29 The tribunal added that ‘they are clearly matters which strictly concern GEM and they all relate to subjects being the object of Mongolian legislation and regulation’.30 It thus declined to exercise jurisdiction over any of the counterclaims. Two more recent ICSID cases, Roussalis v Romania and Goetz v Burundi, have generated con- 17.11 siderable discussion, presenting two radically opposed approaches to establishing jurisdiction over respondent state counterclaims. In Roussalis v Romania, an ICSID tribunal established under the Greece–​Romania BIT 17.12 rejected Romania’s counterclaims against claimant and his companies for (1)  damages for breach of investment obligations and breach of a privatization agreement, (2) damages for misappropriation of funds, (3) damages for breach of contractual pledge to transfer shares, and (4)  declaratory relief and damages regarding invalidity of resolution to increase share capital. A majority of the arbitrators found that the tribunal did not have jurisdiction over the counterclaims because there was no consent under the terms of the treaty to state counterclaims concerning obligations of the investor.31 The arbitrators first explained that, under Article 46 of the ICSID Convention and Rule 40 of the ICSID Arbitration Rules, the tribunal must decide ‘any counterclaims arising directly out of the subject-​matter of the dispute provided that they are within the scope of the consent of the Parties and are otherwise within the jurisdiction of the Centre’.32 It analysed whether in principle ‘the Parties consented

on which the original claim and counterclaim were based in those cases, resulting in the tribunals holding that they had jurisdiction over the counterclaims’). 26 Paushok, supra note 13, ¶ 690, citing Saluka, supra note 19, ¶ 76. 27  Id. ¶ 694. 28  Id. 29  Id. ¶ 696. The same reasoning was applied to the last counterclaim based on the claimant’s alleged failure to comply with an order from the British House of Lords rejecting GEM’s application for an injunction against the Bank of Nova Scotia in London, where the gold in dispute was deposited by Mongolian authorities. Id. ¶ 697. 30  Id. 31  Spyridon Roussalis v. Romania, ICSID Case No. ARB/​06/​1, Award (Dec. 7, 2011), ¶¶ 748–​57. 32  Id. ¶ 863.

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Counterclaims in Investment Treaty Arbitration to have the State’s counterclaims arbitrated’,33 and found that Article 9(1) of the Greece–​ Romania BIT providing for arbitration of ‘ “disputes  . . .  concerning an obligation of the [host state]” undoubtedly limit jurisdiction to claims brought by investors about obligations of the host State’.34 In addition, the majority pointed out that ‘the BIT imposes no obligations on investors, only on contracting States’.35 The tribunal concluded that ‘where the BIT does specify that the applicable law is the BIT itself, counterclaims fall outside the tribunal’s jurisdiction’.36 17.13 However, the third arbitrator, Professor W. Michael Reisman, dissented in a brief declaration,

which has since then often been quoted in academic literature and arbitral awards. He disagreed with the majority’s rejection of jurisdiction over counterclaims: [W]‌hen the States Parties to a BIT contingently consent, inter alia, to ICSID jurisdiction, the consent component of Article 46 of the Washington Convention is ipso facto imported into any ICSID arbitration which an investor then elects to pursue. It is important to bear in mind that such counterclaim jurisdiction is not only a concession to the State Party: Article 46 works to the benefit of both respondent state and investor. In rejecting ICSID jurisdiction over counterclaims, a neutral tribunal—​which was, in fact, selected by the claimant—​ perforce directs the respondent State to pursue its claims in its own courts where the very investor who had sought a forum outside the state apparatus is now constrained to become the defendant.37

17.14 In Goetz et al. v Burundi, which followed shortly after the Roussalis award, the tribunal de-

parted from the majority decision in Roussalis and embraced Professor Reisman’s approach, asserting jurisdiction over the respondent state’s counterclaim on the basis of Article 46.38 There, the respondent state counterclaimed for damages for failure to comply with the conditions of an operating licence. The tribunal, presided over by former ICJ President Gilbert Guillaume, observed that Article 46 of the ICISD Convention governing counterclaims is ‘directly inspired’ by Article 80 of the Rules of Procedure of the International Court of Justice, which provide: ‘[a]‌counter-​claim may be presented provided that it is directly connected with the subject-​matter of the claim of the other party and that it comes within the jurisdiction of the Court’.39 The tribunal identified two requirements that would need to be satisfied for it to hear the counterclaim: (1) that the counterclaim falls within ICSID’s jurisdiction and notably that it is covered by the parties’ consent and (2) that it directly relates to the ‘object of the litigation’ (l’objet du litige).

  Id. ¶ 864 (emphasis omitted).   Id. ¶ 869. Article 9 of the Greece–​Romania BIT reads: Disputes between an investor of a Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement, in relation to an investment of the former, shall, if possible, be settled by the disputing parties in an amicable way . . .  If such disputes cannot be settled within six months from the date either party requested amicable settlement, the investor concerned may submit the dispute either to the competent courts of the Contracting Party in the territory of which the investment has been made or to international arbitration. 35  Id. ¶ 871. Article 9(4) provides: ‘The arbitral tribunal shall decide the dispute in accordance with the provisions of this Agreement [the BIT] and the applicable rules and principles of international law . . .’. 36  Id. ¶ 871. 37 Roussalis, supra note 31, Declaration of W. Michael Reisman (Nov. 28, 2011). 38  Antoine Goetz and Others v. Republic of Burundi, ICSID Case No. ARB/​01/​2, Award (June 21, 2012). 39  Id. ¶ 273 (translation) (original text in French: ‘[u]‌ne demande reconventionnelle peut être présentée pourvu qu’elle soit en connexité directe avec l’objet de la demande de la partie adverse et qu’elle relève de la compétence de la Cour’). 33 34

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II. Milestone Cases The tribunal first found that the counterclaim arose directly out of the claimant’s investment 17.15 and thus satisfied the requirements of Article 25 for ICSID jurisdiction. It then determined that both parties had agreed to the submission of counterclaims when they consented to the application of the ICSID Convention. The tribunal reasoned that, by entering into the BIT, Burundi and Belgium were offering to arbitrate disputes under the ICSID Convention in accordance with the procedure set therein, including Article 46, which concerns counterclaims. By referring the dispute to arbitration, the claimants in turn accepted the terms of the standing offer;40 it was of no importance that the BIT itself did not contain any provision giving to the tribunal jurisdiction to hear counterclaims.41 The tribunal also found that the counterclaim was admissible because it was properly connected to the object of the dispute (l’objet du différend), as required under Article 46.42 In the end, having found that it enjoyed jurisdiction, the tribunal rejected the counterclaims on the merits. The next tribunal to consider the issue that in the ICSID case of Urbaser v Argentina, fol- 17.16 lowed the approach of the Roussalis tribunal by seeking to establish the parties’ consent to counterclaims in the terms of the BIT.43 This case involved a novel counterclaim alleging that the investors had violated obligations in relation to the human right to water by failing to make sufficient investments under a concession for water and sewage services to be provided in the Province of Greater Buenos Aires.44 The tribunal found that Article X of the

  The Belgium–​Burundi BIT provides for the following scope of arbitrable disputes:

40

8.1 [A]‌dispute relating to an investment is defined as a dispute concerning: (c) The alleged violation of any right conferred or established by this Convention with regard to investments . . . 8.3 [E]‌ach Contracting Party shall by means of this provision give its anticipated and irrevocable consent to the referral of any dispute of this kind to ICSID. Belgium–​Burundi BIT, arts. 8.1, 8.3 (translation) (original text in French: ‘8.1 Pour l’application du présent article, un différend relatif à un investissement est défini comme un différend concernant: . . . (c) l’allégation de la violation de tout droit conféré ou établi par la présente Convention en matière d’investissement . . . 8.3 A  cette fin, chaque Partie contractante donne, par la présente disposition, son consentement anticipé et irrévocable à ce que tout différend de cette nature soit soumis au CIRDI’). 41 Goetz, supra note 38, ¶ 279. 42  Id. ¶¶ 283–​85. 43 Urbaser S.A. & Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v.  Argentine Republic, ICSID Case No. ARB/​07/​26, Award (Dec. 8, 2016). This is the first case that recognized that investors are subject to some international human rights law obligation, in particular, an obligation not to engage in activity aimed at destroying the enjoyment of human rights. Cf. Rivas, supra note 9 at 30 (previously observing that there were no investment arbitration cases ‘where a tribunal has awarded a declaration of liability and damages against a claimant on the basis of a counterclaim for violation of international general principles of law or domestic law’). 44  This is not the first occasion when the state’s counterclaim involved a novel subject matter. See Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/​08/​5, Decision on Ecuador’s Counterclaims (Feb. 7, 2017); Perenco Ecuador Ltd. v. Republic of Ecuador, ICSID Case No. ARB/​08/​6, Interim Decision on the Environmental Counterclaim (Aug. 11, 2015). In Burlington and in Perenco, Ecuador’s counterclaims included environmental claims under Ecuadorian law for the environmental harm caused by the operations of a consortium of companies under a share purchase agreement for exploration of oil. The Burlington tribunal rendered an unprecedented award on the merits of Ecuador’s counterclaims, finding breaches of Ecuadorian environmental law and of contractual obligations, and ordering the investor to pay U.S.$41.7 million to the state. See Burlington, ¶¶ 1075–​86. It is the first decision on the merits in favor of a state’s counterclaim based on domestic law. Cf. Rivas, supra note 9 at 30. The tribunal’s jurisdiction in respect of Ecuador’s counterclaims was not challenged, ‘and rightly so’, as the tribunal observed. See id. ¶ 60. In fact, the parties entered into an agreement expressing their consent that the arbitration was the ‘appropriate forum for the final resolution of the Counterclaims arising out of the investments made by Burlington Resources and its affiliates in Blocks 7 and 21, so as to ensure maximum judicial economy and consistency’. See id. ¶¶ 60–​62. In Perenco, the tribunal’s decision on counterclaims did not address the basis for its jurisdiction; the issue may have been addressed in one of the tribunal’s procedural orders that are not publicly available. See Perenco v. Ecuador,

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Counterclaims in Investment Treaty Arbitration Spain–​Argentina BIT was broad enough to encompass counterclaims, emphasizing the fact that it expressly permitted either party to an investment dispute to commence arbitration.45 The tribunal observed that other cases rejecting counterclaims had been heard under BITs with narrower dispute resolution clauses. It asserted its jurisdiction over the state’s counterclaim after finding that it also fulfilled the requirement of being manifestly connected to the primary claim.46 17.17 As discussed in following sections, the UNCITRAL Arbitration Rules as revised in 2010 con-

tain a provision on counterclaim jurisdiction significantly different from the 1976 version of the rules.47 Only two publicly known cases dealing with counterclaim jurisdiction were conducted under the 2010 UNCITRAL Rules, and only one of these opined on the scope of the new rule. In Al-​Warraq v Indonesia, the tribunal found that the Organisation of Islamic Cooperation (OIC) Agreement authorized counterclaims by the state party, first because ‘Article 17, which establishes the investor–​State arbitration mechanism, envisages claims by the State party’,48 and, secondly, because Article 9 of the OIC Agreement ‘impose[d]‌a positive obligation on investors to respect the law of the Host State, as well as public order and morals’.49 The tribunal thus found that the OIC Agreement ‘authorize[d] counterclaims, and so the Tribunal [had] jurisdiction to decide on the Respondent’s counterclaim’.50 Finally, the tribunal found ‘additional support for the right to a counterclaim in the procedural rules selected by the Parties and the terms of their Letter Agreement’, specifically Article 21(3) of the 2010 UNCITRAL Arbitration Rules.51 The tribunal did not address whether the 2010 UNCITRAL Rules contained the requirement of close connection but rather simply pointed out that Indonesia’s counterclaim was, as a matter of fact, ‘closely related both to the investment and to the Claimant’s claims’.52

17.18 Unlike the Al-​Warraq tribunal, the UNCITRAL tribunal in Oxus Gold v Uzbekistan addressed

the applicable UNCITRAL rule on counterclaims at the outset. It found that: ‘Article 21(3) of the [2010] UNCITRAL Arbitration Rules . . . [does not] create[] a jurisdiction where there is none. All it does is stating [sic] that counter-​claims are admissible and can be submitted to the extent that they already fall under the scope of jurisdiction of the Arbitral Tribunal’.53

Interim Decision on the Environmental Counterclaim, ¶ 20 and fn. 12 (referring to Procedural Orders Nos. 1, 2, and 3 in the context of jurisdiction and liability phase). 45 Urbaser, supra note 43, ¶ 1143 (art. X(1) of the Spain–​Argentina BIT provides: ‘Disputes arising between a Party and an investor of the other Party in connection with investments within the meaning of this Agreement shall, as far as possible, be settled amicably between the parties to the dispute’). 46  The tribunal noted that ‘the factual link between the two claims is manifest. Both the principal claim and the claim opposed to it are based on the same investment, or the alleged lack of sufficient investment, in relation to the same Concession’. See id. ¶ 1151. 47  2010 UNCITRAL Rules art. 21(3). While the rules were further amended in 2013 to add one provision to incorporate the UNCITRAL Rules on Transparency in Treaty-​based Investor–​State Arbitration for arbitrations initiated pursuant to an investment treaty concluded on or after April 1, 2014, see supra note 10, we will refer to the 2010 UNCITRAL Rules as they contain exactly the same new rule on counterclaims as the 2013 UNCITRAL Rules. 48  Al-​ Warraq, supra note 14, ¶ 660 (art. 17 provides: ‘If the two parties to the dispute do not reach an agreement as a result of their resort to conciliation, or if the conciliator is unable to issue his report within the prescribed period, or if the two parties do not accept the solutions proposed therein, then each party has the right to resort to the Arbitration Tribunal for a final decision on the dispute’ (emphasis added)). 49  Id. ¶ 663. Article 9 of the OIC Agreement reads: ‘The investor shall be bound by the laws and regulations in force in the host state and shall refrain from all acts that may disturb public order or morals or that may be prejudicial to the public interest. He is also to refrain from exercising restrictive practices and from trying to achieve gains through unlawful means’. See id. ¶ 662. 50  Id. ¶ 664. 51  Id. ¶ 663. 52  Id. 53  Oxus Gold, supra note 14, ¶ 944 (emphasis added).

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III.  Counterclaims under the ICSID Convention It proceeded to analyse Article 8 of the UK–​Uzbekistan BIT to see ‘whether this provision makes room for counter-​claims as the ones at hand’.54 The tribunal found that ‘the wording of Article 8(1) refers only to disputes ‘concerning an obligation of the [Contracting Party] under this Agreement’. The wording of Article 8(1) of the BIT is . . . a clear indication that the Parties’ consent to arbitration under the BIT only cover claims from investors against the host State, but not claims from the host State against the investors’.55 Nonetheless, the tribunal recognized a ‘possible exception of counter-​claims having a close connection with the investor’s claims’,56 thereby holding open the prospect of counterclaims jurisdiction based upon the connection between claim and counterclaim, despite the narrow scope of the BIT’s ISDS clause.

III.  Counterclaims under the ICSID Convention The ICSID Convention provides that, as a general rule, arbitral tribunals constituted under 17.19 the Convention have the power to consider counterclaims.57 However, only a small fraction of ICSID arbitrations have seen states interpose their counterclaims.58 In approximately half of these cases the tribunals rejected the respondent states’ counterclaims on the merits, and more than a quarter of them were dismissed for lack of jurisdiction. Thus far, in only four cases have respondent states enjoyed either partial or full success on the merits of their counterclaims.59 As will be discussed, this lack of success is largely attributed to the limits of the tribunals’ power set out in Article 46 of the ICSID Convention governing counterclaims, which requires tribunals to search for jurisdiction in the applicable BIT. In turn, the BIT’s dispute settlement clause is typically asymmetrical, affording only the investor the right to bring claims and excluding potential sources of obligations that would serve to support the host state’s counterclaims.

  Id. The relevant provision reads: (1) Disputes between a national or company of one Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement in relation to an investment of the former claim, be submitted to international arbitration if the national or company concerned so wishes. 55  Oxus Gold, supra note 14, ¶¶ 947–​48. 56  Id. ¶ 948. See also Vestey Group Ltd. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​06/​4, Award (Apr. 15, 2016), ¶ 333 (rejecting Venezuela’s claim based in part on the fact that the treaty only recognized disputes concerning an obligation of the host state). 57  ICSID Convention § 3: Powers and Functions of the Tribunal art. 46. 58  Based on publicly available information, fewer than two dozen of the completed ICSID arbitrations involved state counterclaims. 59  Maritime International Nominees Establishment (MINE) v.  Republic of Guinea, ICSID Case No. ARB/​84/​4, Final Award (Jan. 6, 1988), 4 ICSID Rep. 61 (1997) (rejecting one counterclaim and partially accepting another counterclaim for legal expenses that Guinea incurred to obtain release of attachments of its property, which resulted from the claimant’s non-​compliance with the tribunal’s recommendation); Desert Line Projects LLC v. Republic of Yemen, ICSID Case No. ARB/​05/​17, Award (Feb. 6, 2008), ¶¶ 22–​224 (accepting Yemen’s counterclaim and request for set-​off relating to the amount that the claimant already received under a settlement agreement which the tribunal found to be ineffective and rejecting Yemen’s counterclaim based on the contractual non-​performance claim on the grounds of estoppel); Elsamex S.A. v. Republic of Honduras, ICSID Case No. ARB/​09/​4, Award (Nov. 16, 2012) (fully rejecting counterclaims based on non-​ contractual liability because the tribunal’s jurisdiction stems from a contract; partly accepting Honduras’ counterclaim based on a contract, and awarding U.S.$5,500 as set-​off; rejecting the remainder of the counterclaims on the merits). Indeed, the only case where an ICSID tribunal accepted the host state’s counterclaims on the merits was Burlington, supra note 44, ¶¶ 1075–​86. The Burlington tribunal, however, significantly reduced Ecuador’s U.S.$2.6 billion request for compensation, ordering the claimant to pay only U.S.$41.7 million. See id. ¶ 1075. 54

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Counterclaims in Investment Treaty Arbitration A. Introduction to Article 46 17.20 Article 46 of the ICSID Convention provides that counterclaims may be brought in the same

proceedings:

Except as the parties otherwise agree, the Tribunal shall, if requested by a party, determine any incidental or additional claims or counterclaims arising directly out of the subject-​matter of the dispute provided that they are within the scope of the consent of the parties and are otherwise within the jurisdiction of the Centre.60 17.21 This rule requires an ICSID tribunal mandatorily (‘shall’) to determine counterclaims, if the

following conditions are satisfied: (1) the counterclaim must arise ‘directly out of the subject-​ matter of the dispute’; (2) it must fall within the scope of the parties’ consent; and (3) it must be within the ICSID jurisdiction. In addition, the opening clause of Article 46—​’Except as the parties otherwise agree’—​allows for the possibility that the parties might expressly opt out of their agreement to hear counterclaims.61 It has been noted that this clause requires that ‘[p]‌arties to a dispute . . . explicitly express their will for the tribunal not to entertain counterclaims’.62 As discussed later, this clause has also been considered in the interpretation of the consent element of Article 46.63

17.22 The ICSID Convention’s travaux préparatoires shed light on the intent behind the rule. They

show that the drafters did not intend to ‘extend’ the competence of the arbitral tribunal beyond what the parties had agreed.64 The preliminary draft of the ICSID Convention provided: ‘Except as the parties otherwise agree, the Tribunal shall have the power to hear and determine incidental or additional claims or counter-​claims arising directly out of the subject-​matter of the dispute’.65 The chairman Mr Broches explained that: [T]‌he aim of the section was not in any way to extend the competence of the Tribunal. No issue could be brought before the Arbitral tribunal that the parties had not agreed to submit to arbitration. The point of the section was to obviate separate proceedings for incidental claims, but in all cases there must be a specific understanding to submit the question to arbitration.66

17.23 Notably, when a US representative suggested that the phrase ‘to the extent that the parties

so agree’ might be used rather than ‘except as the parties shall otherwise agree’,67 Mr Broches responded:

  ICSID Convention (2006) art. 46 (emphasis added),   J. Kalicki & M. Silberman, Case Comment: Spyridon Roussalis v Romania, 27(1) ICSID Rev. 1, 10 [hereinafter Kalicki & Silberman] (This clause addresses the situation when the parties expressly opt out of their consent to counterclaims). 62  Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 7. 63  Rule 40 of the ICSID Arbitration Rules further elaborates on art. 46 by requiring that any ancillary claim, including a counterclaim, be presented ‘no later than in the counter-​memorial, unless the Tribunal, upon justification by the party presenting the ancillary claim and upon considering any objection of the other party, authorizes the presentation of the claim at a later stage in the proceeding’. 64 D. Atanasova, C.A. Martínez Benoit & J. Ostřanský, The Legal Framework for Counterclaims in Investment Treaty Arbitration, 31(3) J. Int’l Arb. 357, 367 (2014) [hereinafter Atanasova, Martínez Benoit & Ostřanský (2014)]. 65 Paul C. Szasz & Lucien Moreau, I Analysis of Documents Concerning the Origins and Formulation of the Convention 204 (Paul C. Szasz & Lucien Moreau eds., 1970), referring to art. VI(9) in the preliminary draft (Doc. 24). 66  ICSID, II(1) History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Analysis of Documents 337 (1970) [hereinafter History of the ICSID Convention]. 67  Id. at 336–​ 37 (from the Summary Record of Proceedings, Santiago Consultative Meetings of Legal Experts, Feb. 17–​22) 337, 422 & 573. 60 61

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III.  Counterclaims under the ICSID Convention [I]‌f the Tribunal was to possess that power [to hear counterclaims] as a general rule, the existing wording should be retained, so that any other procedure would be regarded as a departure from the rule; but if the Tribunal were not, as a rule, to have that power the United States’ suggestion could be accepted. It might be advisable to make clear beyond any doubt that submission of any incidental claims was subject to the overriding principle of consent: for instance, the words ‘and within the competence of the Tribunal’ might be added at the end of the section.68

The drafters’ intention arguably conveys ‘a presumption in favour of permissibility of coun- 17.24 terclaims which can be rebutted by demonstrating lack of any of the preconditions specified by art. 46’.69 The drafters intended that the arbitral tribunal would have this power provided that the conditions set out in Article 46 are met.

B. Counterclaims Arising Directly out of the Subject Matter of the Dispute The first requirement that the counterclaim must arise ‘directly out of the subject-​matter of 17.25 the dispute’ has seen a number of approaches. First, the meaning of the ‘subject-​matter of the dispute’ as it applies to investment arbitration 17.26 has been a point of debate. Generally, a dispute ‘is a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons’.70 Disputes can be defined narrowly71 or involve multiple legal issues.72 International courts and tribunals agree that, for a dispute to exist, it must have crystallized into an actual disagreement.73 The ‘subject-​matter’

68  Id. at 337 (emphasis added). The First Draft preceding the final formulation indeed included the language ‘provided that [counterclaims] are within the jurisdiction of the Center. History of the ICSID Convention, vol. I, p. 204. The drafters explained that it was . . . elaborated to make clear that Article 49 does not extend the competence of the Tribunal to disputes not already within the jurisdiction of the Center’: See id. at 632. For more discussion on the travaux préparatoires, see A.G. Jain, Consent to Counterclaims in Investor-​State Arbitration: A Post-​Roussalis Analysis, 16(5) Int’l Arb. L. Rev. 135, 138–​40 [hereinafter Jain]. In discussing this draft, a suggestion was made regarding the introduction of the consent requirement. See II(2) History of the ICSID Convention at 810 (quoting the Chinese delegate, Mr. Tsai, that ‘the words “as well as the scope of consent of the other party” be added at the end of the Article’). This suggestion was accepted without objection, and the change was reflected in the revised draft, along with the inclusion of the requirement that one of the parties have raised a counterclaim. See II(2) History of the ICSID Convention 810 & I History of the ICSID Convention 206. 69 Jain, supra note 68 at 139. 70  Mavrommatis Palestine Concessions, Greece v. United Kingdom, Judgment (Merits) (Aug. 30, 1924), P.C.I.J., Series A, No. 2 at 11 [hereinafter Mavrommatis Palestine Concessions]. See also Black’s Law Dictionary (Dispute is defined as ‘[a]‌conflict or controversy, esp. one that has given rise to a particular lawsuit’). See generally Douglas (2012), supra note 2 at 337, ¶ 634 (‘There is a settled meaning for this term of art in international adjudication thanks to several pronouncements from the Permanent Court of International Justice. In Mavrommatis Palestine Concessions, the Court defined a “dispute” as “a disagreement on a point of law or fact, a conflict of legal” views or interests between the two persons. That definition has been applied in numerous cases before the International Court of Justice, and ICSID tribunals. Its continued validity cannot be in doubt. Certain refinements or clarifications have been introduced by the International Court . . .’) (citing AGIP v.  People’s Republic of the Congo, ICSID Case No. ARB/​77/​1, Award (Nov. 30, 1979), 1 ICSID Rep. 306; Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/​87/​3, Final Award (June 27, 1990), 4 ICSID Rep. 250; Impregilo S.p.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​3, Decision on Jurisdiction (Apr. 22, 2005), 12 ICSID Rep. 245; Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v. The Republic of Peru, ICSID Case No. ARB/​03/​4, Award (Feb. 7, 2005), 12 ICSID Rep. 219; Emilio Agustín Maffezini v. Kingdom of Spain, Decision of the Tribunal on Objections to Jurisdiction (Oct. 28, 1999), 5 ICSID Rep. 396). 71  See, e.g., Gujarat State Petroleum Corporation Limited and others v. Republic of Yemen, ICC Arbitration No. 19299/​MCP, Award (July 10, 2015), ¶ 239. 72  See, e.g., Bernhard von Pezold and Others v.  Republic of Zimbabwe, ICSID Case No. ARB/​ 10/​15, Award (July 28, 2015), ¶ 164. 73  See also Murphy Exploration and Production Company International v. Republic of Ecuador, ICSID Case No. ARB/​08/​4, Award on Jurisdiction (Dec. 15, 2010), ¶ 103 (‘The Tribunal finds that in order for a dispute to be submitted to ICSID arbitration, in accordance with Article VI of the BIT, a claim on an

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Counterclaims in Investment Treaty Arbitration of a dispute is something more specific, defined as ‘the thing in dispute’74 or, in the context of investment arbitration, as ‘the rights comprising the investment and the disagreement between the investor and host state on questions of law and fact relating to those rights’.75 Secondly, the phrase ‘arising directly out of ’ is often construed to mean a causal relationship.76 However, in the context of Article 46, it is more appropriate to interpret the phrase as imposing a connection or nexus between the counterclaim and the subject matter of the dispute.77 17.27 With respect to the provision ‘arising out of the subject-​matter of the dispute’ in Article 46, a

comparison has been drawn between this provision and the one found in Article 25.78 It has been suggested that the ‘subject-​matter’ in Article 46 ‘is probably something different—​and narrower—​than the same investment as that term is used in Article 25’.79 However, in a particular case, the two notions may be ‘closely related’.80

17.28 One view is that the subject matter of the dispute is the investment in dispute.81 Professor

Douglas earlier advanced as a ‘general rule’ that, for an investment treaty tribunal to exercise jurisdiction ratione materiae over a counterclaim, ‘it must be formulated in respect of matters directly relating to the investment’.82 This approach would simplify the test and align it with the arbitral practice relating to ‘additional claims’, where the ICSID tribunals applying the same Article 46 to ‘additional claims’ use ‘the investment in dispute’ as a reference for determining the requisite connectedness.83

alleged breach of the BIT must previously exist’). As the tribunal in Murphy held: ‘Without the prior allegation of a Treaty breach, it is not possible for a dispute to arise which could then be submitted to arbitration . . . The Tribunal understands that it is necessary for the Respondent to have been aware of the alleged Treaty breaches in order to resort to arbitration . . . ’. See id. ¶ 104 (emphasis added). See also South West Africa Cases (Ethiopia v. South Africa; Liberia v. South Africa), Preliminary Objections, Judgment (Dec. 21, 1962), I.C.J. Rep. 1962, 319, 328 (emphasis added). See also Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v. Rwanda), I.C.J. Rep. 2006, 43, at ¶ 99. 74  Subject matter, Black’s Law Dictionary 1652 (2014). 75  Z. Douglas, Enforcement of Environmental Norms, in Harnessing Foreign Investment To Promote Environmental Protection (P. Dupuy & J. Viñuales eds., 2013) [hereinafter Douglas (2013)] at 430. See also Douglas (2012), supra note 2 at 337, ¶ 634. 76  It can mean ‘originating from’ or ‘stemming from’. See Arise (from), Black’s Law Dictionary 129 (2014). 77  See P. Lalive & L. Halonen, On the Availability of Counterclaims in Investment Treaty Arbitration, 2 Czech Y.B.Int’l L. 141 (2011) [hereinafter Lalive & Halonen] ¶ 7.13. 78  Article 25 of the ICSID Convention, which is the gateway provision to ICSID jurisdiction, reads: ‘The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally’ (emphasis added). See ICSID Convention (2006) art. 25. 79  See Lalive & Halonen, supra note 77 at 141–​56, ¶ 7.12 (emphasis added) (‘If it were not, there would have been no reason to add the word “subject-​matter” to Article 46, since the question of “jurisdiction” would in any event have covered the issue’). 80 C. Schreuer et  al., The ICSID Convention:  A Commentary 74 (2009) [hereinafter Schreuer et al.]. 81  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 387 (internal citations omitted) (submitting ‘that the requirement [arising out of the subject matter of the dispute] should be considered satisfied when the counterclaim relates to the investment that is the object of the primary claim’). 82  Z. Douglas (2012), supra note 2 at 260, ¶ 496 (emphasis added).This view would be practically identical to the connection test under art. 19(3) of the UNCITRAL Rules. See, e.g., Lalive & Halonen, supra note 77, ¶ 7.39. 83  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 387. See, e.g., Itera International Energy L.L.C. and Itera Group N.V. v. Georgia, ICSID Case No. ARB/​08/​7, Decision on Admissibility of Ancillary Claims (Dec. 4, 2009), ¶¶ 93–​99, 103.

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III.  Counterclaims under the ICSID Convention The ICSID tribunal in Goetz v Burundi effectively followed this approach (while acknow- 17.29 ledging that the requirement under Article 46 is different from that of Article 25 of the ICSID Convention).84 The claimant alleged that the unfair revocation of a bank operating certificate constituted a violation of an investment treaty, while Burundi counterclaimed alleging that the claimant’s bank had failed to observe the obligations under the same bank operating certificate.85 The tribunal found that the counterclaim arose out of the same subject matter as the primary claim, that is, the bank operating certificate, which also formed the investment in dispute. Similarly, more recently, the tribunal in Urbaser v Argentina found, inter alia, that both the principal claim and the counterclaim were based on the same investment and this was ‘sufficient to adopt jurisdiction over the Counterclaim as well’.86 Another prominent view is that the requirement ‘arising out of the same subject-​matter of the 17.30 dispute’ can be satisfied so long as there is a ‘factual nexus’ with the primary claims:87 [T]‌here is no reason to imply a requirement of a legal connection into the term ‘subject-​ matter’. If this had been the intention, it could have been clearly stated, like it is in Article 25, which refers to a ‘legal dispute’. It should be enough that the claims and counterclaims arise directly out of the same subject-​matter as a matter of fact, as indicated in the official ‘Notes’ that accompanied the first version of the ICSID Arbitration Rules: [T]‌o be admissible such claims must arise ‘directly’ out of the ‘subject-​matter of the dispute’ (French version: ‘l’objet du différend’: Spanish version: ‘la diferencia’). The test to satisfy this condition is whether the factual connection between the original and the ancillary claim is so close as to require the adjudication of the latter in order to achieve the final settlement of the dispute . . .88

Lalive and Halonen therefore submit that, in addition to the requirement that the counter- 17.31 claim relate to the same ‘investment’ as the main claims, it must also have a ‘factual nexus with the main claims themselves’.89 Professor Douglas’ recent position appears to echo this view. He argues that in all cases, re- 17.32 gardless of which arbitration rules are applicable, ‘the scope of the tribunal’s jurisdiction to determine counterclaims by the host state ultimately depends upon a factual nexus between the dispute submitted by the claimant and the counterclaim . . . required by virtue of the consensual basis for the tribunal’s jurisdiction’.90 Professor Douglas thus submits that a factual nexus between the counterclaim and the dispute, as opposed to the counterclaim and the primary claim is required, adhering closer to the language of Article 46 ‘arising directly out of the subject-​matter of the dispute’. In the context of ICSID arbitration, however, the counterclaim  Goetz, supra note 38, ¶ 283.   Id. ¶ 285; Rivas, supra note 9 at 29. 86 Urbaser, supra note 43, ¶ 1151. The tribunal pointed out that ‘[t]‌he legal connection is also established to the extent the Counterclaim is not alleged as a matter based on domestic law only’, but on ‘the fundamental right for access to water, which was the very purpose of the investment agreed upon in the Regulatory Framework and the Concession Contract and embodied in the protection scheme of the BIT’. See id. 87  Lalive & Halonen, supra note 77, ¶ 7.13 (‘[I]‌t should be enough that there is a factual nexus with the claims themselves—​for example when the state’s actions of which the investor complains in the main claim were driven by the acts that constitute the heart of the counterclaim’); see id. ¶ 7.41. 88  Id. ¶ 7.12 (citing Notes to the ICSID Arbitration Rules (1968), Note B (a) to Rule 40, reprinted in 1 ICSID Reports, 100) (emphasis in the original). 89  Id. ¶ 7.13. 90  Douglas (2013), supra note 75 at 430 (internal citations omitted) (emphasis added). Similar to Lalive and Halonen, Professor Douglas expressly disavows that the counterclaim would have to have the same legal basis as the primary claim. He concludes that: ‘the legal basis of the claim is not dispositive for determining the scope of the tribunal’s jurisdiction over counterclaims. So long as the factual matrix for the counterclaim directly relates to the dispute between the parties concerning the investment in question, the legal basis for the host state’s counterclaim could be a contractual obligation, a domestic regulatory obligation and so on’. Id. at 433. 84 85

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Counterclaims in Investment Treaty Arbitration would also have to satisfy ICSID Article 25’s requirement of a ‘legal dispute directly arising out of the investment’.91 The ‘factual nexus’ approach resonates with one of the tests applied by the International Court of Justice (ICJ) requiring that counterclaims relate to the same ‘factual complex’ as the primary claims.92 In the investor-​state context, it would allow jurisdiction over a much broader range of respondent state counterclaims than another, very narrow approach of requiring that the counterclaim be based on the same, or closely related, legal source as the principal claim.93 This narrow approach was notably adopted by the UNCITRAL tribunal in Saluka v Czech Republic, which sought to apply ‘a general legal principle as to the nature of the close connexion’ between the claim and counterclaim.94 It based its reasoning on, inter alia, an ICSID tribunal in Klöckner v Cameroon, which, as noted,95 asserted jurisdiction over a counterclaim brought under an agreement that ‘constitute[d]‌ an indivisible whole’ with the agreements giving rise to the main contract-​based claims.96 The Klöckner tribunal’s conclusions, however, were not tied to the terms of Article 46 of the ICSID Convention. Article 46 does not by express terms require the identity of a legal source between the claim and counterclaim. As will be discussed, this narrow approach has been extensively criticized.97 17.33 The ‘factual nexus’ approach is not without its critics, principally for understating the legal

aspects of a counterclaim that will always be among the ‘elements in the tribunal’s apprehension of close connection’.98 Their critique has some merit, especially if we consider that the determination of the ‘subject-​matter of the dispute’ remains to be a question of law and fact. But it is also partially misplaced—​at least in the context of ICSID arbitration—​because the proponents of the factual nexus approach have viewed this test as distinct from the ICSID Article 25 requirement of a ‘legal dispute directly arising out of the investment’, formulating it in opposition to the narrow approach of the Saluka tribunal.99

17.34 Indeed, the discussion will not be complete without addressing several approaches that ef-

fectively treat the requirement of ‘arising out of the subject-​matter of the dispute’ as a general ‘close connection’ requirement applicable in investment arbitration.100 This has led some commentators to seek to formulate, sometimes problematically, a test that fits all the rules. For example, some have leaped to conclude that the requirement ‘arising directly out of the

  Id. at 432 (citing ICSID Convention art. 25(1); Amco v. Indonesia, supra note 15).   The language of Rule 40 of the I.C.J. Rules is not quite the same as the ICSID Rules. Nonetheless, the I.C.J. concludes that the facts on which the parties rely form part of the ‘same factual complex’ and ‘more specifically, that they are alleged to have occurred on the same territory during the same period; that they are of the “same nature”; and that the respondent relies on certain identical facts in order both to refute the allegations of the claimant and to obtain judgment against it’. See H.E. Kjos, The Scope of the Arbitration Agreement:  Claims and Counterclaims of a National and/​or International Nature, in Applicable Law in Investor-​State Arbitration 149 (H.E. Kjos ed., 2013) [hereinafter Kjos] (internal citations omitted). 93  Douglas (2013), supra note 75 at 430–31, citing Saluka, supra note 19, ¶¶ 78–​79 (critiquing the approach taken by the tribunal in Saluka, which ‘insisted upon the “interdependence and essential unity of the instruments on which the original claim and counterclaim are based” such that if the counterclaims were based upon the general law of the host state they must be resolved exclusively through the appropriate procedures of the host state’s law’). 94 Saluka, supra note 19, ¶ 76. 95  See supra ¶¶ 17.07–​17.09. 96 Klöckner, supra note 16 at 17. 97  See infra ¶ 17.90. 98  See, e.g., Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 387. See also id. (‘At most we can say that the close connection is a factual link with the subject matter, which is itself the legally defined rights and obligations in the dispute’). 99  See Douglas (2013), supra note 75 at 432; Lalive & Halonen, supra note 77, ¶ 7.13. 100  See C. Schreuer, Article 46—​ Ancillary Claims, in Schreuer et al., supra note 80, ¶ 73; Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 386–​88. 91 92

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III.  Counterclaims under the ICSID Convention subject-​matter of the dispute’ means that it must be ‘sufficiently connected’ to the primary claim.101 Support for this generic connection test comes from, among other progenitors, the jurisprudence of the International Court of Justice, which does not allow counterclaims that are not ‘directly connected with the subject-​matter of the claim of the other party’ due to ‘the risk of infringing the [a]‌pplicant’s rights and of compromising the proper administration of justice’.102 The ICJ has pointed out that ‘as a general rule, the existence of a direct connection between the counter-​claim and the principal claim must be assessed both in fact and in law’.103 This test has inspired a mutatis mutandis application to investment arbitration, focusing on 17.35 the ‘legal’ and ‘factual’ connections between the primary claim and the counterclaim.104 For example, Professor Kjos identifies the factual connectivity requirement as the primary basis for the test of close connection in investment arbitration cases,105 and the juridical connectivity as a subsidiary test since it is not always relevant.106 The juridical connectivity test is easily transposed to investment arbitration where both the primary claims and counterclaims arise out of the same contract, and thus have the same legal basis.107 However, it becomes problematic when the investor’s claim concerns an alleged treaty violation, while the state’s counterclaims are likely to be based on national law, a contract, or general principles of

101  Schreuer et al., supra note 80, ¶ 74 (the test is ‘whether the ancillary claim is sufficiently connected to the primary claim’); Kjos, supra note 92 at 147. See Saluka v. Czech Republic, supra note 19; Paushok v. Mongolia, supra note 13. 102  Case concerning Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosn. & Herz. v. Serb. & Montenegro), Counter-​Claims Order (Dec. 17, 1997), ¶ 31 (cited in Kjos, supra note 92 at 148) (emphasis added). See also Case Concerning Oil Platforms, Counter-​Claims Order, Order of March 10 [1998] I.C.J. Rep. 190, ¶ 331; Case Concerning Armed Activities on the Territory of Congo, Counter-​Claims Order (Nov. 29, 2001), ¶ 35. 103 Kjos, supra note 92 at 149 (internal citations omitted) (emphasis added). 104  In their earlier work, Atanasova, Martínez Benoit & Ostřanský (2012) described this test as follows: ‘[T]‌he counterclaim must be connected with the claim. Connectedness of the counterclaim with the claim entails both factual and legal elements at the same time. Reference to the subject-​matter of the dispute: entails a common fact pattern and a common legal link with original claim. About this, and in relation with the 1968 Arbitration Rules, it has been said that: “The test to satisfy this condition is whether the factual connection between a claim and a counterclaim is so close as to require the adjudication of the latter in order to settle finally the dispute, the object being to dispose of all the grounds of dispute arising out of the same subject matter’’.’ Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 7 (emphasis added) (citing Rules of Procedure for Arbitration Proceedings (Arbitration Rules) (1968), 1 ICSID Rep. (1993) 63, 100). The authors elaborate further: ‘The assessment of the [connectedness] requirement is done on a case-​by-​case basis and both facts and law are taken into consideration. The factual elements considered pertained to the conduct of the parties and its temporal and spatial characteristics. From judicial and arbitral practice we can see that a relevant legal factor is especially the legal instrument on which the counterclaim is based, whether a contract, treaty, other norm of international law or general domestic law’. See id. at 379 (internal citations omitted). 105 Kjos, supra note 82 at 148 (‘related to the aspect of judicial economy, there is [a]‌general agreement that the claim and counterclaim must be factually linked’). 106  Id. Kjos refers for additional guidance to the jurisprudence of the International Court of Justice, whose rules contain a definition of counterclaims almost identical to that of the ICSID Convention, namely that they must be ‘directly connected with the subject-​matter’ of the initial claim. Kjos writes: ‘In applying this criterion, the Court has found it significant that the facts on which the parties rely for a counterclaim form part of the “same factual complex”, and, more specifically, that they are alleged to have occurred on the same territory during the same period; that they are of the “same nature”; and that the respondent relies on certain identical facts in order both to refute the allegations of the claimant and to obtain judgment against it’. See id. at 149 (internal citations omitted). 107  Id. Generally, an ICSID jurisdiction founded on a contract encompasses counterclaims ‘[b]‌ecause contractual dispute resolution provisions are generally bilateral, thus allowing either party to the contract to assert claims for breach of the contract’s terms’. See Kalicki & Silberman, supra note 61 at 10.

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Counterclaims in Investment Treaty Arbitration international law.108 In such cases, tribunals will be required to apply norms from different legal systems or different legal sources. Therefore, ‘juridical connexity’ might more appropriately be considered as only one factor, and not as a prerequisite, for allowing a counterclaim. As noted by Judge Higgins in the Oil Platforms case: In both civil and common law domestic systems, as in the Rules of the Court, a defendant seeking to bring a counter-​claim must show that the Court has jurisdiction to pronounce upon them. But it is not essential that the basis of jurisdiction in the claim and in the counter-​claim be identical. It is sufficient that there is jurisdiction. (Indeed, were it otherwise, counter-​claims in, for example, tort could never be brought, as they routinely are, to actions initiated in contract.)109 17.36 Article 46’s limitation to counterclaims ‘arising directly out of the subject-​matter of the dis-

pute’ is facially distinct from any required factual connection between the primary claim and a counterclaim. Therefore, the most persuasive approach may be to consider that the counterclaim under Article 46 must arise out of the same investment in dispute as the main claim and must be based on a ‘factual matrix . . . directly relat[ing] to the dispute between the parties concerning the investment in question’.110 This approach would not require ‘the identity of the source of the norms underlying a claim and counterclaim’,111 because, as long as the counterclaim arises out of the same investment in dispute, its legal basis is not married to the legal basis of the principal claim.

C. Counterclaims Within the Scope of the Parties’ Consent 17.37 The second of Article 46’s requirements—​that the counterclaim must fall within the scope of

the parties’ consent—​has generated a significant doctrinal debate. In investment arbitration, the gateway element of the arbitral tribunal’s jurisdiction is the parties’ consent in their agreement to settle their investment disputes.112 In investment treaty cases, consent is perfected in two stages.113 First, the state party makes a standing offer in the IIA, which defines the scope of arbitrable claims, available fora, and applicable rules. Secondly, the investor accepts this offer as is, usually at the time of submitting its request for arbitration. Once the arbitration agreement is formed, the arbitration rules of the elected forum are ‘incorporated’ into the arbitration agreement subject to further agreement of the parties.114 Based on the incorporation of the arbitration rules into the arbitration agreement, two approaches to establishing the parties’ consent have developed in the jurisprudence and doctrine, ‘prioritizing either of the instruments for the assertion of the parties’ consent to counterclaims’.115 Both schools of thought operate under the foundational understanding that for counterclaims to be admitted

108 Kryvoi, supra note 6 at 250 (‘Unlike international treaties or international customary law, general principles of [international] law can provide for obligations of private parties. In the absence of specific provisions setting out obligations of investors in international treaties, these principles of law serve as an appropriate source of law to determine obligations of investors in investor–​state arbitration’). Among general principles of law that may give rise to counterclaims are prohibition from benefiting from one’s own fraud and unjust enrichment. 109 Kjos, supra note 92 at 150 (citing Case Concerning Oil Platforms, supra note 102 at fn. 311, Counter-​ Claim Order, Separate Opinion of Judge Higgins). 110  Douglas (2013), supra note 75 at 433. 111  Id. at 431, critiquing Saluka v. Czech Republic, supra note 19 for requiring ‘the identity of the source of the norms underlying the claim and counterclaim’. 112  It is axiomatic that consent is the cornerstone of any international tribunal’s jurisdiction. See ICSID Convention arts. 3, 25 & 46. 113  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 365–​66. 114  Id. 115  Id.

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III.  Counterclaims under the ICSID Convention they must be covered by the consent of the parties to the dispute, and thus fall within the tribunal’s jurisdiction.

1. Source of consent: two schools of thought The first reading, representing the dominant view, gives full precedence to the terms of the 17.38 treaty without giving any weight to the parties’ election of specific applicable arbitration rules and their relevant provisions. This approach is reflected in the majority decision of the Roussalis tribunal (Professors Andrea Giardina and Bernard Hanotiau), which held that ‘[u]‌nder the system created by the ICSID Convention, consent by both parties is an indispensable condition for the exercise of the Centre’s jurisdiction’ and the parties’ consent ‘must be determined in the first place by reference to the dispute resolution clause contained in the BIT’.116 As discussed in following sections, this approach looks at the broader question of whether, in principle, ‘counterclaims’ are allowed under the applicable IIA, but also whether the specific types of counterclaims fall within the tribunal’s subject matter jurisdiction. The second reading, attributed to the New Haven School of International Law,117 is encapsu- 17.39 lated in Professor Reisman’s dissenting opinion in Roussalis: in the context of ICSID arbitration, counterclaims need not fall within the scope of the parties’ consent as expressed in the investment treaty because when the state parties to an investment treaty ‘contingently consent, inter alia, to ICSID jurisdiction, the consent component of Article 46 of the Washington Convention is ipso facto imported into any ICSID arbitration which an investor then elects to pursue’.118 In other words, consent is established through the parties’ incorporation of the ICSID Convention, including Article 46. Under this approach, ‘Article 46 would expand or otherwise be considered an integral part of the treaty-​based consent to arbitration’.119 While Professor Reisman’s dissent does not provide any rationalization for his theory of ipso 17.40 facto importation of consent,120 his approach has been endorsed by several commentators121 and adopted by at least one ICSID tribunal in Goetz v Burundi.122 Professor Douglas expresses preference for Professor Reisman’s approach in laying out his reasons for his disagreement with the majority approach in Roussalis: The majority of the tribunal considered that in view of the tribunal’s limited jurisdiction over claims, it followed that “the BIT does not provide for counterclaims to be introduced by the host state in relation to obligations of the investor” because the “meaning of ‘dispute’ is the issuance of compliance by the State within the BIT.” This reasoning should not be endorsed. A limitation upon the scope of the host state’s consent to arbitration in respect of the investor’s claims does not necessarily apply to the host state’s counterclaims; indeed, there are compelling reasons militating against such a conclusion in the ICSID context, especially given that once a notice of arbitration is filed it must be the exclusive forum for resolving the dispute. Professor Reisman’s dissent on this point is to be preferred . . .123

116  Roussalis v. Romania, Award, supra note 31, ¶¶ 865–​66. See also Metal-​Tech v. Republic of Uzbekistan, ICSID Case No. ARB/​10/​3, Award (Oct. 4, 2013), ¶ 412 (‘Article 46 of the [ICSID] Convention was “in no way intended to extend the jurisdiction of the arbitral tribunal” ’). 117  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 358 and fn. 1. 118 Roussalis, supra note 31, Dissenting Opinion of W. Michael Reisman. 119 Bjorklund, supra note 7 at 472. 120 Jain, supra note 68 at 135–​47. 121  See Douglas (2013), supra note 75 at 433; Bjorklund, supra note 7 at 472; see generally M.N. Bravin & A.B. Kaplan, Arbitrating Closely Related Counterclaims at ICSID in the Wake of Spyridon Roussalis v. Romania, 9(4) TDM 1 [hereinafter Bravin & Kaplan]. 122  See Goetz, supra note 38, ¶¶ 278–​79. 123  Douglas (2013), supra note 75 at 433 (emphasis in the original) citing Roussalis, supra note 31, ¶¶ 868–​69.

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Counterclaims in Investment Treaty Arbitration Professor Douglas submits that the ‘[t]‌he host state’s consent to ICSID arbitration requires the full application of Article 47 [sic] insofar as it vests the tribunal with the power to adjudicate counterclaims with the required factual nexus to the dispute’.124 However, he neither explains how the parties’ consent to ICSID arbitration results in the ipso facto importation of consent to counterclaims nor provides an explanation for this conclusion that Article 46 ‘vests’ the tribunal with the power to adjudicate counterclaims that satisfy the required factual nexus.125 His earlier analysis placed the primary emphasis on a ‘general rule’ that ‘jurisdiction ratione materiae of an international tribunal extends to counterclaims unless expressly excluded by the constitutive instrument’,126 and he tentatively advocated for a narrower approach that echoed the Roussalis majority opinion.127 17.41 One justification for Professor Reisman’s approach is the parties’ implied consent to counter-

claims found in the parties’ election of ICSID jurisdiction itself.128 Mark Bravin and Alex Kaplan explain that: Both the ICSID Convention and the BIT must be construed and harmonized to correctly analyze the issue. Where a State has consented in the BIT to arbitrate treaty claims at ICSID, the investor’s acceptance of that consent necessarily constitutes agreement to arbitrate eligible claims as defined in the BIT and eligible counterclaims as defined in the ICSID Convention and Rules. The provisions authorizing respondents to assert counterclaims, and conferring jurisdiction on tribunals to adjudicate them, afford State parties to the Convention with a procedural and substantive right that may be considered an integral part of ICSID arbitration, no less so than other rights such as the provisions on interim measures. Further, in most instances in which States have included in a BIT their consent to ICSID arbitration, they already have ratified the ICSID Convention. Their consent to ICSID arbitration must be understood to incorporate all the provisions of the ICSID Convention and Rules. So, for the purpose of answering the question of implied consent by the investor to arbitrate closely related counterclaims at ICSID, the starting point is Article 46 of the Convention.129

17.42 Bravin and Kaplan endorse the approach taken by the Goetz v Burundi tribunal, which ‘con-

cluded that explicit consent to a counterclaim in an investment treaty was not necessary for that claim to be admissible—​an investor’s filing of a claim at ICSID is sufficient evidence of consent’.130 They argue that: There is support in the text of Article 46 for a default rule in favor of a finding of consent based on the investor’s affirmative decision to file his claim with ICSID. Article 46 provides for the arbitration of closely related counterclaims ‘[e]‌xcept as the parties otherwise agree.’ Absent such a contrary agreement, the presumption is that counterclaims will be arbitrable. That is why Article 46 uses mandatory language.131

  Id. 433.   See id. 126  Douglas (2012), supra note 2 at 256, ¶ 488. 127  Douglas (2013), supra note 75 at 433 and fn. 61. For example, Douglas argued that where ‘the consent to arbitration is expressed in narrow terms, such as in Articles 1116 and 1117 of NAFTA, which limited the scope of primary claims to a breach of an international obligation in Section A of Chapter 11’, the better approach is to delineate ‘the scope of counterclaims by the legal source of the primary claims’. The counterclaims would therefore be excluded in the context of Chapter 11. Douglas (2012), supra note 2 at 257, ¶ 489. 128  Bravin & Kaplan, supra note 121 at 1. 129  Id. at 6 (citing Roussalis v. Romania, Award, supra note 31, ¶ 865). 130  Id. at 5 (emphasis in the original). 131  Id. at 7 (emphasis in the original). 124 125

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III.  Counterclaims under the ICSID Convention However, by placing such emphasis on the provision “[e]‌xcept as the parties otherwise agree”, this argument perhaps takes insufficient account of the significance of the rule’s requirement that the counterclaims must fall within the parties’ consent.132 In contrast, Jean Kalicki maintains that the specific wording of Article 46 leads to the con- 17.43 clusion that the conditional clause ‘provided that [counterclaims] are within the scope of consent’ refers to an ‘extrinsic precondition to the tribunal’s hearing counterclaims’133 or requires establishing consent via an external source. For this reason, Jean Kalicki concurs with the approach of the majority in Roussalis that: [A]‌claimant’s mere filing at ICSID is insufficient in and of itself to create consent to counterclaims is more intellectually robust; the majority reasoned that ‘the scope of the consent’ of the parties referenced in Article 46 must be determined by reference to instruments external to the Convention, such as by the dispute resolution clause contained in the BIT.134

However, this may not address the implication of the Reisman approach that a BIT’s provi- 17.44 sion for ICSID arbitration constitutes such an external source of consent. An earlier analysis by Jean Kalicki suggested yet another approach: that both a treaty provision incorporating the ICSID rules135 as well as the provision describing the scope of disputes136 ‘should be presumed to have meaning’, applying ‘the principle of effective interpretation’.137 This can be seen as an issue of ‘conflicts within treaties’.138 Although their position was later misinterpreted,139 Jean Kalicki and Mallory Silberman did not provide their view on how the two

132  See Jain, supra note 68 at 143. According to Jain, if article 9(1) of the Greece–​Romania BIT is ‘presumed to mean what it plainly says, then application of Bravin and Kaplan’s underlying principle of harmonious interpretation supports the Roussalis tribunal’s decision’. See id. at 144. 133  J. Kalicki, ‘Counterclaims by States in Investment Arbitration’, Investment Treaty News (14 Jan. 14, 2013) 3 (emphasis in the original) (‘It is worth recalling the bedrock notion that States’ ratification of the Convention does not itself provide their consent to jurisdiction over any particular dispute; rather, consent for any particular claim must be sourced to a writing other than the Convention, such as a treaty, contract, or national legislation. If that is the case for the investor’s claims, why not also for the State’s counterclaims? Stated otherwise, if Article 46 itself provided that consent, then its incorporated requirement of consent (“provided they are within the scope of consent”) would be entirely circular and extraneous’). 134  Id. at 3. 135 In Roussalis, the relevant provision provided that the dispute can be referred to international arbitration, and the investor concerned may submit the dispute either to ICISD or an ad hoc tribunal to be established under the UNCITRAL Arbitration Rules. See Roussalis, supra note 31, ¶ 43 (citing art. 9(3) of the Greece–​Romania BIT). 136  Id. In Roussalis, the relevant treaty provision read: ‘Disputes between an investor of a Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement, in relation to an investment of the former, shall, if possible, be settled by the disputing parties in an amicable way’. 137  Kalicki & Silberman, supra note 61 at 13. Kalicki and Silberman critiqued the majority in Roussalis for overemphasizing the requirement ‘within the scope of the consent of the parties’ as the operative language; and they found that Romania overemphasized the provision ‘except as the parties otherwise agree’. See id. Romania argued that ‘the phrase “[e]‌xcept as the parties otherwise agree” created a presumption in favour of jurisdiction that could only be overcome by an explicit treaty provision excluding counterclaims. The majority treated “within the scope of the consent of the parties” as the operative phrase, and held that the limited dispute resolution offer in Article 9 of the Greece–​Romania BIT did not itself contemplate counterclaims’. Kalicki suggests that the BIT provisions incorporating the ICSID Rules on the one hand and providing for narrower disputes relating to the obligations of the host State must be reconciled through effective interpretation, thereby ‘both clauses should be presumed to have meaning . . . ’. See id. 138 Jain, supra note 68 at 141. Jain suggests that the Roussalis majority decision, unlike the dissent, ‘maintains the effect of both art. 46 of the ICSID Convention as well as art. 9(1) of the BIT’. See id. 144. 139  It was suggested that Kalicki and Silberman were arguing that art. 9(2) in the Greece–​Romania BIT, at issue in Roussalis (referring to ICSID arbitration), provides consent and the language of art. 9(1) (referring only to obligation of the state) ‘is inadequate to satisfy the requirement of [sic] consent displacing agreement’. Jain, supra note 68 at p. 143. As explained, Kalicki and Silberman, however, did not express this view.

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Counterclaims in Investment Treaty Arbitration clauses in the Greece–​Romania BIT at issue in Roussalis could be reconciled though the principle of effective interpretation. They focused on examples where the conflicting provisions were found in more than one document (i.e. not a conflict within a treaty). For example, in a situation where the treaty is broad enough to encompass counterclaims, but a concession agreement provides that the breach of the agreement will proceed to a non-​ICSID forum, that is, national courts, they argue that the second, more specific agreement between the parties precludes these concession agreement claims from the broader jurisdiction of the BIT.140 17.45 The principle of effet utile is certainly relevant to the interpretation of provisions that appear to

be conflictual, but in the instance of the BIT’s reference to ICSID arbitration, the conflict is arguably not present. While the parties’ submission of arbitration to ICSID certainly results in their acceptance of the application of the ICSID Conventions and Rules to the proceedings, such ‘acceptance, however, could be construed as implied consent to counterclaims only to the extent they fulfill the criteria set out in Article 46’.141 Article 46 in turn requires determining the basis for the tribunal’s authority to hear counterclaims in the parties’ agreement to settle their investment disputes. This approach is consistent with the ICSID Convention’s travaux préparatoires that Article 46 did not intend to ‘extend the jurisdiction of the arbitral tribunal’.142 Article 46, however, intended to acknowledge and provide for the tribunal’s power, as a general rule, to hear counterclaims.143 This factor is particularly relevant in the context of the vast majority of treaties that do not expressly refer to the tribunal’s power to hear counterclaims. In light of the travaux préparatoires and the emphasis placed on the prerequisite nature of consent in Article 46, the approach of establishing the parties’ consent in the terms of applicable IIA may be more appropriate.144 With this approach in mind, it is worthwhile to consider the guiding principles in deciding whether the parties’ consent covers counterclaims.

2. Relevant factors in establishing the parties’ consent in the IIA 17.46 When the source of the ICSID tribunal’s jurisdiction is a contract, and the dispute revolves around that contract, it has generally been undisputed that a respondent state’s counterclaim comes within the provisions of Article 46.145 However, in the context of a treaty-​based offer of ICSID arbitration, the issue of consent to encompass counterclaims has raised many challenges.146 As will be discussed, the views of different scholars and practitioners have often changed underscoring the difficulty of ascertaining what exactly is needed in order to demonstrate that the parties have consented to counterclaim jurisdiction. Certainly, ‘the terms of the consent given in the BIT must be carefully scrutinized to determine whether they are intended to cover counterclaims’.147 There are three aspects of treaty text that aid in establishing whether the parties’ consent encompasses counterclaims:  (1) direct or indirect references to counterclaims, (2) the scope of jurisdiction ratione materiae granted to the tribunal, and (3) the standing granted to parties to initiate the proceedings.148

  Kalicki & Silberman, supra note 61 at 13.   Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 367 (supporting the view that ‘a limitation to the types of ‘claims’ available to the claimant should not automatically ban counterclaims, for the parties did agree to arbitrate the whole dispute’, but contending that ‘this does not take counterclaims from the real of jurisdictional enquiry’). Id. 142  Id. 143 Jain, supra note 68 at 138. 144  See also Rivas, supra note 9 at 25 (‘Reliance on the ordinary meaning of the terms in the BIT might be an avenue that other tribunals follow to prevent an annulment of their awards on the basis of exceeding the scope of their competency’). 145  Kalicki & Silberman, supra note 61 at 10. 146  Id. 147  Lalive & Halonen, supra note 77, ¶ 7.18 (emphasis in the original). 148  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 367. 140 141

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III.  Counterclaims under the ICSID Convention (a)  References to counterclaims  An express reference to the state’s right to bring counterclaims would of course avoid any am- 17.47 biguity. However, very few treaties explicitly allow counterclaims (the one often cited being the COMESA Investment Agreement of 2007).149 There are many more treaties that address the issue of counterclaims in an implicit manner—​ 17.48 by excluding a particular type of counterclaim. Most commonly, BITs exclude certain counterclaims based on the recovery of the investor’s loss through a guarantee or insurance agreement.150 It can be argued that such explicit exclusion of some types of counterclaims a contrario admits that ‘other types of counterclaims are admissible under the particular IIA’.151 For example, Article 24(7) of the United States–​Uruguay BIT, reflecting the provisions of the 2004 Model US BIT, provides in a clause on collateral source of compensation: ‘A respondent may not assert as a defense, counterclaim, right of set-​off, or for any other reason that the claimant has received or will receive indemnification or other compensation for all or part of the alleged damages pursuant to an insurance or guarantee contract’.152 This clause provides that the host state may not raise as a defence or counterclaim the fact that the investor has received partial or total compensation under an insurance or guarantee programme. It is arguable that its express exclusion of some counterclaims acknowledges in principle that the state has a right to bring other counterclaims. However, as will be discussed, such provision may not be capable of overcoming an otherwise narrowly worded offer to arbitrate.

(b)  Scope of jurisdiction ratione materiae (i)  Scope of arbitrable disputes  Absent an express provision allowing respondent state counterclaims, the inquiry has focused 17.49 on the ‘breadth’ of the scope of types of disputes expressly stated in the treaty to be arbitrable. Generally, a broad definition of disputes in the investment treaty, such as ‘all disputes arising out of an investment’,153 ‘all disputes relating to the investment’, or even ‘any dispute’ are ‘counterclaim-​friendly’.154 As seen earlier, similar provisions have been found broad enough to encompass counterclaims by the tribunals in Saluka v Czech Republic and Paushok v Mongolia. The rationale is that these provisions allow for claims based on domestic law, contracts, or investment authorizations in addition to the obligations set out in the BIT itself, subject to other potential limitations in the treaty that might exclude altogether any claims other than those based on the treaty protections.155 As discussed later, the legal basis for a counterclaim does not have to be identical to the legal basis for the primary claim. A more problematic provision is one like that which caused the tribunal in Roussalis to de- 17.50 cline jurisdiction over Romania’s counterclaim. That provision defined arbitrable disputes

149  Common Market for Eastern and Southern Africa (COMESA) Investment Agreement (2007), art. 28(9). See, e.g., Bjorklund, supra note 7 at 467; Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 17; Rivas, supra note 9 at 32, nn. 102–​103. The 2012 Model BIT for the Southern African Development Community also provides for counterclaims. 150  Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 17 151  Id., supra note 1 at 18. For various examples of the provision see Table No. 1 in id. at 18–​21. 152  United States–​Uruguay BIT (2005) art. 24(7). A similar provision can be found in the Ecuador–​U.S. BIT. See United States–​Ecuador BIT (1993) art.VI(7) (‘In any proceeding involving an investment dispute, a Party shall not assert, as a defense, counterclaim, right of set-​off or otherwise, that the national or company concerned has received or will receive, pursuant to an insurance or guarantee contract, indemnification or other compensation for all or part of its alleged damages’). 153  Douglas (2012), supra note 2 at 256, ¶ 488 (‘Where the consent of the contracting state parties to investor/​state arbitration in an investment treaty is couched in broad terms, there is nothing in principle to exclude a tribunal’s ratione materiae jurisdiction over counter-​claims by the host state’). 154  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 371. 155  Id. at 371.

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Counterclaims in Investment Treaty Arbitration as ‘[d]‌isputes between an investor of a Contracting Party and the other Contracting Party concerning an obligation of the latter under this Agreement, in relation to an investment of the former’.156 Applying the principles of interpretation under the Vienna Convention (and construing the text in good faith and ‘by taking into account the consequences of the commitments the parties may be considered as having reasonably and legitimately envisaged’157), the tribunal considered that this clause ‘limit[s] jurisdiction to claims brought by investors about obligations of the host State’, and accordingly excludes any counterclaims as they necessarily would have to be based upon obligations other than those of the host state. Some commentators agree that ‘[s]uch narrow definition of a dispute is an obstacle to the assertion of counterclaims in practice’.158 17.51 This view, however, has been challenged. Professor Douglas points out, for example, that ‘[a]‌

limitation upon the scope of the host state’s consent to arbitration in respect of the investor’s claims does not necessarily apply to the host state’s counterclaims’.159 According to his ‘factual nexus’ approach, which also requires ipso facto importation of consent based on the parties’ agreement to submit to ICSID arbitration, the tribunal is vested with the power to adjudicate counterclaims having the requisite factual nexus to the dispute out of which the main claims arise.160 But, as discussed, this view would not be consistent with the view that rejects the ipso facto importation of consent approach in the ICSID context.

17.52 Arbitral practice has not been conclusive on this issue. As noted earlier, while the tribunal in

Goetz v Burundi adopted Professor Reisman’s approach, the BIT at issue there itself was amenable to counterclaims.161 It defined disputes as ‘concerning: . . . (b) the interpretation or application of any investment authorization granted by the authorities of the host country governing foreign investments’,162 which is arguably broader than the IIA provision at issue in Roussalis. In Hamester v Ghana, the tribunal noted that the Germany–​Ghana BIT limited arbitral jurisdiction to disputes ‘concerning an obligation of [one Contracting Party] under this Treaty in relation to an investment of [a national or company of the other Contracting Party]’, but also recognized that states may be ‘aggrieved’ and ‘shall have the right to refer the dispute to arbitration’.163 The tribunal did not analyse these provisions because it found that the counterclaims were not sufficiently particularized.164

(ii)  Law applicable to the merits of an investment dispute

17.53 The law applicable to the merits of an investment dispute may also be relevant to the deter-

mination of the parties’ consent to hear counterclaims, and goes more specifically to the legal bases for counterclaims.165 Most BITs do not contain express terms on applicable law.166 But

 Roussalis, supra note 31, ¶ 868.   Id. ¶¶ 867, 869 (internal citations omitted). 158  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 372. 159  Douglas (2013), supra note 75 at 433 (emphasis in the original). 160  Id., supra note 75 at 433. 161  See Rivas, supra note 9 at 23–​24. 162 Goetz, supra note 38, ¶ 140 (citing Belgo–​ Luxembourg–​Burundi Convention art. 8(1) (translation) (original text in French: ‘Pour l’application du présent article, un différend relatif à un investissement est défini comme un différend concernant:  . . .  (b)  l’interprétation ou l’application de toute autorisation d’investissement accordée par les autorités de l’Etat hôte régissant les investissements étrangers’). 163  Gustav F.W. Hamester GmbH & Co. K.G. v. Republic of Ghana, ICSID Case No. ARB/​07/​24, Award (June 18, 2010), ¶¶ 354–​54. 164  Id. ¶ 355. See also Popova & Poon, supra note 5 at 229–​30. 165  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 373. 166  See Y. Banifatemi, The Law Applicable in Investment Treaty Arbitration, in Arbitration Under International Investment Agreements:  A Guide to the Key Issues 197, 200 (Katia Yannaca-​Small ed.,  2010) [hereinafter Banifatemi]; Kryvoi, supra note 6 at 236 and fn. 130 (citing Antonio R. Parra, 156 157

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III.  Counterclaims under the ICSID Convention when a BIT does contain such a provision and also defines the scope of arbitrable disputes broadly, the relevant applicable law clause may be relevant in establishing the legal bases for counterclaims.167 There are instances where the law applicable to the dispute is stated to include the terms of in- 17.54 vestment contracts and/​or the provisions of the domestic law of the host state in addition to international law.168 Indeed, unless the BIT states otherwise, domestic law is always applicable in ICSID arbitrations by operation of Article 42 of the ICSID Convention, which provides for the application of domestic law as well as international law.169 These circumstances may provide a broader basis for counterclaim jurisdiction by affording an 17.55 express legal source for counterclaims,170 possibly ‘rendering counterclaims generally available’.171 The relevance of applicable law was addressed expressly in Roussalis v Romania. The tribunal 17.56 declined jurisdiction over the counterclaims, alleging breaches of domestic law because domestic law was not included in the applicable law provision of the BIT.172 The Roussalis

Applicable Law in Investor–​State Arbitration, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 3, 7–​8 (Arthur Rovine ed., 2007). 167  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 373–74. 168  See, e.g., Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic (1991) art. 8(6) (‘The arbitral tribunal shall decide on the basis of the law, taking into account in particular though not exclusively: the law in force of the Contracting Party concerned; the provisions of this Agreement, and other relevant Agreements between the Contracting Parties; the provisions of special agreements relating to the investment; the general principles of international law’); Agreement between France and the Dominican Republic concerning the Encouragement and Reciprocal Protection of Investments (2003) art. 7 (‘The arbitration is to be resolved on the basis of the provisions of this agreement, the provisions of special agreements relating to the investment, as well as the general principles of international law’ (translation) (original text in French: ‘L’arbitrage est rendu sur le fondement des dispositions du présent accord, sur les termes d’éventuels accords particuliers passés au titre de l’investissement ainsi que sur les règles et principes du droit international en la matière’). 169  ICSID Convention art. 42(1) (‘The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable’). See Banifatemi, supra note 166 at 200–​204 (discussing determination of the applicable law by the arbitrators in the absence of the parties’ agreement); see id. at 204 (‘[E]‌ach of the second sentence of Article 42(1) [of the ICSID Convention], Article 33 of the UNCITRAL Arbitration Rules or Article 22(1) of the Arbitration Rules of the Stockholm Chamber of Commerce, which enable arbitral tribunals, in the exercise of their discretion and pursuant to a choice of law inquiry, to decide what rules of law (international or domestic) is the most appropriate to the determination of each specific question’). But see Lalive & Halonen, supra note 77, ¶ 7.31 (‘Where the BIT does not specify any applicable law, the default rule is that the lex specialis is the BIT itself, and counterclaims are likely to fall outside a tribunal’s jurisdiction’); id. at fn. 31 (‘The ICSID Convention (Article 42) provides that the applicable law is the one agreed by the parties. In the absence of such agreement, the laws of the host state together with applicable rules of international law would govern, but in the case of BIT arbitration, the BIT constitutes the agreement on applicable law’). 170  For a detailed description of applicable law and different types of counterclaims, see Kryvoi, supra note 6 at 216–​52. 171  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 375. 172  Id. at 373; Roussalis, supra note 31, ¶¶ 871–​ 72. Article 9(4) of the Greece–​Romania BIT provides, in respect of the applicable law, that: ‘The arbitral tribunal shall decide the dispute in accordance with the provisions of this Agreement and the applicable rules and principles of international law . . .’. See id. ¶ 870. See also Amto L.L.C. v. Ukraine, SCC Case No. 080/​2005, Award (Mar. 26, 2008). The tribunal in Amto v. Ukraine, operating under the rules of the Stockholm Chamber of Commerce, noted that: ‘[t]‌he jurisdiction of an Arbitral Tribunal over a State party counterclaim under an investment treaty depends upon the terms of the dispute resolution provisions of the treaty, the nature of the counterclaim, and the relationship of the counterclaims with the claims in the arbitration’. See id. ¶ 118. Observing that the Energy Charter Treaty ‘provides for the application of the treaty itself and “the applicable rules and principles of international law”, it dismissed the counterclaim for lack of basis in law: “The Respondent has not presented any basis in this applicable law for a claim of non-​material injury to reputation based on the allegations made before an Arbitral

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Counterclaims in Investment Treaty Arbitration tribunal reasoned that:  ‘the [Greece–​Romania] BIT imposes no obligations on investors, only on contracting States. Therefore, where the BIT does specify that the applicable law is the BIT itself, counterclaims fall outside the tribunal’s jurisdiction’.173 It further explained that ‘in order to extend the competence of a tribunal to a state counterclaim, “the arbitration agreement should refer to disputes that can also be brought under domestic law” ’.174 17.57 However, counterclaims based on violations of domestic law may also fail for a different

reason: non-​compliance with domestic law is often to be raised as a jurisdictional objection in treaties that require that investments be made in accordance with domestic laws.175 Thus, if an investment is made in violation of the host state’s domestic law, the tribunal will not have jurisdiction over the investor’s claim and, therefore, no jurisdiction over the host state’s counterclaim based on that violation.176 In Metal-​Tech v Uzbekistan, under the Israel–​Uzbekistan BIT providing for the arbitration of ‘any legal dispute arising between the Contracting Party and a national or company of the other Contracting Party concerning an investment’,177 the tribunal found that, because the claimant’s investment had not been made in accordance with host state’s laws, there was no ‘investment’ within the terms of the treaty. As a result, the tribunal held that consent was lacking not only for purposes of supporting jurisdiction over the claims, but also over the counterclaims. Thus, a jurisdictional objection may be interposed at the expense of the possibility of maintaining a counterclaim.

17.58 Finally, the issue of subject matter jurisdiction as it concerns the legal bases for claims and

counterclaims overlaps to some extent with the requirement of sufficient connection between the counterclaim and the subject matter of the dispute.178 For example, the tribunal in Saluka v Czech Republic dismissed some of the counterclaims raised by the respondent state because they did not meet the requisite level of legal connectivity. However, Professor Kjos argues that the tribunal could have ‘without referring to the requirement of connexity, . . . dismiss[ed] the non-​contractual counterclaim for lack of jurisdiction on the basis that it did not concern an investment as required by article 8 of the Treaty but rather the alleged non-​compliance of the investor with [general domestic laws]’.179 Moreover, it has been suggested that a sufficient connection between the primary claim and a counterclaim may overcome the treaty’s limited

Tribunal. Accordingly, the Arbitral Tribunal finds that there is no basis for a counterclaim of this nature and it is accordingly dismissed” ’. See id. ¶ 118. 173 Roussalis, supra note 31, ¶ 871. 174  Id. (citing  Lalive & Halonen, supra note 77, ¶ 7.19). 175  See Popova & Poon, supra note 5 at 235–​37. 176  This principle was firmly followed by the Iran–​U.S. Claims Tribunal, which held that: ‘[i]‌n the absence of jurisdiction over the claim it is by now well established in the Tribunal’s jurisprudence that any counterclaim which depends upon it must likewise fail’. Bendone-​Derossi International and Government of the Islamic Republic of Iran, Award No. 352-​375-​1 ITM at para.16 (Mar. 10, 1998) (citing William Bikoff and George Eisenpresser and Islamic Republic of Iran, Award No. 138-​82-​2 at 11 (June 29, 1984), reprinted in 7 Iran–​U.S. C.T.R. at 7). 177  See Metal-​Tech v. Republic of Uzbekistan, ICSID Case No. ARB/​10/​3, Award (Oct. 4, 2013), ¶¶ 411–​ 13 (‘In other words, the State’s offer to arbitrate did not extend to this “non-​investment” and the investor’s acceptance included this limitation . . . As a consequence of its having no jurisdiction over the claims, this Tribunal has no jurisdiction over the counterclaims’). See also Fraport AG Frankfurt Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/​11/​12, Award (Dec. 10, 2014), ¶ 468 (having found that the claimant violated the Philippines’ ‘anti-​dummy’ law at the time its investment was made and concluded that as a result the investment failed to satisfy the treaty’s legality requirement, the tribunal found that: ‘there is no legal dispute arising out of, or a divergence concerning, an “investment” and, moreover, the Respondent has not consented to the arbitration of Claimant’s claims with respect to its investment . . . It also follows that the Tribunal lacks jurisdiction over Respondent’s counterclaims in view of their necessary connection with the subject matter of the dispute pursuant to Article 46 of the ICSID Convention’). 178  See Kjos, supra note 92 at 151–​52. 179  Id. at 152.

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III.  Counterclaims under the ICSID Convention legal bases for counterclaims. As noted, the tribunal in Oxus v Uzbekistan, operating under the 2010 UNCITRAL Rules, which, as will be discussed, contains a counterclaim provision similar to ICSID Article 46, recognized that a counterclaim may be still allowed through a ‘possible exception’ to the limited scope of arbitrable disputes under the treaty if it ‘ha[s]‌a close connection with the investor’s claims’.180 Professor Douglas appears to advocate this approach: as long as the ‘factual matrix [on which 17.59 the counterclaims relies] directly relates to the dispute between the parties concerning the investment in question, the legal basis for the host State’s counterclaim could be a contractual obligation, a domestic regulatory obligation and so on’.181 Thus, Professor Douglas’ ‘factual nexus’ approach would allow for counterclaims that are not necessarily based on the law described by the BIT as applicable, a limitation that so far has posed the largest hurdle in allowing counterclaims formulated under domestic laws.182 It would expand possible legal bases for counterclaims beyond the permissible legal bases for claims provided for in the BIT.183 Professor Douglas, however, does not relate this approach to the requirement of Article 46 that the counterclaim must fall within the parties’ consent established externally to Article 46. There thus remains a potential barrier to such an expansive approach.

(c)  Standing to initiate proceedings  The third factor possibly relevant in ascertaining the parties’ consent is whether the treaty pro- 17.60 vides locus standi to the state to bring a claim.184 Treaty practice on this varies. For example, treaties that provide that the dispute ‘shall be submitted to arbitration by either party to 180  Oxus Gold, supra note 14 ¶ 948. The tribunal tentatively accepted this possibility but dismissed the state’s counterclaims based on and subject to Uzbek law. See id. ¶¶ 952–​58. 181  Douglas (2013), supra note 75 at 433. He also accepts that ‘in all cases the content of the arbitration agreement is best defined as the acceptance of an offer to arbitrate the dispute relating to a covered investment in accordance with the rules set out in the investment treaty and the applicable arbitration rules’. Id. at 429–​30. 182  Until the award in Burlington v. Ecuador, there were no other successful counterclaims based on domestic law. See Burlington v.  Ecuador, supra note 44, ¶¶ 1075–​86; Rivas, supra note 9 at 30. While in Burlington the parties agreed to settle Ecuador’s counterclaims through the ICSID arbitration brought under the U.S.–​Ecuador BIT, the BIT itself may have been open to counterclaim jurisdiction. U.S.–​Ecuador BIT, art. VI(1) (describing an investment dispute as ‘a dispute between a Party and a national or company of the other Party arising out of or relating to (a) an investment agreement between that Party and such national or company; (b) an investment authorization granted by that Party’s foreign investment authority to such national or company; or (c) an alleged broach of any right conferred or created by this Treaty with respect to an investment’). However, the BIT did not specify that domestic law was applicable to the resolution of disputes. 183  This approach resonates with some municipal laws. For example, under the U.S. federal rules of procedure, the counterclaim must arise ‘out of the transaction which is the subject matter’ of the plaintiff’s suit, and ‘the jurisdiction over the suit is sufficient also for the counterclaim, so that the counterclaim may be pleaded even though, had it been prosecuted as an independent action, it would not have been cognizable in the federal courts’. H. Shulman & E.C. Jaegerman, Some Jurisdictional Limitations on Federal Procedure, 45 Yale L. J. 410 (1936). 184  According to Atanasova, Martínez Benoit & Ostřanský (2012) a State party’s standing to initiate claims is helpful in recognizing the right to bring counterclaims:

As an illustration of the importance of different locus standi provisions for the purposes of counterclaims, the Iran–​U.S. Claims Tribunal’s view on official counterclaims (between States—​Article II.2.), as opposed to counterclaims brought against individuals (pursuant to Article II.1.) is of great interest. In Iran–​United States case, the U.S. as a respondent argued that there is a general customary international law right to counterclaim as far as disputes between States are concerned. The Tribunal ruled that official counterclaims are allowed as a general rule, assuming that the other conditions are met. The tribunal argued that even though counterclaims are not specifically mentioned in the provision, the States under Article II.2. are on equal footing as any of them can always initiate new proceedings. Thus, counterclaims are allowed as a matter of efficiency and fairness. The need for an explicit mention of counterclaims in Article II.1. is explained, on the other hand, by the fact that it is only an individual or an entity that can bring a main claim under this provision.

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Counterclaims in Investment Treaty Arbitration the dispute’ are clearly more capable of supporting counterclaim jurisdiction.185 However, treaties that identify as potential claimants only the investors arguably present a barrier to counterclaims. For example, the Energy Charter Treaty provides that ‘the investor Party to the dispute may choose to submit [the dispute to arbitration]’.186 Another example is the US–​Uruguay BIT, which gives the right to initiate arbitral proceedings to the ‘claimant’, defined as ‘an investor . . . party to an investment dispute’.187 17.61 Provisions that only recognize investors as potential claimants, and also narrowly define the

scope of arbitrable disputes, may more readily be seen as inconsistent with an interpretation that the contracting states have provided for consent to counterclaims.188 However, it has been submitted that, in the absence of additional limiting language (i.e. a narrowly worded dispute settlement clause), a one-​sided locus standi cannot be construed as necessarily excluding counterclaims.189 First, a one-​sided locus standi provision could simply be interpreted as underlining the host state’s willingness and unequivocal consent to arbitrate investor claims.190 Secondly, some commentators have suggested that any ambiguity should be resolved by taking into account the ‘systemic and policy implications of state counterclaims’, including efficiency considerations.191 This approach has further been justified by what some see as a rebuttable presumption under the ICSID Convention that, as a general rule, counterclaims are admissible.192

(d)  Inviolability of the state’s standing offer in a BIT to arbitrate 

17.62 Some discussion in the literature has taken place on whether a claimant can effectively limit

the scope of the parties’ consent in the manner in which it accepts the state’s standing offer to arbitrate as set out in the BIT. Christoph Schreuer submits in his Commentary on the ICSID Convention: If the investor accepts the offer [to arbitrate contained in a BIT] only in respect of its specific claim, consent will be restricted by the terms of the acceptance. If the investor accepts the offer of jurisdiction by instituting proceedings, consent exists only to the extent necessary to deal with the investor’s request. But if a counterclaim of the State is closely connected to the investor’s complaint, it is arguable that it will be covered by the mutual consent of the parties.193 Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 15–1​6 (citing Iran v. United States, Case No. B1, Iran–​USCT, Interlocutory Award (Sept. 9, 2004), ¶ 89 and Iran v. United States, Iran–​USCT, Case No. A/​2, Decision (Jan. 13, 1982), ¶ II.B). 185  Germany–​Ghana BIT (1995) art. 9(2); France–​Dominican Republic BIT (1999) art. 7(2). 186  Energy Charter Treaty (1994) art. 26(2). 187  U.S.–​Uruguay BIT, Section A, ‘claimant’. See also 2012 U.S. Model BIT. 188  See Kjos, supra note 92 at 141 (‘This leads to the conclusion that whereas the sole reference to the investor’s locus standi would not necessarily be conclusive with regard to the inadmissibility of counterclaims, the combined features of a limited jurisdiction ratione personae and a limited jurisdiction ratione materiae will have such effect’). 189  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 370 (referring to the 2012 U.S. Model BIT: ‘If a treaty is silent on the range of disputes capable of resolution by arbitration and only the investor’s “claims” are envisaged expressly in it, it is reasonable not to exclude counterclaims on this basis alone’). See id. at 377 (‘In view of the uncertain tenure of reserving the right to initiate proceedings only to investors, and due to the specific structure of investment treaty arbitration, it would be too strict a reading to discard the possibility of counterclaims by a host state on this basis alone’). 190 Kjos, supra note 92 at 140–​41. Kjos points out that: ‘Moreover, in practice, such treaties do not differ very much from those in which the host state may also institute proceedings, as the separate consent of the investor is always required. In fact, whereas a narrow definition of investment disputes tends to dovetail with a limited locus standi, a broad definition of arbitrable claims does not always go hand in hand with a reference to the right of the host state to present claims against the investor in the sense of the U.S.–​Estonia BIT quoted earlier’. See id. at 141. 191  See Popova & Poon, supra note 5 at 230. 192  See Jain, supra note 68 at 138. 193  Schreuer et al., supra note 80 at 756.

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III.  Counterclaims under the ICSID Convention However, as pointed out by Professor Douglas, this view may be seen as ‘too restrictive’.194 He 17.63 reasons that: ‘[i]‌f consent were limited to the lowest common denominator represented by the precise formulation of a “specific claim” by the investor, then the arbitral tribunal’s power to order provisional measures would also have to be excluded by this logic’.195 While admitting that certain BITs do use the more restrictive language of ‘claims’ rather than ‘disputes’,196 he advocates that in all cases ‘the content of the arbitration agreement is best defined as the acceptance of an offer to arbitrate the dispute relating to a covered investment in accordance with the rules set out in the investment treaty and the applicable arbitration rules’.197 Similarly, Lalive and Halonen rebuff the view that the investor can limit the scope of consent: The investor cannot pick and choose from the dispute resolution provision of a BIT, just like it cannot pick and choose from other provisions of the investment agreement. A BIT is not an à la carte selection of provisions among which the investor can choose—​deciding, for example, to arbitrate its own expropriation claim but not the state’s ‘essential security interests’ defence. The offer to arbitrate in a BIT’s dispute resolution provision can only be accepted according to its own terms. If those terms provide an opportunity for the state to introduce counterclaims, then an investor cannot exclude this possibility by wording its acceptance of the offer narrowly.198

The recent ICSID tribunal decision in Urbaser v Argentina added support for this principle 17.64 in the context of Article 46 of the ICSID Convention: ‘when allowing additional claims or counterclaims which fall “within the scope of the consent of the parties”, this provision “does not open the door for any unilateral determination of the Tribunal’s competence” ’.199 The tribunal reiterated the principle that, when the investor accepts the state’s offer under the BIT, it accepts the exact scope of the offer as defined in the BIT.200

D. Counterclaims Otherwise Within ICSID’s Jurisdiction Article 46 also requires that the host state’s counterclaim must be ‘otherwise within the jur- 17.65 isdiction of the Centre’.201 The requirements for the Centre’s jurisdiction are set out in Article 25 of the ICSID Convention: (1) a written consent of the parties to the jurisdiction of the Centre, (2) the parties’ dispute must arise out an investment and (3) must be a legal dispute (4) between an investor of an ICSID state party and an ICSID state party.202 In addition, because ICSID has jurisdiction only over legal disputes arising directly out of an investment, the claimant ‘must demonstrate that the case concerns an investment both within the meaning of the BIT and within the meaning of the ICSID Convention’.203 Thus, a counterclaim may also have to meet all of these requirements.   Douglas (2013), supra note 75 at 429.   Id. 196  Id. 197  Id. 429–​30. 198  Lalive & Halonen, supra note 77, ¶ 7.30. See also Douglas (2012), supra note 2 at 258, ¶ 491 (‘[I]‌f the host state party’s standing offer to arbitrate in the investment treaty in expressed in terms of all disputes arising out of an investment’, then Article 46 of the ICSID Convention merely confirms the general principle in Rule 26 by emphasizing the need for a nexus between the counterclaim and the subject-​matter of the dispute’). 199 Urbaser, supra note 43, ¶ 1147. 200  Id. 201  ICSID Convention art. 46 (emphasis added). 202  ICSID Convention art. 25(1) (‘The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre. When the parties have given their consent, no party may withdraw its consent unilaterally’) (emphasis added). 203 K.J. Vandevelde, Bilateral Investment Treaties, History, Policy, and Interpretation 133 (2010). 194 195

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Counterclaims in Investment Treaty Arbitration 17.66 For example, the requirement that the dispute must arise out of an investment has created

an additional hurdle for the admission of counterclaims.204 In Amco v Indonesia, the tribunal dismissed the state’s counterclaim on the ground that it did not satisfy the requirement for ICSID jurisdiction. Indonesia counterclaimed based on the alleged tax fraud committed by Amco. The ICSID tribunal agreed that tax claims ‘may be within ICSID’s jurisdiction and that claims in relation thereto would be available to both parties to an investment dispute’.205 However, the ICSID tribunal rejected its jurisdiction ratione materiae over Indonesia’s counterclaim because it did not fall within Article 25(1) of the ICSID Convention. In this case, ‘[t]‌he obligation not to engage in tax fraud is clearly a general obligation of law in Indonesia. It was not specially contracted for in the investment agreement and does not arise directly out of the investment’.206 But the tribunal added a caveat: ‘unless the general law generates an investment dispute under the Convention’ so that it ‘arises directly out of an investment’.207 As pointed out by Professor Douglas, the Amco tribunal thus ‘did not rest solely upon the general law nature of the legal obligation forming the basis of the counterclaim’.208

E. Conclusion 17.67 It is fair to say that there remain significant divergences of opinion concerning the circum-

stances under which counterclaims may be said to satisfy the tests set out in Article 46 of the ICSID Convention. First, exactly what constitutes the subject matter of the dispute, out of which the counterclaim must arise, is avidly debated. Can the subject matter of the dispute be conceived as of as any ‘matters directly relating to the investment’209 out of which the dispute arose, or at least such of those matters as share a ‘factual nexus’ with that dispute?210 Or must the legal source of the counterclaim be the same as the source of the primary claim, especially in light of express language in the BIT limiting the scope of disputes and/​or the class of potential claimants? Secondly, does a counterclaim automatically fall within the scope of the parties’ consent by operation alone of the parties’ submission to ICSID arbitration, that is, by way of an ipso facto importation of consent? Or may the fate of the counterclaim be determined by the BIT’s limitations on the scope of the dispute raised by the main claims, possibly implicating the factors of (1) direct or indirect references to counterclaims in the treaty; (2)  the scope of jurisdiction ratione materiae granted to the tribunal; and (3)  the state’s standing to bring claims or initiate proceedings. In addition, should any ambiguity in the scope of the tribunal’s intended jurisdiction be construed to favour counterclaim jurisdiction, since Article 46 states the tribunal’s general power to hear counterclaims? Finally, Article 46 also requires that the counterclaim otherwise fall within ICSID’s jurisdiction, that is, satisfy the conditions of ICSID Article 25, including its requirement that the parties’ dispute arise out of an investment. While the latter requirement may overlap with the requirement that the counterclaim arise out of the subject matter of the dispute, it is clear that this element reads into the jurisdictional question the further requirements of ICSID Article 25 relating to written consent, the legal nature of the dispute, and nationality and ICSID membership.

  Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 8.  Amco, supra note 15 at 187, ¶ 124 (emphasis added). 206  Id. ¶ 126. 207  Id. 187, ¶ 125. 208  Douglas (2013), supra note 75 at 432. 209  Douglas (2012), supra note 2 at 260, ¶ 496. 210  See Douglas (2013), supra note 75 at 430. 204 205

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IV.  Counterclaims Under the UNCITRAL Rules

IV.  Counterclaims Under the UNCITRAL Rules A. Introduction While most investor-​state disputes are adjudicated under the ICSID Convention, a great 17.68 many are resolved under the UNCITRAL Arbitration Rules, as is commonly provided for in BITs. As a practical matter, absent agreement by the disputing parties, or unless the BIT provides otherwise,211 such cases will be conducted under the original, 1976 version of the UNCITRAL Arbitration Rules. This is because, unlike the ICSID Convention,212 the 1976 UNCITRAL Rules do not themselves provide for automatic observance of future amendments. Moreover, the 2010 Rules expressly state that the presumption of application of the revised rules that would otherwise obtain ‘does not apply where the arbitration agreement has been concluded by accepting after 15 August 2010 an offer made before that date’,213 that is, in a BIT that has come into force before that date, which includes the vast majority of BITs in force today. With respect to counterclaim jurisdiction, which version of the rules applies is not an insig- 17.69 nificant question. While the 2010 Arbitration Rules contain an amended Article 1, which widens the ‘ambit of the Rules . . . to ensure that they [would] not [be] limited to disputes of a contractual nature’,214 Article 21(3) of the 2010 UNCITRAL Rules relating to counterclaims includes no language at all regarding the substantive basis for counterclaim jurisdiction. It provides: In its statement of defence, or at a later stage in the arbitral proceedings if the arbitral tribunal decides that the delay was justified under the circumstances, the respondent may make a counterclaim or rely on a claim for the purpose of a set-​off provided that the arbitral tribunal has jurisdiction over it.215

The new rule’s language ‘provided that the arbitral tribunal has jurisdiction over it’ under- 17.70 scores the issue confronted under Article 46 of whether an external source of consent is required in order to establish a tribunal’s jurisdiction over counterclaims. Consequently, as may be the case with ICSID Article 46 counterclaims, a tribunal operating under the 2010 UNCITRAL Rules will have to ascertain the parties’ consent to counterclaims from sources other than Article 21(3) itself, and possibly whether it falls within the scope of disputes that

211  The authors are unaware that any pre-​2010 BIT that provides the option of UNCITRAL arbitration expressly contemplates the possibility of amendments to the rules. Moreover, it is questionable whether a BIT provision referring to the rules ‘as then in force’ at the time consent is perfected would be sufficient to supersede the 1976 version of the rules, since both versions must be considered to be ‘in force’. See, e.g., Agreement between the Government of the Czech and Slovak Federal Republic and the Government of the Republic of Finland for the Promotion and Protection of Investments (adopted November 6, 1990, entered into force on October 23, 1991), art. 8(1)(b) (referring to ‘an international ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law as then in force’ (emphasis added)). 212  ICSID Convention art. 44 (‘Any arbitration proceeding shall be conducted in accordance with the provisions of this Section and, except as the parties otherwise agree, in accordance with the Arbitration Rules in effect on the date on which the parties consented to arbitration’ (emphasis added)). 213  2010 UNCITRAL Arbitration Rules art. 1(2) (‘The parties to an arbitration agreement concluded after August 15, 2010 shall be presumed to have referred to the Rules in effect on the date of commencement of the arbitration, unless the parties have agreed to apply a particular version of the Rules. That presumption does not apply where the arbitration agreement has been concluded by accepting after 15 August 2010 an offer made before that date’). 214 S. Nappert, Commentary on the UNCITRAL Arbitration Rules 2010: A Practitioner’s Guide 8 (2012). 215  2010 UNCITRAL Rules art. 21(3) (emphasis added).

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Counterclaims in Investment Treaty Arbitration may be the subject of the main claims under the BIT. On the other hand, 2010 UNCITRAL Article 21(3) does not impose any other requirements.216 In particular, unlike ICSID Article 46, it does not require that the counterclaim arise directly out of the subject matter of the dispute. Moreover, it does not state any other connection between the primary claim and the counterclaim. 17.71 The 1976 version of the UNCITRAL Rules treats counterclaims quite differently. Article

19(3) of the 1976 UNCITRAL Rules addresses counterclaims in the following way:

In his statement of defence, or at a later stage in the arbitral proceedings if the arbitral tribunal decides that the delay was justified under the circumstances, the respondent may make a counter-​claim arising out of the same contract or rely on a claim arising out of the same contract for the purposes of a set-​off.217 17.72 This language may be seen as having two effects. First, it arguably provides a basis for coun-

terclaim jurisdiction independent of any external source, consistent with ipso facto importation of consent approach advocated by some with respect to ICSID Article 46. Secondly, while its terms limit counterclaims to those arising out the ‘same contract’, those terms may be subject to a transmutation consistent with the adoption, and necessary adaptation, of UNCITRAL arbitration for investor-​state treaty disputes. Finally, there also remains a question of whether any other connection between claim and counterclaim is implicitly required or is otherwise applicable by reason of general principles. These questions will be explored in the following section.

B.  Ipso Facto Importation of Consent 17.73 Investment arbitration tribunals operating under the 1976 UNCITRAL Rules have avoided

express application of Article 19(3) as a source of jurisdiction, and instead have focused on sources of consent to counterclaims external to the UNCITRAL Rules.218

17.74 The first BIT tribunal under the UNCITRAL Rules to have an opportunity to address this

issue was that in Saluka v Czech Republic. As seen earlier, that tribunal decided that the starting point was the BIT’s dispute settlement clause, concluding that, where the consent to arbitration is expressed in wide terms in an investment treaty, the tribunal is in principle conferred jurisdiction ratione materiae over counterclaims by the respondent host state, subject to

216 Douglas (2013), supra note 75 at 430. As observed by Atanasova, Martínez Benoit & Ostřanský (2012), ‘[t]‌he present rule is silent regarding on [sic] the degree of connectedness that must exist between the claim and the counterclaim. It poses on the arbitral tribunal the discretion to assert jurisdiction over it taking into account the particular circumstances of each case. This wording was regarded as “broad enough to encompass a wide range of circumstances and did not require substantive definitions of the notions of claims for set-​offs and counterclaims” ’. Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 10–​11 (citing United Nations Commission on International Trade Law, Report of the Working Group on Arbitration and Conciliation on the Work of its fiftieth session (New York, Feb. 9–​13, 2009) A/​CN.9/​669, ¶¶ 27–​32). 217  1976 UNCITRAL Rules art. 19(3) (emphasis added). 218 Saluka, supra note 19; Zeevi, supra note 13; Paushok, supra note 13. See also Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 12 (‘Even though an express provision to this effect does not exist in the UNCITRAL Arbitration Rules, tribunals dealing with counterclaims brought under these rules have also consistently considered whether the advanced counterclaim entered in the parties’ scope of consent. Notably, the Iran–​U.S. Claims Tribunal required for counterclaims to fulfil the conditions set in Article II.1. of the Algiers Accords, i.e., for them to be pendant by 1981. Similarly, two tribunals dealing with investment treaty arbitral proceedings under the UNCITRAL Arbitration Rules (Saluka v. Czech Republic and Paushok v. Mongolia) assessed to what extent counterclaims entered within the scope of the parties’ consent’) (internal citations omitted).

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IV.  Counterclaims Under the UNCITRAL Rules the close connection requirement.219 It observed that the Dutch–​Czech BIT confers jurisdiction over ‘[a]‌ll disputes between a Contracting Party and an investor of the other Contracting Party concerning an investment of the latter’.220 The tribunal also noted that the BIT authorized the tribunal to ‘determine its own procedure applying the arbitration rules of the United Nations Commission for International Trade Law (UNCITRAL)’.221 However, this led the tribunal merely to conclude that ‘the jurisdiction conferred upon it by [the BIT’s ISDS clause], particularly when read with Article 19.3, 19.4, and 21.3 of the UNCITRAL Rules, is in principle wide enough to encompass counterclaims’.222 Thus, in Saluka, the source of the tribunal’s authority over counterclaims was the treaty itself, and the UNCITRAL Rules, incorporated by reference into the Dutch-​Czech BIT, were treated merely as auxiliary support for finding jurisdiction over counterclaims. The same approach was adopted by another UNCITRAL tribunal in Paushok v Mongolia.223 However, the text to Article 19(3) clearly has a more direct relevance for counterclaim jur- 17.75 isdiction. In contrast to both Article 46 of the ICSID Convention and Article 21(3) of the 2010 UNCITRAL Rules, the clear terms of 1976 UNCITRAL Article 19(3) state a right to bring a counterclaim that is not conditional upon finding an external source of the parties’ consent to counterclaims (although it is of course delimited, as discussed later). By incorporating the 1976 UNCITRAL Rules as part of the state’s standing offer to settle an investment dispute, by virtue of Article 19(3), this offer ipso facto contains consent to counterclaims that otherwise qualify.224 In other words, Professor Reisman’s theory of ipso facto importation of consent finds a direct application in the context of the 1976 UNCITRAL Rules. The theory of ipso facto importation of consent by incorporation of the 1976 UNCITRAL 17.76 Rules has not yet been considered by any ad hoc investment tribunals. The Iran–​US Claims Tribunal has, however, come close to addressing the issue when considering the relevance of the 1976 UNCITRAL Rules in deciding its jurisdiction over ‘official counterclaims’.225 Article II(1) of the tribunal’s constitutive instrument, the Claims Settlement Declaration 17.77 between Iran and the United States, expressly permits the interposition of counterclaims by the governments of either party in cases brought by nationals of another state party.226 But it 219  See also Douglas (2013), supra note 75 at 427 (stating ‘a general principle  . . .  that the jurisdiction ratione materiae of an international tribunal extends to counterclaims unless expressly excluded by the constitutive instrument’). 220 Saluka, supra note 19, ¶ 21 (citing Dutch–​Czech BIT art. 8(1)). 221  Id. ¶ 22 (citing Dutch–​Czech BIT art. 8(5)). 222 Saluka, supra note 19, ¶ 39 (emphasis added). Article 19(4) provides: ‘The provisions of article 18, paragraph 2 [which lists the particulars that a statement of claim must contain], shall apply to a counter-​claim and a claim relied on for the purposes of a set off’ and art. 21(3) provides: ‘A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than in the statement of defence or, with respect to a counter-​claim, in the reply to the counter-​claim’. See 1976 UNCITRAL Rules arts. 19(4), 21(3). 223 Paushok, supra note 13, ¶¶ 689–​90 (citing Saluka v. Czech Republic). The third publicly available case under the 1976 UNCITRAL Rules that involved counterclaims, Zeevi v. Bulgaria, was based on a privatization agreement and did not raise any jurisdictional objections. 224 Roussalis, supra note 31, Declaration of Professor M. Reisman (Nov. 28, 2011). 225  Iran v. United States, Case No. B1 (Counterclaim), Interlocutory Award (Sept. 9, 2004), ITL No. 83-​ B1-​FT [hereinafter Iran–​United States, Interlocutory Award], ¶ 132. 226  Declaration of the Government of the Democratic and Popular Republic of Algeria concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran [hereinafter Claims Settlement Declaration] (Jan. 19, 1981) art. II(1) (‘An International Arbitral Tribunal (the Iran–​United States Claims Tribunal) is hereby established for the purpose of deciding claims of nationals of the United States against Iran and claims of nationals of Iran against the United States, and any counterclaim which arises out of the same contract, transaction or occurrence that constitutes the subject matter of that national’s claim, if such claims and counterclaims are outstanding on the date of this agreement . . .’).

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Counterclaims in Investment Treaty Arbitration does not explicitly state that counterclaims are allowed in ‘official proceedings’ between the United States and Iran addressed in its Article II(2), which provides: 2. The Tribunal shall also have jurisdiction over official claims of the United States and Iran against each other arising out of contractual arrangements between them for the purchase and sale of goods and services.227

The tribunal found that ‘the fact that Article II(1) refers both to “claims” and “counterclaims”, but Article II(2) only refers to “claims”, does not necessarily imply that the Parties sought to exclude counterclaims in official cases’.228 To establish whether counterclaims were permitted by Article II(2), it considered whether Article III(2) of the Claims Settlement Declaration providing that ‘the Tribunal shall conduct its business in accordance with the arbitration rules of the [UNCITRAL] except to the extent modified by the parties or by the Tribunal to ensure that this agreement can be carried out’ shed contextual light on Article II(2).229 It found that the ‘mere mention of the UNCITRAL Rules in Article III, paragraph 2 . . . does not incorporate them into the Claims Settlement Declaration’,230 as ‘it was understood from the beginning that the UNCITRAL Rules would be modified by the Parties or by the Tribunal’.231 17.78 The tribunal did not, however, dismiss out of hand the theory of ‘incorporation by refer-

ence’ with respect to the Tribunal Rules, which had been adapted from the UNCITRAL Rules.232 It considered that it was not necessary to decide this issue since it was satisfied that the Tribunal Rules constituted ‘relevant rules of international law applicable in the relations between the parties’, which it could take into consideration pursuant to Article 31(3)(c) of the Vienna Convention.233 In the end, the tribunal determined that the Tribunal Rules did not contain ‘a clear answer to the question of the Tribunal’s jurisdiction’,234 and based its interpretation of Article II(2) as allowing jurisdiction on an entirely different basis: the parties’ subsequent practice which was found to clearly establish that they ‘have interpreted the Claims Settlement Declaration as providing the Tribunal with jurisdiction to entertain official counterclaims’.235 Thus, it was not ‘necessary’ for the tribunal to consider if Article 19(3) of the UNCITRAL Rules ‘afford[ed] an independent basis for the Tribunal’s jurisdiction over official counterclaims’.236

  Id. art. II.   Iran–​United States, Interlocutory Award, supra note 225, ¶ 89. The tribunal reasoned that art. II(1) had to provide for counterclaims expressly because without such express reference a state party would have been prevented from submitting any types of claims. Id. ¶ 94 (emphasis added). Some authors have cited the tribunal’s decision for the principle that express reference to counterclaims is not always required. See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 361–​62 (‘In this context the tribunal found that express reference to counterclaims was not necessary, for both parties are on the equal footing, as opposed to the case of proceedings brought by individuals. . . . Thus it can be inferred that an explicit reference to counterclaims is not always required for their admission’). 229  Iran–​United States, Interlocutory Award, supra note 225, ¶ 94 (emphasis added). 230  Id. 231  Id. 232  Id. ¶ 95. 233  Id. ¶ 96. The tribunal found that art. 19(3) of the Tribunal Rules, adopted from the UNCITRAL Rules ‘could be read as indicating that official counterclaims are permitted’ so long as in substance they were the types of claims that could be heard by the Tribunal under the provisions defining the kinds of claims that the parties can bring, i.e., the tribunal’s jurisdiction ratione materiae. Id. ¶ 97. 234  Id. ¶ 99. Indeed, the modified art. 19(3) of the Tribunal Rules authorized counterclaims if they were ‘allowed under the Claims Settlement Declaration’, thus referring back to the Claims Settlement Declaration. See id. ¶¶ 20, 100. 235  Id. ¶ 132. 236  Id. ¶ 136. 227 228

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IV.  Counterclaims Under the UNCITRAL Rules Article III(2)’s referral to the UNCITRAL Rules modified mutatis mutandis by the Tribunal 17.79 Rules ‘to ensure that this agreement can be carried out’, arguably provides for a future incorporation of consent to counterclaims, and thus creates advance consent to counterclaims as provided for in the Tribunal’s Rules. However, given that the Tribunal Rules’ revision of Article 19(3) refers back to the Claims Settlement Declaration for the source of the tribunal’s counterclaim jurisdiction, importation of consent via such reference was not perfected. In contrast, BITs do not contain prospective modifications of the applicable UNCITRAL rules.237 An alternative to the theory of direct incorporation of consent is the parties’ implied con- 17.80 sent to counterclaims as manifested in their acceptance of the UNCITRAL Rules.238 In either scenario, the acceptance of the 1976 UNCITRAL Rules may be seen as extending the tribunal’s jurisdiction ratione materiae to encompass counterclaims that satisfy Article 19(3) requirements. It eliminates any issues of standing or narrow definitions of dispute in the BIT that otherwise could be argued to exclude counterclaims. Finally, even if we take the mainstream approach of ascertaining consent from the treaty pro- 17.81 visions and not by direct incorporation or implied consent, at the very least the state’s locus

237  See supra note 211; see also, e.g., Ecuador–​ U.S. BIT (1997) art. VI(3) (‘[t]‌he national or company concerned may choose to consent in writing to the submission of the dispute for settlement by binding arbitration . . . (iii) in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) . . . ’); Mongolia–​Russia BIT (1995) art. 6 (‘If the dispute cannot be resolved this way within six months from the time it arises, it can be referred for settlement to: . . . (c) ad hoc arbitration in accordance with the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL)’ (translation) (original text in Russian: Если таким образом спор не будет разрешен в течение шести месяцев с момента его возникновения, рассмотрение его может быть передано в: . . . в) третейский суд ad hoc в соответствии с Арбитражным регламентом Комиссии Организации Объединенных Наций по праву международной торговли (ЮНСИТРАЛ)). But see Agreement between the Government of the Czech and Slovak Federal Republic and the Government of the Republic of Finland for the Promotion and Protection of Investments (adopted Nov. 6, 1990, entered into force Oct. 23, 1991), art. 8(1) (‘Any legal dispute between an investor of one Contracting Party and the other Contracting Party concerning an investment of the latter in territory of the former which has not been amicably settled during three months from written notification of a claim may, at the rest of either party to the dispute, be submitted for settlement either to: . . . (b) an international ad hoc arbitral tribunal established under the Arbitration Rules of the United Nations Commission on International Trade Law as then in force. The parties to the dispute may agree in writing to modify these Rules’ (emphasis added)). 238  The concept of implied consent is not new to investment arbitration. In Noble Energy v. Ecuador, the tribunal looked for the parties’ ‘implied consent’ to resolve all their disputes based on different instruments in one single arbitration. See Noble Energy, Inc. & Machalapower Cia. Ltda. v. Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/​05/​12, Decision on Jurisdiction (Mar. 5, 2008). The tribunal first pointed out that: ‘Article 44 of the ICSID Convention provides that arbitration proceedings are governed by the Convention and, unless the parties agree otherwise, by the ICSID Arbitration Rules. Whenever the ICSID Convention and Rules are silent on an issue ‘the Tribunal shall decide the question’ in the exercise of its general procedural powers’. Id. ¶ 190. The tribunal acknowledged that it was a ‘controversial issue whether the consent of the parties is required to consolidate separate proceedings’. Id. ¶ 194. It found that in the case at hand, there was an ‘implied consent’ to have the pending disputes arising from the same overall economic transaction resolved in one and the same arbitration: ‘Even though there is no express language to this effect in the dispute resolution clauses, the consent is manifest from a number of elements’. Id. ¶ 194 (emphasis added). The tribunal was guided by the following principles: (1) interpreting the parties’ consent ‘objectively and in good faith’ and (2) ascertaining the parties’ intentions by looking inter alia at the expectations of the parties. Id. ¶ 196 (citing Southern Pacific Properties (Middle East) Limited (SPP) v. Arab Republic of Egypt, ICSID Case No. ARB/​84/​3, Decision on Jurisdiction (Apr. 14, 1988)). The tribunal was able to ascertain the parties’ implied consent to deal with disputes ‘arising out of the various instruments and subject to different legal systems in a single proceeding’ because the instruments included cross-​references, ‘strong connections between contract and treaty claims’ (id. ¶ 205) even though they were addressed in separate instruments, no intent to segregate these types of claims, and numerous other connections between the instruments. Id. ¶¶ 198–​205.

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Counterclaims in Investment Treaty Arbitration standi is not an issue under the 1976 UNCITRAL Rules because the parties’ agreement to the rules manifests their acceptance of the state’s standing to bring counterclaims.

C. The 1976 UNCITRAL Rules: Implied Modification by State Parties 17.82 Article 19(3) of the 1976 UNCITRAL Rules does expressly limit counterclaims to those

arising out of the ‘same contract’. This is not surprising since the UNCITRAL Rules were intended for commercial arbitration, as indeed stated in the very first article of the rules describing their scope of application to ‘disputes in relation to [a]‌contract’. In the same vein, Article 3.3(d), which governs notice of arbitration, requires ‘[a] reference to the contract out of or in relation to which the dispute arises’, and Article 21(2), which governs pleas as to the jurisdiction of the arbitral tribunal, also makes reference to contracts only.239 Thus, the 1976 UNCITRAL Rules’ focus on contract disputes permeates its provisions.

17.83 Nonetheless, the state parties to investment treaties have often included arbitration pursuant

to the UNCITRAL Arbitration Rules as one of the procedural options available at the election of the claimant.240 When the state parties referred to these rules, they clearly did not intend to restrict their use to commercial disputes arising from investment, but included them to settle investment disputes of all types falling within the scope of the parties’ consent.

17.84 Yet, the reference to the ‘contract’ in Article 19(3) governing counterclaims has been noted as

‘problematic’241 or ‘inappropriate’ for arbitration arising under international treaties because not all claims arise from a contract relating to an investment.242 This must partially explain the very low number of ad hoc investment arbitration cases, compared to ICSID arbitration, in which the state parties have raised counterclaims.243 Professor Douglas underlines the problem that ‘the state parties have not amended Article 19(3) to make it compatible with the tribunal’s jurisdiction ratione materiae in respect of the primary claims’.244

17.85 But is this necessarily so if we consider that, by referring to the UNCITRAL Rules in invest-

ment treaties for the settlement of investment disputes, the state parties implicitly modified these rules to transpose them effectively to the investment arbitration context?

17.86 This may be seen from the very first Article of the 1976 UNCITRAL Rules, which con-

templates the application of the rules only to arbitration involving contracts.245 Given their express intent to settle future investment disputes, by adopting the rules, state parties must be seen to have implicitly modified the nature of the disputes contemplated in UNCITRAL Article 1, transposing them to investment arbitration. However, to render the entire UNCITRAL Arbitration Rules effective for investment arbitration, the parties must have also intended, and must be seen to have implied, the modification of other provisions of the Rules, including Article 19(3). Otherwise, their choice of the UNCITRAL Arbitration Rules would not provide the adequate procedural infrastructure for effectively resolving their inve stment dispute.

239  1976 UNCITRAL Rules art. 21(2) (‘The arbitral tribunal shall have the power to determine the existence or the validity of the contract of which an arbitration clause forms a part’). 240  Douglas (2012), supra note 2 at 259. 241  Id. 258–​60. 242  Atanasova, Martínez Benoit & Ostřanský (2012), supra note 1 at 10 (citing J. Paulsson & G. Petrochilos, Revision of the UNCITRAL Arbitration Rules: A Report (2006), ¶ 174). 243  Based on publicly available data, there were only three ad hoc investment arbitration cases brought under the 1976 UNCITRAL Rules where the State brought counterclaims. In contrast, since 1977, there have been at least 23 ICSID cases where the respondents raised counterclaims. 244  Douglas (2012), supra note 2 at 259, ¶ 494. 245  1976 UNCITRAL Rules art. 1.

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IV.  Counterclaims Under the UNCITRAL Rules The question, however, remains what is the effective modification of the term ‘contract’? 17.87 One possible implied modification is to consider the term ‘contract’ as having been replaced with the term ‘investment treaty’.246 This approach would result in a ‘blanket exclusion of counterclaims by the respondent host state because the claimant investor is not a party to the investment treaty and cannot act in breach of it’.247 Professor Douglas suggests that the term should more appropriately be considered as replaced by ‘a reference to the source of the rights forming the object of the claim’, that is, ‘investment’ itself.248 While investment per se is not the source of the rights (the treaty is), replacing the ‘contract’ with ‘investment’ would most effectively modify the rules for investment arbitration, consistent with the object of most dispute settlement provisions, that is, to resolve investment disputes. Seen as implicitly modified in this manner, the provision would be read as follows: In his statement of defence, or at a later stage in the arbitral proceedings if the arbitral tribunal decides that the delay was justified under the circumstances, the respondent may make a counter-​claim arising out of the same investment or rely on a claim arising out of the same contract for the purposes of a set-​off.

D. The Connection Requirement under the New and Old UNCITRAL Rules Some commentators have observed that the requirement for a close connection between 17.88 the primary claim and counterclaims affords arbitral tribunals discretion to consider the admissibility of even those counterclaims that meet the terms of the arbitration’s constitutive instruments.249 Indeed, some tribunals have viewed the connection requirement as a general principle that must be satisfied, ‘notwithstanding silence on the matter in the constituent document’, that is, the treaty, and without regard to the rules governing counterclaims.250 As seen, this includes tribunals operating under the 1976 UNCITRAL Rules. Curiously, instead of applying the language of the applicable rule, the Saluka tribunal, and subsequently the Paushok tribunal, proceeded to apply a general principle derived from a variety of arbitration rules and arbitral practice.251 In the same vein, one of the two tribunals operating under the 2010 UNCITRAL Rules favourably observed a close connection between the primary claim and the state’s counterclaim.252 This approach has been extensively criticized, in particular for effectively requiring the iden- 17.89 tity of the legal foundation or source of the counterclaim with that of the principal claim.253 Professor Douglas critiqued the Saluka tribunal for its unduly narrow approach: [T]‌he test cannot be the identity of the source of the norms underlying the claim and counter-​claim. In that case, the tribunal insisted upon the ‘interdependence and essential 246  Douglas (2012), supra note 2 at 258–​59. Professor Douglas submits that the state parties, unlike the Iran–​U.S. Claims Tribunal, have not amended art. 19(3) to make it compatible with the tribunal’s jurisdiction ratione materiae in respect of the primary claim. ‘How, then, is the reference to “contract” in Article 19(3) to be interpreted? If the purpose of the reference was to identify the instrument that creates the tribunal’s jurisdiction, then an accurate transposition to the investment treaty context would lead to its replacement with the term “investment treaty.” ’ 247  Id. at 259, ¶ 494. 248  Id. (‘In the investment treaty context, that is the investment, and hence a symmetry between the tribunal’s jurisdiction over primary claims and counterclaims is achieved by interpreting the reference to “contract” in Article 19(3) as equivalent to “investment” in this context.’) 249  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 358. 250  Id. 364 (‘Arbitral practice also requires them to have a certain degree of connectedness to the primary claim, notwithstanding silence on the matter in the constituent document’). 251 Saluka, supra note 19, ¶ 76 (deducing a ‘general legal principle as to the nature of the close connexion which a counterclaim must have with the primary claim if a tribunal with jurisdiction over the primary claim is to have jurisdiction also over the counterclaim’); Paushok, supra note 13, ¶ 690. 252  See Al-​Warraq v. Indonesia, supra note 14, ¶ 663. 253  Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 383–85.

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Counterclaims in Investment Treaty Arbitration unity of the instruments on which the original claim and counterclaim [are] based’ such that if the counterclaims were based upon the general law of the host state they must be resolved exclusively through the appropriate procedures of the host state’s law.254

Nor, in his view, did Saluka ‘accurately reflect the Amco tribunal’s finding, which did not rest solely upon the general law nature of the legal obligation forming the basis of the counterclaim. He noted that ‘a caveat was added: ‘unless the general law generates an investment dispute under the Convention’ so that it ‘arises directly out of an investment’.255 17.90 But if we follow the theory of implied modification of the UNCITRAL Rules, including Article

19(3), then the requirement ‘arising out of the same contract’ becomes ‘arising out of the same investment’, that is, the investment in dispute. There would be no additional ‘connection’ requirement outside the rules.256 This reading has been endorsed by a number of commentators who, while not arguing implied modification, have recognized that Article 19(3) could be transposed into investment arbitration if the term ‘contract’ is replaced by ‘investment’.257

17.91 Grounding the connection test in Article 19(3) is more cogent since it constitutes lex specialis

for the UNCITRAL arbitration, and there is no obvious justification for adding another test beyond the one formulated in Article 19(3). It would also lead to consistency in the treatment of counterclaims.258

17.92 Article 21(3) of the 2010 UNCITRAL Arbitration Rules, however, does not state a separate

connection requirement.259 As noted, the tribunals operating under the revised UNCITRAL Rules may follow the view that there is a general rule requiring a connection between the primary claim and a counterclaim, seeing it as ‘intrinsically linked to the two main objectives for allowing counterclaims: procedural economy and the better administration of justice’.260 This is more so the case since the main rationale for the connection requirement arguably transcends any specific regime: the respondent cannot use a counterclaim to ‘. . .  impose on the Applicant any claim it chooses, at the risk of infringing the Applicant’s rights and of compromising the proper

  Douglas (2013), supra note 75 at 431.   Douglas (2012), supra note 2 at 262, ¶ 499. 256  See Lalive & Halonen, supra note 77, ¶ 7.41 (‘The “connection” that is required should be deducted from the ICSID Convention/​UNCITRAL Rules and the applicable BIT (such as “subject-​matter” or “investment”), nothing suggests that a stricter test than that for jurisdiction or admissibility should be devised (like the Saluka tribunal did)’). 257  Douglas (2012), supra note 2 at 259, ¶ 494 (‘It is therefore preferable to interpret reference to “contract” in Article 19(3) of the UNCITRAL Rules as a reference to the source of the rights forming the object of the claim. In the investment treaty context, that is the investment . . .’); Lalive & Halonen, supra note 77, fn. 43 (‘The term “contract” in the old UNCITRAL Rules could also be read to refer to the object of the claim, i.e. the investment . . .’). 258  A  prime example in consistent application of the connection test is reflected in the practice of the Iran–​U.S. Claims Tribunal, which applied the connection rule laid out in its constitutive instrument: ‘counterclaim [must] arise  . . .  out of the same contract, transaction or occurrence that constitutes the subject matter of [the] national’s claim’. Claims Settlement Declaration art. II(1). As pointed out by Judge George H. Aldrich: ‘[w]‌hile it is usually obvious whether a counterclaim is based on the same contract as a claim, it may be less obvious whether it arises from the same transaction or occurrence’. G.H. Aldrich, The Jurisprudence of the Iran–​United States Claims Tribunal 113 (1996). As a general rule, the tribunal has looked to satisfy ‘the same transaction or occurrence’ requirement considering whether a linkage between the contracts at issue is sufficiently strong to consider them as part of one transaction. See id. 113–​116. See, e.g., Westinghouse Electric Corp. v. Islamic Republic of Iran, Award No. 579-​389-​2, 33 Iran–​US CTR 60 (Mar. 26, 1997); Owens-​Corning Fiberglass Corp. v. Iran, Case ITL 18-​113-​2 (May 13, 1983), 2 Iran–​US CTR 322. 259  Douglas (2013), supra note 75 at 430. 260 Kjos, supra note 92 at 147. See supra ¶ 17.34 (discussing the generic connection requirement). 254 255

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V.  Moving Forward: Greater Expectations in Counterclaim Practice administration of justice; and . . . it is for that reason that . . . the Rules of Court requires [inter alia] “that it is directly connected with the subject-​matter of the claim of the other party” ’.261

However, in the absence of an express requirement in Article 21(3), there is no reason to in- 17.93 sist on the narrow approach of requiring the identity of the legal basis of the counterclaim with that of the principal claim.262 At the same time, there is a problem with applying the expansive approach to the connection test according to which ‘[s]‌o long as the factual matrix for the counterclaim directly relates to the dispute between the parties concerning the investment in question, the legal basis for the host state’s counterclaim could be a contractual obligation, a domestic regulatory obligation and so on’.263 The appropriateness of this latter approach depends entirely upon the terms external to Article 21(3) that provide for arbitral jurisdiction.

E. Conclusion As seen, the theory of ipso facto importation of consent finds application under the 1976 17.94 UNCITRAL Rules, when the applicable BIT provides that an arbitration be conducted in accordance with these rules. In contrast, the 2010 UNCITRAL Article 21(3) requires that counterclaim jurisdiction be ascertained from other elements of the parties’ agreement. The 1976 UNCITRAL Rules must be read as implicitly modified by the parties for the purposes of investment arbitration. In particular, the provision ‘arising out of the same contract’ should be read to be modified as ‘arising out of the same investment’, which limits the connection requirement in the context of investment arbitration.

V.  Moving Forward: Greater Expectations in Counterclaim Practice The tale of the two systems, ICSID and UNCITRAL, reveals areas for further consideration 17.95 in arbitral practice. First, the applicable arbitration rules must be applied with sound judgment and not treated merely as auxiliary tools. In particular, the new approach of implied modification of the 1976 UNCITRAL Arbitration Rules and ipso facto importation of consent to counterclaims would dispel some of the difficulties faced by investment arbitration tribunals when dealing with the language of Article 19(3) as originally drafted for commercial arbitration. Secondly, there are many theories and approaches to counterclaims, which provide practitioners with ample ammunition to make arguments, but it falls upon arbitral tribunals to ensure consistent and rigorous application of the arbitration rules as far as the process is concerned, particularly in the context of growing concerns about the legitimacy of the investment arbitration system. For instance, under both the ICSID Convention and the 1976 UNCITRAL Rules, the relevant connection test may be best described as requiring that the counterclaim arise out of the investment in dispute and, additionally, in the case of ICSID arbitration, contain a factual nexus to the particular dispute relating to the investment. There is no reason to impose a further, more restrictive connection test as suggested by the Saluka tribunal.

261  Id. at 148, citing Case concerning Application of the Convention on the Prevention and Punishment of the Crime of Genocide (Bosn. and Herz. v. Serb. and Montenegro), Counter-​Claims Order, supra note 102, ¶ 31. 262  See Atanasova, Martínez Benoit & Ostřanský (2014), supra note 64 at 383; Douglas (2012), supra note 2 at 262. 263  Douglas (2013), supra note 75 at 433.

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Counterclaims in Investment Treaty Arbitration 17.96 Much has been said about the ideal role of counterclaims in contributing to a more balanced

investment arbitration system.264 As seen, however, there may well be avenues to counterclaim adjudication within the framework of existing BITs, the ICSID Convention and the UNCITRAL Rules. However, to overcome the possible obstacles identified in this chapter, and secure an absolute right of states to counterclaim in investment arbitration, especially in the context of ICSID and the 2010 UNCITRAL Rules, it may be necessary to seek revision of BIT terms to allow more expansive counterclaim settlement provisions.265 Indeed, frustration with the poor record of states’ counterclaims over the last decades has led to various proposals to recalibrate ISDS expressly to include the right of host states to present counterclaims before investment treaty tribunals.266 For instance, UNCTAD advocates the express inclusion of the state’s right to counterclaims as one of the requirements of ‘negotiating sustainable-​development-​friendly IIA’.267 Such changes would properly recognize the interests of states in balanced access to treaty arbitration to whatever extent such access survives the growing re-​examination of ISDS as a whole.268

264  See, e.g., Kryvoi, supra note 6; T. Kendra, State Counterclaims in Investment Arbitration: A New Lease of Life?, 29(4) Arb. Int’l 575. 265  It may be that, in some cases, the state parties to IIAs can resort to their statements expressing their interpretation of the dispute settlement clause as encompassing counterclaims, as ‘subsequent agreement’ within the meaning of art. 31(3) of the Vienna Convention on the Law of the Treaties. See, e.g., Sean D. Murphy, Statements by Parties as “Subsequent Agreement” in Treaty Interpretation, 95(4) Am. J. Int’l L. 887 (2001). 266  These revisions come with proposals to change investment protection in other ways as well; ‘to alter the current balance in the equilibrium are not new’. See Kendra, supra note 264 at 598–​99; Poon & Popova, supra note 5 at 243–​44. 267  UNCTAD, World Investment Report 2012:  Towards a New Generation of Investment Policies 135 (2012). 268  The recent years have also seen an opposite trend reflecting a more restrictive approach to ISDS. See, e.g., Poon & Popova, supra note 5 at 239–​42.

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18 THE STATE’S CORRUPTION DEFENCE, PROSECUTORIAL EFFORTS, AND ANTI-​C ORRUPTION NORMS IN INVESTMENT TREATY ARBITRATION Charles N Brower and Jawad Ahmad *

I. Introduction  II. Binary Outcomes of the Corruption Defence—​Can the Playing Field be Levelled? 

III. Anti-corruption Norms in Recent Investment Agreements 

18.01

A. Introduction  B. Independent Anti-​corruption Provisions—​the Japanese Treaties  C. Anti-​corruption Norms as a Part of Corporate Social Responsibility (CSR)—​ the Canadian Treaties 

18.12 A. Preliminary Remarks Regarding Jurisdiction, Admissibility, and Merits  18.14 B. Illegality Where There Is a Legality Clause  18.19 C. Illegality Where There Is No Legality Clause  18.24 D. The State’s Obligation to Prosecute or Investigate and the Corruption Defence  18.29

IV. Conclusion

18.84 18.84 18.88

18.102 18.110

I. Introduction Respondent states defending against an investment claim have frequently asserted a corrup- 18.01 tion defence on the ground that the claimant investor bribed a government official in connection with the investment. Academics and practitioners alike have criticized the draconian outcome of a successful 18.02 corruption defence asserted by the respondent state in investment arbitration. The crux of the complaint is that, upon a state’s successful plea of corruption, the claimant is denied compensation from the respondent state for that state’s violations while the respondent state also avoids responsibility for those violations, and quite often avoids responsibility for its own role in that very same corruption. Addressing the infamous World Duty

*  The authors express deep appreciation to Michael Daly, Visiting Associate Professor of Law at George Washington University Law School; and to Bernardo Rohden Pires, Amy Chen, and Jason Czerwiec  of George Washington University Law School, for their contributions to this chapter. The authors also wish to thank Diane Valk-​Schwab and Angela Donnelly for their tireless work and invaluable assistance in editing and formatting the chapter. The opinions expressed in this article are those of the authors, and they do not reflect in any way those of the institutions to which they are affiliated.

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The State’s Corruption Defence, Prosecutorial Efforts Free case, Professor W Michael Reisman colourfully described the absurdity of the wider implications of that case: World Duty Free is often celebrated because it clearly condemned an overt case of bribery, one that, moreover, was facilitated or, if you like, imposed on the tribunal by the admission against interest of the claimant itself. However, from the standpoint of the implementation of the broad policy against bribery and corruption, it is fair to ask whether the outcome in that particular case was rather perverse. The claimant had made an investment, which he lost. The claimant had paid a substantial bribe, which he lost or he received, at least, an antique case full of corn. The Kenyan government received the benefit of the investment, had the opportunity to sell the concession a second time and double that benefit, and walked away with the bribe. If there was a shame sanction, a loss of face sanction imposed on the government or on the president, I must say I think that both were able to bear it very lightly.1 18.03 John R Crook similarly has stated that ‘the treatment of significant corruption in connection

with the establishment of an investment has typically been “binary”—​if corruption is sufficiently established, the claim is rejected. Full stop’.2 Crook described three undesirable consequences of the ‘binary approach’. The first is ‘[i]‌nequity’, in that ‘the successful respondent State escapes liability for the investor’s claim, even if the claim is otherwise perfectly valid and would entitle the claimant to substantial relief ’.3 The second is ‘[u]njust enrichment. The successful respondent state or its corrupt agents may stand to be unjustly enriched on account of conduct that would result in the State’s liability absent the initial corruption’.4 The third is that ‘[t]he binary rule creates a powerful incentive for the respondent States to plead corruption’,5 an untoward result.

18.04 Tribunals, albeit reluctantly, have justified this strict result by paying homage to policy con-

siderations such as the rule of law. In World Duty Free the tribunal found that it would offend international public policy if the claimant were permitted to succeed on claims arising from corruption.6 The tribunal did so reluctantly, however, by noting the following: It remains nonetheless a highly disturbing feature in this case that the corrupt recipient of the Claimant’s bribe was more than an officer of State but its most senior officer, the Kenyan President; and that it is Kenya which is here advancing as a complete defence to the Claimant’s claims the illegalities of its own former President. Moreover, on the evidence before this Tribunal, the bribe was apparently solicited by the Kenyan President and not wholly initiated by the Claimant. Although the Kenyan President has now left office and is no longer immune from suit under the Kenyan Constitution, it appears that no attempt has been made by Kenya to prosecute him for corruption or to recover the bribe in civil proceedings.7

18.05 While recognizing the unfairness to the claimant of the outcome, the tribunal explained ‘that

the law protects not the litigating parties, but the public; or in this case, the mass of tax-​ payers and other citizens making up one of the poorest countries in the world’.8 The tribunal,

1  Professor W. Michael Reisman at the 12th Annual ITA–​ASIL Conference, Corruption in International Arbitration: Evidence and Remedies 9 World Arb. & Mediation Rev., 245 (2015). 2  John R. Crook, Remedies for Corruption, 9 World Arb. & Mediation Rev., 304 (2015). 3  Id. at ¶ 309. 4  Id. 5  Id. at 310. 6  World Duty Free v. Republic of Kenya, ICSID Case No. ARB/​ 00/​7, Award (Aug. 31, 2006), ¶ 179 [hereinafter World Duty Free]. 7  Id. ¶ 180. 8  Id. ¶ 181.

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I. Introduction quoting Lord Mansfield in Holman v Johnson,9 maintained that it was upholding the principle of public policy known as ex dolo malo non oritur action, that is, ‘no court will lend its aid to a man who founds his cause of action upon an immoral or illegal act’. The tribunal concluded that: ‘if Kenya were guilty of bribery and the claimant in this proceeding, it would likewise fall at the same procedural hurdle, to the benefit of the Claimant as respondent’.10 In Metal-​Tech—​which, unlike World Duty Free, concerned corruption in the context of an 18.06 investment treaty—​the tribunal found that corruption was proven in connection with the establishment of the claimant’s investment in Uzbekistan and, consequently, that the investment had not been ‘implemented in accordance with the laws and regulations of the Contracting Party in whose territory the investment is made’ as required by Article 1(1) of the Israel–​ Uzbekistan bilateral investment treaty (BIT). Since Uzbekistan had consented to ICSID arbitration only in respect of disputes concerning investments so made, the tribunal found that the consent requirement in Article 25(1) of the ICSID Convention had not been met. Thus, the tribunal dismissed the treaty claims for want of jurisdiction ratione voluntatis.11 Similar to the World Duty Free tribunal, the Metal-​Tech tribunal reached its conclusion to 18.07 dismiss the treaty claims reluctantly, noting the harsh outcome of a finding of corruption in an investment treaty dispute: [W]‌hile reaching the conclusion that the claims are barred as a result of corruption, the Tribunal is sensitive to the ongoing debate that findings on corruption often come down heavily on claimants, while possibly exonerating defendants that may have themselves been involved in the corrupt acts. It is true that the outcome in cases of corruption often appears unsatisfactory because, at first sight at least, it seems to give an unfair advantage to the defendant party. . . .12

Again, similar to the World Duty Free tribunal, the Metal-​Tech tribunal explained that: ‘[t]‌he 18.08 idea, however, is not to punish one party at the cost of the other, but rather to ensure the promotion of the rule of law, which entails that a court or tribunal cannot grant assistance to a party that has engaged in a corrupt act’.13 This chapter will address two developments in the field of investment arbitration and corrup- 18.09 tion. First, it will discuss the ‘binary’ or ‘harsh’ outcomes in investment arbitration awards and whether there is scope to level the playing field. This will involve a brief discussion of the cases where illegality—​including corruption—​has surfaced, whether as a question of jurisdiction, of admissibility or of the merits. Based on this study, this chapter will then discuss the viability of conditioning the state’s entitlement to assert corruption as a defence on proof of steps by the respondent state to investigate and prosecute public officials for corruption. This chapter maintains that such a condition may be pushing things too far as findings at the local level may not be of assistance to the tribunal. Such findings, albeit instructive, are not binding. Additionally, there are practical realities on the ground that may explain why a state may not prosecute. Secondly, this chapter will provide a survey of recently concluded investment agreements 18.10 that have incorporated anti-​corruption norms within their text and consider the extent to which they address the issues facing corruption globally and within the investment arbitration space. The conclusion will draw on the analyses made in the first and second parts.   Holman v. Johnson (1775) 1 Cowp. 341, 343.   World Duty Free, supra note 6, ¶ 181. 11  Metal-​ Tech Ltd. v.  Republic of Uzbekistan, ICSID Case No. ARB/​10/​3, Award (Oct. 4, 2013), ¶¶ 129, 372–​74. 12  Id. ¶ 380. 13  Id. 9

10

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18.11

The State’s Corruption Defence, Prosecutorial Efforts

II.  Binary Outcomes of the Corruption Defence—​Can the Playing Field be Levelled? 18.12 In light of the drastic results of a finding of corruption, some commentators have suggested

that host states be required to demonstrate that they have actively prosecuted the public officials involved in each case in which corruption is raised as a defence. Doing so can place investment arbitration ‘as a catalyst for bringing about good governance dividends, incentivizing States to take seriously every corruption defense raised and thereby address the fear that the issue will be used or viewed with cynicism as a tactical ploy’.14

18.13 Llamzon maintains that:

when a host State invokes corruption as a defense against investor claims, both the principles of acquiescence under international law (including the law of State responsibility) and the duty to prosecute corruption (under national and international anti-​corruption law) should oblige the State to demonstrate that it has been or is actively investigating and prosecuting those public officials who allegedly received bribes.15

A. Preliminary Remarks Regarding Jurisdiction, Admissibility, and Merits 18.14 In investment arbitration, there are situations in which the illegality issue is dealt with as

going to jurisdiction, admissibility, or the merits. ‘Illegality’ is a broad term that includes, inter alia, corruption, fraud, and misrepresentation. Illegality can infect the investment proj­ ect at various times, thus affecting how the illegality issue is conceptualized by the tribunal and, further, the tribunal’s adjudicative power. Another factor, specifically within the investment treaty context, is the treaty’s inclusion—​or lack of inclusion—​of an ‘in accordance with the host State law’ provision (‘legality clause’).

18.15 Broadly speaking, ‘jurisdiction is about the scope of the tribunal’s authority, based on the

State’s consent to arbitrate, while admissibility is about the particular claim raised by the claimant’.16 Jurisdiction serves as a ‘gateway’ issue and, should a claimant be unable to establish that the tribunal has jurisdiction, the case is dismissed for want of jurisdiction. Admissibility, on the other hand, is an attack by the respondent state on the claim brought by the investor.17

18.16 The lines are blurred when attempting to distinguish between a state’s defence as going to ‘ad-

missibility’ and one going to ‘the merits’. For example, a respondent state may assert as a defence on the merits that the substantive protections of the treaty—​because of some illegality pertaining to the investment—​should not be extended to the investor and, thus, that the 14  Aloysius P. Llamzon, Corruption in International Investment Arbitration, para. 10.103 (2014) [hereinafter Llamzon]. Another commentator has expressed a similar point: Mohamed Abdel Raouf, How Should International Arbitrators Tackle Corruption Issues?, 1 ICSID Rev. 135 (2009): ‘A State that has accepted and benefited from a bribe should be precluded from complaining. The requirement of “clean hands” should be mandated from both parties in order to be a sustainable principle. If a host State takes no action to investigate or prosecute the corrupt acts of its own officials, it should forfeit its right to rely on corruption as a defense. In cases where the allegations of corruption are invoked by the host State denouncing the acts of its former officials, the question arises whether there should be preconditions for declaring the contract null and void, e.g., that the procedure required to report the corrupt practice has been followed, or if the government is the claimant, that the bribed governmental official has been pursued’. 15 Llamzon, supra note 14, ¶ 10.94(g). 16 Veijo Heiskanen, Ménage-​ à-​ trois? Jurisdiction, Admissibility and Competence in Investment Treaty Arbitration, 29 ICSID Rev. 7 (2014) (emphasis in original). 17  Cameron A. Miles, Corruption, Jurisdiction and Admissibility in International Investment Claims, 3 J Int’l Disp. Settlement 334 (2012) [hereinafter Miles].

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? claim(s) should be dismissed. This has been characterized by some tribunals as rendering the investor’s claims ‘inadmissible’.18 A further point should be made about arbitral procedure. A party may raise preliminary 18.17 objections of admissibility or jurisdiction at an early stage of the arbitration. The tribunal can then decide, pursuant to its procedural powers, to address preliminary objections of admissibility, jurisdiction, or both ahead of the merits hearing as discrete issues or to join them to the merits. The tribunal may opt for the latter solution if it feels that the issues underpinning the preliminary objections are inseparable from the merits. The important point to keep in mind is that, while issues of jurisdiction or admissibility may be considered collectively with the merits of the dispute, they are conceptually distinct and addressed separately in an award.19 These distinctions are not always respected by tribunals, but the important point is that 18.18 the ‘box’ in which the illegality issue is placed—​admissibility, jurisdiction, or as part of the merits—​can be significant for the outcome of the investor’s claims. As will be shown, any consideration of the respondent state’s efforts to prosecute the public officials may be closed off if the case is dismissed for want of jurisdiction.

B. Illegality Where There Is a Legality Clause In cases brought under investment treaties containing a legality clause which goes to the 18.19 establishment of the investment, tribunals mostly have treated the illegality issue as going to jurisdiction.20 Few tribunals and commentators have maintained that a legality clause addressing the establishment of the investment should cause the tribunal to consider the issue as going to the merits.21 The matter becomes further complicated in the context of ICSID arbitration. The 18.20 Phoenix tribunal suggested that an additional legality requirement may exist in ICSID arbitration, but it did not clarify whether this requirement arose under the applicable treaty, under the ICSID Convention, or from a combination of both. The Phoenix tribunal found that: the States cannot be deemed to offer access to the ICSID dispute settlement mechan­ ism to investments not made in good faith. The protection of international investment arbitration cannot be granted if such protection would run contrary to the general principles of international law, among which the principle of good faith is of utmost importance.22

  Id. at 338.   Id. at 333–​34. 20  The tribunals in Fraport AG Frankfurt Airport Services Worldwide v.  Republic of the Philippines, ICSID Case No. ARB/​03/​25, Award (Aug. 16, 2007)  [hereinafter Fraport I] and Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/​11/​12, Award (Dec. 10, 2014) [hereinafter Fraport II] found that the express legality provision contained in the applicable treaty extended treaty protection only to ‘investments’ that met legal requirements of the host state’s laws and failure of which resulted in the tribunal lacking jurisdiction rationae materia (Fraport I, ¶¶ 345, 339–​40; Fraport II, ¶¶ 295, 331–​32); Metal-​Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/​10/​3, Award (Oct. 4, 2013), ¶¶ 129, 372–​74; Inceysa Vallisoletana S.L. v. Republic of El Salvador (ICSID Case No. ARB/​03/​26), Award (Aug. 2, 2006), ¶¶ 144, 161, 208–​39; Gustav F.W. Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/​07/​24, Award (June 18, 2010), ¶ 127–​29. 21  Vladimir Berschader & Moïse Berschader v. Russian Federation, SCC Case No. V. 080/​2004, Award (Apr. 21, 2006), ¶ 111; Fraport I, Dissenting Opinion of Bernardo M. Cremades, ¶ 38. See also Zachary Douglas, Plea of Illegality in Investment Treaty Arbitration, 29 ICSID Rev. 1 (2014). 22  Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/​ 06/​5, Award (Apr. 15, 2009), ¶ 106 [hereinafter Phoenix]. 18 19

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The State’s Corruption Defence, Prosecutorial Efforts While there was a legality clause in the applicable treaty, it could not be used to deprive the tribunal of jurisdiction because the investment did not violate any Czech laws.23 According to one commentator: ‘[t]‌o exclude the investment from its jurisdiction the tribunal developed an additional Salini precondition to be met if an investment was to be considered to fulfil the definition provided in Article 25(1) of the ICSID Convention, namely that the investment had to be made in good faith’.24 The extent to which this additional legality requirement exists has been questioned.25 18.21 The Phoenix tribunal also noted that a ‘manifest’ violation of the host state’s laws would

permit the tribunal to deny jurisdiction while a non-​manifest violation of the law could deprive the investment of protection under the treaty and could be determined on the merits.26 The tribunal, thus, did not appear to ‘view domestic legality as a strict jurisdictional requirement’.27

18.22 The other gloss that the Phoenix tribunal added was that, at times, the fact that the ‘invest-

ment is in violation of the laws of the host State can only appear when dealing with the merits, whether it was known before that stage or whether the tribunal considered it best to be analysed as [sic] the merits stage, like the case of Plama’.28 In other words, when and how the alleged illegality surfaces during the life of the arbitration will have an impact on when it will be treated—​during the jurisdictional phase (if there is a separate one) or during the merits phase—​and, even if it surfaces during the jurisdictional phase, tribunals may join the illegality issue to the merits.

18.23 The proposition in the Phoenix decision, that an investment will not be protected if it is

in violation of international public policy principles or constitutes a misuse of the ICSID Convention, was confirmed in Hamester.29

C. Illegality Where There Is No Legality Clause 18.24 Whether the investment treaty contains a legality clause makes little difference to the out-

come of the case ‘as illegal investments are not protected in either situation’.30 What matters for our purposes, however, is whether ‘illegality in these cases affects only the substantive protection granted to foreign investments by an investment treaty . . . or whether compliance with domestic law can be implied as an additional jurisdictional requirement’.31

18.25 The relevant case in this regard is Plama, a case brought under the Energy Charter Treaty

(ECT).32 The Plama tribunal found that the claimant had fraudulently induced the respondent state to award it a project. While the respondent state initially had argued that the   Id. ¶ 134.  Miles, supra note 17, at 362. 25  See Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/​07/​20, Award (July 14, 2010), ¶¶ 112–​14, where the tribunal downplayed the existence of a legality requirement in the ICSID Convention. 26 Phoenix, supra note 23, ¶¶ 102 and 104. 27  Stephan W. Schill, Illegal Investments in Investment Treaty Arbitration, 11 The Law and Practice of International Courts and Tribunals 317 (2015) [hereinafter Schill]. 28 Phoenix, supra note 22, ¶ 102. 29  Gustav F.W. Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/​07/​24, Award (June 18, 2010), ¶¶ 123–​24. 30 Schill, supra note 27, at 311. 31  Id. 32  The tribunal in SAUR International v. Argentine Republic, ICISD Case No. ARB/​04/​4, Decision on Jurisdiction and Liability (June 6, 2012), also found that ‘[t]‌he requirement of not having engaged in a serious violation of the legal regime is a tacit condition, inherent in every BIT, since it cannot be understood under any circumstance that a State is offering the benefit of protection through investment arbitration when the investor, to reach that protection, has committed an unlawful action’ (freely translated from the French). 23 24

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? misrepresentation deprived the tribunal of jurisdiction, the tribunal concluded that the issue went to the merits.33 On the merits, the tribunal concluded that the claimant’s illegality—​ here specifically fraud—​deprived the investment of any benefits under the ECT.34 While the tribunal acknowledged that the ECT did not contain a legality clause, it noted that it did not matter because ‘the substantive protections of the ECT cannot apply to investments that are made contrary to law. The tribunal [found] that the investment in this case violates not only Bulgarian law . . . but also “applicable rules and principles of international law” ’.35 With reference to Inceysa and World Duty Free, the tribunal noted that fraud violated basic international public policy principles such as good faith and nemo auditur propriam turpitudinem allegans,36 that is, ‘no one can be heard to invoke his own turpitude’. In World Duty Free, which was a contract-​based investment arbitration, the tribunal similarly 18.26 treated the illegality issue as going to the merits. The tribunal noted that ‘no evidence was adduced, or argument submitted by either of the Parties to the effect that the bribe specifically procured Article 9 of the Agreement, containing the Parties’ agreement to arbitration under the ICSID Convention’.37 Thus, the illegality did not result in a denial of jurisdiction. Commentators have noted also that this

18.27

implicit obligation for foreign investors to make their investments ‘in accordance with the law’ should be treated differently than when the treaty contains an explicit clause to that effect. Such an implicit obligation should not be considered as a jurisdictional prerequisite. Thus, while a tribunal would have jurisdiction over the investor’s claim, it may (depending on the circumstances) nevertheless find it inadmissible.38

Recall, however, that the Phoenix tribunal left open the possibility of denying jurisdiction where the violation of the host state law is ‘manifest’. Recently, the Yukos tribunal noted this principle: The Tribunal notes that there is support in the decisions of tribunals in investment treaty arbitrations for the notion that, even where the applicable investment treaty does not contain an express requirement of compliance with host State laws (as is the case with the ECT), an investment that is made in breach of the laws of the host State may either: (a) not qualify as an investment, thus depriving the tribunal of jurisdiction; or (b) be refused the benefit of the substantive protections of the investment treaty.39 (Emphasis added).

So, save for the situation left open in the Phoenix case, as acknowledged in Yukos, in cases 18.28 brought under investment treaties not containing a legality clause, tribunals have treated the illegality as going to the merits.40

33 Plama Consortium Limited v.  Republic of Bulgaria, ICSID Case No. ARB/​ 03/​24, Decision on Jurisdiction (Feb. 8, 2005), ¶¶ 228–​29 [hereinafter Plama]. 34  Id. ¶ 135. 35  Id. ¶¶ 138–​40 (emphasis in original). 36  Id. ¶¶ 141–​42. 37  World Duty Free, supra note 6, ¶ 187. 38  Patrick Dumberry, State of Confusion: The Doctrine of ‘Clean Hands’ in Investment Arbitration After the Yukos Award, 17 J. World Investment & Trade 236 (2016) (emphasis in original). 39  Yukos Universal Limited (Isle of Man) v. Russian Federation, (PCA Case No. AA 227), Final Award, (July 18, 2014), ¶ 1349. Note that the judgment of the District Court of The Hague, the Netherlands of April 20, 2016 (Cases C/​09/​477160/​HA ZA 15-​1, C/​09/​477162/​HA ZA 15-​2, C/​09/​481619/​HA ZA 15-​112) setting aside the Yukos Award was based on grounds other than those discussed herein. Yukos also confirms that, where illegality is an issue of the merits, the tribunal must weigh the claim as made against the illegality in order to determine whether the claim should be dismissed or, if not dismissed, whether the character or quantum of relief is affected by the illegality. 40  World Duty Free; Plama; Yukos; Hesham Talaat M. Al-​Warraq v. Republic of Indonesia, UNCITRAL, Award on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims (June 21, 2012), ¶ 99.

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The State’s Corruption Defence, Prosecutorial Efforts D. The State’s Obligation to Prosecute or Investigate and the Corruption Defence 18.29 What then does the divide between the merits and jurisdiction mean for the proposition

that the respondent state must prosecute public officials before it can assert its corruption defence? The choice between treating illegality as a jurisdictional or a merits issue affects the tribunal’s ability to consider any of the state’s efforts to prosecute the public officials.

1. Illegality as a jurisdictional issue 18.30 It is suggested that, where the illegality issue results in a denial of jurisdiction, there is little

room—​see later in this chapter, however, concerning Fraport I41—​for the tribunal to find that the state acquiesced to the illegality by failing to conduct any investigation or to prosecute. Such considerations belong to the merits. To elaborate, if the allegation of illegality is treated as a jurisdictional issue, then upon a successful finding of corruption, the tribunal is deprived of jurisdiction. The inquiry into the state’s complicity in the corrupt act stops there as the tribunal’s mandate expires. This is premised on giving effect to the rule of law, broader international public policy principles,42 and, where one exists, the legality clause contained in the applicable treaty. ‘Hence, where a respondent wishes to avert the tribunal’s gaze from its own malfeasance, there is considerable strategic incentive to challenge the tribunal’s jurisdiction.’43

2. Illegality as a merits issue 18.31 If the illegality is treated as a merits issue, the tribunal has more latitude to consider the conduct of the respondent state in relation to the corrupt act of the investor. That is indeed why some commentators have strongly advocated treating the legality clause and, more generally, the legality of the investor’s conduct, as a merits issue. Otherwise, as Mr Cremades maintains, ‘the Respondent Host State is placed in a powerful position. In the Biblical phrase, the tribunal must first examine the speck in the eye of the investor and defer, and maybe never address, a beam in the eye of the Host State. Such an approach does not respect fundamental principles of procedure’.44 18.32 There are at least two cases in which the state’s failure to prosecute public officials appears to

have contributed to the tribunal’s decision to reject that state’s corruption defence.45 In SPP v Egypt the tribunal rejected Egypt’s allegation that the claimant had obtained the investment contracts through, inter alia, bribery. The tribunal noted that: [t]‌he particular persons whom the respondent had exempted from any allegation of misconduct are the very same persons who established the initial contracts with the Claimants, who invited the Claimants to visit Egypt for the first time, and who—​as high ranking authorities

41  Note that Fraport I was annulled on December 23, 2010 by an ICISD annulment committee (Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, Decision on the Application for Annulment of Fraport AG Frankfurt Airport Services Worldwide, ICSID Case No. ARB/​03/​25). Following the commencement of fresh ICSID proceedings by Fraport, a newly constituted tribunal dismissed Fraport’s claims for want of ICSID jurisdiction and competence of the Tribunal (Fraport II). Fraport II dismissed jurisdiction for essentially the same reason as Fraport I, despite the intervening annulment decision. 42  See extracts from the awards in World Duty Free and Metal-​Tech, supra ¶¶ 18.04, 18.07. 43 Miles, supra note 17, at 338. 44  Dissenting Opinion of Bernardo M. Cremades, in Fraport I, ¶ 37; See also Douglas, Plea of Illegality in Investment Treaty Arbitration, supra note 21. 45 Llamzon, supra note 14, ¶¶ 7.26–​7.28; see also ¶¶ 6.71–​6.89 for summaries on SPP v. Egypt and Wena Hotels v. Egypt.

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? in the Government—​were called upon to make important decisions with respect to the project.46

The tribunal was pointing out the respondent state’s hypocrisy in invoking corruption allegations when its public officials who participated in the same unlawful act were exempted from prosecution. In Wena Hotels Ltd v Egypt47 the tribunal similarly rejected Egypt’s allegation that the claimant 18.33 had improperly influenced the chairman of the Egyptian Hotels Company (EHC), which was affiliated with the state tourism authority, to obtain the leases. The tribunal found that because Egypt, despite being aware of an agreement between the chairman of the EHC and the claimant for the development of the claimant’s hotel business, ‘decided (for whatever reasons) not to prosecute Mr. Kandil [chairman of the EHC] [and, thus], the Tribunal [was] reluctant to immunize Egypt from liability in this arbitration because it now alleges that the agreement with Mr. Kandil was illegal under Egyptian law’.48 The corruption allegations in Wena and SPP were raised in the merits phase and treated 18.34 as merits issues, rather than as jurisdictional ones.49 This is significant because the tribunal would have more latitude to consider factors concerning the state’s conduct in relation to the corrupt act on which it seeks to rely, either as a defence to the claims asserted against it by the claimant or as a basis to dismiss the claims on grounds of inadmissibility. Moreover, the tribunals in those cases did not explain the legal basis on which they were dismissing the respondent state’s corruption allegation—​there was no mention of acquiescence or a similar principle. Hesham, a case brought under the Agreement on Promotion, Protection and Guarantee of 18.35 Investments among Member States of the Organization of the Islamic Conference (OIC Agreement), addressed the illegality issue as a merits issue. The case is unique and warrants particular attention. The case arose out of the bail-​out of Bank Century in which the claimant—​Hesham Tallat 18.36 M Al-​Warraq—​held indirect ownership. The Indonesian central bank advanced short-​term loans to Bank Century that ultimately reached US$676–​700 million.50 After the bail-​out, the Indonesian central bank charged the claimant and his associates with banking irregularities and an arrest warrant was issued for the claimant.51 Corruption was alleged by both sides. The claimant maintained that a member of the Indonesian police from the special economic criminal division had solicited a bribe of US$300,000 in exchange for discontinuing the proceedings against two of the claimant’s associates.52 The claimant and one of his associates, Mr Rivzi, engaged professional services—​a UK law firm, a risk management company, and an Indonesian law firm—​to establish contact with the Indonesian Attorney General’s Office (AGO) with the aim of reaching a settlement.53 A meeting was fixed, attended by the Deputy

46  Southern Pacific Properties v.  Arab Republic of Egypt, ICSID Case No. ARB/​ 84/​3, Award on the Merits (May 20, 1992)SPP v. Egypt, ¶ 128 [hereinafter Southern Pacific]. 47  Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​98/​4, Award (Dec. 8, 2000), ¶ 116 [hereinafter Wena]. 48  Id. ¶ 117. 49  Southern Pacific, supra note 46, ¶ 128; Wena, supra note 47, ¶¶ 116–​17; see also Llamzon, supra note 14 at 307 where, in respect of both SPP and Wena, corruption was dealt with at the merits phase. 50  Hesham Talaat M. Al-​ Warraq v. Republic of Indonesia, UNCITRAL, Final Award (Dec. 15, 2014), ¶ 98 [hereinafter Hesham Final Award]. 51  Id. ¶¶ 108–​109. 52  Id. ¶¶ 109–​10. 53  Id. ¶¶ 112–​15.

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The State’s Corruption Defence, Prosecutorial Efforts Attorney General, the responsible investigating officer and a Mr Ernest Pallet of the risk management company engaged by the claimant and Mr Rivzi. The respondent state was seeking a settlement of IDR3.1 trillion. Mr Pallet was informed that only the Indonesian law firm could resolve the matter and it could only represent the claimant and Mr Rivzi in their dealings with the AGO. Following the meeting with the AGO, Mr Pallet was informed by the Indonesian law firm that, in order to secure the deal with the AGO, an immediate payment of US$2 million was required, of which US$1 million would be for ‘networking’ that was to be ‘distributed amongst the various agencies and departments that needed to “close off” on any settlement deal’.54 The money was to be paid directly to the Indonesian law firm which then would arrange the various payments. The UK law firm instructed the claimant and Mr Rivzi to bring the matter to the attention of the respondent’s enforcement agencies, which they did, following which the claimant alleges that no responses were received.55 The respondent maintains, however, that it was Mr Pallet who sought to bribe the AGO on the claimant’s and Mr Rivzi’s behalf.56 There were also other allegations, including that the bail-​out funds had been used to support the 2009 presidential election campaign of President Yudhoyono.57 The claimant was tried, in absentia, by the Indonesian court and, in December 2010, was convicted and his assets were confiscated.58 18.37 The tribunal—​chaired by Mr Bernardo M Cremades—​treated the corruption allegations

as merits issues.59 The tribunal found that the ‘Claimant was not properly notified of the criminal charges against him, he was tried and convicted in absentia and the sentence was not properly notified to the Claimant. The Claimant was not able to appoint legal counsel and was not able to appeal his sentence’.60 While the tribunal noted that the threshold for establishing a denial of justice was high, it nevertheless constituted ‘a clear violation of the FET standard’.61

18.38 Despite finding that the FET standard had been violated, the tribunal declared that the

claimant could not seek the benefit of the substantive protections under the treaty as the claims were inadmissible under the clean hands doctrine and pursuant to Article 9 of the OIC Agreement, which requires the claimant to ‘refrain from trying to achieve gains through unlawful means’.62 The tribunal noted that: the Claimant failed to uphold the Indonesian laws and regulations. The Tribunal further considers that the Claimant’s action, whether criminal or not, caused a liquidity issue for Bank Century, and his actions have been prejudicial to the public interest, in this case, the Indonesian financial sector. The Claimant having breached the local laws and put the public interest at risk, he has deprived himself of the protection afforded by the OIC Agreement.63

18.39 The Hesham decision has been praised by commentators both for affirming investor obliga-

tions and for treating illegality as a merits issue:

Although the [Hesham] decision can be criticized for failing to consider the status and content of the ‘clean hands’ doctrine, the Final Award is important in solidifying a jurisprudential

  Id. ¶¶ 115–​16 (emphasis in original).   Id. ¶¶ 116–​17. 56  Id. ¶ 118. 57  Id. ¶ 122. 58  Id. at 140–​41. 59 Hesham Talaat M.  Al-​ Warraq v.  Republic of Indonesia, UNCITRAL, Award on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims (June 21, 2012), ¶ 99. 60  Hesham Final Award, supra note 50, ¶ 621. 61  Id. 62  Id. ¶¶ 645–​48. 63  Id. ¶ 645. 54 55

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? trend in which investor–​State tribunals find investor claims to be inadmissible due to serious investor wrongdoing. Not all forms of wrongdoing strike at the Tribunal’s jurisdiction; the ability of tribunals to find claims inadmissible provides an important mechanism to deal with wrongdoing. Addressing investor wrongdoing at the jurisdictional stage of the arbitration is a blunt tool particularly where there is serious wrongdoing by both parties to the proceedings or where one party is making a counterclaim. By concluding that the claim was inadmissible only after having scrutinized the investigation and the prosecution of the Claimant by the Respondent, the Tribunal emphasized the State’s breach of fundamental due process rights. Even though the Claimant was prevented from pursuing his claim and obtaining damages, the Tribunal unambiguously concluded that the Respondent had failed to treat the investment according to the fair and equitable treatment recognized in international investment law. Such a conclusion thus contributes to flatten the asymmetry of obligations found in the IIA, which highlights the obligations of both investors and States.64

3. Whether the respondent state can lose the right to assert the corruption defence Llamzon argues that under Article 45(b) of ILC Draft Rules on State Responsibility (ILC 18.40 Rules): a claim that corruption existed at the time the investment was made, depriving the tribunal of jurisdiction to hear the case in its entirety, is an affirmative defense that can be likened to assertion of a legal right. As such, the investor would potentially be able to respond that the host State has either waived the right to make such a claim or had acquiesced in the corrupt act.65

Focusing on acquiescence,66 Llamzon suggests that it

18.41

may complicate a host State’s ability to invoke corruption as a complete defense against an investor’s claims when the State’s public officials (usually a successor government) are made aware of the corruption of a public official but take no effective steps to prosecute that official. Such inaction can be viewed by a tribunal as disinterest at best and complicity with corrupt acts at worst.67

Llamzon then refers to SPP v Egypt and Wena v Egypt (discussed above) as examples of tribunals refusing to entertain the respondent state’s corruption allegations on the basis of that state’s failure to prosecute the allegedly corrupt officials. He also refers to the Fraport I tribunal’s consideration of the availability to the claimant of estoppel if the respondent state knowingly overlooked the violation of domestic law.68 The doctrine of acquiescence dictates that ‘inaction on behalf of a State may lead to the 18.42 loss of a right or claim if, under the circumstances, that State would have been expected to engage in some form of activity’.69 A failure to assert the defence of corruption—​through

64  Andrew Newcombe and Jean-​Michel Marcoux, Hesham Talaat M. Al-​Warraq v. Republic of Indonesia:—​ Imposing International Obligations on Foreign Investors, 30 ICSID Rev. 53 (2015). 65 Llamzon, supra note 14, ¶ 10.83. 66  The discussion on acquiescence and related principles presumes that the acts of public officials engaged in corruption are not attributable to the state. But the authors recognize that there is a lively debate on whether attribution within the context of corruption in investment arbitration can be established: See Llamzon, supra note 14, Chapter 10; see also James Crawford & Paul Mertenskötter, Chapter 3: The Use of ILC’s Attribution Rules in Investment Arbitration, in Building International Investment Law: The First 50 Years of ICSID (Meg N. Kinnear, Geraldine R. Fischer, et al. eds., 2015). 67 Llamzon, supra note 14, ¶ 10.87. 68  Id. 69  Christian J. Tams, Waiver, Acquiescence and Extinctive Prescription, in Manuel de la Responsabilité Internationale 12 (Crawford et  al. forthcoming), available at SSRN, http://​ssrn.com/​abstract=1414188 (last visited Mar. 14, 2018).

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The State’s Corruption Defence, Prosecutorial Efforts passivity or silence—​would be sufficient. This could equally be implied ‘from certain forms of active conduct’. In the Temple Case, Thailand’s sovereignty claim failed due to Thailand’s use of certain boundary maps that contradicted the claim.70 Furthermore, the Court stated that ‘the failure to assert a claim must have extended over a period of time’.71 The longer the period of inaction; the easier it is to conclude that the state has given up the claim. However, ‘where the circumstances would have called for the claim to be asserted, a short period of passivity may be sufficient to establish acquiescence’.72 Finally, ‘[i]‌t is clear that only under specific circumstances can inaction amount to acquiescence. In order to entail legal effects, a State must have failed to assert claims in circumstances that would have required action’. 73 In the context of corruption, Llamzon notes that ‘such circumstances encompass the failure of a state to fulfil its duty to prosecute public officials known to have engaged in corruption, a duty found primarily under national anti-​corruption legislation, but also under international anti-​corruption norms derived from treaties which require domestic anti-​corruption legislation and diligent enforcement of those laws’.74 18.43 Llamzon also notes that acquiescence does not depend on ‘the existence of a positive principle

in international law that corrupt public officials must be prosecuted. No “primary rule” on prosecution is necessary to lead a tribunal to a finding that, under the circumstances, the host State has lost its ability to invoke corruption against the investor’.75

18.44 These observations raise some further questions. First, a Legality Clause conditions the

state’s consent to investment arbitration. Should it be proven that the investment was made through corruption violating the Legality Clause, the respondent state’s consent to investment arbitration would not exist. One commentator views the legality clause as lex specialis, thus precluding jurisdiction where there is investor corruption.76 In such circumstances, it seems difficult to imagine how a tribunal would come to consider the ILC Rules at all. This is compounded by the fact that the ILC Rules are ‘secondary’ or ‘residual’ in nature in that they become engaged only upon a breach of a primary rule.77 After all, ‘it will be the relevant primary obligations that will determine whether or not a non-​state party [i.e. an investor] has any entitlement to claim in the particular circumstances, for example by initiating a complaint under human rights treaty monitoring mechanisms, or invoking bilateral investment treaty provisions that permit recourse to arbitration’.78

18.45 Llamzon cites the SPP v Egypt and Wena v Egypt decisions as buttressing the acquiescence

argument. As discussed, however, in those cases corruption was addressed in the merits phase, not jurisdiction.79

18.46 Insofar as Fraport I is concerned, it is indeed correct that the tribunal recognized that

‘[p]‌rinciples of fairness should require a tribunal to hold a government estopped from raising violations of its own law as a jurisdictional defense when it knowingly overlooked them and endorsed an investment which was not in compliance with its law’.80 The Fraport I tribunal

  Id. 14; Temple of Preah Vihear Case, ICJ Rep. (1962), 27–​28 (emphasis in original).   See Tams, Waiver, Acquiescence and Extinctive Prescription, supra note 69, at 14. 72  Id. 73  Id. (emphasis in original). 74 Llamzon, supra note 14, ¶ 10.91. 75  Id. ¶ 10.92. 76 Miles, supra note 17, at 353–​54. 77  Commentary to art. 55 of the ILC Rules, ¶ 2. 78  James Crawford, State Responsibility:—​The General Part 549 (2013) [hereinafter Crawford]. 79  Southern Pacific, supra note 46, ¶ 128; Wena, supra note 47, ¶¶ 116–​17; see also Llamzon, supra note 14, at 307, where, in respect of both SPP and Wena, corruption was dealt with in the merits phase. 80  Fraport I, supra note 20, Award (Aug. 16, 2007), ¶ 346. 70 71

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? found on the facts that the respondent state did not have such knowledge, but it clearly left open the possibility of estoppel defeating a respondent state’s jurisdictional defence. At least two cases have referred to Fraport I concerning the availability of estoppel to defeat 18.47 a respondent state’s jurisdictional defence of illegality:81 Desert Line Projects82 and Railroad Development Corporation.83 In Desert Line Projects, the relevant treaty provision—​Article 1(1) of the Oman–​Yemen BIT—​required the investment to be ‘accepted’ by the host state according to its laws and regulations and an ‘investment certificate’ to be issued. The tribunal rejected the respondent state’s jurisdictional objection that such a certificate had not been issued, finding, inter alia, that the respondent state had waived the certificate requirement and, citing Fraport I, that it was estopped to rely on it to defeat jurisdiction.84 The tribunal relied on written communications that showed ‘effective certification of the investment’,85 in particular a memorandum by the prime minister addressed to other ministries endorsing the claimant’s projects. In Railroad Development Corporation, the respondent state argued that the tribunal lacked 18.48 jurisdiction ratione materiae as the claimant’s investment was not a ‘covered investment’ under the BIT or the ICSID Convention because the investment was allegedly illegal and therefore did not create rights under domestic law.86 Specifically, the respondent state argued that because the contracts in issue lacked governmental approval, they were ultra vires and thus not in accord with its domestic law. The tribunal, referring to Fraport I, rejected this argument, finding that the respondent state—​operating via a state entity—​had knowingly overlooked its own laws and therefore could not rely on violations of the same as a jurisdictional defence.87 The extent to which acquiescence can be applied to cases in which corruption is alleged is 18.49 unclear. Commentating on estoppel,88 Jarrod Hepburn notes that estoppel has been raised in

81  This assertion is based on the use of the sophisticated research tools available on the investorstate­ lawguide.com database. Through those tools, visited on Mar. 14, 2018, the authors were able to determine that the Desert Line and Railroad Development Corporation tribunals specifically referred to ¶ 346 of Fraport I, supra note 20, which leaves open the estoppel argument—​in their respective awards. Thus, there may be other awards that have referred to either the estoppel argument left open in Fraport I that are not available on the investorstatelawguide.com database or have otherwise referred generally to the availability of estoppel to bar a state from arguing lack of jurisdiction. See for instance Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/​08/​8, Decision on Jurisdiction (Mar. 8, 2010) at ¶ 140, where the tribunal, citing Fraport I, was of the view that the respondent state did not regard the underlying contracts to be illegal under Ukranian law. Notably, the tribunal noted that it could render such a view without relying on estoppel. 82 Desert Line Projects L.L.C.  v.  Republic of Yemen, ICSID Case No. ARB/​ 05/​17, Award (Feb. 6, 2008) at ¶ 120 [hereinafter Desert Line Projects]. 83 Railroad Development Corporation v.  Republic of Guatemala, ICSID Case No. ARB/​ 07/​ 23, Second Decision on Objections to Jurisdiction (May 18, 2010), ¶ 146 [hereinafter Railroad Development Corporation]. 84  Desert Line Projects, supra note 82, ¶¶ 118 and 120. 85  Id. ¶ 118. 86  Railroad Development Corporation, supra note 83, ¶ 139. 87  Id. ¶ 146. 88  Acquiescence resembles the concept of estoppel in international law. While estoppel is not mentioned in the Draft Articles on the Responsibility of States for Internationally Wrongful Acts, estoppel is a general principle of law, borrowed from common law systems. ‘Whereas with acquiescence the state concerned is taken to have relinquished a claim or right through inaction, estoppel makes no such presumption: rather, the state is precluded from alleging the contrary to what was represented. In practical terms, the same facts may ground both a claim of estoppel and acquiescence, but they are analytically distinct.’ See Crawford, supra note , 78; Jarrod Hepburn, Domestic Law in International Investment Arbitration 155 (2017) [hereinafter Hepburn].

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The State’s Corruption Defence, Prosecutorial Efforts investment cases with respect to allegations of violations of specific domestic laws by investors.89 He opines that estoppel’s application to claims of violations of, for instance, corruption ‘is more doubtful. This position is quite intuitive. In a situation where an investment has been procured by corruption or bribery of state officials, the investor could hardly be permitted to argue that the state acquiesced in its investment or gave representations of its legality, since the covert acquiescence forms the whole basis of the corruption finding’.90 The commentator cites Mr Franck Charles Arif v Republic of Moldova for support, in which the tribunal found, without referring to estoppel, that the state officials had treated the investment as valid over a period a time, resulting in the respondent being prevented from asserting illegality to challenge the tribunal’s jurisdiction.91 The tribunal maintained that there were ‘temporal limitations on a jurisdiction argument based on the illegality of an investment, where the legality of the investment has been accepted and acted upon in good faith by both parties over a period of time’.92 The tribunal recognized one such limitation as being investment made on the basis of corruption.93 18.50 Andrea Menaker, speaking at the 12th Annual ITA–​ASIL Conference in Washington, D.C.,

correctly described the difficulty of imposing concepts of estoppel, waiver, and acquiescence where corruption is alleged: [I]‌think that it would be easier to find waiver or estoppel when you are talking about illegality at the beginning of the investment; when that illegality is fraud or misrepresentation, because, there, in my opinion, you can clearly find estoppels. If there has been a misrepresentation by the investor or fraud in the making of that investment, and the State later uncovers that, but yet decides to move forward with the investment. There, those principles, I think, can work. I think it is much more difficult in the corruption context, because where would you find waiver or estoppel? I mean, who has uncovered this and decided it is okay? Are they saying now corruption is not a violation of law?94

18.51 Menaker then went on to suggest that estoppel or waiver may be possible where there has

been a lack of prosecution by the respondent state:

I think that gets very close to arguing that you need to prosecute once the corruption has been uncovered and that a lack of prosecution by the domestic courts, then, is a defense. That is a current debate. Otherwise, when there is corruption, I find it hard to find an estoppel or a waiver as you could for other types of illegality.95

4. Tribunals should be circumspect with national authorities’ findings on corruption 18.52 It follows from these observations that a tribunal must consider the circumstances in which corruption surfaces, the conduct of the national authorities, and the state’s ability to prosecute public officials or investigate the corruption vis-​à-​vis the state’s assertion of that corruption as a defence.

  See Hepburn, supra note 88, at 160.   Id. 91  Id. See also Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/​11/​23, Award (Apr. 8, 2013) at ¶ 376 [hereinafter Arif ]. 92 Arif, supra note 88. 93  Id. See also Hepburn, supra note 88, 160–​61. 94  Andrea Menaker at the 12th Annual ITA–​ASIL Conference, Allegations of Corruption in the Underlying Claims: What Remedies Are Available to the Arbitral Tribunal, 9 World Arb. & Mediation Rev. 291 (2015). 95  Id. 89 90

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? Even where the local authorities have conducted investigations and, at times, rendered con- 18.53 clusions on the alleged illegality, it does not necessarily follow that tribunals have acted on those findings. The extent to which local authorities’ findings have influenced the tribunal’s reasoning has differed depending on the facts of the case. In Fraport I—​which did not turn on corruption allegations raised by the respondent state—​ 18.54 the majority denied jurisdiction ratione materiae on the basis that the protections afforded by the BIT did not extend to investments made in violation of Philippine law, noting that the claimant’s investment was made in contravention of the Philippine Constitution and its anti-​dummy law.96 While the national authorities had conducted an investigation into the matter and concluded that the claimant’s investment did not violate local law requirements,97 the tribunal found that those authorities did not have knowledge of the ‘secret shareholder agreements’ which revealed the violation of local law, as they were produced only during the course of the arbitration.98 In Niko Resources,99 the corruption alleged by the respondent was that the claimant had 18.55 given a car to the Bangladeshi State Minister for Energy and Mineral Resources and also that the minister was invited by the claimant to attend an exposition in Calgary, Canada on the claimant’s bill.100 The tribunal found that there was no causal link between those acts and the conclusion of the agreements upon which the ICSID claim was based; indeed, it was not alleged that there was such a link.101 Canadian authorities had investigated Niko’s activities and had ordered it to pay approximately CA$9.5 million in fines.102 Proceedings also had been commenced in Bangladesh by the local anticorruption commission, but the tribunal found that those investigations had not led to any trial or conviction of the claimant or its group.103 Furthermore, a local environmental legal association had commenced action against the claimant and respondents before the Supreme Court of Bangladesh. The association argued, inter alia, that one of the agreements was invalid.104 The court had concluded, however, that the joint venture agreement was not obtained through fraudulent means.105 In TSA Spectrum de Argentina SA106 the respondent state alleged that the investor’s conces- 18.56 sion was obtained by corruption and, thus, deprived the tribunal of jurisdiction. The tribunal did not rule on the corruption allegation, while denying jurisdiction on another ground. Significantly, the tribunal acknowledged that local investigations concerning the concession contract had commenced, but were incomplete. The tribunal also noted that two indictments had been made against two persons connected with the claimant, but no judgment had yet

  Fraport I, supra note 20, ¶¶ 401–​404.   Id. ¶ 366. 98  Id. ¶¶ 361, 366–​82. 99 Niko Resources (Bangladesh) Ltd. v.  Bangladesh Petroleum Exploration & Production Company Limited & Bangladesh Oil Gas and Mineral Corporation, ICSID Case No. ARB/​10/​11 and ARB/​10/​18, Decision on Jurisdiction (Aug. 19, 2013) [hereinafter Niko Resources]. 100  Id. ¶¶ 384–​ 85. Note that since the Decision on Jurisdiction, Bangladesh has filed new submissions alleging that the agreements have been procured through corruption. The tribunal will examine this new submission and the allegations of corruption. See Niko Resources (Bangladesh) Ltd. v. Bangladesh Petroleum Exploration & Production Company Ltd. & Bangladesh Oil Gas and Mineral Corporation, ICSID Case No. ARB/​10/​11 and ARB/​10/​18, Third Decision on the Payment Claim (May 26, 2016), ¶¶ 92–​93. 101  Niko Resources, supra note 99, ¶ 455. 102  Id. ¶ 389. 103  Id. ¶ 426. 104  Id. ¶ 98. 105  Id. ¶ 403. 106  TSA Spectrum de Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/​ 05/​5, Award (Dec. 19, 2008). 96 97

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The State’s Corruption Defence, Prosecutorial Efforts been rendered.107 As a result, ‘[t]‌he Arbitral Tribunal [could not establish], on the basis of available materials, that the Concession was illegally obtained and that, for this reason, it [was] not protected under the BIT. On the other hand, investigations and proceedings in Argentina [were] still going on’.108 18.57 In EDF, the allegation of corruption surfaced in a different light. There, the claimant alleged

that the respondent state had committed corruption by soliciting a million dollar bribe from it during the life of the investment. When the claimant refused to pay the bribe, the respondent state ‘engaged in a concerted attack on EDF’s business in Romania resulting in the total loss of its operation in the country’.109 The respondent state denied the allegations and pointed out that local authorities had looked into the matter and concluded that there was insufficient evidence to substantiate the claimant’s allegations of corruption.110 The tribunal found that the claimant had failed to satisfy the required level of proof of the alleged bribe solicitation by the officials111 and appears to have relied on the local authority’s conclusions concerning the claimant’s bribery claim.112

18.58 The cases demonstrate that even where local authorities are addressing, or have investigated,

the allegedly illegal conduct, or even have commenced prosecution, the investment tribunal may still have to determine whether deference should be given to these efforts or findings and, if so, how much. The suggestion that some prosecutorial efforts must be undertaken before the state can successfully invoke the corruption defence may be pushing things too far, especially since such efforts may not go far in assisting the tribunal’s task in determining whether corruption has taken place.

18.59 This is not to say that national authorities’ investigation of the alleged illegality is insig-

nificant. Local investigations in the EDF case appear to have played a role in the tribunal rejecting the claimant’s claims. To quote the tribunal in Fraport I, however, ‘holdings of municipal legal institutions cannot be binding with respect to matters properly within the jurisdiction of this Tribunal’.113 At best, the findings of local authorities are instructive and the weight to be attributed to them will always depend upon the circumstances of the authorities’ conduct and ultimate findings, or lack thereof.

18.60 In MOL v Republic of Croatia, a key issue was whether the underlying agreement—​a share-

holders’ agreement—​was procured through bribery.114 Soon after the claimant commenced ICSID proceedings, Croatia commenced parallel proceedings under the UNCITRAL Rules against MOL by alleging that MOL had secured the contract by bribing the then former Prime Minister, Ivo Sanader, with €10 million. In December 2016, the UNCITRAL tribunal dismissed all of Croatia’s claims, concluding that ‘Croatia has failed to establish that MOL did in fact bribe Dr Sanader’.115

18.61 By way of background, the respondent state sought to privatize INA, its state-​owned entity

in oil and gas. The claimant and the respondent entered into a shareholder agreement in

  Id. ¶ 174.   Id. ¶ 175. 109  EDF v. Romania, ICSID Case No. ARB/​05/​13, Award (Oct. 8, 2009), ¶ 73 [hereinafter EDF]. 110  Id. ¶¶ 145–​46. 111  Id. ¶ 231. 112  Id. ¶ 228. 113  Fraport I, supra note 20, ¶ 391. 114  MOL Hungarian Oil and Gas Company Plc v.  Republic of Croatia, ICSID Case No. ARB/​ 13/​32 [hereinafter MOL ICSID]. 115  The Republic of Croatia v. MOL Hungarian Oil and Gas Plc, PCA Case No. 2014-​15, Final Award (Dec. 23, 2016), ¶ 333. 107 108

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? 2003, whereby the claimant acquired a 25 per cent stake in INA. Between 2003 and 2007, the parties continued to negotiate the further privatization of INA. In early 2008, the parties entered into a modification of the shareholders agreement and the claimant’s stake increased to about 50 per cent in INA. By the end of 2009, the parties had entered into two further agreements—​the Gas Master Agreement and the First Amendment to the Shareholders’ Agreement (collectively the 2009 agreements). Pursuant to the 2009 agreements, INA’s gas storage and trading businesses were to be spun off into separate entities and transferred to the respondent by specified dates in 2009. The gas trading business was loss-​making, while the gas storage business was profit-​making.116 The claimant’s complaint was that, while the respondent acquired the gas storage business, it 18.62 did not acquire the gas trading business, which amounted to a breach of the 2009 agreements. The claimant, thus, had to put up costs to stave off INA’s bankruptcy.117 Moreover, the claimant alleged that the respondent took a series of other measures that impacted its investment in INA. For instance, in breach of its obligations under the 2003 shareholders’ agreement, the respondent did not grant or uphold licences and permits necessary for INA’s operation. The claimant also alleged that the respondent’s bribery allegations—​discussed further below—​amounted to harassment and intimidation to compel the claimant to surrender control of INA.118 The respondent state argued that the claimant had bribed Croatia’s then Prime Minister Ivo 18.63 Sanader. The respondent argued that Sanader was convicted in local court proceedings for accepting a bribe from the claimant. The respondent state had also commenced criminal proceedings against certain officials of the claimant. The claimant, on the other hand, argued that the criminal prosecution against it formed part of the narrative of its complaint against the respondent state’s treaty violation.119 In July 2015, however, the Croatian Constitutional Court overturned the local court’s ruling 18.64 because of procedural errors that occurred and that Sanader’s right to a fair trial had been breached.120 The Constitutional Court also emphasized that its own ruling did not have res judicata effect on the UNCITRAL tribunal: Decisions by national courts, including those by the Constitutional Court, cannot in general have an impact on arbitration proceedings initiated or conducted by the Republic of Croatia in the field of international commercial law. It is a general principle that arbitral tribunals are not bound by final judgments of national courts, or decisions issued by national constitutional courts, because such judgments and decisions are regarded as facts by arbitral tribunals. Such tribunals examine matters in the case before them on their own.121 The UNCITRAL tribunal also opined that it would consider the findings of the lower court 18.65 ‘with the utmost caution’,122 given the clear indications, according to the tribunal, of bias on the part of the lower court judge.123   Id. Decision of the Tribunal on Preliminary Objections (Dec. 2, 2014), ¶¶ 13–​18 .   Id. ¶ 18. 118  Id. ¶¶ 19–​21. 119  Id. ¶¶ 17 & 19(3). 120  Sven Milekic, Croatia Court Orders Retrial for Ex-​PM Sanader, BalkanInsight (July 27, 2015), http://​ www.balkaninsight.com/​en/​article/​croatian-​constitution-​court-​revokes-​former-​pm-​s-​corruption-​verdicts. 121 Ema Vidak Gojkovic, An Unlikely Tandem of Criminal Investigations and Arbitral Proceedings:  A Case Study of the INA—​MOL Oil & Gas Proceedings, Kluwer Arbitration Blog (Jan. 26, 2017), http://​ arbitrationblog.kluwerarbitration.com/​2017/​01/​26/​unlikely-​tandem-​criminal-​investigations-​arbitral-​ proceedings-​case-​study-​ina-​mol-​oil-​gas-​proceedings/​. 122  Republic of Croatia v. MOL Hungarian Oil & Gas Plc, PCA Case No. 2014-​15, Final Award (Dec. 23, 2016), ¶ 139. 123  Id. ¶ 137. 116 117

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The State’s Corruption Defence, Prosecutorial Efforts 18.66 The MOL cases highlight the fleeting binding state of local court rulings and the potential limited

utility such rulings may have for arbitration tribunals.

18.67 Similar hesitance towards local rulings is followed in other realms of international law. Within

the realm of international criminal law, the Rome Statute of the International Criminal Court (Rome Statute) recognizes that the International Criminal Court (ICC) could determine that a case is inadmissible where ‘[t]‌he case has been investigated by a State which has jurisdiction over it and the State has decided not to prosecute the person concerned, unless the decision resulted from the unwillingness or inability of the State genuinely to prosecute’.124 The ICC must engage in a sensitive analysis to determine for itself whether the state’s decision not to investigate was genuine and not based on ‘unwillingness’ or an ‘inability’ as described at Articles 17(2) and 17(3) of the Rome Statute, respectively. Thus, even for the ICC, a state’s determination of the matter is not final.

18.68 Given that a tribunal will have to determine for itself whether local authorities’ findings are both

relevant and reliable, does it further fairness to condition a state’s entitlement to raise a corruption defence on it prosecuting the wrongdoers?

18.69 Underlying this question are the economic and political realities pertaining to national author-

ities and how corruption allegations are handled by states. Significantly, Article 5 of the OECD Convention inherently ‘recogni[zes] the fundamental nature of national regimes of prosecutorial discretion’.125 The state’s discretion is preserved but must be ‘exercised on the basis of professional motives and is not to be subject to improper influence by concerns of a political nature’.126

18.70 Contrary to the spirit of Article 5 of the OECD Convention,127 however, states’ decisions

to prosecute or investigate corruption remain a discretionary decision sometimes based on political and/​or economic factors.128 As one commentator has noted: ‘States have a right to regulate their internal affairs and to investigate crimes within their territories [and that this] is an undisputed sovereign right of states’.129

18.71 The Rome Statute, discussed above, also recognizes the state’s right to carry out the adminis-

tration of justice, given that the ICC is to be ‘complementary to national criminal jurisdictions’.130 In fact, ‘the complementarity principle pays tribute to the realization that national authorities are closer to evidence and that crimes under the jurisdiction of the [ICC] are normally best prosecuted in the state where they have been committed’.131 If the Rome Statute

  Rome Statute of the International Criminal Court art. 17(1)(b).   OECD, Commentaries on the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions ¶ 27 (2011) (emphasis added). 126  Id. 127  OECD Convention art. 5: ‘Investigation and prosecution of the bribery of a foreign public official shall be subject to the applicable rules and principles of each Party. They shall not be influenced by considerations of national economic interest, the potential effect upon relations with another State or the identity of the natural or legal persons involved’. 128  In the Consultation Paper prepared by the Working Group on Bribery following the 10-​year anniversary of the OECD Convention, the working group interestingly observed that contracting parties required decisions to prosecute to be approved by levels of government or for prosecution to only commence if it was in the ‘public interest’. See Consultation Paper on the Review of the OECD Instruments on Combating Bribery of Foreign Public Officials in International Business Transactions (January 2008), ¶¶ 49–​54, http://​www.oecd.org/​ daf/​anti-​bribery/​39882963.pdf (last visited Mar. 16, 2018). 129  Ruslan Mirzayev, International Investment Protection Regime and Criminal Investigations, 29 J. Int’l Arb. 70 (2012). 130  Rome Statute of the International Criminal Court preamble, ¶ 10 and art. 1. 131 Markus Benzing, The Complementarity Regime of the International Criminal Court:  International Criminal Justice between State Sovereignty and the Fight against Impunity, 7 Max Planck Y.B. of UN L. 591, 599–​600 (2003), http://​www.mpil.de/​files/​pdf3/​mpunyb_​benzing_​7.pdf (last visited Mar. 15, 2018). 124 125

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II.  Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled? respects the state’s right to enforce its criminal laws in respect of the most heinous crimes, it appears only logical that the state should be permitted to exercise similar discretion in the fight against corruption. Successful prosecutions are not the only means of fighting corruption. Since 1977 when the 18.72 US Foreign Corrupt Practices Act (USFCPA) was enacted, 92.50 per cent of defendants have settled with the Securities and Exchange Commission and 76.19 per cent of defendants have settled with the Department of Justice.132 Thus, a vast majority of cases brought under USFCPA have resulted in settlements. No sweeping conclusions can be made either way on whether those settlements furthered the fight against corruption, but the point made here is that at least the US felt that they did. It can be questioned whether a state has an international obligation to investigate corrup- 18.73 tion. In Hesham133 the tribunal found that the claimant could not demonstrate that it had a right to have its corruption allegations investigated by the Indonesian authorities.134 The claimant relied, inter alia, on Article 30(3) of the UN Convention against Corruption (UN Convention)135 for this proposition. The tribunal noted: The UN’s Legislative Guide for the implementation of this Convention classifies Article 30(3) under the heading of ‘non-​mandatory requirements’, and further states in relation to Article 30(3) that ‘these States must make an effort to encourage the application of the law to the maximum extent possible in order to deter the commission of offences established in accordance with the Convention’ . . . Indonesia therefore has no obligation under Art 30(3) to investigate corruption allegations.136

Commentators also have recognized the ‘on-​the-​ground’ reality concerning national author- 18.74 ities in the fight against corruption: [T]‌he implementation and enforcement of . . . anti-​corruption laws can make a significant difference. The funding, sophistication and political autonomy of government investigating agencies vary from State to State (and even between different agencies within one State). Indeed, the circumstances of funding or political will within the relevant jurisdiction to pursue an anti-​corruption agenda can vary from year to year. For example, an anti-​corruption agency may be poorly equipped with inexperienced staff and inadequate funding and, for whatever meagre funding it does receive, dependent upon central government’s support. Such an agency might be, in effect, little more than a puppet of the central government or particularly powerful individual politicians.137

Other national authorities may be well funded, well staffed, and completely independent 18.75 from government. But even such authorities may be ‘subject to the whims or particular agenda of the agency’s management in focusing on certain sectors or seeking to achieve target statistics (for example, number of convictions), which may tie into a broader political agenda’.138 132 Stanford Law School, Foreign Corrupt Practices Act Clearinghouse:  a collaboration with Sullivan & Cromwell LLP, http://​fcpa.stanford.edu/​index.html (last visited Mar. 15, 2018). 133  Hesham Final Award, supra note 50. 134  Id. ¶ 612. 135  UN Convention art. 30(3): ‘Each State Party shall endeavour to ensure that any discretionary legal powers under its domestic law relating to the prosecution of persons for offences established in accordance with this Convention are exercised to maximize the effectiveness of law enforcement measures in respect of those offences and with due regard to the need to deter the commission of such offences’. 136  Hesham Final Award, supra note 50, ¶ 612 (emphasis in original). 137  Joe Tirado, Matthew Page & Daniel Meagher, Corruption Investigations by Governmental Authorities and Investment Arbitration: An Uneasy Relationship, 29 ICSID Rev. 501 (2014) [hereinafter Tirado, Page & Meagher]. 138  Tirado, Page & Meagher, supra note 137, at 501–​502.

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The State’s Corruption Defence, Prosecutorial Efforts 18.76 Moreover, the standard of proof is different in the domestic criminal context than before an

investor-​state arbitral tribunal, which may be a reason why local authorities choose not to press charges or opt to drop an investigation. Proving guilt ‘beyond a reasonable doubt’ is much harder than the civil standards that are applied in an arbitration.

18.77 An investment tribunal may need to consider this reality when determining whether any

acquiescence by the state has occurred due to the respondent state’s failure to prosecute or investigate.

18.78 Additionally, it is unclear when in an investment dispute the state would be required to pros-

ecute the public officials for it successfully to invoke the corruption defence. Recall that corruption is secretive and clandestine in nature and relies on being undetected. Confidentiality restrictions in place in arbitration may prevent local prosecutors from having all of the damaging evidence that comes to light in an investment arbitration, thus preventing conviction. Moreover, it is likely that the state would not become aware of the corruption unless its existence was disclosed voluntarily or accidentally. In fact, in World Duty Free139 a claimant witness disclosed the facts that established the bribery and in Metal-​Tech an amendment to a consultancy agreement surfaced during a hearing that caused the tribunal to be suspicious. These were not discoveries by the local authorities.

18.79 If a state would be required to conduct investigations immediately upon learning of the al-

leged existence of corruption before it could invoke successfully the corruption defence in an investment treaty case, then this could jeopardize the entire arbitral process. The tribunal might have to halt the proceedings, potentially placing the fate of the arbitration in the hands of the local authorities, who could take a long time to complete their inquiries and then act on the results.140

5. Conclusion 18.80 Not all enforcement authorities are adequately resourced and some may not be disentangled from the state sufficiently to enable them to make impartial and serious investigations. Moreover, the decision to prosecute is a discretionary act of the state. There may be ‘bigger fish’ to catch, which must be determined on the basis of resources and a number of policy objectives. 18.81 As a policy, requiring states to prosecute officials as a precondition to invoking the corruption

defence is sound and sensible. But it becomes harder to justify such policies in light of states’ discretion over prosecutorial initiatives, especially where the utility of such initiatives to the tribunal is questionable. The precondition may be too much of a price to pay when there is no guarantee that any fruits of the investigation or successful prosecution will add anything to the tribunal’s inquiry.

18.82 It appears that if states are to make efforts to combat corruption before they can be entitled to

assert the corruption defence, this can occur only where the corruption issue is addressed as a merits issue, as it was in SPP, Wena, and Hesham, and not as a jurisdictional issue. When corruption is treated as a jurisdictional issue a finding of corruption precludes the tribunal from considering the state’s conduct any further. Principles of acquiescence or a related principle

  World Duty Free, supra note 6, ¶ 130.   See Tanzania Electric Supply Co. v. Independent Power Tanzania Ltd., ICSID Case No. ARB/​98/​8, Final Award (July 12, 2001), ¶¶ 47–​49, where the tribunal denied Tanesco’s request for extension of time of three months to make additional filings while investigations in Tanzania of the allegations of bribery were underway. 139 140

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III.  Anti-corruption Norms in Recent Investment Agreements invoked when the corruption is treated as a jurisdictional issue may not change this, as a state’s decision not to prosecute may be premised on a plenitude of policy considerations or an inability as discussed earlier. This is by no means a desirable situation, and the debate over whether illegality should be 18.83 treated as a jurisdictional issue or a merits one is in a state of flux. But perhaps this is the nature of investment arbitration and reforms may need to be made elsewhere in order to balance the scales in the investment arbitration space. One commentator provides useful insights in this regard: [P]‌unishing the investor for corrupt conduct is no doubt sound public policy. However, the powers of an investor-​State tribunal stop there; it can do no more than dismiss the claims of an investor on the grounds that a corruptly procured investment is not protected by an investment treaty. When the host State prevails on the basis of its corruption defense and when no public officials are prosecuted for their role in the corrupt activities, the question remains whether the objective of combating corruption has been well-​served. This result may be a necessary consequence of the limited powers of investor-​State tribunals; after all, their mandate ends with the disposition of the dispute submitted to them. It remains to be seen whether future international instruments governing foreign investments should include obligations by states to investigate and prosecute their own government officials involved in the alleged corruption.141

III.  Anti-​corruption Norms in Recent Investment Agreements A. Introduction In Section II, we discussed how difficult it may be under the current investment regime to 18.84 precondition the corruption defence on a showing of some prosecutorial efforts. This issue may be alleviated by incorporating anti-​corruption norms in investment treaties that require states to prosecute or investigate. Until relatively recently, corruption was not addressed specifically in the extensive web of 18.85 investment treaties, which has resulted in ‘giving comparatively little guidance to arbitrators about how corruption issues should be treated vis-​à-​vis the protections provided to investors under these treaties’.142 Now, however, states have begun to conclude treaties with commitments to combatting cor- 18.86 ruption. Such commitments appear in (i) independent provisions which, at times, are inserted under defined chapters such as ‘Investment’ or ‘Substantive Obligations’; and (ii) in a ‘Corporate Social Responsibility’ (‘CSR’) provision in which combatting corruption is identified as one objective amongst others. Some treaties, however, exclude their anti-​corruption provisions from the investor-​state arbitration clause. It should be noted that the treaties discussed in Section III are not exhaustive, as there may be 18.87 other treaties that are not yet publicly available. Additionally, this chapter specifically focuses on those treaties that are available in English.

141 Stanimir A. Alexandrov, Review of ‘Corruption in International Investment Arbitration’ by Aloysius P. Llamzon, 109 Am. J. Int’l L. 706 (2015). 142 Llamzon, supra note 14, ¶ 4.66.

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The State’s Corruption Defence, Prosecutorial Efforts B. Independent Anti-​corruption Provisions—​the Japanese Treaties 18.88 From 2007 onwards, Japanese treaties have included independent provisions against corrup-

tion that are covered by the states’ consent to investor-​state arbitration.143 By way of example, the Iraq–​Japan BIT,144 Article 9, ‘Measures against Corruption’, provides: ‘Each Contracting Party shall ensure that measures and efforts are undertaken to prevent and combat corruption regarding matters covered by this Agreement in accordance with its laws and regulations’.

18.89 At least fourteen other Japanese investment treaties have identical language.145 The India–​

Japan Economic Partnership Agreement (EPA), however, has a slightly varied version. Article 7 of the India–​Japan EPA,146 entitled ‘Measures against Corruption’, states: ‘Each Party shall, in accordance with its laws and regulations, take appropriate measures to prevent and combat corruption of its public officials regarding matters covered by this agreement’.

18.90 In addition to these anti-​corruption provisions, the same treaties mostly provide for investor-​

state arbitration. Continuing with our first example, Article 15(1) of the Iraq–​Japan BIT, the BIT’s investor-​state arbitration clause covers a claim for violation of the BIT’s ‘Measures against Corruption’ provision: For the purposes of this Article, ‘investment dispute’ is a dispute between a Contracting Party and an investor of the other Contracting Party that has incurred loss or damage by reason of, or arising out of, an alleged breach of any obligation of the former Contracting Party under this Agreement with respect to the investor of that other Contracting Party or its investments in the Area of the former Contracting Party. (emphasis added)

18.91 Most of the Japanese treaties contain virtually identical language.147 Article 17(1) of the

Japan–​Lao People’s Democratic Republic BIT, Article 16(1) of the Japan–​Uzbekistan BIT and Article 17(1) of the Cambodia–​Japan BIT, however, provide a slightly varied version of the investor-​state arbitration clause: For the purposes of this Article, an investment dispute is a dispute between a Contracting Party and an investor of the other Contracting Party that has incurred loss or damage by reason of, or arising out of, an alleged breach of any right conferred by this Agreement with respect to investments of investors of that other Contracting Party. (emphasis added)

18.92 Article 10.13(1)(f ) of Japan–​Mongolia EPA contains a still different text in its investor-​state

arbitration clause:

The term ‘investment dispute’ means a dispute between a Party and an investor of the other Party that has incurred loss or damage by reason of, or arising out of, an alleged breach of any

143  To the best of our knowledge, there is one exception to this statement. The Colombia–​Japan BIT (Sept. 12, 2011) explicitly prevents the investor from submitting an arbitration claim premised on a breach of the ‘Measures against Corruption’ provision. 144  Iraq–​Japan BIT treaty provides comprehensively for investor-​state arbitration in art. 17. 145  Japan–​Kuwait BIT art. 9; Japan–​Lao People’s Democratic Republic BIT art. 10; Japan–​Mozambique BIT art. 10; Japan–​Myanmar BIT art. 11; Japan–​Papua New Guinea BIT art. 9; Japan–​Peru BIT art. 10; Japan–​Uzbekistan BIT art. 9; Cambodia–​Japan BIT art. 10; Japan–​Kazakhstan BIT art. 10; Japan–​Oman BIT art. 8; Japan–​Mongolia Economic Partnership Agreement art. 1.7; Japan–​Ukraine BIT art. 11; Japan–​ Uruguay BIT art. 14; and Colombia–​Japan BIT art. 8.  It is noteworthy that art. 27(2)(a)(i), on dispute settlement, explicitly prevents the investor from submitting a claim to arbitration premised on a breach of, inter alia, art. 8 of the treaty. 146  Id. See India–​ Japan EPA (date of signature: February 16, 2011; date of entry into force: August 1, 2011). The agreement provides for investor-​state arbitration in art. 96. 147  See Japan–​Kuwait BIT art. 16(1); Japan–​Mozambique BIT art. 17(1); Japan–​Myanmar BIT art. 18(1); Japan–​Papua New Guinea BIT art. 16(1); Japan–​Peru BIT art. 18(1); Japan–​Kazakhstan BIT art. 17(1)(a); Japan–​Oman BIT art. 15(1); Japan–​Ukraine BIT art. 18(1); Japan–​Uruguay BIT art. 21(1).

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III.  Anti-corruption Norms in Recent Investment Agreements obligation of the former Party under this Chapter with respect to the investor of that other Party or its investment in the Area of the former Party; . . . (emphasis added)

Article 1.7 of the Japan–​Mongolia EPA—​the ‘Measures against Corruption’ provision—​ 18.93 is contained in Chapter  1, titled ‘General Provisions’, whereas Article 10.13 is contained in Chapter  8, titled ‘Investment’. Unlike the India–​Japan EPA, Article 10.13(1)(f ) appears to limit investment dispute arbitrations to alleged breaches of any obligation found in Chapter 8, the ‘Investment’ chapter. Consequently, Article 1.7 of the Japan–​Mongolia EPA could not be the basis of an investment treaty claim. The Colombia–​Japan BIT expressly excludes ‘Measures Against Corruption’ from investor-​ 18.94 state arbitration. Under the Colombia–​ Japan BIT, Article 8—​ the ‘Measures against Corruption’ provision—​is contained in Chapter 2, titled ‘Investment’. The Colombia–​Japan BIT’s dispute settlement provision, Article 27(2)(a)(i) explicitly prevents the investor from claiming a breach of the anti-​corruption provision:148 In the event that an investment dispute cannot be settled through consultations and negotiations within the period of time set out in paragraph 5: (a) the disputing investor, on its own behalf, may submit to arbitration under this Chapter a claim: (i) that the disputing Party has breached an obligation under Chapter II other than paragraphs 2 and 4 of Article 7 [‘Transparency’], Articles 8 [‘Measures against Corruption’], 9 [‘Entry, Sojourn and Residence’] and 20 [‘Joint Committee’]; . . . (emphasis added)

Article 7 of the India–​Japan EPA,149 the EPA’s anti-​corruption provision, is contained in 18.95 Chapter  1, titled ‘General Provisions’, and Article 96, the EPA’s investor-​state arbitration clause, contained in Chapter 8, titled ‘Investment’, provides: For the purposes of this Chapter, an ‘investment dispute’ is a dispute between a Party and an investor of the other Party that has incurred loss or damage by reason of, or arising out of, an alleged breach of any obligation under this Chapter and other provisions of this Agreement as applicable with respect to the investor and its investments. (emphasis added)

Thus, while the Japan–​Mongolia EPA appears to exclude an investment treaty claim prem- 18.96 ised on the anti-​corruption provision, the India–​Japan EPA does not, given that ‘other provisions of this Agreement’ necessarily include Article 7. A number of observations can be made in respect of these treaties. Starting with the Iraq–​ 18.97 Japan BIT, the scope of the investor-​state arbitration clause, Article 15(1), providing that the investor can arbitrate in respect of ‘loss or damage by reason of, or arising out of, an alleged breach of any obligation of the former Contracting Party’ under the BIT, means that it is theoretically possible for an investor to assert a claim for the state’s failure to adopt ‘measures and efforts . . . to prevent and combat corruption’, as required by the BIT’s Article 9 (‘Measures Against Corruption’), provided that it can establish a causal link between the state’s violation of Article 9 and the loss of its investment. Demonstrating such a causal link could be a challenge for a putative investor, especially 18.98 where the obligation is to ‘ensure that measures and efforts are undertaken to prevent and combat corruption’ and such ‘measures and efforts’ are unsuccessful. The state can be seen to undertake an obligation of means, as opposed to an obligation of result. Also, in Hesham, the claimants argued, inter alia, that the respondent state failed to investigate or even to engage 148  A similar restriction exists at art. 27(2)(b)(i) which is identical to art. 27(2)(a)(i) save for the fact that it concerns investors bringing a claim on behalf of an enterprise of the respondent party. 149 See supra ¶ 18.79.

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The State’s Corruption Defence, Prosecutorial Efforts with its complaints of bribe solicitation during the criminal investigation, and that there was no evidence that the respondent state took any steps to investigate the matter. The tribunal found, however, that such behaviour by the respondent state did not amount to a violation of the FET provision because there was ‘no connection between the corruption allegations and the Claimant’s alleged deprivation of its investment’.150 18.99 As noted, the investor-​state arbitration clause contained in Japan’s BITs with the Lao People’s

Democratic Republic, Uzbekistan, and Cambodia limits the investor’s ability to arbitrate in respect of ‘loss or damage by reason of, or arising out of, an alleged breach of any right conferred by’ the BIT (emphasis added).151 One reading of the anti-​corruption provision suggests that no right is conferred on the putative investor, and that state parties may have intended that the obligation was only to be inter partes.

18.100 Moreover, the anti-​corruption provision in those investment agreements may operate as

a condition to the respondent state’s assertion of a corruption defence. If, however, a respondent state’s allegation of corruption is addressed as a merits issue, the tribunal may be able to evaluate the state’s performance of its obligation to combat corruption in the process of determining whether the investment should be extended protection under the treaty.

18.101 A final remark needs to be made regarding Article 7 of the India–​Japan EPA. It is interesting

to note that the state parties sought to specify that their efforts to prevent and combat corruption were limited to corruption of their respective ‘public officials’. Such language may strengthen the state’s obligation to investigate and prosecute, should its allegation of corruption be addressed as a merits issue.

C. Anti-​corruption Norms as a Part of Corporate Social Responsibility (CSR)—​the Canadian Treaties 18.102 In contrast to the Japanese treaties discussed, Canadian treaties signed during the three-​year

period 2013–​2016 inject anti-​corruption norms within the wider rubric of CSR. For example, Article 16 of the Burkina Faso–​Canada BIT provides as follows: Each Party should encourage enterprises operating within its territory or subject to its jurisdiction to incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or are supported by the Parties. These principles address issues such as labour, the environment, human rights, community relations and anti-​corruption.152

18.103 Unlike the other Canadian investment treaties signed during the three-​year period 2013–​

2016 described later,153 the Burkina Faso–​Canada BIT does not explicitly prevent the investor from asserting a claim in arbitration for breach of the CSR provision. For example, Article 21(1) of the Burkina Faso–​Canada BIT states:

  Hesham Final Award, supra note 50, ¶ 61.   See ¶ 18.88. 152  Burkina Faso–​Canada BIT art. 16 (emphasis added). 153  Id. See Canada–​ Guinea BIT arts. 16 and 23(1); Benin–​Canada BIT arts. 16 & 23(1)(a); Canada–​ Honduras FTA arts. 10.16  & 10.19(1)(a); Canada–​Republic of Korea FTA arts. 8.16, 8.18  & 8.19(1); Canada–​Côte d’Ivoire BIT arts. 15(2) & 20(a); Canada–​Serbia BIT arts. 16, 21(1) & 21(2)(a); Canada–​ Nigeria BIT arts. 16, 21(1) & 21(2)(a); Cameroon–​Canada BIT arts. 15(2), 20(1) & 20(2)(a); Canada–​ Mongolia BIT arts. 14 & 20(1)(1); Canada–​Mali BIT arts. 15(3), 20(1) & 20(2)(a); Canada–​Senegal BIT arts. 16, 21(1) & 21(2)(a). 150 151

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III.  Anti-corruption Norms in Recent Investment Agreements An investor of a Party may submit to arbitration under this Section a claim that: 1. the respondent Party has breached an obligation under Section B (Substantive Obligations), other than an obligation under: a. Article 4 (National Treatment), with respect to the establishment and acquisition of an investment [Footnote 5], b. Article 8(3) (Senior Management, Boards of Directors and Entry of Personnel), or c. Article 12 (Transparency) or 15 (Health, Safety and Environmental Measures); and 2. the investor has incurred loss or damage by reason of, or arising out of, that breach.154

It is further interesting to note that the Burkina Faso–​Canada BIT preamble also gives a nod 18.104 to the UN Convention.155 While it is theoretically possible for an investor to invoke a breach of the CSR provision under 18.105 the Burkina Faso–​Canada BIT, it is conceptually hard to imagine a fact pattern in which the respondent state has breached the CSR provision by, supposedly, failing to ‘encourage enterprises . . . to incorporate internationally recognized standards of corporate social responsibility in their practices and internal policies, such as statements of principle that have been endorsed or supported by the Parties [, for instance,] . . . anti-​corruption’. The content of the state parties’ obligation is, essentially, ‘to encourage’ the enterprises to incorporate certain practices, which may easily be discharged by the state by way of notifications, investment guidelines and state-​sponsored CSR briefing materials. Thus, it may be difficult for the investor to convince a tribunal that the state failed ‘to encourage’ enterprises to incorporate CSR standards in their policies and, furthermore, that it ‘has incurred loss or damage by reason of, or arising out of, that breach’. This is especially the case where it is likely that internationally recognized CSR policies are already incorporated in the policies of major companies engaged in foreign investment. A number of the Canadian treaties exclude the possibility of an investor claiming a breach of 18.106 a CSR provision in arbitration. These include its BITs with Guinea, Benin, Honduras, Korea, the Côte d’Ivoire, Serbia, Nigeria, Cameroon, Mali, and Senegal.156 By way of example, Article 23(1)(a) of the Benin–​Canada BIT provides as follows: 1. An investor of a Contracting Party may submit to arbitration under this Chapter a claim that: (a) the respondent Contracting Party has breached an obligation under Chapter II, other than an obligation under paragraph 3 of Article 9 (Senior Management, Boards of Directors and Entry of Personnel), Article 13 (Transparency), Article 15 (Health, Safety and Environmental Measures) or Article 16 (Corporate Social Responsibility); and (b) the investor has incurred loss or damage by reason of, or arising out of, that breach. (emphasis added).

Despite the fact that these treaties exclude the possibility that their CSR anti-​corruption 18.107 provisions can be the basis of an investor’s claim of a treaty breach, they do not necessarily 154  Burkina Faso–​ Canada BIT. Article 21(2) is identical to art. 21(1), save for the fact that it concerns investors bringing a claim on behalf of an enterprise of the respondent party. 155  ‘RECOGNIZING the undertakings in the United Nations Convention against Corruption[.]‌’. 156  Canada–​ Guinea BIT arts. 16 & 23(1); Benin–​Canada BIT arts. 16 & 23(1)(a); Canada–​Honduras FTA arts. 10.16 & 10.19(1)(a); Canada–​Republic of Korea FTA arts. 8.16, 8.18 & 8.19(1); Canada–​Côte d’Ivoire BIT arts. 15(2) & 20(a); Canada–​Serbia BIT arts. 16, 21(1) & 21(2)(a); Canada–​Nigeria BIT arts. 16, 21(1) & 21(2)(a); Cameroon–​Canada BIT arts. 15(2), 20(1) & 20(2)(a); Canada–​Mongolia BIT arts. 14  & 20(1)(1); Canada–​Mali BIT arts. 15(3), 20(1) & 20(2)(a); Canada–​Senegal BIT arts. 16, 21(1) & 21(2)(a) (additional language is added to the end of art. 16 of the Canada–​Senegal BIT that does not appear in the other Canadian BITs mentioned: ‘[S]‌uch enterprises are encouraged to make investments whose impacts contribute to the resolution of social problems and preserve the environment’).

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The State’s Corruption Defence, Prosecutorial Efforts exclude the theoretical possibility that the state’s failure to adhere to these provisions creates factual circumstances that lead to a breach of another substantive provision under the treaty that is subject to arbitration. 18.108 By way of example, in EDF, the tribunal agreed with the claimant ‘that a request for a bribe

by a State agency is a violation of the fair and equitable treatment obligation owed to the Claimant by the BIT, as well as a violation of international public policy, and that “exercising a State’s discretion on the basis of corruption is a . . . fundamental breach of transparency and legitimate expectations” ’.157 While the tribunal in that case found insufficient evidence of bribery158 and, hence, there was no violation of the FET provision,159 it left open the proposition that the solicitation of a bribe by a public official could violate the FET provision.

18.109 The point, however, cannot be oversold. A state’s failure to take measures to combat corrup-

tion is different from a state agent requesting a bribe from the investor. There would need to be evidence of a causal link between the state’s failure to take measures to combat corruption and the alleged FET violation. Such an inquiry remains theoretical and depends on the facts of each case.

IV. Conclusion 18.110 Preconditioning the state’s corruption defence upon a showing of prosecutorial efforts ig-

nores practical realities of how investigations are handled at the local level. A successful prosecution of a corrupt official at the local court does not necessarily mean bribery took place. The local rulings may be wrong. Such investigations or findings are instructive, but not binding on an arbitral tribunal.

18.111 The Japanese treaties discussed above suggest that the state’s prosecutorial efforts will be

scrutinized more acutely in future investment cases. A state may be on the hook for simply not taking appropriate steps to dismantle bribery in its country.

18.112 It could be observed that the explicit incorporation of anti-​corruption norms in investment

treaties is unnecessary given the existence of extensive international legal instruments on anti-​ corruption—​such as the OECD Anti-​Bribery Convention and the UN Convention. Such instruments are part of international law and have been referred to by investment tribunals. Thus, the spirit of Article 9 of the Iraq–​Japan BIT quoted above—​and the numerous other identical provisions contained in other Japanese BITs—​is already reflected in international legal instruments that require states to combat corruption.160 Reference to these international legal instruments in the process of interpreting a particular investment treaty could be made via Article 31(3)(c)161 of the Vienna Convention on the Law of Treaties (VCLT), which, as some have argued, ‘encapsulates a principle of systemic integration, the foundation of which

 EDF, supra note 109, ¶ 221.   Id. 159  Id. ¶ 237. 160  Recall art. 15 of the UN Convention: ‘Each State Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences, when committed intentionally: (a) The promise, offering or giving, to a public official, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties; (b) The solicitation or acceptance by a public official, directly or indirectly, of an undue advantage, for the official himself or herself or another person or entity, in order that the official act or refrain from acting in the exercise of his or her official duties’. 161  VCLT art. 31(3)(c): ‘There shall be taken into account, together with the context: . . . any relevant rules of international law applicable in the relations between the parties’. 157 158

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IV. Conclusion is that treaties are themselves creatures of international law—​predicated for their existence and operation on being part of the international legal system’.162 Additionally, the finding in EDF that solicitation of a bribe by a public official would violate FET was made regardless of the absence of a provision in the applicable treaty containing anti-​corruption norms. Thus, anti-​corruption provisions in investment treaties may not be required. One possible benefit of including these anti-​corruption provisions in the treaties is that they 18.113 form part of the ‘context’ of a treaty in accordance with Article 31(2) of the VCLT. Thus, they play a crucial role in the interpretation of other provisions of the treaty. This function exists irrespective of whether the treaty in question excludes the anti-​corruption provision from investor-​state arbitration.163 Investor-​state tribunals are creatures of the investment treaties or contracts pursuant to which 18.114 they are constituted and, hence, are constrained by their texts. Reliance on and reference to international law at large can only go so far in resolving the complex issues that arise where corruption is alleged by a party.

162  Campbell McLachlan QC, Laurence Shore & Matthew Weiniger, International Investment Arbitration: Substantive Principles ¶ 7.69 (2007). 163  For a discussion of the Trans-​ Pacific Partnership Agreement and the interplay between Chapter  26 (‘Transparency and Anti-​Corruption’), Chapter 9 (‘Investment’), and the VCLT see Joshua Robbins, A Secret Weapon, But For Whom?: Investment Disputes Under the Trans-​Pacific Partnership’s Anti-​Corruption Chapter, Kluwer Arbitration Blog (Aug. 24, 2016), http://​kluwerarbitrationblog.com/​2016/​08/​24/​secret-​weapon-​ investment-​disputes-​trans-​pacific-​partnerships-​anti-​corruption-​chapter/​ (last visited Mar. 16, 2018).

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Part IV GUIDE TO KEY SUBSTANTIVE ISSUES

19 THE LAW APPLICABLE IN INVESTMENT TREATY ARBITRATION Yas Banifatemi

I. Introduction  II. Identification of the Law Chosen by the Parties 

III. Determination of the Applicable Law by the Arbitrators in the Absence of the Parties’ Agreement  19.14 IV. Implications of the Specific Nature of Investment Treaties in the Choice of Law Process  19.22

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19.04 A. Choice of Law in Context  19.05 B. Variations on the Law of the Host State and International Law  19.09

I. Introduction The inquiry into the law ‘applicable’ to a dispute seems, on its face, a fairly simple ques- 19.01 tion:  identifying the law that will govern the resolution of the dispute. Given the fundamental principle of party autonomy in international arbitration, the arbitrators’ inquiry is primarily guided by the determination of whether the parties themselves have chosen the law governing their dispute. It is only in the absence of such choice that the arbitrators must determine the law that will apply to the dispute. The framework of the analysis is therefore discernible. The choice of law process must first be distinguished from the arbitrators’ subsequent determination of the content of the law that will apply and the manner in which such content must be evidenced.1 It is also distinct from the review, at the back end of the arbitral process, of the manner in which the arbitrators have applied or failed to apply such law to the merits of the dispute.2 Finally, a further distinction must be made between the substance of the dispute and the procedure governing the arbitration: choice of law is concerned with the substance of the dispute, the conduct of the arbitration not being necessarily subject to a particular national legal system but allowing for a great degree of freedom for the parties (including their choice of the arbitration rules which will govern the arbitral process), and, in

1  On this question, see, e.g., the Final Report prepared by M.  Friedman & L.  Radicati di Brozolo for the Committee on International Commercial Arbitration of the International Law Association entitled ‘Ascertaining the Contents of the Applicable Law in International Commercial Arbitration’ and adopted at the 73rd Conference of the International Law Association in Rio de Janeiro on August 17–​21, 2008, 26 Arb. Int’l 1 (193 (2010); the Report contains a number of developments on investment arbitration. See also J. Crawford, Treaty and Contract in Investment Arbitration, 24 Arb. Int’l 351 (2008). See also C.P. Alberti & D.M. Bigge, Ascertaining the Content of the Applicable Law and iuria novit tribunus: Approaches in Commercial and Investment Arbitration, 70 Disp. Resol. J. 2 (2015). 2  On this question see K. Yannaca-​Small, Annulment of ICSID Awards: Limited Scope but Is There Potential?, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 27 (K. Yannaca-​Small ed., 2018). See also E. Gaillard, The Extent of Review of the Applicable Law in Investment Treaty Arbitration’, in Annulment of ICSID Awards 223 ff. (Emmanuel Gaillard & Yas Banifatemi eds., 2004).

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The Law Applicable in Investment Treaty Arbitration the absence of agreement between them, the arbitrators.3 As the tribunal in Ambiente Ufficio v Argentina stated: [T]‌he Tribunal . . . adheres to the predominant opinion in this field, namely that the afore-​ cited [Article 42(1) of the ICSID Convention] address[es] the question of the law applicable to the merits of the case, and not the law applicable to the determination of the Tribunal’s jurisdiction for the purposes of Art. 25 of the ICSID Convention.

The tribunal in Pac Rim v El Salvador made a  similar statement:  ‘Q]uestions of jurisdiction . . . are not . . . necessarily governed by the same law that applies to the merits of the parties’ dispute. Article 42(1) of the ICSID Convention addresses the law that applies to the merits of the dispute, not to decisions on jurisdiction’. As did the tribunal in Azurix v Argentina: ‘[t]‌he rules applying to the dispute under Article 42(1) address the resolution of disputes on the merits, and so will not necessarily be those which apply to the Tribunal’s determination of its jurisdiction under Article 41 at this stage of the proceedings’. 19.02 That is not to say that choice of law is of no consequence. To the contrary, in investment

treaty arbitration, just as in international commercial arbitration, it is a fundamental process in that the outcome of the dispute may sometimes greatly depend on the rules determined to be applicable.

19.03 Being an arbitral process, investment treaty arbitration in no way differs from international

commercial arbitration in that the principle of party autonomy is the primary rule governing the arbitration, including as regards the law applicable to the substance of the dispute. When the applicable law has been chosen by the parties, the arbitrators have a duty to apply such law and nothing but such law. It is only in the absence of a choice by the parties that the arbitrators are entitled to exercise a degree of discretion in the determination of the applicable law. Each of these situations will be examined in turn, before considering whether the specific nature of investment protection treaties has implications in terms of choice of law process.

II.  Identification of the Law Chosen by the Parties 19.04 The parties’ agreement to arbitrate may include the legal system or the rules of law that will

govern the substance of their dispute. The main arbitration rules which may come into play in investment treaty arbitration recognize the parties’ autonomy in this respect, the only differences being the reference to a particular system of law (‘law’) or to specific ‘rules of law’. Article 42(1) of the ICSID Convention provides that ‘[t]‌he Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties’. Article 35(1) of the 2013 UNCITRAL Arbitration Rules is, in substance, virtually identical: ‘[t]he arbitral tribunal shall apply the rules of law designated by the parties as applicable to the substance

3  For a general presentation of the law governing the procedure under the common rules of international arbitration, see Fouchard Gaillard Goldman on International Commercial Arbitration 633 ff. (E. Gaillard & J. Savage eds., 1999). See, e.g., 2013 UNCITRAL Arbitration Rules art. 17(1). For a different view on the determination of the lex arbitri as ‘the law applicable to the conduct of the arbitration’ in investment treaty arbitration, see, e.g., C. McLachlan, Investment Treaty Arbitration: The Legal Framework, in 50 Years of the New York Convention 95–​145 (Albert Jan van den Berg ed., 2009). As regards the distinction between the law applicable to the merits and the law applicable to issues of jurisdiction: see, e.g., Ambiente Ufficio S.p.A.  and Others v.  Argentine Republic, ICSID Case No. ARB/​08/​09, Decision on Jurisdiction and Admissibility (Feb. 8, 2013), ¶ 236. See also Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/​09/​12, Award (Oct. 14, 2016), ¶ 5.68; Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Decision on Jurisdiction (Dec. 8, 2003), ¶ 48; CMS Gas Transmission Company v. Republic of Argentina, ICSID Case ARB/​01/​12, Decision on Objections to Jurisdiction (July 17, 2003), ¶¶ 88–​89.

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II.  Identification of the Law Chosen by the Parties of the dispute’.4 Article 27(1) of the 2017 Arbitration Rules of the Stockholm Chamber of Commerce, for its part, provides that: ‘[t]he Arbitral Tribunal shall decide the merits of the dispute on the basis of the law(s) or rules of law agreed upon by the parties’. In line with these rules, the choice of law effectuated in investment treaties often covers a variety of models on the basis of the law of the host state and international law. Before examining these models, it is important to put in context the notion of choice of law by the ‘parties’ to an investment treaty arbitration.

A. Choice of Law in Context One of the specific features of investment treaty arbitration is that the parties to the inter- 19.05 national instrument under consideration (a bilateral or a multilateral treaty containing investment protection rules), namely the contracting states, are to be distinguished from the parties to the dispute brought to arbitration on the basis of the instrument, namely one of those contracting states and an investor of the other contracting state. This distinction was at play in AAPL v Sri Lanka, the first arbitration initiated on the basis of an investment treaty. In that case, the arbitral tribunal seemed to have difficulty with the notion that a prior choice of law could be effectuated by the contracting states for the benefit of their respective investors. It therefore felt it necessary to lay emphasis on the conduct of the parties to the arbitration amounting to an agreement on the applicable law during the course of the arbitration: [T]‌he Parties in dispute have had no opportunity to exercise their right to choose in advance the applicable law determining the rules governing the various aspects of their eventual disputes. In more concrete terms, the prior choice-​of-​law referred to in the first part of Article 42 of the ICSID Convention could hardly be envisaged in the context of an arbitration case directly instituted in implementation of an international obligation undertaken between two States in favour of their respective nationals investing within the territory of the other Contracting State. Under these special circumstances, the choice-​of-​law process would normally materialize after the emergence of the dispute, by observing and construing the conduct of the Parties throughout the arbitration proceedings. Effectively, in the present case, both Parties acted in a manner that demonstrates their mutual agreement to consider the provisions of the Sri Lanka/​U.K. Bilateral Investment Treaty as being the primary source of the applicable legal rules . . .5

On that basis, the AAPL v Sri Lanka tribunal concluded that the parties to the arbitration 19.06 had agreed to the applicability of the Sri Lanka–​UK bilateral investment treaty (BIT) as ‘lex specialis’ and of the relevant international or domestic legal rules referred to ‘as a supplementary source’ by virtue of the provisions of the treaty itself. The AAPL award was criticized especially for the methodology used in determining the ap- 19.07 plicable law where the appropriate rule, in the absence of a choice of law in the BIT, would normally have been determined in accordance with the second sentence of Article 42(1) of

4  The 1976 UNCITRAL Arbitration Rules differed slightly: Art. 33(1) provided that the tribunal was to apply ‘the law’ designated by the parties to govern the substance of the dispute, as opposed to the ‘rules of law’ under the 2010 Rules. Thus, under the 1976 Rules, the parties could designate the legal system that would in toto govern their dispute. See generally D. Caron & L.M. Caplan, The UNCITRAL Arbitration Rules: A Commentary 110 ff. (2013). 5  Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/​87/​3, Award (June 27, 1990) [hereinafter AAPL v. Sri Lanka], ¶¶ 19–​20 (emphasis added). The award was cited approvingly on this point by the tribunal in El Paso Energy International Co. v. Argentine Republic, ICSID Case No. ARB/​03/​ 15, Award (Oct. 31, 2011), ¶ 131.

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The Law Applicable in Investment Treaty Arbitration the ICSID Convention.6 It shows, in particular, the conceptual difficulty for the tribunal to envisage a prior choice of law ‘between two States in favor of their respective nationals’. There is, however, no such difficulty since the arbitration agreement contained in an investment treaty is deemed to be stipulated by the contracting states for the benefit of their investors.7 Any agreed mechanism in the arbitration agreement, including the law applicable to the dispute, is therefore deemed to be chosen directly by the parties to the arbitration. This assumption is nothing more than the implementation of the dissociated nature of consent to arbitration in investment treaty arbitration: although consent to arbitration is dissociated in time, the parties to the arbitration are still presumed to have given their common consent to arbitration at the time the investor accepts the host state’s general consent by filing the request for arbitration.8 19.08 This mechanism has been readily recognized in case law and is today well established.9 In

Antoine Goetz v Burundi, for example, the tribunal had to determine whether the applicable law clause in the Burundi–​Belgium investment treaty had to be considered as an express choice of law under Article 42 of the ICSID Convention. The arbitral tribunal specifically noted: Undoubtedly, the applicable law has not been determined here, strictly speaking, by the parties to this arbitration (Burundi and the investors), but rather by the parties to the Bilateral Treaty (Burundi and Belgium). As was the case with the consent of the parties [to the arbitration], the Tribunal deems nevertheless that Burundi accepted the applicable law as determined in the above provision of the Bilateral Treaty by becoming a party to this Treaty, and that claimants did the same by filing their request for arbitration based on the Treaty.10

6  See, in particular, Samuel Asante’s Dissenting Opinion, AAPL v. Sri Lanka, supra note 5 at 576. See also, for a criticism of the tribunal’s conclusion as to the existence of an implicit choice of law where the bilateral investment treaty contained none, E. Gaillard, Observations on the AAPL Award, 119 J. Droit Int’l 217, 227–​29 (1992), reproduced in E. Gaillard, La Jurisprudence du CIRDI 336–​38 (2004) (‘Un tel accord ne peut résulter de la simple concordance des écritures respectives des parties sur le fondement de leurs prétentions. Les arbitres doivent cependant faire preuve d’une certaine prudence dans la constatation d’un accord qui résulterait uniquement de la concordance des écritures. En particulier, le fait que les parties aient l’une et l’autre longuement discuté de l’interprétation d’un texte ne suffirait pas à traduire leur accord sur son applicabilité à la cause. Ce n’est que s’il résulte de leurs explications qu’elles ont entendu y voir une source de droit applicable qu’il est permis d’analyser la concordance de leurs écritures comme la manifestation de l’adoption de règles de droit au sens de l’article 42(1)’, id. at 337); C. Schreuer et al, The ICSID Convention: A Commentary 573–​75 (2d ed. 2009) [hereinafter Schreuer et al., A Commentary]. 7  The possibility was envisaged during the negotiation of the Washington Convention with respect to the situation where the law applicable to a dispute is specified in a State legislation or in a bilateral treaty: see Summary Record of Proceedings, Addis Ababa Consultative Meetings of Legal Experts (Dec. 16–​20, 1963), Document No. 25, in II Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, Documents Concerning the Origin And the Formation of the Convention 267 (1968) (‘The Chairman remarked that . . . it was likewise open to the parties to prescribe the law applicable to the dispute. Either stipulation could be included in an agreement with an investor, in a bilateral agreement with another State, or even in a unilateral offer to all investors, such as might be made through investment legislation’). 8  See E. Gaillard, L’arbitrage sur le fondement des traités de protection des investissements, 3 Revue de l’Arbitrage 853, 859 (‘[i]‌l s’agit d’une forme d’arbitrage dans lequel le consentement des parties à la convention d’arbitrage est dissocié. L’Etat émet une offre générale de contracter en spécifiant, dans l’instrument de protection des investissements concernés, que les litiges relatifs aux investissements couverts par cet instrument pourront être réglés par voie d’arbitrage. L’investisseur n’accepte cette offre qu’au moment de former la demande d’arbitrage. Les auteurs de la Convention de Washington avaient prévu, dès l’origine, la possibilité d’une telle dissociation. La convention d’arbitrage reposant, une fois conclue, sur la volonté commune des parties, cette première caractéristique ne nous paraît pas de nature à rendre compte, à elle seule, du particularisme de cette forme d’arbitrage’) (emphasis added). 9  See, e.g., R. Dolzer & C. Schreuer, Principles of International Investment Law 258–​59 (2012). 10  Antoine Goetz et al. v. Republic of Burundi I, ICSID Case No. ARB/​95/​3, Award (Feb. 10, 1999), ¶ 94 [hereinafter Goetz v. Burundi I] (English translation in XXVI Y.B. Com. Arb. 24, 36 (2001)).

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II.  Identification of the Law Chosen by the Parties The tribunal, noting the increasing ‘internationalization’ of investor-​state relations, also observed that: The Bilateral Treaty on investment protection is not only the basis for the jurisdiction of the Centre and of the Tribunal; it also determines the applicable law. The present case is one of the first ICSID cases where this happens. Considering the growing use of choice of law clauses in investment treaties, as well as their considerable variety, such situation is equally likely to occur with increasing frequency. It may be interesting to remark on this subject that choice of law clauses in investment protection treaties frequently refer to the provisions of the treaty itself, and, more broadly, to international law principles and rules. This leads to a remarkable comeback of international law, after a decline in practice and jurisprudence, in the legal relations between host States and foreign investors. This internationalization of investment relations, be they contractual or not, surely does not lead to a radical ‘denationalization’ of the legal relations born of foreign investment, to the point that the national law of the host State is totally irrelevant or inapplicable in favour of the exclusive role played by international law. It merely means that these relations fall simultaneously—​one could say in parallel—​under the purview of the sovereignty of the host State over its national law and of its international obligations.11

B. Variations on the Law of the Host State and International Law Article 42(1) of the ICSID Convention gives the parties considerable freedom in that they 19.09 can choose the ‘rules of law’ as opposed to an entire system of law that will govern their relationship, namely any national legal system such as the law of the host state, selected rules of that system, rules common to certain legal systems, general principles of law, lex mercatoria,12 or international law.13 In general, the reference to the law of the host state is more likely to occur in relationships arising out of a contract, where the investor’s rights and obligations may be governed by specific instruments or by the legal system of the host state more generally,14 sometimes combined with a reference to international law. In this context,

  Id. ¶¶ 68–​69.  On lex mercatoria, see, in particular, E. Gaillard, Thirty Years of Lex Mercatoria: Towards the Selective Application of Transnational Rules, 10 ICSID Rev. 208 (1995), in particular 215 ff. 13  On the parties’ freedom to choose the applicable rules of law pursuant to the first sentence of art. 42(1) of the Washington Convention, see generally A. Broches, Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965: Explanatory Notes and Survey of its Application, XVIII Y.B. Com. Arb. 627, 667 (1993), ¶¶ 113–​14; I. Shihata & A. Parra, Applicable Substantive Law in Disputes Between States and Private Foreign Parties: The Case of Arbitration under the ICSID Convention, 9 ICSID Rev. 183, 188 ff.; C.F. Amerasinghe, Dispute Settlement Machinery in Relations Between States and Multinational Enterprises: With Particular Reference to the International Centre for Settlement of Investment Disputes, 11 Int’l L. 45, 54–​55 (1977); Schreuer et al., A Commentary, supra note 6 at 557 ff.; H.E. Kjos, Applicable Law in Investor-​State Arbitration 70 ff. (2013) [hereinafter Kjos, Applicable Law in Investor-​State Arbitration]. 14  In the context of a dispute arising out of a contract and not an investment treaty, see, e.g., Autopista Concesionada de Venezuela, C.A. (Aucoven) v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​ 00/​5, Award (Sept. 23, 2003). The Aucoven tribunal determined that clause 5 of the agreement represented the ‘rules of law’ under the first sentence of art. 42(1) of the ICSID Convention and a ‘valid choice of law agreement providing for the application of Decree Law 138 and Executive Decree Nr. 502’. It also noted that the reference to these specific instruments did not ‘necessarily amount to a general choice of Venezuelan law’ (¶¶ 96–​97); had the parties to the Agreement so wished, they could have referred to Venezuelan law in general or to international law. Compare, for example, Atlantic Triton Company Ltd. v.  Revolutionary Republic of Guinea, ICSID Case No. ARB/​84/​1, Award (Apr. 21, 1986), where the agreement specifically provided for Guinean law to be applicable subject to the contractual protection from subsequent changes in the law. Article 14 of the agreement provided: ‘The term “law” in the present Agreement refers to Guinean law. However, Guinean law will be applicable only insofar as it is not incompatible with the terms of the present Agreement, and where it is not more restrictive than the law in force at the date of entry into force of the present Agreement’. 11 12

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The Law Applicable in Investment Treaty Arbitration international law may apply either directly, possibly in conjunction with the law of the host state,15 or indirectly, as incorporated into the selected domestic law. 19.10 Most investment treaties do not contain an express choice of law. Where such choice exists,

the situations can broadly be categorized as follows.16 Almost always, the dispute is to be decided ‘in accordance with the provisions of the Agreement’ itself.17 Frequently, the BIT is applicable in conjunction with ‘the principles of international law’18 or ‘the applicable rules of international law’.19 This is also the case for multilateral treaties containing investment protection rules such as the NAFTA20 and the Energy Charter Treaty.21 The choice of applicable law may include, in addition, the law of the host state in its entirety.22 Some bilateral investment treaties refer to the treaty, the law of the host state, and particular agreements between the parties, but not necessarily to the rules of international law.23

15  See, e.g., AGIP S.p.A. v. Government of the People’s Republic of the Congo, ICSID Case No. ARB/​ 77/​1, Award (Nov. 30, 1979) (the law applicable was ‘the law of the Congo, supplemented if need be by any principles of international law’); Kaiser Bauxite v.  Jamaica, ICSID Case No. ARB/​74/​3, Decision on Jurisdiction (July 16, 1975) (the law applicable was the law of Jamaica and ‘such rules of international law as may be applicable excluding however any enactments passed or brought into force in Jamaica subsequent to the date of this agreement which may modify or affect the rights of the parties under the Principal Agreement or this Agreement . . .’). 16  Regarding BITs in general, see R. Dolzer & M. Stevens, Bilateral Investment Treaties 128–​29 (1995). Concerning the reliance on a treaty containing a clause on the applicable law, see Schreuer et al., A Commentary, supra note 6 at 575–​78. 17  See, e.g., BITs entered into by Argentina, Australia, Belgium and Luxembourg (most BITs with exceptions such as the BIT with Mongolia), Canada, Chile, China (most BITs with exceptions such as the BIT with Australia), Costa Rica, Ecuador, Spain; see also BITs entered into by Bulgaria (with Albania, Ghana, the Slovak Republic), Cuba (with Mexico), the Czech Republic (with Italy, Ireland, Switzerland, Paraguay), Egypt (with Sri Lanka, Uganda), France (with Algeria, the Dominican Republic, Honduras, Hungary, Mexico, Uruguay), Germany (with Kuwait, India, Peru, Zimbabwe), Greece (with Latvia), Italy (with Venezuela), Malaysia (with Vietnam), Mexico (with Portugal), the Netherlands (with Mexico, Venezuela, Zimbabwe), Panama (with Uruguay), Paraguay (with Romania), Peru (with Paraguay, Romania), Poland (with Estonia, France, Latvia, Lithuania), Portugal (with Venezuela, Turkey), Switzerland (with Mexico, Paraguay, Peru), United Kingdom (with Lebanon). 18  See, e.g., BITs entered into by Argentina, Belgium and Luxembourg, Chile, China, Costa Rica, Ecuador, Spain (with the exception of the BIT with Mexico); see also BITs entered into by Bulgaria, the Czech Republic, Egypt, Poland, France, Germany, Italy, Panama, Peru; see also the BITs entered into between Japan and Iran, Montenegro and Azerbaijan, San Marino and Bosnia and Herzegovina, and Macedonia and Qatar. 19  See, e.g., the BITs entered into between, on the one hand, Canada and, on the other hand, Armenia, Barbados, Cameroon, Croatia, Ecuador, Egypt, Korea, Honduras, Latvia, Lebanon, Mongolia, Panama, Philippines, South Africa, Romania, Thailand, Trinidad and Tobago, Ukraine, Uruguay and Venezuela; see also BITs entered into between Japan and Kenya, Mexico and the Netherlands, Mexico and Spain, Mexico and Switzerland, the Netherlands and Zimbabwe, or between France and Poland. 20  See North American Free Trade Agreement (NAFTA) art. 1131(1), which entered into force on January 1, 1994, provides: ‘A Tribunal established under this Section shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law’. 21  See Energy Charter Treaty art. 26(6), which entered into force on April 16, 1998, provides: ‘A Tribunal established under paragraph (4) shall decide the issues in dispute in accordance with this Treaty and applicable rules and principles of international law’. 22  See, e.g., BITs entered into by Argentina, Belgium, Luxembourg, and Chile (with exceptions such as the BITs with Greece and Norway), China, Costa Rica, Ecuador (with the exception of the BIT with Canada), Peru, Spain; see also BITs entered into by Bulgaria, Egypt, France (with the exception of the BITs with the Dominican Republic, Hungary, Mexico), Germany, Italy, Paraguay, Poland, Switzerland (with the exception of the BIT with Mexico); see also BIT entered into between Colombia and Turkey. The BITs between Canada and Argentina and between Canada and Costa Rica refer also to the law of the host state; in the latter case, the law of the host state applies only insofar as it is not inconsistent with the BIT or the principles of international law. 23  See, e.g., the BITs entered into between Australia, on the one hand and, on the other hand, the Czech Republic, Egypt, Hungary, Laos, Lithuania, Pakistan, Peru, Philippines, Poland, Romania, and Vietnam. As an exception, however, the BIT entered into between Australia and Argentina is internationalized and refers

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II.  Identification of the Law Chosen by the Parties It is important to observe that the choice of the applicable law must be made clearly and un- 19.11 equivocally and cannot be implied without a clear intention of the parties to that effect. As the tribunal in Santa Elena v Costa Rica held: Article 42(1) of the ICSID Convention does not require that the parties’ agreement as to the applicable law be in writing or even that it be stated expressly. However, for the Tribunal to find that such an agreement was implied it must first find that the substance of the agreement, irrespective of its form, is clear. Having reviewed and considered Respondent’s oral and written argument on this question and analysed the documents to which we have been referred, including, in particular, the Helms Amendment and related documents, the Tribunal is unable to conclude that the parties ever reached a clear and unequivocal agreement that their dispute would be decided by the Tribunal solely in accordance with international law.24

The question may arise as to whether a treaty provision setting out that a number of sources 19.12 of law must be ‘taken into account’ amounts to a choice of the applicable law. The question was raised in CME v Czech Republic, an arbitration conducted in accordance with the UNCITRAL Arbitration Rules and arising under the Netherlands–​Czech BIT. Article 8(6) of the treaty provided as follows: The arbitral tribunal shall decide on the basis of the law, taking into account in particular though not exclusively: –​ the law in force of the Contracting Party concerned; –​ the provisions of this Agreement, and other relevant Agreements between the Contracting Parties; –​ the provisions of special agreements relating to the investment; –​ the general principles of international law.25

The tribunal considered this clause to be a proper choice of law provision, albeit in a flexible manner: . . . the choice-​of-​law clause in the (Dutch) Treaty is broad and grants to the Tribunal a discretion, without giving precedence to the systems of law referred to. Art. 8(6) of the Treaty says: ‘The Arbitral Tribunal shall decide on the basis of the law, taking into account in particular though not exclusively:  . . .  There is no ranking in the application of the national law of the host state, the Treaty provisions or the general principles of international law. Further there is no exclusivity

also to the ‘relevant principles of international law’, in the same way as the BIT between Argentina and the Netherlands (which includes a reference to ‘such rules of international law as may be applicable’); see also the BIT entered into between Belgium and Luxembourg and Mongolia. See also art. 9(5) of the Colonia Protocol of the Common Market of the South (MERCOSUR) signed on January 17, 1994 (‘[t]‌he arbitral tribunal shall decide the disputes in accordance with the provisions of this Protocol, the law of the Contracting Party that is a party to the dispute, including its rules on conflict of laws, the terms of any specific agreements concluded in relation to the investment, as well as the relevant principles of international law’) (unofficial translation). 24  See, e.g., Compañía del Desarrollo de Santa Elena S.A.  v.  Republic of Costa Rica, ICSID Case No. ARB/​96/​1 Final Award (Feb. 17, 2000), ¶ 63; See also B. Goldman, Le droit applicable selon la Convention de la BIRD du 18 mars 1965 pour le règlement des différends relatifs aux investissements entre États et ressortissants d’autres États, in Investissements Étrangers et Arbitrage Entre États et Personnes Privées 133, 144 (1969); Kjos, Applicable Law in Investor-​State Arbitration, supra note 12 at 74 (‘the existence of an implied choice of law should not be too readily made’). 25  CME Czech Republic B.V. v. Czech Republic, Final Award (Mar. 14, 2003), ¶ 91. In the context of this arbitration, the delegations of the Netherlands and the Czech Republic agreed on a ‘common position’

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The Law Applicable in Investment Treaty Arbitration in the application of these laws . . . None of the precedents contained a choice of law clause similar to the clause in the Treaty, which instructs the Arbitral Tribunal to take into account (not: to apply) the abovementioned sources of law, in particular though not exclusively . . .26 19.13 In all situations where a choice of the applicable law exists unequivocally, the issue boils down

to the arbitral tribunal’s duty to respect the choice of law validly made by the parties pursuant to the first sentence of Article 42(1) of the ICSID Convention.27 In other words, any issue of interpretation by the tribunal would arise in relation to the parties’ intention, as opposed to an interpretation of the ICSID Convention itself.28 These cases, however, are not the most frequent ones: a very large number of bilateral investment treaties do not provide for any choice of law. The vast majority of BITs entered into by countries such as the United States, the United Kingdom, France, or Germany do not contain a clause on the law applicable to the investment disputes between one of the contracting states and the investors of the other contracting state.29

concerning the interpretation of this treaty provision (‘When making its decisions, the arbitral tribunal shall take into account . . . each of the four sources of law set out in Article 8.6 [of the treaty]’). 26  Id. ¶ 402 (emphasis supplied). See also the judgment rendered by the Svea Court of Appeal following the Czech Republic’s application for annulment of the Partial Award of September 13, 2001 (‘The wording that the arbitral tribunal shall “take into account in particular although not exclusively” must be interpreted such that the arbitrators may also use sources of law other than those listed. The four sources of law are not numbered, nor are they otherwise marked in such a manner that [the] governing law in the relevant contracting state should primarily be applied and general principles of international law applied thereafter. The un-​numbered list almost gives the impression that the contracting states have left to the arbitrators the determination, on a case by case basis, as to which source or sources of law shall be applied. If the case concerns an alleged violation of the Investment Treaty, it might be relevant first of all to apply international law, in light of the Investment Treaty’s purpose of affording protection to foreign investors by prescribing norms in accordance with international law’. The Svea Court observed that there was ‘no conclusion other than that the arbitral tribunal has complied with the provisions of the choice of law clause as such must be interpreted, i.e. applied relevant sources of law, primarily international law, and thus has not based its decision that the Republic violated the Treaty on a general assessment of reasonableness devoid of any basis in law’). See Svea Court of Appeal, Czech Republic v. CME Czech Republic B.V., Judgment (May 15, 2003), 42 I.L.M. 919, 965 (2003). 27  On the arbitrators’ duty to respect the choice of the parties in general, see E. Gaillard, The Role of the Arbitrator in Determining the Applicable Law, in The Leading Arbitrators’ Guide to International Arbitration 185 (Lawrence Newman ed., 2003); in investment arbitration, see also the author’s observations under SPP v. Egypt in relation to the tribunal’s failure to apply the law applicable under the first sentence of Article 42(1) of the ICSID Convention, in Emmanuel Gaillard, la Jurisprudence du CIRDI, supra note 6 at 379–​83; see also Kjos, Applicable Law in Investor-​State Arbitration, supra note 13, 68–​69. 28  An arbitral tribunal may find inspiration in the ICSID case law regarding the interpretation of the second sentence of art. 42(1) when the wording of the choice of law clause of the BIT is similar to or exactly the same as the second sentence of art. 42(1): see, e.g., art. 9(3) of the BIT between the Netherlands and Zimbabwe of December 11, 1996, which provides that :‘[t]‌he arbitral tribunal to which such legal dispute is submitted shall, unless the parties to the dispute agree otherwise, decide in accordance with the laws of the Contracting Party—​party to the dispute—​(including its rules on the conflict of laws) and such rules of international law as may be applicable’. See also the BIT between Japan and Uruguay (2015); Australia–​Korea FTA (2014); Gambia–​Turkey BIT (2013); and China–​Uzbekistan BIT (2011). In this case, however, the tribunal should interpret and give effect to the provision under the BIT or the FTA and not to art. 42(1) of the Convention as such. 29 According to information sourced from the UNCTAD website on international investment agreements, http://​investmentpolicyhub.unctad.org/​IIA (last visited Nov. 6, 2017), only 2 out of the 40 BITs in force entered into by the United States feature a choice of law clause governing the merits of an investor-​State dispute (those with Rwanda and Uruguay); only 10 out of the 96 BITs in force entered into by France; and only 6 out of the 96 BITs in force entered into by the United Kingdom.

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III.  Determination of the Applicable Law by the Arbitrators

III.  Determination of the Applicable Law by the Arbitrators in the Absence of the Parties’ Agreement Practice shows that, in the majority of cases, there was no choice of law provision in the ar- 19.14 bitrations initiated on the basis of a BIT.30 In such cases, the determination of the applicable law depends on the arbitration rules in accordance with which the arbitration is conducted. The statistics established by UNCTAD in 2015 show that, out of a total of 696 known 19.15 investor-​state arbitrations commenced between 1987 and 2015, 62 per cent were submitted to ICSID (including the ICSID Additional Facility), with the remaining 38 per cent conducted under other rules (including UNCITRAL and ICC).31 The statistics also establish that the parties have increasingly selected non-​ICSID fora since 2002, a trend that may remain on the rise in the coming years and that makes other options under investment treaties, such as UNCITRAL or the Stockholm Chamber of Commerce, all the more significant. Under these various arbitration rules, although the differences tend to diminish as regards 19.16 the arbitrators’ freedom to determine the applicable law in the absence of the parties’ agreement, one major difference exists between the ICSID system and the other fora available to the investors: the respective role of the law of the host state and the rules of international law. Under the second sentence of Article 42(1) of the ICSID Convention, in the absence of an agreement between the parties, ‘the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable’. The rule is worded more broadly under Article 27(1) of the 2017 Arbitration Rules of the Stockholm Chamber of Commerce, which provides that, in the absence of a choice by the parties, ‘the Arbitral Tribunal shall apply the law or rules of law it considers most appropriate’, without specifically designating the law of the host state or the rules of international law. Article 35(1) of the 2013 UNCITRAL Arbitration Rules provides that, in the absence of a choice of law by the parties, ‘the arbitral tribunal shall apply the law which it determines to be appropriate’, whereas previously the arbitrators had to go through the conflict of laws method in order to determine the legal system that would govern the dispute. As the drafters have explained, the 2010 revision was designed ‘to provide the arbitral tribunal with a broader discretion in the determination of the applicable instrument’.32 30  See A. Parra, Applicable Law in Investor-​State Arbitration, in Contemporary Issues in International Arbitration and Mediation: the Fordham Papers (2007) 3, 7–​8 (Arthur Rovine ed., 2008). The author indicates that out of 20 ICSID awards rendered on the merits on the basis of bilateral investment treaties as of June 19, 2007, fifteen concerned treaties containing no choice of law provision; the remaining five bilateral treaties provided that the treaty itself, general international law principles, and the law of the host state applied. See also Kjos, Applicable Law in Investor-​State Arbitration, supra note 13, 80 (‘Frequently, the parties to an investment dispute cannot be deemed to have agreed on the application of a particular law’, citing M.N. Kinnear, Treaties as Agreements to Arbitrate:  International Law as the Governing Law, in International Arbitration 2006: Back to Basics (A.J. van den Berg ed., 2007) (‘Numerous treaties fail to state a governing law. Treaties in this category are often older treaties; those concluded more recently tend to state the governing law expressly’). 31  United Nations Conference on Trade and Development (UNCTAD), IIA Issues Note No. 2 (June 2016), International Investment Agreements, Investor-​State Dispute Settlement:  Review of Developments in 2015 http://​investmentpolicyhub.unctad.org/​Publications/​Details/​144 (last visited Nov. 6, 2017). As at July 4, 2017, the UNCTAD website reports a total of 767 known investor-​state arbitrations. 32  United Nations Commission on International Trade Law (UNCITRAL), Working Group II (Arbitration), Forty-​ninth session (Vienna, September 15–​19, 2008), Settlement of Commercial Disputes:  Revision of the UNCITRAL Arbitration Rules, Note by the Secretariat (Aug. 6, 2008), Doc. A/​CN.9/​WG.II/​WP.151/​Add.1, 14–​15. Under the previous provision, the arbitrators had to go through the less flexible conflict of laws method:  art. 33(1) of the UNCITRAL Arbitration Rules adopted on December 15, 1976 thus provided that:  ‘the arbitral tribunal shall apply the law determined by the conflict of law rules which it considers

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The Law Applicable in Investment Treaty Arbitration 19.17 In practice, the decisive question in the operation of these rules is what balance is found by

the arbitrators, in the absence of a choice of the applicable law by the parties, between the law of the host state and international law. Unlike the UNCITRAL Arbitration Rules and the Arbitration Rules of the Stockholm Chamber of Commerce, in the ICSID system the arbitrators’ recourse to both the law of the host state and international law is mandatory. Until the decision rendered by the ad hoc Committee in Wena v Egypt,33 both the arbitral practice and scholarly writings essentially focused on the primary role of the law of the host state, leaving a residual role to international law in situations where the law of the host state contained lacunae or was inconsistent with international law, or in situations where the law of the host state entered into collision with fundamental norms of international law.34 The role of international law as a body of substantive rules directly accessible to the arbitrators without initial scrutiny into the law of the host state, which had been advocated by some,35 was not fully espoused until the decision by the ad hoc Committee in the Wena v Egypt annulment proceeding.

19.18 In that case, the application for annulment was based on the tribunal’s alleged failure to

apply the applicable law because Egyptian law was the law applicable to the lease contracts underlying the dispute between the parties. The investor submitted that there was an important distinction to be drawn between the lease contracts (for which the applicable law was Egyptian law) and the BIT which was the basis for its action in consideration of Egypt’s failure to protect its investment under that treaty. The ad hoc committee concurred in determining that the subject matter of the lease agreements submitted to Egyptian law was different from the subject matter brought before ICSID arbitration on the basis of the BIT, which is why there was no choice of law under Article 42(1), first sentence.36 Therefore, in the absence of a choice of law pursuant to the first sentence of Article 42(1), the ad hoc committee considered the issue of the meaning of the second sentence of Article 42(1) and the interplay between domestic and international law,37 before determining the meaning of ‘and’, as well as the role of international law under that provision:

applicable. For an analysis of the previous rule, leaving a “wide margin to the arbitral tribunal in the selection of the applicable conflict of laws rules, in contrast to the restriction to host State law and international law in Article 42(1) of the ICSID Convention” ’: see McLachlan, Investment Treaty Arbitration, supra note 3 at 22. More generally, see E. Gaillard, The Role of the Arbitrator in Determining the Applicable Law, in The Leading Arbitrator’s Guide to International Arbitration Ch. 18 (2d ed. 2014). 33  Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​98/​4, Decision on the Application for Annulment (Feb. 5, 2002) [hereinafter Wena v. Egypt]. 34  On these two lines of reasoning and an analysis of the negotiating history of the ICSID Convention with respect to art. 42(1), see E. Gaillard & Y. Banifatemi, The Meaning of ‘and’ in Article 42(1), Second Sentence, of the Washington Convention: The Role of International Law in the ICSID Choice of Law Process’, 18 ICSID Rev. 375 (2003). For a different view, see W.M. Reisman & M.H. Arsanjani, Applicable Law Under the ICSID Convention: The Tortured History of the Interpretation of Article 42, in Building International Investment Law: The First 50 Years of ICSID 3–​12 (M.N. Kinnear, G.R. Fischer et al. eds., 2015). 35  See, regarding the question of the applicability of international law to issues involving the conduct of the host state, E. Lauterpacht, The World Bank Convention on the Settlement of International Investment Disputes, in Recueil D’études de Droit International en Hommage à Paul Guggenheim, I  uhei 642, 659 (1968) (suggesting, with respect to ‘disputes arising out of contracts’, that an ICSID tribunal should be able to consider whether a state party’s conduct is consistent with its obligations under public international law). See also E. Gaillard, Centre international pour le règlement des différends relatifs aux investissements (C.I.R.D.I.) Chronique des sentences arbitrales, 114 J. Droit Int’l 135, 157 (1987); E. Gaillard, Centre international pour le règlement des différends relatifs aux investissements (C.I.R.D.I.)—​Chronique des sentences arbitrales, 118 J. Droit Int’l 165,182–​83 (1991). 36  Wena v. Egypt, supra note 33, Decision on Annulment (Feb. 5, 2002), 940–​41. 37  Id. 941.

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III.  Determination of the Applicable Law by the Arbitrators What is clear is that the sense and meaning of the negotiations leading to the second sentence of Article 42(1) allowed for both legal orders to have a role. The law of the host State can indeed be applied in conjunction with international law if this is justified. So too international law can be applied by itself if the appropriate rule is found in this other ambit.38

The rationale underlying the Wena v Egypt holding is that, on a given issue, the rules of 19.19 international law can be applied as the proper law in the same way as the law of the host state. A tribunal may find two equally applicable rules in each legal system and decide that, under the circumstances of the case, it will apply the rule of international law, without any need to find either a lacuna or an inadequacy of the law of the host state. On this basis, the Wena v Egypt ad hoc committee validated the tribunal’s recourse to international law, in particular the award of compound interest to the investor as the appropriate rule justified by the international law standard of ‘prompt, adequate and effective’ compensation under the BIT, which could not be achieved through the simple interest rule of Egyptian law.39 The Wena method implies a choice of law inquiry.40 The designation of the rule of inter- 19.20 national law in that case was the result of the identification of the particular issue at hand (award of damages) and the consideration of the various rules that were susceptible to apply (rules under Egyptian law and international law). The tribunal thus determined, after a choice of law inquiry, that the international law rule of compound interest was the proper rule in consideration of the state’s wrongful act and of the principle of full compensation with respect to the loss of the claimant’s investment.41 38  Id. (emphasis added). This holding is in sharp contrast with the ad hoc Committee’s decision in Klöckner v. Cameroon, according to which ‘Article 42(1) therefore clearly does not allow the arbitrator to base his decision solely on the “rules” or “principles of international law” ’ (Klöckner Industrie-​Anlagen GmbH and Others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/​81/​2 Decision on Annulment (May 3, 1985), ¶ 69 (emphasis in original)), and also with the ad hoc Committee’s decision in Amco v.  Indonesia, according to which ‘Article 42(1) of the Convention authorizes an ICSID tribunal to apply rules of international law only to fill up lacunae in the applicable domestic law and to ensure precedence to international law norms where the rules of the applicable domestic law are in collision with such norms’ (Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/​81/​ 1, Decision on Annulment (May 16, 1986), ¶ 20 (emphasis added)). For a more recent recognition of this ruling, see also CMS v. Argentina, supra note 3, Award (May 12, 2005), ¶ 116 (‘[a]‌more pragmatic and less doctrinaire approach has emerged, allowing for the application of both domestic law and international law if the specific facts of the dispute so justifies. It is no longer the case of one prevailing over the other and excluding it altogether. Rather, both sources have a role to play . . .’). 39  Wena v.  Egypt, supra note 33, Decision on Annulment (Feb. 5, 2002), 942–​ 43 (¶¶ 50–​53). For a similar reasoning, in the context of art. 42(1), first sentence, directing the tribunal to rule on the basis of the applicable BIT as the law chosen by the parties (and proceeding to a renvoi to Egyptian law only regarding provisions more favourable to the investor), Middle East Cement Shipping and Handling Co. S.A. v. Arab Republic of Egypt, ICSID Case No. ARB/​99/​6, Award (Apr. 12, 2002), ¶¶ 173–​75. Contra, see Aucoven v. Venezuela, supra note 14 at 393–​96 (determining, in an arbitration initiated on the basis of a concession agreement, that international law does not ‘require’ an award of compound interest and that the applicable Venezuelan law combined with the pertinent contractual provisions did not allow compound interest). 40  Compare, for a critical approach in terms of methodology, C. McLachlan, ‘Investment Treaty Arbitration supra note 3 at 20: (‘It is doubtless correct, as the [Wena] ad hoc Committee observed, that the second sentence of Article 42(1) “does not draw a sharp line for the distinction of the respective scope of international and of domestic law and, correspondingly, that this has the effect to confer on to the Tribunal a certain margin and power for interpretation.” But, it is submitted that the rule nevertheless still requires the tribunal to undertake a choice of law enquiry. The starting point for the analysis, as in Private International Law, is the identification and characterization of the particular issue to which the legal rule is to be applied, and the selection of the legal system which properly applies to the determination of that issue’). 41  See Wena v. Egypt, supra note 33, Award (Dec. 8, 2000), ¶¶ 128–​29 and the reference to ‘restor[ing] the Claimant to a reasonable approximation of the position in which it would have been if the wrongful act had not taken place’. International tribunals have recently relied on the Wena Award on this point, e.g. Crystallex International Co. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​11/​2, Award (Apr. 4, 2016), ¶ 935 (fn. 1320); Quiborax et al. v. Plurinational State of Bolivia, ICSID Case No. ARB/​6/​2,

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The Law Applicable in Investment Treaty Arbitration 19.21 The role of international law in investment treaty arbitration is essential; recognizing this

role in no way undermines that of the law of the host state in situations where it would be the proper law. Indeed, by the very nature of investment treaty arbitration, certain issues can be resolved only through the application of international law;42 on the other hand, certain questions can be determined only pursuant to domestic law. The two systems of law may thus apply, depending on each distinct issue to be determined on the merits. In terms of methodology, this is allowed, for example, by the second sentence of Article 42(1) of the ICSID Convention and Article 27(1) of the 2017 Arbitration Rules of the Stockholm Chamber of Commerce, which enable arbitral tribunals, in the exercise of their discretion and pursuant to a choice of law inquiry, to decide what rule of law (international or domestic) is the most appropriate to the determination of each specific question.

IV.  Implications of the Specific Nature of Investment Treaties in the Choice of Law Process 19.22 As previously noted, multilateral treaties such as the NAFTA and the Energy Charter Treaty

and a number of bilateral investment treaties provide that the treaty itself, along with the rules of international law, apply to the resolution of disputes brought under those instruments. It is unquestionable that arbitral tribunals are also bound by the terms of the investment treaty as the instrument that provides the parties’ rights and obligations and the treaty standards against which they will have to determine whether the international responsibility of the host state must be engaged. In this context, the question arises as to the role of the treaty in the choice of law mechanism. In other words, must a distinction be drawn between, on the one hand, a treaty’s substantive protections—​for example the obligation to treat an investment in a fair and equitable manner, or the obligation to refrain from any measures of discrimination or arbitrary treatment, or the prohibition of expropriatory measures without due compensation—​and, on the other hand, the treaty as containing the law applicable to the determination of whether such standards have been violated?

19.23 The role of the investment treaty in the choice of law mechanism was envisaged in AAPL v

Sri Lanka, where the tribunal saw in the Sri Lanka–​United Kingdom BIT the ‘substantive material rules of direct applicability’ as well as seeing in it, by renvoi, other sources of law: Furthermore, it should be noted that the Bilateral Investment Treaty is not a self-​contained closed legal system limited to provide for substantive material rules of direct applicability, but it has to be envisaged within a wider juridical context in which rules from other sources are integrated through implied incorporation methods, or by direct reference to certain supplementary rules, whether of international law character or of domestic law nature. Such extension of the applicable legal system resorts clearly from Article 3.(1), Article 3.(2), and Article 4 of the Sri Lanka/​U.K. Bilateral Investment Treaty.43

Award (Sept. 16, 2015), ¶ 524 (fn. 663). See also Wena v. Egypt, Decision on Annulment (Feb. 5, 2002), supra note 33, ¶ 53 (‘The option the Tribunal took was in the view of this Committee within the Tribunal’s power. International law and ICSID practice, unlike the Egyptian Civil Code, offer a variety of alternatives that are compatible with those objectives [of prompt, adequate and effective compensation]. These alternatives include the compounding of interest in some cases. Whether among the many alternatives available under such practice the Tribunal chose the most appropriate in the circumstances of the case is not for this Committee to say as such matter belongs to the merits of the decision. Moreover, this is a discretionary decision of the Tribunal’). 42  On this question, see infra Section IV, Implications of the Specific Nature of Investment Treaties in the Choice of Law Process: Standards of Protection versus Law Applicable to the Substance. 43  AAPL v. Sri Lanka,, supra note 5, ¶ 21.

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IV.  Implications of the Specific Nature of Investment Treaties in the Choice of Law Process The AAPL v Sri Lanka tribunal concluded that both parties had agreed to the applicability 19.24 of the Sri Lanka–​UK BIT as ‘lex specialis’ and of the international or domestic legal relevant rules referred to ‘as a supplementary source’ by virtue of the provisions of the treaty itself. A very similar reasoning was adopted by the tribunal in Azurix v Argentina: The Tribunal notes first the agreement of the parties with the statement that the BIT is the point of reference for judging the merits of Azurix’s claim. The Tribunal further notes that, according to the Argentine Constitution, the Constitution and treaties entered into with other States are the supreme law of the nation, and treaties have primacy over domestic laws . . . Azurix’s claim has been advanced under the BIT and, as stated by the Annulment Committee in Vivendi II, the Tribunal’s inquiry is governed by the ICSID Convention, by the BIT and by [the] applicable international law. While the Tribunal’s inquiry will be guided by this statement, this does not mean that the law of Argentina should be disregarded. On the contrary, the law of Argentina should be helpful in the carrying out of the Tribunal’s inquiry into the alleged breaches of the Concession Agreement to which Argentina’s law applies, but is only an element of the inquiry because of the treaty nature of the claims under consideration.44

and by the tribunal in LG&E v Argentina,45 although in the context of the absence of a choice of law provision under the US–​Argentina BIT: It is to be noted that the Argentine Republic is a signatory party to the Bilateral Investment Treaty, which may be regarded as a tacit submission to its provisions in the event of a dispute related to foreign investments. In turn, LG&E grounds its claim on the provisions of the Treaty, thus presumably choosing the Treaty and . . . general international law as the applicable law for this dispute. Nevertheless, these elements do not suffice to say that there is an implicit agreement by the Parties as to the applicable law, a decision requiring more decisive actions. Consequently, the dispute shall be settled in accordance with the second part of Article 42(1).

The arbitral tribunal in Wena v Egypt had equally relied on the Egypt–​UK BIT, while relying 19.25 on the second sentence of Article 42(1) of the ICSID Convention to complete the provisions of the treaty through the application of Egyptian law and international law. It stated that: [A]‌s both parties agree, ‘this case all turns on an alleged violation by the Arab Republic of Egypt of the agreement for the promotion and protection of investments that was entered into in 1976 between the United Kingdom and the Arab Republic of Egypt’. Thus, the Tribunal, like the parties (in both their submissions and oral advocacy), considers the IPPA [BIT] to be the primary source of applicable law for this arbitration. However, the IPPA is a fairly terse agreement of only seven pages containing thirteen articles . . . The Tribunal finds that, beyond the provisions of the IPPA, there is no special agreement between the parties on the rules of law applicable to the dispute. Rather, the pleadings of both parties indicate that, aside from the provisions of the IPPA, the Tribunal should apply both Egyptian law (i.e. ‘the law of the Contracting State party to the dispute’) and ‘such rules of international law as may be applicable’. The Tribunal notes that the provisions of the IPPA would in any event

44  Azurix v. Argentina, supra note 3, Award (July 14, 2006), ¶¶ 65–​67 (emphasis added). The tribunal in El Paso expressly relied on Azurix to reach the same conclusion. See supra note 5, ¶¶ 137, 141. 45  LG&E Energy Corp., LG&E Capital Corp. & LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006), ¶ 85. The tribunal went on to analyze the respective roles of domestic law and international law under Article 42(1), second sentence, before concluding, by specific reference to AAPL v. Sri Lanka, supra note 5, ¶ 97, that, in the absence of a ‘binding contractual agreement’ between the parties, it must apply ‘first the Bilateral Treaty; second and in the absence of explicit provisions therein, general international law, and, third, . . . Argentine domestic law, particularly the Gas Law that governs the natural gas sector’ (¶¶ 98–​99, emphasis added). See also El Paso, supra note 5, ¶¶ 138, 141.

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The Law Applicable in Investment Treaty Arbitration be the first rules of law to be applied by the Tribunal, both on the basis of the agreement of the parties and as mandated by Egyptian law as well as international law.46 19.26 The tribunal in ADC v Hungary also applied the BIT, on the basis of what it found to be the

express terms of the treaty itself as completed by the rules of international law. In the tribunal’s view, by consenting to arbitration under Article 7 of the BIT with respect to Any dispute between a Contracting Party and the investor of another Contracting Party concerning expropriation of an investment . . . the Parties also consented to the applicability of the provisions of the Treaty . . . Those provisions are Treaty provisions pertaining to international law. That consent falls under the first sentence of Article 42(1) of the ICSID Convention . . . The consent must also be deemed to comprise a choice for general international law, including customary international law, if and to the extent that it comes into play for interpreting and applying the provisions of the Treaty . . .47 (emphasis added).

19.27 In all these cases, the relevant BIT was treated as the primary source of applicable law by each of

the arbitral tribunals. The question, however, is not as straightforward as it would seem at first glance: when confronted with a choice of law provision containing a reference to the treaty itself, must the arbitral tribunal treat the provisions of such treaty as the ‘applicable law’ or, rather, as the provisions containing the respective rights and obligations of the parties to the dispute on the basis of which the claim is lodged? The same would be true of a contract in a purely contractual context: the proper law of the contract is not the contract but the legal system in which the contract finds its validity. In other words, the question is whether investment treaty provisions must be treated as primary rules of conduct forming the basis of the claim or, in choice of law terms, as secondary rules designed to ensure the proper ‘application’ of the primary rules, following the well-​known distinction adopted by the International Law Commission in its codification of the law of state responsibility.48

19.28 In individual cases, it could be argued that a treaty provision contains both a standard of

conduct (for example, the prohibition of an expropriation or measures having an equivalent effect without due compensation) and rules regarding the operation of such standard in case of dispute (for example, the method of calculation of compensation due in case of

  Wena v. Egypt, Award (Dec. 8, 2000), supra note 41, ¶¶ 78–​79 (emphasis added).   ADC Affiliate Ltd. & ADMC Management Ltd. v. Republic of Hungary, ICSID Case No. ARB/​03/​ 16, Award (Oct. 2, 2006), ¶ 290 [hereinafter ADC v. Hungary]. Although the ADC v. Hungary tribunal refers to the treaty as the applicable law under the first sentence of art. 42(1) of the ICSID Convention, it would appear that the express reference to the bilateral investment treaty under art. 6(5) of the treaty concerns disputes between the contracting parties and not disputes between an investor and a contracting party. See also Flughafen Zürich y Gestión e Ingeniería IDC S.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​10/​19, Award (Nov. 18, 2014), ¶ 380. 48  On secondary rules in this context, see J. Crawford, The International Law Commission’s Articles on State Responsibility. Introduction, Text and Commentaries 16 (2002) (‘The law relating to the content and the duration of substantive State obligations is as determined by the primary rules. The law of State responsibility as articulated in the Draft Articles provides the framework—​those rules, denominated “secondary,” which indicate the consequences of a breach of an applicable primary obligation’). See also at 75 (‘[i]‌t is not the function of the articles to specify the content of the obligations laid down by particular primary rules, or their interpretation. Nor do the articles deal with the question whether and for how long particular primary obligations are in force for a State. It is a matter for the law of treaties to determine whether a State is a party to a valid treaty, whether the treaty is in force for that State and with respect to which provisions, and how the treaty is to be interpreted. The same is true, mutatis mutandis, for other “sources” of international obligations, such as customary international law. The articles take the existence and content of the primary rules of international law as they are at the relevant time; they provide the framework for determining whether the consequent obligations of each State have been breached, and with what legal consequences for other States’). 46 47

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IV.  Implications of the Specific Nature of Investment Treaties in the Choice of Law Process expropriation, such as fair market value at the time of expropriation).49 In such situations, the tribunal will be bound to ‘apply’ the treaty provision to the extent that it is part of the general framework of the parties’ rights and obligations. In terms of methodology, however, this does not make the treaty the ‘law applicable’ to the dispute brought under the treaty, or change the nature of the treaty provisions which contain substantive obligations that can be the subject of the parties’ dispute and provide the basis for a claim. Beyond methodological differentiations, practical consequences may attach to the distinction 19.29 between standards of protection and the law applicable to the substance of the dispute. Strictly speaking, in situations where there is a choice of law provision making reference to the treaty itself, the treaty’s substantive provisions would normally constitute the standards against which the parties’ conduct is assessed by the tribunal, whereas the rules of international law would in any event constitute the ‘law applicable’ to the determination of the creation, scope, modification, extinction, interpretation and operation of such provisions, for example the rules on state responsibility which determine whether an international obligation has been breached and attach specific consequences to such breach or determine whether there are causes of exoneration, or the rules of treaty interpretation when the nature and extent of the parties’ obligations under the treaty are in dispute.50 Equally, where the treaty does not contain a choice of law rule, it is submitted that the proper ‘rules of law’ that can be determined as applicable by the arbitrators as regards the creation, scope, modification, extinction, interpretation, and operation of the treaty’s substantive provisions will always be rules of international law.51 This conclusion is not very different from that reached unambiguously by the Vivendi v 19.30 Argentina ad hoc committee in relation to the distinction between claims arising out of a contract and claims arising out of a treaty: [A]‌state may breach a treaty without breaching a contract, and vice versa, and this is certainly true of these provisions of the BIT. The point is made clear in Article 3 of the ILC Articles, which is entitled ‘Characterization of an act of a State as internationally wrongful’: The characterization of an act of a State as internationally wrongful is governed by international law. Such characterization is not affected by the characterization of the same act as lawful by internal law. 49  The treaty may contain other rules concerning, for example, the time at which the obligations under the treaty come into effect or whether such obligations may have retroactive effect, or the types of investment that are protected. In such situations, it may be argued, the rules in question concern the qualifying conditions under which the treaty will apply ratione personae, ratione materiae, and ratione temporis, and presumably concern issues of jurisdiction rather than merits. See generally C. Schreuer, Jurisdiction and Applicable Law in Investment Treaty Arbitration, 1 McGill J. Disp. Resol. 1 (2014). 50  Compare with the Judgment of the International Court of Justice in the Case concerning the Gabčíkovo-​ Nagymaros Project (Hungary/​Slovakia), Judgment of September 25, 1997, I.C.J. Rep 1997, 7, ¶ 47 (‘Nor does the Court need to dwell upon the question of the relationship between the law of treaties and the law of State responsibility, to which the Parties devoted lengthy arguments, as those two branches of international law obviously have a scope that is distinct. A determination of whether a convention is or is not in force, and whether it has or has not been properly suspended or denounced, is to be made pursuant to the law of treaties. On the other hand, an evaluation of the extent to which the suspension or denunciation of a convention, seen as incompatible with the law of treaties, involves the responsibility of the State which proceeded to it, is to be made under the law of State responsibility’). 51  Compare A. Parra, Applicable Law in Investor-​State Arbitration, supra note 30, at 8 (‘Unlike the BITs in Siemens and the four other cases, most BITs, including those involved in the remaining 15 cases under consideration, lack specific provisions on [the] applicable law. However, as indicated earlier, in all of the cases the claims were made in respect of alleged violations by the respective host States of their obligations under the BITs. The investor-​State arbitration provisions of the BITs obviously authorize this type of claim; they typically do so by stating that they cover disputes over the obligations of the State under the BIT or disputes relating to alleged breaches of rights created or conferred by the BIT in respect of investments. Inevitably it would seem the claims will [fall] to be decided in accordance with the provisions of the BIT and of international law as the BIT’s governing law’) (emphasis added).

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The Law Applicable in Investment Treaty Arbitration In accordance with this general principle (which is undoubtedly declaratory of general international law), whether there has been a breach of the BIT and whether there has been a breach of contract are different questions. Each of these claims will be determined by reference to its own proper or applicable law—​in the case of the BIT, by international law; in the case of the Concession Contract, by the proper law of the contract, in other words, the law of Tucumán. For example, in the case of a claim based on a treaty, international law rules of attribution apply, with the result that the state of Argentina is internationally responsible for the acts of its provincial authorities. By contrast, the state of Argentina is not liable for the performance of contracts entered into by Tucumán, which possesses separate legal personality under its own law and is responsible for the performance of its own contracts.52 19.31 The conclusion reached in MTD v Chile was similar. In that case, the parties disagreed on the

law applicable with regard to foreign investment contracts, the claimants arguing in favour of international law, while Chile alleged that Chilean law applied. The tribunal held that: ‘[t]‌his being a dispute under the BIT, the parties have agreed that the merits of the dispute be decided in accordance with international law’ and that, as regards foreign investment contracts, ‘the parties have agreed to this arbitration under the BIT. This instrument being a treaty, the agreement to arbitrate under the BIT requires the Tribunal to apply international law’.53 The ad hoc committee constituted after Chile’s application for annulment of the MTD award confirmed this conclusion: [MTD]’s claim is one for ‘an alleged breach of any right conferred or created by this Agreement with respect to an investment by such investor’ (BIT, Article 6(1)(ii)), and thus international law as the proper law of the BIT is applicable to that claim and to any defence thereto. The Respondent insists—​and the Claimants do not disagree—​that the Tribunal had to apply international law as a whole to the claim, and not the provisions of the BIT in isolation. . . . As noted above, the lex causae in this case based on a breach of the BIT is international law. However it will often be necessary for BIT tribunals to apply the law of the host State, and this necessity is reinforced for ICSID tribunals by Article 42(1) of the ICSID Convention. Whether the applicable law here derived from the first or second sentence of Article 42(1) does not matter: the Tribunal should have applied Chilean law to those questions which were necessary for its determination and of which Chilean law was the governing law. At the same time, the implications of some issue of Chilean law for a claim under the BIT were for international law to determine. In short, both laws were relevant.54

19.32 This case shows, and the above analysis may explain, the progressive fading, in investment

treaty arbitration, of the assumed strict frontier between an express choice of the applicable law by the parties and the absence of such choice, such that the arbitrators’ reference to the investment treaty under consideration as the ‘applicable’ instrument will inevitably lead to the determination of international law as the ‘applicable law’. In other words, irrespective of whether or not an investment treaty refers to international law as the law applicable to the merits of the dispute, international law will always be the law governing the interpretation and the application of the treaty providing the basis for the arbitration, to the extent that what is at stake, in investment treaty arbitration, is the international responsibility of a state.

52  Compañía de Aguas del Aconquija S.A. & Vivendi Universal S.A. v. Argentine Republic, Decision on Annulment (July 3, 2002), 6 ICSID Reports 340, 365 (2004), ¶¶ 95–​96. These very same paragraphs were cited approvingly and in extenso in Crystallex International Co. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​11/​2, Award (Apr. 4, 2016), ¶ 474. 53  MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/​01/​7, Award (May 25, 2004), ¶¶ 86–​87. See also Bayindir Insaat Turizm Ticaret ve Sanayi A.Ş. Islamic v.  Republic of Pakistan, ICSID Case No. ARB/​03/​29, Award (Aug. 27, 2009), ¶¶ 109–​110. 54  MTD Equity v. Chile, supra note 53, Decision on Annulment (Mar. 21, 2007), ¶¶ 61 and 72.

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20 FAIR AND EQUITABLE TREATMENT Have Its Contours Fully Evolved? Katia Yannaca-​Small*

I. Introduction  II. Does FET Refer to Customary International Law or Is It an Autonomous Standard? 

III. The Normative Content of the Fair and Equitable Treatment Standard 

20.01

A. The NAFTA Tribunals  B. Non-​NAFTA Tribunals  C. What Difference Does It Make Whether Fair and Equitable Treatment Refers to the Minimum Standard of Customary Law? 

20.28 A. Denial of Justice, Due Process  20.31 B. Transparency, Stability, and Legitimate Expectations  20.45 C. Obligation of Vigilance and Protection  20.87 D. Lack of Arbitrariness and Non-​ discrimination  20.90 IV. Conclusion  20.98

20.08 20.12 20.20

20.25

I. Introduction The fair and equitable treatment standard (FET) is an ‘absolute’, or ‘non-​contingent’, 20.01 standard of treatment, that is, a standard that states the treatment to be accorded in terms that have their own normative content, as contrasted with the ‘relative’ standards embodied in the ‘national treatment’ and ‘most-​favoured-​nation’ principles, which define the required treatment by reference to the treatment accorded to other investments in similar circumstances.1 FET is not necessarily satisfied by treating the investor as well as the host state treats its own nationals or other foreigners. Its exact meaning must be determined by reference to the specific circumstances of application. The FET standard has been extensively litigated and significantly clarified but still has ambiguities and continues to evolve. FET is a flexible, elastic standard whose normative content is being expanded to include 20.02 new elements. Because of this, it is the most often invoked treaty standard in investor-​state arbitration, present in almost every single claim brought by foreign investors against host states. It has been increasingly used to provide protection to investors in cases where the test for indirect expropriation is too difficult to meet, since the threshold is high. It has therefore become a preferred way for tribunals to provide a remedy. As the tribunal in Sempra v Argentina said: [I]‌t would be wrong to believe that fair and equitable treatment is a kind of peripheral requirement. To the contrary, it ensures that even where there is no clear justification for

*  The author is grateful to Alexandra (Sasha) Filippova, Associate, International Arbitration Group of Shearman & Sterling LLP for her assistance in research and comments on this chapter. 1 A. Fatouros, Government Guarantees to Foreign Investors 35–​141, 214–​15 (1962); UNCTAD, Bilateral Investment Treaties in the Mid-​1990s (1998).

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? making a finding of expropriation, [as in the present case], there is still a standard which serves the purpose of justice and can of itself redress damage that is unlawful and that would otherwise pass unattended . . . It must also be kept in mind that on occasion the line separating the breach of the fair and equitable treatment standard from an indirect expropriation can be very thin, particularly if the breach of the former standard is massive and long-​lasting.2 20.03 On this point, the tribunal in Continental Casualty v Argentina stated that:

While the requirements of a lawful expropriation focus on the preservation of the value of the investment when the host State precludes its further operation for some public reasons, the fair and equitable standard is aimed at assuring that the normal law-​abiding conduct of the business activity by the foreign investor is not hampered without good reasons by the host government and other authorities.3 20.04 Some even call the FET standard ‘expropriation light’.4 Its arguably ‘invasive’ character some-

times also takes over other investment protection standards such as full protection and security and the obligation of non-​arbitrariness and non-​discrimination.

20.05 For the moment, the standard continues to be a favourite element of investment protections

and disputes despite, or perhaps because, its content is somewhat amorphous:

The Arbitral Tribunal . . . will simply acknowledge that there is a great variation in the way th[e FET] standard is applied by international tribunals, partly because of the different approaches towards the origins and nature of the FET standard (e.g. whether conceived as an international minimum standard or as an autonomous standard) (for a summary of the situation, see El Paso v. Argentina, paras. 330 fol.), partly because the relevant provisions contemplating the FET standards in BITs differ in their structure and wording, thereby requiring a case by case analysis and application.5 20.06 Governments have been inserting this standard into almost every single bilateral in-

vestment treaty (BIT) and other international investment agreement (IIA) that they have concluded since the 1960s, as they had done with the FCN agreements that preceded them.6 The first time concerned governments attempted to clarify the standard was in 1967, when they were negotiating the text of the draft OECD Convention on the Protection of Foreign Property.7 In an official commentary, they linked it to the minimum standard of customary international law.8 Discussions were revived in

2   Sempra Energy International v.  Argentine Republic, ICSID Case No. ARB/​02/​16, Award (Sept. 28, 2007), ¶¶ 300, 301 [hereinafter Sempra v. Argentina]. 3   Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/​03/​9, Award (Sept. 5, 2008), ¶ 254 [hereinafter Continental Casualty v. Argentina]. 4  The Achmea tribunal opined, that, ‘in certain circumstances, conduct of a state in anticipation of an expropriation might amount to a breach of its obligation to respect the FET standard’. Achmea B.V. v. Slovak Republic [II], PCA Case No. 2013-​12, Award on Jurisdiction and Admissibility, (May 20, 2014), ¶ 260 (declining to find that such a breach had occurred) (emphasis added). 5  Oxus Gold plc v. Republic of Uzbekistan, UNCITRAL, Final Award (Dec. 17, 2015), ¶ 313 [hereinafter Oxus Gold v. Uzbekistan]. 6  K. Vandevelde, The Bilateral Treaty Program of the United States, 21 Cornell Int’l L.J. 201 (1988); S. Vasciannie, The Fair and Equitable Treatment Standard in International Investment Law and Practice, 70 Brit. Y.B.Int’l L. 99 (2000). 7  Draft Convention on the Protection of Foreign Property and Resolution of the Council of the OECD on the Draft Convention (OECD 1967) 3–​15. 8 ‘The phrase “fair and equitable treatment,” customary in relevant bilateral agreements, indicates the standard set by international law for the treatment due by each State regarding the property of foreign nationals. The standard requires that—​subject to essential security interests—​protection afforded under the Convention shall be that generally accorded by the Party concerned to its own nationals, but, being set by international law, the standard may be more exacting where rules of national law or national administrative practices fall short of the requirements of international law. The standard required conforms in effect to the

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II.  Does FET Refer to Customary International Law or Is It an Autonomous Standard? 2001,9 in the aftermath of the Metalclad10 award and have continued ever since in several international fora and in bilateral and multilateral negotiations. The great volume of jurisprudence generated in the last fifteen years and the various interpretations of the standard by arbitral tribunals have brought changes to the language of the FET provisions and clarification of its meaning in the new generation of international investment agreements. This chapter will tackle the FET standard from two angles: its position in the international 20.07 law context and the elements identified by arbitral tribunals as forming part of this standard (and their balance).11

II.  Does FET Refer to Customary International Law or Is It an Autonomous Standard? The FET standard is included in almost all investment agreements and preferential trade 20.08 agreements (PTAs) with investment chapters. A standard formulation without any reference to international law is: ‘Investors and investments of each contracting party shall at all times be accorded fair and equitable treatment in the territory of the other contracting party’.12 Sometimes there is reference to international law.13 In the case of NAFTA,14 the United 20.09 States15 and Canada16 Model BITs and the PTAs concluded by the three NAFTA countries17

‘minimum standard’ which forms part of customary international law’, Notes and Comments to art. 1, https://​ www.oecd.org/​investment/​internationalinvestmentagreements/​39286571.pdf (last visited Nov. 9, 2017). 9  The discussions demonstrated that not all participating governments had entirely grasped the real nature of the standard they were including in their agreements. Some appeared to have rarely given a second thought to its potential breadth, perhaps because they saw themselves as essentially capital exporters, not importers, and wished the standard to be as protective as possible. Second thoughts about the FET standard and other BIT provisions began to arise when arbitral tribunals started to shed light on them. 10  Metalclad Corporation v.  United Mexican States, ICSID case No. ARB/​ AF/​97/​1, Award (Aug. 30, 2000) [hereinafter Metalclad v. Mexico]. 11   See R. Dolzer & C. Schreuer, Principles of International Investment Law (2d ed. 2012); R. Schill, Fair and Equitable Treatment under Investment Treaties as an Embodiment of the Rule of Law (2006); R. Dolzer, Fair and Equitable Treatment: A Key Standard in Investment Treaties, 39 Int’l L. 87 (2005); C. McLachlan et al., International Investment Arbitration—​Substantive Principles (2d ed. 2017); K. Yannaca-​Small, Fair and Equitable Treatment in International Investment Law, in International Investment Law: A Changing Landscape Ch. 3 (2005), M. Paparinskis, The International Minimum Standard and Fair and Equitable Treatment (2013). 12   Treaties concluded by the Netherlands, Sweden, Switzerland, and Germany. For example, the German Model BIT (1998) art.2(1) states:  ‘Each Contracting Party  . . .  shall in any case accord such investments fair and equitable treatment’ and the Swiss Model BIT (1995) art. 4(1), states:  ‘Investments and returns of investors of each Contracting Party shall at all times be accorded fair and equitable treatment  . . .’. See UNCTAD, supra note 1. 13  See, e.g., art. 3 of France Model BIT (2006), which refers to ‘fair and equitable treatment in accordance with the principles of international law’. 14  Article 1105(1) of NAFTA provides: ‘Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security’. In 2001, the parties issued an agreed interpretation expressly invoking the minimum standard of international law. See infra ¶ 20.12. 15  U.S. Model BIT (2004). 16  Canada Model FIPA (2004). 17  U.S.–​Singapore FTA (2003), U.S.–​Chile FTA (2004), U.S.–​Australia FTA (2004), U.S.–​CAFTA–​DR FTA (2004), U.S.–​Morocco FTA (2004), U.S.–​Peru TPA (2006), Mexico–​Japan FTA (2004).

503

Fair and Equitable Treatment: Have Its Contours Fully Evolved? the reference is specifically to the minimum standard of customary international law, for example: 1. Each party shall accord to covered investments treatment in accordance with customary international law minimum standard of treatment of aliens, including fair and equitable treatment and full protection and security. 2. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ in paragraph 1, do not require treatment in addition to or beyond that which is required by the customary law minimum standard of treatment of aliens.18 20.10 Consequently, when tribunals are called upon to interpret the normative content of the fair and

equitable standard in treaties which include explicit language linking or, in some cases limiting, fair and equitable treatment to the minimum standard of international customary law,19 they have more limited options than tribunals interpreting the standard found in treaties that either link the standard to international law broadly, without specifying custom, or treaties that lack any reference to international law. The latter have given a broader scope to FET than the minimum standard of treatment required by customary international law.

20.11 The broad interpretation of the standard by arbitral tribunals has led a growing number of coun-

tries to qualify the language they include in their new investment treaties,20 in the image of NAFTA, either by making a specific mention of the minimum standard or referring to its constituent elements. The new generation of international investment agreements such as the TPP,21 CETA,22 and recent model BITs23 reflect this approach. This new generation of IIAs has not yet been the subject of interpretation by arbitral tribunals; therefore, the analysis in this chapter reflects the interpretation of older generation agreements.

A. The NAFTA Tribunals 20.12 In the context of NAFTA, early arbitral tribunals, such as those in Metalclad v Mexico24

and S.D. Myers v Canada,25 gave different interpretations of the ‘fair and equitable’

  Article 5 of Canada Model FIPA (2005).   The international minimum standard is a norm of customary international law that provides a minimum set of principles which states, regardless of their domestic legislation and practices, must respect when dealing with foreign nationals and their property. While the principle of national treatment foresees that aliens can only expect equality of treatment with nationals, the international minimum standard sets a number of basic rights established by international law that states must grant to aliens, independent of the treatment accorded to their own citizens. Violation of this norm engenders the international responsibility of the host state and may open the way for international action on behalf of the injured alien provided that the alien has exhausted local remedies. The classic monograph on the principle is A. Roth, The Minimum Standard of International Law Applied to Aliens 127 (1949), where it is defined as follows: ‘[t]‌he international standard is nothing else than a set of rules, correlated to each other and deriving from one particular norm of general international law, namely that the treatment of aliens is regulated by the law of nations’. See Yannaca-​Small, supra note 11. 20  See ch. 1 in this volume. 21  Trans-​Pacific Partnership (TPP), see language on FET in ch. 1 in this volume, ¶¶ 1.54–​1.55. 22  Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union; see language on FET in ch. 1 in this volume , ¶¶ 1.54–​1.60. 23  India Model BIT (2016) art. 3 ‘Standard of Treatment’ provides: 3.1 Each Party shall not subject Investments of Investors of the other Party to Measures which constitute: (i) Denial of justice under customary international law (ii) Un-​remedied and egregious violations of due process; or (iii) Manifestly abusive treatment involving continuous, unjustified and outrageous coercion or harassment. 24  Metalclad v. Mexico, supra note 10. 25  S.D. Myers, Inc. v. Government of Canada, UNCITRAL (NAFTA), Award (Nov. 13, 2000). 18 19

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II.  Does FET Refer to Customary International Law or Is It an Autonomous Standard? provision of Article 1105(1), establishing a breach of fair and equitable treatment standard based on the transparency26 and national treatment provisions of the NAFTA, respectively. To clarify the interpretation of this provision, the NAFTA Free Trade Commission (FTC) issued a binding interpretation on 21 July 2001 that provides: Article 1105 (1) prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to investments of investors of another Party. The concepts of ‘fair and equitable treatment’ and ‘full protection and security’ do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens. A  determination that there has been a breach of another provision of the NAFTA, or of a separate international agreement, does not establish that there has been a breach of Article 1105 (1).

Since then, all NAFTA tribunals have accepted this binding interpretation. However, they 20.13 have applied it with variations. Some have stipulated that the provision on the customary international law minimum standard of treatment refers to an evolving customary international law and not one frozen in time. In the famous Mondev v United States holding,27 for instance, the tribunal stated that: [T]‌he term ‘customary international law’ refers to customary international law as it stood no earlier than the time at which NAFTA came into force. It is not limited to the international law of the 19th century or even of the first half of the 20th century, although decisions from that period remain relevant. In holding that Article 1105(1) refers to customary international law, the FTC interpretations incorporate current international law, whose content is shaped by the conclusion of more than two thousand bilateral investment treaties and many treaties of friendship and commerce. Those treaties largely and concordantly provide for ‘fair and equitable’ treatment of, and for ‘full protection and security’ for, the foreign investor and his investments.28

The tribunal in ADF v United States29 expressed a similar view: [W]‌hat customary international law projects is not a static photograph of the minimum standard of treatment of aliens as it stood in 1927 when the Award in the Neer case30 was rendered. For both customary international law and the minimum standard of treatment of aliens it incorporates, are constantly in a process of development.31

26  Mexico, in its defense, supported that, transparency is a conventional law concept which has been developed in international trade law (GATT art. X), not the body of international investment-​protection law from which the concept of minimum standard of treatment expressed in art. 1105 has been derived. 27  Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/​99/​2, Award (Oct. 11, 2002) [hereinafter Mondev v. United States]. 28  Id. ¶ 125. 29 ADF Group Inc. v.  United States of America, ICSID Case No. ARB(AF)/​ 00/​1, Award (Jan. 9, 2003) [hereinafter ADF v. United States]. 30  The decision on the Neer claim became the landmark case for the international minimum standard. This claim was presented to the US–​Mexico Claim Commission by the United States on behalf of the family of Paul Neer, who had been killed in Mexico in obscure circumstances. In what has become a classic dictum, the Commission expressed the concept as follows: ‘the propriety of governmental acts should be put to the test of international standards . . . the treatment of an alien, in order to constitute an international delinquency should amount to an outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards that every reasonable and impartial man would readily recognize its insufficiency. Whether the insufficiency proceeds from the deficient execution of a reasonable law or from the fact that the laws of the country do not empower the authorities to measure up to international standards is immaterial’. See Neer v. Mexico (Oct. 15, 1926), 4 UNRIAA 60. 31  ADF v. United States, supra note 29, ¶ 179.

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20.14

Fair and Equitable Treatment: Have Its Contours Fully Evolved? 20.15 The Glamis v United States32 tribunal took a more restrictive approach. It agreed that the

reference in Article 1105 to ‘fair and equitable treatment’ is to be understood not as autonomous treaty language but in terms of customary international law33 and that the content of that rule remains unsettled. However, it found that the threshold is high for establishing the inclusion of elements beyond the historic content: A tribunal confronted with a question of treaty interpretation can, with little input from the parties, provide a legal answer. It has the two necessary elements to do so, namely the language at issue and rules of interpretation. A tribunal confronted with the task of ascertaining custom, on the other hand, has a quite different task because ascertainment of the content of custom involves not only questions of law but also questions of fact, where custom is found in the practice of States regarded as legally required by them. The content of a particular custom may be clear; but where a custom is not clear, or is disputed then it is for the party asserting the custom to establish the content of that custom.34

20.16 The tribunal found that Glamis failed to establish that the evolution in custom it asserted

had occurred and concluded that, although situations presented to tribunals are more varied and complicated today than in the 1920s, the level of scrutiny required remains the same as under Neer: Given the absence of sufficient evidence to establish a change in the custom, the fundamentals of the Neer standard thus still apply today: to violate the customary international law minimum standard of treatment codified in Article 1105 of the NAFTA, an act must be sufficiently egregious and shocking—​a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons—​so as to fall below accepted international standards and constitute a breach of Article 1105(1). Such a breach may be exhibited by a ‘gross denial of justice or manifest arbitrariness falling below acceptable international standards;’ or the creation by the State of objective expectations in order to induce investment and the subsequent repudiation of those expectations.35

20.17 The tribunal emphasized that, although bad faith may often be relevant to such a determin-

ation, and its presence will certainly be determinative of a violation, a finding of bad faith is not a requirement for a breach of Article 1105(1). However, the tribunal acknowledged that, although the requirements for finding a breach of the customary international law minimum standard of treatment remained as stringent as under Neer, it was entirely possible that, ‘as an international community, we might be shocked by State actions now that did not offend us previously’.36 The tribunal concluded that the acts of the federal government and the State

32  Glamis Gold Ltd. v. United States of America, (UNCITRAL) Award (June 8, 2009) [hereinafter Glamis v. United States]. 33  Id. ¶¶ 606–​18. 34  Id. ¶ 20. 35  Id. ¶ 22. See also, e.g., Adel A Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/​ 11/​ 33, Award (Oct. 27, 2015), ¶ 390. The tribunal was called upon to interpret the Oman–​US FTA, which, like art. 1105 of the NAFTA, links the obligation to provide FET directly with the minimum standard of treatment: (‘In the Tribunal’s view, therefore, to establish a breach of the minimum standard of treatment under Article 10.5, the Claimant must show that Oman has acted with a gross or flagrant disregard for the basic principles of fairness, consistency, even-​handedness, due process, or natural justice expected by and of all States under customary international law. Such a standard requires more than that the Claimant point to some inconsistency or inadequacy in Oman’s regulation of its internal affairs . . .’); id. ¶ 383 (‘Although a number of subsequent arbitral decisions have acknowledged that with the passage of time the standard has likely advanced beyond these basic requirements, tribunals have continued to employ descriptions which emphasise the high threshold for breach. As was noted by the tribunal in Glamis Gold (which invoked Neer), the customary international law minimum standard of treatment sets only a minimum standard . . .’). 36  Id. ¶ 22.

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II.  Does FET Refer to Customary International Law or Is It an Autonomous Standard? of California complained of by Glamis did not, either individually or collectively, violate the Article 1105 obligations of the United States. Others have followed this restrictive interpretation. The tribunal in Mobil & Murphy v 20.18 Canada held that: [A]‌rticle 1105 of NAFTA may protect an investor from changes that give rise to an unstable legal and business environment, but only if those changes may be characterized as arbitrary or grossly unfair or discriminatory, or otherwise inconsistent with the customary international law standard . . . What the foreign investor is entitled to under Article 1105 is that any changes are consistent with the requirements of customary international law on fair and equitable treatment. Those standards are set, as we have noted, at a level which protects against egregious behavior.37

Similarly, the tribunal in Apotex v the United States, having acknowledged the approaches taken by NAFTA tribunals on this issue, observed that these past NAFTA tribunals ‘have emphasized that a high threshold of severity and gravity is required in order to conclude that the host state has breached any of the elements contained within the FET standard under Article 1105’.38 A notable exception to this trend is Merrill & Ring v Canada, which distinguished two tracks 20.19 in the evolution of the minimum standard of treatment. The first track is ‘the approach of the Neer Commission and of other tribunals which dealt with due process . . . A second track . . . is also discernible in so far it concerns business, trade and investment’.39 While the standard developed in the context of the first track is a narrow one (‘no general rule of customary international law can thus be found which applies the Neer standard beyond the strict confines of personal safety, denial of justice and due process’),40 the standard developed under the second track is an open one: ‘a requirement that aliens be treated fairly and equitably in relation to business, trade and investment is the outcome of this changing reality and as such it has become sufficiently part of widespread and consistent practice so as to demonstrate that it is reflected today in customary international law as opinio juris . . . the standard protects against all such acts or behavior that might infringe a sense of fairness, equity and reasonableness’.41 The Merrill tribunal recognized that, ‘while a requirement for transparency may not at present be proven to be part of the customary law standard, as the judicial review of Metalclad rightly concluded, it is nonetheless approaching that stage. Indeed, it would be difficult today to justify the appropriateness of a secretive regulatory system’.42

B. Non-​NAFTA Tribunals Other tribunals outside NAFTA, faced with investment agreements making no reference to 20.20 international law, have most often interpreted the relevant provisions of the underlying agreement autonomously, relying on the treaty interpretation rules and international law more broadly. The Tecmed v Mexico43 tribunal, for instance, said that: 37 Mobil Investments Canada Inc. & Murphy Oil Corporation v.  Government of Canada, ICSID Additional Facility Case No. ARB(AF)/​07/​4, Decision on Liability and Principles of Quantum (May 22, 2012), ¶ 152 [hereinafter Mobil & Murphy v. Canada]. 38  Apotex Holdings Inc. and Apotex Inc. v. United States of America, ICSID Additional Facility Case No. ARB(AF)/​12/​1, Award (Aug. 25, 2014), ¶ 8.43 [hereinafter Apotex v. United States]. 39  Merrill & Ring Forestry L.P. v. Government of Canada, ICSID Case No. UNCT/​07/​1, UNCITRAL Rules, ICSID Administrated, Award (Mar. 31, 2010), ¶ 201 [hereinafter Merrill & Ring v. Canada]. 40  Id. ¶ 204. 41  Id. ¶ 210. 42  Id. ¶ 231. 43  Técnicas Medioambientales Tecmed S.A. v. United Mexican States, ARB(AF)/​ 00/​2, Award (May 29, 2003) [hereinafter Tecmed v. Mexico].

507

Fair and Equitable Treatment: Have Its Contours Fully Evolved? [T]‌he scope of the undertaking of fair and equitable treatment under Article 4(1) of the Agreement . . . is that resulting from an autonomous interpretation, taking into account the text of Article 4(1) of the Agreement according to its ordinary meaning (Article 31(1) of the Vienna Convention), or from international law and the good faith principle, on the basis of which the scope of the obligation assumed under the Agreement and the actions related to compliance therewith are to be assessed.44 20.21 In Siemens v Argentina,45 even though there was no reference to international law or to a

minimum standard in the relevant treaty, the tribunal, in applying the treaty, considered itself: ‘[b]‌ound to find the meaning of these terms under international law bearing in mind their ordinary meaning, the evolution of international law and the specific context in which they are used’.46

20.22 The Enron v Argentina47 tribunal also positioned the fair and equitable standard in the con-

text of evolutionary international law:

[E]‌volution that has taken place as part of an outcome of a case by case determination by courts and tribunals, partly hinging on the general formulation of ‘general principles of law’48 . . . in some circumstances, where the international minimum standard is sufficiently elaborate and clear, fair and equitable treatment might be equated with it. But in other vague circumstances, fair and equitable treatment may be more precise than its customary international law forefathers.49

It concluded that, in the specific context, it required a treatment additional to or beyond that of the customary international law. 20.23 The second tribunal in Vivendi v Argentina II50 saw no basis for limiting fair and equitable

treatment to the customary international law minimum standard. According to the tribunal, the reference to the principles of international law in the France–​Argentina BIT supports ‘a broad reading that invites consideration of a wider range of international law principles’. It echoed the Azurix v Argentina tribunal’s holding that the requirement of conformity of the fair and equitable treatment standard to the principles of international law sets ‘a floor, not a ceiling’ on this standard,51 to avoid an interpretation of the standard falling below what is required by international law. It also posited that contemporary principles of international law—​and not those of a century ago—​apply.52

20.24 The tribunal in Sempra v Argentina stated:

It might well be that in some circumstances in which the international minimum standard is sufficiently elaborate and clear, the standard of fair and equitable treatment might be equated with it. But in other cases, it might as well be the opposite, so that the fair and equitable treatment standard will be more precise than its customary international law forefathers. On many occasions, the issue will not even be whether the fair and equitable treatment standard

  Id. ¶ 155.   Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/​02/​08, Award (Feb. 6, 2007) [hereinafter Siemens v. Argentina]. 46  Id. ¶ 291. 47 Enron and Ponderosa Assets v.  Argentine Republic, ICSID Case No. ARB/​ 01/​3, Award (May 22, 2007) [hereinafter Enron v. Argentina]. 48  Id. ¶ 257. 49  Id. ¶ 258. 50  Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/​97/​3, Award (Aug. 20, 2007) [hereinafter Vivendi v. Argentina I]. 51  Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Award (July 14, 2006), ¶ 361 [hereinafter Azurix v. Argentina]. 52  Vivendi v. Argentina I, supra note 50, ¶ 7.4.7. 44 45

508

II.  Does FET Refer to Customary International Law or Is It an Autonomous Standard? is different or more demanding than the customary standard, but only whether it is more specific, less generic and spelled out in a contemporary fashion so that its application is more appropriate to the case under consideration. This does not exclude the possibility that the fair and equitable treatment standard imposed under a treaty can also eventually require a treatment additional to or beyond that of customary law.53

C. What Difference Does It Make Whether Fair and Equitable Treatment Refers to the Minimum Standard of Customary Law? Some tribunals have questioned whether substantive differences result from text referring to 20.25 the minimum standard of customary international law. In Azurix v Argentina,54 for instance, the tribunal did not consider it to be of material significance in applying the standard of fair and equitable treatment to the facts of the case: [T]‌he question whether or not fair and equitable treatment is or is not additional to the minimum treatment requirement under international law is a question about the substantive content of fair and equitable treatment and whichever side of the argument one takes, the answer to the question may in substance be the same.55

Similarly, the tribunal in Saluka v Czech Republic,56 was of the view that:  ‘[w]‌hatever the merits of the controversy between the parties may be, it appears that the difference between the treaty standard and the customary minimum standard, when applied to the specific facts of the case, may be more apparent than real’.57 In Biwater v Tanzania,58 the tribunal accepted ‘that the actual content of the treaty standard 20.26 of fair and equitable treatment is not materially different from the content of the minimum standard of treatment in customary international law’. In Rumeli v Kazakhstan,59 the tribunal was of the same view, and considered the purported distinction to be more theoretical than real.60 Other tribunals, such as the tribunal in Duke Energy v Ecuador,61 Deutsche Bank v Sri Lanka,62 and SAUR v Argentina63 agreed. The SAUR v Argentina tribunal characterized the discussion on the relationship and difference between the two standards as ‘dogmatic and conceptualist’.64

  Sempra v. Argentina, supra note 2, ¶ 302.   Azurix v. Argentina, supra note 51. 55  Id. ¶ 364. 56 Saluka Investments BV (Netherlands) v.  Czech Republic, UNCITRAL, Partial Award (Mar. 17, 2006) [hereinafter Saluka v. Czech Republic]. 57  Id. ¶ 291. 58  Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/​ 05/​22, Award (July 24, 2008) [hereinafter Biwater v. Tanzania]. 59  Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Kazakhstan, ICSID Case No. ARB/​05/​16, Award (July 29, 2008) [hereinafter Rumeli v. Kazakhstan]. 60  Id. ¶ 611. 61  Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No. ARB/​ 04/​19, Award (Aug. 18, 2008), ¶ 337 [hereinafter Duke Energy v. Ecuador]. 62  Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​09/​2, Award (Oct. 31, 2012), ¶¶ 418–​19 [hereinafter Deutsche Bank v. Sri Lanka]. 63  SAUR International SA v. Republic of Argentina, ICSID Case No. ARB/​04/​4, Decision on Jurisdiction and Liability (June 6, 2012) [hereinafter SAUR v. Argentina]. 64  Id. ¶ 491: ‘En réalité, la question de savoir si le “traitement juste et équitable conformément aux principes du droit international” défini dans l’APRI coïncide ou non avec le niveau dit “minimal de traitement dû aux étrangers selon le droit international coutumier” constitue une discussion plutôt dogmatique et conceptualiste’ (emphasis added). 53 54

509

Fair and Equitable Treatment: Have Its Contours Fully Evolved? 20.27 Acceptance of the evolutionary character of the minimum standard to include new elements

as shaped by the over 3,700 concluded BITs, as has been done by the Mondev and other tribunals, may provide an express path of convergence between the traditional expression of fair and equitable treatment as the minimum standard of customary international law and an independent treaty law interpretation of the FET standard in treaty provisions not linking it expressly to international law. As the Sempra tribunal stated: [I]‌nternational law is itself not too clear or precise as concerns the treatment due to foreign citizens, traders and investors. This is the case because the pertinent standards have gradually evolved over the centuries. Customary international law, treaties of friendship, commerce and navigation, and more recently bilateral investment treaties, have all contributed to this development.65

III.  The Normative Content of the Fair and Equitable Treatment Standard 20.28 The vagueness of the phrase ‘fair and equitable’, which some say may be intended to give tri-

bunals the possibility of articulating the range of principles necessary to achieve the treaty’s purpose in particular disputes, has raised concern among governments that the less guidance is provided for arbitrators the more discretion is involved and the more closely the process resembles decisions ex aequo et bono, that is, based on the arbitrators’ notions of ‘fairness’ and ‘equity’.66

20.29 Experience has proven these concerns to be largely unfounded. Tribunals have mostly refrained

from free-​form equitable reasoning and have instead identified several recurring constitutive elements for establishing violations of the fair and equitable treatment standard, according to the specific facts of each case. These elements can be analysed in two categories: (a) due process, including denial of justice; and (b) transparency and stability, including the respect of the investors’ reasonable expectations. In addition to these two elements, tribunals have often had recourse to other elements, usually interlinked with other substantive standards such as vigilance and protection (full protection and security); lack of arbitrariness; and non-​discrimination.

20.30 The Lemire v Ukraine decision is representative. In it, the tribunal listed the following non-​

exhaustive factors for determining whether a state had violated the fair and equitable treatment standard: -​ whether the State has failed to offer a stable and predictable legal framework; -​ whether the State made specific representations to the investor; -​ whether due process has been denied to the investor;

65 Sempra v.  Argentina, supra note 2, ¶ 296. See also, e.g., AWG Group Ltd. v.  Argentine Republic, UNCITRAL, Decision on Liability (July 30, 2010), ¶ 187. 66  See Yannaca-​Small, supra note 11. See also Joseph C. Lemire v. Ukraine, ICSID Case No. ARB/​06/​18, Dissenting Opinion of Arbitrator Dr. Jürgen Voss (March 28, 2011), ¶ 449 (‘I find disquieting the Majority’s attempt at grounding the legitimacy of BIT protection on perceived restrictions of municipal laws and explaining the fundamental rationale of BIT protection with a desirability of overcoming these restrictions to the benefit of BIT protected business operators. This legal policy position indeed can pave the way to construing the FET standard into an empowerment of tribunals ex aequo et bono to develop a case law superseding host countries’ administrative laws even where they conform to recognized principles of law within the meaning of Article 38(1) of the ICJ Statute’).

510

III.  The Normative Content of the Fair and Equitable Treatment Standard -​ whether there is an absence of transparency in the legal procedure or in the actions of the State; -​ whether there has been harassment, coercion, abuse of power or other bad faith conduct by the host State; -​ whether any of the actions of the State can be labeled as arbitrary, discriminatory or inconsistent.67

The tribunal then noted that these factors must, in turn, be weighed against ‘other legally relevant interests’ before determining whether a compensable violation of the standard had occurred: -​ the State’s sovereign right to pass legislation and to adopt decisions for the protection of its public interests, especially if they do not provoke a disproportionate impact on foreign investors; -​ the legitimate expectations of the investor, at the time he made his investment; -​ the investor’s duty to perform an investigation before effecting the investment; -​ the investor’s conduct in the host country.68

Specific treatment of these factors is detailed in section III.A.

A. Denial of Justice, Due Process Some older investment agreements explicitly spell out elements of the scope or content of 20.31 the fair and equitable standard. For example, the 2004 US Model BIT, several US FTAs, and CAFTA stipulate that the obligation to provide fair and equitable treatment ‘includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world . . .’.69 The new generation of IIAs, including TPP, CETA, and most recent model BITs70 systematically include denial of justice and due process as part of the main elements of FET. Tribunals have consistently found that, even in the absence of express definitions, the fair and 20.32 equitable treatment standard contemplates some due process protections: Some treaties are more specific and include within that standard the obligation not to deny justice and to respect the principle of due process. But even in cases in which there is

67  Lemire v. Ukraine, supra note 66, Decision on Jurisdiction and Liability (Jan. 21, 2010), ¶ 284. See also Rumeli v.  Kazakhstan, supra note 59 at 609 (providing a complementary list of ‘concrete principles’ governing state obligations, namely: ‘the State must act in a transparent manner; the State is obliged to act in good faith; the State’s conduct cannot be arbitrary, grossly unfair, unjust, idiosyncratic, discriminatory, or lacking in due process; the State must respect procedural propriety and due process’; and ‘the State must respect the investor’s reasonable and legitimate expectations’); Spyridon Roussalis v. Romania, ICSID Case No. ARB/​06/​1, Award (Dec. 1, 2011), ¶ 314 (quoting Rumeli); Bosh International, Inc. and B&P, LTD Foreign Investments Enterprise v. Ukraine, ICSID Case No. ARB/​08/​11, Award (Oct. 25, 2012) (quoting Lemire). Another elegant summary was provided by the Electrabel v. Hungary tribunal: A foreign investor protected by the Treaty may in any case properly expect that the Czech Republic implements its policies bona fide by conduct that is, as far as it affects the investors’ investment, reasonably justifiable by public policies and that such conduct does not manifestly violate the requirements of consistency, transparency, even-​handedness and non-​discrimination. In particular, any differential treatment of a foreign investor must not be based on unreasonable distinctions and demands, and must be justified by showing that it bears a reasonable relationship to rational policies not motivated by a preference for other investments over the foreign-​ owned investment. Electrabel S.A. v. Republic of Hungary, ICSID Case No. ARB/​07/​19, Award (Nov. 25, 2015), ¶ 305. 68  Lemire v. Ukraine, supra note 66 at 285. 69  See art. 5(2)a, US Model BIT (2004), supra note 15. 70  TPP art. 9.6; CETA art. 8.10; India Model BIT art. 3. See supra notes 22 and 23 & ch. 1, ¶¶ 1.54–​1.60.

511

Fair and Equitable Treatment: Have Its Contours Fully Evolved? no clause of that type, ICSID tribunals have considered that fair and equitable treatment includes the prohibition against denial of justice.71 Although the BIT does not specifically refer to the concept of denial of justice, the Tribunal, in line with other tribunals and established doctrine, considers it to be comprised in the FET standard.72 20.33 While universally acknowledging protections against denial of justice as an element of the fair

and equitable treatment standard, tribunals have also been careful to note that the threshold is high, and remains a fact-​based determination specific to each case.73 In Mondev v United States,74 the tribunal posed the question ‘whether, a tribunal can conclude in the light of all the available facts that the impugned decision was clearly improper and discreditable, with the result that the investment has been subjected to unfair and inequitable treatment’. As a general matter, the tribunal found that it could, and stated: The test is not whether a particular result is surprising, but whether the shock or surprise occasioned to an impartial tribunal leads, on reflection, to justified concerns as to the judicial propriety of the outcome, bearing in mind on the one hand that international tribunals are not courts of appeal, and on the other hand that Chapter 11 of NAFTA (like other treaties for the protection of investments) is intended to provide a real measure of protection. In the end the question is whether, at an international level and having regard to generally accepted standards of the administration of justice, a tribunal can conclude in the light of all the available facts that the impugned decision was clearly improper and discreditable, with the result that the investment has been subjected to unfair and inequitable treatment. This is admittedly a somewhat open-​ended standard, but it may be that in practice no more precise formula can be offered to cover the range of possibilities.75

20.34 The tribunal in Waste Management v Mexico76 defined a violation of fair and equitable treat-

ment as ‘[i]‌nvolving a lack of due process leading to an outcome which offends judicial propriety—​as might be the case with a manifest failure of natural justice in judicial proceedings or a complete lack of transparency in an administrative process’.77

20.35 In Loewen v United States,78 the tribunal considered that a violation required ‘manifest in-

justice in the sense of a lack of due process leading to an outcome which offends a sense of judicial propriety is enough’.79

20.36 The tribunal in Oostergetel & Laurentius v Slovak Republic was of the same view.

[A]‌claim for denial of justice under International law is a demanding one. To meet the applicable test, it will not be enough to claim that municipal law has been breached, that the

71  Swisslion DOO Skopje v.  Macedonia, former Yugoslav Republic of, ICSID Case No. ARB/​ 09/​16, Award (July 6, 2012), ¶¶ 329–​30. 72 Jan Oostergetel & Theodora Laurentius v.  Slovak Republic, UNCITRAL, Final Award (Apr. 23, 2012), ¶ 272. 73 In Deutsche Bank v. Sri Lanka, the dissenting arbitrator criticized the rest of the panel for relying on ‘contested evidence’ to find a due process violation of fair and equitable treatment protections in the applicable BIT. Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​09/​2, Dissenting Opinion of Makhdoom Ali Khan (Oct. 31, 2012), ¶ 113 (The majority viewed as sufficient evidence that the local court had reached its conclusion ‘without a proper examination and without giving the banks involved an opportunity to respond’). See Deutsche Bank v. Sri Lanka, supra note 62, ¶ 478. 74  Mondev v. United States, supra note 27. 75  Id. ¶ 127. 76  Waste Management Inc. v. United Mexican States, ARB(AF)/​00/​3, Award (Apr. 30, 2004) [hereinafter Waste Management v. Mexico]. 77  Id. ¶ 98. 78  The Loewen Group, Inc. and Raymond L. Loewen v. United States, ARB(AF)/​98/​3, Final Award (June 26, 2003). 79  Id. ¶ 132.

512

III.  The Normative Content of the Fair and Equitable Treatment Standard decision of a national court is erroneous, that a judicial procedure was incompetently conducted, or that the actions of the judge in question were probably motivated by corruption. A denial of justice implies the failure of a national system as a whole to satisfy minimum standards.80

So too was the tribunal in Hesham Talaat M. Al-​Warraq v Indonesia: The Tribunal points out that its role is not to correct procedural or substantive errors that might have been committed by the local courts . . . [T]‌he international obligation on states is not to create a perfect system of justice but a system of justice where serious errors are avoided or corrected. The Tribunal also stresses that the threshold to establish a claim of denial of justice is high.81

The tribunal in Dan Cake v Hungary described several accepted formulations of denial of 20.37 justice: Arbitral Tribunals have used, in order to characterize judicial decisions as denials of justice, various expressions . . .: ‘administer[ing] justice in a seriously inadequate way,’ ‘clearly improper and discreditable,’ ‘[m]‌anifest injustice in the sense of a lack of due process leading to an outcome which offends a sense of judicial propriety . . . ,’ [and] ‘a willful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety.’82, 83

Most cases arise out of denial of justice84 in a matter of procedure, together with some de- 20.38 ficiency in the vindication and enforcement of the investor’s rights, and connect it with the improper administration of civil and criminal justice, including denial of access to courts or inadequate and unjust procedures. In Genin v Estonia,85 the tribunal took the position that, to amount to a violation of the BIT, 20.39 any procedural irregularity would have to amount to bad faith, a wilful disregard of due process of law, or an extreme insufficiency of action.86 In the longest-​running claim in the history of ICSID, Pey Casado v Chile,87 the tribunal had 20.40 no doubt that a denial of justice breaches the state’s obligation to afford the foreign investment fair and equitable treatment.88 According to the tribunal, important procedural delays constitute one of the classic forms of denial of justice.89 It concluded that Chile had denied justice and thereby breached the fair and equitable treatment provision by the absence of a

  Oostergetel & Laurentius v. Slovak Republic, supra note 72, ¶ 273.   Hesham Talaat M. Al-​Warraq v. Republic of Indonesia, UNCITRAL, Final Award (Dec. 1, 2014), ¶ 621 (finding that ‘[f ]‌ailure to comply with the most basic elements of justice when conducting a criminal proceeding against an investor amounts to a breach of the investment treaty’). 82 Dan Cake (Portugal) S.A.  v.  Hungary, ICSID Case No. ARB/​ 12/​9, Decision on Jurisdiction and Liability (Aug. 24, 2015), ¶ 146 (internal citations omitted) [hereinafter Dan Cake v. Hungary]. 83 The Siag v. Egypt tribunal also noted: ‘The concepts of “due process” and “denial of justice” are closely linked. A failure to allow a party due process will often result in a denial of justice’; Waguih Elie George Siag & Clorinda Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​15, Award (June 1, 2009), ¶ 452. 84  For a comprehensive analysis, see J. Paulsson, Denial of Justice in International Law (2005). 85  Alex Genin et al. v. Estonia, ICSID Case No. ARB/​ 99/​2, Final Award (June 25, 2001) [hereinafter Genin v. Estonia]. 86  Id. ¶ 371. 87  Pey Casado and Président Allende Foundation v. Republic of Chile, ICSID Case No. ARB/​98/​2, Award (May 8, 2008) [hereinafter Pey Casado v. Chile]. 88  Id. ¶ 656. 89  On this point, it referred to J.  Paulsson’s relevant comments:  ‘[d]‌ elays may be “even more ruinous” than absolute refusal of access [to justice], because in the latter situation the claimant knows where he stands and take action accordingly, whether by seeking diplomatic intervention or exploring avenues of direct legal action’. See Paulsson, Denial of Justice, supra note 84, ¶ 660. 80 81

513

Fair and Equitable Treatment: Have Its Contours Fully Evolved? decision by the Chilean authorities during a period of more than seven years and the absence of any response of the presidency to the claimant’s inquiries. 20.41 However, the denial of justice can go beyond procedure.90 The tribunal in Jan de Nul v Egypt91

also had no doubt—​and neither did the parties to the dispute—​that the fair and equitable treatment standard encompasses the notion of denial of justice.92 It examined the fair and equitable treatment standard under the prism of both procedural and substantive denial of justice. The procedural aspects included in the case were (i) due process before the courts, (ii) duration of the proceedings, and (iii) the conduct of a judicial panel.93 The tribunal found that none of these elements rose to the level of a denial of justice. The substantive denial of justice involved fraudulent behaviour on the part of the Egyptian authorities. The tribunal expressed the view that the threshold for the claimant in proving this fraud was high, because it reflected ‘the demanding nature of the concept of fraud and of a claim for denial of justice’. It concluded that there was ‘no evidence on record of any discrimination, bias or malicious application of the law . . .’.94

20.42 In Rumeli v Kazakhstan,95 while stating that denial of justice was procedural, the tribunal also

considered that the substance of the decision can be relevant:

The standard is indeed of a procedural nature. In that sense, a court procedure which does not comply with due process is in breach of the duty. On the other hand, as pointed out by Respondent, the substance of a decision may be relevant in the sense that a breach of the standard can also be found when the decision is so patently arbitrary, unjust or idiosyncratic that it demonstrates bad faith.96 20.43 More recent decisions have echoed these formulations of the fair and equitable treatment

standard. In Binder v Czech Republic, the tribunal took for granted that ‘[t]‌he fair and equitable treatment standard . . . protects the investor from manifest maladministration of justice, which may take the form of, inter alia, lack of due process, lack of a fair trial, undue delay and obstruction of access to justice, as well as grossly unjust judgments’.97 The tribunal went on to clarify that the underlying impropriety must ordinarily be ‘egregious’ to violate the standard, but noted that ‘it will also be triggered when the decision of a court or an administrative organ is, as the tribunal in the Mondev v United States case noted, so “clearly discreditable and improper” that it cannot but imply manifest deficiency in the judicial or administrative process’.98 The Binder tribunal further agreed with Mondev that exhaustion of all local remedies is not required for denial of justice to be found where evidence of systemic failures of justice—​rather than an isolated error—​could be found.99

90  See, e.g., Rupert Binder v. Czech Republic, UNCITRAL, Final Award (Redacted) (July 15, 2011), ¶ 329 (‘Denial of justice may arise out of either procedural or substantive deficiencies in judicial processes’) [hereinafter Binder v. Czech Republic]. 91  Jan de Nul N.V. and Dredging International N.V. v. Arab Republic of Egypt, ICSID Case No. ARB/​ 04/​13, Award (Nov. 6, 2008) [hereinafter Jan de Nul v. Egypt]. 92  Id. ¶ 193. 93  Id. ¶ 196. It undertook a thorough analysis of this element, taking guidance from the Loewen tribunal’s definition and found the test formulated by the Mondev tribunal useful in this case, i.e., that the denial of justice may occur irrespective of any trace of discrimination or maliciousness, if the judgment at stake shocks a sense of judicial propriety. 94  Id. ¶¶ 207–​209. 95  Rumeli v. Kazakhstan, supra note 59. 96  Id. ¶ 654. 97  Binder v. Czech Republic, supra note 90, ¶ 448. 98  Id. 99  Id. at 450–​51.

514

III.  The Normative Content of the Fair and Equitable Treatment Standard The tribunal in OI European Group v Venezuela followed equivalent reasoning. Regarding 20.44 procedural due process, it identified two elements of a denial of justice claim: (i) [t]‌he legal system of the host State must have applied to the foreign investor treatment clearly and obviously contrary to the legal system or due process; [and] (ii) [t]he foreign national in turn must have exhausted all existing domestic legal remedies to combat the legal decision in question, or must prove that the filing of such appeals would be clearly futile’.100

Its further explanation included both the procedural and a substantive element: national courts deviate from ‘generally accepted standards at the international level . . . if they refuse to admit or process without undue delay a claim by a foreign national, or if they issue a judgment following a proceeding which is severely flawed or the contents of which is manifestly inadmissible and unlawful’.101 Exhaustion of local remedies is generally required, although this general rule has a significant qualification:  in the application of international law governing international claims, the appellant is not obligated to exhaust the domestic remedies when it is denied access to justice, when unreasonable delays existed in reaching the decision or when subsequent remedies promise to be futile, due to the existence of reasonable doubt as to their existence or their possibility of success.102

B. Transparency, Stability, and Legitimate Expectations The first reference to the principle of transparency as an element of the fair and equitable 20.45 treatment was made by the Metalclad v Mexico tribunal, with respect to administrative proceedings, while the tribunal in Tecmed v Mexico gave further substance to this interpretation by putting it in the context of more concrete procedural principles and rights and expanding it to include the investor’s legitimate expectations. Subsequent tribunals have included the investor’s legitimate expectations as one of the main components of fair and equitable treatment. Its application tends to cover the regulatory experience, where stability and transparency are governmental promises upon which the investor relies for his investment. The principles of transparency, clarity, and stability guide the process of both defining the conditions of the ‘legitimate expectations’ principle and applying it to the facts of a specific situation. Good faith, as the underlying principle, informs all of these obligations and, as has been commented, ‘is relied on as the common guiding beacon that will orient the understanding and interpretation of obligations . . .’.103 Except for the Genin and the Alpha Projektholding GmbH v Ukraine tribunals’ interpret- 20.46 ation,104 there is a common thread in the awards under NAFTA and BITs that bad faith or malicious intention of the respondent state is not required as a necessary element in the failure to treat investment fairly and equitably.105

100  OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​11/​25, Award (Mar. 10, 2015), ¶ 524 [hereinafter OI European Group v. Venezuela]. 101  Id. ¶ 525 (emphasis supplied). 102  Id. ¶¶ 525–​27. 103  See Dolzer & Schreuer, supra note 11. 104  Genin v. Estonia, supra notes 85 & 86; Alpha Projektholding GmbH v. Ukraine, ICSID Case No. ARB/​07/​16, Award (Nov. 8, 2010) [hereinafter Alpha v. Ukraine]. 105  See, e.g., El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/​03/​15, Award (Oct. 31, 2011), ¶¶ 357–​58 [hereinafter El Paso v. Argentina].

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? 1. Transparency 20.47 In Metalclad v Mexico,106 the tribunal defined the concept of ‘transparency’ (stated in NAFTA Article 1802) as the idea that ‘[a]‌ll relevant legal requirements for the purpose of investing should be capable of being readily known to all investors’.107 20.48 The Tecmed v Mexico108 tribunal considered that:

[t]‌his provision of the Agreement, in light of the good faith principle established by international law, requires the Contracting Parties to provide to international investments treatment that does not affect the basic expectations that were taken into account by the foreign investor to make the investment. The foreign investor expects the host State to act in a consistent manner, free from ambiguity and totally transparent in its relations with the foreign investor, so that it may know beforehand any and all rules and regulations that will govern its investments, as well as the goals of the relevant policies and administrative practices or directives, to be able to plan its investment and comply with such regulations.109 20.49 The tribunal in Cargill v Poland110 held Poland liable for discriminating against the US agri-

cultural firm Cargill and for a lack of transparency, which the tribunal deemed to be part of the fair and equitable treatment standard. The tribunal in Lemire v Ukraine similarly found a fair and equitable treatment violation where the relevant regulatory practice was, inter alia, not transparent.111

20.50 In Nordzucker v Poland, the tribunal found that ‘lack of open and frank communica-

tion . . . constitutes a lack of transparency’ in violation of the fair and equitable treatment standard.112 The tribunal in Crystallex v Venezuela opined that the notion of transparency is

106  Metalclad v. Mexico, supra note 10; See also Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​29, Award (Aug. 27, 2009), ¶ 178 (adopting Metalclad standard); Ioan Micula, Viorel Micula & others v. Romania, ICSID Case No. ARB/​05/​20, Award (Dec. 11, 2013, ¶ 866 (quoting Metalclad extensively) [hereinafter Micula v. Romania]. Note that while NAFTA tribunals have historically held that transparency is not among the substantive protections implied under the fair and equitable treatment standard of art. 1105, more recent decisions suggest that tribunals increasingly view customary international law as evolving on this point. Compare Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Award (Dec. 16, 2002), ¶ 133 (referencing Metalclad but calling into question whether a ‘lack of transparency alone rises to the level of violation of NAFTA’); Cargill, Incorporated v. United Mexican States, ICSID Case No. ARB(AF)/​05/​2, Award (Sept. 18, 2009) (‘Claimant has not established that a general duty of transparency is included in the customary international law minimum standard of treatment owed to foreign investors per Article 1105’s requirement to afford fair and equitable treatment’) with Merrill & Ring v.  Canada, supra note 39, ¶ 231 (‘[W]‌hile a requirement for transparency may not at present be proven to be part of the customary law standard, as the judicial review of Metalclad rightly concluded, it is nonetheless approaching that stage. Indeed, it would be difficult today to justify the appropriateness of a secretive regulatory system’). 107  Metalclad v. Mexico, supra note 10, ¶ 76. 108  Tecmed v. Mexico, supra note 43. 109  Id. ¶ 154. 110  The arbitration proceeding was initially commenced at ICSID but was subsequently converted into an UNCITRAL proceeding. Therefore, while the award was rendered in March 2008, it has not been published, 1(5) Investment Arbitration Reporter (July 16, 2008). 111  Lemire v.  Ukraine, supra note 66 at 418 (finding that ‘practice constitutes a violation of the FET standard . . . because it facilitates the secret awarding of licences, without transparency, with total disregard of the process of law and without any possibility of judicial review. The practice must be considered arbitrary, since it meets the Saluka test of “manifestly violat[ing] the requirements of consistency, transparency, even-​ handedness and non-​discrimination.” The lack of propriety is such that—​as the test was articulated in Tecmed and Loewen—​the practice also “shocks, or at least surprises, a sense of juridical propriety” ’). 112  Nordzucker AG v. Republic of Poland, UNCITRAL, Second Partial Award (Merits) (Jan. 28, 2009), ¶¶ 83–​84.

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III.  The Normative Content of the Fair and Equitable Treatment Standard linked to ‘the concept of consistency, which requires that “one arm of the State cannot affirm what another arm denies to the detriment of a foreign investor” ’.113 However, Professor Abi-​Saab, in his separate opinion in Micula v Romania, cautioned that 20.51 even ‘the best of governments’ might often ‘speak[] at cross purposes [and exhibit] hesitation or wavering . . . particularly in times of rapid and rather disorderly) change’. He proposed that any related failures were ones of due diligence (which carries with it a lower measure of responsibility), rather than a lack of transparency.114 The tribunal in ECE and PANTA v Czech Republic also expressed scepticism that ‘serious questions as to the transparency or predictability of the applicable procedures’ could be raised where no changes to the administrative system of the host state had occurred.115

2. Stability The stability of the host state’s legal order, along with the promulgation and enforcement of 20.52 predictable and transparent rules and regulations, enhance and promote legal security. This is in conformity with the object and purpose of international investment treaties, as stability, predictability, and consistency are necessary for investors to plan their investment according to the legal framework of the host country. In Occidental (OEPC) v Ecuador,116 the tribunal referred to the preamble of the US–​Ecuador 20.53 BIT and concluded that ‘the stability of the legal and business framework is thus an essential element of fair and equitable treatment’117 and that ‘fair and equitable is an objective requirement that does not depend on whether the Respondent has proceeded in good faith or not’.118 In CMS v Argentina,119 the tribunal upheld CMS’s claim for violations of fair and equitable 20.54 treatment under Article II(2) of the US–​Argentina BIT, noting that fair and equitable treatment is inseparable from stability and predictability and that there was no need to prove bad faith on the part of Argentina. Rather, an objective assessment could be made of whether the legitimate expectations of the investor were met.120 In LG&E v Argentina,121 citing previous awards that were adjudicated on the same fair and 20.55 equitable standard of this treaty or identical wording in other treaties, the tribunal acknowledged that ‘the stability of the legal and business framework is an essential element of the standard of what is fair and equitable treatment’122 and considered this interpretation to be an

113  Crystallex International Corporation v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​ 11/​2, Award (Apr. 4, 2016, ¶ 814 (internal citation omitted) [hereinafter Crystallex v. Venezuela]. 114  Micula v. Romania, supra note 106, Separate Opinion of Professor Georges Abi-​Saab (Dec. 11, 2013), ¶¶ 13–​15. 115  ECE Projektmanagement International GmbH & Kommanditgesellschaft PANTA Achtundsechzigste Grundstücksgesellschaft mbH & Co v. Czech Republic, PCA Case No. 2010-​5, Award (Sept. 19, 2013), ¶ 4.808 [hereinafter ECE and PANTA v. Czech Republic]. 116  Occidental Exploration and Production Company v. Republic of Ecuador, LCIA Case No. UN 3467, Award (July 1, 2004) [hereinafter Occidental v. Ecuador]. 117  Id. ¶ 183. 118  Id. ¶ 186. 119  CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/​ 01/​8, Award (May 12, 2005) [hereinafter CMS v. Argentina]. 120  Id. ¶ 274. 121 LG&E Energy Corp., LG&E Capital Corp., & LG&E International Inc. v.  Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006) [hereinafter LG&E v. Argentina]. 122  Id. ¶ 124.

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? emerging standard of fair and equitable treatment in international law. Subsequent tribunals have endorsed this view.123 20.56 In Enron v Argentina,124 the tribunal also concluded that a key element of fair and equit-

able treatment is the requirement of a ‘stable framework for the investment’ and in Sempra v Argentina the tribunal affirmed that ‘what counts is that in the end the stability of the law and the observance of legal obligations are assured, thereby safeguarding the very object and purpose of the protection sought by the treaty’.125

20.57 In PSEG v Turkey, the tribunal held that ‘the fair and equitable treatment obligation was ser-

iously breached by what has been described . . . as the “roller-​coaster” effect of the continuing legislative changes’, concluding that the ‘aggregate’ legislative and administrative changes, as well as changes in the ‘attitudes and policies of the administration’, were a violation of the applicable BIT.126

20.58 However, there are important limits on the stability protected by the standard. In Impregilo

v Argentina, the tribunal cautioned that expectations for stability arising from fair and equitable treatment clauses could not be read to require ‘the immutability of the legal order, the economic world and the social universe’ and were not equivalent to the protections created by express stabilization clauses.127 In Electrabel v Hungary, the tribunal further emphasized that fairness as stability did not require immutability of the legal framework, but merely that any changes to the regulatory environment ‘should be made fairly, consistently and predictably, taking into account the circumstances of the investment’.128 The Micula tribunal adopted a similar position: ‘[T]‌he fair and equitable treatment obligation is not an unqualified guarantee that regulations will never change. Investors must expect that the legislation will change from time to time, absent a stabilization clause or other specific assurances giving rise to a legitimate expectation of stabilization’.129

20.59 The El Paso v Argentina tribunal rejected the notion of stability as a fair and equitable treat-

ment requirement entirely, declining to ‘follow the line of cases in which fair and equitable treatment was viewed as implying the stability of the legal and business framework. Economic and legal life is by nature evolutionary’.130

3. Legitimate expectations 20.60 As the El Paso v Argentina tribunal stated: The contours of fair and equitable treatment have gradually come into focus in the past few years. It has become clear that the basic touchstone of fair and equitable treatment is to be found in the legitimate and reasonable expectations of the parties, which derive from the obligation of good faith.131

123  See, e.g., AWG Group Ltd. v. Argentine Republic, UNCITRAL, Decision on Liability (July 30, 2010), ¶ 222; Alpha v. Ukraine, supra note 104, ¶ 420. 124  Enron v. Argentina, supra note 47. 125  Sempra v. Argentina, supra note 2, ¶ 300. 126  PSEG Global Inc. & Konya Ilgin Elektrik Üretim ve Ticaret Ltd. Sirketi v. Republic of Turkey, ICSID Case No. ARB/​02/​5, Award (Jan. 19, 2007), ¶¶ 250–​55 [hereinafter PSEG v. Turkey]. 127  Impregilo S.p.A.  v.  Argentine Republic, ICSID Case No. ARB/​ 07/​17, Award (June 21, 2011), ¶¶ 290–​91 (‘The legitimate expectations of foreign investors cannot be that the State will never modify the legal framework, especially in times of crisis, but certainly investors must be protected from unreasonable modifications of that legal framework’) [hereinafter Impregilo v. Argentina]. 128  Electrabel v. Hungary, supra note 67, ¶ 7.77. 129  Micula, v. Romania, supra note 106, ¶ 529. 130  El Paso v. Argentina, supra note 105, ¶¶ 352–​68. 131  Id. ¶¶ 339, 356 (noting further that the expectations of investors must also be examined objectively).

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III.  The Normative Content of the Fair and Equitable Treatment Standard The tribunal in Arif v Moldova offered a particularly concise formulation: [w]‌here [investor] expectations have an objective basis, and are not fanciful or the result of misplaced optimism, then they are described as ‘legitimate expectations’. ‘Their expectations, in order to be protected, must rise to the level of legitimacy and reasonableness in light of the circumstances’.132

Legal rules and regulations can create an environment beneficial to long-​term investment 20.61 when they are applied in the manner a reasonable investor would expect them to be applied. The investors’ perceptions and their expectations regarding the government’s activity have become an essential element of their perception of the host country’s ordering function of law. As mentioned, the legitimate expectation principle became a recurrent, independent basis for a claim under the fair and equitable treatment standard. As Professor Thomas Wälde argued in his Separate Opinion in the Thunderbird v Mexico case, such growth in scope and role ‘is possibly related to the fact that it provides a more supple way of providing a remedy appropriate to the particular situation as compared to the more drastic determination and remedy inherent in the concept of regulatory expropriation’.133 The statement confirms the findings of the CMS v Argentina tribunal,134 which first examined the claim for expropriation and then turned to the legitimate expectation principle to provide protection to the investor. This approach suggests that obligations entailed in the expropriation clause and those of fair and equitable treatment do not necessarily differ in quality, but only in intensity. In its concluding remarks on the standard, the CMS v Argentina tribunal went so far as to 20.62 state that the connection between fair and equitable treatment and respect of investor’s legitimate expectations, ‘is not different from the international law minimum standard’, and it can thus be said to have acquired customary nature.135 The Crystallex v Venezuela tribunal expressed a similar view: ‘the doctrine of legitimate expectations is “firmly rooted in arbitral practice”; . . . has its origins in principles of domestic administrative law in various legal systems[;]‌and finds increasing recognition both in civil and common law countries’.136 In Saluka v Czech Republic,137 the tribunal considered that the standard of fair and equitable

132  Mr. Franck Charles Arif v. Republic of Moldova, ICSID Case No. ARB/​11/​23, Award (Apr. 8, 2013), ¶ 532 [hereinafter Arif v. Moldova]; see also Oxus Gold v. Uzbekistan, supra note 5, ¶ 313 (‘The Arbitral Tribunal further agrees with the tribunal in El Paso v. Argentina, that the concept of “legitimate expectations” is an objective concept, that is the result of interests and rights of both the investor and the State, and that the result of such balancing may thus vary according to the specific context (El Paso v. Argentina, ¶¶ 356 fol.)’. 133  International Thunderbird Gaming Corporation v.  United Mexican States, UNCITRAL, Separate Opinion (Dissent in Part) by Professor Thomas Wälde (Jan. 26, 2006), ¶ 37 [hereinafter Thunderbird v. Mexico]. 134  CMS v. Argentina, supra note 119. 135  Id. ¶ 284. 136  Crystallex v. Venezuela, supra note 113, ¶ 546. The tribunal further held that the standard had ‘well-​ defined limits’. ‘A legitimate expectation may arise in cases where the Administration has made a promise or representation to an investor as to a substantive benefit, on which the investor has relied in making its investment, and which later was frustrated by the conduct of the Administration. To be able to give rise to such legitimate expectations, such promise or representation—​addressed to the individual investor—​must be sufficiently specific, i.e. it must be precise as to its content and clear as to its form. Furthermore, as recalled by the Arif v Moldova tribunal, “a claim based on legitimate expectations must proceed from the exact identification of the origin of the expectation alleged, so that its scope can be formulated with precision” ’. Id. at 547. But see Oxus Gold v. Uzbekistan, supra note 5, ¶ 313 (‘[T]‌here is a great variation in the way this standard is applied by international tribunals, partly because of the different approaches towards the origins and nature of the FET standard (e.g. whether conceived as an international minimum standard or as an autonomous standard), partly because the relevant provisions contemplating the FET standards in BITs differ in their structure and wording, thereby requiring a case by case analysis and application’) (internal citations omitted). 137  Saluka v. Czech Republic, supra note 56.

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? treatment is closely tied to the notion of legitimate expectations which, in its view, is the dominant element of that standard: An investor’s decision to make an investment is based on an assessment of the state of the law and the totality of the business environment at the time of the investment as well as on the investor’s expectation that the conduct of the host State subsequent to the investment will be fair and equitable. The standard of ‘fair and equitable treatment’ is therefore closely tied to the notion of legitimate expectations which is the dominant element of that standard. By virtue of the ‘fair and equitable treatment’ standard included in Article 3.1 the Czech Republic must therefore be regarded as having assumed an obligation to treat foreign investors so as to avoid the frustration of investors’ legitimate and reasonable expectations.138 20.63 In ADF v United States,139 the tribunal discussed the claimant’s expectation allegedly created by

existing case law, but it denied the existence of a legitimate expectation in the case because the expectation was not created by ‘any misleading representations made by authorized officials of the U.S. federal government but rather, by legal advice received from private counsel’. The tribunal suggested that it is representations from authorized officials that provide the foundation for legitimate expectations if these representations reasonably become the basis for the investor’s commitment of capital.140

20.64 The Thunderbird v Mexico tribunal attempted to clarify the role to be played by the principle of

legitimate expectations in the context of investment arbitration, particularly under the NAFTA. It is especially useful in providing a relatively concise description of the circumstances in which the principle will apply: [T]‌he concept of ‘legitimate expectations’ relates, within the context of the NAFTA framework, to a situation where a Contracting Party’s conduct creates reasonable and justifiable expectations on the part of an investor (or investment) to act in reliance on said conduct, such that a failure by the NAFTA Party to honour those expectations could cause the investor (or investment) to suffer damages.141

However, the tribunal did not elaborate on the precise role of the legitimate expectations principle in the context of investor-​state arbitration.142 In this respect, Professor Wälde, in his separate opinion, was more precise—​approaching the principle of legitimate expectations as forming a central part of the fair and equitable test under NAFTA Article 1105: One can observe over the last years a significant growth in the role and scope of the legitimate expectation principle, from an earlier function as a subsidiary interpretative principle to reinforce a particular interpretative approach chosen, to its current role as a self-​standing

138  Id. ¶¶ 301–​ 302 (‘Seen in this light, the [FET] standard prescribed in the Treaty should therefore be understood to be treatment which, if not proactively stimulating the inflow of foreign investment capital, does at least not deter foreign capital by providing disincentives to foreign investors’); see also Total S.A. v. Argentine Republic, ICSID Case No. ARB/​04/​01, Decision on Liability, Individual Opinion of Henri Alvarez (Dec. 27, 2010), ¶¶ 26, 35 [hereinafter Total v. Argentina]. 139  ADF v. United States, supra note 29. 140  Id. ¶ 189. 141  Thunderbird v. Mexico, Award, supra note 133, ¶ 147. See also Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​09/​1, Award (Sept. 22, 2014), ¶ 570 (citing Thunderbird and noting that ‘[l]‌egitimate expectations are created when a State’s conduct is such that an investor may reasonably rely on that conduct as being consistent. Fair and equitable treatment also requires that any regulation of an investment be done in a transparent manner . . .’). 142 For a more detailed analysis and comments on the Thunderbird case, see S. Fietta, International Thunderbird Gaming Corporation v. The United Mexican States: an indication of the limits of the ‘legitimate expectation’ basis of claim under Article 1105 of NAFTA?, 3(2) TDM (2006).

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III.  The Normative Content of the Fair and Equitable Treatment Standard subcategory and independent basis for a claim under the ‘fair and equitable standard’ as under Art. 1105 of the NAFTA.143

However, the threshold for finding a violation of the fair and equitable treatment standard 20.65 in the presence of informal and general representations might be quite high. A legitimate expectation is more readily found if an individual investor receives specific formal assurances that evidently display an official character and if the official(s) perceives or should perceive that the investor intends, reasonably, to rely on such representation. The more specific the assurances given, the more likely they are to give rise to some basis for a legitimate expectation claim. As the CMS v Argentina tribunal stated: It is not a question of whether the legal framework might need to be frozen as it can always evolve and be adapted to changing circumstances, but neither is it a question of whether the framework can be dispensed with altogether when specific commitments to the contrary have been made. The law of foreign investment and its protection has been developed with the specific objective of avoiding such adverse legal effects.144

The tribunal in Glamis v Unites States145 was of the view that a state may be tied to those 20.66 objective expectations that it creates in order to induce investment, but these expectations have to be specific.146 It determined that, since no specific assurances were made to induce the Claimant’s ‘reasonable and justifiable expectations’, it did not need to determine the level, or characteristics, of state action in contradiction of those expectations that would be necessary to constitute a violation of NAFTA Article 1105.147 In Parkerings v Lithuania,148 the tribunal affirmed that the principal basis for a legitimate ex- 20.67 pectation is an explicit promise or guarantee from the state or implicit representations: [T]‌he expectation is legitimate if the investor received an explicit promise or guaranty from the host-​State, or if implicitly, the host-​State made assurances or representations that the investor took into account in making the investment. Finally, in the situation where the host-​ State made no assurance or representation, the circumstances surrounding the conclusion of the agreement are decisive to determine if the expectation of the investor was legitimate. In order to determine the legitimate expectation of an investor, it is also necessary to analyse the conduct of the State at the time of the investment.149

It concluded that, owing to lack of specific demonstrations by the claimant that the modifications of laws were made specifically to prejudice its investment, the claim that the state acted unfairly, unreasonably, or inequitably in the exercise of its legislative power could not be sustained. The majority in Total v Argentina expressed scepticism that investor expectations were to be 20.68 protected in the absence of a specific promise or provision in the investment treaty.150 The tribunal distinguished between cases where the BIT at issue included some provision concerning stability of the legal framework for investment and ones where such provisions were absent:

  Thunderbird v. Mexico, Separate Opinion, supra note 133, ¶ 37.   CMS v. Argentina, supra note 119, ¶ 277. 145  Glamis v. United States, supra note 32. 146  Id. ¶ 621. 147  Id. ¶ 622. 148  Parkerings Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/​05/​8, Final Award (Sept. 11, 2007) [hereinafter Parkerings v. Lithuania]. 149  Id. ¶ 331. 150  Total v. Argentina, supra note 138, Decision on Liability (Dec. 27, 2010), ¶¶ 113–​17. 143 144

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? This absence indicates, at a minimum, that stability of the legal domestic framework was not envisaged as a specific element of the domestic legal regime that the contracting parties undertook to grant to their respective investors.151 In the absence of some ‘promise’ by the host state or a specific provision in the bilateral investment treaty itself, the legal regime in force in the host country at the time of making the investment is not automatically subject to a ‘guarantee’ of stability merely because the host country entered into a bilateral investment treaty with the country of the foreign investor. The expectation of the investor is undoubtedly ‘legitimate’, and hence subject to protection under the fair and equitable treatment clause, if the host State has explicitly assumed a specific legal obligation for the future, such as by contracts, concessions or stabilisation clauses on which the investor is therefore entitled to rely as a matter of law.152 20.69 In Biwater v Tanzania,153 in an unusual ruling the tribunal held the government in breach

of the fair and equitable treatment obligation for negative public statements made about an investor. The claimant had pled that it had a legitimate expectation that the government ‘would, at the very least, maintain a neutral position and not tarnish City Water’s image in the eyes of the public’. Yet, they complained that following the government’s move to commence termination of the contract, the relevant Tanzanian minister made a series of public announcements which denigrated the company’s ‘poor performance’ and announced that a new public entity would be taking over the service. The tribunal held that, at the time of the statements by the minister, the company ‘still had a right to the proper and unhindered performance of the contractual termination process’, and that public statements attributable to Tanzania ‘constituted an unwarranted interference’ in this contractual termination process, and inflamed and polarized public opinion so that the termination process was doomed not to play out according to the contractually agreed process.154

20.70 In Continental Casualty v Argentina,155 the tribunal addressed the most detailed list to date

of the factors included in the ‘abstract’ concept of ‘reasonable legitimate expectations’ to evaluate their relevance to whether there has been a breach of the duty to afford fair and equitable treatment: i) the specificity of the undertaking allegedly relied upon . . . considering moreover that political statements have the least legal value, regrettably but notoriously so; ii) general legislative statements engender reduced expectations, especially with competent major international investors in a context where the political risk is high. Their enactment is by nature subject to subsequent modification, and possibly to withdrawal and cancellation, within the limits of respect of fundamental human rights and ius cogens; iii) unilateral modification of contractual undertakings by governments, notably when issued in conformity with a legislative framework and aimed at obtaining financial

  Id. at 116.   Id. at 117. The Micula tribunal also suggested that state actions should be considered somewhat more broadly. See Micula v. Romania, supra note 106, ¶ 669 (‘There must be a promise, assurance or representation attributable to a competent organ or representative of the state, which may be explicit or implicit. The crucial point is whether the state, through statements or conduct, has contributed to the creation of a reasonable expectation, in this case, a representation of regulatory stability. It is irrelevant whether the state in fact wished to commit itself; it is sufficient that it acted in a manner that would reasonably be understood to create such an appearance. The element of reasonableness cannot be separated from the promise, assurance or representation, in particular if the promise is not contained in a contract or is otherwise stated explicitly’). But see Micula v. Romania, supra note 106, Separate Opinion of Professor Georges Abi-​Saab (Dec. 11, 2013), ¶¶ 3–​11 (questioning expansive reading). 153  Biwater v. Tanzania, supra note 58. 154  Id. ¶ 627. 155  Continental Casualty v. Argentina, supra note 3. 151 152

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III.  The Normative Content of the Fair and Equitable Treatment Standard resources from investors deserve clearly more scrutiny, in the light of the context, reasons, effects, since they generate as a rule legal rights and therefore expectations of compliance; iv) centrality to the protected investment and impact of the changes on the operation of the foreign owned business in general including its profitability is also relevant; good faith, absence of discrimination (generality of the measures challenged under the standard), relevance of the public interest pursued by the State, accompanying measures aimed at reducing the negative impact are also to be considered in order to ascertain fairness.156

In light of these criteria, the tribunal concluded that Continental could not invoke legitimate expectations for most of the alleged behaviour of the state. The only element that might be considered contrary to fair and equitable treatment in light of previous assurances by Argentina was the de-​dollarization and its specific modalities, which were covered under Argentina’s necessity defence. It concluded that ‘the measures were not discriminatory; were general, affecting all sectors of the national economy and all classes of depositors and investors, nor did they affect the carrying-​on of the insurance business of Continental in respect of which the reliance on stability of the legal environment could have been properly focused’.157

4. Proportionality and balance of interests In view of the concern now being expressed about possible abusive claims by investors of vio- 20.71 lations of their legitimate expectations and the chilling effect of this possibility on some governments’ exercise of regulatory power, it is worth looking at the balanced positions taken by tribunals, which accompanied their interpretation with proportionality and a balancing of interests of both investors and governments. A number of tribunals have followed the S.D. Myers reasoning that the determination of a breach of 20.72 the obligation of ‘fair and equitable treatment’ must be made in the light of the high measure of deference that international law generally extends to the right of domestic authorities to regulate matters within their own borders and which should therefore not be handled as an inflexible yardstick. The tribunal in Saluka v Czech Republic warned against the literal interpretation of the terms 20.73 stability and predictability in the regulatory environment and noted that: [I]‌f their terms were to be taken too literally, they would impose upon host States obligations which would be inappropriate and unrealistic. Moreover, the scope of the Treaty’s protection of foreign investment against unfair and inequitable treatment cannot exclusively be determined by foreign investors’ subjective motivations and considerations. Their expectations, in order for them to be protected, must rise to the level of legitimacy and reasonableness in light of the circumstances.158

It concluded that the determination of a breach of fair and equitable treatment standard requires a weighing of the claimant’s legitimate and reasonable expectations on the one hand and the respondent’s legitimate regulatory interests on the other.159 Subsequent tribunals have endorsed this logic, emphasizing the fact-​intensive nature of the inquiry.160   Id. ¶ 261 (emphasis added).   Id. ¶ 262. 158  Saluka v. Czech Republic, supra note 56, ¶ 304. 159  Id. ¶ 306. 160  Micula v. Romania, supra note 106, ¶ 533 (citing Saluka and noting that ‘[w]‌hether a state has been unfair and inequitable by failing to be transparent with respect to its laws and regulations, or being ambiguous and inconsistent in their application, must be assessed in light of all of the factual circumstances surrounding such conduct’); id. (‘[I]t would be unrealistic to require Romania to be totally transparent with the general public in the context of diplomatic negotiations. The question before the Tribunal is thus not whether Romania has failed to make full disclosure of or grant full access to sensitive information; it is whether, in the 156 157

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? 20.74 The LG&E v Argentina tribunal also followed the balancing approach, which requires that

the host state’s specific investment and regulatory environment be taken into account when applying the fair and equitable treatment standard.

20.75 In Enron v Argentina, the tribunal noted also that the stabilization requirement does not

mean the freezing of the legal system or the disappearance of the regulatory power of the state.161

20.76 The tribunal in MCI v Ecuador also considered that the investor’s expectations of fair and

equitable treatment and good faith, in accordance with the BIT, must be paired with a legitimate objective. The legitimacy of the expectations for proper treatment entertained by a foreign investor protected by the BIT does not depend solely on the intent of the parties but on certainty about the contents of the enforceable obligations.162

20.77 The Oostergetel & Laurentius v Slovak Republic tribunal found that ‘stability of the legal and

business environment does not equate immutability of the legal framework and that legitimate expectations must be measured through a balancing test taking account of specific circumstances’.163 The Mamidoil v Albania tribunal pointed out that even determining the timing of an investment—​relative to which an investor’s expectations must be established—​ required a balancing of party interests in the totality of surrounding circumstances.164

20.78 In addition, tribunals are making explicit that the inherent business risks of an investment are

to be borne by the investor. In the case of an investment in developing states, this includes acceptance of potentially less stable socio-​economic and political environments. For example, in MTD v Chile, the tribunal reduced the damages awarded to MTD by 50 per cent on the ground that ‘BITs are not an insurance against business risk and the claimants should bear the consequences of their own actions as experienced businessmen’.165

20.79 The tribunal in Parkerings v Lithuania emphasized the inter-​relationship between a state’s

right to change its laws and regulations and an investor’s expectations of legal stability. It recognized the state’s ‘undeniable right and privilege to exercise its sovereign legislative power’ and ‘to enact, modify or cancel a law at its own discretion’. It also stated that any businessman or investor knows that laws will evolve over time.166 On the other hand, it recognized the event that Romania failed to do so, Romania acted unfairly and inequitably with respect to the Claimants. The same applies to consistency: the question is not merely whether Romania has acted inconsistently; it is whether, in acting inconsistently, it has been unfair and inequitable with respect to the Claimants. This is a question that cannot be answered in a vacuum; it is highly dependent on the factual circumstances’); Binder v. Czech Republic, supra note 90, ¶ 59 (‘What the investor may legitimately expect must be evaluated in the light of all circumstances in each given case’). 161  Enron v. Argentina, supra note 47, ¶ 261. 162  M.C.I. Power Group, L.C. & New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/​03/​6, Award (July 31, 2007), ¶ 278. 163  Oostergetel & Laurentius v. Slovak Republic, supra note 72, ¶ 224 (citing Duke Energy, supra note 61, ¶ 340). 164  Mamidoil Jetoil Greek Petroleum Products Societe Anonyme S.A. v. Republic of Albania, ICSID Case No. ARB/​11/​24, Award (Mar. 30, 2015), ¶¶ 695–​716 [hereinafter Mamidoil v.  Albania] (‘Therefore, the Tribunal finds it difficult to fix a precise point in time within a long process of decision-​making and implementation. Rather, the evolving and gradual nature of the process has to be taken into consideration with an objective to balance both parties’ interests. That leads to the necessity of a concrete appraisal of these interests when judging the host State’s measures. The investor’s flexibility is reduced the more it commits funds to implementation, and the gradual loss of flexibility increases the legitimate expectation of stability and protection, while the State, although retaining its right and duty to pursue public policy objectives, is obliged to respect the legitimate expectations by pursuing the objectives consistently, coherently and predictably’). 165  MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/​01/​7, Award (May 25, 2004) [hereinafter MTD v. Chile]. 166  Parkerings v. Lithuania, supra note 148, ¶ 332.

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III.  The Normative Content of the Fair and Equitable Treatment Standard right of the investor to a certain stability and predictability of the legal environment of the investment and the right of protection of its legitimate expectations—​provided it exercised due diligence and that its legitimate expectations were reasonable in light of the circumstances. However, an investor must anticipate that the circumstances could change and, thus, structure its investment to adapt it to the potential changes of legal environment. What is prohibited is for a state to act unfairly, unreasonably, or inequitably in the exercise of its legislative power.167 In the case at hand, the tribunal noted that the investor, by deciding to invest notwithstanding a possible instability, took the business risk of being faced with changes of laws possibly or even likely to be detrimental to its investment, although ‘he could (and with hindsight should) have sought to protect its legitimate expectations by introducing into the investment agreement a stabilisation clause or some other provision protecting it against unexpected and unwelcome changes’. The tribunal then drew a line between contractual expectations and expectations protected under international law and concluded: It is evident that not every hope amounts to an expectation under international law. The expectation a party to an agreement may have of the regular fulfilment of the obligation by the other party is not necessarily an expectation protected by international law. In other words, contracts involve intrinsic expectations from each party that do not amount to expectations as understood in international law. Indeed, the party whose contractual expectations are frustrated should, under specific conditions, seek redress before a national tribunal.168

Professor Wälde, in his partial dissent on the Thunderbird case, further expressed the view 20.80 that the disappointment of legitimate expectations must be sufficiently serious and material. Otherwise, acting on any minor misconduct by a public official could go to the jurisdiction of a treaty tribunal, whose function is not to act as a general recourse administrative law tribunal.169 The frequently cited test set out in Tecmed v Mexico, which gave primacy to the expectations 20.81 that were taken into account by the foreign investor in making the investment, was challenged by the ICSID ad hoc annulment Committee in MTD v Chile: [T]‌he Tecmed Tribunal’s apparent reliance on the foreign investor’s expectations as the source of the host State’s obligations (such as the obligation to compensate for expropriation) is questionable. The obligations of the host State towards foreign investors derive from the terms of the applicable investment treaty and not from any set of expectations investors may have or claim to have. A tribunal which sought to generate from such expectations a set of rights different from those contained in or enforceable under the BIT might well exceed its powers, and if the difference were material might do so manifestly.170

In L.E.S.I.  v Argentina,171 the tribunal noted that the concept of fair and equitable treat- 20.82 ment172 does not depend exclusively on the subjective expectations of the investor. It set out the following test: [T]‌he State must act in a coherent, unambiguous, transparent manner, it must maintain an environment sufficiently stable to allow a reasonably diligent investor to adopt a strategy and

  Id. ¶ 333.   Id. ¶ 344. 169  Thunderbird v. Mexico, Separate Opinion, supra note 133, ¶ 14. 170  MTD v. Chile, supra note 165, Decision on the Application for Annulment (Mar. 21, 2007), ¶ 67. 171  L.E.S.I., S.p.A. & Astaldi, S.p.A. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/​ 05/​3, Award, (Nov. 12, 2008) [hereinafter L.E.S.I. v. Algeria]. 172  The claimants made a claim for breach of the fair and equitable treatment obligation—​a provision not found in the Algeria–​Italy BIT, but imported into the arbitration thanks to the operation of the most-​favored-​ nation (MFN) clause. It benefited from the BIT between Belgium–​Luxembourg and Algeria. 167 168

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? implement it over time, and it must act in a non-​arbitrary and nondiscriminatory manner, without abuse of power and in compliance with its commitments.173

The tribunal rejected all elements of the fair and equitable treatment claim. Other tribunals have similarly emphasized the necessity of an objective examination of the investors’ expectations.174 20.83 In National Grid v Argentina,175 the tribunal construed ‘fair’ and ‘equitable’ to call for ‘even-​

handedness’ and an attention to the factual context of the investment. While the provision should protect certain expectations of foreign investors, the tribunal stressed two important qualifications: ‘first, that the investor should not be shielded from the ordinary business risk of the investment and, second, that the investor’s expectations must have been reasonable and legitimate in the context in which the investment was made’.

20.84 Along these lines, the tribunal in EDF v Romania,176 while acknowledging that protection

of the investor’s legitimate and reasonable expectations was a major component of the fair and equitable treatment standard in the UK–​Romania treaty, cautioned that expectations of a stable legal and business framework must not be understood to require a ‘virtual freezing of the legal regulation of economic activities’ by a State.177 It added that, except where investors have had specific promises or representations, it would not be reasonable or legitimate for them to assume that a state’s legal and economic framework may not evolve and change and fair and equitable treatment should not be conflated with so-​called stabilization clauses sometimes inserted into investor-​state contracts so as to provide for the express stabilization of certain laws, taxes or other regulations.178 Moreover, the tribunal stressed that legitimate expectations must not be deduced solely in light of the subjective expectations of the investor; they must be examined as the expectations at the time the investment is made, as they may be deduced from all the circumstances of the case, due regard being paid to the host state’s power to regulate its economic life in the public interest.179

20.85 More recent decisions have similarly emphasized the inherent unreasonableness of the ex-

pectation that a state will make no legislative changes, especially in the absence of a stabilization clause. For example, the Micula tribunal opined that: the correct position is that the state may always change its legislation, being aware and thus taking into consideration that: (i) an investor’s legitimate expectations must be protected; (ii) the state’s conduct must be substantively proper (e.g., not arbitrary or discriminatory); and (iii) the state’s conduct must be procedurally proper (e.g., in compliance with due process and fair administration). If a change in legislation fails to meet these requirements, while the legislation may be validly amended as a matter of domestic law, the state may incur international liability.180

  L.E.S.I., v. Algeria, supra note 171, ¶ 151 (unofficial translation).   See, e.g., El Paso v. Argentina, supra note 105, ¶ 356 (‘[Investor] expectations, as well as their violation, have to be examined objectively’). 175 National Grid PLC v.  Argentine Republic, UNCITRAL case, Award (Nov. 3, 2008)  [hereinafter National Grid v. Argentina]. 176  EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/​05/​13, Award and Dissenting Opinion (Oct. 8, 2009) [hereinafter EDF v. Romania]. 177  Id. ¶ 217. 178  Id. ¶ 218. 179  Id. ¶ 219. 180  See, e.g., Micula v. Romania, supra note 106, ¶ 529. 173 174

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III.  The Normative Content of the Fair and Equitable Treatment Standard Ambiguity and uncertainty in regulatory changes can meet this standard.181 In Mamidoil v Albania, the tribunal noted that investors’ rights and expectations must similarly 20.86 be balanced against ‘other economic and social interests’.182

C. Obligation of Vigilance and Protection In a number of early decisions, tribunals treated violation of the obligation of vigilance, some- 20.87 times phrased as an obligation to exercise due diligence in protecting foreign investments (and used interchangeably in this chapter), as a violation of the duty to afford equitable treatment and full protection and security. In these cases, tribunals have treated the standards of ‘fair and equitable treatment’ and ‘full protection and security’ as interlocking and have examined them together. Full protection and security is a customary law standard often included in treaties as a separate obligation and was applied in the past essentially when the foreign investment had been affected by civil strife and physical violence. The obligation of vigilance is part of the definition of the customary international law obligation to protect, which is a duty of care (obligation de moyens), not an absolute guarantee of protection (obligation de résultat). Among the tribunals which equated the standards of fair and equitable treatment and full 20.88 protection and security, or considered the latter to be an element of the former, are Asian Agricultural Products Ltd (AAPL) v Sri Lanka;183 American Manufacturing & Trading (AMT), Inc. v Republic of Zaire;184 Wena Hotels v Egypt;185 Occidental v Ecuador;186 PSEG v Turkey;187 and El Paso Energy v Argentina.188 The Wena Hotels tribunal held that ‘a treatment that it is not fair and equitable automatically entails an absence of full protection and security’ and considered a separate examination moot.189 The PSE tribunal held that the standard applied only exceptionally to legal security—​which in this case was very similar to the fair and equitable treatment standard.190 The tribunal in El Paso v Argentina noted these decisions and opined that there is ‘sometimes’ no difference between the two standards and that the fair and equitable treatment standard is the more general of the two.191 Conversely, in Azurix v Argentina, the tribunal found that the two standards were separate and 20.89 also that the full protection and security standard went beyond physical violence and covered the obligation to create a secure investment environment.192 In Parkerings v Lithuania193 and   Mamidoil v. Albania, supra note 164, ¶¶ 617–​24.   Id. ¶¶ 612–​16 (‘Tribunal subscribes to findings in arbitral awards according to which the obligations of States under investment protection treaties cannot be appraised with only a view to the protection of foreign investors’ rights. The fair and equitable standard brings foreign investors into the normative sphere of rational policy in the general interest. It is not meant to favor the investors’ interests over other economic and social interests. In fact, a onesided policy of favoring one social group over another may have the opposite effect than the one intended’). 183  Asian Agricultural Products Ltd. (AAPL) v. Republic of Sri Lanka, ICSID Case No. ARB/​87/​3, Award (June 27, 1990) [hereinafter AAPL v. Sri Lanka]. 184  American Manufacturing & Trading, Inc. (AMT) v. Republic of Zaire, ICSID Case No. ARB/​93/​1, Award (Feb. 21, 1997) [hereinafter AMT v. Zaire]. 185 Wena Hotels Limited v.  Arab Republic of Egypt, ICSID Case No. ARB/​ 98/​4, Award (Dec. 8, 2000) [hereinafter Wena Hotels v. Egypt]. 186  Occidental Exploration and Production Company v. Republic of Ecuador, LCIA Case No. UN 3467, Award (July 1, 2004). 187  PSEG v. Turkey, supra note 126. 188  El Paso v. Argentina, supra note 105. 189  Wena Hotels v. Egypt, supra note 185, ¶ 185. 190  PSEG v. Turkey, supra note 126, ¶ 259. 191  El Paso v. Argentina, supra note 105, ¶¶ 228–​29. 192  Azurix v. Argentina supra note 51, ¶ 408. 193  Parkerings v. Lithuania, supra note 148. The tribunal defined the violation of the standard of full protection and security as the failure of the State to prevent the damage, to restore the previous situation or to 181 182

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Fair and Equitable Treatment: Have Its Contours Fully Evolved? Jan de Nul v Egypt,194 the tribunals also examined the two standards separately.195 In Jan de Nul, the tribunal gave weight to the fact that the two standards were placed in two different provisions of the BIT and examined them separately, ‘even if the two guarantees can overlap’. It defined the concept as related to the exercise of due diligence.196

D. Lack of Arbitrariness and Non-​discrimination 20.90 Although most BITs include a separate provision on protection against arbitrary and dis-

criminatory behaviour, some tribunals have interpreted lack of arbitrariness and non-​discrimination as elements of the fair and equitable treatment standard.197 Other tribunals have framed this standard as a prohibition on administrative capriciousness, indifference, and negligence;198 or abuse of authority, harassment, and intimidation.199

20.91 In CMS v Argentina,200 the tribunal linked the standard of protection against arbitrariness

and discrimination to the fair and equitable treatment standard. In its view, ‘any measure that might involve arbitrariness or discrimination is in itself contrary to the fair and equitable treatment’.201

20.92 The MTD v Chile,202 PSEG v Turkey,203 Saluka v Czech Republic,204 and Binder v Czech

Republic205 tribunals also declined to distinguish the two standards. The Binder tribunal stated that: The standard of fair and equitable treatment also ensures that a state acts in good faith in its dealings with the investor or its investment and that it does not coerce, threaten or harass the investor or its investment. Similarly, if the state conducts itself in an arbitrary or discriminatory way, it will have violated the fair and equitable treatment standard.206

punish the author of the injury. The injury could be committed either by the host State, or by its agencies or by an individual. See id. ¶ 355. 194  Jan de Nul v. Egypt, supra note 91. 195  More recent examples of tribunals treating this standard as separate and distinct from fair and equitable treatment include the following: Frontier Petroleum Services Ltd. v. Czech Republic, UNCITRAL, Final Award (Nov. 12, 2010), ¶ 296; Impregilo v. Argentina, supra note 127, ¶ 334; Arif v. Moldova, supra note 132, ¶ 505. 196  Jan de Nul v. Egypt, supra note 91, ¶ 269. 197  See C. Schreuer, Fair and Equitable Treatment (FET): Interactions with Other Standards, in Investment Protection and the Energy Charter Treaty 63 (G. Coop & C. Ribeiro eds., 2008). See also, e.g., Alpha v. Ukraine, supra note 104, ¶ 420; Micula v. Romania, supra note 106, Award, ¶ 522 (‘There is no dispute that conduct that is substantively improper, whether because it is arbitrary, manifestly unreasonable, discriminatory or in bad faith, will violate the fair and equitable treatment standard’). 198  See, e.g., Impregilo v. Argentina, supra note 127, Concurring and Dissenting Opinion of Judge Charles N. Brower (June 21, 2011), ¶ 9 (‘Administrative capriciousness and indifference, let alone deliberate delay that undermines the profitability of an investment, are well-​established grounds for finding a fair and equitable treatment violation’). 199  Mamidoil v.  Albania, supra note 164, Dissenting Opinion of Steven A.  Hammond, 30 (Mar. 30, 2015), ¶ 134 (‘in appropriate circumstances state coercion and intimidation can constitute an independent FET violation’). 200  CMS v. Argentina, supra note 119. 201  Id. ¶ 290. 202  MTD v. Chile, supra note 165. 203  PSEG v. Turkey, supra note 126. 204  Saluka v. Czech Republic, supra note 56. The tribunal agreed with S.D. Myers v. Canada that ‘an infringement of the fair and equitable standard requires treatment in such an unjust or arbitrary manner that the treatment rises to the level that is unacceptable from the international perspective’. 205  Binder v. Czech Republic, supra note 90. 206  Id. ¶ 447.

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III.  The Normative Content of the Fair and Equitable Treatment Standard Of course, FET is broader than non-​arbitrariness. The tribunal in LG&E v Argentina207 20.93 examined the two standards separately and found that it was possible to violate one standard without violating the other: ‘characterizing the measures as non-​arbitrary does not mean that such measures are characterized as fair and equitable . . .’.208 NAFTA does not include separate provisions on these elements, but NAFTA tribunals 20.94 have included them in their interpretation of the fair and equitable standard. For example, in S.D. Myers v Canada,209 the tribunal considered that arbitrariness breaches Article 1105 only when it is shown that an investor has been treated in such an unjust or arbitrary manner that the treatment rises to the level that is unacceptable from the international perspective.210 In Waste Management v Mexico,211 the tribunal stated that:

20.95

the minimum standard of treatment of fair and equitable treatment is infringed by conduct attributable to the State and harmful to the claimant if the conduct is arbitrary, grossly unfair, unjust or idiosyncratic, discriminatory’, but it also added conduct that ‘involves a lack of due process leading to an outcome which offends judicial property . . .212

Similarly, the arbitral tribunal in CMS v Argentina stated that the standard of pro- 20.96 tection against discrimination ‘is related to that of fair and equitable treatment. Any measure that might involve arbitrariness or discrimination is in itself contrary to fair and equitable treatment, provided, of course, that, to be actionable, the measure must impair the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of the investment’.213 The tribunal in Crystallex opined that ‘[i]‌t is beyond peradventure that a conduct that is arbitrary is contrary to FET whether or not a separate provision on prohibition of “arbitrary treatment” is present in the treaty’.214 Arbitrariness, it concluded, ‘is not based on legal standards but on excess of discretion, prejudice or personal preference, and taken for reasons that are different from those put forward by the decision maker’.215 In Rumeli v Kazakhstan, the tribunal noted that: violations alleged by Claimants and allegedly constituting unreasonable, arbitrary or discriminatory measures, have also been invoked by Claimants as constituting a violation of the fair and equitable treatment principle. The Arbitral Tribunal considers that these violations are better qualified and dealt with as issues falling under the fair and equitable treatment standard, which also includes in its generality the principle of no-​unreasonable, arbitrary or discriminatory measures.216

  LG&E v. Argentina, supra note 121.   Id. ¶ 162. 209  S.D. Myers Inc. v. Canada (UNCITRAL), First Partial Award (Nov. 13, 2000). 210  Id. ¶ 263. 211  Waste Management v. Mexico, supra note 76. 212  Id. ¶ 98. See also Micula v. Romania, supra note 106, Award, ¶¶ 524–​25 (citing same). 213  CMS v. Argentina,, supra note 119, ¶ 290. 214  Crystallex v. Venezuela, supra note 113, ¶ 577. 215  Id. (‘An authoritative definition of arbitrariness was given by a Chamber of the ICJ in the ELSI case, where the Court stated that: “Arbitrariness is not so much something opposed to a rule of law, as something opposed to the rule of law . . . It is a willful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety” ’). 216  Rumeli v. Kazakhstan, supra note 59, ¶ 681. See also Lemire v. Ukraine, supra note 66, ¶ 284. 207 208

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20.97

Fair and Equitable Treatment: Have Its Contours Fully Evolved?

IV. Conclusion 20.98 To use the words of the PSEG tribunal, the standard of fair and equitable treatment has ac-

quired prominence in investment arbitration as a consequence of the fact that other standards traditionally provided by international law might not in the circumstances of each case be entirely appropriate to do justice.217 This is particularly the case when the facts of the dispute do not clearly support the claim for indirect expropriation, but when there are, nevertheless, events that might require compensation for the investor and need to be assessed under a different standard. Because the role of fair and equitable treatment changes from case to case, it is sometimes not as precise as would be desirable. Yet, it clearly does allow for justice to be done in the absence of breach of the more traditional international law standards.

20.99 There is diversity in the way the ‘fair and equitable treatment’ standard is formulated in in-

vestment agreements. Accordingly, the proper interpretation of the ‘fair and equitable treatment’ standard can depend on the specific wording of the treaty, its context, object, and purpose, as well as its negotiating history or other indications of the parties’ intent.

20.100 There has been a debate about whether the fair and equitable treatment standard is part of the

minimum standard of customary international law or is an autonomous standard. Because of NAFTA’s language linking the fair and equitable treatment standard to the minimum standard and NAFTA Free Trade Commission’s binding interpretation linking the minimum standard to customary international law, NAFTA tribunals, in their majority, follow this interpretation. On the other hand, BIT tribunals lean toward interpreting it more broadly as an autonomous standard going beyond the minimum standard. A growing number of tribunals have questioned whether substantial differences result from this characterization.

20.101 Arbitral tribunals have identified a number of elements that, singly or in combination, have

been treated as encompassed in the FET standard of treatment: denial of justice, due diligence, transparency, stability, and respect of the investor’s legitimate expectations. Sometimes tribunals include the obligation of vigilance and security, which is part of the standard of full protection and security, and the protection against arbitrariness and discrimination, and consider that treating these elements in an FET examination makes it unnecessary to address claims under specific treaty provisions referring to them.

20.102 Denial of justice is a notion well anchored in customary international law and traditionally is

referred to as an element of the fair and equitable treatment standard.

20.103 The investor’s legitimate expectations have emerged as a recurrent essential element of the

fair and equitable treatment standard. The principle, traditionally related to transparency, can also be considered a further development of the concepts of stability and predictability. It has often been applied as a suppler way of providing a remedy appropriate to a particular situation than the higher threshold test of indirect expropriation. It relates, in particular, to specific assurances of an official character given to the investor—​either through laws and regulations or other administrative acts—​and the host state’s officials’ perception that the investor intends, reasonably, to rely on such representation. Most tribunals have adopted a proportionate approach and agree that the disappointment of legitimate expectations must be sufficiently serious and material and that the investor should bear the inherent business risks of his investment.

  PSEG v. Turkey, supra note 126, ¶ 238.

217

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IV. Conclusion Among the interpretative elements of the FET, transparency, stability, and legitimate expect- 20.104 ations are the ones not initially grounded in customary international law, but which emerge from general principles and the recurrent opinion of arbitral tribunals in the last few years. The interpretation of the FET beyond the customary international law elements has been a 20.105 concern to states. It has brought a growing number of them, when they review their model BITs or negotiate new IIAs, to clarify the scope of its application by specifically limiting it to the customary law elements to the exclusion of transparency and legitimate expectations. Some others include these elements on the list, albeit with several express limitations.

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21 THE NATIONAL TREATMENT OBLIGATION Andrea K Bjorklund*

I. Introduction  II. Precluding Nationality-​based Discrimination  III. National Treatment in Practice 

E. Objective Justifications for Differential Treatment: The Role of Burden Shifting in National Treatment Analysis 

21.01 21.05 21.17 21.22 21.59

IV. Reservations and Exceptions 

A. The Like Circumstances Inquiry  B. Treatment Accorded the Investor  C. ‘Arbitrary and Discriminatory’ Treatment  21.77 D. Determining the Level of Treatment that Must Be Accorded a Foreign Investor  21.83

A. State, Provincial, or Municipal Government Measures  B. Measures to Protect Health, Safety, and the Environment C. Measures to Protect Local Culture 

V. Conclusions

21.89 21.94 21.97 21.103 21.105 21.106

I. Introduction 21.01 The obligation not to discriminate on the basis of nationality is a key feature of most invest-

ment agreements.1 National treatment is a relative obligation; it requires that a host state treat foreign-​owned investments at least as well as similarly situated national investments, or foreign investors as well as domestic investors. Determining whether a state has violated the national treatment obligation thus usually requires identifying the appropriate comparator against which to measure the allegedly less favourable treatment. If the foreign entity is not in a like situation as compared to the more favourably treated entity, the national treatment claim will fail. Even if a tribunal determines that the foreign entity is in like circumstances with the more favourably treated domestic entity, however, it must also examine whether the host state had legitimate, non-​nationality-​based reasons for according the two entities different treatment.

21.02 The national treatment obligation protects against both de jure and de facto discrimin-

ation. There have been few cases of de jure discrimination; the gravamen of most claims of nationality-​based discrimination is the differential effect of a facially neutral measure. A claimant need not demonstrate discriminatory intent in order to prevail on a national treatment claim. Indeed, many tribunals have been concerned that imposing such an obligation would preclude recovery in most instances. Rather, ‘in the absence of a legitimate rationale

*  The author thanks Lukas Vanhonnaeker for excellent assistance in updating this chapter for the second edition. Seán Duggan, Meg Kinnear, Jürgen Kurtz, and Andrew Newcombe gave me comments on the version written for the first edition, and I am grateful to them for their insights. Any errors are mine alone. 1 United Nations Conference on Trade and Development (UNCTAD), National Treatment (1999), UNCTAD/​ITE/​IIT/​11 (Vol. IV) 15–​24 (noting the importance of the national treatment obligation in investment codes and international investment agreements) [hereinafter UNCTAD, National Treatment].

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II.  Precluding Nationality-based Discrimination for the discrimination between investors in like circumstances, the tribunal will presume—​or at least infer—​that the differential treatment was a result of the claimant’s nationality’.2 It is generally accepted that a claimant bears the burden of proving that there has been differ- 21.03 ential treatment more favourable to a domestic entity in like circumstances with the foreign investor or investment. This statement is misleading in its apparent simplicity, as establishing which entities are in like circumstances is a complicated endeavour and is at the heart of most national treatment claims. Another difficult question is precisely what level of treatment states are obliged to accord foreign investors or investments. Claimants frequently argue that national treatment obligates host states to accord foreign investors the best treatment afforded any single domestic investor, whereas states contend that the purpose of the provision is to provide only equality of opportunity to foreign and domestic investors.3 Another disputed issue is whether, once a prima facie case is established, the burden of proof shifts from the claimant to the respondent state to proffer a legitimate, non-​nationality-​based explanation for the differential treatment. Finally, most states have taken reservations to their national treatment obligations, an exercise that demonstrates the continued importance states place on reserving a measure of regulatory autonomy in order to further domestic political goals that often will favour local rather than foreign interests. This chapter first explores the historical development of the national treatment obligation. 21.04 It then addresses national treatment in practice, with particular reference to the investment treaty practice of the last decade and a half. As part of that examination, it sets out the difficult and unresolved issues in the national treatment jurisprudence, including the hurdles that claimants face in establishing a national treatment claim. Finally, it addresses some of the reservations to national treatment that states have included in their investment treaties.

II.  Precluding Nationality-​based Discrimination The national treatment obligation is a response to the tendency of governments to in- 21.05 sulate domestic investors and producers from foreign competition. National treatment obligations are usually dated to Hanseatic League treaties of the twelfth and thirteenth centuries.4 They were part of the concessions extended to foreign merchants during what is often termed the Middle Ages and were also part of the trade treaties prevalent in the nineteenth century.5

2 A. Newcombe & L. Paradell, The Law and Practice of Investment Treaties 183 (2009) [hereinafter Newcombe & Paradell]; see also Bilcon v. Government of Canada, PCA Case No. 2009-​04, Award on Jurisdiction and Liability (Mar. 17, 2015), ¶ 719. 3 C. McLachlan, L. Shore & M. Weiniger, International Investment Arbitration: Substantive Principles 251 (2007) [hereinafter McLachlan, Shore & Weiniger) (‘the requirement of national treatment  . . .  aims to provide a level playing field for foreign investors (at least post establishment)’); cf. Newcombe & Paradell, supra note 2, at 186 (‘References to “no less favorable” treatment in [international investment agreements do not clarify whether the investor is entitled to the best treatment afforded to any other investor, national or foreign, or the average treatment afforded to a group of like investors’). See generally A. Davies, Group Comparison v. Best Treatment in International Economic Law, in 2014–​15 Yearbook on International Investment Law and Policy 111 (A. Bjorklund ed., 2016). 4 P. Verloren Van Themaat, The Changing Structure of International Economic Law 19–​21 (1981); G. Schwarzenberger, The Principles and Standards of International Economic Law, 117 Recueil des Cours 1, 18–​26 (1966) [hereinafter Schwarzenberger]. 5 Schwarzenberger, supra note 4 at 67. Professor Schwarzenberger traced the evolution of international economic law standards in his course at The Hague Academy, and noted that of the seven he identified, six were concerned in some measure with equality of treatment.

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The National Treatment Obligation 21.06 Notwithstanding its long history, national treatment remains a conventional obligation:6 ‘A

degree of discrimination in the treatment of aliens as compared with nationals is, generally, permissible as a matter of customary international law’.7 National treatment is thus an essential feature of many treaties seeking to protect foreign nationals. It has been called ‘perhaps the single most important standard of treatment enshrined in international investment agreements (IIAs). At the same time, it is perhaps the most difficult to achieve, as it touches upon economically (and politically) sensitive issues’.8 National treatment is also at the heart of the General Agreement on Tariffs and Trade (GATT) and its related treaties.9 In addition, human rights treaties require states party to them to treat equally all similarly situated persons within their respective jurisdictions.10

21.07 A state’s promise to accord at least equal treatment (the usual formulation is ‘treatment no

less favourable’ than that accorded to domestic entities, which would permit foreign entities to receive better treatment) is often viewed as a boon to foreign investors or traders, but adopting such an obligation raises some concerns, even as it alleviates others. First, exactly what constitutes less favourable treatment is a matter of debate, as absolutely identical treatment cannot be meted out to everyone. Secondly, in some instances even equal treatment might not be sufficient to protect the interests of foreigners. National treatment requires only that the foreign investor or investment be given the same, or better, treatment as given to nationals. Theoretically, at least, national treatment obligations provide no protection to foreigners should nationals be treated badly.

21.08 The Argentine jurist Carlos Calvo steadfastly maintained that national treatment was the

most that foreign investors had any right to demand; the ‘Calvo’ clause found in the laws of several developing countries and in many state contracts recognizes that philosophical position.11 This position illustrated the potential weakness of national treatment obligations, which provide no particular benefit to foreign investors in circumstances where nationals have few rights.12 In order to remedy this shortcoming, the minimum standard of treatment in customary international law provides a floor below which treatment cannot fall, regardless of any relevant relative comparison.13

21.09 Ironically, despite its historic aversion to the Calvo clause, the United States has actually

adopted a ‘reverse’ Calvo clause in its 2015 renewal of Trade Promotion Authority (as well as in the earlier renewal of authority under President George W Bush), which stipulated that the executive branch should not negotiate investment treaties that confer on foreign investors greater substantive rights than are enjoyed by US investors.14   McLachlan, Shore & Weiniger, supra note 3, at 212–​13.   Oppenheim’s International Law 932 (9th ed. R. Jennings & A. Watts eds., 1996). 8   Id. at 1. 9   See e.g., General Agreement on Tariffs and Trade (Oct. 30, 1947) art. III; General Agreement on Trade in Services art. XVAA; Marrakesh Agreement Establishing the World Trade Organization, Annexes IB and IC; Agreement on Trade-​Related Aspects of Intellectual Property Rights art. 3. 10  See, e.g., Convention for the Protection of Human Rights and Fundamental Freedoms art. 1; American Convention on Human Rights art. 1(1); see also Universal Declaration of Human Rights art. 2. 11 D. Shea, The Calvo Clause 35–​36 (1955). 12 M. Kinnear, A. K. Bjorklund, & J.F.G. Hannaford, Investment Disputes Under NAFTA: An Annotated Guide to NAFTA Chapter 11 1102.12 (2007, 2009 Update) (noting that national treatment obligations have been used both to limit and to expand the rights of foreigner traders and investors) [hereinafter Kinnear, Bjorklund & Hannaford (2009 update)]. 13 R.B. Lillich, The Human Rights of Aliens in Contemporary International Law 17 (1984); A.K. Bjorklund, Reconciling State Sovereignty and Investor Protection in Denial of Justice Claims, 45 Va. J. Int’l L. 809, 836–​37 (2005) [hereinafter Bjorklund]. 14  The Bipartisan Congressional Trade Priorities and Accountability Act of 2015, S. Rep. 114–​42, 114th Cong., 1st Sess. (May 12, 2015) 14. See also Bjorklund, supra note 13, at 891–​92; N. DiMascio & J. Pauwelyn, 6 7

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II.  Precluding Nationality-based Discrimination National treatment and the international minimum standard are doctrinally separate. The 21.10 first is a relative standard, while the second is absolute. The first is conventional, while the second is customary international law.15 There are, however, some areas in which the two have converged because discrimination on the basis of nationality itself violates the international minimum standard—​cases in which the national treatment obligation has become part of customary international law. The best example of this is in the provision of justice, where discrimination on any basis is prohibited by customary international law, and might even be jus cogens.16 For example, the Inter-​American Court of Human Rights has concluded, in an advisory opinion, that ‘the principle of equality before the law, equal protection before the law and non-​discrimination belongs to jus cogens, because the whole legal structure of national and international public order rests on it and it is a fundamental principle that permeates all laws’.17 In addition, some treaties protect foreign investors or their investments from ‘arbitrary 21.11 and discriminatory’ treatment.18 For example, Article 3 of the Bolivia–​Netherlands BIT provides: ‘Each Contracting Party shall ensure fair and equitable treatment to the investments of nationals of the other Contracting Party and shall not impair, by unreasonable or discriminatory measures, the operation, management, maintenance, use, enjoyment or disposal thereof by those nationals’.19 In that context, most tribunals have read ‘discriminatory’ as precluding nationality-​based discrimination, as well as other arbitrary distinctions.20 Because many treaties, including the Argentina–​United States BIT, contain both national treatment obligations21 and pledges to refrain from according discriminatory and Nondiscrimination in Trade and Investment Treaties: Worlds Apart or Two Sides of the Same Coin?, 102 Am. J. Int’l L. 48, 67 & n. 111 (2008). 15 See McLachlan, Shore & Weiniger, supra note 3, at 239–​40 (noting that international law does not preclude all distinctions between foreigners and nationals in the absence of a specific treaty obligation or customary international law principle). 16  See e.g., Bjorklund, supra note 13, at 837–​38; E. Root, The Basis of Protection to Citizens Residing Abroad, 4 Am. Soc. Int’l L. Proc. 16, 20 (‘Each country is bound to give to the nationals of another country in its territory the benefit of the same laws, the same administration, the same protection, and the same redress for injury which it gives to its own citizens, and neither more nor less: provided the protection which the country gives to its own citizens conforms to the established standard of civilization’). 17  Juridical Conditions and Rights of the Undocumented Migrants, Advisory Opinion OC-​18/​03 of Sept. 17, 2003, Inter-​Am. Ct. H.R. (Ser. A) No. 18 (2003), ¶ 101. 18  See, e.g., the award in CMS v. Argentina, in which the tribunal noted that it could not ‘hold that arbitrariness and discrimination are present in the context of the crisis noted, and to the extent that some effects become evident they will relate rather to the breach of fair and equitable treatment than to the breach of separate standards under the Treaty.’ See CMS Gas Transmission Co. v. Argentina, ICSID Case No. ARB/​01/​ 8, Award (May 12, 2005), ¶ 295. 19  Agreement on encouragement and reciprocal protection of investments between the Kingdom of the Netherlands and the Republic of Bolivia art. 3(1). The BIT’s full protection and security provision also contains a national treatment obligation: ‘More particularly, each Contracting Party shall accord to such investments full security and protection which in any case shall not be less than that accorded either to investments of its own nationals or to investments of nationals of any third States, whichever is more favourable to the investor’. 20  See e.g., Noble Ventures, Inc. v.  Romania, ICSID Case No. ARB/​ 01/​11, Award (Oct. 12, 2005), ¶ 180; LG&E Energy Corp. v. Argentine Republic, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006), ¶ 146; Newcombe & Paradell, supra note 2, at 151–52 (referring to the OECD model treaty, which made clear that nationality-​based discrimination is included in the reference to discrimination); see also McLachlan, Shore & Weiniger, supra note 3 at 239–​40 (noting cases in which the tribunal had considered whether fair & equitable treatment requirements encompassed a nondiscrimination obligation); R. Dolzer & M. Stevens, Bilateral Investment Treaties 61–​63 (1995); see also A.F.M. Maniruzzaman, Expropriation of Alien Property and the Principle of Non-​Discrimination in International Law of Foreign Investment:  An Overview, 8 J. Transnat’l Law & Pol’y 57, 69–​70 (1998) (describing different types of discrimination). 21  Treaty Between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment (entered into force Oct. 20, 1994) art II(1): ‘Each Party shall

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The National Treatment Obligation arbitrary treatment,22 discrimination needs to extend to more than just nationality-​based protection in order to give each provision meaning, as required by the principle of effective interpretation.23 Tribunals have not necessarily made this distinction in practice.24 21.12 The scope of the national treatment obligation to which states have adhered varies by treaty.

Many treaties accord protection only after an investment has been permitted to enter the country, while others include obligations to permit entry and establishment. The UK prototype only requires a host state to permit the investment of capital ‘subject to its right to exercise powers conferred by its laws’.25 On the other hand, many North American treaties, such as NAFTA Chapter 11, the 2012 US Model BIT, and the 2004 Canadian Model FIPA offer broad pre-​establishment protections.26 Some treaties—​particularly those that offer only post-​establishment protections—​apply only to investments.27 If a treaty offers the right to establish an investment, its protection probably extends to investors who have not yet made an investment, as well as to the investment itself.

21.13 Treaties differ in the breadth of the protection offered to foreign investors. The Energy

Charter Treaty (ECT), for example, contains an open-​ended list of obligations:  national treatment must be afforded investments of investors of other contracting parties, and ‘their related activities including management, maintenance, use, enjoyment or disposal’.28 Other treaties, such as the UK prototype, contain a closed list requiring states party to extend national treatment to the ‘management, maintenance, use, enjoyment or disposal of [investors’] investments’.29

21.14 National treatment is relatively new in the investment context and has reached prominence

only recently with the rapid increase in investor-​state arbitrations that commenced in the mid-​1990s. Yet national treatment is a core obligation in the General Agreement on Tariffs and Trade and has been extensively construed by GATT and WTO panels and examined comprehensively by GATT and WTO scholars. National treatment is also included in the

permit and treat investment, and activities associated therewith, on a basis no less favorable than that accorded in like situations to investment or associated activities of its own nationals or companies . . .’ [hereinafter Argentina–​United States BIT]. 22  Id. art. II(2)(b):  ‘Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments’. 23  See I. Sinclair, The Vienna Convention on the Law of Treaties 118–​19 (2d ed. 1984) (noting the principle of effective interpretation, but cautioning that it must be read in conjunction with the teleological approach to treaty interpretation); A. McNair, The Law of Treaties 385 (1961) (quoting Cayuga Indians Claims case: ‘Nothing is better settled, as a canon of interpretation in all systems of law, than that a clause must be so interpreted as to give it a meaning rather than so as to deprive it of meaning’). 24  See discussion in ¶¶ 21.74–​ 79 infra. See also T. Weiler, The Interpretation of International Investment Law 288–​96 (2013). 25  Agreement Between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of [Country] for the Promotion and Protection of Investments, Model Text 2008 art. 2(1) [hereinafter 2008 U.K. Model BIT], http://​investmentpolicyhub.unctad.org/​Download/​TreatyFile/​ 2847 (last visited Nov. 11, 2017). 26 North American Free Trade Agreement, Can.–​ Mex.–​U.S. (Dec. 17, 1992)  arts. 1102(1), 1102(2) [hereinafter NAFTA], https://​www.nafta-​sec-​alena.org/​Home/​Texts-​of-​the-​Agreement/​North-​American-​ Free-​Trade-​Agreement (last visited Nov. 11, 2017); 2012 U.S. Model Bilateral Investment Treaty arts. 3(1), 3(2) [hereinafter U.S. Model BIT], https://​ustr.gov/​sites/​default/​files/​BIT%20text%20for%20ACIEP%20 Meeting.pdf (last visited Nov. 11, 2017); Agreement Between Canada and -​-​--​​--​​-​--​​for the Promotion and Protection of Investments, arts. 3(1), 3(2) [hereinafter 2004 Canadian Model FIPA], https://​www.italaw. com/​documents/​Canadian2004-​FIPA-​model-​en.pdf (last visited Nov. 11, 2017). 27  Newcombe & Paradell, supra note 2, at 159. 28 Energy Charter Treaty art. 10(7), http://​www.energycharter.org/​fileadmin/​DocumentsMedia/​Legal/​ ECTC-​en.pd (last visited Nov. 11, 2017). 29  U.K. Model BIT art. 3(2).

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II.  Precluding Nationality-based Discrimination General Agreement on Trade in Services (GATS), although there have as yet been relatively few GATS cases.30 In GATT cases, the question is usually whether the goods that have received less favourable treatment are ‘like products’ as compared to the more-​favoured goods.31 To what extent GATT ‘like products’ analyses provide fruitful analogies for ‘like circum- 21.15 stances’ or ‘like situations’ analyses is unclear. Early cases such as S.D. Myers v Canada and Pope & Talbot v Canada were characterized by frequent references to GATT and WTO jurisprudence by claimants, respondents, and the tribunals themselves.32 After these initial cases, the Methanex tribunal suggested that it ‘would be open to persuasion based on legal reasoning developed in GATT and WTO jurisprudence, if relevant’,33 but that GATT like-​products analysis offered inappropriate guidance for a tribunal construing an investment treaty’s ‘like circumstances’ language.34 In particular, the Methanex tribunal rejected the claim that because two producers manufactured goods that competed in the gasoline oxygenate market, their producers were necessarily in like circumstances with each other. To the contrary, according to the Methanex tribunal, the NAFTA negotiators were ‘fluent in GATT law and incorporated, in very precise ways, the term “like goods” and the GATT provisions relating to it when they wished to do so’.35 Article 1102 of NAFTA does not contain any reference to ‘any like, directly competitive or substitutable goods’.36 More recent decisions confirm this approach, with tribunals in Cargill v Mexico, Merrill & Ring v Canada, and Bilcon v Canada all questioning the applicability of GATT decisions on like products in the broader ‘like circumstances’ context.37 Thus, the Article 1102 like circumstances inquiry is different from that conducted by a typical WTO tribunal. This summarizes well what is likely to be the general approach: investor-​state tribunals may 21.16 consult GATT/​WTO practice when called upon to consider issues that have also arisen in the trade context, but they will not necessarily follow the same analytical path. Particularly as investment treaty tribunals themselves have developed an investment-​specific approach in the increasing number of investment treaty cases, their incentives to find guidance in GATT/​ WTO jurisprudence has waned.38

  Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, at 1102.15–​16.   See e.g., WTO Appellate Body Report, European Communities–​Measures Affecting Asbestos and Asbestos-​Containing Products, WT/​DS135/​AB/​R (Apr. 5, 2001), ¶ 99. 32  See generally Kinnear, Bjorklund & Hannaford, supra note 12, at 1102.10–​17a. 33  Methanex Corp. v. United States of America, UNICTRAL, Award (Aug. 3, 2005), Pt. II, Ch. B, ¶ 6. 34  Id. 35  Id. Pt. IV, Ch. B, ¶ 30. 36  Id. Pt. IV, Ch. B, ¶ 37. 37  Cargill Inc. v. Mexico, ICSID Case No. ARB(AF)/​05/​2, Award (Sept. 18,2009), ¶ 193 (finding that ‘like circumstances’ in art. 1102 must be interpreted on its own terms); Merrill & Ring Forestry L.P. v. Canada, UNCITRAL (ICSID Administered), Award (Mar. 31, 2010), ¶ 86 (expressions used in different treaties and different contexts are not interchangeable in spite of their similarity); Bilcon, Award, supra note 2, ¶ 692 (language in art. 1102 is ‘less restrictive’ than that found in other trade-​liberalizing agreements, such as those that refer to ‘like products’). 38  Many have recently written on investment arbitral awards as a source of law, and even as quasi-​ precedent. See, e.g., G. Kaufmann-​Kohler, The 2006 Freshfields Lecture:  Arbitral Precedent:  Dream, Necessity, or Excuse?, 23 Arb. Int’l 357 (2007); C. Schreuer, Diversity and Harmonization of Treaty Interpretation in Investment Arbitration, 3 Transnat’l Disp. Mgmt. 11 (2006); J. Commission, Precedent in Investment Treaty Arbitration: A Citation Analysis of a Developing Jurisprudence, 24 J. Int’l Arb. 129 (2007); A. Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante, in International Economic Law: The State and Future of the Discipline 265 (C. Picker et al. eds., 2008). One commentator has provocatively and persuasively argued that investment tribunals should not so quickly eschew reliance on—​or at least guidance from—​WTO tribunals. J. Kurtz, ‘The Merits and Limits of Comparativism: National Treatment’, in International Investment Law and Comparative Public Law 243 (Stephan W. Schill ed., 2010). 30 31

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The National Treatment Obligation

III.  National Treatment in Practice 21.17 No one disputes that national treatment obligations in investment treaties extend to de facto,

as well as de jure, discrimination. Indeed, there are remarkably few cases of de jure discrimination. The key issue is ordinarily not identifying evidence of a state’s intent to discriminate, but, rather, which entity or entities the allegedly injured party should be measured against when it comes to assessing the treatment accorded.

21.18 Many if not most national treatment cases have arisen under NAFTA Chapter  11, and a

large number of NAFTA Chapter 11 cases have contained allegations of national treatment violations.39 Despite these initial allegations, national treatment has not necessarily been the basis for the decision in every one of the awards rendered. In some cases, the focus shifted to other grounds during the case’s development.40 Notwithstanding this qualification, however, NAFTA Chapter 11 awards have played a leading role in developing the national treatment jurisprudence.

21.19 Joost Pauwelyn and Nicholas DiMascio suggest that national treatment claims are more

likely in cases brought against developed countries, in which violations of minimum standards or the prohibition against expropriation are unlikely to be at issue.41 This explanation is not altogether convincing, as nearly every case brought against the United States and Canada, the two most frequent developed-​country defendants, has involved allegations that the minimum standard of treatment was also violated, and often those claims have eclipsed the national treatment allegations. Yet allegations of nationality-​based discrimination might play an important role in creating a particular atmosphere around the case. After all, one of the reasons for having an investment treaty is to level the playing field for a foreign investor who might be at a disadvantage in a home state’s courts and who might have less political leverage than domestic investors.42 Thus, claiming national treatment violations can help set the tone for the rest of the case.

21.20 While there is no universally accepted approach to addressing a national treatment claim, a

common essential element is the identification of the appropriate domestic comparator—​the entity in ‘like circumstances’—​against which to assess the treatment accorded the allegedly injured foreign investment (or investor). The analysis also requires identifying the treatment itself that is less favourable than that given the domestic comparator. A third inquiry usually involves an assessment of whether the host government had non-​discriminatory reasons that justified the difference in treatment.43

39  As of August 2007, all but two NAFTA statements of claim had included alleged national treatment violations. See Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, at 1102.18. That number has diminished some over the years, but five NAFTA cases decided from 2010 to 2016 involved alleged national treatment violations. See Bilcon, supra note 2, Award; Merrill & Ring, supra note 37, Award; Apotex Holdings Inc. and Apotex Inc. v. United States, ICSID Case No. ARB (AF)/​12/​1 Award (Aug. 25, 2014); Grand River Enterprises Six Nations, Ltd. et al. v. United States, UNCITRAL (ICSID Administered), Award, 12 January 2011; and Windstream v. Canada, UNCITRAL (PCA Administered), Award (Sept. 27, 2016). 40 Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12 at 1102.18 (noting that, in Azinian v. Mexico, Mondev v. United States, and Metalclad v. Mexico, the national treatment allegations played virtually no role in the conduct of the case). 41  DiMascio & Pauwelyn, supra note 14, at 67. 42 Weiler, supra note 24, at 430 (quoting Jan Paulsson as having said ‘the very fact of being foreign creates an inequality’). 43  Newcombe & Paradell, supra note 2 at 162; McLachlan, Shore & Weiniger, supra note 3, at 253–​ 54; A. Reinisch, National Treatment, in International Investment Law:  A Handbook 846, 869 (M. Bungenberg et al. eds., 2015).

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III.  National Treatment in Practice Most tribunals will address the three analytical questions suggested, but they will not neces- 21.21 sarily do so in the order suggested or in discrete steps. In certain cases, the type of treatment at issue cannot be severed from the like circumstances inquiry. In the UPS Dissent, for example, Dean Cass cautioned against deciding that two entities are not in like circumstances because of the different treatment accorded them, rather than because the host state had legitimate reasons for structuring the differential treatment.44

A. The Like Circumstances Inquiry The most important component of the national treatment analysis in almost any national 21.22 treatment case is the identification of the appropriate comparator, as the outcome usually depends on whether the allegedly favoured entity was actually in like circumstances with the foreign investor or investment.45 By far the bulk of national treatment cases have involved facially neutral statutes or regulations that allegedly had a disparate impact on foreign investors or investors. If the allegedly favoured entity is not like the less-​favoured entity, the inquiry ends as the claimant will not have any way of showing the discriminatory effect of facially neutral treatment. While some treaties, particularly those that prohibit arbitrary and discriminatory treatment, do not specify that the assessment of discrimination must involve a comparative assessment, tribunals to date have assumed that the inquiry requires the identification of a similarly situated comparator or comparators.46 The existence of only one comparator can suffice to establish a violation if that entity receives more favourable treatment in circumstances that suggest nationality considerations explain the distinction made.

1. Comparators in cases of de jure National Treatment Violations In cases of de facto national treatment violations, the absence of any actual comparator will 21.23 nearly always be fatal. This contrasts with the situation presented by a de jure measure, as a claimant needs not show a disparate impact if the discrimination is inherent in the terms of the measure. For example, legislation establishing an investment incentive but limiting its availability to domestic-​owned entities could serve as the basis for a national treatment claim, even if no domestic entities had sought to take advantage of the opportunity.47 However, even de jure cases can fail if the apparently discriminatory measure does not in fact confer any advantage on a domestic investor that is in like circumstances with the foreign investor. A section on de jure national treatment must necessarily be short and largely hypothetical as 21.24 there are no decided cases based strictly on de jure measures. Some investment treaty cases

44  United Parcel Service of America Inc. v. Canada, UNCITRAL, Separate Statement of Dean Cass (May 24, 2007), ¶¶ 49–​50 (noting that the determination of whether circumstances are like could not be segregated completely from the question of whether less favorable treatment had actually been accorded the foreign investment). 45  Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, at 1102.20–​ 40c; McLachlan, Shore & Weiniger, supra note 3, at 251–​54, 263. Some treaties refer to those ‘similarly situated’ or ‘in like situations’. See Newcombe & Paradell, supra note 2, at 159–62. It is unlikely that any difference in outcome hinges on the use of ‘same’ or ‘like’ or ‘similar’. Id. 46  See, e.g., Rusoro Mining Ltd. v. Venezuela, ICSID Case No. ARB(AF)/​12/​5, Award (Aug. 22, 2016), ¶ 563; Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş.  v.  Pakistan, ICSID Case No. ARB/​03/​29, Award (Aug. 27, 2009), ¶ 389; Invesmart v. Czech Republic, UNCITRAL, Award (June 26, 2009), ¶¶ 404, 414–​ 15; Champion Trading Co. et  al. v.  Egypt, ICSID Case No. ARB/​02/​9, Award (Oct. 27, 2006), ¶ 387; Occidental Exploration and Production Company v. Ecuador, LCIA Case No. UN 3467, Final Award (July 1, 2004), ¶ 170; Nykomb Synergetics Technology Holding AB v. Latvia, Stockholm Chamber of Commerce, Award (Dec. 16, 2003), 34; Consortium RFCC v. Morocco, ICSID Case No. ARB/​00/​6, Award (Dec. 22, 2003), ¶ 53. 47  See e.g., McLachlan, Shore & Weiniger, supra note 3, at 35 (discussing possible national treatment violation if preferential tax treatment were offered only to qualified domestic investments).

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The National Treatment Obligation have included de jure elements, but most have been treated more like de facto cases. For example, S.D. Myers v Canada included statements by the then-​Minister of the Environment, Sheila Copps, that closing the Canadian border to prevent exports of PCB waste was essential to ensure the health of the domestic PCB waste remediation industry. In the House of Commons, as well as on other occasions, she stated that it was Canada’s policy that PCB waste should be remediated in Canada by Canadians.48 There were also reports that she had promised the Canadian industry that she would close the border.49 The measure itself, however, was neutral in that it prohibited any entity from exporting PCB waste. The case thus focused on de facto, rather than de jure, national treatment. The impulse giving rise to the export prohibition did, however, lead to an inference that the border had been closed to limit competition from US PCB waste remediation entities.50 21.25 ADF involved a challenge to the United States’ apparently facially discriminatory ‘Buy

America Act’, which requires government contractors using funds provided by the US government to purchase US-​origin products. On its face, the statute appears de jure discriminatory, and the tribunal held first that the purchase of steel by the State of Virginia for use in a highway construction project constituted government procurement that was excepted from NAFTA’s national treatment obligations.51 Yet, the tribunal also analysed the case on the merits to determine whether the application of the law resulted in a violation of the national treatment provision, and it did so by identifying the appropriate comparators to determine whether ADF was in like circumstances with more favourably treated entities.

21.26 Canadian-​owned ADF proposed to purchase steel manufactured in the United States and

transport it to Canada for fabrication before conveying it to the contractor. The processing done to the steel in Canada would make it ‘Canadian’ for purposes of the Buy America Act and ineligible for purchase with federal funds. Based on the treatment proposed, the tribunal concluded that the appropriate comparison was to examine the treatment accorded the investment of the investor, which it identified as its steel in the United States, and that accorded to the investments of US investors, which it defined as US-​origin steel.52 Because all of the investments would lose their US-​origin designation if subject to sufficient fabrication in Canada, the tribunal concluded that, for the investments in like circumstances, there was no difference in treatment.53

21.27 A de jure case need not inevitably involve a like circumstances determination, yet one tribunal

faced with an arguably de jure case dismissed the national treatment claim when it sought to no avail an appropriate comparator. In The Loewen Group Inc. v United States, the claimants (The Loewen Group Inc. and its US subsidiary, collectively ‘Loewen’) challenged the acts of the Mississippi judiciary as national treatment violations on the grounds that they were permeated with bias because of Loewen’s Canadian origin. The Loewen tribunal concluded that there was no comparator against which it could assess the treatment accorded to Loewen. The other litigant would be inappropriate, and there were no other comparators in like circumstances.54 It seems correct that the other litigant is not an appropriate comparator—​ the mere fact that the domestic party wins and the foreign party loses a trial should be an

  S.D. Myers Inc. v. Canada, UNCITRAL, Partial Award (Nov. 13, 2000), ¶ 244.   Id. ¶ 172. 50  Id. ¶¶ 252–​55. 51  ADF Group Inc. v. United States, ICSID Case No. ARB(AF)/​00/​1, Award (Jan. 9, 2003), ¶¶ 162–​68. 52  Id. ¶ 155. 53  Id. ¶ 156. 54  The Loewen Group Inc. & Raymond L. Loewen v. United States, ICSID Case No. ARB(AF)/​ 98/​3, Award (June 26, 2003), ¶ 149. 48 49

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III.  National Treatment in Practice insufficient basis for finding a national treatment violation. Yet in the case of alleged de jure national treatment, in which the presiding judge failed to rein in adverse commentary about the nationality of the defendant that could have had an effect on the outcome of the trial, requiring that there be a comparator seems superfluous. The appropriate question would be whether the treatment has actually injured the claimant.55

2. Comparators in cases of de facto national treatment violations Tribunals have not adopted a uniform approach to identifying the entity or entities in like 21.28 circumstances. Rather, they have made clear that the approach needs to be flexible and can vary according to the circumstances of the investment or investor and according to the treatment at issue. One NAFTA tribunal has said ‘[b]‌y their very nature, “circumstances” are context dependent and have no unalterable meaning across the spectrum of fact situations . . . the concept of “like” can have a range of meanings, from “similar” all the way to “identical” ’.56 Another tribunal borrowed phraseology from a WTO decision: ‘The accordion of “likeness” stretches and squeezes in different places as different provisions of the WTO Agreement are applied’.57 Most, but not all, entities in like circumstances with each other will have a competitive rela- 21.29 tionship. This analysis stems in part from the GATT/​WTO context, in which the question for the panel is whether products are ‘like’ each other, which ordinarily means that they compete in the same economic sector or that one product is substitutable for the other, such that a measure limiting market access will protect the local product that would otherwise face competition and potential displacement by the rival product. In the investment context, the existence of a competitive relationship between the domestic comparator and the claimant is not an essential prerequisite to a tribunal’s finding that they are in like circumstances, but it is helpful in that the protection a measure gives an apparently competing entity might lead to an inference of nationality-​based preference. Most of the attention is on the entity or entities to which the tribunal is comparing the foreign 21.30 investment (or investor). Yet this focus can obscure an important nuance in the like circumstances analysis. The appropriate comparison will often be between the like-​circumstanced treatment accorded the investments (or investors), rather than between the like-​circumstanced investments (or investors) themselves.58 This emphasis explains the approach many tribunals take when they are identifying the appropriate comparators and is also consistent with the statutory language in many investment agreements. NAFTA Article 1102, for example, provides that: ‘Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to its own investors. . . ’.59 The like circumstances qualification appears to modify the word ‘treatment’, rather than ‘investor’. There is thus textual encouragement for tribunals to be sure that their comparative analysis takes into account the regulatory context, as well as any market-​based competition, in determining the identity of those in like circumstances with the foreign claimant.60

55 The S.D. Myers tribunal has suggested that protectionist intent alone is insufficient to sustain a claim absent actual injury. See infra ¶ 21.61. 56  Pope & Talbot Inc. v. Canada, UNCITRAL, Award on the Merits of Phase 2 (Apr. 10, 2001), ¶ 75. 57  S.D. Myers, Partial Award, supra note 48, ¶ 244 (citing Japan–​Alcoholic Beverages, WT/​DS38/​AB/​R ¶¶ 8.5 & 9), cited approvingly in Attorney General of Canada v. Myers, 2004 FC 38, at 32 (Trial Division) (Jan. 13, 2004). 58  See Rodney Neufeld, Trade and Investment, in Oxford Handbook of International Trade Law 620, 630–​31 (D. Bethlehem et al. eds., 2009). 59  NAFTA art. 1102(1) (emphasis added). The same language is in art. 3(1) of the 2004 U.S. Model BIT. 60  DiMascio & Pauwelyn, supra note 14, at 76. Cf. Corn Products Int’l v.  Mexico, ICSID Case No. ARB(AF)/​04/​01, Decision on Responsibility (Jan. 15, 2008), ¶ 126 (cautioning against giving too much

541

The National Treatment Obligation 21.31 Many of these subtleties are best illustrated by the case law. In S.D. Myers v Canada, a US

investor, S.D. Myers, challenged Canada’s closing of its border to the export of polychlorinated biphenyl (PCB) waste as discriminatory because it was not able to compete in Canada for contracts to process PCB waste at its Ohio remediation facility. In its like-​circumstances analysis, the tribunal determined that generally comparisons should be made between firms operating in the same business and economic sectors and that general policy considerations, such as environmental concerns, should also play a role.61 The tribunal weighed environmental concerns that might justify treating companies differently to protect public health and safety and also considered Canada’s obligations to avoid unjustified trade distortions.62 Ultimately, the tribunal concluded that S.D. Myers and its Canadian investment were in like circumstances with the Canadian PCB waste-​disposal industry. Their competitive relationship was a significant factor in its conclusion:  ‘It was precisely because [S.D. Myers International] was in a position to take business away from its Canadian competitors that [they] lobbied the Minister of the Environment to ban exports when the U.S. authorities opened the border’.63

21.32 In United Parcel Service Inc. v Canada, United Parcel Service (UPS) alleged that Canada

accorded more favourable treatment to Canada Post in the non-​monopoly postal services market than it accorded UPS or its Canadian subsidiary, UPS Canada. UPS also alleged that Canada Post’s monopoly network conferred on it an advantage in purveying non-​monopoly postal services. In particular, UPS claimed that courier companies had to pay customs fees for the processing of mail that Canada Post did not have to pay and that Canada Post collects certain import duties on behalf of Customs Canada for which it is paid a fee.

21.33 UPS’s claim failed because the majority of the UPS tribunal found that neither UPS nor UPS

Canada was in like circumstances with Canada Post. It based this decision on a distinction between postal imports and courier imports and held that the different characteristics of each warranted different customs treatment.64 The dissenting arbitrator, on the other hand, found that the appropriate comparison was between the investor and the entity with which it was in a competitive relationship with respect to the matters at issue; the provision of services for mail not in the regular postal stream.65 He thus focused on two of UPS’s allegations: the first was that Canada Customs pays handling fees to Canada Post for services that UPS must perform without compensation, and the second was that Canada Customs does not penalize Canada Post for failure to comply with Customs regulations as it does UPS, nor does it collect the same duties and taxes from Canada Post. He concluded that UPS was indeed similarly situated to Canada Post but was accorded different treatment.66

21.34 The UPS tribunal also considered whether Canada’s Publications Assistance Program (PAP),

under which the government subsidizes Canada Post’s delivery of eligible Canadian publications, violated NAFTA’s national treatment obligation.67 Although the majority found that the PAP was covered by the cultural industries exception to NAFTA,68 it considered whether UPS would have been in like circumstances with Canada Post for purposes of the PAP had it weight to differences in the ways products are ‘owned, managed, regulated, or priced’ because they are inevitable and doing so would negate the effectiveness of nondiscrimination clauses). 61  S.D. Myers, Partial Award, supra note 48, ¶ 250. 62  Id. ¶¶ 247, 250. 63  Id. ¶ 251. 64  United Parcel Service of America, Inc. v. Canada, UNCITRAL, Award (May 24, 2007), ¶ 99. 65  UPS, Dissent, supra note 44, ¶ 17. 66  Id. ¶¶ 33, 39. 67  UPS, Award, supra note 64, ¶ 146. 68  Id. ¶ 137. See discussion at ¶¶ 21.42–​45 infra.

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III.  National Treatment in Practice gone on to consider the merits of the case and concluded it was not. The basis for this decision was that only Canada Post had the ability to deliver to every postal address in Canada, while UPS’s capabilities were slightly more limited.69 Given the objectives of the PAP, UPS, and Canada Post were not in like circumstances and Canada did not breach any NAFTA obligations.70 Again the dissenting arbitrator came to a different conclusion. He found that UPS had made 21.35 a prima facie showing that it was in like circumstances with Canada Post with respect to the PAP: both UPS and Canada Post deliver materials of the sort that the PAP subsidizes; both do so routinely as a part of their business, and both do so to make money.71 The burden thus shifted to Canada to explain the difference in treatment. Here he found Canada’s proffered justification—​that only Canada Post could deliver to every address in Canada—​to be a post hoc rationalization designed to defend the programme during dispute settlement proceedings.72 In the three high-​fructose corn syrup (HFCS) cases, the tribunals had to decide whether US-​ 21.36 controlled manufacturers of HFCS, a corn-​based sweetener used as a sugar substitute, were treated less favourably than Mexican cane sugar producers.73 Mexico had imposed a 20 per cent tax on the transfer and importation of any beverage using a sweetener other than cane sugar and a 20 per cent tax on distribution agreements that involved transferring products using any sweeteners besides cane sugar.74 Those obligated to pay the taxes were also subject to other government-​imposed requirements.75 The ADM tribunal was the first to issue a decision. It determined that identifying the appropriate comparators required focusing on the competitive requirement of the parties in the marketplace. The tribunal concluded that Mexican cane sugar producers were in like circumstances with the claimants’ joint venture that produced HFCS in Mexico given their face-​to-​face competition supplying sweeteners to the Mexican food and beverage industry and Mexico’s having filed a WTO case against HFCS at the behest of the Mexican sugar industry.76 The Corn Products tribunal came to a similar decision,77 as did the Cargill tribunal.78 In Champion Trading Co. v Egypt, a claim brought under the Egypt–​United States BIT, the 21.37 claimants alleged that Egypt had failed to include their investment, a cotton company, in the settlements they paid to certain Egyptian cotton producers to compensate them for the losses they incurred by selling their cotton to government-​owned collection centres, which paid a fixed price to producers, rather than by selling the cotton on the open market. Egypt had promised to compensate producers who were penalized by participating in the state-​ regulated cotton market. Champion’s claim failed, however, because the claimants’ cotton company could not show it was in like circumstances with the favoured producers. Although the investments at issue operated in the same economic sector, that alone was insufficient to

  Id. ¶¶ 173–​74.   Given its conclusion with respect to the cultural industries exception, the majority did not consider whether the program also fell within the purview of the subsidies exception. The dissenting arbitrator concluded that it did not. 71  UPS, Dissent, supra note 44, ¶ 94. 72  Id. ¶¶ 124–​25. 73  Corn Products Int’l Decision, supra note 60; Archer Daniels Midland Co et al. v. Mexico, ICSID Case No. ARB(AF)/​04/​05, Award (Nov. 21, 2007); Cargill, supra note 37. 74  ADM, Award, supra note 73, ¶ 82. 75  Id. 76  Id. ¶¶ 199, 201. 77  Corn Products, Award, supra note 60, ¶¶ 120–​21. 78  Cargill, Award, supra note 37, ¶¶ 219–​23. 69 70

543

The National Treatment Obligation sustain the claim that they were in like circumstances with respect to the treatment at issue.79 Champion’s company had not sold any cotton to government-​owned collection centres and was thus ineligible to collect any of the settlement monies made available to those who did. 21.38 As is clear from the discussion of the preceding cases, the like circumstances determination

cannot be cordoned off from the treatment alleged to cause injury. The challenge in any case, however, is to ensure that the focus on treatment does not swallow the like circumstances determination. In other words, the policy considerations motivating the treatment can justify a finding that entities are not in like circumstances even though they would ordinarily seem to be; contrarily, a focus on treatment to the exclusion of differential circumstances (e.g. operation in entirely different economic sectors) might uphold the finding of a national treatment violation.

21.39 In Pope & Talbot v Canada, the claimant was a US investor that owned three lumber mills in

British Columbia which brought a Chapter 11 challenge to Canada’s implementation of the US–​Canada Softwood Lumber Agreement, which suspended for five years the long-​running trade dispute over Canadian exports of softwood lumber to the United States. Under the terms of the agreement, Canada agreed to limit the exports of softwood lumber from four ‘covered’ provinces—​Alberta, British Columbia, Quebec, and Ontario—​that had historically been the largest exporters of softwood lumber to the United States. Lumber exports from the non-​covered provinces were not limited. In return, the United States would not institute any unfair trade remedies cases against Canadian softwood lumber exporters.

21.40 The agreement required that Canadian softwood lumber be broken into three categories.

Up to 14.7 billion board feet of lumber could be exported free of charge; exports between 14.7 and 15.35 billion board feet would be charged a duty at the rate of US$50 per board foot; and exports in excess of 15.35 billion board feet would be charged a duty at the rate of US$100 per board foot.80 To implement the agreement, Canada allocated the quota among Canadian lumber producers in each of the covered provinces. That allocation was based primarily on their historic levels of export to the United States.

21.41 Pope & Talbot claimed a violation of Article 1102, NAFTA’s national treatment provision,

because lumber producers in the non-​covered provinces were not subject to the quota and were thus accorded more favourable treatment than lumber producers in the covered provinces. Pope & Talbot also claimed that it was treated less favourably than some other producers in the covered provinces.

21.42 The Pope & Talbot tribunal had to make separate like circumstances determinations to resolve

these different allegations. The first question for the Pope & Talbot tribunal was whether Pope & Talbot was in like circumstances with lumber producers in the non-​covered provinces. The Pope & Talbot tribunal approached this question by conflating the initial determination of like circumstances and whether the government offered a rationale for the difference in treatment. The first inquiry was whether the foreign investor was in like circumstances with the allegedly more favourably treated domestic investor, which required merely that the two entities operating in the same economic sector received differential treatment.81 If the foreign investor could make such a showing, the burden then shifted to Canada to show that some legitimate government objective justified the differential treatment and thereby demonstrate that the two were not really in like circumstances: ‘once a difference in treatment between

79  Champion Trading Co. et al. v. Arab Republic of Egypt, ICSID Case No. ARB/​02/​9, Award (Oct. 23, 2006), ¶¶ 131, 155–​56. 80  Pope & Talbot, Phase II Merits Award, supra note 56, ¶ 18. 81  Id. ¶ 78.

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III.  National Treatment in Practice a domestic and a foreign-​owned investment is discerned, the question becomes, are they in like circumstances?’82 Using this approach, the Pope & Talbot tribunal determined that Pope & Talbot’s investments 21.43 in British Columbia were not in like circumstances with any of the allegedly more favourably treated investments because Canada had justifiable policies explaining the differences in treatment. First, the tribunal concluded that limiting exports only from the four covered provinces was rational given the historical background of the case. Because the United States had never imposed duties on producers in the non-​covered provinces, limiting exports from only the covered provinces was ‘reasonably related to the rational policy of removing the threat of CVD [countervailing duty] actions’.83 Secondly, the tribunal concluded that the allegedly more favourable treatment given to producers within the covered provinces (and particularly in Quebec) than to producers in British Columbia was also warranted as it was based on the allocation of some quota to new entrants into the lumber industry, most of whom were in Quebec. Thus, British Columbian producers were not in like circumstances with Quebecois new entrants; in any event, Pope & Talbot was not a new entrant.84 Finally, within British Columbia, producers of lumber operating in the interior of the province, rather than on the Coast, were required to pay an extra fee to settle a dispute about British Columbian stumpage fees (the amount British Columbia charges producers for the privilege of cutting timber on Crown land). Again, the Pope & Talbot tribunal determined that Pope was not in like circumstances with the more favourably treated coastal producers.85 Occidental Exploration and Production Co. v Ecuador provides the unusual example of a tribunal 21.44 finding two entities to be in like circumstances notwithstanding the lack of any competitive relationship between them. Ecuador has a value-​added tax (VAT) refund programme that permits exporters dealing in certain products, including flowers and seafood, to claim a refund of the VAT on all products exported from the country. Occidental was not permitted to claim a VAT refund on exports of oil, which it claimed violated the national treatment obligation in the Ecuador–​United States BIT. In defence, Ecuador argued that the VAT refund was not available to any exporters of oil, including Petroecuador, the state-​owned oil company, and that there was thus no evidence of any attempt to discriminate against foreign companies. The tribunal found Ecuador’s arguments unavailing. Because the purpose of the national 21.45 treatment obligation is to protect foreign investors, it would be inappropriate to address ‘exclusively the sector in which that particular activity is undertaken’.86 Going further, the tribunal concluded that exporters should not be placed at a disadvantage in foreign markets because they had to pay more taxes in the country of origin.87 The Occidental tribunal’s conclusion that exporters qua exporters are in like circumstances is 21.46 unlikely to be replicated often. The lack of any competitive relationship between the comparators would ordinarily be a difficult hurdle to overcome with respect to the like-​circumstances determination. On the other hand, to the extent the tribunal’s decision reflected an assessment that VAT refunds are denied the oil exploration sector because it is dominated by foreign competitors, the decision is less surprising.88 Here you could say there was a strong focus

  Id. ¶ 79.   Id. ¶ 87. 84  Id. ¶ 93. 85  Id. ¶ 103. 86  Occidental, Award, supra note 46, ¶ 60. 87  Id. ¶ 175. 88  Ecuador moved to set aside the award, but its petition was denied. Because the award was subject to challenge on only limited grounds, the English courts did not address the proper application of the 82 83

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The National Treatment Obligation on the treatment—​refund of VAT—​given to exporters, all of whom were viewed as being in like circumstances. 21.47 At least one tribunal has taken a more holistic approach. The Apotex v United States tri-

bunal said that identifying comparators in like circumstances requires looking at, inter alia, ‘whether those which are said to be comparators: (i) are in the same economic or business sector; (ii) have investment in, or are businesses that compete with the investor or its investments in terms of goods or services; or (iii) are subject to a comparable legal regime or regulatory requirements, as the claimants and their investments’.89

3. Few versus many comparators 21.48 Some tribunals have grappled with the analytical challenge posed when a claimant alleges the

discriminatory effect of a facially neutral measure, but there are few entities against which to compare the treatment accorded. Many of these cases will turn on suggesting that there is a disparate impact on foreign investors or their investments, but demonstrating a disparate impact is a challenge if the size of the respective pools is small. Feldman v Mexico involved a challenge to a Mexican tax rebate law by a US investor in a Mexican enterprise, CEMSA, which resold and exported cigarettes from Mexico. Feldman claimed that Mexican laws discriminated against his company because the rebates were available only to exporters who were also producers of cigarettes, rather than to resellers of cigarettes. Moreover, notwithstanding the provisions of the law, Feldman alleged that in practice Mexican resellers/​exporters of cigarettes were able to claim rebates.

21.49 The Feldman tribunal determined that CEMSA was not in like circumstances with the pro-

ducers/​exporters because Mexico had rational bases for treating producers differently from resellers, including ‘better control over tax revenues, discourag[ing] smuggling, protect[ing] intellectual property rights, and prohibit[ing] gray market sales’.90 The decision does not clarify whether the tribunal was determining that CEMSA was not in like circumstances with the producers/​exporters, or whether, notwithstanding the facially like circumstances, Mexico had good reason for treating the two differently.91 The difference in these approaches is the stage at which the burden shifts to the respondent to justify the difference in treatment.

21.50 On the other hand, the Feldman tribunal did find that CEMSA was in like circumstances

with one Mexican reseller/​exporter of cigarettes and that it was given less favourable treatment.92 The dissenting arbitrator departed from this analysis on the ground that a tribunal could not find de facto discrimination based on a single domestic comparator who allegedly received advantageous treatment but only if there were ‘composite acts involving a set of conducts of a state evincing a systematic practice’,93 as described in the International Law Commission’s State Responsibility article on composite acts.94 nondiscrimination principle. See Occidental Exploration Production Co. v.  Republic of Ecuador (2005) EWCA Civ. 1116 (Sept. 9, 2005); Republic of Ecuador v. Occidental Exploration & Production Co. [2006] EWHC 345 (Comm.) (Mar. 2, 2006); Republic of Ecuador v. Occidental Exploration & Production Co. [2007] EWCA Civ. 656 (July 4, 2007). See generally Susan D. Franck, International Decision:  Occidental Exploration & Production Co. v. Republic of Ecuador, 99 Am. J. Int’l L. 675, 679–​80 (2005). 89 Apotex, Award, supra note 39, ¶ 8.15. See also Railroad Development Corporation v.  Guatemala, ICSID Case No. ARB/​07/​23, Award (June 29, 2012), ¶¶ 153–​55 (rejecting claim that investors are in like circumstances merely because they have possibly competing interests). 90  Feldman v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Award (Dec. 16, 2002), ¶¶ 17–​72. 91  Id. ¶ 170. 92  Id. ¶¶ 177–​80. 93  Feldman v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Dissenting Opinion of Arbitrator Covarrubias Bravo (Dec. 3, 2002), ¶ 15. 94  Id.

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III.  National Treatment in Practice The composite acts argument misses the mark. Nothing in treaty language or practice sug- 21.51 gests that only systemic discrimination can qualify as a violation of a state’s national treatment obligation. The crux of ILC State Responsibility Article 15 is that certain breaches consist of composite acts that occur over an extended time; it is not that only composite acts can be a breach of a state’s obligations.95 Rather, the real concern when there are few comparators is whether the differential treatment can be explained only by nationality-​based distinctions or whether the differences are mere happenstance. GAMI v Mexico is another instance of a case in which the number of entities in like circum- 21.52 stances was small. GAMI involved a challenge to Mexico’s decision to nationalize some, but not all, sugar mills. GAMI’s Mexican subsidiary, GAM, owned five mills, all of which were expropriated. The question was whether GAM was in like circumstances with owners of non-​expropriated mills. Although GAMI presented evidence showing that one domestic-​ owned mill with very similar characteristics to GAM’s mills was not expropriated, the tribunal concluded that the circumstances were not so alike as to make the difference in treatment wrong.96 The tribunal concluded that GAM’s mills fell within the category of insolvent sugar mills that Mexico had determined to nationalize in the public interest. While Mexico’s drawing of the line between mills to expropriate and not to expropriate might have been clumsy, there was no evidence that it was discriminatory.97 Again, the mere fact that one domestic comparator happened to fall on the more favourable side of the line was insufficient to demonstrate nationality-​based discrimination. In Bayindir v Pakistan, the tribunal had to consider whether the claimant was in like cir- 21.53 cumstances with one allegedly more favourably treated entity, and concluded that it was not. Bayindir had a contract with the government of Pakistan to build a motorway from Islamabad to Peshawar.98 When construction under the contract did not proceed as planned, Pakistan terminated its relationship with Bayindir, requested bids on the project, and engaged another company to complete the construction project. Bayindir alleged that the domestic company was a nearly ideal comparator, and that Pakistan had given it much more favourable terms under which to complete the work on the motorway. The tribunal concluded that the domestic entity was not in like circumstances with Bayindir. Even though the two operated in the same project and business sectors, the terms of the specific contracts were very different, including the fact that the new contract did not permit payment in foreign exchange, and that the scope of work was different.99 The tribunal was not troubled by the fact that there was only one comparator, but the claimant’s inability to point to other favourably treated entities meant its claim failed. In Methanex Corp. v United States, a Canadian methanol producer challenged California’s 21.54 ban on methyl tertiary-butyl ether (MTBE), a gasoline oxygenate for which methanol is a feedstock, on the grounds that the ban resulted in more favourable treatment being accorded to the US-​based ethanol industry. High-​pollution areas in the United States are required to sell only oxygenated gasoline in order to improve air quality, but the only effective oxygenates are MTBE and ethanol, as others are not yet commercially viable.

95 J. Crawford, The International Law Commission’s Articles on State Responsibility: Introduction, Text and Commentaries 141–​44 (2002). 96  GAMI Investments Inc. v. Mexico, UNCITRAL, Final Award (Nov. 15, 2004), ¶ 113. 97  Id. ¶ 114. 98  Bayindir Insaat Turizm Ticaret Ve Sanayi A.Ş. v. Pakistan, ICSID Case No. ARB/​03/​29, Award (Aug. 27, 2009). 99  Id. ¶¶ 403–​11.

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The National Treatment Obligation 21.55 In contrast to Feldman and GAMI, Methanex involved a situation in which there were many

possible comparators, including US producers of ethanol, methanol, and MTBE. Methanex had to show that it was in like circumstances with producers of ethanol, who received the more favourable treatment, rather than only with producers of methanol, or producers of MTBE. Methanex did not overcome this hurdle. According to the Methanex tribunal: ‘[i]‌t would be as perverse to ignore identical comparators if they were available and to use comparators that were less “like” as it would be perverse to refuse to find and to apply less “like” comparators when no identical comparators existed’.100 Methanex could not prevail on its national treatment claim because it was in like circumstances with other producers of methanol and was accorded the same treatment as they were.101

21.56 In Bilcon v Canada, the claimant argued, inter alia, that Canada violated Article 1102 by

requiring that it undergo the most rigorous form of environmental impact assessment in its application to develop a mining quarry and marine terminal in Nova Scotia. Bilcon successfully pointed to three other similarly situated investors who were subject to less stringent environmental impact assessments in prevailing on its national treatment claim.102

21.57 For investors, convincing the tribunal that the more favourable treatment is accorded to

entities in like circumstances is crucial to their case. An entity not like the allegedly more favourably treated entity can sustain no claim, regardless of the difference in treatment. Yet the like circumstances analysis cannot be segregated from considerations of the type of treatment accorded.

21.58 Establishing like circumstances is easier when the differentially treated entities compete in

the same economic sector, and the more favourable treatment accords domestic entities a competitive advantage. However, even demonstrating that the foreign investment is similarly situated to more favourably treated domestic entities is not sufficient if other domestic entities bear the same burden placed on the allegedly less-​favourably treated foreign entity. On the other hand, Occidental illustrates that even entities in different sectors can be like if it appears the state is taking advantage of sectoral dominance by foreign entities to impose a burden on them.

B. Treatment Accorded the Investor 21.59 To sustain its national treatment claim, an investor (or investment) must demonstrate that a

host state has accorded the domestic investor (or investment) more favourable treatment. In most instances, this will not be difficult as the alleged advantage conferred will be relatively clear. Yet there are nuances here, too, that give rise to difficulty in application. One question is the degree to which the differential treatment need give rise to an inference of nationality-​based prejudice, while another is the level of treatment that need be given the foreign investor. Is she entitled to treatment that ensures an equal playing field, or is she entitled to the best treatment given any domestic investor in like circumstances?

21.60 De facto national treatment claims by definition challenge measures that have a differential

effect on foreign investors. Some claimants have argued that the disparate impact alone is sufficient to permit them to maintain a national treatment claim. In other words, any adverse effect on a foreign investor violates the national treatment obligation, whether or not the differential treatment is attributable to nationality-​based considerations.103   Methanex, Award, supra note 33, Pt. IV, Ch. B, ¶ 17.   Id. Pt. IV, Ch. B, ¶ 28. 102  Bilcon, Award, supra note 2, ¶¶ 696–​716. 103  See Weiler, supra note 24 at 430 (arguing that: ‘There is not even so much as a hint in such texts [IIA provisions] that the aim or intent of the State responsible for the impugned measures should be relevant in 100 101

548

III.  National Treatment in Practice The argument that any disparate impact, no matter how small, can sustain a national treat- 21.61 ment claim fails for historical as well as textual reasons. First, it does not comport with the general understanding that the purpose of the national treatment obligation is to discourage protectionism. Secondly, this interpretation is also inconsistent with the existence in most treaties of non-​contingent obligations. Unreasonable differential treatment accorded a foreign-​owned investment is probably a violation of the fair and equitable treatment standard, so interpreting the national treatment obligation to prohibit it would render one of the two provisions redundant. This is particularly evident for those treaties that contain a prohibition against ‘arbitrary or discriminatory’ treatment, as well as a national treatment obligation, as the effect of this argument is to import the whole of the discrimination element in that standard into the national treatment obligation.104 It is important to note, however, that prevailing on a nationality-​based discrimination claim 21.62 does not require actual proof of protectionist intent. As the Feldman tribunal noted, imposing such an evidentiary hurdle would make it too difficult for claimants to prevail on de facto national treatment claims.105 Intent-​based claims are hard enough to sustain when the allegation is directed against an individual actor. When the defendant is a government entity, it might be difficult to demonstrate that a governmental department formed the requisite intent. Different actors within the department might have had different motivations, some of which were innocent of any nationality-​based concerns. Yet it is likely that creating an inference of discriminatory intent will make it harder for the state to justify its conduct; conversely if the effect is inadvertent the state will have an easier time justifying the conduct.106 Even if a claimant can demonstrate discriminatory intent, that alone will not be sufficient 21.63 to sustain a claim unless there is damage to the individual investor. The S.D. Myers tribunal said:  ‘Intent is important, but protectionist intent is not necessarily decisive on its own . . . The word “treatment” suggests that practical impact is required to produce a breach of Article 1102, not merely a motive or intent that is in violation of Chapter 11’.107 The case law accords with the position that the less favourable treatment must be motivated, 21.64 at least inferentially, by nationality-​based discrimination. In GAMI, which illustrates a clear example of differential treatment—​some US-​owned sugar mills were expropriated, while some Mexican-​owned sugar mills were not—​the tribunal dismissed the idea that differential treatment alone violated Mexico’s national treatment obligations: ‘[i]‌t is not conceivable that a Mexican corporation becomes entitled to the anti-​discrimination protections of international law by virtue of the sole fact that a foreigner buys a share of it’.108 The difference in treatment had to create the inference that the distinction had been made on the basis of nationality to sustain the claim. The S.D. Myers tribunal was faced with a situation in which Canada’s ban on the export 21.65 of PCB waste was facially neutral, but the alleged practical effect of the ban was to put the claimant at a disadvantage compared with the Canadian PCB waste disposal industry.109 The the determination of prima facie compliance. There is also no mention whatsoever of the concept of nativist protections’). 104  See discussion at ¶¶ 21.74–​79 infra. 105  Feldman, Award, supra note 90, ¶ 183. 106 F. Baetens, Discrimination on the Basis of Nationality:  Determining Likeness in Human Rights and Investment Law, in Investment Law and Comparative Public Law 280, 313 (S. Schill ed., 2010); Reinisch, supra note 43 at 869 (‘Here [in de facto discrimination cases] discriminatory intent, though not required, will add probative value’). 107  S.D. Myers, Award, supra note 48, ¶ 254. 108  GAMI, Award, supra note 96, ¶ 115. 109  Id. ¶ 209.

549

The National Treatment Obligation tribunal concluded that it had to assess ‘whether the practical effect of the measure is to create a disproportionate benefit for nationals over non-​nationals’.110 The tribunal also examined ‘whether the measure, on its face, appears to favour its nationals over non-​nationals who are protected by the relevant treaty’.111 The effect of the measure, coupled with evidence that the ban was motivated at least in part by protectionist motives, led the tribunal to reject Canada’s argument that the ban was simply part of a uniform regulatory regime.112 21.66 The UPS tribunal considered the matter of according treatment to be distinct from the

question of discrimination. Thus, the first question was whether Canada had accorded any treatment whatsoever to either the investor or its investment. The tribunal determined that Canada had indeed accorded treatment to UPS and UPS Canada. In so doing it rejected Canada’s arguments that the only treatment alleged to have been given was the processing of goods shipped by UPS into Canada113 and that the processing did not encompass treatment accorded to UPS or UPS Canada. Such an argument, said the tribunal, ‘would essentially open an enormous hole in the protection of investments and investors’.114 Given the UPS tribunal’s decision with respect to like circumstances, it did not need to consider whether the treatment allegedly given was less favourable or was based on nationality. It did suggest in obiter dicta, however, that the appropriate question would be whether the disparate treatment suggested some nationality-​based motivation: ‘the rationale for providing distribution assistance through Canada Post does not comprise any nationality-​based discrimination’.115

21.67 The tribunal in ADF addressed the question of discrimination only briefly and in obiter dicta

owing to its conclusion that the alleged treatment fell within the government procurement exception to NAFTA Article 1102. The tribunal acknowledged that the facially equal treatment it had identified—​that all steel was treated the same, regardless of ownership—​could hide de facto discrimination. In order to make such a determination, however, the tribunal suggested it would need information, such as evidence that steel fabrication costs were much lower in Canada, to demonstrate that the measure had actual discriminatory effect and had been adopted as a result of a protectionist impulse.116

21.68 The Loewen tribunal addressed national treatment cursorily but confirmed its view that

NAFTA’s national treatment obligation relates only to ‘nationality-​based discrimination and . . . it proscribes only demonstrable and significant indications of bias and prejudice on the basis of national origin, of a nature and consequence likely to have affected the outcome of the trial’.117

21.69 The ADM tribunal found producers of HFCS were discriminated against based on both the

intent and effect of the tax imposed against them.118 The tribunal discerned the intent from Mexico’s desire to protect the Mexican sugar industry,119 and the effect from the more favourable treatment accorded to cane sugar producers.120 The Corn Products tribunal, for its part, also concluded that circumstances demonstrated Mexico’s intent to treat HFCS producers

  S.D. Myers, Award, supra note 48, ¶ 252.   Id. ¶ 252. 112  Id. ¶ 242. 113  UPS, Award, supra note 64, ¶ 85. 114  Id. 115  Id. ¶ 177. 116  ADF, Award, supra note 51, ¶ 157. 117  Loewen, Award, supra note 54, ¶ 139. 118  ADM, Award, supra note 73, ¶ 209. 119  Id. ¶ 210. 120  Id. ¶ 211. 110 111

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III.  National Treatment in Practice differently on the grounds of nationality, although proof of discriminatory intent was not required to sustain the claim.121 In an ironic twist, the tribunal found in Mexico’s assertion of a counter-​measures defence—​that its imposition of the tax should be excused because it was enacted in retaliation for US discrimination against Mexican interests—​evidence of Mexico’s intent to discriminate. ‘If the HFCS tax was intended as a countermeasure targeted against the United States, it had to have been crafted in such a way that it bore especially heavily upon US interests . . . the very fact that such a justification has been advanced amounts to a recognition by Mexico that HFCS producers and suppliers were targeted, in part a least, because of the extent of their links to the United States’.122 In Consortium RFCC v Morocco, an ICSID case, the tribunal suggested that a national treat- 21.70 ment claim must be predicated on distinctions made because of nationality. Consortium RFCC involved tenders made by Italian and Moroccan companies for the concession to construct portions of the highway between Rabat and Fez. The tribunal held that the tenders were objectively different, and the choice between them was made on the basis of objective criteria, thus suggesting no way in which the non-​discrimination provision of the BIT was violated.123 A few tribunals have been more ambiguous about whether a successful national treatment 21.71 claim can rest on differential treatment alone. At bottom, they seem to agree that the differential treatment must give rise to an inference of nationality-​based discrimination to be actionable but would impose a strong presumption in the claimant’s favour that differential treatment is the result of nationality-​based discrimination. In Pope & Talbot, the focus was the allegedly differential effect of the implementation of the 21.72 Softwood Lumber Agreement. Canada allocated quotas to all mills in the covered provinces, whether Canadian or foreign-​owned. Canada argued that Pope & Talbot needed to show that Canadian-​owned mills received a disproportionate advantage, a test similar to that employed in some WTO cases, when compared to US-​owned mills in order to prevail on its national treatment claim. The Pope & Talbot tribunal rejected this approach. Because NAFTA plainly contemplated a case brought by one investor to vindicate its rights, the question was whether that particular investor was at a disadvantage because of the ostensibly neutral government measure.124 Requiring the claimant to gather evidence to permit comparisons between all US-​owned lumber producing companies and all Canadian-​owned lumber producing companies would place too large a burden on the investor, which in turn would be inconsistent with the investment-​liberalizing principles of the NAFTA. Such an approach ‘would hamstring foreign owned investments seeking to vindicate their Article 1102 rights’.125 Nonetheless, the Pope & Talbot tribunal appeared to endorse a requirement that claim- 21.73 ants demonstrate some nationality-​based motivation for the difference in treatment once a claimant had made a preliminary like-​circumstances showing, stating that ‘any difference in treatment [must] be justified by showing that it bears a reasonable relationship to rational policies not motivated by preference of domestic over foreign owned investments’.126 The Feldman tribunal’s decision is also less than clear on the question of whether differential 21.74 treatment alone can sustain a national treatment claim. The tribunal cited the US Statement

  Corn Products, Award, supra note 60, ¶ 138.   Id. ¶ 137. 123  Consortium RFCC, supra note 46, ¶ 75. 124  Id. ¶¶ 56, 71. 125  Id. ¶ 72. 126  Id. ¶ 79 (original emphasis). 121 122

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The National Treatment Obligation of Administrative Action’s description of Article 1102’s purpose being to prevent discrimination ‘by reason of nationality’,127 but also described the plain language of Article 1102 as ‘by its terms suggest[ing] that it is sufficient to show less favorable treatment for the foreign investor than for domestic investors in like circumstances’.128 The Feldman tribunal’s concern, for which it found support in the Pope & Talbot tribunal’s decision, was that requiring proof of nationality-​based discrimination would forestall most de facto national treatment claims. Ultimately, the Feldman tribunal seemed to suggest that some presumption of national-​ origin discrimination must underlie that differential treatment. Like the Pope & Talbot tribunal, it would establish a presumption that differential treatment between similarly situated foreign and domestic investors was a result of nationality-​based discrimination.129 In the end, however, the tribunal found a fairly strong connection between the discrimination and the claimant’s US nationality.130 Mexico offered no explanation for the treatment accorded CEMSA ‘other than the obvious fact that CEMSA was owned by a very outspoken foreigner who had, prior to the initiation of the audit, filed a NAFTA Chapter 11 claim against the Government of Mexico’.131 21.75 The Bayindir v Pakistan tribunal endorsed the approach of Feldman. It described the ap-

proach as objective and rejected any requirement that a claimant prove intent: ‘a showing of discrimination [against] an investor who happens to be a foreigner is sufficient’.132

21.76 The clearest statement in favour of a pure differential impact statement is found in International

Thunderbird Gaming Corporation v Mexico. The Thunderbird tribunal emphasized that Thunderbird need not show that any less favourable treatment accorded it was ‘motivated because of nationality’.133 Notwithstanding this apparent rejection of any nationality-​based reason for the differential treatment, the tribunal also suggested that Thunderbird, in addition to proving the existence of less favourable treatment, also needed to show ‘the reason why there was a less favorable treatment’.134 What reason would suffice to sustain a claim was not addressed.

C. ‘Arbitrary and Discriminatory’ Treatment 21.77 Several investment agreements prohibit ‘arbitrary and discriminatory’ treatment. A threshold

question is whether nationality-​based discrimination is included in that formulation. Most tribunals have concluded that it is, even when there is a separate national treatment provision. Several United States BITs have such dual provisions. The Argentina–​United States BIT is one example; Article II(1) prohibits nationality-​based discrimination, while Article II(2)(b) prohibits a host state from engaging in arbitrary and discriminatory treatment.135 The BITs between Romania and the United States and the Czech Republic and the United States have virtually identical provisions.136   Feldman, Award, supra note 90, ¶ 181.   Id. 129  Id. ¶¶ 183–​84. 130  Id. ¶ 182. 131  Id. 132  Bayindir, Award, supra note 98, ¶ 390. 133  International Thunderbird Gaming Corp. v. Mexico, UNCITRAL, Award (Jan. 26, 2006), ¶¶ 175–​76. 134  Id. ¶ 177 (emphasis added). The Merrill & Ring tribunal discussed, without deciding, whether the purpose of NAFTA art. 1102 is to prevent nationality-​based discrimination, or whether it encompasses differential treatment that is arbitrary and unjustified. Merrill & Ring, Award, supra note 37, ¶ 94. 135  Argentina–​United States BIT, supra note 21. 136  Treaty Between the Government of the United States of America and the Government of Romania Concerning the Reciprocal Encouragement and Protection of Investment (May 28, 1992); Treaty with the Czech and Slovak Federal Republic Concerning the Reciprocal Encouragement and Protection of Investment (the Czech Republic later succeeded to the Agreement) (Oct. 22, 1991). 127 128

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III.  National Treatment in Practice Several of the tribunals in cases brought under the Argentina–​United States BIT have addressed 21.78 claims brought under that provision. In LG&E v Argentina, for example, the claimant argued that gas distribution companies were treated less favourably than other public utility companies in violation of the prohibition against arbitrary and discriminatory treatment. The tribunal held that the nationality-​based aspect of discriminatory treatment was missing: the claimants had not proved that the measures targeted their investments specifically as foreign investments, although the measures did treat gas distribution companies worse than others.137 On the other hand, the Enron v Argentina tribunal did not treat the provision as encompassing nationality-​based discrimination, but only as requiring rational reasons for according different treatment to different sectors: ‘The Tribunal does not find that there has been any capricious, irrational or absurd differentiation in the treatment accorded to the Claimants as compared to other entities or sectors’.138 In Noble Ventures v Romania, the owners of a US-​owned steel mill claimed that judicial meas- 21.79 ures initiated against it were ‘unreasonable or discriminatory’ under the Romania–​United States BIT. The tribunal assumed that the US investor would have to show the measures were ‘directed specifically against a certain investor by reason of his, her or its nationality’ to sustain a claim under the article.139 The claimant could not do so as there was no suggestion that Romanian-​owned ventures that were similarly situated were not also the subject of proceedings initiated by the Romanian government.140 The Lauder v Czech Republic tribunal decided that the Czech Republic–​United States BIT’s 21.80 prohibition on according ‘arbitrary and discriminatory’ treatment required that a claimant show discrimination on the basis of nationality.141 The question arose as the Czech Republic argued that it was not enough for the claimant to show arbitrary treatment; to prevail, the treatment needed to be both arbitrary and discriminatory. The tribunal agreed, and bolstered its conclusion that discriminatory meant nationality-​based discrimination by referring to Clause 3 of the Treaty Annex, which provides that: ‘Consistent with Article II, paragraph 1, the Czech and Slovak Federal Republic reserves the right to make or maintain limited exceptions to national treatment in the sectors or matters it has indicated below’.142 This provision served as textual evidence of the meaning of discrimination. The tribunal also referred to Article II(1) itself (the prohibition against national treatment) as evidence that nationality-​ based discrimination was precluded by the treaty. Furthermore, it said that if Article II(2)(b) required only the showing of arbitrary or discriminatory measures, it would be redundant of Article II(1).143 On that basis, the Lauder tribunal found that the Czech Republic had violated the obligation 21.81 because its refusal to award to a German company a licence to operate a television station in the Czech Republic resulted from fear of the adverse political repercussions should a foreign-​ owned entity be awarded such a licence.144 Mr Lauder did not receive any damages, however, as he and his affiliates were able to structure their holdings to avoid the nationality requirements. Without actual injury, Mr Lauder could not prevail on his claim.145

  LG&E, Award, supra note 20, ¶ 147.   Enron Corp. & Ponderosa Assets LP v. Argentina, ICSID Case No. ARB/​01/​3, Award (May 22, 2007), ¶ 282. The award in Sempra v. Argentina was similar. See Sempra Energy International v. Argentina, ICSID Case No. ARB/​02/​16, Award (Sept. 28, 2007), ¶ 319. 139  Noble Ventures, Award, supra note 20, ¶ 180. 140  Id. 141  Ronald S. Lauder v. Czech Republic, UNCITRAL, Award (Sept. 3, 2001), ¶¶ 219–​20. 142  Id. ¶ 218. 143  Id. ¶ 219. 144  Id. ¶¶ 229–​31. 145  Id. ¶¶ 232–​35. 137 138

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The National Treatment Obligation 21.82 What might be described as Lauder’s companion case, CME v Czech Republic, was brought

by Mr Lauder’s Dutch subsidiary based on the Czech Republic–​Netherlands BIT, which also contained a provision precluding arbitrary or discriminatory measures. That tribunal’s conclusion rested primarily on the expropriation provision of the BIT. Nonetheless, it held that: ‘[t]‌he behaviour of the Media Council also smacks of discrimination against the foreign investor’.146

D. Determining the Level of Treatment that Must Be Accorded a Foreign Investor 21.83 Most investment treaties require that host states accord foreign investments treatment ‘no

less favourable’ than that accorded to domestic investments in like circumstances, while some refer to ‘the same’ or ‘as favourable’ treatment.147 Any of these formulations permit foreign investments to be treated more favourably than domestic investments.148 However, none of them specifies whether a foreign investment must be given the most favourable treatment given to any domestic investment, or whether a state need only establish a level playing field in which foreigners and nationals compete equally. As yet, the ‘most favourable treatment’ argument has not been outcome-​determinative in any case, but some tribunals have been called on to address the point.

21.84 The tribunal in Pope & Talbot v Canada concluded that the national treatment guarantee in

NAFTA Article 1102 required a state to give the foreign investor the best treatment accorded any one domestic investor.149 In coming to its decision, the Pope & Talbot tribunal rejected the contentions of all three NAFTA parties that treatment ‘no less favorable’ did not mean the best treatment accorded to any domestic investor.150

21.85 The Pope & Talbot tribunal was able to engage in further textual analysis because of the por-

tion of NAFTA’s national treatment obligation specifically applicable to state and local governments. NAFTA Article 1102(3) provides: The treatment accorded by a Party under paragraphs 1 and 2 means, with respect to a state or province, treatment no less favorable than the most favorable treatment accorded, in like circumstances, by that state or province to investors, and to investments of investors, of the Party of which it forms a part.

21.86 Does ‘treatment no less favorable than the most favorable treatment accorded’ articulate a

more demanding requirement than the simpler ‘no less favorable’ formulation in the other paragraphs of Article 1102? If so, sub-​national government units would actually have a more stringent obligation than the federal governments, an unusual outcome given the general tendency to impose lesser obligations on sub-​national government units.151 This unlikely result was one of the reasons the Pope & Talbot tribunal concluded that the NAFTA requires host states to afford the most favourable treatment given to any domestic investor.152

21.87 The Feldman tribunal also faced the argument, but because there was only one other entity

in like circumstances with Feldman’s investment, the Feldman tribunal did not in fact decide

  CME Czech Republic B.V. v. Czech Republic, UNCITRAL, Partial Award (Sept. 13, 2001), ¶ 612.  UNCTAD, National Treatment, supra note 1 at 37. 148  Id. at 35–​37. 149  Pope & Talbot, Phase II Merits Award, supra note 56 at ¶ 41. For a discussion of this finding, see Davies, supra note 3 at 141–​44. 150 Pope & Talbot, Phase II Merits Award, supra note 56 at ¶ 39. See also Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12 at 1102.51–​54. 151  See ¶¶ 21.95–​99 infra, for more discussion of the meaning of this provision. 152  Pope & Talbot, Phase II Merits Award, supra note 56, ¶ 40. 146 147

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III.  National Treatment in Practice whether NAFTA’s text required such a determination.153 The Feldman tribunal said that the provision was ‘on its face unclear as to whether the foreign investor must be treated in the most favorable manner provided for any domestic investor, or only with regard to the treatment generally accorded to domestic investors, or even the least favorably treated domestic investor’.154 However, the Feldman tribunal also compared the language in Article 1102 to that in Article 1103, the MFN provision, which clearly provides for a covered investor to receive the same treatment afforded the ‘most-​favored’ nation.155 The implication of this textual analysis is that the national treatment obligation is less onerous. Because the UPS tribunal disposed of the case on like-​circumstances grounds, it did not 21.88 address the issue. In his dissent, Dean Cass suggested that the national treatment obligation required ‘an effective parity’ between foreign and domestic investors and investments.156 His view of parity would preclude a host state from favouring a national entity over foreign entities, even if some domestic entities also received less favourable treatment.157

E. Objective Justifications for Differential Treatment: The Role of Burden Shifting in National Treatment Analysis A claimant bears the burden of proof to sustain his or her claims under international law.158 21.89 Exactly what is required to establish a prima facie case of a national treatment violation is not clear, and most tribunals have given at most limited attention to burden of proof. Moreover, tribunals have not taken a uniform approach to analysing the existence of a national treatment violation so that discerning a general practice is difficult. Implicit in most cases is that the arguments made by the claimant must give rise to an inference that the difference in treatment was attributable to nationality-​based considerations or that the distinction made between apparently similarly situated entities disguises protectionist intent. The main differ­ ence in cases seems to be the ease with which an assumption of discriminatory intent can be established. The Pope & Talbot and Feldman tribunals adopted a burden-​shifting approach that would 21.90 be triggered after a showing of differential treatment—​a conclusion that seems to set a low hurdle for a claimant to establish a prima facie case. The Pope & Talbot tribunal stated that: ‘[d]‌ifferences in treatment will presumptively violate Article 1102(2), unless they have a reasonable nexus to rational government policies that (1) do not distinguish, on their face or de facto, between foreign-​owned and domestic companies, and (2) do not otherwise unduly undermine the investment liberalizing objectives of NAFTA’.159 The Feldman tribunal explicitly embraced a burden-​shifting approach,160 although the dissenting arbitrator took issue with the majority’s conclusion: ‘neither the NAFTA nor international law provide any grounds to account for the fact that, as in this case, the burden of proof should shift to the Respondent’ when the claimant has made a prima facie case.161 Rather, the burden should remain with the claimant at all times.162

  Feldman, Award, supra note 90, ¶ 186.   Id. ¶ 185. 155  Id. 156  UPS, Dissent, supra note 44, ¶ 59. 157  Id. at ¶ 60. 158 S. Rosenne, The Law and Practice of the International Court, 1920–​1996 1083 (1997). 159  Pope & Talbot, Phase II Merits Award, supra note 56, ¶ 78. 160  Feldman, Award, supra note 90, ¶ 177 (quoting United State Measures Affecting Imports of Woven Wool Shirts and Blouses from India, WT/​DS33/​AB/​R, 14 (May 23, 1997)). 161  Feldman, Dissent, supra note 93, 9–​10. 162  Id. 153 154

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The National Treatment Obligation 21.91 The tribunal in Nykomb v Latvia, an ECT case, interpreted international law differently than

did the Feldman dissent. It endorsed a burden-​shifting approach that would be triggered once the claimant had established that it was in like circumstances with a more favourably treated entity. After the claimant makes such a showing, and in accordance with established international law, the burden of proof lies with the Respondent to prove that no discrimination has taken or is taking place. The Arbitral Tribunal finds that such burden of proof has not been satisfied, and therefore concludes that Windau has been subject to a discriminatory measure in violation of Article 10 (1).163

21.92 In UPS, once the dissenting arbitrator had determined that UPS was similarly situated to

Canada Post with respect to the provision of courier services but was subject to less favourable treatment, the burden shifted to Canada to show that the difference in treatment was justified.164 He emphasized that UPS was not challenging Canada Post’s delivery of products using regular postal channels; rather, the question was whether Canada Post’s express mail services were similar to courier services.165 In marked contrast to the determination made by the majority, he suggested that the different characteristics advanced by Canada to explain why mail services were different from courier services not only did not justify less favourable treatment of the latter but actually illustrated that even providing equal treatment to the courier services would not suffice to place courier services on an even playing field with postal services.166 This was because customs inspection of courier imports was actually less costly than the inspection of postal imports.167 Arbitrator Cass did not go so far as to claim that the national treatment obligation in Article 1102 would actually require such equalizing action.168

21.93 A more sophisticated distinction can be found in the Apotex case, where the tribunal dis-

tinguished between the legal burden of proof, which rests with the claimant throughout the case, and the evidential burden of proof, which can shift from one party to another.169 Adopting a burden-​shifting approach is not inconsistent with requiring that the claimant present a prima facie case. In discrimination cases, the respondent ordinarily has access to the evidence that would rebut the presumption established by the investor. Thus, shifting the burden of evidential proof to the respondent makes sense from the standpoint of ensuring procedural fairness.170 The real question is at which stage the burden should shift. Professor Newcombe suggests that the claimant be required to identify the relevant subjects for comparison, demonstrate that it is in like circumstances with the domestic entity with respect to the treatment at issue, and demonstrate that it has received less favourable treatment.171 The burden would then shift to the state to adduce legitimate public policy considerations

  Nykomb, Award, supra note 46, at 34.   Id. ¶¶ 33, 39. 165  Id. ¶¶ 43–​45. 166  Id. ¶¶ 46–​48. 167  Id. ¶ 46–​47. 168  Id. ¶ 48. 169  Apotex, Award, supra note 39, ¶¶ 8.7–​8.9; see also Adel A. Hamadi Al Tamimi v. Sultanate of Oman, ICSID Case No. ARB/​22/​33, Award (Oct. 27, 2015), ¶ 457 (the principle of burden shifting does not obviate the need for a claimant to provide at least some relevant evidence to support his or her claim). 170  In the context of most-​ favored-​nation treatment, see Apotex, Award, supra note 39, ¶ 8.66 (‘Where crucial documents are properly withheld by a respondent State on grounds of strict confidentiality or other like privilege and not ordered for production by a tribunal (on those grounds), how then can the claimant investor discharge the legal burden of providing its positive case under NAFTA Article 1103 [the MFN provision] in regard to factual matters essentially within the exclusive domain of the respondent State?’). The same would hold true for burden shifting in the national treatment context. 171  Newcombe & Paradell, supra note 2, at 163. 163 164

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IV.  Reservations and Exceptions justifying the measure.172 Under this approach, the plaintiff bears the burden of presenting a prima facie case but does not face an insurmountable hurdle. This outcome is a reasonable balance between protecting the ability of the investor to succeed on a national treatment claim and that of the host state to defend itself against allegations of misconduct. Nonetheless, one commentator cautions against granting too much deference to the state when it proffers its justifications for the treatment, counselling the tribunal’s obligation to ensure that the justification makes sense in the context in which it occurs.173

IV.  Reservations and Exceptions Most investment treaties contain national treatment obligations, but most investment treaties 21.94 also contain many exceptions and reservations to those obligations. Reservations and exceptions come in many sizes and shapes, so to speak. Some are temporally focused. Thus, broad reservations, particularly those regarding economic sectors worthy of special treatment, such as telecommunications, aviation, or energy, preserve the ability of a state to take particular actions in future. Others are retrospective and protect existing laws but require that future measures be changed only to accord more favourable treatment for foreign investments.174 Certain business or economic sectors, such as telecommunications, aviation, and energy pro- 21.95 duction, tend to be subject to exceptions.175 A few states have taken broad-​based reservations to permit activity addressing ‘development considerations’.176 In the NAFTA Canada took an exception to protect its cultural industries.177 Some treaties protect measures whose goal is to elevate the status of historically disadvan- 21.96 taged minorities. Thus, in its investment treaties, the United States ‘reserves the right to adopt or maintain any measure according rights or preferences to socially or economically disadvantaged minorities . . ’.178 South Africa did not take any such reservations, and a controversial case filed against it, which was subsequently withdrawn, demonstrates the potential consequences of such an omission. A  group of Italian nationals and a Luxembourg company filed a claim against the Republic of South Africa under the Italy–​South Africa and Belgo-​Luxembourg–South Africa BITs challenging a South African law that modified the mineral rights owned by companies as of 1 May 2004 and gives preferential treatment in the awarding of mining rights and licences to companies that are partially owned by historically disadvantaged South Africans.179 The acts were challenged as violations of fair and equitable treatment and expropriation, rather than as denials of national treatment, although discrimination would probably have played a role had the tribunal analysed the legality of the alleged expropriation.

  Id.  Kurtz, supra note 38, at 276–​77. 174  See, e.g., D. Price, An Overview of the NAFTA Investment Chapter: Substantive Rules and Investor-​State Dispute Settlement, 27 Int’l Lawyer 727, 731 (1993); Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, at 1108.13. 175 UNCTAD, National Treatment, supra note 1, at 45–​46. 176  Id. at 47–​50. 177  NAFTA art. 2106, NAFTA Annex 2106. See generally Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, Article 1108 commentary; O.R. Goodenough, Defending the Imaginary to the Death? Free Trade, National Identity, and Canada’s Cultural Preoccupation, 15 Ariz. J. Int’l & Comp. L. 203 (1998). 178  NAFTA Annex II-​U-​6. 179  See Luke Eric Peterson, More Details Emerge of Miner’s Case Against South Africa, Investment Treaty News (Nov. 30, 2007). 172 173

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The National Treatment Obligation A. State, Provincial, or Municipal Government Measures 21.97 Federal governments whose constituent states have a good deal of autonomy pose special

problems for national treatment obligations and for exceptions to those obligations. These difficulties have more to do with internal domestic politics than international law. It is axiomatic that, under customary international law, federal governments are responsible for the acts of their constituent states. Thus, state or local government measures that violate national treatment obligations contained in an investment treaty entail international responsibility for the federal government. Because local government entities frequently give preferential treatment to local industries, many investment treaties exclude their activities from the treaty’s purview to protect the federal government from liability.

21.98 Some investment treaties have special provisions pertaining to state and local governments

both with respect to exceptions and reservations and with respect to the national treatment obligation itself. NAFTA, for example, excluded from the national treatment obligation existing non-​conforming federal government measures set out in a Schedule to Annex I; existing state or provincial government measures to be identified within two years of NAFTA’s entry into force; and existing local government measures.180 As the deadline for the state and provincial governments to list their existing non-​conforming measures became imminent, the parties agreed simply to a short general reservation excluding all existing state or provincial government measures.181 NAFTA’s national treatment article also contains a specific section identifying the obligations of state and provincial governments, but the import of that provision has not always been clear.

21.99 The ambiguity in the text of NAFTA’s provision respecting state and provincial measures is

problematic on two fronts. First, it has caused confusion regarding the extent of the obligation of the federal government, as discussed above. Secondly, the language does not even clearly explain the obligations borne by the state and provincial governments.

21.100 Article 1102(3) provides that provinces accord foreign investors (and investments) treat-

ment ‘no less favourable than the most favourable treatment accorded, in like circumstances’ to investors (and investments) ‘of the Party of which it forms a part’. If an ‘investor of the Party of which it forms a part’ includes any investor, whether hailing from within or without the province, then it seems that the province can make no distinction between them. Yet this interpretation means that states would have the same obligations as the federal government, and those obligations would have been encompassed in Article 1102(1) and 1102(2). The Pope & Talbot tribunal’s interpretation of this language borrowed the ‘most favorable’ standard from Article 1102(3), but made the obligations of state and provincial authorities and federal authorities uniform. If provinces were to have only the same obligation as federal states, however, there would have been no need to include a specific provision to extend that obligation to the provinces, as international obligations undertaken by the federal government extend to the states. Thus, contrary to the conclusion of the Pope & Talbot tribunal, the better interpretation of Article 1102 is that ‘investor of the Party of which it forms a part’ includes only investors hailing from outside the province. Then the obligation would permit provinces to discriminate in favour of local, in-​province investors

180  See, e.g., NAFTA art. 1108; Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, commentary to art. 1108. 181  NAFTA Trilateral Agreement on Listing State and Provincial Reservations (1996), https://​www.nafta-​ sec-​alena.org/​Portals/​0/​Documents/​en/​NAFTAreservations0001.pdf?ver=2015-​11-​02-​140540-​943 (last visited Nov. 11, 2017); Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12, at 1108.13.

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IV.  Reservations and Exceptions but would require provinces to treat foreign investors the same way it treats the most-​ favoured extra-​provincial investor. Moreover, the United States revised the text of the model BIT commensurate with the inter- 21.101 pretation that permits in-​province discrimination: The treatment to be accorded . . . means, with respect to a regional level of government, treatment no less favorable than the treatment accorded, in like circumstances, by that regional level of government to natural persons resident in and enterprises constituted under the laws of other regional levels of government of the Party of which it forms a part, and to their respective investments.182

Mexico has offered another possible interpretation of Article 1102(3). In an Article 1128 21.102 submission (Article 1128 permits non-​disputing states to file amicus curiae type memorials on matters of NAFTA interpretation), Mexico argued that Article 1102(3) means that the treatment given by one province is not the standard by which to judge treatment given by another province.183 If, for example, Alabama offers tax incentives to lure investment, Florida cannot be required to give similar tax breaks. This interpretation is also consistent with the language of the provision suggested by the United States’ clarification of the language in its 2004 Model BIT.

B. Measures to Protect Health, Safety, and the Environment Many, although not all, investment instruments contain exceptions to national treatment 21.103 obligations for the protection of public health, order, and morals.184 The ECT, for example, contains in Article 24 a general exception for the adoption or enforcement of measures ‘necessary to protect human, animal or plant life or health’.185 On the other hand, NAFTA Chapter 11 is not subject to such a provision. Although Article 2101 contains exceptions virtually identical to those included in Article XX of the General Agreement on Tariffs and Trade (including measures necessary to protect public morals, necessary to protect human, animal, or plant life or health and that relate to the conservations of exhaustible natural resources), Article 2101 does not apply to Chapter 11.186 Notwithstanding this exclusion, however, at least one arbitrator has suggested that the treaty be construed to encompass such an exception. The S.D. Myers tribunal was faced with a situation in which Canada defended its closure of 21.104 the border to the export of PCB waste on the grounds that it had a legitimate desire, consistent with its obligations under the Basel Convention, to maintain its ability to remediate PCB waste in Canada. The tribunal recognized the legitimacy of Canada’s goal but not its means of effectuating that goal: ‘Canada’s right to source all government requirements and to grant subsidies to the Canadian industry are but two examples of legitimate alternative measures’.187 The concurring arbitrator in S.D. Myers would have gone further with respect to incorporating environmental protection objectives into the investment chapter (even though, in the particular case, he found Canada’s arguments unavailing): he would have concluded that Article 2101 applied to Chapter 11, that a legitimate policy goal such as environmental

  2012 U.S. Model BIT art. 3(3). The provision was first modified in the 2004 U.S. Model BIT.   Pope & Talbot Inc. v. Canada, UNCITRAL, Mexican 1128 Submission (Apr. 3, 2000), ¶ 65. 184 UNCTAD, National Treatment, supra note 1, at 44. 185  Energy Charter Treaty art. 24(2)(b)(i). Article 24 does not apply to the prohibition on expropriation. Expropriating property for the reasons listed in art. 24, inter alia, might render the expropriation legal as done to further a public purpose, but would not alleviate the host state’s obligation to pay compensation. 186  NAFTA art. 2101. 187  S.D. Myers, Partial Award, supra note 48, ¶ 255. 182 183

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The National Treatment Obligation protection would justify differential treatment under Article 1102 so long as it was pursued by using the least restrictive means available, and that the precautionary principle could justify measures that violate national treatment.188

C. Measures to Protect Local Culture 21.105 Canada took an exception for cultural industries in the Canada–​US Free Trade Agreement

and maintained that exception in the NAFTA as to the United States and Mexico (it does not apply as between Mexico and the United States).189 Canada has long believed that the encroachment of US products—​including television programmes, books, magazines, newspapers, and audio or video recordings—​on the Canadian market will result in the dilution of Canadian culture.190 The UPS tribunal considered whether Canada’s PAP, under which the government subsidizes Canada Post’s delivery of eligible Canadian publications, fell under this exception.191 The tribunal noted that Canada’s programme of subsidizing postal rates for eligible Canadian publications had two main purposes: ‘to connect Canadians to each other through the provision of accessible Canadian cultural products’ and to ‘sustain and develop the Canadian publishing industry’.192 The majority found first that the PAP was covered by the cultural industries exception to NAFTA.193 It went on to consider, however, whether UPS would have been in like circumstances with Canada Post had it considered the merits of the case and concluded it was not. Only Canada Post had the capacity to deliver to every postal address in Canada. Given this ability, the tribunal found that Canada Post was not in like circumstances with UPS, which had somewhat more limited delivery capabilities.194 Given the objectives of the PAP, Canada was justified in limiting the availability of the subsidy to Canada Post.195

V. Conclusions 21.106 The national treatment obligation is at the core of the international investment law regime.

A  successful national treatment claim is more likely to be based on discriminatory effect, rather than on discriminatory intent, given the difficulty of proving the latter. The primary challenge for any tribunal hearing de facto (and even most de jure) national treatment claims is to determine the appropriate comparator. Is the less favourably treated entity ‘like’ the more favourably treated entity with respect to the treatment at issue? If not, the national treatment claim must fail. Usually the comparators will operate in the same economic sector as the allegedly disfavoured foreign-​owned investment, although this assessment might change depending on the kind of treatment accorded.

21.107 A claimant’s challenge in bringing a national treatment claim is to establish a prima facie

case—​that the investor (or investment) is like a domestic entity whose more favourable   Id. Separate Opinion of Bryan Schwartz, ¶ 129.   NAFTA art. 2106 & Annex 2106. 190 For a general discussion of Canada’s cultural industries exception, see Kinnear, Bjorklund & Hannaford (2009 Update), supra note 12 at 1108.21–​23. See also Culture/​Trade Quandary: Canada’s Policy Options (Dennis Browne ed., 1998); Goodenough, supra note 177, 207–​208. 191  UPS, Award, supra note 64, ¶ 146. 192  Id. 193  Id. ¶ 137. 194  Id. ¶¶ 173–​74. 195  Given its conclusion with respect to the cultural industries exception, the majority did not consider whether the program also fell within the purview of the subsidies exception. The dissenting arbitrator concluded that it did not. 188 189

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V. Conclusions treatment gives rise to an inference of nationality-​based discrimination. Once the claimant has been successful, the evidential burden shifts to the respondent to offer neutral reasons for the difference in treatment. If at the stage of the like circumstances analysis the reasons for the difference in treatment are evident, a tribunal will probably determine that the suggested comparators are not like and terminate the analysis at that stage, thus obviating the need for a state to proffer a non-​discriminatory justification for its measure. National treatment allegations can be used by claimants to paint a contextual picture for 21.108 the rest of their claim, even if those complaints turn out not to be the gravamen of their case. Even though many cases have tended recently to coalesce around the ubiquitous ‘fair and equitable treatment’ obligation, those cases often include allegations of nationality-​based bias, as well as a failure by the host state to meet the investor’s legitimate expectations. In addition, discriminatory treatment is one of the factors involved in assessing whether a state has illegally expropriated a foreign investment. Thus, whether or not it is the crux of an investor’s case, concerns about nationality-​based discrimination are likely to permeate most investment cases.

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22 INDIRECT EXPROPRIATION AND THE RIGHT TO REGULATE Has the Line Been Drawn? Katia Yannaca-​Small*

I. Introduction  II. Basic Concepts of the Obligation to Compensate for Expropriation  III. The Notion of ‘Property’  IV. Legal Instruments and Other Texts  V. Main Sources of Jurisprudence 

A. Degree of Interference with the Property Right  22.51 B. Duration of the Regulation  22.73 C. Economic Impact as the Exclusive Criterion  22.79 D. Character of Governmental Measures and the Police Powers of the State  22.85 E. Proportionality  22.97 F. Interference of the Measure with Reasonable Investment-​backed Expectations  22.109 VII. Conclusion 22.119

22.01

22.06 22.13 22.25 22.35 A. The Iran–​US Tribunal  22.39 B. The European Court of Human Rights  22.42 C. Investor-​state Tribunals  22.46

VI. Criteria Indicating Whether an Indirect Expropriation Has Occurred  22.49

I. Introduction 22.01 It is a well-​recognized rule in international law that the property of aliens cannot be

taken, whether for public purposes or not, without adequate compensation.1 Four decades ago, disputes before courts and the discussions in academic literature focused mainly on the standard of compensation and measuring expropriated value. Divergent views of

*  The author is grateful to Evelyn Wiese, Legal Adviser with CARECEN SFN, former Associate with the International Arbitration Group of Shearman & Sterling LLP until March 2017, for her research and comments on this chapter. 1  See generally, J. Paulsson and Z. Douglas, Indirect Expropriation in Investment Treaty Arbitrations, in Arbitrating Foreign Investment Disputes 145–​58 (N. Horn ed., 2004); M. Reisman & R. Sloane, Indirect Expropriation and Its Valuation in the BIT Generation, in The British Year Book of International Law (2003); A. Reinisch, Expropriation, in The Oxford Handbook of International Investment Law 407–​58 (P. Muchlinski, F. Ortino & C. Schreuer eds., 2008); T. Wälde & A. Kolo, Environmental Regulation, Investment Protection and “Regulatory Taking” in International Law, 50 Int’l & Comp. L.Q. 811 (2001); C. Schreuer, The Concept of Expropriation under the ECT and other Investment Protection Treaties, in Investment Arbitration and the Energy Charter Treaty 108–​58 (C. Ribeiro ed., 2006); K. Yannaca-​Small, Comment on C. Schreuer’s Rapport: Indirect Expropriation and the Right of the Governments to Regulate:  Criteria to Articulate the Difference,  in Investment Arbitration and the Energy Charter Treaty 159–​68 (C. Ribeiro ed., 2006); A. Newcombe & L. Paradell, Law and Practice of Investment Treaties: Standards of Treatment (2009); C. McLachlan, L. Shore & M. Weiniger, International Investment Arbitration, Substantive Principles (2017).

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I. Introduction developed and developing countries2 raised issues regarding the formation and evolution of customary law. Today disputes on direct expropriation—​which were essentially related to the nationalizations 22.02 that marked the 1970s and 1980s—​have been replaced by disputes related to foreign investment regulation and ‘indirect expropriation’. Largely prompted by the numerous cases brought under the North American Free Trade Agreement (NAFTA), the Energy Charter Treaty (ECT), and the approximately 3,300 bilateral investment treaties and free trade agreements with investment chapters, the debate has shifted to indirect expropriation in the context of regulatory measures aimed at protecting the environment, health, and other welfare interests of society. The question that arises is to what extent a government may affect the value of property by regulation, either general in nature or by specific actions in the context of general regulations, for a legitimate public purpose without effecting a ‘taking’ and having to compensate a foreign owner or investor for this act. Defining indirect expropriation in this context has become one of the dominant issues in international investment law.3 An increasing number of arbitral cases and a growing body of literature have shed light on the 22.03 line between the concept of indirect expropriation and governmental regulatory measures not requiring compensation. While case-​by-​case consideration remains necessary,4 certain criteria for determining whether an indirect expropriation requiring compensation has occurred have emerged through international agreements and arbitral decisions. Although the present chapter will focus on the way arbitral tribunals have dealt with indirect 22.04 expropriation claims based on investment agreements, it would also be useful to look at the cross-​fertilization with two other sources of jurisprudence which deal with similar issues, under different circumstances and different legal bases, that is, the US–​Iran Claims Tribunal and the European Court of Human Rights (ECtHR). This chapter presents the issues at stake and (i) describes the basic concepts of the obligation 22.05 to compensate for indirect expropriation; (ii) reviews whether and how legal instruments and

2  A  number of developed countries endorsed the ‘Hull formula’, first articulated by the United States Secretary of State Cordell Hull in response to Mexico’s nationalization of American petroleum companies in 1936. Hull claimed that international law requires ‘prompt, adequate and effective’ compensation for the expropriation of foreign investments. Developing countries supported the Calvo doctrine during the 1960s and 1970s as reflected in major United Nations General Assembly resolutions. In 1962, the General Assembly adopted its Resolution on Permanent Sovereignty over Natural Resources, which affirmed the right to nationalize foreign-​owned property and required only ‘appropriate compensation’. This compensation standard was considered an attempt to bridge differences between developed and developing states. In 1974, the UN General Assembly decisively rejected the Hull formula in favour of the Calvo doctrine in adopting the Charter of Economic Rights and Duties of States. While Article 2(c) repeats the ‘appropriate compensation’ standard, it goes on to provide that in ‘any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalising state and by its tribunals . . .’. Nowadays, the Hull formula and its variations are often used and accepted and considered as part of customary international law. 3  R. Dolzer, Indirect Expropriations: New Developments, 11 Envtl L.J. 64 (2002) (Article of the Colloquium on Regulatory Expropriation organized by New York University, Apr. 25–​27, 2011). 4  See J. Paulsson, ‘Indirect Expropriation: Is the Right to Regulate at Risk?’ Presentation at the Symposium ‘Making the Most of International Investment Agreements: A Common Agenda’, co-​organized by ICSID, OECD, and UNCTAD (Dec. 12, 2005), OECD Paris: (‘[i]‌nternational investment agreements that promise compensation for measures tantamount to expropriation will be hopelessly unreliable unless it is accepted that the competent international tribunals have the authority to exercise their judgment in each case. There is no magical formula, susceptible to mechanical application that will guarantee that the same case will be decided the same way irrespective of how it is presented and irrespective of who decides it. Nor is it possible to guarantee that a particular analysis will endure over time; the law evolves, and so do patterns of economic activity and public regulation’).

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Indirect Expropriation and the Right to Regulate other texts articulate the difference between indirect expropriation and the right of the governments to regulate without compensation; and (iii) identifies a number of criteria which emerge from jurisprudence and state practice for determining whether an indirect expropriation has occurred, and compensation is due.

II.  Basic Concepts of the Obligation to Compensate for Expropriation 22.06 Customary international law does not preclude host states from expropriating foreign invest-

ments provided certain conditions are met. The conditions for a ‘lawful’ expropriation are that the taking of the investment is for a public purpose, as provided by law, in a non-​discriminatory manner and with compensation.

22.07 Expropriation or ‘wealth deprivation’5 can take different forms. It could be direct where an

investment is nationalized or otherwise expropriated6 through formal transfer of title or outright physical seizure. In addition to ‘expropriation’, terms such as ‘dispossession’, ‘taking’, ‘deprivation’, or ‘privation’ are also used.7 Expropriation or deprivation of property could also occur through interference by a state in the use of that property or with the enjoyment of the benefits even where the property is not seized and the legal title to the property is not affected. Such measures taken by the state have a similar effect to expropriation or nationalization and are generally termed ‘indirect’, ‘creeping’,8 or ‘de facto’ expropriation or measures ‘tantamount’ to expropriation.

22.08 However, under international law, not all state measures interfering with property constitute

expropriation. As Ian Brownlie has stated, ‘state measures, prima facie a lawful exercise of powers of governments, may affect foreign interests considerably without amounting to expropriation. Thus, foreign assets and their use may be subjected to taxation, trade restrictions involving licenses and quotas, or measures of devaluation. The assets may be subject to seizure in execution of judgments or liens. While special facts may alter cases, in principle such measures are not unlawful and do not constitute expropriation’.9

22.09 It is an accepted principle of customary international law that, where economic injury re-

sults from a bona fide non-​discriminatory regulation within the police powers of the state,

5  ‘Wealth deprivation’ is a term that, according to Burns Weston, avoids most, if not all, of the major ambiguities and imprecision of the traditional terminology. See B. Weston, ‘Constructive Takings’ under International Law: A Modest Foray into the Problem of ‘Creeping Expropriation’, 16 Va. J. Int’l L. 103, 112 (1975). 6  In general, expropriation applies to individual measures taken for a public purpose while nationalization involves large-​scale takings on the basis of an executive or legislative act for the purpose of transferring property or interests into the public domain. 7 R. Dolzer & M. Stevens, Bilateral Investment Treaties 98 (1995) [hereinafter Dolzer & Stevens]. 8  On this point, Dolzer notes that, ‘ “creeping expropriation” suggests a deliberate strategy on the part of the state, which may imply a negative moral judgment’. See Dolzer, Indirect Expropriation of Alien Property, 1 ICSID Rev.-​FILJ 41, 44 (1986). Reisman and Sloane, supra note 1, note that:  ‘A creeping expropriation . . . denotes . . . an expropriation accomplished by a cumulative series of regulatory acts or omissions over a prolonged period of time, no one of which can necessarily be identified as the decisive event that deprived the foreign national of the value of its investment. Moreover, they may be interspersed with entirely lawful state regulatory actions. By definition, then, creeping expropriations lack the vividness and transparency not only of formal expropriations, but also of many regulatory or otherwise indirect expropriations, which may be identified more closely with a few discrete events. The gradual and sometimes furtive nature of the acts and omissions that culminate in a creeping expropriation tends to obscure what tribunals ordinarily denominate the “moment of expropriation” ’. 9 I. Brownlie, Principles of Public International Law 509 (6th ed. 2003).

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III.  The Notion of ‘Property’ compensation is not required. A state measure will be discriminatory if it results ‘in an actual injury to the alien . . . with the intention to harm the aggrieved alien to favour national companies’.10 The Restatement (Third) of Foreign Relations Law recognizes the nondiscrimination 22.10 rule: ‘One test suggested for determining whether regulation and taxation programs are intended to achieve expropriation is whether they are applied only to alien enterprises’.11 Specifying what distinguishes indirect expropriation from non-​compensable regulation, is a 22.11 question of great significance to both investors and governments: To the investor, the line of demarcation between measures for which no compensation is due and actions qualifying as indirect expropriations (that require compensation) may well make the difference between the burden to operate (or abandon) a non-​profitable enterprise and the right to receive full compensation (either from the host State or from an insurance contract). For the host State, the definition determines the scope of the State’s power to enact legislation that regulates the rights and obligations of owners in instances where compensation may fall due. It may be argued that the State is prevented from taking any such measures where these cannot be covered by public financial resources.12

As R. Higgins wrote in her study on the taking of property by the state, the issue can be 22.12 further refined as the determination of who is to pay the economic cost of attending to the public interest involved in the measure in question. Is it to be the society as a whole, represented by the state, or the owner of the affected property?13

III.  The Notion of ‘Property’ In the context of international law, ‘property’ refers to both tangible and intangible prop- 22.13 erty. Under Article 1139 of the NAFTA, the definition of ‘investment’ covers, among other things, ‘real estate or other property, tangible or intangible [emphasis supplied], acquired in the expectation or used for the purpose of economic benefit or other business purposes’. Similarly, most BITs contain a relatively standard definition of investment14 that also covers intangible forms of property: ‘intellectual property and contractual rights’. The US Free Trade Agreements (FTAs) with Australia, Chile, Colombia, the Dominican Republic, ​ Central America, Korea, Morocco, Oman, Peru, and Singapore provide: ‘An action or series of actions by a Party cannot constitute an expropriation unless it interferes with a tangible or intangible property right or property interest in an investment’.15 One of the first instances in which the violation of an intangible property right was held to 22.14 be an expropriation was the Norwegian Shipowners’ Claims case. Although the United States contended that it had requisitioned only ships and not the underlying contracts, the tribunal

  Dolzer & Stevens, supra note 7.   Restatement (Third) of the Foreign Relations Law of the United States Vol. 1, § 712 (1987). 12  Dolzer & Stevens, supra note 7, at 99. 13  R. Higgins, The Taking of Property by the State: Recent Developments in International Law, 176 Recueil des Cours 276 (1982). 14 See K. Yannaca-​ Small & D. Katsikis, The Meaning of ‘Investment’ in Investment Treaty Arbitration, in Arbitration under International Investment Agreements:  A Guide to the Key Issues ch. 11 (K. Yannaca-​Small ed., 2018). 15  See, e.g., U.S.–​ Australia Free Trade Agreement, signed on March 1, 2004 [Annex 11-​B(2)2]; U.S.–​ Chile Free Trade Agreement, signed on June 6, 2003 [Annex 10-​D(2)]; U.S.–​Dominican Republic–​Central America Free Trade Agreement, signed on August 5, 2004 [Annex 10-​C(2)]. 10 11

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Indirect Expropriation and the Right to Regulate found that a taking of property rights ancillary to those formally taken had occurred and required compensation.16 22.15 In the 1926 case of German Interests in Polish Upper Silesia—​the Chorzów Factory case—​the

Permanent Court of International Justice found that the Polish government’s seizure of a factory plant and machinery was also an expropriation of the closely interrelated patents and contracts of the management company, although the Polish government at no time claimed to expropriate these.17

22.16 However, certain intangible property rights or interests, by themselves, may not be cap-

able of being expropriated but may be viewed instead as elements of value of business. In the 1934 Oscar Chinn case, the Permanent Court did not accept the contention that good will is a property right capable, by itself, of being expropriated. The Permanent Court of International Justice (PCIJ) found that a granting of a de facto monopoly did not constitute a violation of international law, stating that ‘it was unable to see in [Claimant’s] original position—​which was characterised by the possession of customers—​anything in the nature of a genuine vested right’ and that ‘favourable business conditions and good will are transient circumstances, subject to inevitable changes’.18

22.17 The Iran–​United States Claims Tribunal stated that ‘[the Claimants] rely on precedents in

international law in which case measures of expropriation or takings, primarily aimed at physical property, have been deemed to comprise also rights of a contractual nature closely related to the physical property . . .’.19 It has consistently rejected attempts by Iranian respondents to narrowly interpret “property” and has confirmed that shareholder rights, contractual rights and other immaterial rights can be the object of expropriation.20

22.18 Under Protocol 1 of the European Convention on Human Rights, the concept of property is

very broadly defined by reference to all the proprietary interests of an individual. It covers a range of economic interests: ‘movable or immovable property, tangible and intangible interests, such as shares, patents, an arbitration award, the entitlement to a pension, a landlord’s entitlement to rent, the economic interests connected with the running of a business and the

16  Norwegian Shipowners’ Claims (Nor. v. U.S.), Permanent Court of Arbitration (PCA) (Oct. 13 1922), Reports of International Arbitral Awards, Vol. I, 307–​46, United Nations (2006), http://​legal.un.org/​riaa/​ cases/​vol_​I/​307-​346.pdf (last visited Nov. 15, 2017). 17  Chorzów Factory claim (Germ. v. Pol.), Permanent Court of International Justice (P.C.I.J.) Judgment No. 13 (Claim for Indemnity) (Merits) (Sept. 13, 1928) (ser. A. No. 17), Publications of the P.C.I.J., http://​ www.icj-​cij.org/​files/​permanent-​court-​of-​international-​justice/​serie_​A/​A_​17/​54_​Usine_​de_​Chorzow_​ Fond_​Arret.pdf (last visited Nov. 15, 2017). 18 Oscar Chinn (Britain v.  Belgium), Judgment, Permanent Court of International Justice (P.C.I.J.) Judgment No. 61 (Dec. 12, 1934) (ser. A./​B. No. 63), Publications of the P.C.I.J., http://​www.icj-​cij.org/​ files/​permanent-​court-​of-​international-​justice/​serie_​AB/​AB_​63/​01_​Oscar_​Chinn_​Arret.pdf (last visited Nov. 15, 2017). 19  Starrett Housing Corporation, Starrett Systems, Inc., Starrett Housing International, Inc. v. Government of the Islamic Republic of Iran, Bank Omran, Bank Mellat & Bank Markazi, Case No. 24, Interlocutory Award (Dec. 19, 1983), 4 Iran–​U.S. Cl. Trib. Rep.  122, 156–​57 [hereinafter Starrett Housing v.  Iran]; see also Starrett Housing v. Iran, Final Award (Aug. 14, 1987), ¶ 262, 16 Iran–​U.S. C.T.R. 195; Amoco International Finance Corporation v.  Government of the Islamic Republic of Iran, National Iranian Oil Company, National Petrochemical Company & Kharg Chemical Company, Partial Award No. 310-​56-​3 (July 14, 1987), 15 Iran–​U.S. Cl. Trib. Rep. 189–​89 [hereinafter Amoco v. Iran]. 20  Phillips Petroleum Iran v. Government of the Islamic Republic of Iran & National Iranian Oil Company, Iran–​US Claims Tribunal, Case No. 39, Chamber Two, Award No. 425-​39-​2 (June 29, 1989), Vol. XVI Y.B. of Commercial Arbitration 298 (1991), ¶ 75 [hereinafter Phillips v. Iran].

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III.  The Notion of ‘Property’ right to exercise a profession . . . ’. The ECtHR also held that rights under judicial decisions are protected property that can be the object of an expropriation.21 In a BIT arbitration, Saipem v Bangladesh,22 the tribunal also found that a judicial act could 22.19 result in an expropriation23 and, in that case, it recognized that the residual contractual rights under the investment, as crystallized in an ICC Award, were property which could be expropriated. Saipem’s claim was based, inter alia, on the local courts revocation of its right to pursue ICC arbitration of its disputes with the Bangladesh Oil Gas and Mineral Corporation (Petrobangla). Ultimately, the tribunal held that the actions of the Bangladeshi courts amounted to measures tantamount to an expropriation.24 The GEA Group v Ukraine tribunal accepted the reasoning of the Saipem tribunal. However, it rejected the investor’s claim as the investor had not demonstrated that the ‘actions taken by the Ukrainian courts were “egregious” in any way; that they amounted to anything other than the application of Ukrainian law; or that they were somehow deliberately taken to thwart GEA’s ability to recover on the ICC Award’.25 The tribunal in Burlington v Ecuador rejected the claimant’s argument that the non-​compliance 22.20 with an order for provisional remedies constituted expropriation of the claimant’s rights to pursue ICSID arbitration. It noted that an order for provisional remedies only created procedural rights during the arbitration and was not like a court’s decision to annul a final award, such as was in the case of Saipem.26 Tribunals also have examined whether contractual rights were capable of being expropriated, 22.21 often by termination of the investment contract. The tribunal in Vanessa Ventures v Venezuela noted that, ‘in order to amount to an expropriation under international law, it is necessary that the conduct of the State should go beyond that which an ordinary contracting party could adopt’.27 Having found that the termination of the underlying contract was nothing ‘more than legitimate contractual responses to what the tribunal considers to be contractual breaches’,28 the tribunal rejected the investor’s expropriation claim. The tribunal in Inmaris v Ukraine had to determine whether the investor’s contractual right to use a ship had been expropriated following the host State’s one-​year travel ban on the ship. The tribunal concluded that the travel ban amounted to an indirect expropriation in that it destroyed the value of the claimants’ contractual rights, and that the decrease in value due to the lasting damage to claimants’ business was, for all intents and purposes, permanent.29

21  Stran Greek Refineries and Stratis Andreadis v. Greece, Admissibility, merits and just satisfaction, App. No. 13427/​87, Case No. 22/​1993/​417/​496, A/​301-​B, [1994] ECHR 48, (1994) 19 EHRR 293 (Dec. 9, 1994), ¶¶ 59–​62, http://​worldlii.org/​eu/​cases/​ECHR/​1994/​48.html (last visited Nov. 15, 2017). 22  Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No. ARB/​05/​7, Decision on Jurisdiction and Recommendation on Provisional Measures (Mar. 21, 2007) [hereinafter Saipem v. Bangladesh]. 23  Id. 132. 24  Saipem v. Bangladesh, supra note 22, Award (June 30, 2009), ¶ 129. 25 GEA Group Aktiengesellschaft v.  Ukraine, Award (Mar. 31, 2011), ¶ 236. The tribunal in White Industries Australia Limited v. Republic of India used a similar approach and reached a similar conclusion, Final Award (Nov. 30, 2011), ¶¶ 12.3.4.–​12.3.6. 26  Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/​08/​5, Decision on Liability (Dec. 14, 2012), ¶ 481 [hereinafter Burlington v. Ecuador]. 27  Vannessa Ventures Ltd. v. Bolivarian Republic of Venezuela, ICSID case No. ARB(AF)/​ 04/​6, Award (Jan. 16, 2013), ¶ 209 [hereinafter Vannessa v. Venezuela]. 28  Id. 210. 29  Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ICSID Case No. ARB/​08/​ 8), Award (Mar. 1, 2012), ¶¶ 300–​301.

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Indirect Expropriation and the Right to Regulate 22.22 The tribunal in Vigotop v Hungary, invoked the issues relevant to the determination of

whether a contract termination amounts to an expropriation:

i) whether the contract is terminated by the contractual procedure rather than a legislative act or executive decree, and ii) whether there exists a legitimate contractual basis for termination, i.e., a) the contract or the governing law provides the ground for termination, b) the evidence substantiates a factual basis for invoking the contractual ground and c) the State acts in good faith, not abusing its right by a fictitious or malicious exercise of it.30

The opinion of the tribunal was that the claimant’s expropriation claim could only be successful if the claimant could prove that the state terminated the contract in bad faith or abused such right of termination in order to avoid its liability to compensate under the treaty. It ultimately found that the claimant was not able to prove such conduct by the State.31 22.23 In Philip Morris v Uruguay, the claimants argued that the host State’s cigarette packaging

regulations expropriated their ‘brand assets, including the intellectual property and goodwill associated with each of the . . . brand variants’32 and ‘destroyed the brand equity’ of the remaining variants, with a substantial effect on profits.33 The tribunal did not consider each ‘brand asset’ as an ‘individual investment in its own right’34 but rather examined the alleged expropriation of the business as a whole.35 The tribunal observed that the business continued to be profitable and therefore found that no expropriation had occurred.36

22.24 In two NAFTA cases, the tribunals addressed claims concerning market access and market

share and suggested that these might be property rights for purposes of expropriation. In neither case, however, did the tribunals find that market access or market share could be capable themselves of being expropriated nor did either tribunal find that an expropriation had taken place.37

IV.  Legal Instruments and Other Texts 22.25 Protection against indirect expropriation has been included in various forms of international

instruments. Literally all relevant treaties and draft treaties provide for indirect expropriation or measures tantamount to expropriation. The older generation treaties, which are the basis for the majority of the relevant jurisprudence, are mute on the treatment of the non-​compensable regulatory measures. For example, treaties entered into by France refer to ‘measures of expropriation or nationalisation or any other measures the effect of which would be direct or indirect dispossession’. The 1984 US Model BIT mentioned ‘measures tantamount to expropriation or nationalisation’.38 Several US treaties are more specific on these   Vigotop Ltd. v. Hungary, ICSID Case No. ARB/​11/​22, Award (Oct. 1, 2014), ¶ 331.   Id. at 630. 32  Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) & Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay, ICSID Case No. ARB/​10/​7, Award (July 8, 2016), ¶ 180 [hereinafter Philip Morris v. Uruguay]. 33  Id. at 194. 34  Id. at 195. 35  Id. at 283. 36  Id. at 284–​87. 37  Pope & Talbot, Inc. v. Government of Canada, Interim Award (June 26, 2000), ¶¶ 96–​98, [hereinafter Pope & Talbot v. Canada] and S.D. Myers, Inc. v. Government of Canada, Partial Award, I.L.M. 408 (Nov. 13, 2000), ¶ 232 [hereinafter S.D. Myers v. Canada]. See also, e.g., G. White, Nationalization of Foreign Property 49 (1961); The Iran-​United States Claims Tribunal: Its Contribution to the Law of State Responsibility 196–​97 (Richard Lillich, Daniel Magraw & David Bederman eds., 1998). 38  The 2004 and 2012 US Model BITs refer to ‘measures equivalent to expropriation or nationalization’. 30 31

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IV.  Legal Instruments and Other Texts measures: ‘any other measure or series of measures, direct or indirect, tantamount to expropriation (including the levying of taxation, the compulsory sale of all or part of an investment, or the impairment or deprivation of its management, control of economic value) . . ’.39 Article 13 of the ECT provides that, ‘investments of investors of a Contracting Party in the 22.26 Area of any other Contracting Party shall not be nationalized, expropriated or subjected to a measure or measures having effect equivalent to nationalization or expropriation’, except where such measure complies with the rules of customary international law in this matter (public purpose, due process, nondiscrimination, and compensation). Article 1110 of NAFTA protects against the expropriation of foreign investments with the 22.27 following language: 1. No Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment, except: (a) for a public purpose; (b) on a non-​discriminatory basis; (c) in accordance with due process of law and Article 1105(1)40 and (d) on payment of compensation in accordance with [subsequent paragraphs specifying valuation of expropriations and form and procedure of payment].

The OECD Draft Convention on the Protection of Foreign Property and the draft OECD 22.28 Multilateral Agreement on Investment,41 while themselves silent on the non-​compensable regulatory measures, were accompanied by commentaries which did address the issue. Other texts which addressed it are the Harvard Draft Convention on International Responsibility (by Sohn and Baxter) and the Restatement (Third) of the Foreign Relations of the United States which, while the work of scholars and not state practice, constitute an influential elem­ ent of doctrine. The relevant principles for the purposes of the European Convention of Human Rights are 22.29 included in Article 1 of Protocol 1, concluded in 1952 and entered into force in 1954. Though this article does not say so explicitly, it strongly implies that the duty to compensate is not applicable to normal regulation:42 Every natural or legal person is entitled to the peaceful enjoyment of its possessions. No one should be deprived of his possessions except in the public interest and subject to the conditions provided for by the law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

In 1961, the Harvard Draft Convention on the International Responsibility of States for 22.30 Injuries to Aliens, drafted by Louis B Sohn and R R Baxter, assumed a taking to occur in the case of any ‘unreasonable interference with the use, enjoyment or disposal of property as to justify an inference that the owner thereof will not be able to use, enjoy or dispose of the

  Dolzer & Stevens, supra note 7.   Article 1105(1) provides: ‘each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security’. 41  The Multilateral Agreement on Investment (MAI), Report by the Chairman of the Negotiating Group, DAFFE/​MAI(98)17 (May 4, 1998), http://​www1.oecd.org/​daf/​mai/​pdf/​ng/​ng9817e.pdf (last visited Nov. 15, 2017). 42  The jurisprudence attached to the Convention by the Eur. Ct. H.R. has consistently taken this line. 39 40

569

Indirect Expropriation and the Right to Regulate property within a reasonable period of time after the inception of such interference’. In its Article 10(5), it recognized the existence of a category of non-​compensable takings: An uncompensated taking of an alien property or a deprivation of the use or enjoyment of property of an alien which results from the execution of tax laws; from a general change in the value of currency; from the action of the competent authorities of the State in the maintenance of public order, health or morality; or from the valid exercise of belligerent rights or otherwise incidental to the normal operation of the laws of the State shall not be considered wrongful. 22.31 Article 3 of the 1967 OECD Draft Convention on the Protection of Foreign Property,43

states that ‘no Party shall take any measures depriving, directly or indirectly, of his property a national of another Party’ unless four conditions are met, according to recognized rules of international law.44 An accompanying note on the nature of the obligation and its scope states the duty to compensate in a broad way: Article 3 acknowledges, by implication, the sovereign right of a State, under international law, to deprive owners, including aliens, of property which is within its territory in the pursuit of its political, social or economic ends. To deny such a right would be to attempt to interfere with its powers to regulate—​by virtue of its independence and autonomy, equally recognised by international law—​its political and social existence. The right is reconciled with the obligation of the State to respect and protect the property of aliens by the existing requirements for its exercise—​before all, the requirement to pay the alien compensation if his property is taken.

However, subsequent notes make clear that the concept of ‘taking’ is not intended to apply to normal and lawful regulatory measures short of direct taking of property rights, but rather, to misuse of otherwise lawful regulation to deprive an owner of the substance of his rights: 4(a). . . By using the phrase ‘to deprive . . . directly or indirectly . . . in the text of the Article it is, however, intended to bring within its compass any measures taken with the intent of wrongfully depriving the national concerned of the substance of his rights and resulting in such loss (e.g. prohibiting the national to sell his property of forcing him to do so at a fraction of the fair market price)’ (emphasis in original). 4(b)  . . .  Thus in particular, Article 3 is meant to cover ‘creeping nationalisation’ recently practiced by certain states. Under it, measures otherwise lawful are applied in such a way: . . . as to deprive ultimately the alien of the enjoyment of value of his property, without any specific act being identifiable as outright deprivation. As instances may be quoted excessive or arbitrary taxation; prohibition of dividend distribution coupled with compulsory loans; imposition of administrators; prohibition of dismissal of staff; refusal of access to raw materials or of essential export or import licences. 22.32 The commentary to the American Law Institute’s Restatement (Third) of the Foreign

Relations Law of the United States45 was designed to assist in determining, inter alia, how to distinguish between an indirect expropriation and valid government regulation: A state is responsible as for an expropriation of property when it subjects alien property to taxation, regulation, or other action that is confiscatory, or that prevents, unreasonably

43  Draft Convention on Foreign Property (OECD Oct. 12, 1967) 17, https://​www.oecd.org/​investment/​ internationalinvestmentagreements/​39286571.pdf (last visited Nov. 15, 1017). 44  Id. at 18, Notes and Comments to art. 3. The measures in question must be taken (i) in the public interest; (ii) under due process of law; (iii) must not be discriminatory; and furthermore, (iv) just and effective compensation must be paid. 45  Restatement (Third) of the Foreign Relations Law of the United States, supra note 11, § 712, Comment g (1987).

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IV.  Legal Instruments and Other Texts interferes with, or unduly delays, effective enjoyment of an alien’s property or its removal from the state’s territory . . . A state is not responsible for loss of property or for other economic disadvantage resulting from bona fide general taxation, regulation, forfeiture for crime, or other action of the kind that is commonly accepted as within the police power of states, if it is not discriminatory . . . [italics added].

As a response to the growing jurisprudence in this field, the US FTAs with Australia,46 22.33 Chile,47 Dominican Republic–​Central America,48 Morocco,49 Singapore,50 and Peru,51 and the 2012 US model BIT52 provided explicit guidance on what constitutes an indirect expropriation. In the Annexes on expropriation, they state that: The determination of whether an action or series of actions by a Party, in a specific fact situation, constitutes an indirect expropriation, requires a case-​by-​case, fact-​based inquiry that considers, among other factors: (i) the economic impact of the government action, although the fact that an action or series of actions by a Party has an adverse effect on the economic value of an investment, standing alone, does not establish that an indirect expropriation has occurred; (ii) the extent to which the government action interferes with distinct, reasonable, investment-​backed expectations; and (iii) the character of the government action.

In addition, they address indirect expropriation and the right to regulate: ‘[E]‌xcept in rare circumstances, non-​discriminatory regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations’. Canada’s 2004 model Foreign Investment Promotion and Protection Agreement (FIPA)53 also incorporates a clarification of indirect expropriation: Except in rare circumstances, such as when a measure or series of measures are so severe in the light of their purpose that they cannot be reasonably viewed as having been adopted and applied in good faith, non-​discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objectives, such as health, safety and the environment, do not constitute indirect expropriation.

Most recent investment agreements, such as the Transpacific Partnership (TPP),54 EU–​ 22.34 Canada Comprehensive Economic and Trade Agreement (CETA),55 and the Model India

  U.S.–​Australia Free Trade Agreement, signed on March 1, 2004 [Annex 11-​B, art. 4(b)].   U.S.–​Chile Free Trade Agreement, signed on June 6, 2003 (Annex 10-​D). 48  U.S–​Dominican Republic–​Central America Free Trade Agreement, signed on August 5, 2004 (Annex 10-​C). The countries parties to the Agreement are Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States. 49  U.S.–​.Morocco Free Trade Agreement, signed on June 15, 2004 (Annex 10-​B). 50  U.S.–​Singapore Free Trade Agreement, signed on May 6, 2003, Exchange of Side Letters between U.S. Trade Representative Robert Zoellick and Singapore Minister of Trade and Industry George Yeo, on May 6, 2003. 51  U.S.–​Peru Free Trade Agreement, signed on April 12, 2006. 52  For the text of the model 2012 Model BIT, see https://​www.state.gov/​documents/​organization/​188371. pdf (last visited Nov. 15, 2017). 53  For the text of the 2004 Canada FIPA model, see https://​www.italaw.com/​documents/​Canadian2004-​ FIPA-​model-​en.pdf (last visited Nov. 15, 2017). 54  TPP Annex 9-​B, pp. 9–​36, see language in ch. 1 of the present volume, R. Echandi, Bilateral Investment Treaties and Investment Provisions in Regional Trade Agreements: Recent Developments in Investment Rule-​making [hereinafter Echandi, Recent Developments]. 55  CETA Annex 8-​A, pp. 21–​22; see language in ch. 1 by Echandi in this volume, Recent Developments, supra note 54. 46 47

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Indirect Expropriation and the Right to Regulate BIT,56 affirm, as do the IIAs, that, except in rare circumstances, non-​discriminatory regulatory actions by a Party aimed at protecting legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriation. They also set out guidelines and criteria for determining whether, in a particular situation, an indirect expropriation has in fact taken place. The Model India BIT stipulates that: The determination of whether a Measure or a series of Measures have an effect equivalent to expropriation requires a case-​by-​case, fact-​based inquiry, and usually requires evidence that there has been: (i) permanent and complete or near complete deprivation of the value of Investment; and (ii) permanent and complete or near complete deprivation of the Investor’s right of management and control over the Investment and (iii) an appropriation of the Investment by the Host State which results in transfer of the complete or near complete value of the Investment to that Party or to an agency or instrumentality of the Party or a third party.

V.  Main Sources of Jurisprudence 22.35 Although almost every investor-state dispute has included a claim of indirect expropri-

ation, very few of these claims have been successful. Indirect expropriation claims are usually accompanied by a claim based on the violation of fair and equitable treatment, which has a lower threshold and is very often retained.57

22.36 In the early years of the investment arbitration surge, there was a debate over the criteria

which determine whether an indirect expropriation or a taking has occurred. As mentioned, few of the early legal texts had attempted to address directly how to distinguish legitimate non-​compensable regulations having an effect on the economic value of foreign investments and indirect expropriation, requiring compensation. This reflected the difficulty in attempting to lay down simple, clear rules in a matter that is subject to so many varying and complex factual patterns and a preference to leave the resolution of the problem to the development of arbitral or judicial decisions on a case-​by-​case basis.58

22.37 The two most prominent early sources of such decisions were the Iran–​United States Claims

Tribunal and decisions arising under Article 1, Protocol 1 of the European Convention for the Protection of Human Rights. The last fifteen years have seen a further body of jurisprudence,

56  Model Indian BIT, 2015, https://​www.mygov.in/​sites/​default/​files/​master_​image/​Model%20Text%20 for%20the%20Indian%20Bilateral%20Investment%20Treaty.pdf (last visited Mar. 30, 2018). 57  K. Yannaca-​Small, The Fair and Equitable Treatment Standard in Investment Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 20 (K. Yannaca-​Small ed., 2018). 58  Christie wrote in 1962 that: ‘[i]‌t is evident that the question of what kind of interference short of outright expropriation constitutes a “taking” under international law presents a situation where the common law method of case by case development is pre-​eminently the best method, in fact probably the only method, of legal development’. See G. Christie, What Constitutes a Taking of Property under International Law?, in British Yearbook of International Law 307 (1962). Sornarajah noted that the difficulty is ‘in the formulation of a theory that could be used as a predictive device so that there could be guidance as to whether the taking is a compensable or not. Here, though several efforts have been made at devising a theory capable of making the distinction, none has been successful. See M. Sornarajah, The International Law on Foreign Investment (1994). Dolzer, after an extensive review of judicial precedent and state practice, acknowledged that one cannot but admit at this stage that the law of indirect expropriation can be established, at this moment, on the basis of primary sources of international law, only in a very sketchy and rough manner’; see Dolzer, supra note 8.

572

V.  Main Sources of Jurisprudence from cases based on NAFTA, the ECT, and bilateral investment agreements. At the same time, a new generation of investment agreements, including investment chapters of free trade agreements, has developed, that attempt to formulate criteria to articulate the difference between indirect expropriation and non-​compensable regulation. The cross-​fertilization mentioned earlier between the US–​Iran Tribunal and the ECtHR and 22.38 the investment arbitration tribunals is evident in the influence of these two tribunals in the development of investor-​state jurisprudence, although the legal bases and scope are substantially different. These bodies of jurisprudence embody two doctrines which have influenced the investment arbitration tribunals: the ‘effects doctrine’, which focuses on the effect of the governmental measure on the investor (US–​Iran Tribunal), and the ‘proportionality’ doctrine, embraced by the ECtHR, which respects a balance between the various interests at stake and does not impose a disproportionate burden on the Claimants. Investment arbitration tribunals have been influenced by either one or the other of these doctrines and have added to their analysis a classic doctrine of international law, the police powers doctrine. Under this doctrine, governments are traditionally entitled to take private property without compensation in certain circumstances.

A. The Iran–​US Tribunal The Iran–​United States Claims Tribunal was established in 1981 to adjudicate claims by 22.39 nationals of each country following the Iranian Revolution. Its creation was pursuant to the Algiers Declarations which resolved the hostage crisis between Iran and the United States. This ‘modern pioneer of the international takings jurisprudence’59 has dealt with a substantial 22.40 number of claims related to expropriation over a period of almost 30 years. The particularity of the Tribunal, which differentiates it from the investment arbitration tribunals, is that it was established as a result of a single agreement between the parties with the aim of resolving claims between nationals of the two parties, including claims for ‘expropriation or other measures affecting property rights’, in the extraordinary mass-​claims context of the Islamic Revolution.60 Most of those private claims have now been resolved.61 The majority of the expropriation claims it dealt with related to physical seizures or appropriation of property by governmental entities or individuals close to the government or deprivations of property rights, for instance through the appointment by the government of temporary managers.62

59  V. Heiskanen, The Doctrine of Indirect Expropriation in Light of the Practice of the Iran-​ United States Claims Tribunal, 8(2) J. World Investment & Trade 215 (2008). 60  The tribunal’s jurisdiction was established in Article II of the Claims Settlements Declaration, which provides that: ‘An international arbitral tribunal (the Iran–​United States Claims Tribunal) is hereby established for the purpose of deciding claims of nationals of the Unites States against Iran and claims of nationals of Iran against the United States, and any counterclaim which arises out of the contract, transaction or occurrence that constitutes the subject matter of that national’s claim, if such claims and counterclaims . . . arise out of debts, contracts . . . expropriations or other measures affecting the property rights . . .’ (Jan. 19, 1981), reprinted in 1 Iran–​US Cl. Trib. Rep. 9. 61  ‘Almost all of the approximately 4,700 private U.S. claims filed against the Government of Iran at the Tribunal have been resolved and have resulted in more than $2.5 billion in awards to U.S. nationals and companies’ U.S. Department of State, https://​www.state.gov/​s/​l/​3199.htm (last visited Nov. 15, 2017). 62  Sornarajah suggests that ‘although the awards of the Iran-​ United States Claims Tribunal have been a fruitful recent source for the identification of indirect takings, they dealt with takings that took place in the context of a revolutionary upheaval and the propositions the tribunal formulated may not have relevance outside the context of the events that attended the Iranian upheaval following the overthrow of the Shah of Iran’. See supra note 58 at 282. For instance, these actions in context are in many ways different from the sorts of environmental and land-​use regulations that have been subjects of NAFTA or BIT claims.

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Indirect Expropriation and the Right to Regulate 22.41 The tribunal has followed a consistent line guided by the exceptional circumstances under

which it was called to adjudicate. The main features consisted of a particular definition of the notion of deprivation63 and the focus on the effect of the measure on the foreign investor without consideration of the governmental intent—​the ‘sole effect’ doctrine (analysis will follow). Cases such as Tippetts and Starrett Housing set the tone for subsequent decisions. Only in two cases, which were not related to the Islamic revolution, did the Tribunal engage in a legality analysis and evoke the police powers doctrine (Emmanuel Too and Sedco Inc).64

B. The European Court of Human Rights 22.42 The ECtHR was established by the Council of Europe under the Protection of Human

Rights and Fundamental Freedoms Convention, to determine questions brought before it by individual petitioners or signatory states concerning violations of human rights by signatory states. It does not distinguish between foreign and domestic owners,65 and disputes between Contracting States and their own nationals form the large majority of the cases before the Court. However, it refers to the conditions provided by the ‘general principles of international law’ which apply only to foreigners, that is, in case of expropriation, and also refers to the right of the state to regulate. Its distinctions as to compensable and non-​compensable takings on a human rights basis are relevant for international investment law purposes.

22.43 Only very few cases decided by the Court and the Commission targeting foreigners con-

cerned interferences with property rights.66 In one group of cases, the Court refused to decide whether the interference was an expropriation, a control of use, or other interference into property rights.67 In other cases, the Court held that the interferences were control of use and not expropriations.68 In the Lithgow v United Kingdom case, the Court held that the guarantee of protection and standard of compensation will vary depending on whether the applicant is a national of the expropriating state or not: Firstly, [it] enables non-​nationals to resort directly to the machinery of the Convention to enforce their rights on the basis of the relevant principles of international law, whereas otherwise they would have to seek recourse to diplomatic channels or to other available means of dispute settlement to do so.69

63  ‘The Tribunal prefers the term “deprivation” to the term “taking”, although they are largely synonymous, because the latter may be understood to imply that the Government has acquired something of value, which is not required  . . .  A  deprivation or taking of property may occur under international law through interference by a state in the use of that property or with the enjoyment of its benefits, even where legal title to the property is not affected.’ See Tippetts, Abbett, McCarthy & Stratton v.  TAMS-​AFFA Consulting Engineers of Iran, Government of the Islamic Republic of Iran, Civil Aviation Organization, Plan and Budget Organization, Iranian Air Force, Ministry of Defence, Bank Melli, Bank Sakhteman, Mercantile Bank of Iran and Holland, Case No. 7, Award No. 141-​7-​2 (June 22, 1984) [hereinafter Tippetts v. Iran]. 64  See Heiskanen, supra note 59. 65  The European Commission on Human Rights has recognized this repeatedly:  ‘[i]‌ t [the State party] undertakes to secure these rights and freedoms not only to its own nationals and those of other High Contracting Parties but also to nationals of States not parties to the Convention and to stateless persons, as the Commission itself has expressly recognized in previous decisions’. See Austria v. Italy, ECommHR, App. No. 788/​60, 4 Y.B. of the European Convention on Human Rights 116, 140 (1961). 66  For a detailed analysis, see U. Kriebaum, Nationality and the Protection of Property under the European Convention on Human Rights, 6(1) TDM (2009). 67  Eur. Ct. H.R., Beyeler v. Italy, Judgment and Merits, App. No. 33202/​96, ECHR 2000-​I 57, (2001) 33 EHRR 52, Judgment (Jan. 5, 2000); Eur. Ct. H.R., Sovtransavto Holding v. Ukraine, No. 48553/​99, Judgment (July 25, 2002), ECHR 2002-​VII. 68  Eur. Ct. H.R., Rosenzweig and Bonded Warehouses Ltd. v.  Poland, App. No. 51728/​ 99, Judgment (July 28, 2005); Eur. Ct. H.R., Zlínsat, Spol. S.R.O. v. Bulgaria, App. No. 57785/​00, Judgment (June 15, 2006); Eur. Ct. H.R., Bimer S.A. v. Moldova, App. No. 15084/​03, Judgment (July 10, 2007). 69  Lithgow v. United Kingdom, Judgment (July 8, 1986), (ser. A), ¶ 115.

574

V.  Main Sources of Jurisprudence Secondly, although a taking of property must always be effected in the public interest, different considerations may apply to nationals and non-​nationals and there may well be legitimate reason for requiring nationals to bear a greater burden in the public interest than non-​nationals.70

What is important to retain with respect to the ECtHR jurisprudence is that States are given 22.44 a very wide margin of appreciation concerning measures for the public interest and that the ECtHR has recognized that it is for national authorities make the initial assessment71 of the existence of a public concern warranting measures that result in a ‘deprivation’ of property. In addition, the Court has adopted the proportionality approach to ‘deprivations’ or ‘controls’ 22.45 of use of property. It examines whether the interference at issue strikes a reasonable balance between the demands of the general interest of the community and the private interests of the alleged victims of the deprivation and whether an unjust burden has been placed on the Claimant. In order to make this assessment, the Court proceeds into a factual analysis, insisting that precise factors which are needed to be taken into account vary from case to case.

C. Investor-​state Tribunals Although investor-​state tribunals were in uncharted territory when first called upon to re- 22.46 spond to indirect expropriation claims in the context of investment agreements, they have developed a rich body of jurisprudence addressing this type of claim. Both initially and at present, their reasoning has been heavily influenced by existing bodies of jurisprudence, namely the Iran–​US tribunal and the ECtHR. The sole effect doctrine and the proportionality doctrine, imported from the jurisprudence of the Iran–​US tribunal and the ECtHR, were put alongside the police power doctrine in order to determine whether or not a measure was expropriatory and thus required compensation. There are different variations and gradations in the way investor-​state tribunals applied these doctrines, and doing so allowed the development of a number of criteria for determining whether an indirect expropriation has occurred. However, these criteria are subject to a constant evolution since case-​by-​case determination, based on the measures in question and the overall factual and legal context, remains the cornerstone of investment tribunal analysis. As the tribunal in Generation Ukraine v Ukraine72 stated:

22.47

[I]‌t would enhance the sentiment of respect for legitimate expectations if it were perfectly obvious why, in the context of a particular decision, an arbitral tribunal found that a government action or inaction crossed the line that defines acts amounting to an indirect expropriation. But there is no checklist, no mechanical test to achieve that purpose. The decisive considerations vary from case to case, depending not only on the specific facts of a grievance but also on the way the evidence is presented, and the legal bases pleaded. The outcome is a judgment, i.e., the product of discernment, and not the printout of a computer programme.73

The tribunal in Saluka v Czech Republic74 similarly very clearly noted that international law 22.48 has yet ‘to draw a bright and easily distinguishable line between non-​compensable regulations

  Id. 116.   The state margin of appreciation is justified by the idea that national authorities have better knowledge of their society and its needs, and are therefore ‘better placed than [an] international [court] to appreciate what is in the public interest’; see James v. United Kingdom, 98 Eur. Ct. H.R. (ser. A) 9, 32 (1986) [hereinafter James v. UK]. 72  Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/​00/​9, Award (Sept. 16, 2003). 73  Id. 20.29. 74  Saluka Investments B.V. v. Czech Republic, UNCITRAL, Partial Award (Mar. 17, 2006). 70 71

575

Indirect Expropriation and the Right to Regulate on the one hand and, on the other, measures that have the effect of depriving foreign investors of their investment and are thus unlawful and compensable in international law’.75 It went on to state: It thus inevitably falls to the adjudicator to determine whether particular conduct by a state ‘crosses the line’ that separates valid regulatory activity from expropriation. Faced with the question of when, how and at what point an otherwise valid regulation becomes, in fact and effect, an unlawful expropriation, international tribunals must consider the circumstances in which the question arises. The context within which an impugned measure is adopted and applied is critical to the determination of its validity.76

VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred 22.49 Although a few years ago there were differences in the ways tribunals had distinguished le-

gitimate non-​compensable regulations having an effect on the economic value of foreign investments and indirect expropriation requiring compensation, since then there seems to be a conversion. In broad terms, tribunals have identified and have had recourse to the following criteria which look very similar to the ones laid out by the new generation of investment agreements:  (i) the degree of interference with the property right, including the duration of the regulation; (ii) the character of governmental measures, that is, the purpose and the context of the governmental measure; (iii) the proportionality between the public policy objective pursued by a measure and the impact of such measure on the property of the investor; and (iv) the interference of the measure with reasonable and investment-​backed expectations. These criteria are often deeply intertwined with one another in tribunals’ analyses, such that, in certain instances, separating them from one another may impose somewhat artificial distinctions. Similarly, depending on the facts at play in a given arbitration, many tribunals consider only a few, or even a single one of these criteria and pay only glancing, if any, attention to the others. Nonetheless, they each represent a separate concern that may inform a tribunal’s determination as to whether indirect expropriation has occurred.

22.50 As the tribunal in Archer Daniels v Mexico77 stated:

[O]‌ther factors may be taken into account, together with the effects of the government’s measure, including whether the measure was proportionate or necessary for a legitimate purpose; whether it discriminated in law or in practice; whether it was not adopted in accordance with due process of law; or whether it interfered with the investor’s legitimate expectations when the investments was made.78

A. Degree of Interference with the Property Right 22.51 Particularly when confronted with allegations of indirect expropriation, which takes more

subtle forms than direct expropriation, tribunals often look to the degree to which claimants’ property rights have been affected by government conduct to determine whether such conduct is expropriatory. This inquiry tends to focus on the severity of the economic impact that

  Id. at 264.   Id. at 265. 77  Archer Daniels Midland Company & Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/​04/​5, Award, Redacted version (Nov. 21, 2007). 78  Id. at 250. 75 76

576

VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred alleged acts of indirect expropriation cause, and the duration of the regulatory actions. The more temporary a government action, or its effect, the less likely it is to be deemed to constitute indirect expropriation. However, few tribunals have considered the economic impact to the investment as an exclusive criterion with no reference to the government’s intent. Most international decisions treat the severity of the economic impact caused by a gov- 22.52 ernment action as an important element in determining whether it rises to the level of an expropriation requiring compensation. International tribunals have often refused to require compensation when the governmental action did not remove essentially all or most of the property’s economic value. There is broad support for the proposition that the interference has to be substantial in order to constitute expropriation, that is, when it deprives the foreign investor of fundamental rights of ownership or when it interferes with the investment for a significant period of time. Several tribunals have found that a regulation may constitute expropriation when it substantially impairs the investor’s economic rights, that is, ownership, use, enjoyment, or management of the business, by rendering them useless. Without such substantial impairment, mere restrictions on the property rights do not constitute takings. The ECtHR has found deprivation where the investor has been definitely and fully deprived of the ownership of his/​her property. If the investor’s rights have not disappeared but have only been substantially reduced, and the situation is not ‘irreversible’, there will be no ‘deprivation’ under Article 1, Protocol 1 of the European Convention of Human Rights.79 The Iran–​United States Claims Tribunal,80 in Starrett Housing v Iran,81 which dealt with the 22.53 appointment of Iranian managers to an American housing project, concluded that an expropriation had taken place: [I]‌t is recognised by international law that measures taken by a State can interfere with property rights to such an extent that these rights are rendered so useless that they must be deemed to have been expropriated, even though the State does not purport to have expropriated them and the legal title to the property formally remains with the original owner.

In the Tippetts v Iran82 case, the tribunal found an indirect expropriation because of the ac- 22.54 tions of a government-​appointed manager, rather than because of his appointment per se83 and equated that deprivation of property rights with a taking of property.84 The tribunal said: While assumption of control over property by a government does not automatically and immediately justify a conclusion that the property has been taken by the government, thus requiring compensation under international law, such a conclusion is warranted whenever events demonstrate that the owner was deprived of fundamental rights of ownership and it appears that the deprivation is not merely ephemeral . . .85

79  See Handyside v. United Kingdom, 24 Eur. Ct. H.R. (ser. A) 29 (1976); Poiss v. Austria, 117 Eur. Ct. H.R. (ser. A) 84, 108 (1987); Matos e Silva, Lda. v. Portugal, App. No. 15777/​89, 24 Eur. Ct. H.R. Rep. 573, 600–​601 (1996). See, for discussion, H. Ruiz Fabri, The Approach Taken by the European Court of Human Rights to the Assessment of Compensation for “Regulatory Expropriations” of the Property of Foreign Investors, 11(1) N.Y.U. Envt’l. L.J. 148 (2002). 80  For details on these cases, see G.H. Aldrich, What Constitutes a Compensable Taking of Property? The Decisions of the Iran-​United States Claim Tribunal, 88 Am. J. Int’l L. 585 (1994). 81  Starrett Housing v. Iran, supra note 19, at 154. 82  Tippetts v. Iran, supra note 63, at 226. 83  While Tippetts was able to work with the Iranian appointed manager for some months and reestablished its rights as a partner, its personnel left Iran following the seizure of the American Embassy and the new manager broke off communications with Tippetts by refusing to respond to its letters and telexes. 84  As noted in this case, the tribunal said that it ‘prefers the term “deprivation” to the term “taking,” although they are largely synonymous, because the latter may be understood to imply that the government has acquired something of value, which is not required’; see Tippetts, supra note 63, at 225. 85  Id.

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Indirect Expropriation and the Right to Regulate 22.55 The ECtHR, in the most widely cited case under Article 1, Protocol 1 of the European Convention

of Human Rights, Sporrong and Lönnroth v Sweden,86 did not find indirect expropriation to have occurred as a result of land use regulations that affected the claimant’s property because, [a]‌lthough the right [of peaceful enjoyment of possessions] lost some of its substance, it did not disappear . . . The Court observes in this connection that the [claimants] could continue to utilise their possessions and that, although it became more difficult to sell properties [as a result of the regulations], the possibility of selling subsisted.

22.56 In the NAFTA context, in the Pope & Talbot v Canada case,87 the tribunal found that, although

the introduction of export quotas resulted in a reduction of profits for the Pope & Talbot company, sales abroad were not entirely prevented and the investor was still able to make profits. It stated, ‘. . . while it may sometimes be uncertain whether a particular interference with business activities amounts to an expropriation, the test is whether the interference is sufficiently restrictive to support a conclusion that the property has been taken from the owner . . . ’.88

22.57 In S.D. Myers v Canada, S.D. Myers, a US company which operated a PCB remediation

facility in the United States, alleged that Canada had violated NAFTA Chapter 11 by banning the export of PCB waste to the United States. This tribunal also distinguished regulation from expropriation primarily on the basis of the degree of interference with property rights: ‘expropriations tend to involve the deprivation of ownership rights; regulations [are] a lesser interference’.89

22.58 In Marvin Roy Feldman Karpa v Mexico,90 CEMSA, a registered foreign trading company and

exporter of cigarettes from Mexico, was allegedly denied the benefits of the law that allowed certain tax refunds to exporters and claimed expropriation under NAFTA Article 1110. The tribunal found that there was no expropriation since ‘the regulatory action has not deprived the Claimant of control of his company, interfered directly in the internal operations of the company or displaced the Claimant as the controlling shareholder. The Claimant is free to pursue other continuing lines of business activity . . .91 Of course, he was effectively precluded from exporting cigarettes . . . However, this does not amount to Claimant’s deprivation of control of his company’.92

86  In this case, long-​term expropriation permits (23 and 8 years) had been granted by the city of Stockholm in respect of the applicant’s properties. These did not of themselves expropriate the property, but gave local authorities the power to do so, should they so decide in the future. Sporrong and Lönnroth complained that it was impossible for them to sell these properties and that it amounted to an interference with their right to peaceful enjoyment of possessions. The Swedish government, by contrast, emphasized the public purpose of the permits system and the intentions of the city of Stockholm to make improvements for the general good. See Sporrong and Lonnroth v. Sweden, Eur. Ct. H.R. App. No. 7152/​75 (1983) 5 EHRR 35 (1982); see also Higgins, supra note 13, at 276–​77. 87  Pope & Talbot v. Canada, supra note 37. 88  In addition, the tribunal stated that: ‘Regulations can indeed be characterised in a way that would constitute creeping expropriation . . . Indeed, much creeping expropriation could be conducted by regulation, and a blanket exception for regulatory measures would create a gaping loophole in international protection against expropriation’; see id. at 99. 89  The tribunal added that: ‘the distinction between expropriation and regulation screens out most potential cases of complaints concerning economic intervention by a state and reduces the risk that governments will be subject to claims as they go about their business of managing public affairs’. See S.D. Myers v. Canada, supra note 37, ¶ 282. 90  In this case, Marvin Feldman, a United States citizen, submitted claims on behalf of CEMSA. See Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Award (Dec. 16, 2002) [hereinafter Marvin Roy Feldman v. Mexico]. 91  Id. ¶ 152. 92  Id. ¶ 142.

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred The tribunal in Chemtura v Canada also examined whether the host State measure had ‘sub- 22.59 stantially deprived the investor of the benefit of the investment’.93 It noted that such determination is a ‘fact-​sensitive exercise to be conducted in the light of the circumstances of each case’ and that ‘it would make little sense to state a percentage or a threshold that would have to be met for a deprivation to be “substantial” as such modus operandi may not always be appropriate’.94 The tribunal ultimately rejected Chemtura’s expropriation claim. Almost every single BIT tribunal has also retained the criterion of the severity of the impact 22.60 to qualify an act as an expropriation. 95 In CME v The Czech Republic,96 CME had purchased a joint venture media company in the 22.61 Czech Republic and alleged, inter alia, that the actions of the national Media Council were a breach of the obligation of the [host country] not to deprive the investor of its investment.97 The tribunal, citing, inter alia, the Tippetts and Metalclad cases, found that an expropriation had occurred because ‘the Media Council’s actions and omissions . . . caused the destruction of the [joint-​venture’s] operations, leaving the [joint venture] as a company with assets, but without business’.98 It stated also that, although ‘regulatory measures are common in all types of legal and economic systems in order to avoid use of private property contrary to the general welfare of the host state’,99 the administrative measures taken by the host country did not fall under this category. It therefore concluded that: ‘Expropriation of [the company’s] investment is found as a consequence of the [host country’s] actions and inactions as there is no immediate prospect at hand that the [joint venture] will be reinstated in a position to enjoy an exclusive use of the licence . . .’.100 In Occidental v Ecuador,101 Occidental claimed that the Ecuadorian authorities’ refusal to re- 22.62 fund to Occidental the value-​added tax, to which it was entitled under Ecuadorian law, constituted an expropriation. The tribunal made reference to the Metalclad102 and CME cases103 and held that ‘Ecuador did not adopt measures that could be considered as amounting to direct or indirect expropriation’ since: ‘In fact, there has been no deprivation of the use . . . of the investment, let alone measures affecting a significant part of the investment. The criterion of ‘substantial deprivation’ under international law identified in Pope & Talbot is not present in this case’.104 In CMS v Argentina,105 the indirect expropriation claim concerned the suspension by 22.63 Argentina of a tariff adjustment formula for gas transportation applicable to an enterprise 93  Chemtura Corporation v. Government of Canada (UNCITRAL) (formerly Crompton Corporation v. Government of Canada), Award (Aug. 2, 2010), ¶ 247. 94  Id. at ¶ 249. 95  See also AWG Group Ltd. v. Argentine Republic (UNCITRAL), Decision on Liability (July 30, 2010), ¶ 134; RosInvestCo UK Ltd. v.  Russian Federation, SCC Case No. V079/​2005, Final Award (Sept. 12, 2010), ¶ 625; Mamidoil Jetoil Greek Petroleum Products S.A. v. Republic of Albania, ICSID Case No. ARB/​ 11/​24), Award (Mar. 30, 2015), ¶ 559. 96  CME Czech Republic B.V. v. Czech Republic UNCITRAL, Partial Award (Sept. 13, 2001). 97  Article 5 of the 1991 Netherlands–​Czech Republic BIT. 98  CME v. Czech Republic, supra note 96, ¶ 591, at 166. 99  Id. ¶ 603, at 170. 100  Id. ¶ 607, at 171. 101  Occidental Exploration and Production Co. v. Republic of Ecuador, LCIA Case No. UN3467, Award (July 1, 2004), ¶¶ 80–​92 [hereinafter Occidental v. Ecuador]. 102  Metalclad Corporation v. United Mexican States, ICSID Case No. ARB(AF)/​97/​1, Award, (Aug. 30, 2000) [hereinafter Metalclad v. Mexico]. 103  CME v. Czech Republic, supra note 96. 104  Pope & Talbot v. Canada, supra note 37, ¶ 89. 105  CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/​ 01/​8, Award (May 12, 2005), ¶ 262.

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Indirect Expropriation and the Right to Regulate in which the claimant had an investment. The tribunal described its task as follows: ‘[t]‌he essential question is . . . to establish whether the enjoyment of the property has been effectively neutralised. The standard that a number of tribunals have applied in recent cases where indirect expropriation has been contended is that of substantial deprivation’. Although the tribunal recognized that the disputed measures had an important effect on the claimant’s business, it found no substantial deprivation and thus no breach of the expropriation article in the US–​Argentina BIT had occurred. It noted that: ‘the investor is in control of the investment; the government does not manage the day-​to-​day operations of the company; and the investor has full ownership and control of the investment’.106 22.64 In Mobil v Venezuela,107 the claimants alleged that the government of Venezuela had enacted

a series of regulatory measures affecting their investments in oil prior to the government’s direct expropriation, that were tantamount to indirect expropriation. These measures included increased royalties, an extraction tax and an increased income tax. In finding that these measures did not constitute indirect expropriation, the tribunal stated that: Under international law, a measure which does not have all the features of a formal expropriation may be equivalent to an expropriation if it gives rise to an effective deprivation of the investment as a whole. Such a deprivation requires either a total loss of the investment’s value or a total loss of control by the investor of its investment, both of a permanent nature.108

22.65 However, in Vivendi v Argentina II,109 the tribunal concluded that the measures taken by the

Province of Tucumán undermined the legitimacy of the Concession Agreement and deprived the investment of its economic use. It held that: Paraphrasing the words of the Tecmed, CME, Santa Elena, and Starrett Housing tribunals, Claimants were radically deprived of the economic use and enjoyment of their investment, the benefits of which (i.e. the right to be paid for services provided) had been effectively neutralised and rendered useless . . . By leaving Claimants with no other rational choice, we conclude that the Province thus expropriated Claimants’ right of use and enjoyment of their investment under the Concession Agreement.110

22.66 In Sempra v Argentina,111 although the tribunal found that many of the measures discussed

had a very adverse effect on the conduct of the business concerned, this was a question addressed by the treaty in the context of other safeguards of protection. It stated that: ‘A finding of indirect expropriation would require more than adverse effects. It would require that the investor no longer be in control of its business operation, or that the value of the business have been virtually annihilated. This is not the case in the present dispute’.112

22.67 Several recent tribunals did not limit the deprivation to the economic value of the investment.

In Gemplus v Mexico,113 the tribunal stated simply that ‘an indirect expropriation occurs if the state deliberately deprives the investor of the ability to use its investment in any meaningful

  Id. ¶ 263.   Venezuela Holdings B.V. et al. (case formerly known as Mobil Corporation, Venezuela Holdings, B.V., et al.) v. Bolivarian Republic of Venezuela (ICSID), Award (Oct. 9, 2014). 108  Id. ¶ 286. 109  Compañíá de Aguas del Aconquija S.A. and Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/​97/​3, Award (Aug. 20, 2007). 110  Id. 7.5.34. 111  Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/​02/​16, Award (Sept. 28, 2007) [hereinafter Sempra v. Argentina]. 112  Id. 285. 113  Gemplus, S.A., SLP, S.A. & Gemplus Industrial, S.A. de C.V. v. United Mexican States, ICSID Case No. ARB(AF)/​04/​3  & ARB(AF)/​04/​4, Award (June 16, 2010), ¶¶ 8–​23 (emphasis added) [hereinafter Gemplus v. Mexico]. 106 107

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred way’ (emphasis supplied). Under this analysis, it is not simply the loss of an investment’s economic value, but more broadly an investment’s loss of potential for meaningful utility in the face of government regulatory actions that determines whether the investment has been indirectly expropriated. In Deutsche Bank v Sri Lanka,114 the tribunal pointedly suggested that economic loss is not neces- 22.68 sarily a requirement in order to prove that expropriation has occurred, stating: [T]‌he absence of economic loss or damage is in the first place a matter of causation and quantum –​rather than a necessary prerequisite in the cause of action of expropriation itself. Therefore, the suffering of substantive and quantifiable economic loss by the investor is not a precondition for the finding of an expropriation . . .

In El Paso v Argentina, the tribunal considered the neutralization of the use of the investment as 22.69 a necessary condition for indirect expropriation and noted that the loss of control, rather than the mere loss of value is the crucial element: ‘[i]‌t is generally accepted that the decisive element in an indirect expropriation is the “loss of control” of a foreign investment, in the absence of a physical taking . . .’ and that ‘a mere loss in value of the investment, even if important, is not an indirect expropriation’. 115 The Burlington v Ecuador and Total v Argentina116 tribunals, however, clearly stated that the loss 22.70 of economic value is vital to determining whether expropriation occurred—​with the Burlington tribunal finding that loss of value should be distinguished from an investor’s loss of control over its investment. On this point, the tribunal stated: The loss of viability does not necessarily imply a loss of management or control. What matters is the capacity to earn a commercial return. After all, investors make investments to earn a return. If they lose this possibility as a result of a State measure, then they have lost the economic use of their investment . . . It must be shown that the investment’s continuing capacity to generate a return has been virtually extinguished.117

The Total tribunal similarly found a loss of economic value to be key to finding that expropriation has occurred, stating: the Tribunal considers that under international law a measure which does not have all the features of a formal expropriation could be equivalent to an expropriation if an effective deprivation of the investment is thereby caused. An effective deprivation requires, however, a total loss of value of the property such as when the property affected is rendered worthless by the measure, as in case of direct expropriation, even if formal title continues to be held.118

However, it considered a loss of investor control to also be vital to determining that indirect expropriation has occurred. On this count, it stated that: ‘[T]‌he mere loss of value of an investment due to host State measures without deprivation of control is not a sufficient basis to find an unlawful indirect expropriation’.119

114  Deutsche Bank AG v. Democratic Socialist Republic of Sri Lanka, ICSID Case No. ARB/​09/​2, Award (Oct. 31, 2012), ¶ 505 [hereinafter Deutsche Bank v. Sri Lanka]. 115  El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/​01/​15, Award (Oct. 31, 2011), ¶ 245 [hereinafter El Paso v. Argentina]. 116  Total S.A. v. Argentine Republic, ICSID Case No. ARB/​04/​1, Decision on Liability (Dec. 27, 2010), ¶ 195 [hereinafter Total v. Argentina]. 117  Burlington v. Ecuador, supra note 26, ¶¶ 397–​99. 118  Total v. Argentina, supra note 116, ¶ 195. 119  Id. at 341.

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Indirect Expropriation and the Right to Regulate 22.71 Under the ECT, in Nykomb v Latvia,120 the claimant contended, inter alia, that the non-​

payment of double tariffs by the state-​owned purchaser of power from the claimant’s cogeneration plants constituted an indirect expropriation, since it allegedly resulted in a substantial loss of sales income, making the enterprise economically nonviable and its investment worthless. While the claimant prevailed on other grounds, regarding the indirect expropriation claim, the tribunal found that: [‘r]egulatory takings’ may under the circumstances amount to expropriation or the equivalent of an expropriation. The decisive factor for drawing the border line towards expropriation must primarily be the degree of possession taking or control over the enterprise the disputed measures entail. In the present case, there is no possession taking of [the Claimant’s wholly-​owned subsidiary] or its assets, no interference with the shareholder’s rights or with the management’s control over and running of the enterprise—​apart from ordinary regulatory provisions laid down in the production license, the off-​take agreement, etc.

22.72 Similarly, under the ECT, in Electrabel v Hungary,121 Electrabel, a Belgian company, alleged

that Hungary indirectly expropriated its investment when it terminated a Power Purchase Agreement that had led Electrabel to invest in a wholly-​owned Hungarian company that operated the country’s largest power plant. The tribunal rejected Electrabel’s indirect expropriation claim, stating that, to find indirect expropriation: ‘[There is a] requirement under international law for the investor to establish the substantial, radical, severe, devastating or fundamental deprivation of its rights or the virtual annihilation, effective neutralisation or factual destruction of its investment, its value or enjoyment’.122

B. Duration of the Regulation 22.73 The duration of the regulation has been often used to measure whether the regulation at issue

had a severe enough impact on a property right to constitute a taking.123, 124

22.74 The Iran–​United States Claims Tribunal has acknowledged this was an issue, but it has had

little difficulty in finding that the appointment of ‘temporary’ managers may constitute a taking of property, when the consequent deprivation of property rights is not ‘merely ephemeral’ (in the Tippetts v Iran, Phelps Dodge v Iran, and Saghi v Iran cases125).

22.75 In S.D. Myers v Canada, the NAFTA tribunal accepted that ‘in some contexts and circum-

stances it would be appropriate to view a deprivation as amounting to an expropriation even if it were partial and temporary’.126 However, it concluded that Canada’s initiative was only valid for a time. Under these circumstances, ‘an opportunity was delayed’,127 but no indirect expropriation could be found.

120 Nykomb Synergetics Technology Holding AB v.  Republic of Latvia (SCC) Award (Dec. 16, 2003), at 4.3.1. 121 Electrabel S.A.  v.  Republic of Hungary, ICSID Case No. ARB/​ 07/​19, Decision on Jurisdiction, Applicable Law and Liability (Nov. 30, 2012) [hereinafter Electrabel v. Hungary]. 122  Id. ¶ 6.62. 123  J.M. Wagner, International Investment, Expropriation and Environmental Protection, 29(3) Golden Gate U. L. Rev. 465 (1999). 124  Professor Christie, in his 1962 article, supra note 58, discusses when a ‘temporary seizure’ ripens into an expropriation. 125 Tippetts v.  Iran, supra note 63; Phelps Dodge International Corp. v.  Government of the Islamic Republic of Iran, Case No. 99, Award (Dec. 19, 1986); Saghi v. Government of the Islamic Republic of Iran, Case No. 298, Award (Jan. 12, 1987). 126  S.D. Myers v. Canada, supra note 37, ¶ 283. 127  Id. ¶ 287.

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred In Wena v Egypt,128 the tribunal found that the seizure of Wena’s hotel lasting for almost a year 22.76 was not ‘ephemeral’ but amounted to an expropriation.129 In its Decision on Interpretation, the tribunal held that: It is true that the Original Tribunal did not explicitly state that such an expropriation totally and permanently deprived Wena of its fundamental rights of ownership. However, in assessing the weight of the actions described above, there was no doubt in the Tribunal’s mind that the deprivation of Wena’s fundamental rights of ownership was so profound that the expropriation was indeed a total and permanent one.130

In LG&E v Argentina,131 the tribunal also held that the duration of the measure is an element 22.77 to be taken into account and that the permanent character of the interference leads to an expropriation: Similarly, one must consider the duration of the measure as it relates to the degree of interference with the investor’s ownership rights. Generally, the expropriation must be permanent, that is to say, it cannot have a temporary nature . . .132  . . .  without a permanent severe deprivation of LG&E’s rights with regard to its investment, or almost complete deprivation of the value of LG&E’s investment, the Tribunal concludes that these circumstances do not constitute expropriation.133

The tribunal in Tza Yap Shum v Peru134 stated that the impact of a measure over the invest- 22.78 ment must be permanent or at least not temporary or ephemeral in order to give rise to a finding of expropriation.

C. Economic Impact as the Exclusive Criterion There is no serious doubt that the severity of the impact upon the legal status and the prac- 22.79 tical impact on the investor’s ability to use and enjoy his/​her property are among the main factors in determining whether a regulatory measure effects an indirect expropriation. More controversial ‘is the question of whether the focus on the effect will be the only and exclusive relevant criterion—​“sole effect doctrine”—​or whether the purpose and the context of the governmental measure may also enter into the takings analysis’.135 The outcome in any case may be affected by the specific wording of the particular treaty provision. From the doctrine and case examination, it seems, however, that a balanced approach is predominant. In addition, the ‘sole effect’ doctrine is not likely to represent the intent of the government parties to the investment protection agreements. A few cases have focused on the effect on the owner as the main factor in discerning a regu- 22.80 lation from a taking. As mentioned before, this is one of the main characteristics of the Iran–​US Tribunal’s jurisprudence. In the Tippetts case, the tribunal held that: ‘[t]‌he intent of

128  Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​98/​4, Award (Dec. 8, 2000), 41 I.L.M. 896 [hereinafter Wena v. Egypt]. 129  Id. 99. 130  Id. Decision on Interpretation (Oct. 31, 2005), ¶ 120. 131  LG&E Energy Corp., LG&E Capital Corp. & LG&E International, Inc. v. Argentina, ICSID Case No. ARB/​02/​1, Decision on Liability (Oct. 3, 2006) [hereinafter LG&E v. Argentina]. 132  Id. 151. 133  Id. 200. 134  Señor Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/​07/​6, Award (July 7, 2011), ¶ 163 [hereinafter Tza Yap Shum v. Peru]. 135 Dolzer, supra note 3, ¶ 79.

583

Indirect Expropriation and the Right to Regulate the government is less important than the effects of the measures on the owner, and the form of the measures of control or interference is less important than the reality of their impact’. 22.81 In the Phelps Dodge case,136 a transfer of management was made pursuant to a pre-​revolutionary

law designed to prevent the closure of factories, ensure payments due to the workers, and protect any debts owed to the Government, which in this case included loans made by a bank that had been nationalized in 1979. Citing Tippetts, the Iran–​United States tribunal stated: The Tribunal fully understands the reasons why the respondent felt compelled to protect its interests through this transfer of management, and the Tribunal understands the financial, economic and social concerns that inspired the law pursuant to which it acted, but those reasons and concerns cannot relieve the Respondent of the obligation to compensate Phelps Dodge for its loss.

22.82 In the NAFTA context, in the case Metalclad v Mexico, Metalclad alleged that its subsidiary

COTERIN’s attempt to operate a hazardous waste landfill that it constructed in the municipality of Guadalcázar had been thwarted by measures attributable to Mexico. Metalclad commenced an action, claiming that an ecological decree promulgated after the claim was made, violated NAFTA Article 1110 requiring compensation for expropriation. The tribunal found a violation of NAFTA Article 1110 and stated that in order to decide on an indirect expropriation, it ‘need not decide or consider the motivation, nor intent of the adoption of the Ecological Decree’.137 The tribunal stated: expropriation under NAFTA includes not only open, deliberate and acknowledged takings of property, such as outright seizure or formal or obligatory transfer of title in favour of the host State, but also covert or incidental interference with the use of property which has the effect of depriving the owner, in whole or in significant part, of the use or reasonably-​to-​be-​ expected economic benefit of property even if not necessarily to the obvious benefit of the host State.138

22.83 The case Compañía del Desarrollo de Santa Elena v Costa Rica,139 although referring to a

direct expropriation, not an indirect taking, has attracted particular attention because the panel expressly stated that the environmental purpose had no bearing on the issue of compensation. In this case, the claimant (Santa Elena SA) was formed primarily for the purpose of purchasing Santa Elena—​a 30-​kilometre terrain in Costa Rica—​with the intention of developing it as a tourist resort. In 1978, Costa Rica issued an expropriation decree for Santa Elena aimed at declaring it a preservation site. Twenty years of legal proceedings between the parties finally ended with a decision by an ICSID panel. While in this case the primary issue was the date of the taking for purposes of determining compensation, the panel, citing the Tippetts case, indicated that a compensable expropriation could occur through measures of a state which deprive the owner of ‘access to the benefit and economic use of his property’140 or ‘ha[ve] made those [property] rights practically useless’.141 The panel held that: While an expropriation or taking for environmental reasons may be classified as a taking for a public purpose, and thus may be legitimate, the fact that the Property was taken for this reason does not affect either the nature or the measure of the compensation to be paid for the taking. That is, the purpose of protecting the environment for which the Property was

  Phelps Dodge v. Iran, supra note 125, 10 Iran–​U.S. Cl. Trib. Rep. at 130.   Metalclad v. Mexico, supra note 102, ¶ 111. 138  Id. ¶ 103. 139  Compañía del Desarrollo de Santa Elena S.A. v. Republic of Costa Rica, ICSID Case No. ARB/​96/​1 (Feb. 17, 2000) [hereinafter Santa Elena v. Costa Rica]. 140  Id. ¶ 76. 141  Id. ¶ 78. 136 137

584

VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred taken does not alter the legal character of the taking for which adequate compensation must be paid.142 The international source of the obligation to protect the environment makes no difference.143

It also added that: Expropriatory environmental measures—​no matter how laudable and beneficial to society as a whole—​are, in this respect, similar to any other expropriatory measures that a state may take in order to implement its policies: where property is expropriated, even for environmental purposes, whether domestic or international, the state’s obligation to pay compensation remains.144

In Burlington v Ecuador, after citing Tippetts v Iran, the tribunal contended that the intent of 22.84 government conduct alleged to be expropriatory ‘plays a secondary role relative to the effects test’. According to this tribunal, ‘evidence of intent may serve to confirm the outcome of the effects test, but does not replace it’.145 The tribunal in Spyridon Roussalis v Romania, after citing the Phillips Petroleum v Iran case, similarly found ‘the intention or purpose of a state to be relevant but not decisive of the question whether there has been an expropriation’.146

D. Character of Governmental Measures and the Police Powers of the State A very significant factor in determining if a government measure is expropriatory is whether 22.85 the measure falls within the State’s right to promote147 a recognized ‘social purpose’148 or the ‘general welfare’149 by regulation. ‘The existence of generally recognized considerations of the public health, safety, morals or welfare will normally lead to a conclusion that there has been no “taking” ’.150 As one commentator has noted, ‘non-​discriminatory measures related to anti-​trust, consumer protection, securities, environmental protection, land planning are non-​compensable takings since they are regarded as essential to the functioning of the state’.151 The notion that the exercise of the state’s ‘police powers’152 will not give rise to a right to compensation has been widely accepted in international law.

142  Id. For this reason, the tribunal did not analyze the detailed evidence submitted regarding what Costa Rica referred to as its international obligations to preserve the unique Santa Elena ecological site. See n. 32 in the original Award. 143  Id. ¶ 71. 144  Id. ¶ 72. 145  Burlington v. Ecuador, supra note 26, ¶ 401. 146  Spyridon Roussalis v. Romania, ICSID Case No. ARB/​06/​1, Award (Dec. 1, 2011), ¶ 330. 147 One commentary on the law on expropriation and the State’s ‘police powers’ is found in the Restatement (Third) of the Foreign Relations Law of the United States. It was designed to assist, inter alia, in determining how to distinguish between an indirect expropriation and valid governmental regulation: ‘. . . a state is not responsible for loss of property or for other economic disadvantage resulting from bona fide general taxation, regulation, forfeiture for crime, or other action of the kind that is commonly accepted as within the police power of the states, if it is not discriminatory . . .’. Restatement of the Law (Third), the Foreign Relations of the United States, supra note 11, Vol. 1, § 712, Comment g (1987). 148  The Iran-​United States Claims Tribunal: Its Contribution to the Law of State Responsibility 200, supra note 37. 149 Weston, supra note 5, at 116. 150 Christie, supra note 58, at 338. 151 Sornarajah, supra note 58. 152  The governments of Canada and the United States have jointly agreed that a new tax introduced by the Canadian Government in October of 2006 does not constitute an expropriation under the terms of the North American Free Trade Agreement (NAFTA). The joint determination—​which was confirmed in an exchange of letters in April 2008—​ensures that a group of individual U.S. investors cannot proceed with an expropriation claim against Canada pursuant to NAFTA Chapter 11. In October 2007, the investors (Marvin Gottlieb, et. al.) had formally signaled their ‘intent’ to sue Canada, following a decision by Canada to introduce a tax on so-​called income trusts in the energy sector.

585

Indirect Expropriation and the Right to Regulate 22.86 In the S.D. Myers v Canada, the tribunal found that the expression ‘tantamount to expropri-

ation’ in NAFTA’s Article 1110(1) was understood as ‘equivalent to expropriation’ and added: Both words require a tribunal to look at the substance of what has occurred and not only at form. A tribunal should not be deterred by technical or facial considerations from reaching a conclusion that an expropriation or conduct tantamount to an expropriation has occurred. It must look at the real interests involved and the purpose and effect of the government measure.153

22.87 In Marvin Roy Feldman v Mexico, the tribunal explained that:

. . . the ways in which governmental authorities may force a company out of business, or significantly reduce the economic benefits of its business, are many. In the past, confiscatory taxation, denial of access to infrastructure or necessary raw materials, imposition of unreasonable regulatory regimes, among others, have been considered to be expropriatory actions. At the same time, governments must be free to act in the broader public interest through protection of the environment, new or modified tax regimes, the granting or withdrawal of government subsidies, reductions or increases in tariff levels, imposition of zoning restrictions and the like. Reasonable governmental regulation of this type cannot be achieved if any business that is adversely affected may seek compensation, and it is safe to say that customary law recognises this.154 22.88 In Methanex v USA, the tribunal found that a ban by the California government on the gas-

oline additive MTBE did not constitute expropriation because the measure was adopted for a public purpose and was not discriminatory: In the Tribunal’s view, Methanex is correct that an intentionally discriminatory regulation against a foreign investor fulfils a key requirement for establishing expropriation. But as a matter of general international law, a non-​discriminatory regulation for a public purpose . . . is not deemed expropriatory and compensable . . .155

22.89 In Saluka v Czech Republic, the tribunal stated that a deprivation can be justified if it results

from the exercise of regulatory actions aimed at the maintenance of public order. It further noted that: It is now established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-​ discriminatory manner bona fide regulations that are aimed at the general welfare.156 . . . In the opinion of the Tribunal, the principle that a State does not commit an expropriation and is thus not liable to pay compensation to a dispossessed alien investor when it adopts general regulations that are ‘commonly accepted as within the police power of States’ forms part of customary international law today. There is ample case law in support of this proposition.157

Although it found that the investor had been deprived of its investment, the tribunal justified the Czech National Bank’s measures given the critical financial circumstances which could affect the country.158 22.90 In the context of the Iran–​United States Claims Tribunal, two awards referred to the police

powers doctrine. However, in both of them, the measures taken occurred outside the context of the Islamic Revolution.

  S.D. Myers v. Canada, supra note 37, ¶ 285.   Marvin Roy Feldman v. Mexico, supra note 90, ¶ 103. 155  Methanex v. United States of America, Final Award (Aug. 3, 2005), Pt, IV, ch., ¶ 4. 156  Saluka v. Czech Republic, supra note 74, ¶ 255. 157  Id. 262. 158  Id. 266–​75. 153 154

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred In Too v Greater Modesto Insurance Associates, the Claimant sought compensation for the 22.91 seizure of his liquor licence by the United States Internal Revenue Service. The tribunal rejected the allegation of taking on the grounds of police power regulations: [A]‌State is not responsible for loss of property or for other economic disadvantage resulting from bona fide general taxation or any other action that is commonly accepted as within the police power of States, provided it is not discriminatory and is not designed to cause the alien to abandon the property to the State or to sell it at a distress price . . .159

In Sedco, Inc. v National Iranian Oil Co., Iran argued that no liability should exist for a 22.92 transfer of shares of stock pursuant to a law authorizing the nationalization of companies whose debts to banks exceeded their net assets. The tribunal noted that it was an ‘accepted principle of international law that a State is not liable for economic injury which is a consequence of bona fide regulation within the accepted police power of States’.160 The tribunal in the Lauder v The Czech Republic case said about the issue of interference with 22.93 property rights that ‘. . . Parties to [the Bilateral] Treaty are not liable for economic injury that is the consequence of bona fide regulation within the accepted police powers of the State’. 161 In Tecmed v Mexico, although the tribunal found an expropriation, it stated that: ‘the prin- 22.94 ciple that the State’s exercise of its sovereign power within the framework of its police power may cause economic damage to those subject to its powers as administrator without entitling them to any compensation whatsoever is undisputable’.162 In the case of Total v Argentina the claimant argued that legal and regulatory actions taken by 22.95 Argentina affecting its investments in gas, oil and power amounted to indirect expropriation. Here, the tribunal engaged with and rejected the sole effects doctrine, finding that government intent should be balanced in weighing whether government conduct is expropriatory. On this point, the tribunal said: The Tribunal is aware of the current international debate on the issue of whether, by judging changes in national legal systems introduced by legislative measures under bilateral investment treaties ‘[o]‌ne should only take into account the effects produced by the measure or if one should consider also the context within which a measure was adopted and the host State’s purpose’  . . .  When foreign investors complain of State regulatory actions under a BIT, in order to decide whether the measures also amount to an indirect expropriation (a so-​called regulatory taking) a tribunal must take into account their features and object so as to assess their proportionality and reasonableness in respect of the purpose which is legitimately pursued by the host State. These regulatory measures, when judged as legitimate, proportionate, reasonable and non-​discriminatory, do not give rise to compensation in favour of foreign investors. The Tribunal shares the dominant approach followed by international tribunals, that is to take into account also the purpose and the causes of the measures taken by a State (together with their adverse effects on the foreign investment).163

Here, in examining the intent of a government action, the tribunal argued for looking to both the reasonableness and proportionality of a government’s actions. The latter is discussed in the next section of this chapter.

159  Too v. Greater Modesto Insurance Associates, Award (Dec. 29, 1989), 23 Iran–​U.S. Cl. Trib. Rep. 378. See also Aldrich, supra note 80. 160  Sedco, Inc. et al. v. National Iranian Oil Co. et al., Award, No. ITL 55-​ 129-​3 (Oct. 28, 1985), reprinted in 9 Iran–​U.S. Cl. Trib. Rep. 248. 161  Ronald S. Lauder v. Czech Republic, Final Award (Sept. 3, 2002), ¶ 198. 162  Técnicas Medioambientales, S.A. v. United Mexican States, ICSID Case No. ARB (AF)/​00/​2, Award (May 29, 2003), ¶ 119 [hereinafter Tecmed v. Mexico]. 163  Total v. Argentina, supra note 116, ¶ 197 at n 232.

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Indirect Expropriation and the Right to Regulate 22.96 In Philip Morris v Uruguay, the tribunal considered whether Uruguay’s cigarette packaging

measures constituted an indirect expropriation. It stated that the regulations had been adopted ‘ . . . in fulfilment of Uruguay’s national and international legal obligations for the protection of public health’164 and that they satisfied commonly mentioned conditions for the exercise of regulatory powers, in particular that ‘the action must be taken bona fide for the purpose of protecting the public welfare, must be non-​discriminatory and proportionate’.165 It concluded that the measures were not expropriatory since they ‘were a valid exercise by Uruguay of its police powers for the protection of public health’.166

E. Proportionality 22.97 The proportionality doctrine also looks to the government’s intent motivating regulatory and

legal measures that are alleged to constitute expropriation. This doctrine considers the extent to which the ‘deprivation’ or ‘control’ over property effected by regulatory or legal action is balanced by the public interest of such action. In the case of both deprivations and control, this doctrine holds that there must be a reasonable and foreseeable national legal basis for the taking because of the underlying principle in stability and transparency and the rule of law.167 In other words, the national public interest served by government measures must be proportionate to the deprivation or control they effect. From the outset, it should be noted that this analysis is closely linked to examining the purpose and character of a government measure, the criterion discussed in the previous subsection, as both criteria probe government intent. Proportionality, however, weighs this intent against the measure’s effect on an investment.

22.98 The proportionality doctrine figures prominently in the jurisprudence of the ECtHR. In

the context of this jurisprudence, the state may affect control on activities by individuals by imposing restrictions which may take the form of ‘planning controls, environmental orders, rent controls, import and export laws, economic regulation of professions, [and] the seizure of properties for legal proceedings or inheritance laws’.168 The Court examines whether the interference at issue strikes a reasonable balance between the demands of the general interest of the community and the private interests of the alleged victims of the deprivation and whether an unjust burden has been placed on the claimant. In order to make this assessment, the Court proceeds into an in-​depth factual analysis, insisting that precise factors which are needed to be taken into account vary from case to case.

22.99 In the James v United Kingdom case, for example, the Court said that:

The taking of property in pursuance of a policy calculated to enhance social justice within the community can properly be described as being ‘in the public interest’. In particular, the fairness of a system of law governing the contractual or property rights of private parties is a matter of public concern and therefore legislative measures intended to bring about such fairness are capable of being in the ‘public interest’, even if they involve the compulsory transfer of property from one individual to another.169

  Philip Morris v. Uruguay, supra note 32, ¶ 302.   Id. 305. 166  Id. 307. 167  See H. Mountfield, ‘Regulatory Expropriations in Europe: the Approach of the European Court of Human Rights’, 11(1) N.Y.U. Envtl. L.J. 136 (2002). 168  See, referring to the jurisprudence of the Eur. Ct. H.R., D.J. Harris et al., Law of the European Convention on Human Rights 535 (1995). 169  This case concerns a reform undertaken by the United Kingdom regarding the right of individuals with long leases to acquire the freehold of their leasehold property. This reform, according to James, the claimant, ‘deprived’ the freeholders of their property since they could neither refuse to sell nor set the price for it. See James v. UK, supra note 71, ¶ 41. 164 165

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred In Sporrong and Lönnroth v Sweden, the Court stated that Article 1 contains ‘three distinct 22.100 rules’: The first rule, which is of a general nature, enounces [sic] the principle of peaceful enjoyment of property; it is set out in the first sentence of the first paragraph. The second rule covers deprivation of possessions and subjects it to certain conditions; it appears in the second sentence in the same paragraph. The third rule recognises that the States are entitled, amongst other things, to control the use of property in accordance with the general interest, by enforcing such laws as they deem necessary for the purpose; it is contained in the second paragraph.170

The ECtHR found no expropriation as a result of the first test, yet found compensation to be required as a result of the second test. Under the ‘fair balance test’, it found that over the years the state had failed to take proper account of individual interests involved. Since the state had neither shortened the temporal effect of the rules nor paid compensation, the Court ruled that the State had placed ‘an individual and excessive burden’171 on plaintiffs and therefore acted in violation of Article 1. A number of ICSID tribunals have followed the ECtHR’s lead in factoring the proportion- 22.101 ality doctrine into their analysis determining whether government action should be characterized as expropriatory. In the case of Tecmed v Mexico, the investor alleged that the Mexican government’s failure 22.102 to relicense its hazardous waste site contravened various rights and protections set out in the bilateral investment treaty between Spain and Mexico and was an expropriatory act. The tribunal, in order to determine whether the acts undertaken by Mexico were to be characterized as expropriatory, citing the ECtHR’s practice, considered ‘whether such actions or measures are proportional to the public interest presumably protected thereby and the protection legally granted to investments, taking into account that the significance of such impact plays a key role in deciding the proportionality’.172 It added that ‘there must be a reasonable relationship of proportionality between the charge or weight imposed to the foreign investor and the aim sought to be realised by an expropriatory measure’.173 This approach was endorsed subsequently by the arbitral decisions in Azurix v Argentina 174 22.103 and LG&E v Argentina. In LG&E v Argentina, the tribunal stated that: With respect to the power of the State to adopt its policies, it can generally be said that the State has the right to adopt measures having a social or general welfare purpose. In such a case, the measure must be accepted without any imposition of liability, except in cases where the State’s action is obviously disproportionate to the need being addressed.175

It was similarly advocated by the Tza Yap Shum v Peru tribunal, which cited Tecmed v 22.104 Mexico and Saluka v Czech Republic in finding that it is established international law that a government’s regulatory action must meet the condition of proportionality.176 The tribunal in El Paso v Argentina,177 meanwhile, considered proportionality as one of the fac- 22.105 tors key to determining the reasonableness, and by its estimation, thus the non-​expropriatory

  Sporrong and Lönnroth v. Sweden, supra note 86, ¶ 61.   Id. ¶ 73. 172  Tecmed v. Mexico, supra note 162, ¶ 122. 173  Id. 174  Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Award (July 14, 2006). 175  LG&E v. Argentina, supra note 131, ¶ 195. 176  Tza Yap Shum v. Peru, supra note 134, ¶ 223. 177  El Paso v. Argentina, supra note 115, ¶ 241. 170 171

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Indirect Expropriation and the Right to Regulate nature, of government action. It stated: ‘If general regulations are unreasonable, i.e. arbitrary, discriminatory, disproportionate or otherwise unfair, they can, however, be considered as amounting to indirect expropriation if they result in a neutralisation of the foreign investor’s property rights’. 22.106 The Deutsche Bank v Sri Lanka tribunal similarly highlighted the requirement that govern-

ment measures be proportional, stating:

The Tribunal does not agree with Sri Lanka that it has an extremely broad discretion to interfere with investments in the exercise of “legitimate regulatory authority”. A number of tribunals . . . have adopted a proportionality requirement in relation to expropriatory treatment. It prevents the States from taking measures which severely impact an investor unless such measures are justified by a substantial public interest.178 22.107 The tribunal in Total v Argentina also found that Argentina’s pesification was a ‘bona fide regu-

latory measure of general application, which was reasonable in light of Argentina’s economic and monetary emergency and proportionate to the aim of facing such an emergency’179 and therefore did not amount to a measure equivalent to expropriation.

22.108 However, the tribunal in Perenco v Ecuador found that the proportionality doctrine alone

cannot render otherwise permissible government actions expropriatory, stating:  ‘[T]‌ he Tribunal does not believe that a measure which may be disproportionate tips the balance to a finding of expropriation where the evidence of effect indicates otherwise’.180

F. Interference of the Measure with Reasonable Investment-​backed Expectations 22.109 Another criterion is whether the governmental measure affects the investor’s reasonable ex-

pectations. To meet this criterion, the investor has to prove that his/​her investment was based on a state of affairs that did not include the challenged regulatory regime. The claim must be objectively reasonable and not based entirely upon the investor’s subjective expectations.181

22.110 In the 1934 Oscar Chinn case, the Permanent Court of International Justice (PCIJ) did not

accept the contention of indirect taking,182 noting that in those circumstances, a granting of a de facto monopoly did not constitute a violation of international law and that ‘favourable business conditions and good will are transient circumstances, subject to inevitable changes’: No enterprise . . . can escape from the chances and hazards resulting from violated by the State. general economic conditions. Some industries may be able to make large profits during a period of general prosperity, or else by taking advantage of a treaty of commerce or of an alteration in customs duties; but they are also exposed to the danger of ruin or extinction if circumstances change. Where this is the case, no vested rights are violated by the State.183

  Deutsche Bank v. Sri Lanka, supra note 114, ¶ 522.   Total v. Argentina, supra note 116, ¶¶ 196–​97. 180 Perenco Ecuador Limited v.  Republic of Ecuador, ICSID Case No. ARB/​ 08/​6, Decision on the Remaining Issues of Jurisdiction and on Liability (Sept. 12, 2014), ¶ 689. 181  This criterion has also been used by a growing number of tribunals as one of the emerging characteristics of the fair and equitable treatment standard (FET). Because of the high threshold required for the finding of an expropriation, tribunals decide often for a breach of the FET instead when all the requirements for such a breach are met. See discussion in K. Yannaca-​Small, The Fair and Equitable Treatment Standard in Investment Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 20 (K. Yannaca-​Small ed., 2018). 182  The P.C.I.J. employed ‘effective deprivation’ as the standard for determining if the interference was sufficiently serious to constitute a compensable taking. 183  Oscar Chinn, supra note 18, at 88. 178 179

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VI.  Criteria Indicating Whether an Indirect Expropriation Has Occurred In Starrett Housing Corp. v Iran,184 the Iran–​US Claims Tribunal took into account the rea- 22.111 sonable expectations of the investor: Investors in Iran, like investors in all other countries, have to assume a risk that the country might experience strikes, lock-​outs, disturbances, changes of economic and political system and even revolution. That any of these risks materialised does not necessarily mean that property rights affected by such events can be deemed to have been taken.

The tribunal in Metalclad v Mexico stated that ‘[M]‌etalclad was led to believe, and did be- 22.112 lieve, that the federal and state permits allowed for the construction and operation of the landfill’.185 It held that expropriation includes deprivation in whole or in significant part of the use or ‘reasonably to-​be-​expected economic benefit of property’.186 In Marvin Roy Feldman v Mexico, the NAFTA tribunal noted as part of its reasoning denying 22.113 the expropriation claim: Governments, in their exercise of regulatory power, frequently change their laws and regulations in response to changing economic circumstances or changing political, economic or social considerations. Those changes may well make certain activities less profitable or even uneconomic to continue . . .187

In Thunderbird v Mexico, the tribunal gave a general definition of ‘legitimate expectations’:

22.114

Having considered recent investment case law and the good faith principle of international customary law, the concept of ‘legitimate expectations’ relates, within the context of the NAFTA framework, to a situation where a Contracting Party’s conduct creates reasonable and justifiable expectations on the part of an investor (or investment) to act in reliance on said conduct, such that a failure by the NAFTA Party to honour those expectations could cause the investor (or investment) to suffer damages.188

In Tecmed v Mexico, the tribunal attempted to determine whether the Mexican government’s 22.115 measures were ‘reasonable with respect to their goals, the deprivation of economic rights and the legitimate expectations of who suffered such deprivation’.189 [E]‌ven before the Claimant made its investment, it was widely known that the investor expected its investments in the Landfill to last for a long term and that it took this into account to estimate the time and business required to recover such investment and obtain the expected return upon making its tender offer for the acquisition of the assets related to the Landfill. To evaluate if the actions attributable to the Respondent—​as well as the Resolution190—​violate the Agreement, such expectations should be considered legitimate and should be evaluated in light of the Agreement and of international law.191

Based on this and the fact that the ‘Resolution’ was not proportionate to the ‘infringements’ by Tecmed, the tribunal found that the ‘Resolution’ and its effects amounted to an expropriation.

  Starrett Housing v. Iran, supra note 19.   Metalclad v. Mexico, supra note 102, ¶ 100. 186  Id. ¶ 103. 187  Marvin Roy Feldman v. Mexico, supra note 90, ¶ 112. 188  International Thunderbird Gaming Corporation v. United Mexican States, UNCITRAL (NAFTA), Award (Jan. 26, 2006), ¶ 147. 189  Tecmed v. Mexico, supra note 162, ¶ 122. 190  Id. The resolution was the decision not to renew the license. 191  Id. at 50. 184 185

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Indirect Expropriation and the Right to Regulate 22.116 In Occidental v Ecuador,192 the tribunal acknowledged the reasonable expectations by the

investor as a factor for determining an expropriatory act: ‘[t]‌here has been no deprivation of the use or reasonably expected economic benefit of the investment . . .’.

22.117 In Azurix v Argentina, the tribunal also discussed the issue of legitimate expectations. It

held that expectations ‘are not necessarily based on a contract but on assurances explicit or implicit, or on representations made by the State which the investor took into account in making the investment’.193 Although it found that Argentina had created these reasonable expectations, it found that no expropriation took place because Azurix had not lost control over its investment.

22.118 The tribunal in El Paso v Argentina,194 however, found that, as claims of indirect expropri-

ation rooted in violations of legitimate expectations are often closely intertwined with failures to meet the fair and equitable treatment standard, such claims should generally be considered FET claims.

VII. Conclusion 22.119 Expropriation (direct and indirect) requires compensation based on clearly established rules

of customary international law. However, while a determination of direct expropriation is relatively straightforward, determining whether a measure falls into the category of indirect expropriation has required tribunals to undertake a thorough examination of the specific circumstances of the case and a careful consideration of the specific wording of the treaty. Ultimately, however, only in a few cases have tribunals found an indirect expropriation to have occurred. This results from the fact that the threshold for characterizing a governmental measure as expropriation is very high. Instead, recourse to another protection standard such as the violation of the fair and equitable standard, which represents a lower threshold, seems to gain ground.

22.120 The line between the concept of indirect expropriation and non-​compensable regulatory

governmental measures has increasingly been articulated. An examination of the relevant jurisprudence reveals that, in broad terms, there are some criteria that tribunals have used to distinguish these concepts: (i) the degree of interference with the property right; (ii) the character of governmental measures, that is, the purpose and the context of the governmental measure; (iii) the proportionality between the public policy objective pursued by a measure and the impact of such measure on the property of the investor; and (iv) the interference of the measure with reasonable and investment-​backed expectations.

22.121 Investment tribunals, instead of focusing exclusively on the ‘sole effect’ on the owner, have

also often taken into account the purpose and proportionality of the governmental measures to determine whether compensation was due. Thus, a number of cases were determined on the basis of recognition that governments have the right to protect, inter alia, the environment, human health and safety, market integrity, and social policies through non-​ discriminatory actions without providing compensation for any incidental deprivation of foreign-​owned property.

  Occidental v. Ecuador, supra note 101, ¶ 88.   Azurix v. Argentina, supra note 174, ¶¶ 316–​22. 194  El Paso v. Argentina, supra note 115, ¶ 227. 192 193

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VII. Conclusion Until a few years ago, only a handful of international agreements had articulated this diffe- 22.122 rence. A  new generation of investment agreements, including investment chapters of free trade agreements, have introduced specific language and established criteria to assist in determining whether an indirect expropriation requiring compensation has occurred. These criteria are consistent with those emerging from arbitral decisions.

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23 THE MFN CLAUSE AND ITS EVOLVING BOUNDARIES Abby Cohen Smutny, Petr Polášek, and Chad Farrell*

I. Introduction  II. Historical Background 

III. Bilateral Investment Treaty Practice  23.48

23.01 23.04 23.04

A. MFN Clauses and Dispute Settlement  23.48 B. The Cases  23.57

A. Origins  B. Work of the International Law Commission  23.08 C. Early Jurisprudence  23.35

IV. Treaty-​making Practice and Investment Treaty Jurisprudence V. Conclusion

23.114 23.118

I. Introduction 23.01 The obligation to accord most-​favoured-​nation (MFN) treatment arises when ‘a state (the

granting state) undertakes the obligation towards another state (the beneficiary state) to accord to it or to persons or things in a determined relationship with it most-​favoured-​nation treatment in an agreed sphere of relations’.1 To be accorded MFN treatment means that the beneficiary will enjoy treatment in the agreed sphere of relations no less favourable than the granting state accords to third parties in that same sphere of relations.2

23.02 MFN clauses originated in early international trade practice and have continued to be in-

corporated in modern trade and investment treaties, both bilateral and multilateral. Their intended purpose is to reduce discrimination and encourage the growth of trade and foreign investment by ensuring that certain defined benefits accorded to one set of states (or their nationals, investments, goods, etc.) are extended to other states (or their nationals, investments, goods, etc.). The trade and investment benefits that fall within the scope of an MFN clause may be either substantive (e.g. lower tariffs on certain goods, the promise to accord investments fair and equitable treatment) or procedural (e.g. the right to invoke certain dispute settlement procedures). In the investment treaty context, some commentators have observed that the right to a favourable dispute settlement mechanism is the primary concern of foreign investors3 and investors often invoke MFN clauses to secure procedural rights

*  This chapter was previously co-​authored by Abby Cohen Smutny and Lee A. Steven in the first edition of this work. 1  3 Encyclopedia of Public International Law 468 (1997); see also Robin Geiβ & Meinhard Hilf, Most-​Favoured-​Nation Clause, in Max Planck Encyclopedia of Public International Law (2014). 2  3 Encyclopedia of Public International Law 468 (1997). 3  See Francisco Orrego Vicuña, Bilateral Investment Treaties and the Most-​Favored-​Nation Clause: Implications for Arbitration in the Light of a Recent ICSID Case, in Investment Treaties and Arbitration 138 (Gabrielle Kaufmann-​Kohler & Blaise Stucki eds., 2002) (‘Under most [bilateral investment treaties] . . . the key of the protection of the investor lies not so much in the substantive provisions of the treatment accorded . . . but in the arrangements allowing for the submission of disputes to arbitration’); see also Kenneth J. Vandevelde,

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II.  Historical Background that might otherwise be unavailable to them. The extent to which MFN clauses may be used to secure procedural rights, however, continues to generate controversy and has resulted in divergent approaches by investment treaty tribunals, as the cases that will be discussed demonstrate. This chapter discusses MFN clauses from early references in trade agreements to contem- 23.03 porary references in investor-​state arbitrations.

II.  Historical Background A. Origins The obligation to accord MFN treatment is created and governed by conventional, rather 23.04 than customary, international law. Historically, MFN clauses were used within a limited sphere of trading relations in state-​to-​state (or even city-​to-​city) agreements in order to reduce discrimination and provide greater access to a state’s trading partners.4 The primary aim of the parties was to reduce tariffs and other barriers to the flow of goods across borders and to expand trading benefits to a larger number of beneficiaries. MFN provisions were in use as early as the Middle Ages.5 At least one scholar has traced 23.05 the use of the MFN obligation as far back as the beginning of the Holy Roman Empire for favours granted ‘by whatsoever town’.6 England and Continental Europe first used MFN clauses in commercial treaties in the twelfth century, and by the close of the fifteenth century, England’s use of MFN clauses without listing specific nations paved the way for its contemporary usage, as ‘privileges granted to the beneficiary are no longer necessarily defined with reference to one or several named countries, the most favoured nations in the original meaning of the term’.7 The use of the phrase ‘most favoured nation’ became commonplace in treaties of friendship, commerce, and navigation dating from the 1700s8 and continues to be found in trade and investment treaties in use today. As MFN clauses arose in the context of international trade, they naturally have been included 23.06 in the tariff and trade agreements negotiated through the General Agreement on Tariffs and Trade (GATT), which ultimately led to the creation of the World Trade Organization. The MFN clause in the 1947 GATT, for example, provides that: With respect to customs duties and charges of any kind imposed on or in connection with importation or exportation or imposed on the international transfer of payments for imports or exports . . . any advantage, favour, privilege or immunity granted by any contracting party to any product originating in or destined for any other country shall be accorded immediately and unconditionally to the like product originating in or destined for the territories of all other contracting parties.9

Bilateral Investment Treaties: History, Policy, and Interpretation 427 (2010) (‘[T]‌he protections accorded by the BITs are effective only to the extent that they are enforceable through the BITs’ dispute resolution provisions. Thus, due process, the BIT principle underlying dispute, is the principle upon which rests the effectiveness of the other principles’). 4  See 1 Oppenheim’s International  Law 1327 (Sir Robert Jennings & Sir Arthur Watts eds., 9th ed. 1996). 5 Geiβ & Hilf, supra note 1, ¶ 11. 6  Georg Schwarzenberger, International Law and Order 130 (1971). 7  Id. 8 3 Encyclopedia of Public International Law 469 (1997); see also Geiβ & Hilf, supra note 1, ¶ 13 (similar). 9  General Agreement on Tariffs and Trade art. 1(1) (1947).

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The MFN Clause and Its Evolving Boundaries 23.07 With the advent of bilateral and multilateral investment treaties in the latter half of the

twentieth century, MFN clauses became common in the foreign investment field. As an example, Article 1103 of the North American Free Trade Agreement states: ‘Each Party shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to investors of another Party or a non-​Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments’.10 Similarly, Article 10(7) of the Energy Charter Treaty provides: Each Contracting Party shall accord to Investments in its Area of Investors of other Contracting Parties, and their related activities including management, maintenance, use, enjoyment or disposal, treatment no less favourable than that which it accords to Investments of its own Investors or of the Investors of any other Contracting Party or any third state and their related activities including management, maintenance, use, enjoyment or disposal, whichever is the most favourable.11

The purpose of an MFN clause in the investment treaty context is to ensure ‘that investments or investors of contracting parties to [an investment treaty] receive the best treatment that each of them has granted to the investments or investors of any other third country. Thus, the MFN standard establishes, at least in principle, a level playing field between all foreign investors protected by [an investment treaty]’.12

B. Work of the International Law Commission 1. 1978 Draft Articles on MFN clauses 23.08 As part of its programme of work for the United Nations, the International Law

Commission (ILC) began examining the MFN obligation in the context of its work on the law of treaties in the 1960s. It ultimately separated MFN and the law of treaties into two distinct areas of study and, in 1967, appointed Endre Ustor as Special Rapporteur on MFN clauses.13 The goal of this programme of study was to ‘clarify the scope and effect of the [MFN] clause as a legal institution in the context of all aspects of its practical application’.14 The ILC specifically instructed Ustor not to confine his analysis of MFN clauses to international trade but to explore other applications of the MFN clause as well.15

23.09 From 1969 to 1976, Ustor presented seven reports to the ILC on the MFN standard and in

1976 presented a set of draft articles on the subject.16 Nikolai A Ushakov succeeded Ustor as Special Rapporteur in 1977 and presented a revised set of draft articles after taking into account the comments of the member states on the first set of draft articles.17 Based upon this work, the ILC adopted the ‘Draft Articles on Most-​Favoured-​Nation Clauses’ in 1978 and

10  North American Free Trade Agreement art. 1103(1) (1994). Article 1103(2) repeats the same formulation, except that it applies it to ‘investments of investors’. 11  Energy Charter Treaty art. 10(7) (1998). 12  UNCTAD, Bilateral Investment Treaties: 1995–​2006: Trends in Investment Rulemaking (2007) 38; see also UNCTAD, Most-​Favoured Nation Treatment, UNCTAD Series on Issues in International Investment Agreements II (2010), UNCTAD/​DIAE/​IA/​2010/​1 (Jan. 24, 2011) 13–​14 (‘MFN treatment in IIAs [international investment agreements] is meant to ensure an equality of competitive conditions between foreign investors of different nationalities seeking to set up an investment or operating that investment in a host country’). 13  See II Yearbook of the International Law Commission 369 (1967); G.A. Res. 2272 (XXIX), U.N. Doc. A/​6898 (Dec. 1, 1967). 14  Endre Ustor, The Most-​Favoured-​Nation Clause, 11 J. World Trade L. 462 (1977). 15 II Yearbook of the International Law Commission 223 (1968); see also Sir Arthur Watts, The International Law Commission 1949–​1998 1794 (1999). 16  Id. at 1794, 1796. 17  See II(1) Yearbook of the International Law Commission 1 (1978).

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II.  Historical Background presented the Draft Articles, together with a commentary,18 to the General Assembly with a recommendation for the member states to conclude a convention on the subject.19 Although the General Assembly never acted upon the ILC’s recommendation to use the Draft Articles as the basis for a convention, the Draft Articles and their commentary are a helpful resource in interpreting MFN clauses in use today.

(a) Interpretation  The Draft Articles emphasize that MFN treatment is not a customary law obligation but 23.10 arises only where a treaty creates it.20 The scope of the MFN obligation in any particular case therefore will be defined by the specific language of the MFN clause in question, which is ‘subject to the general rules of treaty interpretation’.21 As such, Articles 31 and 32 of the Vienna Convention on the Law of Treaties serve as the interpretative starting point. An important tenet of treaty interpretation that has played a key role in the reasoning of the 23.11 cases to be discussed, and which is confirmed in the Vienna Convention, is that treaty provisions such as MFN clauses are to be interpreted and applied in a manner consistent with the intent of the contracting parties to the particular treaty. The Vienna Convention settled earlier differences of approach. It made clear that the general rule for determining party intent is the ordinary meaning of the terms of the treaty, interpreted in their context and in light of their object and purpose; however, recourse may be had to supplementary means of interpretation, such as the documents associated with the treaty’s negotiation, conclusion, and ratification, to confirm that interpretation or to determine the meaning when application of the general rule gives an ambiguous, obscure, or manifestly absurd or unreasonable result. This reflects the approach previously followed by the International Court of Justice (ICJ).22

(b)  Definition of MFN Treatment  Draft Article 4 defines an MFN clause as ‘a treaty provision whereby a state undertakes an ob- 23.12 ligation towards another state to accord most-​favoured-​nation treatment in an agreed sphere of relations’.23 Draft Article 5 defines the MFN obligation as ‘treatment accorded by the granting State to the beneficiary State, or to persons or things in a determined relationship with that State, not less favourable than treatment extended by the granting State to a third State or to persons or things in the same relationship with that third State’.24 The reference in Article 4 of the Draft Articles to an ‘agreed sphere of relations’ recognizes 23.13 that, although it is possible for states to accord MFN treatment in all relations between the parties concerned, the more usual practice is to define a more limited area in which to apply the MFN standard, such as in the area of trade in certain goods or in foreign direct investment. This agreed area of application may be defined in the MFN clause itself, by reference to specific terms or matters that are defined or identified elsewhere in the treaty, or by

  See Watts, supra note 15, at 1798–​1916 (republishing the Draft Articles and Commentary).   See II(2) Yearbook of the International Law Commission 16 (1978); Watts, supra note 15, at 1794. 20  See Draft Articles on MFN Clauses arts. 1, 4, 6–​ 8, in II(2) Yearbook of the International Law Commission 16, 18, 23–​25 (1978). 21 3 Encyclopedia of Public International Law 471 (1997). See also Geiβ & Hilf, supra note 1, ¶ 22. 22  See, e.g., Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), 1952 I.C.J. 176, 191–​92 (Judgment of Aug. 27) (stating that the intention of the parties in the case ‘is shown both by the wording of the particular treaties, and by the general treaty pattern which emerges from an examination of the treaties made by Morocco with [various States] over the period from 1631 to 1892’). 23  Draft Articles on MFN Clauses art. 4, in II(2) Yearbook of the International Law Commission 18 (1978). 24  Draft Articles on MFN Clauses art. 5, in II(2) Yearbook of the International Law Commission 21 (1978). 18 19

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The MFN Clause and Its Evolving Boundaries the specific nature of the treaty as a whole. A bilateral or multilateral investment treaty, for example, constitutes a limited area of state-​to-​state relations dealing with specifically defined types of investment and applying to a specifically defined class of investors. The investment contemplated by such a treaty thus constitutes the outer bounds of the ‘agreed sphere of relations’ for purpose of an MFN clause contained in such a treaty. 23.14 With respect to the meaning in Article 5 of the Draft Articles of the persons or things that

are in a ‘determined relationship’ with the beneficiary state, the commentary to the Draft Articles explains that: A ‘determined relationship’ in this context means that the relationship between the States concerned and the persons or things concerned is determined by the clause, i.e. by the treaty. The clause embodied in the treaty between the granting and the beneficiary State has to determine the persons or things to whom and to which the most-​favoured-​nation treatment is applicable and this determination has to include, obviously, the link between the beneficiary State and the persons or things concerned.25

In the investment treaty context, the treaty’s definitions of an investor and an investment define the category of persons and things to which that treaty’s MFN clause applies. 23.15 Article 5 of the Draft Articles defines the treatment to be accorded the beneficiary state

as treatment ‘not less favorable’ than that extended to other states. This formulation or its equivalent is found in most MFN clauses today, and its use reflects the fact that MFN clauses do not require treatment of the beneficiary that is identical or exactly equal to the treatment extended to third parties. That is, treatment may be different as between the beneficiary state and the third state as long as the treatment of the beneficiary state is at least as favourable as the treatment extended to the third state or, in the investment context, their respective investors and investments.

(c)  MFN Clauses May Be Conditioned or Restricted 

23.16 In extending MFN benefits to another state, the granting state may impose conditions, re-

strictions, and exceptions to the application of a particular MFN clause. As the commentary to the Draft Articles explains, The parties stipulating the clause, i.e. the granting State and the beneficiary State, can . . . restrict in the treaty or agreement itself the extent of the favours that can be claimed by the beneficiary State . . . If the clause contains a restriction, the beneficiary State cannot claim any favours beyond the limits set by the clause, even if this extent does not reach the level of the favours extended by the granting State to a third State. In other words, the treatment granted to the third State by the granting State is applicable only within the framework set by the clause.26

23.17 An example of a more specific restriction is provided by the bilateral investment treaty be-

tween Albania and the United Kingdom (UK),27 which exempts from MFN treatment the beneficial treatment extended to third states arising from membership in a customs union and from taxation treaties. Article 7 of that treaty provides as follows:

25  Draft Articles on MFN Clauses Commentary 5(4), in II(2) Yearbook of the International Law Commission 22 (1978). 26  Draft Articles on MFN Clauses Commentary 8(8), in II(2) Yearbook of the International Law Commission 27 (1978); see also Draft Articles on MFN Clauses Arts. 11–​19, in II(2) Yearbook of the International Law Commission 29–​51 (1978); 3 Encyclopedia of Public International Law 470 (1997). 27  Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Albania for the Promotion and Protection of Investments art. 7.

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II.  Historical Background The provisions of this Agreement relative to the grant of treatment not less favourable than that accorded to the nationals or companies of either Contracting Party or of any third State shall not be construed so as to oblige one Contracting Party to extend to the nationals or companies of the other the benefit of any treatment, preference or privilege resulting from: (a) any existing or future customs union or similar international agreement to which either of the Contracting Parties is or may become a party, or (b) any international agreement or arrangement relating wholly or mainly to taxation or any domestic legislation relating wholly or mainly to taxation.

Another example is the restriction provided by the bilateral investment treaty between Colombia and the UK,28 according to which investor-​state dispute settlement mechanisms found in other investment treaties or in international investment agreements are outside the scope of the Colombia–​UK treaty’s requirement to accord MFN treatment: The most favourable treatment to be granted in like circumstances referred to in this Agreement does not encompass mechanisms for the settlement of investment disputes, such as those contained in Articles IX and X of this Agreement, which are provided for in treaties or international investment agreements.

(d)  The ejusdem generis principle  In the MFN context, the principle of ejusdem generis29 operates to define the scope of an MFN 23.18 clause’s subject matter. Sir Gerald Fitzmaurice has explained that MFN clauses, following the ejusdem generis principle, ‘only attract rights of the same kind or order, or belonging to the same class, as those contemplated by the most-​favoured-​nation clause concerned. The subject-​matter or category of subject-​matter must be the same’.30 This concept is embodied in Articles 9 and 10 of the Draft Articles on MFN Clauses as follows: Article 9 1. Under a most-​favoured-​nation clause the beneficiary State acquires, for itself or for the benefit of persons or things in a determined relationship with it, only those rights which fall within the limits of the subject-​matter of the clause. 2. The beneficiary State acquires the rights under paragraph 1 only in respect of persons or things which are specified in the clause or implied from its subject matter. Article 10 1. Under a most-​favoured-​nation clause the beneficiary State acquires the right to most-​ favoured-​nation treatment only if the granting State extends to a third State treatment within the limits of the subject-​matter of the clause. 2. The beneficiary State acquires rights under paragraph 1 in respect of persons or things in a determined relationship with it only if they: (a) belong to the same category of persons or things as those in a determined relationship with a third State which benefit from the treatment extended to them by the granting State and (b) have the same relationship with the beneficiary State as the persons and things referred to in subparagraph (a) have with that third State.31 28  Bilateral Agreement for the Promotion and Protection of Investments between the Government of the United Kingdom of Great Britain and Northern Ireland and Republic of Colombia art. III(2). 29  Ejusdem generis is a canon of construction to the effect that ‘when a general word or phrase follows a list of specifics, the general word or phrase will be interpreted to include only items of the same class as those listed’. See Black’s Law Dictionary 631 (10th ed. 2014). 30  Sir Gerald Fitzmaurice, 1 The Law and Procedure of the International Court of Justice 324 (1986). 31  Draft Articles on MFN Clauses Arts. 9–​10, in II(2) Yearbook of the International Law Commission 27 (1978); see also 3 Encyclopedia of Public International Law 472 (1997) (‘The beneficiary State can

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The MFN Clause and Its Evolving Boundaries The ILC’s commentary to the Draft Articles quotes Lord McNair to explain this idea further: Suppose that a most-​favoured-​nation clause in a commercial treaty between State A  and State B entitled State A to claim from State B the treatment which State B gives to any other State, that would not entitle State A to claim from State B the extradition of an alleged criminal on the ground that State B has agreed to extradite alleged criminals of the same kind to State C, or voluntarily does so. The reason, which seems to rest on the common intention of the parties, is that the clause can only operate in regard to the subject-​matter which the two States had in mind when they inserted the clause in their treaty.32 23.19 The application of the MFN standard is, as Sir Gerald Fitzmaurice described it, ‘double’ in

nature because it depends upon the ‘interplay of two sets of treaty provisions’.33 The first treaty, called the ‘basic treaty’,34 contains the MFN clause and establishes the right to be accorded MFN treatment, whereas a ‘third-​party treaty’ determines ‘the extent of the favours’ that the beneficiary of the clause may enjoy.35 In fact, a third-​party treaty itself is not strictly necessary. In principle, and depending upon the wording of the basic treaty, MFN treatment may be invoked as long as benefits in the same subject matter are extended to a third party, whether those benefits are ‘based upon a treaty, another agreement or a unilateral, legislative, or other act, or mere practice’.36 As the commentary to the Draft Articles explains, ‘[t]‌he mere fact of favourable treatment is enough to set in motion the operation of the clause’.37

23.20 In most cases, however, the specific benefits to be invoked under an MFN clause are con-

tained in an appropriate third-​party treaty. In such a case, both the basic treaty and the third-​ party treaty must be in force in order for the MFN clause to operate. The beneficiary of the MFN clause, however, does not need to show that the third-​party state (or its nationals) have, in fact, invoked the benefits of the third-​party treaty. The mere existence of the third-​party treaty is sufficient: [T]‌he fact of favourable treatment may consist . . . in the conclusion or existence of an agreement between the granting State and the third State by which the latter is entitled to certain benefits. The beneficiary State, on the strength of the [MFN] clause, may also demand the

only claim rights which belong to the subject-​matter of the clause which are within the time-​limits and other conditions and restrictions set by the agreement, and which are in respect of persons or things specified in the clause or implied from its subject-​matter. The beneficiary State is entitled to the same treatment as extended by the granting State to a third State, as long as that treatment lasts, only in respect of persons and things which belong to the same category and have the same relationship to the beneficiary State as those persons and things related to the third State which enjoy the favoured treatment extended to them by the granting State’); Geiβ & Hilf, supra note 1, ¶ 28 (similar). 32  Draft Articles on MFN Clauses Commentary 10(1), in II(2) Yearbook of the International Law Commission 27 (1978) (quoting A.D. McNair, The Law of Treaties 287 (1961)). 33 Fitzmaurice, supra note 30 at 326; see also Draft Articles on MFN Clauses art. 8, in II(2) Yearbook of the International Law Commission 25 (1978). 34  See Anglo–​Iranian Oil Co. (U.K. v. Iran), 1952 I.C.J. 93, 109 (Judgment on Preliminary Objection of July 22) (‘The treaty containing the most-​favoured-​nation clause is the basic treaty . . . It is this treaty which establishes the juridical link between the United Kingdom and a third-​party treaty and confers upon that State the rights enjoyed by the third party. A third-​party treaty, independent of and isolated from the basic treaty, cannot produce any legal effect as between the United Kingdom and Iran: it is res inter alios acta’). 35 3 Encyclopedia of Public International Law 471 (1997); Geiβ & Hilf, supra note 1, ¶ 28. See also Fitzmaurice, supra note 30, at 327–​28 (‘[T]‌he entire right to receive such treatment derives from and depends on the earlier most-​favoured-​nation treaty. The role of the [third-​party] treaty is so to speak largely indicative. It does not per se confer rights on [State] A, but (as between [State] A and B) it indicates what particular treatment B must grant A by reason of the right given to A under the earlier most-​favoured-​nation clause’). 36  Draft Articles on MFN Clauses Commentary 8(1), in II(2) Yearbook of the International Law Commission 25 (1978). 37  Draft Articles on MFN Clauses Commentary 5(6), in II(2) Yearbook of the International Law Commission 23 (1978).

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II.  Historical Background same benefits as were extended by the agreement in question to the third State. The mere fact that the third State has not availed itself of the benefits which are due to it under the agreement concluded with the granting State cannot absolve the granting State from its obligations under the clause.38

In considering the extent to which an MFN clause may be invoked in a particular case, 23.21 therefore, one must determine whether the basic treaty containing the MFN clause establishes the appropriate juridical link between it and the benefits that are extended to a third party:  ‘[T]‌he beneficiary State can claim most-​favoured-​nation treatment in respect of its nationals, ships, products, etc. only to the extent that the granting State confers the same benefits upon the nationals, ships, products, etc., of a third State’.39 In addition, under the ejusdem generis principle, the benefits to be invoked under an MFN clause must be limited to the appropriate subject matter: ‘[T]he grant of most-​favoured-​nation rights on one subject or order of subjects, cannot confer a right to enjoy the treatment granted to another country in respect of a different subject-​matter or category of subject-​matter’.40

2. 2015 Final Report of the Study Group on the Most-​Favoured-​Nation Clause The ILC revisited the topic of the MFN clause in 2006, when it decided to seek the views of 23.22 governments as to whether it should include the topic in its long-​term work programme.41 Following an affirmative response, in 2009, the ILC established a Study Group on the MFN clause, chaired by Donald M. McRae.42 The Study Group met twenty-​four times from 2009 to 201543 and in 2015 issued a Final Report on the Most-​Favoured-​Nation Clause (2015 ILC Report),44 which the ILC adopted at its sixty-​seventh session, commended to the attention of the United Nations General Assembly and recommended for a wide dissemination.45 Having surveyed developments since the 1978 Draft Articles, the ILC concluded that ‘MFN 23.23 clauses remain unchanged in character from the time the 1978 draft articles were concluded’ and that the ‘core provisions of the 1978 draft articles continue to be the basis for the interpretation and application of MFN clauses today’.46 Accordingly, the ILC decided not to produce new draft articles or revise the 1978 draft articles but to focus on interpretative issues relating to MFN clauses, in particular, those concerning the scope of treatment to be provided under an MFN clause with respect to investors’ access to investor-​state dispute resolution mechanisms under investment treaties.47 In the 2015 ILC Report, the ILC identified a number of interpretative issues arising from 23.24 decisions of investment treaty tribunals, including the following, among others: (1) whether

  Id.   Draft Articles on MFN Clauses Commentary 5(4), in II(2) Yearbook of the International Law Commission 22 (1978). 40 Fitzmaurice, supra note 30, at 324. 41  Report of the International Law Commission to the General Assembly, 61 U.N. General Assembly Official Records, Supplement No. 10, U.N. Doc. A/​61/​10 (2006), ¶¶ 12, 32, 33. 42  Report of the International Law Commission to the General Assembly, 70 U.N. General Assembly Official Records, Supplement No. 10, U.N. Doc. A/​70/​10 (2015), ¶¶ 33, 34, 44. The Study Group was co-​chaired from 2009 to 2011 by A. Rohan Perera and, in Mr. McRae’s absence in 2013 and 2014, chaired by Mathias Forteau. 43  Id. ¶ 35. 44  International Law Commission, Final Report of the Study Group on the Most-​Favoured-​Nation Clause (2015), http://​legal.un.org/​docs/​?path=../​ilc/​texts/​instruments/​english/​reports/​1_​3_​2015.pdf (last visited Nov. 11, 2017) [hereinafter 2015 I.L.C. Rep.]. 45  Report of the International Law Commission to the General Assembly, 70 U.N. General Assembly Official Records, Supplement No. 10, U.N. Doc. A/​70/​10 (2015), ¶ 41. 46  2015 I.L.C. Rep., ¶ 212. 47  Id. ¶¶ 7–​9, 68. 38 39

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The MFN Clause and Its Evolving Boundaries MFN treatment as a matter of principle extends to both ‘substantive’ treaty provisions and ‘procedural’, or dispute settlement, provisions;48 (2) whether a stricter interpretative approach or a heightened standard of proof of a treaty parties’ intent should be applied to the question whether a treaty’s MFN clause extends to dispute settlement;49 (3) whether the application of MFN clauses to dispute settlement goes to the jurisdiction of the tribunal or is an issue of admissibility and, if the former, whether the subject matter, personal and temporal jurisdictional requirements of the basic treaty must be satisfied independent of the MFN clause;50 (4) whether the degree of specificity with which the basic treaty addresses dispute settlement relative to the dispute settlement provisions of the third party treaty should be taken into account when interpreting the scope of the MFN clause;51 (5) whether the treaty-​making practice of one state alone, such as investment treaties concluded between the host state and other countries, is of relevance to an interpretation of an MFN clause;52 (6)  whether the proper time as of which the meaning of the term ‘treatment’ should be ascertained is the time of the conclusion of the basic treaty or the time of the interpretation, in other words, whether changes of the term’s meaning over time should be taken into account;53 (7) whether the perceived significance or utility of the treaty provision sought to be supplemented or bypassed by way of an MFN clause, such as the eighteen-​month local litigation requirement,54 should be a factor in interpreting the scope of the MFN clause;55 (8) whether the provisions of the third party treaty must be in fact more favourable than those of the basic treaty or whether the choice of a different treatment alone can be considered as more favourable treatment;56 and (9) whether the consistency of investment treaty jurisprudence and various policy considerations are factors relevant to the interpretation.57 23.25 The ILC noted that investment treaty tribunals have addressed these questions without a uni-

form approach to interpretation and that ‘different factors, sometimes unrelated to the words used in the treaties before them, appear to have been given weight’.58 The ILC described the decisions of investment treaty tribunals as reflecting ‘conflicting views . . . over the application of MFN clauses to dispute settlement provisions’59 and noted that it would ‘not . . . attempt to decide between the conflicting views’, because ‘to conclude that one tribunal was right and another wrong would simply insert the Commission as just another voice in an ongoing debate’.60

23.26 The ILC emphasized in this connection the need to ‘reinforce respect for the rules of inter-

pretation set out in the VCLT [Vienna Convention], which are applicable to all treaties’61

  Id. ¶¶ 93–​99.   Id. ¶¶ 101–​103. 50  Id. ¶¶ 104, 105. 51  Id. ¶ 115. 52  Id. ¶ 119. 53  Id. ¶ 123. 54  When the 2015 I.L.C. Report was prepared, a number of investment treaty tribunals had addressed the question whether MFN treatment may be invoked to bypass the basic treaty’s requirement that the claimant investor litigate the dispute in domestic courts for a specified period of time before the dispute can be submitted to international arbitration. The ILC used this question to illustrate a number of the interpretative issues that arise in the context of applying MFN treatment to investor-​state dispute settlement. See, e.g., id. ¶¶ 108–​14, 124. 55  Id. ¶ 124. 56  Id. ¶ 137. 57  Id. ¶¶ 135, 140. 58  Id. ¶ 91. 59  Id. ¶ 8. 60  Id. ¶ 8. 61  Id. ¶ 92. 48 49

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II.  Historical Background and that ‘the key question of ejusdem generis—​what is the scope of the treatment that can be claimed—​has to be determined on a case-​by-​case basis’.62 The ILC stated: [T]‌he common objective of all MFN provisions, and the similarity in the language used across many investment agreements means that the interpretation of an MFN provision in one investment agreement may well provide guidance for the interpretation of an MFN provision in another agreement. Investment tribunals have indeed considered provisions under agreements other than the agreement before them in seeking to interpret an MFN provision. However, the interpretation of any particular MFN provision must be in accordance with articles 31–​32 of the VCLT. Thus, while guidance can be sought from the meaning of MFN treatment in other agreements each MFN provision must be interpreted on the basis of its own wording and the surrounding context of the agreement it is found in. As a result, there is no basis for concluding that there will be a single interpretation of an MFN provision applicable across all investment agreements.63

Proceeding from these principles, the ILC provided general guidance on the interpretation of 23.27 MFN clauses and some of the specific issues referenced. First, the ILC observed that ‘there is little doubt that in principle MFN provisions are capable of applying to the dispute settlement provisions of BITs’64 but emphasized that the question whether MFN treatment extends to dispute resolution ‘is truly one of treaty interpretation that can be answered only in respect of each particular case’.65 Turning to the question whether MFN treatment goes to the jurisdiction of the tribunal or 23.28 the admissibility of the claim, the ILC suggested that this issue reflects a ‘difference between those who regard investment agreements as public international law instruments’ and thus favour the jurisdictional approach and ‘those who regard investor-​state dispute settlement as being more of a private law nature akin to contractual arrangements’ and thus favour the admissibility approach.66 The ILC noted that this issue has practical consequences in that the different approaches might result in different answers to the question ‘whether a limitation on access to dispute settlement, such as an eighteen-​month domestic litigation requirement, is a similar jurisdictional limitation applicable to qualified investors’ and, consequently, whether such limitations may be bypassed by way of an MFN clause.67 The ILC concluded that this is a ‘partly conceptual debate about the nature of investment agreements’ as to which no ‘definitive solution can be offered’, given that ‘[i]‌nvestment agreements have elements of both a public and a private nature’ and the issue was ‘dealt with through a “mixed” arbitration with “ad hoc” arbitrators’.68 The ILC emphasized in this connection that ‘conclusions about the applicability of MFN clauses to dispute settlement provisions should be based on the interpretation and analysis of the provisions in question and not on assumptions about the nature of investment agreements or of the rights that are granted under them’.69 Similarly, as to the question whether the meaning of the term ‘treatment’ should be inter- 23.29 preted in an evolutionary manner, the ILC stated that this will depend on a number of factors specific to the particular treaty, including whether this was the intent of the parties to the

  Id. ¶ 147.   Id. ¶¶ 148–​49. 64  Id. ¶ 162. 65  Id. ¶ 163. 66  Id. ¶ 169. 67  Id. ¶ 166. 68  Id. ¶ 172. 69  Id. ¶ 173. 62 63

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The MFN Clause and Its Evolving Boundaries treaty as well as the parties’ subsequent practice and their interpretation and application of the treaty.70 23.30 With respect to the treaty practice of only one state party to the basic treaty with third states,

the ILC observed that such treaty practice is outside the scope of Articles 31(2) and 31(3) of the Vienna Convention, which limit the context to be taken into account in interpreting a treaty to agreements, instruments and practice relating to the treaty that are accepted by or undertaken among all parties to the treaty.71 The ILC noted that third-​state treaty practice nevertheless might be of some limited potential as a supplementary means of interpretation under Article 32 of the Vienna Convention, such as in circumstances where a state continues to include an eighteen-​ month litigation requirement in its treaties, notwithstanding that some of its earlier treaties do not contain such a requirement.72

23.31 With respect to the relevance of the degree of specificity of the provisions of the basic treaty to the

interpretation, the ILC stated that ‘the mere fact that there is a specific provision in the basic treaty itself cannot be conclusive on whether an MFN provision can provide better treatment’ and that ‘a presumption that the specific overrides the general is simply inconclusive in the interpretation of an MFN provision’.73 Similarly, the ILC stated that the interpretative principle that mentioning one thing excludes other things of the same class (expressio unius est exclusio alterius) is a ‘factor to consider and nothing more’, including in circumstances where the MFN clause in question expressly excludes some matters—​but not dispute settlement—​from MFN treatment.74

23.32 As regards the relevance of the perceived significance or utility of the treaty provisions sought

to be supplemented or bypassed by way of an MFN clause, the ILC noted that some investment treaty tribunals considered in their interpretation of MFN clauses that the eighteen-​ month litigation requirement sought to be bypassed via MFN treatment constituted an unnecessary hurdle for the claimant investor and ran contrary to the objective of investment treaties to promote and facilitate investment.75 The ILC stated that it had ‘difficulty in seeing how such a consideration can be justified under the rules on treaty interpretation’,76 that the ‘function of the tribunal is to ascertain the meaning and the intent of the parties, not to query their policy choices’77 and that ‘the content of a provision that is being bypassed by application of the MFN provision is, in the view of the Study Group, irrelevant as far as treaty interpretation is concerned’.78

23.33 As regards whether the treatment sought via an MFN clause in fact is more favourable than

that provided under the basic treaty and whether the beneficiary of an MFN clause may ‘pick and choose’ procedural benefits from a third party treaty as opposed to invoking the dispute settlement provisions of the third party treaty as a whole, the ILC stated that ‘what constitutes less favourable treatment can only be answered on a case-​by-​case analysis’.79

23.34 The ILC concluded that ‘MFN clauses remain unchanged in character from the time the

1978 draft articles were concluded’,80 that the ‘core provisions of the 1978 draft articles’,

  Id. ¶ 178.   Id. ¶¶ 180–​82. 72  Id. ¶ 183. 73  Id. ¶ 187. 74  Id. ¶ 188. 75  Id. ¶ 189. 76  Id. 77  Id. ¶ 190. 78  Id. 79  Id. ¶ 193. 80  Id. ¶ 212. 70 71

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II.  Historical Background although they do not provide answers to all interpretative issues, ‘continue to be the basis for the interpretation and application of MFN clauses today’,81 that the ‘interpretation of MFN clauses is to be undertaken on the basis of the rules for the interpretation of treaties as set out in the VCLT’,82 that the ‘scope and nature of the benefit that can be obtained under an MFN provision depends on the interpretation of the MFN provision itself ’83 and that, absent specific treaty provisions one way or the other, as regards the question whether an MFN clause extends to dispute settlement, ‘the matter will be left to dispute settlement tribunals to interpret MFN clauses on a case-​by-​case basis’.84

C. Early Jurisprudence The International Court of Justice and other international tribunals have been confronted 23.35 with the interpretation and application of MFN clauses on a number of instances, and the resulting decisions have relevance not only to understanding how the relevant principles have been applied in specific circumstances but also to the contemporary question of the extent to which MFN clauses may be relied on in the investment treaty context to confer benefits not otherwise available to the beneficiary of the MFN clause. The following cases have been discussed and referenced in several bilateral investment treaty cases. The Ambatielos case in particular continues to be referenced and debated by tribunals interpreting MFN clauses.85

1. Anglo–​Iranian Oil Company Although the Anglo–​Iranian Oil Company case86 has often been cited in investment treaty 23.36 cases, it has had little relevance to the issues actually decided. Its chief contribution, if any, has been the Court’s dicta concerning the need to determine party intent in interpreting the meaning and scope of an MFN clause. In the case, the UK invoked MFN clauses in treaties concluded with Iran in 1857 and 1903 23.37 in an attempt to benefit from a 1934 treaty between Iran and Denmark, as well as similar Iranian treaties concluded with Switzerland in 1934 and Turkey in 1937, that guaranteed treatment of persons and property in accordance with international law. Without reaching the merits, the ICJ dismissed the case on the grounds that it did not have jurisdiction. The basis of the Court’s ruling was that Iran’s Declaration accepting the ICJ’s jurisdiction 23.38 was not made until 1932, which postdated the two treaties containing the MFN clauses

  Id.   Id. ¶ 213. 83  Id. ¶ 214. 84  Id. ¶ 216. MFN clauses also were the subject of study by the United Nations Conference on Trade and Development (UNCTAD), which, in 2010, published a study of MFN clauses in investment treaties and their application by investment treaty tribunals as part of its second series of monographies on issues in international investment agreements. See UNCTAD, Most-​Favoured Nation Treatment, UNCTAD Series on Issues in International Investment Agreements II (2010), UNCTAD/​DIAE/​IA/​2010/​1 (Jan. 24, 2011). 85  See, e.g., Wintershall Aktiengesellschaft v.  Argentine Republic, ICSID Case No. ARB/​ 04/​14, Award (Dec. 8, 2008), ¶¶ 103–​105; Renta 4 S.V.S.A.  et  al. v.  Russian Federation, SCC, Award on Preliminary Objections (Mar. 20, 2009), ¶¶ 89, 96–​97, 100–​101; Austrian Airlines v. Slovak Republic, UNCITRAL, Final Award (Oct. 9, 2009), ¶ 124 & n.40; ICS Inspection and Control Services Ltd. v. Argentine Republic, PCA Case No. 2010-​9, Award on Jurisdiction (Feb. 10, 2012), ¶¶ 89 n.44, 286, 291, 293, 307; Daimler Financial Services A.G. v. Argentine Republic, ICSID Case No. ARB/​05/​1, Award (Aug. 22, 2012), ¶¶ 211, 227 n.397. The Renta 4 Award on Preliminary Objections was challenged before Sweden’s Svea Court of Appeal, which held that the tribunal did not have jurisdiction in the matter. See Russian Federation v. GBI 9000 SICAV S.A.  et  al., Svea Court of Appeal Case No. T9128-​14, Judgment (Jan. 18, 2016), https://​ www.arbitration.sccinstitute.com/​Swedish-​Arbitration-​Portal/​Court-​of-​Appeal/​Court-​of-​Appeal/​Court-​of-​ Appeal/​(last visited Nov. 11, 2017). 86  Anglo–​Iranian Oil Co. (U.K. v. Iran), supra note 34. 81 82

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The MFN Clause and Its Evolving Boundaries invoked by the UK, and that the Declaration applied only to disputes arising under treaties concluded after the date of the Declaration. In interpreting the wording of the Declaration, the Court sought evidence of Iran’s intent in making the Declaration by comparing its contemporaneous treaty practice with other states and the wording of its internal ratification of the Declaration.87 The Court’s conclusion was that Iran had intended to agree to the Court’s jurisdiction only with respect to disputes arising under treaties concluded after the date of the Declaration. Accordingly, [t]‌he Court must, therefore, find in regard to the Iranian–​Danish Treaty of 1934, that the United Kingdom is not entitled, for the purpose of bringing its present dispute with Iran under the terms of the Iranian Declaration, to invoke its Treaties of 1857 and 1903 with Iran, since those Treaties were concluded before the ratification of the Declaration; that the most-​ favoured-​nation clause contained in those Treaties cannot thus be brought into operation; and that, consequently, no treaty concluded by Iran with any third party can be relied upon by the United Kingdom in the present case.88 23.39 The Court’s finding was not that the MFN clauses in the treaties of 1857 and 1903 were, by

their nature, incapable of giving rise to jurisdiction or otherwise operating to confer benefits on the UK, but that because of the specific wording and effect of Iran’s Declaration, which was the only possible basis for the ICJ’s jurisdiction in the case, those particular treaties could not be invoked on any basis before the Court. The case thus turned on the Court’s understanding of Iran’s purpose and intent in making its Declaration of acceptance of the Court’s jurisdiction.

2. Rights of US Nationals in Morocco 23.40 As already noted, the application of MFN treatment generally depends upon the interplay of two sets of treaties: the basic treaty establishes the right to be accorded MFN treatment and the third-​party treaty establishes the content of the treatment. In the Rights of U.S. Nationals in Morocco case,89 the ICJ explained that because the basic treaty relies on the provision of another treaty for the content of the rights to be accorded to the beneficiary of the MFN clause, both treaties must be valid and in force.90 23.41 The case concerned the question of whether the United States (US) could continue to claim

‘privileges with regard to consular jurisdiction’ that Morocco had granted to Spain and the UK in other treaties, but which privileges Spain and the UK had since renounced. The US argued that it was entitled to such consular jurisdiction on the basis of an MFN clause in a treaty concluded with Morocco in 1836, pursuant to which Morocco agreed that ‘whatever indulgence, in trade or otherwise, shall be granted to any of the Christian Powers, the citizens of the United States shall be equally entitled to them’.91

23.42 The ICJ rejected the US’ contention that MFN provisions are intended to be ‘a form of drafting

by reference . . . [under which] rights or privileges which a country was entitled to invoke by virtue of [an MFN] clause . . . would be incorporated permanently by reference . . . even

  1952 I.C.J. 105–​107.   1952 I.C.J. 110. 89  Rights of Nationals of the United States of America in Morocco (Fr. v. U.S.), 1952 I.C.J. 176 (Judgment of Aug. 27). 90  See also Oppenheim’s International Law, supra note 4, at 1330 (‘A most favoured nation clause will usually relate not only to the level of treatment accorded to third states at the time the treaty was concluded, but also to all subsequent changes in the level of treatment given to third states. However, where the treatment granted to a third state is based on a treaty between it and the granting state, the termination of that treaty will in principle bring to an end the entitlement of the beneficiary state to that treatment’). 91  1952 I.C.J. at 190 (citing Treaty of Sept. 16, 1836, art. 24). 87 88

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II.  Historical Background after the abrogation of the treaty provisions from which they derived’.92 Based on an examination of the treaty at issue and the general treaty pattern of the contracting parties, the Court found that the intent of the parties was to treat each other with equality at all times, and therefore the Court held that once Spain and the UK had renounced the privileges at issue, the basis of those privileges ceased to exist, and the US accordingly could not invoke the MFN clause to continue to claim them.

3.  Ambatielos The most widely cited case in investment treaty cases is the Ambatielos case decided by an ad 23.43 hoc Arbitration Commission in 1956.93 In that case, Greece brought a claim in arbitration against the UK on behalf of its national, arguing that Mr Ambatielos had suffered a denial of justice in respect of a dispute brought before the English courts.94 Greece invoked the right to bring such a claim by relying on the MFN clause in an 1886 Anglo–​Greek Treaty of Commerce and Navigation and earlier treaties between the UK and third states that Greece claimed had obligated the UK to accord its nationals treatment in accordance with international standards in the administration of justice.95 In response, the UK argued that Greece had not brought a valid claim because the MFN 23.44 clause at issue only related to commerce and navigation, not to the administration of just­ ice.96 The Arbitration Commission rejected this interpretation, ultimately holding that ‘the effects of the most-​favoured-​nation clause contained in Article X of the said Treaty of 1886 can be extended to the system of the administration of justice in so far as it concerns the protection by the courts of the rights of persons engaged in trade and navigation’.97 In reaching this conclusion, the Arbitration Commission agreed that the ejusdem generis prin- 23.45 ciple applied and that an MFN ‘clause can only attract matters belonging to the same category of subject as that to which the clause itself relates’.98 The Commission, however, found that the subject matter of the 1886 Anglo–​Greek treaty encompassed the administration of justice, at least in respect of the intended beneficiaries under the treaty. As the Commission explained: It is true that “the administration of justice”, when viewed in isolation, is a subject matter other than “commerce and navigation”, but this is not necessarily so when it is viewed in connection with the protection of the rights of traders. Protection of the rights of traders naturally finds a place among the matters dealt with by Treaties of commerce and navigation. Therefore it cannot be said that the administration of justice, in so far as it is concerned with the protection of these rights, must necessarily be excluded from the field of application of the most-​favoured-​nation clause, when the latter includes “all matters relating to commerce and navigation”. The question can only be determined in accordance with the intention of the Contracting Parties as deduced from a reasonable interpretation of the Treaty.99

  1952 I.C.J. 191.   The Ambatielos Claim (Gr. v. U.K.), XII R.I.A.A. 91 (Award of Mar. 6, 1956). 94 Jurisdiction to hear the case arose from a Declaration annexed to a 1926 Anglo–​ Greek Treaty of Commerce and Navigation. See Ambatielos (Gr. v.  U.K.), 1953 I.C.J. 10 (Judgment on the Obligation to Arbitrate of May19); Ambatielos (Gr. v. U.K.), 1952 I.C.J. 28 (Judgment on Preliminary Objection of July 1). 95  See XII R.I.A.A. at 106; 1953 I.C.J. 20–​21. 96  Id. 106. 97  Id. 109. 98  Id. 107. 99  Id. 92 93

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The MFN Clause and Its Evolving Boundaries The ultimate question for the Commission, therefore, was the intent of the parties to the MFN clause. The Commission found that the administration of justice was included within the scope of  the MFN clause at issue because that clause applied broadly to ‘all matters relating to commerce and navigation’ and because: Although the wording of Article X does not provide a clear and decisive indication in this respect, the Commission is of the opinion that it is difficult to reconcile the narrow interpretation submitted by the Government of the United Kingdom with the indications given in the text, in particular in the last part of the sentence ‘it being their (the Contracting Parties’) intention that the trade and navigation of each country shall be placed, in all respects, by the other on the footing of the most favoured nation’.100 23.46 The Arbitration Commission ultimately decided against Greece on the merits (that is, it

decided that Mr Ambatielos had not suffered a denial of justice). However, its conclusion regarding the scope of an MFN clause in respect of the ‘administration of justice’ has been cited by claimants and some tribunals as authority for the proposition that foreign investors can rely on an MFN clause in one investment treaty to invoke the benefits of another investment treaty in regard to the terms of submission of disputes to international arbitration.

23.47 This understanding of the significance of the Ambatielos case, however, has not been accepted

universally. That is because the reference to the administration of justice in the Ambatielos case was in the context of the quality of the substantive treatment afforded by the UK (albeit through its courts). As such, the case does not provide direct support for the conclusion that the ‘administration of justice’ includes the manner in which the treaty obligations themselves can be enforced against the state. Indeed, as the 2015 ILC Report observes, there may have been a misinterpretation of what the Commission of Arbitration in Ambatielos meant when it referred to ‘the administration of justice’ being within the scope of an MFN provision that referred to ‘all matters relating to commerce and navigation’. The Commission there was referring to access to the courts of the United Kingdom for enforcing substantive rights and not to a right to alter the conditions under which dispute settlement may be invoked.101

A number of investment treaty tribunals have understood the Ambatielos case similarly.102 Nevertheless, the Ambatielos case remains relevant for various basic propositions concerning the operation of MFN treatment, such as the application of the ejusdem generis principle.

III.  Bilateral Investment Treaty Practice A. MFN Clauses and Dispute Settlement 23.48 MFN clauses are routinely found in modern investment treaties. Many such treaties pair

MFN with national treatment, thereby requiring the contracting parties to treat covered   Id. 107 (emphasis in original).   2015 I.L.C. Rep., ¶ 162. 102  See, e.g., Salini Costruttori & Italstrade v.  Hashemite Kingdom of Jordan, ICSID Case No. ARB/​ 02/​13, Decision on Jurisdiction (Nov. 29, 2004), ¶ 112 (‘The Tribunal will observe that in [Ambatielos], Greece invoked the most-​favored-​nation clause with a view to securing, for one of its nationals, not the application of a dispute settlement clause, but the application of substantive provisions in treaties between the United Kingdom and several other countries under which their nationals were to be treated in accordance with “justice”, “right” and “equity”. The solution adopted by the Arbitration Commission cannot therefore be directly transposed in this specific instance’) (emphasis in original); Daimler Financial Services AG v.  Argentine Republic, ICSID Case No. ARB/​05/​1, Award (Aug. 22, 2012), ¶ 211 (similar); Wintershall Aktiengesellschaft v. Argentina, supra note 85, ¶ 103 (similar). 100 101

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III.  Bilateral Investment Treaty Practice investors and investments no less favourably than they treat their own investors/​investments or investors/​investments of third-​party states. The UK–​Turkey BIT103 provides an example: National Treatment and Most-​favoured-​nation Provisions (1) Neither Contracting Party shall in its territory subject investments or returns of nationals or companies of the other Contracting Party to treatment less favourable than that which it accords to investments or returns of its own nationals or companies or to investments or returns of nationals or companies of any third State. (2) Neither Contracting Party shall in its territory subject nationals or companies of the other Contracting Party, as regards the management, maintenance, use, enjoyment or disposal of their investments, to treatment less favourable than that which it accords to its own nationals or companies or to nationals or companies of any third State.

In disputes arising under investment treaties, claimants have invoked MFN clauses in 23.49 an attempt to secure both substantive and procedural benefits. The proposition that an MFN clause can be invoked to secure substantive benefits has not generated much controversy. In MTD Equity v Chile,104 for example, the claimant brought expropriation and fair and equitable treatment claims under the Malaysia–​Chile BIT (the basic treaty) but also relied on the MFN clause in that treaty to assert claims for breach of investment contract, unreasonable and discriminatory measures, and failure to grant necessary permits, which were based upon the Denmark–​Chile BIT and the Croatia–​Chile BIT.105 Similarly, in EDF v Argentina, the tribunal permitted claimants to rely on the MFN clause in the Argentina–​France BIT to invoke a so-​called ‘umbrella clause’ from the Argentina–​ Luxembourg BIT providing that ‘[e]‌ach of the Contracting Parties shall respect at all times the commitments it has undertaken with respect to investors of the other Party’.106 Similar conclusions have been reached by the tribunals in White Industries v India,107 Arif v Moldova,108 and Al-​Warraq v Indonesia,109 among others. A  contrary conclusion was reached by the tribunal in Teinver v Argentina, which did not permit the claimant to rely on the MFN clause in the Argentina–​Spain BIT in order to invoke the umbrella clause of the Argentina–​US BIT.110 In the majority of cases, however, claimants have sought procedural benefits, arguing that the 23.50 MFN clause in the basic treaty allows them to look to third state investment treaties to secure a more favourable dispute settlement mechanism.

103  Agreement between the Government of the Republic of Turkey and the Government of the United Kingdom of Great Britain and Northern Ireland for the Promotion and Protection of Investments art. 3. 104  MTD Equity Sdn. Bhd. and MTD Chile S.A.  v.  Republic of Chile, ICSID Case No. ARB/​ 01/​7, Award (May 25, 2004). 105  Id. ¶¶ 100–​105. 106  EDF International S.A., SAUR International S.A. and León Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​23, Award (June 11, 2012), ¶ 923. 107  White Industries Australia Limited v. Republic of India, UNCITRAL, Final Award (Nov. 30, 2011), ¶¶ 11.2.1–​11.2.9. 108 Mr. Franck Charles Arif v.  Republic of Moldova, ICSID Case No. ARB/​ 11/​23, Award (Apr. 8, 2013), ¶ 396. 109  Hesham Talaat M. Al-​Warraq v. Republic of Indonesia, UNCITRAL, Final Award (Dec. 15, 2014), ¶¶ 551–​55. 110  Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/​09/​1, Award (July 21, 2017), ¶¶ 882–​86; see also İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No. ARB/​10/​24, Award (Mar. 8, 2016), ¶ 329 (finding that where the MFN clause was limited to ‘similar situations’ it could not be read to include standards of treatment contained in other treaties between the state party and third states).

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The MFN Clause and Its Evolving Boundaries 23.51 The question whether an MFN clause may permit a claimant to benefit from the dispute

settlement procedures contained in other treaties arises because there can be significant variations among investment treaties as to the right, conditions, and forums available for dispute settlement. Whereas most investment treaties give investors the right to bring claims in arbitration against the host state for alleged breaches of the substantive provisions of the investment treaty in question, a small number of investment treaties contain no provision for the arbitration of investment disputes, and others allow arbitration of only a limited subset of potential investment disputes. There may be other differences as well, including the applicable arbitral rules/​institution, whether arbitration claims are barred if the investor avails itself of local remedies, whether the investor must first bring its claims to the local courts and the amount of time an investor must wait before commencing an arbitration.

23.52 The question whether an investor can rely on an MFN clause in one investment treaty to

avail itself of a more favourable dispute settlement mechanism found in a third state investment treaty is a question of interpretation and turns on the intent of the contracting parties to the basic treaty. It is commonly understood that the starting point for determining the parties’ intent must be the rules of treaty interpretation set out in Articles 31 and 32 of the Vienna Convention.111 According to these rules, a treaty ‘shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in light of its object and purpose’.112 Tribunals also generally agree that the ejusdem generis principle should be applied when determining whether an MFN clause applies to dispute settlement.113 The difficulties—​and divergences in opinion—​arise in interpreting these rules and principles. As the ILC Study Group noted, ‘controversies over the interpretation of MFN provisions sometimes reflect an underlying difference in the application of the VCLT provisions’.114

23.53 Some treaties make the parties’ intent clear. Article 3 of the BIT between Albania and the

UK, for example, includes the same two clauses found in the UK–​Turkey BIT listed earlier. In addition, however, it includes the following provision: ‘For the avoidance of doubt it is confirmed that the treatment provided for in paragraphs (1) and (2) shall apply to the provisions of Articles 1 to 11 of this agreement’.115 Articles 1–​11 of the UK–​Albania BIT contain the substantive and procedural rights typically extended to investors under such treaties, including, in Article 8, the right of investors to bring claims in arbitration under the treaty. It is thus apparent that the UK and Albania intended the MFN clause to apply to dispute settlement.

23.54 States also sometimes expressly exclude dispute settlement from the application of an MFN

clause. This might be done either by an express statement in the treaty,116 for example, or

  2015 I.L.C. Rep., ¶ 67.   Vienna Convention on the Law of Treaties Art. 31(1) (1969). 113  See, e.g., Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/​ 97/​7, Decision on Jurisdiction (Jan. 25, 2000), ¶ 56. 114  2015 I.L.C. Rep., ¶ 67. 115  Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Albania for the Promotion and Protection of Investments art. 3(3). 116  See Agreement between Canada and the Republic of Peru for the Protection and Promotion of Investments Annex B.4 (‘For greater clarity, treatment “with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments” referred to in paragraphs 1 and 2 of Article 4 [MFN Treatment] does not encompass dispute resolution mechanisms, such as those in Section C, that are provided for in international treaties or trade agreements’). 111 112

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III.  Bilateral Investment Treaty Practice by a later interpretative note agreed to by the contracting parties, as Argentina and Panama apparently have done with respect to their BIT.117 In many investment treaties, however, the contracting parties’ intent to include or exclude dis- 23.55 pute settlement within the scope of the treaty’s MFN clause remains a matter of interpretation. As the commentary to the ILC’s Draft Articles on MFN Clauses states, [d]‌rafters of a most-​favoured-​nation clause are always confronted with the dilemma of either drafting the clause in too general terms, risking thereby the loss of its effectiveness through a rigid interpretation of the ejusdem generis rule, or of drafting it too explicitly, enumerating its specific domains, in which case the risk consists in the possible incompleteness of the enumeration.118

The result is that it is not always clear what the contracting parties intended, and in cases where investors have sought to invoke an investment treaty’s MFN clause to benefit from another investment treaty’s dispute settlement mechanisms, arbitral tribunals have been required to discern such intent from the available evidence. Indeed, the question whether, and under what circumstances, an MFN clause may operate 23.56 to expand the jurisdiction of tribunals in this manner has proved to be one of the most controversial and divisive issues in recent investment treaty jurisprudence. One of the few aspects of this question that has been widely agreed is that there appears to be an absence of a jurisprudence constante.119 The number of investment treaty cases in which a tribunal has found an MFN clause in the relevant BIT to apply to the treaty’s dispute settlement provisions is roughly equal to the number of cases that have reached a contrary finding.120 Although some of these diverging outcomes can be explained by the fact that MFN clauses have a variety of formulations which naturally lead to different interpretations, the differing views held by individual arbitrators and tribunals have also contributed to inconsistent outcomes. Thus, for example, four tribunals have examined whether the same MFN clause in the Argentina–​Germany BIT applied to the treaty’s dispute settlement provisions, with two tribunals (Siemens AG121 and Hochtief AG122) ruling in the affirmative and two others (Wintershall AG123 and Daimler Financial Services AG124) ruling in the negative. Tribunals in other cases have articulated a variety of apparently incompatible rationales for reaching particular results.125 The cases that will be discussed illustrate the diverging approaches to interpreting MFN clauses taken by different tribunals.

117  See National Grid Plc v.  Argentine Republic, UNCITRAL, Decision on Jurisdiction (June 20, 2006), ¶ 85. 118  Draft Articles on MFN Clauses Commentary 10(6), in II(2) Yearbook of the International Law Commission 29 (1978). 119  See, e.g., ST-​AD GmbH v. Republic of Bulgaria, PCA Case No. 2011-​06, Award on Jurisdiction (July 18, 2013), ¶ 386; Renta 4 S.V.S.A. et al. v. Russian Federation, SCC Case No. 24/​2007, Award on Preliminary Objections (Mar. 20, 2009), ¶ 94; European American Investment Bank AG v. Slovak Republic, PCA Case No. 2010-​17, Award on Jurisdiction (Oct. 22, 2012), ¶¶ 436–​37; Christopher Greenwood, Reflections on ‘Most Favoured Nation’ Clauses in Bilateral Investment Treaties, in Practising Virtue: Inside International Arbitration 556 (David D. Caron, Stephan W. Schill, Abby Cohen Smutny, and Epaminontas E. Triantafilou eds., 2015). 120  See Greenwood, supra note 119, at 556. 121  Siemens A.G.  v.  Argentine Republic, ICSID Case No. ARB/​ 02/​8, Decision on Jurisdiction (Aug. 3, 2004). 122  Hochtief AG v.  Argentine Republic, ICSID Case No. ARB/​ 07/​31, Decision on Jurisdiction (Oct. 24, 2011). 123  Wintershall Aktiengesellschaft v. Argentina, supra note 85. 124  Daimler Financial Services AG v.  Argentine Republic, ICSID Case No. ARB/​ 05/​01, Award (Aug. 22, 2012). 125  Compare, e.g., Plama Consortium Limited v.  Republic of Bulgaria, ICSID Case No. ARB/​ 03/​24, Decision on Jurisdiction (Feb. 8, 2005), ¶ 223 (finding that MFN treatment does not extend to dispute

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The MFN Clause and Its Evolving Boundaries B. The  Cases 1. Maffezini v Spain 23.57 The first BIT case to address the issue of whether an MFN clause in an investment treaty can be used to invoke the dispute settlement provisions in another investment treaty was Maffezini v Spain,126 a case brought under the Argentina–​Spain BIT. This BIT includes as a precondition to submitting a dispute to international arbitration that the investor submits the dispute to the local courts and defer commencing the arbitration until either the local court has ruled on the dispute or 18 months have passed without a decision.127 Maffezini, the Argentine claimant, commenced the arbitration without submitting the dispute to the Spanish courts, relying on the BIT’s MFN clause and the dispute settlement provisions of the Chile–​Spain BIT, which does not require submission to the local courts.128 23.58 The MFN provision of the Argentina–​Spain BIT relied on by Maffezini provides that ‘[i]‌n all

matters subject to this Agreement, this treatment shall not be less favorable than that extended by each Party to the investments made in its territory by investors of a third country’.129 Spain’s principal objection was that, under the ejusdem generis principle, an MFN clause can only operate in respect of the same subject matter as the basic treaty and that ‘the reference in the [MFN] clause of the Argentine–​Spain BIT to ‘matters’ can only be understood to refer to substantive matters or material aspects of the treatment granted to investors and not to procedural or jurisdictional questions’.130

23.59 The Maffezini tribunal rejected Spain’s argument. The tribunal relied on the Ambatielos case,

finding that that case held that ‘the protection of the rights of persons engaged in commerce and navigation by means of dispute settlement provisions embraces the overall treatment of traders covered by the [MFN] clause’.131 The tribunal reasoned further that ‘today dispute settlement arrangements are inextricably related to the protection of foreign investors, as they are also related to the protection of rights of traders under treaties of commerce’ and that: International arbitration [is] essential . . . to the protection of the rights envisaged under the pertinent treaties; they are also closely linked to the material aspects of the treatment accorded . . . From the above considerations it can be concluded that if a third party treaty contains provisions for the settlement of disputes that are more favorable to the protection of the investor’s rights and interests than those in the basic treaty, such provisions may be extended to the beneficiary of the most favored nation clause as they are fully compatible with the ejusdem generis principle.132

23.60 The Maffezini tribunal also looked at the negotiations leading to the Argentina–​Spain BIT

and the general treaty practices of both Argentina and Spain and found it relevant that Spain usually espoused a policy of allowing investors to commence arbitration without any resort

settlement provisions unless the MFN clause ‘leaves no doubt’ that the Contracting Parties intended to incorporate such provisions), with Renta 4 S.V.S.A. et al. v. Russian Federation, SCC Case No. 24/​2007, Award on Preliminary Objections (Mar. 20, 2009), ¶¶ 95–​100 (considering that there should not be a presumption that an MFN provision does not incorporate dispute settlement provisions set forth in another treaty); see also Greenwood, supra note 119, at 556. 126  Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. Arb/​97/​7, Decision on Jurisdiction (Jan. 25, 2000). 127  Id. ¶ 19. 128  Id. ¶ 39. 129  Id. ¶ 38. 130  Id. ¶ 41. 131  Id. ¶ 50. 132  Id. ¶¶ 54–​56.

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III.  Bilateral Investment Treaty Practice to local remedies.133 The tribunal concluded that ‘the requirement for the prior resort to domestic courts spelled out in the Argentine–​Spain BIT does not reflect a fundamental question of public policy considered in the context of the treaty, the negotiations relating to it, the other legal arrangements or the subsequent practice of the parties’.134 It accordingly upheld Maffezini’s right to rely on the MFN clause in the Argentina–​Spain BIT and the dispute settlement provisions of the Chile–​Spain BIT to commence the arbitration without first resorting to the Spanish courts. In reaching its decision, the Maffezini tribunal sought to put some limits on the use of an 23.61 MFN clause to invoke the procedural benefits of other investment treaties, stating that: As a matter of principle, the beneficiary of the clause should not be able to override public policy considerations that the contracting parties might have envisaged as fundamental conditions for their acceptance of the agreement in question, particularly if the beneficiary is a private investor, as will often be the case. The scope of the clause might thus be narrower than it appears at first sight.135

The tribunal enumerated four examples of specific dispute settlement requirements that, in its opinion, could not be ignored by relying on an MFN provision136 and then concluded as follows: Other elements of public policy limiting the operation of the clause will no doubt be identified by the parties or tribunals. It is clear, in any event, that a distinction has to be made between the legitimate extension of rights and benefits by means of the operation of the clause, on the one hand, and disruptive treaty–​shopping that would play havoc with the policy objectives of underlying specific treaty provisions, on the other hand.137

2. Siemens v Argentina In Siemens v Argentina,138 where the BIT at issue also required prior submission of the invest- 23.62 ment dispute to the local courts and an eighteen-​month wait, the MFN clause did not include the broad reference to ‘all matters subject to this Agreement’. The respondent Argentina therefore argued that the MFN clause at issue was distinct from the clause at issue in Maffezini and that it did not allow the claimant to rely on the dispute settlement provisions of other Argentina BITs to avoid submission of the dispute to the local courts. The tribunal disagreed with Argentina’s position and interpreted the MFN clause to allow the claimant to rely on third-​party investment treaties. The MFN clause of the Germany–​Argentina BIT at issue provides as follows: Article 3(1): None of the Contracting Parties shall accord in its territory to the investments of nationals or companies of the other Contracting Party or to investments in which they hold shares, a less favorable treatment than the treatment granted to the investments of its own nationals or companies or to the investments of nationals or companies of third States.

  Id. ¶¶ 54–​61.   Id. ¶ 64. 135  Id. ¶ 62. 136  The four examples were (1) a requirement to exhaust local remedies; (2) a fork-​in-​the-​road-​provision, whereby the investor is required to make an irreversible choice either to submit the investment dispute to international arbitration or the local courts; (3) provision of a specific arbitral forum; and (4) provision for a highly institutionalized system of arbitration that incorporates precise rules of procedure, such as is found in NAFTA. Id. ¶ 63. 137  Id. 138  Siemens A.G.  v.  Argentine Republic, ICSID Case No. ARB/​ 02/​8, Decision on Jurisdiction (Aug. 3, 2004). 133 134

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23.63

The MFN Clause and Its Evolving Boundaries Article 3(2):  None of the Contracting Parties shall accord in its territory to nationals or companies of the other Contracting Party a less favorable treatment of activities related to investments than granted to its own nationals and companies or to the nationals and companies of third States.139

In addition, Article 3 of this BIT contains various exceptions and limitations to the application of the MFN clause, exempting the MFN clause from the benefits extended to third states under ‘customs or economic unions and of free trade areas (Article 3(3)), and to advantages granted in taxation–​related agreements (Article 3(4))’.140 The BIT’s Protocol further excludes ‘measures dictated by internal or external security or public order concerns, and the fiscal advantages, exemptions or reductions granted to each Contracting Party’s nationals or companies (Ad Article 3 (a) and (b))’.141 23.64 The Siemens tribunal acknowledged that the MFN clause at issue did not refer to ‘all matters

subject to this Agreement’ and that its formulation was narrower than the MFN clause at issue in Maffezini; nevertheless, it found that ‘the term “treatment” and the phrase “activities related to the investments” [in the MFN clause] are sufficiently wide to include settlement of disputes’.142

23.65 The tribunal relied on the Ambatielos case to support its view that treatment of investors in

the BIT at issue included terms of submission to international arbitration. It explained:

The Respondent has argued that, in Ambatielos, administration of justice refers to substantive procedural rights like just and equitable treatment and not to purely jurisdictional matters. The Tribunal does not find any basis in the reasoning of the Commission to justify such distinction. On the other hand, the Tribunal finds that the Treaty itself, together with so many other treaties of investment protection, has as a distinctive feature special dispute settlement mechanisms not normally open to investors. Access to these mechanisms is part of the protection offered under the Treaty. It is part of the treatment of foreign investors and investments and of the advantages accessible through a MFN clause.143 23.66 The tribunal also interpreted the specific wording of the MFN clause to encompass dispute

settlement by explaining that

‘[t]‌reatment’ in its ordinary meaning refers to behavior in respect of an entity or a person. The term ‘treatment’ is neither qualified nor described except by the expression ‘not less favorable’. The term ‘activities’ is equally general. The need for exceptions confirms the generality of the meaning of treatment or activities rather than setting limits beyond what is said in the exceptions . . . Treatment in Article 3 refers to treatment under the Treaty in general and not only under that article.144 23.67 In reaching its decision, the Siemens tribunal repeated the concerns expressed in Maffezini

concerning the limits of using an MFN clause to avail oneself of more favourable dispute settlement provisions, noting that ‘[t]‌he Tribunal concurs with Maffezini that the beneficiary of the MFN clause may not override public policy considerations judged by the parties to a treaty essential to their agreement’.145 The tribunal, however, found that Argentina had not consistently required investors to submit disputes to the local courts in its other BITs and that, therefore,

  Id. ¶ 82.   Id. ¶ 83. 141  Id. ¶ 83. 142  Id. ¶ 103. 143  Id. ¶ 102. 144  Id. ¶ 85. 145  Id. ¶ 109. 139 140

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III.  Bilateral Investment Treaty Practice [t]‌his lack of consistency among the BITs entered into by the Respondent during the same year as the Treaty was signed does not support the argument that the institution of proceedings before the local courts is a “sensitive” issue of economic or foreign policy or that it is an essential part of the consent of the Respondent to arbitration. The Respondent has sought for its own nationals as investors in Chile or the United States similar treatment to that sought by the Claimant in these proceedings.146

Accordingly, as in Maffezini, the Siemens tribunal rejected the respondent’s objections and 23.68 allowed the claimant to invoke the more favourable dispute settlement provisions found in other BITs, so as to avoid the precondition of submitting its dispute to the local courts.

3. Other early cases in the line of  Maffezini and Siemens Although not without some ambiguity, given their dicta regarding the limits of MFN clauses, 23.69 the Maffezini and Siemens cases support the proposition that unless there is evidence of contrary intent by the contracting parties, an MFN clause may be relied upon to benefit from the terms of submission to dispute settlement set out in other investment treaties where the more favourable treatment that the investor seeks is to avoid a requirement first to submit the dispute to the local courts. Several other tribunals in the early cases reached the same conclusion based on similar reasoning, including Camuzzi International v Argentina,147 National Grid v Argentina,148 Gas Natural v Argentina,149 Suez v Argentina,150 and the joined cases Suez v Argentina/​AWG Group v Argentina.151 The principal rationale for the decisions in these cases, even if not expressly articulated, is that 23.70 the dispute settlement procedures set out under an investment treaty are of the same category as other protections set out by that treaty. Thus, application of the ejusdem generis principle does not, in principle, exclude such procedures from the scope of an MFN clause. Of the several cases listed, the Decision on Jurisdiction in Gas Natural v Argentina bears 23.71 mentioning as its reasoning is more elaborated. In that case, which involved the same Argentina–​Spain BIT at issue in Maffezini (but with a Spanish claimant) and the same attempt by the claimant to bypass prior submission of the investment dispute to the local courts, the tribunal allowed the claimant to forgo submitting the dispute to the Argentine courts on the basis of the dispute settlement provisions in other Argentine BITs that did not impose that requirement. In reaching its decision, the tribunal relied on Ambatielos to conclude that the international 23.72 arbitration rights provided for in most investment treaties ‘constitute part of the bundle of protections granted to foreign investors by host states’, that the arbitration provisions were ‘perhaps the most crucial element’ of such treaties and that international dispute settlement ‘provisions are universally regarded—​by opponents as well as by proponents—​as essential to a regime of protection of foreign direct investment’.152 The tribunal further rejected

  Id. ¶ 105.  Camuzzi International S.A.  v.  Argentine Republic, ICSID Case No. ARB/​ 03/​ 7, Decision on Jurisdiction (June 10, 2005) (in Spanish). For a case description in English, see Dana H. Freyer & David Herlihy, Most-​Favored-​Nation Treatment and Dispute Settlement in Investment Arbitration: Just How “Favored” is “Most-​Favored”?, 21 ICSID Rev.-​FILJ 58, 78–​79 (2006). 148  National Grid Plc v. Argentine Republic, UNCITRAL, Decision on Jurisdiction (June 20, 2006). 149  Gas Natural SDG, S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​10, Decision on Jurisdiction (June 17, 2005). 150 Suez et  al. v.  Argentine Republic, ICSID Case No. ARB/​ 03/​17, Decision on Jurisdiction (May 16, 2006). 151  Id. 152  Gas Natural v. Argentina, supra note 149, ¶ 2. 146 147

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The MFN Clause and Its Evolving Boundaries Argentina’s argument that it would be against Argentina’s public policy to allow the claimant to bypass the specific procedural requirements of the Argentina–​Spain BIT, explaining that the ‘Tribunal notes further that it does not find the public policy argument raised by Argentina to be persuasive, particularly in view of the many BITs concluded by Argentina (in addition to the US–​Argentina BIT) that do not require resort to national jurisdiction prior to access to international arbitration’.153 23.73 The tribunal therefore held that the MFN clause in the Argentina–​Spain BIT was applicable

to dispute settlement and summed up its ruling as follows:

This Tribunal understands that the issue of applying a general most–​favored–​nation clause to the dispute resolution provisions of bilateral investment treaties is not free from doubt, and that different tribunals faced with different facts and negotiating background may reach different results. The Tribunal is satisfied, however, that the terms of the BIT between Spain and Argentina show that dispute resolution was included within the scope of most–​favored–​ nation treatment, and that our analysis set out in paragraphs 28–​30 above is consistent with the current thinking as expressed in other recent arbitral awards. We remain persuaded that assurance of independent international arbitration is an important—​perhaps the most important—​element in investor protection. Unless it appears clearly that the state parties to a BIT or the parties to a particular investment agreement settled on a different method for resolution of disputes that may arise, most–​favored–​nation provisions in BITs should be understood to be applicable to dispute settlement.154 23.74 Under the rationale of this decision, an investment treaty’s provision for international arbi-

tration should be understood as ‘a significant substantive incentive and protection for foreign investors’,155 and it should be understood that, unless the state can show ‘clearly’ that the contracting parties intended for a treaty’s specific dispute settlement procedures to apply notwithstanding more favourable dispute settlement procedures in other relevant investment treaties, the MFN clause in that treaty should apply to dispute settlement.

23.75 In Tecmed v Mexico,156 the claimant argued that the MFN clause in the Mexico–​Spain BIT

entitled it to present claims based upon events that occurred prior to the BIT’s entry into force. The claimant argued further that the MFN clause entitled it to bypass the BIT’s provisions requiring it to submit claims within three years from the date such claims arose. The tribunal rejected the claimant’s position on both counts, relying on the public policy limitations expressed in Maffezini concerning those matters deemed crucial to the contracting parties in concluding the treaty.157

23.76 The tribunal in Salini v Jordan158 recognized that the contracting parties to an investment

treaty could intend the treaty’s MFN clause to encompass dispute settlement. However, it found that the MFN clause in the Italy–​Jordan BIT of 1999 should not be interpreted so as to permit the claimants to override the treaty’s limitation concerning the types of claims arbitrable under the BIT, specifically, the BIT’s provision according to which ‘[i]‌n case the investor and an entity of the Contracting Parties have stipulated an investment Agreement, the procedure foreseen in such investment agreement shall apply’.159 Accordingly, because   Id. ¶ 30.   Id. ¶ 49 (emphasis added). 155  Id. ¶ 31. 156  Técnicas Medioambientales TECMED, S.A. v. United Mexican States, ICSID Case No. ARB(AF)/​00/​ 2, Award (May 29, 2003). 157  Id. ¶¶ 69, 74. 158 Salini Costruttori & Italstrade v.  Hashemite Kingdom of Jordan, ICSID Case No. ARB/​ 02/​13, Decision on Jurisdiction (Nov. 29, 2004). 159  Id. ¶ 70. 153 154

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III.  Bilateral Investment Treaty Practice the construction contracts at issue provided for dispute settlement in domestic courts and did not provide for ICSID arbitration, the tribunal dismissed the contract-​based claims.160 A different result was reached in RosInvestCo v Russian Federation,161 a case that concerned 23.77 a treaty that permitted reference to dispute settlement only as to disputes relating to the amount of compensation due in the event of an expropriation or concerning other matters ‘consequential upon an act of expropriation’.162 Given this limitation, the claimant invoked the MFN clause in Article 3 of the BIT to avail itself of the dispute settlement provision of the Denmark–​Russia BIT, which allows, among other things, the arbitration of expropriation disputes, including the question whether an expropriation has taken place. The MFN clause at issue provides as follows: (1) Neither Contracting Party shall in its territory subject 111, use, enjoyment or disposal of their investments, to treatment less favourable than that which it accords to investors of any third State.163

The RosInvestCo tribunal concluded that ‘an expropriation is indeed a “treatment” of the 23.78 investment by the Host State’, and ‘the protection by an arbitration clause covering expropriation is a highly relevant aspect of that “treatment,” if compared with the alternative that the expropriation of an investment can only be challenged before the national courts of the Host State’.164 The tribunal observed that the benefit afforded by an agreement to submit disputes to arbi- 23.79 tration is a right that runs to the investor, as opposed to the investment, and thus the tribunal focused its analysis on the second sub-​paragraph of the MFN clause, which grants MFN protection for investors in ‘their management, maintenance, use, enjoyment or disposal of their investments’.165 Directing its attention to the phrase ‘use and enjoyment’, the tribunal concluded: [I]‌t is difficult to doubt that an expropriation interferes with the investor’s use and enjoyment of the investment, and that the submission to arbitration forms a highly relevant part of the corresponding protection for the investor by granting him, in case of interference with his “use” and “enjoyment”, procedural options of obvious and great significance compared to the sole option of challenging such interference before the domestic courts of the host state.166

  Id. ¶¶ 118–​19.   RosInvestCo UK Ltd. v. Russian Federation, SCC Case No. V079/​2005, Award on Jurisdiction (Oct. 5, 2007). The RosInvestCo tribunal’s final award on the merits was set aside by the Svea Court of Appeal on the basis of a default judgment entered against the claimant by the Stockholm District Court. As a result of the default judgment, the Court of Appeal found that the tribunal did not have jurisdiction to determine whether Russia had taken expropriation measures vis-​à-​vis RosInvest. Neither the District Court nor the Court of Appeal addressed the question whether the RosInvestCo tribunal’s interpretation of the MFN clause was correct. See Russian Federation v. RosInvestCo UK Ltd., Stockholm District Court Case No. T24891-​ 07, Default Judgment (Nov. 9, 2011)  at 4, https://​www.arbitration.sccinstitute.com/​Swedish-​Arbitration-​ Portal/​District-​Court/​District-​Court/​District-​Court/​ (last visited Nov. 11, 2017); Russian Federation v. RosInvestCo UK Ltd., Svea Court of Appeal, Case No. T10060-​10, Judgment (Sept. 5, 2013), at 5, https://​ www.arbitration.sccinstitute.com/​Swedish-​Arbitration-​Portal/​Court-​of-​Appeal/​Court-​of-​Appeal/​Court-​of-​ Appeal/​(last visited Nov. 11, 2017). 162  RosInvestCo UK Ltd. v. Russian Federation, supra note 161, Award on Jurisdiction (Oct. 5, 2007),  ¶¶ 105–​18. 163  Id. ¶ 126. 164  Id. ¶ 128. 165  Id. ¶ 126. 166  Id. ¶ 130. 160 161

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The MFN Clause and Its Evolving Boundaries In reliance on this reasoning, the tribunal held that ‘it has jurisdiction beyond that granted by Article 8 of the UK–​Soviet BIT and which extends to the issues whether Respondent’s actions have to be considered as expropriations and were valid’.167 23.80 In support of its holding, the tribunal stated that there was nothing unusual in the fact that

the scope of the dispute settlement provision in the UK–​Soviet BIT was widened because that was the natural and expected result of the MFN clause: While indeed the application of the MFN clause of Article 3 widens the scope of Article 8 and thus is in conflict to its limitation, this is a normal result of the application of MFN clauses, the very character and intention of which is that protection not accepted in one treaty is widened by transferring the protection accorded in another treaty. If this effect is generally accepted in the context of substantive protection, the Tribunal sees no reason not to accept it in the context of procedural clauses such as arbitration clauses. Quite the contrary, it could be argued that, if it applies to substantive protection, then it should apply even more to “only” procedural protection. However, the Tribunal feels that this latter argument cannot be considered as decisive, but that rather, as has been argued further earlier in the chapter, an arbitration clause, at least in the context of expropriation, is of the same protective value as any substantive protection afforded by applicable provisions such as Article 5 of the BIT.168

4.  Plama v Bulgaria 23.81 Soon after Maffezini and Siemens were decided, other tribunals considering the MFN question began reaching contrary conclusions. Several tribunals came to the opposite general conclusion implicitly reached by Siemens and explicitly stated in Gas Natural, finding the MFN clauses should not apply to the dispute settlement clauses of a treaty unless the parties clearly intended such a result. 23.82 In Plama v Bulgaria,169 the claimant sought to rely on the MFN clause in the 1987 Bulgaria–​

Cyprus BIT to avoid the limitation in that treaty that only allowed for a limited form of ad hoc arbitration of claims concerning the amount of compensation due an investor in the event of an expropriation. Relying on third-​party treaties, the claimant argued that the MFN clause allowed it to submit the dispute to ICSID arbitration. The Plama tribunal rejected the claimant’s arguments and held that the MFN clause ‘cannot be interpreted as providing consent to submit a dispute under the Bulgaria–​Cyprus BIT to ICSID arbitration’.170

23.83 Unlike previous cases, where both the basic treaty and the third-​party treaty contained the

state parties’ consent to submit specific categories of disputes to a certain type of international arbitration (e.g., arbitration pursuant to the ICSID Convention), the Bulgaria–​Cyprus BIT’s reference to dispute resolution was a sui generis form of ad hoc arbitration. The issue presented to the Plama tribunal, therefore, was whether the MFN clause contained in the Bulgaria–​Cyprus BIT could be interpreted as constituting Bulgaria’s consent to submit disputes to ICSID arbitration.

23.84 The MFN clause at issue provided in relevant part, ‘[e]‌ach Contracting Party shall apply

to the investments in its territory by investors of the other Contracting Party a treatment which is not less favorable than that accorded to investments by investors of third states’.171   Id. ¶ 133.   Id. ¶¶ 131–​33. 169  Plama Consortium Ltd. v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Decision on Jurisdiction (Feb. 8, 2005). 170  Id. ¶ 184. 171  Id. ¶ 187. 167 168

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III.  Bilateral Investment Treaty Practice Regarding the intent of the parties, the tribunal noted that the Bulgaria–​Cyprus BIT stands apart from other BITs in that it was concluded at a time when Bulgaria’s communist rulers ‘favored bilateral investment treaties with limited protections for foreign investors and with very limited dispute settlement provisions’.172 Given that fact, as well as a later (failed) attempt by Bulgaria and Cyprus to renegotiate the BIT’s terms, including its dispute settlement provisions, the tribunal concluded that ‘at the time of conclusion, Bulgaria and Cyprus limited specific investor-​state dispute settlement to the provisions set out in the BIT and had no intention of extending those provisions through the MFN provision’.173 The Plama tribunal also noted that the dispute settlement provisions contained in a particular 23.85 BIT are a product of specific negotiations and ‘Contracting States cannot be presumed to have agreed that those provisions can be enlarged by incorporating dispute settlement provisions from other treaties negotiated in an entirely different context’.174 The tribunal observed that this conclusion was further supported by the principle of separability of dispute resolution agreements from the principal agreement to which they relate.175 Hence, the tribunal observed that: ‘It is one thing to add to the treatment provided in one treaty more favorable treatment provided elsewhere. It is quite another thing to replace a procedure specifically negotiated by parties with an entirely different mechanism’.176 With respect to the specific wording of the MFN clause at issue, the tribunal held that, al- 23.86 though arbitration has become the accepted means of resolving disputes between foreign investors and states, ‘that phenomenon does not take away the basic prerequisite for arbitration: an agreement of the parties to arbitrate. It is a well-​established principle, both in domestic and international law, that such an agreement should be clear and unambiguous’.177 Since the MFN clause at issue did not include an express indication of consent to ICSID arbitration, the tribunal observed that it could only operate to establish such consent if it incorporated by reference dispute settlement procedures, including reference to ICSID arbitration, from other investment treaties. The tribunal concluded that: ‘[A]‌n MFN provision in a basic treaty does not incorporate by reference dispute settlement provisions in whole or in part set out in another treaty, unless the MFN provision in the basic treaty leaves no doubt that the Contracting Parties intended to incorporate them’.178 Because an arbitration agreement in a BIT context depends upon the wording of the treaty, ‘doubts as to the parties’ clear and unambiguous intention can arise if the agreement to arbitrate is to be reached by

  Id. ¶ 196.   Id. ¶ 197. 174  Id. ¶ 207. 175  Id. ¶ 212 (‘When concluding a multilateral or bilateral investment treaty with specific dispute resolution provisions, states cannot be expected to leave those provisions to future (partial) replacement by different dispute resolution provisions through the operation of an MFN provision, unless the States have explicitly agreed thereto (as in the case of BITs based on the UK Model BIT). This matter can also be viewed as forming part of the nowadays generally accepted principle of the separability (autonomy) of the arbitration clause. Dispute resolution provisions constitute an agreement on their own, usually with interrelated provisions’). 176  Id. ¶ 209. 177  Id. ¶ 198. 178  Id. ¶ 223; see also id. ¶ 200 (‘[T]‌ he reference must be such that the parties’ intention to import the arbitration provision of the other agreement is clear and unambiguous’); id. ¶ 204 (‘The intention to incorporate dispute settlement provisions must be clearly and unambiguously expressed’). The issue of whether consent to arbitration must be expressed in a ‘clear and unambiguous’ manner has been questioned in other cases. See, e.g., Vladimir Berschader and Moïse Berschader v. Russian Federation, SCC Case No. 080/​2004, Award (Apr. 21, 2006), ¶ 177; Suez et al. v. Argentine Republic, ICSID Case No. ARB/​03/​17, Decision on Jurisdiction (May 16, 2006), ¶ 64. 172 173

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The MFN Clause and Its Evolving Boundaries incorporation by reference [through an MFN clause]’.179 That doubt was sufficient for the Plama tribunal to reject claimant’s argument: A clause reading ‘a treatment which is not less favourable than that accorded to investments by investors of third states’ as appears in Article 3(1) of the Bulgaria–​Cyprus BIT, cannot be said to be a typical incorporation by reference clause as appearing in ordinary contracts. It creates doubt whether the reference to the other document (in this case the other BITs concluded by Bulgaria) clearly and unambiguously includes a reference to the dispute settlement provisions contained in those BITs.180

5. Other cases in the line of Plama 23.87 In Telenor v Hungary,181 the claimant brought claims under the Hungary–​Norway BIT,

which allows ICSID arbitration only of expropriation claims.182 Relying on the MFN clause in this BIT, which provides that ‘[i]‌nvestments made by Investors of one Contracting Party in the territory of the other Contracting Party, as also the returns therefrom, shall be accorded treatment no less favourable than that accorded to investments made by Investors of any third State’,183 the claimant argued that it could bring claims for breach of the fair and equitable standard as provided by other BITs concluded by Hungary. Thus, the claimant invoked the MFN clause to expand the arbitrable claims available to it.

23.88 After briefly reviewing Maffezini, Siemens, Plama, and Salini v Jordan,184 the Telenor tri-

bunal rejected the claimant’s argument and declined jurisdiction over the fair and equitable treatment claim on the basis that it ‘wholeheartedly endorses the analysis and statement of principle furnished by the Plama tribunal’.185 By this, the tribunal meant that ‘an MFN clause . . . should not be construed as extending the jurisdiction of the arbitral tribunal to categories of dispute beyond those set forth in the BIT itself in the absence of clear language that this is the intention of the parties’.186 The tribunal found no such intent in the circumstances of the case and thus rejected the claimant’s position.

23.89 The tribunal articulated four reasons in support of its conclusion. First, it found that, in the

absence of contrary evidence of intent, the

ordinary meaning of ‘investments shall be accorded treatment no less favorable than that accorded to investments made by investors of any third State’ is that the investor’s substantive rights in respect of the investments are to be treated no less favorably . . . and there is no warrant for construing the phrase as importing procedural rights as well.187

Second, the effect of adopting a wider interpretation of an MFN clause would be to encourage unwarranted treaty-​shopping, ‘and even then there would be questions as to whether the investor could select those elements of the wider dispute resolution that were apt for its purpose and discard those that were not’.188 Third, the effect of adopting a wider interpretation

179 Plama Consortium Limited v.  Republic of Bulgaria, ICSID Case No. ARB/​ 03/​24, Decision on Jurisdiction (Feb. 8, 2005), ¶ 19. 180  Id. ¶ 200. 181  Telenor Mobile Communications A.S. v. Republic of Hungary, ICSID Case No. ARB/​05/​15, Award (Sept. 13, 2006). 182  Id. ¶ 25. 183  Id. ¶ 84. 184 Salini Costruttori & Italstrade v.  Hashemite Kingdom of Jordan, ICSID Case No. ARB/​ 02/​13, Decision on Jurisdiction (Nov. 29, 2004). 185  Telenor v. Hungary, supra note 181, ¶ 90, 186  Id. ¶ 91. 187  Id. ¶ 92 (emphasis in original). 188  Id. ¶ 93.

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III.  Bilateral Investment Treaty Practice of an MFN clause would generate uncertainty and instability because the BIT’s dispute settlement procedures would be operative in some circumstances but not in others.189 And fourth, because a BIT’s specific dispute settlement provisions represent the common intention of the contracting parties to that treaty, that intention would be subverted if an investor could invoke the BIT’s MFN clause to reach dispute settlement provisions in other BITs.190 A similar analysis was adopted by the tribunal in Berschader v Russian Federation.191 The case 23.90 involved a fact pattern like Telenor in that the basic treaty (the Belgium/​Luxembourg–​Russia BIT) limited arbitrable disputes to ‘the amount or mode of compensation to be paid in the event of an expropriatory act’,192 and the claimants sought to invoke that treaty’s MFN clause to allow them to bring a wider set of claims. After a review of the case law, a majority of the Berschader tribunal also adopted the reasoning of the Plama decision and rejected the claimants’ right to bring any claims other than those specifically provided by the basic treaty. The MFN clause at issue in the case provided that: Each Contracting Party guarantees that the most favoured nation clause shall be applied to investors of the other Contracting Party in all matters covered by the present Treaty, and in particular in Articles 4, 5 and 6, with the exception of benefits provided by one Contracting Party to investors of a third country on the basis -​ of its participation in a customs union or other international economic organizations, or -​ of an agreement to avoid double taxation and other taxation issues.193

The majority opinion in Berschader began its analysis of this clause by explaining that the 23.91 tribunal’s fundamental purpose was to discern the intent of the contracting parties to the BIT: Firstly, the Tribunal must express its firm view that the fundamental issue in determining whether or not an MFN clause encompasses the dispute resolution provisions of other treaties must always be an assessment of the intention of the contracting parties upon the conclusion of each individual treaty. In each case, the question must be asked as to whether the contracting parties to the treaty intended the MFN provision to incorporate by reference the dispute settlement provisions of other treaties. Ultimately, that question can only be answered by a detailed analysis of the text and, where available, the negotiating history of the relevant treaty, as well as other relevant facts.194

The majority further stated that it agreed with the Plama tribunal that ‘doubts as to the inten- 23.92 tions of the parties may arise’ where the ‘agreement to arbitrate is to be reached by incorporation by reference’ in an MFN clause.195 The majority developed this point further by finding there to be a crucial difference in the application of an MFN clause to substantive rights and to the dispute resolution provisions set out in the treaty.196 As a result of this uncertainty over whether an MFN clause should extend to constitute consent to submit to the dispute resolution provisions set out in third-​party treaties, the Berschader majority found that it would be more appropriate to presume that that MFN clause only applies to substantive rights unless there is clear evidence to the contrary.197

  Id. ¶ 94.   Id. ¶ 95. 191  Vladimir Berschader and Moïse Berschader v. Russian Federation, SCC Case No. 080/​ 2004, Award (Apr. 21, 2006). 192  Id. ¶ 152. 193  Id. ¶ 47. Article 4 of the BIT covers fair and equitable treatment, Article 5 covers expropriation and Article 6 covers transfers of investment returns. 194  Id. ¶ 175. 195  Id. ¶ 178. 196  Id. ¶ 179. 197  Id. ¶¶ 180–​81 (emphasis added). 189 190

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The MFN Clause and Its Evolving Boundaries 23.93 The Berschader award was accompanied by a dissenting opinion to the effect that the MFN

clause should have been interpreted to permit the claims at issue to be submitted to the dispute settlement procedures: The MFN standard is a tried-​and-​true expression of the international economic law principle of non-​discrimination. Its application, its breadth and depth are limited primarily by restrictive language found in the text of a treaty (such as general exception clauses and reservation schedules) and by the requirement that most favourable treatment be accorded only to those who stand in like circumstances. There is simply no reason to suppose that—​absent some specific treaty language—​any given MFN provision should be more or less narrowly defined. In other words, MFN clauses apply to all aspects of the regulatory environment governed by an investment protection treaty, including availability of all means of dispute settlement.198

23.94 The tribunal in Wintershall v Argentina reached a similar conclusion as the Berschader ma-

jority. It noted that invocation of the MFN provision to import dispute settlement provisions ‘clearly involves “issues of jurisdiction or consent to arbitration  . . .” ’.199 According to the tribunal, all international arbitration must be based upon an agreement of the parties, which must be clear and unambiguous, even where reached by incorporation or by reference; States could provide expressly that they intended the MFN Clause to apply to dispute settlement, but the mere fact that the MFN Clause was expressed to apply ‘with respect to all matters’ dealt with by the basic treaty was not sufficient to dispel the doubt as to whether the parties had really intended it to apply to the dispute settlement clause . . . [O]‌rdinarily and without more, the prospect of an investor selecting at will from an assorted variety of options provided in other treaties negotiated with other parties under different circumstances, dislodges the dispute resolution provision in the basic treaty itself—​unless of course the MFN Clause in the basic treaty clearly and unambiguously indicates that it should be so interpreted: which is not so in the present case.200

23.95 A somewhat different approach was adopted by the tribunal in ICS Inspection and Control

Services v Argentina, which required the claimant to ‘prove consent [to arbitration] with sufficient certainty’, but did not go so far as to require that such consent be ‘clear and unambiguous’, unlike the tribunals in Plama, Telenor, Berschader and Wintershall. The claimant in ICS sought to apply the MFN clause of the Argentina–​UK BIT to avoid a requirement that it submit its claim to local courts for a period of eighteen months before initiating arbitration. The tribunal stated that ‘[a]‌ny general rule of restrictive treaty interpretation is plainly in conflict with the VCLT and customary international law’ and that ‘the Plama award is interpreted incorrectly when it is taken to stand for the restrictive interpretation of MFN clauses as compared to other treaty provisions’.201 According to the tribunal, rather, Plama stood for the proposition that a State’s consent to arbitration shall not be presumed in the face of ambiguity. Consent to the jurisdiction of a judicial or quasi-​judicial body under international law is either proven or not according to the general rules of international law governing the interpretation of treaties. The burden of proof for the issue of consent falls squarely on a given claimant who invokes it against a given respondent. Where a claimant fails to prove consent with sufficient certainty, jurisdiction will be declined.202 198  Vladimir Berschader and Moïse Berschader v. Russian Federation, SCC Case No. 080/​2004, Separate Opinion of Todd Weiler (Apr. 21, 2006), ¶ 20. 199  Wintershall Aktiengesellschaft v. Argentine Republic, supra note 85, ¶ 160. 200  Id. ¶ 167 (emphasis in original). 201  ICS Inspection and Control Services Ltd. v. Argentine Republic, PCA Case No. 2010-​ 9, Award on Jurisdiction (Feb. 10, 2012), ¶ 282. 202  Id. ¶ 280.

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III.  Bilateral Investment Treaty Practice The tribunal stated that consent could be proven in a number of ways, in accordance with Articles 31 and 32 of the Vienna Convention.203 Thus, it was not necessary to have ‘clear and unambiguous’ language in the MFN clause itself. The tribunal ultimately concluded that the circumstances in which the BIT was signed in 23.96 1990 indicated that the parties likely did not intend the word ‘treatment’ to apply to non-​ substantive issues. The tribunal thus concluded that ‘in the absence of any contrary stipulation in the treaty itself ’, the MFN clause ‘was most likely meant by the two Contracting Parties to refer only to the legal regime to be respected by the host State in conformity with international obligations, conventional or customary. The settlement of disputes meanwhile remained an entirely distinct issue, covered by a separate and specific treaty provision’.204

6. Renewed focus on treaty text and intent of the parties Several tribunals and arbitrators have avoided adopting either the reasoning in the Plama 23.97 line of cases that MFN clauses do not extend to dispute settlement provisions unless explicitly stated or the reasoning in Gas Natural that MFN clauses, as a default, extend to dispute settlement. According to this approach, no presumptions for or against the extension of MFN clauses to dispute settlement provisions should apply. Rather, each MFN clause should be evaluated sui generis. Thus, for example, Judge Brower stated in his separate opinion in Renta 4 v Russia: The principle [sic] basis on which the Plama tribunal reached its conclusion, and on which also the tribunals in Telenor, Berschader and Wintershall relied, i.e., that a State’s acceptance of jurisdiction must be ‘clear and unambiguous’, however, is a principle that, whatever validity it may have had in an earlier era, is patently incompatible with Articles 31 and 32 of the Vienna Convention on the Law of Treaties . . . [T]‌he principle [sic] basis of the decisions in Plama, Telenor, Berschader and Wintershall is, with respect, wrong and cannot be followed.205

The tribunal in Garanti Koza v Turkmenistan reached a similar conclusion, stating: Some arbitration tribunals have followed Plama v. Bulgaria in grafting onto the requirement that the State must consent to arbitration the corollary that the State’s consent must be ‘clear and unambiguous.’ This Tribunal finds no basis in the Vienna Convention for imposing such a standard onto the interpretation of the terms of a treaty. Rather, this Tribunal agrees . . . ‘that dispute resolution provisions are subject to interpretation like any other provisions of a treaty, neither more restrictive nor more liberal’.206

The tribunal in Austrian Airlines v Slovakia also expressed this view, despite finding, by a ma- 23.98 jority, that the MFN clause at issue did not extend to the dispute settlement provisions of the BIT. It stated: [T]‌he Tribunal does not consider that provisions that embody a State’s consent to arbitration must be strictly interpreted. This view, which was adopted by the tribunals in Plama v. Bulgaria, Telenor v. Hungary, Berschader v. Russia and Wintershall v. Argentina, is not an accurate reflection of international law on this matter . . . [T]he Tribunal considers that it must interpret [the MFN clause in] the Treaty neither restrictively nor expansively but rather objectively and in good faith.207

  Id. ¶ 283.   Id. ¶ 296. 205  Renta 4 S.V.S.A. et al. v. Russian Federation, SCC Case No. 24/​2007, Separate Opinion of Charles N. Brower (Mar. 20, 2009), ¶¶ 7, 10. 206  Garanti Koza LLP v. Turkmenistan, ICSID Case No. ARB/​11/​20, Decision on Jurisdiction of 3 July 2013, ¶ 22. 207  Austrian Airlines v. Slovak Republic, UNCITRAL, Final Award (Oct. 9, 2009), ¶¶ 119, 121. 203 204

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The MFN Clause and Its Evolving Boundaries 23.99 Other tribunals interpreting MFN clauses in recent years also appear to have adopted a

sui generis approach to interpreting MFN clauses. For example, the tribunal in Hochtief v Argentina stated that the offer to arbitrate in the BIT must be conducted in accordance with the Vienna Convention,208 and added that ‘it is the responsibility of this Tribunal to interpret to the best of its ability the specific provisions of the particular treaties that are applicable in this case, and not to choose between broad doctrines or schools of thought, or to conduct a head-​count of arbitral awards taking various positions and to fall in behind the numerical majority’.209

7. Distinguishing between matters of jurisdiction and admissibility 23.100 Some tribunals have approached the question of whether to apply an MFN clause of the basic

treaty to dispute settlement from the perspective of whether the question goes to the admissibility of claims, in which case MFN treatment could be extended to dispute settlement, or the tribunal’s jurisdiction, in which case MFN treatment could not operate to expand the tribunal’s jurisdiction.

23.101 The tribunal’s decision in European American Investment Bank AG v Slovak Republic is an

example of this approach.210 The applicable BIT’s dispute resolution clause provided for arbitration only in respect of disputes regarding the amount, or arrangements for payment, of compensation in the event of expropriation, nationalization, or similar measures, and did not explicitly cover the question whether an expropriation had occurred.211 The claimant argued that the BIT’s MFN clause allowed it to invoke a number of other BITs to which the Slovak Republic was a party which allowed investors to pursue arbitration concerning all aspects of an alleged expropriation or similar measures.212

23.102 The tribunal decided not to follow any general principle or presumption with regard to the

interpretation of the MFN clause in the BIT, stating that it

does not consider that the object and purpose of the BIT require either a broad or a restrictive approach to the interpretation of its provision for arbitration. Nor does the Tribunal accept that there is any general principle of international law that the acceptance by a State of the jurisdiction of an international court or tribunal must be restrictively construed.213

The tribunal distinguished, however, between situations where the respondent state had already consented in the basic treaty to arbitration of the type of claims that the claimant has brought, in which case ‘the dispute was one which fell within the substantive scope of the offer to arbitrate’,214 and the case before it, where in the tribunal’s view the claimant sought to use the MFN clause to create an ‘entirely new, direct, relationship between that investor and the State Party concerned’.215 The tribunal stated: The Tribunal therefore considers that the special character of the provision for investor-​State arbitration and the radical nature of the transformation in that provision which acceptance

208  Hochtief AG v. Argentine Republic, ICSID Case No. ARB/​07/​31, Decision on Jurisdiction (Oct. 24, 2011), ¶ 26. 209  Id. ¶ 58. 210  European American Investment Bank A.G. v. Slovak Republic, PCA Case No. 2010-​ 17, Award on Jurisdiction (Oct. 22, 2012), ¶¶ 40, 43–​46. 211  Id. ¶¶ 42, 48(3). 212  Id. ¶ 49(3). 213  Id. ¶ 439. 214  Id. ¶ 449. The tribunal observed that this was the case in Maffezini, Siemens, Camuzzi International, National Grid, Gas Natural, and, indeed (at the time of the tribunal’s decision), every case in which a tribunal had held that an MFN clause could apply to dispute settlement, except RosInvestCo v. Russian Federation. 215  Id. ¶ 445.

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III.  Bilateral Investment Treaty Practice of the Claimant’s argument would entail, both militate against attributing to [the MFN clause] of the BIT the effect suggested by the Claimant unless there are clear indications that such was the intention of the States Parties.216

The tribunal found that such ‘clear indications’ were not contained in the text of the MFN 23.103 clause ‘or its place in the context of the BIT, taken as a whole’, and it dismissed the claimant’s argument accordingly.217 In Hochtief AG v Argentina, the tribunal explicitly framed the issue as reflecting the distinc- 23.104 tion between jurisdiction and admissibility.218 The claimant in that case sought to use the MFN clause to avoid a provision in the Argentina–​Germany BIT that mandated that claimants litigate their claim in the domestic courts of the state party concerned for 18 months before bringing the claim to arbitration.219 Relying on ICJ jurisprudence, the tribunal stated that ‘[d]‌efects in admissibility can be waived or cured by acquiescence: defects in jurisdiction cannot’220 and that ‘the question in the present case is whether the 18-​month period is a requirement of the kind in respect to which the Respondent could accept or acquiesce in non-​compliance, and whether it has done so’.221 The tribunal found that the eighteen-​month period was ‘a provision going to the admissibility of the claim rather than the jurisdiction of the Tribunal’222 and concluded that ‘the procedures relating to the bringing of a dispute to the Tribunal are covered by [the MFN clause] of the Argentina–​Germany BIT . . . . [and] the Claimant can therefore rely upon the procedures set out in . . . the Argentina–​Chile BIT’.223 The same result was reached by the tribunal in Teinver v Argentina with respect to a similar eighteen-​month litigation provision in the Argentina–​Spain BIT.224 In contrast, the tribunal in ICS Inspection and Control Services Limited v Argentina appeared 23.105 to the view the question as one solely of jurisdiction, stating that ‘[s]‌hould the MFN provision not be found to operate in a jurisdictional manner, that is to act independently as a substitute for the consent found in the basic treaty’s dispute resolution clause, it cannot have the effect advocated for by the Claimant here’.225 Based on its examination of the word ‘treatment’ in the MFN clause in the context of the BIT’s conclusion, the tribunal found that ‘treatment’ was ‘most likely meant by the two Contracting Parties to refer only to the legal regime to be respected by the host state in conformity with its international obligations, conventional or customary. The settlement of disputes meanwhile remained an entirely distinct issue, covered by a separate and specific treaty provision’.226 The tribunals in ST-​AD GmbH v Republic of Bulgaria and Wintershall Aktiengesellschaft v 23.106 Argentina similarly found that compliance with the eighteen-​month litigation requirement

  Id. ¶ 450.   Id. ¶ 451. 218  Hochtief AG v. Argentine Republic, ICSID Case No. ARB/​07/​31, Decision on Jurisdiction (Oct. 24, 2011), ¶ 90; see also id. ¶¶ 91–​95. 219  Id. ¶ 40. 220  Id. ¶ 95. 221  Id. ¶ 96. 222  Id. 223  Id. ¶ 99. The tribunal cautioned that it took no position on what the outcome might have been had claimant sought to use the MFN clause to invoke a BIT that ‘established a wider jurisdiction for tribunals than is established in the Argentina–​Germany BIT’. 224  Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/​09/​1, Decision on Jurisdiction (Dec. 21, 2012), ¶¶ 168–​72. 225  ICS Inspection and Control Services Limited v. Argentine Republic, PCA Case No. 2010-​9, Award on Jurisdiction (Feb. 10, 2012), ¶ 278. 226  Id. 216 217

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The MFN Clause and Its Evolving Boundaries in the Germany–​Bulgaria BIT and the Germany–​Argentina BIT, respectively, was a question of jurisdiction.227 23.107 The tribunal in Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v Turkmenistan

disagreed with the view that a requirement to resort to local remedies is a question of admissibility rather than one of jurisdiction. The Turkey–​Turkmenistan BIT at issue contained a requirement that an investor bring a dispute to local courts, but provided that arbitration could be commenced if ‘a final award has not been rendered [by the local courts] within one year’.228 The tribunal stated: [A]‌n ICSID tribunal’s jurisdiction is defined by the disputing parties’ written consent/​agreement and  . . .  in this case, Respondent’s consent/​offer to arbitrate was conditioned, inter alia, on Claimant having previously brought the dispute before Respondent’s courts and a final award not having been rendered within one year from the institution of the local court proceedings. . . . . [T]‌he Tribunal concludes that the requirements set forth in [the arbitration clause of the BIT] are to be treated as conditions, and that the failure to meet those conditions goes to the existence of the Tribunal’s jurisdiction, and are not to be treated as issues of admissibility.229

23.108 The tribunal proceeded to examine the applicability of the BIT’s MFN clause from a jur-

isdictional standpoint230 and concluded that the MFN clause did not apply to the dispute resolution provisions of the BIT.231 Professor Park dissented, stating that the provision in the BIT requiring claimants to submit the dispute to local courts should be treated ‘as a procedural requirement not reaching the level of jurisdictional precondition’,232 that is, as a matter of admissibility rather than one of jurisdiction.233

23.109 In WNC Factoring v Czech Republic,234 Claimant sought to use the MFN clause in Article 3 of

the UK–​Czech BIT to import an umbrella clause from another Czech BIT. The UK–​Czech BIT’s jurisdictional provision, contained in Article 8(1) of the BIT, stated: Disputes between an investor of one Contracting Party and the other Contracting Party concerning an obligation of the latter under Articles 2(3), 4, 5 and 6 of this Agreement in relation to an investment of the former which have not been amicably settled shall, after a period of four months from written notification of a claim, be submitted to arbitration under paragraph 2 below if either party to the dispute so wishes.235

227  ST-​ AD GmbH v.  Republic of Bulgaria, PCA Case No. 2011-​06, Award on Jurisdiction (July 18, 2013), ¶ 398; Wintershall Aktiengesellschaft v. Argentina, supra note 85, ¶¶ 160, 172. 228  Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/​ 10/​1, Award (July 2, 2013), ¶ 6.1.4. 229  Id. ¶¶ 6.3.13, 6.3.15. 230  Id. ¶ 7.1.2 (noting ‘Claimant’s case for jurisdiction, based on the operation of the MFN clause’). 231  Id. ¶ 7.8.10. The tribunal found, inter alia, that the MFN clause was located in a section of the BIT governing substantive rights, whereas the procedures for the resolution of disputes were located in a different section of the treaty. It concluded that ‘[t]‌his distinction suggests strongly that the “treatment” of “investments” for which MFN rights were granted was intended to refer only to the scope of the substantive rights identified and adopted in Articles II–​VI’ of the treaty. Id. ¶ 7.3.9 (emphasis in original). 232  Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/​ 10/​1, Separate Opinion of William W. Park (July 2, 2013), ¶ 22. 233  See Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/​10/​1, Award (July 2, 2013), ¶ 6.2.9 n.118 (‘Professor Park considers that Claimant’s failure to comply with Article VII.2’s local litigation proviso goes not to the Tribunal’s jurisdiction, but only to the admissibility of Claimant’s claims’). 234  WNC Factoring Ltd. v. Czech Republic, PCA Case No. 2014-​34, Award (Feb. 22, 2017). 235  Id. ¶ 349.

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III.  Bilateral Investment Treaty Practice Thus, the MFN clause itself was not listed among the BIT’s enumerated clauses subject to 23.110 arbitration. The tribunal held that its jurisdiction was derived exclusively from Article 8(1) of the BIT236 and that the dispute concerning the scope of the MFN clause ‘concerns a dispute as to the application and interpretation of the Article 3, which is not provided for in Article 8(1)’.237 Thus, the tribunal concluded that it lacked jurisdiction to resolve that dispute.238 In Ansung Housing v People’s Republic of China,239 the dispute resolution clause of the China–​ 23.111 Korea BIT contained a provision barring investors from bringing a claim ‘if more than three years have elapsed from the date on which the investor first acquired, or should have first acquired, knowledge that the investor had incurred loss or damage’.240 The claimant sought to rely on the BIT’s MFN clause to avoid this temporal limitation. The relevant portions of the MFN clause, contained at Articles 3(3) and 3(5) of the BIT, provided: Each Contracting Party shall in its territory accord to investors of the other Contracting Party and to their investments and activities associated with such investments by the investors of the other Contracting Party treatment no less favourable than that accorded in like circumstances to the investors and investments and associated activities by the investors of any third State . . . with respect to investments and business activities, including the admission of investment.241 Treatment accorded to investors of one Contracting Party within the territory of the other Contracting Party with respect to access to the courts of justice and administrative tribunals and authorities both in pursuit and in defence of their rights shall not be less favourable than that accorded to investors of the latter Contracting Party or to investors of any third State.242

The tribunal ruled that a ‘plain reading of this Article does not extend to MFN treatment for 23.112 a state’s consent to arbitrate with investors and, in particular, not to the temporal limitation period for investor-​state arbitration in Article 9(7) of the China–​Korea BIT’.243 It added that, because ‘the wording of the MFN Clause in Article 3(3) of the Treaty is clear, it is not necessary to give further consideration to additional arguments or previous arbitral decisions on the interpretation of other MFN clauses or treaty practice’.244 The tribunal noted that its conclusion was supported by reference to Article 3(5) of the BIT, 23.113 which offered specific MFN protection in relation to an investor’s access to domestic courts and tribunals. The tribunal stated that ‘[i]‌n marked contrast to those domestic avenues, such express reference to international dispute resolution is conspicuously absent in the MFN Clause in Article 3(3)’.245

  Id.   Id. ¶ 350. 238  Id. ¶¶ 349, 358. 239  Ansung Housing Co., Ltd. v. People’s Republic of China, ICSID Case No. ARB/​14/​25, Award (Mar. 9, 2017). 240  Id. ¶ 29 (quoting art. 9(7) of the China–​Korea BIT). 241  Id. ¶ 123 (quoting art. 3(3) of the China–​Korea BIT). 242  Id. ¶ 123 (quoting art. 3(5) of the China–​Korea BIT). 243  Id. ¶ 138. 244  Id. ¶ 140. 245  Id. ¶ 139. 236 237

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The MFN Clause and Its Evolving Boundaries

IV.  Treaty-​making Practice and Investment Treaty Jurisprudence 23.114 As apparent reaction to the evolving investment treaty jurisprudence, a number of states have

sought to stipulate with greater precision in their treaties whether MFN treatment encompasses the right to invoke dispute settlement procedures.246 The European Union in particular has adopted this practice in its recent investment treaties. For example, the MFN clause of the Canada–​European Union Free Trade Agreement (CETA) states that: ‘For greater certainty, the “treatment” referred to in paragraphs 1 and 2 does not include procedures for the resolution of investment disputes between investors and states provided for in other international investment treaties and other trade agreements’.247

23.115 According to the European Commission, this provision is part of CETA’s ‘clearer and more pre-

cise investment protection standards . . . removing ambiguities that made these standards open to abuses or excessive interpretations’.248 The European Union–​Vietnam Free Trade Agreement, signed in 2016, provides similarly: ‘For greater certainty, the “treatment” referred to in paragraphs 1 and 2 does not include international dispute resolution procedures or mechanism [sic], such as those included in Section 3, provided for in any other bilateral, regional and/​or international agreements’.249

23.116 Similar provisions can be found in a number of other investment agreements post-​dating

Maffezini. For example, the MFN clause in the ASEAN Comprehensive Trade Agreement of 2012 contains a footnote stating that ‘[f ]‌or greater certainty . . . this Article shall not apply to investor-​state dispute settlement procedures that are available in other agreements to which Member States are party’.250 Other examples include the Canada–​Peru Free Trade Agreement negotiated in 2008,251 and the Chile–​Colombia Free Trade Agreement negotiated in 2006.252

246  The EU–​ Vietnam and Canada–​EU free trade agreements, discussed later, provide, in addition, that their MFN clauses do not apply to substantive obligations in other investment treaties. See Comprehensive Economic and Trade Agreement between Canada and the European Union (CETA) art. 8.7(4) (‘Substantive obligations in other international investment treaties and other trade agreements do not in themselves constitute “treatment”, and thus cannot give rise to a breach of this Article, absent measures adopted or maintained by a Party pursuant to those obligations’); Free Trade Agreement between the European Union and the Socialist Republic of Viet Nam, Chapter  8, Trade In Services, Investment and e-​Commerce art. 4(6) (‘Substantive obligations in [other international investment agreements] do not in themselves constitute “treatment” and thus cannot be taken into account when assessing a breach of this Article’). 247  CETA art. 8.7(4) (2016). 248  European Commission, Investment Provisions in the EU–​ Canada Free Trade Agreement (CETA) (Feb. 2016), 1, http://​trade.ec.europa.eu/​doclib/​docs/​2013/​november/​tradoc_​151918.pdf (last visited Nov. 11, 2017); see also id. at 3 (‘CETA does not allow investors to “import” and use in the dispute settlement procedures the substantive provisions from other agreements (e.g. from Treaties of EU Member States) that they consider are more advantageous to their interests’). 249  Free Trade Agreement between the European Union and the Socialist Republic of Viet Nam, Chapter 8, Trade In Services, Investment and e-​Commerce art. 4(6). 250  ASEAN Comprehensive Investment Agreement art. 6 n.4. 251  Free Trade Agreement between Canada and Peru Annex 804.1 (‘For greater clarity, treatment “with respect to the establishment, acquisition, expansion, management, conduct, operation and sale or other disposition of investments” referred to in paragraphs 1 and 2 of Article 804 [the MFN clause] does not encompass dispute resolution mechanisms, such as those in section B, that are provided for in international treaties or trade agreements’). 252 Acuerdo de Libre Comercio Chile–​ Colombia el cual constituye un protocolo adicional al ACE 24 Annex 9.3 (2006) (unofficial English translation from UNCTAD, Most-​Favoured Nation Treatment, UNCTAD Series on Issues in International Investment Agreements II (2010), UNCTAD/​DIAE/​IA/​2010/​1, (Jan. 24, 2011) 86 (‘The Parties agree that the scope of application of Article 9.3 [the MFN clause] only

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V. Conclusion Such treaty provisions have the benefit of delimiting clearly the scope of the MFN treatment 23.117 in question and are a reflection of the policy prerogative of the contracting parties to decide for themselves whether MFN treatment provided for in their treaties extends or does not extend to investor-​state dispute settlement.

V. Conclusion The common touchstone in the decisions of investment treaty tribunals is the premise that 23.118 the intent of the contracting parties to the treaty containing the MFN clause is paramount in determining whether an investor can rely on the clause to benefit from the dispute settlement provisions of other treaties. There is no standard MFN clause and no standard context; therefore, each such clause requires an independent examination in light of its specific wording, the treaty in which it is found, and other indications of the intent of the parties, as set out in Articles 31 and 32 of the Vienna Convention. Tribunals have adopted varying approaches to discerning whether an MFN clause in a particular treaty applies to the dispute-​resolution provisions of the treaty, sometimes referring to purported distinctions, such as between jurisdiction versus admissibility or as between substance versus procedure; distinctions that are not always particularly clear in application or of obvious relevance to the interpretation of the treaty provisions at issue. In this sense, we might expect that investment treaty tribunals will continue to reach divergent results, in part because the terms of treaty language and their context genuinely differ from one case to the next, and in part because of possibly irreconcilably different views as to the meaning and scope of the term ‘treatment’ in the context of an MFN clause in an investment protection treaty.

covers the matters related to the establishment, acquisition, expansion, administration, conduct, operation sale or other disposition of investments, and hence, does not apply to procedural issues, including dispute settlement mechanisms such as that contained in Section B of this Chapter’)).

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Part V REMEDIES AND COSTS

24 INTERIM RELIEF IN INVESTMENT TREATY ARBITRATION Gabrielle Kaufmann-​Kohler, Aurélia Antonietti, and Michele Potestà

I. Introduction  II. The Power to Grant Interim Relief  A. Interim Relief in the ICSID System  B. Interim Relief under the UNCITRAL Arbitration Rules  C. Other Relevant Provisions 

V. Requirements for Interim Relief 

24.01 24.03 24.04

24.92 A. The Initiative to Request Interim Relief  24.93 B. Jurisdiction of the Tribunal?  24.96 C. Prima Facie Case on the Merits? 24.105 D. Urgency 24.113 E. Necessity or Risk of Irreparable Harm 24.130

24.11 24.17

VI. Against Whom Can the Measures be Ordered? VII. Effect of Interim Measures 

III. Purpose of the Measures: Preserving the Respective Rights of the Parties  24.19 A. ICSID System  B. NAFTA Proceedings  C. UNCITRAL Arbitration Rules 

IV. Types of Measures 

24.20 24.28 24.29 24.35 24.37

A. ICSID Convention Cases B. Additional Facility Cases C. NAFTA Proceedings D. UNCITRAL Rules

A. Preservation of a Right  B. Preservation of the Status Quo/​Non-​ aggravation of the Dispute  24.47 C. Preserving the Integrity of the Proceedings/​Preventing Prejudice to the Arbitral Process Itself  24.62 D. Preserving Evidence  24.65 E. Protection of the Tribunal’s Jurisdiction  24.70 F. Non-​frustration of the Award  24.84

VIII. Concurrent Jurisdiction of Domestic Courts

A. ICSID Convention Proceedings B. Additional Facility Rules C. UNCITRAL Rules D. NAFTA Proceedings

IX. Conclusion

24.144 24.147 24.148 24.154 24.157 24.158 24.162 24.163 24.165 24.166 24.167 24.168

I. Introduction Arbitration rules applicable in the context of investor-​state disputes usually provide that ar- 24.01 bitral tribunals may grant interim relief under certain conditions. This chapter will review the requirements for a party to obtain interim relief from an arbitral tribunal, the measures that can be ordered, their nature, and effects. It will also consider whether the parties to the dispute can seek interim relief from domestic courts rather than from an arbitral tribunal. The vast majority of investor-​state arbitrations are initiated today on the basis of an inter- 24.02 national investment agreement (IIA), either a bilateral investment treaty (BIT) or a multilateral investment treaty (MIT), such as the North American Free Trade Agreement (NAFTA). These arbitrations are most often governed by the Arbitration Rules of ICSID, the ICSID Additional Facility, or UNCITRAL. Some IIAs also refer to arbitration under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) or the International Chamber of Commerce (ICC). This chapter will exclusively focus on interim measures in the context of proceedings governed by the ICSID Arbitration Rules, the ICSID Additional Facility Arbitration Rules (both referred to as the ICSID system), and the

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Interim Relief in Investment Treaty Arbitration UNCITRAL Arbitration Rules, because these are the arbitration rules most commonly used in the context of investor-​state disputes.1

II.  The Power to Grant Interim Relief 24.03 The power of an arbitral tribunal to grant interim relief2 is to be sought in the legal rules that

govern each proceeding, as well as in a tribunal’s inherent power.3

A. Interim Relief in the ICSID System 1. ICSID Convention cases 24.04 For proceedings that are governed by the ICSID Convention, provisions on interim relief are

to be found both in the ICSID Convention and in the ICSID Arbitration Rules.

24.05 Article 47 of the ICSID Convention allows an arbitral tribunal to recommend provisional

measures. It reads: ‘Except as the parties otherwise agree, the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken to preserve the respective rights of either party’.

24.06 This Article, said to have been directly inspired by Article 41 of the Statute of the International

Court of Justice (ICJ),4 makes clear that the parties can agree not to allow the tribunal the power to grant interim relief or can restrict such power (see NAFTA for an example). More details are found in ICSID Arbitration Rule 39 on Provisional Measures, which reads: (1) At any time after the institution of the proceeding, a party may request that provisional measures for the preservation of its rights be recommended by the Tribunal. The request shall specify the rights to be preserved, the measures the recommendation of which is requested, and the circumstances that require such measures. (2) The Tribunal shall give priority to the consideration of a request made pursuant to paragraph (1).

1  This chapter thus does not deal with so-​ called ‘emergency arbitration’ relief, which is available under certain arbitral rules, such as the SCC Rules. Unless otherwise stated, all the decisions or orders quoted in this chapter are available on the ICSID website or on the ITA website. This chapter is updated up to April 2017. The authors are grateful to Lukas Montoya, Associate at Lévy Kaufmann–​Kohler, for his assistance in finalizing this chapter. 2  This chapter will refer to interim relief as a general expression encompassing both the ‘provisional measures’ of the ICSID system and the ‘interim measures’ of the UNCITRAL Rules. When addressing each particular set of rules, the chapter will refer to the designated terms. 3  See generally Chester Brown, The Inherent Powers of International Courts and Tribunals, The British Year Book of International Law 195–​244, at 217–​18 [2005]. 4  Christoph Schreuer with Loretta Malintoppi, August Reinisch and Anthony Sinclair, The ICSID Convention: A Commentary Article 47(1) (2d ed. 2009) [hereinafter Schreuer et al.]. See Victor Pey Casado and Presidente Allende Foundation v. Republic of Chile, ICSID Case No ARB/​98/​2 [hereinafter Pey Casado], Decision on Provisional Measures (Sept. 25, 2001), ¶ 2, French and Spanish original, English translation in 6 ICSID Rep. 2004, 375; CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​08/​15 [hereinafter Cemex], Decision on the Claimant’s Request for Provisional Measures (Mar. 3, 2010), ¶¶ 39–​40. art. 41 of the Statute of the Court reads: ‘1. The Court shall have the power to indicate, if it considers that circumstances so require, any provisional measures which ought to be taken to preserve the respective rights of either party. 2. Pending the final decision, notice of the measures suggested shall forthwith be given to the parties and to the Security Council’. Article 41 is completed by arts. 73 to 78 of the 1978 Rules of Court. See generally The Statute of the International Court of Justice, A Commentary 1026 ff. (A. Zimmermann, C. Tomuschat, K. Oellers-​Frahm eds., 2012) [hereinafter Zimmermann et al.] and Shabtai Rosenne, Provisional Measures in International Law, The International Court of Justice and the International Tribunal for the Law of the Sea (2005) [hereinafter Rosenne].

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II.  The Power to Grant Interim Relief (3) The Tribunal may also recommend provisional measures on its own initiative or recommend measures other than those specified in a request. It may at any time modify or revoke its recommendations. (4) The Tribunal shall only recommend provisional measures, or modify or revoke its recommendations, after giving each party an opportunity of presenting its observations. (5) If a party makes a request pursuant to paragraph (1)  before the constitution of the Tribunal, the Secretary-​General shall, on the application of either party, fix time limits for the parties to present observations on the request, so that the request and observations may be considered by the Tribunal promptly upon its constitution. (6) Nothing in this Rule shall prevent the parties, provided that they have so stipulated in the agreement recording their consent, from requesting any judicial or other authority to order provisional measures, prior to or after the institution of the proceeding, for the preservation of their respective rights and interests.

Arbitration Rule 39 was last modified in April 2006 with the introduction of paragraph 5.5 It 24.07 had previously been amended in 1984 when the current paragraph 6 (formerly Rule 39(5)) was added.

2. Additional facility cases Cases which fall outside of the scope of the ICSID Convention can be administered by 24.08 the Centre under the Additional Facility (AF) Rules under certain conditions set out in Article 4 of those rules. Interim relief in AF proceedings is governed by Article 46 of the AF Arbitration Rules, which contains a provision similar but not identical to ICSID Arbitration Rule 39. Article 46 reads: (1) Unless the arbitration agreement otherwise provides, either party may at any time during the proceeding request that provisional measures for the preservation of its rights be ordered by the Tribunal. The Tribunal shall give priority to the consideration of such a request. (2) The Tribunal may also recommend provisional measures on its own initiative or recommend measures other than those specified in a request. It may at any time modify or revoke its recommendations. (3) The Tribunal shall order or recommend provisional measures, or any modification or revocation thereof, only after giving each party an opportunity of presenting its observations. (4) The parties may apply to any competent judicial authority for interim or conservatory measures. By doing so they shall not be held to infringe the agreement to arbitrate or to affect the powers of the Tribunal.

The tribunal’s power under the AF Arbitration Rules is also subject to potential restrictions 24.09 agreed by the parties. Generally speaking, and except for differences that will specifically be mentioned in the following discussion, the regime of interim relief under the AF Arbitration Rules follows the regime of the ICSID Arbitration Rules. For example, in the case of Metalclad v Mexico, governed by the AF Rules and AF Arbitration Rules, the tribunal considered that the reasoning applicable under Article 47 of the ICSID Convention was relevant in the context of these AF proceedings and, more particularly, said that it was ‘no less applicable to the wording of Article 1134 of the NAFTA’.6 The powers of a tribunal under the AF Rules are subject to the mandatory rules of the law of 24.10 the seat of arbitration as the AF Arbitration Rules, pursuant to their Article 1, will not apply 5  Aurélia Antonietti, The 2006 Amendments of the ICSID Rules and Regulations, 21 ICSID Rev.-​FILJ (2006). 6 Metalclad Corporation v.  United Mexican States, ICSID Case No. ARB(AF)/​ 97/​ 1 [hereinafter Metalclad], Decision on a Request by the Respondent for an Order Prohibiting the Claimant from Revealing Information Regarding ICSID Case No. ARB(AF)/​97/​1 (Oct. 27, 1997), ¶ 8. Similar reasoning appeared in

635

Interim Relief in Investment Treaty Arbitration when ‘in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate’.

B. Interim Relief under the UNCITRAL Arbitration Rules 24.11 In 2010, the original 1976 UNCITRAL Arbitration Rules underwent a significant revi-

sion, following the 2006 revision of the 1985 UNCITRAL Model Law. The 2006 revision of the Model Law replaced former Article 17 on interim measures with a new Chapter IV bis, establishing a comprehensive legal regime on interim measures in support of arbitration. Article 26 of the 2010 UNCITRAL Arbitration Rules represents a significant departure from the original UNCITRAL Rules. The 2010 version of the Rules is presumed to be applicable to arbitration agreements concluded after 15 August 2010;7 whereas the 1976 Arbitration Rules will continue to apply to pending cases and, if the parties so wish, to cases initiated after the entry into force of the new Rules.8 Nevertheless, the presumption in favour of the 2010 Rules does not apply where the arbitration agreement is concluded by accepting, after 15 August 2010, an offer made before that date.9 This rule is particularly applicable in investment treaty arbitration, where the claimant investor may accept an offer made by a state in an IIA concluded many years earlier.

1.  The 1976 UNCITRAL Rules 24.12 Article 26 of the 1976 UNCITRAL Arbitration Rules, entitled ‘Interim Measures of Protection’, reads: 1. At the request of either party, the arbitral tribunal may take any interim measures it deems necessary in respect of the subject-​matter of the dispute, including measures for the conservation of the goods forming the subject-​matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods. 2. Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures. 3. A  request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement. 24.13 While the 1976 version of Article 26 does not mention it, parties to UNCITRAL proceed-

ings can limit the scope of the tribunal’s power if they so wish. Article 26 was adopted by the Iran–​US Claims Tribunal without modification. Hence, the jurisprudence of the Iran–​US Claims Tribunal is an important benchmark when analysing the power of an arbitral tribunal to grant interim relief under the 1976 UNCITRAL Rules and provides good guidance in the application of the Rules.10 Lao Holdings N.V. v. Lao People’s Democratic Republic, ICSID Case No. ARB(AF)/​12/​6 [hereinafter Lao], Ruling on Motion to Amend the Provisional Measures Order (May 30, 2014), ¶ 30. 7  UNCITRAL Rules (2010) art. 1(2); Note by the Secretariat (Aug. 6, 2008), A/​CN.9/​WG.II/​WP.151. 8  Id. 9  UNCITRAL Rules (2010) art. 1(2), second sentence. 10  Although the Iran–​U.S. Claims Tribunal applied art. 26, it must be noted that it placed great emphasis on its inherent power to issue interim measures ‘as may be necessary to conserve the respective rights of the Parties and to ensure that the tribunal’s jurisdiction and authority are made fully effective’: For example, when the tribunal first addressed a request for interim relief, it based the measures it ordered not on art. 26 but on its inherent power. See George H. Aldrich, The Jurisprudence of the Iran-​United States Claims Tribunal 137–​38 (1996) [hereinafter Aldrich]. See also Rockwell International Systems Inc. & Islamic Republic of Iran, Ministry of Defence, Award No. ITM20-​430-​1 (June 6, 1983) at 4–​5, reprinted in 2 Iran–​ USCTR 369, 371 (1983-​I); RCA Global Communications Disc, Inc. & Islamic Republic of Iran, Award No. ITM 30-​160-​1 (Oct. 31, 1983) at 5, reprinted in 4 Iran–​USCTR 9, 11–​12 (1983-​II). For a discussion on the inherent power of the Iran–​US Claims Tribunal, see also David Caron, The Iran–​United States Claims Tribunal and the International Arbitral Process 216–​23 (1990) [hereinafter Caron 1990].

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II.  The Power to Grant Interim Relief 2.  The 2010 UNCITRAL Rules Article 26 of the 2010 Rules reads as follows:

24.14

1. The arbitral tribunal may, at the request of a party, grant interim measures. 2. An interim measure is any temporary measure by which, at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party, for example and without limitation, to: (a) Maintain or restore the status quo pending determination of the dispute; (b) Take action that would prevent, or refrain from taking action that is likely to cause, (i) current or imminent harm or (ii) prejudice to the arbitral process itself; (c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or (d) Preserve evidence that may be relevant and material to the resolution of the dispute. 3. The party requesting an interim measure under paragraphs 2 (a) to (c) shall satisfy the arbitral tribunal that: (a) Harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and (b) There is a reasonable possibility that the requesting party will succeed on the merits of the claim. The determination on this possibility shall not affect the discretion of the arbitral tribunal in making any subsequent determination. 4. With regard to a request for an interim measure under paragraph 2 (d), the requirements in paragraphs 3 (a) and (b) shall apply only to the extent the arbitral tribunal considers appropriate. 5. The arbitral tribunal may modify, suspend or terminate an interim measure it has granted, upon application of any party or, in exceptional circumstances and upon prior notice to the parties, on the arbitral tribunal’s own initiative. 6. The arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure. 7. The arbitral tribunal may require any party promptly to disclose any material change in the circumstances on the basis of which the interim measure was requested or granted. 8. The party requesting an interim measure may be liable for any costs and damages caused by the measure to any party if the arbitral tribunal later determines that, in the circumstances then prevailing, the measure should not have been granted. The arbitral tribunal may award such costs and damages at any point during the proceedings. 9. A request for interim measures addressed by any party to a judicial authority shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.

The authority of a tribunal to order interim relief under the UNCITRAL Rules is subject to 24.15 any mandatory rules of the national law applicable to the arbitration. The submission to the relevant national law is confirmed by Article 1(2) of the 1976 UNCITRAL Rules and 1(3) of the 2010 Rules, which provide: ‘These rules shall govern the arbitration except that where any of these Rules is in conflict with a provision of the law applicable to the arbitration from which the parties cannot derogate, that provision shall prevail’. Thus, the power of a tribunal to grant interim relief is subject to the lex arbitri. It is worth 24.16 noting that some jurisdictions, such as Italy, reserve this power to domestic courts.

C. Other Relevant Provisions In addition to the preceding provisions referred to, one must consider any specific IIA pro- 24.17 vision that supplements and modifies the applicable arbitration rules. For example, Article 1134 of the NAFTA prohibits attachment orders and orders that enjoin the application of the challenged measures in the following terms: A Tribunal may order an interim measure of protection to preserve the rights of a disputing party, or to ensure that the Tribunal’s jurisdiction is made fully effective, including an order

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Interim Relief in Investment Treaty Arbitration to preserve evidence in the possession or control of a disputing party or to protect the Tribunal’s jurisdiction. A Tribunal may not order attachment or enjoin the application of the measure alleged to constitute a breach referred to in Article 1116 [claim by an investor of a party on its own behalf claiming inter alia for a breach of an obligation under section A (investment)] or 1117 [claim by an investor of a party on behalf of an enterprise claiming inter alia for a breach of an obligation under section A (investment)]. For purposes of this paragraph, an order includes a recommendation. 24.18 The US Model BIT (2012), as well as numerous recent treaties concluded by the United

States, contain wording similar to the NAFTA provision just quoted. Very similar wording is also present in Article 8.34 of the EU–​Canada Comprehensive Economic and Trade Agreement (CETA). Similarly, Article 9.20(4) of the EU–​Singapore FTA allows investors to request interim measures before arbitration tribunals in order to preserve their rights and interests as claimants, while vesting the same prerogative in domestic courts if interim relief is sought before the constitution of the tribunal.

III.  Purpose of the Measures: Preserving the Respective Rights of the Parties 24.19 Interim measures are temporary in nature and are traditionally intended to ‘preserve the re-

spective rights of the Parties pending the decision’11 of the tribunal.

A. ICSID  System 24.20 Article 47 of the ICSID Convention allows a tribunal12 to grant provisional measures ‘if

it considers that the circumstances so require . . . to preserve the respective rights of either party’. Arbitration Rule 39(1) requires that the applicant specify in its request the right(s) to be preserved. The AF Arbitration Rules also refer to the preservation of the parties’ rights. Absent any further guidance, it is accepted that provisional measures in the ICSID system are left to the appreciation of each tribunal,13 provided that they aim at the preservation of a right of a party. This begs the question as to what rights can be preserved (which will be examined later in the chapter) and whether the rights to be preserved are limited to the rights in dispute.14 11  Anglo–​ Iranian Oil Co. (United Kingdom v.  Iran), Interim Protection Order (July 5, 1951), I.C.J. Rep. 1951, 93. 12  Ad hoc committees have also been presented with requests for provisional measures. In Commerce Group Corp. and San Sebastian Gold Mines, Inc. v.  Republic of El Salvador, ICSID Case No. ARB/​09/​ 17, Decision (Sept. 20, 2012), the request for security for costs was not presented as a provisional measure and was denied. In Libananco Holdings Co. Ltd. v. Republic of Turkey, ICSID Case No. ARB/​06/​8 [hereinafter Libananco], Decision on Preliminary Issues (June 23, 2008), the Committee dismissed a request and questioned whether it had competence to recommend provisional measures. In Ioan Micula, Viorel Micula and Others v. Romania, ICSID Case No. ARB/​05/​20, Decision of August 18, 2014, as mentioned in the Decision on Annulment (Feb. 26, 2016), ¶¶ 38–​50, the Committee dismissed the request for provisional measures because the issues and rights in the annulment proceeding were different than in the arbitration, and doing so questioned its authority to recommend such measures. See also Border Timbers Ltd., Timber Products International (Private) Ltd., & Hangani Development Co. (Private) Ltd. v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​25 & Bernhard von Pezold and Others v. Republic of Zimbabwe, ICSID Case No. ARB/​10/​15 [hereinafter Border], Decision on Applicant’s Application for Provisional Measures to Exclude Consideration of the Merits in Part I (Oct. 13, 2016), dismissing the requests for provisional measures even assuming that the Committees had the power to recommend such measures. 13  Pey Casado, supra note 4, ¶ 15. 14  For the ICJ, the rights to be preserved are the rights which are the subject of dispute in the proceedings (see Great Passage Belt Case mentioned infra). In the Arbitral Award of July 31, 1989 Case (Guinea-​Bissau

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III.  Purpose of the Measures: Preserving the Respective Rights of the Parties The tribunal in Amco v Indonesia15 concurred with Amco that the rights that can be preserved 24.21 are the rights in dispute. In that case, Indonesia requested that the claimant take no action which ‘might aggravate the dispute’ and abstain from ‘promoting, stimulating or instigating the publication of propaganda presenting their case selectively outside this tribunal or otherwise calculate[d]‌to discourage foreign investment to Indonesia’ following the publication of an article in a Hong Kong newspaper. The tribunal found that the publication of the article did not do any actual harm nor aggravate or exacerbate the legal dispute. Saying so, the tribunal noted that ‘no such right [in dispute] could be threatened by the publication of articles like’16 the one at issue. A restrictive approach to the notion of ‘right to be preserved’ was later adopted in Maffezini 24.22 v Spain.17 In this case, the respondent requested that the claimant post a guarantee or bond in the amount of the costs expected to be incurred in the arbitration. The tribunal denied the request for two main reasons: one related to the existence of a right to be preserved, a topic that will be addressed later in the chapter, and the other was that the request did not relate to the subject matter of the case before the tribunal, i.e., to the investment made in Spain but that it related to separate or extraneous matters.18 This restrictive approach has not been confirmed since and could be viewed as too limitative. 24.23 Indeed, the rights to be preserved ought not to be limited to the rights which form the subject matter of the dispute on the merits. It is admitted that other rights which relate to the dispute can also be protected, such as procedural rights19 or the more general right to non-​ aggravation of the dispute. The applicable criterion is thus that the right to be preserved bear a relation with the dispute. This latter approach was adopted by the Plama tribunal: The rights to be preserved must relate to the requesting party’s ability to have its claims and requests for relief in the arbitration fairly considered and decided by the arbitral tribunal and for any arbitral decision which grants to the Claimant the relief it seeks to be effective and able to be carried out. Thus the rights to be preserved by provisional measures are circumscribed by the requesting party’s claims and requests for relief. They may be general rights, such as the rights to due process or the right not to have the dispute aggravated, but those general rights must be related to the specific disputes in arbitration, which, in turn, are defined by the Claimant’s claims and requests for relief to date.20

v. Senegal), which concerned the validity of a previously rendered arbitral award on the determination of a maritime boundary, the Court dismissed a request for provisional measures that the parties refrain from all acts in the disputed maritime territory that was the subject of the arbitral award at stake but not of the ICJ proceedings: see 1990 I.C.J. Rep., pp. 69–​70, Order (Mar. 2, 1990). 15  Amco Asia Corporation and Others v. Republic of Indonesia, ICSID Case No. ARB/​81/​1 [hereinafter Amco], Decision on Request for Provisional Measures (Dec. 9, 1983), ¶ 1, ICSID Rep. 1993, 410. 16  Id. ¶ 3. 17  Emilio Agustín Maffezini v. Kingdom of Spain, ICSID Case No. ARB/​ 97/​7 [hereinafter Maffezini], Decision on Request for Provisional Measures (Oct. 28, 1999), ¶ 10. 18  Id. ¶ 23. 19  See Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/​05/​22 [hereinafter Biwater], Procedural Order No. 1 (Mar. 31, 2006), which stated: ‘The type of rights capable of protection by means of provisional measures are not only substantive rights but also procedural rights’: id. ¶ 71. 20  Plama Consortium Ltd. v.  Republic of Bulgaria, ICSID Case No. ARB/​ 03/​24 [hereinafter Plama], Order (Sept. 6, 2005), ¶ 40 (emphasis added). See also Churchill Mining PLC and Planet Mining Pty Ltd. v. Republic of Indonesia, ICSID Case No. ARB/​12/​14 and 12/​40 [hereinafter Churchill], Procedural Order No. 4 (Mar. 4, 2013), ¶ 48, and finding that ‘the rights invoked by the Respondent, i.e. the right to attract foreign investment, the right to regulate and promote foreign investment in its natural resources, the right to enforce the regulations on investments in its natural resources, the right to the protection of its honor and reputation, and the right to justice based on factual truth, are not rights in dispute that could warrant the recommendation of provisional measures.’ ¶ 50.

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Interim Relief in Investment Treaty Arbitration 24.24 In Plama, the rights relating to the dispute were the rights deriving from the Energy Charter

Treaty, that is, Plama’s rights to fair, equitable, and non-​discriminatory treatment for its investment. The tribunal observed that Plama’s claims and requests for relief were limited to damages under the Energy Charter Treaty. It concluded that ‘the scope of the “rights relating to this dispute” which deserve protection by provisional measures is necessarily limited to the damage claims’.21 On that basis, the tribunal did not see how local proceedings, the stay of which was requested, could affect the ICSID arbitration. Whatever the fate of the local proceedings, Plama could still pursue its claims for damages before the ICSID tribunal.

24.25 A similar approach was adopted in Burlington v Ecuador22 in which the tribunal stated:

In the Tribunal’s view, the rights to be preserved by provisional measures are not limited to those which form the subject-​matter of the dispute or substantive rights as referred to by the Respondents, but may extend to procedural rights, including the general right to the status quo and to the non-​aggravation of the dispute. These latter rights are thus self-​standing rights.23 24.26 The rights to be preserved thus do not need to be the rights in dispute but need to bear a re-

lation to the dispute as it is defined by the claims and the relief sought.24

24.27 Rights that are eligible for protection are substantive as well as procedural:25 they are rights

to preservation of the status quo and non-​aggravation of the dispute, the right to the exclusivity of the ICSID proceedings, rights to the procedural integrity of the arbitral proceedings, including access to evidence (whether documents or witnesses) and the integrity of the evidence, and the right not to prejudice the execution of the award, as will be discussed later in the chapter.

B. NAFTA Proceedings 24.28 NAFTA Article 1134, quoted above, provides for interim relief to preserve the rights of a

disputing party. However, in contrast to the ICSID system, it makes clear that the rights in dispute cannot be the subject matter of the provisional measures. The reason for this appears to be that ‘Articles 1134 and 1135 permit a state to implement and maintain a measure even if it breaches substantive rights contained in Chapter  11A. Thereafter, even if restitution

 Plama, supra note 20, ¶ 41.  Burlington Resources Inc. and Others v.  Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/​08/​5 [hereinafter Burlington], Procedural Order No. 1 on Burlington Oriente’s Request for Provisional Measures (June 29, 2009), ¶ 60. 23 For a similar reasoning, see Quiborax S.A., Non-​ Metallic Minerals S.  A. & Allan Fosk Kaplún v. Plurinational State of Bolivia, ICSID Case No. ARB/​06/​2 [hereinafter Quiborax], Decision on Provisional Measures (Feb. 26, 2010), ¶¶ 117–​18. See also Convial Callao S.A. and CCI—​Compañía de Concesiones de Infraestructura S.A. v. Republic of Peru, ICSID Case No. ARB/​10/​2 [hereinafter Convial], Decision on Application for Provisional Measures (Feb. 22, 2011), ¶ 82. See also Teinver S.A., Transportes de Cercanías S.A.  and Autobuses Urbanos del Sur S.A.  v.  Argentine Republic, ICSID Case No. ARB/​09/​1 [hereinafter Teinver], Decision on Provisional Measures (Apr. 8, 2016), ¶¶ 177 and 185. The terminology ‘self-​ standing rights’ has often been used since. See, e.g., Churchill, supra note 20, Procedural Order No. 9 (Aug. 7, 2014), ¶ 90. 24  See also Transglobal Green Energy, LLC and Transglobal Green Energy de Panama, S.A.  v.  Panama, ICSID Case No. ARB/​13/​28 [hereinafter Transglobal], Decision on the Respondent’s Request for Provisional Measures Relating to Security for Costs (Jan. 21, 2016), indicating that ‘a wider reading of the parties’ rights is justified in light of the unspecified nature of the rights to be preserved in Article 47’: id. ¶ 28. 25  See Biwater, supra note 19, ¶ 71; Burlington, supra note 22, ¶ 60; Quiborax, supra note 23, ¶ 117; RSM v. St Lucia, Decision on Provisional Measures (Aug. 13, 2014), ¶ 71; Menzies Middle East and Africa S.A. et Aviation Handling Services International Ltd. v. Senegal, ICSID Case No. ARB/​15/​21 [hereinafter Menzies], Procedural Order No. 2 (Dec. 2, 2015), ¶¶ 128–​33; Transglobal, supra note 24, Decision (Jan. 21, 2016), ¶ 28. 21 22

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III.  Purpose of the Measures: Preserving the Respective Rights of the Parties is ordered, a State Party may choose to pay monetary damages instead’.26 In proceedings conducted in accordance with the AF Arbitration Rules as modified by the provisions of NAFTA, Chapter 11, Section B, a tribunal rejected a request to order the respondent to cease and desist from any interference with the claimant’s property whether by embargo or any other means. The tribunal considered that an order in the terms requested by the claimant would not be consistent with the limitations imposed by Article 1134 ‘since such an order would entail an injunction of the application of the measures which in this case are alleged to constitute a breach referred to in NAFTA Article 1117’.27

C. UNCITRAL Arbitration Rules The revision of the UNCITRAL Rules has brought significant changes as to the purpose for 24.29 which a tribunal may grant interim measures.

1. The 1976 UNCITRAL Rule The heading of Article 26 of the 1976 UNCITRAL Arbitration Rules reads ‘Interim Measures 24.30 of Protection’. The text, however, merely relates to ‘measures [the tribunal] deems necessary in respect of the subject-​matter of the dispute, including measures for the conservation of the goods forming the subject-​matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods’. This text, which elicited discussions over the years, has generally been understood not to restrict the power of the arbitral tribunal to order any type of interim measure it deemed appropriate.28 According to a leading commentary, Article 26(1) should not be seen as an exhaustive list and was only meant to give examples.29 In other words, measures could aim at any type of protection as long as it is necessary. The practice of the Iran–​US Claims Tribunal is of limited interest in this respect, given the 24.31 commercial nature of many of the cases and the numerous applications to stay duplicative proceedings. In addition to the stay of proceedings, measures ordered have dealt with the conservation of goods,30 the prohibition of the sale of goods, and the return of goods.31

2. The 2010 UNCITRAL Rules Article 17(1) of the Model Law was originally drafted against the background of Article 26 24.32 of the 1976 UNCITRAL Arbitration Rules. It was modified in 2006 to provide a generic definition of interim measure. Article 17(1) of the Model Law now reads: ‘[u]‌nless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures’. Observing that the ICC or the AAA Arbitration Rules gave broader discretion to the arbitrators and did not make any reference to the subject matter of the dispute, the UNCITRAL Working Group deleted such reference in the Model Law and listed the different purposes of a measure, namely, maintaining or restoring the status quo pending determination of the

  Henri Alvarez, Arbitration under the North American Free Trade Agreement, 16(4) Arb. Int’l 417 (2000).   Marvin Roy Feldman Karpa v. United Mexican States, ICSID Case No. ARB(AF)/​99/​1, Procedural Order No. 2 concerning request for provisional measures and the schedule of the proceeding (May 3, 2000), ¶ 5, http://​www.naftaclaims.com/​disputes/​mexico/​Feldman/​FeldmanProceduralOrder2.pdf (last visited Nov. 10, 2017). Also in Investment Disputes Under NAFTA, an Annotated Guide to NAFTA ch. 11 (Meg N. Kinnear, Andrea K. Bjorklund, John F. G. Hannaford eds., 2006) [hereinafter Kinnear et al.] who also refer to Pope & Talbot Inc. v. Canada (UNCITRAL), Award on Interim Measures Motion (Jan. 7, 2000). 28  UNCITRAL Working Group, Doc. A/​ CN.9/​WG.II/​WP.119—​Settlement of commercial disputes—​ Preparation of uniform provisions on interim measures of protection, ¶ 41. 29  David Caron, Lee Caplan & Matti Pellonpää, The UNCITRAL Arbitration Rules: A Commentary 539 (1st ed. 2006) [hereinafter Caron et al.]. 30  See, e.g., Behring International, Inc. and the Islamic Republic of Iran Air Force et al., Interim Award No. 46-​382-​3 (Feb. 22, 1985), reprinted in 8 Iran–​USCTR 44 [hereinafter Behring International]. 31  See Aldrich, supra note 10, at 151–​55. 26 27

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Interim Relief in Investment Treaty Arbitration dispute; taking action that would prevent or refraining from taking action that is likely to cause current or imminent harm or prejudice to the arbitral process itself; providing a means of preserving assets out of which a subsequent award may be satisfied or preserving evidence that may be relevant and material to the resolution of the dispute. 24.33 Article 26 of the 2010 Rules further confirms this evolution. The heading only reads ‘Interim

Measures’, and the text contains very similar wording to Article 17(1) of the Model Law. Under the current Rules, there is thus no specific limitation set to the general power of a tribunal to grant interim measures awarded under Article 26(1) in terms of the scope of the measure or rights to be protected.

24.34 A close look at the various revised drafts shows that Article 26(2) could have been construed

to contain an exhaustive list of interim measures. In the context of the revision of the Model Law, which contains the same list, the Working Group considered that ‘to the extent that all the purposes for interim measures were generically covered by the revised list contained in paragraph (2), it was no longer necessary to make that list non-​exhaustive’.32 The list contained in Article 17(2) of the Model Law and in Article 26(2) of the Rules has been described as ‘reasonably accurately reflect[ing] reality in that it lists the types of interim measures most commonly requested’.33 However, to avoid any doubt, the terms ‘for example and without limitation’ were added to paragraph 2 of Article 26 at the Working Group’s Fiftieth Session. This made clear that the list contained therein is non-​exclusive and that the definition of interim measures is to be construed widely.34

IV.  Types of Measures 24.35 In practice, it can be said that measures can be granted in order to: (i) preserve the right

of a party which is the subject matter of the dispute; (ii) maintain or restore the status quo and/​or avoid the aggravation of the dispute between the relevant parties; (iii) preserve the integrity of the proceedings and/​or prevent prejudice to the arbitral process itself; (iv) preserve evidence; (v) protect the jurisdiction of the tribunal; and (vi) prevent the frustration of the award.

24.36 It is important to bear in mind, however, that the foregoing classification of types of measures

is neither strict nor exhaustive. It may well be the case that one measure may pursue more than one of the listed objectives at the same time.

A. Preservation of a Right 24.37 A party may seek to preserve a right to which it claims to be entitled. In this respect, two

closely connected questions of procedure arise, i.e., whether the applicant must prove that the right exists and whether a prima facie case on the merits must be shown. The latter question will be discussed in the more general examination of the requirements to obtain interim relief. The former one is reviewed in the following paragraphs.

1. ICSID  system 24.38 In Maffezini, Spain requested the posting of a bond to protect its alleged right to obtain

reimbursement of its legal costs in the event that the claimant was to fail in its case, and

  Report of the Working Group on the work of its 39th Session, A/​CN.9/​545, ¶ 21.   Kaj Hobér, Interim Measures by Arbitrators, ICCA Congress series No. 13, International Arbitration 2006: Back to Basics?, at 734 [hereinafter Hobér]. 34  Report A/​CN.9/​669, ¶¶ 92–​94, Note A/​CN.9/​WG.II/​WP.154.Add.1, ¶ 25. 32 33

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IV.  Types of Measures the tribunal to order it to pay the costs. In its analysis, the Maffezini tribunal stated that, under Arbitration Rule 39, the ‘rights must exist at the time of the request, must not be hypothetical, nor are ones to be created in the future’.35 As an example of an existing right, the tribunal cited an interest in a piece of property, the ownership of which is in dispute.36 It concluded that Spain’s alleged right was hypothetical and could thus not be protected. Indeed, ‘[e]‌xpectations of success or failure in an arbitration or judicial case are conjectures’.37 Accordingly, protecting a right that did not exist at the time of the order would have prejudged the merits of the case in an undue manner. The issue of hypothetical rights was revisited fifteen years later also in the context of security 24.39 for costs, which will be discussed in greater detail later in the chapter. In RSM v St Lucia, the majority of the tribunal found that: ‘the right to be preserved’ by a provisional measure need not already exist at the time of the request is made. Future or conditional rights such as the potential claim for costs reimbursement also qualify as ‘rights to be preserved’ . . . As long as interim measures do not cross the line to a definite judgment, the right allegedly to be protected need, in the Tribunal’s opinion, not definitely exist at the time the respective measure is issued.38

Arbitrator Nottingham dissented, pointing out that: the right claimed by Respondent is ‘contingent’ and hypothetical. It does not presently exist. It may never exist. It will arise if and only if (1) Respondent prevails on the merits and (2) the Tribunal grants a request for reimbursement of its costs. It is therefore not entirely sensible to speak of preserving, maintaining, or protecting such a non-​existent thing. Indeed, one may question whether the contingent claim to a cost award is a ‘right’ at all.39

Other ICSID tribunals have discussed the existence of a right outside of the security for 24.40 costs context. The tribunal in Pey Casado elaborated on whether a right must exist to be protected. It noted that the tribunal must reason on the basis of assumptions and that ‘[i]‌t results from the very nature of this mechanism that the tribunal cannot require . . . evidence of the existence, the reality or the present nature of the rights which the measure sought aims to safeguard or preserve’.40 In addition, to demand that the right that one seeks to preserve must be existing would oblige the tribunal to prejudge the substance of the case at a time when it is not in a position to do so.41 Such prejudgment is not required under the ICSID Convention42 and is contrary to the very nature of provisional remedies, which by essence can only assess the likelihood of the rights at issue. This approach was further validated by the Occidental tribunal with respect to a request for an 24.41 order for specific performance.43 The tribunal held that the right to be preserved need not be  Maffezini, supra note 17, ¶ 13.   Id. ¶ 14. 37  Id. ¶ 20. 38 RSM v.  St Lucia, supra note 25, Decision on St Lucia’s Request for Security for Costs (Aug. 13, 2014), ¶ 72. 39  RSM v.  St Lucia, Decision on Provisional Measures (Aug. 13, 2014), Dissenting Opinion of Judge Edward Nottingham, ¶ 6. 40  Pey Casado, supra note 4, ¶ 46 (italics in the original). 41  Id. ¶ 48, referring to the ICJ case of LaGrand (discussed infra) in ¶ 24.47. 42  Id. ¶ 45. 43  Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/​06/​11 [hereinafter Occidental], Decision on Provisional Measures (Aug. 17, 2007). In this case, a participation contract was entered into by Occidental Exploration Petroleum Company (OEPC), Ecuador and Petroecuador, a state-​owned petroleum company in connection with the exclusive exploration and exploitation of oil. After the state’s nullification of the contract, OEPC and its mother company (Occidental Petroleum Company) initiated an ICSID proceeding under the U.S.–​Ecuador 35 36

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Interim Relief in Investment Treaty Arbitration proven to exist in fact.44 It is sufficient that it be asserted as ‘a theoretically existing right’, the tribunal only dealing with the nature of the right and not its merits.45 A theoretically existing right was defined as ‘an actual right or legally protected interest, by opposition to a simple interest which does not entail legal protection’.46 The tribunal then further found that, at the stage of the request, the claimants had not established that ‘there exists a right to specific performance where a natural resources concession agreement has been terminated or cancelled by a sovereign State’.47 It thus examined the existence of a right in theory. For that purpose, it reviewed whether a principle of law existed providing for a right to specific performance in petroleum contracts and concluded that such a right did not exist. 24.42 By contrast, the tribunal in City Oriente, while distinguishing the facts of the case from

Occidental,48 concluded that the claimant had proven the appearance of a right, namely that under Ecuadorian Law, a contractor may demand that the public entity it contracted with be ordered to fulfil its commitments. In doing so, it observed that ‘at this stage, the sole decision to be made by the arbitral tribunal is whether the party requesting the provisional measures, City Oriente, has been able to prove fumus boni iuris, an appearance of a good right’.49 The same finding of an appearance of a contractual right to specific performance under national law was also made in Burlington.50

24.43 The tribunal in Tethyan v Pakistan, faced with the parties’ conflicting submissions regarding

the existence of the asserted right to be preserved (a right to mine ore), refused to assume that the claimant did not have the right or remedies to which it was allegedly entitled, including rights capable of enforcement by specific performance. The tribunal thus assumed that the claimant would succeed on the merits before considering the other conditions for the issuance of interim relief.51

24.44 It is also worth noting that some ICSID tribunals have taken a stricter approach and refused

to grant a relief that would coincide with the final remedy sought. In TANESCO,52 the respondent applied for the payment by the claimant of a sum allegedly due under the disputed contract, i.e., for specific performance. It argued that, in the absence of payment, there was a risk that its lenders would foreclose on the facility, which could have resulted in the

BIT alleging that their exploration rights had been illegally nullified and their assets had been expropriated. The claimants requested that the tribunal order the respondents (i) to invest a minimum amount in the development and operation of the area; (ii) to give a notice prior to entering into a contract with another party to carry out exploration and exploitation activities in the area; (iii) to produce reports regarding production and expenditures and; (iv) to enter into a contract with the claimants for the shipment of a certain number of barrels of crude oil. The claimants presented their request as necessary to preserve their rights to obtain specific performance and restoration of their rights. The request was rejected. See Brigitte Stern commenting on the Occidental case in Building International Investment Law: The First 50 Years of ICSID 627 (Meg Kinnear et al. eds., 2016). 44 Occidental, supra note 43, ¶ 64. 45  Id. ¶ 64. 46  Id. ¶ 65. 47  Id. ¶ 86. 48  Among those, was the fact that the claim in Occidental, supra note 43, was based on a BIT, while City Oriente requested the performance of a contract subject to Ecuadorian law. 49  City Oriente Ltd. v. Republic of Ecuador and Empresa Estatal Petroleos del Ecuador (PetroEcuador), ICSID Case No. ARB/​06/​21 [hereinafter City Oriente], Decision on Revocation of Provisional Measures and Other Procedural Matters (May 13, 2008), ¶ 45. 50 Burlington, supra note 22, ¶¶ 70–​71. 51  Tethyan Copper Company Pty Ltd. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​12/​1 [hereinafter Tethyan], Decision on Claimant’s Request for Provisional Measures (Dec. 13, 2012), ¶ 137. 52  Tanzania Electric Supply Co. Ltd. (TANESCO) v. Independent Power Tanzania Ltd., ICSID Case No. ARB/​98/​8, Decision on the Respondent’s Request for Provisional Measures (Appendix A to the Award) (Dec. 20, 1999).

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IV.  Types of Measures deprivation of the ownership of the facility. The tribunal noted that the right to be preserved in that case was the right to enjoy the benefit of the agreement. The tribunal observed: We do not go as far as to conclude that “provisional measures” under Rule 39 can never include recommending the performance of a contract in whole or in part: it is not necessary for us to go that far. But where what is sought, is, in effect, performance of the Agreement, and where the only right said to be preserved thereby is the right to enjoy the benefits of that Agreement, we consider that the application falls outside the scope of Rule 39, and therefore is beyond our jurisdiction to grant.53

In the same spirit, the Phoenix tribunal recalled that ‘[p]‌rovisional measures are indeed not 24.45 deemed to give to the party requesting them more rights than it ever possessed and has title to claim’.54 It concluded that ‘the requested provisional measure concerning the ownership of the land cannot be granted as it is equivalent to the final result sought’.55

2.  UNCITRAL Rules A request to preserve a right most often aims at maintaining or restoring the status quo. In spite of this, it does not appear that the existence of the right which is the subject matter of the measure has been discussed as such by UNCITRAL tribunals. It probably has been addressed in the more general discussion as to whether a prima facie case on the merits is necessary, which will be examined later in the chapter. Finally, one should note that the Iran–​US Claims Tribunal has been reluctant to grant in- 24.46 terim relief tantamount to the final relief requested.56

B. Preservation of the Status Quo/​Non-​aggravation of the Dispute 1. ICSID  system The travaux préparatoires of the ICSID Convention referred to the need ‘to preserve the 24.47 status quo between the parties pending [the] final decision on the merits’. This expression has not been widely embraced by ICSID tribunals which, rather, refer to the non-​aggravation of the dispute. This is a principle of international law well embedded since the case of the Electricity Company of Sofia and Bulgaria.57 The commentary of the 1968 edition of the ICSID Arbitration Rules stated that the non-​aggravation of the dispute was a valid concern. 53  Id. ¶ 16 (emphasis in the original). The respondent’s position was found to be too speculative as the risk of foreclosure was not supported and TANESCO’s alleged incapacity to face a possible award for costs was uncertain. For the tribunal, there was ‘a distinction to be drawn between the protection of rights and the enforcement of rights’: ¶ 13. It further noted that ICSID interim measures should not be recommended ‘in order, in effect, to give security for the claim’: ¶ 14, referring to Atlantic Triton Company Ltd. v. People’s Revolutionary Republic of Guinea, ICSID Case No. ARB/84/1 [hereinafter Atlantic Triton], decision unreported. It found that rather than preserving the status quo, the respondent’s request was ‘plainly directed to affect a fundamental change to it’: ¶ 15. 54  Phoenix Action, Ltd. v. Czech Republic, ICSID Case No. ARB/​06/​5 [hereinafter Phoenix], Decision on Provisional Measures (Apr. 6 2007), ¶ 37. 55  Id. See also Teinver, supra note 23, according to which ‘[i]‌n the Tribunal’s view, Respondent is correct that, in principle, an application for provisional or interim measures is not the appropriate vehicle for requesting relief on the merits, nor for the Tribunal to grant an award of relief on the merits’: id. ¶ 169. 56  See Behring International, supra note 30, where it was stated: ‘The Tribunal, however, determines that the granting of the full interim relief requested by Respondents, in particular, the transfer to Respondents of possession, custody and control of the warehoused goods (Respondent’s title to which is not disputed by Claimant), would be tantamount to awarding Respondents the final relief sought in their counterclaim. The Tribunal decides that, under the circumstances of this particular case, it cannot award such relief prior to determining as a final matter that it has jurisdiction’: id.¶ 3. 57  Electricity Company of Sofia and Bulgaria (Belgium v. Bulgaria), Judgment (Dec. 5, 1939), P.C.I.J. series A/​B, No 79, 199. See also LaGrand Case (Germany v. United States), Judgment (June 27, 2001), ¶ 103, I.C.J. Rep. 2001, 466 [hereinafter LaGrand Case].

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Interim Relief in Investment Treaty Arbitration It explained that Article 47 of the Convention ‘is based on the principle that once a dispute is submitted to arbitration the parties should not take steps that might aggravate or extend their dispute or prejudice the execution of the award’.58 24.48 The principle was first affirmed in the first ICSID case Holiday Inns v Morocco59 and reiterated

in Amco v Indonesia. In the latter case, the tribunal acknowledged ‘the good and fair practical rule, according to which both Parties to a legal dispute should refrain, in their own interest, to do anything that could aggravate or exacerbate the same, thus rendering its solution possibly more difficult’.60

24.49 It was reaffirmed in Pey Casado. The tribunal had to decide whether there was a risk of ag-

gravation or extension of the dispute ‘or of a development likely to make the execution of an eventual judgment more difficult (in the hypothesis, again, that the tribunal recognises itself as having jurisdiction) and in consequence a compromise of the rights recognised therein for one or other of the Parties’.61 The tribunal acknowledged that there were tensions between the parties and thus invited them, under the heading of a provisional measure, to take into account the various possible hypotheses and each to ensure—​to reproduce the expression used by the International Court of Justice in the Anglo–​Iranian Oil Company Case—​‘that no action is taken which might prejudice the rights of the other Party in respect of the carrying out of [the judgment] which the [Arbitration Tribunal] may subsequently render’ and ‘that no action of any kind is taken which might aggravate or extend the dispute’.62

24.50 The Plama tribunal adopted a somewhat more limited approach. While acknowledging that

the local bankruptcy proceedings which the claimant sought to discontinue could aggravate the dispute between the parties, it considered: that the right to non-​aggravation of the dispute refers to actions which would make resolution of the dispute by the Tribunal more difficult. It is a right to maintenance of the status quo, when a change of circumstances threatens the ability of the Arbitral Tribunal to grant the relief which a party seeks and the capability of giving effect to the relief.63

24.51 In that case, as already mentioned, the resolution of the dispute was to be effected through

monetary relief. In other words, the resolution was not rendered more difficult by the alleged action of the respondent. This approach to the non-​aggravation of the dispute mirrors the tribunal’s vision of the rights to be preserved as discussed previously. On that basis, an aggravation of a dispute, the consequences of which could be compensated by an award of monetary damages, might not be deemed a sufficient ground for granting interim relief. This aspect will be discussed further in the context of the requirement of irreparable harm.

24.52 The Occidental tribunal appears to have confirmed this approach. It recalled that when

granted, provisional measures have always been directed at the behaviour of the parties to the dispute and that ‘[p]‌rovisional measures are not designed to merely mitigate the final amount of damages’.64 The tribunal held that the measures requested aimed at the non-​aggravation

  1 ICSID Rep. 99.  Holiday Inns S.A.  and Others v.  Kingdom of Morocco, ICSID Case No. ARB/​72/​1, Order (July 2, 1972), not public but commented on by Pierre Lalive, The First ‘World Bank’ Arbitration (Holiday Inns v. Morocco—​Some Legal Problems, 51 BYBIL 123 (1980) [hereinafter Lalive]. 60 Amco, supra note 15, at 412. 61  Pey Casado, supra note 4, ¶ 73. 62  Id. ¶ 77. 63 Plama, supra note 20, ¶ 45. 64 Occidental, supra note 43, ¶ 97. In addition, the Occidental tribunal observed: ‘[I]‌n any situation resulting from an illegal act, the mere passage of time aggravates the damages that can be ultimately granted and it is well known that this is not a sufficient basis for ordering provisional measures’: id. ¶ 97. 58 59

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IV.  Types of Measures of the monetary damages but not of the dispute per se.65 The Burlington tribunal adopted a somewhat different approach. It considered that the continuation of the seizures was bound to aggravate the dispute, because there was ‘a risk that the relationship between the foreign investor and Ecuador may come to an end’.66 In other words, it held that the continuation of the contractual cooperation between the parties represented the status quo to be protected.67 The Cemex tribunal recalled that the non-​aggravation of the dispute cannot be an independent 24.53 ground to recommend provisional measures without urgency or necessity (requirements examined later in the chapter), because ‘the so-​called principle of non-​aggravation cannot supplant the requirements of Article 47’68 and ‘ “non-​aggravation measures” are ancillary measures which cannot be recommended in the absence of measures of a purely protective or preservative kind’.69 While the concept of non-​aggravation of the dispute is a ground widely invoked, its relevance 24.54 has been recently limited in the context of criminal investigations and prosecutions.70 As a matter of fact, it can be said that a dispute may be aggravated by harassment, threats and intimidations on the part of one party through the conduct of criminal investigations and prosecutions and some tribunals have placed themselves in this context. However, tribunals tend rather to examine those situations through the lens of the integrity of the proceedings (as will be examined below) on the basis that criminal investigations do not necessarily aggravate the dispute.71 Irrespective of whether the context is aggravation of the dispute or integrity of the proceeding, 24.55 as recalled by various tribunals, the right and duty to conduct criminal investigations and prosecutions is a sovereign prerogative of a state.72 There is a consensus that there is a ‘high   Id. ¶ 98.  Burlington, supra note 22, ¶ 65. In that case, PetroEcuador initiated local proceedings to collect amounts allegedly due under an amendment to the Hydrocarbon Act, which the claimants considered to unilaterally modify their rights under two production sharing contracts for the exploration and exploitation of oil fields in the Amazon Region. 67  Id. ¶ 67. 68 Cemex, supra note 4, ¶ 61. 69  Cemex, ¶ 65, relying on the Pulp Mills case. Also referred to in PNG Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, ICSID Case No. ARB/​13/​33 [hereinafter PNG], Decision on the Claimant’s Request for Provisional Measures (Jan. 21, 2015), ¶ 153. 70  Parallel criminal proceedings that have a direct relationship with an ICSID proceeding and can thus be said to impeach on ICSID exclusive jurisdiction are rare and will be examined later under ‘Preserving the Jurisdiction of the Tribunal.’ In practice, it has been decided that most criminal cases do not ‘threaten’ the exclusivity of ICSID proceedings per se mainly because the subject matters, the parties and the sources of consent are different. See Quiborax, supra note 23, ¶¶ 128–​30. Convial, supra note 23, ¶ 94; Lao, supra note 6, ¶ 30; Churchill, supra note 20, Procedural Order No. 9 (Aug. 7, 2014), ¶¶ 85–​86; Hydro S.r.l. and Others v. Republic of Albania, ICSID Case No. ARB/​15/​28 [hereinafter Hydro], Order on Provisional Measures (Mar. 3, 2016), ¶ 3.23, which was revoked and modified by a Decision of September 1, 2016. See also Teinver, supra note 23, ¶ 193. 71 Quiborax, supra note 23, ¶¶ 137–​38, concluding that this is not a matter of status quo or aggravation of the dispute but rather of integrity of the process (relating to witnesses and presentation of the case). In Quiborax, the investor no longer held an investment in Bolivia. See also Convial, supra note 23, ¶ 106; Lao, supra note 6, ¶ 30. See also Bear Creek v. Peru, supra note 201, ¶ 9.117 in this volume where it was undisputed that the claimant did not have any ongoing operations for its investment and that the lawsuit could not threaten the status quo (¶ 65) or exacerbate the dispute (¶ 78); EuroGas Inc. & Belmont Resources Inc. v. Slovak Republic, ICSID Case No. ARB/​14/​14 [hereinafter EuroGas], Procedural Order No. 3 (June 23, 2015), ¶ 89. 72  See Abaclat and Others v.  Argentine Republic, ICSID Case No. ARB/​ 07/​5 (formerly Giovanna a Beccara and Others v. Argentine Republic) [hereinafter Abaclat], Procedural Order No. 13 (Sept. 27, 2012), ¶¶ 39 and 45; and Lao, supra note 6, pointing out that ‘[n]‌either the ICSID Convention nor the BIT imposed a prohibition on a State that enjoins it from exercising criminal jurisdiction over such matters. In particular, they do not exempt suspected criminals from investigation or prosecution by virtue of being investors’: id. ¶ 21. The Lao tribunal then examined the exceptions to this rule, especially when the purpose is to collect evidence for use in the arbitration and to undermine the integrity of the arbitral process, ¶ 26. Order (Dec. 22, 2014), ¶ 72; EuroGas, supra note 71, ¶ 77. Italba Corporation v. Oriental Republic of Uruguay, 65 66

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Interim Relief in Investment Treaty Arbitration threshold’ for an ICSID tribunal to recommend provisional measures regarding criminal investigations conducted by a state.73 Asked to recommend that Kazakhstan refrain from conducting criminal investigations, and participating as partie civile in such proceedings, including joining in criminal proceedings already pending in Lebanon, the Caratube 2 tribunal concluded that: The Claimants would have to establish that the Respondent’s investigations and participation as partie civile in the criminal proceedings in Lebanon constitute an impermissible act that prevents them from asserting their rights in this Arbitration, thus causing an irreparable harm to the Claimants’ rights to be preserved in this Arbitration by the recommendation of urgent provisional relief. This would imply a showing that there is no higher or equivalent public interest of the State to be a party to the criminal proceedings.74 24.56 The Churchill tribunal also recalled that there is a high threshold to establish aggravation by

concrete instances of intimidation or harassment.75

24.57 Depending on the facts, tribunals have found that the preservation of the status quo or the in-

tegrity of the proceedings warranted a stay of criminal proceedings. In City Oriente, Ecuador was requested to suspend criminal proceedings aimed at obtaining payment in application of the statute, Law 42, that was at stake in the arbitration.76 The same was ordered in Perenco.77 In Convial, to preserve the integrity of the proceeding, the tribunal rejected the claimant’s request but ordered Peru to abstain from and, if necessary, suspend any actions limiting the freedom of movement of two witnesses.78 Similarly, to preserve the integrity of the proceeding, the respondent in Quiborax was told to suspend the criminal proceedings against some of the claimants and witnesses and refrain from initiating other criminal proceedings related to the arbitration.79 The criminal proceedings were found to be related to the ICSID proceeding and ‘may even be motivated by’ the arbitration.80 In Lao, the respondent requested a modification of a previous order prohibiting it to take any steps that would alter the status quo or aggravate the dispute. It asked permission to extend its criminal investigation into the conduct of the claimant’s employees and alleged corruption of the respondent’s officials. Because of the timing (prior to the hearing) and the relation between the criminal proceedings and the ICSID AF arbitration, the claimant’s rights were considered to merit protection, and the stay of the criminal investigation (which the respondent had originally put on hold voluntarily) was ordered to continue.81 In Hydro v Albania, the tribunal noted that the extradition and ICSID Case No. ARB/​16/​9 [hereinafter Italba], Decision on Claimant’s Application for Provisional Measures and Temporary Relief (Feb. 15, 2017), ¶ 115. 73  Tokios Tokeles v. Ukraine, ICSID Case No. ARB/02/18 [hereinafter Tokios Tokeles], Procedural Order No. 3 (Jan. 18, 2005), ¶¶ 12–​13; Caratube International Oil Company LLP v.  Republic of Kazakhstan, ICSID Case No. ARB/​08/​12 [hereinafter Caratube  1], Decision Regarding Claimant’s Application for Provisional Measures (July 31, 2009), ¶ 137; Caratube International Oil Company LLP and Mr. Devincci Salah Hourani v. Republic of Kazakhstan, ICSID Case No. ARB/​13/​13 [hereinafter Caratube 2], Decision on the Claimant’s Request for Provisional Measures (Dec. 4, 2014), ¶ 135; Lao, supra note 6, ¶¶ 21–​25; Churchill, supra note 20, Procedural Order No. 14 (Dec. 22, 2014), ¶ 72; PNG, supra note 69, ¶ 145: ‘[i]‌n addition, separate from the question of whether provisional measures are warranted, the abuse of the sovereign power of a State to pursue criminal proceedings may give rise to damage and a claim for the breach of rights protected by a BIT or international law, more generally: id. ¶ 190; Italba, supra note 72, ¶ 116, declaring that the tribunal has no power to order the cessation of a criminal investigation. 74  Caratube 2, supra note 73, ¶ 135. 75 Churchill, supra note 20, Procedural Order No. 14 (Dec. 22, 2014), ¶ 72. 76  City Oriente, supra note 49, Decision on Provisional Measures (Nov. 19, 2007), ¶¶ 61–​66. 77  Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), ICSID Case No. ARB/​08/​16 [hereinafter Perenco], Decision on Provisional Measures (May 8, 2009), ¶ 79. 78 Convial, supra note 23, ¶ 124. 79 Quiborax, supra note 23, at 46. 80  Id. ¶ 119. 81 Lao, supra note 6, ¶ 75.

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IV.  Types of Measures criminal proceedings initiated by Albania concerned the factual circumstances at issue in the arbitration. The possible incarceration of two of the claimants was to affect the arbitration and the integrity of the proceeding.82 It ordered that Albania suspend the criminal proceedings in Albania until the issuance of the award and take action to suspend the extradition proceedings pending in England. This decision was revoked and modified a few months later after Albania requested the stay of the extradition proceedings in England.83 Requests for provisional measures seeking to prevent aggravation of the dispute can also 24.58 be related to the confidentiality of the arbitration. No principle of confidentiality is said to exist in ICSID arbitration,84 and ‘no party should be prevented from engaging in general discussion about the case in public . . . provided that such public discussion is not used as an instrument to antagonize any party, exacerbate the parties’ differences, aggravate the dispute, disrupt the proceedings or unduly pressure any party’.85 This notwithstanding, some tribunals have found that press conferences or specific forms or consent of publicity might aggravate the dispute, and have made orders accordingly.86

2. UNCITRAL  Rules It is clear that the non-​aggravation of the dispute can be a ground to obtain interim re- 24.59 lief under the 1976 UNCITRAL Rules. The maintenance or restoration of the status quo is now an explicit ground for granting interim relief under Article 26(2)(a) of the 2010 UNCITRAL Rules. It is interesting to note that the Iran–​US Claims Tribunal does not appear to have relied 24.60 on the concept of non-​aggravation of the dispute when assessing requests for interim relief. However, references to maintaining the status quo can be found in concurring opinions.87 In investment treaty cases, non-​aggravation of the dispute has been considered in a number 24.61 of cases. In Chevron v Ecuador, the claimants requested the tribunal to order the respondent, inter alia, to refrain from taking action that could aggravate, exacerbate or extend the dispute between the parties, with reference to the ongoing Ecuadorian domestic court proceedings known as the ‘Lago Agrio Case’ and criminal proceedings against some of the claimants’ lawyers. The tribunal expressly ordered both parties to maintain the status quo, not to exacerbate the procedural and substantive disputes between them, including by avoiding public statements aimed at compromising the arbitral proceedings, and not to exert any unlawful influence on the domestic court in the Lago Agrio Case.88 It also ordered the respondent not to discourage the claimants’ engagement of Ecuadorian legal experts and advisers for the  Hydro, supra note 70, ¶¶ 3.20, 3.41.   Hydro, Decision (Sept. 1, 2016). 84  See Amco, supra note 15, ¶ 4; World Duty Free Company Ltd. v. Republic of Kenya, ICSID Case No. ARB/​00/​7, Decision on Provisional Measures (Apr. 25 2011), cited in the Award (Oct. 4, 2016), ¶ 16. See also United Utilities (Tallinn) B.V. & Aktsiaselts Tallinna Vesi v. Republic of Estonia, ICSID Case No. ARB/​ 14/​24, Decision (May 12, 2016) [hereinafter United Utilities]. For a discussion, see ¶¶ 80–​85, referring to Biwater, supra note 19, and Abaclat, supra note 72. 85  United Utilities, supra note 84, ¶ 112. 86 Teinver, supra note 23, ¶ 210, noting that ‘the dissemination sponsored by Respondent exceeded by a wide margin any reporting which may have been appropriate’. The tribunal ordered the respondent ‘to refrain from further aggravating the dispute by publicizing the filing of the Complaints or the criminal investigation and any relation they may have to this arbitration, whether by way of the press or otherwise, is appropriate’: id. ¶ 210. 87  See concurring opinion of Judge Holtzmann and Judge Mosk to the interim award rendered in E-​ systems v. Islamic Republic of Iran and Bank Melli (Feb. 4, 1983), reprinted in 2 Iran–​USCTR 51 [hereinafter E-​systems]. 88  Chevron Corporation and Texaco Petroleum Corporation v. Republic of Ecuador [hereinafter Chevron], UNCITRAL, PCA Case No. 2009-​23, Order on Interim Measures (May 14, 2010), ¶¶ 1(i) and (iii). 82 83

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Interim Relief in Investment Treaty Arbitration purpose of the arbitration.89 In Hesham v Indonesia, the tribunal sustained the existence of ‘a general right to status quo ante and non-​aggravation of disputes in investment arbitration law’.90 Finally, the claimant in Enkev Beheer v Poland sought to obtain interim relief to preserve the status quo and thus to avert the expropriation of its property in Poland and the damages resulting thereof.91 This request was raised twice throughout the proceedings,92 and rejected in both instances, as the claimant was unable to satisfy the requirements under Article 26(3) of the rules.93

C. Preserving the Integrity of the Proceedings/​Preventing Prejudice to the Arbitral Process Itself 1. ICSID  system 24.62 The principle of integrity of the proceedings aims at allowing parties to freely present their case. It protects parties and counsel alike. In Border v Zimbabwe, on the basis of prima facie evidence that the respondent’s central intelligence organization had issued instructions to kill one of the claimants, the tribunal ordered the respondent to take measures to protect the life and safety of the claimants.94 The PNG tribunal recalled that ‘provisional measures would generally be appropriate if there were credible evidence that either party had made, directed or encouraged threats of physical harm against employees, officers or agents of the other party. Such actions would be a serious breach of each party’s obligation to arbitrate in good faith and would ordinarily warrant immediate relief ’.95 In Libananco v Turkey, the respondent was ordered not to intercept or record communications between legal counsel and the claimant, to destroy intercepted communications, and to allow legal counsel to enter Turkey to prepare the case free from surveillance.96 Even where they do recommend measures, tribunals show special concern for possible criminal allegations against the claimant’s counsel.97 Requests have also aimed at avoiding that a respondent use documents obtained in criminal proceedings in an ICSID arbitration and thereby obtain an unfair advantage.98 2. UNCITRAL  Rules 24.63 The content of Article 26(2)(b) of the 2010 Rules builds upon Article 17(b) of the UNCITRAL Model Law. The latter enables arbitral tribunals to ‘[t]‌ake action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself ’. In the 2010 Rules, the insertion of ‘(i)’ before the word ‘current’ and

  Id. ¶ 1(vi).   Hesham T. M. Al-​Warraq v. Republic of Indonesia, UNCITRAL [hereinafter Hesham], Final Award (June 21, 2012), ¶ 615. 91  Enkev Beheer B.V. v. Republic of Poland, PCA Case No. 2013-​ 01 [hereinafter Enkev], First Partial Award (Apr. 29, 2014), ¶ 11. 92  Id. ¶ 288. 93  Id. ¶¶ 18, 296 & 381. 94 Border, supra note 12, Procedural Order No. 5 (Apr. 3, 2013), ¶ 65. 95 PNG, supra note 69, ¶ 141, although, in this case, the claimant failed to establish the alleged facts. 96 Libananco, supra note 12, ¶ 82. 97  See, e.g., Teinver, supra note 23, ¶¶ 205–​208. In Teinver, the request for provisional measures was presented after the hearing, and sought an order that Argentina cease and desist from criminal investigations against the claimants, their representatives, and their funder. 98 Libananco, supra note 12, ¶ 82, citing paragraph 1.2 of a letter to the parties asking that documents obtained in the course of the criminal investigation not be made available to the defense team in the arbitration. Churchill, supra note 20, Procedural Order No. 14 (Dec. 22, 2014), ¶¶ 81–​82 recommending that the respondent ask for leave before introducing evidence obtained through the criminal investigation. See also EuroGas, supra note 71, ¶¶ 94–​99. 89 90

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IV.  Types of Measures ‘(ii)’ before the word ‘prejudice’ in Article 26(2)(b) clearly distinguishes between ‘prejudice to the arbitral process’ from ‘current or imminent harm’ to one of the parties.99 In Chevron, after noting that Ecuador had failed to comply with two Orders on Interim 24.64 Measures and a First Interim Award on Interim Measures, the tribunal issued a Second Interim Award on Interim Measures ordering ‘the Respondent (whether by its judicial, legislative or executive branches) to take all measures necessary to suspend or cause to be suspended the enforcement and recognition within and without Ecuador of the judgments . . . against the First Claimant in the Ecuadorian legal proceedings known as “the Lago Agrio Case” ’.100 The tribunal issued its order ‘bearing in mind’ inter alia its ‘mission (required under the arbitration agreement) to efficaciously and fairly decide the Parties’ dispute . . .’.101 Such a concern regarding the integrity of the proceedings was already extant in the tribunal’s first Order on Interim Measures.102 Moreover, it was further confirmed in its Fourth Interim Award on Interim Measures when, in support of its declaration that Ecuador’s non-​compliance with the First and Second Interim Awards constituted a breach of international law,103 the tribunal considered that the enforcement and execution of the Lago Agrio judgment against one of the claimants imperilled ‘to a very significant extent the overall fairness and the efficacy of these arbitration proceedings’.104

D. Preserving Evidence Interim relief can aim at preserving evidence. The same purpose could also be achieved in 24.65 reliance on the general procedural powers of a tribunal, for example under Article 44 of the ICSID Convention.

1. ICSID  system ICSID tribunals have granted measures aimed at the protection of evidence. The Biwater 24.66 tribunal, for example, recommended that the respondent preserve certain documents and make an inventory of given categories of documents.105 In Border, the tribunal directed the respondent not to visit the claimants’ offices to inspect share registers of the claimant’s parent companies following a decision of the Attorney General and ordered it to abide instead by the procedure for production of documents in the ICSID arbitration.106 In an earlier case, Agip v Congo,107 the tribunal had granted the claimant’s request for measures requiring the government to collect all the documents kept at Agip’s local office, furnish a complete list of

99  Report of the Working Group on the work of its 50th Session, UNCITRAL 42nd Session, A/​CN.9/​ 669, ¶ 95. 100 Chevron, supra note 88, Second Interim Award on Interim Measures (Feb. 16, 2012), ¶ 3(i). 101  Id. ¶ 3. 102  Chevron, Order on Interim Measures (May 14, 2010), ¶ 1(ii). 103  Chevron, Fourth Interim Award on Interim Measures (Feb. 7, 2013), Part IV(1). 104  Id. ¶ 85. 105 Biwater, supra note 19, ¶¶ 84 to 98. The applicant was also seeking the production of various categories of documents. The Biwater tribunal noted that ‘actual production is catered for by other rules (in particular Article 43 of the ICSID Convention and Rule 34 of the ICSID Arbitration Rules)’: id. ¶ 100. It concluded: ‘[a]‌lthough there may be instances in which document production could be ordered pursuant to Article 47, this would in the Arbitral Tribunal’s view be exceptional’: id. ¶ 101. In that particular instance, it found that the requirements of art. 47 were not established and that there was no right threatened, but went on to examine the request pursuant to art. 43 of the Convention. The Phoenix tribunal also declined to grant a provisional measure related to the opening of secret services archives under art. 47 of the Convention as the request appeared overly broad and unspecific and could be dealt with under art. 43 if needed; see ¶ 46. 106 Border, supra note 12, Directions Concerning Claimant’s Application for Provisional Measures of 12 June 2012 (June 13, 2012), ¶ 8. 107  Agip S.p.A. v. People’s Republic of Congo, ICSID Case No. ARB/​77/​1310 [hereinafter Agip v. Congo], Decision (Jan. 18, 1979), reported in the Award (Nov. 30, 1979), 1 ICSID Rep.

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Interim Relief in Investment Treaty Arbitration these documents to the tribunal, and keep them available for presentation to the tribunal on Agip’s request. In another case, Vacuum Salt v Ghana,108 the claimant sought an order to preserve its corporate records. The government gave a voluntary undertaking that it would not deny the claimant access to its records, which was acknowledged by the tribunal. In Abaclat v Argentina, the tribunal ordered the claimants to refrain from altering or destroying certain documents, including powers of attorneys.109 Measures protecting the evidence include preserving access to potential witnesses. In Quiborax, the suspension of the criminal proceedings was in part ordered so that witnesses could be free to participate in the ICSID arbitration.110

2. UNCITRAL  Rules 24.67 Article 26(2)(d) of the 2010 Rules is clear that arbitral tribunals can issue provisional meas-

ures to preserve evidence that may be ‘relevant and material’ to the resolution of the dispute. This provision is, in all material respects, identical to Article 17(2)(d) of the UNCITRAL Model Law.

24.68 During the revision of the Model Law, some members of the Working Group considered

that it was problematic to ask arbitral tribunals ‘to prejudge the relevance and materiality of evidence at the stage of granting an interim measure’.111 To address such concern, it was noted that the power of a tribunal to grant an order to preserve evidence that may be relevant and material to the resolution of the dispute under Article 17(2)(d) of the Model Law is a different issue from the tribunal’s power to assess the admissibility, relevance, materiality and weight of the evidence under Article 19(2) of the Law. It was further noted that the terms ‘relevant’ and ‘material’ had taken on a meaning such ‘that the term “relevant” required that the evidence be connected to the dispute and the term “material” referred to the significance of the evidence’.112 This same understanding can be extended to Article 26(2)(d) of the Rules.

24.69 It is important to highlight that, pursuant to Article 26(4) of the Rules, the requirements

for an interim measure aimed at preserving evidence are less stringent than those for interim relief with other purposes.113 This does not mean that applicants seeking to preserve evidence are necessarily exempted from showing a reasonable likelihood of success on the merits or current or imminent harm not adequately repairable by an award on damages. The difference is merely that, unlike with the other types of measures, arbitral tribunals have leeway to decide the extent to which said requirements are applicable.

E. Protection of the Tribunal’s Jurisdiction 24.70 The ICSID Convention, the ICSID AF, and UNCITRAL Arbitration Rules are silent as to

whether interim relief can be used for the purpose of protecting the tribunal’s jurisdiction, while NAFTA 1134, for example, specifically mentions this purpose as a reason for interim relief. That said, it is accepted that this is one of the purposes of interim relief.

108 Vacuum Salt Products Ltd. v.  Government of the Republic of Ghana, ICSID Case No. ARB/​ 92/​ 1, Decision No. 3 on Request for Recommendation of Provisional Measures (June 14, 1993), 4 ICSID Rep. 323. 109  Abaclat Procedural, supra note 72, No. 11 (June 27, 2012), ¶ 21. 110 Quiborax, supra note 23, ¶ 143. See also Convial, supra note 23, ¶ 124. EuroGas, supra note 71, ¶¶ 107–​108. 111  Report of the Working Group on the work of its 43rd Session, UNCITRAL 39th Session, A/​CN.9/​ 589, ¶ 28. 112  Id. ¶¶ 29–​30. 113  See art. 26(4) (‘With regard to a request for an interim measure under paragraph 2(d), the requirements in paragraphs 3(a) and (b) shall apply only to the extent the arbitral tribunal considers appropriate’).

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IV.  Types of Measures 1. ICSID Convention cases Article 26 of the ICSID Convention provides that ICSID proceedings are of an exclusive 24.71 nature.114 On that basis, tribunals have been asked to enjoin parties from seeking interim relief in domestic courts or initiating or continuing proceedings in another forum, be it civil or arbitration proceedings, bankruptcy proceedings, enforcement proceedings or criminal proceedings. In Atlantic Triton, the ICSID tribunal was reluctant to affirm that, pursuant to Article 26 of 24.72 the ICSID Convention, the parties should refrain from preserving their rights by filing an action in domestic courts.115 By contrast, the tribunal in MINE v Guinea recommended that Guinea terminate any proceedings in connection with the dispute and any provisional measures pending in national courts.116 In Tokios Tokeles, the tribunal also addressed Article 26 of the ICSID Convention in the con- 24.73 text of provisional measures. It stated that ‘[a]‌mong the rights that may be protected by provisional measures is the right guaranteed by Article 26 to have the ICSID Arbitration be the exclusive remedy for the dispute to the exclusion of any other remedy . . .’.117 On that basis, the tribunal had already decided in relation to an earlier application that once the parties had consented to ICSID arbitration, they were under a duty to refrain from initiating or pursuing proceedings in any other forum in respect of the subject matter of the dispute before ICSID. Accordingly, the tribunal recommended in its first procedural order that both parties refrain from, suspend, or discontinue any judicial or other domestic proceedings concerning Tokios Tokeles or its investment in Ukraine which may affect the issuance or enforcement of a future award or aggravate the dispute.118 In CSOB v Slovak Republic, the tribunal also recommended that the local bankruptcy pro- 24.74 ceedings be suspended as they could have included determinations on issues at stake in the ICSID arbitration.119 Similarly, the Holiday Inns tribunal120 considered that the Moroccan courts were to refrain from making decisions until it had itself decided the questions in dispute, although no interim measure was recommended as such.

114  See Charles N. Brower & Ronald E.M. Goodman, Provisional Measures and the Protection of ICSID Jurisdictional Exclusivity against Municipal Proceedings, 6 ICSID Rev.-​ FILJ [hereinafter Brower and Goodman]. 115  Atlantic Triton, supra note 53, cited in Paul Friedland, ‘Provisional Measures and ICSID Arbitration’, 2(4) Arb. Int’l 347 (1986) [hereinafter Friedland]. 116  Maritime International Nominees Establishment (MINE) v.  Republic of Guinea, ICSID Case No. ARB/​84/​4 [hereinafter MINE], Decision on Provisional Measures (Dec. 4, 1985). For an analysis of Atlantic Triton and MINE, see Friedland, supra note 115, at 335–​57 and also ICSID and Court-​Ordered Provisional Measures Remedies: An Update (1988) 4(2) Arb. Int’l 161–​65. See also Antonio R. Parra, The Practices and Experience of the ICSID, 519 ICC Bulletin 37 (1993) [hereinafter Parra], and Brower and Goodman, supra note 114. 117  Tokios Tokeles, supra note 73, ¶ 7. For a similar position, see Burlington, supra note 22, ¶ 57. 118  Tokios Tokeles, supra note 73, Procedural Order No. 1 (July 1, 2003). 119  Československá Obchodní Banka a.s. v. Slovak Republic, ICSID Case No. ARB/​97/​4, Orders No. 4 and No. 5 (Jan. 11, 1999 and Mar. 1, 2000). See also Plama, supra note 20, where the tribunal dismissed the claimant’s request to discontinue local proceedings and noted that, at least with regard to local bankruptcy proceedings, the parties were not the same since the proceedings were brought by private parties and not by the state, see infra. 120  Holiday Inns v. Kingdom of Morocco, ICSID Case No. ARB/​72/​1, Order (July 2, 1972), quoted in Pey Casado, supra note 4, ¶ 54.

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Interim Relief in Investment Treaty Arbitration 24.75 To protect its exclusive jurisdiction, the Perenco tribunal recommended that Ecuador refrain

from pursuing any actions before local courts and that none of the parties resort to the domestic courts of Ecuador to enforce or resist any claim or right part of the subject matter of the arbitration until the tribunal decided on its jurisdiction.121

24.76 In Millicom v Senegal, the tribunal found that local civil proceedings concerned the same facts

and the same question (whether the concession granted was valid) as the ICSID arbitration. Although the parties in dispute and legal instruments providing the basis for the claims were not identical, the tribunal found that pursuing both proceedings in parallel would generate difficulties and upset the status quo.122 Accordingly, the tribunal recommended that, until its decision on jurisdiction, Senegal and one of the claimants request the local court to suspend the proceedings.

24.77 In Niko v Bapex and Petrobangla, albeit referring to the status quo of the case (and not the ex-

clusivity of the tribunal’s jurisdiction), the tribunal ordered that the respondent Petrobangla seek an adjournment of the hearing in local proceedings regarding the attachment of funds in order for the ICSID tribunal to hear the parties on the claimant’s request for provisional measures.123

24.78 To what extent do ICSID tribunals limit the application of the rule of exclusivity under

Article 26 to identical parallel proceedings and require triple identity under the rule of lis pendens (identity of parties, subject matter, and relief sought)?124 When dealing with civil proceedings, the positions of tribunals appear to have varied.125 When dealing with criminal proceedings, a new line of case law has emerged making it more difficult to invoke Article 26. The Lao tribunal considered that the exclusivity rule only applies to civil proceedings with the same parties and same subject matter and does not concern criminal procedures.126 Other tribunals have been reluctant to encroach on a state’s prerogative to initiate criminal proceedings and have limited the application of the rule of exclusivity to proceedings involving investment disputes only.127 This more restrictive approach has resulted in ICSID exclusivity being less likely to be threatened by local criminal proceedings.128 As a consequence, parallel

121 Perenco, supra note 77, ¶ 62. That case arose under the same factual circumstances as Burlington, supra note 22, i.e., the amendment by Ecuador of its Hydrocarbon Act, where Ecuador was also ordered to discontinue the local proceedings against the claimant. 122  Millicom International Operations B.V. & Sentel GSM SA v. Republic of Senegal, ICSID Case No. ARB/​08 [hereinafter Millicom], Decision (Dec. 9, 2009), ¶ 47. 123  Niko Resources (Bangladesh) Ltd. v.  Bangladesh Petroleum Exploration and Production Company Ltd. (‘Bapex’) & Bangladesh Oil Gas and Mineral Corporation (Petrobangla), ICSID Case No. ARB/​10/​ 11 and 10/​18, Procedural Order No. 5 (Mar. 6, 2014), ¶ 12. See subsequent agreement of the parties in Procedural Order No. 6 (May 1, 2014). See also the tribunal’s reference to its ‘exclusive jurisdiction extending to provisional measures’ in Decision on the Payment Claim (Sept. 11, 2014), ¶¶ 285–​90. 124 Plama, supra note 20, ¶ 42. See generally C.C. McLachlan, Lis Pendens in International Litigation: Collected Courses of the Hague Academy of International Law 336 (2014). 125  See, e.g., CSOB recommending suspension of local bankruptcy although the parties were not the same. By contrast, see Pey Casado, supra note 4, ¶ 40. 126 Lao, supra note 6, ¶ 21. 127  See Quiborax, supra note 23, ¶ 128, defining the exclusivity ‘here [to be] the determination of whether Respondent has breached its international obligation under the BIT and whether Claimants are entitled to the relief they seek’. See also Churchill, supra note 20, Procedural Order No. 9 (Aug. 7, 2014): ‘A breach of Article 26 of the ICSID Convention only occurs if a claim or right forming part of the subject matter of these proceedings is the object of parallel proceedings in another forum. In the present case, the subject matter of the criminal proceedings (to impose sanctions for the alleged criminal act of document forgery) and of the present arbitration (to grant monetary relief for alleged breaches of the investment treaty) are not the same’: id. ¶ 86. Teinver, supra note 23, ¶ 193. 128  See supra notes 73 and ff.

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IV.  Types of Measures criminal proceedings have been examined through the prisms of aggravation of the dispute and integrity of the proceedings, as explained above. Regarding concurrent arbitration proceedings, in SGS Société Générale de Surveillance v Pakistan, 24.79 the tribunal was presented with a request to stay a concurrent arbitration in Pakistan. Finding that SGS had ‘a prima facie right to seek access to international adjudication under the ICSID Convention’,129 the tribunal considered it ‘its duty to protect this right’. It thus recommended that Pakistan inform all the relevant domestic courts of the current standing of the ICSID arbitration and ensure that no action be taken to hold SGS in contempt of court. In parallel, the tribunal also recommended that local arbitration proceedings be stayed until the tribunal decided on its jurisdiction.130 By contrast, it rejected a broader request aiming at an injunction refraining from commencing or participating in proceedings relating in any manner to the ICSID arbitration. This latter request was deemed to restrain the ordinary exercise of Pakistan’s normal process of justice.131

2. Additional Facility cases In cases governed by the AF Rules, Article 26 of the Convention does not apply. Nevertheless, an 24.80 AF tribunal could well consider that there is a necessity to protect its jurisdiction under the circumstances.132 This is certainly beyond doubt in AF NAFTA proceedings, since NAFTA Article 1134 expressly provides for interim relief to preserve the tribunal’s jurisdiction. 3. UNCITRAL  Rules Most of the interim relief granted by the Iran–​US Claims Tribunal concerned stays of proceed- 24.81 ings brought in other fora pending the tribunal’s determination. In doing so, the tribunal sought to ensure that its jurisdiction and authority were fully effective,133 notwithstanding the silence of the 1976 UNCITRAL Arbitration Rules. The Claims Settlement Declaration provided in Article VII (2) that the claims referred to the 24.82 Iran–​US Claims Tribunal were excluded from the jurisdiction of the courts of Iran, the United States, and any other courts. Stays decided by the tribunal were contingent upon a showing that the parties in both proceedings were identical or closely related and that the same subject matter was involved.134 The latter requirement was interpreted as implying that the two proceedings presented common issues of law and facts currently or in the future without requiring an identity of claims, the main concern of the tribunal being to avoid inconsistent decisions. However, the mere exclusive jurisdiction of the tribunal was not deemed a sufficient ground for preventing a similar claim from being filed in another forum.135 Indeed, the tribunal was cautious to preserve rights which might otherwise have been time-​barred.

129  SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​01/​ 13 [hereinafter SGS v. Pakistan], Procedural Order No 2 (Oct. 16, 2002), 18 ICSID Rev.-​FILJ 299 (2003). 130  Id. 304. 131  Id. 301. 132 Lao, supra note 6, tribunal referred to the exclusivity of jurisdiction of ICSID without further distinction. 133  See, e.g., E-​ Systems; Rockwell International Systems Inc. and Islamic Republic of Iran, Ministry of Defence, Interim Award No. 20-​430-​1 (June 6, 1983), reprinted in 2 Iran–​USCTR 369. 134  Charles N. Brower & Jason D. Brueschke, The Iran–​United States Claims Tribunal 231–​32 (1998) [hereinafter Brower]. See, e.g., RCA Global Communications Disc., Inc. and the Islamic Republic of Iran, Interim Award No. 30-​160-​1 (Oct. 31, 1983), reprinted in 4 Iran–​USCTR 9. 135  See Brower, supra note 134, at 234. See also Fluor Corporation and Islamic Republic of Iran, Interim Award No. I62-​333-​1, ¶ 6 (Aug. 6, 1986), reprinted in 11 Iran–​USCTR 296, wherein the request to enjoin the claimant from instituting an ICC proceeding was denied especially since substantial questions as to the jurisdiction of the tribunal existed and given the fact that the ‘filing elsewhere might be necessary to preserve

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Interim Relief in Investment Treaty Arbitration 24.83 Article 26(2)(b) of the 2010 Rules also allows interim measures to prevent a party from taking

action that is likely to cause prejudice to the arbitral process itself. This wording was meant to encompass preserving the jurisdiction of the tribunal through anti-​suit injunctions. However, because they infringe upon the principle of the competence-​competence of courts and tribunals, which is a general principle of procedure, anti-​suit (and anti-​arbitration) injunctions by an arbitral tribunal should only be granted to prevent grossly abusive conduct.136

F. Non-​frustration of the Award 24.84 Can interim measures be used to preserve assets out of which a subsequent award may be satisfied

or to guarantee the payment of an award?

1. ICSID  system 24.85 ICSID tribunals have been reluctant to acknowledge that the avoidance of the frustration of the

award can be a valid purpose of provisional measures. This purpose has mainly been discussed in the context of requests for security to cover the amount in dispute or the legal costs. The last few years have seen a sharp increase in the number of requests for security for costs, all of which but one have been rejected.137 In this context, it is worth noting first that tribunals have accepted to change the fifty-​fifty allocation of arbitration cost advances138 provided by the ICSID legal framework.139

24.86 Irrespective of the advances on costs, the parties, generally the respondent, can request that the

other party provide security for costs. In Atlantic Triton, it was decided that such a request for security for the amount of the claim fell within the ambit of Article 47 of the Convention.140 The tribunal, however, rejected the request on the grounds that ‘there is no reason to suppose that the Government of Guinea would not perform any obligations for which the final award might hold it responsible’.141

24.87 In Maffezini, the tribunal dismissed the request for security for the two main reasons already

explained, i.e., the non-​existence of a right to be preserved and the fact that the request was not linked to the subject matter of the case. In Pey Casado, the respondent applied for a guarantee for the payment of costs. The tribunal considered that granting a cautio judicatum

rights which might otherwise be time-​barred’ (at 297). The claimant had also undertaken to commence the arbitration but not to pursue it. For a detailed analysis of the stay of proceedings granted by the Iran–​U.S. Claims Tribunal, see Aldrich, supra note 10, at 142–​49. 136  Nottebohm Case (Liechtenstein v. Guatemala), Preliminary Objections, Judgment (Nov. 18, 1953), I.C.J. Rep. 1953, 119–​20. 137  RSM v. St Lucia, supra note 25, Decision on Provisional Measures (Aug. 13, 2014). 138  See RSM v. St Lucia, supra note 25, Decision (Dec. 12, 2013), granting the respondent’s request upon a ‘good cause’ (¶¶ 49–​50) and finding that claimant should bear 100% of the advances on costs as there was a ‘reasonable inference’ that the claimant would not pay the costs (¶ 74). See also Transglobal, supra note 24, Decision on Respondent’s Request for Shifting the Costs of the Arbitration (Mar. 4, 2015), refusing to shift the arbitration costs to the claimants; BSG Resources Ltd. v. Republic of Guinea, ICSID Case No. ARB/​14/​ 22 [hereinafter BSGR], Procedural Order No. 3 (Nov. 25, 2015), ¶ 70 deciding that claimant shall bear 75% of the advances on costs. But see also Valle Verde Sociedad Financiera S.L. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​12/​18 [hereinafter Valle Verde], Decision on the Provisional Measures (Jan. 25, 2016), ¶¶ 84–​85, refusing to modify the rule pursuant to which if a party fails to pay the advances on costs, the other party proceeds to the missing payment, and considering the request for provisional measures to that effect inadmissible. 139 ICSID Administrative and Financial Regulation 14(3)(d). ICSID Arbitration Rule 28 on cost of proceeding. 140  See Atlantic Triton, cited in Friedland, supra note 115, at 347 and in Schreuer et al., at 785–​86; also cited in Pey Casado, supra note 4, ¶ 88. 141  Cited in Friedland, supra note 115, at 347.

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IV.  Types of Measures solvi for the payment of costs was not an ordinary measure142 and that the circumstances did not justify an extraordinary one. It noted that such a measure was not mentioned in the ICSID texts, which entailed ‘a certain presumption that such a measure is not authorized or included’,143 and deduced that the drafters of the Convention appeared to have evaluated and accepted the risk of non-​payment of a party’s allocated costs.144 This line of reasoning now appears isolated. The majority of ICSID tribunals have accepted that they have the authority to decide security for costs.145 Tribunals have accepted that the conditional right to the reimbursement of costs deserves protection.146 That said, the applicant must meet the requirements of urgency and necessity, which might explain why only one request for security for costs has been granted in RSM v St Lucia in the amount of US$ 750,000.147 In that case, the claimant’s failure to pay in previous ICSID cases, its lack of financial resources, and its admission that it was third party-​funded148 convinced the majority of the tribunal that the claimant may not comply with a cost award.

2. UNCITRAL  Rules By seeking to ‘preserve assets out of which a subsequent award may be satisfied’, Article 26(2) 24.88 (c) of the 2010 Rules explicitly accounts for the non-​frustration of the award as a ground for the issuance of interim measures. With respect to security for costs, it has been argued that Article 26 in the 1976 version of the Rules did not allow for such orders, as they could not be made in respect of the subject matter of the dispute pursuant to Article 26(1) of the 1976 Rules.149 This opinion, however, is too restrictive150 and, in any event, appears obsolete in view of the new formulation of Article 26. Moreover, the drafting history of the current rules evidences that the terms ‘preserving assets’ were intended to enable arbitration tribunals to issue interim measures requiring parties to provide security for costs.151 A number of UNCITRAL tribunals have considered requests for security for costs. In Hesham 24.89 the tribunal examined whether an interim measure requiring security for costs complied

  Pey Casado, supra note 4, ¶ 86.   Id. 144  See also Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​29, Decision on Jurisdiction (Nov. 14, 2005), ¶ 46. 145  See, e.g., RSM Production Corporation and Others v.  Grenada, ICSID Case No. ARB/​ 05/​ 14, Procedural Order (May 14, 2007), ¶¶ 5.5 and 5.16; Burimi SRL and Eagle Games SH.A v.  Republic of Albania, ICSID Case No. ARB/​11/​18 [hereinafter Burimi], Procedural Order No. 2 (May 3, 2012), ¶ 42; RSM v. St Lucia, supra note 25, Decision on Provisional Measures (Aug. 13, 2014), ¶¶ 51–​57, with Judge Nottingham dissenting. 146  See RSM v.  St Lucia, supra note 25, Decision on Provisional Measures (Aug. 13, 2014), ¶ 64; Transglobal, supra note 24, Decision (Jan. 21, 2016), ¶ 30; BSGR, supra note 138, ¶ 75. 147  RSM v. St Lucia, Decision on Provisional Measures (Aug. 13, 2014), ¶ 89. 148 See contra on the use of third party-​funding, EuroGas, supra note 71: ‘The Tribunal is of the view that financial difficulties and third party-​funding—​which has become a common practice—​do not necessarily constitute per se exceptional circumstances justifying that the Respondent be granted an order for security for costs’: id. ¶ 123. 149  Noah Rubins, In God We Trust, All Others Pay Cash:  Security for Costs in International Commercial Arbitration, 11 Am. Rev. Int’l Arb. 343 (2000). 150  See Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company v. Government of Mongolia, UNCITRAL [hereinafter Paushok], Order on Interim Measures (Sept. 2, 2008): ‘The Tribunal notes that the wording of Article 26(1) of the UNCITRAL Rules is not the same as under the ICSID Convention; it leaves wider discretion to the Tribunal in the awarding of provisional measures (any interim measures it deems necessary in respect of the subject-​matter of the dispute) than under Article 47 of the ICSID Rules (provisional measures for the preservation of its rights) : id. ¶ 36. 151  Report of the Working Group on the work of its 47th Session (Vienna, Sept. 10–​14 2007), A/​CN.9/​ 641, ¶ 48. 142 143

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Interim Relief in Investment Treaty Arbitration with the standard set out in Article 26(3) of the UNCITRAL 2010 Rules.152 It rejected the request, noting that the respondent had not established that the alleged risk of the claimant’s non-​payment of a possible adverse cost award was likely to occur, or that this risk outweighed the harm to the claimant, in terms of an additional financial burden that would be imposed on it, if security for costs was ordered. 24.90 In Guaracachi v Bolivia, the tribunal noted that Article 26 of the 2010 Rules ‘expressly envis-

ages’ the possibility to order security for costs, but added that this type of measure remains ‘very rare and exceptional’.153 In turn, in South American Silver v Bolivia,154 the tribunal was of the view that Article 26 of the 2010 UNCITRAL Rules did not expressly provide for the power to order security for costs as interim measures.155 Nevertheless, it considered that several investor-​state tribunals had confirmed a tribunal’s power to order security for costs and that the parties appeared to be in agreement as to such power.156

24.91 Despite the different approaches regarding the source of a tribunal’s power to order se-

curity for costs by means of interim measures, there seems to be unanimity vis-​à-​vis the high threshold required for this type of order. In all of these cases, the interested party failed to demonstrate sufficiently that, pursuant to Article 26(3) of the rules, it had a reasonable possibility of succeeding on the merits of the claim, and/​or that harm not adequately reparable by an award of damages was likely to result if the measure was not ordered. Both of these requirements will be further developed throughout the chapter.

V.  Requirements for Interim Relief 24.92 It is accepted that ‘[t]‌he imposition of provisional measures is an extraordinary measure

which should not be granted lightly by the Arbitral Tribunal’.157 Specific circumstances must exist for which the measure(s) cannot await the tribunal’s determination on the merits. Although tribunals have adopted varying approaches as to the requirements that must be met for a party to obtain interim relief, the applicant is normally required to establish: (i) prima facie jurisdiction of the tribunal; (ii) a prima facie case of the merits; (iii) the urgency of the measure; and (iv) the necessity of the measure.158 Some tribunals have added a requirement of proportionality of the measure requested or a balance of interest or convenience test.159

A. The Initiative to Request Interim Relief 1. ICSID  system 24.93 ICSID Arbitration Rule 39(1) and Article 46(1) of the AF Arbitration Rules start from the

premise that either party may present a request to the tribunal, at any time during the proceedings. In addition, Arbitration Rule 39(3) allows a tribunal to ‘recommend’ provisional

152 Hesham, supra note 90, Award on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims (June 21, 2012), ¶¶ 104–​10. 153  Guaracachi America, Inc. and Rurelec PLC v. Plurinational State of Bolivia, PCA Case No. 2011-​17 [hereinafter Guaracachi], Procedural Order No. 14 (Mar. 11, 2013), ¶ 6. 154  South American Silver Ltd. v. Plurinational State of Bolivia, PCA Case No. 2013-​15 [hereinafter South American Silver], Procedural Order No. 10 (Jan. 11, 2016). 155  Id. ¶¶ 46, 51. 156  Id. ¶ 52. 157  See, e.g., Maffezini, supra note 17, ¶ 10. See also Plama, supra note 20, ¶ 38. 158  See, e.g., Occidental, supra note 43, ¶ 59; Quiborax, supra note 23, ¶ 113; Burlington, supra note 22, ¶ 51; Churchill, supra note 20, Procedural Order No. 9 (Aug. 7, 2014), ¶ 69. 159  See, e.g., United Utilities, supra note 84, ¶ 78.

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V.  Requirements for Interim Relief measures ‘on its own initiative’ or to recommend measures ‘other than those specified in a request’. Article 46(1) of the AF Arbitration Rules contains the same rule, although it allows a tribunal to ‘order’ rather than ‘recommend’ provisional measures. This leaves the tribunal with wide discretion.160 There is no information publicly available on any measures recommended by ICSID tribunals proprio motu. Indeed, this would appear as an extremely rare occurrence in practice. Under the applicable rules, a tribunal is also free to recommend a different measure than the 24.94 one requested. An illustration can be found in Holiday Inns, in which the tribunal declined to recommend a series of measures sought in the request and chose to recommend instead that both parties ‘abstain from any measure incompatible with the upholding of the contract’.161

2. UNCITRAL  Rules Article 26(1) of both the 1976 and 2010 UNCITRAL Arbitration Rules provide that meas- 24.95 ures may be granted at the request of either party. Accordingly, on the face of Article 26(1) and of the travaux préparatoires,162 an UNCITRAL tribunal would not be empowered to order interim measures of its own motion.163 B. Jurisdiction of the Tribunal? It is accepted that a tribunal does not need to establish that it has jurisdiction prior to ruling 24.96 on a request for interim relief. By its very nature, interim relief requires a prompt determination that cannot await a full and final determination on jurisdiction. It is thus sufficient for a tribunal to be satisfied that it has prima facie jurisdiction. Investor-​state tribunals consistently rely on ICJ decisions to support this view.164 Since the case of Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America),165 the ICJ has adopted a consistent line of reasoning according to which it need not finally satisfy itself that it has jurisdiction over the dispute, but its prima facie jurisdiction must be established.

  Pey Casado, supra note 4, ¶¶ 15–​16.   See Lalive, supra note 59, at 137. See also for a more recent illustration, Churchill, supra note 20, where the tribunal denied the claimant’s request but asked respondent to seek leave before introducing evidence obtained through criminal investigation conducted in Indonesia, Procedural Order No. 14, ¶ 82. 162  Report of the Secretary-​ General on the Revised Draft Set of Arbitration, UNCITRAL, 9th Session, Addendum 1 (Commentary), UN Doc A/​CN.9/​112/​Add.1 (1975) 176 under art. 23, http://​www.uncitral. org/​uncitral/​en/​commission/​sessions/​9th.html (last visited Nov. 10, 2017). 163  See, in this sense, Caron et al., supra note 29, at 533–​34. See also Brower, supra note 134, at n. 1029. 164  This question elicited strong controversy over the years in the ICJ’s jurisprudence. See, e.g., for supporters of a jurisdiction clearly established, the dissenting opinion of Judge Forster in the Nuclear Tests (Australia v. France/​New Zealand v. France) Order of June 22, 1973, I.C.J. Rep. 1973, 173, or Judge Morozov in his separate opinion in Aegean Sea Continental Shelf (Greece v. Turkey), Order of September 11, 1976, I.C.J. Rep. 1976, 22 [hereinafter Aegean Sea Continental Shelf Case]. 165  Military and Paramilitary Activities in and against Nicaragua (Nicaragua v. United States of America), Provisional Measures, Order (May 10, 1984), I.C.J. Rep. 1984, p. 169, ¶ 24. Rosenne, supra note 4, defines jurisdiction in this context as ‘jurisdiction both ratione personae and ratione materiae over the merits of the claim, as well as jurisdiction to determine whether the provisional measures requested are compatible with the principal claim and do not change the nature of the claim as advanced in the application instituting the proceedings’; id. 92 (footnotes omitted, italics in the original). The ICJ’s position can also be illustrated by the Case Concerning Pulp Mills on the River Uruguay (Arg. v. Uru.), in which the Court stated: ‘Whereas in dealing with a request for provisional measures, the Court need not finally satisfy itself that it has jurisdiction on the merits of the case, but will not indicate such measures unless the provisions invoked by the applicant appear, prima facie, to afford a basis on which the jurisdiction of the Court might be established (see Armed Activities on the Territory of the Congo (New Application: 2002), Democratic Republic of the Congo v. Rwanda, Provisional Measures, Order (July 10, 2002), I.C.J. Rep. 2002, p. 241, ¶ 58); Order of July 13, 2006, also reiterated in Order of Jan. 23, 2007, ¶ 24 [hereinafter Pulp Mills on the River Uruguay]. 160 161

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Interim Relief in Investment Treaty Arbitration 1. ICSID practice 24.97 ICSID tribunals have also accepted that measures can be recommended before the tribunal has ruled on all the objections to jurisdiction or on the admissibility of the claims.166 An argument to this effect was found in the text of Arbitration Rule 39, which mentions that a request may be made at any time. However, the practice is not consistent as to whether and how prima facie jurisdiction ought to be established. Older decisions either overlooked this issue entirely or brushed it away. The tribunal in Tokios Tokeles167 simply mentioned that a determination on interim relief did not prejudge jurisdiction: It is finally to be recalled that, as ICSID tribunals have repeatedly stated, the ‘recommendation’ of provisional measures does not in any way prejudge the question of jurisdiction. It is, therefore, independently of the present Order on provisional measures that this Tribunal will have to rule on the jurisdictional objections raised by the Respondent. 24.98 The majority of tribunals appear now to resort to the prima facie test in line with the jurispru-

dence of the ICJ.168 The Occidental tribunal stated that it would ‘not order such measures unless there is, prima facie, a basis upon which the tribunal’s jurisdiction might be established’.169

24.99 How can a tribunal be satisfied that it has prima facie jurisdiction? It has been suggested that

the determination made by the Secretary-​General of the Centre when registering the request for arbitration pursuant to Article 36 of the ICSID Convention (i.e., unless the Secretary-​ General finds that the dispute is not manifestly outside of the jurisdiction of the Centre) is sufficient for the purpose of establishing prima facie jurisdiction.170 Certain authors have indeed argued that ‘although the tribunal is, of course, in no way bound by this preliminary examination of jurisdiction [made by the Secretary General], it provides a useful basis for its power to recommend provisional measures’.171 A number of tribunals have not considered the Secretary-​General’s determination sufficient for these purposes.172

24.100 In practice, tribunals either examine whether there is no manifest reason for excluding their

jurisdiction (the ‘unless approach’ giving the benefit of the doubt to the claimant) or whether a provision confers prima facie jurisdiction upon them. Some tribunals have proceeded to a more thorough prima facie analysis than others.173

  See, e.g., Pey Casado, supra note 4, ¶ 5.   Tokios Tokeles, supra note 73, Order No. 1 (July 1, 2003). 168 The Caratube 2, supra note 73, tribunal dispensed from this analysis ‘given the lack of any substantiated jurisdictional objection so far (unless, quod non, the Tribunal should decide to raise an issue of jurisdiction ex officio).’ ¶ 107. See Menzies, supra note 25, where the tribunal looked at prima facie jurisdiction, notwithstanding the complexity of the claimant’s arguments relying on the GATS and the Most Favored Nation Clause. Ultimately, the tribunal declined jurisdiction. 169 Occidental, supra note 43, ¶ 55. 170  See Brower & Goodman, supra note 114, at 455. It was also noted in Pey Casado, supra note 4, that the criterion under art. 36 of the ICSID Convention (unless the Secretary-​General finds that the dispute is manifestly outside the jurisdiction of the Centre) resembles to a certain extent the prima facie test of the ICJ (¶ 8). That said, one must keep in mind that the determination of the Secretary-​General under art. 36 of the ICSID Convention is only made on the basis of the information contained in the request for arbitration, without having heard the other party. 171 Schreuer et al., supra note 4, ¶ 48 and Friedland, supra note 115. 172 Millicom, supra note 122, Decision (Dec. 9, 2009), ¶ 42; Perenco, supra note 77, ¶ 39; PNG, supra note 69, ¶ 119; Menzies, supra note 25, ¶ 109. 173  For some examples applying the prima facie approach, see Occidental, supra note 43, ¶ 55. See also SGS v. Pakistan, supra note 129, at 299; PNG, supra note 69, ¶¶ 118–​99, referring to its Decision on art. 41(5), ¶ 125. 166 167

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V.  Requirements for Interim Relief An interesting question arises when the respondent is the party requesting relief. In some 24.101 cases, it has been held that the respondent does not need to establish jurisdiction prima facie and that jurisdiction is simply assumed.174 In any event, the tribunal’s prima facie determination does not prejudge its later decision on 24.102 jurisdiction. Neither does it preclude any jurisdictional objections raised within the relevant period of time.

2. UNCITRAL practice The UNCITRAL Arbitration Rules are silent as to whether the jurisdiction of the tribunal 24.103 needs to be established for the purposes of an order for interim relief. The early decisions of the Iran–​US Claims Tribunal did not consistently require an express finding of prima facie jurisdiction.175 However, following the ICJ’s reasoning in the Military and Paramilitary Activities in and against Nicaragua (Nicaragua v United States of America) mentioned earlier, the tribunal also required that prima facie jurisdiction over the merits be shown.176 The Encana tribunal referred to ‘an apparent basis of jurisdiction’,177 although it did not need to enter into that discussion, having found that there was no necessity for the measures. Similarly, the Chevron tribunal operating under the 1976 Rules was satisfied that the claim- 24.104 ants had ‘established, to the satisfaction of the tribunal, a sufficient case for the existence of such jurisdiction’ at that preliminary stage of the proceeding, referring to the ‘written arbitration agreement invoked by the Claimants against the Respondent’ under the BIT, which incorporates the 1976 Rules by reference.178

C. Prima Facie Case on the Merits? In national court litigation, the likelihood of success on the merits is traditionally considered 24.105 a requirement for provisional remedies. In commercial arbitration practice, transnational standards have developed, and tribunals generally soften the traditional requirements and tend to be satisfied with a showing that the underlying claim is not manifestly without merit.179 Whether the applicant must establish that it has a prima facie case on the merits in an investor-​state arbitration in order to obtain interim relief is debatable. As observed by one author: [a]‌lthough the likelihood of success on the merits of the underlying claim is required for injunctive relief in many municipal systems, it rarely is articulated in public international arbitration as a factor to be considered in the granting of interim measures. It is a factor nonetheless, albeit sotto voce. It certainly is appropriate that when a case manifestly lacks merit, necessarily costly and disruptive interim measures to protect such dubious rights should not be granted. A tribunal must determine prima facie not only whether it possesses jurisdiction but also whether the question presented by the case is frivolous. The reluctance

174 Churchill, supra note 20, Procedural Order No. 3 (Mar. 4, 2013), ¶ 48. See also Assenting Opinion of Gavan Griffith in RSM v. St Lucia, supra note 25, Decision on Provisional Measures (Aug. 12, 2014), ¶ 5. 175  See Brower, supra note 134, at 218. 176  Id. 220; see Ford Aerospace and Communications Corporation and the Air Force of the Islamic Republic of Iran, Interim Award No. 39-​159-​3 (June 4, 1984), reprinted in 6 Iran–​USCTR 104, which discussed jurisdiction over counterclaims. See also Bendone—​Derossi International and the Government of the Islamic Republic of Iran, Interim Award No. 40-​375-​1 (June 7, 1984), reprinted in 6 Iran–​USCTR 130. 177 EnCana Corporation v.  Republic of Ecuador, LCIA Case No. UN3481, UNCITRAL (formerly EnCana Corporation v.  Government of the Republic of Ecuador) [hereinafter Encana], Interim Award, Request for Interim Measures of Protection (Jan. 31, 2004), ¶ 13. 178 Chevron, supra note 88, Order for Interim Measures (Feb. 9, 2011), ¶ (A). 179  Gabrielle Kaufmann-​Kohler & Antonio Rigozzi, International Arbitration Law and Practice in Switzerland 6.119–​6.120 (2015).

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Interim Relief in Investment Treaty Arbitration of tribunals to openly voice their consideration of this factor probably reflects in large part a desire to avoid embarrassment to a sovereign state party to the arbitration or accusations of pre-​judging the case.180

1. ICSID  system 24.106 The ICSID Convention does not require a showing of a prima facie case.181 This said, depending

on the nature of the request, an ICSID tribunal often examines the prima facie merits of the case to a certain extent, in the context of its assessment of the rights for which interim protection is sought, so especially in respect of substantive rights such as specific performance. The Occidental tribunal denied provisional measures, because the claimants had failed to make a ‘strongly arguable case’ that they had a theoretically existing right to specific performance.182

24.107 Furthermore, tribunals have generally adopted a low threshold on the merits, if any, as ‘[i]‌n prac-

tice, the requirement to demonstrate the prima facie success on the merits will ordinarily lead to a rejection of a request for provisional measures only in rare circumstances, where the requesting party has failed to advance any credible basis for its claims’.183

2. UNCITRAL  Rules 24.108 Under the 1976 UNCITRAL Rules, the need to establish a prima facie case was doubtful.

However, and in line with the general practice in commercial arbitration, it has been suggested that under the 1976 UNCITRAL Rules, ‘[a]‌lthough at the interim measures stage an arbitral tribunal should not be overly concerned with the merits of the case, a party whose case is clearly without merit should not be granted a request for interim measures. There can be no prejudice if there is little or no prospect that the alleged right threatened will be recognized as a right’.184 Article 26(3)(b) of the 2010 Rules now explicitly refers to ‘a reasonable possibility that the requesting party will succeed on the merits of the claim’, except in relation to requests for preservation of evidence.

24.109 The tribunal in Paushok applied the test along these lines, requiring that ‘on their face’ the under-

lying claims ‘not be frivolous’:

[t]‌he Tribunal need not go beyond whether a reasonable case has been made, which, if the facts alleged are proven, might possibly lead the Tribunal to the conclusion that an award could be made in favour of Claimants. Essentially, the Tribunal needs to decide only that the claims made are not, on their face, frivolous or obviously outside the competence of the Tribunal. To do otherwise would require the Tribunal to proceed to a determination of

  See Caron 1990, supra note 10, at 237–​38 (footnotes omitted, emphasis in the original).   Article 41 of the ICJ Statute is also silent on this issue. However, the Court has adopted the standard of plausibility, in the sense that the moving party must assert that the rights asserted are at least plausible. See Questions relating to the Obligation to Prosecute or Extradite (Belgium v. Senegal), Provisional Measures, Order (May 28, 2009), I.C.J. Rep. 2009, 139, ¶ 57. Request for Interpretation of the Judgment of June 15, 1962 in the Case Concerning the Temple of Preah Vihear (Cambodia v. Thailand), Provisional Measures, Order (July 18, 2011), ICJ Rep. 2011, 537, ¶ 33. Certain Activities Carried Out by Nicaragua in the Border Area (Costa Rica v. Nicaragua), Provisional Measures, Order (Mar. 8, 2011), I.C.J. Rep.  2011, 6, ¶¶ 53–​59. Questions relating to the Seizure and Detention of Certain Documents and Data (Timor-​Leste v. Australia), Provisional Measures, Order (Mar. 3, 2014), I.C.J. Rep.  2014, p.  147, ¶ 26. See also remarks of Judge Abraham’s in the Pulp Mills case in 2006 distinguishing between ‘fumus boni juris’ and ‘fumus non mali juris’. See Pulp Mills on the River Uruguay (Argentina v. Uruguay), Provisional Measures, Order (July 13, 2006), I.C.J. Rep. 2006, 113, Separate Opinion of Judge Abraham, ¶10. 182 Occidental, supra note 43, ¶ 86. 183 PNG, supra note 69, ¶ 120. 184  See Caron et al., supra note 29, at 537 (emphasis added). 180

181

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V.  Requirements for Interim Relief the facts and, in practice, to a hearing on the merits of the case, a lengthy and complicated process which would defeat the very purpose of interim measures.185

In Guaracachi the tribunal considered a request by Bolivia to order security for costs.186 The 24.110 tribunal succinctly found that the respondent had failed to sufficiently demonstrate grounds justifying the granting of a security for costs order.187 It considered it unnecessary to examine whether Bolivia had a reasonable possibility to succeed on the merits under Article 26(3)(b) of the rules.188 This notwithstanding, it noted that it was ‘unwise to risk even the most minor prejudgment of the case so close to the date of the final hearings. Such determinations are therefore best avoided unless absolutely necessary to come to a decision on the request for interim measures, which is not the case here’.189 South American Silver also dealt with a request for security for costs.190 Referring to Article 24.111 26(3)(2) of the Rules, it held: [T]‌he Tribunal considers it cannot order the measure requested by Bolivia on the basis of the allegations that SAS is a Bermuda shell company . . . which is only used . . . to attempt, improperly, to obtain protection under the Treaty, because so doing would imply pre-​judging Bolivia’s jurisdictional objections. This specific issue . . . is one of the central questions in the jurisdictional discussion, on which the Parties’ submissions are pending . . . .191

It appears implicit in the tribunal’s reasoning that a reasonable possibility to succeed on the merits 24.112 of a claim may refer to the prospect of succeeding on a jurisdictional objection, if the respondent has raised one and is the party requesting interim relief that bears relation to that objection.

D. Urgency The first question that arises is whether urgency is a requirement at all for interim relief 24.113 in investor-​state arbitration. The second question goes to the definition of urgency, being understood that the nature of the urgency involved may have an impact on the conduct of the proceedings.

1. Is urgency a requirement? Although none of the arbitration rules addressed here expressly mentions urgency, it appears 24.114 to be one of the requirements for the granting of interim relief. Indeed, unless there is urgency in the situation presented to the tribunal, the relief sought can await the determination on the merits. (a)  ICSID system  A  leading author observed that ‘an attempt to have reference to urgency and imminent 24.115 danger was defeated’ in the preparation of the Convention.192 Rather, the criterion is whether ‘a question cannot await the outcome of the award on the merits’.193 Some tribunals, when dealing with a request for provisional measures, have not discussed the matter of urgency at all.194 Others have found guidance in the test applied by the ICJ195 and have  Paushok, supra note 150, ¶ 55, footnote omitted.  Guaracachi, supra note 153, ¶ 3. 187  Id. ¶ 7. 188  Id. ¶ 8. 189  Id. 190  South American Silver, supra note 154, ¶ 17. 191  Id. ¶ 55. 192  Schreuer et al., supra note 4, ¶ 63 under art. 47. 193  Id. See also Quiborax, supra note 23, ¶ 150. 194  See, e.g., Maffezini, supra note 17, and Tokios Tokeles, supra note 73. 195  In the words of the ICJ: ‘[w]‌ hereas the power of the Court to indicate provisional measures will be exercised only if there is urgency in the sense that there is a real risk that action prejudicial to the rights of 185 186

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Interim Relief in Investment Treaty Arbitration characterized urgency as one of the requirements for interim relief. By now, most of the ICSID tribunals do require urgency. The tribunal in Pey Casado stated that it is ‘in the very nature of the institution of provisional measures that they are not only provisional, but also and above all urgent, that is to say that they must be or be able to be decided quickly’.196 For its part, the Plama tribunal declared that ‘[t]‌he need for provisional measures must be urgent and necessary to preserve the status quo or avoid the occurrence of irreparable harm or damage’.197 The latter part of the requirement is examined later in this section. The Occidental tribunal recalled that ‘[i]t is also well established that provisional measures should only be granted in situations of necessity and urgency in order to protect rights that could, absent such measures, be definitely lost’.198 Or, in the words of the Perenco tribunal, ‘[p]rovisional measures may only be granted where they are urgent, because they cannot be necessary if, for the time being, there is no demonstrable need for them’.199

(b)  What is urgency? 

24.116 According to the ICJ, ‘[a]‌measure is urgent where “action prejudicial to the rights of

either party is likely to be taken before [a] final decision is given” ’.200 In other words, a provisional measure is urgent if a decision cannot await the final award.201 That said, urgency is usually considered on a case-​by-​case basis, depending on the facts of the case and on the rights to be protected. Few tribunals, however, have elaborated on the notion of urgency and on the level of urgency required. The Biwater tribunal noted that ‘whilst it was a common ground that this is a requirement, for its own part the Arbitral Tribunal considers that the requirement needs more elaboration’.202 It then observed that the notion of urgency can vary: In the Arbitral Tribunal’s view, the degree of ‘urgency’ which is required depends on the circumstances, including the requested provisional measures, and may be satisfied where a party can prove that there is a need to obtain the requested measure at a certain point in the procedure before the issuance of an award. In most situations, this will equate to ‘urgency’ in the traditional sense (i.e. a need for a measure in a short space of time). In some cases, however, the only time constraint is that the measure be granted before an award—​even if the

either party might be taken before the Court has given its final decision (see, for example, Passage through the Great Belt (Finland v. Denmark), Provisional Measures Order of 29 July 1991, I.C.J. Reports 1991, p. 17, para. 23. Certain Criminal Proceedings in France (Republic of the Congo v. France), Provisional Measures, Order of 17 June, 2003, I.C.J. Reports 2003, p. 107, para. 22; Pulp Mills on the River Uruguay (Argentina v. Uruguay), Preliminary Objections, Order of 23 January 2007, p. 11, para. 32); and whereas the Court thus has to consider whether in the current proceedings such urgency exists’: see Case Concerning Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Georgia v. Russian Federation), Order (Oct. 15, 2008), ¶ 129 [hereinafter Case Concerning Application of the Convention on the Elimination of Discrimination] (emphasis added). 196  Pey Casado, supra note 4, ¶ 5. 197 Plama, supra note 20, ¶ 38. 198 Occidental, supra note 43, ¶ 59. 199 Perenco, supra note 77, ¶ 43. 200  See Passage Through the Great Belt Case, in which Finland submitted that the rights of passage through the Great Belt of ships, including drill ships and oil rigs, to and from Finnish ports and shipyards was threatened by the construction of a fixed bridge over the Great Belt by Denmark. The ICJ considered that there was no need to indicate Denmark to freeze construction work of the East Channel Bridge since the Passage was only to be hindered with the installation of cable works not before the end of 1994, by which time the Court would have disposed of the case (Order of July 29, 1991, I.C.J. Rep. 1991, 12). Cited in Occidental, supra note 43, ¶ 59. See also Case Concerning Application of the Convention on the Elimination of Racial Discrimination, supra note 195, ¶ 129. 201 Biwater, supra note 19, ¶ 76; Quiborax, supra note 23, ¶ 15; PNG, supra note 69, ¶ 116; Teinver, supra note 23, ¶ 233. 202 Biwater, supra note 19, ¶ 76.

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V.  Requirements for Interim Relief grant is to be some time hence. The Arbitral Tribunal also considers that the level of urgency required depends on the type of measure which is requested.203

Accordingly, the degree of urgency may vary and influence when and how a tribunal will 24.117 deal with an application for provisional measures. The circumstances of the case are thus critical in assessing the level of urgency of a request. Depending on the right to protect, the urgency requirement may be fulfilled by definition. For example, both the Burlington and the Quiborax tribunals held that when the measures aim at protecting against the aggravation of the dispute or the integrity of the process, they are urgent by definition.204

(c)  Urgency and procedural aspects of an ICSID or AF case  Pursuant to ICSID Arbitration Rule 39(2) and Article 46(1) of the AF Arbitration Rules, the tri- 24.118 bunal must give priority to the consideration of the request for interim relief, thus reflecting the urgency of the matter. To expedite the process, Arbitration Rule 39(5) was introduced in April 2006 in order to allow the presentation of a request whilst the tribunal is being constituted.205 Tribunals can prioritize the request in different ways. In practice, tribunals can convene a 24.119 hearing or take a decision by correspondence. Before making a decision, they must give both parties the opportunity of presenting their observations. Unlike other arbitration regimes, the ICSID system contains no provisions on ex parte measures. If a party does not avail itself of the opportunity to present its observations, this failure will of course not be viewed as an obstacle to the issuance of an order.206 To what extent should the parties be offered the opportunity to present their observations 24.120 when there is a matter of urgency? In City Oriente, the claimant requested the maintenance of the status quo as a matter of 24.121 urgency, which was granted by a letter to the parties in which the tribunal ordered the respondents to refrain inter alia from instituting or prosecuting any judicial action and from demanding payment pending the tribunal’s determination on provisional measures, which was in effect equivalent to granting ex parte measures. It then called for a hearing.207 Similarly, the Perenco tribunal requested the parties not to alter the status quo until ‘it could 24.122 hear the parties’.208 In Border, the president of the tribunal issued directions one day after receiving the claimant’s request to stop the respondent from entering certain premises.209

(d)  UNCITRAL Rules  There is no requirement of urgency in the rules. The Iran–​US Claims Tribunal does not seem 24.123 to have referred to it as a necessary requirement either. It must be said, however, that the Iran–​ US Claims Tribunal focused instead on the notion of irreparable harm, which will be examined below. By contrast, the Encana and Paushok tribunals emphasized that urgency was an important requirement in the context of investor-​state arbitration.210 That being said, neither tribunal conceptualized urgency nor clarified what exactly should be understood as urgent.   Id. See also City Oriente, supra note 49, Decision on Provisional Measures, ¶ 69.   Id. ¶ 74; Quiborax, supra note 23, ¶ 153. Teinver, supra note 23, ¶ 235. 205  A similar provision was not deemed necessary in the AF Arbitration Rules since the parties can resort to domestic courts if urgency requires it. 206  City Oriente, supra note 49, Decision on Provisional Measures (Nov. 19, 2007), ¶ 70. The tribunal underlined the need for affording both parties the opportunity to provide their observations. It concluded that when this had been done, and even if one of the parties has failed to provide its observations, a measure can be recommended. 207  Id. Decision on Provisional Measures (Nov. 19, 2007), ¶ 81. 208 Perenco, supra note 77, ¶ 28. 209 Border, supra note 12, Directions (June 13, 2012), ¶¶ 1–​2. 210 Encana, supra note 177, ¶ 13; Paushok, supra note 150, ¶ 45. 203 204

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Interim Relief in Investment Treaty Arbitration 24.124 In South American Silver, the tribunal noted that, for an interim order for security for costs

to be issued, the criteria of both necessity and urgency had to be satisfied.211 Referring to ICSID decisions, the tribunal considered that requests for security for costs may only be granted in extreme and exceptional circumstances (i) proving ‘a high real economic risk for the Respondent’; and/​or (ii) demonstrating ‘bath faith on the part from whom the security for costs is requested’.212

24.125 Urgency may also have an effect on the form in which the interim measure is issued. The

tribunal in Chevron, for instance, justified issuing an order on interim measures rather than an award ‘given the urgency required for such decision’, notwithstanding the possibility to ‘confirm such order at a later date in the form of an award’.213 Subsequently, the tribunal ‘re-​issued’ the order on interim measures as an award pursuant to Articles 26 and 32 of the UNCITRAL 1976 Rules.214

(e)  Urgency and the administration of an UNCITRAL case 

24.126 Article 26 of the UNCITRAL Arbitration Rules contains no provisions specifically ad-

dressing the procedure to be followed in connection with a request for provisional measures. This being so, Article 17(1) of the UNCITRAL 2010 Rules stipulates generally that the parties must be treated with equality and given a ‘reasonable opportunity’ to present their case at any stage of the proceedings.215

24.127 There have been instances, though, in which the Iran–​US Claims Tribunal issued orders

without first hearing the opposing party. These orders were given pending further determination of the request for interim measures. They were rendered because there was an urgent compelling need to stay local proceedings216 or to prevent the sale of goods.217 Whether the power to issue such ex parte orders is an inherent procedural power of the tribunal or was encompassed in the 1976 version of Article 26(1) has been discussed, with a preference being expressed for the latter.218

24.128 The question whether an UNCITRAL tribunal can issue a temporary order upon the request

of a party without notice of the request to the other party was subject to extensive discussion during the revision of the UNCITRAL Model Law.219 Article 17B and C of the Model Law now provides for ‘preliminary orders’ granted ex parte for a maximum duration of 21 days when it is likely that harm not adequately reparable by an award on damages would occur if the order is not granted. Article 17E of the Model Law further considers the provision of security by the applicant.

24.129 During the works leading to the revision of the UNCITRAL Rules, the possible introduc-

tion of ‘preliminary orders’ without prior notice to the other party (along the lines of Article 17B and C of the UNCITRAL Model Law) elicited concerns especially in the context of

  South American Silver, supra note 154, ¶ 46.   Id. ¶¶ 59–​68. 213 Chevron, supra note 88, Order for Interim Measures (Feb. 9, 2011), ¶ (C). 214  Chevron, First Interim Award on Interim Measures (Jan. 25, 2012), ¶ 1. 215  Article 15 of the 1976 Rules requires that each party be given a ‘full opportunity’ of presenting his or her case. 216  Teledyne Industries Incorporated and the Islamic Republic of Iran, Order (Sept. 9, 1983), Case No. 10812, Chamber Two, reprinted in 3 Iran–​USCTR 336. 217  Shipside Packing Company, Incorporated & Islamic Republic of Iran, Interim Award No. 27-​11875-​1 (Sept. 6, 1983), reprinted in 3 Iran–​USCTR 331. 218  See Caron 1990, supra note 10, at 228. 219  Gabrielle Kaufmann-​Kohler, Mesures ex parte et injonctions préliminaires, in Les Mesures Provisoires, in 14 L’arbitrage Commercial International, Évolutions et Innovations, Débats et Colloques (2007). 211 212

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V.  Requirements for Interim Relief investor-​state disputes.220 Although different proposals were considered, the final text of the 2010 Rules contains no indication that arbitral tribunals have the prerogative to adopt preliminary measures ex parte under Article 26.

E. Necessity or Risk of Irreparable Harm Article 26 of the 1976 UNCITRAL Rules refers to any measures that the tribunal deems 24.130 necessary. By contrast, the word ‘necessary’ does not appear in the 2010 Rules. It is not mentioned in the ICSID provisions either. Necessity appears nonetheless to be an indispensable feature. The need to grant a measure is assessed by balancing the degree of harm suffered by the applicant but for the measure. In other words, the necessity of a measure is assessed against the consequence for the applicant of the absence of the measure. Tribunals have routinely assessed these consequences in light of the harm that the applicant would suffer if the measure were not granted.

1. International precedents The ICJ consistently conditions the indication of provisional measures upon a showing of 24.131 ‘irreparable prejudice’. It is commonly said that the notion of irreparable harm or prejudice derives from the common law concept of irreparable injury. This said, the exact meaning of the ‘irreparable harm’ standard in international law appears uncertain. Irreparable harm or prejudice was first defined by the Permanent Court of International Justice as one that cannot be compensated by way of damages or restitution in some other material form.221 This narrow test has been abandoned in the ICJ’s subsequent practice,222 except for the Aegean Sea Continental Shelf Case.223 2. ICSID  system ICSID practice refers routinely to ICJ precedents and to the notion of irreparable harm, 24.132 although the latest trend seems to use a less stringent concept. The Tokios Tokeles tribunal considered that, under Article 47, a provisional measure had to be urgent and necessary and that it was necessary if ‘there is a threat or possibility of irreparable harm to the rights 220  Report of the Working Group on the work of its 47th Session (Vienna, Sept. 10–​14, 2007), A/​CN.9/​ 641, ¶ 55. Report of the Working Group on the work of its 50th Session (New York, Feb. 9–​13, 2009), A/​ CN.9/​669, ¶ 104. 221  Denunciation of the Treaty of 2 November 1865 between China and Belgium (Belgium v. China), also known as the Sino Belgian Treaty Case, 1927 P.C.I.J. Series A, No. 8, p. 7, Order (Feb. 21, 1927). 222  The ICJ’s order on provisional measures rendered in the Pulp Mills on the River Uruguay case illustrates the Court’s recent practice. The Court stated in its Order of July 13, 2006: ‘Whereas the power of the Court to indicate provisional measures to maintain the respective rights of the parties is to be exercised only if there is an urgent need to prevent irreparable prejudice to the rights that are the subject of the dispute before the Court has had an opportunity to render its decision (see Passage through the Great Belt (Finland v.  Denmark), Provisional Measures, Order of 29 July 1991, I.C.J. Reports 1991, p.  17, para. 23; Certain Criminal Proceedings in France (Republic of the Congo v. France), Provisional Measure, Order of 17 June 2003, I.C.J. Reports 2003, p. 107, para. 22)’: see id. 223  Aegean Sea Continental Shelf Case, supra note 164, ¶ 33: ‘Whereas, in the present instance, the alleged breach by Turkey of the exclusivity of the right claimed by Greece to acquire information concerning the natural resources of areas of continental shelf, if it were established, is one that might be capable of reparation by appropriate means; and whereas it follows that the Court is unable to find in that alleged breach of Greece’s rights such a risk of irreparable prejudice to rights in issue before the Court as might require the exercise of its power under Article 41 of the Statute to indicate interim measures for their preservation’: id. The test was criticized by Judge Elias in his Separate Opinion, in which he stated: ‘It means that the State which has the ability to pay can under this principle commit wrongs against another State with impunity, since it discounts the fact that the injury by itself might be sufficient to cause irreparable harm to the national susceptibilities of the offended State. The rightness or wrongness of the action itself does not seem to matter. This is a principle upon which, contemporary international law should frown: might should no longer be right in today’s inter-​State relations’: id. 30.

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Interim Relief in Investment Treaty Arbitration invoked’.224 Similarly, the Occidental tribunal recalled that, according to the ICJ, ‘a provisional measure is necessary where the actions of a party “are capable of causing or of threatening irreparable prejudice to the rights invoked” ’.225 The tribunal assessed irreparable harm in light of the existence of a monetary relief. The Occidental tribunal found that there was no irreparable harm since the claimants’ harm, if any, could be compensated by a monetary award.226 This position has been widely adopted. 24.133 Previously, the Plama tribunal mentioned that it accepted the respondent’s argument that the

harm was not irreparable if it could be compensated by damages,227 but did not discuss the matter further. Similarly, the tribunal in Metalclad v Mexico denied the request and underlined that the measures must be required to protect the applicant’s rights from ‘an injury that cannot be made good by subsequent payment of damages’.228

24.134 By contrast, the City Oriente tribunal favoured the urgency requirement over the need for ir-

reparable harm. It considered that the Tokios Tokeles decision was isolated229 and had adopted too strict an approach to Article 47 of the ICSID Convention. Turning to the existence of irreparable harm, the City Oriente tribunal distinguished its case from investment cases where the sole relief sought by the claimants is damages, while City Oriente was seeking contract performance.230 In its decision not to revoke the measures that had been granted previously, the tribunal observed that it had verified that neither Article 47 of the ICSID Convention nor Arbitration Rule 39 ‘require that provisional measures be ordered only as means to prevent irreparable harm’.231

24.135 The Burlington tribunal for its part referred to the standard of ‘harm not adequately reparable

by an award of damages’ used by the UNCITRAL Model Law.232 It stressed that its decision sought to avoid ‘the destruction of an ongoing investment and of its revenue producing potential which benefits both the investor and the State’.233

24.136 In Cemex v Venezuela, the tribunal reviewed ICSID case law and concluded that ICSID tri-

bunals make a distinction between ‘(a) situations where the alleged prejudice can be readily compensated by awarding damages’ and where provisional measures are denied because of the absence of irreparable harm; and ‘(b) . . . those where there is a serious risk of destruction of a going concern that constitutes the investment’.234 The tribunal went on to find that the alleged harm which related to the seizing of vessels and assets that would allegedly increase

  Tokios Tokeles, supra note 73, Procedural Order 3, ¶ 8.  Occidental, supra note 43, ¶ 59, quoting President Jiménez de Aréchaga in the Aegean Sea Continental Shelf Case, supra note 164. 226 Occidental, supra note 43, ¶ 92. 227 Plama, supra note 20, ¶ 46. 228 Metalclad, supra note 6, ¶ 8. 229  City Oriente, supra note 49, Decision on Revocation, ¶ 82. 230  Id. ¶ 86. 231  Id. ¶ 70. 232 Burlington, supra note 22, ¶ 82. 233  Id. ¶ 83. See also Quiborax, supra note 23, ¶¶ 156–​58, defining ‘an irreparable harm’ as ‘a harm that cannot be repaired by an award of damages’: id. ¶ 156. 234 Cemex, supra note 4, ¶ 55. Doing so, the Cemex tribunal revisited the ICJ’s case law and practice to find that there is a distinction between: ‘(a) Actions which should be restrained, because their effects, though capable of financial compensation, are such that compensation cannot fully remedy the damage suffered and (b) actions which may well prove to have infringed a right and caused harm, but in respect to which it will be sufficient to award damages, without taking provisional measures’: id. ¶ 49. 224 225

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V.  Requirements for Interim Relief the claimant’s damages was not irreparable, because it could be readily compensated by a damages award.235 Although the term ‘irreparable harm’ is often used, there seem to be variations in approach, 24.137 and more recent decisions have hinted that ‘serious harm’ may suffice depending on the circumstances.236 In the words of the PNG tribunal, ‘the term “irreparable” harm is properly understood as requiring a showing of a material risk of serious or grave damage to the requesting party, and not harm that is literally “irreparable” ’, that is, harm that cannot be made good with money. It added that the degree of ‘gravity’ or ‘seriousness’ of harm ‘cannot be specified with precision, and depends in part on the circumstances of the case, the nature of the relief requested and the relative harm to be suffered by each party; suffice it to say that substantial, serious harm, even if not irreparable, is generally sufficient to satisfy this element of the standard for granting provisional measures’.237 The tribunal also noted that what is required is a showing of material risk that serious harm will occur, not a certainty: The Tribunal is also of the view that the requesting party need not prove that ‘serious’ harm is certain to occur. Rather, it is generally sufficient to show that there is a material risk that it will occur. The requirement of showing material risk does not, however, imply a showing of any particular percentage of likelihood, or probability, that the risk will materialize. The proper requirement is that the requesting party must establish the existence of a sufficient risk or threat that grave or serious harm will occur if provisional measures are not granted.238

It concluded that:

24.138

While some provisional measures (such as, for example, preserving the status quo and ordering performance of a contract or other legal obligation) typically require a strong showing of serious injury, urgency and a prima facie case, other provisional measures (such as preservation of evidence, enforcement of confidentiality obligations) are often unlikely to demand the same showings.239

The risk of harm does not only concern the applicant. The Occidental tribunal recalled that 24.139 the risk of harm must be assessed with respect to the rights of both parties. Specifically, it stated that ‘provisional measures may not be awarded for the protection of the rights of one party where such provisional measures would cause irreparable harm to the rights of the other party, in this case, the rights of a sovereign State’,240 namely its sovereign rights to dispose freely of its lawfully held property. In the same spirit, the City Oriente tribunal stressed the need to weigh the interests at stake against each other. Referring to Article 17A(1)(c) of the UNCITRAL Model Law, it emphasized the balance of interests that needed to be struck.241 This search for a balance of convenience is often highlighted.242

235 Cemex, supra note 4, ¶ 58. ‘Irreparable harm’ was also referred to in Burimi, supra note 145, ¶ 34; Tethyan, supra note 51, ¶¶ 118–​19; Abaclat, supra note 72, Procedural Order No. 11 (June 27, 2012), ¶ 11; Caratube 2, supra note 73, ¶ 100; Menzies, supra note 25, ¶¶ 120–​21; Valle Verde, supra note 138, ¶ 86. 236 Churchill, supra note 20, Procedural Order No. 3 (Apr. 3, 2013), referring to ‘a risk of irreparable harm or substantial harm,’ ¶ 42. Similar wording appears in BSGR, supra note 138, ¶ 72. 237 PNG, supra note 69, ¶ 109. 238  Id. ¶ 111. 239  Id. ¶ 113. 240 Occidental, supra note 43, ¶ 93. 241  City Oriente, supra note 49, Decision on Revocation, ¶ 72. A similar approach was followed by the Burlington tribunal, supra note 22, ¶ 82. That tribunal noted that ‘provisional measures are in the interest of both sides if they are adequately structured,’ ¶ 85. In order to preserve each party’s right, it ordered the establishment of an escrow account. 242  See, e.g., Caratube 2, supra note 73, ¶¶ 120–​21; United Utilities, supra note 84, ¶ 107.

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Interim Relief in Investment Treaty Arbitration 3. UNCITRAL  Rules 24.140 It has been debated whether the 1976 UNCITRAL Arbitration Rules required the applicant to show a risk of (literally) irreparable harm. One author has submitted that no such requirement was implied and that it was sufficient that the act to be enjoined would substantially prejudice the rights in dispute.243 24.141 This said, the Iran–​US Claims Tribunal has largely endorsed the requirement of irreparable

harm. The notion of irreparable harm was discussed for the first time in 1984 in the case of Boeing and the Islamic Republic of Iran.244 In this case, Chamber One denied a stay of execution since it was not necessary to protect a party from irreparable harm. In passing, it observed that ‘monetary damages are not irreparable harm’ and that the tribunal had the power to compensate any harm caused by the execution. Faced with a subsequent application in the same case, Judge Holtzmann noted in a concurring opinion that showing that the execution of a judgment would cause grave or irreparable monetary harm to Iran could not be the only test, as ‘[t]‌he loss of a treaty right to be free of litigation in another forum may itself be irreparable’.245 A subsequent case embraced a more flexible approach. In Behring International, the tribunal considered that the concept of irreparable prejudice in international law is broader than the Anglo–​American law concept of irreparable injury and that the availability of monetary remedy was not a bar to granting interim relief.246 Nonetheless, the review of the decisions of the Iran–​US Claims Tribunal shows that the admission of irreparable harm is closely linked to the nonexistence of monetary relief. Indeed, [o]‌n balance, it has been the practice of the Tribunal to conclude that, except where unique property is involved, irreparable prejudice is difficult to establish since monetary damages generally are considered adequate to compensate the requesting party for any actual damages.247

24.142 The tribunal in Paushok took a different approach. Distinguishing itself from the Plama,

Occidental, and City Oriente ICSID tribunals,248 and relying on the Behring case, it concluded

243  See Caron 1990, supra note 10, at 241–​42 (‘that article 26 does not require irreparable prejudice is evident from the example in that article of an appropriate interim measure: the sale of perishable goods. Surely the loss of goods, the sale price of which is ascertainable, is not irreparable’). 244  Boeing et al. and the Islamic Republic of Iran, Interim Award No. 34-​222-​1 at 4 (Feb. 17, 1984), reprinted in 5 Iran–​USCTR 152. 245  Concurring Opinion of Judge Holtzmann (Aug. 27, 1984), attached to the Interim Award No. 38-​ 222-​1 (May 25, 1984), reprinted in 6 Iran–​USCTR 43. 246  Behring International, supra note 30, where the tribunal stated:  ‘A definition of “irreparable prejudice” is elusive; however, the concept of irreparable prejudice in international law arguably is broader than the Anglo–​American law concept of irreparable injury. While the latter formulation requires a showing that the injury complained of is not remediable by an award of damages (i.e., where there is no certain pecuniary standard for the measure of damages, 43 C.J.S. Injunctions § 23), the former does not necessarily so require. See Anglo–​Iranian Oil Co. Case (U.K. v. Iran), 1951 I.C.J. 89, 94 (Interim Protection Order of 5 July) (ordering, inter alia, joint control of contested oil company with profits to be deposited in escrow account. Arguably, rights sought to be protected susceptible to reparation by award of damages); Fisheries Jurisdiction Case (U.K. v. Ice.), 1972 I.C.J. 12, 13 (Interim Protection Order of 17 August) (ordering Iceland not to enforce extension of exclusive fishing zone beyond pre-​existing 12 mile limit. Arguably, any damage to U.K. fishing industry reparable by damages); Goldsworthy, Interim Measures of Protection in the International Court of Justice (1974) 68 Am. J. Int’l L. 258, 269 (‘the [I.C.J.] test is not whether adequate compensation can ultimately be provided but whether “irreparable prejudice” would be occasioned to the rights of the applicant if interim protection is refused’)’: id. 247  See Brower, supra note 134, at 229. 248  See Paushok, supra note 150.The Paushok tribunal stated: ‘The Tribunal is aware of preceding awards concluding that even the possible aggravation of a debt of a claimant did not (“generally” says the City Oriente case cited elsewhere in the chapter) open the door to interim measures when, as in this case, the damages suffered could be the subject of monetary compensation, on the basis that no irreparable harm would have been caused [referring to Plama, Occidental and City Oriente in its decision on revocation]. And, were it not

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VI.  Against Whom Can the Measures be Ordered? that ‘ “irreparable harm” in international law has a flexible meaning’.249 It also referred to Article 17A of the UNCITRAL Model Law, which only required that ‘harm not adequately reparable by an award of damages is likely to result if the measures are not ordered’.250 It found that the claimants faced substantial prejudice, namely the possible insolvency and bankruptcy of one of the claimants and the complete loss of their investment. The tribunal concluded ‘[w]‌hile it is true that Claimants would still have a recourse in damages and that other arbitral tribunals have indicated that debt aggravation [in City Oriente] was not sufficient to award interim measures, the unique circumstances of this case justify a different conclusion’.251 The tribunal further weighed the balance of inconvenience in the imposition of interim measures and found that it was in the interest of both parties to issue an order.252 It is submitted that the risk of bankruptcy present in this case certainly constituted a risk of harm not compensable by monetary damages. The same approach can be found in the 2010 version of the Rules. Using the language of the 24.143 Model Law, Article 26(3)(a) conditions the issuance of an interim measure to the likelihood of a resulting harm ‘not adequately’ reparable by an award on damages. The expression ‘harm not adequately reparable by an award of damages’ presents a lower threshold than the ‘irreparable harm’ test (understood to exclude any harm that can be remedied with a payment). It leaves more discretion to the tribunal in deciding upon the issuance of an interim measure. Further, in line with the Model Law, Article 26(3)(a) of the Rules requires a balance of interests253 in the sense that the harm not adequately reparable by an award of damages ‘substantially outweigh’ the harm that is likely to result to the party against whom the measure is directed.254

VI.  Against Whom Can the Measures be Ordered? The measures are usually recommended against the other disputing party. One leading au- 24.144 thor has suggested that an ICSID tribunal could recommend a measure to be carried out by a third party, especially a court of a third state.255 One has difficulty, however, identifying the source of the tribunal’s authority vis-​à-​vis a non-​party. The Plama tribunal dismissed the claimant’s request to order the respondent to discontinue 24.145 local proceedings and noted that, at least with regard to local bankruptcy proceedings, the parties are not the same since the proceedings were brought by private parties and not by the state. The tribunal then explained that it was ‘reluctant to recommend to a State that it order its courts to deny third parties the right to pursue their judicial remedies and [was] not

for the specific characteristics of this case, the Tribunal might have reached the same conclusion, although it might have expressed reservations about the concept that the possibility of monetary compensation is always sufficient to bar any request for interim measures under the UNCITRAL Rules’: id. ¶ 62. 249 Paushok, supra note 150, ¶¶ 68–​69. 250  Id. ¶ 69. 251  Id. ¶ 78. 252 Paushok, supra note 150, ¶ 84. The tribunal found that the respondent had an interest that its second largest gold producer continued its operations (¶ 83). On that basis, the tribunal ordered inter alia the suspension of the payment of the windfall profit tax (the validity of which under the BIT was the subject matter of the dispute) owing by one of the claimants and that claimants provide a security of US$ 2 million, either through an escrow account or through a bank guarantee, until a final award is rendered. 253  Or ‘balance of convenience’ in the words of Guaracachi, supra note 153, ¶ 9. 254 Hesham, supra note 90, Award on Respondent Preliminary Objections to Jurisdiction and Admissibility of the Claims (June 21, 2012), ¶ 109. 255  Schreuer et al., art. 47, ¶ 153.

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Interim Relief in Investment Treaty Arbitration satisfied that if it did so in this case, Respondent would have the power to impose its will on an independent judiciary’.256 24.146 In the UNCITRAL context, the Iran–​US Claims Tribunal also held that it could not grant

a request for interim relief directed against a non-​party.257 In Chevron, the tribunal issued a number of orders and interim awards requiring Ecuador to take all necessary measures (whether by its judicial, legislative, or executive branches) to suspend the enforcement and recognition of the Lago Agrio judgments handed down in proceedings initiated by private individuals against the claimants and concerning the latter’s alleged environmental liability.258 In this context, early in the proceedings the tribunal resolved that, whilst the Lago Agrio plaintiffs were not named parties to the arbitration and Ecuador was not a named party to the Lago Agrio court proceedings, ‘a State may be responsible for the conduct of its organs, including its judicial organs, as expressed in Chapter II of Part One of the International Law Commission’s Articles on State Responsibility’.259 At the annulment stage before the District Court of The Hague, Ecuador argued that by ordering the respondent to cause the recognition/​enforcement of the Lago Agrio judgment to be suspended, the tribunal had violated Ecuador’s sovereignty and independence with the result that the award was in breach of public policy.260 The District Court did not follow this argument: The District Court also finds that the Tribunal explicating in the Second Interim Award that the order to take measures is also directed at Ecuador’s judiciary is not contrary to public policy, as this judiciary is a body that is an inextricable part of the State of Ecuador (bound to the BIT), as that state may be held liable for the conduct of that body, and as reliance on the independence of that body does not constitute a valid reason to allow breaches of obligations under international law to continue to exist. Ecuador has asserted that the independence of the Ecuadorian courts is threatened. Contrary to what this argument suggests, the District Court agrees with Chevron and TexPet that the Tribunal’s order cannot be interpreted to mean that (the executive or legislative bodies of ) Ecuador should breach the separation of powers at the expense of the judiciary. The order merely refers to the obligations ensuing from international law that also apply to the judiciary.261

VII.  Effect of Interim Measures 24.147 While the measures so ordered will lapse upon the issuance of the award, their effect in the

meantime is disputed. There are two distinct issues when it comes to the effect of interim measures: to which extent is the recommendation or order binding on the parties and is it enforceable? These issues are linked to the nature of the decision rendered. As a related issue, the conditions upon which an order or recommendation can be modified or terminated will also be discussed.

 Plama, supra note 20, ¶ 43.   Atlantic Richfield Co. and the Islamic Republic of Iran et al., Interim Award No. 50-​396-​1 (May 8, 1985), reprinted in 8 Iran–​USCTR 181. In that case, the request was directed at the United States, which was not a party to the specific proceedings. 258  See, e.g., Chevron, supra note 88, Second Interim Award on Interim Measures (Feb. 16, 2012), ¶ 3(i). 259  Chevron, Order on Interim Measures, (Jan. 28, 2011), ¶ (C)(2); see also Fourth Interim Award (Feb. 7, 2013), ¶ 55. 260 District Court of The Hague, Case No. C/​ 09/​ 477457 (Jan. 20, 2016)  [hereinafter Chevron Annulment], ¶¶ 3.2, 3.2.2. 261  Id. ¶ 4.27. 256 257

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VII.  Effect of Interim Measures A. ICSID Convention Cases 1. Nature of the decision Pursuant to Article 47 of the ICSID Convention and Arbitration Rule 39, unless the parties 24.148 agree otherwise, a tribunal can only ‘recommend’ provisional measures. The use of the word ‘recommend’ has stirred discussions as to the binding character of the measures. The travaux préparatoires show that the drafters first envisaged the word ‘prescribe’, which was ultimately replaced by the term ‘recommend’ in order ‘to indicate that there was no direct sanction for not following the recommendation of the Tribunal’.262 This decision was adopted in the context of a strong division about the binding nature of the measures and the tribunal’s power to impose sanctions for non-​compliance. Nonetheless, ICSID tribunals have ruled that the term ‘to recommend’ has the same meaning as 24.149 the term ‘to order’.263 The Maffezini tribunal considered that the difference is more apparent than real and that the authority of the tribunal to rule on provisional measures ‘is no less binding than that of a final award’.264 One reason could be that the parties are under an obligation to conduct themselves so as to avoid rendering the award impossible of execution.265 The Tokios Tokeles tribunal further ‘recalled that, according to a well-​established principle laid down by the jurisprudence of the ICSID tribunals, provisional measures “recommended” by an ICSID tribunal are legally compulsory; they are in effect “ordered” by the tribunal, and the parties are under a legal obligation to comply with them’.266 This approach has been reiterated and numerous tribunals have decided that they have the authority to ‘order’ provisional measures.267 The question remains as to the consequences of a party’s non-​compliance with a tribunal’s recommendation or order. It is beyond doubt, however, that a recommendation under Arbitration Rule 39 cannot be 24.150 enforced through the ICSID Convention since it does not qualify as a final award.268 Chapter 262 II(2) History of the ICSID Convention, Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States 813 (1968, reprinted in 2001 & 2006), quoting Aron Broches, Chairman of the Legal Committee [hereinafter History of the ICSID Convention]. 263 Maffezini, supra note 17, ¶ 9. In the same vein, art. 41 of the ICJ Statute states that the ICJ ‘indicates’ measures. The ICJ decided in its judgment LaGrand Case in 2001 that its orders have a binding effect, albeit in a different jurisdictional context. The Court stated: ‘It follows from the object and purpose of the Statute, as well as from the terms of Article 41 when read in their context, that the power to indicate provisional measures entails that such measures should be binding, inasmuch as the power in question is based on the necessity, when the circumstances call for it, to safeguard, and to avoid prejudice to, the rights of the parties as determined by the final judgment of the Court. The contention that provisional measures indicated under Article 41 might not be binding would be contrary to the object and purpose of that Article’: see Judgment of June 27, 2001, ¶ 102, I.C.J. Rep. 2001, 466. 264 Maffezini, supra note 17, ¶ 9. 265  Lawrence Collins, Provisional and Protective Measures in International Litigation, 234 Recueil des Cours 218 (1992-​III) [hereinafter Collins]. 266  Tokios Tokeles, supra note 73, Order No. 1, ¶ 4. 267 Occidental, supra note 43, ¶ 58; City Oriente, supra note 49, ¶ 52; Perenco, supra note 77, ¶¶ 67–​76; Millicom, supra note 122, ¶ 49; Tethyan, supra note 51, ¶ 120; RSM v. St Lucia, supra note 25, Decision on Provisional Measures (Aug. 13, 2014), ¶¶ 49–​50, with dissenting opinion of Judge Nottingham at ¶¶ 10–​16; Valle Verde, supra note 138, ¶ 75; PNG, supra note 69, ¶ 102; Transglobal, supra note 24, Decision (Jan. 21, 2016), ¶ 25, noting that the Spanish version of Arbitration Rule uses the verb ‘dictar’; United Utilities, supra note 84, ¶ 109. For a full discussion, see Quiborax, supra note 23, Award (Sept. 16, 2015), ¶¶ 576–​83. The tribunal followed the ‘consistent line of cases and the evolution of international law evidenced in ICJ and ECtHR jurisprudence’ to find the operative part of its decision on provisional measures ‘binding’: id. ¶ 582. For a critical approach, see Chester Brown, A Common Law of International Adjudication (2007). See also Fouad Alghanim & Sons Co. for General Trading & Contracting, W.L.L. and Mr. Fouad Mohammed Thunyan Alghanim v. Hashemite Kingdom Of Jordan, ICSID Case No. ARB/13/38, Order on Application for the Grant of Provisional Measures (Nov. 24, 2014), Statement of Dissent of Professor Marcelo G. Kohen, ¶¶ 53–58. 268  In passing, one should note that the ICSID Convention does not recognize the concept of an interim award that could be enforced while the proceedings are not yet terminated.

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Interim Relief in Investment Treaty Arbitration IV, Section 6 of the ICSID Convention, which deals with recognition and enforcement, indeed only concerns awards as defined by the Convention. Moreover, the beneficiary of the measures is not allowed to seek enforcement of the measure before a domestic court during the course of the proceedings, as a result of Article 26 of the ICSID Convention. 24.151 Nevertheless, one should not underestimate the authority attached to a recommendation of an

ICSID tribunal. It is undoubtedly at least morally binding upon the parties, not to speak of tactical considerations inciting a party not to disregard directions given by persons who will ultimately decide on the merits. In addition, a tribunal can draw adverse inferences from the non-​compliance with its recommendations.269 It is indeed beyond cavil that a tribunal can take into account the behaviour of the parties and their failure to observe the provisional measures in its final award.270

24.152 What are the consequences of non-​compliance with an ‘order’ for provisional measures? In

Burlington, the claimant later argued that such non-​compliance amounted to an expropriation.271 The tribunal dismissed that argument.272 In Perenco, the claimant argued that Ecuador’s failure to comply with the provisional measures decisions was a breach of the contract and constituted a separate breach of the BIT in violation of the claimant’s reasonable expectations. The tribunal found that Ecuador had an obligation to comply with the provisional measures under the contract and, hence, had breached the contract.273 Having reached that conclusion, the tribunal did not deal with the same argument on the basis of the BIT.274 In Quiborax, as, notwithstanding the provisional measures, Bolivia had not suspended the criminal proceedings,275 the tribunal found in its award that Bolivia had breached Article 47 of the ICSID Convention, ‘[b]‌ecause provisional measures issued under Article 47 are binding per se, a failure to comply with them will automatically entail a breach of Article 47’.276 It added, however, that ‘[t]his does not necessarily give rise to a breach of the underlying right that the measures seek to preserve [here the right to the procedural integrity of the arbitration proceedings and the duty to arbitrate in good faith] whether those rights are harmed will depend on the facts of the case’.277

2. Modification or revocation of the measures 24.153 Pursuant to Arbitration Rule 39(4), an ICSID tribunal may at any time modify or revoke

the measures, after giving each party an opportunity to present observations.278 Such power

269  See History of the ICSID Convention, 815; Note B to Arbitration Rule of 1968, 1 ICSID Rep. 99. See also RSM v. St Lucia, supra note 25, Decision on Provisional Measures (Aug. 13, 2014), ¶ 50. 270  Agip v. Congo, supra note 107, ¶ 311; MINE, supra note 116, Decision on Provisional Measures (Dec. 4, 1985). See also Pey Casado, supra note 4, ¶ 24. This principle was also acknowledged by a tribunal constituted under the ASEAN Agreement for the Promotion and Protection of Investments 1987, in Yaung Choo Trading v. Myanmar, Procedural Order (Feb. 27, 2002), 8 ICSID Rep. 2005, 456. The tribunal rejected a request for presentation of evidence but stated that: ‘in any event, the Tribunal could draw inference from the nonproduction of evidence’: id. 271 Burlington, supra note 22, Decision on Liability (Dec. 14, 2012), ¶ 481. 272  Id., noting that ‘an order for provisional remedies, which only creates procedural rights during the arbitration (the situation here) cannot be assimilated to a court’s decision to annul a final award (the situation in Saipem). In any event, the very fact that Burlington continues to pursue this arbitration condemns this argument’: id. ¶ 481. 273 Perenco, supra note 77, Decision on Remaining Issues of Jurisdiction and on Liability (Sept. 12, 2014), ¶ 417. 274  Id. ¶ 479. 275 Quiborax, supra note 23, Award, ¶¶ 570–​83. 276  Id. note 743. 277  Id. 278  Or in the words of the Pey Casado, supra note 4, tribunal, ‘provisional measures, which are provisional by nature and by definition (as the Respondent has observed), can be modified or cancelled at any time by the Tribunal, do not benefit from the force of res judicata, will only last for the duration of the proceedings

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VII.  Effect of Interim Measures reflects the provisional character of the measures. Indeed, by nature, interim relief is temporary but the duration of the validity of the measure can extend over the entire duration of the proceedings. In that respect, one could consider that there is a general duty of the parties to inform the tribunal of any changes in the circumstances that were relevant at the time of granting the measures. This duty would be the corollary of the absence of any limitation of the period for which the measure is granted.

B. Additional Facility Cases 1. Nature of the decision By contrast to ICSID Convention cases, an arbitral tribunal constituted under the AF Rules 24.154 renders an ‘order’ when it rules on interim relief requested by a party and makes a recommendation when it does so on its own initiative. The recognition and enforcement of decisions rendered by a tribunal established pursuant 24.155 to the AF Rules does not follow the regime of the ICSID Convention. AF decisions are enforceable through the regular mechanisms. This said, whether procedural orders may be enforced under the New York Convention is debated. The majority view is that the New York Convention applies only to awards. Enforcement is subject to more favourable provisions of domestic law, such as, for example, section 1041(2) of the German ZPO or Article 183(2) of the Swiss PIL Act.279 It follows that an AF order could be enforced by a local court in accordance with the procedural requirements of local law. Doubts may remain about the enforcement of a simple recommendation. However, no AF tribunal appears to have issued a recommendation so far.

2. Modification or revocation of the measures Pursuant to Article 46(3) of the AF Arbitration Rules, a tribunal can modify or re- 24.156 voke its order or recommendation after giving each party the opportunity to present its observations.280 C. NAFTA Proceedings In proceedings conducted pursuant to NAFTA Chapter 11, the tribunal may ‘order’ an in- 24.157 terim measure. Article 1134 specifies in its last sentence that ‘[f ]‌or purposes of this paragraph, an order includes a recommendation’. This was allegedly meant to ensure ‘that interim measures have the same effect in NAFTA Chapter 11 proceedings governed by the ICSID Convention as in proceedings governed by the UNCITRAL or ICSID (Additional Facility) Arbitration Rules’.281 Concerns regarding enforcement similar to those just reviewed will arise here as well.

and automatically fall if the Tribunal decides that it lacks jurisdiction to decide the case’: id. ¶ 14. See also SGS v. Pakistan, supra note 129, Procedural Order No. 2 (Oct. 16, 2002). For an example of a request for revocation that was dismissed, see City Oriente, supra note 49, Decision on Revocation. For a request for revocation that was upheld, see Hydro, supra note 70, Decision (Sept. 1, 2016), ¶¶ 4.1, 4.9. 279  Gabrielle Kaufmann-​Kohler & Antonio Rigozzi, International Arbitration:  Law and Practice in Switzerland 347–​50 (2015), with citations. See generally on this matter, Donald F. Donovan, Provisional Measures:  Proposals for Moving Forward ICCA Congress series no.  11 (2002), at 132–​49, and Andrea Carlevaris, Enforcement of Interim Measures in International Arbitration, 9 Yearbook of Private International Law 503 (2007). 280  See e.g., Lao, supra note 6, ¶¶ 8–​9. 281  See Kinnear et al., supra note 27, at 6-​1134.

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Interim Relief in Investment Treaty Arbitration D. UNCITRAL  Rules 1. Nature of the decision 24.158 Pursuant to Article 26(2) of the 1976 version of the UNCITRAL Arbitration Rules, a tribunal may render an order or an interim award.282 The possibility of issuing an interim award was included in order to attempt to facilitate the enforcement of the measures. Nonetheless, the same question arises here in terms of enforcement as to an order rendered under the AF Rules or NAFTA Article 1134. The label on the decision will not modify its true nature, which is decisive for enforcement purposes. Be that as it may, and pending the adoption of Articles 17 H and I of the amended Model Law by national legislators, the enforcement of an order granted by an UNCITRAL tribunal is far from evident and would follow the same regime as an order rendered under the AF Rules or NAFTA Article 1134. 24.159 In contrast to the 1976 Rules, Article 26 of the 2010 Rules refers only to ‘orders’. During its

drafting it was submitted that there was no purpose in issuing interim awards on provisional measures given that the revised version of the UNCITRAL Model Law contained express provisions permitting the enforcement of interim measures regardless of the form in which they are ordered.283 Indeed, Article 17H of the Model Law provides for the enforcement of an interim measure issued by an arbitral tribunal except if very few limited grounds for refusal of recognition or enforcement are met. In addition, the Working Group noted that ‘issuing an interim measure in the form of an award could create confusion particularly in light of article 26(5) which [permits] the arbitral tribunal to modify or suspend an interim measure’.284

24.160 Article 26(9) provides for the applicant’s possible liability for costs and damages if the

tribunal later determines that the measures should not have been granted. This provision mirrors Article 17G of the UNCITRAL Model Law. It was noted that this paragraph ‘might have the effect that a party requesting an interim measure be liable to pay costs and damages in situations where, for instance, the conditions of . . . article 26 had been met but the requesting party lost the arbitration’.285 However, it appears from the discussions at the time of the adoption of Article 17G that the final decision on the merits is not an essential element in determining whether the interim measure should have been granted.286

2. Modification or revocation of the measures 24.161 An arbitral tribunal may review or alter the interim relief ordered if the circumstances or the

progress of the arbitral proceedings so require. Strictly speaking, given that an UNCITRAL tribunal cannot act proprio motu, it is not supposed to modify, suspend, or terminate the measure on its own initiative. The 2010 Rules modify this and allow a tribunal to act not only upon the request of a party but also on its own initiative ‘in exceptional circumstances and upon prior notice to the parties’. Any modification, suspension, or termination of the measure could be effected by a subsequent order.

282  See Perenco, supra note 77, on how the Iran–​U.S. Claims Tribunal also issues ‘requests’, instead of orders, in its interim awards, to impose provisional measures that it regards as binding (¶¶ 71–​73). 283  Report of the Working Group on the work of its 47th Session (Vienna, Sept. 10–​14, 2007), A/​CN.9/​ 641, ¶ 51. 284  Id. 285  Report of the Working Group on the work of its 50th Session (New York, Feb. 9–​13, 2009), A/​CN.9/​ 669, ¶ 116; Note A/​CN.9/​WG.II/​WP.154.Add.1, ¶ 32. 286  Note A/​CN.9/​WG.II/​WP.154.Add.1, ¶ 32.

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VIII.  Concurrent Jurisdiction of Domestic Courts

VIII.  Concurrent Jurisdiction of Domestic Courts Can a party seek interim relief from domestic courts, for example, if the tribunal is not yet 24.162 constituted or if it is constituted but has no jurisdiction to grant the requested measures, or when a measure is directed at a third party, or a court-​ordered measure is deemed more efficient?

A. ICSID Convention Proceedings Interim relief under the ICSID Convention proves to be specific when it comes to the inter- 24.163 action with local courts. As already mentioned, Article 26 of the ICSID Convention provides that, unless otherwise stated, consent to ICSID arbitration is given to the exclusion of any other remedy. It was debated whether this exclusion applied to interim relief.287 As indicated, the tribunal in MINE recommended, in clear contrast to the tribunal in Atlantic Triton, that the respondent withdraw and terminate any proceedings in connection with provisional measures pending in national courts. In 1984, Arbitration Rule 39(6) (formerly Rule 39(5)) was introduced to clarify that, ex- 24.164 cept when otherwise stipulated, the parties waive their right to seek interim measures of protection in domestic courts, whether before or after the institution of the ICSID proceedings. For this rule not to apply, the parties must have stipulated so in the agreement recording their consent, namely in the arbitration clause, be it in a contract,288 national legislation, or a treaty. An illustration of such a stipulation in an IIA can be found in NAFTA Article 1121. Arbitration Rule 39(6) is a further illustration of the insulated nature of ICSID proceedings.

B. Additional Facility Rules By contrast, Article 46 of the AF Arbitration Rules expressly authorizes the parties to request 24.165 assistance from local courts to obtain interim relief. Article 46(4) specifies that, by doing so, the parties are not infringing upon the agreement to arbitrate or affecting the powers of the tribunal. This feature is explained by the absence of an insulated mechanism in the AF Rules and the fact that AF arbitration is generally subject to a national legal order.289

C. UNCITRAL  Rules Similarly, Article 26(3) of the 1976 UNCITRAL Arbitration Rules and Article 26(9) of the 24.166 2010 Rules allow the parties to seek interim relief from domestic courts. Such action is not seen as a breach or waiver of the agreement to arbitrate.

D. NAFTA Proceedings Parties to NAFTA proceedings governed by the UNCITRAL or the ICSID AF Rules can 24.167 seek interim relief from domestic courts. Article 1134 contains no guidance in this respect.

287  See Parra, supra note 116, at 37. Some authors suggested that since an ICSID tribunal can only recommend measures, ‘the Contracting States did not intend to deprive national courts of the power to prescribe provisional measures’ in Collins, supra note 265, at 99. See also on this issue Brower and Goodman, supra note 114. 288  For instance, the parties could insert into their contract the language of ICSID Model Clause 14, which reads as follows: ‘Without prejudice to the power of the Arbitral Tribunal to recommend provisional measures, either party hereto may request any judicial or other authority to order any provisional or conservatory measure, including attachment, prior to the institution of the arbitration proceeding, or during the proceeding, for the preservation of its rights and interests.’ 289  See Parra, supra note 116, at 40.

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Interim Relief in Investment Treaty Arbitration However, Article 1121 (entitled ‘Conditions Precedent to Submission of a Claim to Arbitration’) complements the existing arbitration rules and limits the nature of the relief sought and the courts from which such relief may be requested. It states that, by consenting to arbitration under Chapter 11, a party (an investor on its own behalf or on behalf of an enterprise) waives its right to resort to domestic courts ‘except for proceedings for injunctive, declaratory or other extraordinary relief, not involving the payment of damages, before an administrative tribunal or court under the law of the disputing Party’.

IX. Conclusion 24.168 The scope of the interim relief available in the context of investor-​state disputes is broad

enough to meet the parties’ legitimate needs for temporary protection, subject to limitations which may be found in the relevant treaty, such as the ones contained in NAFTA Article 1134. This said, applicants are faced with a high threshold when seeking to establish that the interim relief requested is urgent and needed. This may explain the reluctance of many tribunals to grant interim relief in the context of investor-​state arbitration, whether in the ICSID system or under the UNCITRAL Rules. In recent years, the number of requests for provisional measures appears to be on the rise.290 Whether the most recent decisions signal a shift towards more leniency in the assessment of the requirements for interim relief remains to be seen. Among the various challenges faced by recent tribunals, one interesting question concerns the consequences of non-​compliance with an order/​award for interim relief as they may arise within the arbitration. Tribunals have, for instance, been faced with requests for declaratory relief according to which the non-​compliant party had breached the ICSID Convention and/​or the applicable IIA and the duty to arbitrate in good faith.291 Furthermore, within the UNCITRAL 1976 Rules context, the Chevron case provides an example of a tribunal declaring that the respondent had violated its earlier interim awards on interim measures, by reference to the applicable IIA and the UNCITRAL Rules, under which the respondent had undertaken to comply with any award without delay.292 These developments show that the parties attach increasing significance to the compliance with decisions on provisional measures, and thus to the provisional measures themselves.

290  See the table of Decisions on provisional measures in the ICSID system (for requests and outcomes that are public), https://​icsid.worldbank.org/​en/​Pages/​process/​Decisions-​on-​Provisional-​Measures.aspx. 291  See, e.g., Quiborax, supra note 23, Award, ¶¶ 527–​96, and esp. 573–​83. 292  See Chevron, supra note 88, ¶¶ 77 ff., and esp. at 31.

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25 COMPENSATION AND DAMAGES IN INVESTMENT TREATY ARBITRATION Irmgard Marboe

I. Introduction  25.01 II. Applicable Legal Rules and Principles  25.06 A. Rules on State Responsibility  B. BIT Provisions on Compensation  C. Other BIT Provisions  D. Contractual Obligations 

III. Causation  IV. Valuation Date 

V. Limiting Circumstances  A. Contributory Negligence  B. Mitigation of Damages  C. Country Risk 

25.07 25.13 25.18 25.21 25.26 25.33

VI. Valuation Methods 

A. Market Approach  B. Income Approach  C. Asset-​based or Cost Approach 

VII. Conclusion 

25.40 25.41 25.44 25.52 25.56 25.59 25.62 25.67 25.70

I. Introduction Compensation and damages represent the pecuniary remedies available in investor-​state arbitra- 25.01 tion. While in inter-​state disputes financial redress has traditionally played only a subordinate role,1 claimant investors are primarily interested in not only succeeding on the merits but also in receiving financial redress.2 The quantification of legal claims represents a considerable challenge which, amongst others, is connected to the interdisciplinary nature of this endeavour. Principles of corporate finance and valuation as well as other economic considerations need to be taken into consideration. In recent years, the issue of calculation of compensation and damages in international in- 25.02 vestment arbitration has triggered intense debate and numerous publications.3 The topic has

1  The ICJ in its entire history has only twice awarded pecuniary remedies. See Corfu Channel (U.K. v. Alb.) (Damages) [1949] ICJ Rep. 243, 247 ff.; and Ahmadou Sadio Diallo (Guinea v. Democratic Republic of the Congo) [2012] (Compensation) ICJ Rep. 322, ¶ 25. The ITLOS has also only twice awarded pecuniary remedies, namely in the M/​V ‘SAIGA’ (No. 2) Case (Saint Vincent and the Grenadines v. Guinea) (Judgment of July 1, 1999) ¶ 175, and in the M/​V ‘Virginia G’ (No, 19) Case (Panama v. Guinea-​Bissau) (Judgment of April 14, 2014) ¶ 446. 2  The Iran–​U.S. Claims Tribunal has an extensive practice on awarding compensation and damages in the wake of the Islamic Revolution in Iran. Its practice has been of a rich source of inspiration for subsequent mixed arbitral tribunals, such as under the ICSID arbitration rules and others. The cases are collected in the Iran–​United State Claims Tribunal Reports (CUP) [hereinafter Iran–​USCTR]. 3  Sergey Ripinsky & Kevin Williams, Damages in International Investment Law (2008) [hereinafter Ripinsky & Williams, Damages); Mark Kantor, Valuation for Arbitration (2008) [hereinafter Kantor, Valuation]; Thomas Wälde & Borzu Sabahi, Compensation, Damages, and Valuation, in The Oxford Handbook of International Investment Law 1049 (Peter Muchlinski, Federico Ortino & Christoph Schreuer eds., 2008) [hereinafter Wälde and Sabahi, Compensation, Damages, and Valuation]; III Investment Treaty Law. Current Issues (Andrea Bjorklund, Ian Laird & Sergey Ripinsky eds.,

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Compensation and Damages in Investment Treaty Arbitration become all the more important with the increasing size of claims that are at stake. It can be observed that the amount of money claimed and awarded in recent investment arbitrations has considerably increased in the past years, reaching record sums of hundreds of millions of US dollars.4 25.03 Investor-​ state arbitration is different from commercial arbitration between two private

entities, in that the involvement of a state or a state entity may entail considerations connected to sovereignty. States as sovereigns have certain rights and prerogatives stemming from the right to self-​determination and their responsibility to safeguard public interests.5

25.04 On the other hand, states are also bound by the obligations they have freely decided to enter

into. In particular, bilateral investment treaties are concluded to protect foreigners from arbitrary and unlawful state behaviour. It is therefore important to distinguish between unlawful and lawful acts of states. Not every financial disadvantage suffered by a foreign investor is compensable, but damages suffered due to a violation of a state’s obligation are. As the state influences the political and economic circumstances prevailing in its territory, the connection between violation and causation of damage is particularly difficult to identify. It is true that valuation is not an ‘exact science’,6 but also that, in the long run, maintaining the legitimacy of international arbitration will increasingly require well-​reasoned and financially sound decisions on valuation.7 2009) [hereinafter Bjorklund, Current Issues]; Borzu Sabahi, Compensation and Restitution in Investor-​State Arbitration (2011) [hereinafter Sabahi, Compensation and Restitution]; Herwig Wöss, Adriana San Román Rivera, Pablo Spiller & Santiago Dellepiane, Damages in International Arbitration Under Complex Long-​Term Contracts (2014) [hereinafter Wöss and others, Long-​Term Contracts]. See also Restitution, Damages and Compensation, in International Investment Law 1031 (Marc Bungenberg, Jörn Griebel, Stephan Hobe, & August Reinisch eds., 2015) [hereinafter Bungenberg and others, International Investment Law]; The Guide to Damages in International Arbitration (John A. Trenor ed., 2016) [hereinafter Trenor, Guide to Damages]; Irmgard Marboe, Calculation of Compensation and Damages in International Investment Arbitration (2d ed. 2017) [hereinafter Marboe, Calculation of Compensation and Damages]. 4  A survey undertaken by PwC in 2015 showed that, until the year 2000, none of the awards exceeded the amount of U.S.$100 million. Between 2011 and 2015, 14% of the awards were between U.S.$100 million and U.S.$1 billion, and 8% greater than U.S.$1 billion. See PwC, International Arbitration Damages Research—​ Closing the Gap between Claimants and Respondents, http://​www.pwc.co.uk/​services/​forensic-​ services/​disputes/​2015-​international-​arbitration-​damages-​research-​closing-​the-​gap-​between-​claimants-​and- ​ respondents.html (last visited Nov. 17, 2017); reprinted in 3(1) J. Damages in Int’l Arb. 99, 109.The record sum of U.S.$50 billion was awarded against the Russian Federation in the cases connected to the demise of the Russian oil company Yukos, but these are currently pending in annulment proceedings before Dutch national courts. See Irmgard Marboe, Yukos Universal Limited (Isle of Man) v. The Russian Federation: Calculation of Damages in the Yukos Award: Highlighting the Valuation Date, Contributory Fault and Interest 30 ICSID Rev. 326 (2015); Egishe Dzhazoyan and Benjamin Burnham, The Aftermath of the Hague District Court Judgment: Are the Yukos Shareholders Now Shut Out from Enforcing the ECT Awards through the English Courts?, 1 Eur. Inv. L. & Arb. Rev. 88 (2016). 5  See Wälde and Sabahi, Compensation, Damages, and Valuation, supra note 3, at 1056, who see investment arbitration as ‘a form of international administrative law’. They suggest that this could have an effect on the calculation of compensation related to the significance and intensity of the breach. However, comparative research has not led to clear results in this respect. See Irmgard Marboe, State Responsibility and Comparative State Liability for Administrative and Legislative Harm to Economic Interests, in International Investment Law and Comparative Public Law 377, 410–​11 (Stephan Schill ed., 2010). 6  Vivendi v. Argentina (Vivendi II), Award (Aug. 20, 2007), ICSID Case No. ARB/​97/​3, ¶ 8.3.16; Azurix v. Argentina, Decision on Annulment (Sept. 1, 2009), ICSID Case No. ARB/​01/​12, ¶ 351; ADC v. Hungary, Award (Oct. 2, 2006), ICSID Case No. ARB/​03/​16, ¶ 521; Himpurna California Energy Ltd. v. PT (Persero) Perusahaan Listruik Negara (Indonesia), Final Award (May 4, 1999), 25 Y.B. Comm. Arb. 13 (2000), ¶ 374; Sapphire International Petroleum Ltd. v. National Iranian Oil Company, Arbitral Award (Mar. 15, 1963), 35 I.L.R. 136, 187–​88. 7  Joshua Simmons, Valuation in Investor-​ State Arbitration:  Toward a More Exact Science, 30 Berkeley J. Int’l L. 196, 197 (2012).

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II.  Applicable Legal Rules and Principles The present chapter will provide an overview of some important issues and problems in the 25.05 calculation of compensation and damages in investor-​state arbitration. It will start with the legal rules applicable and then address some important issues which must be identified in practice, such as causation and the valuation date. Thereafter, circumstances which might limit the amount of compensation or damages will be discussed before some remarks about the appropriate valuation method will conclude the chapter.

II.  Applicable Legal Rules and Principles The most important principles and rules for the calculation of compensation and damages in 25.06 investor-​state arbitration include the rules under the law of state responsibility and provisions contained in bilateral investment treaties. In addition, contractual obligations which states may have entered into with foreign investors are relevant in this context.

A. Rules on State Responsibility The codification of the law of state responsibility by the International Law Commission 25.07 in 2001 provides the most authoritative statement of the current status of customary international law regarding the legal consequences of an unlawful behaviour of states.8 As these rules have been drafted in the context of inter-​state relations, it could be argued that they are not automatically applicable in investor-​state disputes.9 However, international investment arbitration tribunals and parties have regularly referred to the ILC Articles, including with respect to the question of quantum.10 Most importantly, the principle of ‘full reparation’, as reflected in the jurisprudence of the Permanent Court of International Justice in the case Factory at Chorzów, has been widely referred to. In that case, the Court found: The essential principle contained in the actual notion of an illegal act—​a principle which seems to be established by international practice and in particular by the decisions of arbitral tribunals—​is that reparation must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed. Restitution in kind, or, if this is not possible, payment of a sum corresponding to the value which a restitution in kind would bear; the award, if need be, of damages for loss sustained which would not be covered by restitution in kind or payment in place of it—​such are the principles which should serve to determine the amount of compensation due for an act contrary to international law.11

8 Draft Articles on the International Responsibility of States for Internationally Wrongful Acts, UN General Assembly of December 2001, UN Doc A/​56/​10, Annex [hereinafter ILC Articles on State Responsibility, or merely ILC Articles]. Kaj Hober, Remedies in Investment Disputes, in Bjorklund and others, Current Issues, supra note 3, at 3, 4; Sabahi, Compensation and Restitution, supra note 3, at 9. 9  In particular, because the ILC’s Commentary to art. 28 notes: ‘Part II . . . does not apply to obligations of reparation to the extent that these arise towards or are invoked by a person or entity other than a State’: II(2) ILC, Draft Articles on Responsibility of States for Internationally Wrongful Acts with Commentaries, Yearbook of the International Law Commission (2001), as corrected (United Nations 2008)  [hereinafter ILC Commentary]. See also the discussion by James Crawford, Investment Arbitration and the ILC Articles on State Responsibility, 25 ICSID Rev.-​FILJ 1, 128, 132; Zachary Douglas, Other Specific Regimes of Responsibility: Investment Treaty Arbitration and ICSID, in The Law of International Responsibility 815 (James Crawford, Allain Pellet & Simon Olleson eds., 2009). 10  See the discussion on whether the rules on state responsibility are applicable to the calculation of compensation and damages in investment arbitration in Gold Reserve v.  Venezuela, Award (Sept. 22, 2014), ICSID Case No. ARB(AF)/​09/​1, ¶¶ 678–​82. 11  Factory at Chorzów (Ger. v. Pol.) (Merits) [1928] P.C.I.J. Series A, No. 17, 47.

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Compensation and Damages in Investment Treaty Arbitration 25.08 The duty to ‘wipe out all the consequences of the illegal act and re-​establish the situation

which would, in all probability, have existed’ represents the core rule for the quantification of damage incurred. It has both an enabling and a limiting function and helps to avoid under-​ and overcompensation. This principle is contained in Article 31 of the ILC Articles on State Responsibility as follows: 1. The responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act. 2. Injury includes any damage, whether material or moral, caused by the internationally wrongful act of a State.

25.09 The focus in investment arbitration has, for a long time, been on material damage, but, in

recent years, claims for immaterial damage are more frequently also raised.12 After the award of USD 1 million for ‘moral damages, including loss of reputation’ in Desert Line v Yemen,13 claimants have more often raised claims for moral damages, but without success. Investment tribunals have developed a high threshold of ‘exceptional circumstances’, usually implying physical threat, deterioration of health and mental suffering, or loss of reputation, credit and social position.14

25.10 Arbitral tribunals have applied the Chorzów principle by determining the financial situation

of the claimant ‘but-​for’ the breach. As the tribunal in Lemire v Ukraine formulated:

But this is only a theoretical definition of a general standard; the actual calculation of damages cannot be made in the abstract, it must be case specific: it requires the definition of a financial methodology for the determination of a sum of money which, delivered to the investor, produces the equivalent economic value which, in all probability, the investor would enjoy, ‘but for’ the State’s breach.15 25.11 For the calculation of damages, this means that the actual and the hypothetical scenarios

must be compared.16 Not only the breach of the state, but also the likely behaviour of the investor and the prevailing regulatory and economic situation in the host state must be taken into account.17

12 See the discussion on moral damages by Patrick Dumberry, Compensation for Moral Damages in Investor–​State Arbitration Disputes, 27 J. Int’l Arb. 247, 248–​49 (2010); Patrick Dumberry, Moral Damages, in Bungenberg and others, International Investment Law, supra note 3, at 1130, 1132; Stephan Wittich, Non-​Material Damage and Monetary Reparation in International Law. 15 Finnish Yearbook of Int’l L. 329 (2004); Stanimir Alexandrov, The Present and Future of Moral Damages in Investment Arbitration, in Revolution in the International Rule of Law. Essays in Honour of Don Wallace, Jr 515 (Borzu Sabahi, Nicholas Birch, Ian Laird & José Antonio Rivas eds., 2014); Sabahi, Compensation and Restitution, supra note 3, at 134–​46. 13  Desert Line v. Yemen, Award (Feb. 6, 2008), ICSID Case No. ARB/​05/​17, ¶¶ 289–​91. 14  See Siag v. Egypt, Award (June 1, 2009), ICSID Case No. ARB/​05/​15; ¶ 545; Lemire v. Ukraine, Award (Mar. 28, 2011), ICSID Case No. ARB/​06/​18, ¶¶ 326 ff. 15  Lemire v. Ukraine, Award (May 28, 2011), ICSID Case No. ARB/​06/​18, ¶ 152. 16 This technique corresponds to the so-​ called ‘differential method’ (Differenzmethode) developed by Friedrich Mommsen in the 19th century in the area of civil law. See Friedrich Mommsen, Von der Lehre von dem Interesse 3–​15 (Schwetschke 1855); for an analysis of the importance of this technique in contemporary arbitration see Wöss and others, Long-​Term Contracts, supra note 3, at 15 ff. 17  S.D. Myers v. Canada, Second Partial Award (Oct. 21, 2002), UNCITRAL, ¶ 98; LG&E v. Argentina, Award (July 25, 2007), ICSID Case No. ARB/​02/​1, ¶ 48; Cargill v. Mexico, Award (Sept. 18, 2009), ICSID Case No. ARB(AF)/​05/​2; Chevron v. Ecuador, Final Award (Aug. 31, 2011), PCA Case No. 34877, ¶ 308; Lemire v. Ukraine, Award (May 28, 2011), ICSID Case No. ARB/​06/​18, ¶ 244; El Paso v. Argentina, Award (Oct. 31, 2011), ICSID Case No. ARB/​03/​15, ¶ 703; Micula v. Romania, Award (Dec. 11, 2013). ICSID Case No. ARB/​05/​20, ¶ 917:  TECO v.  Guatemala, Award (Dec. 19, 2013). ICSID Case No. ARB/​10/​ 17, ¶ 728.

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II.  Applicable Legal Rules and Principles The creation of a hypothetical ‘but for’ scenario inevitably involves estimation and projec- 25.12 tion. Tribunals may exercise their discretion and rely on the expertise of valuation experts in deciding which method would best lead to an appropriate and plausible comparison of the two scenarios.

B. BIT Provisions on Compensation Disputes between states and foreign investors often involve the issue of an alleged ex- 25.13 propriation. This can almost be regarded as the archetypical problem when it comes to the treatment of aliens under international law. For decades, the debate about the right of a state to expropriate foreign property, and under which conditions, dominated the discussion of the treatment of aliens under international law. The debate was highly influenced by the different ideological perceptions about the role of private property in society.18 The compromise that could be achieved between the different nations, Western and Eastern, developed and developing, was that the right to expropriate private property is a sovereign right of a state and as such not an unlawful act. However, disagreement persisted as to the conditions for the exercise of this right. In the United Nations, several resolutions have been adopted which addressed this problem,19 but the crucial issue upon which no consensus could be achieved remained the amount of compensation due.20 Bilateral treaties for the reciprocal encouragement and protection of foreign investments 25.14 (BITs) aim at closing this gap and generally contain provisions on the conditions for expropriation. They usually follow the standard of compensation expressed in the well-​known Hull formula, according to which compensation must be ‘prompt, adequate, and effective’.21 This is not only true for the BITs concluded by industrialized countries,22 but also in BITs concluded between developing countries. For example, the BIT between Ethiopia and Sudan provides: Neither Contracting Party shall take any measures of expropriation, nationalization or any other measures having the same nature or the same effect against investments of Investors of the other Contracting Party unless the following conditions are complied with: (a) The measures are taken for public purpose or interest and under due process of law; (b)  The

18 See more about the ideological divide on the concept of property in Marboe, Calculation and Compensation of Damages, supra note 3, at 16–​18. 19  See the UN GA Resolution on the Permanent Sovereignty over Natural Resources No. 1803 (XVII) of December 14, 1962; the UN GA Resolution adopting the Declaration on the Establishment of a New International Economic Order No. 3201 (S-​VI) of May 1, 1974; the UN GA Resolution on the Programme of Action on the Establishment of a New International Economic Order No. 3202 (S-​VI) of May 1, 1974; and the UN GA Resolution on the ‘Charter of Economic Rights and Duties of States’ No. 3281 (XXIX) of December 12, 1974. 20  Whether there is, nevertheless, a customary international law standard of compensation, was the subject of a study by the World Bank in the 1990s. After the analysis of state practice, it came to the conclusion that the standards found reflected emerging, rather than settled, standards under contemporary international law. This level of precision is, however, too uncertain to rely on to provide confidence to foreign investors. See 1 World Bank, Legal Framework for the Treatment of Foreign Investment (1992). The question of compensation is dealt with, in particular, at 10, 24 ff. and 41 ff. 21  Contained in the note by the U.S. Secretary of State Cordell Hull to the ambassador of Mexico in 1938. See 8 Marjorie Whiteman, Digest of International Law 1020 (1967). 22  The Hull formula is contained in almost all the BITs of the U.S. See also art. 6(1)(c) of the U.S. Model BIT (2012); similarly, art. 13 of the Canadian Model BIT (2004); see also art. 5 of the BIT between the U.K. and Argentina (1990); art. 5 of the BIT between the U.K. and Croatia (1997); art. 5(1) (d) of the Austrian–​Slovenian BIT (2001) and art. 5(1)(d) of the BIT between Austria and Bangladesh (2001).

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Compensation and Damages in Investment Treaty Arbitration measures are non-​discriminatory; and (c) The measures are taken against prompt, adequate and effective compensation.23 25.15 To explain more clearly what is meant by ‘adequate’ compensation, BITs usually describe the

standard of valuation to be applied in more detail. In numerous BITs, this standard is the ‘fair market value’.24 The BIT between Ethiopia and Sudan, accordingly, stipulates: Such compensation shall amount to the market value of the investments affected immediately before the measures of expropriation or nationalization are taken or became public knowledge, and it shall be freely transferable in a freely convertible currency from the Contracting Party. Any unreasonable delay in payment of compensation shall carry on interest at prevailing commercial rate as agreed upon by both parties unless such rate is prescribed by law.25

25.16 The ‘fair market value’ is a valuation approach used in business practice to determine the

price at which an object would change hands between a hypothetical willing buyer and a hypothetical willing seller. More precisely, it is the price, expressed in terms of cash equivalents, at which property would change hands between a hypothetical willing and able buyer and a hypothetical willing and able seller, acting at arm’s length in an open and unrestricted market, when neither is under an obligation to buy or sell and when both have reasonable knowledge of the relevant facts.26

25.17 The provisions in BITs regulating the conditions of expropriation provide instructions for

determining the amount of compensation due, even if they do not follow exactly the same formulation.27 Yet, BITs do not prohibit expropriations per se. The conditions are formulated to describe what a state has to do in order to avoid a violation of the BIT, that is, the conditions for a lawful expropriation. According to the prevailing view, a dispute about the amount of compensation alone does not render the expropriation unlawful,28 so that the treaty instructions can still be applied. By contrast, lack of due process and discrimination do render an expropriation unlawful. In such a case, the state is in violation of its international

23  Article 4 of the Agreement between the Government of the Federal Democratic Republic of Ethiopia and the Government of the Republic of the Sudan on the Reciprocal Promotion and Protection of Investment of March 7, 2000. 24  This is the case in most BITs concluded by the United States and Canada and can be found in their model BITs. See art. 6(2) of the U.S. Model BIT (2012); art. 13(2) of the Canadian Model BIT (2004); see also NAFTA art. 1110 and art. 13 of the Energy Charter Treaty; it is also contained in the World Bank, Guidelines on the Treatment of Foreign Direct Investment (1992), reprinted in 31 I.L.M. 1363, 1383 (1992). 25  Id. 26  International Glossary of Business Valuation Terms, in Statement of Standards on Valuation Services (AICPA ed., 2015) 33. See also Shannon Pratt & Alina Niculita, Valuing a Business. The Analysis and Appraisal of Closely Held Companies 21 (5th ed. 2008). 27  Some treaties refer to other values, such as the ‘genuine value’ in BITs of the United Kingdom. German BITs usually point to the ‘value of the expropriated investment’. Tribunals must then interpret how this standard is to be understood. Tribunals usually did not find that the respective standard was different from ‘fair market value’. See Unglaube v. Costa Rica, Award (May 16, 2012), ICSID Cases No. ARB/​08/​1 and ARB/​09/​20, ¶ 307; Rusoro Mining v. Venezuela, Award (Aug. 22, 2016), ICSID Case No. ARB(AF)/12/​5, ¶¶ 647, 751. 28 August Reinisch, Legality of Expropriations, in Standards of Investment Protection 171, 199 (August Reinisch ed., 2008); James Crawford, Brownlie’s Principles of International Law 624 (2012); Ripinsky & Williams, Damages, supra note 3, at 68–​69; Georg Schwarzenberger, International Law, as Applied by International Tribunals 666 (1957); Marboe, Calculation  of Compensation and Damages, supra note 3, at 55–​65; Tidewater v. Venezuela, Award (Mar. 13, 2015), ICSID Case No. ARB/​ 10/​5, ¶ 146; but see, in contrast, Steven Ratner, Compensation for Expropriations in a World of Investment Treaties: Beyond the Lawful/​Unlawful Distinction, 111 Am. J. Int’l L. 7, 44–​45 (2017); David Khachvani, Compensation for Unlawful Expropriation: Targeting the Illegality, 32 ICSID Rev. 385, 390 (2017).

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II.  Applicable Legal Rules and Principles obligations so that the above-​mentioned rules on state responsibility are pertinent. To what extent the provision in the treaty may still be useful for the quantification needs to be assessed by the tribunal in its application of the principle of full reparation.

C. Other BIT Provisions BITs may contain rules on the conduct of the arbitration which also deal with the issue of 25.18 calculation of damages. For example, the BIT between Canada and Venezuela provides in its Article XII para 9: A tribunal may award, separately or in combination, only: (a) monetary damages and any applicable interest; b) restitution of property, in which case the award shall provide that the disputing Contracting Party may pay monetary damages and any applicable interest in lieu of restitution.29

The tribunal in Gold Reserve v Venezuela referred to this provision and awarded monetary 25.19 damages in accordance with the applicable rules of state responsibility.30 It thereby avoided a dispute between the parties as to whether the ‘prompt, fair and adequate compensation’ in Article VII of the BIT provided a sui generis remedy for expropriation only or whether it could also be considered as a sui generis remedy for other breaches where a total deprivation of the investment has resulted.31 Similar rules about awarding damages are contained in Model BITs,32 in the Energy Charter 25.20 Treaty,33 in the NAFTA,34 and in some institutional arbitration rules.35 These may provide tribunals with more instructions for the quantification stage, including on currency, interest, and costs.

D. Contractual Obligations Disputes between investors and states can be based on contracts concluded between them, 25.21 but also, in cases of BIT, breaches of the terms of a contract may represent the relevant basis for the calculation of damages. They create the legal framework under which the investor operates and has made its initial investment and planned its activities. Usually, investment contracts are concluded for a long period spanning over twenty or more years, which renders the calculation of damages particularly complex.36 They often involve the construction and operation of infrastructure projects, water and energy supply, waste disposal, or the exploitation of natural resources. All these activities are politically sensitive and prone to risk. BITs should encourage foreign investment and protect foreign investors from political risk, but they do not protect them from economic risk.

29  Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments of July 1, 1996. 30  Gold Reserve v. Venezuela, Award (Sept. 22, 2014), ICSID Case No. ARB(AF)/​09/​1, ¶ 681. 31  Id. ¶ 676. Similarly, Crystallex v.  Venezuela, Award (Apr. 4, 2016), ICSID Case No. ARB(AF)/​ 11/​ 2, ¶ 861. 32  E.g., in U.S. Model BIT (2012) art. 34, Canadian Model BIT (2004) art. 44, or Norwegian Model BIT art. 17. 33  Energy Charter Treaty art. 26 ¶ 8. 34  NAFTA art. 1135. 35  See, e.g., LCIA Arbitration Rules (2014) art. 22. 36  As to the nature and classification of complex long-​term contracts, see Wöss and others, Long-​term Contracts, supra note 3, at 34–​44.

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Compensation and Damages in Investment Treaty Arbitration 25.22 Owing to the diversity of contracts, there is not a single method of calculating damages in

case of breach. Frequently, forward-​looking valuation methods are applied so that the contract is treated just as another investment which derives its value from future prospects.37

25.23 In this context, the question arises whether circumstances after the breach should or could

be taken into consideration for the calculation of damages. While in some national contract laws, the foreseeability of damage at the date of the breach of the contract is decisive, under international law the aim to achieve full reparation is paramount. Several investment tribunals have therefore decided that subsequent developments and information could be included in the calculation. As the tribunal in Amco v Indonesia (Amco II) put it: If the purpose of compensation is to put Amco in the position it would have been in had it received the benefits of the Profit-​Sharing Agreement, then there is no reason of logic that requires that to be done by reference only to data that would have been known to a prudent businessman in 1980.38

25.24 Other tribunals have also pointed out that there is no reason to revert to the date of the

breach for the calculation of damages and have included subsequent information in the calculation of long-​term contractual damages.39 Such use of the benefit of hindsight contributes to a more accurate calculation of the amount of damage actually incurred, which, as of the date of the award, are more or less certain.40 This view is, however, not shared uniformly.41

25.25 The problem remains of how to deal with the passage of time between the date of the breach

and the award or the end of the contract. There is no generally accepted answer to the question of whether the aggregated amount of lost revenue should be discounted as of date of the breach, or whether it should be calculated as of the date of the award. In addition, the use of an appropriate discount rate, including for the time after the award until the end of the contract, remains an area of controversy. Valuation experts have criticized the practice of tribunals to discount the lost revenue by a high factor reflecting time value and risk, but adding pre-​award interest at a low rate up until the date of the award.42 An increasingly refined application of the principles of full reparation, including by the consequent application of the element of causation, could help to overcome these controversies.

III. Causation 25.26 Causation is an essential element for the quantification of damage. It represents the link be-

tween the wrongful act and the injury. Only damage caused is recoverable. However, factual causation is necessary, but not sufficient. In addition to the fact that the wrongful act had some influence on the occurrence of damage—​as a conditio sine qua non—​it is important

  As to these forward-​looking methods, see further in Section VI.B.   Amco Asia v. Indonesia, Award (June 5, 1990) (Amco II) (1993) 1 ICSID Reports 569, ¶ 186. 39  See also Nykomb v. Latvia, Award (Dec. 16, 2003), ICC, 41; El Paso v. Argentina, Award (Oct. 31, 2011), ICSID Case No. ARB/​03/​15, ¶ 710; SAUR International v.  Argentina, Award (May 22, 2014), ICSID Case No. ARB/​04/​4, ¶ 263. 40  In this sense, Ripinsky & Williams, Damages, supra note 3, at 117–​ 19; Manual Abdala & Pablo Spiller, Chorzów’s Standard Rejuvenated: Assessing Damages in Investment Treaty Arbitration, 15 J. Int’l Arb. 103 (2008). 41  Wälde and Sabahi suggest using the expropriation/​international law perspective for actions that qualify as governmental revocation of a contract. See Wälde & Sabahi, Compensation, Damages, and Valuation, supra note 3, at 1092, 1095. 42  Manuel Abdala, Pablo López Zadicoff & Pablo Spiller, Invalid Round Trips in Setting Pre-​ Judgment Interest in International Arbitration, 5 World Arb. and Mediation Rev. 1, 3 (2011). 37 38

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III. Causation that it is legally connected to the damage. In other words, the damage must fall within the ambit of the legal norm violated with regard to its purpose.43 The relevant causation therefore depends on the legal norm. Under the ILC Articles on State Responsibility, the responsible state is obliged to make full 25.27 reparation for ‘the injury caused by the internationally wrongful act’44 and that compensation shall cover any financially assessable damage including loss of profits ‘insofar as it is established’.45 The ILC Commentary notes that there are various concepts used to describe the link which must exist between the wrongful act and the injury, including ‘remoteness’, ‘directness’, ‘foreseeability’, ‘proximity’, or ‘intent’.46 The ILC does not express a preference for a particular legal test of causation. It limits itself to state that ‘the requirement of a causal link is not necessarily the same in relation to every breach of an international obligation’ and that the injury should be ‘the consequence of the wrongful act, but without the addition of any particular qualifying phrase’.47 One of the elements of causation is that speculative elements are excluded from the calcula- 25.28 tion. The ILC Commentary explains that ‘tribunals have been reluctant to provide compensation for claims with inherent speculative elements’.48 In this respect, the Iran–​US Claims Tribunal, in an often-​quoted statement, held in Amoco v Iran, that ‘[o]‌ne of the best settled rules of the law of international responsibility of States is that no reparation for speculative or uncertain damage can be awarded’.49 The tribunal in S D Myers v Canada required a ‘sufficient causal link’,50 and noted that this 25.29 meant that the harm must ‘not be too remote’, or that the breach of the specific NAFTA provision ‘must be the proximate cause of the harm’.51 It rejected the term ‘foreseeability’ as used in the law of contract to limit the range of recoverability. It emphasized that the focus should be on causation, not foreseeability, as is the case in the law of tort or delict. The tribunal also found that the debate as to whether damages are ‘direct or indirect’ was not appropriate. Instead, the concept of ‘remoteness’ should be the key.52 The term ‘proximate cause’ has also been used by tribunals.53 The tribunal in Feldman v Mexico decided that ‘what is owed

43  Islamic Republic of Iran v. United States of America, Award (Dec. 28, 1998), Iran–​United States Claims Tribunal Cases A15(IV) and A 24, 34 Iran–​USCTR 1998, 105 ¶¶ 101–​103; see ILC Commentary, supra note 9, art. 31, ¶ 10; see also Ripinsky & Williams, Damages, supra note 3, at 137. 44  ILC Articles on State Responsibility art. 31. 45  Id. art. 36, ¶ 2. 46  ILC Commentary art. 31, ¶ 10. 47  Id.¶ 48  Id. art. 36, ¶ 27. 49  Amoco International Finance v. Iran, Partial Award (July 14, 1987), 15 Iran–​ USCTR (1987) 189, ¶ 238. See also Shufeldt Claim (United States v. Guatemala), Award (Nov. 2, 1929), 2 RIAA, 1079, 1099; and Robert H. May (U.S. v. Guat.) Award (Nov. 16, 1900), in III M. Whiteman, Damages in International Law 1704 (1943). 50  S.D. Myers v. Canada, First Partial Award (Nov. 13, 2000), UNCITRAL, ¶ 316; the ‘sufficient causal link’ was also highlighted in Gemplus v.  Mexico, ICSID Case Nos. ARB(AF)/​04/​3 and ARB(AF)/​04/​4, Award (June 16, 2010), ¶ 11.8; Duke Energy v. Ecuador, ICSID Case No. ARB/​04/​19, Award (Aug. 18, 2008), ¶ 468; Biwater v.  Tanzania, ICSID Case No. ARB/​05/​22, Award (July 24, 2008), ¶ 779; Archer Daniels v. Mexico, ICSID Case No. ARB(AF)/​04/​5, Award (Nov. 21, 2007), ¶ 282; Crystallex v. Venezuela, Award (Apr. 4, 2016), ICSID Case No. ARB(AF)/​11/​2, ¶ 860. 51  S.D. Myers v. Canada, Second Partial Award (Oct. 21, 2002), UNCITRAL, ¶ 140. 52  Id. ¶¶ 159–​60. 53  LG&E v. Argentina, Award (July 25, 2007), ICSID Case No. 02/​1, ¶ 117; Hoffland Honey v. NIOC, Award (Jan. 26, 1983), 2 Iran–​USCTR 41. See also the discussion of the different concepts by Ripinsky & Williams, Damages, supra note 3, at 138–​40.

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Compensation and Damages in Investment Treaty Arbitration by the responding Party is the amount of loss or damage that is adequately connected to the breach’.54 The requirement is the amount of loss or damage ‘actually incurred’.55 25.30 With respect to the necessary evidence and burden of proof for the damage caused, there seems

to be a growing consensus that the level of certainty is different with regard to the question of whether damage has been caused and the precise calculation of the amount of damages.56 As the tribunal in Lemire v Ukraine put it: The Tribunal agrees that it is a commonly accepted standard for awarding forward looking compensation that damages must not be speculative or uncertain, but proved with reasonable certainty; the level of certainty is unlikely, however, to be the same with respect to the conclusion that damages have been caused, and the precise quantification of such damages. Once causation has been established, and it has been proven that the in bonis party has indeed suffered a loss, less certainty is required in proof of the actual amount of damages; for this latter determination Claimant only needs to provide a basis upon which the Tribunal can, with reasonable confidence, estimate the extent of the loss.57

25.31 Where more than one separate factor combined to cause damage, international practice does

not support the reduction or attenuation of reparation for concurrent causes,58 except for cases of contributory negligence.59 The responsible state is thus held responsible for all the consequences of its wrongful conduct, unless some part of the injury can be shown to be severable.60

25.32 The requirement of legal causation is an essential tool for avoiding under-​and overcompen-

sation. In the comparison of the ‘but for’ scenario with the actual scenario, it is necessary to identify the hypothetical situation in a way that appropriately reflects the situation without the breach and considers developments, such as political and economic changes, which are not connected to the breach.

IV.  Valuation Date 25.33 The date on which assets are valued can have a significant impact on quantum. Possible

dates in investor-​state arbitration are the date of the relevant act of the state or the date of the award. In addition, the date on which the damage materializes may be relevant.61 Furthermore, the kind of information that can be included in the valuation is important, for example, whether subsequent developments can be taken into account.

25.34 In expropriation cases, the date at which the expropriation occurred or became publicly

known is generally regarded as the most appropriate date.62 This date is contained in most

54 Feldmann v.  Mexico, Award (Dec. 16, 2002), ICSID Case No. ARB(AF)/​ 99/​1, ¶ 194 (emphasis added); quoted affirmatively by LG&E v. Argentina, supra note 53, ¶ 44. 55  Feldmann v. Mexico, supra note 54, ¶ 194; LG&E v. Argentina, supra note 53, ¶¶ 41–​45. 56  See SPP v. Egypt, Award (May 20, 1992), ICSID Case No. ARB/​84/​3, ¶ 215; Tecmed v. Mexico, Award (May 29, 2003), ICSID Case No. ARB(AF)/​00/​2, ¶ 190; Vivendi v. Argentina (Vivendi II), Award (Aug. 20, 2007), ICSID Case No. ARB/​97/​3, ¶ 8.3.16. 57  Joseph Charles Lemire v. Ukraine, Award (May 28, 2011), ICSID Case No. ARB/​ 06/​18, ¶ 246; see also Gold Reserve v. Venezuela, Award (Sept. 22, 2014), ICSID Case No. ARB(AF)/​09/​1, ¶ 686; Crystallex v. Venezuela, Award (Apr. 4, 2016), ICSID Case No. ARB(AF)/​11/​2, ¶¶ 866–​70. 58  ILC Commentary art. 31, ¶ 12, with reference to the jurisprudence of the ICJ in that regards and principles of national law. 59  On contributory fault, see more details in Section V.A. 60  ILC Commentary, supra note 9, art. 31, ¶ 13. 61  See, e.g., CME v. Czech Republic, Final Award on Damages (Mar. 14, 2003), UNCITRAL, ¶ 492. 62  As the World Bank Guidelines in 1992 noted: ‘Compensation will be deemed adequate if . . . such value is determined immediately before the time at which the taking occurred or the decision to take the asset

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IV. Valuation Date BITs to ensure that the value of the investment is not diminished by the expropriation itself or its prior announcement.63 As this standard represents one of the conditions for a lawful expropriation, it cannot be lower when the state violates one of the other conditions. Furthermore, compensation should be paid promptly at the time of the expropriation so that only information available at that time should be taken into account for the valuation. On the other hand, under the law of state responsibility, the amount of compensation pay- 25.35 able after a violation of international law shall cover any financially assessable damage and is payable ‘insofar as such damage is not made good by restitution’.64 As ‘restitution’ is the primary remedy after a violation of international law,65 it seems logical that the valuation date should be the date of the award.66 Nevertheless, the date of the award is not always chosen as the valuation date in investor-​state 25.36 arbitration. One reason may be that, under national law, damages in contract cases are only recoverable as far as they were ‘foreseeable’ at the time of the breach. This seems to imply that the valuation must be done as of the date of the breach. Another reason can be that, historically, expropriations have been the subject of the vast ma- 25.37 jority of cases between states and foreign entities, the Iran–​US Claims Tribunal representing the most prominent example. In most of the cases, the value of the investment decreased dramatically or even vanished entirely after the expropriation. It was thus necessary to ensure that the expropriated property immediately before or at the date of the expropriation was the point of reference for the valuation. However, this situation has changed, and tribunals are increasingly confronted with cases in 25.38 which the value of the property has not decreased, but increased after the expropriation. In such a situation, it needs to be decided whether the lower value as of the time of the expropriation or rather the higher value as of the date of the award should be decisive. The tribunal in ADC v Hungary was the first to decide that, in case of an unlawful expropriation, the higher value at the time of the award needs to be chosen as it represents the best substitute for restitution under the law of state responsibility.67 Numerous tribunals followed the reasoning that the BIT standard is only applicable for lawful expropriations, but not for unlawful expropriations,68 even if they did not find this distinction pertinent in the case at hand.69 became publicly known.’ World Bank, Guidelines on the Treatment of Foreign Direct Investment 31 I.L.M. 1379, 1382 (1992). 63  See the example of the BIT provision in Section II.B. 64  ILC Articles on State Responsibility art. 36(1) and (2). See Section II.A. 65  See the ILC Commentary, supra note 9, art. 35, ¶ 1. 66  Georg Schwarzenberger, International Law as Applied by International Tribunals 666 (1957); similarly, Manual of Public International Law 567 (Max Sorenson ed., 1968); Mark Friedman & Floriane Lavaud, Damages Principles in Investment Arbitration, in Trenor, Guide to Damages, supra note 3, at 90, 101. 67  ADC v. Hungary, Award (Oct. 2, 2006), ICSID Case No. ARB/​03/​16, ¶ 497. It did so by an examination of the jurisprudence of the ECtHR, most importantly the case of Papamichalopoulos v. Greece (Just Satisfaction) Eur. Ct. H.R. (ser. A), No. 330-​B (Oct. 31, 1995). But also the Iran–​UN Claims Tribunal held in several obiter dicta that the distinction between lawful and unlawful expropriations was the primacy of restitution or the valuation at the date of the award, if the asset had increased in value. See Phillips Petroleum v. Iran, Award (June 29, 1989), 21 Iran–​USCTR 79, ¶ 110; Amoco International Finance v. Iran, Partial Award (July 14, 1987), 15 Iran–​USCTR 189, ¶ 18. 68  See, e.g., Siemens v.  Argentina, Award (Feb. 6, 2007), ICSID Case No. ARB/​ 02/​8, ¶ 353; Vivendi v. Argentina (Vivendi II), Award (Aug. 20, 2007), ICSID Case No. ARB/​97/​3, ¶¶ 8.2.4–​6, 8.3.20; Saipem v.  Bangladesh, Award (June 30, 2009), ¶ 201; Kardassopoulos v.  Georgia, Award (Mar. 3, 2010), ¶ 514; Quiborax v. Bolivia, Award (Sept. 16, 2015), ICSID Case No. ARB/​06/​2, ¶ 385. 69  See, e.g., Funnekotter v.  Zimbabwe, Award (Apr. 22, 2009), ICSID Case No. ARB/​ 05/​6, para  112; Unglaube v. Costa Rica, Award (May 16, 2012), ICSID Case No. ARB/​09/​20, ¶¶ 306–​307.

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Compensation and Damages in Investment Treaty Arbitration 25.39 It is particularly difficult to determine the date of the expropriation or breach of international

law when the state commits a series of acts and omissions that, in their totality, caused the damage. For such indirect expropriations or other composite acts, the law of state responsibility provides that the breach occurs ‘when the action or omission occurs which, taken with the other actions or omissions, is sufficient to constitute the wrongful act’.70 Such a determination is always difficult and needs to be decided by diligent consideration of the facts. Even if this date is not the valuation date, it is still decisive for establishing the ‘but for’ scenario necessary to achieve full reparation and, in expropriation cases, the value of the asset at the time of the taking, in order to compare the two values.

V.  Limiting Circumstances 25.40 The obligation to provide full reparation of the damage incurred might be limited under cer-

tain circumstances.71 The following section more closely examines contributory negligence, mitigation of damages, economic distress, and country risk.

A. Contributory Negligence 25.41 Contributory negligence can reduce the duty to compensate for the damage caused by an un-

lawful act. The question of contribution may be regarded from different perspectives. It can be regarded as a matter of causation and thus preclude the establishment of liability,72 or it can be seen as a matter of quantification. It can even be regarded as a matter precluding jurisdiction.73 The ILC Articles on State Responsibility provide that contributory negligence should be regarded as a matter of quantification and stipulate, in Article 39: ‘In the determination of reparation, account shall be taken of the contribution to the injury by willful or negligent action or omission of the injured State or any person or entity in relation to whom reparation is sought’.

25.42 A distinction can be drawn between contributory negligence unrelated to the unlawful con-

duct of the state, such as unwise business decisions,74 and behaviour that provoked state action.75 Nevertheless, both cases led to a reduction of the amount of damages. A  mere

70  Article 15(1) of the ILC Articles on State Responsibility. See Michael Reisman & Robert Sloane, Indirect Expropriation and its Valuation in the BIT Generation, 75 BYIL 115, 140 ff. (2003). 71  See Borzu Sabahi, Kabir Duggal & Nicholas Birch, Limits on Compensation for Internationally Wrongful Acts, in Bungenberg and others, International Investment Law 1115 [hereinafter Sabahi and others, ‘Limits on Compensation’]; Craig Miles & David Weiss, Overview of Principles Reducing Damages, in Trenor, Guide to Damages, supra note 3, at 78 [hereinafter Miles & Weiss, Reducing Damages]. 72 In Lauder v. Czech Republic, the tribunal found that the claimant had contributed to the destruction of its business by choosing an unreliable local partner, which was his own fault and not that of the respondent. The latter was thus not found to be liable. See Lauder v. Czech Republic, Award (Sept. 3, 2001), ¶¶ 234–​35, 313. 73  This is comparable to the principle of ‘clean hands’ advanced by respondents in investment arbitration cases. See, e.g., the arguments put forward by the Russian Federation in the Yukos cases. See Yukos v. Russia, Award (July 18, 2014), PCA Case No, AA 227, ¶¶ 1273–​374. 74  See, e.g., MTD Equity v. Chile, Award (May 25, 2004), ICSID Case No. ARB/​01/​7, ¶ 242, where the tribunal criticized the unwise business decision by the investor; and Iurii Bogdanov, Agurdino-​Invest Ltd. & Agurdino-​Chimia JSC v. Moldova, SCC Award (Sept. 22, 2005), in which the fault was not sufficiently precisely drafting a contract. See Yukos v. Russia, Award (July 18, 2014), ¶ 1604. 75  See, e.g., Antoine Goetz and Others v. Burundi, ICSID Case No. ARB/​01/​2, Award (June 21, 2012); and Occidental v.  Ecuador, Award (Oct. 5, 2012), ICSID Case No. ARB/​06/​11, ¶¶ 662–​87, where the claimants had not informed Ecuador in a timely way about the nature of the ‘Farmount Agreement’, which purported to transfer rights to a third party without obtaining ministerial authorization. See Yukos v. Russia, Award (July 18, 2014), ¶ 1604.

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V.  Limiting Circumstances contribution to the damage is, however, not sufficient; the action or omission must represent negligent and reproachable behaviour.76 Arbitral practice seems to apply this criterion rather restrictively.77 As regards the extent of reduction in the few cases in which contributory fault has been accepted, 25.43 the rather sweeping way this reduction was assessed78 raised some criticism.79 An improvement in the assessment of the extent of contributory negligence could be to relate it more closely to the issue of causation.

B. Mitigation of Damages The duty to mitigate damages is recognized as a general principle of law.80 In contrast to con- 25.44 tributory negligence, it arises after the respondent has committed the alleged unlawful act. It implies that the injured party must take reasonable steps to reduce its losses. Depending on the facts of the case, it may include selling products, stopping the delivery of services, trying to renegotiate contracts, or even giving up unprofitable projects.81 However, this principle should not be applied too strictly, as this could unjustly favour the wrongdoer.82 In international practice, the duty to mitigate damages has primarily been applied in breach 25.45 of contract cases. The Iran–​US Claims Tribunal found that the duty to mitigate damages required that, after the termination of the contract or its notification, no further services were to be rendered.83 The duty to mitigate damages could also be used to exclude lost profits on investments not yet made84 or to limit the amount of lost profits to a certain period of time

76  Brigitte Bollecker-​Stern, Le préjudice dans la théorie de la responsabilité internationale 195 (1973). 77  SPP (Middle East) Ltd., Southern Pacific Properties Ltd. v.  Egypt, ICC Award (Mar. 11, 1983)  22 I.L.M. 752 (1983), ¶ 66; CME v. Czech Republic, Final Award on Damages (Mar. 14, 2003), UNCITRAL, ¶¶ 310 ff. 78  In MTD Equity v. Chile it was a 50% reduction of the amount; in Occidental Petroleum v. Ecuador and in Yukos v. Russia it was 50%. 79  Mark Kantor, Fifty Billion Dollars; The Yukos Damages Awards (2015) 2 J. Damages in Int’l Arb. 1; B. Sabahi & K. Duggal, Occidental Petroleum v. Ecuador (2012)1: Observations on Proportionality, Assessment of Damages and Contributory Fault, 28 ICSID Rev. 279, 288–​89 (2013). 80  See ILC Commentary, supra note 9, art. 31, ¶ 11; Sabahi and others, Limits on Compensation, supra note 71, at 1121; Gabčíkovo-​Nagymaros Project (Hungary v. Slovakia), Judgment (Sept. 25, 1997) (1997) ICJ Reports, 7; ME Cement v.  Egypt, Award (Apr. 12, 2002), ICSID Case No. ARB/​99/​6, ¶ 167; AIG v. Kazakhstan, Award (Oct. 2, 2003), ICISD Case No. ARB/​99/​6, ¶ 10.6.4(1); CME v. Czech Republic, Final Award on Damages (Mar. 14, 2003), UNCITRAL, ¶ 482. 81 Wälde & Sabahi, Compensation, Damages, and Valuation, supra note 3, at1096; Sabahi and others, ‘Limits on Compensation’, supra note 71, at 1122, referring to Bridas v. Turkmenistan, Third Partial Award and Dissent (Sept. 6, 2000), ICC Case No. 9058/​FMS/​KGA, ¶¶ 45–​53, where the tribunal reduced the award by U.S.$50 million due to the claimant’s failure to abandon an unprofitable oilfield. 82 According to Schwarzenberger, the principles of good faith and reasonableness, or generally the ius aequum, are the only measure available. See Schwarzenberger, International Law as Applied by International Tribunals, supra note 66, 663. 83  Seismograph Service Corporation v. NIOC, Award (Dec. 22, 1988), 22 Iran–​USCTR (1989) 3, ¶ 115; Petrolane Inc v. Iran, Award (Aug. 14, 1991), 27 Iran–​USCTR (1992) 64, ¶ 54; see also George Aldrich, The Jurisprudence of the Iran–​US Claims Tribunal 300 ff. (1996). 84  Himpurna California Energy Ltd. v.  PT (Persero) Perusahaan Listruik Negara (PLN), Final Award (May 4, 1999), 25 Yearbook of Commercial Arb. 13, ¶ 347. The tribunal denied those profits by reference to the principle of ‘abuse of rights’. Commentators noted, however, that the principle to mitigate damages would have been more appropriate. See Mark Kantor, The Limitations of Arbitration, 1(2) TDM (2004); John Gotanda, Recovering Lost Profits in International Disputes, 36 Georgetown J. Int’l L. 61, 104 ff (2004).

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Compensation and Damages in Investment Treaty Arbitration under the premise that, after this period, the damage could have been mitigated.85 However, while tribunals recognize the duty to mitigate damages in principle, they are generally rather reluctant to apply it.86

1 Economic distress 25.46 Host states may undergo severe economic crises that put governments under pressure to

introduce regulatory or other measures to mitigate and overcome the difficulties. If such measures entail the violation of international or contractual obligations by the state, the question of compensation for the loss may become pertinent and whether, in the calculation of such compensation, the economic distress of the country should be taken in to consideration. Under international law, there are several vehicles to deal with such situations. In investor-​ state arbitration, the state of necessity and the non-​precluded measures provisions (NPMs) contained in BITs have played a relevant role.

25.47 Necessity, under the law of state responsibility, is a circumstance precluding the wrong-

fulness of an act of a state. A state may be justified in breaching its international obligations, including those towards a foreign investor, if such a breach is ‘is the only way for the State to safeguard an essential interest against a grave and imminent peril’.87 There are several conditions connected so this right,88 which have to be interpreted restrictively, including that it cannot be invoked if ‘the State has contributed to the situation of necessity’.89 It has long been recognized that a functioning economy represents an essential interest of a state which can lead to an exemption from payment obligations.90 As regards the consequences for a monetary award, it should be noted that the invocation of necessity is ‘without prejudice to the question of compensation for any material loss caused by the act in question’.91 It follows that, even if the act was not wrongful, compensation could still be due.

25.48 Necessity has been widely discussed in the context of the Argentine economic crisis between

2000 and 2002, which led the Argentine government to enact an Emergency Law92 and a number of other measures that had detrimental consequences for foreign investors, most importantly the so-​called ‘pesification’ of economic terms due to the abandonment of the fixed exchange rate of the Argentina peso with the US dollar. In the subsequent ICSID proceedings, tribunals and ad hoc committees in annulment proceedings have interpreted and applied the concept of necessity differently, which raised concerns about the lack of

85  See, e.g., ICC Award No. 7006, reprinted in pertinent part in 18 YCA 58 (1993). See also Jan Paulsson, The Expectation Model, in Evaluation of Damages in International Arbitration 57, 75 (Yves Derains and Richard Kreindler eds., 2006); more examples are quoted by Yasuhei Taniguchi, The Obligation to Mitigate Damages, in id. at 79 ff. 86  After some discussion, it was denied, for example, in ME Cement v. Egypt, Award (Apr. 12, 2002), ICSID Case No. ARB/​99/​6, ¶ 167; Amco Asia v. Indonesia, Award (June 5, 1990) (Amco II), ICSID Case No. ARB/​81/​1, ¶¶ 78, 79; see also Southern Pacific Properties (Middle East) v. Egypt, Award (May 20, 1992), ICSID Case No. ARB/​84/​3, ¶ 245. 87  See art. 25 ¶ 1(a) of the ILC Articles on State Responsibility. 88  These include also that the act ‘does not seriously impair an essential interest of the State or States towards which the obligation exists, or of the international community as a whole’ and that ‘the international obligation in question excludes the possibility of invoking necessity’. See art. 25 ¶ 1(b) and ¶ 2(a) of the ILC Articles on State Responsibility. 89  ILC Articles on State Responsibility art. 25 ¶ 2(b). 90  Russian Indemnities (Russia v. Turkey), Award (Nov. 11, 1912, 11 RIAA, 431. 91  ILC Articles on State Responsibility art. 27(b). 92  Ley emergencia publica y reforma del regimen cambiario, Law 25.561 of January 6, 2002, Boletín Oficial (Jan. 7, 2002).

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V.  Limiting Circumstances uniformity and predictability of international investment arbitration.93 However, maintaining legal certainty and stability in time of extreme economic difficulties involves complex considerations and weighing of economic nature, most importantly with respect to the question of whether the measure applied was the ‘only way to safeguard’ the essential interest of the state. The ICSID tribunal in CMS v Argentina, the first to decide the damages issue, eventually denying the state of necessity, put its dilemma in the following terms: The question for the Tribunal is then how does one weigh the significance of a legal guarantee in the context of a collapsing economic situation. It is certainly not an option to ignore the guarantee, as the Respondent has advocated and done, and neither is it an option to disregard the economic reality which underpinned the operation of the industry.94

The ICSID tribunal in LG&E v Argentina found that the measure taken by the Argentine 25.49 Government was justified, but decided that the Government should have re-​established the original tariff regime earlier than it did, so that Argentina was responsible for the violation of its obligations after the period of necessity.95 The tribunal in Continental Casualty v Argentina also accepted Argentina’s contention with respect to its emergency situation, but not with respect to all claims.96 Other ICSID tribunals and ad hoc committees have emphasized that a severe economic 25.50 crisis should more appropriately be taken into account by the application of so-​called ‘non-​ precluded measures provisions’ (NPMs). Such a provision, for example, is contained in Article XI of the US–​Argentina BIT: ‘This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the Protection of its own essential security interests’.97 The difference between the invocation of an NPM provision and the invocation of necessity 25.51 is that, if the NPM conditions are met, the BIT is not violated and thus no justification for alleged ‘wrongfulness’ is needed. Several ICSID awards were annulled by ad hoc committees because of the allegedly wrongful interpretation and non-​application of NPMs.98 It follows that, in situations of serious economic distress, host states may take measures to address the problem without automatically having to pay for the damage caused to investors.

C. Country  Risk Another way of reflecting economic difficulties and thus reducing the amount of damages 25.52 is the assessment of the so-​called ‘country risk’. It is possible that, over the lifetime of an investment, the economic situation will deteriorate and the investor will not be able to operate as envisaged at the time of the investment was made. While BITs are concluded to protect 93 August Reinisch, Necessity in Investment Arbitration, 41 Netherlands Yearbook of Int’l L 137 (2010); Christina Binder, Necessity Exceptions, the Argentine Crisis and Legitimacy Concerns: or the Benefits of a Public International Law Approach to Investment Arbitration, in Foreign Investment, International Law and Common Concerns 71–​85 (Tullio Treves and others eds., 2014). 94  CMS v. Argentina, Award (May 12, 2005), ICSID Case No. ARB/​01/​8, ¶ 165. 95  LG&E v. Argentina, Decision on Liability (Oct. 3, 2006), ICSID Case No. ARB/​02/​1, ¶ 266. 96  Continental Casualty v. Argentina, Award (Sept. 5, 2008), ICSID Case No. ARB/​03/​9, ¶ 23. 97 Treaty between United States of America and the Argentine Republic concerning the Reciprocal Encouragement and Protection of Investment (signed November 14, 1991, entered into force October 20, 1994). 98  Enron v. Argentina, Decision on Annulment (July 30, 2010), ICSID Case No, ARB/​01/​3, ¶¶ 347–​405; Sempra v. Argentina, Decision on Annulment (June 29, 2010), ICSID Case No. ARB/​02/​16, ¶¶ 159–​85; the ad hoc committee in CMS v. Argentina limited itself to criticizing this lack of distinction heavily, but ultimately refrained from annulment. See CMS v. Argentina, Decision on Annulment (Sept. 25, 2007), ICSID Case No. ARB/​01/​8, ¶¶ 134–​36.

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Compensation and Damages in Investment Treaty Arbitration investors from political risk, they are ‘not insurance policies’ against bad business decisions and fluctuations in the economy.99 25.53 The ‘country risk’ can be included in the valuation of international investment, in particular

when forward looking valuation methods are applied.100 It can be evaluated on the basis of the country’s US dollar sovereign debt over the US dollar risk-​free rate or the relative standard deviation in stock prices,101 or it can be reflected by diminished cash flow projections.102 All of these methods should take account of the risk associated with investing in a particular economy, most importantly in developing or emerging countries.

25.54 The state, by its decisions and actions, has an important influence on the economic situation

of a country and thus on the value of foreign investments. Should it benefit from its own (in) actions or decisions that increase the country risk and thus diminish the amount of compensation or damages? Tribunals have dealt with this question in particular in cases submitted against Venezuela in the wake of Hugo Chavez’ so-​called ‘Bolivarian Revolution’ which entailed the nationalization of companies involved in the exploitation of natural resources.103 Should the fact that this policy was proclaimed and gradually implemented be a reason for diminished amounts owed to foreign investors?

25.55 Without going into more detail, it can be concluded from the case law so far that a reduction

for country risk was disallowed when the state acted wrongfully and violated its obligations contained in the BITs, most importantly the obligation of fair and equitable treatment.104 By contrast, a reduction was allowed when the state acted in accordance with its national and international obligations, for example as provided for expropriation.105

VI.  Valuation Methods 25.56 ‘Valuation is neither the science that some of its proponents make it out to be nor the ob-

jective search for true value that idealist would like it to become’.106 As value means different things to different people, it is necessary, at the beginning of every valuation, to define the basis of the valuation, in other words ‘value to whom?’ and ‘under what circumstances?’107

99  EDF v.  Romania, Award (Oct. 9, 2009), ICSID Case No. ARB/​ 05/​13; ¶ 217; CMS v.  Argentina, Award (May 12, 2005), ICSID Case No. ARB/​01/​8, ¶ 244; Tidewater v. Venezuela, Award (Mar. 13, 2015), ICSID Case No. ARB/​10/​5, ¶¶ 182–​90. 100  As to the different valuation methods, see further in Section VI.B. 101  Tim Koller, Marc Goedhart & David Wessels, Valuation: Measuring and Managing the Value of Companies 729 (6th ed. 2015) [hereinafter Koller and others, Valuation]; Aswath Damodaran, Investment Valuation: Tools and Techniques for Determining the Value of Any Asset 167–​77 (3rd ed. 2012), [hereinafter Damodaran, Investment Valuation]. 102  Koller and others, Valuation, supra note 101, at 721. 103  See the discussion of relevant cases by Florin Dorobantu, Natasha Dupont & Alexis Maniatis, Country Risk and Damages in Investment Arbitration, 31 ICSID Rev. 1, 219 (2015); see also Markus Burgstaller & Jonathan Ketcheson, Should Expropriation Risk Be Taken Into Account in the Assessment of Damages, 32 ICSID Rev. 1, 193–​215. 104  Gold Reserve v.  Venezuela, Award (Sept. 22, 2014), ICSID Case No. ARB(AF)/​ 09/​1, ¶ 615; OI European Group v. Venezuela, Award (Mar. 10, 2015), ICSID Case No. ARB/​11/​25, ¶ 781. 105  Tidewater v. Venezuela, Award (Mar. 13, 2015), ICSID Case No. ARB/​10/​5, ¶¶ 182–​90; Mobil Cerro Negro v. Venezuela, Award (Apr. 4, 2016), ICSID Case No. ARB/​07/​27, ¶ 365. 106  Damodaran, Investment Valuation, supra note 101, at 2. 107  Shannon Pratt & Alina Niculita, Valuing a Business: The Analysis and Appraisal of Closely Held Companies (5th ed. 2014) 41 [hereinafter Pratt and Niculita, Valuing a Business].

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VI.  Valuation Methods The basis of valuation describes the fundamental assumptions on which the reported value will be based.108 In investment arbitration, the basis of value needs to be defined by the tribunal, which 25.57 must clarify the premises and circumstances under which the valuation shall be carried out. The legal rules applicable and the evidence available shall inform the respective choices. Nevertheless, tribunals also often rely on the submissions of the parties, in particular if they agree on certain points, even if these do not exactly match the criteria that would be mandated by the applicable legal rules. According to the above-​mentioned rules in BITs on expropriation, the valuation should be 25.58 performed on the basis of the ‘fair market value’, which means that the price upon which a hypothetical willing buyer and a hypothetical willing seller would agree is decisive. Conversely, the principle of ‘full reparation’ requires that the injured party is put in the financial position he or she would have been in if the unlawful act had not been committed. In valuation practice, a distinction can also be made between valuations made under the premises of value in exchange and value to the holder.109 For both premises of value, various methods of valuation are available. The following sections briefly present the three valuation approaches most widely used in business valuation and in investment arbitration.110

A. Market Approach The market or sales comparison approach provides an indication of value by comparing 25.59 the subject asset with identical or similar assets for which price information is available.111 In general, an asset being valued is compared with sales of similar properties that have been transacted in the market. Listings and offerings may also be considered as a source of information.112 A variant of the market approach is the reliance on share prices of publicly traded companies.113 25.60 The price of the stock seems to be the most reliable and objective indicator of value because the buyers and sellers are well informed (owing to stringent disclosure laws) and have no special motivation or compulsion to buy or sell.114 Nevertheless, the company’s stock prices do not necessarily reflect the value of an investment. Discounts and premiums have to be considered depending, in particular, on the number of shares (minority/​control) and (lack of ) marketability.115 Furthermore, the prices of publicly traded stock are frequently rather volatile, reflecting not always purely economic but also political and psychological motives. Yet, as it is the purpose of the stock to balance supply and demand and to facilitate transactions of company shares on a market value basis, stock prices are still considered as an important yardstick.116

108  International Valuation Standards Council, International Valuation Standards 2013 (IVSC, 2013) 17 [hereinafter IVS 2013]. 109  This distinction is recognized and generally accepted, as pointed out by Jay Fishman, Shannon Pratt, & William Morrison, Standards of Value 20–​21 (2d ed. 2013). 110 References will be made to the International Valuation Standards, one of the most authoritative standards published by the International Valuation Standards Council (IVSC). See IVSC, International Valuation Standards (2013) [hereinafter IVSC 2013]. 111  See IVS Framework, in IVSC 2013, supra note 110, at 24. 112  Id. 113  Id. 44. 114  Pratt & Niculita, Valuing a Business, supra note 107, at 264. 115  Shannon Pratt & Alina Niculita, The Lawyer’s Business Valuation Handbook (2d ed. 2010) [hereinafter Pratt & Niculita, The Lawyer’s Business Valuation Handbook. 116  Kantor, Valuation, supra note 3, at 15; Simon de Quidt & Phil Rees, Methods of Valuation: Which Method for Which Case? in Bjorklund and others, Current Issues, supra note 3, at 74; Ripinsky & Williams, Damages, supra note 3, at 213.

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Compensation and Damages in Investment Treaty Arbitration 25.61 Another variation of the market approach is the comparable companies method.117 Prior

transactions of similar companies are used as a benchmark. As companies are often quite dissimilar and difficult to compare, a simplified and more practical form is the use of multiples. Multiples are a particular variable of the company’s performance, such as cash flow, earnings, profits, EBIT, or EBITDA, which are then multiplied by an appropriate factor.118 Multiples are derived from sales of companies and regularly published for specific types of enterprises and industries. While multiples are relatively easy to use and intuitive, they require special expertise to assess comparability and are still easy to misuse.119 Tribunals have applied them usually in combination with other valuation methods.120

B. Income Approach 25.62 The income approach reflects best the prevailing opinion that the value of an asset is repre-

sented by its ability to yield financial benefits to its owner.121 This is true not only for entire businesses, but also for shares in businesses, immovable property, and intangible assets, such as rents and annuities. The income approach provides an indication of value by converting expected future cash flows to a single current capital value.122

25.63 The most prominent of the different methodologies to arrive at the present value of future

benefits is the discounted cash flow (DCF) method, because, in modern valuation practice, cash flow is preferred to other parameters of income, such as profits or earnings.123

25.64 The forecast of future cash flows requires the collection of extensive information and, based

on such information, an analysis of the asset’s past, present, and future situation. The forecast needs to be checked for plausibility in order to determine its reasonableness and lack of contradiction. It includes an analysis of the company’s share in the respective market, general and industry-​specific economic conditions, the production, finance, and competition relations and their development in the future. Both negative and positive factors must be included.

25.65 The determination of an appropriate discount rate should reflect (1) the time value of money

and (2) the risk connected to the expected cash flow. The most prominently employed discount rate is the Weighted Average Cost of Capital (WACC), which is based on the Capital Asset Pricing Model (CAPM). Under this model, the risk of a particular enterprise is as big as the market participants estimate it.124

25.66 In investor-​state arbitration, the income approach has long been regarded with skepticism,

which was mainly based on its inherent ‘speculation’ about the future. However, more recent tribunals apply it on a regular basis.125 The main reason for this increased acceptance is the

117  The IVS refer to ‘prior transactions or offers for any component of the business’ as indicative of value under the market approach. See IVSC, 200 Businesses and Business Interests, in IVS 2013, supra note 110, at 43. 118  Damodaran, Investment Valuation, supra note 101, at 453; Pratt & Niculita, Valuing a Business, supra note 107, at 203 ff. 119  Damodaran, Investment Valuation, supra note 101. 120  See, e.g., Crystallex v. Venezuela, Award (Apr. 4, 2016), ICSID Case No. ARB(AF)/​11/​2, ¶¶ 901–​905. 121  Damodaran, Investment Valuation, supra note 101, at 1; Pratt & Niculita, Valuing a Business, supra note 107, at 56; Koller and others, Valuation, supra note 101, at 103. 122  See IVS Framework, in IVSC 2013, supra note 110, at 58. 123  Damodaran, Investment Valuation, supra note 101, at 6; Pratt & Niculita, Valuing a Business, supra note 107, at 56. 124  Koller and others, Valuation, supra note 101, at 626. 125  The Iran–​U.S. Claims Tribunal paved the way for it in Starrett Housing (1987) and Phillips Petroleum (1989). Under the auspices of ICSID, the award in Amco v. Indonesia (Amco II 1990) was the first to discuss it in detail and to apply it. Subsequent ICSID cases include large arbitrations, such as Occidental v. Ecuador, supra note 75, Mobil Cerro Negro v. Venezuela, supra note 105, and Quiborax v. Bolivia, supra note 68.

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VII. Conclusion fact that this valuation approach has been widely used in economic practice. Tribunals could no longer ignore this reality. Nevertheless, the complexity of the approach raises numerous questions in the details, so that the appropriate application in a particular case will remain a challenge. A tendency can be observed to combine and cross-​check the income approach with other approaches.126

C. Asset-​based or Cost Approach According to the asset value or cost approach, the value of different component parts deter- 25.67 mines the overall value of an object. The basic concept of the asset-​based approach is that, if all assets and liabilities are revalued to current values, the difference between the assets and the liabilities should equal the value of the object.127 The advantage of this approach is that, in comparison with the income capitalization ap- 25.68 proach, it appears to be a lot easier and less speculative. It looks into the past and not into the future and is seemingly much simpler to apply than the highly complex forecasting and discounting processes. Evidence is usually available and no prognoses about the future are required. The disadvantage is, however, that many assets and liabilities, such as certain intangible assets and goodwill, are not appropriately reflected on a company’s balance sheet. Furthermore, the asset-​based approach does not consider the combination of the assets, and thus the value of the entity as a whole. Investment tribunals have applied the cost approach when the prospects for the future were 25.69 too uncertain to allow a meaningful cash flow forecast.128 They have also applied it in the absence of a record of past performance.129 While this approach is hardly used in economic practice and is not recommended, it serves a certain purpose in investment arbitration, including the avoidance of expensive valuation services for an uncertain future.

VII. Conclusion The above discussion of some basic principles for the valuation of compensation and damages 25.70 in investor-​state arbitration has tried to throw some light on the most pertinent problems in practice. It was attempted to show that while the theory both in law and valuation might be logical and consistent, their combination and implementation in the reality of investment disputes remains difficult. The understanding amongst the legal and the valuation discipline is improving notably and so is the attention dedicated to quantum issues in investment arbitration awards. Ultimate clarity and predictability will be hard to achieve, as valuation is not an exact science. However, well-​reasoned awards and an increasingly coherent application of generally accepted valuation criteria will raise the confidence in the tribunals’ assessments and ultimately help to safeguard the legitimacy of investment arbitration as a whole.

126  See, e.g., National Grid v. Argentina, Award (Nov. 3, 2008) UNCITRAL; Gold Reserve v. Venezuela, supra note 10; and Crystallex v. Venezuela, supra note 31. 127  See IVS Framework, in IVSC 2013, supra note 110, at 25. 128  Asian Agricultural Products v. Sri Lanka, Award (June 27, 1990), ICSID Case No. ARB/​87/​3, ¶ 98; Siemens v. Argentina, Award (Feb. 6, 2007), ICSID Case No. ARB/​02/​8, ¶ 355. 129  Wena Hotels v. Egypt, Award (Dec. 8, 2000), ICSID Case No. ARB/​98/​4, ¶ 122; Meerapfel v. CAR, Award (May 21, 2011), ICSID Case No. ARB/​07/​10, ¶ 385; Impregilo v. Argentina, Award (June 21, 2011), ICSID Case No. ARB/​07/​17, ¶ 38.

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26 THIRD -​PARTY FUNDING IN INVESTMENT TREATY ARBITRATION Nigel Blackaby and Alex Wilbraham*

I. Introduction  II. Does Third-​party Funding Provoke Frivolous Claims?  III. The Different Forms of Funding  A. Non-​recourse Financing  B. Financing by Lawyers  C. Insurance  D. Equity Financing  E. Debtor in Possession Financing  F. Pro Bono or Charitable Funding  G. Common Interest Funding 

IV. Regulation of Litigation Funding 

V. Jurisdiction and Admissibility  VI. Third-​party Funding and Liability for Costs 

26.01 26.12 26.15 26.16 26.17 26.18 26.19 26.20 26.21 26.22 26.23

26.27

26.34 A. The Right to Recover Costs if Successful  26.35 B. Recovery of Funding Costs  26.38 C. Security for Costs  26.44 VII. Disclosure of Third-​party Funding  26.52 A. Disclosure of a Third-​party Funder’s Identity  26.53 B. Should the Terms of Funding Agreements be Disclosed?  26.59 VIII. Concluding Remarks  26.63

I. Introduction 26.01 There has been much debate about the use of third-​party funding in international investment

arbitration. Before we enter that debate, we need to be clear about the object of our study. What is third-​party funding?

26.02 The Comprehensive Economic and Trade Agreement between Canada and the EU (CETA)

provides a useful definition:

[T]‌hird party funding means any funding provided by a natural or legal person who is not a party to the dispute but who enters into an agreement with a disputing party in order to finance part or all of the cost of the proceedings either through a donation or grant, or in return for remuneration dependent on the outcome of the dispute.1

In truth, the scope of what may be called third-​party funding is so broad it can defy any attempt to define it in one paragraph. As Professors Park and Rogers have explained: ‘One reason why third-​party funding is difficult to define is that economic interests in a party or a dispute can come in many shapes and sizes’. 26.03 We will address the ‘many shapes and sizes’ below. However, whatever shape or size it may

come in, the third-​party funding of a litigant’s claims has raised challenging questions since antiquity. In ancient times, litigation was personal and a well-​aimed lawsuit could destroy a political enemy. Paying others to bring claims was therefore frowned upon by the ancient

1  Economic and Trade Agreement between Canada and the EU—​CETA ch. 8, http://​trade.ec.europa.eu/​ doclib/​docs/​2016/​february/​tradoc_​154329.pdf (last visited Nov. 15, 2017).

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I. Introduction Greeks as sycophancy and by the Romans as calumnia.2 In the Middle Ages, the English courts developed the doctrines of maintenance, champerty, and barratry3 to protect the justice system from abuse4 by feudal barons who would undermine competitors by paying their tenants to sue them.5 With third-​party funding of litigation outlawed, access to just­ ice was mostly restricted to those who could afford it. As the common law spread with the British Empire, the seeds of champerty and maintenance were sown in legal systems on every continent. By contrast, civil law countries never developed analogous doctrines. Pactum de quota litis contracts allowing a third party to share in the proceeds of a lawsuit were, in principle, recognized, although lawyers were supposed to abstain from such arrangements.6 It was the English philosopher and jurist, Jeremy Bentham, who began the attack on cham- 26.04 perty and maintenance in the mid-​nineteenth century. For him, these doctrines were ‘barbarous precautions’ restricting access to justice: My notion is, that there never was a time, that there never could have been, or can be a time, when the pushing of suitors away from court with one hand, while they are beckoned into it with another, would not be a policy equally faithless, inconsistent, and absurd. But, what everybody must acknowledge, is, that, to the times which called forth these laws, and in which alone they could have started up, the present are as opposite as light to darkness.7

The English courts began to limit the scope of application of maintenance and champerty in 26.05 the early 1900s.8 By the end of the twentieth century, the doctrines were only being applied to cases that would ‘undermine the ends of justice’.9 Then, in 2005, the English Court of Appeal declared its support for commercial funding that ‘facilitated access to justice’, provided that the claimant remains the ‘party primarily interested in the result of the litigation and the party in control of the conduct of the litigation’.10 This opened the door for the development of modern commercial funding in the UK. Lord Justice Jackson, in his review of civil litigation costs completed in 2009 (Jackson Report), concluded that: ‘Third party funding provides an additional means of funding litigation and, for some parties, the only means of funding litigation. Thus third party funding promotes access to justice’.11

  M. Radin, Maintenance by Champerty, 24 Cal. L. Rev. 48, 49 ff. (1935).  Osprey, Inc. v.  Cabana Ltd. P’ship, 532 S.E.2d 269, 273 (S.C. 2000)  (quoting In re Primus, 436 U.S. 412, 424 n.15 (1978)) (‘[P]‌ut simply, maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome; and barratry is a continuing practice of maintenance or champerty’), cited by the American Bar Association, Commission on Ethics 20/​20 Information Report to the House of Delegates, White Paper (2011) 9. 4  Radin, Maintenance by Champerty, supra note 2, 48, 65, 5   Damian Reichel, The Law of Maintenance and Champerty and the Assignment of Choses in Action, 10 Sydney L. Rev. 166 (1983). 6  Black’s Law Dictionary (9th ed. B. Garner ed., 2014). 7 J. Bentham, The Works of Jeremy Bentham (Bowring ed., 1843) III(1) William Tait , A Defence of Usury, Letter XII.7, Maintenance and Champerty. 8  Lord Neuberger, From Barratry, Maintenance and Champerty to Litigation Funding, Speech at Gray’s Inn (May 8, 2013) 6 [hereinafter Neuberger], https://​www.harbourlitigationfunding.com/​first-​annual-​lecture-​2/​ (last visited Nov. 15, 2017). 9  R (Factortame) v. Secretary of State for Transport (No. 8) [2003] QB 381 at 400, cited in Neuberger at 18. 10  Arkin v.  Borchard Lines Ltd. [2005] EWCA (Civ) 655 (‘Our approach is designed to cater for the commercial funder who is financing part of the costs of the litigation in a manner which facilitates access to justice and which is not otherwise objectionable. Such funding will leave the claimant as the party primarily interested in the result of the litigation and the party in control of the conduct of the litigation’) (Lord Phillips MR) v. at [40]. 11  Rupert Jackson, Review of Civil Litigation Costs ch. 11 (2009) [hereinafter Jackson]. 2 3

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Third-party Funding in Investment Treaty Arbitration 26.06 By 2013, Lord Neuberger, President of the English Supreme Court, was able to declare that:

The public policy rationale regarding maintenance and champerty has turned full circle. Originally their prohibition was justifiable as a means to help secure the development of an inclusive, pluralist society governed by the rule of law. Now . . . the exact reverse of the prohibition is justified for the same reason. The argument . . . appears positively to support the development of litigation funding.12 26.07 A  similar evolution can be traced in the US. Some states have abandoned champerty laws13

and, in those states that still have such laws, they are rarely applied.14 In a 2012 white paper, the American Bar Association Committee on Ethics concluded that: ‘Given that existing ethical and legal obligations of lawyers and their clients are already supposed to ensure that litigation be conducted in good faith and non-​frivolously, it is unclear why the historical concerns of the common law would justify today placing special burdens on litigation funded by third parties’.15

26.08 Most other common law jurisdictions, with the notable exception of Ireland,16 have moved in

the same direction. Champerty and maintenance have been limited in their scope of application or abolished altogether.17 Even Hong Kong18 and Singapore, which, until recently, had been among the most reticent jurisdictions when it came to third-​party funding, have moved to liberalize their laws to ensure they remain competitive as jurisdictions of choice for international arbitration. In a consultation paper issued in June 2016, Singapore’s Ministry of Law stated that: As a leading centre for international commercial arbitration, Singapore is cognisant of the practices and business requirements of commercial parties, many of whom choose to arbitrate in Singapore despite their dispute having no connection to the jurisdiction. Introducing third party funding in Singapore for international arbitration will allow international businesses to use the funding tools available to them in other centres, and promote Singapore’s growth as a leading venue for international arbitration.19

  See Neuberger, supra note 8, at 21.   For example, in 1997, the Massachusetts Supreme Judicial Court struck down the state’s champerty laws, stating that: ‘the decline of champerty, maintenance, and barratry as offenses is symptomatic of a fundamental change in society’s view of litigation—​from “a social ill, which, like other disputes and quarrels, should be minimized,” to “a socially useful way to resolve disputes” ’: see Saladini v. Righellis, 687 N.E.2d 1224, 1226 (Mass. 1997). See also Osprey, Inc. v. Cabana Ltd. P’ship, 532 S.E.2d 269, 273 (S.C. 2000) (abolishing champerty under South Carolina law). 14  Del Webb Communities, Inc. v. Partington, 652 F.3d 1145, 1156 (9th Cir. 2011), 1156–​57 (‘The consistent trend across the country is toward limiting, not expanding, champerty’s reach’). 15  American Bar Association, Commission on Ethics 20/​ 20 Information Report to the House of Delegates, White Paper (Feb. 2012) 9. 16  In a 2016 case, the Irish High Court made clear that it would continue to enforce a strict interpretation of champerty and maintenance. See Persona Digital Telephony Ltd. & Anor v. Minister for Public Enterprise & Ors [2016] IEHC 187, Judgment of Ms Justice Donnelly (Apr. 20, 2016). 17  For an overview of key third-​party funding markets, see L. Bench Nieuwveld & V. Shannon Sahani, Third Party Funding in International Arbitration (2d ed. 2017) [hereinafter Nieuwveld & Sahani]. 18  The Law Reform Commission of Hong Kong Report on Third-​ Party Funding for Arbitration issued in October 2016 recommended, inter alia, that:  ‘The Arbitration Ordinance should be amended to provide that Third Party Funding for arbitration taking place in Hong Kong is permitted under Hong Kong law’:  see Law Reform Commission of Hong Kong Third Party Funding for Arbitration Report (October 2016), Preliminary Recommendation 1.11, http://​www.hkreform.gov.hk (last visited Apr. 7, 2017)). On December 30, 2016 the Hong Kong government gazetted the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 through which this recommendation would be implemented. See http://​www.legco.gov.hk/​general/​english/​bills/​bill1617.htm (last visited Apr. 7, 2017). Copy of the draft bill, http://​www.legco.gov.hk/​yr16-​17/​english/​bills/​b201612301.pdf (last visited Apr. 7, 2017). The draft bill was passed by Hong Kong’s Legislative Council on June 14, 2017. See D. Thomson, Third-​Party Funding Gets All Clear in Hong Kong, Global Arbitration Review (June 14, 2017). 19  Singapore Government, Ministry of Law, Public Consultation on the Draft Civil Law (Amendment) Bill 2016 and Civil Law (Third Party Funding) Regulations 2016, ¶ 4. 12 13

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I. Introduction Singapore’s Civil Law Amendment Bill 38/​2016 permitting access to third party funding was passed on 10 January 2017.20 In civil law jurisdictions, the absence of any doctrine of champerty and maintenance has pro- 26.09 duced differing reactions to the emergence of modern third-​party funding. In Germany, the first modern commercial third-​party funding enterprise was able to emerge in the late 1980s without impediment from the local courts.21 In Switzerland, a law prohibiting third-​party funding was passed but then declared unconstitutional by the country’s Supreme Court on the basis that it restricted economic freedom.22 The French courts have taken the view that commercial third-​party funding contracts are enforceable, even if they are conceptually alien to French law.23 In May 2017, the council of the Paris Bar issued a resolution declaring that: The practice of third-​party funding is favorable to the interests of those seeking justice and to the lawyers registered with the Paris Bar, particularly in international arbitration. No provision of French law prevents a party from resorting to the services of a third party to fund an international arbitral proceeding.24

Ultimately, the underlying reason for the sea-​change in the approach to funding is quite 26.10 simple—​it promotes access to justice. As the ICCA Queen Mary University London Task Force on Third-​Party Funding in International Arbitration (ICCA Queen Mary University Task Force) observed in 2015, facilitating access to justice is of particular importance in the field of investment treaty arbitration because: ‘[t]‌he respondent is often alleged of having unlawfully expropriated the claimant, thereby causing claimant’s impecuniosity. For this reason, access to justice for claimants can be an even more delicate issue in investment arbitration disputes’.25 In this sense, funding helps to level the playing field for investors who have been powerless against adverse state action which has wiped out their revenue generating business. Through funding, they can ensure that the state is held to account pursuant to the international standards it has subscribed in the relevant treaty. This situation is reflected in the increasing number of investment arbitration cases in which funding has been used.26 20  Singapore’s Civil Law Amendment Bill abolishes the common law tort of champerty and maintenance; permits third-​party funding in categories of dispute resolution that will be listed in the Civil Law (Third Party Funding) Regulations; permits the imposition of conditions on third-​party funders policed by the threat of inability to enforce rights under funding contracts; and permits the recommendation of third-​party funders by lawyers to their clients provided lawyers derive no financial benefit from doing so. See Civil Law Amendment Bill 38/​2016, https://​www.parliament.gov.sg/​sites/​default/​files/​Civil%20Law%20 %28Amendment%29%20Bill%2038-​2016.pdf (last visited Apr. 7, 2017). 21  P. Pinsolle, Le financement de l’arbitrage par les tiers, 2 Revue de l’arbitrage, 385, 389 (2011) [hereinafter Pinsolle] (‘On évoque en général la société Foris AG, société cotée en Allemagne, comme l’un des précurseurs de ce système de financement par les tiers’). 22  Bundesgerichtsentscheide 131 I 223, 2P.4/​2004 (Dec. 10, 2004). 23  See Pinsolle, supra note 21, at 390. 24  Rapport sur le financement de l’arbitrage par les tiers (Ordre des Avocats de Paris, 2 May 2017), citing Résolution adoptée à la séance du Conseil de l’Ordre du 21 février 2017, http://​www.avocatparis.org/​mon-​ metier-​davocat/​publications-​du-​conseil/​rapport-​sur-​le-​financement-​de-​larbitrage-​par-​les-​tiers (last visited May 11, 2017). 25  ICCA-​QMUL Task Force on TPF in International Arbitration, Draft Report on Security for Costs and Costs (Nov. 1, 2015)  14–​15. See also G. Born, International Commercial Arbitration 2496 (2014) (‘Tribunals may conclude, where the facts justify it, that the party seeking security is, at least in part, responsible for its counter-​party’s financial condition and is therefore not entitled to protection against that condition’). 26  There are at least 18 publicly known examples of investment treaty cases where claimants have received third-​party funding. These include S&T Oil v.  Romania; Teinver v.  Argentina, Fuchs & Kardassopoulos v.  Georgia, Oxus Gold v.  Uzbekistan, S&T Oil v.  Romania, Guaracachi America and Rurelec v.  Bolivia, Giovanni Alemanni & Others v. Argentina, Crystallex v. Venezuela; Rusoro v. Venezuela; RSM Production Corp. v.  Saint Lucia; Adem Dogan v.  Turkmenistan; Alapli Elektrik v.  Turkey; EuroGas Inc & Belmont Resources v. Slovak Republic; Muhammet Çap & Sehil Insaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan;

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Third-party Funding in Investment Treaty Arbitration 26.11 The growth in commercial third-​party funding has nonetheless provoked criticism. The

Institute for Legal Reform,27 set up by the US Chamber of Commerce, has campaigned vociferously against third-​party funding. A strong motive for this opposition seems to be a fear among businesses that third-​party funding will promote more class action litigation.28 Perhaps not surprisingly, sovereign states facing claims under investment treaties are reported to perceive such funding as an ‘irritant’.29 Nevertheless, tribunals in investment treaty cases have generally been accepting of third-​party funding in cases before them. There have, however, been rare dissenting voices. The words of one arbitrator in a minority opinion describing third-​party funding as a ‘new industry of mercantile adventurers’30 are often cited by those critical of commercial funding. The overarching objection most commonly given by those who are opposed in principle to third-​party funding is that it can encourage frivolous or meritless claims,31or provoke inflated claims.32 In the following sections of this chapter, we turn first to examine this question of principle before examining the types of third-​party funding, regulation of third-​party funding, and the positions taken by international investment treaty tribunals on certain key questions relating to third-​party funding.

II.  Does Third-​party Funding Provoke Frivolous Claims? 26.12 When a third-​party funder analyses a claim, it necessarily undertakes a thorough due dili-

gence process because its investment is only as good as the litigant’s chance of winning. The UK Jackson Report took this view in 2009: ‘Third party funding tends to filter out unmeritorious cases, because funders will not take on the risk of such cases. This benefits opposing parties’.33 Third-​party funders have concurred with this view, explaining that the financing of claims that are frivolous or manifestly without merit would be economically irrational.34 Others have suggested, however, that an excess of capital supply in the funding market could lead to a funding ‘bubble’35 that would incite funders to chase weak claims. This view holds that any claim, no matter how risky, will find a funder at the right price. Funders suggest, however, that the process of assessing risk is more complex. Mick Smith, founder of funder Calunius Capital, has explained that: ‘[d]‌ue diligence is not an exercise

Corona Materials LLC v.  Dominican Republic; South American Silver Ltd. v.  Bolivia; Stans Energy v. Kyrgyzstan; Infinito Gold v. Costa Rica; Cortec Mining Kenya Ltd., Cortec (Pty) Ltd. & Stirling Capital Ltd. v. Kenya; Gabriel Resources Ltd. & Gabriel Resources v. Romania. Full citations are given for these cases where they are referred to below. 27  See J. Beisner, J. Miller & G. Rubin, Selling Lawsuits, Buying Trouble—​Third-​Party Litigation Funding in the Unites States (2009) [hereinafter Beisner et al.]. See also Before the Flood, An Outline of Oversight Options for Third Party Funding in England & Wales (2016). 28  See, e.g., Beisner et al., supra note 27. 29  G. Kahale, III, Is Investor-​State Arbitration Broken?, 9(7) Transn’l Disp. Mgmt’ 33 (2012) [hereinafter Kahale] (‘The fact is that the relatively new phenomenon of third party funding is another unanticipated development and an irritant that is making investor-​state arbitration more unpopular than it already has been with states’). 30  See RSM Production Corporation v. St Lucia, ICSIDE Case No. ARB/​12/​10, Decision on Security for Costs (Aug. 14, 2014), assenting reasons of Gavan Griffith, ¶ 14. 31  See Beisner et al., supra note 27. 32 Kahale, supra note 29, at 33. 33  Jackson, supra note 11, ch. 11, ¶ 1.2(v). 34  C. Bogart, RSM v. St Lucia: Why Griffith Was Wrong on Security for Costs, Global Arb. Rev. (Sept. 11, 2014). 35  See Corporate Europe Observatory, Speculating on Injustice: Third-​Party Funding of Investment Disputes (Nov. 27, 2012), https://​corporateeurope.org/​trade/​2012/​11/​chapter-​5-​speculating-​injustice-​third-​party-​ funding-​investment-​disputes (last visited Nov. 15, 2017).

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II.  Does Third-party Funding Provoke Frivolous Claims? in identifying only cases without risk; rather a third-​party funder in due diligence seeks to confirm that the case carries the right balance of expected return versus expected risk . . .’.36 Establishing the right balance of risk and reward therefore requires funders to engage in a ‘multi-​disciplinary and rigorous’37 due diligence exercise.38 To date, there is no evidence that this process has led to an increase in meritless claims backed by third-​party funders. Indeed, studies suggest that third-​party funders ultimately finance only a small proportion of the claims presented to them.39 Professor Shannon points out that claimants with weak claims often benefit from the advice they receive from funders who explain their reasons for rejecting a claim.40 If this is the case, third-​party funders may sometimes prevent weak or frivolous claims from being brought. When it comes to investment treaty arbitrations, there are other incentives not to fund weak 26.13 or meritless claims. Article 36(3) of the ICSID Convention allows the ICSID Secretary General to refuse to register claims that are manifestly outside the jurisdiction of the ICSID. Rule 41(5) of the ICSID Rules allows a respondent to seek the early dismissal of claims that are ‘manifestly without merit’.41 Claims that are founded on weak jurisdictional premises can often be weeded out by bifurcating proceedings. As for the question of whether third-​party funding encourages the inflation of claims, it is 26.14 important to remember that an arbitration claim is an asset, a chose in action in the common law conception. The value of such an asset will ultimately depend on the amount an arbitral tribunal decides the claim is worth—​if successful. Clearly, a third-​party funder interested in the outcome of the dispute will encourage a claimant to seek the full value of the asset claimed but the same claimant will be just as motivated to seek the same full value if it is self-​funding. A decision to claim an inflated value for an asset is more likely to be the result of poor expert or legal advice. Third-​party funders of international investment treaty claims are usually sophisticated actors whose in-​house teams include experts in both the law and financial matters. They are well placed to provide a claimant with a second opinion as to the probable value of a claim. They understand that the credibility of a claim in the eyes of a tribunal can suffer if the value of the claim is inflated.

36  See Mick Smith, Mechanics of Third-​Party Funding Agreements: A Funder’s Perspective, in Nieuwveld & Sahani, supra note 17, Chapter 2, 33 [hereinafter Mick Smith]. 37  See J.  von Goeler, Third-​ Party Funding in International Arbitration and its Impact on Procedure, 35 International Arbitration Law Library 13 (2016). For a detailed description of a typical due diligence exercise, see Mick Smith, supra note 36. 38  C.  Bowman, K.  Hurford & S.  Khouri, Third Party Funding in International Commercial and Treaty Arbitration—​A Panacea or a Plague? A Discussion of the Risks and Benefits of Third Party Funding, 8(4) TDM 1, 5 (2011). Some funders state that they would only consider cases with a 70% chance or greater success rate. C. Veljanovski, Third Party Litigation Funding in Europe, 8 J. Law, Econ. & Pol’y 405, 425 (2011). 39  V. Shannon Sahani, The Impact of Third-​Party Funders on the Parties They Decline to Finance, at 1, http://​ arbitrationblog.kluwerarbitration.com/​2015/​07/​06/​the-​impact-​of-​third-​party-​funders-​on-​the-​parties-​they-​ decline-​to-​finance/​ (last visited Nov. 15, 2017). See also C.  Veljanovski, Third-​Party Litigation Funding in Europe, Paper presented to Third Party Financing of Litigation: Civil Justice Friend or Foe? Conference, Searle Civil Justice Institute, Law and Economics Center, George Mason University (Nov. 9, 2011)  31, http://​ www.masonlec.org/​site/​files/​2011/​07/​Veljanovski-​Third-​Party-​Funding-​of-​Litigation-​in-​Europe-​Draft-​2-​ 30-​October-​2011.pdf (last visited May 11, 2017). 40  See Shannon Sahani, supra note 39. 41  Examples of cases in which art. 41(5) of the ICSID Rules has successfully been invoked to strike out a claim are: Global Trading Resource Corp. and Globex International, Inc v. Ukraine (ICSID Case No. ARB/​ 09/​11) and RSM Production Corporation and Others v.  Grenada (ICSID Case No. ARB/​10/​6); see also K. Yannaca-​Small & D. Earnest, The Fate of Frivolous and Unmeritorious Claims, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 7 (K. Yannaca-​Small ed., 2018).

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Third-party Funding in Investment Treaty Arbitration

III.  The Different Forms of Funding 26.15 Having addressed the criticisms of the basic concept of funding, it is important to analyse

the ‘many shapes and sizes’ of third-​party funding, to use the phrase of Professors Park and Rogers. In essence, it can take the form of: (a) non-​recourse financing with repayment contingent on success; (b) financing by lawyers; (c) insurance; (d) equity financing; (e) debtor in possession financing; (f ) pro bono or charitable funding; and (g) common interest funding.42

A. Non-​recourse Financing 26.16 Non-​recourse financing with repayment being contingent on success is probably the most

common form of commercial third-​party funding. The funding arrangement usually begins with the funder conducting due diligence on the underlying claim. If the third-​party funder decides to proceed, a funding agreement is concluded with the claimant, through which the funder agrees to pay legal and other fees connected with an arbitration in return for a proportion of any sums successfully recovered. Usually, the third-​party funder will be kept informed of the progress of the arbitration but control of the arbitration and any decision to settle will remain with the funded claimant. Depending on the jurisdiction in which a funder operates, such a ‘hands off’ approach on the part of funders may also be mandated by local ethical rules. Non-​recourse financing can be provided for single claims, but commercial funders can also provide portfolio financing for multiple claims. Such portfolio financing can be used as a risk management tool by companies with exposure to frequent claims or by law firms who wish to offer their clients alternative financing arrangements.

B. Financing by Lawyers 26.17 Lawyers can finance cases through pro bono arrangements or by using contingency fees or

conditional fees. Contingency fees (‘no-​win-​no-​fee’) are contingent on the lawyer achieving a successful outcome in the case. Traditionally, such fees are valued as a percentage of the sums awarded. In such an arrangement, the lawyer assumes the risk of not being paid in the event of an unsuccessful outcome. Conditional fee arrangements commonly involve lawyers offering a discount and then obtaining a refund of the discount and an uplift on their fees in the event of a successful outcome. How these arrangements work or how they are constructed varies from jurisdiction to jurisdiction, depending on the rules of local bar associations. Lawyers in some countries such as the United States have been able to use contingent or conditional fees for a long time. Other jurisdictions, such as the UK, have more recently begun to permit conditional and, more recently, contingency fee arrangements. By contrast, some jurisdictions, such as Hong Kong, prohibit lawyers from working under contingency or conditional fee arrangements.43 Lawyers can turn to third-​party funders to pass on some or all of the risk they incur when they finance a case through a contingency or conditional fee arrangement. Some third-​party funders offer law firms portfolio funding, through which a number of cases taken on by the law firm are funded by the third-​party funder en bloc. This allows law firms to reduce the risk to themselves involved in financing, allowing more cases to be taken on.44

42  For more detailed analysis of the different types of third-​party funding, see Nieuwveld & Sahani, supra note 17, at 5–​9. 43  The Law Reform Commission of Hong Kong, Third-​ Party Funding For Arbitration, Sub-​committee Consultation Paper, at 13, http://​www.hkreform.gov.hk (last visited Apr. 7, 2017). 44  See, e.g., ‘Portfolio & complex financing’, http://​www.burfordcapital.com/​customers/​portfolio-​ financing/​(last visited May 11, 2017).

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III.  The Different Forms of Funding C. Insurance Under a traditional insurance policy, an insured will be covered for a particular risk—​for 26.18 example the political risk that an asset may be expropriated. If the risk materializes, then the insurer will pay the insured. At this point, the insurer will then assume subrogated rights to control the insured’s claim from that time on—​although the insured continues to be the claimant in the arbitration. Insurers also provide ‘before-​the-​event’ (BTE) and ‘after-​the-​ event’ (ATE) insurance to cover legal fees and expenses. BTE and ATE insurance does not usually cover an insured for the risk of having to pay a judgment or award. For this reason, BTE and ATE policies do not usually allow insurers to exercise control over a claim. BTE insurance covers the risk that legal fees may have to be incurred in the future if a claim is brought. ATE insurance covers the risk of costs in an already existing dispute. Premiums are usually paid in tranches as fees in an arbitration are incurred. ATE insurance is expensive because the risk insured against (paying the claimant’s own legal fees and, potentially, an order to pay the opposing party’s fees) is a high probability when the insurance is purchased. As a result, if a claimant is required not only to pay a third-​party funder to cover its own fees but also to take out ATE insurance to cover the risk of an adverse costs order, the cost of funding an arbitration can increase considerably.

D. Equity Financing A company faced with government measures affecting its key income generating asset may 26.19 need cash to fund both an arbitration and the day-​to-​day running of the company until the asset or its value can be recovered through the arbitration. Capital to achieve both of these goals can be obtained by selling shares in the company to an equity investor. To fund a company involved in an arbitration in this way differs significantly from the non-​recourse model of third-​party funding. The conditions under which such an equity investment is made may or may not include provisions that are dependent on the outcome of the dispute. For this reason, some equity investments made to support a company whose key asset may be the subject of an arbitration might not satisfy the definition of third-​party funding cited at the beginning of this section. An equity investor becomes more directly involved with all of the affairs of a company by being exposed to broader risks than simply the outcome of an arbitration. The investor may remain involved in the company after the arbitration is concluded. Depending on the amount of stock purchased and the terms on which it is purchased, the equity investor can receive some representation on a company’s board, allowing it to receive information about the conduct of the arbitration and to make contributions to strategy. This differs significantly from the non-​recourse financing model where funders prefer, or are obliged, to take a hands-​off approach to the conduct of the dispute. The actions of an equity investor’s representative on the board of a company will be governed by the complex ethical rules relating to the duties of directors towards the company in question.

E. Debtor in Possession Financing Debtor in Possession (DIP) financing is designed for companies under the Chapter 11 bank- 26.20 ruptcy process.45 Such funding can allow a technically insolvent company to continue to function under the supervision of a bankruptcy court, while the company seeks to recover a lost asset or the value of that asset through arbitration. DIP financing usually has priority over existing debt, equity, and other claims.

45  Debtor-​ In-​Possession Financing:  DIP Financing Definition | Investopedia, http://​www.investopedia. com/​terms/​d/​debtorinpossessionfinancing.asp#ixzz4LzenUfHs.

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Third-party Funding in Investment Treaty Arbitration F.  Pro Bono or Charitable Funding 26.21 As the CETA definition of third-​party funding suggests, it is possible for a third party to

fund a claim through a donation without having a financial interest in the outcome of the dispute. Sometimes, such funding takes place for moral or political reasons—​for example, where the Campaign for Tobacco-​Free Kids (a body financed by the Bloomberg Foundation) funded the defence of Uruguay against the claim brought by the Philip Morris tobacco company.46

G. Common Interest Funding 26.22 In certain cases, claimants in investor-​state arbitrations have been funded by third parties

who have an interest in the issue underlying the dispute.47 Such funders may fund ‘through a donation or grant’ but they do not necessarily benefit from the financial result of the arbitration. Instead, they may be seeking to establish points of principle that could be applicable in other similar cases. Some arbitral rules48 permit the filing of amicus curiae briefs by third parties. It is possible that those filing such briefs may be funded by third parties.

IV.  Regulation of Litigation Funding 26.23 The wide variety of funding arrangements identified makes it very difficult to satisfy calls for

mandatory regulation of all third-​party funding. In fact, each separate approach to funding implies different regulatory requirements. Lawyers financing cases are subject to the ethical rules of the bar where they practise. Insurers must follow rules established by national insurance regulators. Funders buying equity stakes in companies are subject to rules imposed by the securities authorities in the country where a claimant company is incorporated. DIP financers must work under the supervision of the court administering the bankruptcy protection regime. By contrast, commercial funders working under the non-​recourse finance model have only recently become subject to voluntary self-​regulation or compulsory regulation by national authorities. The Jackson Report recommended, in 2009, that: [a]‌satisfactory voluntary code, to which all litigation funders subscribe, should be drawn up. This code should contain effective capital adequacy requirements and should place appropriate restrictions upon funders’ ability to withdraw support for ongoing litigation.49

26.24 In 2012, the Association of Litigation Funders of England and Wales (ALF) issued a Code

of Conduct for Litigation Funders. Voluntary compliance with this ALF code is a condition for third-​party funders to join.50 The ALF describes the key aspects of its code of conduct as follows:

46  L.E. Peterson, ‘Uruguay hires law firm and secures outside funding to defend against Philip Morris claim; not the first time an NGO offers financial support for arbitration’, (2012) IAReporter, cited in Pinsolle, supra note 21, at 394–​95. 47  See, e.g., two cases in which bondholders were suing Argentina:  Giovanni Alemanni and Others v. Argentine Republic, ICSID Case No. ARB/​07/​8, Decision on Jurisdiction and Admissibility (Nov. 17, 2014); Abaclat and Others v. Argentine Republic, ICISD Case No. ARB 07/​5, Decision on Jurisdiction and Admissibility (Aug. 4, 2011). See also Quasar de Valors and Others v. Russian Federation, SCC Case No. 24/​ 2007, Award (July 20, 2012). 48  See, e.g., the ICSID Arbitration Rules, ICSID Additional Facility Arbitration Rules & the UNCITRAL Rules on Transparency. 49  Jackson, supra note 11, ch.11 ¶ 6.1(i). 50  L. Bench Nieuwveld & V. Shannon, Third Party Funding in International Arbitration 101 & Appendix I (2017).

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V.  Jurisdiction and Admissibility Capital adequacy of funders The code requires funders to maintain adequate financial resources at all times in order to meet their obligations to fund all of the disputes they have agreed to fund, and to cover aggregate funding liabilities under all of their funding agreements for a minimum period of 36 months. Termination and approval of settlements The code provides that funders must behave reasonably and may only withdraw from funding in specific circumstances. Where there is a dispute about termination or settlement, a binding opinion must be obtained from an independent QC, who has been either instructed jointly or appointed by the Bar Council. Control Under the code, funders are prevented from taking control of litigation or settlement negotiations and from causing the litigant’s lawyers to act in breach of their professional duties. This is in line with the practice, in England & Wales, of keeping the roles of funders, litigants and their lawyers separate. Because of their interest in the litigation, funders may ask to be kept informed of the progress of the case.51

Hong Kong’s new legislation permitting third-​party funding for arbitration52 provides for the 26.25 Ministry of Justice to appoint an authorized body to issue a code of practice for third-​party funders. Singapore’s Civil Law Amendment bill passed in 2017 also allows for third-​party funding to be regulated.53 National governments and bar associations will continue to debate what kind of ethics should 26.26 be applied to third-​party funding and how the industry should be regulated. However, many of the ethical and procedural issues that arise in the context of the relationship between a funder and the party it funds are not relevant from the perspective of a tribunal in an investment treaty arbitration. It is only in more limited circumstances that the existence of a third-​party funder, or the terms on which such a funder has been engaged, may become issues of relevance to an arbitral tribunal. Such issues include: (i) jurisdiction and admissibility; (ii) the allocation of costs and security for costs; and (iii) disclosure of third-​party funding agreements. These issues are examined below.

V.  Jurisdiction and Admissibility Over the last two decades, tribunals in investment treaty cases have been asked to consider 26.27 whether receipt of third-​party funding affects the jurisdiction of the tribunal or the admissibility of claims. In CSOB v Slovakia,54 the respondent argued that assignments of the benefit of the claim by the claimant (to the Czech Republic) had: [t]‌ransformed the Czech Republic into the real party in interest because it became, for all practical purposes, the beneficial owner of the disputed claims and because Claimant, as a result, no longer has a real economic interest in the outcome of these proceedings.

51  ALF Code of Conduct, key aspects, http://​associationoflitigationfunders.com/​code-​of-​conduct/​ (last visited May 11, 2017). 52  Hong Kong Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Bill 2016 arts. 98O and 98W, http://​www.legco.gov.hk/​yr16-​17/​english/​bills/​b201612301.pdf (last visited Apr. 7, 2017). 53  Article 5(B)(8) permits Singapore’s Minister of Justice to make regulations necessary for the implementation of the new rules. See Civil Law Amendment Bill 38/​2016, https://​www.parliament.gov.sg/​sites/​default/​ files/​Civil%20Law%20%28Amendment%29%20Bill%2038-​2016.pdf (last visited Apr. 7, 2017). 54  Československá Obchondni Banka, A.S. (CSOB) v.  Slovak Republic ARB/​ 97/​4, ¶ 30, Decision on Jurisdiction (May 24, 1999) [hereinafter CSOB v. Slovakia].

707

Third-party Funding in Investment Treaty Arbitration The tribunal rejected the respondent’s arguments for timing reasons55 but observed, obiter dictum, that: Absence of beneficial ownership by a claimant in a claim or the transfer of the economic risk in the outcome of a dispute should not and has not been deemed to affect the standing of a claimant in an ICSID proceeding, regardless whether or not the beneficial owner is a State party or a private party.56

Applying this principle, if a claimant decides to assign some or all of the eventual proceeds of an arbitration to a third-​party funder, this would not affect that claimant’s standing. The claimant would still be the true party at interest. 26.28 More recently, the potential effects of third-​party funding on jurisdiction have been examined

in a series of cases57 involving collective claims financed by common interest funders who were supporting the claims of numerous bondholders against Argentina.

26.29 In Ambiente v Argentina,58 the claimants were funded by NASAM, a Luxembourg entity that

did not stand to gain financially from its funding arrangement. Argentina argued that this distinguished NASAM from a genuine third-​party funder (to which Argentina expressed no objection in principle). NASAM was therefore the real party at interest and not the claimants.59 The tribunal rejected this argument. In Abaclat v Argentina, the claimants were funded through a mandate package that required them to cede much of the control of their claims. The respondent argued that this deprivation of the claimants’ procedural rights made their claims inadmissible. The tribunal disagreed, holding that: It is undeniable that the TFA Mandate Package has the effect to depriving Claimants of a substantial part of their procedural rights, such as the decision on how to conduct the proceedings, the right to instruct the lawyers, etc. However, as mentioned above (see §§ 457-​465), the setting of strict boundaries in relation to Claimants’ procedural rights has been consciously accepted by Claimants in order to benefit from the collective treatment of their claims before an ICSID tribunal. In addition, the Tribunal did not find that such agreement was affected by any vice which would render it invalid. Consequently, the Tribunal sees no reason to disregard—​as a matter of principle—​Claimants’ conscious choice.60

26.30 In Alemanni v Argentina, multiple claimants were also funded by NASAM. This led Argentina

to argue that the claimants had ‘no effective voice over who would represent them’ and that they had ‘renounced any control over the presentation or handling of their case’.61 The tribunal rejected this argument on the basis that all that the ICSID Convention and Rules require of a party is consent and authorization. Consent to ICSID jurisdiction is usually made on behalf of a party in a notice of dispute or request for arbitration62 through counsel duly authorized with a power of attorney. As already explained, the same tribunal went on to

  Id. ¶¶ 31–​32.   Id. 57  For a review of these cases, see J.-​ C. Honlet, Recent Decisions on Third-​Party Funding in Investment Arbitration, 30(3) ICSID Rev. 699 (2015). 58  Ambiente Ufficio S.p.A. and Others v. Argentine Republic, ICSID Case No. ARB/​08/​9, Decision on Jurisdiction and Admissibility (Feb. 8, 2013) [hereinafter Ambiente v. Argentina]. 59  Id. ¶ 186. 60  Abaclat and Others v. Argentine Republic, ICISD Case No. ARB 07/​5, Decision on Jurisdiction and Admissibility (Aug. 4, 2011), ¶ 546 [hereinafter Abaclat v. Argentina]. 61 Giovanni Alemanni and Others v.  Argentine Republic, ICSID Case No. ARB/​ 07/​8, decision on Jurisdiction and Admissibility (Nov. 17, 2014), ¶ 276 [hereinafter Alemanni v. Argentina]. 62  Id. ¶ 277. 55 56

708

VI.  Third-party Funding and Liability for Costs observe that the existence of third-​party funding itself was no reason to object to the admissibility of a request to arbitrate.63 In Quasar de Valores and others v Russian Federation, the claimant (a small investor in Yukos) 26.31 was funded by Menatep, a company that had its own separate arbitration against Russia that might have benefited from the result of Quasar de Valores’ claim. The tribunal rejected Russia’s assertion that the claimants had no stake in the claim because they were not the domini litis when it came to choosing counsel,64 holding that: [t]‌here is no reason of principle why [Claimants] were not entitled to pursue rights available to them under the BIT, and to accept the assistance of a third party, whose motives are irrelevant as between the disputants in this case. Ultimately, the Respondent’s complaint, in the event its liability is established, can hardly be raised against the Good Samaritan, but rather against its own officials who acted in such a way as to give rise to that liability.65

The tribunal in RosInvestCo v Russia emphasized the importance of looking at the definition 26.32 of investor in a given treaty. Russia had argued that a funding arrangement had made the claimant a mere nominal owner but the tribunal rejected this, declaring that it was required by Article 31 of the Vienna Convention on the Law of Treaties to apply the plain meaning of the broadly worded definition of investor in the applicable treaty.66 The respondent state in Teinver v Argentina67 argued that the claimants had transferred their 26.33 rights to Burford, a third-​party funder, after the commencement of the arbitration. The tribunal refused to hold, however, that this could have any impact on jurisdiction, given that jurisdiction is usually to be assessed as at the date an arbitration claim is filed and not afterwards.68

VI.  Third-​party Funding and Liability for Costs Third-​party funding has most commonly been raised as an issue with investment treaty ar- 26.34 bitration tribunals when it comes to costs. In particular, tribunals have been asked to decide whether a successful party who had to engage a third-​party funder to pursue its claim can (i) recover its ordinary arbitration costs; or (ii) recover the additional costs and recovery that it has to hand over to the funder. Where a claimant is funded, tribunals have (iii) also had to wrestle with applications for security for costs from respondent states.

A. The Right to Recover Costs if Successful By contrast with the practice of the International Court of Justice,69 there is no firmly es- 26.35 tablished principle governing responsibility for costs in investment treaty arbitration. Article

  Id. ¶ 278.  Quasar de Valors and Others v.  Russian Federation, SCC Case No. 24/​2007, Award (July 20, 2012), ¶ 31. 65  Id. ¶ 33. 66  RosInvestCo UK Ltd. v. Russian Federation, SCC Case No. V079/​2005, Final Award (Sept. 12, 2010), ¶¶ 322–​23 [hereinafter RosInvestCo v. Russia]. 67  Teinver SA, Transportes de Cercanías SA and Autobuses Urbanos del Sur SA v. Argentine Republic, ICSID Case No. ARB/​09/​1, Decision on Jurisdiction (Dec. 21, 2012) [hereinafter Teinver v. Argentina]. 68  Id. ¶¶ 255–​56. 69  Statute of the International Court of Justice (Oct. 24, 1945)  art. 64:  ‘Unless otherwise decided by the Court, each party shall bear its own costs’ and Statute of the Permanent Court of International Justice (September 1921). See also M. Hodgson, Costs in Investment Treaty Arbitration: The Case for Reform, 11(1) TDM 1 (2014). 63 64

709

Third-party Funding in Investment Treaty Arbitration 42 of the UNCITRAL Rules establishes a default rule that ‘costs of the arbitration shall in principle be borne by the unsuccessful party’. The ICSID Convention70 adopts a more neutral approach on this issue by giving tribunals a broad discretion when it comes to awarding costs.71 As Professor Schreuer explains: ‘Neither the Convention nor the attendant Rules and Regulations offer substantive criteria for the tribunals’ decision on which party should bear the costs. Possible principles are the equal sharing of costs, the “loser pays” maxim, or the use of costs as a sanction for procedural misconduct’.72 As a result, the majority of ICSID tribunals have held that parties should bear their own costs, regardless of whether they win or lose.73 Some have adopted a ‘loser pays’ approach,74 but others have applied a hybrid approach75 by taking into account factors such as the relative success of claims and defences and amounts claimed, as opposed to amounts awarded.76 The question then arises—​should the existence of third-​party funding be a factor that is taken into account in this process? The tribunals that have so far examined this issue have concluded that it should not. 26.36 In Kardassopoulos and Fuchs v Georgia, the respondent state argued that the successful claim-

ants should not be entitled to recover their costs because they had received third-​party funding. The tribunal rejected this argument, declaring that:  ‘The Tribunal knows of no principle why any such third party financing arrangement should be taken into consideration in determining the amount of recovery by the Claimants of their costs’.77 These words were cited with approval by the annulment committees in RSM v Grenada78 and ATA v Jordan.79 In Siag v Egypt,80 the tribunal allowed a claimant who had been funded by its lawyer to recover the fees payable to that lawyer at normal hourly rates.

70  Article 61(2) of the ICSID Convention states that: ‘the Tribunal shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall be paid’. Similarly, art. 58(1) of the ICSID Additional Facility Rules establishes that:  ‘Unless the parties otherwise agree, the Tribunal shall decide how and by whom the fees and expenses of the members of the Tribunal, the expenses and charges of the Secretariat and the expenses incurred by the parties in connection with the proceeding shall be borne’. 71  ICCA-​QMUL Task Force on TPF in International Arbitration, Draft Report on Security for Costs and Costs, supra note 25, at 7. 72 C. Schreuer, The ICSID Convention: A Commentary 1224 (2001), cited in Siag and Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​15, Award (June 1, 2009), ¶ 616. 73  See L.E.S.I. S.p.A. & ASTALDI S.p.A. v. République Algérienne Démocratique et Populaire, ICSID Case No. ARB/​05/​3, Award (Nov. 12, 2008), ¶ 186. See also Alasdair Ross Anderson and Others v. Republic of Costa Rica, ICSID Case No. ARB(AF)/​07/​3, Award (May 19, 2010), ¶¶ 62–​64. 74  See, e.g., ADC Affiliate Ltd. & ADC & ADMC Management Ltd. v. Republic of Hungary, ICSID Case No. ARB/​03/​16 Award (Oct. 2, 2006), ¶¶ 531–​33. See also Gemplus S.A., SLP S.A., & Gemplus Industrial S.A. de C.V. v. United Mexican States, ICSID Case No. ARB(AF)/​04/​3 Award (June 16, 2010), ¶¶ 17–​22. 75  See Hodgson, supra note 69, at 2–​3. 76  See, e.g., Helnan International Hotels A/​ S v.  Arab Republic of Egypt, ICSID Case No. ARB/​05/​ 19, Award (July 3, 2008), ¶¶ 173–​74; Occidental Petroleum Corporation & Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/​06/​11, Award (Oct. 5, 2012), ¶¶ 873–​ 74; EDF (Services) Ltd. v. Romania, ICSID Case No. ARB/​05/​13, Award (Oct. 8, 2009), ¶¶ 327–​29. 77  Kardassopoulos & Fuchs v. Republic of Georgia, ICSID Case Nos. ARB/​05/​18 and ARB/​07/​15, Award (Mar. 3, 2010), ¶ 691. 78 RSM Production Corporation v.  Grenada, ICSID Case No. ARB/​ 05/​14 (Annulment Proceeding), Order of the Committee Discontinuing the Proceeding and Decision on Costs (Apr. 28, 2011), ¶ 68. 79  ATA Construction, Industrial & Trading Company v. Hashemite Kingdom of Jordan, ICSID Case No. ARB/​08/​2 (Annulment Proceeding), Order Taking Note of the Discontinuance of the Proceeding (July 11, 2011), ¶ 34. 80  Siag and Vecchi v. Arab Republic of Egypt, ICSID Case No. ARB/​05/​15, Award (June 1, 2009) [hereinafter Siag v. Egypt].

710

VI.  Third-party Funding and Liability for Costs The 2015 ICC Commission Report on Decisions on Costs in International Arbitration also 26.37 concluded that costs of an arbitration paid by a third-​party funder should be recoverable: 86. The rationale behind allocating costs to a successful party is that the party should not be out of pocket as a result of having to seek adjudication to enforce or vindicate its legal rights . . . 87. Where a successful claimant or counterclaimant has been funded by a third party, the third-​party funder is usually repaid (at least) the costs of the arbitration from the sum awarded. Therefore, the successful party will itself ultimately be out of pocket upon reimbursing such costs to the third-​party funder and may therefore be entitled to recover its reasonable costs, including what it needs to pay to the third-​party funder, from the unsuccessful party. The tribunal will need to determine whether these costs were actually incurred and paid or payable by the party seeking to recover them, and were reasonable. The fact that the successful party must in turn reimburse those costs to a third-​party funder is, in itself, largely immaterial.81

B. Recovery of Funding Costs Tribunals in investment treaty arbitrations have arrived at different conclusions when it 26.38 comes to deciding whether the additional costs payable by a successful claimant to a third-​ party funder should be recoverable. Some, for example, have allowed recovery of administrative costs82 and others have not.83 Should the costs payable to a third-​party funder be recoverable—​and, if so, should they be viewed as part of a costs award or part of the damages claimed? In 2015, the ICCA Queen Mary University London task force suggested, in its draft report, that funding costs should not be recoverable: It is not appropriate for tribunals to award funding costs (such as a conditional fee, ATE premium, or litigation funder’s return), as they are not procedural costs incurred for the purpose of an arbitration. The success portion payable to a third-​party funder results from a trade-​off between the funded party and the funder, where the funder assumes the cost and risk of financing the proceedings and receives a reward if the case is won. This agreement is not linked to the arbitration proceedings as such. The reasonable legal fees incurred by a funded party should remain recoverable.84

In the same year, however, the ICC Commission Report on Decisions on Costs in 26.39 International Arbitration reached a different view, suggesting that third-​party funding costs may, in certain circumstances, be recoverable: 92. In reality, funding arrangements are rarely limited solely to the costs of the arbitration. Usually, the third-​party funder will require payment of an uplift or success fee in exchange for accepting the risk of funding the claim, which is in effect the cost of capital. As a tribunal only needs to satisfy itself that a cost was incurred specifically to pursue the arbitration, has been paid or is payable, and was reasonable, it is feasible that in certain circumstances the cost of capital, e.g. bank borrowing specifically for the costs of the arbitration or loss of use of the funds, may be recoverable. 93. The requirement that the cost be reasonable serves as an important check and balance in protecting against unfair or unequal treatment of the parties in respect of costs, or improper windfalls to third-​party funders. Tribunals have from time to time dealt with this when

81  ICC Commission Report, Decisions on Costs in International Arbitration, 2 ICC Dispute Resolution Bulletin 87 (2015). 82  Id. at 314. 83  Id. 84  ICCA-​QMUL Task Force on TPF in International Arbitration, Draft Report on Security for Costs and Costs, supra note 25, at 10.

711

Third-party Funding in Investment Treaty Arbitration assessing the reasonableness of costs in general, sometimes including the success fee in the allocation of costs and sometimes not, depending on their view of the case as a whole.85 26.40 There have been few investment treaty decisions to date on the question of whether third-​party

funding costs should be recoverable. The tribunal in Siag v Egypt allowed a claimant to recover the costs it was required to pay to its lawyers in the event of success. This arrangement, however, only involved fees calculated at normal hourly rates.86 There was no success uplift designed to reward the lawyer for assuming the risk of funding the claimant. The tribunal in Khan Resources v Mongolia,87 however, concluded that the words ‘legal and other costs’ in Article 40(e) of the UNCITRAL Rules88 was broad enough to include the fees and the success fee that the winning claimants had to pay to their lawyers who had funded the case. One could argue that, by ana­ logy, the fees payable to a third-​party funder under a litigation funding agreement should be recoverable on the same principle. To date, there has been no investment treaty case decided on this point. The issue has, however, been addressed in the sphere of commercial arbitration under the ICC Rules.

26.41 Article 31(1) of the ICC Rules of 1998 and Article 37(1) of the ICC Rules of 2012 include in

the definition of ‘Costs of the Arbitration’, inter alia, ‘reasonable legal and other costs incurred by the parties for the arbitration’. In its 2016 decision in Essar Oilfields Services Limited v Norscot Rig Management PVT Limited,89 the English Court of Appeal, reviewing the decision of an arbitrator sitting under the ICC Rules, confirmed that the term ‘other costs’ in Article 31(1) of the ICC Rules—​and similar words in section 59 of the English Arbitration Act 1996, could include the fee payable to a litigation funder under a litigation funding agreement. The Court of Appeal also cited, with approval, passages from the award in which the tribunal made clear that one of the main factors it had taken into account was the egregious conduct of the respondent in the arbitration. As a result of this, the claimant: [h]‌ad no alternative, but was forced to enter into the litigation funding to the full cost of 300 per cent of the sum advanced by the funder or 35 per cent of the sum recovered, whichever was the higher. The funding costs reflect standard market rates and terms for such facility, as evidenced by the expert statement of Mr. Blick, a broker in litigation funding.90

The tribunal went on to state that: The conduct of the respondent before and during the dispute was a blatant attempt to drive [the claimant] ‘from the judgment seat’ . . . They pursued their claims with courage and determination. They undertook a huge financial burden and gamble in entering into the funding arrangement. The claimant’s conduct throughout . . . cannot be faulted. Justice and the merits point in [the direction of the claimant’s].91

Although this was a commercial case, the logic applied by the tribunal is not dissimilar to that applied by the tribunal in ADC v Hungary, which held that the full reparation principle92

  ICC Commission Report, supra note 81, at 87.   Siag v. Egypt, supra note 80, ¶¶ 604 and 625. 87  Khan Resources Inc., Khan Resources B.V., CAUC Holding Company Ltd. v. Government of Mongolia & MonAtom LLC, PCA Case No. 2011-​09, Award (Mar. 2, 2015), ¶¶ 445–​48. 88  UNCITRAL Rules (2010) r. 40(e) states that: ‘The legal and other costs incurred by the parties in relation to the arbitration to the extent that the arbitral tribunal determines that the amount of such costs is reasonable’. 89  Essar Oilfields Services Ltd. v. Norscot Rig Management PVT Ltd. [2016] EWHC 2361 (Comm). 90  Id. ¶ 22. 91  Id. ¶ 24. 92  Factory at Chorzów (Claim for Indemnity), No. 13, 1928, P.C.I.J. Rep., Series A, No. 17, Merits (Sept. 13, 1928), 47 (¶ 125) (‘reparation must, as far as possible, wipe out all the consequences of the illegal act and re-​establish the situation which would, in all probability, have existed if that act had not been committed’). 85 86

712

VI.  Third-party Funding and Liability for Costs could be applied to costs: ‘Were the Claimants not to be reimbursed their costs in justifying what they alleged to be egregious conduct on the part of Hungary it could not be said that they were being made whole’.93 As Irmgard Marboe points out: It is not possible to achieve full reparation if the injured and eventually prevailing party has to spend a large part of the amount awarded for litigation. Also, general preventive reasons speak against this practice because a host State would not face an additional financial disadvantage for its unlawful behavior. In order to remedy this situation, the expenses and costs—​at least those outside the arbitral process itself—​could be regarded ‘damage caused by the unlawful act’, and thus as ‘consequential damage’. Similarly, a more coherent application of the principle of ‘the costs follow the event’ or of ‘the loser pays’ could also lead to better results.94

A claimant in an investment treaty case, reduced to penury by the measures of a respondent 26.42 state and thus obliged to seek third-​party funding, could credibly argue that its funding costs should be recoverable as damages applying the full reparation principle. The ICCA Queen Mary University London task force concluded that funding costs could be claimed as damages ‘where permitted by the applicable substantive law’. 95 However, the task force went on to observe that ‘It is unclear whether such funding costs would meet the relevant tests for causation and foreseeability’.96 Arguably, however, this test could be satisfied if a claimant were to announce at the beginning of an arbitration that it was receiving funding and to prove that it was forced to seek such funding as a result of the respondent’s measures. The picture will become clearer as more investment treaty tribunals address this issue. In the 26.43 meantime, it is likely that tribunals will continue to approach the issue on a case-​by-​case basis. It is possible that tribunals will not only be required to consider whether claimants should be entitled to recover litigation funding costs but also the cost of any ATE insurance taken out to cover the risk of an adverse costs order. Sometimes, ATE insurance will be taken out by a claimant as an optional risk management tool. It may also be the case that a claimant is ordered by a tribunal to show that it has taken out ATE insurance—​as a substitute for providing security for costs. If this is the case, a claimant that is eventually successful in an arbitration will have a stronger argument in favour of recovering its ATE insurance costs because the cost can legitimately be shown to be an unavoidable cost in the arbitration—​imposed at the request of an opposing party. How frequently this question arises in investment treaty cases will depend on whether security for costs is ordered.

C. Security for Costs In jurisdictions where the ‘loser pays’ approach to legal costs applies,97 it has long been pos- 26.44 sible for parties to apply to courts for an order for security for costs or, in civil law countries,

This passage from the Chorzów Factory case was cited by the tribunal in Gemplus v. Mexico to justify its costs award. Gemplus S.A., SLP S.A., & Gemplus Industrial S.A. de C.V. v. United Mexican States, ICSID Case No. ARB(AF)/​04/​3 Award (June 16, 2010), ¶ 27. 93  ADC Affiliate Ltd. & ADC & ADMC Management Ltd. v. Republic of Hungary, ICSID Case No. ARB/​03/​16, Award (2 Oct. 2006), ¶ 533 [hereinafter ADC v. Hungary]. 94 I. Marboe, Calculation of Compensation and Damages in International Investment Law 312 (2009). 95  ICCA-​QMUL Task Force on TPF in International Arbitration, Draft Report on Security for Costs and Costs, supra note 25, at 10. 96  Id. 97  According to a survey carried out by the law firm Lovells (now Hogan Lovells) in 2010, the ‘loser pays’ approach to costs applied in 49 of the 56 surveyed jurisdictions. See Lovells, At What Cost? A Lovells Multi-​Jurisdictional Guide to Litigation Costs (2010), cited in ICC Commission Report, supra note 81, at Appendix B.

713

Third-party Funding in Investment Treaty Arbitration cautio judicatum solvi. Tribunals in commercial arbitrations under the rules of most major institutions give tribunals the power to order interim measures and those measures have occasionally included orders for security for costs. Similar interim measures powers to issue interim measures are available to tribunals in investment treaty arbitrations under the ICSID Rules,98 ICSID Additional Facility Rules,99 or the UNCITRAL Rules.100 However, tribunals in investment arbitrations have shown themselves to be reluctant to order security for costs, repeatedly holding that only extraordinary circumstances merit such measures. Consequently, to date, security for costs has only been ordered in one investment treaty case:  RSM v St Lucia.101 26.45 The principal basis for a security for costs application is that (a) if the respondent wins it will have

a right to recover its costs; and (b) that the claimant will not be in a position to pay those costs owing to impecuniosity. Given the dominance of a ‘costs fall where they lie’ approach in investment arbitration, it is far from clear that the first supposition (that a winning state will obtain costs) is correct. With regard to the second supposition (impecuniosity), the ICCA–​Queen Mary University task force concluded that a third-​party funding agreement ‘on its own it is no necessary indication that a claimant is impecunious’.102 Reasons for engaging a funder vary, including the need or opportunity to place capital elsewhere and risk management.103 The same logic was applied by the tribunal in South American Silver v Bolivia, when it held that the existence of a third-​party funder does not ‘evidence the impossibility of payment or insolvency’ or ‘imply risk of non-​payment’.104 A similar conclusion was reached in Guaracachi America, Inc. & Rurelec v Bolivia.105

26.46 More importantly, however, even if a claimant does seek funding because it is impecunious,

tribunals in investment treaty cases have held that this alone should not be a reason to order security for costs, owing to the unique nature of investment arbitrations. In the realm of commercial arbitration, the deterioration in the opposing party’s financial status is a factor that tribunals may take into account when deciding whether to award security for costs.106 Parties signing a contract are able to assess the financial standing of a counterparty at the time the contract is signed. This position may have changed by the time a dispute begins. The position is different when it comes to the broad offer of a state in a treaty to consent to arbitration with any qualifying investor, whose financial status will not be tested.107 This explains why

  See ICSID Convention art. 47 and art. 39(1) of the ICSID Arbitration Rules.   See ICSID Additional Facility Rules (2006) art. 46. 100  See UNCITRAL Rules (2010) art. 26(3). See also D. Caron & L. Caplan, The UNCITRAL Arbitration Rules:  A Commentary 521–​22 (2d ed. 2013). See also Encana Corporation v.  Ecuador, Interim Award (Jan. 31, 2004), ¶ 13. 101  RSM Production Corporation v. Saint Lucia (ICSID Case No. ARB/​12/​10) Decision on Saint Lucia’s Request for Security for Costs (Aug. 13, 2014) [hereinafter RSM v. Saint Lucia]. 102  ICCA-​QMUL Task Force on TPF in International Arbitration, Draft Report on Security for Costs and Costs (Nov. 1, 2015), at 3, 17. 103  Id. at 16. 104  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶¶ 76 and 63. 105  Guaracachi America, Inc & Rurelec v.  Bolivia (PCA Case No. 2011-​ 17) Procedural Order No. 14 (Mar. 11, 2013), ¶ 7 (‘Respondent has not shown a sufficient causal link such that the Tribunal can infer from the mere existence of third party funding that the Claimants will not be able to pay an eventual award of costs rendered against them, regardless of whether the funder is liable for costs or not’). 106  ICC Commission Report, supra note 81, at 89. 107 ICCA–Queen Mary University London Task Force on Third-​ Party Funding in International Arbitration, Draft Report on Security for Costs and Costs (Nov. 1, 2015), 14–​15 (‘Unlike the case in commercial arbitration, the respondent State . . . has not signed an arbitration agreement with a particular claimant’). See also RSM v. Saint Lucia, supra note 101, Assenting Reasons of Gavan Griffith, ¶ 2 (‘As a general proposition it may be said that a state party to a BIT has prospectively agreed to take claimant foreign investors as it 98 99

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VI.  Third-party Funding and Liability for Costs tribunals in investment treaty cases have commonly decided that a claimant’s impecuniosity should not be taken into account when it comes to deciding whether to award security for costs. The tribunal in South American Silver Limited v Bolivia summarized the consensus on this point: In sum, the general position of investment tribunals in cases deciding on security for costs is that the lack of assets, the impossibility to show available economic resources, or the existence of economic risk or difficulties that affect the finances of a company are not per se reasons or justifications sufficient to warrant security for costs.108

In a similar vein, the UNCITRAL tribunal in Hesham Tallat M Al-​Warraq v Indonesia underlined that: ‘the Claimant is not required to demonstrate sufficient financial standing to meet a possible adverse costs award, or to provide security for such a sum, as a precondition of pursuing an investor-​state arbitration’.109 This is because the only sanction available to enforce such an order is draconian indeed: the dismissal of the claim. It is also highly relevant that, in many cases, the financial status of the claimant has been 26.47 caused by the alleged adverse action by the state. In those circumstances, tribunals have consistently denied requests for security for costs.110 This situation quite commonly occurs in investment treaty cases where the dispute revolves around allegations that a state’s measures have damaged or destroyed the value of an investor’s most valuable or only significant asset. For these and other reasons, UNCITRAL111 and ICSID tribunals alike have consistently held that security for costs is an extraordinary remedy that can only be granted in exceptional circumstances.112 As the tribunal in South American Silver Limited v Bolivia explained: the standard to grant [security for costs] is very strict, given that it shall be granted only in case of extreme and exceptional circumstances, for example, when there is evidence of

finds them. That the claimant does not have funds to meet costs orders if unsuccessful is no reason to make orders for security’). 108  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶ 63. 109 Hesham Tallat M.  Al-​ Warraq v.  Indonesia, Award on Respondent’s Preliminary Objections to Jurisdiction and Admissibility of the Claims (June 21, 2012), ¶ 109. See also Rachel S. Grynberg, Stephen M. Grynberg, Miriam Z. Grynberg & RSM Production Corporation v. Government of Grenada, ICSID Case No. ARB/​10/​6, Decision on Respondent’s Application for Security for Costs (Oct. 14, 2010), ¶ 5.19 (holding that it is ‘not part of the ICSID dispute resolution system that an investor’s claim should be heard only upon the establishment of a sufficient financial standing of the investor to meet a possible costs award’); Víctor Pey Casado & President Allende Foundation v.  Republic of Chile, ICSID Case No. ARB/​98/​2 Decision on Provisional Measures (Sept. 25, 2001), ¶ 86. 110 Libananco Holdings Co Ltd. v.  Republic of Turkey, ICSID Case No. ARB/​ 06/​ 8 Decision on Preliminary Issues (June 23, 2008), ¶¶ 33(f ), 57–​59; RSM v. Saint Lucia, supra note 101, Assenting Opinion of Dr. Griffith, ¶ 2. 111  There are four reported cases under the UNCITRAL Rules: Hesham Tallat M. Al-​Warraq v. Indonesia, Award on Jurisdiction and Admissibility of the Claims (June 21, 2012); Guaracachi America, Inc & Rurelec v. Bolivia (PCA Case No. 2011-​17) Procedural Order No. 14 (Mar. 11, 2013); South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​15) Procedural Order No. 10 (Jan. 11, 2016); and Dawood Rawat v. Republic of Mauritius (UNCITRAL), PCA Case 2016-​20, Order Regarding Claimant’s and Respondent’s Requests for Interim Measures (Jan. 11, 2017). 112  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶ 63; Guaracachi America, Inc and Rurelec v. Bolivia (PCA Case No. 2011-​17) Procedural Order No. 14 (Mar. 11, 2013), ¶ 6; Emilio Agustín Maffezini v. Kingdom of Spain (ICSID Case No. ARB/​97/​7) Procedural Order No. 2 (Oct. 28, 1999), ¶ 10. See also Commerce Group Corp & San Sebastian Gold Mines, Inc v. El Salvador (ICSID Case No. ARB/​09/​17) Decision on El Salvador’s Application for Security for Costs (Sept. 20, 2012), ¶ 45 (holding that security for costs can only be granted in exceptional circumstances, ‘for example, where abuse or serious misconduct have been evidenced’).

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Third-party Funding in Investment Treaty Arbitration constant abuse or breach [of obligations in arbitration] that may cause an irreparable harm if the measure is not granted.113

The question of what amounts to extreme and exceptional circumstances was tested in Libananco v Turkey. In this case, an application for security for costs was rejected even where the claimant was a shell company whose legal costs were funded by a third party. The arbitral tribunal concluded that: ‘it would only be in the most extreme case, one in which an essential interest of either Party stood in danger of irreparable damage, that the possibility of granting security for costs should be entertained at all’.114 It is notable that the tribunal in Libananco v Turkey did not find there was a danger of ‘irreparable damage’, even though the claimant was subject to a criminal investigation concerning ‘financial crime on a massive scale’ in two countries.115 The annulment committee in Commerce Group v El Salvador found that the kind of extreme circumstances that would justify the granting of security for costs might exist where ‘abuse or serious misconduct has been evidenced’.116 26.48 The paradigm of what amounts to abuse and serious misconduct was illustrated in the case

of RSM v Saint Lucia,117 the only investment treaty case in which security for costs has been ordered. The ‘truly exceptional circumstances’118 that justified granting security for costs in this case involved a claimant with a notorious history of advancing frivolous claims and repeatedly failing to pay the resulting costs awards.119 In each case, the claimant had brought claims while benefiting from third-​party funding and, in each case, neither the claimant nor the third-​party funders had paid the costs awards.120 The tribunal therefore concluded that security for costs should be awarded because that history of non-​compliance showed that there was a material and serious risk that a costs award would not be complied with.121

26.49 Tribunals in other cases have rejected requests for security for costs where there has been no

history of failure to pay previous costs or arbitral fees.122 Moreover, in Hamester v Ghana, when the claimant (through no fault of its own) was unable to pay an advance on costs, the tribunal held that this was not enough to justify an order for security for costs. The tribunal

113  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶ 68. 114 Libananco Holdings Co Ltd. v.  Republic of Turkey (ICSID Case No. ARB/​ 06/​8), Decision on Preliminary Issues (June 23, 2008), ¶ 57. 115  Id. ¶ 72. 116  Commerce Group Corp. & San Sebastian Gold Mines, Inc. v. Republic of El Salvador (ICSID Case No. ARB/​09/​17), Annulment Proceeding, Decision on El Salvador’s Application for Security for Costs (Sept. 20, 2012), ¶ 45. 117  RSM v. Saint Lucia, supra note 101. 118  Dr Gavan Griffith’s assenting opinion states that only ‘truly exceptional circumstances’ would justify security for costs in investment arbitration. See RSM v. Saint Lucia, supra note 101, Assenting Opinion of Dr Griffith, ¶ 3. 119  RSM v. Saint Lucia, supra note 101, ¶¶ 78–​79. The claimant failed even to pay part of the advance on costs in the prior proceeding, despite representations to the contrary: id. ¶ 78. 120  This persistent failure by both the claimant and its third-​party funders to pay previous costs awards was characterized by the respondent, St Lucia, as ‘hit and run arbitration’. This phrase has sometimes been cited as if it had been intended as a label applicable to all third-​party funders. See, e.g., J. Kalicki, Security for Costs in International Arbitration, 3(5) Transn’l. Disp. Mgmt. 1 (2006). The text of the RSM v. St Lucia decision, however, makes clear that it was the involvement of third-​party funders in abetting the previous conduct of RSM that had earned them their poor reputation. See RSM v. Saint Lucia, supra note 101, ¶¶ 32–​33. 121  RSM v. Saint Lucia, supra note 101, ¶¶ 77–​82. 122  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶ 66 (‘[t]‌here was no evidence of failure to comply with by [claimant] before third parties, nor breach of obligations in this or other arbitrations, nor clear evidence that [claimant] does not want or cannot pay’. See also EuroGas Inc & Belmont Resources Inc v. Slovak Republic, ICSID Case No. ARB/​14/​14 Procedural Order No. 3, Decision on Requests for Provisional Measures (June 23, 2015), ¶¶ 122–​23.

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VI.  Third-party Funding and Liability for Costs went on to state that: ‘there was a serious risk that an order for security for costs would stifle the Claimant’s claims’.123 It seems, therefore, that for a tribunal to find that a failure to pay costs or arbitral fees amounts to extreme circumstances, an element of abuse or bad faith must exist. Such bad faith was characterized by the ICCA–​QMU task force as follows:124 ‘[s]‌ituations where the claimant company was deliberately created as a mere procedural shell to collect money if the case is won, and frustrate the respondent’s costs claim if the case is lost’.125 The same task force went on to explain that: ‘By contrast, mere recourse to third-​ party funding by a claimant that has become impecunious cannot readily be characterized as carrying an element of abuse, and cannot of itself be taken as a reason for tribunals to award security for costs’.126 This synthesis is consonant with the conclusion of all the tribunals in bilateral investment treaty cases that have come to consider this issue, including Libananco v Turkey, Guaracachi America, Inc & Rurelec v Bolivia,127 and EuroGas v Slovak Republic.128 The majority of the tribunal in RSM v St Lucia did not diverge from this position when granting security for costs to St Lucia.129 However, one member of that tribunal, Dr Gavan Griffith QC, expressed the dissenting view that the mere existence of third-​party funding should put the onus on a claimant to prove why security for costs should not be ordered.130 His reason for this conclusion was that third-​party funders who gamble on the rewards of success should not be protected from the risk of an adverse costs order in the event of failure.131 Cases of security for costs being granted for reasons similar to those in RSM v Saint Lucia will be, as one commentator has put it, ‘few and far between’.132 Tribunals will probably continue to grant security for costs only in cases where the use of third-​party funding is, in some way, abusive.133 There are states who have begun to press for changes to what is emerging as a consensus ap- 26.50 proach to this question. In September 2016, Panama sent a memo to the General Secretary of ICSID asking for the issue of ‘improved protection for respondent states against judgment-​ proof claimants’ to be put on the agenda for the annual meeting of the ICSID Administrative

123  Gustav F.W. Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/​07/​24 Award (June 18, 2010), ¶ 17. 124 ICCA–Queen Mary University London Task Force on Third Party Funding in International Arbitration, Subcommittee on Security for Costs and Costs, draft report (Oct. 5, 2015), at 16–​17 (‘[e]‌xtreme circumstances may involve an element of abuse or bad faith’). 125  Id. 126  Id. 127  Guaracachi America, Inc. & Rurelec v. Bolivia (PCA Case No. 2011-​ 17) Procedural Order No. 14 (Mar. 11, 2013), ¶ 7 (‘Respondent has not shown a sufficient causal link such that the Tribunal can infer from the mere existence of third party funding that the Claimants will not be able to pay an eventual award of costs rendered against them, regardless of whether the funder is liable for costs or not’). 128  EuroGas Inc. & Belmont Resources Inc v. Slovak Republic, ICSID Case No. ARB/​14/​14 Procedural Order No. 3, Decision on Requests for Provisional Measures (June 23, 2015), ¶ 123 (‘The Tribunal is of the view that financial difficulties and third party-​funding –​which has become a common practice –​do not necessarily constitute per se exceptional circumstances justifying that the Respondent be granted an order of security for costs’). 129 ICCA–​ Queen Mary University London Task Force on Third Party Funding in International Arbitration, Draft Report on Security for Costs and Costs (Nov. 1, 2015), at 15. 130  RSM v. Saint Lucia, supra note 101, Assenting Reasons of Dr. Gavan Griffith QC, ¶ 18 (‘[o]‌ nce it appears that there is third party funding of an investor’s claim, the onus is cast on the claimant to disclose all relevant factors and to make a case why security for costs orders should not be made’). 131  Id. ¶¶ 12–​14. 132  RSM v. Saint Lucia: Why the Tribunal Is to Be Applauded for Security for Costs Order, Global Arb. Rev., (Sep. 11, 2014), http://​globalarbitrationreview.com/​article/​1033695/​rsm-​v-​st-​lucia-​why-​griffith-​was-​wrong-​ on-​security-​for-​costs (last visited Mar. 29, 2017). 133  W. Kirtley & K. Wietrzykowski, Should an Arbitral Tribunal Order Security for Costs, 30(1) J.Intern’l Arb. 17 (2013) (‘[t]‌hird-​party funding should not impact the arbitral tribunal’s decision on security for costs unless a respondent can show that third-​party funding is being used abusively’).

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Third-party Funding in Investment Treaty Arbitration Council.134 It remains to be seen if this will lead to structural changes in the current regime. In the meantime, some countries have inserted provisions in new bilateral investment treaties giving tribunals more latitude when it comes to security for costs. Article 22 of the draft investment chapter of the EU–​Vietnam Free Trade Agreement allows a tribunal to order the claimant to post security for costs if there are ‘reasonable grounds to believe that the claimant risks not being able to honor a possible decision on costs issued against the claimant’.135 Article 11(3) of the same chapter provides that:  ‘When applying Article 22 (Security for Costs), the Tribunal shall take into account whether there is third party funding’.136 Such provisions, if they become common, could restrict access to justice by impecunious claimants. For this reason, the tribunal in South American Silver v Bolivia, while finding that the existence of third-​party funding could be one of a number of factors taken into account when considering whether to grant security for costs—​held that it could not be the only factor: If the existence of these third-​parties alone, without considering other factors, becomes determinative on granting or rejecting a request for security for costs, respondents could request and obtain the security on a systematic basis, increasing the risk of blocking potentially legitimate claims.137 26.51 For the moment, it seems more likely than not that tribunals in investment treaty cases will

continue to be reluctant to order claimants to pay security for costs.138 Absent significant changes in the applicable institutional rules or more extensive changes in treaty wording, the high threshold established in numerous cases, and met only once in RSM v Saint Lucia, will probably continue to be applied.

VII.  Disclosure of Third-​party Funding 26.52 The next question to be addressed by arbitral tribunals is whether a claimant should be ob-

liged to declare the existence of third-​party funding? If so, should the terms of that funding be disclosed as well? These questions are frequently asked in investor-​state disputes today and have been addressed in a number of awards, in changes to the IBA and ICC Guidelines on conflicts of interests, and in the text of recent bilateral and multi-​lateral treaties.

A. Disclosure of a Third-​party Funder’s Identity 26.53 As explained in section V, tribunals in bilateral investment treaty cases have consistently

refused to consider third-​party funders as the real party at interest in arbitrations. From a jurisdictional perspective, therefore, the way in which a claimant funds itself is largely irrelevant unless the terms of a particular treaty contain specific terms requiring the identification of those funding or controlling a claim. Indeed, there is nothing unusual about a company

134  Effective Protection for Respondent States Against Judgment-​proof Claimants, Memorandum to Meg Kinnear, Secretary General, International Center for Settlement of Investment Disputes from I. Zarak Acting Minister of Economy and Finance, Republic of Panama (Sept. 12, 2016), https://​www.transnational-​dispute-​ management.com/​legal-​and-​regulatory-​detail.asp?key=17450 (last visited Mar. 29, 2017). 135 Draft investment chapter of the EU–​ Vietnam Free Trade Agreement, Section 3, Resolution of Investment Disputes, art. 22(1), http://​trade.ec.europa.eu/​doclib/​docs/​2016/​february/​tradoc_​154210.pdf (last visited Dec. 11, 2017). 136  Id. art. 11(3). 137  South American Silver Ltd. v. Bolivia (PCA Case No. 2013-​ 15) Procedural Order No. 10 (Jan. 11, 2016), ¶ 77. 138  Some authors have been critical of the reluctance of tribunals in international arbitrations to grant security for costs. See A. Redfern & S. O’Leary, Why It Is Time for International Arbitration to Embrace Security for Costs, 32(3) Arb. Int’l 397 (2016).

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VII.  Disclosure of Third-party Funding obtaining funding in order to protect and develop its assets. Companies are liable for any debt they underwrite in the course of their business and fund themselves from a mix of equity and debt. In many ways, third-​party funding is just another form of company borrowing secured on a particular asset of the company (i.e. its claim). As a consequence, recent arbitral decisions on whether the existence of third-​party funding arrangements should be disclosed have focused on (a) whether the funding relationship might generate potential conflicts of interest between arbitrators and third-​party funders and (b) its relevance for claims for security for costs. The tribunal in Guaracachi America & Rurelec v Bolivia139 decided not to order the claimant to 26.54 disclose its agreement with a third-​party funder. The issue was partly moot because the identity of the funder was already known, but the tribunal also observed that the UNCITRAL Arbitration Rules placed the onus on the arbitrators not the parties to disclose circumstances that might create a conflict of interest.140 In September 2016, the ICC included the following recommendation to arbitrators when completing their statement of acceptance, availability, impartiality, and independence: ‘Relationships between arbitrators, as well as relationships with any entity having a direct economic interest in the dispute or an obligation to indemnify a party for the award, should also be considered in the circumstances of each case’.141 Naturally, a newly nominated arbitrator will not be in a position to declare any relationship with a third-​party funder involved in a case if the identity of that funder has not been declared. Some tribunals have therefore concluded that it makes sense for claimants to be required to declare the existence and names of funders. In Muhammet Çap v Turkmenistan, the tribunal held that: First, the importance of ensuring the integrity of the proceedings and to determine whether any of the arbitrators are affected by the existence of a third-​party funder. In this respect the Tribunal considers that transparency as to the existence of a third-​party funder is important in cases like this.142

Similarly, in January 2016, the tribunal in South American Silver Limited v Bolivia also ordered disclosure of the name of the third-​party funder.143 States have also sought to make disclosure of the existence of third-​party funding obliga- 26.55 tory by adding requirements to new bilateral investment treaties or fair trade agreements. The Comprehensive Economic and Trade Agreement between Canada and the EU (CETA), signed at the end of 2016, provides at Article 8.26 that:144 1. Where there is third party funding, the disputing party benefiting from it shall disclose to the other disputing party and to the Tribunal the name and address of the third party funder. 2. The disclosure shall be made at the time of the submission of a claim, or, if the financing agreement is concluded or the donation or grant is made after the submission of a claim, without delay as soon as the agreement is concluded or the donation or grant is made.

139  Guaracachi America, Inc. & Rurelec v. Bolivia, PCA Case No. 2011-​ 17, Procedural Order No. 13 (Feb. 21, 2013). 140  Id. ¶ 8. 141  ICC, International Court of Arbitration, Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (Sept. 22, 2016), ¶ 24. 142  Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No. ARB/​ 12/​6, Procedural Order No. 3 (June 12, 2015), ¶ 9. 143 South American Silver Ltd. (Bermuda) v.  Bolivia (UNCITRAL), Procedural Order No. 10 (Jan. 11, 2016). 144  Comprehensive Economic and Trade Agreement between Canada and the EU-​ CETA ch. 8, http://​ trade.ec.europa.eu/​doclib/​docs/​2016/​february/​tradoc_​154329.pdf (last visited Dec. 11, 2017).

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Third-party Funding in Investment Treaty Arbitration Similar provisions are to be found in the drafts of the now moribund TTIP145 and the EU–​ Vietnam Free Trade Agreement.146 Article 24(l) of the 2017 SIAC Investment Arbitration Rules goes even further, giving tribunals the power to: l. order the disclosure of the existence of a Party’s third‐party funding arrangement and/​ or the identity of the third‐party funder and, where appropriate, details of the third‐party funder’s interest in the outcome of the proceedings, and/​or whether or not the third‐party funder has committed to undertake adverse costs liability;147 26.56 This clear trend in favour of requiring disclosure of the identity of a third-​party funder

can also be identified in the 2014 IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines). General Standard 6(b) of the IBA Guidelines states that: If one of the parties is a legal entity, any legal or physical person having a controlling influence on the legal entity, or a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration, may be considered to bear the identity of such party.148

General Standard 7 of the IBA Guidelines goes on to establish the following duty for both parties and arbitrators: (a) A party shall inform an arbitrator, the Arbitral Tribunal the other parties and the arbitration institution or other appointing authority (if any) of any relationship, direct or indirect, between the arbitrator and the party (or another company of the same group of companies, or an individual having a controlling influence on the party in the arbitration), or between the arbitrator and any person or entity with a direct economic interest in, or a duty to indemnify a party for, the award to be rendered in the arbitration. The party shall do so on its own initiative at the earliest opportunity.149 26.57 If disclosure of relationships between arbitrators and third-​party funders becomes the norm,

what kind of relationships would preclude an arbitrator from serving on a tribunal? There are no public investment treaty decisions in which an arbitrator has been successfully challenged because of a relationship with a third-​party funder. If the IBA Guidelines are used as a yardstick, some relationships between arbitrators and third-​party funders are clear ‘red list’ items that would preclude an arbitrator from being able to accept an appointment—​for example, where an arbitrator sits on the board of a third-​party funder150 or his or her law firm regularly advises that third-​party funder.151 In such circumstances, the notion that a third-​party funder bears the identity of a party makes sense because the potential arbitrator has a clear interest in promoting the financial success of the third-​party funder. More nuanced issues are raised by the following ‘orange list’ items in the IBA Guidelines:

145 EU–​ U.S. Transatlantic Trade and Investment Partnership (TTIP) Negotiations:  draft ch. II Investments, art. 8, http://​trade.ec.europa.eu/​doclib/​docs/​2015/​november/​tradoc_​153955.pdf (last visited Dec. 11, 2017). 146 Draft investment chapter of the EU–​ Vietnam Free Trade Agreement, Section 3, Resolution of Investment Disputes, art. 11, http://​trade.ec.europa.eu/​doclib/​docs/​2016/​february/​tradoc_​154210.pdf (last visited Dec. 11, 2017). 147 SIAC Investment Arbitration Rules (Jan. 1, 2017), http://​www.siac.org.sg/​images/​stories/​articles/​ rules/​IA/​SIAC%20Investment%20Arbitration%20Rules%20-​%20Final.pdf (last visited May 11, 2017). 148  IBA Guidelines on Conflicts of Interest in International Arbitration (October 2014), http://​www. ibanet.org/​Publications/​publications_​IBA_​guides_​and_​free_​materials.aspx (last visited May 12, 2017). 149  Id. 150  IBA Guidelines art. 1.2: ‘The arbitrator is a manager, director or member of the supervisory board, or has a controlling influence on one of the parties or an entity that has a direct economic interest in the award to be rendered in the arbitration’: id. 151  IBA Guidelines art. 1.4: ‘1.4 The arbitrator or his or her firm regularly advises the party, or an affiliate of the party, and the arbitrator or his or her firm derives significant financial income therefrom’: id.

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VII.  Disclosure of Third-party Funding 3.1.3 The arbitrator has, within the past three years, been appointed as arbitrator on two or more occasions by one of the parties, or an affiliate of one of the parties. 3.1.5 The arbitrator currently serves, or has served within the past three years, as arbitrator in another arbitration on a related issue involving one of the parties, or an affiliate of one of the parties.152

If, according to General Standard 6(b) of the IBA Guidelines, a third-​party funder is 26.58 deemed to bear the identity of a party—​does this common identity extend from one case to another? In other words, if an arbitrator has just been appointed by party A funded by third-​party funder X and the same arbitrator has, in the past three years, been appointed by parties B, C, and D—​all of whom were funded by the same third-​party funder X, has the arbitrator effectively been appointed by the same party? Ultimately, this is an issue that tribunals will need to decide if the matter is raised by an opposing party. The fact that an item is included on the ‘orange list’ does not automatically preclude an arbitrator from accepting an appointment. It simply requires the arbitrator to declare the information so that the parties can raise timely objections if they wish.153 In view of this, it makes practical sense for an arbitrator to declare—​upon nomination—​any previous appointments over the past three years in which third-​party funders were involved and to provide the name of any third-​party funder involved. Naturally, this process requires parties to be open about any third-​party funding they receive. If parties are not open, an arbitrator may be ignorant of the fact that a party who appointed him or her received third-​party funding or not know the identity of the funder. If information about other appointments emerges involving the same third-​party funder later in the proceedings, this might become the pretext for a challenge. It is doubtful, however, that such a challenge would succeed. The multiple appointments rules relating to arbitrators and counsel154 are designed to shield arbitrators from the suspicion that they might be beholden to a party or a law firm who frequently appoints them. To be beholden, however, one must logically know to whom one is beholden. This cannot be the case where an arbitrator does not know that a third-​party funder is funding an appointing party.

B. Should the Terms of Funding Agreements be Disclosed? The institutional rules most commonly applied in investment treaty arbitrations all give 26.59 tribunals the power to order disclosure.155 Parties and tribunals usually agree on a methodology and a standard to be applied in deciding what should be disclosed. Often, the standard applied is that set out in Article 3 of the IBA Rules on the Taking of Evidence in International Arbitration,156 which allows a party to request disclosure of documents that

  Id. arts. 3.1.3 & 3.1.5.   IBA Guidelines Pt II:  Practical Application of the General Standards, art. 3:  ‘The Orange List is a non-​exhaustive list of specific situations that, depending on the facts of a given case, may, in the eyes of the parties, give rise to doubts as to the arbitrator’s impartiality or independence. The Orange List thus reflects situations that would fall under General Standard 3(a), with the consequence that the arbitrator has a duty to disclose such situations. In all these situations, the parties are deemed to have accepted the arbitrator if, after disclosure, no timely objection is made, as established in General Standard 4(a)’: id. 154  See also art. 3.3.8 of the IBA Guidelines, which includes the following in the ‘orange list’: ‘The arbitrator has, within the past three years, been appointed on more than three occasions by the same counsel, or the same law firm’: id. 155  See, e.g., ICSID Rules of Procedure for Arbitration Proceedings (Arbitration Rules 2006) r. 34(2)(a); ICSID Rules Governing the Additional Facility for the Administration of Proceedings by the Secretariat (Additional Facility Rules 2006) art. 41(2); UNCITRAL Arbitration Rules (2013) art. 27(3); ICC Rules of Arbitration (March 2017) art. 25(5). 156  IBA Rules on the Taking of Evidence in International Arbitration 2011 art. 3(3)(b), http://ibanet.org. 152 153

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Third-party Funding in Investment Treaty Arbitration are ‘relevant to the case or material to its outcome’. As the Swiss arbitrator, Laurent Levy, puts it: Importantly, funding legal proceedings should not constitute a circumstance that is directly or sufficiently ‘relevant to the case or material to its outcome’. This assertion does not mean that the third-​party funding agreement will not influence the funded party’s conduct in the arbitration. Neither does it mean that third-​party funding will not be relevant for the determination and allocation of the arbitration costs. What it does mean is that third-​party funding should have no impact on the merits of the case. Perhaps this explains (at least partly) why no generally accepted rules or practice in international arbitration require that a party disclose the way in which it is funding its claim or defence.157

It follows that, a priori, the terms of a third-​party funding agreement ought not be disclosed158 unless there is a specific reason for disclosure, usually related to an issue such as security for costs. Indeed, the terms of the funding will necessarily reveal material which would be privileged, such as likelihood of success. As a consequence of (a) the lack of materiality to the merits of the dispute; and (b) the possible disclosure of perceptions of strengths and weaknesses through the terms agreed, tribunals have been reluctant to order the disclosure of funding terms. 26.60 In Muhammet Çap v Turkmenistan,159 the tribunal ordered the claimants to disclose whether

third-​party funders were involved, the name of the funder, and the terms of the funding.160 The tribunal made clear, however, that one of its reasons for making this order was that the claimants had failed to satisfy a costs order in a previous case.161 This raised the possibility that the kind of exceptional circumstances identified in RSM v Saint Lucia as justifying a grant of security for costs might be applicable in that case. By contrast, in South American Silver v Bolivia,162 there was no evidence of failure by the claimant to satisfy previous costs orders163 and, consequently, no exceptional circumstances to justify the granting of security for costs.164 The tribunal therefore ordered the claimant to disclose the existence and name of its third-​party funder but declined to order disclosure of the agreement concluded with the third-​party funder.165

26.61 A  claimant seeking to recover the costs of funding from a respondent state may need to

disclose details of its funding agreement to satisfy the requisite burden of proof. In Khan Resources v Mongolia166 the claimant produced a redacted copy of the success fee arrangement

157  L. Lévy and R. Bonnan, Third-​ party Funding: Disclosure, Joinder and Impact on Arbitral Proceedings, in Dossier X: Third-​party Funding in International Arbitration 79 (B. Cremades & A. Dimolitsa eds., 2013). 158  The same logic applies to respondents as well. The tribunal in Dawood Rawat v. Republic of Mauritius refused to order disclosure of documents by the respondent State that had been requested by the claimant in order to allow the claimant’s prospective third-​party funder to carry out its due diligence prior to deciding to fund. See Dawood Rawat v. Republic of Mauritius (UNCITRAL), PCA Case 2016-​20, Order Regarding Claimant’s and Respondent’s Requests for Interim Measures (Jan. 11, 2017), ¶¶ 114–​15. 159  Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ICSID Case No. ARB/​ 12/​6, Procedural Order No.3 (June 12, 2015). 160  Id. ¶ 8. 161  Id. ¶¶ 10–​11. 162 South American Silver Ltd. v.  Bolivia, PCA Case No. 2013-​ 15, Procedural Order No. 10 (Jan. 11, 2016). 163  Id. ¶ 66. 164  Id. ¶¶ 80–​81. 165  Id. ¶¶ 77–​81. 166 Khan Resources Inc., Khan Resources B.V., CAUC Holding Company Ltd. v.  Government of Mongolia and MonAtom LLC, PCA Case No. 2011-​09, Award (Mar. 2, 2015).

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VIII.  Concluding Remarks it had agreed with counsel. The tribunal was satisfied that this amounted to ‘sufficient detail and evidence’ of the arrangement.167 It is important that claimants be able to communicate freely with third-​party funders during 26.62 the course of an arbitration. When legal advice is transferred to a third-​party funder, this can raise the question of whether privilege has been waived on such advice. There is no recorded decision by a tribunal in an investment treaty case finding that privilege has been waived because legal advice has been passed to a third-​party funder. Decisions on what can amount to waiver vary from jurisdiction to jurisdiction. The English courts have found that privilege extends to third parties, such as insurers, receiving ‘legal advice which that person needs to know by reason of a sufficient common interest between them’.168 A less clear position on the application of this ‘common interest’ exception has emerged from the US courts.169 However, even in those cases where common interest protection was held not to extend automatically to communications and documents shared with funders, the US courts have been willing to recognize that the conclusion of a non-​disclosure agreement between a third-​party funder and its funded client can be used to extend the protection relating to attorney work product privilege (i.e. documents prepared in anticipation of litigation).170 Commonly therefore, third-​party funders will conclude a non-​disclosure agreement with a funded party to protect against attempts to argue that privilege has been waived.

VIII.  Concluding Remarks Third-​party funding is now an established part of the investment arbitration landscape. 26.63 Despite criticism in some quarters, tribunals and international arbitral bodies have tended to favour the view that third-​party funding promotes access to justice, rather than encouraging frivolous claims. Tribunals have consistently held that receipt of third-​party funding is unlikely to affect a claimant’s position from a jurisdictional perspective and will not affect a claimant’s ability to recover legal costs in cases where tribunals make costs awards. The costs of third-​party funding itself may be recoverable in some circumstances. There is a growing tendency among tribunals to require disclosure by funded claimants of the existence and identity of third-​party funders. It is, however, unlikely that claimants will commonly be required to disclose the terms of any funding agreement except in rare cases when security for costs is being considered. If tribunals continue to follow the principle established in RSM v Saint Lucia, awards of security for costs in cases involving third-​party funders will continue to be rare and limited to situations of historic abuse.

  Id. ¶¶ 445–​48.   Svenska Handelsbanken v. Sun Alliance and London Insurance plc [1995] 2 Lloyd’s Rep. 84 at 88. 169  Some U.S. courts have held that litigation funding agreements and communications are protected by attorney client privilege and the doctrine of common interest. See, e.g., Walker Digital LLC v. Google Inc. (D. Del., Feb. 12, 2013); Devon IT, Inc. v. IBM Corp., (E.D. Pa., Sept. 27, 2012); Xerox Corp. v. Google Inc. (D. Del., Aug. 1, 2011). Other U.S. courts have held that common interest protection could not be extended to a third-​party funder because the funders interest was commercial rather than legal. See Miller UK v. Caterpillar (N.D. III, Jan. 6, 2014). 170  Miller UK v. Caterpillar, supra note 169. 167 168

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Part VI THE POST-​AWARD PHASE

27 ANNULMENT OF ICSID AWARDS Is it Enough or Is Appeal around the Corner? Katia Yannaca-​Small*

I. Introduction  II. Scope and Application of Annulment under the ICSID Convention 

IV. Stay of Enforcement  V. The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism 

27.01

27.04 A. Annulment: An Exceptional Recourse?  27.08 B. Annulment versus Appeal: A Thin Line in ICSID Annulment Proceedings  27.15 III. The Grounds for Annulment  27.23 A. Improper Constitution of the Tribunal  27.24 B. Manifest Excess of Powers  27.30 C. Failure to State Reasons  27.44 D. Serious Departure from a Fundamental Rule of Procedure  27.50

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27.70 A. Past and Current Efforts to include Provisions on the Establishment of an Appeal Mechanism in Investment Agreements  27.74 B. What Lies Ahead? A Multilateral Solution? 27.101 VI. Conclusion 27.106

I. Introduction Review of arbitral awards is designed to preserve the interests of the parties. Where a defeated 27.01 party is dissatisfied with the arbitral tribunal’s award, it may seek to set it aside. The possibilities for challenging the award differ according to the system of arbitration chosen by the parties, institutional or ad hoc. The review, which is different for ICSID and non-​ICSID cases, is based on limited grounds and does not have as broad a scope as an appeal. Non-​ ICSID awards are reviewed by the domestic courts of the seat of arbitration, on the grounds provided for by the arbitration law of the seat (see Chapter 28). By comparison, the ICSID Convention prevents domestic courts from reviewing any decisions issued by ICSID tribunals. ICSID awards are therefore immune from challenges brought before national courts, which may have a local bias or be subject to the influence of the host government. The ICSID Convention mechanism is self-​contained, providing for internal control which includes several provisions on the review of awards. According to the ICSID Convention provisions on review, either party is allowed to request 27.02 a review of the award issued by an ICSID tribunal. In addition to annulment, which is discussed at length in this chapter, the review provisions allow parties to seek a supplementary

*  The author is grateful to Zoya Bozhko, Associate, Shearman and Sterling LLP, for her research and valuable assistance on this chapter.

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Annulment of ICSID Awards decision,1 a rectification,2 an interpretation,3 or a revision of the award.4 Annulment is the most common remedy sought5 and is also by far the most drastic form of review.6 Just as with other provisions allowing post-​award review, either party can ask for the annulment of the award in whole or in part. Unlike other forms of review, however, annulment decisions are not made by the original tribunal but by a separate ad hoc Committee.7 1  According to art. 49 of the ICSID Convention, a party to the dispute may request a supplementary decision with respect to any question, which in the opinion of the requesting party, the tribunal omitted to decide in the award. ICSID has registered twelve requests for supplementary decisions in ICSID cases, as follows: Amco Asia Corporation v. Republic of Indonesia, ICSID Case No. ARB/​81/​1 [hereinafter Amco v. Indonesia I]; Compañía de Aguas del Aconquija S.A. & Vivendi Universal v. Argentine Republic, ICSID Case No. ARB/​97/​3 [hereinafter Vivendi v. Argentina]; Alex Genin, Eastern Credit Limited, Inc. & A.S. Baltoil v. Republic of Estonia, ICSID Case No. ARB/​99/​2 [hereinafter Genin v. Estonia]; LG&E Energy Corp., LG&E Capital Corp. & LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/​02/​1 [hereinafter LG&E v. Argentina]; Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/​03/​9 [hereinafter Continental Casualty v. Argentina]; Railroad Development Corporation v. Republic of Guatemala, ICSID Case No. ARB/​07/​23 [hereinafter Railroad Development v. Guatemala]; Victor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No. ARB/​98/​2 [hereinafter Pey Casado v. Chile]; Enron Creditors Recovery Corporation & Ponderosa Assets, LP v. Argentine Republic, ICSID Case No. ARB/​01/​3 [hereinafter Enron v. Argentina]; İçkale İnşaat Limited Şirketi v. Turkmenistan, ICSID Case No. ARB/​10/​24 [hereinafter İçkale v. Turkmenistan] and three under the ICSID Additional Facility Rules—​The Loewen Group, Inc. & Raymond L. Loewen v. United States of America, ARB(AF)/​98/​3 [hereinafter Loewen Group v.  U.S.]; Marvin Roy Feldman Karpa v.  United Mexican States, ARB(AF)/​99/​1 [hereinafter Karpa v. Mexico], and Archer Daniels Midland Company & Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, ARB(AF)/​04/​5 [hereinafter Archer Daniels v. Mexico]. 2  According to art. 49 of the ICSID Convention, a party to the dispute may request the tribunal to rectify any error in the award. ICSID has registered twenty-​one requests for rectification of which seven were registered at the same time as the request for a supplementary decision. See ICSID website, https://​icsid. worldbank.org/​en/​Pages/​cases/​searchcases.aspx (last visited Nov. 13, 2017). 3  According to art. 50 of the ICSID Convention, a party to the dispute may request the interpretation of the meaning or scope of the award. Interpretation has been requested in eight cases. See ICSID website, https://​icsid.worldbank.org/​en/​Pages/​cases/​searchcases.aspx (last visited Nov. 13, 2017). 4  According to art. 51 of the ICSID Convention, a revision of the award is possible when new facts emerge which may affect the award decisively and were unknown to the tribunal and to the party seeking to introduce these facts, and the latter’s ignorance was not due to negligence. The review shall, if possible, be undertaken by the same tribunal. If that is not possible, a new tribunal will be constituted to carry out the revision. The new elements must be ones of fact and not law and the facts must be of such a nature that they would have led to a different decision had they been known to the tribunal. There have been eight revision proceedings commenced since 1993. However, most of these proceedings were discontinued either following a settlement between the parties (as was the case in American Manufacturing & Trading, Inc. v. Democratic Republic of the Congo, ICSID Case No. ARB/​93/​ 1 [hereinafter AMT v. Congo] and Siemens A.G. v. Argentine Republic, ICSID Case No. ARB/​02/​8 [hereinafter Siemens v. Argentina], or unilaterally by the tribunal in accordance with the ICSID Arbitration Rules (as was the case in Ioannis Kardassopoulos v. Republic of Georgia, ICSID Case No. ARB/​05/​18 [hereinafter Kardassopoulos v. Georgia]; Ron Fuchs v. Republic of Georgia, ICSID Case No. ARB/​07/​15 [hereinafter Fuchs v. Georgia]; and Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24 [hereinafter Plama v. Bulgaria]. In the remaining three revision proceedings, the tribunal refused to revise the award and ordered the party seeking revision to pay for the costs of the proceeding as well as, in one case, the legal costs of the other party. See Pey Casado v. Chile, supra note 1, Decision on the Application for the Revision of the Award (Nov. 18, 2009); Venezuela Holdings B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​07/​27, Decision on the Application for the Revision of the Award (June 12, 2015) [hereinafter Venezuela Holdings v. Venezuela]; Tidewater Investment SRL and Tidewater Caribe, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/​10/​5, Decision on the Application for the Revision of the Award (July 7, 2015) [hereinafter Tidewater v. Venezuela]. 5  As of June 30, 2017, ICSID reports that partial or full annulment has been sought in 104 cases compared to only twelve proceedings that involved applications for supplementary decisions, eighteen proceedings that involved applications for rectification, seven proceedings that involved applications for interpretation, and eight proceedings that involved applications for revision. Of these 104 applications, twenty-​three annulment proceedings were discontinued before the ad hoc committees issued their decisions and twenty-​four annulment proceedings are still pending. Source: The ICSID Caseload Statistics: Issue 2017-​2 [hereinafter ICSID Caseload], https://​icsid.worldbank.org/​en/​Documents/​resources/​ICSID%20Web%20Stats%202017-​2%20 (English)%20Final.pdf (last visited Nov. 13, 2017). 6 C. Schreuer with L. Malintoppi, A. Reinisch & A. Sinclair, The ICSID Convention:  A Commentary (2d ed. 2009) [hereinafter Schreuer et al., A Commentary]. 7  ICSID Convention art. 52.

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II.  Scope and Application of Annulment Under the ICSID Convention This chapter will discuss (i) the scope and application of annulment of ICSID awards under 27.03 the ICSID Convention; (ii) the grounds for annulment; (iii) the stay of enforcement as a requirement that often accompanies an application for annulment; and (iv) the proposals related to the creation for an appellate mechanism for investment disputes as a response to the mounting criticism of the investor-​state dispute settlement system (ISDS) and the quest to improve legitimacy and consistency.

II.  Scope and Application of Annulment under the ICSID Convention An ICSID ad hoc Committee can only annul the decision of the tribunal under one or more 27.04 of the following narrow grounds set out in Article 52(1) of the ICSID Convention: (a) (b) (c) (d) (e)

the tribunal was not properly constituted; the tribunal has manifestly exceeded its powers; there was corruption on the part of a member of the tribunal; there has been a serious departure from a fundamental rule of procedure; the award has failed to state the reasons on which it is based.

Annulment on these grounds is generally considered an exceptional and narrowly circum- 27.05 scribed remedy that does not allow for review of alleged misapplication of the law or mistake of fact.8 However, over the last twenty-​five years, the number of annulment proceedings has steadily increased with two annulment proceedings being concluded between 1991 and 2000, twenty-​six proceedings being concluded between 2001 and 2010, and forty-​eight proceedings being concluded between 2011 and June 2017.9 According to Article 52(3) of the ICSID Convention, ad hoc Committees have the ‘authority’ 27.06 to annul the award or any part of the award in case any of the five grounds is fulfilled. The authority of an annulment Committee is limited to review on the grounds specified in the application. Therefore, an ad hoc Committee cannot annul an award based on a ground that it considers applicable unless that ground is included in the application. Some Committees have interpreted Article 52(3) to mean that once one ground is fulfilled, further review of the award is not necessary.10 Others have taken a different approach and addressed each ground articulated in the application. Moreover, once one of the grounds has been found to apply, Article 52 has been inter- 27.07 preted to give Committees some discretion with respect to the extent of annulment. For

8  Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, ICSID Case No. ARB/​06/​11, Decision on Annulment (Nov. 2, 2015) [hereinafter Occidental v. Ecuador], ¶ 47 (‘Factual findings and weighing of evidence made by tribunals are, as a general rule, outside the remit of ad hoc committees’). 9 ICSID 2017 Annual Report (Sept. 6, 2017), https://​icsid.worldbank.org/​en/​Documents/​icsiddocs/​ ICSID%20AR%20EN.pdf (last visited Nov. 13, 2017). These figures include proceedings that resulted in a full or partial annulment, a rejection of the application or a proceeding being discontinued. 10 Sempra Energy International v.  Argentine Republic, ICSID Case No. ARB/​ 02/​ 16, Decision on Annulment (June 29, 2010) [hereinafter Sempra v. Argentina], ¶¶ 78–​79 (‘Once an ad hoc committee has concluded that there is one instance of manifest excess of powers (or any other ground for annulment), which warrants annulment of the Award in its entirety, this will be the end of the ad hoc committee’s examination. Since annulment of an award in its entirety necessarily leads to the loss of the res judicata effect of all matters adjudicated by the Tribunal, it is unnecessary to consider whether there are other grounds—​whether in respect of the same matter or other matters—​that may also lead to annulment’).

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Annulment of ICSID Awards example, a Committee has discretion to decide whether annulment should be partial or full.11 Furthermore, in Vivendi v Argentina the Committee described an even broader discretion, including refusal to annul an award even when an annullable error is found. The ad hoc Committee explained that: Article 53(1) . . . has been interpreted as giving committees some flexibility in determining whether annulment is appropriate in the circumstances. Among other things, it is necessary for an ad hoc committee to consider the significance of the error relative to the legal rights of the parties.12

A. Annulment: An Exceptional Recourse? 27.08 The rate of annulment proceedings to the total number of registered cases13 is no more than

approximately 8 per cent. However, as previously noted, there is a growing trend for the losing party to seek annulment of the award.14

27.09 Since the entry into force of the ICSID Convention in 1966, annulment proceedings

have been instituted in 104 cases. Seven applications for annulment had been registered with ICSID up to 2000.15 These applications involved awards in Klöckner v Cameroon (twice),16 Amco v Indonesia (twice),17 MINE v Guinea,18 SPP v Egypt,19 and Philippe Gruslin v Malaysia.20 Decisions with respect to annulment were issued in five of these proceedings with three ad hoc Committees annulling the awards in full and two ad hoc Committees,

11  Total S.A. v. Argentine Republic, ICSID Case No. ARB/​04/​1, Decision on Annulment (Feb. 1, 2016), ¶ 167 (‘ICSID ad hoc committees have affirmed in their decisions, and this Committee agrees, that . . . an ad hoc committee’s authority to annul is circumscribed by the art. 52 grounds specified in the application for annulment, but an ad hoc committee has discretion with respect to the extent of an annulment, i.e., either partial or full’). 12  Vivendi v. Argentina I, supra note 1, Decision on Annulment (July 3, 2002), ¶ 66. 13  Overall, 619 cases were registered at ICSID by end of June 30, 2017 (503 ICSID, 50 Additional Facility and Conciliation cases, and 10 UNCITRAL cases). See ICSID Caseload, supra note 5. 14  According to the ICSID Secretariat, this reflects the increased number of awards issued, and not an increased rate of annulment. The rate of annulment for 1971–​2000 was 13%, for 2001–​2010 was 8% and for 2011–​present 4%, ICSID 2017 Annual Report, supra note 9. 15  For a comprehensive analysis of early annulment procedures and cases, see Annulment of ICSID Awards (E. Gaillard & Y. Banifatemi eds., 2004). 16  The ad hoc Committee annulled the first award on the grounds that the tribunal had failed in its duty to state the reasons for the award. The dispute was resubmitted to a second tribunal which rendered a new award; both parties asked for its annulment, but the second ad hoc Committee rejected the applications. Klöckner Industrie–​Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, ICSID Case No ARB/​81/​2, Award (Oct. 21, 1983), 2 ICSID Rep.  9 [hereinafter Klöckner v. Cameroon]; Klöckner v. Cameroon, Decision on Annulment (May 3, 1985), 2 ICSID Rep. 95. 17  The ad hoc Committee annulled the award on the basis of the tribunal’s failure to apply the proper law–​which the Committee considered to be beyond its jurisdiction ratione materiae; Amco v. Indonesia I, supra note 1, Decision on Annulment (May 16, 1986), 1 ICSID Rep. 509. The case was retransmitted to a new tribunal which decided first on jurisdiction (May 10, 1988), 1 ICSID Rep. 543, and then on the merits, Award (June 5, 1990), 1 ICSID Rep. 569. Both parties applied for annulment of the second award, applications rejected by a second ad hoc Committee. 18  The ad hoc Committee annulled the damages section of the award because the tribunal had failed to deal with questions raised by Guinea, and this failure might have affected the damages awarded. Maritime International Nominees Establishment (MINE) v. Republic of Guinea, ICSID Case No. ARB/​84/​4, Decision on Annulment (Dec. 22, 1989), 4 ICSID Reports 79 [hereinafter MINE v. Guinea]. After MINE resubmitted the damages question for decision by a new tribunal, the parties reached a settlement by agreement. 19  Middle East Limited v. Arab Republic of Egypt, ICSID Case No. ARB/​84/​3. This case was settled before the ad hoc Committee issued its decision. 20  Philippe Gruslin v. Malaysia, ICSID Case No. ARB/​99/​3. The proceeding was discontinued for lack of payment of advances pursuant to Administrative and Financial Regulation 14(3)(d), Order for the discontinuance of the proceeding (Apr. 2, 2002).

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II.  Scope and Application of Annulment Under the ICSID Convention formed after second awards were issued following annulment in the first annulment proceedings, rejecting the applications. Since 2001, the number of applications for annulment filed has doubled every five years. 27.10 Eleven applications were registered from the beginning of 2001 to 2005, twenty-​two applications were registered from the beginning of 2006 to 2010, and sixty-​three applications were registered from 2011 to 30 June 2017. Annulment of an arbitral award may lead to the submission of the dispute to a new tribunal. Once a new award is issued, an application for a second annulment may be submitted. By mid-​2017, there have been four cases with respect to which an application for a second annulment has been registered.21 The outcomes in the annulment proceedings have not usually been in favour of the applicant. 27.11 Among the eighty concluded annulment proceedings, twenty-​three proceedings have been discontinued. Of the remaining fifty-​seven proceedings, Committees rejected the application for annulment on forty occasions and annulled seventeen awards (twelve decisions annulled the award in its entirety and five decisions annulled it partially).22 Despite the increasing frequency of annulment applications, the ICSID Secretariat and com- 27.12 mentators continue to stress the exceptional character of annulment as relief that should be sought sparingly. In an apparent effort to provide a disincentive for parties filing frivolous annulment applications, Committees frequently require the applicant to pay all of the procedural expenses if the application is rejected. More recently, Committees have also required the losing applicant to pay the legal fees incurred by the party defending against annulment. The first ad hoc Committee to order an unsuccessful applicant to pay the administrative 27.13 costs and legal fees of the defending party was the Committee in CDC v Seychelles.23 The Committee noted that the annulment application filed by Seychelles was ‘fundamentally lacking in merit’ and that the applicant’s case was, ‘to any reasonable and impartial observer, most unlikely to succeed’.24 Similarly, the Committee in Repsol v Petroecuador required Petroecuador, the applicant, to pay all administrative fees and one-​half of the legal fees of the party opposing the application for annulment, and observed: [T]‌he Parties are aware that the annulment proceedings are designed to grant reparation for damages only in cases of serious violations of certain fundamental principles. Such procedures should not be confused with the proceedings of an Appeals Tribunal and, therefore, should be adopted only in special situations. Thus, annulment proceedings should not be applied routinely, or as means of delaying the objectives of an award, or the enforcement thereof. [emphasis added]25

Since the Repsol v Petroecuador decision on annulment was issued in 2007, twelve Committees 27.14 have ordered the applicant to pay all or some of the legal fees and expenses of the other party.26

21  See ICSID website for the list of cases submitted for annulment https://​icsid.worldbank.org/​en/​Pages/​ cases/​searchcases.aspx (last visited Nov. 13, 2017). 22 Secretariat of the International Centre for Settlement of Investment Disputes (ICSID), Updated Background Paper on Annulment for the Administrative Council of ICSID (May 5, 2016) 10–​11 [hereinafter ICSID Updated Background Paper on Annulment], https://​icsid.worldbank.org/​en/​Documents/​resources/​Background%20Paper%20on%20Annulment%20April%202016%20ENG.pdf (last visited Nov. 13, 2017). 23  CDC Group plc v. Republic of the Seychelles, ICSID Case No. ARB/​02/​14, Decision on Annulment (June 29, 2005), ¶¶ 89–​90 [hereinafter CDC v. Seychelles]. 24  Id. at 89. 25  Repsol YPF Ecuador S.A.  v.  Empresa Estatal Petróleos del Ecuador, ICSID Case No. ARB/​ 01/​10, Decision on Annulment (Jan. 8, 2007) [hereinafter Repsol v. Ecuador], ¶ 86. 26  ICSID Updated Background Paper on Annulment, supra note 22, at 25–​29.

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Annulment of ICSID Awards B. Annulment versus Appeal: A Thin Line in ICSID Annulment Proceedings 27.15 Annulment is different from appeal, both in the scope of the review each process entails

and the impact of that review. As Professor Schreuer states in his treatise on the ICSID Convention, ‘annulment is concerned only with the legitimacy of the process of decision. It is not concerned with the substantive correctness of the decision’. 27 By contrast, Professor Schreuer notes that ‘[a]‌ppeal is concerned with both’.28 Article 53 of the ICSID Convention expressly provides that ICSID awards are not subject to an appellate mechanism or to any other remedy except those provided for in the Convention. Thus, the review of ICSID awards does not extend beyond the closed list of enumerated Article 52 grounds to errors on the merits, that is, errors of law or fact in the award. In theory, an appellate body could substitute its own decision for that of the first tribunal or require that tribunal to rectify its mistakes.29 An ICSID ad hoc Committee, on the other hand, does not have that authority.

27.16 The role of the ad hoc Committee has been interpreted as ensuring ‘that the resulting award

is truly an “award”, i.e., a result arrived at fairly, under due process and with transparency and hence in the basic justice of which parties will have faith’.30 This narrow procedural review allows a limited sacrifice of finality of ICSID awards for greater integrity and fairness in the decision-​making process. Review of substantive correctness entails a higher level of scrutiny to obtain greater accuracy in the legal reasoning.31 Successive ad hoc Committees have emphasized that annulment is different from appeal.32 However, as described below, some ad hoc Committees, including Committees that emphasized this separation, have been criticized for stepping over this line.

27.17 Based on the degree of respect shown for this separation and the limited role the ICSID

Convention provides for ad hoc Committees, doctrine. and commentators divide the ad hoc Committee decisions into several generations.

27.18 The first generation of annulment decisions (Klöckner v Cameroon I and Amco v Indonesia

I)33 were issued in 1985 and 1986. These ad hoc Committees were heavily criticized for having exceeded their powers by re-​examining the merits of the cases, crossing the line between annulment and appeal.34 Indeed, the new tribunal that was constituted after the Amco v Indonesia I annulment was issued found that the ad hoc Committee had made statements

  Schreuer et al., A Commentary, supra note 6 at 901, ¶ 11.   Id. 29  D.D. Caron, Reputation and Reality in the ICSID Annulment Process: Understanding the Distinction between Annulment and Appeal, 7 ICSID Rev.-​FILJ 21 47 (1992). 30  CDC v. Seychelles, supra note 23, ¶ 36. 31  According to H.  Van Houtte in Gaillard & Banifatemi, supra note 15 (‘Arbitrators and counsel in ICSID cases, both will benefit from a better insight into the grounds for annulment. Indeed, for arbitrators, the risk that otherwise their decision may be annulled is an extra reason to render good justice—​if ever they would need such additional motive. For counsel, a deeper insight in the grounds for a possible annulment helps to evaluate whether or not a request for annulment could be successful’). 32  See, e.g., M.C.I. Power Group L.C. and New Turbine Inc. v. Republic of Ecuador, ICSID Case No. ARB/​03/​6, Decision on Annulment (Oct. 19, 2009) [hereinafter M.C.I. v. Ecuador], ¶ 24: ‘the role of an ad hoc committee is a limited one, restricted to assessing the legitimacy of the award and not its correctness . . . The committee cannot for example substitute its determination on the merits for that of the tribunal’; Mr. Patrick Mitchell v. Democratic Republic of Congo, ICSID Case No. ARB/​99/​7, Decision on Annulment (Nov. 1, 2006) [hereinafter Patrick Mitchell v. Congo], ¶ 19 (‘No one has the slightest doubt—​all the ad hoc committees have so stated, and all authors specializing in the ICSID arbitration system agree—​that an annulment proceeding is different from an appeal procedure and that it does not entail the carrying out of substantive review of an award’). 33  Klöckner v. Cameroon I, supra note 16; Amco v. Indonesia I, supra note 17. 34  M. Reisman, The Breakdown of the Control Mechanism in ICSID Arbitration, 4 Duke L. J. 739 (1989). 27 28

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II.  Scope and Application of Annulment Under the ICSID Convention ‘obiter to the annulment function’35 and had expressed views beyond its jurisdiction ratione materiae.36 The second generation of decisions (Klöckner v Cameroon II, Amco v Indonesia II, and MINE 27.19 v Guinea),37 issued between 1989 and 1992, appeared to be more cautious. The Klöckner v Cameroon II and Amco v Indonesia II Committees refused to annul the awards. The MINE v Guinea annulment decision, which dealt with some of the concerns raised about the first generation of annulment decisions, has been praised as illustrating that the ICSID annulment process was back ‘on track’ to fulfilling its ‘limited purposes’.38 The third generation of annulments, issued between 2000 and 2009, received a mixed re- 27.20 action from commentators. The first decisions of this period, Wena v Egypt and Vivendi v Argentina, seemed to follow the same cautious line as their immediate predecessors. The ad hoc Committee in Wena, for instance, found that, in order to lead to annulment, a serious departure from a fundamental rule of procedure would have to have been capable of taking the tribunal to a result different from the one it would have reached if the rule had been followed. However, two decisions within the third generation were criticized by some as a setback. The 27.21 ad hoc Committee in CMS v Argentina extensively criticized the original award and expressed a sense of frustration at not being able to set the award aside, despite those shortcomings.39 Similarly, the ad hoc Committee in Patrick Mitchell v Congo40 concluded that the tribunal manifestly exceeded its powers in deciding that the activities of a law firm constitute an investment for purposes of Article 25 of the ICSID Convention, even though these activities, in the opinion of the ad hoc Committee, did not contribute to the economic development of the host state.41 The criticisms of these annulments were focused again on the crossing of the line between annulment and appeal and the role of the ad hoc committees. The ICSID system was declared in crisis, and the discussions ranged from the lack of consistency of ICSID jurisprudence to the reform of the ICSID system and its rules. It incited one scholar to declare 2006–​2007 ‘a black year for ICSID’.42 From 2010 to 2016, the majority of decisions issued by ad hoc committees rejected annul- 27.22 ment. Indeed, twenty-​eight of the thirty-​four decisions issued prior to May 2016 were rejections. The decisions annulling awards, in full43 or in part,44 sought to perform their review within the conservatively defined scope of annulment set out in Klöckner v Cameroon II,

  Amco v. Indonesia II, Resubmitted case: Decision on Jurisdiction (May 10, 1988).   Amco v. Indonesia II, Resubmitted case: Award (June 5, 1990). 37 Klöckner v.  Cameroon II:  Resubmitted Case, Second Decision on Annulment (May 17, 1990); Amco v. Indonesia II, Resubmitted case: Second Decision on Annulment of the 1990 Award and the 1990 Supplemental Award (Dec. 17, 1992); MINE v. Guinea, supra note 18. 38  A. Broches, Observations on the Finality of ICSID Awards, 6(2) ICSID Rev. 321, 376 (1991). 39 CMS Gas Transmission Company v.  Argentine Republic, ICSID Case No ARB/​ 01/​8, [hereinafter CMS v. Argentina], ¶ 158. 40  Patrick Mitchell v. Congo, supra note 32. 41  Id. ¶¶ 38–​40. See also K. Yannaca-​Small & D. Katsikis, The Meaning of ‘Investment’ in Investment Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 11 (K. Yannaca-​Small ed., 2018). 42  E. Gaillard, ‘A Black Year for ICSID’, New York L. J. (Feb. 22, 2007). 43 Sempra v.  Argentina, supra note 10; Helnan International Hotels A/​ S v.  Arab Republic of Egypt, Decision on Annulment (June 14, 2010). 44  Enron v.  Argentina, supra note 1, Decision on Annulment (July 30, 2010); Fraport AG Frankfurt Airport Services Worldwide v.  Republic of the Philippines, ICSID Case No ARB/​03/​25, Decision on Annulment (Dec. 23, 2010) [hereinafter Fraport v. Philippines]; Pey Casado v. Chile, supra note 1, Decision on Annulment (Dec. 18, 2012); Occidental v. Ecuador, supra note 8. 35 36

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Annulment of ICSID Awards Amco v Indonesia II, and MINE v Guinea. Nevertheless, this fourth generation of annulments has reinvigorated the debate. The recent wave of discussions came in 2010, following the decisions on annulment in Sempra v Argentina, Enron v Argentina, and Fraport v Philippines.45 In the case of Fraport, the government of Philippines, the applicant in the annulment proceedings, urged the ICSID secretariat to issue guidelines for ad hoc committees in order to ensure ‘fair and effective annulment proceedings’.46

III.  The Grounds for Annulment 27.23 As mentioned above, there are five grounds for annulment, of which only four have been

invoked in the published cases, usually cumulatively: improper constitution of the tribunal, manifest excess of powers, serious departure from a fundamental rule of procedure, and failure to state reasons on which the award is based. The remaining grounds for annulment—​ corruption on the part of a member of the tribunal—​has never been invoked.47 Between 1998 and 2008, almost three out of ten ICSID annulment applications eventually led to annulment. Manifest excess of powers and failure to state reasons were the basis for annulment in three-​quarters of the cases submitted to annulment, while the serious departure from a fundamental rule of procedure was the basis for the remaining one-​quarter of cases submitted.48 Over time, some grounds have emerged as having a greater chance of success than others.

A. Improper Constitution of the Tribunal 27.24 Five annulment applications have invoked improper constitution of the tribunal but no

award has been annulled on that ground.49 In the single annulment proceedings that invoked improper constitution of the tribunal as grounds for annulment and where the award was annulled, the Committee concluded that annulment was proper on other grounds and did not address the question of constitution.50 The four ad hoc Committees that have addressed this ground have disagreed as to what circumstances would qualify as improper constitution.51

27.25 In Azurix v Argentina, the earliest of the five cases, the ad hoc Committee adopted a re-

strictive reading of improper constitution in line with the procedural review character of the annulment process. It took the view that, under the ICSID Convention, the proper venue for

45  Sempra v. Argentina, supra note 10; Enron v. Argentina, supra note 44; Fraport v. Philippines, supra note 44. See discussion by P. Friedland & P. Brumpton, Rabid Redux:  The Second Wave of Abusive ICSID Annulments, 27(4) Am. U. Int’l L. Rev. (2012). 46  Background Paper on Annulment for the Administrative Council of ICSID, ICSID Review, Vol. 27, No. 2, at pp. 443–​92 (2012). 47  ICSID Updated Background Paper on Annulment, supra note 22, ¶ 97. 48  G. Verhoosel, ‘Annulment and Enforcement Review of Treaty Awards: To ICSID or not to ICSID’, 23(1) ICSID Rev. 119 (2008). 49  ICSID Updated Background Paper on Annulment, supra note 22, ¶ 79. See Vivendi v. Argentina II, supra note 1 Resubmitted case: Decision on Annulment (Aug. 10, 2010); Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/​01/​12, Decision on Annulment (Sept. 1, 2009)  [hereinafter Azurix v.  Argentina]; Companie d’Exploitation du Chemin de Fer Transgabonais v. Gabonese Republic, ICSID Case No. ARB/​ 04/​5, Decision on Annulment (May 11, 2010) [hereinafter Transgabonais v. Gabon]; EDF International S.A. SAUR International S.A. & Leon Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/​03/​23, Decision on Annulment (Feb. 5, 2016) [hereinafter EDF v. Argentina]; Sempra v. Argentina, supra note 10. 50  See Sempra v. Argentina, supra note 10, ¶ 78. 51  See Azurix v. Argentina, supra note 49, ¶¶ 274–​84, 286–​92; Transgabonais v. Gabon, supra note 49, ¶¶ 109–​30; Vivendi v. Argentina II, supra note 49, ¶¶ 200–​42; EDF v. Argentina, supra note 49, ¶¶ 74–​175.

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III.  The Grounds for Annulment the resolution of any disputes involving the make-​up of the arbitral tribunal was the tribunal itself, that the decision of the tribunal as to the suitability of an arbitrator was final and that the role of the ad hoc committee in regard to such decisions was simply to ensure that the proper procedures had been followed. So long as those procedures were not ignored, the correctness of the tribunal’s decision was irrelevant to the question of whether the tribunal had been properly constituted. The committee noted that ‘an ad hoc committee cannot decide for itself whether or not a decision . . . was correct, as this would be tantamount to an appeal against such a decision. All that an ad hoc committee can consider is whether the provisions and procedures prescribed . . . were complied with’.52 Since Argentina had filed a proposal for the disqualification of the arbitrator in question before the arbitral tribunal and the tribunal had followed the proper procedures laid out in the ICSID Convention and Arbitration Rules, the ad hoc Committee found that the tribunal was properly constituted. Committees that have addressed the constitution of the tribunal grounds since Azurix v 27.26 Argentina have gone beyond this limited scope and sought to determine whether the arbitrator being challenged in fact displayed ‘a manifest lack of the qualities required’ by the ICSID Convention.53 In fact, the ad hoc Committee in EDF v Argentina, the most recent Committee to offer its views on this ground for annulment, held that, in cases where the party challenging the constitution of the tribunal becomes aware of the basis for its challenge only after the tribunal has reached its decision, and where therefore the issue of improper constitution is raised for the first time before the ad hoc committee, the committee should review the issue de novo.54 Where, on the other hand, the issue has been previously addressed by the tribunal itself, the ad hoc committee should show deference to the previous decision. In such cases, the party applying for an annulment must show that the previous decision was ‘so plainly unreasonable that no reasonable decision-​maker could have come to such a decision’.55 In EDF v Argentina, two arbitrators were subject to challenge and the ad hoc Committee applied de novo review to one challenge and deferential review to the other. In neither case, however, did it decide in favour of the challenging party. There is also some disagreement regarding the standard to apply when evaluating the constitu- 27.27 tion of a tribunal. The Vivendi v Argentina II Committee declined to annul a decision where one arbitrator had failed to disclose a significant conflict of interest, because the evidence suggested that the conflict of interest had not materially affected the decision.56 The Committee in EDF v Argentina, however, held that the proper standard ought to have been not whether the conflict ‘had’ affected the decision, but whether it ‘could have’ affected the decision.57 It is not suggested that there is an emerging trend in parties relying on this ground for pur- 27.28 poses of ICSID annulment applications. In fact, the significance of these annulment decisions is called into question by the fact that four of the five annulment applications that invoke improper constitution of the arbitral tribunal were filed by the Republic of Argentina between 2006 and 2012. Two of these cases, Vivendi v Argentina II and EDF v Argentina, involved an attempt to disqualify the same arbitrator. In the fifth annulment application, brought by the Republic of Gabon in Transgabonais v Gabon,58 the applicant failed to

  Azurix v. Argentina, supra note 49, ¶ 282.   ICSID Convention art. 57. 54  EDF v. Argentina, supra note 49, ¶ 132. 55  Id. at 145. 56  Vivendi v. Argentina II, supra note 49, ¶ 235. 57  EDF v. Argentina, supra note 49, ¶¶ 133–​34. 58  Transgabonais v. Gabon, supra note 49. 52 53

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Annulment of ICSID Awards invoke improper constitution in any of its written submissions, only raising the issue at oral argument. 27.29 There is no settled approach to committee review of this ground for annulment. Overall,

it is understood that annulment applications based on this ground are likely to succeed only in ‘rare circumstances’, if at all.59 The EDF v Argentina and Azurix v Argentina decisions set out some clear principles to govern the decision-​making process of the ad hoc committee, but it remains to be seen whether future committees will follow either of those approaches.

B. Manifest Excess of Powers 27.30 Manifest excess of powers is the most widely used: it has been invoked in all but one of the

annulment proceedings that resulted in a decision on annulment. It is generally accepted that the ‘excess of powers’ requirement is a means of asserting disciplinary control over the conduct of the arbitral tribunal in conducting its analysis but not over the tribunal’s conclusions on the merits. To serve as grounds for annulment, the tribunal’s excess of powers must also be ‘manifest’, a term that expresses a threshold, not a standard. As Professor Schreuer summarizes: In accordance with its dictionary meaning, ‘manifest’ may mean ‘plain’, ‘clear’, ‘obvious’, ‘evident’ and easily understood or recognized by the mind. Therefore, the manifest nature of an excess of powers is not necessarily an indication of its gravity. Rather it relates to the ease with which it is perceived. On this view, the word relates not to the seriousness of the excess or the fundamental nature of the rule that has been violated but rather to the cognitive process that makes it apparent. An excess of powers is manifest if it can be discerned with little effort and without deeper analysis.60

27.31 ICSID’s 2016 Updated Paper on Annulment notes two distinct methodological approaches

applied by ad hoc committees in their analysis:  (a) a two-​step analysis that requires a determination of whether there was an ‘excess’ of power and whether that excess was ‘manifest’ and (b)  a prima facie test based on a summary examination of whether any of the alleged excesses of power could be viewed as ‘manifest’.61 To determine whether an excess of powers is ‘manifest’, ad hoc committees consider whether the excess of powers is ‘self-​evident rather than the product of elaborate interpretations’62 or ‘obvious by itself by reading the award . . . prior to a detailed examination’.63 However, some committees have moved closer to the line between annulment and appeal, and gone beyond the dictionary meaning, in noting

  ICSID Updated Background Paper on Annulment, supra note 22, ¶ 54.   Schreuer et al., A Commentary, supra note 6, ¶ 135. For a historical review of the meaning of ‘manifest excess of powers’ starting with Roman law, see N. Tsolakidis, ICSID Annulment Standards: Who Has Finally Won the Reisman v.  Broches Debate of Two Years Ago?, in Reshaping the Investor-​State Dispute Settlement System: Journeys for the 21st Century 833–​34 (J.E. Kalicki & A. Joubin-​Bret eds., 2015). 61  ICSID Updated Background Paper on Annulment, supra note 22, ¶ 82. 62  Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No ARB/​98/​4, Decision on Annulment, (Feb. 5, 2002), 41 I.L.M. 933 (2002), ¶ 25 [hereinafter Wena v. Egypt]. See also CDC v. Seychelles, supra note 23, ¶ 41; M.C.I. v. Ecuador, supra note 32, ¶ 49; Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/​07/​17, Decision on Annulment (Jan. 24, 2014), ¶ 128 [hereinafter Impregilo v. Argentina]. 63  Repsol. v. Ecuador, supra note 25, ¶ 36. See also Rumeli Telekom A.S. & Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/​05/​16 Decision on Annulment (Mar. 25, 2010), ¶ 96 [hereinafter Rumeli v. Kazakhstan]; Occidental v. Ecuador, supra note 8, ¶ 57; TECO Guatemala Holdings, LLC v. Republic of Guatemala, ICSID Case No. ARB/​10/​23, Decision on Annulment (Apr. 5, 2016), ¶¶ 77, 181 [hereinafter TECO v. Guatemala]. 59

60

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III.  The Grounds for Annulment that, to be ‘manifest’, the excess must be ‘substantially serious’,64 ‘material to the outcome of the award’,65 or obvious, evident, clear, self-​evident, and extremely serious.66 The most commonly invoked examples of allegedly manifest excess of powers are:  (a) ex- 27.32 ceeding the limits of jurisdiction, which are determined by Article 25 of the ICSID Convention and the parties’ agreement or consent; and (b) failing to apply applicable law as required by Article 42 of the ICSID Convention,67 or issuing a decision ex aequo et bono—​ that is to say, exercising a general discretion not conferred by the applicable law or agreed to by the parties—​in violation of Article 42(3) of the Convention.

1. Jurisdiction The most obvious example of a tribunal exceeding its power involves improper exercise of 27.33 jurisdiction—​for example, issuing an award when the tribunal has no jurisdiction, going beyond the limits of existing jurisdiction, or failing to exercise jurisdiction when jurisdiction is proper.68 However, in general, very few committees have annulled awards based on a finding of manifest excess of powers with respect to jurisdiction.69 The verification of the existence of jurisdiction generally requires ensuring that (a) there is an investment under the relevant BIT or other consent instrument, (b) the legal dispute before the tribunal arises out of an investment, (c) the parties meet the nationality requirements, and (d) there is written consent. In reviewing a tribunal’s conclusions with respect to these key elements of jurisdiction, ad hoc Committees often face the challenge of carrying out a procedural review without encroaching on the substantive review more appropriate to an appeal. In Lucchetti v Peru,70 an ad hoc Committee declined, by a two to one margin, to annul a jur- 27.34 isdictional award that had held that the original tribunal lacked jurisdiction over the dispute owing to its having arisen prior to the entry into force of the Chile–​Peru BIT. Lucchetti had argued that the original tribunal manifestly exceeded its powers when it: arrogated to itself an authority it did not properly possess, to determine that a government measure taken after an investment treaty’s entry into force fell outside that treaty’s coverage, simply because its ‘subject matter’ was the same as earlier government measures which were formally, legally and irrevocably invalidated by the local courts . . .71

The ad hoc Committee observed that the tribunal had not spelled out clearly the interpretive steps which it took in reaching its interpretation of Article 2 of the Chile–​Peru BIT.

64 Hussein Nuaman Soufraki v.  United Arab Emirates, ICSID Case No. ARB/​ 02/​ 7, Decision on Annulment (June 5, 2007), ¶ 40 [hereinafter Soufraki v. UAE]; Impregilo v. Pakistan, supra note 62, ¶ 128. 65  Vivendi v. Argentina I, supra note 12, ¶ 86. 66  El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/​03/​15 Decision on Annulment (Sept. 22, 2014), ¶ 142 [hereinafter El Paso v. Argentina]. 67 Y. Banifatemi, The Law Applicable in Investment Treaty Arbitration, in Arbitration under International Investment Agreements:  A Guide to the Key Issues ch. 19 (K. Yannaca-​Small ed., 2018). See also Schreuer et al., A Commentary, supra note 6. 68  Vivendi v. Argentina I, supra note 1, ¶ 86 (‘It is settled . . . that an ICSID tribunal commits an excess of powers not only if it exercises a jurisdiction which it does not have under the relevant agreement or treaty and the ICSID Convention, read together, but also if it fails to exercise a jurisdiction which it possesses under those instruments’). 69  As of May 2016, although committees decided on alleged manifest excess of powers with respect to jurisdiction in forty-​three annulment proceedings, this ground led to full annulment of only two awards and partial annulment of only three awards. ICSID Updated Background Paper on Annulment, supra note 22, ¶ 89. 70  Industria Nacional de Alimentos, S.A. & Indalsa Perú, S.A v.  Republic of Peru (formerly Empresas Lucchetti, S.A. & Lucchetti Perú, S.A.) ICSID Case No. ARB/​03.4, Decision on Annulment (Sept. 5, 2007) [hereinafter Lucchetti v. Peru]. 71  Id. ¶ 31.c.

737

Annulment of ICSID Awards Nevertheless, it concluded that this ‘somewhat simplified’ approach betrayed no signs that the tribunal ‘disregarded any significant element of the well-​known and widely recognized international rules of treaty interpretation’.72 As such, there was no manifest excess of powers, in the view of the majority of the Committee. The third Committee member, in a dissenting opinion, took what he characterized as a ‘sterner view’ of the ‘manifold shortcomings of the Tribunal’s Award’.73 He stated that ICSID tribunals must offer ‘clear and strong’ explanations in the event that they decline jurisdiction over investment treaty claims at the initial stage.74 He warned that a tribunal should offer ‘clearly explained and justified’ grounds to claimants and to ‘other consumers of the ICSID system’ in cases where it declines jurisdiction over a claim (and does not hear the claim on its merits) or run the risk of having its award annulled.75 27.35 The majority of the Committee in MHS v Malaysia76 applied a similarly stern standard of

review to the conclusions of the tribunal in finding that the tribunal exceeded its powers by failing to exercise the jurisdiction. The Committee found that the following gaps in the tribunal’s reasoning amount to ‘manifest’ excess of powers:  (a) the tribunal failed to take account of and apply the ‘broad and encompassing’ definition of investments in the applicable BIT and, instead, limited its analysis to the criteria of Article 25(1) of the ICSID Convention (the so-​called Salini criteria);77 (b) the tribunal’s evaluation of whether there was a contribution to the economic development of Malaysia did not consider small contributions and contributions of a cultural and historical nature, which the Committee believed should qualify as an investment; and (c) the tribunal, in concluding that there was no investment, failed to take account of the travaux préparatoires of the ICSID Convention and the decision of the drafters of the Convention to leave ‘investment’ undefined.78 The third Committee member, in his dissenting opinion, insisted that ‘substantial’ or ‘significant’ contributions to the economic development of the host state form the ‘outer limits’ of the definition of an ICSID investment.79 He considered that the investment in question was lacking these characteristics. In addition, he highlighted the procedural nature of the ICSID annulment process by differentiating between a ‘manifest error’ and a ‘manifest excess of powers’, and noting an ‘obvious distinction’ between the two.80

27.36 The ad hoc Committee in Patrick Mitchell v Congo fully annulled the award on the grounds

that the tribunal manifestly exceeded its powers when it retained jurisdiction based on a finding that a legal consulting firm constituted an investment, without sufficiently stating the reasons justifying that conclusion.81

27.37 The ad hoc Committee in Occidental v Ecuador explained that:

jurisdictional excess of powers requires a finding that the tribunal has misconstrued the applicable law (e.g. the law regulating ownership of a protected investment) or has wrongly

  Id. ¶ 116.   Lucchetti v. Peru, supra note 70, Dissenting Opinion Attached to Decision on Annulment, ¶ 1. 74  Id. ¶ 4. 75  Id. 76  Malaysian Historical Salvors (MHS), SDN, BHD v. Government of Malaysia, ICSID Case No. ARB/​ 05/​10, Decision on Annulment (Apr. 16, 2009) [hereinafter MHS v. Malaysia]. 77 For an analysis on the definition of ‘investment’, see K. Yannaca-​ Small & Dimitrios Katsikis, The Meaning of ‘Investment’ in Investment Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 10 (K. Yannaca-​Small ed., 2018). 78  MHS v. Malaysia, supra note 76, ¶ 80. 79  Id. Dissenting opinion by Mohamed Shahabuddeen. 80  Id. ¶ 54. 81  Patrick Mitchell v. Congo, supra note 32, ¶¶ 38–​40. 72 73

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III.  The Grounds for Annulment established the relevant facts (e.g. whether an investor actually controls an investment). Article 52(1)(b) of the Convention requires that the excess of jurisdiction resulting from such misconstruction or from such wrongful determination be “manifest”; if that requirement is fulfilled, the tribunal’s award deserves annulment.82

The Committee partially annulled the award, having concluded that the tribunal manifestly exceeded its powers by assuming jurisdiction with regard to the portion of the investment owned by a Chinese investor. It concluded that ‘[b]‌y compensating a protected investor for an investment which is beneficially owned by a non-​protected investor, the Tribunal has illicitly expanded the scope of its jurisdiction and has acted with an excess of powers’83 and that this excess of powers was manifest.84

2. Applicable  law According to Article 42(1) of the ICSID Convention, a tribunal must apply the rules of law 27.38 that are agreed by the parties. Absent such agreement, the tribunal must apply the law of the Contracting state party and applicable rules of international law. C. Schreuer notes a widespread agreement that a failure to apply the proper law may amount to an excess of powers by the tribunal.85 This general rule has been recognized by many ad hoc committees.86 However, numerous ad hoc committees have been forced to grapple with the more nuanced question of whether an error in the application of the proper law may provide adequate grounds for annulment. One line of ad hoc committee decisions rejects the erroneous application of proper law as 27.39 grounds for annulment. For example, in the Klöckner v Cameroon I87 case, the Committee, having referred to ‘the fine distinction between the ‘non-​application’ of the applicable law and mistaken application of this same law’,88 stated: It is clear that ‘error in judicando’ could not in itself be admitted as a ground for annulment without indirectly reintroducing an appeal against the arbitral award, and the ad hoc Committee under Article 52 of the Convention does not, any more than the Permanent Court of Arbitration in the Orinoco case, have the ‘duty . . . to say if the case has been well or ill judged, but whether the award must be annulled’.89

  Occidental v. Ecuador, supra note 8, ¶ 51.   Id. ¶ 266. 84  Id. ¶¶ 267–​68. 85  Schreuer et al., A Commentary, supra note 6, ¶ 192. 86  Amco v. Indonesia I, supra note 17, ¶¶ 23 & 28; Amco v. Indonesia II, supra note 37, ¶ 7.28; Klöckner v.  Cameroon I, supra note 16, ¶ 79; MINE v.  Guinea, supra note 18, ¶ 5.03; Enron v.  Argentina, supra note 44, ¶ 218 (quoting Azurix v. Argentina, supra note 49, ¶ 136); MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile, ICSID Case No. ARB/​01/​7 Decision on Annulment (Mar. 21, 2007), ¶ 44 [hereinafter MTD v.  Chile); CMS v.  Argentina, supra note 39, ¶ 49, Soufraki v.  UAE, supra note 64, ¶ 85 (quoting Amco v.  Indonesia I, supra note 1, ¶ 23); Daimler Financial Services AG v.  Argentine Republic, ICSID Case No. ARB/​05/​1 Decision on Annulment (Jan. 7, 2015), ¶ 153 [hereinafter Daimler v. Argentina]; EDF v. Argentina, supra note 49, ¶ 191; Total v. Argentina, supra note 11, ¶ 195; Adem Dogan v. Turkmenistan, ICSID Case No. ARB/​09/​9 (Jan. 15, 2016), ¶ 98 [hereinafter Dogan v. Turkmenistan]; Ioan Micula, Viorel Micula and others v. Romania, ICSID Case No. ARB/​05/​20 Decision on Annulment (Feb. 26, 2016), ¶ 127 [hereinafter Micula v.  Romania]; Antoine About Lahoud & Leila Bounafeh-​Abou Lahoud v.  Democratic Republic of the Congo, ICSID Case No. ARB/​10/​4, Decision on Annulment (July 25, 2017), ¶ 118 [hereinafter Lahoud v. Congo]; TECO v. Guatemala, supra note 63, ¶¶ 283, 311. 87  Klöckner v. Cameroon I, Decision on Annulment (May 3, 1985), 2 ICSID Rep, 1994, 95 ff., 119. 88  Id. ¶ 60. 89  Id. ¶ 61. 82 83

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Annulment of ICSID Awards 27.40 The Committee’s annulment decision in the Amco v Indonesia I90 case was equally categor-

ical. The Committees in MINE v Guinea,91 CMS v Argentina,92 Repsol v Petroecuador,93 MTD v Chile,94 CDC v Seychelles,95 Sempra v Argentina,96 Impregilo v Argentina,97 El Paso v Argentina,98 and Occidental v Argentina99 adopted the same approach. The Committee in El Paso v Argentina stated: [i]‌t is necessary to distinguish between the failure to apply the proper law and an error in the application of that law. The first is a ground for annulment under Article 52, the second is not. Reviewing the substantive reasoning by which an arbitral tribunal reached its conclusions would require reexamining how the tribunal applied or interpreted the law, which would transform annulment committees into appellate tribunals. Under this scenario, committees would necessarily have to evaluate the facts and the evidence as well as the legal principles put forward by the parties all of which were already analyzed by the respective arbitration tribunal. This would change the very nature of the ICSID arbitration system.100

27.41 On the other hand, a number of ad hoc committees adopted the position that gross or egre-

gious misapplication or misinterpretation of the appropriate law may lead to annulment. In 2007, the ad hoc Committee in Soufraki v UAE was the first decision that adopted this interpretation in stating the following: Misinterpretation or misapplication of the proper law may, in particular cases, be so gross or egregious as substantially to amount to failure to apply the proper law. Such gross and consequential misinterpretation or misapplication of the proper law which no reasonable person (‘bon père de famille’) could accept needs to be distinguished from simple error—​even a serious error—​in the interpretation of the law which in many national jurisdictions may be the subject of ordinary appeal as distinguished from, e.g., an extraordinary writ of certiorari.101

27.42 Although multiple ad hoc committees have agreed with this interpretation,102 none of those

committees concluded that the tribunal’s misapplication or misinterpretation of the applicable law was egregious enough to justify annulment.

27.43 Indeed, of the forty-​four annulment applications alleging that the tribunal failed to apply

the proper law, this ground has led to annulment in only four instances.103 In all of those

90  Amco v.  Indonesia I, supra note 1, ¶ 23 (‘The ad hoc Committee will limit itself to determining whether the Tribunal did in fact apply the law it was bound to apply to the dispute. Failure to apply such law, as distinguished from mere misconstruction of that law, would constitute a manifest excess of powers on the part of the Tribunal and a ground for nullity under Article 52(1)(b) of the Convention’). 91  MINE v. Guinea, supra note 18, ¶¶ 5.03–​5.04. 92  CMS v. Argentina, supra note 39 (Sept. 25, 2007, ¶ 49. 93  Repsol v. Ecuador, supra note 25, ¶ 38. 94  MTD v. Chile, supra note 86, ¶ 47. 95  CDC v. Seychelles, supra note 23, 11 ICSID Rep. 237, 252, ¶ 45. 96  Sempra v. Argentina, supra note 10, ¶ 206. 97  Impregilo v. Argentina, supra note 62, ¶ 131. 98  El Paso v. Argentina, supra note 66, ¶ 144. 99  Occidental v. Ecuador, supra note 8, ¶ 56. 100  El Paso v. Argentina, supra note 66, ¶ 144. 101  Soufraki v. UAE, supra note 64, ¶ 86. 102 M.C.I. v. Ecuador, supra note 32, ¶¶ 43, 51 (quoting Soufraki v. UAE, supra note 64, ¶ 86); MHS v. Malaysia, supra note 76, ¶ 74; AES Summit Generation Limited and AES-​Tisza Eromu Kft. v. Republic of Hungary, ICSID Case No. ARB/​07/​22 Decision on Annulment (June 29, 2012)  ¶¶ 33, 34 (quoting Soufraki v. UAE, supra note 64, ¶ 86) [hereinafter AES v. Hungary]; Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/​08/​12, Decision on Annulment (Feb. 21, 2014), ¶ 81 (quoting Soufraki v. UAE, supra note 64, ¶ 86) [hereinafter Caratube v. Kazakhstan]; Dogan v. Turkmenistan, supra note 86, ¶ 105); Micula v. Romania, supra note 86, ¶ 130; Lahoud v. Congo, supra note 86, ¶ 121. 103  Amco v. Indonesia I (partial); Klöckner v. Cameroon I, supra note 16 (full); Enron v. Argentina, supra note 44 (partial); Sempra v. Argentina, supra note 10 (full).

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III.  The Grounds for Annulment instances, either full or partial annulment of the award was based on the tribunal’s failure to apply a particular law. Therefore, while the possibility of annulment based on an egregious misapplication of the law is possible in theory, in practice ad hoc committees have yet to encounter a situation where this ground is satisfied.

C. Failure to State Reasons The failure to state reasons on particular points contained in the award has been alleged in fifty 27.44 applications for annulment. The inclusion of this ground for annulment reinforces the requirements of Article 48(3) of the ICSID Convention, which provides that an award must deal with every question submitted to a tribunal and must state the reasons upon which it is based. These requirements are intended to ensure that the parties can understand the facts and the law applied by the tribunal in coming to its decision.104 As with other grounds for annulment, the correctness of the tribunal’s reasoning is not subject to review. As the ad hoc Committee in Vivendi v Argentina I summarized, this ground for annulment is satisfied by ‘a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons’.105 At the same time, ad hoc committees have stated that ‘insufficient’ and ‘inadequate’ reasons106 or ‘frivolous’ and ‘contradictory’ reasons107 may amount to a failure to state reasons. The standards for review for annulment based on a tribunal’s failure to state the reasons in the 27.45 award were set by the ad hoc Committee in MINE v Guinea and continue to be applied in subsequent decisions. Generally, the MINE v Guinea Committee stated that: [T]‌he requirement to state reasons is satisfied as long as the award enables one to follow how the tribunal proceeded from Point A to Point B and eventually to its conclusion, even if it made an error of fact or of law. The minimum requirement is in particular not satisfied by either contradictory or frivolous reasons.108

The Vivendi v Argentina I Committee clarified that annulment is only proper where (a) the 27.46 failure to state reasons leaves ‘the decision on a particular point essentially lacking in any expressed rationale’ and (b) that point must itself be ‘necessary to the tribunal’s decision’.109

104  MINE v. Guinea, supra note 18, ¶ 5.08 (‘[T]‌he requirement that an award has to be motivated implies that it must enable the reader to follow the reasoning of the Tribunal on points of fact and law. It implies that, and only that’). 105  Vivendi v. Argentina I, supra note 1, ¶¶ 64–​65. 106  Patrick Mitchell v. Congo, supra note 32, ¶ 21 (‘a failure to state reasons exists whenever reasons are ... so inadequate that the coherence of the reasoning is seriously affected’); Soufraki v. UAE, supra note 64, ¶¶ 122–​26 (‘insufficient or inadequate reasons, which are insufficient to bring about the solution or inadequate to explain the result arrived at by the Tribunal’); TECO v. Guatemala, supra note 63, ¶¶ 248–​50. 107  Amco v.  Indonesia I, supra note 17, ¶ 97; Klöckner v.  Cameroon I, supra note 16, ¶ 116; MINE, v.  Guinea, supra note 18, ¶¶ 5.09  & 6.107; CDC v.  Seychelles, supra note 23, ¶ 70; M.C.I.  v.  Ecuador, supra note 32, ¶ 84; Sociedad Anónima Eduardo Vieira v.  Republic of Chile, ICSID Case No. ARB/​04/​ 7, Decision on Annulment (Dec. 10, 2010), ¶ 357 [hereinafter Vieira v. Chile]; Caratube v. Kazakhstan, supra note 102, ¶¶ 185–​86, 245; Tza Yap Shum v. Republic of Peru ICSID Case No. ARB/​07/​6 Decision on Annulment (Feb. 12, 2015), ¶ 101 [hereinafter Tza Yap Shum v. Peru]; El Paso v. Argentina, supra note 66, ¶ 221 (‘contradictory to a point to neutralize each other’); Malicorp Limited v. Arab Republic of Egypt, ICSID Case No. ARB/​08/​18 Decision on Annulment (July 3, 2013), ¶ 45 (‘an award must be upheld unless the logic is so contradictory as to be “as useful as no reasons at all” ’) [hereinafter Malicorp v. Egypt]; RSM Production Corporation v. Central African Republic, ICSID Case No. ARB/​07/​2, Decision on Annulment (Feb. 20, 2013), supra note 23, ¶ 86 (noting that the contradiction must be substantial) [hereinafter RSM v. Central African Republic]; Occidental v. Ecuador, supra note 8, ¶ 65; Tulip Real Estate and Development Netherlands B.V.  v.  Republic of Turkey, ICSID Case No. ARB/​11/​28 Decision on Annulment (Dec. 30, 2015), ¶¶ 109–​12 [hereinafter Tulip v. Turkey]; Total v. Argentina, supra note 11, ¶ 268; Lahoud v. Congo, supra note 86, ¶¶ 133–​35; TECO v. Guatemala, supra note 63, ¶¶ 90, 275, 278. 108  MINE v. Guinea, supra note 18, ¶ 5.09. 109  Vivendi v. Argentina I, supra note 1, ¶ 65.

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Annulment of ICSID Awards At the same time, the Vivendi v Argentina I Committee cautioned that: ‘[T]‌ribunals must often struggle to balance conflicting considerations, and an ad hoc committee should be careful not to discern contradiction when what is actually expressed in a tribunal’s reasons could more truly be said to be but a reflection of such conflicting considerations’.110 27.47 Committees have generally adopted the two-​part Vivendi test.111 However, they have also

shown a preference for broad discretion in the determination of whether reasons provided by a tribunal are insufficient or inadequate. The Wena v Egypt Committee, for example, noted that a tribunal’s ‘reasons may be implicit in the considerations and conclusions contained in the award, provided they can be reasonably inferred from the terms used in the decision’.112 The Committee held that: if the award is lacking reasons, ‘the remedy need not be the annulment of the award’ because ‘the purpose of this particular ground for annulment is not to have the award reversed on its merits. It is to allow the parties to understand the Tribunal’s decision . . . and the reasons supporting the tribunal’s conclusions can be explained by the ad hoc Committee itself ’.113

Other Committees have also avoided annulment by further explaining, making reasonable inferences, or clarifying the reasoning of the tribunal.114 27.48 The tribunal’s failure to state reasons in its award has resulted in annulment in eight cases.115

In Patrick Mitchell v Congo, for example, the committee fully annulled the award and stated that annulment is proper ‘whenever reasons are purely and simply not given or are so inadequate that the coherence of the reasoning is seriously affected’.116 In the particular case, the committee held that the tribunal had not adequately explained how the claimants’ legal consulting firm contributed to the economic development of the Congo, which would be necessary for determining that the firm is an investor for purposes of ICSID arbitration. The committee concluded that in failing to provide the ‘slightest explanation as to the relationship’ between the firm and the Congo, the award was ‘incomplete and obscure’ as to why the firm is considered to be making an investment.117

27.49 It is worth noting that the failure to state reasons grounds for annulment is frequently invoked

with respect to the quantum aspects of awards. This is the product of (a) the complexity of valuation methodologies in investor-​state arbitrations and (b) the discretion given to tribunals in determining appropriate compensation. Indeed, the partial annulment of the award in TECO v Guatemala provides a good example. While accepting that ‘in order to discharge its duty to provide reasons for its decision, a tribunal is not under an obligation to address

  Id.   See, e.g., Amco v. Indonesia I, supra note 17, ¶¶ 38–​44); MINE v. Guinea, supra note 18, ¶¶ 5.07–​ 5.13; Amco v. Indonesia II, supra note 37 (1992) 9 ICSID Reports 3, 48–​49 (¶¶ 7.55–​7.57); Wena Hotels v. Egypt, supra note 62, ¶¶ 77–​82; CDC v. Seychelles, supra note 23, ¶¶ 66–​72; Patrick Mitchell v. Congo, supra note 32, ¶ 21. 112  Wena Hotels v. Egypt, supra note 62, ¶ 81. 113  Id. ¶ 83. 114  Vivendi v. Argentina II, supra note 22, ¶ 248; Soufraki v. UAE, supra note 64, ¶ 24; CMS v. Argentina, supra note 39, ¶ 127; Rumeli v. Kazakhstan, supra note 63, ¶ 83 (with the caveat that if non-​stated reasons ‘do not necessarily follow or flow from the award’s reasoning, an ad hoc committee should not construct reasons in order to justify the decision of the tribunal’). 115  Amco v. Indonesia I, supra note 17 (partial), Klöckner v. Cameroon I, supra note 16 (full), MINE v. Guinea, supra note 18 (partial), Patrick Mitchell v. Congo, supra note 32 (full); CMS v. Argentina, supra note 39 (partial), Enron v. Argentina, supra note 44 (partial), Pey Casado v. Chile, supra note 44 (partial); TECO v. Guatemala, supra note 63 (partial). 116  Patrick Mitchell v. Congo, supra note 32 (full), ¶¶ 40, 41. 117  Id. ¶ 40. 110 111

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III.  The Grounds for Annulment every piece of evidence in the record or every single argument made by the parties’,118 the ad hoc Committee annulled part of the award based on the tribunal’s failure to explain how certain evidence informed the tribunal’s decision to deny the claimant recovery of one type of claimed losses while allowing the other. While this decision may be welcomed by those who have advocated for a more stringent review of quantum issues,119 it is a departure from the deferential standard previously adopted by ad hoc Committees.

D. Serious Departure from a Fundamental Rule of Procedure A fundamental irregularity in the arbitration process is an easily recognizable basis to set aside 27.50 the award, not only under the ICSID Convention but also under national laws. It is also the least controversial and the most important safeguard of the system itself. This ground has been invoked in forty-​one annulment proceedings that have led to a decision but has rarely served as the basis for annulment. How is this violation expressed? The violation of a rule of procedure will be a ground for an- 27.51 nulment only if two requirements are met: the departure from the rule must be serious, and the rule concerned must be fundamental. The Committee in MINE v Guinea, in analysing the provision, stated that the ‘the departure must be substantial and be such as to deprive a party from the benefit or protection which the rule was intended to provide’.120 However, according to the MINE v Guinea Committee, ‘even a serious departure from a rule of procedure will not give rise to annulment unless that rule is “fundamental” ’.121 In Wena v Egypt, the Committee said that the term ‘fundamental’:

27.52

[R]‌efers to a set of minimum standards of protection to be respected as a matter of international law. It is fundamental as a matter of procedure that each party is given the right to be heard before an independent and impartial tribunal. This includes the right of a party to state its claim or its defence and to produce all arguments and evidence in support of it. This fundamental right has to be ensured on an equal level in a way that allows each party to respond adequately to the arguments and evidence presented by the other . . . In order to be a serious departure from a fundamental rule of procedure, the violation of such a rule must have caused the tribunal to reach a result substantially different from what it would have awarded had such a rule been observed.122

In its 2012 decision, prior to annulling the award on this ground, the Committee in Pey 27.53 Casado v Chile added a third prong to the analysis by requiring that a committee ‘examine the full record, including the Transcripts and the Award to determine whether or not the Tribunal violated the rule in question’.123 The annulment applications based on this ground have rarely been retained, given the dif- 27.54 ficulty to demonstrate that a tribunal has departed from a fundamental rule of procedure. The most common arguments that have been advanced under this ground are lack of impartiality of the tribunal, the violation of the right to be heard, absence of deliberations of the tribunal, inadequate evidence, and burden of proof on the wrong party.124 In Fraport v

  TECO v. Guatemala, supra note 63, ¶ 125.   See S. Mullen & E. Whitsitt, Quantum, Annulment and the Requirement to Give Reasons: Analysis and Reform, 32 Arb. Int’l 59 (2016). 120  MINE v. Guinea, supra note 18, ¶ 5.05. 121  Id. ¶ 5.06. 122  Wena v. Egypt, supra note 62, ¶¶ 57–​58. 123  Pey Casado v. Chile, supra note 44, ¶ 74. 124 C.  Schreuer, in Gaillard & Banifatemi, supra note 15; A. Cohen Smutny, Procedural Review in 1 Investment Treaty Law, Current Issues (F. Ortino et al. eds., 2006). 118 119

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Annulment of ICSID Awards Philippines, for example, the ad hoc Committee partially annulled the award based on the determination that the tribunal had committed a ‘serious departure from the fundamental rule of procedure entitling the parties to be heard’ in relying heavily on extensive evidence that was provided to the tribunal after the oral hearing had concluded.125 The Committee explained that: In the Committee ‘s view, the Tribunal’s direction . . . was incompatible with the fundamental obligation on the Tribunal to permit both parties to present their case in relation to the new material . . . The Tribunal ought not to have proceeded to analyse and consider this evidence itself in its deliberations without having afforded the parties the opportunity to make submissions on it, and availed itself of the benefit of those submissions.126

IV.  Stay of Enforcement 27.55 Under Article 52(5) of the Convention, the ad hoc committee may stay enforcement of an award

‘if it considers that the circumstances so require’.127 If a stay is requested in the annulment application, enforcement of the award will be stayed provisionally by the Secretary-​General upon registration until the ad hoc committee rules on such request. Upon request of one of the parties, under Arbitration Rule 54(2), the ad hoc committee is required to rule within thirty days of its constitution on whether or not provisional stay should be continued or lifted. If the committee does not decide within thirty days, the stay is automatically terminated—​although the thirty-​day limit may be extended by agreement of the parties.128 So far, there have been forty-​three requests for the stay of enforcement, forty-​one of which have led to committee decisions of which thirty-​ six have granted the stay of enforcement.129 Under the ICSID Rules, if a committee decides or is asked to annul only part of the award, it may at its discretion ‘order the temporary stay’ of the non-​annulled part.130

27.56 Several committees have emphasized the discretional character of the stay of enforcement.

As the Committee in Kardassopoulos & Fuchs v Georgia stated: ‘a stay of enforcement during the annulment proceeding is by no way automatic, quite to the contrary, a stay is contingent upon the existence of relevant circumstances which must be proven by the Applicant’.131 The Committee in SGS v Paraguay was of the same view: ‘[b]‌ased on the plain language of Rule 54(4) of the ICSID Arbitration Rules  . . .  the party interested in the continued stay bears the burden of proof to demonstrate the existence of circumstances that warrant said continuation’.132 In this case, however, Paraguay failed to demonstrate that it would be

  Fraport v. Philippines, supra note 44, ¶ 218.   Id. ¶ 230. 127  P.D. Friedland, Stay of Enforcement of the Arbitral Award Pending ICSID Annulment Proceedings, in Gaillard & Banifatemi (eds.), supra note 15; M. Polasek, Introductory Note to Three Decisions on the Stay of Enforcement of an ICSID Award, 20(1) ICSID Rev. 581 (2006). 128  See examples in Patrick Mitchell v. Congo, supra note 32 and MTD v. Chile, supra note 86. However, in Sempra v. Argentina, supra note 10, the Committee sent a letter to the parties notifying them that it had decided to continue the provisional stay until the opening of the pleadings. See Sempra v. Argentina, supra note 10, ¶ 8. 129  ICSID Updated Background Paper on Annulment, supra note 22, ¶ 58. 130  ICSID Arbitration Rule 54(3). 131  Kardassopoulos v. Georgia, supra note 4, Decision of the ad hoc Committee on the Stay of Enforcement of the Award (Nov. 30, 2004), ¶ 26. 132  SGS Société Générale de Surveillance S.A.  v.  Republic of Paraguay, ICSID Case No. ARB/​ 07/​29 Decision on Annulment (May 19, 2014), ¶ 86 [hereinafter SGS v. Paraguay]. 125 126

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IV.  Stay of Enforcement prejudiced if enforcement were allowed and that such prejudice warranted a continued stay of enforcement.133 In deciding whether or not to grant a stay, committees balance the rights of the parties 27.57 pending disposition of the annulment application. The Committee in Libananco v Turkey, considering the burden that would be imposed on the respective parties should the stay request be granted or rejected, held that it [h]‌ad no doubt that, given the terms of the dispositif of the Award, Applicant has a clear interest in obtaining a continued stay of enforcement of the order on reimbursement and cost compensation, this being an interest which should be balanced against Respondent’s interest in enforcing this part of the Award at an early point in time.134

The stay of enforcement of an award may be subject to the condition that the requesting 27.58 party provides a bond or other security in the full amount of the award rendered against it. However, the practice of the ad hoc committees is not homogeneous on the conditions tied to the stay of enforcement, such as the posting of a bank guarantee or the setting up of an escrow account. Out of the thirty-​six decisions on the stay of enforcement of an award, fourteen ruled in favour of an unconditional stay and twenty-​two in favour of a conditional stay (with a bond guarantee, the setting up of an escrow account, or language in the decision that would condition the posting of security upon certain action to be taken by the party challenging the annulment or a declaration by that party that it will promptly comply with the award).135 In eleven of these cases, the stay was terminated because the condition was not satisfied. As with the decision on the stay of enforcement, the decision of committees to allow the pos- 27.59 iting of security is not automatic. Committees examine a number of factors, such as the prospects of compliance, would the beneficiary of the guarantee be put into a more favourable

  Id. ¶ 92.   Libananco Holdings Co. Limited v.  Republic of Turkey, ICSID Case No. ARB/​06/​8 Decision on Applicant’s Request for a Continued Stay of Enforcement of the Award (May 7, 2012), ¶ 47 [hereinafter Libananco v.  Turkey]. See also Enron v.  Argentina, supra note 44, Decision on the Argentine Republic’s Request for a Continued State of Enforcement of the Award (Oct. 7, 2008), ¶ 26; Pey Casado v. Chile, supra note 44, ¶ 28; Kardassopoulos v. Georgia, supra note 4, ¶ 29. 135  See the Decisions on the Stay of Enforcement in all ICSID Annulment Cases in the ICSID Updated Background Paper on Annulment, supra note 22:  Amco v.  Indonesia I, supra note 17, Order (May 17, 1985) and Amco v. Indonesia II, supra note 37, Interim Order (Mar. 2, 1991); Wena Hotels v. Egypt, supra note 62, Procedural Order No. 1 (Apr. 5, 2001); CDC v. Seychelles, supra note 23, Decision on Whether or Not to Continue Stay and Order (July 14, 2004); Repsol v.  Ecuador (Petroecuador), supra note 25, Procedural Order No. 1 concerning the Stay of Enforcement of the Award (Dec. 22, 2005), Procedural Order No. 4 concerning the Stay of Enforcement of the Award (Feb. 22, 2006); CMS v. Argentina, supra note 39, Decision on Stay of Enforcement (Sept. 1, 2006); Vivendi v. Argentina II, supra note 22, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award (Nov. 4, 2008); Sempra v.  Argentina, supra note 10, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award (Mar. 5, 2009); Transgabonais v. Gabon, supra note 49, Decision on Stay of Enforcement of the award (Mar. 13, 2009); Rumeli & Telsim v. Kazakhstan, supra note 63, Decision on Stay of Enforcement (Mar. 19, 2009); Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, ICSID Case No. ARB/​03/​28 Decision on Stay of Enforcement (not public) (June 23, 2009) [hereinafter Duke Energy v. Peru]; Kardassopoulos v. Georgia, supra note 4, Decision on Stay of Enforcement (Nov. 12, 2010); Joseph Charles Lemire v. Ukraine, ICSID Case No. ARB/​06/​18, Decision on Stay of Enforcement (Feb. 14, 2012)  [hereinafter Lemire v.  Ukraine]; EDF v.  Argentina, supra note 49, Decision on Stay of Enforcement (July 18, 2013); Elsamex, S.A. v. Republic of Honduras, ICSID Case No. ARB/​09/​4, Decision on Stay of Enforcement (Jan. 7, 2014) [hereinafter Elsamex v. Honduras]; Micula v. Romania, supra note 86, Decision on Stay of Enforcement (Aug. 7, 2014); Venezuela Holdings v. Venezuela, supra note 4, Decision on Stay of Enforcement (Sept. 17, 2015). 133 134

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Annulment of ICSID Awards position with respect to enforcement, would the state suffer economic hardship, or would the posting of a security have discriminating effect, to name but a few. 27.60 Although it ultimately decided against the posting of a security, the Committee in Libananco v

Turkey held that:

As a general matter it is useful to recall that a party in an ICSID arbitration, whether it be a state or a private party, has no right under the ICSID Convention to protection from enforcement efforts while pursuing an annulment proceeding. In the instant case Applicant would draw a benefit to which it has no right and for which a cost may be imposed in some form of assurance to comply with the Award should the Application be dismissed. The assurance imposed would simply serve the purpose of balancing the rights of the parties as a counterpart to the benefit that would be granted to Applicant.136 27.61 In deciding also against the granting of security, the Committee in Patrick Mitchell v Congo held

that the granting of security would put the creditor in a more favourable position than before the filing of the application for annulment, allowing it to avoid issues of sovereign immunity from execution.137

27.62 In a similar vein, the ad hoc Committee in Azurix v Argentina noted that the burden of proof

was on the investor to prove that the suspension should be accompanied by a bond guarantee. According to the Committee, to require the posting of a security might undermine the confidence of all nations in ICSID by implying that there is discrimination between states because security is usually only sought against developing nations.138 In rejecting Azurix’s arguments for annulment, the Committee reasoned that Argentina had not denounced the ICSID Convention and was thus still bound to enforce ICSID awards as final judgments of its domestic courts. The Committee thus found the principal ‘security’ for Azurix to be the very obligations to which Argentina had agreed pursuant to the ICSID Convention.139

27.63 In Continental v Argentina,140 the Committee, after it rejected Continental’s preliminary objec-

tion to Argentina’s application for annulment,141 ordered the continuation of the stay of enforcement of the award, which had been requested by Argentina.142 The Committee considered that the relevant circumstances in the case, that is, the small amount of damages (US$2.8 million), and the fact that both parties had applied for annulment, justified a continuation of the stay, without the need for security.

27.64 The committees that condition the stay of enforcement on the posting of a security have used

different forms, such as bonds, escrow accounts, or letters of assurance. The Committee in Repsol v Petroecuador conditioned the stay upon the issuance of ‘an unconditional and irrevocable bond for the total amount of the award plus the corresponding interest’.143

  Libananco v. Turkey, supra note 134, ¶ 56.  M. Polasek, supra note 127. 138  Azurix v. Argentina, supra note 49, ¶ 32. Ultimately, the ad hoc Committee in its decision of September 1, 2009, dismissed, in its entirety, Argentina’s application for annulment and the stay of enforcement of the award ordered by the Committee on December 28, 2007, was terminated. 139  Id. ¶ 38. 140 Continental v.  Argentina, supra note 1, Decision by ad hoc Committee on Continental Casualty Company’s preliminary objection to Argentina’s application for annulment (Oct. 23, 2009). 141  Id. 142  Id. Decision by the ad hoc Committee on Argentina’s application for a stay of enforcement of the Award (Oct. 23, 2009). 143  Repsol v. Petroecuador, supra notes 25 and 135, Procedural Order No. 1, ¶ 10. 136 137

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IV.  Stay of Enforcement In Rumeli v Kazakhstan,144 the Committee conditioned the stay of enforcement on the is- 27.65 suance by Kazakhstan of a declaration that it will comply with the award thirty days from a decision rejecting the application for annulment. It decided, alternatively, that if Kazakhstan failed to issue the declaration and wished the stay to continue, Kazakhstan had to deposit 50 per cent of the award into an escrow account. Although most of the committees in the initial annulment cases involving Argentina did not 27.66 condition the stay of enforcement upon the issuance of a guarantee, the positions of later committees evolved as they observed Argentina’s official statements. In Vivendi v Argentina,145 for instance, the Committee ordered Argentina to make a state- 27.67 ment that contained a specific paragraph ensuring that full payment would be made within a fixed period of time that the Committee considered reasonable. As an alternative, Argentina would have to provide a bank guarantee for the entire sum due if the award were not annulled. The Committee gave Argentina thirty days from the issuance of its decision to provide such a commitment, at the end of which a sixty-​day period began for Argentina to provide a bank guarantee for the entire sum. If, in turn, Argentina did not provide such bank guarantee, the stay of enforcement would be lifted. The sixty-​day time line for such a guarantee expired without the requested communication or guarantee from Argentina. This opened the way for Vivendi to seek the enforcement of the award. In Enron v Argentina, the Committee decided to continue the stay of enforcement of the 27.68 award and gave Argentina a sixty-​day period to reconsider its position on fulfilling its obligation to comply with the award should it not be annulled. This grace period was granted by the Committee because Argentina was under a misapprehension as to the meaning and correlation of Articles 53 and 54 of the ICSID Convention and Article VII(2) of the US–​ Argentina BIT. At the end of this period, Argentina was asked to reconsider its position and provide a statement of assurance that it would comply with the award. Argentina did not respond to the Committee’s request. Subsequently, the Committee gave another sixty days from the date of its last decision to Argentina to reconsider its position; otherwise, upon the application of Enron, it would be prepared to reconsider the issue of continuance of the stay and the issue of security by reference to the circumstances then existing. In an interesting twist, the Committee took the decision that it would not lift the stay or require financial security unless arrangements were put in place by Enron that would ensure the recovery of any amounts or security by Argentina if the award were annulled.146 In response, Enron proposed three options for a guarantee that would be protected from creditors: (i) an escrow agreement, administered exclusively by an agent in the name of Argentina, with Enron having a security interest in all of Argentina’s rights, titles, and interest in the escrow account; (ii) a letter of credit from a bank of Argentina’s choice; and (iii) a commitment by the claimants, if the stay is lifted, to undertake enforcement action against Argentina only in the name of Ponderosa Assets (a solvent Delaware company) and to reimburse any amounts collected by Ponderosa Assets should the award be annulled. In Sempra v Argentina,147 the Committee had initially ruled that it would continue the 27.69 stay of a 2007 arbitral award only on the condition that the Argentina put US$75 million into an escrow account. The Committee, after having surveyed developments in the other ongoing annulment proceedings, in which Argentina had not complied with its payment

  Rumeli v. Kazakhstan, supra notes 63 and 135.   Vivendi v. Argentina II, supra notes 12 and 135. 146  Enron v. Argentina, supra note 134, ¶¶ 102, 103. 147  Sempra v. Argentina, supra note 10. 144 145

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Annulment of ICSID Awards obligations promptly, drew its own conclusions as to Argentina’s probable compliance with ICSID awards and indicated that it would condition any continued stay of enforcement of the award upon some more tangible demonstration of Argentina’s preparedness to comply. In this regard the Committee held that: Argentina’s posture makes it clear that it will in fact not comply with its obligation ‘to abide by and comply with’ an arbitral award in Sempra’s favour unless and until Sempra seeks recognition and enforcement of the Award before an Argentine judicial tribunal in the manner prescribed by the national law of Argentina.148

The Committee provided for 120 days during which Argentina could make such arrangements. In the event that the payment was not posted, Sempra could request the Committee to lift the stay of enforcement—​thus paving the way for the company to seek enforcement of the award even as the ICSID annulment process runs its course.149 Argentina did not make such arrangements. Its defence was based on the fact that the placing of funds in escrow would cause prohibitive cost to Argentina and, in addition, placing funds in escrow would create ‘unacceptable risk of attachment to Argentina’, implying the risk that the funds, if and when released, would be applied to satisfy third-​party creditors’ claims rather than be repatriated to Argentina. The Committee did not accept these defences brought by Argentina and issued a decision lifting the stay of enforcement.150

V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism 27.70 Defining the appropriate scope of the ICSID annulment review involves balancing the com-

peting interests of finality of ICSID awards against the benefits of correctness, coherence, and consistency within and among those awards.151 Before the recent wave of growing numbers of investor-​state disputes and the criticism that the system of investor-​state dispute settlement (ISDS) has generated, it was generally believed that both states and investors involved in ICSID proceedings preferred finality.152 However, in the last few years, there has been a widespread perception in the ISDS community, in particular by states, that the legitimacy of the investment arbitration system depends on assurances of coherence and consistency, which are not always compatible with the principle of finality.153

27.71 Among the different concerns about ISDS and the quest for consistency lies the role of the

ad hoc committees and the limits of the annulment system. Widespread discussion of these

  Id. ¶ 104.   The committee had indicated that, in the event that Argentina were to place the stipulated amount in escrow, Sempra should not pursue any enforcement or asset-​attachment measures which it may have earlier initiated. 150  Sempra requested the termination of the stay of enforcement on May 13, 2009. The ad hoc Committee granted the request on August 7, 2009. 151  See generally Ian Laird & Rebecca Askew, Finality versus Consistency:  Does Investor-​ State Arbitration Need an Appellate System?, 7 J. App. Prac. & Process 285, 286 (2005); Jason Clapham, Finality in Investor-​ State Arbitral Awards: Has the Tide Turned and is there a Need for Reform?, 26(4) J. Int’l Arb. 437 (2009). 152  See Clapham, supra note 151, at 439–​43 (reviewing the emphasis placed by states on the ‘finality’ of awards based on the travaux préparatoires and the text of the ICSID convention); 450–​51 (noting a 2006 study that found that 91% of in-​house counsel at leading corporations around the world ‘reject the idea of including an appeal mechanism in international arbitration’). 153 Laird and Askey, Finality versus Consistency, supra note 151; Lisa M. Bohmer, Finality in ICSID Arbitration Revisited, 31(1) ICSID Rev. 236, 245 (2016). 148 149

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V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism concerns has been fuelled by the decisions of ad hoc committees in a number of cases, such as Patrick Mitchell v Congo,154 CMS v Argentina,155 SGS v Paraguay,156 and Sempra v Argentina157 which, as mentioned above, allegedly went beyond their mandate, reached inconsistent decisions based on the same factual situations, or, because of the limited scope of annulment, have not examined legal or factual errors in the awards. If finality is preferred, there is an inherent risk of inconsistency, which may undermine the 27.72 predictability, objectivity, and legitimacy of investment arbitration as a conflict resolution mechanism.158 However, mitigating that risk through additional review of awards to improve consistency and correctness may undermine one of the key attributes of arbitration favoured by investors. There are differing views on whether an additional layer of review would be appropriate, rather than finality as the key advantage of arbitration. Although the criticisms about inconsistency of the system are not always entirely justified, 27.73 they nevertheless evidence a lack of confidence in the system itself. Several proposals have been made and discussed but establishing an appeal mechanism159 has been by far the one that has drawn the most discussion and attention in the last thirteen years, attributable in particular to the insertion of relevant provisions in some investment agreements. An appeal mechanism would expand the scope of review of ICSID awards from the review of procedural legitimacy currently allowed under the ICSID Convention to also  include review of the substantive and possibly the factual correctness of the award so as to make it possible for inconsistencies or manifest errors of law to be held in check. It would similarly expand the review for non-​ICSID awards beyond the limited grounds available under the New York Convention.160 A more recent idea, to establish a multilateral investment court, which would include an appeal mechanism, received a significant boost with the European Union proposal of such a system in the context of negotiations over the Transatlantic Trade and Investment Partnership (TTIP)161 and its inclusion in the trade agreements with Canada (CETA)162 and Vietnam.163 It is also under consideration by UNCITRAL in its proposals for future work on the reforms of the ISDS.164

  Patrick Mitchell v. Congo, supra note 32.   CMS v. Argentina, supra note 39. 156  SGS v. Paraguay, supra note 23. 157  Sempra v. Argentina, Decision on Annulment, supra note 10. 158 Clapham, Finality of Investor-​State Arbitral Awards, supra note 151 at 437–​66. 159  D. Bishop, The Case for an Appellate Panel and Its Scope of Review, in 1 Investment Treaty Law, Current Issues (F. Ortino et al. eds., 2006). 160  See art. V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New  York, 1958), http://​www.uncitral.org/​pdf/​english/​texts/​arbitration/​NY-​conv/​New-​York-​Convention-​ E.pdf (last visited Nov. 14, 2017). 161  See EU Commission draft text TTIP—​ Chapter II—​Investment, http://​trade.ec.europa.eu/​doclib/​ docs/​2015/​september/​tradoc_​153807.pdf (last visited Nov. 14, 2017). 162  See CETA art. 8.27 Constitution of the Tribunal, art. 8.28 Appellate Tribunal, and art. 8.29 Establishment of a multilateral investment tribunal and appellate mechanism, http://​ec.europa.eu/​trade/​ policy/​in-​focus/​ceta/​ceta-​chapter-​by-​chapter/​ (last visited Nov. 14, 2017). 163  See EU–​ Vietnam Trade Agreement: Agreed text as of January 2016, Chapter 8, Chapter II, Section 3: Resolution of Investment Disputes, Sub-​Section 4: Investment Tribunal, art. 12 Tribunal, art. 13 Appeal Tribunal, http://​trade.ec.europa.eu/​doclib/​docs/​2016/​february/​tradoc_​154210.pdf (last visited Nov. 14, 2017). 164  United Nations Commission on International Trade Law (UNCITRAL), Possible future work in the field of dispute settlement:  Reforms of investor-​state dispute settlement (ISDS), Note by the Secretariat, 50th session (Vienna, July 3–​21, 2017), https://​documents-​dds-​ny.un.org/​doc/​UNDOC/​GEN/​V17/​023/​ 69/​PDF/​V1702369.pdf? (last visited Nov. 14, 2017). 154 155

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Annulment of ICSID Awards A. Past and Current Efforts to include Provisions on the Establishment of an Appeal Mechanism in Investment Agreements 27.74 Discussion on the possibility of appeal for investment disputes started among scholars as far back

as the early 1990s,165 while the first discussion at the governmental level took place during the OECD’s negotiations of a multilateral agreement on investment (MAI).166 Some countries have inserted provisions in their investment agreements on the possibility of developing an appeal mechanism for investment disputes.167

1. The first wave of International Investment Agreements including an appeal mechanism (a)  The US IIAs and CAFTA  27.75 The US Trade Act of 2002, which granted trade promotion authority to the executive branch of the US government168 and has been the basis for the conclusion of several recent US free trade agreements, set out a number of objectives with respect to foreign investment.169 These included a negotiating objective of an appeal mechanism for investment disputes under free trade agreements:170  ‘[p]‌roviding for an appellate body or similar mechanism to provide coherence to the interpretations of investment provisions in trade agreements . . .’ The objective, as well as the overall drive towards an appellate mechanism for investment disputes, stemmed in part from the widely recognized success of the Appellate Body of the World Trade Organization.171 As a result of this Act, the following specific language on an appeal mechanism was inserted into the US bilateral treaties and free trade agreements with Uruguay,172 Chile,173

165  E. Lauterpacht, Aspects of the Administration of International Justice (1991); S. Schwebel, The Creation and Operation of an International Court of Arbitral Awards, in The Internationalisation of International Arbitration 115 (M. Hunter et al. eds., 1995). See also the exchanges in the early 1990s in the ICSID Rev., e.g., Vol. 7. 166  At a high-​level meeting in February 1998, one delegation proposed the establishment of an appellate mechanism in the MAI for both State-​State and investor-​state dispute settlement. In informal consultations, delegations broadly agreed with the objectives of ensuring the development of a coherent jurisprudence and permitting an appeal where there may have been an error in law—​particularly concerning the interpretation of MAI obligations. However, concerns were expressed about the delays and costs that might be engendered by adding an appeal and departing, for investor-​state arbitration, from the traditional philosophy of fast, inexpensive, and final one-​step arbitration. As an alternative, it was proposed and accepted that awards under the MAI dispute settlement mechanism would initially remain drafted as final and binding, but it would be made subject to review of practical experience in five years from signature of the MAI. If, as a result of that review, the contracting parties considered it advisable to introduce an appeals body, this could be done by amending the agreement. See Selected Issues on Dispute Settlement (Note by the Chairman), DAFFE/​MAI(98)12 (Mar. 13, 1998), http://​www1.oecd.org/​daf/​mai/​pdf/​ng/​ng9812e.pdf (last visited Nov. 14, 2017). 167  ‘Possible Improvements of the Framework for ICSID Arbitration’ ICSID Secretariat Discussion Paper (Oct. 22, 2004), https://​icsid.worldbank.org/​en/​Documents/​resources/​Possible%20Improvements%20 of%20the%20Framework%20of%20ICSID%20Arbitration.pdf (last visited Nov. 14, 2017). 168  See B. Legum, The Introduction of an Appellate Mechanism: The U.S. Trade Act of 2002, in Gaillard and Banifatemi (eds.) Annulment of ICSID Awards, supra note 15 at 289–​313 (‘This trade authority, formerly known as “fast-​track,” allows the Executive Branch to present trade agreements to Congress for approval by a yes-​or-​no vote by a simple majority’). 169  19 U.S.C. § 3802(b)(3). 170  See B. Legum, supra note 168; 19 U.S.C. § 3802(b)(3)(G)(iv). 171 Established in 1995, the WTO Appellate Body is comprised of seven persons and hears appeals from reports issued by panels in disputes brought by WTO Members. Between 1996 and 2014, the WTO Appellate Body had reviewed 136 appeals filed (amounting to 68% of the total 201 Panel Reports issued in that time period). 172  Annex E. The U.S.–​Uruguay Bilateral Investment Treaty was signed on October 25, 2004 and entered into force on November 1, 2006. 173  Annex 10-​H. The U.S.–​Chile Free Trade Agreement was signed on June 6, 2003 and entered into force on January 1, 2004.

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V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism Singapore,174 Morocco,175 Peru,176 Colombia,177 South Korea,178 and the 2004 US Model BIT:179 Within three years after the date of entry into force of this [Agreement/​Treaty], the Parties shall consider whether to establish a bilateral appellate body or similar mechanism to review awards rendered under Article . . . in arbitrations commenced after they establish the appellate body or similar mechanism.180

This language is not included in the 2012 US Model BIT, which instead provides that: In the event that an appellate mechanism for reviewing awards rendered by investor-​State dispute settlement tribunals is developed in the future under other institutional arrangements, the Parties shall consider whether awards rendered under Article 34 should be subject to that appellate mechanism.

The language of the Dominican Republic–​Central America Free Trade Agreement181—​the 27.76 agreement between the US, five Central American countries and the Dominican Republic—​ sets out a very specific schedule for establishing a negotiating group to advance the development of an appellate body, and a number of issues to be considered: Within three months of the date of entry into force of this Agreement, the Commission shall establish a Negotiating Group to develop an appellate body or similar mechanism to review awards rendered by tribunals under this Chapter. Such appellate body or similar mechanism shall be designed to provide coherence to the interpretation of investment provisions in the Agreement. The Commission shall direct the Negotiating Group to take into account the following issues, among others: (a) the nature and composition of an appellate body or similar mechanism; (b) the applicable scope and standard of review; (c) transparency of proceedings of an appellate body or similar mechanism; (d) the effect of decisions by an appellate body or similar mechanism; (e) the relationship of review by an appellate body or similar mechanism to the arbitral rules that may be selected under Articles 10.16 and 10.25; and (f ) the relationship of review by an appellate body or similar mechanism to existing domestic laws and international law on the enforcement of arbitral awards. The Commission shall direct the Negotiating Group to provide to the Commission, within one year of establishment of the Negotiating Group, a draft amendment to the Agreement that establishes an appellate body or similar mechanism. On approval of the draft amendment

174  Letter exchange, U.S. Trade Representative R. Zoellick to Singapore Minister of Trade and Industry, G. Yeo on May 6, 2003. The U.S.–​Singapore Free Trade Agreement was concluded on January 15, 2003 and entered into force on January 1, 2004. 175  Annex 10-​D. The U.S.–​Morocco Free Trade Agreement was signed on June 15, 2004 and entered into force on January 1, 2006. 176  Annex 10-​D. The U.S.–​Peru Trade Promotion Agreement was signed on April 12, 2006 and was entered into force on February 1, 2009. 177  Annex 10-​ D. The U.S.–​Colombia Trade Promotion Agreement was signed on November 22, 2006. and entered into force on May 15, 2012. 178  Annex 11-​D. The U.S.–​South Korea Free Trade Agreement was signed on June 30, 2007 and entered into force on March 15, 2012. 179  Annex D. For the text of the 2004 U.S. Model BIT, see http://​www.state.gov/​documents/​organization/​ 38710.pdf (last visited Nov. 14, 2017). 180  Id. 181 Annex 10-​ F. The Dominican Republic–​ Central America–​ United States Free Trade Agreement was signed on August 5, 2004. The Central American countries are Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua.

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Annulment of ICSID Awards by the Parties, in accordance with Article 22.2 (Amendments), the Agreement shall be so amended.182

(b)  The ICSID proposed appeals facility rules 

27.77 At the time that the language on an appeal mechanism was introduced in these agreements,

there was a discussion among governments, practitioners, and the ICSID Secretariat on the feasibility of such a mechanism183 and a concern that any future decisions by the parties to such agreements to establish an appellate body or similar mechanism would mean in practice the creation of an ad hoc appeal tribunal under each such treaty, instead of one single institutionally managed and widely accepted appeals mechanism. At the risk of the fragmentation of the dispute settlement system that could ensue under the first scenario and would itself affect the consistency of law, ICSID, in the context of the 2006 Revision of the ICSID Rules, offered proposals on the creation of an optional ICSID appeals facility, which would be established and operate under a set of Appeals Facility Rules. This facility was to be designed for use in conjunction with both forms of ICSID arbitration, the UNCITRAL Rules, and any other forms provided in investor-​state dispute settlement provisions of investment treaties.

27.78 The proposed Appeals Facility Rules provided for the establishment of an appeals panel com-

posed of fifteen persons elected by the Administrative Council of ICSID on the nomination of the Secretary-​General of ICSID. Eight of the first fifteen members would serve for a three-​ year term, while all others would be elected for six-​year terms. Each member would be of different nationality and members would be ‘all persons of recognized authority, with demonstrated expertise in law, international investment and investment treaties’.184 According to the proposed rules, an award could be challenged for a clear error of law or on any of the five current grounds for annulment of an award. In addition, the inclusion of serious errors of fact was proposed to be ‘narrowly defined to preserve appropriate deference to the findings of fact of the arbitral tribunal’.185 An appellate tribunal could uphold, modify, or reverse the award concerned or wholly or partially annul it on any of the existing annulment grounds (borrowed from Article 52 of the ICSID Convention).

27.79 The discussion did not produce any positive results for the proposal. At that time, the need

for greater consistency and coherence had not been established and, therefore, there was not sufficient political will to proceed further. A number of governments that had never been directly involved in investor-​state procedures did not feel immediately concerned and expressed great scepticism about embarking on systemic changes of such magnitude.

27.80 The ICSID Administrative Council and most of those who participated in the discussions

and offered comments expressed the view that it would be premature to attempt to establish such an ICSID mechanism, particularly in view of the difficult technical and policy issues raised. The ICSID Secretariat, in its statement, committed to continue studying such issues

182  As of June 2016, no appellate body or similar mechanism has been established and no public records record meetings or negotiations of the Negotiating Group. Nevertheless, the recognition that an appellate body may yet take shape is apparent. 183  K. Yannaca-​Small, Improving the System of Investor-​ State Dispute Settlement:  An Overview, in International Investment Perspectives (2006). The OECD Investment Committee and ICSID held a joint meeting of legal experts on November 4, 2004, in order to get the reaction of arbitrators and counsel on the ICSID Proposal for an Appeals facility. The discussions focused on (i) developments with respect to the creation of an appellate facility and the possible consequences, if any, for the OECD member countries; and (ii) the rationale for creating such a mechanism, i.e., its advantages and disadvantages. See also K. Yannaca-​Small, Improving the System of Investor-​State Dispute Settlement: The OECD Government Perspective, in Appeals Mechanism in International Investment Disputes 223–​39 (Karl Sauvant ed., 2008). 184  ICSID Secretariat Discussion Paper, supra note 167, Annex, ¶ 5. 185  Id. ¶ 7.

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V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism to assist member countries when and if it were decided to proceed towards the establishment of an ICSID appeal mechanism.186

2. The second and current wave of International Investment Agreements including an appellate mechanism: the TPP and the EU agreements The investment chapter (Chapter 9) of the Trans-​Pacific Partnership Agreement (TPP),187 27.81 which was officially released in November 2015 and approved by participating nations on 4 February 2016, expressly states that, if an appellate mechanism is developed in the future in another forum, the parties will consider whether awards rendered under the TPP should be subject to that mechanism.188 On 23 January 2017, the US President signed an executive order pulling the United States out of the TPP. Although the future of the TPP is uncertain, the movement towards appellate mechanism is not limited to the TPP. Shortly after the draft TPP was released, on 12 November 2015, the European Commission 27.82 submitted to the United States a revised proposal for a new international investment court (IIC) that was intended to serve as the investor-​state dispute settlement mechanism under the Transatlantic Trade and Investment Partnership (TTIP), that was under negotiation between the US and the EU. The IIC TTIP proposal envisions a standing court with two tiers, a tribunal of first instance comprised of fifteen judges and an appeal tribunal that would be staffed by six judges,189 with the authority to adjudicate disputes under the ICSID or UNCITRAL rules, or under another set of rules with the consent of the parties.190 Designed to ensure the legal correctness of decisions, the appeal tribunal’s mandate was to consider whether the tribunal had erred in the interpretation or application of the applicable law or whether it had manifestly erred in the appreciation of the facts, including the appreciation of relevant domestic law. The TTIP has been stalled for now, but the EU proposal found its way into the EU–​Canada 27.83 Comprehensive Economic and Trade Agreement (CETA)191 and the EU–​Vietnam Free Trade Agreement.192 The EU, Canada, and Vietnam have accepted the IIC as the method for dispute resolution of investment disputes and the IIC now stands on the brink of establishing itself as a new standard for dispute resolution. The CETA provides for the CETA Joint Committee to appoint fifteen members of the first 27.84 instance tribunal, five nationals of a Member State of the European Union, five nationals of Canada and five nationals of third countries.193 Members of the tribunal of first instance are to be appointed to serve on three-​member ‘divisions’ by the president of the tribunal via a ‘random and unpredictable’ rotation system.194 Decisions of the tribunal may be appealed 186  See suggested changes to the ICSID Rules and Regulations, Working Paper of the ICSID Secretariat (May 12, 2005)  4, ¶ 4, https://​icsid.worldbank.org/​en/​Documents/​resources/​Suggested%20Changes%20 to%20the%20ICSID%20Rules%20and%20Regulations.pdf (last visited Nov. 13, 2017). 187 The TPP Agreement includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. 188  TPP Agreement, ch. 9, art. 9.23(11). The language is similar to the one included in the 2012 U.S. Model BIT. 189  Id. Section 3 Sub-​Section 2, arts. 9 and 10. 190  Id. ¶ 3, art. 6(2). 191  Press release, European Commission CETA (Sept. 20, 2017), http://​trade.ec.europa.eu/​doclib/​press/​ index.cfm?id=1723 (last visited Nov. 14, 2017). Canada and the EU signed CETA in October 2016 and the agreement entered into force on September 21, 2017 provisionally at first until Parliaments in the EU countries approve it. 192  Press release, European Commission, The EU and Vietnam Finalise Landmark Trade Deal (Dec. 2, 2015), http://​trade.ec.europa.eu/​doclib/​press/​index.cfm?id=1409 (last visited Nov. 14, 2017). 193  CETA art. 8.23(2). 194  Id. art. 8.23(6)–​(7).

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Annulment of ICSID Awards within ninety days of the awards’ issuance to the appellate tribunal.195 Grounds for appeal would include, in addition to the ICSID Convention’s grounds for annulment, errors of law and manifest errors of fact.196 27.85 These proposals represent a historic turning point in international investment law.197 On the

one hand, it is believed that replacing arbitrators with a standing pool of judges and allowing for the review of the awards transforms the current system of ad hoc practice—​criticized for inconsistent decisions and the appearance of bias—​to an institution bearing the hallmarks of legitimacy that is poised to restore public trust in the resolution of investment disputes. However, there are also concerns that structural weaknesses in the existing proposals, for example the bilateral set-​up, make these proposals unsuitable as a model for a global dispute mechanism.198 On this point, CETA provides that the parties shall pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes.199 Upon establishment of such a multilateral mechan­ ism, the CETA Joint Committee shall adopt a decision providing that investment disputes under this section will be decided pursuant to the multilateral mechanism and make appropriate transitional arrangements.

27.86 These new EU agreements significantly alter the current system for the resolution of in-

vestment disputes. They shift responsibility for the appointment of the arbitrators/​judges from the parties in dispute to the state parties, via their oversight committee, depriving investors of any say—​at least formally—​on the appointment of the members of the tribunal. Furthermore, the decision of the tribunal would no longer be final, but would be subject to further review by the appeal tribunal. At the same time, the EU proposal would retain certain of the aspects of the ICSID Convention that commentators have found most objectionable, such as the adjudication of challenges to a judge’s fitness by that judge’s colleagues—​in the case of ICSID by the other members of the arbitral tribunal, in the case of the EU proposal by the president of the tribunal.200

27.87 The European Commission initiated this new policy vis-​à-​vis investor-​state dispute settle-

ment with the express intention of establishing greater state control over the process, including stronger protection of the state’s regulatory powers, greater control over the selection of arbitrators, and, most importantly for the purposes of this chapter, the creation of an appellate process.201 Furthermore, the proposal is explicit about seeing the creation of an investment court as a step towards the ultimate establishment of a multilateral appellate system.202 As the following section will show, however, an appellate system presents both advantages and disadvantages, which must be carefully considered prior to the undertaking of any reforms.

  Id. art. 8.28(9)(a).   Id. art. 8.28 (2)(a)(b). 197 Barnali Choudhury, The Year of Reorienting International Investment Law, American Society of International Law, Insights (Feb. 5, 2016). 198  Stephen W.  Schill, The European Commission’s ‘Investment Court System’ for TTIP:  Stepping Stone of Stumbling Block for Multilateralising International Investment Law, American Society of International Law, Insights (Apr. 22, 2016). 199  CETA art. 8.29. 200  Id. art. 8.30(2). 201  See Commission Concept Paper: ‘Investment in TTIP and beyond: the path for reform: Enhancing the right to regulate and moving from current ad hoc arbitration towards an Investment Court’ (May 5, 2015). 202  Id. at 11–​12. 195 196

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V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism 3. Why an appellate mechanism in investment disputes? Advantages and disadvantages Although the recent agreements concluded by the EU with Canada and Vietnam offer a 27.88 radical change to the system of investor-​state arbitration with the introduction of a standing investment court and a built-​in appellate mechanism, the remaining 3,300 investment agreements continue to be subject to the same ad hoc arbitration, which includes the same mechanisms of review, the ICSID Annulment procedures or the limited review by national courts for non-​ICSID awards. Until the majority of states accept the idea of eliminating ad hoc arbitration in favour of a standing investment court, the discussion on the creation of an appellate mechanism will continue in its own right. It is difficult to dissociate the rationale for an appellate mechanism from the approach to be 27.89 taken vis-​à-​vis the scope and the specific modalities of such a mechanism and, in particular, its advantages and disadvantages as have been widely discussed.203 In the discussion, it is assumed that such an appellate mechanism is established at the multilateral level and not as a product of a bilateral treaty, which would have a limited effect binding only the parties to that treaty.204 Issues such as the appointment authority of the appeal tribunal’s members (the contracting states, ICSID Secretariat, or other) or the possibility to give investors a voice, by allowing them to appoint ad hoc members to the appellate tribunal, have been raised. There are perceptions that this would be a higher-​level tribunal whose decisions should have a greater precedential value.

(a) Advantages  The main advantages advanced for an appellate mechanism are consistency; the possibility 27.90 of rectification of legal errors and, possibly, serious errors of fact; confining review to an impartial international tribunal instead of national courts; and possible enhancing effective enforcement. Consistency and coherence of jurisprudence create predictability and enhance the legitimacy 27.91 of the system of investment arbitration. The chances for consistency would be reinforced by the existence of a common appellate body instead of several appellate bodies included in individual treaties, which would review not only ICSID awards but also UNCITRAL awards and awards rendered by the International Chamber of Commerce (ICC), the Stockholm Chamber of Commerce (SCC), and other ad hoc arbitral tribunals. The notion of consistency would go beyond the situation when two panels constituted under different agreements deal with the same set of facts and give conflicting opinions or reach a different conclusion. It might also encompass coherence of interpretation of basic principles, which may underlie differently worded provisions in particular agreements and therefore might enhance the development of a more consistent international investment law.205

203  K.  Yannaca-​Small, supra note 183; G. Bottini, Reform of the Investor-​ State Arbitration Regime:  The Appeal Proposal, in Reshaping the Investor-​State Dispute Settlement System 455–​73 (J. Kalicki & A. Joubin-​Bret eds., 2015). 204  G. Kaufmann-​ Kohler & M. Potestà, Can the Mauritius Convention serve as a model for the reform of investor-​State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap (Geneva Center for International Dispute Settlement, June 3, 2016). 205  However, it is often pointed out that one needs to approach the question of consistency with some caution and clarity in terms of one’s objectives. For example, several discussions and debates on the substantive obligations in investment agreements have revealed that countries’ intent with respect to the interpretation of a similar provision in their investment agreements may differ in some respects. Thus, the development of consistent international legal principles needs to be balanced by respect for the intent of the parties to specific agreements. Even where the intent of the countries may differ in some respects in relation to similar provisions in their investment agreements, there could be a value in encouraging consistency in interpretation across the agreements of a particular country or countries where the intent of the parties do not differ.

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Annulment of ICSID Awards 27.92 If there is a single appellate body with a wide scope of review—​for instance, review of

issues of jurisdiction and admissibility, fundamental errors of procedure, due process issues, errors of law—​there may be a greater likelihood of consistent interpretations of investment provisions.206

27.93 An appellate mechanism could provide a more uniform and coherent means for challenging

awards if the traditional bases for annulment were incorporated, and this mechanism would become the exclusive means to challenge an award.

27.94 Another advantage is that an appellate mechanism would allay public concern that awards af-

fecting important public policy issues and interests could be enforced, despite serious error of law or of fact. This could enhance support for investor-​state arbitration at a time of growing criticism.

27.95 While arbitral awards may not be appealed on the merits under the current ICSID arbitra-

tion system, the system reserves a limited but real role for national courts in reviewing the non-​ICSID awards. The creation of an appeals mechanism would uphold the principal advantage of investor-​state dispute settlement: the review of all investment awards, in particular those outside the ICSID system, that is, under UNCITRAL and the ICSID Additional Facility Rules, would be confined to impartial and qualified international tribunals which would operate on the basis of international standards and procedures instead of taking place in domestic courts, which may have a local bias or be subject to governmental influences.

(b) Disadvantages 

27.96 The main disadvantages/​criticisms of an appellate mechanism are that an appeal would go

against the principle of finality, bring additional delays, costs and caseload, and lead to the politicization of the system.

27.97 The finality of arbitration proceedings, that is, that an arbitration award is binding and not

open to appeal on the merits, has generally been seen as one of the major advantages of arbitration over judicial settlement.207 The ‘final’ award puts an end to the parties’ conflict and related dispute settlement expenses in a limited period of time. However, while finality is considered one of the main advantages of international arbitration—​for the savings it brings in costs and time—​it may sometimes come at the risk of having to live with flawed awards or inconsistent awards on the same or very similar questions or facts. To the extent the appellate mechanism would expand the grounds for annulment or set-​aside of an award, it would compromise the finality of arbitration. Investment arbitration however, involves issues of public interest which make the acceptance of the risk of flawed or erroneous decisions less justifiable in the name of finality than it may be in traditional commercial arbitration.

27.98 Another criticism is that the existence of an appellate mechanism could result in additional

costs and delays in the resolution process which could be problematic for both states and investors with limited resources, although this potential problem could be limited by setting specific time limits in the appellate process. Another aspect affecting the potential delay and cost of an appellate mechanism could be the scope of the review. An appeal including both questions of law and review for errors of fact could be potentially costlier and more time consuming.

206  Mark Feldman points to the fact that gains in the consistency of treaty interpretation by an appellate body would not guarantee corresponding gains in the accuracy of treaty interpretation. M. Feldman, Investment Arbitration Appellate Mechanism Options: Consistency, Accuracy, and Balance of Power, 32 ICSID Rev. 528 (2017). 207  There are, however, examples of institutional arbitration regimes that provide for appellate review of arbitral awards, such as the American Arbitration Association (AAA) (2013; JAMS (2013), Optional Arbitration Appeal Procedure; International Institute for Conflict Prevention and Resolution (CPR) (2015).

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V.  The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism By including grounds additional to the ones under the current annulment and review pro- 27.99 cedures, an appeal in investment arbitration could result in a greater number of challenges to arbitral awards. There is concern that there would be a tendency to appeal in every case, which would result in decreasing confidence in the main body of decisions and the authority of the ‘first instance’ arbitrators. On this point, it might be possible to negotiate a balance of disincentives to appeal, such as the requirement of the deposit of a bond to secure the award or the costs of the proceedings, which would discourage routine resort to appeal. In addition to the above, there are concerns that the depoliticization of investment disputes, 27.100 considered one of the main achievements of investor-​state arbitration, could be undermined.208 Governments, to please their constituencies, might appeal every case they lose in the first instance, and they would be the main beneficiaries of the system. In addition, if the choice of appellate arbitrators is made by the states only, there might be a risk of bias against investors. However, a number of arguments could be advanced about the benefits that investors could draw from the creation of an appeals mechanism. First, statistics have shown that investors lose at least as often as governments, so they would have at least the same opportunity to appeal. Secondly, the posting of a bond could provide the investor security for the amount of the award rendered. Finally, different solutions could be envisaged for the choice of arbitrators so as to ensure impartiality of the system.

B. What Lies Ahead? A Multilateral Solution? In the previous edition of this book, the last section of this chapter was dedicated to the uto- 27.101 pian idea of having a world court. Eight years later, the idea is far from being utopian since it has found its way into the adopted investment policy of a major economic power, the EU, into two of its investment agreements, a major policy mandate and onto the agenda of a global international organization, the United Nations Commission on International Trade Law (UNCITRAL). In 2016, UNCITRAL embarked on a programme of work to examine possible reforms of 27.102 ISDS, including the setting up of a stand-​alone appellate body or a two-​tier international investment court, which would include an appellate body. Working Group III of UNCITRAL will be examining these options in its future work, based on a research paper by the Center for International Dispute Settlement (CIDS),209 which brought a number of options for the improvement of ISDS into the forefront of the debate.210 On the option of setting up an appellate body to review the decisions of ad hoc tribu- 27.103 nals, UNCITRAL, through consultation with governments and other interested parties, is planning to examine issues such as whether the appellate body should be created to hear appeals against awards, irrespective of the rules applied, its composition, the mode of appointment of the adjudicators and the role of the disputing parties, the grounds for appeal, whether its decisions would constitute a precedent or bind only the parties to the dispute, and its relationship with existing annulment mechanisms, to name but a few. The option of establishing a standing international investment court with a built-​in appeal 27.104 will also be examined. This option, which would constitute a departure from the current ISDS regime, is similar to that adopted by the EU in its treaties but will be considered at

208 J. Paulsson, Avoiding Unintended Consequences, in Appeals Mechanism in International Investment Disputes 241, 258–​62 (K. Sauvant ed., 2008). 209  See Kaufmann-​Kohler & Potestà, supra note 204. 210  Possible future work in the field of dispute settlement: Reforms of investor-​ State dispute settlement (ISDS), Note by the Secretariat, UNCITRAL, Fiftieth session (Vienna, July 3–​21, 2017).

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Annulment of ICSID Awards the multilateral level. UNCITRAL’s role in this context has been recently reinforced when on 20 March 2018 the EU Council adopted negotiating directives authorizing the EU Commission to negotiate, on behalf of the EU, in the framework of UNCITRAL, a convention establishing a multilateral court for the settlement of investment disputes.  For the EU, the multilateral investment court would eventually replace the bilateral investment court systems included in EU trade and investment agreements.211 27.105 For both options, the examination will consider whether a multilateral mechanism could

be extended to disputes arising under existing investment treaties and related legal issues, taking as a possible model the United Nations Convention on Transparency in Treaty-​based Investor-​State Arbitration (‘Mauritius Convention’).212, 213

VI. Conclusion 27.106 The most widely used procedure of review of ICSID awards, the annulment procedure, is

confined by the ICSID Convention to a limited scope. Annulment is not appeal and does not rectify errors of law or fact. It has become a frequent recourse for unsatisfied parties based on limited grounds, but the line between annulment and appeal is a very thin one. Some committees have stepped over this line and have been heavily criticized for doing so. Criticisms also are being directed at the composition of the ad hoc committees and the lack of consistency of awards, which cannot be cured by the current annulment procedures.

27.107 Proposals have been formulated in the past for changes to ISDS, including drastic ones such

as the creation of an Appeals Facility. However, proposals for systematic change encountered difficulties due in large part to the lack of strong political will, associated with the perception of a number of governments that there was no real need for such an endeavour and, in addition, to difficulties associated with the establishment of a permanent body based on a fragmented legal canvas of investment agreements. Today, after mounting criticism of the present system of ISDS, the political will of states to consider and undertake such changes seems stronger. Some countries, including the EU, Canada, and Vietnam have embraced this radical change by moving away from the traditional ad hoc arbitration system to a contained, two-​tier international investment court. Although these changes remain for now at the bilateral level, a new EU mandate and work underway in the context of UNCITRAL suggests that it may soon move to the multilateral one.

27.108 In the first edition of this book, it was suggested that ‘if there were a standing appellate body

rather than the current ad hoc annulment committees and if that appellate body were to gain credibility, it is not unthinkable that, over time, bilateral and multilateral treaties would be renegotiated, or a multilateral agreement would be negotiated with a view to using such an institutional facility as an option’. Eight years later, this idea, as well as the idea of a world investment court are not only thinkable, but they may also become reality.

211  See Council of the EU press release: http://​www.consilium.europa.eu/​en/​press/​press-​releases/​2018/​03/​ 20/​multilateral-​investment-​court-​council-​gives-​mandate-​to-​the-​commission-​to-​open-​negotiations/​. 212 United Nations Convention on Transparency in Treaty-​ based Investor-​State Arbitration (adopted on December 10, 2014, opened for signature on March 17, 2015). See also UN (2014a), United Nations Convention on Transparency in Treaty-​based Investor-​State Arbitration, General Assembly, 69th session, Resolution A/​69/​116 (Dec. 18, 2014). 213 Uncitral, Note by the Secretariat, supra note 164.

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28 REVIEW OF NON-​I CSID AWARDS BY NATIONAL COURTS Kaj Hobér and Nils Eliasson

I. Introduction  II. The Legal Framework for Review and Challenge of Investment Treaty Awards  III. Decisions by National Courts 

I. Argentina v BG Group PLC  28.76 J. Energoalians (Currently Known as Komstroy) v Moldova  28.83 K. Ecuador v Chevron (USA) and Texaco  28.88 L. Sanum Investments Ltd v Lao People’s Republic  28.98 M. Russian Federation v Renta 4 S.V.S.A. et al. 28.117 IV. Discussion 28.127 A. Do National Courts Have Jurisdiction to Determine Challenges of Investment Treaty Awards? 28.128 B. Is It Appropriate for National Courts to Review Investment Treaty Awards? 28.134 C. What Standards of Review Do National Courts Adopt for Reviewing Challenges to the Jurisdiction of Investment Treaty Arbitral Tribunals? 28.145 V. Conclusion 28.159

28.01

A. Republic of Poland v Saar Papier Vertriebs GmbH  B. Russian Federation v Sedelmayer  C. Republic of Ecuador v Occidental Exploration & Production Company  D. Petrobart Ltd v Kyrgyz Republic and Kyrgyz Republic v Pertrobart Ltd  E. Czech Republic v Saluka Investments BV  F. Bayview Irrigation District 11 and Ors v Mexico  G. Czech Republic v European Media Ventures SA  H. Mexico v Cargill, Incorporated 

28.09 28.14 28.15 28.18 28.26 28.34 28.45 28.49 28.57 28.66

I. Introduction In investment arbitration, just as in commercial arbitration, the final award is often merely 28.01 the starting point for challenge and/​or enforcement proceedings that may take as long as, or even longer than, the prior proceedings. For example, in the first investment arbitration leading to an award against the Russian Federation, the claimant had to defend the award in challenge proceedings and then spent about ten years of persistent attempts to enforce his award. Thus, the final award was merely the end of the beginning. This chapter discusses the challenge and review of investment treaty awards in national courts, 28.02 based on thirty-​eight cases from twelve different jurisdictions: Belgium (1),1 Canada (6),2 the   Republic of Poland v. Eureko, Court of First Instance of Brussels (Nov. 23, 2006), RG 2005/​1542/​A.   United Mexican States v. Metalclad Corporation, Supreme Court of British Columbia, Judgment (May 2, 2001); Attorney General of Canada v.  S.D. Myers Inc., Federal Court of Canada, Judgment (Jan. 13, 2004); Bayview Irrigation District #11 and Ors v. Mexico, Ontario Superior Court, Ontario Superior Court of Justice, Judgment (May 5, 2008); Mexico v. Feldman, Ontario Superior Court of Justice, Judgment (Dec. 3, 2003)  and Court of Appeal for Ontario, Judgment (Jan. 11, 2005); Mexico v.  Cargill, Incorporated, Superior Court of Justice Ontario, Judgment (Aug. 26, 2010) and Court of Appeal for Ontario, Judgment (Oct. 4, 2011); Attorney General of Canada v. Mobil Investments Canada Inc. and Murphy Oil Corporation, Superior Court of Justice Ontario, Judgment (Feb. 16, 2017). 1 2

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Review of non-ICSID Awards by National Courts Czech Republic (1),3 England (2),4 France (4),5 Germany (1),6 the Netherlands (2),7 Russia (2),8 Sweden (7),9 Switzerland (6),10 Singapore (1),11 and the United States (5).12, 13 These jurisdictions are frequently chosen as the seat of non-ICSID arbitrations. 28.03 Most Canadian and US cases challenge NAFTA awards, whereas most European cases chal-

lenge bilateral investment treaty (BIT) awards. The remaining cases challenge awards under the Energy Charter Treaty (ECT), one challenge of a decision on jurisdiction under the

3  Binder v. Czech Republic, District Court of Prague, Default Judgment (22 June 2009) and Higher court of Prague, Judgment (July 2, 2010). 4  Ecuador v. Occidental Exploration and Production Company, Judgment [2006] EWHC 345 (Comm) (Mar. 2, 2006); Czech Republic v. European Media Ventures S.A., Judgment on jurisdiction [2007] EWHC 285 (Comm) (Dec. 5, 2007). 5  Czech Republic v. Pren Nreka, Recours en Annulation, Court d’Appel de Paris, Arret (Sept. 25, 2008); Kalininggrad Region v. Lithuania, Paris Court of Appeal (Nov. 18, 2010); Peter De Sutter, Kristof De Sutter, DS 2 S.A. and Polo Garments Majunga S.A.R.L. v. Republic of Madagascar, Paris Court of Appeal (Mar. 15, 2016); Energoalians (afterwards, Komstroy, which acquired all of Energoalians’ rights) v. Moldova, Paris Court of Appeal (Apr. 12, 2016). 6  Achmea B. V. v. Slovak Republic (formerly Eureko B. V. v. Slovak Republic), Frankfurt Higher Regional Court, Judgment (May 10, 2012). 7  Ecuador v. Chevron (U.S.A.) and Texaco, Hague District Court, Judgment (May 2, 2012) and Dutch Supreme Court, Judgment (Sept. 26, 2014); Adria Beteiligungs GmbH v. Croatia, Hague Court, Judgment (Aug. 15, 2012). 8  Stans Energy v. Kyrgyz Republic, Moscow Arbitrazh Court, Judgment (May 25, 2015); Lee John Beck & Central Asian Development Corporation v. Kyrgyz Republic, Moscow Arbitrazh Court, Judgment (June 5, 2015). 9  Russian Federation v. Sedelmayer, Judgment of the Stockholm District Court (Dec. 12, 2002), Case No. T6-​583-​98; Czech Republic v. CME Czech Republic B.V., Judgment of the Svea Court of Appeal (May 15, 2003), Case No. T-​8735-​01; Nagel v. Czech Republic, Decision of the Svea Court of Appeal (May 30, 2005), Case No. T 9059-​03; Petrobart Limited v. Kyrgyz Republic, Judgment of the Svea Court of Appeal (Apr. 13, 2006), Case No. T 3739-​03 and Judgment of the Supreme Court (Mar. 28, 2008), Case No. 2113-​06; Kyrgyz Republic v. Petrobart Limited, Judgment of the Svea Court of Appeal (Jan. 19, 2007), Case No. T 5208-​05; RosInvest Co UK Ltd. v. the Russian Federation, Swedish District Court, Default Judgment (Nov. 9, 2011) and Svea Court of Appeal, Judgment (Sept. 5, 2013); Renta 4 S.V.S.A., Ahorro Corporación Emergentes F.I., Ahorro Corporación Eurofondo F.I., Rovime Inversiones SICAV S.A., Quasar de Valors SICAV S.A., Orgor de Valores SICAV S.A., GBI 9000 SICAV S.A. v. Russian Federation, Stockholm District Court, Judgment (Sept. 14, 2014) and Svea Court of Appeal, Judgment (Jan. 8, 2016); Republic of Kazakhstan v. Anatolie Stati, Gabriel Stati, Ascom Group S.A. and Terra Raf Trans Traiding Ltd., Svea Court of Appeal, Judgment (Dec. 9, 2016). 10  Republic of Poland v. Saar Papier Vertriebs GmbH, Judgment of the Federal Court (Sept. 20, 2000); Saar Papier Vertriebs GmbH v.  Republic of Poland, Judgment (Mar. 1, 2002); Czech Republic v.  Saluka Investments BV, Judgment of the Federal Court of Switzerland (Sept. 7, 2006); Lebanon v. France Télécom Mobiles Internationales S.A. and FTML SAL, Judgment of the Federal Court of Switzerland (Nov. 10, 2005); Thailand v. Walter Bau, Swiss Federal Tribunal, Judgment (Aug. 14, 2012); EDF Int’l S.A. v. Hungary, Federal Supreme Court, Judgment (Oct. 6, 2015). 11  Sanum Investments Ltd. v. Lao People’s Democratic Republic, Singapore High Court, Judgment (Jan. 20, 2015) and Sanum Investments Limited v. Government of Lao People’s Democratic Republic, Singapore Court of Appeal [2016] SGCA 57. 12  Raymond L.  Loewen v.  United States of America, United States District Court for the District of Columbia; Civil Action No. 04-​2151 (Oct. 31, 2005); International Thunderbird Gaming Corporation v. Mexico, United States District Court for the District of Columbia, Civil Action 06-​00748 (Feb. 14, 2007); Tembec Inc et al. v. U.S., US District Court for the District of Columbia, Civil Action No. 07-​1905 (RMC) (Aug. 14, 2008); Argentina v. National Grid PLC, US District Court for the District of Columbia, Civil Action No. 09-​248 (RBW) (June 7,  2010); Argentina v.  BG Group PLC, US Court of Appeals for the District of Columbia Circuit, Docket No. 1:08-​cv-​00485 (Jan. 17, 2012); BG Group PLC v. Republic of Argentina, US Supreme Court, Docket No. 12-​138 (Mar. 5, 2014). 13 We have also identified five pending cases:  Libya v.  Mohamed Abdulmohsen Al-​ Kharafi &  Sons Co. (a Kuwaiti group), Egyptian Supreme Court, Judgment (Nov. 4, 2015); Veteran Petroleum Limited v. Russia, Hulley Enterprises Limited v. Russia; Yukos Universal Limited v. Russia, Hague District Court, Judgment (Apr. 20, 2016); Aaron C. Berkowitz, Brett E. Berkowitz & Trevor B. Berkowitz (formerly Spence International Investments and Others) v. Republic of Costa Rica, United States District Court for the District of Columbia. Additional unreported cases might exist.

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II.  The Legal Framework for Review and Challenge of Investment Treaty Awards Kyrgyz Foreign Investment Law and two challenges of awards under the CIS Convention for the Protection of Investors Rights. Thirty-​five of the cases challenge partial awards on jurisdiction and/​or liability, or final 28.04 awards on damages brought by the state party to the dispute, whereas eight are investor challenges of decisions declining jurisdiction or denying liability. The grounds for challenge in these cases include lack of jurisdiction, excess of mandate, procedural irregularities/​ violation of due process, and violations of public policy.14 Three cases also deal with whether challenges of investment treaty awards are ‘justiciable’ and/​or come within national court jurisdiction.15 In this chapter, we focus on three issues that raise questions specific to investment treaty 28.05 award challenges: (i) do national courts have jurisdiction to determine challenges of investment treaty awards, (ii) is it appropriate for national courts to review them, and (iii) what standards of review do national courts apply when they do? The first two issues stem from the fact that investment treaty arbitration differs from inter- 28.06 national commercial arbitration, primarily due to the public international law element in the former. The third issue—​standard of review—​is also different in jurisdictional challenges in invest- 28.07 ment treaty arbitration. The ruling on jurisdiction in international commercial arbitration is often limited to whether the dispute ‘arose out of or in connection with’ the contract containing the arbitration clause. Arbitral tribunals in investment arbitration, frequently must rule on complex issues of international law, including treaty interpretation, such as whether the claimant qualifies as an ‘investor’ who has made an ‘investment’ as defined in the treaty, whether the dispute is covered by the dispute resolution clause of the treaty, etc. In the thirty-​eight reviewed cases, challenges based on the other grounds mentioned—​that 28.08 is, excess of mandate, procedural irregularities, due process, and public policy—​did not raise issues unique to investment treaty arbitration.

II.  The Legal Framework for Review and Challenge of Investment Treaty Awards In investment treaty arbitration, the issues in dispute are normally decided in accordance 28.09 with the applicable investment treaty, supplemented by rules and principles of customary international law. International law of treaty interpretation and state responsibility will often be decisive.16 Also, the dispute resolution provisions of investment treaties are interpreted in accordance with international law. The significance of public international law notwithstanding, non-​ICSID investment arbi- 28.10 tration procedure is ultimately anchored in a national jurisdiction.17 Arbitration under the 14  Saar Papier Vertriebs GmbH v. Republic of Poland, Judgment (Mar. 1, 2002); Mexico v. Metalclad, supra note 2; Mexico v. Feldman, supra note 2, at 3. 15  Ecuador v. Occidental, Judgment of the Stockholm District Court (Dec. 12, 2002), Case No. T6-​583-​ 98; Sanum Investments Ltd. v. Lao People’s Democratic Republic, Singapore Court of Appeal [2016] SGCA 57 (Sept. 29, 2016). 16  See, e.g., K. Hobér, State Responsibility and Attribution, in The Oxford Handbook of International Investment Law (P. Muchlinski, F. Ortino & C. Schreuer eds., 2008). 17  See also J.  van Haersolte-​ van Hof & A.  Hoffmann, The Relationship Between International Tribunals and Domestic Courts, in The Oxford Handbook of International Investment Law, supra note 16; C. Dugan, D. Wallace, N. Rubins & B. Sabahiet, Investor-​State Arbitration 635–​73 (2008).

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Review of non-ICSID Awards by National Courts ICSID Convention is the only form of settlement of investment disputes that provides a completely ‘delocalized’ arbitral procedure, that is, one not subject to the laws of any national jurisdiction. ICSID arbitrations are governed by the ICSID Convention and its self-​ contained system for annulment, recognition and enforcement of awards. 28.11 In non-​ICSID Convention arbitration, including arbitration under the ICSID Additional

Facility, the arbitral procedure is ultimately subject to the law applicable at the seat of the arbitration. This means that, in all such arbitration, be it ad hoc arbitration under the UNCITRAL Rules or administered arbitration under the ICSID Additional Facility, the ICC Rules, or the SCC Rules, the normal way to challenge an investment treaty award is through national courts. Thus, in non-​ICSID Convention investment arbitration, the seat of arbitration plays a significant role.18

28.12 Most jurisdictions with modern arbitration legislation accept the finality of arbitral awards.

This means that the award is not subject to any appeal on the merits, can be set aside only on narrowly defined procedural grounds, and is immediately enforceable under the New York Convention.19

28.13 Although the grounds on which an arbitral award may be set aside vary from jurisdiction

to jurisdiction, modern arbitration legislation is to a large extent based on similar principles. To date, legislation based on the UNCITRAL Model Law has been adopted in a total of 106 jurisdictions. Moreover, most non-​Model Law jurisdictions that frequently host international arbitrations have adopted arbitration legislation in line with the UNCITRAL Model Law regarding the challenge of arbitral awards.20 The most important of these widely recognized principles is that they do not allow any review of the merits of the award. The correctness of the arbitral tribunal’s determination of legal and factual issues is not for the court that hears the challenge to review. The review is limited to four main categories: (i) the jurisdiction of the arbitral tribunal, (ii) irregularities regarding the independence or impartiality of arbitrators, (iii) procedural irregularities and violations of due process, and (iv) public policy and arbitrability.21

III.  Decisions by National Courts 28.14 This section presents elements of a selection of cases, elements relevant to the issues on

which this chapter focuses: (i) do national courts have jurisdiction to determine challenges of investment treaty awards, (ii) is it appropriate for national courts to review investment treaty awards, and (iii) what standards of review do national courts apply when they review challenges to the jurisdiction of the arbitral tribunal?22 The cases are presented in

18   See also S. Wilske, The Global Competition for the ‘Best Place’ of Arbitration for International Arbitrations, 1 Contemp. Asia Arb. J. 1, 21 (2008). 19   Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). 20   Jernej Sekolec & Nils Eliasson, The UNCITRAL Model Law on Arbitration and the Swedish Arbitration Act: A Comparison, in The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and Weaknesses (L. Heuman & S. Jarvin eds., 2006). 21  See, e.g., the UNCITRAL Model Law on International Commercial Arbitration art. 34. 22  In the previous edition of this book, we dealt with all cases existing at that time touching upon one or more of the three issues discussed in para. 28.14. Given the sharp increase in the number of challenge cases, for this edition a selection had to be made. The scope of this chapter also caused us not to include certain well-​known challenge cases, i.e., Czech Republic v. CME Czech Republic B.V.; Mexico v. Feldman; Republic of Poland v. Eureko; and Republic of Hungary v. EDF. These cases do not raise any of the three issues dealt with in this chapter.

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III.  Decisions by National Courts chronological order. Since each decision is based on the facts, arguments, and evidence presented in such cases, caution is required when trying to draw general conclusions based on individual cases.

A. Republic of Poland v Saar Papier Vertriebs GmbH The dispute between Saar Papier and Poland concerned a factory in Poland established by 28.15 Saar Papier to produce recycled paper products using imported used paper. The Polish environmental authorities soon stopped its import. In a first arbitration under the UNCITRAL Arbitration Rules and with the seat of arbitration in Zurich, the arbitral tribunal ruled that Poland’s treatment was ‘tantamount to an expropriation’ and ordered compensation.23 Thereafter, Saar Papier commenced a second arbitration seeking damages for continued blockage of its operations. In an interim award, the arbitral tribunal ruled that it had jurisdiction and that Saar Papier, in principle, was entitled to compensation, the quantum of which was deferred to a second stage. Poland challenged the interim award before the Swiss Federal Court.24 It argued, inter 28.16 alia, that it had not committed an act of expropriation and the arbitral tribunal therefore lacked subject matter jurisdiction. It further claimed that, since it was a precondition for the tribunal’s jurisdiction under the BIT that the dispute be about expropriation, the Court was entitled freely to review the tribunal’s finding of expropriation.25 The Federal Court denied Poland’s challenge of the arbitral tribunal’s jurisdiction. As to the 28.17 standard of review, the Federal Court held that it must make a free assessment as to whether the arbitral tribunal had been correct in finding that it had jurisdiction.26 It emphasized, however, that this did not mean that the Court, like an appellate body, would be entitled to review the merits of the case.27 Whether or not the arbitral tribunal had been correct in finding expropriation did not affect its jurisdiction.

B. Russian Federation v Sedelmayer 1. The arbitration Mr Sedelmayer claimed that the Russian Federation expropriated premises belonging to a 28.18 St. Petersburg company in which Mr Sedelmayer had invested through SGC International, incorporated in the United States, of which he was the ultimate controlling investor. He commenced arbitral proceedings under the German–​Soviet BIT, under the auspices of the Arbitration Institute of the Stockholm Chamber of Commerce, with the seat of arbitration in Stockholm. The arbitral tribunal ruled in favour of Mr Sedelmayer.28 However, one arbitrator filed a dissent to the effect that the arbitral tribunal lacked jurisdiction under the German–​Soviet BIT since the investments had been made by a US corporation, not Mr Sedelmayer.

23  This award, and the subsequent awards between the same parties, are not in the public domain. The information we have collected is based on the Swiss court cases discussed later in this section. 24  Poland v. Saar Papier, supra note 10. 25  Id. ¶ 4.a. 26  Id. ¶ 4.b. 27  Id. ¶ 4.b. 28 The Sedelmayer case is discussed in greater detail in Kaj Hobér, Investment Arbitration in Eastern Europe: In Search for a Definition of Expropriation 46–​60 (2007).

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Review of non-ICSID Awards by National Courts 2. The challenge proceedings 28.19 The Russian Federation challenged the arbitral award before the Stockholm District Court29 on the ground that the arbitral tribunal had no jurisdiction.30 (a)  Jurisdiction of the courts of Sweden 

28.20 Mr Sedelmayer claimed that, because the arbitral proceedings and award were governed by

public international law, the courts of Sweden lacked jurisdiction to hear the challenge under the Swedish Arbitration Act.31 In the alternative, he argued that, despite Stockholm being the seat, the award should be equated with a foreign arbitral award not challengeable under the Arbitration Act.32 Finally, he argued that it was implied in the German–​Soviet BIT that an arbitral award issued under the BIT could not be challenged in national courts.33

28.21 The Stockholm District Court emphasized that it was well-​established Swedish arbitration law

that, unless otherwise agreed between the parties, arbitral proceedings having their seat in Sweden were governed by the Swedish Arbitration Act and the award must be regarded as a Swedish award challengeable under it even if neither party has any connection to Sweden. The Court concluded that, at least where one of the parties to the arbitration was not a sovereign state, the fact that the arbitration was based on a treaty did not cause it to reach a different conclusion.34

(b)  Jurisdiction of the arbitral tribunal 

28.22 The Russian Federation argued that the tribunal lacked jurisdiction on the grounds that,

inter alia, indirect investments fell outside the scope of the arbitration clause in the German–​ Soviet BIT and Mr Sedelmayer was not an ‘investor’ under the BIT, since Germany was not his ‘permanent place of residence’.35

28.23 The district court applied the Swedish doctrine of assertion, which means that the dispute

falls within the jurisdiction of the arbitral tribunal if one of the parties asserts that its comes within the scope of the agreement containing the arbitration clause, provided the assertion is not completely unfounded and there is no dispute about the arbitration agreement’s validity.36 Accordingly, Mr Sedelmayer’s assertion that he was an ‘investor’ with a ‘permanent place of residence’ in Germany was sufficient to establish jurisdiction for the arbitral tribunal.37

28.24 The district court also explained, however, that the arbitral tribunal would not be bound by

the determination of these issues for jurisdiction; whether or not Mr Sedelmayer in fact was

29  The challenge proceedings in this case were brought under the old Swedish Arbitration Act of 1929, in force in Sweden until April 1, 1999 when the new Arbitration Act entered into force. The grounds for setting aside arbitral awards under the old Arbitration Act were more or less the same as under the new Act. One difference, however, is that under the old Arbitration Act, lack of a valid arbitration agreement constituted a ground for invalidity that could be invoked without any time limit. Under the new Arbitration Act, such an action must be brought within three months from the date on which the party received the award. Another difference is that, under the old Act, an action for setting aside an arbitral award commenced in the district court, with the right of appeal to the Court of Appeal. Under the new Arbitration Act, an action to set aside an arbitral award is brought directly before the Court of Appeal. 30 Russian Federation v.  Sedelmayer, supra note 9.  For English translations of the judgment of the Stockholm District Court, see 2 Stockholm Int’l Arb. Rev. (2005). 31  Id. 8. 32  Id. 33  Id. 34  Id. at 16. 35  Article 1(c) of the German–Soviet BIT provides that: ‘ “investor” means an individual having a permanent place of residence in the area covered by this Agreement, or a body corporate having its registered office therein, authorized to make investments’. 36  Russia v. Sedelmayer, supra note 9, at 17. See also L. Heuman, Arbitration Law of Sweden: Practice and Procedure 56–​63 (2003). 37  Id. at 17.

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III.  Decisions by National Courts an ‘investor’ who had made an ‘investment’ in Russia would still have to be determined by the arbitral tribunal as part of the merits, which were not reviewable in challenge proceedings.38 On appeal by Russia, the Svea Court of Appeal upheld the District Court’s decision on the 28.25 grounds given by the District Court.39 It dismissed Mr Sedelmayer’s objection to the jurisdiction of the courts of Sweden on the procedural grounds that he had failed to appeal that aspect of the District Court decision.40

C. Republic of Ecuador v Occidental Exploration & Production Company 1. The arbitration The dispute between Occidental Exploration & Production Company (OEPC) and the 28.26 Republic of Ecuador41 concerned whether OEPC was entitled to refunds of VAT payments made in connection with operations under its hydrocarbon exploration and exploitation contract with Ecuador. OEPC commenced arbitral proceedings under the US–​Ecuador BIT and UCITRAL Rules, with London as the seat. It claimed, inter alia, breach of Ecuador’s obligation to afford national treatment. Ecuador objected to the arbitral tribunal’s jurisdiction on the ground, inter alia, that mat- 28.27 ters of taxation were expressly excluded from the BIT, save for three limited exceptions not applicable in the present case. The arbitral tribunal found, however, that OEPC’s claim fell within one of these exceptions, as a taxation matter with respect to ‘the observance and enforcement of terms of an investment agreement’, in this case, whether the contract limited OEPC’s right to VAT refunds under Ecuadorian law.42 The tribunal concluded that it did not, and, since no refunds had been made, Ecuador was in breach of its obligation to accord OEPC national treatment.43

2. The challenge proceedings Ecuador applied to the High Court of Justice of England and Wales to set aside the award 28.28 under section 67 of the English Arbitration Act of 1996.44 Ecuador’s main argument was that ‘matters of taxation’ were outside the scope of the arbitral tribunal’s jurisdiction pursuant to Article X of the BIT. It also argued that, even if the exception for matters of taxation with respect to ‘the observance and enforcement of terms of an investment agreement or authorization’ were deemed applicable, the jurisdiction of the arbitral tribunal did not extend beyond the observance and enforcement of the terms of such an investment agreement or authorization to, in particular, the observance of national treatment under the BIT. This was the first time an investment treaty award was brought before English courts. (a) Justiciability  OEPC challenged Ecuador’s right to bring the claim, arguing that Ecuador’s challenge would 28.29 require the Court to interpret provisions of an international treaty, contrary to the rule of   Id. 18.   Russian Federation v. Sedelmayer, Judgment of the Svea Court of Appeal (May 15, 2003), Case No. T8735-​01, at 3. For English translations of the judgment of the Svea Court of Appeal, see 2 Stockholm Int’l Arb. Rev. (2005). 40  Id. at 3. 41  Occidental Exploration and Production Company v. Ecuador, Award, LCIA Case No. UN 3467 (July 1, 2004). 42  Id. ¶ 77. 43  Id. ¶¶ 199–​200. 44  In relevant part, Section 67 reads as follows: ‘[A]‌party to arbitral proceedings may . . . apply to the court (a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or (b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction . . .’. 38 39

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Review of non-ICSID Awards by National Courts English law that such a task is not justiciable in the English Courts.45 The House of Lords, in The Tin Council Case,46 had held that a treaty which has not been incorporated into English law can create no rights or obligations in domestic law.47 28.30 The High Court found, however, that, although determining a challenge to the jurisdiction

of an arbitral tribunal constituted under a BIT would require the Court to adjudicate upon rights arising out of a treaty between sovereign states, they were rights intended to be invoked by individuals and corporate entities before arbitral tribunals constituted in accordance with and subject to control of the national arbitration laws at the seat of arbitration.48 The Court therefore found that there was a foothold in domestic law for a ruling to be given on international law, that is, the right given by section 67 of the Arbitration Act to a party to an arbitration whose seat is in England, Wales, and Northern Ireland, to challenge the jurisdictional ruling of the arbitral tribunal.49 The Court of Appeal of England and Wales found that the High Court had reached the correct conclusion.50

(b) Jurisdiction 

28.31 In a second stage of the proceedings, the High Court dealt with Ecuador’s challenge of the

jurisdiction of the arbitral tribunal.51 As to the standard of review, the Court found that a challenge to the jurisdiction of an arbitral tribunal proceeds by way of a rehearing of matters before the arbitrators, the test for the Court being whether the arbitral tribunal had been correct in its decision on jurisdiction.52 The Court then carefully examined whether the dispute came within the ambit of the BIT’s above-mentioned exception from the exclusion of taxation from the scope of the BIT with respect to taxation matters with respect to the ‘observance and enforcement of terms of an investment agreement or authorization’ and found that it did.53

28.32 Finally, as regards Ecuador’s argument that even if the exception for taxation matters with

respect to ‘observance and enforcement of terms of an investment agreement or authorization’ were to be applied, it did not bring within the jurisdiction of the arbitral tribunal a claim based on enforcing the BIT’s national treatment provision regarding matters of taxation, the Court concluded that, if a ‘matter of taxation’ falls within the scope of any of the three exceptions from the exclusion of taxation from the scope of the BIT, then the whole BIT applies to that ‘matter of taxation’.54

28.33 Ecuador appealed the judgment of the High Court to the Court of Appeal of England and

Wales,55 which upheld the judgment of the High Court.56

D. Petrobart Ltd v Kyrgyz Republic and Kyrgyz Republic v Pertrobart Ltd 28.34 The dispute between Petrobart Ltd (Petrobart) and the Kyrgyz Republic gave rise to two separate

investment arbitrations and two separate challenge proceedings before the Courts of Sweden.

45  The High Court dealt with such objection in a separate judgment, Ecuador v. Occidental Exploration and Production Company (non-​justiciability), Judgment [2005] EWHC 774 (Comm) (Apr. 29, 2005), ¶ 30. 46  J.H. Rayner Ltd. v. Department of Trade [1990] 2 A.C. 418, at 476 (Lord Templeman) and 499–​500 (Lord Oliver of Aylmerton). 47  Ecuador v. Occidental (nonjusticiability), supra note 45, ¶ 71. 48  Id. ¶ 73. 49  Id. ¶¶ 73–​76. 50  Occidental Exploration and Production Company v. Ecuador, Judgment of the Court of Appeal [2005] EWCA Civ 1116 (Sept. 9, 2005), ¶¶ 57–​58. 51  Ecuador v. Occidental, supra note 4, Judgment [2006] EWHC 345 (Comm). 52  Id. ¶ 7. 53  Id. ¶ 108. 54  Ecuador v. Occidental, ¶ 96. 55  Ecuador v. Occidental Exploration and Production Company, Judgment of the Court of Appeal [2007] EWCA Civ. 656 (July 4, 2007). 56  Id. ¶¶ 57–​58.

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III.  Decisions by National Courts 1. Petrobart  I (a)  The arbitration  Petrobart Ltd (Petrobart), registered in Gibraltar, entered into a contract with the state-​ 28.35 owned Kyrgyzgazmunaizat (KGM) regarding supply of gas condensate. Petrobart delivered five shipments but was only paid for the first two. At the same time as Petrobart turned to domestic courts for recourse, Kyrgyz authorities—​as part of a reform of the system for supply of oil and gas and to deal with the critical financial situation of KGM—​took measures that made it impossible for Petrobart to enforce its contractual rights. Petrobart initiated arbitral proceedings against the Kyrgyz Republic under its Foreign Investment Law. The proceedings were conducted under the UNCITRAL Rules. The seat of arbitration was Stockholm. The arbitral tribunal found that it lacked jurisdiction to determine Petrobart’s claim, since Petrobart had not made an investment within the meaning of the Foreign Investment Law. (b)  The Challenge Proceedings  Petrobart challenged the arbitral award before the Svea Court of Appeal in Stockholm in ac- 28.36 cordance with section 3657 of the Swedish Arbitration Act (1999).58 Parallel to the challenge proceedings, Petrobart commenced new arbitral proceedings under the ECT.59 In the challenge proceedings, Petrobart argued that, for an arbitral tribunal to have jurisdic- 28.37 tion over the merits of a claim, it is generally sufficient that the claimant has invoked circumstances (whether true or not) that—​if they were true—​would establish jurisdiction (the doctrine of assertion60). Accordingly, it was sufficient that Petrobart claimed to have made an ‘investment’ under the Foreign Investment Law. Whether it had actually done so, investment would be a substantive matter which (unlike matters of jurisdiction) could not be reviewed by national courts. Petrobart also argued that the tribunal in any event had erred in finding that Petrobart was not an ‘investor’ under the Foreign Investment Law, which it said was evidenced by the fact that the ECT arbitral tribunal in Petrobart II had found that Petrobart’s investment qualified as an ‘investment’ under the ECT. The Court of Appeal agreed with the UNCITRAL tribunal that the question of whether 28.38 Petrobart had made an ‘investment’ in accordance with the Foreign Investment Law was a matter of jurisdiction. It also found that, for the tribunal to have jurisdiction, it had to be established, and not merely claimed, that the investor had made an ‘investment’ in accordance with the Foreign Investment Law. The Court did not consider it persuasive that the ECT tribunal had found that Petrobart had made an investment, given that the ECT tribunal had relied on the definition of ‘investment’ in the ECT and not in the Foreign Investment Law. Thus, the Court fully upheld the tribunal’s decision on jurisdiction. Even though Petrobart’s claim had, in the meantime, been partially granted by the ECT tri- 28.39 bunal in Petrobart II, it appealed the decision of the Court of Appeal to the Swedish Supreme Court.61 The Supreme Court took the view that the arbitral tribunal, in deciding it did not have jurisdiction, had made a substantive determination that Petrobart had not made an

57  Under Section 36 of the Arbitration Act, the Court of Appeal may review (and revise) negative jurisdictional rulings by the arbitral tribunal. In relevant parts, Section 36 reads as follows: ‘An award whereby the arbitrators concluded the proceedings without ruling on the issues submitted to them for resolution may be amended, in whole or in part, upon the application of a party . . .’. 58  Petrobart Limited v. Kyrgyz Republic, Judgment of the Svea Court of Appeal (Apr. 13, 2006), Case No. T 3739-​03. 59  These proceedings are discussed infra in ¶¶ 28.40 ff. 60  See also supra ¶ 28.23. 61  Petrobart Limited v.  Kyrgyz Republic, Judgment of the Supreme Court (Mar. 28, 2008), Case No. 2113-​06.

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Review of non-ICSID Awards by National Courts investment within the meaning of the Foreign Investment Law rather than assuming, as it should have at that stage, that the factual circumstances asserted by the claimant were at hand. Had this been done, the arbitral tribunal—​in the opinion of the Supreme Court—​ would have found that it had jurisdiction.62

2. Petrobart  II (a)  The arbitration  28.40 As mentioned, after the negative jurisdictional ruling in Petrobart I, Petrobart initiated new arbitral proceedings against the Kyrgyz Republic, this time under the ECT,63 invoking essentially the same circumstances. The proceedings were conducted under the auspices of the Arbitration Institute of Stockholm Chamber of Commerce. The seat of arbitration was Stockholm. As before, the Kyrgyz Republic disputed the ECT tribunal’s jurisdiction of the ECT, inter alia, on the ground that Petrobart had not made an ‘investment’ within the meaning of the ECT. The tribunal, however, found that Petrobart had made an ‘investment’ within the meaning of the ECT. 28.41 The Kyrgyz Republic also argued that the decision of the arbitral tribunal in Petrobart I barred

Petrobart’s ECT claim on the ground of res judicata. The arbitral tribunal rejected that defence as the two arbitrations were based on different arbitration clauses, the first in the Foreign Investment Law of the Kyrgyz Republic and the other in the ECT, and the first dealt with alleged violations of Kyrgyz law, whereas the other dealt with alleged violations of the ECT.64

28.42 As to the merits, the arbitral tribunal found that the Kyrgyz Government had failed to pro-

vide fair and equitable treatment to Petrobart, by transferring assets from KGM to a newly established company to the detriment of KGM’s creditors, including Petrobart, and by intervening in court proceedings regarding the execution of a judgment against KGM to the detriment of Petrobart.65

(b)  The challenge proceedings 

28.43 It was then the Kyrgyz Republic’s turn to challenge the ECT Award before the Svea Court of

Appeal.66 It argued that there was no valid arbitration agreement between Petrobart and the Kyrgyz Republic since, while Gibraltar had been included in the United Kingdom’s declaration of provisional application of the ECT, it was not listed in its subsequent instrument of ratification which had the effect of terminating provisional application. The Kyrgyz Republic also argued that there was no valid arbitration agreement since delivery of gas did not constitute an ‘investment’ under the ECT.

28.44 To determine whether the ECT applied to investors of Gibraltar, the Court examined ECT

Article 45, which governs the treaty’s provisional application.67 Article 45(3)(a) stipulates that

  Id. at 6–​7.   Petrobart Ltd. v. Kyrgyzstan, Award, SCC Case No. 126/​2003 (Mar. 29, 2005). The Petrobart case is also discussed in greater detail in K. Hobér, The Energy Charter Treaty—​Awards Rendered, 1 Disp. Resol. Int’l 36 (2007) and in K. Hobér, Investment Arbitration in Eastern Europe: In Search for a Definition of Expropriation 209–​20 (2007). 64  Petrobart Ltd. v. Kyrgyzstan, supra note 63, Award, SCC Case No. 126/​2003 (Mar. 29, 2005), at 65–​66. 65  Id. at 76. 66  Kyrgyz Republic v. Petrobart Limited, Judgment of the Svea Court of Appeal (Jan. 19, 2007), Case No. T 5208-​05. 67  The provisional application of the ECT—​in particular in relation to the Russian Federation—​is dealt with in greater detail in K. Hobér, The Energy Charter Treaty—​An Overview, 8 J.World Investment & Trade 323 (2007). The provisional application of the ECT in relation to the Russian Federation is also subject to the pending challenge proceedings before the Dutch Courts with respect to the three Yukos cases brought under the ECT: Russia v. Veteran Petroleum Ltd., Russia v. Hulley Enterprises Ltd., & Russia v. Yukos Universal Ltd., Hague District Court, Judgment (Apr. 20, 2016) (jointly referred to as the ‘ECT Yukos Cases’). 62 63

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III.  Decisions by National Courts a signatory state may terminate its provisional application of the ECT by a special notification to the depository, declaring its intention not to become a contracting party. Provisional application also ends when a signatory ratifies the treaty. The Court noted that the ECT does not expressly regulate the situation in the present case where the provisional application of the treaty and the final ratification do not have the same territorial scope. The Court found that, had the intention been to terminate the provisional application with regard to Gibraltar, the United Kingdom should have explicitly declared this when ratifying the treaty. Accordingly, Gibraltar was still covered by the provisional application of the ECT and a valid arbitration agreement was in effect between the parties when Petrobart made its investment and when it initiated arbitral proceedings under the ECT. As to the objection that Petrobart had not made an ‘investment’ within the meaning of the ECT, the Court simply stated that the term ‘investment’ in the ECT should be given a broad interpretation and agreed with the arbitral tribunal that Petrobart must be deemed to have made an ‘investment’ under the terms of the ECT. The request to set aside the award was denied.

E. Czech Republic v Saluka Investments BV 1. The arbitration The arbitration between Saluka Investments BV (Saluka) and the Czech Republic68 arose out of 28.45 the reorganization and privatization of the Czech banking sector, in which Saluka, a Netherlands subsidiary of the Japanese Nomura group, acquired shares in IPB, one of the so-​called big four Czech Banks. Saluka initiated arbitration proceedings against the Czech Republic under the Netherlands–​Czech Republic BIT, claiming that IPB was unreasonably excluded from assistance given to the other three major banks to deal with a ‘systemic’ bad debt problem that equally affected all of the big four banks. That exclusion, Saluka claimed, resulted in loss of its investment. The arbitral proceedings were conducted pursuant to the UNCITRAL Arbitration Rules. The seat of arbitration was Geneva. The arbitral tribunal found that the Czech Republic had violated the ‘fair and equitable treatment’ obligation and the ‘non-​impairment obligation’ under Article 3.1 of the BIT by responding to the bad debt problem in the Czech banking sector in a way which accorded IPB differential treatment without a reasonable justification. 2. The challenge proceedings The Czech Republic challenged the award before the Federal Court of Switzerland.69 28.46 According to the Czech Republic, the decision on how the financial assistance was to be distributed was finally and conclusively made before Saluka made its ‘investment’. It argued that, by finding that the Czech Republic had violated the BIT through acts that took place prior to Saluka’s ‘investment’, the arbitral tribunal went beyond the scope of its jurisdiction under the Netherlands–​Czech Republic BIT. The Court agreed that it would be outside the scope of the tribunal’s jurisdiction under the 28.47 Netherlands–​Czech Republic BIT to find that the Czech Republic had violated the BIT through acts that took place prior to the time Saluka made its investment;70 however, the arbitral tribunal’s finding of a BIT violation was based on the actual provision of the financial assistance after Saluka had made its investment, not on the earlier government decision. The Court therefore concluded that the tribunal had not gone beyond the scope of its jurisdiction.71

  Saluka Investments B.V. v. Czech Republic, Partial Award, Ad Hoc UNCITRAL Rules (Mar. 17, 2006).  Czech Republic v.  Saluka Investments B.V., Judgment of the Federal Court of Switzerland (Sept. 7, 2006). 70  Czech Republic v. Saluka Investments B.V., Section 6.4. 71  Id. Section 6.5.3. 68 69

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Review of non-ICSID Awards by National Courts 28.48 The Court emphasized that the arbitral tribunal’s finding that the unfair and discriminatory

treatment consisted of the actual provisioning of the financial assistance was part of the merits of the case and could not be reviewed by the Court as part of a challenge to the jurisdiction of the tribunal.72

F. Bayview Irrigation District 11 and Ors v Mexico 28.49 This case arose out of Mexico’s capture and diversion to Mexican farmers and municipalities of

water allocated to the United States under a treaty signed in 1944 between the United States of America and Mexico,73 water over which seventeen Texas irrigation districts, twenty-​four individuals, and a corporate investor (together the Bayview applicants) claimed ownership.

1. The arbitration 28.50 The Bayview applicants filed a request for arbitration against Mexico under Chapter 11 of

the NAFTA and pursuant to the ICSID Additional Facility Rules. The seat of arbitration was Toronto. The applicants argued that their right to water located in Mexico constituted an investment in Mexico and claimed damages because Mexico had violated the NAFTA. Mexico objected to the jurisdiction of the arbitral tribunal on the basis that the water rights did not constitute ‘investments’ under the NAFTA.

28.51 The arbitral tribunal agreed with Mexico. It refused to accept that the Bayview applicants’

water rights in Mexico constituted ownership of personal property rights in the physical water of rivers flowing in Mexican territory, since it could not be determined at any given time who owned what water. It also found that the 1944 treaty was an agreement to apportion water between the two states and was not intended to create property rights amounting to an ‘investment’. The arbitral tribunal therefore found that it did not have jurisdiction.74

2. The challenge proceedings 28.52 The Bayview applicants applied to the Ontario Superior Court of Justice75 to set aside the

arbitral award. With reference to the decision of the ICJ in The Oil Platforms Case,76 they argued that settled practice required the arbitral tribunal to base its jurisdictional decision on the assumption that their assertion that they owned water in Mexico was correct and to defer the question of their ownership to the merits stage. The applicants further argued that, at the jurisdictional stage, the arbitral tribunal is not equipped to decide the merits because it does not yet have a complete factual record. They claimed that, by not respecting these fundamental legal principles, the tribunal had failed to give them a fair opportunity to present their case, in violation of Article 1877 and Article 34(2)(a)(ii)78 of the UNCITRAL Model Law.

  Id. Section 6.5.4.  Treaty Between the United States of America and Mexico Respecting Utilization of Waters of the Colorado and Tijuana Rivers and the Rio Grande (signed February 3, 1944, entry into force November 8, 1945). 74 Bayview Irrigation District et  al. v.  Mexico, ICSID Case No. ARB/​ AF.05/​ 1, Award (June 19, 2007), ¶ 122. 75  Bayview Irrigation District #11 and Ors v. Mexico, supra note 2. 76  Case concerning Oil Platforms (Islamic Republic of Iran v. United States of America), I.C.J. Reports 1996, II, 856. 77  Article 18 reads: ‘The parties shall be treated with equality and each party shall be given a full opportunity of presenting his case’. 78  Article 34(2)(a)(ii) reads: ‘An arbitral award may be set aside by the court [specified in article 6] only if: (a) the party making the application furnishes proof that:  . . . ; (ii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case . . .’. 72 73

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III.  Decisions by National Courts Mexico argued that it had not disputed the underlying facts but only the applicants’ legal 28.53 characterization that the water rights constitute an ‘investment’, and that the arbitral tribunal had not only decided, based on the facts as argued by the applicants, that they had not made an investment within the meaning of the NAFTA.79 The Ontario Superior Court denied the application to set aside the arbitral award. The Court 28.54 made clear that its role on judicial review is not to conduct a hearing de novo of the merits of the arbitral tribunal’s decision on jurisdiction.80 It went on to state that: ‘[w]‌hile decisions by arbitral tribunals are not immune from challenge, any challenge is confronted with the “powerful presumption” that the tribunal acted within its authority. An arbitral decision is not invalid because it wrongly decided a point of fact or law’.81 The Court also found that nothing in the record of the arbitral proceeding indicated that 28.55 the arbitral tribunal had not allowed the applicants a fair opportunity to present their case.82 The Court rejected the applicants’ claim that the arbitral tribunal acted contrary to settled 28.56 practice by not presuming that the facts asserted by the claimants were correct. It noted that the tribunal had decided that it did not have jurisdiction because the applicants’ alleged ownership in water rights did not constitute an ‘investment’ under NAFTA The Court deferred to the arbitral tribunal’s expertise in deciding the substantive and procedural issues before it.83

G. Czech Republic v European Media Ventures SA 1. The arbitration European Media Ventures (EMV), a Luxembourg company, claimed compensation under the 28.57 BIT between the Czechoslovak Socialist Republic and the Belgium–​Luxembourg Economic Union for loss and damage arising out of the alleged indirect expropriation of its investment in a Czech television station.84 The arbitral proceedings were conducted pursuant to the UNCITRAL Arbitration Rules. The seat of arbitration was London. The main issue at the jurisdictional stage was the scope of the tribunal’s jurisdiction under 28.58 Article 8 of the BIT, which offers arbitration for ‘[d]‌isputes  . . .  concerning compensation due by virtue of Article 3’ on expropriation.85 Such wording is commonly found in arbitration clauses in BITs concluded by the Soviet Union or Eastern European states during the communist era. The Czech Republic argued that the reference to ‘disputes concerning compensation due 28.59 by virtue of Art. 3’ in Article 8 meant that the arbitral tribunal’s jurisdiction was limited to disputes as to the amount of compensation to be paid following expropriation. Whether there had been an expropriation had to be determined in the courts of the Czech Republic. EMV argued that jurisdiction also extended to whether compensation should be paid, that is, whether an expropriation had occurred. The arbitral tribunal found that the phrase ‘concerning compensation’ in Article 8(1) was 28.60 intended ‘to exclude from . . . jurisdiction any claim for relief other than compensation (e.g.,

  Bayview Irrigation District #11 and Ors v. Mexico, supra note 2 ¶ 54.   Id. ¶ 60. 81  Id. ¶ 63. 82  Id. ¶¶ 67–​71. 83  Id. ¶¶ 75–​77. 84  The arbitral award is not in the public domain. 85  The same issue was at stake in Laos v. Sanum and Russian Federation v. Renta 4, dealt with later in this chapter. 79 80

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Review of non-ICSID Awards by National Courts a claim for restitution or a declaration that a contract was still in force)’.86 The tribunal concluded that it had jurisdiction to determine whether expropriation had occurred.

2. The challenge proceedings 28.61 The Czech Republic applied to the High Court of England and Wales to set aside the award

pursuant to section 67(1) of the English Arbitration Act on the grounds that the arbitral tribunal lacked substantive jurisdiction.87 The Czech Republic submitted, inter alia, that (i) it was a policy of Communist states at the time to agree to arbitration with private investors only in relation to disputes as to the amount of compensation following expropriation; (ii) the circumstances in which the BIT was concluded showed an intention to confine the right to arbitrate in Article 8 to disputes about the level of compensation awarded; and (iii) the terms of Article 8(1) confirm the limited scope of the contracting parties’ consent to arbitration.

28.62 In response, EMV argued, inter alia, that—​as a matter of ordinary meaning—​the phrase

‘concerning compensation due by virtue of ’ covered both the amount of compensation in case of expropriation and the question of whether any compensation was due and that there was no immutable policy of the Czechoslovak Socialist Republic to confine arbitration agreements to the amount of compensation to be paid.88

28.63 As to the standard of review in a challenge to the jurisdiction of an arbitral tribunal, the

Court referred to the test summarized in Ecuador v Occidental,89 that is, that they must determine whether the tribunal was correct in its decision on jurisdiction.90 The Court also concluded that, since the BIT was governed by international law, the rules of interpretation were Articles 31 and 32 of the Vienna Convention.91

28.64 The Court summarized its approach to the interpretation in the case in four points. First, it

stressed the importance of making an ‘independent’ interpretation without color taken from distinctive features of the legal system of any contracting state. Secondly, the arbitral jurisdiction is the same whether the ‘concerned Contracting Party’ referred to in Article 8 is the Czech Republic or Belgium/​Luxembourg. Thirdly, the ‘ordinary meaning’ is the meaning attributed to those terms at the time the treaty was concluded. Fourth, as a normal principle of interpretation, a court or tribunal should endeavour to give a meaning to each of the words being interpreted.92 In light of these considerations, the Court found that, as a matter of ordinary meaning, it was unable to accept that the phrase ‘concerning compensation’ must be read as meaning ‘relating to the amount of compensation’. The Court said that the meaning of the word ‘concerning’ is broad; its ordinary meaning is to include every aspect of its subject, in this case ‘compensation due by virtue of Paragraphs (1) and (3) of Art. 3’. The Court concluded that, as a matter of ordinary meaning, this covers issues of entitlement as well as quantification.93 Further, since the arbitral tribunal does not have jurisdiction unless the asserted right to compensation arises out of events specified in Article 3(1) and (3), the tribunal must necessarily consider whether such events have occurred, that is, whether there has been an expropriation.94

  The award is not in the public domain. The citation is taken from the judgment of the High Court.  Czech Republic v.  European Media Ventures S.A., Judgment [2007] EWHC 285 (Comm) (Dec. 5, 2007). 88  Id. ¶ 12. 89  See supra ¶ 28.31. 90  Czech Republic v. European Media Ventures S.A., supra note 87, ¶ 13. 91  Id. ¶ 14. 92  Id. ¶¶ 34–​37. 93  Id. ¶ 44. 94  Id. ¶ 45. 86 87

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III.  Decisions by National Courts The Court therefore concluded that the tribunal had jurisdiction to determine the question 28.65 of whether compensation should be awarded.95 The application of the Czech Republic was accordingly dismissed.

H. Mexico v Cargill, Incorporated 1. The arbitration Cargill, a US food company, had undertaken to sell high fructose corn syrup in Mexico 28.66 through its Mexican subsidiary. In Cargill, Inc. v United Mexican States,96 it claimed that Mexico’s imposition of a tax on soft drinks containing the syrup, as well as Mexico’s failure to issue import permits, violated NAFTA Articles 1102 (national treatment), 1103 (most-​ favoured-​nation treatment), 1105 (fair and equitable treatment), 1106 (performance requirements), and 1110 (expropriation), resulting in losses to Cargill’s investment. The arbitration was conducted pursuant to the ICSID Additional Facility Rules and was seated in Toronto, Canada. The arbitral tribunal held that Mexico’s actions breached Articles 1102, 1105, and 1106 of 28.67 NAFTA. The tribunal awarded Cargill compensation exceeding US$77 million for lost sales to Cargill’s Mexican subsidiary of the corn syrup manufactured by Cargill in the US (upstream losses), as well as for direct lost sales and associated costs that the subsidiary sustained (downstream losses).

2. The challenge proceedings Relying on Article 34(2)(a)(iii) of the Canadian International CAA,97 Mexico applied to the 28.68 Ontario Superior Court of Justice to set aside the part of the award granting compensation for upstream losses on the grounds that the tribunal lacked jurisdiction to award such compensation.98 Mexico claimed that the tribunal could only award compensation to Cargill—​as an investor—​for losses suffered in relation to its investment in Mexico.99 Upstream losses, according to Mexico, were suffered by Cargill as a producer in the US in connection with Cargill’s cross-​border trade with its Mexican subsidiary, and thus fell outside the tribunal’s jurisdiction.100 The court dismissed Mexico’s contentions. Mexico argued that the standard of review where jurisdiction is concerned was correctness. 28.69 Cargill argued that the standard was one of deference.101 Relying on several precedents and referring to the worldwide trend towards restricting judicial control over international arbitration awards, the court agreed with Cargill that the court’s approach should be one of restraint and deference. The court therefore found that the standard of review of whether tribunals have exceeded jurisdiction was reasonableness.102

  Id. ¶ 47.   Cargill, Inc v. United Mexican States, Award, ICSID Case No. ARB(AF)/​05/​2 (Sept. 18, 2009). 97  Article 34(2)(a)(iii) in the relevant part reads as follows: ‘An arbitral award may be set aside . . . only if . . . the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration . . .’. 98  Mexico v. Cargill, Incorporated, Superior Court of Justice Ontario, Judgment (Aug. 26, 2010), ¶¶ 1, 3–​5, 44–​45, 60, 69, 74–​75. Mexico had raised essentially the same arguments also before the arbitral tribunal, which the arbitral tribunal dismissed. See Cargill, Inc. v. United Mexican States, Award, ICSID Case No. ARB(AF)/​05/​2 (Sept. 18, 2009), ¶¶ 142, 153–​54, 519–​23, 525–​26. 99  Mexico v. Cargill, supra note 98, ¶¶ 40, 59, 74–​75. 100  Id. ¶¶ 40, 45, 59. 101  Id. ¶ 49. 102  Id. ¶¶ 50–​55. 95 96

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Review of non-ICSID Awards by National Courts 28.70 The court noted that Mexico acknowledged that Cargill was an investor, and that its Mexican

subsidiary was an investment.103 Furthermore, the tax measures adopted by Mexico clearly related to Cargill and its investment.104 In this regard, the court deferred to the tribunal’s factual finding that Cargill’s investment comprised also Cargill’s business income derivable from its investment notwithstanding that a segment of activity necessary to earn the income was in the US.105 Although Mexico invoked another NAFTA case in which the arbitral tribunal had come to a contrary conclusion,106 the court dismissed Mexico’s argument by noting that the tribunal had distinguished the other case on the facts, and that it was not within the court’s jurisdiction to review the tribunal’s factual findings.107

28.71 Applying the standard of reasonableness, the court considered that it was not unreasonable for

the tribunal to conclude that the applicable NAFTA provisions did not require the investor to suffer loss exclusively in the territory of the respondent state party.108 In addition, the court found that there was nothing unreasonable or irrational in the tribunal’s conclusion that the fact that a portion of Cargill’s loss was suffered in the US did not render awarding compensation for such loss beyond the tribunal’s jurisdiction.109 Moreover, although Mexico argued that Article 1105 accorded fair and equitable treatment only to investments (which meant that, according to Mexico, Cargill, the investor, could not have claimed the upstream loss it had suffered due to Mexico’s breach of Article 1105), the court nevertheless found that, given the scope of Cargill’s business operation, it was not unreasonable for the tribunal to find that damages caused to Cargill’s Mexican subsidiary, the investment, were damages caused to Cargill, the investor.110

28.72 Mexico appealed the court’s judgment to the Court of Appeal for Ontario.111 Mexico sub-

mitted that the lower court ought to have applied the standard of correctness, not the standard of reasonableness, and maintained essentially the same position as before the lower court.112 Cargill agreed with the lower court that the standard should be reasonableness.113

28.73 The Court of Appeal affirmed the lower court’s judgment, but found that the standard of

review should be correctness.114 The court acknowledged that courts should interfere sparingly, and not regarding merits,115 whilst adding that courts must nevertheless be able to assess whether tribunals act within their jurisdiction.116 The court noted that the wording of Article 34(2)(a)(iii) of the Canadian International CAA did not state any particular standard of review. However, since the question was whether the tribunal had acted within its jurisdiction, and no words in Article 34(2)(a)(iii) limited the court’s task, there was nothing that detracted from the normal rule that the tribunal could not act beyond its jurisdiction.117 The

  Id. ¶ 57.   Id. 105  Id. ¶ 58. 106  Id. ¶¶ 60, 69. Mexico relied on Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v. United Mexican States, Award (Nov. 21, 2007), ICSID Case No. ARB(AF)/​04/​05. 107  Mexico v. Cargill, supra note 98, ¶ 63. 108  Id. ¶ 64. 109  Id. ¶¶ 64, 73. 110  Id. ¶¶ 75–​78. 111  Court of Appeal for Ontario, Judgment (Oct. 4, 2011). 112  Id. ¶¶ 27, 54, 56–​61, 65. 113  Id. ¶ 27. 114  This conclusion was later followed in Attorney General of Canada v. Mobil Investments Canada Inc. and Murphy Oil Corporation, Superior Court of Justice Ontario, Judgment (Feb. 16, 2016). 115  Court of Appeal for Ontario, Judgment (Oct. 4, 2011), ¶¶ 35, 44–​53. 116  Id. ¶ 35. 117  Id. ¶¶ 40–​42. 103 104

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III.  Decisions by National Courts court therefore found that, in matters of jurisdiction, the applicable standard of review was correctness, which implied ‘possible consideration of, but no deference to, the decision of the tribunal under review’.118 The court also cautioned against adopting a ‘powerful presumption’ that tribunals are correct in determining the scope of their jurisdiction, because such deference would effectively nullify the purpose of court review.119 Finally, regarding the application of the correctness standard to the facts at hand, the Court 28.74 of Appeal agreed with the lower court that Mexico’s submission impermissibly sought to expand the jurisdictional objection into a review of the merits of the case. The inquiry under Article 34(2)(a)(iii) of the Canadian International CAA was restricted to whether the tribunal had dealt with a matter beyond the submission to arbitration, not how the tribunal had decided issues within its jurisdiction.120 Accordingly, making findings of fact, applying the facts to the definitions, and determining whether the damages claimed fall within the defined criteria was up to the tribunal (for example, the tribunal determined Cargill’s losses by relying on the expert damages report).121 Once the court concluded that the tribunal had made no error in its assumption of jurisdiction, the court did not go on to review tribunal’s entire analysis to decide whether the result is reasonable; there was no review of the merits of the decision.122 Accordingly, Mexico’s appeal was dismissed.123 The judgment of the Court of Appeal is notable not only because it expressly discusses the ap- 28.75 plicable standard of review, but also because it departs from the direction that the Canadian case law previously had taken. In arriving at the conclusion that the applicable standard of review is ‘correctness’, the Court of Appeal considered—​it appears with approval124—​the earlier judgments in Metalclad and S.D. Myers,125 instead of following the later judgment in Bayview. In particular, the court expressly dismissed two views endorsed in Bayview. First, the court disagreed that there exists a ‘powerful presumption’ that an arbitral tribunal has acted within its authority. Secondly, the court rejected the possibility that on issues of jurisdiction courts might defer to decisions of arbitral tribunals.126 This approach adopted in Cargill has already been followed in Canada v Mobil Investments Canada Inc. and Murphy Oil Corporation.127

I. Argentina v BG Group PLC 1. The arbitration BG Group v Argentina was an investment arbitration pursuant to the Argentina–​UK BIT, 28.76 under the UNCITRAL Arbitration Rules, and seated in Washington, D.C.128 BG Group, a British company, argued that the legislation adopted by Argentina in response to its 1998–​ 2002 economic crisis damaged BG Group’s investment relating to MetroGAS, an Argentine gas distribution company. It contended that Argentina had expropriated BG Group’s shareholding in MetroGAS or, alternatively, licence rights held by MetroGAS, and had failed to   Id. ¶ 35.   Id. ¶ 46. 120  Id. ¶¶ 66 ff. 121  Id. ¶¶ 69–​70. 122  Id. ¶ 74. 123  Id. ¶ 86. 124  Id. ¶¶ 35, 42–​43. 125  See United Mexican States v.  Metalclad Corporation, Judgment of the Supreme Court of British Columbia (May 2, 2001) and Attorney General of Canada v. S.D. Myers Inc. (Federal Court of Canada), Judgment (Jan. 13, 2004). 126  Court of Appeal for Ontario, Judgment (Oct. 4, 2011), ¶¶ 35, 46. 127  See supra note 125. 128  BG Group PLC. v. Republic of Argentina, Final Award, Ad Hoc UNCITRAL Rules (Dec. 24, 2007). 118 119

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Review of non-ICSID Awards by National Courts accord BG Group fair and equitable treatment, as well as protection and security. Argentina disputed BG Group’s allegations and objected to the tribunal’s jurisdiction and admissibility of BG Group’s claims. 28.77 The main jurisdictional question before the arbitral tribunal was the effect of the BG Group’s

non-​compliance with the requirement under Article 8(2)(a) of the BIT to litigate the dispute for eighteen months before the Argentine courts before referring the matter to arbitration.

28.78 The tribunal concluded that the requirement to litigate the dispute before the Argentinian

courts cannot be construed as an absolute impediment to arbitration where such interpretation would lead to the kind of absurd and unreasonable results proscribed by Article 32 of the Vienna Convention. According to the tribunal, a strict textual interpretation of the requirement to litigate the dispute before the Argentinian courts would result in precisely such an absurd and unreasonable result because Argentina had enacted legislation whose purpose was to bar recourse to its courts. The tribunal therefore found that it had jurisdiction despite the fact that the BG Group had initiated the arbitration without first litigating the dispute for eighteen months before the Argentine courts.129

28.79 On the merits, the tribunal held that Argentina had breached Article 2(2) of the BIT as it had

fundamentally and unreasonably modified the applicable regulatory framework and reversed its commitments towards BG Group.130 The tribunal ordered Argentina to pay BG Group damages and interest.131

2. The Challenge Proceedings 28.80 Argentina sought to vacate or modify the tribunal’s award before the US courts pursuant to the Federal Arbitration Act (FAA), 9 USC §§ 10(a) and 11, inter alia, on the grounds that the arbitral tribunal lacked jurisdiction132 because it had entertained BG Group’s claims without requiring that it first litigate before the Argentine courts.133 The court rejected Argentina’s position. With regard to the applicable standard of review, the court noted that judicial review of arbitral awards was extremely limited, and that a court must confirm an arbitral award where some ‘colorable support for the award can be gleaned from the record’.134 The court concluded that the tribunal correctly turned to the text of the BIT and relevant sources of international law to discern its jurisdiction and it relied upon a ‘colorable, if not reasonable’, interpretation of these provisions in concluding that the matter was arbitrable. The

129  Insofar as relevant, art. 8(2)(a) of the BIT provided:  ‘[D]‌ isputes shall be submitted to  . . .  arbitration . . . (i) where, after a period of eighteen months has elapsed from the moment when the dispute was submitted to the competent tribunal of the Contracting Party in whose territory the investment was made, the said tribunal has not given its final decision; [or] (ii) where the final decision of the aforementioned tribunal has been made but the Parties are still in dispute[.]’ 130  BG Group PLC. v. Republic of Argentina, Final Award, Ad Hoc UNCITRAL Rules (Dec. 24, 2007), ¶¶ 273–​310, 329–​346. 131  Id. ¶¶ 430–​44, 458–​66. 132  Note that Argentina invoked several grounds for vacatur of the award before the district court. However, only one—​lack of jurisdiction due to the disregard of the eighteen-​month litigation requirement—​is relevant for the issues discussed in this chapter. Furthermore, this was the only issue reviewed in the decisions of the Court of Appeal and the Supreme Court. Therefore, in this chapter we will discuss only this ground, the legal basis of which is found in the FAA, 9 U.S.C. § 10(a)(4): ‘[T]‌he . . . court . . . may make an order vacating the award . . . where the arbitrators exceeded their powers . . .’. 133  Republic of Argentina v.  BG Group PLC, U.S. District Court for the District of Columbia, Civil Action No. 08–​485 (RBW) (June 7, 2010), 7. 134  Id.

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III.  Decisions by National Courts court concluded that pursuant to controlling case law, the court was ‘without authority to disturb the panel’s conclusions’.135 Argentina appealed to the Court of Appeal. The Court of Appeal considered that the issue 28.81 was whether the contracting states to the BIT had intended that an investor could seek arbitration without first seeking litigation, and, importantly, whether the answer to this question lay with the courts or the arbitral tribunal.136 The court noted that courts should not assume that the parties have agreed to arbitrate unless there is clear and unmistakable evidence that they have done so.137 If there is such evidence, courts should give considerable leeway to the arbitral tribunal.138 In the present case, the court found that the BIT did not directly answer the question of which forum the contracting states had intended to entrust determinations regarding arbitrability where the requirement to first litigate in courts had been disregarded.139 Article 9 of the BIT dealing with inter-​state disputes, on the other hand, did provide arbitrators with authority to decide on arbitrability, indicating that the absence of an analogous stipulation for investor-​state disputes was intentional.140 The court also considered that the contracting states would likely have expected courts to decide matters of arbitrability, and that, in any event, there was no clear and unmistakable evidence that they had intended for an arbitral tribunal to do that.141 The court therefore held that the question regarding arbitrability was to be decided by courts, not the arbitral tribunal.142 With regard to the substance, the court held that since it had to enforce the parties’ intent, BG Group was required to pursue litigation in Argentine courts for eighteen months before commencing the arbitration.143 As the District Court had erred on these issues, its ruling was reversed and the award vacated. The BG Group appealed to the Supreme Court. The Supreme Court confirmed that the 28.82 relevant issue to be decided was which forum had the primary responsibility to interpret and apply the eighteen-​month litigation requirement—​courts or the arbitral tribunal.144 If those were courts, they should review the tribunal’s decision on the matter de novo (as was done by the Court of Appeal); if it was the tribunal, the courts should review its decision with deference.145 Treating the BIT as a contract, the court reasoned that since the BIT was silent as to which forum had the primary responsibility, the contracting states’ intent regarding this question had to be determined with the help of the presumptions developed in US law.146 According to the presumptions, the eighteen-​month litigation requirement was a matter to be interpreted and applied primarily by the tribunal, as it was a procedural condition precedent to arbitration determining when the duty to arbitrate arose and not whether

135  Id. at 7–​ 8. Note that according to the terminology used by the U.S. courts, ‘arbitrability’ can mean admissibility, or jurisdiction, or both (see, e.g., Jan Paulsson, Jurisdiction and Admissibility, in Gerald Aksen et al. eds., Global Reflections on International Law, Commerce and Dispute Resolution: Liber Amicorum in Honour of Robert Briner 601, 609 ff. (Gerald Aksen et al. eds., 2005). In Argentina v. BG, arbitrability is used to denote jurisdiction. 136  Argentina v. BG Group PLC, US Court of Appeals for the District of Columbia Circuit, Docket No. 1:08-​cv-​00485 (Jan. 17, 2012), 9. 137  Id. 138  Id. at 10. 139  Id. at 12. 140  Id. at 12–​13. 141  Id. at 13. 142  Id. 143  Id. at 16–​17. 144  BG Group PLC v. Republic of Argentina, U.S. Supreme Court, Docket No. 12-​138 (Mar. 5, 2014), at 2, 6. 145  Id. at 5–​6. 146  Id. at 7, 10–​11.

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Review of non-ICSID Awards by National Courts it existed.147 Since the determination of the eighteen-​month litigation requirement was for the tribunal, the courts were to review its interpretation with considerable deference.148 This, however, did not mean that the court could not review the tribunal’s decision at all. It could, but only pursuant to a proper, highly deferential standard. Applying this standard, the court concluded that since the arbitrators’ decision had not strayed from the arbitration provisions in the BIT, the court could not disturb it.149

J. Energoalians (Currently Known as Komstroy) v Moldova 1. The arbitration 28.83 The dispute between Energoalians, a Ukrainian company, and Moldova concerned debts

that Moldova’s state-​owned enterprise Moldtranselectro owed to Energoalians for electricity supplied into Moldova’s power grid between 1999 and 2000.150 In 2000, the Moldovan government, as part of a restructuring of Moldtranselectro, transferred its assets to a new entity, leaving Moldtranselectro without income, and unable to pay its debts. In addition, in 2002 a Moldovan authority ruled that Energoalians had not supplied any electricity to Moldtranselectro. Due to these measures, Energoalians was unable to collect the debts, and in 2010 commenced an investment arbitration against Moldova, relying on the ECT and the 1995 Ukraine–​Moldova BIT and invoking fair and equitable treatment, non-​discrimination, the guarantee of effective means of asserting claims, and indirect expropriation.

28.84 The arbitral tribunal found that it did not have jurisdiction under the Ukraine–​Moldova BIT

because the electricity supplied by Energoalians and debts owed to it did not constitute an investment covered by the BIT, which defined investments as investments made in connection with economic activity in the territory of Moldova, while the electricity in question was delivered only to Moldova’s border.

28.85 The majority of the tribunal, however, found jurisdiction as well as liability under the ECT.151

The majority found that the definition of investment in the ECT had intentionally been drafted more broadly than other investment treaties to include even contract claims and that Energoalians’ rights constituted a ‘claim to money’ under Article 1(6)(c) of the ECT. Furthermore, according to the majority, electricity supply was ‘an economic activity in the   Id. at 8–​14.   Id. at 14. 149  Id. at 17–​ 19. Note, however, that the court’s opinion was reached by a 7–​2 majority. The two dissenting justices appended a dissenting opinion. They interpreted the eighteen-​month litigation requirement as a substantive condition on Argentina’s offer and consent to arbitrate. According to the presumptions developed in the U.S. law, such condition was within the authority of courts. Consequently, the question whether BG Group had complied with the eighteen-​month litigation requirement was to be decided by courts de novo. However, the Court of Appeal had incorrectly concluded that BG Group’s failure to resort to litigation warranted vacatur of the tribunal’s award. BG Group could have argued that Argentina’s offer to arbitrate implicitly incorporated a subsidiary offer by which Argentina had promised to accept, i.e., not to hinder, BG Group’s resort to its courts. Since that would be for the court to decide (which it had not done), its decision had to be reversed. 150  Energoalians v. Republic of Moldova, Award, Ad Hoc UNCITRAL Arbitration Rules (Oct. 23, 2013). The seat of the arbitration was Paris. 151  The case is unusual in that the tribunal chairman, Dominic Pellew, was outvoted by his co-​arbitrators, Mikhail Savranski and Victor Volcinski, with respect to the core question as to whether the debts in question should be viewed as protected investments under the ECT. The chairman considered that Energoalians’ claims to the debts were not an investment under the ECT because, in light of the language of the ECT, an investment still had to satisfy objective criteria such as contribution, risk and duration in order to evidence an investment. The dissenting arbitrator further referred to the definition of investment in art. 1(6) of the ECT. For the dissenting arbitrator, the debt might be a ‘claim to money’ under art. 1(6)(c), but the claim to money could not itself be an investment, since that provision further required that the claim be ‘associated with an Investment’. 147 148

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III.  Decisions by National Courts energy sector’, suggesting that the contractual rights to undertake this supply constituted an investment under Article 1(6)(f ). Regarding the merits, the majority held that the restructuring of Moldtranselectro was car- 28.86 ried out without due regard for its creditors, leading to a violation of the fair and equitable treatment standard. In addition, given that Energoalians was unable to appeal the decision of the Moldovan authority (finding that Energoalians had never supplied any energy) before local courts, there was denial of justice. Energoalians was awarded compensation of approximately US$49 million, including interest, costs and legal fees.

2. The challenge proceedings Moldova sought to set aside the tribunal’s award before the Paris Court of Appeal, inter alia, 28.87 on the ground that the arbitral tribunal lacked jurisdiction. In its ruling, the Court noted that the ECT—​like any other treaty—​must be interpreted in accordance with the customary international law principles to be found in Article 31 of the Vienna Convention. The Court examined the meaning of the term ‘investor’ in the ECT and, essentially agreeing with the dissenting chairman of the arbitral tribunal, held that the tribunal majority erred in finding that a mere claim to money deriving from a cross-​border electricity supply contract did not meet the conditions set out in Article 1(6) of the ECT and was not sufficient to qualify as an ECT-​protected investment. It set aside the award for lack of jurisdiction. K. Ecuador v Chevron (USA) and Texaco 1. The arbitration This dispute involved claims by Chevron and Texaco concerning the protracted duration of 28.88 several Ecuadorian court proceedings on contractual oil pricing disputes between Chevron and Texaco and their Ecuadorian counterparts. The arbitration, brought pursuant to the US–​Ecuador BIT, under the UNCITRAL Arbitration Rules with the seat of arbitration in The Hague, resulted in awards on jurisdiction,152 liability,153 and quantum.154 The case is distinct from the arbitration claim Chevron filed against Ecuador in 2009, in relation to its long-​running US$27 billion environmental litigation with indigenous Ecuadoreans in the city of Lago Agrio. According to Chevron, Ecuador’s courts had failed to adjudicate a series of disputes related to 28.89 oil exploration agreements concluded in the 1970s. In these court disputes Chevron claimed that Ecuador had taken delivery of large amounts of crude oil at a special rate set for domestic consumption, but resold the oil on international markets for much higher prices. Chevron claimed that the courts’ failure to rule on these disputes violated a provision in the US–​Ecuador BIT which provides that: ‘Each Party shall provide effective means of asserting claims and enforcing rights with respect to investment, investment agreements, and investment authorizations’. Chevron further claimed that Ecuador had committed denial of justice in violation of customary international law as well as breached the fair and equitable treatment and full protection and security standards, and the prohibition of arbitrary or discriminatory treatment under the US–​Ecuador BIT.155 Ecuador argued among other things that the tribunal lacked jurisdiction as the claimants did not hold any protected investment the relevant disputes had arisen and Chevron had ceased to operate in Ecuador prior to the

152  Chevron Corporation and Texaco Petroleum Corporation v. Republic of Ecuador, Interim Award, Ad Hoc UNCITRAL Rules (Dec. 1, 2008). 153  Id. Partial Award on the Merits (Mar. 30, 2010). 154  Id. Final Award (Aug. 31, 2011). 155  See, e.g., id. Interim Award (Dec. 1, 2008), ¶ 2.

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Review of non-ICSID Awards by National Courts Ecuador–​US BIT’s entry into force. On the merits, Ecuador argued that it had not breached the BIT or customary international law.156 28.90 In its ruling on jurisdiction, the tribunal found that, when the Ecuador–​US BIT entered into

force in 1997, Chevron still held an investment in Ecuador because its lawsuits pending in the Ecuadorian courts at the time concerned the liquidation and settlement of claims relating to the earlier investment, which was not yet fully wound up due to the ongoing litigation, and that Chevron continued to hold subsisting interests in its original investment, but in a different form.157

28.91 The tribunal found that the arbitration clause in the BIT was wide enough to cover disputes

arising before the BIT’s entry into force158 and, in any event, Chevron’s dispute had arisen after the BIT’s entry into force.159 Furthermore, the tribunal decided that the Ecuador–​US BIT arbitration clause was broad enough to cover not only claims for breaches of the BIT itself, but also claims for breaches of customary international law, including the claimants’ denial of justice claim.160

28.92 The tribunal held that the Ecuadorian courts’ failure to resolve the relevant disputes in a rea-

sonable time constituted a breach of the previously referenced BIT obligation to provide effective means of asserting claims and enforcing rights.161 Finally, with respect to quantum, the tribunal found that Ecuador’s liability to the claimants was US$78 million plus interest.162

2. The challenge proceedings 28.93 Ecuador moved to annul the arbitral tribunal’s awards. The application to set aside the award was heard by the District Court of The Hague163 and, on appeal by Ecuador, by the Court of Appeal of The Hague164 and the Supreme Court of The Netherlands.165 Invoking Article 1065(1)(a) of the Dutch Code of Civil Procedure, Ecuador argued, inter alia, that the arbitral tribunal lacked jurisdiction since Chevron’s investment in Ecuador had been wound-​up before the US–​Ecuador BIT entered into force, and the arbitration clause only applied to investments existing on or after that date.166 Ecuador argued that it is not a reasonable conclusion that Ecuador should be taken to have accepted the competence of the arbitral tribunal with respect to an investment that ended in a regular manner four years and eleven months prior to the entry into force of the BIT, whilst the investor had also discontinued his activities in Ecuador and had taken its assets and personnel out of the country for good. 28.94 All three levels of Dutch courts rejected Ecuador’s annulment application.

  Id. ¶¶ 5–​7, 45.   Id. ¶¶ 180, 184. 158  Id. ¶¶ 188, 265. 159  Id. ¶¶ 269–​70. 160  Id. ¶¶ 203–​13. 161  Id. Partial Award on the Merits (Mar. 30, 2010), paras 241–​75. 162  Id. Final Award (Aug. 31, 2011), at 142. 163  Republic of Ecuador v. Chevron Corporation and Texaco Petroleum Company [hereinafter Ecuador v. Chevron and Texaco], District Court of The Hague, Joined Cases 386934/​HA ZA 11-​402, 408948/​HA ZA 11-​2813 (May 2, 2012). 164  Ecuador v.  Chevron and Texaco, Court of Appeal of The Hague, Case no.  200.112.516/​ 01 (June 18, 2013). 165 Ecuador v.  Chevron and Texaco, Supreme Court of The Netherlands, Case No. 13/​ 04679 (Sept. 26, 2014). 166  Ecuador v. Chevron and Texaco, supra note 163, ¶¶  4.3, 4.8. 156 157

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III.  Decisions by National Courts The District Court first discussed the standard of review, and emphasised that the possibility 28.95 to review arbitral awards is limited and that, when examining whether there are grounds for setting aside, the Court must exercise restraint. Set aside proceedings must not be used as disguised appeal and the effective operation of arbitral proceedings requires that the national courts only interfere with arbitral awards in significant cases. The Court further explained that the applicable standard of review depends on the ground for annulment relied on by the party seeking annulment.167 If the annulment ground is non-​existence of a valid arbitration agreement, the Court should engage in a ‘full review’,168 whereas if the annulment ground is that the arbitral tribunal exceeded its mandate or the award lacks reasoning, the Court should conduct a ‘review with restraint’.169 The District Court found that Chevron’s claim came within the definition of investment dispute 28.96 in Article VI of the US–​Ecuador BIT since the dispute between the parties arose from or related to Chevron’s concession agreements, which can be deemed to be an investment within the meaning of the US–​Ecuador BIT, and since Chevron’s claims concerned alleged breaches of the BIT in connection with such investment.170 The District Court further held that its review powers did not extend to Ecuador’s objections regarding the BIT’s temporal effect since the temporal effect of the BIT pursuant to Article XII of the BIT was a separate question concerning the scope of protection of the BIT, rather than jurisdiction, and thus did not require a full review by the Court.171 As such, the Court was content with limiting its jurisdictional review to ascertaining that the dispute fell within the scope of the arbitration clause in Article VI of the BIT and declined to interfere with the tribunal’s finding as to its temporal competence based on other articles of the treaty. The Court of Appeal and the Supreme Court confirmed the ruling of the District Court. 28.97 However, the Court of Appeal clarified that Article XII of the BIT nevertheless could be of relevance for the jurisdiction of the arbitral tribunal, because the BIT, including the arbitration agreement in Article VI, must be interpreted in its context.172 However, according to the Court of Appeal, this did not change the outcome of the case, as the change in the form of the investment did not alter its status as an investment. Thus, the Court of Appeal found that at the time the BIT entered into force Chevron still held an investment in Ecuador and its claims in the arbitration concerned alleged breaches of the BIT in relation to such investment.173

L. Sanum Investments Ltd v Lao People’s Republic 1. The arbitration The arbitration between Sanum Investments Ltd and the Lao People’s Democratic Republic,174 arose 28.98 out of Sanum’s investment in Laos’ casino and gaming industry. In the Singapore seated arbitration, under the China–​Laos BIT and the UNCITRAL Arbitration Rules, Sanum alleged violation of the BIT’s provisions on expropriation, fair and equitable treatment, the guarantee of transfer of payments, and most-​favoured nation treatment (MFN).175 Laos objected to the jurisdiction of the tribunal. The proceedings were bifurcated, and the tribunal rendered its award on jurisdiction on 13 December 2013.

  Id. ¶¶ 4.3–​4.4.   Id. ¶ 4.5. 169  Id. ¶ 4.6. 170  Id. ¶ 4.10. 171  Id. ¶ 4.11. 172  Ecuador v. Chevron and Texaco, Court of Appeal of The Hague, supra note 164, ¶ 16. 173  Id. ¶¶ 22, 25. 174  Sanum Investments Ltd. v. Government of the Lao People’s Republic, Award on Jurisdiction, Ad Hoc UNCITRAL Rules (Dec. 13, 2013). 175  Id. ¶¶ 21–​39. 167 168

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Review of non-ICSID Awards by National Courts 28.99 At the jurisdictional stage, Laos argued that Sanum was not entitled to rely on the China–​

Laos BIT as it did not extend to companies incorporated in Macao,176 and that the substantive scope of the tribunal’s jurisdiction under Article 8 of the BIT was limited to disputes concerning the amount of compensation for expropriation.

28.100 The tribunal found that found that companies incorporated in Macao were established under

‘the laws and regulations’ of the People’s Republic of China, and, that Sanum, thus, qualified as an ‘investor’ within the meaning of Article 1(2)(b) of the China–​Laos BIT. The tribunal also found that the China–​Laos BIT (concluded prior to the handover of Macao to China in 1999) became applicable to Macao SAR in 1999 pursuant to the moving treaty frontier rule (MTF Rule) recognized in customary international law177 and that neither the China–​Laos BIT itself nor other sources establish an intention to deviate from the default rule under customary international law178 that a treaty is binding in respect of the entire territory of a state.179

28.101 With respect to the second question regarding the substantive scope of the tribunal’s juris-

diction, the China–​Laos BIT is a so-​called ‘first generation’ Chinese BIT,180 which, like BITs of the Soviet Union or Eastern European states during the communist era, either did not include any investor-​state arbitration clause or contained an investor-​state arbitration clause that only covered disputes relating to the amount of compensation payable following an expropriation. The relevant part of Article 8 of the China–​Laos BIT provides: 3. If a dispute involving the amount of compensation for expropriation cannot be settled through negotiation within six months . . . it may be submitted at the request of either party to an ad hoc arbitral tribunal. The provision of this paragraph shall not apply if the investor concerned has resorted to the procedure specified in the paragraph 2 of this Article [submission to the competent court of the Contracting State accepting the investment].

Laos contended that the arbitration clause in the BIT covered only disputes about the amount of compensation for expropriation; all other disputes must be referred to the competent Laotian local courts pursuant to Article 8.2 of the BIT.181 28.102 The tribunal found that it had jurisdiction to decide Sanum’s expropriation claim, including

whether an expropriation had taken place:

As a first impression, the text of [Article 8(3)] would seem to restrict the jurisdiction of the Tribunal to matters related to the amount of compensation due in instances of expropriation. However, other readings are possible. The term “involving” has a wider meaning than other possible terms such as “limited to” which could have been used if the intention of the State Parties had been to limit the jurisdiction of the Tribunal exclusively to disputes on the amount of compensation. “To involve” means “to wrap”, “to include”, terms that are

176  Id. ¶¶ 51–​79. The status of Hong Kong and Macao investors under Chinese BITs are examined in N. Eliasson, Investment Treaty Arbitration, in Arbitration in Hong Kong: A Practical Guide (4th ed. G. Ma & D. Brock eds., 2017). 177  This rule is codified in art. 15 of the 1978 Convention on the Succession of States in Respect of Treaties (VCST). 178 This rule is codified in art. 29 of the 1969 Vienna Convention on the Law of Treaties (Vienna Convention). 179  Sanum v. Lao People’s Republic, supra note 174, ¶¶ 205–​300. 180  See further N. Eliasson, Investment Treaty Protection of Chinese Natural Resources Investments, 7 Transnat’l Disp. Mgmt. 235 (2010); N. Eliasson, Chinese Investment Treaties:  Jurisdictional Aspects, in Foreign Investment and Dispute Resolution Law and Practice in Asia (V. Bath and L. Nottage eds., 2011); N. Eliasson, Investor-​State Arbitration and Chinese Investors, 2 Contemp. Asia Arb. J. 347 (2009). 181  Sanum v. Lao People’s Republic, supra note 174, ¶¶ 144–​56, 170–​78.

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III.  Decisions by National Courts inclusive rather than exclusive. This wider reading of Article 8(3) would seem more consistent with the other provisions of the Treaty . . .

The tribunal found this conclusion confirmed by the last sentence of Article 8(3), which provides that ‘[t]‌he provision of [Article 8(3)] shall not apply if the investor concerned has resorted to the procedure specified in the paragraph 2 of this Article’. This means that, if the investor would refer the question of whether an expropriation had taken place to the competent court, it would be precluded from submitting any dispute concerning the amount of compensation to arbitration. Thus, the only interpretation that would give effect and meaning to Article 8(3), is that Respondent has consented to arbitrate claims of expropriation under Article 8 of the BIT.182 With respect to Sanum’s other claims, however, the arbitral tribunal found that it did not 28.103 have jurisdiction. The tribunal was not convinced by Sanum’s argument that jurisdiction to decide these claims could be based on the MFN clause in Article 3(2) of the China–​Laos BIT. That MFN clause was expressly tied to the fair and equitable treatment standard in Article 3(1), and did not give access to arbitration for breach of all protections under the treaty.183

2. The challenge proceedings (a)  Singapore High Court  Laos applied to the Singapore High Court to set aside the jurisdictional award pursuant to 28.104 section 10 of the International Arbitration Act of Singapore on the ground that the arbitral tribunal lacked jurisdiction to determine Sanum’s expropriation claim.184 Laos relied on the same two grounds for challenging the tribunal’s jurisdiction as it had in the arbitration proceedings. In addition to defending the tribunal’s ruling that it had jurisdiction over Sanum’s expropriation claim, Sanum also contended that the issues of international law raised by the Laos’ set-​aside application were non-​justiciable before the Singapore courts. Sanum argued that the setting aside application involved questions of pure international law because it stemmed from an investment treaty arbitration, which operates on an international plane different from typical international commercial arbitrations. It also argued that a decision on the interpretation of the China–​Laos BIT would potentially have significant consequences for approximately 130 other BITs to which China is party.185 (i) Justiciability The court, however, dismissed Sanum’s justiciability objection, noting that Laos ‘is relying on 28.105 s 10(3)(a) of the [International Arbitration Act], a Singapore statutory provision, to seek a review of the tribunal’s positive ruling on jurisdiction. This issue evidently has a bearing on the application of Singapore law and on the right of [Laos] to have the Tribunal’s ruling on jurisdiction reviewed by this court’.186 The Singapore High Court also stated that the reasoning and conclusion of the English Court of Appeal in Ecuador v Occidental187 were applicable in the present case. It concluded: I am therefore of the view that the present application does not raise questions of international law that are non-​justiciable; it concerns the rights of parties seeking to invoke

  Id. ¶¶ 322–​42.   Id. ¶¶ 343–​358, 370(iv). 184  Government of the Lao People’s Democratic Republic v. Sanum Investments Ltd. [2015] 2 SLR 322, [2015] SGHC 15, ¶¶ 2, 17. 185  Id. ¶¶ 18, 21–​23. 186  Id. ¶ 25. 187  See supra ¶ 28.30. 182 183

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Review of non-ICSID Awards by National Courts this court’s jurisdiction under s 10 of the IAA to review the tribunal’s ruling on jurisdiction. Put another way, I am unable to determine the plaintiff s rights under s 10 of the IAA without first considering the issue of whether the PRC-​Laos BIT applies to Macau.188

(ii)  Standard of review

28.106 The court further found that the applicable standard was a de novo review, as that was the

standard of review for jurisdictional issues under Singapore law and there was no principled basis to make a distinction between an investment and a commercial arbitration.189 In the court’s view, the eminence or expertise of the arbitral tribunal did not change this, and a limited or deferential standard of review in respect for the tribunal, as argued by Sanum, was not appropriate.190

(iii)  Applicability of the China–​Laos BIT to Macao investors

28.107 In determining Lao’s challenge of the jurisdiction of the tribunal based on the alleged

inapplicability of the China–​Laos BIT to Macao investors, the court examined the BIT as well as other relevant sources of public international law. With respect to the China–​Laos BIT, the court concluded that ‘[i]‌t does not state positively that the treaty applies to Macau; nor does it exclude Macau from its scope of application (cf the PRC–​Russia BIT signed in 2006 discussed at [79] below). I  therefore agree with the Tribunal’s conclusion that “no definite conclusion” can be drawn from the silence in the PRC–​Laos BIT’.

28.108 However, unlike the arbitral tribunal, the court found that the other sources of evidence

available to it evidenced an intention of the contracting parties to the BIT to deviate from the default rule in Article 29 of the Vienna Convention and Article 15 VCST that a treaty is binding on the entire territory of a contracting state.191

(iv)  Whether the arbitral tribunal had jurisdiction over Sanum’s expropriation claim

28.109 The court further found that the BIT’s arbitration clause covered only disputes regarding

the amount of compensation for expropriation and not disputes as to whether expropriation has occurred. Contrary to the interpretation of Article 8(3) of the BIT by the arbitral tribunal, the court concluded that the phrase, ‘a dispute involving the amount of compensation’ should be limited to the amount of compensation for expropriation’.192 The court found that while such interpretation would make the scope for submitting disputes to arbitration limited, it would still enable investors to submit disputes which only concern the amount of compensation to arbitration.193 The court therefore found that the tribunal did not possess subject-matter jurisdiction over Sanum’s expropriation claim.

(b)  Singapore Court of Appeal 

28.110 Upon Sanum’s appeal, the Singapore Court of Appeal reversed the High Court’s judgment

and reinstated the tribunal’s award.194

  Lao People’s Republic v. Sanum, supra note 184, ¶ 30.   Id. ¶¶ 32–​33. 190  Id. ¶¶ 34–​35. 191  Id. ¶¶ 57–​128. 192  Id. ¶ 121. 193  Id. ¶¶ 122–​23. 194  Sanum Investments Ltd. v Government of the Lao People’s Democratic Republic [2016] 5 SLR 536, [2016] SGCA 57. 188 189

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III.  Decisions by National Courts (i) Justiciability The Court of Appeal confirmed the decision of the High Court that the issues before it were 28.111 justiciable. The court held that since Singapore was the seat of the arbitration, the Singapore courts were not only competent to consider the issues involved, but obliged to do so.195 (ii)  Standard of review The parties agreed that in principle the lower court was entitled to undertake a de novo re- 28.112 view. However, Sanum contented that, since the issues in question had a unique context and involved public international law, the lower court should have adopted a restrained approach by according deference and regard to the tribunal’s findings. The Court of Appeal disagreed, explaining that even though, when deciding the matter afresh, it will consider what the tribunal has said, it nevertheless is not bound to accept or take into account the arbitral tribunal’s findings.196 (iii)  Applicability of the China–​Laos BIT to Macao investors The Court of Appeal held that the tribunal had correctly decided that the China–​Laos BIT 28.113 was applicable to Macao. The court found that ‘no definite conclusion can be drawn from the absence of any express provisions on this issue in the BIT’.197 However, the chronological sequence of events demonstrated that even though the handover of Macao to China was contemplated when the BIT was concluded in 1993, China and Macao elected not to deviate from the MTF Rules that China’s treaties would automatically apply to Macao upon Macau’s reversion to China.198 Moreover, each Contracting state had the option to give notice to terminate the BIT one year before the expiration of an initial ten-​year period (Article 12(2)), which would necessarily have entailed a review of the application of the BIT quite close in time with the handover of Macau. Yet, again, the contracting states did nothing to expressly displace the effects of the MTF Rule.199 After evaluating all other sources of evidence pertaining to Macao’s handover to China relied 28.114 on by the parties, the Court further agreed with the arbitral tribunal that it had not been ‘otherwise established’ pursuant to Article 29 of the Vienna Convention that the China–​Laos BIT was not to apply to Macao after China resumed sovereignty. An interesting feature of the challenge proceedings in Singapore was that Laos relied on 28.115 three Notes Verbales from the Laotian Ministry of Foreign Affairs, the Chinese Embassy in Vientiane, Laos, and the Ministry of Foreign Affairs of the People’s Republic of China issued in 2014 and 2015, respectively, i.e. after the arbitral tribunal had rendered its award on jurisdiction. The Note Verbales issued by the Laotian Ministry of Foreign Affairs provided that it was the view of the Lao Government that the China–​Laos BIT does not extend to Macao SAR. Similarly, the Notes Verbales issued by the Chinese Embassy in Vientiane, and subsequently confirmed by the Ministry of Foreign Affairs of the People’s Republic of China, stated that the China–​Laos BIT is not applicable to the Macao unless both China and Laos make separate arrangements in the future. Whereas the High Court placed evidentiary weight on the Notes Verbales, the Singapore Court of Appeal concluded that these Notes Verbales did not change its conclusion that there was insufficient evidence that the China–​Laos BIT was not intended to apply to Macao. According to the Court of Appeal, the views expressed

  Id. ¶¶ 37–​39.   Id. ¶¶ 40–​44. 197  Id. ¶ 56. 198  Id. ¶ 57. 199  Id. ¶ 59. 195 196

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Review of non-ICSID Awards by National Courts in the Notes Verbales could not retroactively modify the China–​Laos BIT or the operation of the MTF Rules and the presumption under customary international law that treaties apply to the entire territory of a state.200

(iv)  Whether the arbitral tribunal had jurisdiction over Sanum’s expropriation claim

28.116 The Court of Appeal also found that the BIT’s jurisdiction clause covered not only disputes

as to the amount of compensation for expropriation but also disputes regarding whether expropriation has occurred.201 With respect to the wording of Article 8(3), the Court agreed with the arbitral tribunal that if investors had to submit questions of liability to the national courts, they would by operation of the fork-​in-​the-​road clause in the last sentence of Article 8(3) be blocked from submitting any dispute, including disputes concerning the amount of compensation for expropriation to arbitration. The court concluded that the broad interpretation of the word ‘involve’ in Article 8(3) is also in line with the object and purpose of the PRC–Laos BIT.202 For these reasons, the court found that the tribunal had subject-​ matter jurisdiction over Sanum’s expropriation claims.

M. Russian Federation v Renta 4 S.V.S.A. et al. 1. The arbitration 28.117 Renta 4 and the other claimants in the arbitration against the Russian Federation were Spanish investment funds that held Yukos’ American Depository Receipts (ADRs). Similar to the other ‘Yukos cases’, Renta 4 claimed that Russia unlawfully dispossessed Yukos of its assets and expropriated it from its shareholders. Renta 4 claimed compensation for the lost value of their ADRs. Russia disputed that it had expropriated Yukos from its shareholders and objected to the jurisdiction of the arbitral tribunal. The arbitration was brought under the Russia–​Spain BIT, conducted pursuant to the SCC Arbitration Rules and had its seat in Stockholm. The tribunal bifurcated jurisdiction and liability. 28.118 Similar to EMV and Sanum, the main question at the jurisdictional stage was whether the ar-

bitral tribunal had subject-​matter jurisdiction over Renta 4’s expropriation claims or whether the jurisdiction of the tribunal was limited to disputes concerning the amount of compensation for expropriation. Article 10 of the Russia–​Spain BIT, allowed arbitration for ‘[a]‌ny dispute between one Party and an investor of the other Party relating to the amount or method of payment of the compensation due under article 6 of this Agreement [Nationalization and Expropriation]’.

28.119 Russia argued that the words ‘amount or method of payment’ allow nothing but a narrow de-

bate about quantum, timing and currency. It does not allow the tribunal to consider liability for expropriation, i.e. whether compensation is due under Article 6. The tribunal disagreed. It found that: [t]‌he word “due” in fact disfavours Russia  . . .  The Claimants allege expropriation. Russia denies any obligation under this head. There is therefore a dispute as to whether compensation is “due”. The force of this simple proposition is buttressed by the open texture of the introductory words: any disputes ... relating to.203

  Id. ¶¶ 112–​16.   Id. ¶¶ 45–​152. 202  Id. ¶ 150. 203  Renta 4 S.V.S.A, et al. v. Russian Federation, SCC No. 24/​2007), Award on Preliminary Objections (Mar. 20, 2009), ¶¶ 27–​28. 200 201

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III.  Decisions by National Courts The tribunal found that its textual analysis of Article 10 was sufficient to determine the issues 28.120 at hand and concluded that Renta 4 had established that the tribunal had jurisdiction to decide whether compensation is ‘due’ to it under international law by reason of the conduct of which they complain (and if so in which amount).204 Renta 4 also argued that it was entitled to bring its claim pursuant to the MFN clause in 28.121 Article 5(2) of the Russia–​Spain BIT since Russia is a party to BITs with more broadly-​ worded arbitration clauses, for example, Article 8 of the Denmark–​Russia BIT, which covers ‘any dispute between an investor . . . and the other Contracting Party in connection with an investment . . .’. The tribunal did not agree. Similar to the MFN clause in Sanum, the MFN clause of the Russia–​Spain BIT covers only fair and equitable treatment (‘FET’); it does entitle investors to avail themselves in generic terms of more favourable conditions found ‘in all matters covered’ by other BITs. The tribunal concluded access to international arbitration is not an inherent part of FET205 and a promise to match the level of FET extended to third-​ party nationals therefore cannot widen the scope of arbitral jurisdiction.206

2. The Challenge Proceedings Russia commenced an action before the Stockholm District Court seeking a declaration that 28.122 the tribunal does not have jurisdiction to determine Renta 4’s expropriation claim.207 The Court confirmed that the arbitral tribunal had such jurisdiction pursuant to Article 10 of the BIT. The Court concluded that the cases dealing with similarly worded arbitration clauses do not 28.123 evidence any clear prevailing view.208 It found that the reference in Article 10 to ‘compensation due’ supported the conclusion that the arbitral tribunal had jurisdiction to determine whether there had been expropriation,209 as did the object and purpose of including a right to arbitration in the BIT.210 Russia appealed from the District Court to the Svea Court of Appeal. The Court of Appeal 28.124 noted that it is for the Court to make its own interpretation of the BIT articles, based on articles 31 and 32 of the Vienna Convention.211 It noted that the outer limits of the jurisdiction pursuant to Article 10 are determined by the reference therein to Article 6. The Court then that the relevant element of Article 6, the investor’s rights to compensation in cases of expropriation or the like, assumes that expropriation has in fact already occurred.212 The Court of Appeal found no clear basis for the argument that the object and purpose would support an interpretation that the tribunal has jurisdiction to determine whether an expropriation has occurred.213 Thus, the Court of Appeal found that the arbitral tribunal did not have subject-​ matter jurisdiction over the expropriation claims brought by Renta 4.

  Id. ¶ 67.   Id. ¶ 105. 206  Id. ¶ 119. 207  These proceedings are not setting aside proceedings, but rather free-​standing court proceedings for the determination of the jurisdiction of the arbitral tribunal pursuant to Section 2 of the Swedish Arbitration Act. Under Swedish law, a separate positive ruling on jurisdiction by the arbitral tribunal can only be challenged together with the final award. 208  Russian Federation v. Renta 4 et. al., Judgment of the Stockholm District Court (Sept. 11, 2014), at 28. 209  Id. at 30. 210  Id. 211  Russian Federation v. Renta 4, et al., Judgment of the Svea Court of Appeal (Jan. 18, 2016), p 4. 212  Id. at 6. 213  Id. at 7. 204 205

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Review of non-ICSID Awards by National Courts 28.125 On the question of whether the arbitral tribunal had jurisdiction to decide Renta 4’s expro-

priation claims under the MFN clause in Article 5(2) of the Russia–​Spain BIT, the Court of Appeal reached the same conclusion as had the arbitral tribunal: the MFN clause was limited to FET, which did not include an unconditional right for investors to have their cases decided by an international arbitral tribunal. Therefore, the MFN clause could not import more favourable arbitration clauses in other BITs.214

28.126 Thus, the Court of Appeal concluded that the arbitral tribunal did not have jurisdiction to

decide Renta 4’s claim, whether under Article 10 or Article 5(2) of the Treaty. Russia’s application was therefore upheld, and the judgment of the District Court was reversed.

IV. Discussion 28.127 As stated at the outset, this chapter focuses on three issues: (i) do national courts have juris-

diction to determine challenges of investment treaty awards, (ii) is it appropriate for national courts to review investment treaty awards, and (iii) what standards of review do national courts adopt when they review challenges to the jurisdiction of the arbitral tribunal? Caution is called for in drawing general conclusions from the cases summarized, which are all highly fact-​specific and involve national court judgments from a limited number of jurisdictions. However, some observations nevertheless come to mind.

A. Do National Courts Have Jurisdiction to Determine Challenges of Investment Treaty Awards? 28.128 Investment treaty awards involve the adjudication of treaty obligations entered into between

independent sovereign states on the level of international law. The jurisdiction of the arbitral tribunal is based on, and defined by, the provisions of the applicable treaty which are to be interpreted in accordance with the rules of public international law applicable to treaty interpretation. Liability of the host state is premised on a finding by the arbitral tribunal that the host state has breached treaty obligations or obligations under customary international law. Remedies available to the investor, standards of compensation, etc. are also governed by public international law.

28.129 Thus, in investment treaty arbitration, jurisdiction, liability, and quantum are determined on

the basis of treaty obligations and/​or customary international law, in accordance with arbitral procedures designated in the investment treaty. Although arbitral tribunals in investment treaty arbitration also have to determine many questions of national law, ultimately, investment treaty arbitration is about determining the potential liability of the host state under the applicable treaty and under public international law.

28.130 The question therefore naturally comes to mind whether national courts have jurisdiction to

determine challenges of investment treaty awards and, if so, whether they are suitable fora for determining such challenges. The first question will be addressed in this section; the latter question in the next.215

28.131 Of the cases reviewed, only one, Russian Federation v Sedelmayer,216 involved an objection

by the respondent in the challenge proceedings that national courts do not have jurisdiction

  Id. at 9.   See supra ¶¶ 28.123 ff. 216  See supra ¶¶ 28.18 ff. 214 215

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IV. Discussion to determine challenges of investment treaty awards. In Ecuador v Occidental, Occidental maintained that Ecuador’s claim that the arbitral award should be set aside due to lack of jurisdiction was not justiciable before the courts of England,217 but the case did not involve an objection to the jurisdiction of the High Court. Correspondingly, in Laos v Sanum, Sanum claimed that Laos’ challenge of the jurisdiction of the arbitral tribunal was not justiciable before the courts of Singapore, but did not challenge the jurisdiction of the court. In Russian Federation v Sedelmayer, the Stockholm District Court emphasized that it was a 28.132 well-​established principle of Swedish arbitration law that an arbitral award issued in arbitral proceedings having its seat in Sweden can be challenged before the Swedish courts, even if neither of the two parties has any connection to Sweden. The fact that the arbitration was based on a treaty concluded between two sovereign states did not call for a different conclusion. At least this was the case where one of the parties to the arbitration, Mr Sedelmayer, was a subject of national law and not a sovereign state.218 The decision of the Stockholm District Court is not surprising. The significance of public 28.133 international law notwithstanding, by the inclusion of an ICSID Additional Facility, UNCITRAL, or SCC arbitration clause in the BIT, or in the ECT, the arbitral procedure is ultimately anchored in the national legislation applicable at the seat of arbitration. If a party to an investment treaty arbitration, be it the host state or the investor, is making use of statutory remedies available to such Party at the seat of arbitration, national courts will be reluctant to decline jurisdiction to determine challenges of arbitral awards with reference to the fact that the award was based on an investment treaty.

B. Is It Appropriate for National Courts to Review Investment Treaty Awards? A more difficult question is whether it is appropriate that national courts at the seat of arbi- 28.134 tration exercise their jurisdiction to review investment treaty awards. As has been amply illustrated by the discussion on non-​justiciability in Ecuador v Occidental219 and Laos v Sanum,220 there are many arguments that could be raised against such court review. In case of challenges of investment treaty awards, national courts at the seat of arbitra- 28.135 tion must adjudicate upon treaty provisions entered into by independent sovereign states. Moreover, only one of the contracting state parties to the investment treaty, that is, the host state against which the claim in the arbitration was made, will be a party to the challenge proceedings. For the national court hearing the challenge, the above-​mentioned considerations may raise issues of noninterference with the affairs of other states, since the national court must rule upon transactions between two or several sovereign states without having the benefit of hearing all parties to the transaction. Another concern is that national courts typically do not have sufficient knowledge and ex- 28.136 perience with respect to the issues of public international law which may arise in challenges of investment treaty awards. In most instances, the arbitrators, whose award is being challenged, will be far more experienced and better qualified to determine the jurisdictional issues at stake than the judges reviewing their decision. Another potential issue is whether national courts will take any particular considerations 28.137 because a sovereign state is a party to the proceedings. The investor may fear—​rightly or

  See supra ¶ 28.29.   Russian Federation v. Sedelmayer, supra note 9, at 16. 219  See supra ¶¶ 28.26 ff. 220  See supra ¶¶ 28.104 ff. 217 218

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Review of non-ICSID Awards by National Courts wrongly—​that the court will apply a lower threshold for the setting aside of the award to ensure that there will be no doubt as to the legitimacy of an arbitral award issued against a sovereign state. The state party, on the other hand, may fear that it will not get a fair hearing due to possible political bias against it at the seat of arbitration. 28.138 Furthermore, both parties invest considerable time and money in the arbitration proceed-

ings. For the investor, the investment claim is often the last resort to obtain compensation for the lost investment, and for the state, being subjected to an investment claim is a very serious matter that may raise important issues of public interest.

28.139 The quality of the ‘first instance decision-​makers’, the arbitrators, as well as the importance of

the issues involved, places a great burden on the reviewing court. The parties will expect, and rightly so, predictable and well-​reasoned decisions from the reviewing courts.

28.140 Thus, national court review of investment treaty awards raises several questions and concerns

not present with respect to commercial arbitration. The self-​contained review regime under the ICSID Convention offers solutions to some of these concerns. The fact remains, however, that many states are not party to the ICSID Convention. Due to this and the fact that, even if ICSID jurisdiction is available, investors do not always choose ICSID arbitration, a considerable number of investment arbitrations will continue to be governed by the national arbitration law of the seat of arbitration.

28.141 As shown in Ecuador v Occidental, where a party to an investment arbitration is making use of

its statutory right under the applicable arbitration act to challenge an arbitral award, a national court will usually be reluctant not to exercise its jurisdiction to review the award, even if the court must adjudicate upon the obligations of other sovereign states under treaties. In Laos v Sanum, the court even emphasized that it is its obligation to rule on the jurisdictional issues.221

28.142 The fact that national courts, when exercising such jurisdiction, sometimes will have to ad-

judicate upon international law obligations of other sovereign states is part of the package accepted by the contracting parties to the investment treaty when they include an ICSID Additional Facility, UNCITRAL, or SCC arbitration clause in the BIT or the MIT. It is also part of the package accepted by the investor when making use of its right to arbitration under the applicable investment treaty. If the Contracting state Parties to investment treaties do not want to subject arbitral awards issued under such treaty to review by national courts at the place of arbitration, they have the possibility of including a provision to that effect in the treaty. Whether or not such exclusion agreements are recognized as valid and binding depends, of course, on the law applicable at the seat of arbitration. In Sweden, for instance, section 51 of the Arbitration Act expressly provides that the parties may agree to exclude the applicability of the grounds for setting aside arbitral awards contained in section 34 of the Arbitration Act, provided that none of the parties is domiciled or has its place of business in Sweden. This condition would be fulfilled in most investment arbitrations conducted in Sweden.222

  Sanum v. Lao People’s Republic, supra note 194, ¶ 38.   The UNCITRAL Model Law does not regulate the validity of agreements that exclude the applicability of the grounds in art. 34 for the setting aside of an arbitral award. However, one Canadian decision (Noble China Inc. v. Lei Kat Cheong, Ontario Court of Justice (Nov. 13, 1998) has found that the parties may agree to exclude any rights they may otherwise have to apply to set aside an award under art. 34 as long as their agreement does not conflict with any mandatory provisions of the Model Law or does not confer powers on the arbitral tribunal contrary to public policy. See also J. Sekolec & N. Eliasson, The UNCITRAL Model Law on Arbitration and the Swedish Arbitration Act: A Comparison, in The Swedish Arbitration Act of 1999, Five Years On: A Critical Review of Strengths and Weaknesses 241–​42 (L. Heuman & S. Jarvin, 2006). 221 222

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IV. Discussion However, based on the cases we have reviewed for this chapter, reviewing courts have, with a 28.143 few rare exceptions, not taken decisions that raise any particular cause for concern. We have not come across any challenge of an investment treaty award in which the courts attempted to review the merits of the challenged award. In general, the decisions also show a high degree of deference for the decisions of the arbitral tribunal. However, since the first edition of this book, an increasing number of investment awards have 28.144 been set aside.223 This does not in itself demonstrate that there is something wrong with court review of investment treaty awards. Nor does it demonstrate an alarming trend. It could just be that the courts are fulfilling their task under the applicable arbitration laws to ensure that arbitral tribunals in investment treaty cases, just as in regular commercial cases, do not overreach their jurisdiction. However, if the level of reasoning of the courts making these decisions does not meet the same standards as the reasoning of the arbitrators in the awards they set aside, the legitimacy of these rulings will be scrutinized. Decisions to set aside investment treaty awards that surprised many observes include the decision by the Singapore High Court in Sanum, the decision by the Svea Court of Appeal in Renta 4 and, not the least, the decision of The Hague District Court in the three Yukos cases heard under the ECT. The decision of the Singapore High Court setting aside the award in Sanum was reversed on appeal and the decision by The Hague District Court in the Yukos case is still under appeal and may therefore be reversed as well. As the proceedings are still ongoing, the substance of the latter case has not been discussed in this chapter. With respect to Renta 4, without commenting on the outcome of the case, the authors would have expected a decision contradicting the carefully reasoned award in that case to have been more thorough in its discussion and reasoning. It was therefore disappointing that the Swedish Supreme Court did not grant leave for appeal in this case. It would have been beneficial for Sweden as a significant seat of arbitration in investment treaty cases to have the important issues raised in this case determined by the Swedish Supreme Court. The only previous Swedish case in which an investment treaty award was set aside was Petrobart I,224 where the Swedish Supreme Court found that the arbitral tribunal was wrong in declining jurisdiction and on that basis set aside the tribunal’s negative ruling on jurisdiction.

C. What Standards of Review Do National Courts Adopt for Reviewing Challenges to the Jurisdiction of Investment Treaty Arbitral Tribunals? Most of the publicly available applications to set aside investment treaty awards involve chal- 28.145 lenges to the jurisdiction of the arbitral tribunals. Challenges of investment treaty awards more frequently appear to involve challenges to the jurisdiction of the arbitral tribunal than challenges of awards in international commercial arbitration. This is not surprising given the relative complexity of arbitration clauses in investment treaties compared to standard arbitration clauses in commercial contracts. Also, in investment treaty arbitration, there are usually jurisdictional thresholds which the investor must overcome in order to come within the scope of the relevant investment treaty. This typically means that jurisdictional issues are more complicated in investment arbitration than in commercial arbitration.

223  Government of the Lao People’s Democratic Republic v. Sanum Investments Ltd. [2015] 2 SLR 322, [2015] SGHC 15, ¶¶ 2, 17; Russian Federation v. Renta 4, et al., Judgment of the Svea Court of Appeal (Jan. 18, 2016), at 4; Energoalians (afterwards, Komstroy, which acquired all of Energoalians’ rights) v. Moldova, Paris Court of Appeal (Apr. 12, 2016); and Russia v. Veteran Petroleum Limited, Russia v. Hulley Enterprises Limited, & Russia v. Yukos Universal Limited, Hague District Court, Judgment (Apr. 20, 2016). 224  See supra ¶ 28.39.

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Review of non-ICSID Awards by National Courts 28.146 Rulings on jurisdiction in international commercial arbitration are often limited to deter-

mining whether the dispute ‘arose out of or in connection with’ the contract containing the arbitration clause. Arbitral tribunals in investment treaty arbitration, on the other hand, frequently must rule on issues of public international law, including treaty interpretation, such as whether the claimant qualifies as an ‘investor’ as defined in the treaty, whether the claimant has made an ‘investment’ as defined in the treaty, whether the dispute is covered by the dispute resolution clause of the treaty, etc. Ruling conclusively on these issues often requires the arbitral tribunal to determine complex issues of facts and law. In addition, such issues are often closely connected to the merits of the case.

28.147 To avoid dealing with contentious factual issues during the jurisdictional stage of the proceed-

ings, arbitral tribunals occasionally merge their rulings on jurisdiction with the merits. Other tribunals225—​influenced by the test proffered by Judge Higgins in her separate opinion in the Oil Platforms Case226—​might, for the purposes of establishing jurisdiction, ‘accept pro tem the facts as alleged by [Claimant] to be true and in that light . . . interpret [the relevant provisions of the treaty] for jurisdictional purposes. . . ’.227 It must be added, however, that this test was developed for the determination of the jurisdiction of the International Court of Justice and is not necessarily automatically transferable to jurisdictional rulings in an investment treaty arbitration.

28.148 However, regardless of the approach chosen by the arbitral tribunal when it is ruling on its

own jurisdiction, a national court ruling on a challenge to the jurisdiction of the arbitral tribunal must determine what standard of review it should apply when reviewing the arbitral tribunal’s jurisdictional decision. At a first glance, the answer might seem obvious. The host state’s consent to arbitration does not extend beyond the limits of the arbitration clause in the applicable investment treaty. This would call for a full hearing de novo of all issues of fact and law that form part of the arbitral tribunal’s decision on jurisdiction. The standard of review would be correctness in the sense that the arbitral award shall be set aside if the court finds that the decision of the arbitral tribunal was incorrect.

28.149 However, given the fact that jurisdictional determinations in investment arbitration involve

mixed questions of facts and law, which often are closely connected to the merits of the case, it may prove difficult for the reviewing court—​in particular if the arbitral tribunal’s ruling on jurisdiction was merged with the merits—​to maintain a clear distinction between jurisdiction and merits when determining the challenge to the jurisdiction of the tribunal. In order not to review the merits of the case, the reviewing court might therefore refuse to review the arbitral tribunal’s determination of jurisdictional preconditions, which also have bearing on the merits of the case, such as whether the investor has made an ‘investment’.228 225  See, e.g., Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/​03/​24, Decision on Jurisdiction (Feb. 8, 2005), and Kardassopoulos v. Georgia, ICSID Case No. ARB/​05/​18, Decision on Jurisdiction (July 6, 2007). 226  Oil Platforms Case, supra note 76, at ¶ 810. 227  Plama v. Bulgaria, supra note 225, ¶ 118. 228  In the case of Nagel v. Czech Republic (SCC Case 49/​2002), the arbitral tribunal dismissed Mr. Nagel’s claim, since it found that Mr. Nagel had not made an ‘investment’ within the meaning of the UK–Czech BIT. The arbitral award is not in the public domain, but excerpts from the arbitral award have been published in Stockholm Arbitration Report 2004:1. What is interesting about this award, however, is that the arbitral tribunal, rather than dealing with this objection as part of its ruling on jurisdiction, decided to ‘deal with this question in a later part of this award where the facts relevant to the merits of [Mr. X]’s claim are analysed’ (p. 150). In the view of the arbitral tribunal, the question as to whether or not [Mr. X] was an investor who made an investment within the meaning of the BIT ‘. . . involves the determination of certain factual issues that are also in dispute in connection with the substantive issues between the parties in relation to the merits of [Mr. X]’s claim. It is therefore not an issue which can be easily decided as a preliminary question of jurisdiction but one which requires a more detailed analysis both of the Treaty and of the facts of the case’ (p. 150). Mr. Nagel challenged the arbitral tribunal’s finding that he had not made an investment within the

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IV. Discussion Based on the cases discussed in this chapter, the following observations come to mind con- 28.150 cerning the standard of review adopted by courts. On a scale reflecting the degree of court review, the two judgments of the English High Court, Ecuador v Occidental229 and Czech Republic v EMV,230 as well as the judgment of the Singapore Court of Appeal in Laos v Sanum must be placed at one end. As clearly stated by the High Court in Ecuador v Occidental—​and repeated in Czech Republic v EMV—​a challenge to the jurisdiction of the arbitral tribunal proceeds by way of a rehearing by the court of the matters that had been before the arbitrators, that is, a hearing de novo of the host state’s jurisdictional objection. The test for the Court is, in its view: was the arbitral tribunal correct in its decision on jurisdiction?231 The underlying philosophy is that parties always are entitled to have jurisdictional rulings by arbitral tribunals ultimately reviewed by a court of law.232 In Sanum, the Singapore Court of Appeal explained that the standard is a hearing de novo, which implies the reviewing court’s decision of a matter anew, giving no deference to the tribunal’s findings. The Court of Appeal concluded that ‘the court should consider the matter afresh. In doing this, it will of course consider what the Tribunal has said because this might well be persuasive. But beyond this, the court is not bound to accept or take into account the arbitral tribunal’s findings on the matter’.233 A similar approach was taken by the Svea Court of Appeal in the two Swedish cases, Petrobart 28.151 I234 and Petrobart II.235 In both of these cases, the Court of Appeal made a de novo determination of the jurisdictional issues that had been before the arbitral tribunal. In particular, the judgment in Petrobart II involved a full review of complex issues of treaty interpretation with regard to the provisional application of the ECT in relation to Gibraltar as well as factual issues with regard to the United Kingdom’s ratification of the ECT. The same approach was adopted by the Court of Appeal in Renta 4. In Renta 4 the Court emphasized that it must make its own determination of the arbitral tribunal’s jurisdiction within the limits of the parties’ pleaded case.236 A slightly different approach, however, was taken by the Stockholm District Court, as con- 28.152 firmed by the Svea Court of Appeal, in The Russian Federation v Sedelmayer237 and by the Swedish Supreme Court in Petrobart I (reversing the above-​mentioned decision of the Court of Appeal) based on the so-​called ‘doctrine of assertion’.238

meaning of the UK–​Czech BIT before the Svea Court of Appeal [Nagel v. Czech Republic, supra note 9] The Court, however, decided not to review the arbitral tribunals, finding that Mr. Nagel had not made an investment under the BIT, with the explanation that the arbitral tribunal had found that the question whether the investor’s rights qualified as an ‘investment’ under the BIT was a matter of substance rather than a matter of jurisdiction. For an English translation of the Decision, see 2 Stockholm Int’l Arb. Rev. 139 (2006). 229  See supra ¶¶ 28.31 ff. 230  See supra ¶ 28.63. 231  Ecuador v. Occidental Exploration & Production Company, supra note 4, ¶ 7. 232  In Sweden, for instance, in addition to the right to challenge an arbitral award for want of jurisdiction (Section 34 of the Arbitration Act (1999)), parties also have an explicit statutory right under Section 36 of the Arbitration Act (1999) to court review of negative jurisdictional rulings. Examples of other jurisdictions where such rights to court review of negative jurisdictional rulings are recognized are Belgium, England & Wales, France, India, Italy, New Zealand, Northern Ireland, Scotland, and Switzerland (see, e.g., S. Kröll, Recourse Against Negative Decisions on Jurisdiction, 20 Arb. Int’l 55 (2004); and L.G.S. Boo, Ruling on Arbitral Jurisdiction—​Is That an Award, 3(2) Asian Int’l Arb. J. 125 (2007)). 233  Sanum v. Lao People’s Republic, supra note 194 ¶ 41. 234  See supra ¶¶ 28.35 ff. 235  See supra ¶¶ 28.40 ff. 236  Russian Federation v. Renta 4, et al., Judgment of the Svea Court of Appeal (Jan. 18, 2016). 237  See supra ¶¶ 28.22 ff. 238  See supra ¶¶ 28.37 ff.

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Review of non-ICSID Awards by National Courts 28.153 In Chevron, the Dutch district court explained that the applicable standard of review depends

on the ground for annulment relied on by the party seeking annulment.239 If the annulment ground is non-​existence of a valid arbitration agreement, the Court should engage in a ‘full review’,240 whereas if the annulment ground is that the arbitral tribunal exceeded its mandate or the award lacks reasoning, the Court should conduct a ‘review with restraint’.241

28.154 If the English and Singaporean cases are placed at one end of the scale reflecting the degree

of court review, the decision of the Ontario Superior Court in Bayview Irrigation District #11 and ors v Mexico242 must be placed at the other end. In this case, the Ontario Superior Court emphasized that its role on judicial review was not to conduct a hearing de novo of the merits of the arbitral tribunal’s decision on jurisdiction. The Court further stated that ‘while decisions by arbitral tribunals are not immune from challenge, any challenge is confronted with the ‘powerful presumption’ that the tribunal acted within its authority. An arbitral decision is not invalid because it wrongly decided a point of fact or law’.243

28.155 Another case that should be mentioned is Canada and the United Mexican States v S.D.

Myers Inc.244 In this case, Canada and Mexico claimed that, since the arbitration involved a sovereign state and the state only had consented to arbitration to the extent provided by the NAFTA, the appropriate standard for the Canadian Court to apply when reviewing the present case was ‘correctness’. The Court did not agree. It emphasized that it had to respect the autonomy of the arbitration forum selected by the parties and that all three members of the arbitral tribunal were knowledgeable, experienced, and distinguished in international law, international trade law, and international arbitration. The Court concluded that the arbitration mechanism in Chapter 11 of the NAFTA consequently ensured that the parties had confidence in the persons who had been called to adjudicate the claim.245

28.156 However, this approach appears to have been varied in later Canadian case law. In Cargill v

Mexico, the Ontario Court of Appeal held that, since the question was whether the tribunal had acted within its jurisdiction, the applicable standard of review was correctness, which implied ‘possible consideration of, but no deference to, the decision of the tribunal under review’.246 The court also cautioned against adopting a ‘powerful presumption’ that tribunals are correct in determining the scope of their jurisdiction, because such deference would effectively nullify the purpose of court review.247 This approach adopted in Cargill has also been followed in Mobil.248

28.157 Finally in BG, the US Supreme Court explained that the standard of review with respect to the

tribunal’s interpretation and application of a requirement to litigate the dispute for eighteen months before the Argentinian courts before submitting it to arbitration depended on which forum had the primary responsibility to interpret and apply the litigation requirement—​ courts or the arbitral tribunal.249 If those were courts, they should review the tribunal’s   Ecuador v. Chevron and Texaco, supra note 163 , ¶¶ 4.3–​4.4.   Id. ¶ 4.5. 241  Id. ¶ 4.6. 242  See supra ¶¶ 28.52 ff. 243  Bayview Irrigation District #11 and Ors v. Mexico, supra note 2, ¶ 63. 244  Attorney General of Canada v. S.D. Myers Inc. (Federal Court of Canada), Judgment (Jan. 13, 2004). See also supra note 125. 245  Id. ¶ 16. 246  Court of Appeal for Ontario, Judgment (Oct. 4, 2011), ¶ 35. 247  Id. ¶ 46. 248  Attorney General of Canada v. Mobil Investments Canada Inc. and Murphy Oil Corporation, Superior Court of Justice Ontario, Judgment (Feb. 16, 2016). 249  BG Group PLC v. Republic of Argentina, US Supreme Court, Docket No. 12-​ 138 (Mar. 5, 2014), at 2, 6. 239 240

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V. Conclusion decision on the matter de novo (as was done by the Court of Appeal); if it was the tribunal, the courts should review its decision with deference.250 The Supreme Court held that, since the eighteen-​month litigation requirement was a matter to be interpreted and applied primarily by the tribunal, the courts were to review its interpretation with considerable deference.251 Despite the fact the different standards of court review have been adopted by courts in dif- 28.158 ferent jurisdictions, it is fair to conclude, based on the cases reviewed in this chapter, that, with a few limited exceptions, courts have not taken decisions that raise any particular cause for concern. All in all, the jurisdictions involved in the publicly available cases that we have reviewed appear to offer predictable court review mechanisms of investment treaty awards. This is not surprising, since many of these jurisdictions already have a good track record in international commercial arbitration.

V. Conclusion Investment treaty arbitration is different from traditional international commercial arbi- 28.159 tration, primarily due to the public international law element of the former. This creates particular challenges for national courts faced with reviewing investment treaty awards. This chapter has focused on three such challenges for national courts: (i) do national courts have jurisdiction to determine challenges of investment treaty awards, (ii) is it appropriate for national courts to review investment treaty awards, and (iii) what standards of review do national courts adopt when they review challenges to the jurisdiction of the arbitral tribunal? In none of the cases discussed did the court decline jurisdiction to determine a challenge 28.160 of an investment treaty award. This is not surprising. By including an ICSID Additional Facility, UNCITRAL, or SCC arbitration clause in the BIT, or in the ECT, the arbitral procedure is ultimately anchored in the national legislation applicable at the seat of arbitration. If a party to an investment treaty arbitration, be it the host state or the investor, is making use of explicit statutory remedies available to such party at the seat of arbitration, national courts will be reluctant to decline jurisdiction to determine challenges of arbitral awards with reference to the fact that the award was based on an investment treaty. A more difficult question is whether it is appropriate that national courts review investment 28.161 treaty awards. However, only in a small minority of the cases discussed did the courts take decisions that raise cause for concern regarding national court review of jurisdictional rulings in investment treaty arbitrations. Overall, the cases we have reviewed express a high degree of deference for the decision of the arbitral tribunal. Jurisdictional issues are typically more complicated in investment arbitration than in trad- 28.162 itional international commercial arbitration. To rule conclusively on the jurisdictional preconditions in investment arbitration often requires the arbitral tribunal to determine complex issues of facts and law, which often are closely connected to the merits of the case. This creates particular challenges for national courts determining challenges to the jurisdiction of such arbitral tribunals. In particular, it may prove difficult for the courts to maintain a clear distinction between jurisdiction and merits when reviewing the jurisdiction of the arbitral tribunal.

  Id. at 5–​6.   Id. at 14.

250 251

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Review of non-ICSID Awards by National Courts 28.163 In the cases discussed, the national courts have taken slightly different approaches concerning

the standard of review of the jurisdiction of the arbitral tribunal. Courts in certain jurisdictions have made a de novo hearing of the host state’s jurisdictional objection, whereas courts in other jurisdictions have adopted a more restrictive standard of review based on a ‘powerful presumption’ that the tribunal acted within its jurisdiction.252 Regardless of the approach taken by the national courts, the way in which they approach the jurisdictional issues before them in most cases express a high degree of deference for the decisions of the arbitral tribunal.

 See supra ¶ 28.143.

252

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29 ENFORCEMENT OF INVESTMENT TREATY AWARDS August Reinisch

C. State Immunity as an Additional Hurdle  29.44 29.64 A. The Autonomous International Law Obligation to Comply with ICSID Awards  29.66 B. Exclusivity  29.68 C. The Strict Obligation to Recognize and Enforce ICSID Awards  29.71 D. State Immunity Rules on Enforcement Measures as Remaining Obstacles  29.75 E. Other Failed Attempts to Enforce ICSID Awards  29.82 V. Alternative Enforcement Mechanisms  29.83 VI. Conclusion  29.87

I. Introduction  29.01 II. Enforcement of Non-​ICSID Awards  29.03

IV. Enforcement of ICSID Awards 

A. Foreign Arbitral Awards  29.04 B. Investment Awards as Commercial Disputes  29.06 C. Investment Treaty Arbitration and the Requirement of a Written Arbitration Agreement  29.10 D. Obligation of National Courts to Enforce Investment Awards  29.12

III. Obstacles to the Recognition and Enforcement of Investment Awards  29.13 A. The Article V(1) Grounds for Refusing Enforcement of Investment Awards  B. The Article V(2) Grounds for Refusing Enforcement of Investment Awards 

29.16 29.29

I. Introduction It is frequently asserted that, in the majority of investment disputes, the parties volun- 29.01 tarily comply with arbitration awards.1 There are indeed only few cases where successful claimants have had to resort to national courts for judicial enforcement of their awards,2 although the wave of principled non-​compliance by Argentina and the Russian Federation has produced a considerable body of case law. The overall (and still) prevailing ‘voluntary compliance’ may largely be attributable to the special political embarrassment factor, the threat of economic retaliation, and the reluctance to send a wrong message to potential future investors. However, host states may also be cautious about not honouring arbitral awards because the rules provide for a very effective system for their enforcement. It is important to analyse the enforcement instruments available in order to understand this ‘deterrence’ factor and its contribution to the high level of voluntary compliance with investment awards.

1  Cf. A. Boralessa, Enforcement in the United States and United Kingdom of ICSID Awards Against the Republic of Argentina: Obstacles that Transnational Corporations May Face, 17 N.Y. Int’l L. Rev. 53, 66 ff. (2004). 2  See Z. Douglas, The Hybrid Foundations of Investment Treaty Arbitrations, 74 Brit. Y.B. of Int’l L. 151, 227 (2003).

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Enforcement of Investment Treaty Awards 29.02 Investment arbitration between states and private parties is mostly pursued according to

the ICSID Convention3 and under various institutional or ad hoc arbitration rules leading to arbitral awards which are regarded as foreign arbitral awards in the sense of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New  York Convention).4 The following analysis will distinguish between enforcement possibilities offered by the New York Convention for non-​ICSID awards and the special enforcement regime for ICSID awards laid down in the ICSID Convention.

II.  Enforcement of Non-​ICSID Awards 29.03 The awards rendered pursuant to ad hoc investment arbitrations, mostly under the

UNCITRAL Rules,5 as well as those administered by arbitration institutions, such as the International Chamber of Commerce,6 the Stockholm Chamber of Commerce,7 or the London Court of International Arbitration8 are usually treated as foreign arbitral awards in the sense of the 1958 New York Convention.9 This guarantees that they are enforceable in a large number of states—​subject only to the limited exceptions provided within the Convention. Although voluntary compliance with awards seems to prevail in commercial arbitration as well,10 the potential of enforcement pursuant to the New York Convention is an important factor inducing such compliance.

A. Foreign Arbitral Awards 29.04 The New York Convention provides for the recognition and enforcement of foreign arbitral

awards, which it defines as ‘arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal’.11

29.05 Investment awards are often considered to fall under the category of so-​called anational or

denationalized awards, since their relationship to a specific country and its arbitration rules

3  Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention) (Mar. 18, 1965), 575 U.N.T.S. 159; 4 I.L.M. 532 (1965). 4  Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, 330 U.N.T.S. 38; 7 I.L.M. 1046 (1968). 5 UNCITRAL Arbitration Rules 1976, 15 I.L.M. 701 (1976), http://​www.uncitral.org/​uncitral/​ en/​uncitral_​texts/​arbitration/​1976Arbitration_​rules.html (last visited Dec. 12, 2017); UNCITRAL Arbitration Rules (as adopted in 2013) http://​www.uncitral.org/​pdf/​english/​texts/​arbitration/​arb-​rules-​2013/​ UNCITRAL-​Arbitration-​Rules-​2013-​e.pdf (last visited Dec. 12, 2017). 6  I.C.C. Rules of Arbitration 2012, in I.C.C. ed., I.C.C. Rules of Arbitration, Publication No. 865-​2 (2013), http://​www.iccwbo.org/​Data/​Documents/​Buisness-​Services/​Dispute-​Resolution-​Services/​Mediation/ ​Rules/​2012-​Arbitration-​Rules-​and-​2014-​Mediation-​Rules-​ENGLISH-​version/​. 7  Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce 2010, http://​ www.sccinstitute.com/​media/​40120/​arbitrationrules_​eng_​webbversion.pdf (last visited Dec. 12, 2017). 8  London Court of International Arbitration, Arbitration Rules 1998, 37 I.L.M. 669 (1998), http://​www. lcia-​arbitration.com/​ (last visited Dec. 12, 2017); London Court of International Arbitration, Arbitration Rules 2014 http://​www.lcia.org/​dispute_​Resolution_​Services/​lcia-​arbitration-​rules-​2014.aspx (last visited Dec. 12, 2017). 9  See A.J. van den Berg, The New York Arbitration Convention of 1958: Towards A Uniform Judicial Interpretation (1981); D.  di Pietro & M.  Platte, Enforcement of International Arbitration Awards:  The New  York Convention of 1958 (2001); Enforcement of Arbitration Agreements and International Arbitral Awards—​The New  York Convention in Practice (E. Gaillard & D. Di Pietro eds., 2008). 10  See 2008 International Arbitration Study, Corporate Attitudes and Practices: Recognition and Enforcement of Foreign Awards, http://​www.arbitration.qmul.ac.uk/​research/​2008/​index.html. 11  New York Convention, supra note 4, art. I(1).

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II.  Enforcement of Non-ICSID Awards may be very weak. Although it has sometimes been questioned whether such awards would qualify as ‘foreign arbitral awards’ for enforcement purposes of the New York Convention,12 the fact that Article I(1) of the New York Convention also encompasses ‘arbitral awards not considered as domestic awards’13 indicates that international, anational, or denationalized awards are covered by the New York Convention.14

B. Investment Awards as Commercial Disputes The New York Convention permits states to make a reservation to the effect that they apply 29.06 the Convention ‘only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration’.15 One might question whether investment awards can be qualified as awards in ‘commercial disputes’ for these purposes, since—​as a form of mixed arbitration between states and private parties—​BIT arbitration in particular often touches upon sovereign interests and in effect leads to judicial review of state acts.16 Addressing this issue, a number of investment treaties expressly refer to the ‘commercial’ 29.07 nature of claims that may be brought on the basis of their provisions.17 It is also significant that, while the New York Convention does not define the term ‘commercial’, the 1985 UNCITRAL Model Law on International Commercial Arbitration18 contains a wide definition of the notion ‘commercial arbitration’, which expressly includes a reference to ‘investment’.19 Thus, for the purposes of the Model Law, investment awards should be viewed as

12  Cf. A.J. van den Berg, Recent Enforcement Problems under the New York and ICSID Conventions, 5 Arb. Int’l 2, 7 ff. (1989). 13  New York Convention, supra note 4, art I(1) provides in full: ‘This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought’. 14  See G.R. Delaume, Enforcement of State Contract Awards: Jurisdictional Pitfalls and Remedies, 8 ICSID Rev.-​FILJ 29, 48 ff.; G.R. Delaume, Reflections on the Effectiveness of International Arbitral Awards, 12 J. Int’l Arb. 5, 17 (1995); S. Choi, Judicial Enforcement of Arbitration Awards Under the ICSID and New York Conventions, 28 N.Y.U. J. Int’l L. & Pol. 175, 190 ff. (1995–​1996). 15  New York Convention, supra note 4, art. I(3). 16  See International Investment Law and Comparative Public Law (Stephan W. Schill ed., 2010). 17  For instance, North American Free Trade Agreement art. 1136(7) between the Government of Canada, the Government of the United Mexican States, and the Government of the United States of America (NAFTA) (Dec. 17, 1992), 32 I.L.M. 289 (1993), provides: ‘A claim that is submitted to arbitration shall be considered to arise out of a commercial relationship or transaction for purposes of Article I of the New York Convention and Article I of the Inter-​American Convention’. Similarly, Energy Charter Treaty art. 26(5)(b), 34 I.L.M. 381 (1995), provides: ‘Any arbitration under this Article shall at the request of any party to the dispute be held in a state that is a party to the New York Convention. Claims submitted to arbitration hereunder shall be considered to arise out of a commercial relationship or transaction for the purposes of article I of that Convention’. 18  1985 UNCITRAL Model Law on International Commercial Arbitration, adopted by UNCITRAL on June 21, 1985, and amended by UNCITRAL on July 7, 2006, UN Docs. A/​40/​17, Annex I and A/​61/​ 17, Annex I; http://​www.uncitral.org/​pdf/​english/​texts/​arbitration/​ml-​arb/​07-​86998_​Ebook.pdf (last visited Dec. 12, 2017). 19  UNCITRAL Model Law art. I(1) provides that it ‘applies to international commercial * * arbitration’. The double asterisk is explained as follows: ‘The term “commercial” should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business co-​operation; carriage of goods or passengers by air, sea, rail or road’.

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Enforcement of Investment Treaty Awards awards in ‘commercial disputes’. This view was shared by national courts in set-​aside proceedings concerning investment awards rendered pursuant to the UNCITRAL Arbitration Rules. 29.08 In the proceedings before Canadian courts challenging the Metalclad award,20 the Supreme

Court of British Columbia held that NAFTA Chapter 11 arbitration was to be qualified as ‘commercial arbitration’ in the sense of the UNCITRAL Model Law.21 It expressly rejected the Mexican argument that the ‘relationship between Mexico and Metalclad was not commercial in nature but, instead, was a regulatory relationship’.22 This approach was followed by subsequent Canadian court decisions concerning challenges brought against NAFTA Chapter 11 awards. In proceedings aimed at the setting aside of the ICSID Additional Facility award in Feldman v Mexico,23 the Ontario Court of Appeal found that ‘NAFTA tribunals settle international commercial disputes by an adversarial procedure under which they determine legal rights in a manner not dissimilar to the courts’.24 Similarly, the Swedish Svea Court of Appeal qualified the BIT arbitration between CME and the Czech Republic25 as ‘an international commercial arbitration’.26

29.09 These cases strongly suggest that, in the field of recognition and enforcement governed by the

New York Convention, a possible reservation limiting its application to ‘commercial’ arbitration should not impede the actual enforcement of investment awards.

C. Investment Treaty Arbitration and the Requirement of a Written Arbitration Agreement 29.10 Article II(1) of the New York Convention requires ‘an agreement in writing’ for purposes

of recognition and enforcement under the Convention.27 Modern investment arbitration is to a large extent not based on direct contractual stipulations between investors and host states, but rather on dispute settlement provisions contained in BITs or other international investment agreements between sovereign states.28 One might question whether such treaty clauses constitute ‘agreements in writing’ for purposes of the New York Convention. For this reason, some investment instruments expressly clarify that this is exactly how consent based on treaty clauses should be interpreted.29 Also, national courts do not appear

20  Metalclad Corporation v. United Mexican States, Case No. ARB(AF)/​97/​1, Award (Aug. 30, 2000); 40 I.L.M. 36 (2001) [hereinafter Metalclad v. Mexico]. 21  United Mexican States v. Metalclad, Canada, Supreme Court of British Columbia (May 2, 2001) [2001] BCSC 664, 5 ICSID Rep. 236 [hereinafter Mexico v. Metalclad]. 22  Id. ¶ 44. 23  Marvin Ray Feldman Karpa v.  United Mexican States, Case No. ARB(AF)/​ 99/​1, Award (Dec. 16, 2002), 42 I.L.M. 625 (2003); 7 ICSID Rep. 341 [hereinafter Feldman v. Mexico]. 24  United Mexican States v.  Marvin Ray Feldman Karpa, Canada, Ontario Court of Appeal (Jan. 11, 2005), 9 ICSID Rep. 508, 516, ¶ 41[hereinafter Mexico v. Feldman]. 25  CME Czech Republic B.V. (Netherlands) v. Czech Republic, Partial Award (Sept. 13, 2001), 9 ICSID Rep. 121 [hereinafter CME v. Czech Republic]. 26  Czech Republic v. CME Czech Republic BV, Sweden, Svea Court of Appeal (May 15, 2003), 9 ICSID Rep. 439, 493 [hereinafter Czech Republic v. CME]. 27  New York Convention, supra note 4, art. II(1), provides: ‘Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration’. 28  See J. Paulsson, Arbitration Without Privity, 10 ICSID Rev.-​FILJ 232 (1995). 29  For instance, Energy Charter Treaty art. 26(5)(a), 34 I.L.M. 381 (1995), provides: ‘The consent given in paragraph (3) together with the written consent of the Investor given pursuant to paragraph (4) shall be considered to satisfy the requirement for: . . . (ii) an “agreement in writing” for purposes of article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 [hereinafter referred to as the New York Convention]’. See also U.S. Model BIT 2004 art. 25(2)(b) and Canadian Model FIPA 2004 art. 28(2)(b).

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III.  Obstacles to the Recognition and Enforcement of Investment Awards to have any problems with accepting that treaty arbitration is covered by the New York Convention. For instance, the English Court of Appeal in proceedings challenging the UNCITRAL in- 29.11 vestment award in Occidental v Ecuador,30 discussed the applicable BIT’s provision that the consent of the host state to investment arbitration with investors for the other contracting state constituted ‘an agreement in writing’.31 In the court’s view, ‘[t]‌he application of the New York Convention depends on such an agreement, and the provisions of the Arbitration Act 1996 (ss.100–​104) relating to the enforcement of foreign arbitral awards give effect to this requirement in English law’.32 It concluded that the BIT Article providing for mixed arbitration must have been ‘intended to give rise to a real consensual agreement to arbitrate, even though by a route prescribed in the Treaty’.33

D. Obligation of National Courts to Enforce Investment Awards The core provision of the New York Convention is the obligation to recognize and enforce 29.12 foreign arbitral awards34 which do not suffer from some grave defects, as outlined in the Convention itself.35 In order to have an investment award recognized and enforced in the national courts of a contracting party of the New York Convention, a party to the arbitration proceedings only has to supply the original or duly certified copies of the award and the arbitration agreement,36 as well as translations if these documents are not in an official language of the country where recognition and enforcement is sought.37

III.  Obstacles to the Recognition and Enforcement of Investment Awards The principal obligation to enforce foreign awards, including international investment 29.13 awards, is qualified by a limited number of specific grounds for refusing such enforcement under the New York Convention. These relate either to serious defects of the arbitral process or to fundamental values of the state where enforcement is sought. More specifically, recognition and enforcement may be refused if the opposing party can prove (a) the invalidity of the arbitration agreement; (b) lack of notice or violation of due process; (c) excess of power by the arbitral tribunal; (d) irregular composition of the arbitral tribunal; or (e) that the award has not yet become binding, or was set aside or suspended in the country of origin.38 In addition, the recognition and enforcement of an award may be refused if the subject matter of the

30  Occidental Exploration and Production Company v. Republic of Ecuador, LCIA Case No. UN 3467 (July 1, 2004), 12 ICSID Rep. 59 [hereinafter Occidental v. Ecuador]. 31  Republic of Ecuador v. Occidental Exploration and Production Company, England, Court of Appeal (Sept. 9, 2005) [2005] EWCA 1116, 12 ICSID Rep. 129 [hereinafter Ecuador v. Occidental]. 32  Id. at 145, ¶ 32. 33  Id. 34  New York Convention, supra note 4, art. III, provides: ‘Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards’. 35  Id. art. V(1). 36  Id. art. IV(1) 37  Id. art. IV(2). 38  Id. art. V(1).

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Enforcement of Investment Treaty Awards dispute is considered ‘not capable of settlement by arbitration’ (lack of arbitrability), or if it would be contrary to the public policy of the country of enforcement.39 29.14 These obstacles to the enforcement of arbitral awards are common features found in many

national arbitration laws and, while some jurisdictions may be more restrictive, others are less so with regard to their interpretation.

29.15 It is further generally accepted that the standard of review to be used by national courts

called upon to enforce foreign awards should be a deferential one, permitting refusal only in exceptional situations. This was expressly acknowledged by the Svea Court of Appeal in the CME case, when it found that Swedish law ‘has adopted a restrictive approach towards the possibilities to successfully have an arbitration award declared invalid or set aside based on a challenge’ and that the ‘same approach’ characterizes the rules in the New York Convention.40 Also, the European Court of Justice has acknowledged that ‘it is in the interest of efficient arbitration proceedings that review of arbitration awards should be limited in scope and that annulment of or refusal to recognise an award should be possible only in exceptional circumstances’.41

A. The Article V(1) Grounds for Refusing Enforcement of Investment Awards 29.16 Article V(1) of the New York Convention provides:

Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding, on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.42 29.17 These grounds are essentially mirrored in Article 34(2)(a) of the UNCITRAL Model Law

as reasons for the setting aside of arbitral awards.43 In fact, award debtors generally have the

  Id. art. V(2).   Czech Republic v. CME, supra note 26. 41  Case C-​126/​97, Eco Swiss China Time Ltd. v. Benetton International N.V. [1999] ECR I-​3055, ¶ 35. 42  New York Convention, supra note 4, art. V(1). 43  This parallel was acknowledged by the Canadian court hearing the challenge against the Metalclad award. See Mexico v. Metalclad, supra note 21, at 236, 265, ¶ 127. 39 40

802

III.  Obstacles to the Recognition and Enforcement of Investment Awards choice as to whether they want to challenge an award or resist its enforcement.44 In a number of challenge procedures before national courts, host states have tried to invoke procedural deficiencies in order to attack investment awards. In general, courts have been reluctant to exercise strict review.45 In challenge proceedings directed against the ICSID Additional Facility award in Feldman v 29.18 Mexico,46 the Ontario Court of Appeal held that ‘[n]‌otions of international comity and the reality of the global marketplace suggest that courts should use their authority to interfere with international commercial arbitration awards sparingly’.47 Thus, it concluded that ‘the applicable standard of review in this case is at the high end of the spectrum of judicial deference’.48 On this basis, the Canadian appellate court rejected Mexico’s argument that it was unable to present its case during the arbitral proceedings and that such proceedings were not in accordance with the agreement of the parties49—​two grounds for annulment laid down in Article 34(2)(a)(ii) and (iv) of the UNCITRAL Model Law.50 The Canadian courts also exercise restraint vis-​à-​vis the issue whether a question is indeed 29.19 one of jurisdiction, which would be reviewable for correctness. In Mexico v Cargill, the same Canadian appellate court as in Mexico v Feldman refused to set 29.20 aside another NAFTA award.51 The court held that ‘the fact that the standard of review on jurisdictional questions is correctness does not give the courts a broad scope for intervention in the decisions of international arbitral tribunals. To the contrary, courts are expected to intervene only in rare circumstances where there is a true question of jurisdiction’.52 Similarly, in the set-​aside proceedings against the NAFTA award in Mobil and Murphy v 29.21 Canada,53 another Canadian court found that ‘Canada’s application to set aside the Award cannot succeed as there is no “true jurisdictional” issue in this case . . . Canada is seeking to challenge the merits of the Tribunal’s decision’.54 Thus, it dismissed the set-​aside application.

44  Newspeed Int’l Ltd. v. Citus Trading Pte Ltd., Singapore High Ct, 2001, 28 Y.B. Comm. Arb. 829, 833 (2003) (‘A party faced with a [New York] Convention award against him has two options. Firstly, he can apply to the courts of the country where the award was made to seek the setting aside of the award. If the award is set aside, then this becomes a ground in itself for opposing enforcement under the Convention. Secondly, the unsuccessful party can decide to take no steps to set aside the award but wait until enforcement is sought and attempt to establish a Convention ground of opposition . . . [T]‌he[se] options are alternatives and not cumulative’). 45  An apparent exception is Republique de Madagascar v. Peter and Kristof de Sutter, DS2, and S.A.R.L. Polo Garments Majunga RG N° 14/​19164, France, Cour d’appel de Paris, Pôle 1:  Chambre 1 (Mar. 29, 2016), in which a French court set aside an unpublished I.C.C. award in Peter and Kristof de Sutter, DS2, and Polo Garments Majunga S.A.R.L. v. Madagascar, I.C.C. Award (Aug. 29, 2014), for an alleged failure by the sole arbitrator to respect the parties’ right to a hearing because part of the compensation awarded to the investors had not been fully argued by parties. 46  Feldman v. Mexico, supra note 23. 47  Mexico v. Feldman, supra note 24, ¶ 34. 48  Id. ¶ 43. 49  Id. 9 ICSID Rep. 508, 520, ¶ 61. 50  These grounds correspond to the reasons for nonenforcement laid down in New York Convention, supra note 4, art. V(1)(b) and (d). 51  Cargill, Inc. v.  United Mexican States, ICSID Case No. ARB(AF)/​ 05/​2, ICSID Additional Facility Award (Sept. 18, 2009). 52  United Mexican States v. Cargill, Inc., Canada, Court of Appeal for Ontario 2011 ONCA 622 (Oct. 4, 2011), ¶ 44. 53  Mobil Investments Canada Inc. and Murphy Oil Corporation v. Canada, ICSID Case No. ARB(AF)/​ 07/​4, ICSID Additional Facility Decision on Liability (May 22, 2012), Award (Feb. 20, 2015). 54  Attorney General of Canada v. Mobil et al., Canada, Superior Court of Justice, Ontario, 2016 ONSC 790 (Feb. 16, 2016), ¶ 40.

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Enforcement of Investment Treaty Awards 29.22 The Swedish Supreme Court also rejected a challenge to set aside the SCC award in the

Sedelmayer case.55, 56 As discussed below, the award claimant subsequently managed to recover the entire unpaid amount of the award.

29.23 In 2013, the US Supreme Court reversed the set-​aside of a 2007 UNCITRAL award in BG

v Argentina57 by an appellate court.58 In BG Group PLC v Argentina,59 the main issue was whether a local litigation requirement conditioned ‘consent’ to arbitration, and was thus fully reviewable by domestic courts, or whether it was a ‘threshold’ question of a procedural nature to be determined by the arbitrators. The Supreme Court, while agreeing ‘with the dissent that a sovereign’s consent to arbitration is important [and] that sovereigns can condition their consent to arbitrate by writing various terms into their bilateral investment treaties’, held that ‘that is not the issue. The question is whether the parties intended to give courts or arbitrators primary authority to interpret and apply a threshold provision in an arbitration contract—​ when the contract is silent as to the delegation of authority. We have already explained why we believe that where, as here, the provision resembles a claims-​processing requirement and is not a requirement that affects the arbitration contract’s validity or scope, we presume that the parties (even if they are sovereigns) intended to give that authority to the arbitrators’.60

29.24 In earlier lower court decisions, US courts seemed to have gone even further by accepting

that the parties can delegate the power to decide whether a valid arbitration agreement existed or not to arbitral tribunals to the effect that domestic courts could then not challenge such a determination. The US courts referred to this problem of ‘Kompetenz-​Kompetenz’61 as questions of ‘arbitrability’.

29.25 In Ecuador v Chevron, an appellate court confirmed the decision not to stay arbitral proceed-

ings62 and held that a BIT’s incorporation of the UNCITRAL rules was clear and unmistakable evidence that the parties intended questions of ‘arbitrability’ to be decided by the arbitral panel ‘in the first instance’.63

29.26 Specifically relying on that case, the same court upheld the BIT-​based arbitration agreement

between a German investor and Thailand in proceedings seeking the confirmation of an investment award,64 holding that ‘[b]‌ecause Walter Bau and Thailand clearly and unmistakably agreed to arbitrate issues of arbitrability—​including whether the tollway project involved “approved investments”—​Thailand is not entitled to an independent judicial redetermination of that same question’.65

29.27 In 2015, however, the Russian Federation successfully challenged the largest quantum awards

so far in investment arbitration in the Yukos cases66 before a Dutch first instance court. The

  Sedelmayer v. Russian Federation, Award (July 7, 1998).   Russian Federation v. Franz J Sedelmayer, Sweden, Svea Court of Appeal, Case No. T 525-​03 (June 15, 2005), 2 Stockholm Int’l Arb. Rev. 132 (2005). 57  BG Group Plc v. Argentina, UNCITRAL, Award (Dec. 24, 2007). 58  Id. 665 F. 3d 1363 (DC Cir. 2012). 59  Id. 134 S. Ct. 1198 (2014). 60  Id. at 1212. 61 N. Blackaby, C. Partasides, A. Redfern & M. Hunter, Redfern and Hunter on International Arbitration 340 (6th ed. 2015). 62  Chevron Corporation v. Republic of Ecuador, PCA Case No.2009–​23, initiated Sept. 23, 2009. 63  Republic of Ecuador v. Chevron Corp., 638 F. 3d 384, 394 (2d Cir. 2011). 64  Walter Bau A.G. (in liquidation) v. Kingdom of Thailand, UNCITRAL Award (July 1, 2009). 65  Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau A.G. (in liquidation) v. Kingdom of Thailand, Docket No. 11-​1458-​cv (2d Cir. Aug. 8, 2012). 66  Hulley Enterprises Ltd. (Cyprus) v.  Russian Federation (2014), Award (July 18, 2014), PCA Case No. AA 226 (UNCITRAL); Yukos Universal Ltd. (Isle of Man) v. Russian Federation (2014), Award (July 55 56

804

III.  Obstacles to the Recognition and Enforcement of Investment Awards District Court of The Hague found that the UNCITRAL tribunals had erroneously exercised jurisdiction because the provisional application of the ECT on the part of the Russian Federation did not suffice for a valid agreement to arbitrate.67 The case is currently under appeal but the lower court decision demonstrates that, as to the question of a valid arbitration agreement, domestic courts will exercise full review.68 Recently, the Chromalloy/​Hilmarton debate has reached investment arbitration. As is well 29.28 known, in a number of countries courts have recognized awards set aside at the seat of the arbitration.69 However, in general, courts have been reluctant to enforce awards that had been set aside or annulled at their seat. In the course of the protracted Malicorp litigation, an English court refused to enforce an award rendered by the Cairo Centre, which had been set aside by Egyptian courts.70 The English court did not deal with the ICSID award on Malicorp.71 While suggesting that the use of the word ‘may’ in Article V of the New York Convention gave it discretion to enforce an award that had been set aside in the courts of the seat, the English court found that, in principle, it should give effect to the decision of the Cairo Court of Appeal unless it offended ‘basic principles of honesty, natural justice and domestic concepts of public policy’.72

B. The Article V(2) Grounds for Refusing Enforcement of Investment Awards In commercial arbitration, Article V(2) of the New York Convention has often proved to be 29.29 a veritable hurdle to the successful enforcement of awards. It provides: Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country.73

1. Lack of arbitrability In many countries, certain legal issues are perceived to be of such public interest that any 29.30 disputes concerning them should be settled only before the regular courts. Thus, in many 18, 2014), PCA Case No. AA 227 (UNCITRAL); Veteran Petroleum Ltd. (Cyprus) v. Russian Federation (2014), Award (July 18, 2014), PCA Case No. AA 228 (UNCITRAL). 67  Russian Federation v. Hulley Enterprises Ltd. (Cyprus), Yukos Universal Ltd. (Isle of Man) & Veteran Petroleum Ltd. (Cyprus), Rechtbank Den Haag, C/​09/​477160 /​HA ZA 15-​1, ECLI: NL: RBDHA:2016:4230 (Apr. 20, 2016), ¶ 5.95 (‘[b]‌ased only on the signature of the ECT, the Russian Federation was not bound by the provisional application of the arbitration regulations of Article 26 ECT. The Russian Federation never made unconditional offer for arbitration, in the sense of Article 26 ECT. As a result, the defendants’ “notice of arbitration” did not form a valid arbitration agreement’). 68  As to the expected enforcement problems, see also J. Fouret & P. Daureu, Enforcement of the Yukos Awards: A Second Noga Saga or a New Sedelmayer Fight?, 30 ICSID Rev.-​FILJ 336. 69  Radenska v. Kajo, Austria, Oberster Gerichtshof, Judgment (Oct. 20, 1993), 26(a) Y.B. Comm. Arb. 919 (1999); Société Nationale pour la Recherche, le Transport et la Commercialisation des Hydrocarbures (Sonatrach) v. Ford, Bacon & Davis, Inc., Belgium, Brussels Tribunal de Première Instance, Judgment (Dec. 6, 1988), 15 Y.B. Comm. Arb. 370 (1990); Société Hilmarton v. Société OTV, France, Cour de Cassation, Judgment (Mar. 23, 1994), Revue de l’Arbitrage 327 (1994); Omnium de Traitement et de Valorisation v.  Hilmarton, France, Cour de Cassation, Judgment (June 10, 1997), 22 Y.B. Comm. Arb. 696 (1997); Chromalloy Aeroservices v. Arab Republic of Egypt, 939 F. Supp. 907 (DDC 1996). 70 Malicorp Ltd. v.  Arab Republic of Egypt, Cairo Regional Centre for International Commercial Arbitration, Award (Mar. 7, 2006). 71  Malicorp Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/​08/​18, Award (Feb. 7, 2011). 72  Malicorp Ltd. v. Government of the Arab Republic of Egypt and Ors [2015] EWHC 361 (Comm). 73  New York Convention, supra note 4, art. V(2).

805

Enforcement of Investment Treaty Awards jurisdictions, competition law, intellectual property law, family law, or consumer protection law are considered non-​arbitrable.74 Over the years, however, national courts have reduced the scope of issues that might be regarded as not ‘arbitrable’. 29.31 Given the ‘hybrid’ nature of investment arbitration,75 involving both public and private

interests, it is conceivable that states may invoke the non-​arbitrability defence of Article V(2)(a) of the New York Convention. However, the fact that it is often express treaty provisions, for example, in BITs, which oblige host states to submit to arbitration, would considerably weaken their argument that the substance of expropriation or other alleged violations of investment standards are non-​arbitrable.

29.32 The lack of arbitrability was, however, successfully raised in US enforcement proceedings

concerning an award resulting from arbitration under an oil concession. In the LIAMCO case,76 the District Court for the District of Columbia declined to recognize and enforce the award rendered against Libya,77 specifically invoking Article V(2)(a) of the New  York Convention. The district court found that the subject matter of the difference was Libya’s nationalization of LIAMCO’s assets, an issue that would not have been justiciable under the US act of state doctrine.78 The precedential value of this decision is diminished by the fact that, after the parties’ settlement, the DC Court of Appeals vacated the decision.79

29.33 It should also be noted that, in US jurisprudence, the term ‘arbitrability’ is often used am-

biguously, referring not only to the question of whether certain issues may be subject to arbitration, but also whether the parties have actually agreed to arbitration.80

29.34 In general, the lack of arbitrability does not appear to have posed serious problems in the

enforcement practice concerning investment awards. A  related issue was brought up in challenge proceedings before English courts—​although with reversed roles. In Ecuador v Occidental, it was not the host state trying to oppose enforcement but, rather, the successful investor trying to oppose the challenging of an investment award,81 which raised the non-​ justiciability of the underlying dispute as a preliminary objection to the set-​aside proceedings in English courts.82 Occidental argued that the UNCITRAL arbitration seated in London was based on the US–​Ecuador BIT, which should be viewed as a ‘transaction between foreign sovereigns’, which was non-​justiciable in English law. In rejecting this argument, the English courts discussed the nature of investment treaty claims. They found that BIT claims were also not mere inter-​state rights, which for the sake of convenience could be claimed by individual investors on behalf of their home states, but rather were their ‘own rights’.83 Pursuant to the Court of Appeal, the case was justiciable since it ‘concern[ed] a Treaty intended by its

  See Redfern & Hunter, supra note 61.   Cf. Z. Douglas, The Hybrid Foundations of Investment Treaty Arbitrations, supra note 2. 76  LIAMCO v.  Libya, U.S. District Court, District of Columbia, (Jan. 18, 1980), 482 F.  Supp.  1175 (1980), 62 I.L.R. 220. 77  LIAMCO v. Libya, Mahmassani, Sole Arbitrator (Apr. 12, 1977), 62 I.L.R. 141. 78  LIAMCO v. Libya, supra note 76, 482 F. Supp. 1175, 1178 (1980), 62 I.L.R. 220, 223. 79  LIAMCO v. Libya, U.S. Court of Appeals, D.C. Circuit (May 6, 1981), 62 I.L.R. 224. 80 Republic of Ecuador v.  Chevron Corp., 638 F.  3d 384, 393 (2d Cir. 2011)  (‘  “Question  . . .  of arbitrability” is a term of art covering “dispute[s]‌about whether the parties are bound by a given arbitration clause” [i.e., formation] as well as “disagreement[s] about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy” [i.e., scope]’). See also text at 29.25. 81  Occidental v. Ecuador, supra note 30. 82  Ecuador v. Occidental, England, High Court, Queen’s Bench Division (Apr. 29, 2005), [2005] EWHC 774 (Comm), 12 ICSID Rep.  101; Court of Appeal (Sept. 9, 2005), [2005] EWCA 1116, 12 ICSID Rep. 129. 83  Ecuador v. Occidental, supra note 31, English Court of Appeal (Sept. 9, 2005), [2005] EWCA 1116, 12 ICSID Rep. 129, 138, ¶ 20. 74 75

806

III.  Obstacles to the Recognition and Enforcement of Investment Awards signatories to give rise to rights in favour of private investors capable of enforcement, to an extent specified by the Treaty wording, in consensual arbitration against one or other of its signatory States’.84 On this basis, it appears unlikely that a court would uphold a potential challenge to the en- 29.35 forcement of an investment award based on the allegation that investor rights derived from BITs or other treaties should be considered ‘non-​arbitrable’.

2. Public  policy The ‘public policy defence’ is generally considered as the most serious threat to the effective 29.36 enforcement of arbitral awards under the New York Convention. Depending on the scope of what might be covered by a state’s ordre public, the obligations under the Convention may be considerably limited. Thus, Article V(2)(b) of the New York Convention is also sometimes regarded as the ‘safety valve’ under the Convention, preventing a totally unrestricted obligation to recognize and enforce foreign arbitral awards. Over the years, however, many national courts have developed a more deferential attitude 29.37 towards international arbitration and have restricted their public policy filter. Some countries do in fact distinguish between national and international public policy. With regard to the latter standard, US courts have held that enforcement would be denied only where such enforcement would violate ‘the forum state’s most basic notions of morality and justice’.85 A Canadian court held that the purpose of the public policy defence was ‘to guard against enforcement of an award which offends our local principles of justice and fairness in a fundamental way . . .’.86 According to the ILA Committee on International Commercial Arbitration: The international public policy of any State includes: (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned; (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as ‘lois de police’ or ‘public policy rules’; and (iii) the duty of the State to respect its obligations towards other States or international organisations.87

In some challenge procedures concerning investment awards, a conflict with the public 29.38 policy of the forum state has been raised by respondent states. For instance, in the Feldman Karpa case, Mexico argued that the ICSID Additional Facility award in Feldman v Mexico88 was contrary to Canadian public policy. The tribunal had found that the investor was entitled to damages equivalent in amount to rebates that it did not receive, while domestic exporters were receiving such rebates. In Mexico’s view, the rebates given to domestic exporters were illegal and thus the foreign investor should not be entitled to the same illegal advantages. According to the Ontario Court of Appeal, however, the ‘award of damages [was] not contrary to public policy. There [was] nothing fundamentally unjust or unfair about the award. It [was] rationally connected to the discriminatory conduct found by the tribunal and [sought] to redress the effect of the discrimination. The award [was] a logical quantification of the harm caused to CEMSA by the discriminatory conduct’.89

  Id. 12 ICSID Rep. 129, 148, ¶ 37.   Parsons & Whittemore Overseas Co. v. Société Générale de l’Industrie du Papier, 508 F. 2d 969, 974 (2d Cir. 1974); Revere Copper & Brass Inc. v. Overseas Private Inv. Corp., 628 F. 2d 81, 83 (D.C. Cir.). 86  Mexico v. Feldman, supra note 24, 9 ICSID Rep. 508, 521, ¶ 66 (emphasis in original). 87  ILA Committee on International Commercial Arbitration, International Law Association Recommendations on the Application of Public Policy as a Ground for Refusing Recognition or Enforcement of International Arbitral Awards, Resolution 2/​2002, New Delhi Conference, Recommendation 1(d). 88  Feldman v. Mexico, supra note 23. 89  Mexico v. Feldman, supra note 24, ¶ 67. 84 85

807

Enforcement of Investment Treaty Awards 29.39 Another Canadian court refused to set aside a NAFTA Chapter 11 UNCITRAL award in the

S.D. Myers v Canada case on public policy grounds.90 The Federal Court of Canada found that the arbitral tribunal’s decision did not ‘breach fundamental notions and principles of justice so that the decision [was] not in conflict with the public policy of Canada’.91 Pursuant to the court, ‘ “[P]‌ublic policy” does not refer to the political position or an international position of Canada, but refers to “fundamental notions and principles of justice” ’.92

29.40 A French court refused to follow Venezuela’s argument that an ICSID Additional Facility

award93 should not be enforced because the granting of an exequatur would constitute a breach of basic principles of international public policy and respect for sovereignty.94

29.41 In addition to a more stringent or more lenient ordre public filter, the additional layer of EU

law may impede the effective enforcement of investment awards. According to the European Court of Justice (ECJ), the supremacy of European law must be respected at the enforcement stage of arbitral awards. In the Eco Swiss case, this has been put beyond doubt with regard to European competition law,95 but it may apply also to other fields of EU law. Thus, arbitral awards disregarding binding EU law may be threatened by non-​enforceability.

29.42 This threat has partly materialized in regard to the enforcement efforts of the claimants in the

Micula v Romania case,96 who had won an ICSID award against Romania because the tribunal found that the untimely termination of a state aid programme constituted a violation of fair and equitable treatment. Opposing Romania’s willingness to set off part of its award debts, the EU Commission announced that any payments amounted to the granting of state aid contrary to the principles of EU law and specifically enjoined the respondent state from complying with its obligation to accept the award as binding.97

29.43 At about the same time, however, the Swiss Supreme Court rejected an ordre public challenge

to the UNCITRAL award in EDF v Hungary,98 compliance with which would have arguably constituted a breach of EU state aid law. According to the Swiss Federal Tribunal, the arbitral tribunal had carefully analysed that there was no contradiction between the Energy

90  S.D. Myers, Inc. v. Government of Canada, Partial Award on Liability (Nov. 13, 2000); Second Partial Award on Damages (Oct. 21, 2002); Final Award on Costs (Dec. 30, 2002); 8 ICSID Rep. 18. 91  Attorney-​General of Canada v. S.D. Myers, Inc. & United Mexican States (Intervener), Canada, Federal Court (Jan. 30, 2004), 8 ICSID Rep. 194, 213, ¶ 76. 92  Id. 8 ICSID Rep. 194, 208, ¶ 55. 93  Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/​09/​1, Award (Sept. 22, 2014). 94  République Bolivarienne du Venezuela v. Société Gold Reserve Inc., RG No. 14/​21103, France, Cour d’appel de Paris, Pôle 1: Chambre 1 (Jan. 29, 2015). 95 Case C-​ 126/​97, Eco Swiss China Time Ltd. v.  Benetton International N.V., supra note 41, ¶ 37 (‘[w]‌here its domestic rules of procedure require a national court to grant an application for annulment of an arbitration award where such an application is founded on failure to observe national rules of public policy, it must also grant such an application where it is founded on failure to comply with the prohibition laid down in Article 85(1) of the Treaty’). 96 Ioan Micula, Viorel Micula, S.C. European Food S.A., S.C. Starmill S.R.L. & S.C. Multipack S.R.L.  v.  Romania, ICSID Case No. ARB/​ 05/​ 20, Final Award (Dec. 11, 2013)  [hereinafter Micula v. Romania]. 97  Commission Decision (EU) 2015/​1470 of March 30, 2015 on State aid SA.38517 (2014/​C) (ex 2014/​ NN) implemented by Romania—​Arbitral award Micula v. Romania of December 11, 2013 (notified under Document C (2015) 2112), OJ L232/​43. See also J. Chevry, Micula v.  Romania, 14 World Trade Rev. 540 (2015); C. Tietje & C. Wackernagel, Enforcement of Intra-​EU ICSID Awards. Multilevel Governance, Investment Tribunals and the Lost Opportunity of the Micula Arbitration, 16 J. World Investment & Trade 205 (2015). 98 EDF International S.A. (France) v.  Republic of Hungary, UNCITRAL Award (Dec. 4, 2014) (unpublished).

808

III.  Obstacles to the Recognition and Enforcement of Investment Awards Charter Treaty and EU law and that the compensation it awarded was less than the maximum amount fixed by the European Commission for stranded costs payments, thereby ensuring that payment of the award would not breach EU law.99

C. State Immunity as an Additional Hurdle Although the New York Convention regulates recognition and enforcement in general, the 29.44 obligation contained in its Article III to recognize and enforce foreign arbitral awards does not exclude obstacles to enforcement measures as a result of general international law, such as the rules on state immunity.100 This view was affirmed in the Sedelmayer case, where the German Federal Supreme Court 29.45 held that adherence to the New York Convention did not amount to a waiver of immunity from execution. The Court found that Article III merely required that contracting states recognize and enforce arbitral awards ‘in accordance with national rules of procedure’. In the Court’s view, the reference to ‘domestic rules of procedure’ included the general principles of international law as part of German federal law.101 These general principles, in turn, encompassed the rules on state immunity. Immunity rules may be effectively bypassed where investment award creditors can success- 29.46 fully attach funds owned by state-​enterprises. This happened in the case of Walker International Holdings v Société nationale des pétroles du 29.47 Congo (SNPC), where the attachment of funds held by French banks on the account of the national oil company of the Congo in order to satisfy an investment award debt owed by the Republic of the Congo was upheld by French courts. The Cour de Cassation confirmed the finding of the Cour d’Appel de Paris that ‘SNPC according to its Statute did not possess sufficient functional independence to take autonomous decisions in its own interest and to be considered to enjoy legal and factual autonomy vis-​à-​vis the Congolese State’.102 It should be noted, however, that, in other cases, the Cour de Cassation and other national courts have been reluctant to permit enforcement measures against assets owned by legal persons which were distinct from host states.103

99  République A. v. B., Swiss Federal Tribunal, 4A_​34/​2015, Decision (Oct. 6, 2015), ¶ 5.3.2 (‘Le Tribunal arbitral, après avoir soigneusement analysé la question sur la base des arguments avancés de part et d’autre, a jugé qu’il pouvait faire droit à la conclusion (v) de l’intimée sans porter atteinte au droit européen, étant donné, d’une part, qu’il n’y avait pas de contradiction à cet égard entre le TCE et le TFUE et, d’autre part, que l’indemnité allouée à la partie demanderesse était inférieure au montant maximum des coûts échoués éligibles, tel qu’il avait été fixé par la CE’). 100 Redfern & Hunter, supra note 61, at 654. 101 Sedelmayer v.  Russian Federation, German Federal Supreme Court, Order VII ZB 9/​ 05 (Oct. 4, 2005), NJW-​RR 2006, 198, ¶ 25 (‘[D]‌as UN-​Vollstreckungsübereinkommen bestimmt, dass beim Vorliegen bestimmter Voraussetzungen Schiedssprüche nach den inländischen Verfahrensregeln zur Vollstreckung zugelassen werden müssen und die Vollstreckung weder wesentlich strengeren Verfahrensvorschriften noch wesentlich höheren Kosten unterliegen darf als inländische Schiedssprüche (Art. 3 des UN-​ Vollstreckungsübereinkommens). Die Bezugnahme auf das inländische Verfahrensrecht schließt als Bestandteil des Bundesrechts die allgemeinen Regeln des Völkerrechts ein, zu denen die Beachtung der diplomatischen Schutzrechte gehört’). 102  Walker International Holdings v.  Société nationale des pétroles du Congo (SNPC), Cour d’Appel de Paris (Jan. 23, 2003); Cour de cassation (Feb. 6, 2007), 04-​13107 (‘la cour d’appel a pu déduire, sans encourir les griefs des moyens, que, dès lors que la SNPC n’était pas dans une indépendance fonctionnelle suffisante pour bénéficier d’une autonomie de droit et de fait à l’égard de l’Etat et que son patrimoine se confondait avec celui de l’Etat, elle devait être considérée comme une émanation de la République du Congo; que le moyen n’est pas fondé’). 103  See Benvenuti & Bonfant Srl v. Banque Commercial Congolaise, Cour de cassation Paris (July, 21, 1987), 1 ICSID Rep. 373; AIG Capital Partners Inc. & Another v. Republic of Kazakhstan (National Bank of

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Enforcement of Investment Treaty Awards 29.48 Thus, the rules on enforcement immunity applicable in the forum state where an investment

award is sought to be enforced will ultimately decide whether such attempts will be successful or not.

29.49 National rules on enforcement immunity are often contained in specific immunity legislation as,

for instance, in the United States,104 the UK,105 Canada,106 and Australia.107 Alternatively, they may stem from directly applicable international agreements, such as the European Convention on State Immunity of 1972,108 or result from customary international law incorporated into the domestic legal order. In 2004, the United Nations Convention on Jurisdictional Immunities of States and Their Property,109 based on a draft elaborated by the International Law Commission, was adopted. Subject to the required number of ratifications, it is to be expected that the rules contained in this Convention, which are also regarded as widely reflecting customary international law, will provide important guidelines for the enforcement of investment awards against assets owned by respondent states.

1. Assets immune from enforcement 29.50 Although the rules on enforcement immunity are still much more protective of the interests of

sovereign states than those concerning immunity from jurisdiction, certain trends in the law can be identified: the most important criterion to distinguish between property which may be subject to enforcement measures and property that is exempt from such measures is still the purpose of the property in question. Property serving governmental purposes is generally regarded as immune from enforcement, while enforcement measures may be taken against property serving commercial purposes.110

29.51 In addition, some jurisdictions such as Switzerland require a significant link between the dis-

pute and the forum state. In the enforcement proceedings concerning the ad hoc award in the LIAMCO case,111 the Swiss federal tribunal held that the seat of the tribunal in Switzerland did not furnish a sufficient jurisdictional link to Switzerland to justify enforcement.

29.52 The 1976 US Foreign Sovereign Immunities Act (FSIA)112 provides, among others, for

an exception from enforcement immunity for property of a foreign state located in the United States and used for commercial activity in the United States.113 Also, the 1978 UK

Kazakhstan Intervening), High Court, Queen’s Bench Division (Commercial Court) (Oct. 20, 2005), [2005] EWHC 2239 (Comm), 11 ICSID Rep. 118. 104  Foreign Sovereign Immunities Act 1976, 28 U.S.C. §§ 1330, 1602–​ 11, 15 I.L.M. 1388 (1976), as amended in 1988, 28 I.L.M. 396 (1989) and in 1996/​7, 36 I.L.M. 759 (1997). 105  State Immunity Act 1978, 17 I.L.M. 1123 (1978). 106  State Immunity Act 1982, 21 I.L.M. 798 (1982). Canada is not a party to the ICSID Convention. 107  Foreign States Immunities Act 1985, 25 I.L.M. 715 (1986). 108  European Treaty Series No. 74, 11 I.L.M. 470 (1972). 109  United Nations Convention on Jurisdictional Immunities of States and Their Property, adopted by the UN General Assembly on December 2, 2004, UN, GAOR, 59th session, Supp. No. 22 (A/​59/​22), 44 I.L.M. 803 (2005); see also G. Hafner & U. Köhler, The United Nations Convention on Jurisdictional Immunities of States and Their Property, 35 Netherlands Y.B. Int’l L. 3 (2004); D.P. Stewart, The UN Convention on Jurisdictional Immunities of States and Their Property , 99 Am. J. Int’l L. 194 (2005). 110  Cf. H. Fox, The Law of State Immunity (2d ed. 2008); A. Reinisch, European Court Practice Concerning State Immunity from Enforcement Measures, 17 Eur. J. Int’l L. 803 (2006); C. Schreuer, State Immunity: Some Recent Developments (1988). 111  Socialist People’s Libyan Arab Jamahiriya v. LIAMCO, Switzerland, Federal Tribunal (June 19, 1980), 20 I.L.M. 151 (1981), BGE 106 Ia 142. 112  15 I.L.M. 1388 (1976). 113  28 U.S.C. § 1610.

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III.  Obstacles to the Recognition and Enforcement of Investment Awards State Immunity Act (SIA)114 provides for an exception from enforcement immunity ‘[i]‌n respect of property which is for the time being in use or intended for use for commercial purposes’.115 The basic distinction between assets serving governmental purposes and those serving other 29.53 purposes is retained in the 2004 UN Convention which exempts from immunity ‘property . . . specifically in use or intended for use by the State for other than government non-​ commercial purposes’.116 In an attempt to clarify this distinction further, Article 21 of the UN Convention lists diplomatic, military, central bank, and cultural assets as types of property which should normally be regarded as serving governmental purposes.117 Since the UN Convention is not yet in force, no cases have been decided applying its provisions. However, there are already a number of national court cases interpreting and relying on provisions of the UN Convention, such as a Munich court relying on the exception of Article 19(c) of the UN Convention concerning the distinction between property serving governmental purposes and property serving commercial purposes,118 or a Berlin court relying on the ILC

  17 I.L.M. 1123 (1978).   UK SIA § 13(4). 116  UN Convention, supra note 109, art. 19, provides: No post-​judgment measures of constraint, such as attachment, arrest and execution, against property of a Stare may be taken in connection with a proceeding before a court of another State unless and except to the extent that: (a) the State has expressly consented to the taking of such measures as indicated: (i) by international agreement; (ii) by an arbitration agreement or in a written contract; or (iii) by a declaration before the court or by a written communication after a dispute between the parties has arisen; (b) the State has allocated or earmarked property for the satisfaction of the claim which is the object of that proceeding; or (c) it has been established that the property is specifically in use or intended for use by the State for other than government non-​commercial purposes and is in the territory of the State of the forum, provided that post-​judgment measures of constraint may only be taken against property that has a connection with the entity against which the proceeding was directed. 117  UN Convention, supra note 109, art. 21, provides: 1. The following categories, in particular, of property of a State shall not be considered as property specifically in use or intended for use by the State for other than government non-​commercial purposes under article 19 subparagraph (c): (a) property, including any bank account, which is used or intended for use for the purposes of the diplomatic mission of the State or its consular posts, special missions, missions to international organizations, or delegations to organs of international organizations or to international conferences; (b) property of a military character or used or intended for use in the performance of military functions; (c) property of the central bank or other monetary authority of the State; (d) property forming part of the cultural heritage of the State or part of its archives and not placed or intended to be placed on sale; (e) property forming part of an exhibition of objects of scientific, cultural or historical interest and not placed or intended to be placed on sale. 118  However, in one of the cases resulting from the enforcement attempts of Mr. Sedelmayer, a Munich appellate court held that claims for rent payment by a foreign state against a private party would fall under the exception of UN Convention art. 19(c). Thus, the claimant successfully demanded an order of attachment and transfer of garnished rent claims. Sedelmayer v. Russian Federation, Regional Court Munich (Landgericht München), Az. 20 T 8856/​07 (Feb. 21, 2008)  (‘Aus dem Übereinkommen der Vereinten Nationen über die Immunität der Staaten und ihres Vermögens von der Gerichtsbarkeit vom 2. Dezember 2004 kann die Schuldnerin gegenüber der Gläubigerin keine weiteren Rechte herleiten. Es liegt jedenfalls die Ausnahme gemäß Art. 19 lit. c) des Übereinkommens vor’). 114 115

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Enforcement of Investment Treaty Awards Commentary on the UN Convention as a subsidiary source of international law119 when interpreting the scope of a waiver of immunity and affirming that an unspecified and general waiver of enforcement immunity does not encompass property protected by the Vienna Convention on Diplomatic Relations.120 29.54 The distinction between property serving governmental purposes and property serving com-

mercial purposes as the crucial question to determine whether enforcement measures against foreign states are permissible is widely adhered to in national court practice. Recently, a number of German courts had the opportunity to elaborate on it as a result of various enforcement attempts by the successful investment claimant in the Sedelmayer case. This series of enforcement litigation arose from an investment award, Sedelmayer v Russian Federation,121 rendered by a tribunal sitting in Stockholm, which had been unsuccessfully challenged before Swedish courts122 and declared provisionally enforceable in Germany by a Berlin court.123

29.55 The successful claimant had tried to enforce this award in a number of ways, among them

by a third-​party garnishee order directed against a German airline owing flight charges to the host state stemming from over-​flight, transit, and landing rights. A Cologne court124 and, on appeal, the German Federal Supreme Court,125 disallowed this enforcement measure because it considered that the public law claims to flight charges served governmental purposes. It found that the proceeds of the charges were immediately used for aviation regulation purposes, which it characterized as a public function.126

29.56 Mr Sedelmayer was equally unsuccessful when he tried to enforce the award by attaching

VAT refunds payable by the German tax authorities to the Russian Federation. A  Berlin court decided that enforcement measures against assets of a foreign state which served official

119 Sedelmayer v.  Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Az. 25 W 15/​03 (Dec. 3, 2003), SchVZ (2004) 102, ¶ 65 (‘Die Arbeiten der Völkerrechtskommission und der International Law Association dienen der Feststellung von völkerrechtlichen Normen und sind deshalb Erkenntnisquelle des Völkerrechts (vgl. Art. 38 Abs. 1 des Statuts des Internationalen Gerichtshofes . . .)’). 120  Id. ¶ 64 (‘Entsprechendes ergibt sich aus den Artikeln 18 und 19 des Entwurfs der Völkerrechtskommission der Vereinten Nationen (International Law Commission) zur Staatenimmunität (Artikelentwürfe der ILC über die gerichtlichen Immunitäten der Staaten und ihres Eigentums, in YILC 1991 II (2), 12 ff.) und dem dazu ergangenen Bericht der Völkerrechtskommission der Vereinten Nationen. Danach ist grundsätzlich ein Verzicht auf Vollstreckungsimmunität möglich. Allerdings gelten für die Annahme eines derartigen Verzichts strenge Voraussetzungen; dies folgt aus der amtlichen Erläuterung zu Art. 19 des Entwurfs der Völkerrechtskommission (Report of the International Law Commission on the work of its 43rd Session, Document A/​46/​10, Yearbook of the International Law Commission 1991, vol. 2, 9, 59). Darin heißt es ausdrücklich, dass ein allgemeiner Verzicht oder ein Verzicht in Bezug auf sämtliches in dem Territorium belegene Vermögen nicht ausreichend wäre, um Zwangsvollstreckungsmaßnahmen gegen Vermögen zuzulassen, das dem besonderen Schutz der Wiener [Diplomatenrechts-​]Konvention unterliegt’). 121 Sedelmayer v.  Russian Federation, Award (July 7, 1998), http://​ita.law.uvic.ca/​documents/​investment_​sedelmayer_​v_​ru.pdf. (last visited Dec. 12, 2017). 122  Sedelmayer v. Russian Federation, Stockholms tingsrätt, Az. T 6-​583-​98 (Dec. 18, 2002), http://​ita. law.uvic.ca/​documents/​Sedelemyer-​StockholmTingsrat-​il18-​12-​02.2-​doc.doc (last visited Dec. 12, 2017); affirmed by Stockholm Svea Court of Appeal, T 525-​03 (June 15, 2005). 123  Sedelmayer v. Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Az. 28 Sch 23/​99 (Feb. 16, 2001), SchVZ (2004) 109. 124  Sedelmayer v. Russian Federation, Higher Regional Court Cologne (Oberlandesgericht Köln) (Oct. 6, 2003), SchVZ (2004) 99. 125  Sedelmayer v. Russian Federation, German Federal Supreme Court (Bundesgerichtshof ), Order VII ZB 9/​05 (Oct. 4, 2005). 126  Id. ¶ 20 (‘Nach diesen Maßstäben dienen die gepfändeten Ansprüche hoheitlichen Zwecken. Das Beschwerdegericht hat festgestellt, dass der Erlös aus den Ansprüchen unmittelbar für Zwecke der Luftverkehrsverwaltung verwendet werden soll. Gegen diese Feststellung hat die Rechtsbeschwerde nichts erinnert. Die Luftverkehrsverwaltung ist, wie bereits dargelegt, eine hoheitliche Aufgabe’).

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III.  Obstacles to the Recognition and Enforcement of Investment Awards purposes and were specifically protected by diplomatic law would require a waiver of immunity.127 Since the court found that, pursuant to official information of the Russian Embassy, the VAT refund claims in dispute exclusively served the maintenance of diplomatic and consular relations of the Russian Federation in Germany and that it had always been a part of the Embassy budget,128 it disallowed any enforcement measures.129 The claimant, however, did not give up. Instead, he tried a number of other enforcement 29.57 measures against the Russian Federation,130 some of which proved ultimately successful. One of the successful third-​party garnishment attempts was directed against the Deutsche 29.58 Bundesbank and a commercial bank where the Russian Federation held bank accounts serving commercial purposes. An appellate court in Frankfurt upheld the third-​party garnishee orders of a lower Frankfurt court.131 What is remarkable in this case is the fact that the Frankfurt appellate court appeared to modify the state-​friendly approach of the German Constitutional Court in the famous Philippine Embassy Bank Account case.132 In that case—​ widely relied upon by courts even outside Germany133—​the Court found that: [t]‌here is a general rule of international law that execution by the State having jurisdiction on the basis of a judicial writ of execution against a foreign State, issued in relation to non-​ sovereign action (acta iure gestionis) of that State upon that State’s things located or occupied within the national territory of the State having jurisdiction, is inadmissible without assent by the foreign State, insofar as those things serve sovereign purposes of the foreign State at the time of commencement of the enforcement measure.134

In addition, the German Constitutional Court placed a high burden on the plaintiffs by 29.59 endorsing a quasi-​presumption in favour of the sovereign purposes of an embassy account.135

127  Sedelmayer v. Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Az. 25 W 15/​03 (Dec. 3, 2003), SchVZ (2004) 102, ¶ 44 (‘Eine Zwangsvollstreckung sowohl in Vermögensgegenstände eines fremden Staates, die hoheitlichen Zwecken dienen als auch insbesondere die Zwangsvollstreckung in vom Diplomatenrecht besonders geschützte Vermögensgegenstände setzt einen entsprechenden Immunitätsverzicht des fremden Staates voraus’). 128  Id. ¶ 48 (‘Entgegen der Ansicht des Gläubigers ist hier von einem unzulässigen Eingriff in nach diesem Sinne geschütztes Vermögen auszugehen, denn es ist nach der entsprechenden Auskunft des Botschaftsrates im Auftrag des Botschafters mit Mitteilung vom 25. Oktober 2002 zugrunde zu legen, dass die streitgegenständlichen Umsatzsteuerrückerstattungsansprüche ausschließlich der Aufrechterhaltung der Funktionen der diplomatischen Missionen und der konsularischen Vertretungen der R.  F.  in der Bundesrepublik Deutschland und deren bevorrechtigten Mitgliedern sowie der Erfüllung ihrer dienstlichen Aufgaben dienen. Die Schuldnerin hat ferner vorgetragen, dass die Umsatzsteuerguthaben stets fester Bestandteil des Budgets der Botschaft wären’). 129  See also S. Kröll, Die Pfändung vom Forderungen des Russischen Staats gegen deutsche Schuldner 223 (2004). 130  See, for an interesting account on the part of the claimant himself, Franz J. Sedelmayer, Franz J. Sedelmayer vs. The Russian Federation: The Tribulations of an Arbitral Award Winning Party, 3(5) Transnat’l Disp. Mgmt. (2006). 131 Sedelmayer v.  Russian Federation, Amtsgericht Frankfurt, 83 M 12303/​ 2001, Pfändungs-​und Überweisungsbeschluss (Jan. 22, 2002). 132 Philippine Embassy Bank Account Case, Federal Constitutional Court (Bundesverfassungsgericht (Dec. 13, 1977), 46 BVerfG 342; 65 I.L.R. 146. 133  See A. Reinisch, European Court Practice Concerning State Immunity from Enforcement Measures, 17 Eur. J. Int’l L. 803 (2006). 134  Philippine Embassy Case, supra note 132, 65 I.L.R. 146, at 164, confirmed in the NIOC Revenues Case, Federal Constitutional Court (Bundesverfassungsgericht) (Apr. 12, 1983), BVerfGE 64, 1; 65 I.L.R. 215, at 242. See also Spanish Consular Bank Accounts Case, Regional Court Stuttgart (Landgericht Stuttgart (Sept. 21, 1971), 65 I.L.R. 114, at 117. 135  Philippine Embassy Case, supra note 132, 65 I.L.R. 146, at 186, 189 (‘Because of the difficulties of delimitation involved in judging whether that ability to function is endangered, and because of the potential for abuse, general international law makes the area of protection enjoyed by the foreign State very wide and refers

813

Enforcement of Investment Treaty Awards The Frankfurt appellate court, however, demanded that the state claiming enforcement immunity should substantiate and not only allege the sovereign purpose of property claimed immune from execution. In the case at hand, involving among others Russian accounts with the Deutsche Bundesbank, the court found that while the debtor had claimed the sovereign purpose of its bank accounts with the third-​party debtor, it had merely argued that the latter was not a private law credit institution which held an ordinary account in favour of the debtor. Because the court did not hear any substantiated submissions with regard to a sovereign purpose, it found that the enforcement immunity of the debtor did not exist.136 29.60 Another successful third-​party garnishment was directed against tenants of the respondent in

a central Berlin shopping district at Friedrichstraße. Different German courts permitted the garnishment of rent payments owed to instrumentalities of the Russian Federation and ordered the tenants as third-​party debtors to pay directly to the claimant Sedelmayer. One court expressly found that the claims to be garnished resulted from the renting of business premises. In the court’s view, ‘such claims do not stem from the execution of sovereign purposes but from the debtor’s participation in normal business life in Germany’.137 Sedelmayer was similarly successful with regard to real property in Cologne, which was owned by the Russian Federation. German courts regarded the forced administration and forced sale of such real property not serving sovereign purposes but rented on commercial terms as lawful.138

29.61 Mr Sedelmayer was equally successful with similar arguments before the Swedish courts,

when they permitted him to collect rent payments owed to the Russian Federation.139

29.62 Less successful was his attempt to have a forced mortgage registered on buildings owned by the

Russian Federation, since a Berlin Court held that this was precluded on state immunity grounds where the foreign state used the real property in issue also for housing its diplomats.140

to the typical, abstract danger, but not to the specific threat to the ability of the diplomatic mission . . . for the executing authorities of the receiving State to require the sending State, without its consent, to provide details concerning the existence or the past, present or future purposes of funds in such an account would constitute interference, contrary to international law, in matters within the exclusive competence of the sending State’). 136 Sedelmayer v.  Russian Federation, Higher Regional Court Frankfurt a.M. (Oberlandesgericht Frankfurt a.M.), Beschluss, 26 W 101/​2002 (Oct. 4, 2002) (‘Die Schuldnerin hat zwar die hoheitliche Zwecksetzung von Guthaben auf Konten der Schuldnerin bei der Drittschuldnerin zu 1.) behauptet; sie hat sich insofern jedoch darauf beschränkt, zur Begründung auszuführen, die Drittschuldnerin zu 1.) sei kein privatrechtlich verfasstes Kreditinstitut, das “ein gewöhnliches Konto” für die Schuldnerin führe. . . . Auch in den Ausführungen der Schriftsätze . . . finden sich keine substantiierten Darlegungen zu einer hoheitlichen Zwecksetzung. Eine Vollstreckungsimmunität der Schuldnerin besteht danach nicht’). 137 Sedelmayer v.  Russian Federation, Regional Court Hagen (Landgericht Hagen), Beschluss, 3 T 405/​07 (Jan. 16, 2008) (‘Die Forderung, deren Pfändung und Überweisung der Gläubiger beantragt hat, resultiert nicht aus der Wahrnehmung hoheitlicher Zwecke, sondern aus der Teilnahme der Schuldnerin am normalen Wirtschaftsleben auf dem Gebiet der Bundesrepublik Deutschland. Der zu pfändende angebliche Anspruch der Schuldnerin gegen die Drittschuldnerinnen entspringt der Vermietung bzw. Verpachtung von Ladenlokalen in dem Gebäude Friedrichstraße . . .’). 138  Sedelmayer v. Russian Federation, Regional Court Cologne (Landgericht Köln), Beschluss (May 11, 2007), Oberlandesgericht Köln, Az. 22 U 98/​07 (Mar. 18, 2008); Russian Federation v. Sedelmayer, German Federal Supreme Court (Bundesgerichtshof ), Order IX ZR 64/​08 (Nov. 6, 2005). 139  Russian Federation v. Franz J Sedelmayer, Supreme Court of Sweden, Case No. Ö 170-​ 10 (July 1, 2011), ¶ 22, permitting the withholding of rent payments owed to the Russian Federation because the building was no longer used for official purposes of the Russian embassy or trade delegation, but rather rented for ‘purposes under private law that were of a non-​commercial, but also non-​official nature’, i.e. they were largely let to visiting researchers and students. 140 Sedelmayer v.  Russian Federation, Higher Regional Court Berlin (Kammergericht Berlin), Order, 1 W 276/​09 (June 14, 2010) (‘Der Eintragung einer Zwangssicherungshypothek an dem in Deutschland belegenen Gebäudeeigentum eines ausländischen Staates steht die Staatenimmunität entgegen, wenn der ausländische Staat Wohnungen in diesem Gebäude Diplomaten seiner diplomatischen Mission als Dienstwohnung überlassen hat’).

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IV.  Enforcement of ICSID Awards 2. Waiver of enforcement immunity Most immunity regimes permit not only waivers of jurisdictional immunity but also of im- 29.63 munity from enforcement measures. Such enforcement waivers must be separate and are generally not considered implied in a waiver of jurisdictional immunity.141 This is firmly established in the judicial practice of most states.142 The 1980 Swedish appellate court decision in the LIAMCO case,143 as well as the 2000 French Cour de Cassation decision in the Creighton case,144 in which submissions to ad hoc/​ICC arbitration were interpreted to amount to implicit waivers of enforcement immunity appear to have remained exceptional rulings. In the Sedelmayer case, for instance, the German Federal Supreme Court insisted that consent to arbitration contained in a BIT did not amount to a waiver of immunity from execution.145

IV.  Enforcement of ICSID Awards The enforcement of ICSID awards is directly regulated by the ICSID Convention, which 29.64 provides that awards shall be enforced in all contracting states, in the same way as judgments of their own domestic courts. This excludes even the exceptions, most importantly, the ‘public policy defence’, that would be available under the New York Convention. The only remaining obstacle to a quasi-​automatic enforcement of ICSID awards are the rules on state immunity from execution, which are expressly reserved in Article 55 of the ICSID Convention.146

141  Cf. UN Convention art. 20, which states that ‘consent to the exercise of jurisdiction . . . shall not imply consent to the taking of measures of constraint’. See also UK SIA § 13(3), which provides that ‘[a]‌provision merely submitting to the jurisdiction of the courts is not to be interpreted as a consent for the purposes of this subsection’. 142  See, e.g., Socialist Federal Republic of Yugoslavia v.  Societé Européenne d’Etudes et d’Entreprises, Tribunal de grande instance of Paris (July 6, 1970), 65 I.L.R. 46, at 49; République Islamique d’Iran et consorts c/​sociétés Eurodif et Sofidif, Cour d’appel de Paris (Apr. 21, 1982), 65 I.L.R. 93, at 97; Socifros c/​URSS, Cour d’appel d’Aix (Nov. 23, 1938), 9 Ann. Dig. (1938–​40), 236, at 237. See also A. Reinisch, European Court Practice Concerning State Immunity from Enforcement Measures, 17 Eur. J. Int’l L. 803, 817 ff. (2006). 143  Libyan American Oil Company v.  Libya, Sweden, Svea Court of Appeal (Svea hovrätt) (June 18, 1980), 62 I.L.R. 225. 144  Société Creighton c/​ministre des finances de l’Etat du Qatar et autres, Cour de cassation (1re chambre civile) (July 6, 2000), Bulletin civil I, 207 Revue de l’arbitrage (2001) 114 (‘L’engagement pris par un Etat signataire de la clause d’arbitrage d’exécuter la sentence dans les termes de l’article 24 du règlement d’arbitrage de la chambre de commerce international implique renonciation de cet Etat à l’immunité d’exécution’). 145 Sedelmayer v.  Russian Federation, German Federal Supreme Court, Order VII ZB 9/​ 05 (Oct. 4, 2005), ¶ 23. 146  See, on the enforcement of ICSID awards in general, A.S. Alexandroff & I.A. Laird, Compliance and Enforcement, in The Oxford Handbook of International Investment Law 1172 (P. Muchlinski, F. Ortino & C. Schreuer eds., 2008); S.A. Alexandrov, Enforcement of ICSID Awards:  Articles 53 and 54 of the ICSID Convention, in International Investment Law of the 21st Century: Essays in Honour of Christoph Schreuer 322 (C. Binder, U. Kriebaum, A. Reinisch & S. Wittich eds., 2009); E. Baldwin, M. Kantor & M. Nolan, Limits to Enforcement of ICSID Awards, 23(1) J. Int’l Arb. 1 (2006); Enforcement of Arbitral Awards against Sovereigns (R. Doak Bishop ed., 2009); A.K. Bjorklund, State Immunity and the Enforcement of Investor-​State Arbitral Awards, in International Investment Law of the 21st Century: Essays in Honour of Christoph Schreuer 302 (Christina Binder, Ursula Kriebaum, August Reinisch, and Stephan Wittich eds., 2009); A. Boralessa, Enforcement in the United States and United Kingdom of ICSID Awards Against the Republic of Argentina: Obstacles that Transnational Corporations May Face, 17 N.Y. Int’l L. Rev. 53 (2004); A. Broches, Awards Rendered Pursuant to the ICSID Convention: Binding Force, Finality, Recognition, Enforcement, Execution, 2 ICSID Rev.-​FILJ 287 (1987); G. Cane, The Enforcement of ICSID Awards:  Revolutionary or Ineffective?, 15 Am. Rev. Int’l Arb. 439 (2004); S. Choi, Judicial Enforcement of Arbitration Awards under the ICSID and New  York Conventions, 28 N.Y.U. J.  Int’l L.  &

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Enforcement of Investment Treaty Awards 29.65 ICSID Additional Facility arbitration is not governed by the ICSID Convention.147

Additional Facility awards have to be enforced pursuant to the national law applicable and thus, in many cases, pursuant to the rules laid down in the New York Convention.148 This is one of the reasons why the ICSID Additional Facility Arbitration Rules provide that proceedings shall be held in states that are parties to the New York Convention.149

A. The Autonomous International Law Obligation to Comply with ICSID Awards 29.66 The legal regime governing the enforcement of ICSID awards is very different from the one

applied in the case of non-​ICSID awards, which may be enforced pursuant to the New York Convention in the domestic courts of the Convention’s contracting parties. The ICSID Convention contains not only a special and even very strict enforcement obligation of national courts but also a genuine international law obligation to comply with the outcome of ICSID proceedings.

29.67 Article 53 of the ICSID Convention provides for the binding force of awards and requires

that the parties ‘shall abide by and comply with the terms of the award’.150 This obligation is independent of any potentially available defence to enforcement measures in domestic courts. The non-​observance of the ICSID Convention obligation to comply with ICSID awards may revive the right of diplomatic protection of the home state of the prevailing investor,151 and it could even lead to proceedings being brought before the ICJ pursuant to Article 64 of the Convention.152 The possibility of such consequences was expressly contemplated by the ad hoc Committee in the MINE v Guinea case153 and reaffirmed by the ad hoc Committee in the Mitchell v Congo case, which stated: The immunity of a State from execution (Article 55 of the Convention) does not exempt it from enforcing the award, given its formal commitment in this respect following signature of

Pol. 175 (1995); Delaume, Enforcement of State Contract Awards’, supra note 14; S. Kröll, Enforcement of Awards, in International Investment Law: A Handbook 1482 (M. Bungenberg, J. Griebel, S. Hobe & A. Reinisch eds., 2015); C. Schreuer, L. Malintoppi, A. Reinisch & A. Sinclair, The ICSID Convention. A Commentary 1096 ff. (2d ed. 2009) [hereinafter Schreuer et al., A Commentary]. 147  See Additional Facility Rules art. 3 (‘Since the proceedings envisaged by Article 2 are outside the jurisdiction of the Centre, none of the provisions of the Convention shall be applicable to them or to recommendations, awards, or reports which may be rendered therein’). 148  See Schreuer et al., A Commentary, supra note 146, art. 53, ¶ 8. 149  ICSID Additional Facility Rules art. 20, entitled ‘Limitation on Choice of Forum’, provides: ‘Arbitration proceedings shall be held only in States that are parties to the 1958 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards’. 150  ICSID Convention, supra note 3, art. 53(1), provides: ‘The award shall be binding on the parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention. Each party shall abide by and comply with the terms of the award except to the extent that enforcement shall have been stayed pursuant to the relevant provisions of this Convention’. 151  ICSID Convention, supra note 3, art. 27(1), provides: ‘No Contracting State shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its nationals and another Contracting State shall have consented to submit or shall have submitted to arbitration under this Convention, unless such other Contracting State shall have failed to abide by and comply with the award rendered in such dispute’. 152  ICSID Convention, supra note 3, art. 64, provides: ‘Any dispute arising between Contracting States concerning the interpretation or application of this Convention which is not settled by negotiation shall be referred to the International Court of Justice by the application of any party to such dispute, unless the States concerned agree to another method of settlement’. 153  MINE v. Guinea, Interim Order No. 1 on Guinea’s Application for Stay of Enforcement of the Award (Aug. 12, 1988), 4 ICSID Rep. 115, 116, ¶ 25.

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IV.  Enforcement of ICSID Awards the Convention. If it does not enforce the award, its behaviour is subject to various indirect sanctions. Precisely, reference is made to Articles 27 and 64 of the Convention. The investor’s State has the right, according to Article 27, to exercise diplomatic protection against the State which does not respect its obligation to enforce an arbitral award of the Centre; but also, according to Article 64, to have recourse to the International Court of Justice. Moreover, a State’s refusal to enforce an ICSID award may have a negative effect on this State’s position in the international community with respect to the continuation of international financing or the inflow of other investments.154

B. Exclusivity The exclusive nature of the enforcement rules of the ICSID Convention also implies that the 29.68 grounds for non-​recognition and non-​enforcement available under the New York Convention cannot be raised before national courts where the enforcement of ICSID awards is sought. Procedural defects that may attach to an investment award which could lead to a denial of recognition and enforcement under Article V(1) of the New York Convention may not be invoked before national courts. However, the annulment procedure under Article 52 of the ICSID Convention provides a functional equivalent to correct certain grave deficiencies of arbitral proceedings governed by the ICSID Convention.155 This exclusive nature of the control mechanisms of the ICSID Convention was confirmed by the ad hoc Committee in the MINE v Guinea case, which held: Article 53 of the Convention provides that the award shall be binding on the parties ‘and shall not be subject to any appeal or to any other remedy except those provided for in this Convention’. The post-​award procedures (remedies) provided for in the Convention, namely, addition to, and correction of, the award (Art. 49), and interpretation (Art. 50), revision (Art. 51) and annulment (Art. 52) of the award are to be exercised within the framework of the Convention and in accordance with its provisions. It appears from these provisions that the Convention excludes any attack on the award in national courts.156

Instead of the diverse grounds for non-​recognition available under Article V(1) of the 29.69 New York Convention, the ICSID Convention provides for a strict obligation to recognize and enforce ICSID awards. This was recognized by the French Cour de Cassation in the SOABI case, which held 29.70 that: ‘the Washington Convention of 18 March 1965 has instituted in its Articles 53 and 54 an autonomous and simplified regime for recognition and enforcement which excludes that provided for in [national law]’.157 An obiter dictum to the same effect can be found in the English Occidental case, where the Court of Appeal found: In the case of an ICSID arbitration, no recourse to the English court is currently possible under the Arbitration Act 1996: see the Arbitration (International Investment Disputes) Act 1966 s.3(2). The ICSID scheme also differs in having its own enforcement mechanism, so that the New York Convention is inapplicable.158

154  Patrick Mitchell v. Democratic Republic of the Congo, Decision on the Stay of Enforcement of the Award (Nov. 30 2004), ¶ 41 [hereinafter Mitchell v. Congo]. 155  See Schreuer et al., A Commentary, supra note 146, art. 53, ¶ 18, referring to the ‘self-​contained’ and ‘exhaustive’ nature of review procedures and remedies under the ICSID Convention. 156  MINE v. Guinea, Decision on Annulment (Dec. 22, 1989), 4 ICSID Rep. 79, 84, ¶ 4.02. 157  SOABI v. Senegal, France, Cour de Cassation (June 11, 1991), 2 ICSID Rep. 341. This decision reversed a court of appeal judgment which had denied recognition of an ICSID award as contrary to French public policy. SOABI v. Senegal, Cour d’appel, Paris (Dec. 5, 1989), 2 ICSID Rep. 338. 158  Ecuador v. Occidental, supra note 31, English Court of Appeal (Sept. 9, 2005) [2005] EWCA 1116, 12 ICSID Rep. 129, 148, ¶ 38.

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Enforcement of Investment Treaty Awards C. The Strict Obligation to Recognize and Enforce ICSID Awards 29.71 The obligation to recognize and enforce ICSID awards is basically an unrestricted one that

excludes any substantive review on the part of national courts by requiring states parties to the ICSID Convention to treat such awards in the same way as final judgments of their own national courts. It is expressly laid down in Article 54(1) of the ICSID Convention, which provides: ‘Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State . . .’.

29.72 Although this requirement is limited to the ‘pecuniary obligations’ contained in awards, in

practice this duty leads to a very high level of enforceability of awards.

29.73 However, the fact that Article 54(1) assimilates ICSID awards to final judgments of domestic

courts implies that enforcement may be resisted in countries where national rules provide for the exceptional refusal to enforce a final judgment.159 Although this possibility was acknowledged during the drafting of the Convention,160 it does not seem to have been relied upon in practice in order to refuse recognition and enforcement of ICSID awards. One should note, however, that in the course of the wave of ICSID cases brought against Argentina, this state announced its intention to challenge the constitutionality of ICSID awards under its domestic law based on an interpretation of Articles 53 and 54 of the ICSID Convention, which would allow domestic review.161 Argentina further argued that ‘an investor seeking recognition and enforcement of an ICSID award against Argentina has to follow the procedures provided for in the laws concerning the enforcement of judgments in force in Argentina’.162 This view was strongly rejected by other ICSID contracting parties.163 More recently, Argentina has changed course and agreed to settle a number of its outstanding investment arbitration awards, often with a reduction of 25 per cent to 33 per cent.164

29.74 Past attempts to resist enforcement of awards relied mainly upon rules concerning state im-

munity from execution.

D. State Immunity Rules on Enforcement Measures as Remaining Obstacles 29.75 While the ICSID Convention’s assimilation of ICSID awards to domestic courts’ judgments,

coupled with its obligation to recognize and enforce such awards, effectively eliminated the limited review powers national courts enjoy under the regime of the New York Convention, Article 55 of the ICSID Convention makes clear that state immunity rules may still constitute a bar to enforcement of ICSID awards. This Article expressly provides: ‘Nothing in

159  See E. Baldwin et al., Limits to Enforcement of ICSID Awards, 23(1) J. Int’l Arb. 1, 9 ff. (2006), who give examples from U.S. and French law providing for exceptional grounds to refuse enforcement of domestic judgments. 160  According to A. Broches, ‘treating awards in the same way as court judgments implied that exceptional grounds only could be invoked to prevent recognition and enforcement’: see A. Broches, Awards Rendered Pursuant to the ICSID Convention:  Binding Force, Finality, Recognition, Enforcement, Execution, 2 ICSID Rev.-​FLJ 287, 312 (1987). 161  See G.  Bottini, Recognition and Enforcement of ICSID Awards, Transnational Dispute Management (May 2008); Alexandrov, Enforcement of ICSID Awards’, supra note 146. 162  Letter of Argentina, dated April 7, 2008, cited in Letter from United States Department of State to Ms. Claudia Frutos-​Peterson, Secretary of the Ad Hoc Committee (Siemens) (May 1, 2008), http://​ita.law.uvic. ca/​documents/​Siemens-​USsubmission.pdf (last visited Dec. 12, 2017). 163  Id. at 2. 164  See IAReporter (May 15, 2016), at http://​www.iareporter.com/​articles/​argentina-​announces-​another-​settlement-​of-​unpaid-​bit-​awards-​once-​again-​at-​a-​discount/​ (last visited Dec. 12, 2017).

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IV.  Enforcement of ICSID Awards Article 54 shall be construed as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from execution’.165

1. Assets immune from enforcement The basic distinction between property serving governmental purposes which is generally re- 29.76 garded immune from enforcement and property serving commercial purposes against which enforcement measures may be taken can be identified in most cases involving attempts to enforce ICSID awards in national courts. The enforcement immunity enjoyed by foreign state property serving governmental pur- 29.77 poses, as contained in the 1976 US FSIA,166 was relied upon in the LETCO case, where a successful ICSID claimant tried to enforce an award.167 The District Court for the Southern District of New York found that the property in question was not ‘used for a commercial activity in the United States’. The assets were registration fees and other taxes owed from ships flying the Liberian flag. The Court held that these were revenues for the support and maintenance of government functions. Therefore, Liberia’s motion to vacate the executions was granted.168 Also, a subsequent attempt to attach Liberian-​owned bank accounts for enforcement purposes remained unsuccessful. Although the accounts served mixed purposes, partly the running of the embassy and partly commercial ones, the US courts refused to allow enforcement steps. The DC District Court held: The Court presumes that some portion of the funds in the bank accounts may be used for commercial activities in connection with running the Embassy, such as transactions to purchase goods or services from private entities. The legislative history of the FSIA indicates that these funds would be used for a commercial activity and not be immune from attachment. The Court, however, declines to order that if any portion of a bank account is used for a commercial activity then the entire account loses its immunity . . . On the contrary, following the narrow definition of ‘commercial activity’, funds used for commercial activities which are ‘incidental’ or ‘auxiliary’, not denoting the essential character of the use of the funds in question, would not cause the entire bank account to lose its mantle of sovereign immunity.169

Another statutory immunity provision was the subject of enforcement proceedings in English 29.78 courts. The 1978 UK State Immunity Act (SIA)170 provides, inter alia, that ‘[p]‌roperty of a State’s central bank or other monetary authority shall not be regarded . . . as in use or intended for use for commercial purposes’.171 This statutory definition of the non-​commercial nature of assets owned by a central bank was crucial in the decision of the High Court in AIG Capital Partners v Kazakhstan,172 where successful ICSID claimants failed to enforce an ICSID award173 against assets of the National Bank of Kazakhstan. Although the rejection was mainly based on the fact that the court considered the National Bank of Kazakhstan to be a separate legal person, whose assets could not be regarded as assets of the state of

  ICSID Convention,, supra note 3, art. 55.   28 U.S.C. § 1610. 167  LETCO v. Liberia (Mar. 31, 1986), 2 ICSID Rep. 343. 168  LETCO v. Liberia, District Court, S.D.N.Y. (Dec. 12, 1986), 2 ICSID Rep. 385, 388–​09. 169  LETCO v. Liberia, District Court, D.C. (Apr. 16, 1987), 2 ICSID Rep. 390, 395. 170  17 I.L.M. 1123 (1978). 171  UK SIA § 14(4). 172 AIG Capital Partners Inc. and Anor v.  Republic of Kazakhstan (National Bank of Kazakhstan Intervening), supra note 103. 173  AIG Capital Partners Inc. & CJSC Tema Real Estate Company v.  Republic of Kazakhstan, Award (Oct. 7, 2003), 11 ICSID Rep. 7. 165 166

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Enforcement of Investment Treaty Awards Kazakhstan, it was also based on what the English court termed the ‘complete immunity’ of a foreign state’s central bank property from the enforcement process in UK courts: Given the wording of Sec. 14(4), then the property of a State’s central bank (or other monetary authority) must enjoy complete immunity from the enforcement process in the UK courts . . . If the central bank (etc.) has an interest in the property concerned, but the State of the central bank has another interest in the same property, then in my view the effect of Sec. 14(4) is that the relevant property is immune from enforcement in respect of a judgment against that State, whether the property concerned is in use or intended for use for commercial purposes or not.174 29.79 The distinction between property designated for commercial purposes—​and thus not im-

mune from enforcement measures—​and property serving governmental purposes—​and thus immune from enforcement—​has also been relied upon by French courts. In the context of attempts to enforce the ICSID award in the SOABI v Senegal case,175 the Paris Cour d’Appel held: Considering that the immunity from enforcement [exécution] enjoyed by a foreign State in France is a matter of principle; that in exceptional circumstances it can be set aside when the assets against which enforcement is sought have been assigned by the State to an economic and commercial activity governed by private law; . . . 176

29.80 In a similar vein, the Swiss Supreme Court recently affirmed the relevance of this distinction

and held that assets intended for uses by a foreign state in the exercise of its sovereign authority were excluded from enforcement proceedings and thus immune from enforcement measures.177 It rejected an attempt of a successful ICSID claimant178 to attach assets held by the International Air Transport Association (IATA) in the name of a Kyrgyz State company because it found that these funds were exclusively allocated to activities performed in the exercise of sovereign authority, that is, the surveillance of national airspace.

2. Waiver of enforcement immunity 29.81 The possibility of waiving enforcement immunity prompted ICSID to supply model clauses

involving waivers from enforcement measures. For instance, clause 15 of the 1993 Model Clauses provides: ‘The Host State hereby waives any right of sovereign immunity as to it and its property in respect of the enforcement and execution of any award rendered by an Arbitral Tribunal constituted pursuant to this agreement’.179 It has been suggested, however, that—​given the restrictive approach of many national courts—​such clauses could be interpreted to apply only to a state’s non-​sovereign, commercial property. Thus, it may be advisable to receive a broader waiver expressly extending to ‘any property regardless of its commercial or non-​commercial nature’.180

E. Other Failed Attempts to Enforce ICSID Awards 29.82 Attempts to enforce ICSID awards against assets owned by entities that may be related to re-

spondent states but are not identical with them have proven futile in the past. This is exemplified by

  AIG Capital v. Kazakhstan, 11 ICSID Rep. 118, 141.   SOABI v. Senegal, Award (Feb. 25, 1988), 2 ICSID Rep. 190. 176  SOABI v. Senegal, Cour d’appel, Paris (Dec. 5, 1989), 2 ICSID Rep. 338, 340. 177  Swiss Federal Tribunal, 5A_​681/​2011, Decision (Nov. 23, 2011), 30 ASA Bulletin 4/​2012, 816. 178  Sistem Muhendislik Insaat Sanayi ve Ticaret A.S. v. Kyrgyz Republic, ICSID Case No. ARB(AF)/​06/​ 1, Award (Sept. 9, 2009). 179  Doc. ICSID/​5/​Rev. 2, 4 ICSID Rep. 366. 180  Schreuer et al., A Commentary, supra note 146, art. 55, ¶ 104. 174 175

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V.  Alternative Enforcement Mechanisms the unsuccessful legal proceedings instituted before French courts trying to attach funds owned by the Banque Commerciale Congolaise in order to enforce the ICSID award in Benvenuti & Bonfant v Congo.181 The Cour de Cassation found that this bank, although dependent upon the state of the Congo, was distinct from it and could not be regarded as its emanation.182 Similarly, in AIG Capital Partners v Kazakhstan,183 the investors failed to enforce an ICSID Award184 against assets of the National Bank of Kazakhstan. The English High Court deemed the fact that the Republic of Kazakhstan may have ultimately had a beneficial interest in the assets concerned irrelevant and disallowed attachment proceedings against assets not directly owned by the respondent state. The same reasoning was applied by a Canadian court refusing to enforce an investment award185 against assets owned by an entity fully owned by the respondent state. The court nevertheless insisted on the separate legal personality and found that ‘[t]‌he Republic is the sole shareholder of Kyrgyzaltyn but does not own the assets of Kyrgyzaltyn’.186 Similarly, a Swiss court declined to enforce an ICSID award187 rendered against Argentina by attaching assets owned by one of Argentina’s provinces.188

V.  Alternative Enforcement Mechanisms In addition to the assistance of national courts with the enforcement of investment awards 29.83 through the procedural means available under the New  York Convention or the ICSID Convention, there are a number of other more informal mechanisms which may be relied upon in order to secure compliance with arbitral awards in the investment field. In particular, the role or maybe only the threat of diplomatic protection should not be under- 29.84 estimated. While ICSID arbitration aims at the elimination of the involvement of home states of investors in investment disputes, in order to ensure a certain depoliticization of such conflicts,189 it clearly permits diplomatic protection to be used ‘again’ in case a state fails to comply with an award.190 Thus, political pressure may add to the reputational issues deriving from non-​compliance with awards. In the field of foreign investment, which is widely influenced by competition among poten- 29.85 tial host states concerned about their investment climate as an attraction to foreign investors and thus to the influx of foreign capital, such specific forms of political and economic cost-​ benefit analyses of states play an important, although hardly measurable, role.   Benvenuti & Bonfant v. Congo, Award (Aug. 15, 1980), 1 ICSID Rep. 330.   Benvenuti & Bonfant Srl v. Banque Commercial Congolaise, Cour de cassation Paris (July 21, 1987), 1 ICSID Rep. 373, 374; 115 Journal du Droit International 108 (1988). 183 AIG Capital Partners Inc. and Anor v.  Republic of Kazakhstan (National Bank of Kazakhstan Intervening), High Court, Queen’s Bench Division (Commercial Court) (Oct. 20, 2005), [2005] EWHC 2239 (Comm), 11 ICSID Rep. 118. 184  AIG Capital Partners Inc. & CJSC Tema Real Estate Company v.  Republic of Kazakhstan, Award (Oct. 7, 2003), 11 ICSID Rep. 7. 185  Valeri Belokon v. Kyrgyz Republic, UNCITRAL Award (Oct. 24, 2014). 186  Belokon et al. v. Kyrgyz Republic, Canada, Superior Court of Justice, Ontario, 2016 ONSC 4506 (July 11, 2016), at 16. 187  CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/​ 01/​8, Award (May 12, 2005). 188 Bezirksgericht Zurich, Decision (Mar. 25, 2008)  No. EQ080051/​ U, unpublished; reported in S. Giroud, Enforcement against State Assets and Execution of ICSID Awards in Switzerland: How Swiss Courts Deal with Immunity Defences, 30 ASA Bulletin 4/​2012 (December) 758, 765. 189  See I.F.I. Shihata, Towards a Greater Depoliticization of Investment Disputes:  The Roles of ICSID and MIGA, 1 ICSID Rev.-​FILJ 1 (1986). 190  This follows from ICSID Convention, supra note 3, art. 27(1), which permits diplomatic protection if a ‘Contracting State shall have failed to abide by and comply with the award rendered in such dispute’. 181 182

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Enforcement of Investment Treaty Awards 29.86 In addition to the concerns of host states about how their ‘investment climate’ is perceived

by potential investors, it is sometimes suggested that the institutional link of ICSID to the IBRD may create additional pressure for investment receiving states to comply with ICSID awards.191 Recently, an ICSID ad hoc committee shared this concept, stating that ‘a State’s refusal to enforce an ICSID award may have a negative effect on this State’s position in the international community with respect to the continuation of international financing or the inflow of other investments’.192 In fact, the World Bank Operational Manual foresees under ‘Disputes over Defaults on External Debt, Expropriation, and Breach of Contract’ that, under such circumstances, no new loans may be made to the countries concerned.193 It is hard to assess, however, whether this option has been relied upon in practice.

VI. Conclusion 29.87 The booming ‘industry’ of investment arbitration has resulted in a multitude of arbitral

awards under both ICSID and other arbitration rules. In the majority of that fraction of cases in which host states were found to have incurred liability, the awards seem to have been voluntarily complied with. Enforcement in national courts appears to be a rare phenomenon. At least the investment arbitration boom has not yet led to a substantial case law before national courts concerning enforcement issues. This relative lack of judicial practice should not be interpreted as evidence of an ineffective system. It may, quite to the contrary, signify that, because of the high likelihood of effective enforcement, states prefer to comply with arbitral awards ‘voluntarily’. Precise knowledge of the potential and of the limits of the enforcement regimes available to investment awards is thus crucial for a correct assessment of the effectiveness of investment arbitration.

191  Cf. S. Franck, who argues that with arbitration ‘before ICSID, an entity affiliated with the World Bank, there may be institutional gravitas that creates an incentive for sovereigns to comply with ICSID awards, lest they have difficulty securing future World Bank financing’: see S. Franck, Foreign Direct Investment, Investment Treaty Arbitration, and the Rule of Law, 19 Pac. McGeorge Global Bus. & Dev. L.J. 337, 372. 192  Mitchell v.  Congo, supra note 154, Decision on the Stay of Enforcement of the Award (Nov. 30 2004), ¶ 41. 193  II World Bank Operational Manual, BP 7.40, provides: ‘When a dispute over default, expropriation, or governmental breach of contract comes to the attention of a Bank staff member, the staff member informs the country department (CD) director and the Legal Department (LEG). In consultation with LEG, the CD director recommends a Bank position to the Regional vice president (RVP). If, on this basis, the RVP decides not to make any new loans to the country, the RVP informs the relevant managing director and the Senior Vice President and General Counsel’.

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30 A PRACTICAL GUIDE Research Tools in International Investment Law Julien Fouret

I. Introduction  II. Arbitral Case Law and Public International Case Law  A. Case Law  B. Journal Reviews of Investment Arbitration Case Law 

B. Fundamental Rules of Treaty Interpretation in Public International Law 

30.01 30.08 30.09

IV. Customary International Law 

A. What Is International Custom and How Is a Customary Norm Created?  B. Means to Identify Customary Norms in Public International Law  C. Applicability and Relevance of Customary Norms in International Investment Law 

30.10

III. International Treaties: Identification and Interpretation  30.11 A. Resources to Identify Investment Treaties  30.12

V. Conclusion 

30.13 30.21 30.22 30.27 30.33 30.36

I. Introduction This chapter aims to help the new investment arbitration practitioner identify and find the 30.01 main legal sources for dealing with international investment law issues. International investment law has been referred to as a ménage à trois: the state, the foreign in- 30.02 vestor, and international law.1 As contrasted with ‘pure’ commercial arbitration, the law and the applicable norms are mostly grounded in rules deriving from public international law, sometimes supplemented by the domestic law of the host state.2 Three different topics need to be addressed in order to cover, as extensively as possible, the 30.03 legal issues generally raised during an arbitration based on an international investment agreement (IIA), whether a BIT, a multilateral investment protection treaty, or the investment chapter of a broader international agreement such as a preferential trade agreement. First, even though the stare decisis rule does not exist in international arbitration, including 30.04 investment arbitration, previous rulings are often used and analysed by arbitrators.3 As put by one tribunal, it ‘is not bound by earlier decisions, but will certainly carefully consider such

1  The expression is borrowed from Prosper Weil, L’Etat, l’investisseur étranger et le droit international: la relation désormais apaisée d’un ménage à trois, in Prosper Weil, Ecrits de droit international 411 (2000). 2  See Y. Banifatemi, The Law Applicable in Investment  Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 19 (K. Yannaca-​Small ed., 2018). 3  See J. Paulsson, The Role of Precedent in Investment  Treaty Arbitration, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 4 (K. Yannaca-​Small ed., 2018). See also Precedent in International Arbitration (E. Gaillard & Y. Banifatemi eds., 2008).

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A Practical Guide: Research Tools in International Investment Law decisions whenever appropriate’.4 Hence, the first section will be devoted to listing the tools to retrieve arbitral and public international case law. 30.05 Secondly, when dealing with investment arbitration, it is likely that the claim will be treaty-​

based. For example, in the first semester of 2017, the ICSID Secretariat registered twenty-​two new cases, all of them based on either a bilateral investment treaty, or other form of bilateral or multilateral treaty, often generically referred to in the literature as international investment agreements, or IIAs.5 Therefore, the second section will be devoted to the relevant aspects of the law of treaties, such as the principles of interpretation, as well as sources to identify relevant treaties.

30.06 Finally, but most importantly, in international investment disputes, arbitral tribunals rely

on all the sources of public international law identified in Article 38(1) of the Statute of the International Court of Justice (ICJ), which provides for the rules of that Court to apply: a. international conventions, whether general or particular, establishing rules expressly recognized by the contesting states; b. international custom, as evidence of a general practice accepted as law; c. the general principles of law recognized by civilized nations; d. subject to the provisions of Article 59,6 judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.

30.07 Principally relying on the first source of international norms, as their jurisdiction is usually

based on BITs or other IIAs, these tribunals also need to apply norms deriving from customary international law to define certain general principles, which are not usually mentioned in the treaty. The third section will thus be entirely devoted to this source of public international law.

II.  Arbitral Case Law and Public International Case Law 30.08 The present section lists the main sources for investment arbitration case law, as well as in

public international law in general in Table 30.1. Then, in Table 30.2, it identifies the main law journal reviews for this arbitral case law.

30.09 A. Case  Law

Table 30.1  Main sources for investment arbitration case law and public international law Source and Content

Website Address Investment Arbitration

ICSID: • Historical data concerning all the cases since the creation of the Centre, including a list of all the pending and concluded cases with the composition of the tribunals. • Excerpts of ICSID awards

http://​icsid.worldbank. org

4  Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/​03/​ 29, Decision on Jurisdiction (Nov. 14, 2005), ¶ 76. 5  News from ICSID, 26(1) (Summer 2009), at 3. 6  Article 59 provides: ‘The decision of the Court has no binding force except between the parties and in respect of that particular case’.

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II.  Arbitral Case Law and Public International Case Law Table 30.1  Continued Source and Content

Website Address

• Text of the ICSID awards, when both parties have accepted their publication, as well as procedural ICSID Statistical Reports decisions. • ICSID Statistical Reports published bi-​annually. • Background papers •  Practice Notes for Respondents Investment Arbitration Reporter: • A reporting service provided via an investment newsletter, edited by a team under the supervision of Luke Peterson. • Provides factual elements related to past, pending, and future proceedings in international investment arbitration and international investment law in general. • Provides concise analysis of each of the reported cases and in-​depth analysis of the most important ones. Investment Claims: • Text of all publicly available investment arbitration decisions and awards: ICSID, UNCITRAL, SCC, OPIC, and ICC. • Text of annulment and challenge decisions before National Courts. • Contributions of various others on various subjects of interest or ‘hot topics’. ITA Law: • Text of all publicly available investment arbitration decisions and awards based on investment treaties only: ICSID, UNCITRAL, SCC, and ICC. • Text of annulment and challenge decisions before National Courts. • Database of publicly available expert legal opinions, statements, and affidavits. Investor-​State Law Guide: • A comprehensive database with all materials publicly available on ICSID, NAFTA, and ad hoc tribunals’ decisions. • A contextual and intuitive research tool in all available documentation on the website linking to specific passages of decisions/​documents discussion a particular issue, prior decisions or specific legal instrument. Iran–​United States Claims tribunal: • Comprehensive database of the published decisions rendered by the tribunal, established on the basis of the Algiers Accord of 1981. UNCTAD Investment Dispute Settlement Navigator: • Database providing, among other things, updated information on pending and concluded cases, their main legal issues and links to the full text of decisions if published.

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http://​www.iareporter. com

http://​www.invest-​mentclaims.com

http://​italaw.com

https://​www.investorstatelawguide.com/​

http://​www.iusct.com

http://​investmentpolicyhub.unctad.org/​ ISDS

A Practical Guide: Research Tools in International Investment Law Table 30.1  Continued Source and Content

Website Address Public International Law

International Court of Justice: • Judgments and orders of the ICJ since its creation, as well as all the parties’ oral and written pleadings. • Judgments and orders of the Permanent Court of International Justice, the predecessor of the ICJ. Permanent Court of Arbitration: • Awards and other information (pleadings . . . ) in proceedings under PCA auspices where the parties have so agreed. These include investment arbitration awards as well as purely public international law cases. These awards date back to 1902. U.N. Reports of International Arbitral Awards (UNRIAA): •  Electronic version of the 25 volumes of the UNRIAA. • Includes awards rendered between states and between states and international organizations. • These decisions were rendered by ad hoc tribunals or by mixed and international compensation commissions.

http://​www.icj-​cij.org

http://​www.pca-​cpa.org/​law/​riaa

http://​legal.un.org/​riaa/​

B. Journal Reviews of Investment Arbitration Case Law 30.10 The rapid growth of investment arbitration and its case law has led to a multiplicity of recurring

journal reviews dealing with the subject matter. Each of these has different specificities, which are listed below. All of these reviews are useful to any practitioner wishing to have a global overview of the case law for a given period of time. We have only selected a few of them below.

Table 30.2  Main law journal reviews for arbitral case law cited in Table 30.1. References

Content

Since 2003, a selected review of the year’s investment arbitral case law. It is organized by themes—​notion of investment, of investor—​in which each contributor analyses the relevant decisions. German Yearbook of International Law Since 2003, a descriptive review of ICSID of most of the cases R. Happ & N. Rubins, ‘Awards and Decisions of case law with summaries a rendered each year. ICSID Tribunals’ Cahiers de l’Arbitrage I. Fadlallah, C. Leben & E. Teynier eds., ‘Investissements internationaux et arbitrage’

Journal du Droit International B. Rémy, ‘Centre international pour le règlement des différends relatifs aux investissements (C.I.R.D.I.): chronique des sentences arbitrales’

Since 1986, this review originally done by E. Gaillard, includes a selected number of awards translated into French and then commented upon. It is always preceded by a general introduction on the year’s developments in international investment law.b

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III.  International Treaties: Identification and Interpretation Table 30.2  Continued References

Content

Law and Practice of International Courts and Tribunals J. Fouret & D. Khayat, ‘ICSID Case Law Review’

Since 2012, exhaustive ICSID case law review. Every published decision during a given period of time is analysed and commented as well as compared with previous case law and doctrinal statements. It is always preceded by a short introduction on the latest developments of ICSID. Since 2007, this descriptive review aims at giving a rapid overview, every four months, of the recent developments in international investment law. It deals both with case law and with other recent news in international investment law. From 2002–​2009, exhaustive ICSID case law review. Every published decision during a given period of time is analysed and commented upon, as well as compared with previous case law and doctrinal statements. It is always preceded by a short introduction on the latest developments of ICSID.c

Revue de Droit des Affaires Internationales–​ International Business Law Journal W. Ben Hamida & F. Horchani, ‘Droit et pratique des investissements internationaux’ Revue Québécoise de Droit International J. Fouret & D. Khayat, ‘Centre international pour le règlement des différends relatifs aux investissements (CIRDI)’

a

This review was gathered in a monograph in 2009, which includes the reviews from 2003 to 2007. See R. HAPP & N. RUBINS, DIGEST OF ICSID AWARDS AND DECISIONS, 2003–​2007 (2009). b

This review was gathered in a monograph in 2004, which includes the reviews from 1986 to 2003. as well as commentary on one award of 2004: see E. GAILLARD, LA JURISPRUDENCE DU CIRDI (2004). c

This review was gathered in a monograph in 2009, which includes the reviews from 2002 to 2007. See J. FOURET & D. KHAYAT, RECUEIL DES COMMENTAIRES DES DéCISIONS DU CIRDI (2002–​2007) (2009).

III.  International Treaties: Identification and Interpretation When a practitioner is faced with a potential investment arbitration, it is likely that the 30.11 basis of the tribunal’s jurisdiction will be a BIT concluded between the investor’s state and the host state of the investment. Some multilateral instruments also provide for investment arbitration, and most of them are identified in the next section, a table listing the sources for identifying and obtaining the text of the relevant treaties (Table 30.3). One also needs to remember that many countries keep their own treaty databases, either general or solely devoted to investment treaties.7 However, nothing replaces a thorough verification in the country involved, as the official authorities might be the only ones to possess the information about the entry into force of an instrument. Past arbitral experience has shown that databases are the necessary first step but not the last one that should be undertaken if one wants to verify the existence of the applicable treaty exhaustively. Following Table 30.3 is a 7  For example, see the French database with all the bilateral and multilateral treaties that France has concluded:  http://​www.doc.diplomatie.fr/​pacte/​ (last visited Nov. 12, 2017); the U.S.  database on BITs and Free Trade Agreements concluded or being negotiated: https://​ustr.gov/​trade-​agreements/​trade-​investment-​ framework-​agreements (last visited Nov. 12, 2017); or even, from a developing country’s perspective, the Lebanese database with all the BITs concluded by Lebanon:  http://​www.finance.gov.lb/​en-​us/​Finance/​IA/​ IPA/​Pages/​default.aspx (last visited Nov. 12, 2017).

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A Practical Guide: Research Tools in International Investment Law section explaining and highlighting the relevant rules of treaty interpretation which need to be applied in investment arbitration proceedings. 30.12 A. Resources to Identify Investment Treaties

Table 30.3 Sources for identifying and obtaining the text of the relevant multilateral instruments that provide for investment arbitration Source and Content

Address

ECT Secretariat: •  Text of the Energy Charter Treaty. •  Text of all the preceding agreements. • News about the disputes based on the ECT. History of the ICSID Convention • The entire negotiation and drafting history of the Washington Convention published by ICSID. ICSID: • Text of the Washington Convention and of all the arbitration, mediation and administrative regulations and rules. • Report of the World Bank Executive Directors. • Text of the Additional Facility Rules. •  List of BITs. Investment Treaties: • This ICSID publication contains the texts of BITs concluded by more than 165 countries. It is continuously updated.

www.encharter.org

ITA Law: • Model BITs of a number of countries. • List of websites to find BITs, either institutional or national. NAFTA Secretariat: • All the legal texts pertaining to NAFTA in French, English, and Spanish. UNCTAD–​Investment Policy Hub: • Regularly updated list of the BITs concluded by countries as well as Investment Laws. • Full text database of more than 2000 BITs. The most comprehensive database on the subject.

http://​italaw.com

History of the ICSID Convention Volumes I & II published by the ICSID Secretariat in English, French, and Spanish. Published in 1970 and republished since. http://​icsid.worldbank.org

Investment Promotion and Protection Treaties (ten loose-​ leaf volumes) (Oxford University Press)

http://​www.nafta-​sec-​alena.org

http://​investmentpolicyhub.unctad.org/​

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III.  International Treaties: Identification and Interpretation B. Fundamental Rules of Treaty Interpretation in Public International Law As opposed to international commercial arbitration, where the usual contractual means of 30.13 interpretation—​mainly derived from domestic legal orders—​are applicable, investment arbitration is usually based on treaties. The principles of interpretation are public international law principles, wholly disconnected from the national legal orders. The substance of these rules is also far from being the same as for contractual commercial arbitration. This sub-​ section presents the main elements and the framework of interpretation to understand the basis of most investment arbitration cases. It should first be noted that treaties are the first source mentioned in Article 38 of the 30.14 Statute of the ICJ,8 and for a reason: ‘[t]‌reaties are . . . the first place to look in order to determine a state’s rights and duties’.9 At least two-​thirds of the cases are based on a BIT or other IIAs. As the ICJ has constantly affirmed, when faced with a treaty: ‘[i]t is the duty of the Court to interpret the Treaties, not to revise them’.10 The rules of interpretation have been codified by the 1969 Vienna Convention on the Law of Treaties (VCLT), Articles 31 and 32:11 Article 31 General Rule of Interpretation 1. A  treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2. The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty. 3. There shall be taken into account, together with the context: (a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; (c) any relevant rules of international law applicable in the relations between the parties. 4. A special meaning shall be given to a term if it is established that the parties so intended. Article 32 Supplementary Means of Interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning

  Quoted supra ¶ 30.06.   V. Lowe, International Law 64 (2007). 10   Interpretation of Peace Treaties with Bulgaria, Hungary and Romania (Second Phase), Advisory Opinion (July 18, 1950) [1950] I.C.J. Rep. 221, 229 and Case Concerning the Rights of Nationals of the United States of America in Morocco (France v. U.S.), Judgment of Aug. 27, 1952 [1952] I.C.J. Rep. 176, 196. 11   Vienna Convention on the Law of Treaties (May 22, 1969) 1155 U.N.T.S. 33 (Entry into force: January 27, 1980) [hereinafter VCLT]. 8 9

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A Practical Guide: Research Tools in International Investment Law resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.

These two articles constitute a benchmark from which international judicial bodies cannot easily depart since they have been repeatedly recognized as reflecting customary international law and have been regularly applied by investment treaty tribunals.12 30.15 The treaty’s object and purpose, stated at Article 31(1), is central in this interpretation pro-

cess. Preambles, in this sense, are usually the most useful tools to achieve such a teleological interpretation.13

30.16 While Article 32 refers to them as supplementary means, the drafts and other elements of the

negotiating history, or travaux préparatoires, of BITs, other IIAs, and the ICSID Convention are constantly used by tribunals. These have therefore been diverted from their supplementary role and are being used as regular and normal elements on which every tribunal seems to rely. In fact, arbitrators will automatically resort to the travaux préparatoires if they are readily available.14 Consequently, the distinction between the general rule and the supplementary means of interpretation is almost non-​existent in practice, as ‘most courts . . . do not draw fine distinctions as to the sequence and purpose for which interpretative aids are applied. Lawyers are even less restrained’.15

30.17 It should be borne in mind that the states party to an IIA may reach agreement on the meaning

of a treaty provision well after the conclusion and entry into force of a treaty, and that such subsequent agreement of the parties is part of the general rule of interpretation set out in Article 31 of the VCLT. For example, NAFTA has its own interpretative body, the Free Trade Commission (FTC), composed of representatives of the state parties. Its most famous interpretation was given on 31 July 2001 concerning Article 1105 on the minimum standard of treatment. This Article had been at the centre of multiple problems of interpretation before arbitral tribunals, and the state parties decided to clarify the meaning of ‘fair and equitable treatment’ and ‘full protection and security’. Nevertheless, one major risk for such a procedure is that ‘States may strive to issue official interpretations to influence proceedings to which they are parties’.16

30.18 The other endogenous procedure in conventional agreements usually included in BITs is

an inter-​state dispute settlement clause designed to interpret a disputed provision in the particular treaty. Rarely used, to the best of our knowledge, this procedure has not even prevented an investment treaty tribunal from rendering an award interpreting the provision on the ratione temporis application of the BIT, even though that provision was being reviewed by an inter-​state arbitral tribunal.17 Consequently, the binding force of such an interpretative procedure has yet to be proven.

12  See, e.g., Aguas del Tunari S.A.  v.  Republic of Bolivia, ICSID Case No. ARB/​ 02/​3, Decision on Jurisdiction (Oct. 21, 2005), ¶¶ 88–​93 & 226–​39; Noble Ventures, Inc. v.  Romania, ICSID Case No. ARB/​01/​11, Award (Oct. 12, 2005), ¶ 50 ff.; Saluka Investments BV v. Czech Republic, Ad hoc BIT tribunal, Partial Award (Mar. 17, 2006), ¶¶ 296–​99. 13  See, e.g., Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/​03/​9, Decision on Jurisdiction (Feb. 22, 2006), ¶ 80. 14  See, e.g., A. de Nanteuil, Droit international de l’Investissement 118 ff. (2d ed. 2017). See also C. Schreuer & R. Dolzer, Principles of International Investment Law 28 ff. (2d ed. 2012). 15  See Lowe, supra note 9, at 74. 16  See Schreuer & Dolzer, supra note 14, at 35. 17  See the dissenting opinion of F. Berman, mainly focusing on this pending decision, where he argues that the refusal of the tribunal to suspend its proceedings in order to wait for the decision of the inter-​state

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IV.  Customary International Law The final point one has to retain relates to the authority of precedents, which is dealt with 30.19 in Chapter 4. For the purposes of this chapter, suffice it to note that while, in interpreting treaties, most tribunals have heavily relied on precedents and acknowledged the value of such precedents, they have, at the same time, repeatedly affirmed that they were not bound by such precedents. The best example concerns the multiple awards involving Argentina where the umbrella clause,18 included in the US–​Argentina BIT, has been interpreted in a diametrically opposite manner by different tribunals. Nonetheless, precedents are a useful tool for counsel as they are still, most of the time, the most reliable source to exemplify how a particular provision should be interpreted. However, it should not be forgotten that these will only be elements, sometimes powerful, on which an arbitral tribunal might base its reasoning. No more, no less. The discrepancies observed in the Argentinean cases can be considered as an epiphenomenon, as most tribunals pay some deference and attention to previous decisions. In fact, the mindset of investment treaty tribunals might be summed up as follows: The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it must pay due consideration to earlier decisions of international tribunals. It believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a series of consistent cases. It also believes that, subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the community of States and investors towards certainty of the rule of law.19

All these elements are necessarily combined, but the reliance first on the methodology set 30.20 out in Articles 31 and 32 of the VCLT is almost automatic. Then all the necessary evidence can be used to interpret the applicable treaty ‘in good faith in accordance with the ordinary meaning to be given to the terms of th[at] treaty in their context and in the light of its object and purpose’.

IV.  Customary International Law Customary international law, as set out in the ICJ Statute, is a source placed on the same level 30.21 as treaties. Hence, in principle, the obligations deriving from it weigh the same as sources of public international law. The difficulty of this source is to understand where to find it: what are the resources identifying the norms deriving from it? Once this is done, the issue is also the applicability and the relevance of such norms for international investment law. Nevertheless, and as a preliminary understanding, one needs to comprehend what custom is in international law, and how a customary norm is developed.

A. What Is International Custom and How Is a Customary Norm Created? International custom is one of the threes sources of public international law, along with treaties 30.22 and general principles of law. Nevertheless, it is the most difficult source of international

arbitration should have led the Committee to annul the award: see Indústria Nacional de Alimentos S.A. and Indalsa Perú, S.A. v. Republic of Peru, ICSID Case No. ARB/​03/​4, Decision of the Ad hoc Committee (Sept. 5, 2007). 18  Regarding the umbrella clause and its interpretation, see K. Yannaca-​Small, The Umbrella Clause: Is the Umbrella Closing?, in Arbitration under International Investment Agreements: A Guide to the Key Issues ch. 16 (K. Yannaca-​Small ed., 2018). 19  Saipem S.p.A. v. People’s Republic of Bangladesh, ICSID Case No. ARB/​05/​07, Decision on Jurisdiction and Recommendation on Provisional Measures (Mar. 21, 2007), ¶ 67. See also Pey Casado v. Chile, ICSID Case No. ARB/​98/​01, Award (May 8, 2008), ¶ 119.

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A Practical Guide: Research Tools in International Investment Law law to identify as the terms of its definition always seem very broad and vague, and this uncertainty can lead to serious controversies.20 Article 38 of the ICJ Statute states that it is ‘evidence of general practice accepted as law’, and authors have generally stated that ‘what is sought for is a general recognition among States of a certain practice as obligatory’.21 One also needs to differentiate it from usages as these are not legal obligations but rather practices accepted on the basis of courtesy.22 Custom is usually defined as being composed of two elements: practice and opinio juris sive necessitatis. The ICJ has repeatedly accepted that the customary process will only be perfected through the combined existence of these two elements: The Court will now turn to an examination of customary international law to determine whether a prohibition of the threat or use of nuclear weapons as such flows from that source of law. As the Court has stated, the substance of ‘customary law must be looked for primarily in the actual practice and opinio juris of States’.23 30.23 The first element is the material element or consuetudo, which is a uniform and consistent

practice—​in other words, precedents. It can, at the beginning of the creation of the norm, be a simple usage between states. That practice needs to be uniform and constant, as well as accepted by the other state as binding.24

30.24 That practice need not be legal acts in essence, but all acts and omissions as long as they are

taken by subjects of international law or attributable to them. These comprise, among others, positions taken by diplomatic agents25 but also domestic legislation26 or decisions taken at an inter-​state level,27 or by an international organization.28

30.25 The second element, the psychological element, is opinio juris sive necessitatis. This element is

vague and difficult to prove, but it is the sense, the impression by the state that it is bound by a rule, as illustrated by the constant and recurrent practice of states generally in respecting, although not necessarily complying on all occasions with, that principle. As otherwise stated, ‘[t]‌he sense of legal obligation, as opposed to motives of courtesy, fairness, or morality is real enough, and the practice of states recognizes a distinction between obligation and usage’.29 The ICJ stated that element as early as in the North Sea Continental Shelf Case: The need for such a belief, i.e. the existence of a subjective element, is implicit in the very notion of the opinio juris sive necessitatis. The States concerned must therefore feel that they are conforming to what amounts to a legal obligation. The frequency, or even habitua1 character of the acts is not in itself enough. There are many international acts, e.g., in the field of ceremonial and protocol, which are performed almost invariably, but which are motivated only by considerations of courtesy, convenience or tradition, and not by any sense of legal duty.30

20  See P. Daillier & A. Pellet, Droit International Public 322 (6th ed. 1999): ‘il s’agit d’une source d’une nature particulière et même controversée’. For an exhaustive and theoretical discussion of custom in international law see id. at 322–​45. 21 J.L. Brierly, The Law of Nations: An Introduction to the International Law of Peace 61 (6th ed. 1978). 22 I. Brownlie, Principles of Public International Law 4–​5 (5th ed. 1999). 23  Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion (July 8, 1996)  [1996] I.C.J. Rep. 226. 24  Asylum Case (Columbia v. Peru), Judgment (Nov. 27, 1950) [1950] I.C.J. Rep. 276–​77. 25  Interhandel (Switzerland v. U.S.), Judgment (Mar. 21, 1959) [1959] I.C.J. Rep. 6. 26  P.C.I.J., Lotus Case (Serie A–​N 10), Judgment (Sept. 7, 1927). 27  North Sea Continental Shelf (Ger. v. Neth.), Judgment (Feb. 20,1969) [1969] I.C.J. Rep. 3. 28 Judgments of the Administrative Tribunal of the ILO upon Complaints Made against UNESCO, Advisory Opinion (Oct. 23, 1956) [1956] I.C.J. Rep. 77. 29  See Brownlie, supra note 22, at 7. 30  North Sea Continental Shelf, supra note 30.

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IV.  Customary International Law Even if, traditionally, opinio juris derives from constant practice, it is usually the repetitive nature and consistency of such elements that creates the impression of being legally bound by such a norm.31 Having addressed, in a concise manner, the process leading to the creation of a customary 30.26 norm, it is important to understand the means to identify customary norms before understanding which of them may have an impact in investment arbitration.

B. Means to Identify Customary Norms in Public International Law The identification of norms of customary international law is a difficult exercise: ‘the search of 30.27 the rule of customary international law is not as simple as might at first appear’.32 As for any argument, factual or legal, the burden of proof will be on the party requesting the application of such a norm.33 But how to prove such norms? And how to identify their precise contours? There are three basic sources to identify whether a principle is a customary norm or a mere 30.28 theoretical concept. The first is case law and it is usually the most relevant and trustworthy. As in any legal system, ‘a court is presumed to know the law and may apply a custom even if it has not been expressly pleaded’.34 Thus, the party attempting to prove such a norm before a court will have to demonstrate the existence of the material and psychological elements. The ICJ has always affirmed that its role is to discern which rules were customary and which ones were not.35 Hence, when trying to rely on a norm believed to be customary, any counsel would be wise to analyse the jurisprudence of the world court in order to ascertain whether or not that rule had already been recognized. Investment treaty tribunals usually do not decide by themselves if a norm is customary. Rather, they rely on previous findings, either by the ICJ or the Permanent Court of International Justice (PCIJ), or deriving from a constant trend in past arbitral awards from the Permanent Court of Arbitration (PCA), for example. The analysis of these cases is, therefore, one of the main means to identify such norms. The second source is also the identification, or rather, the codification of these norms in 30.29 multilateral treaties. As acknowledged, a ‘treaty does not “make” customary law, but . . . it may both codify existing law and contribute to the process by which new customary law is created and develops’.36 Where a treaty is considered to codify customary law, the arbitral tribunal does not take into account whether or not the host state in an investment arbitration is a party to that particular treaty. If France were to be a respondent in such an arbitration, it would not matter that it is not a party to the VCLT, as this instrument is now recognized by all international courts, and virtually all states, whether not party to it, as an instrument which, for the most part, including with respect to interpretation, codifies the international customary law of treaties. Hence, some codification agreements could be invoked by counsel in an investment arbitration procedure to identify and frame customary obligations, even if the host country is not a party. Finally, the last source to identify customary norms is the writings of qualified authors. 30.30 Relying on public international law textbooks is probably the easiest secondary source to

31  Some authors have argued that, in a few cases, the process has been inverted: when a norm is necessary, it is announced as a norm and then the practice follows. See, e.g., Daillier & Pellet, supra note 20, at 332. 32  See Lowe, supra note 9, at 48. 33  P.C.I.J., Lotus Case (Serie A–​N 10), Judgment, supra note 26, at 18. 34  See Brownlie, supra note 22, at 11. 35  Military and Paramilitary Activities in and against Nicaragua (Nicar. v.  U.S.), Judgment (June 27, 1986) at 183 ff.: ‘[T]‌he Court has next to consider what are the rules of customary international law applicable to the present dispute’. 36 A. Boyle & C. Chinkin, The Making of International Law 234 (2007).

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A Practical Guide: Research Tools in International Investment Law identify these norms. The references to case law and to codifying treaties might be easier to find in such textbooks. 30.31 As a word of conclusion, it is important to mention that customary norms are evolving.

Not being written in instruments containing specific revision procedures, they evolve as the relations between states do and as the need for change at the international level appear. As Vaughan Lowe affirms: ‘it is a mistake to think of international law as a monolithic body of law’.37 All of these rules evolve through changes in the practice of states. Some norms might even disappear or be replaced by more protective norms. Investment arbitral tribunals have recognized the evolving nature of customs and have advised caution when resorting to customary norms identified in old awards, as these norms might have evolved: Put in slightly different terms, what customary international law projects is not a static photograph of the minimum standard of treatment of aliens as it stood in 1927 when the Award in the Neer case was rendered. For both customary international law and the minimum standard of treatment of aliens it incorporates, are constantly in a process of development.38

30.32 Consequently, relying on the most recent international case law or writings might be the

safest means of identifying customary law norms as they ‘come into existence, evolve and die through a dynamic and incremental process of claims and reactions by States’.39

C. Applicability and Relevance of Customary Norms in International Investment Law 30.33 Customary norms exist, and actually coexist, with the norms included in the applicable BITs

in a given dispute. It is an accepted principle that the BIT or other IIA is a lex specialis if applicable in a dispute and that the lex specialis derogates from the legi generali.40 However, the relevant treaty might not cover all the issues in a given dispute. Hence, customary international law will be a complementary source of obligations for the state.41

30.34 Concerning the importance of such a source in international investment law, its influence

and weight are real. As mentioned, the customary rules of treaty interpretation are always used by investment arbitral tribunals to interpret BITs. It is mostly procedural principles, part of customary international law, that are used as such by investment tribunals; for example, res judicata, estoppel, lis pendens, or the issue of denial of justice.42 More substantial principles or norms are usually dealt with in a conventional instrument,43 either solely in the BIT or in conjunction with the Washington Convention during an ICSID arbitration. Tribunals have repeatedly reaffirmed that they will not resort to customary norms for the substantial elements already covered in the applicable conventional instruments; this is generally the case

 See Lowe, supra note 9, at 61.   ADF Group Inc. v. United States, ICSID Case No. ARB (AF)/​00/​1, Award (Jan. 9, 2003), ¶ 179. 39  T. Gazzini, The Role of Customary International Law in the Field of Foreign Investment, 8 JWIT 5, 691, 694 (2007). 40  Amoco Int’l Fin. Corp. v. Iran, 15 Iran–​U.S. CTR (1987) 189, ¶ 112. The Iran–​U.S. Claims tribunal stated that: ‘As a lex specialis in the relations between the two countries, the Treaty supersedes the lex generalis, namely customary international law’. 41  For a general discussion of the hierarchy or interrelation of sources of international law, including jus cogens, or peremptory norms, from which no derogation is permitted, see M.N. Shaw, International Law 87–​91 (7th ed. 2014). 42  Even though this principle is sometimes subsumed under the fair and equitable treatment heading. See, e.g., Consortium R.F.C.C. v. Kingdom of Morocco, ICSID Case No. ARB/​00/​6, Award (Dec. 22, 2003). 43  For example, general principles of treatment or conditions for an expropriation are generally set out in these treaties. In the absence of such norms, then customary international law might come into play to fill the normative gaps. 37 38

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V. Conclusion regarding the nationality of the investor: ‘As the matter of nationality is settled unambiguously by the Convention and the BIT, there is no scope for consideration of customary law principles of nationality, as reflected in Barcelona Traction’.44 Hence, customary international law will play a secondary, or procedural, role when the basis 30.35 of a claim is an investment treaty but will be more important either when the treaty is incomplete or when the basis of the tribunal’s jurisdiction is an investment contract or domestic legislation. In the latter cases, all of the above-​mentioned means to identify such norms are fundamental for the investor fully to obtain the protection provided by international law and for the host state to ensure that all its sovereign customary prerogatives are respected.

V. Conclusion These research tools do not aim to be exhaustive but, rather, to give a first brush or an intro- 30.36 ductory overview of the most important elements to take into account when faced with a dispute in investment arbitration. ‘[F]‌or a lawyer without books would be like a workman without tools’;45 one can hope that 30.37 the present chapter will be a double tool: practical and theoretical. This twofold approach is necessary to grasp the ever-​evolving subject of international investment law.

44  ADC Affiliate Limited & ADC & ADMC Management Ltd. v. Republic of Hungary, ICSID Case No. ARB/​03/​16, Award (Oct. 2, 2006), ¶ 357. 45  Letter of Thomas Jefferson to Thomas Turpin Shadwell (February 1769).

835

INDEX acta iure gestionis 14.48, 14.56, 14.60, 15.33, 16.52–​16.60,  29.58 acta iure imperii  14.56, 14.61, 15.33, 16.52–​16.60 ad hoc committees  2.50, 3.53–​ 3.54, 5.22, 7.30, 19.18–​ 19.19, 19.30–​19.31, 25.48, 25.50–​25.51,  29.86 annulment of awards  annulment and appeal distinguished  27.21–​27.22 appeals mechanism  27.71, 27.106 failure to state reasons  27.44, 27.46 improper constitution of tribunal  27.25–​27.26 manifest excess of power  27.31, 27.38–​27.39, 27.41–​27.43 stay of enforcement  27.55, 27.58 ad hoc dispute settlement,  see United Nations Commission on International Trade Law Rules admissibility test  1.97 annulment of awards (ICSID Convention), see ICSID awards, annulment of anti-​suit injunctions  24.83 Appeals Facility Rules (ICSID)  27.77–​27.80 appeals mechanism  27.70–​27.73,  27.107 advantages  27.88–​27.95 CAFTA  27.76 CETA  27.83–​27.85 disadvantages  27.96–​27.100 ICSID proposed appeals facility rules  27.77–​27.80 TPP  27.81 TTIP  27.82 UNCITRAL proposals  27.101–​27.105 US IIAs  27.75 applicable law  determination by arbitrators  19.14–​19.21 disputes  19.01–​19.03 absence of party agreement  19.14–​19.21 choice of law  19.05–​19.08

law of host state and international law compared  19.09–​19.13 parties’ agreement  19.04 generally  4.82–​4.88 role of investment treaty  19.22–​19.32 appointment of arbitral tribunals  6.65 appointment by appointing authority  6.69 appointment by the parties  6.66–​6.68 appointment formalities  6.91–​6.99 default process of applicable arbitration rules, under  6.72 ICC default provisions  6.77 ICSID default provisions  6.73–​6.74 SCC default provisions  6.77 UNCITRAL default provisions  6.75–​6.76 formal appointment procedures  6.91 ICSID practice  6.70–​6.71 ICSID default provisions  6.73–​6.74 appointment of arbitrators (institutional discretion)  formal appointment procedures  6.91–​6.94 ICC Rules of Arbitration  8.35–​8.36 investment treaties, under  6.84–​6.87 nationality, impartiality and independence (see impartiality and independence of arbitrators) number of arbitrators  6.62–​6.64 seat of arbitration rules  6.88 sufficient availability of arbitrators  6.89 arbitral awards, foreign, see foreign arbitral awards arbitrary and discriminatory treatment  21.77–​21.82 arbitrators  appointment (see appointment of arbitrators) challenges to arbitrators, examples of  8.81–​8.85

837

administrative secretaries  8.99–​8.108 issue conflicts  8.86–​8.98 social media  8.109–​8.114 codes of conduct  8.07, 8.32, 8.33, 8.64, 8.78 conflicts of interest  8.06, 8.41, 8.56, 8.86–​8.98 disqualification of arbitrators  8.10–​8.21 due diligence  8.03 IBA Guidelines  8.56–​8.59 ICC Rules of Arbitration  8.34–​8.41 ICSID  8.10–​8.21 impartiality and independence  (see impartiality and independence of arbitrators) innovations  8.60–​8.80 LCIA  8.47–​8.51 number of arbitrators  6.62–​6.64 PCA Arbitration Rules  8.22–​8.26 removal of arbitrators  6.89, 8.35–​8.36 SCC Rules of Arbitration  8.43–​8.46 selection of  arbitration rules, under  6.78–​6.83 investment treaties, under  6.84–​6.87 nationality, impartiality and independence  6.78–​6.87 seat of arbitration rules  6.88 sufficient availability of arbitrators  6.89 SIAC Rules  8.52–​8.55 UNCITRAL Rules  8.27–​8.28, 8.32–​8.33 UNCITRAL Transparency Rules  8.29–​8.31 Asia-​Pacific Economic Cooperation (APEC)  ‘closed list’ approach  1.41 asset-​based definition of investment  1.32, 1.39, 1.41 Association of Southeast Asian Nations (ASEAN)  7.10, 8.74, 9.51, 9.156, 23.116 attribution  14.01–​14.09 allocation of competences  14.23 domestic law and  14.16–​14.20 ILC provisions  14.08–​14.20

Index attribution (cont.) obligations in respect of conduct  14.04 para-​statal entities  14.32–​14.36 acts in exercise of governmental authority  14.44–​14.57 governmental authority  14.37–​14.43 plenitude of attribution  14.08, 14.58, 14.66, 14.92 representations, of  14.67 contractual breaches actionable under umbrella clauses  14.78–​14.91,  14.92 representations frustrated by later conduct  14.68–​14.77,  14.92 rules of general international law  14.08 state as separate legal personality  14.21–​14.31,  14.92 state organs, act of  14.10–​14.31,  14.92 ‘non-​justiciable’ acts  14.58–​14.66 awards  annulment (see ICSID awards, annulment of ) enforcement (see enforcement of awards) non-​ICSID awards (see non-​ ICSID awards, review by national courts) bifurcation of investment disputes  12.01–​12.02, 12.30, 13.65 consent of parties  12.28 framework  ICC Rules  12.09–​12.10 ICSID Additional Facility Rules  12.06 ICSID Convention  12.03–​12.05 SCC Rules  12.11 UNCITRAL Rules  12.07–​12.08 jurisdiction and merit issues  12.15 liability and quantum issues  12.14 procedural economy and efficiency  12.14–​12.19 procedure  12.28–​12.29 standards for granting  12.12–​12.13 dismissal /​reduction in scope of case  12.20–​12.23 overlapping jurisdictional and liability issues  12.24–​12.27 procedural economy and efficiency  12.14–​12.19

bilateral investment treaties (BITs)  1.01 ‘admission’ clause  1.13–​1.14 background  1.02 Canada Model FIPA  9.115–​9.116 China-​Colombia BIT  7.09 China-​Laos  28.107–​28.108, 28.113–​28.115 Colombia Model BIT  7.09 Colombia-​UK BIT  7.09 compensation and damages provisions  25.13–​25.20 contents  1.12 Czech Republic-​Greece BIT  11.09 Dutch Model BIT  6.05 evolution  1.20 German Model BIT  10.37 GVCs  1.20, 1.22 Indian Model BIT  6.05 investment defined  10.121, 11.15 non-​discrimination   22.34 protection of confidential information  9.49 umbrella clauses  16.14 indirect expropriation  1.56–​ 1.62, 22.25, 22.33 interim measures  24.18 investment protection rationale  1.121–​1.126 legal perspective  1.12–​1.16 new generation BITs  1.23–​1.27 political perspective  1.17–​1.19 traditional BITs  1.12–​1.22 market access and market presence  1.21 ‘negative list’ approach  1.24–​1.25 new generation BITs  annexes  1.25 liberalisation  1.23–​1.27 ‘negative list’ approach  1.24–​1.25 new non-​conforming measures  1.26 Norway Model BIT  open hearings  9.155 transparency  9.48, 9.119 PTAs and BITs distinguished  1.06 Swiss Model BIT  16.21 third-​party written submissions  9.113–​9.120 Canada Model FIPA  9.115–​9.116 Norway Model BIT  9.119 US Model BIT  9.114 traditional BITs  contents  1.12 GVCs  1.20, 1.22

838

legal perspective  1.12–​1.16 market access and market presence  1.21 political perspective  1.17–​1.19 reform  1.20 US Model BITs  11.10, 11.13 2004 Model BIT  7.02, 7.08 2012 Model BIT  7.02–​7.04 appeal mechanisms  27.75 appointment of arbitrators  6.85 –​  6.86 document disclosure  9.42 fair and equitable treatment  20.31 frivolous claims  7.01 –​7.04, 7.10, 7.15 indirect expropriation  22.25, 22.33 interim measures  24.18 investment defined  11.10, 11.116 legal entities defined  10.37 national treatment obligations  21.12 submissions from non-​parties   9.114 transparency  1.75 waiver and limitation of investors’ rights  10.119 US-​Uruguay BIT  1.78, 10.08, 17.48, 17.60 breaches of contract  15.01–​15.03,  15.80 treaty-​based jurisdictional requirements arising from underlying contracts  15.04–​15.05 contract protection under customary international law  15.06–​15.10 contract protection under investment treaties  15.11–​15.16 investment treaty claims from contracts  15.17–​15.19 treaty-​based jurisdictional requirements from purely contractual claims  15.20–​15.22 attribution distinguished  15.32–​15.34 provisions granting jurisdiction over ‘any dispute’  15.24–​15.34 provisions granting jurisdiction over investment agreement disputes  15.35–​15.37 umbrella clause provisions for  15.23 treaty claims and contract claims distinguished  15.38–​15.43

Index fork-​in-​the-​road provisions  15.72–​15.79 forum selection clauses and  15.57–​15.71 identifying contract claims  15.48–​15.56 interpretation of contracts by treaty-​based tribunals  15.44–​15.47 burden of proof  claimant, by  13.06–​13.13 either party, by  13.14–​13.24 general principles  13.01–​13.04 neither party, by  13.29–​13.34 respondent, by  13.25–​13.28 specific jurisdictional objections  13.35–​13.45 standard of proof  13.73 distinguished  13.05 prima facia standard  13.46–​ 13.61, 13.66–​13.71 standard depends on facts  13.61–​13.65 business concessions under public law  11.09 ‘Calvo clause’  21.08–​21.10, 22.01 Canada  anti-​corruption norms  18.102–​18.109 corporate social responsibility  18.102–​18.109 see also Canada model Foreign Investment Protection Agreement; EU-​Canada Comprehensive Economic and Trade Agreement (CETA) Canada model Foreign Investment Protection Agreement  appointment of arbitrators  6.86 closed-​list definition of investment  1.41 disclosure of documents  9.45 enterprise defined  10.40 filing of written submissions  9.115–​9.116 frivolous claims  7.08 indirect expropriation  22.33 legal entities defined  10.37 national treatment obligations  21.12 open hearings  9.150 transparency  1.74 umbrella clauses  16.14 waivers and limitations of investors’ rights  10.119 causation (damages)  25.26 burden of proof  25.30 contributory negligence  25.31 ILC Articles on State Responsibility  25.27–​25.28 directness  25.27

foreseeability  25.27, 25.29 intent  25.27 legal causation  25.32 necessary evidence  25.30 proximity  25.27 remoteness  25.27, 25.29 speculative elements  25.28 ‘sufficient causal link’  25.29 CETA, see EU-​Canada Comprehensive Economic and Trade Agreement (CETA) choice of forum  2.53, 15.70, 16.24, 16.50, 16.86 choice of law  19.01, 19.05–​19.08, 19.12–​19.13 role of investment treaties  19.22–​19.32 civil law system  5.04 claims to money  2.11, 2.13–​2.14, 11.07, 11.09, 11.13–​11.14, 11.35, 11.55, 11.57 claims to performance  2.11, 2.13–​ 2.14, 11.07, 11.09 ‘closed list’ approach  1.41–​1.42 codes of conduct  arbitrators  8.07, 8.32–​8.33, 8.64, 8.78 third-​party funders  26.24 common law systems  5.04 compensation and damages  25.01, 25.70 BIT provisions  25.13–​25.20 calculation  25.02 causation (see causation) contractual obligations  25.21–​25.25 contributory negligence  25.31, 25.41–​25.43 ECT  25.20 investor-​state arbitration and commercial arbitration compared  25.03 legal rules and principles  25.06–​25.25 limiting circumstances  25.40 contributory negligence  25.41–​25.43 country risk  25.52–​25.55 mitigation of damages  25.44–​25.51 mitigation of damages  25.44–​25.45 economic distress  25.46–​25.51 NAFTA  25.20 state obligations  25.04 state responsibility rules  25.07–​25.12 valuation date  25.33–​25.39 valuation methods  25.56–​25.58 asset-​based/​cost approach  25.67–​25.69 income approach  25.62–​25.66

839

market approach  25.59–​25.61 composition of tribunals  6.52–​6.53 ICSID rules  6.58–​6.60 non-​ICSID rules  6.61 number of arbitrators  6.62–​6.64 party agreement prior to proceedings  6.54–​6.55 Comprehensive Economic and Trade Agreement, see EU-​ Canada Comprehensive Economic and Trade Agreement (CETA) conflicts of interest  IBA Guidelines  8.56 applicability of Guidelines  8.59 impartiality and independence of arbitrators  8.57 consent in counterclaims  17.37 establishing parties’ consent  17.46 applicable law  17.53–​17.59 inviolability of state’s standing offer  17.62–​16.64 references to counterclaims  17.47–​17.48 scope of arbitral disputes  17.49–​17.52 standing to initiate proceedings  17.60–​17.61 sources of consent  17.38–​17.45 consistency  appeals mechanism  27.70–​27.73,  27.107 advantages  27.88–​27.95 CAFTA  27.76 CETA  27.83–​27.85 disadvantages  27.96–​27.100 ICSID proposed appeals facility rules  27.77–​27.80 TPP  27.81 TTIP  27.82 UNCITRAL proposals  27.101–​27.105 US IIAs  27.75 importance of  4.13–​4.17 consolidation of claims  1.95, 1.101–​1.102, 10.122–​10.124 ICC Rules,  3.40 ICSID Rules  3.41 IIA  6.66 contract protection  customary international law, under  15.06–​15.10 investment treaties, under  15.11 expropriation  15.12 fair and equitable treatment  15.13–​15.15 other protections  15.16 investment treaty claims from contracts  15.17–​15.19

Index contracting parties  control of arbitration procedures  1.83–​1.93 ECT  2.10–​2.20 contracts  forum selection clauses  15.57, 15.68–​15.71 identification of contract claims  15.48–​15.56 interpretation by treaty-​based tribunals  15.43–​15.47 see also contract protection contractual claims  15.20–​15.22 attribution distinguished  15.32–​15.34 provisions granting jurisdiction over ‘any dispute’  15.24–​15.34 provisions granting jurisdiction over investment agreement disputes  15.35–​15.37 umbrella clause provisions for  15.23 contractual obligations  16.20 contributory negligence  25.41–​25.43 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)  3.81–​3.82, 29.13–​29.15 Art. V(1)  29.16–​29.28 Art. V(2)  29.29 lack of arbitrability  29.30–​29.35 public policy  29.36–​29.43 state immunity, impact of  29.44–​29.49 assets immune from enforcement  29.50–​29.62 waiver of enforcement immunity  29.63 corruption defence  18.01, 18.110–​18.112 anti-​corruption norms  18.84–​18.87 Canada treaties  18.102–​18.109 Japan treaties  18.88–​18.101 binary outcomes  18.12–​18.13 admissibility  18.16–​18.17 illegality where legality clause  18.19–​18.23 illegality where no legality clause  18.24–​18.28 jurisdiction  18.14–​18.15 merits  18.16–​18.17 criticisms of  18.02–​18.08 state losing right to assert  18.40–​18.51 state’s obligation to prosecute/​ investigate  18.29, 18.80–​18.83

illegality as a jurisdictional issue  18.30 illegality as a merits issue  18.31–​18.39 tribunal obligations to consider circumstances  18.52–​18.79 costs  additional costs and delays in resolution  27.96–​27.100 bifurcation  12.03, 12.08, 12.14–​12.19 costs of proceedings  3.55–​3.61 liability for costs and  26.34 recovery of funding costs  26.38–​26.51 right to recover costs  26.35–​26.37 counterclaims in investment treaty arbitration  17.01–​17.05,  17.94 cases  17.06, 17.09, 17.09–​17.10 Goetz v Burundi  17.14–​17.15 Klöckner v Cameroon  17.07–​17.08 Oxus Gold v Uzbekistan  17.18 Roussalis v Romania  17.12–​17.13 Urbaser v Argentina  17.16–​17.17 ICSID Convention, under  17.19, 17.67 Art. 46  17.20–​17.24 counterclaims ‘otherwise within ICSID’s jurisdiction’  17.65–​17.66 counterclaims arising from subject-​matter of dispute  17.25–​17.36 counterclaims within scope of parties’ consent  17.37–​17.64 moving forward  17.95–​17.96 UNCITRAL Rules, under  17.68–​17.72 1976 Rules  17.82–​17.87 connection requirement  17.88–​17.83 implied modification by state parties  17.82–​17.87 ipso facto importation of consent  17.73–​17.81 cross-​fertilization between areas of international law  4.53, 22.04, 22.38 damages, see compensation and damages de facto expropriation  22.07 de facto monopoly  22.16, 22.110 de facto national treatment violations  21.38–​21.47 de jure discrimination  21.02, 21.17, 21.25

840

de jure national treatment violations  21.23–​21.27 definitions  2.10 attribution  14.01–​14.02 bifurcation  12.01 company  10.46 confidential or protected information  8.30 effective date  2.64 fair and equitable treatment  20.01–​20.02 frivolous claims  7.01 indirect expropriation  22.02 investment  1.38–​1.43, 11.06, 11.15 asset-​based definition of investment  1.32, 1.39, 1.41 CETA  11.14 Czech Republic-​Greece BIT  11.09 ECT  2.11–​2.17, 11.07–​11.08 ICSID  4.36 improved definition of investment  1.32, 1.38–​1.43 making of investments  2.39 NAFTA  11.11–​11.12 TPP  11.14 TTIP  11.14 US Model BIT  11.10, 11.13 investors (Art. 1 ECT)  2.18–​ 2.20, 10.01, 10.10, 10.39–​10.40, 10.44, 10.51, 10.72, 10.89 issue conflicts  8.86 most favoured nation treatment defined  23.12–​23.15 national treatment obligation  21.01–​21.02 nationals  10.09–​10.11, 10.54 ratio decidendi  4.37 seat  10.86 taxation measures  2.86–​2.87 third-​party funding  26.02 umbrella clauses  16.01 without legal merit  7.27 denial of benefits  10.22, 10.41–​ 10.44, 10.71, 10.80–​10.85 Art. 17 ECT  2.21–​2.30 developing countries  arbitration practice  1.128–​1.131,  1.133 Calvo clause  21.08 expropriation  22.01 representation on tribunals  6.87 direct expropriation  2.44, 22.02, 22.51, 22.64, 22.70, 22.83, 22.119 disclosure, see transparency discrimination  de jure discrimination  21.02, 21.17, 21.25

Index fair and equitable treatment  20.90–​20.97 national treatment  de jure and de facto discrimination  21.02 nationality-​based discrimination and  21.05–​21.16 non-​discrimination  1.63–​1.64 dispute settlement (ECT Art. 26)  2.47–​2.52 ad hoc tribunals under UNCITRAL Rules  2.50 state-​to-​state dispute resolution mechanisms (Art. 27)  2.52 domestic administrative practices, improvement of  1.127 developing countries  1.128–​1.131 public agencies  1.132 Dominican Republic-​US-​Central American Free Trade Agreement (CAFTA)  abuse of process  10.76 appeals  27.75 burden of proof  13.18 date of submission  6.37 denial of benefits provision  2.30, 10.84 fair and equitable treatment  20.31 frivolous claims  7.22–​7.25 hearings  9.153 MFN treatment obligations  2.39 national treatment provision  2.39, 2.51 no U-​turn provisions  2.55 non-​discrimination   2.43 notice of arbitration  6.22 submissions in writing  6.86 duty to mitigate  economic distress  25.46–​25.51 generally  25.44–​25.45 effective date  2.11, 2.64, 2.66, 2.69–​2.71 effective nationality  10.05–​10.07, 10.10, 10.18, 10.20–​10.21 effects doctrine  22.38, 22.95 effect utile  2.33, 10.89, 16.38–​16.46,  17.45 Energy Charter Treaty (ECT)  2.01–​2.05,  2.89 ad hoc committees  2.50 background  2.06–​2.09 beneficial ownership  2.15 compensation and damages  25.20 contracting parties  2.10–​2.20 definitions  2.10 ‘investment’  2.11–​2.17, 11.07–​11.08

‘investors’  2.18–​2.20, 10.10 denial of benefits  2.21–​2.30 dispute settlement  2.47–​2.52 fair and equitable treatment  2.33–​2.34 ‘fork in the road’ provisions  2.53–​2.57 Hull Formula  2.42 indirect expropriation  22.26 investments and sales transactions distinguished  2.13 legitimate expectations  2.35–​2.36 MFN clauses  2.39–​2.40 national treatment  2.39 provisional application  2.58–​2.84 state-​to-​state dispute resolution mechanism  2.52 structure  2.09 substantive investment protections  2.31 contractual obligations  2.39 duty to refrain from impairment of investor’s enjoyment of investment  2.32 fair and equitable treatment  2.33–​2.34 Hull Formula  2.42 legitimate expectations  2.35–​2.36 most favoured nation treatment  2.39–​2.40 national treatment  2.39 obligation to submit to international law  2.37 protection against unlawful expropriations  2.41–​2.46 umbrella clause  2.38 taxation provision  2.85–​2.88 termination of provisional application  2.83 treaty benefits  2.19 umbrella clause  16.69 enforcement of awards  29.01–​29.02,  29.87 ICSID awards  29.64–​29.65 assets immune from enforcement  29.76–​29.80 exclusivity  29.68–​29.70 failed attempts to enforce  29.82 obligation to comply  29.66–​29.67 state immunity rules  29.75–​29.81 strict obligation to recognise and enforce  29.71–​29.74 waiver of enforcement immunity  29.81 informal mechanisms  29.83

841

diplomatic protection  29.84 ‘peer pressure’  29.86 perception of investment climate  29.86 political/​economic cost-​ benefit analyses  29.85 New York Convention (see New York Convention) non-​ICSID awards  29.03 foreign arbitral awards  29.04–​29.05 investment awards as commercial disputes  29.06–​29.09 obligations of national courts  29.12 requirement of written arbitration agreements  29.10–​29.11 environmental non-​governmental organizations  1.73 EU-​Canada Comprehensive Economic and Trade Agreement (CETA)  1.45 consistency in application of international law  1.112–​1.114 fair and equitable treatment  1.51–​1.55 frivolous claims  7.05–​7.07 indirect expropriation  1.60–​1.62 interim measures  24.18 legitimate expectations  1.53, 1.55 MFN clauses  23.114–​23.115 transparency provisions  1.75, 1.79 European Commission  amicus submissions  9.104–​9.105 investor-​state disputes, new policy for  27.87 multilateral investment courts  3.84–​3.86 proposal for IIC  27.82 European Convention on Human Rights  22.18, 22.29, 22.37, 22.52 European Court of Human Rights  22.42–​22.45,  22.55 European Energy Charter  2.07–​2.08 European Energy Charter Conference  2.37 European Union  CETA (see EU-​Canada Comprehensive Economic and Trade Agreement) EU-​Singapore FTA  9.118 EU-​Vietnam Free Trade Agreement  3.85

Index evidence preservation  24.65–​24.69 exclusive nature of enforcement rules  29.68–​29.70 expediated procedure  1.100 expropriation  Energy Charter Treaty  2.41–​2.46 indirect expropriation (see indirect expropriation) expropriatory environmental measures  22.84 fair and equitable treatment (FET)  1.51–​1.55, 20.01–​20.07 arbitrariness and non-​ discrimination  20.90–​20.97 denial of justice  20.31–​20.44,  20.102 due process  20.31–​20.44,  20.102 ECT Art. 10  2.33–​2.34 legitimate expectations  20.60–​ 20.70, 20.103, 20.104 normative content  20.28–​20.97 proportionality  balance of interests  20.71–​20.86 stability  20.52–​20.59, 20.104 status  20.08–​20.11 minimum standard of customary law and  20.25–​20.27 NAFTA tribunals  20.12–​20.19 non-​NAFTA tribunals  20.20–​20.24 transparency principle  20.45–​ 20.46, 20.47–​20.51, 20.104 vigilance and protection obligations  20.87–​20.89 finality of arbitration proceedings  27.97 first order obligations  16.21 foreign arbitral awards, enforcement of  29.04–​29.05 foreign investors  21.83–​21.88 ‘fork in the road’ provisions  2.05, 6.12, 6.14, 15.72–​15.79,  28.116 Energy Charter Treaty  2.53–​2.57 free trade agreements (FTAs)  ASEAN Comprehensive Trade Agreement  23.116 Australia-​Chile FTA  9.120 CAFTA (see Dominican Republic-​US-​Central American Free Trade Agreement)

Canada-​Korea FTA  7.08 Canada-​Peru FTA  9.116, 23.116 compensation and damages  25.20 EU-​Singapore FTA  9.118 fair and equitable treatment  20.12–​20.19 frivolous claims  CAFTA  7.22–​7.25 Canada-​Korea FTA  7.08 PTPA  7.26 most favoured nation (MFN) clause  23.116 NAFTA (see North American Free Trade Agreement) open hearings  9.122–​9.135 public access to documents  9.12–​9.20 third-​party written submissions  Australia-​Chile FTA  9.120 Canada-​Peru FTA  9.116 EU-​Singapore FTA  9.118 NAFTA Chap. 11  9.54–​9.76 transparency  9.122–​9.135 US FTAs  indirect expropriation  22.33 frivolous claims  7.02–​7.10 avoidance of  1.95, 1.96–​1.100,  7.31 definition  7.01 preliminary objections in investor-​state arbitrations  7.21–​7.30 summary disposition of claims  (see summary disposition of claims) full protection and security  1.45–​ 1.46, 1.50, 15.14, 15.16, 20.04, 20.09, 20.12–​20.13, 20.29, 20.87–​20.89, 28.89, 30.15 General Agreement on Tariffs and Trade (GATT)  21.06, 21.14–​21.16, 21.29, 23.06 General Agreement on Trade in Services (GATS)  21.14 global value chains (GVC)  1.20, 1.22 globalization, impact on investment rule-​making  1.05 good faith arbitration  11.94 government authority  attribution  14.37–​14.57 Harvard Draft Convention on International Responsibility of States for Injuries to Aliens (Harvard Draft Convention)  22.30 hearings in investment arbitration  5.05, 5.44–​5.48

842

decisions and awards  5.53–​5.58 open hearings  9.122–​9.143 post-​hearing activity  5.49–​5.52 transparency  9.121–​9.143 recent developments  9.144–​9.156 Hull Formula  ECT Art. 13  2.42 generally  22.01fn2, 25.14 IBA Guidelines on Conflicts of Interest in International Arbitration (IBA Guidelines)  applicability of Guidelines  8.59 conflicts of interest  8.56 impartiality and independence  8.57 IBA Rules on the Taking of Evidence  26.59 ICSID, see International Centre for Settlement of Investment Disputes ICSID Additional Facility Rules  1.07 Energy Charter Treaty disputes  2.50 institution of treaty-​based proceedings  6.02 ICSID awards, annulment of  appeal mechanism  27.70–​ 27.73, 27.75–​27.85, 27.107 advantages  27.88–​27.95 disadvantages  27.96–​27.100 UNCITRAL proposals  27.101–​27.105 grounds for annulment  27.23 failure to state reasons  27.44–​27.49 improper constitution of the tribunal  27.24–​27.29 manifest excess of powers  27.30–​27.43 serious departure from procedure  27.50–​27.54 manifest excess of powers  27.30–​27.32 applicable law  27.38–​27.43 jurisdiction  27.33–​27.37 scope and application of annulments  27.04–​27.14 annulment and appeal distinguished  27.15–​27.22 stay of enforcement  27.55–​27.69 see also enforcement of awards; International Centre for Settlement of Investment Disputes ICSID Convention  1.07 institution of treaty-​based proceedings  6.02

Index impartiality and independence of arbitrators  6.78–​6.87 IBA Guidelines  8.56–​8.59 ICC  8.34–​8.42 ICSID  8.10–​8.21 innovations  8.60–​8.80 LCIA  8.47–​8.51 PCA  8.22–​8.26 SCC  8.43–​8.46 SIAC  8.52–​8.55 UNCITRAL  8.27–​8.33 Indian Model BIT  6.05 investment defined  10.121, 11.15 non-​discrimination   22.34 protection of confidential information  9.49 umbrella clauses  16.14 indirect expropriation  1.56–​ 1.62, 22.03–​22.04, 22.119–​22.122 CETA  1.60–​1.62, 22.34 criteria to identify  duration of regulation  22.73–​22.78 economic impact  22.79–​22.84 generally  22.49–​22.50 interference with property rights  22.51–​22.72 interference with reasonable investment-​ backed expectations  22.109–​22.118 nature of governmental measures  22.85–​22.96 police powers doctrine  22.90 proportionality  22.97–​22.108 ECHR  22.29 ECT  22.26 Harvard Draft Convention  22.30 jurisprudence  ECtHR  22.42–​22.45 generally  22.35–​22.38 investor-​state tribunals  22.46–​22.48 Iran-​US Tribunal  22.39–​22.41 NAFTA  22.27 obligation to compensate  22.06–​22.12 OECD  22.28, 22.31 property  22.13–​22.24 protection against  22.25 Third Restatement of Foreign Relations Law  22.32 TPP  1.60–​1.62, 22.34 US FTAs  22.33 US Model BIT  22.25, 22.33 indirect shareholders  rights to bring claims  10.106–​10.113

inherent powers of tribunals  9.137, 24.03 initiation of proceedings  issue of consent  6.04–​6.08 gate-​keeping provisions  6.09 cooling-​off periods  6.10 exhaustion of remedies  6.11–​6.14 pursuit of local remedies  6.11–​6.14 temporal conditions  6.15 tribunal practice  6.16 Requests for Arbitration (see Requests for Arbitration) institution of treaty-​based proceedings  appointment of tribunals  appointment by appointing authority  6.69 appointment by the parties  6.66–​6.68 appointment formalities  6.91–​6.99 default process of applicable arbitration rules, under  6.72–​6.77 generally  6.65 ICC default provisions  6.77 ICSID default provisions  6.73–​6.74 ICSID practice  6.70–​6.71 SCC default provisions  6.77 UNCITRAL default provisions  6.75–​6.76 composition of tribunal  6.52–​6.53 ICSID rules  6.58–​6.60 non-​ICSID rules  6.61 number of arbitrators  6.62–​6.64 party agreement prior to proceedings  6.54–​6.55 constitution of the tribunal  6.98–​6.99 establishment of tribunals  6.50–​6.51 generally  6.01, 6.100 ICSID Convention, based on  6.02 ICSID Additional Facility, based on  6.02 initiation of proceedings  issue of consent  6.04–​6.08 gate-​keeping provisions  6.09–​6.16 Requests for Arbitration (see Requests for Arbitration) cooling off periods  6.10 exhaustion of pursuit of local remedies  6.11–​6.14 selection of arbitrators  nationality, impartiality and independence

843

under arbitration rules  6.78–​6.83 nationality, impartiality and independence under investment treaties  6.84–​6.90 temporal conditions  6.15 investment tribunal practice  6.16 institutionally supported arbitration proceedings  3.03–​3.05 applicable law  3.42 commencement date  3.24 costs of proceedings  3.55–​3.61 experts  3.44 ICC International Court of Arbitration  3.14–​3.19 arbitrators’ appointment  3.34 arbitrators’ disqualification  3.35 commencement date  3.25 costs of proceedings  3.58–​3.59 final awards  3.47 interim measures  3.40 post-​award remedies  3.50 transparency  3.46 ICSID  3.06–​3.13 arbitrators’ appointment  3.32 arbitrators’ disqualification  3.33 costs of proceedings  3.56–​3.57 final awards  3.49 institution of proceedings and commencement of proceedings distinguished  3.24–​3.31 interim measures  3.41 post-​award remedies  3.51–​3.53 transparency  3.45 interim measures  3.38–​3.34 language of proceedings  3.42 remedies, award and post-​award  3.47–​3.54 review process  3.29 SCC Arbitration Institute  3.20–​3.23 arbitrators’ appointment  3.36 arbitrators’ disqualification  3.37 confidentiality  3.46 costs of proceedings  3.60–​3.61 final awards  3.48 interim measures  3.38–​3.39 screening  3.30 seat of arbitration  3.42–​3.43 Secretary-​General, role of  3.25–​3.30 third parties  3.46

Index institutional separateness  14.21–​14.31 intellectual property rights  11.09, 11.41 interference with rights of ownership, see expropriation interim measures  concurrently seeking from national courts  24.162–​24.167 directed against  24.144–​24.146 effect  24.147–​24.161 frustration of awards and  24.84–​24.91 ICSID system  24.04–​24.10, 24.20–​24.27, 24.148–​ 24.153, 24.163–​24.164 jurisdiction  24.96–​24.104 merits  24.105–​24.112 NAFTA proceedings  24.28, 24.157, 24.167 necessity/​risk of irreparable harm  24.130–​24.143 preserving evidence  24.65–​24.69 preserving integrity of proceedings  24.62–​24.63 preserving rights of parties  24.19–​24.46 preserving status quo  24.47–​24.61 protection of tribunal jurisdiction  24.70–​24.83 purpose of measures  ICSID system  24.20–​24.27 NAFTA proceedings  24.28 UNCITRAL Arbitration Rules  24.29–​24.34 requests for interim relief  24.93–​24.95 UNCITRAL Arbitration Rules  24.11–​24.16, 24.29–​24.34, 24.158–​24.161,  24.166 urgency  24.113–​24.129 International Bank for Reconstruction and Development (IBRD)  3.07 International Centre for Settlement of Investment Disputes (ICSID)  3.01, 3.06–​3.13 Additional Facility Rules  1.07, 2.50, 6.02 Administrative Council  3.08, 3.32–​3.33, 3.53, 6.70, 8.11, 8.19, 27.78, 27.80 annulment of awards (see ICSID awards, annulment of ) appeals mechanism  27.77–​27.80

appointment of arbitral tribunals  6.70–​6.71 ICSID default provisions  6.73–​6.74 arbitral proceedings  arbitrators’ appointment  3.32 arbitrators’ disqualification  3.33 costs of proceedings  3.56–​3.57 final awards  3.49 generally  3.06–​3.13 institution of proceedings and commencement of proceedings distinguished  3.24–​3.31 interim measures  3.41 post-​award remedies  3.51–​3.53 transparency  3.45 composition of tribunals  6.58–​6.60 consolidation of claims  10.123–​10.124 costs of proceedings  3.56–​3.57 denial of benefits  10.80–​10.85 disqualification of arbitrators  8.10–​8.21 Energy Charter Treaty disputes  2.50 enforcement of awards (see enforcement of awards) ICSID Rules  1.07 impartiality and independence of arbitrators  8.10–​8.21 interim measures  concurrently seeking from national courts  24.163–​24.165 effect  24.148–​24.155 frustration of awards and  24.85–​24.87 generally  24.04–​24.10 jurisdiction  24.97–​24.102 merits  24.106–​24.107 necessity/​risk of irreparable harm  24.132–​24.139 preserving evidence  24.66 preserving integrity of proceedings  24.62 preserving rights of parties  24.20–​24.27, 24.38–​24.46 preserving status quo  24.47–​24.58 protection of tribunal jurisdiction  24.71–​24.79 requests for interim relief  24.93–​24.94 urgency  24.115–​24.122 lis pendens  10.125–​10.128 open hearings  9.136–​9.143

844

place of incorporation  10.57–​10.79 preliminary objections in investor-​state arbitrations  7.27–​7.30 public access to documents  9.21–​9.31 public estates as investors  10.92–​10.98 Requests for Arbitration  6.25–​6.31 rights of shareholders to bring claims  10.99–​10.118 Rule  41(5) 7.27–​7.30 rule-​making, impact on  1.28–​1.120 siège social  10.86–​10.91 summary disposition of claims,  7.11–​7.15 third party written submissions  9.77–​9.112 transparency  generally  3.45, 9.77–​9.112 open hearings  9.136–​9.143 public access to documents  9.21–​9.31 third party written submissions  9.77–​9.112 waivers and limitations of investors rights  10.119–​10.122 International Chamber of Commerce (ICC)  appointment of arbitral tribunals  6.77 arbitrators  appointment and removal  3.34, 8.35–​8.36 arbitrators’ disqualification  3.35 conflicts of interest  8.41 impartiality and independence  8.34–​8.42 reasons for decisions  8.37–​8.39 commencement date  3.25 costs of proceedings  3.58–​3.59 final awards  3.47 generally  3.01, 3.14–​3.19 ICC Rules  1.07 interim measures  3.40 post-​award remedies  3.50 summary disposition of claims  7.20 transparency  3.46 International Court of Justice (ICJ)  Art. 38 Statute of the ICJ  4.23, 4.82–​4.84 Art. 59 Statute of the ICJ  4.22 proceedings  10.04 provisional measures  24.131

Index International Energy Charter  2.03–​2.04 international investment agreements (IIAs)  generally  1.01 mega-​regional agreements  1.30 new generation IIAs  1.29 broad scope of issues covered  1.34 consistent application of international law  1.109–​1.115 improved definition of investment  1.32, 1.38–​1.43 revised ISDS procedures  1.36, 1.80–​1.108 revised wording of treaty obligations  1.33, 1.44–​1.79 transparency provisions  1.35, 1.116–​1.119 obligations of IIAs  1.44 expropriation  1.56–​1.62 international minimum standard of treatment  1.45–​1.55 national treatment  1.63–​1.64 no investment protection at expense of other public policy objectives  1.65–​1.73 transparency  1.74–​1.79 wording, content and structure  1.28 see also bilateral investment treaties; preferential trade agreements international law, consistent application of  1.109–​1.115 International Law Commission  MFN draft articles  23.08–​23.34 Report on Diplomatic Protection  10.05 state immunity  29.49 State Responsibility articles  4.33, 14.08, 15.33, 19.27, 21.50, 24.146, 25.07 causation  25.27–​25.28 investment, notion of  CETA  11.14 Czech Republic-​Greece BIT  11.09 definitions  1.38–​1.43 double-​barrelled test  11.21–​11.22 double-​keyhole approach  11.21–​11.22 dual approach  11.21 ECT  11.07–​11.08 generally  11.06, 11.15, 11.116–​11.118 ICSID Convention  11.16–​11.22 NAFTA  11.11–​11.12 objectivist approach  11.50–​11.58 subjectivist approach  11.59–​11.63

TPP  11.14 TTIP  11.14 types of assets constituting an investment  awards and settlement agreements  11.37–​11.39 bonds  11.33–​11.36 chattels  11.40 contractual rights  11.42–​11.43 generally  11.23–​11.25 intellectual property  11.41 loans  11.29–​11.32 pre-​investment expenditures  11.44–​11.46 real property  11.40 trade agreements  11.26–​11.28 US Model BIT  11.10, 11.13 investment, interpretation by arbitral tribunals  criteria  contribution  11.70–​11.73 contribution to economic development of host state  11.90–​11.91 duration  11.80–​11.88 generally  11.64–​11.69 good faith  11.94 legality  11.95 origin of capital  11.92 other criteria  11.89–​11.95 regularity of profits and returns  11.93 risk  11.74–​11.79 generally  1.38, 11.47–​11.49 objectivist approach  11.50–​11.58 risks of broad interpretation  1.39–​1.40 subjectivist approach  11.59–​11.63 investment rule-​making  1.05–​1.11 investments ‘in accordance with host state’s law’  11.96–​11.100 investments ‘in the territory of the host state’  generally  11.101–​11.105 intangible property  11.108 contracts for provision of services  11.109–​11.111 financial instruments and products  11.112–​11.115 tangible property  11.106–​11.107 investors  Art. 1 ECT  2.18–​2.20, 10.01, 10.10, 10.39–​10.40, 10.44, 10.51, 10.72, 10.89 foreign investors  national treatment  21.83–​21.88 limitations of investors’ rights  10.119–​10.121

845

nationality of investor  10.02, 10.129–​10.132 legal persons as investors  10.22–​10.128 natural persons as investors  10.03–​10.21 public estates as investors  10.92–​10.98 treatment accorded to the investor  21.59–​21.76 waivers of investors rights  10.119–​10.122 investor-​state dispute settlement (ISDS)  1.07 arbitrators  8.115–​8.116 (see also arbitrators) negotiation and adjudication  1.08 revised ISDS procedures  1.36, 1.80–​1.82 avoidance of ‘frivolous’ claims  1.96–​1.100 avoiding submission to multiple forums  1.103–​1.108 consolidation of claims  1.101–​1.102 greater control by contracting parties  1.83–​1.93 promotion of judicial economy  1.94–​1.95 see also rule-​making investor-​state tribunals  22.46–​22.48 ipso facto importation of consent  17.73–​17.81 Iran-​US Tribunal  22.39–​22.41 irreparable harm  24.130–​2 4.143 irreparable prejudice  24.131, 24.141 Japan  anti-​corruption norms  18.88–​18.101 judicial economy and efficiency  consolidation of claims  1.95 ‘frivolous’ claims  1.95 (see also frivolous claims) generally  1.94 multiple forums  1.95 judicial enforcement of awards,  see enforcement of awards jura novit curia  4.21 jure gestionis  16.53–​16.60 jure imperii  16.53–​16.60 law applicable to disputes, see applicable law legal persons, nationality of  customary international law  10.24–​10.33 generally  10.22–​10.23

Index legal persons, nationality of (cont.) ICSID Convention (Art.25(2))  10.53–​10.128 consolidation of claims  10.123–​10.124 denial of benefits  10.80–​10.85 lis pendens  10.125–​10.128 place of incorporation  10.57–​10.79 public estates as investors  10.92–​10.98 rights of shareholders to bring claims  10.99–​10.118 siège social  10.86–​10.91 waivers and limitations of investors rights  10.119–​10.122 non-​ICSID jurisprudence  10.52 state practice/​investment agreements  10.34–​10.38 control to justify coverage  10.47–​10.51 denial of benefits clause  10.41–​10.45 place of incorporation  10.39–​10.45 siège social  10.46 legitimacy of investor-​state arbitration  8.04, 8.08 codes of ethics  8.33 transparency of proceedings  1.116–​1.119, 8.98, 8.108, 8.115–​8.116 legitimate expectations  1.53, 1.55 ECT Art. 10  2.35–​2.36 lex mercatoria  19.09 like circumstances inquiry  21.22 de facto national treatment  21.23, 21.28–​21.47 de jure national treatment  21.24–​21.27 few and many comparators compared  21.48–​21.58 limitation clauses  2.73–​2.81 limitations of investors’ rights  10.119–​10.121 London Court of International Arbitration (LCIA)  appointment of arbitrators  8.47–​8.51 manifest excess of powers  27.30–​27.43 minimum guarantees in foreign investment  1.02, 1.45 fair and equitable treatment  1.51–​1.55 legitimate expectations  1.53, 1.55 minimum standard of treatment  1.46–​1.50

minimum standard of treatment  Canada Model FIPA  20.09 fair and equitable treatment, link to  20.05–​20.06, 20.10, 20.25–​25.27, 20.62, 20.95, 20.100 international minimum standard of treatment  1.45–​1.55 minimum guarantees in foreign investment  1.46–​1.50 NAFTA tribunals  20.12–​20.19 new generation BITs  20.11 non-​discrimination and  20.95 non-​NAFTA tribunals  20.20–​20.24 US Model BIT  20.09 minority shareholders  rights to bring claims  10.101–​10.106 mitigation of damages  25.44–​25.51 most favoured nation (MFN) clause  dispute settlement and  23.48–​23.80 intent of parties  23.97–​23.99 jurisdiction and admissibility distinguished  23.100–​23.113 Maffezini v Spain  23.57–​23.61 other cases  23.69–​23.80, 23.87–​23.96 Plama v Bulgaria  23.81–​23.86 Siemens v Argentina  23.62–​23.68 treaty text  23.97–​23.99 early jurisprudence  23.35 Ambatielos case  23.43–​23.47,  23.72 Anglo-​Iranian Oil Company case  23.36–​23.39 rights of US nationals in Morocco  23.40–​23.42 ECT Art. 10  2.39–​2.40 generally  23.114–​23.118 ILC Draft Articles 1978  23.08–​23.09 conditions  23.16 ejusdem generis principle  23.18–​23.21 interpretation  23.10–​23.11 MFN treatment defined  23.12–​23.15 restrictions  23.17 International Law Commission  Draft Articles 1978  23.08–​23.21 final report  23.22–​23.34 origins  23.02, 23.04–​23.07 scope  23.01 treaty-​making practice  23.114

846

movable and immovable property  2.11, 11.07, 11.09, 11.40–​11.41,  22.18 Multilateral Agreement on Investment (MIA)  2.89, 22.28 multiple forums, avoiding claims in  1.95, 1.103–​1.108 multiple shareholder claims  consolidation of claims  10.122–​10.124 rights to bring claims  10.114–​10.118 see also consolidation of claims NAFTA, see North American Free Trade Agreement national treatment  arbitrary and discriminatory treatment  21.77–​21.82 burden of proof and  21.89–​21.93 ‘Calvo’ clause  21.08–​21.10 de jure and de facto discrimination  21.02 ECT Art. 10  2.39 foreign investors, to  21.83–​21.88 generally  1.63–​1.64, 21.01–​ 21.04, 21.17–​21.21, 21.106–​21.108 like circumstances inquiry  21.22 de facto national treatment  21.23, 21.28–​21.47 de jure national treatment  21.24–​21.27 few and many comparators compared  21.48–​21.58 nationality-​based discrimination and  21.05–​21.16 reservations and exceptions  environment, protection of  21.104 federal government measures  21.97 generally  21.94–​21.96 local culture, protection of  21.105 local government measures  21.98 morals, protection of  21.103 NAFTA  21.98–​21.102 public health, protection of  21.103 public order, protection of  21.103 state government measures  21.98 treatment accorded to the investor  21.59–​21.76 nationality of investors  10.02, 10.129–​10.132

Index natural persons as investors  10.03–​10.21 legal persons as investors  10.22–​10.128 nationality-​based discrimination  21.05–​21.16, 21.19, 21.29, 21.51–​21.52, 21.59–​21.76 nationalization, see direct expropriation natural persons, nationality of 10.03 customary international law  10.04–​10.07 ICSID Convention (Art.25(1))  10.11–​10.21 state practice/​investment agreements  10.08–​10.10 ‘negative list’ approach  1.24–​1.25 new generation IIAs  annexes  1.25 broad scope of issues covered  1.34 consistent application of international law  1.109–​1.115 improved definition of investment  1.32, 1.38–​1.43 liberalisation  1.23–​1.27 ‘negative list’ approach  1.24–​1.25 new non-​conforming measures  1.26 revised ISDS procedures  1.36, 1.80–​1.108 revised wording of treaty obligations  1.33, 1.44–​1.79 transparency provisions  1.35, 1.116–​1.119 New York Convention, see Convention on the Recognition and Enforcement of Foreign Arbitral Awards no U-​Turn provisions  1.107, 2.55, 6.13–​6.14 non-​conforming measures  1.25–​ 1.26, 1.91–​1.93, 21.98 non-​discrimination  1.63–​1.64 CAFTA  2.43 fair and equitable treatment  20.90–​20.97 see also national treatment non-​frustration of awards  24.84–​24.91 non-​ICSID awards, review by national courts  appropriateness  28.134–​28.144,  28.161 Argentina v BG Group PLC  arbitration  28.76–​28.79 challenge proceedings  28.80–​28.82 Bayview Irrigation District  11 and Ors v Mexico 28.49 arbitration  28.50–​28.51

challenge proceedings  28.52–​28.56 Czech Republic v European Media Ventures SA  arbitration  28.57–​28.60 challenge proceedings  28.61–​28.65 Czech Republic v Saluka Investments BV  arbitration  28.45 challenge proceedings  28.46–​28.48 Ecuador v Chevron (USA) and Texaco  arbitration  28.88–​28.92 challenge proceedings  28.93–​28.97 Energoalians (Currently Known as Komstroy) v Moldova  arbitration  28.83–​28.86 challenge proceedings  28.87 generally  28.01–​28.08, 28.14 jurisdiction of national courts  28.128–​28.133, 28.159–​28.163 legal framework  28.09–​28.13 Mexico v Cargill, Incorporated  arbitration  28.66–​28.67 challenge proceedings  28.68–​28.75 Petrobart Ltd v Kyrgyz Republic and Kyrgyz Republic v Pertrobart Ltd  28.34 arbitration  28.35, 28.40–​28.42 challenge proceedings  28.36–​28.39, 28.43–​28.44 Petrobart I  28.35–​28.39 Petrobart II  28.40–​28.44 Republic of Ecuador v Occidental Exploration & Production Company  arbitration  28.26–​28.27 challenge proceedings  28.28–​28.33 jurisdiction  28.31–​28.33 justiciability  28.29–​28.30 Republic of Poland v Saar Papier Vertriebs GmbH  28.15–​28.17 Russian Federation v Renta 4 S.V.S.A. et al.  arbitration  28.117–​28.121 challenge proceedings  28.122–​28.126 Russian Federation v Sedelmayer  arbitration  28.18 challenge proceedings  28.19–​28.25 jurisdiction of arbitral tribunal  28.22–​28.25 jurisdiction of Swedish courts  28.20–​28.21

847

Sanum Investments Ltd v Lao People’s Republic  applicability of China-​ Laos BIT to Macao investors  28.107–​28.108, 28.113–​28.115 arbitration  28.98–​28.103 challenge proceedings  28.104–​28.116 jurisdiction  28.109, 28.116 justiciability  28.105, 28.111 Singapore Court of Appeal  28.110–​28.116 Singapore High Court  28.104–​28.109 standard of review  28.106, 28.112 standards of review  28.145–​28.158 non-​justiciability doctrine  14.58–​14.66 North-​American Free Trade Agreement (NAFTA)  1.09–​1.10 Chap. 11  9.54–​9.76 compensation and damages  25.20 fair and equitable treatment  20.12–​20.19 indirect expropriation  22.27 interim measures  24.17 concurrently seeking from national courts  24.167 effect  24.157 preserving rights of parties  24.28 investment  11.11–​11.12 national treatment  21.98–​21.102 open hearings  9.122–​9.135 public access to documents  9.12–​9.20 regional trade agreements  1.09 third party written submissions  9.54–​9.76 transparency  9.54–​9.76, 9.122–​9.135 Norway Model BIT  open hearings  9.155 transparency  9.48, 9.119 number of arbitrators  6.62–​6.64 obiter dicta  4.46 OECD draft Convention on the Protection of Foreign Property  16.09, 20.06, 22.28, 22.31 open hearings  9.121 ICSID Arbitration Rules, under  9.136–​9.143 NAFTA  9.122–​9.135 recent developments  9.144–​9.156

Index pacta sunt servanda principle  2.80, 15.06, 15.13, 16.01, 16.09 para-​statal entities  acts in exercise of government authority  14.44–​14.57 generally  14.32–​14.36 governmental authority concept  14.37–​14.43 Permanent Court of Arbitration (PCA) Arbitration Rules  8.22 impartiality and independence  8.23–​8.26 Permanent Court of International Justice (PCJ)  4.28, 15.07, 17.02, 22.15–​22.16, 22.110, 24.131, 25.07, 30.26 precedent  anti-​arbitrariness vaccine  4.13–​4.17 contribution to development of norms  4.58–​4.59 core concepts  4.34–​4.52 critical discernment, importance of  4.34–​4.52 decentralized system, in a  4.53–​4.56 evaluation of  4.57–​4.63, 4.88 generally  4.01–​4.12 International Court of Justice  4.22 legal status in international law  4.22–​4.33 limitations  4.18–​4.21 reasoning by precedent  4.63–​4.88 sustained perusal of legal principle  4.62 sustaining belief in system’s legitimacy  4.61 preferential trade agreements (PTAs)  1.01, 1.03 BITs distinguished  1.06, 1.11 prima facie evidence  13.46–​13.60 procedure in investment arbitration  first session with the tribunal  5.27–​5.29 disclosure of evidence  5.35–​5.39 multiple-​phase cases  5.30–​5.34 principal procedural issues  5.29 generally  5.01–​5.06, 5.59 hearings  5.05, 5.44–​5.48 decisions and awards  5.53–​5.58 post-​hearing activity  5.49–​5.52 preparing the case  5.07

commencement of arbitration  5.08–​5.10 first session with the tribunal  5.27–​5.39 initial case assessment  5.11–​5.12 Requests for Arbitration  5.13–​5.16 selection of arbitration rules  5.17–​5.23 selection of arbitrators  5.24–​5.26 selection of arbitration rules  5.17 cost of proceedings  5.18–​5.20 enforcement  5.22 jurisdictional requirements  5.21 review mechanisms  5.22 transparency  5.23 written submissions  5.40–​5.43 property  22.13–​22.24 proportionality doctrine  22.38, 22.45, 22.97–​22.108 provisional application (ECT Art. 45)  2.58–​2.84 provisional measures, see interim measures public disclosure and participation in investment arbitration,  see transparency public international law  identifying customary norms in  30.25–​30.30 treaty interpretation  30.11–​30.18 public policy objectives  1.65–​1.73 puissance publique  14.36, 14.47, 14.54, 15.50–​15.51 ratio decidendi  4.37, 4.48, 4.56 Regional Comprehensive Economic Partnership  7.10 regional trade agreements (RTAs)  1.08–​1.09, 1.23–​1.27 remedies  compensation (see compensation and damages) damages (see compensation and damages) interim relief (see interim measures) post-​award remedies  3.47–​3.54 third-​party funding (see third-​ party funding) removal of arbitrators  6.89, 8.35–​8.36 Requests for Arbitration  content  6.20

848

description of issues in dispute  6.22 identity of parties  6.21 reference to clause/agreement containing consent  6.24 seat of arbitration  6.23 form of Request  6.18–​6.19 generally  5.13–​5.16, 6.17 ICSID-​specific requirements  6.25–​6.31 notification of  6.40–​6.44 preliminary screening  6.45–​6.49 submission of Requests  6.32–​6.39 research tools in international investment law  customary international law  30.19–​30.33 generally  30.01–​30.07, 30.34–​30.35 international treaties, identification  30.10 international treaties, interpretation  30.11–​30.18 sources for investment arbitration case law  30.8, 30.09 sources of public international law  28.107, 30.6, 30.21, 30.22 Restatement (Third) of Foreign Relations Law  22.10, 22.28, 22.32 right to be preserved  24.22–​ 24.23, 24.39, 24.41, 24.43–​24.44,  24.87 rights of ownership, interference with, see expropriation rule-​making  1.04, 1.120 globalization, impact of  1.05 ICC Rules  1.07 ICSID Additional Facility Rules  1.07 ICSID Convention  1.07 ICSID Rules  1.07 ISDS cases  1.07 negotiation and adjudication  1.08 SCC Rules  1.07 see also investor-​state dispute settlement Singapore International Arbitration Centre (SIAC)  8.52 impartiality and independence  8.53 qualifications of arbitrators  8.54 reasons for decisions  8.55 summary disposition of claims,  7.19

Index sole effect doctrine  22.41, 22.46, 22.79, 22.95, 22.121 sources of international law  4.23–​4.24 state organs, attribution and  14.58–​14.66 status quo, preservation of  ICSID  24.47–​24.58 UNCITRAL  24.59–​24.60 stay of enforcement  27.55–​27.69 Stockholm Chamber of Commerce (SCC) Arbitration Institute  3.01, 3.20–​23 appointment of arbitral tribunals  6.77 arbitrators  arbitrators’ appointment  3.36 arbitrators’ disqualification  3.37 impartiality and independence  8.43–​8.44 reasons for decisions  8.46 confidentiality  3.46 costs of proceedings  3.60–​3.61 Energy Charter Treaty disputes  2.50 final awards  3.48 interim measures  3.38–​3.39 Rules  1.07 summary disposition of claims  7.18 state-​to-​state dispute resolution mechanisms  2.52 summary disposition of claims  7.16 ICC Rules  7.20 ICSID  7.11–​7.15 SCC Rules  7.18 SIAC Rules  7.19 UNCITRAL Rules  7.17 taxation  ECT Art. 21  2.85–​2.88 third-​party funding  26.01, 26.11, 26.63 CETA  26.02 champerty and maintenance  26.04–​26.10 common interest funding  26.22 debtor in possession financing  26.20 disclosure  26.52 identity of third party  26.53–​26.58 terms of funding agreements  26.59–​26.62 equity financing  26.19 financing by lawyers  conditional fee arrangements  26.17

contingency fees/​ no-​win-​no-​fee   26.17 frivolous claims and  26.12–​26.14 insurance  26.18 jurisdiction and admissibility, effect on  26.27–​26.33 liability for costs and  26.34 recovery of funding costs  26.38–​26.51 right to recover costs  26.35–​26.37 non-​recourse financing  26.16 pro bono/​charitable funding  26.21 regulation of funding arrangements  26.23–​26.26 third-​party written submissions  Australia-​Chile FTA  9.120 Canada Model FIPA  9.115–​9.116 Canada-​Peru FTA  9.116 EU-​Singapore FTA  9.118 ICSID cases  9.77–​9.112 NAFTA Chap. 11  9.54–​9.76 Norway Model BIT  9.119 US Model BIT  9.114 Trans-​Pacific Partnership (TPP)  1.30 appeals mechanism  27.81 arbitrators’ codes of conduct  8.64 indirect expropriation  1.60–​1.62,  22.34 investment  11.14 transparency provisions  1.79 Trans-​Atlantic Trade and Investment Partnership (TTIP)  appeals mechanism  27.82 arbitrators’ codes of conduct  8.78 investment  11.14 transparency  9.01–​9.08, 9.157–​9.159 fair and equitable treatment  20.45–​20.46, 20.47–​20.51,  20.104 new generation IIAs  1.35, 1.74–​ 1.79, 1.116–​1.119 open hearing  9.121 ICSID Arbitration Rules, under  9.136–​9.143 NAFTA  9.122–​9.135 recent developments  9.144–​9.156 public access to documents  9.09–​9.11 ICSID approach  9.21–​9.31 Mauritius Convention  9.38–​9.40 NAFTA approach  9.12–​9.20

849

provisions mandating public disclosure  9.41–​9.51 UNCITRAL approach  9.32–​9.37 third party written submissions  Australia-​Chile FTA  9.120 Canada Model FIPA  9.115–​9.116 Canada-​Peru FTA  9.116 EU-​Singapore FTA  9.118 ICSID cases  9.77–​9.112 NAFTA Chap. 11  9.54–​9.76 Norway Model BIT  9.119 US Model BIT  9.114 treaty-​based tribunals  contractual forum selection clauses  15.57 jurisdiction over contract claims  15.68–​15.71 jurisdiction over treaty claims  15.58–​15.67 interpretation of contracts  15.44–​15.47 jurisdictional requirements arising from underlying contracts  15.04–​15.05 contract under customary international law  15.06–​15.10 contracts under investment treaties  15.11–​15.16 investment treaty claims from contracts  15.17–​15.19 jurisdictional requirements from purely contractual claims  15.20–​15.22 attribution distinguished  15.32–​15.34 provisions granting jurisdiction over ‘any dispute’  15.24–​15.34 provisions granting jurisdiction over investment agreement disputes  15.35–​15.37 umbrella clause provisions for  15.23 treaty claims  contract claims distinguished  15.38–​15.79 fork-​in-​the-​road provisions  15.72–​15.79 forum selection clauses and  15.57–​15.71 identifying contract claims  15.48–​15.56 interpretation of contracts by treaty-​based tribunals  15.44–​15.47 tribunal jurisdiction, protection of  24.70–​24.83 triple identity test  2.57

Index umbrella clauses  background  16.06–​16.15 conditions of application  16.24–​16.25 contractual breaches actionable under  14.78–​14.91, 14.92 effect of  broad interpretation  16.38–​16.46 effet utile  16.38–​16.46 forum selection clauses and  16.47–​16.51 generally  16.24–​16.25, 16.26–​16.32 narrow interpretation  16.33–​16.37 Energy Charter Treaty  2.38 application in Art. 22(1) ECT  16.69 contractual commitments and legislative and administrative acts compared  16.61–​16.68 jure imperii and jure gestionis compared  16.53–​16.60 obligations between state and claimant  16.82 parent company rights  16.77–​16.83 party to the investment contract distinct from host state  16.69–​16.79 scope  16.23–​16.25, 16.52 shareholder rights  16.77–​16.83 generally  16.01–​16.05, 16.84–​16.87 significance  16.16–​16.22 treaty-​based jurisdictional requirements from purely contractual claims  15.23 UNCITRAL Arbitration Rules, see United Nations Commission on International Trade Law (UNCITRAL) Rules UNCITRAL Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards  3.81 UNICTRAL Model Law  3.81 UNCITRAL Notes on Organizing Arbitral Proceedings  3.81 UNCITRAL Rules on Transparency  3.83, 8.29–​ 8.31, 9.32–​9.37 UNCTAD  16.14, 17.96, 19.15 unilateral obligations  16.61

United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules  1982 Recommendations  3.81 ad hoc tribunals under UNCITRAL Rules,  3.02 arbitrators’ appointment  3.67 arbitrators’ disqualification  3.68 background  3.62–​3.65 commencement of proceedings  3.66 costs of proceedings  3.80 Energy Charter Treaty disputes  2.50 experts  3.77 interim measures  3.76 post-​award remedies  3.79 proceedings  3.70 termination of proceedings  3.78 transparency  3.72–​3.75 appointment of arbitral tribunals  6.75–​6.76 arbitrators  code of conduct  8.32 code of ethics  8.33 failure to act  8.28 impartiality and independence  8.27 UNCITRAL Transparency Rules  8.29–​8.31 bifurcation  12.07–​12.08 commencement of proceedings  3.66 counterclaims  17.68–​17.72 1976 Rules  17.82–​17.87 connection requirement  17.88–​17.83 implied modification by state parties  17.82–​17.87 ipso facto importation of consent  17.73–​17.81 generally  1.07 impartiality and independence of arbitrators  8.27–​8.33 interim measures  24.11–​24.16 concurrent jurisdiction of national courts  24.166 effect  24.158–​24.161 frustration of awards and  24.88–​24.91 jurisdiction  24.103–​24.104 merits  24.108–​24.112 necessity/​risk of irreparable harm  24.140–​24.143 preserving evidence  24.67–​24.69

850

preserving integrity of proceedings  24.63 preserving rights of parties  24.29–​24.34 preserving status quo  24.59–​24.61 protection of tribunal jurisdiction  24.81–​24.83 requests for interim relief  24.95 urgency  24.123–​24.129 New York Convention  3.81 power to reject claims  1.99 public access to documents  9.32–​9.37 summary disposition of claims  7.17 transparency provisions  1.78 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, see New York Convention unmeritorious claims, see frivolous claims urgency  24.11, 24.113–​24.129 US Model BITs  11.10, 11.13 2004 Model BIT  7.02, 7.08 2012 Model BIT  7.02–​7.04 appeal mechanisms  27.75 appointment of arbitrators  6.85 –​  6.86 document disclosure  9.42 fair and equitable treatment  20.31 frivolous claims  7.01 –​7.04, 7.10, 7.15 indirect expropriation  22.25, 22.33 interim measures  24.18 investment defined  11.10, 11.116 legal entities defined  10.37 national treatment obligations  21.12 submissions from non-​parties   9.114 transparency  1.75 waiver and limitation of investors’ rights  10.119 value-​added tax (VAT) refund programme  21.44–​21.47,  28.27 Vienna Convention on the Law of Treaties (VCLT)  11.61, 30.12 corruption defence  18.110–​18.111 counterclaims  17.50, 17.78 ECT  2.62, 2.74

Index enforcement of awards  29.53 legal persons as investors  10.21 MFN clauses  23.10–​23.11, 23.26, 23.30, 23.52, 23.95–​23.99,  23.118 non-​ICSID awards, review of  28.63, 28.78, 28.87, 28.108, 28.114, 28.124 precedent  4.66 third-​party funding  26.32 umbrella clauses  16.17

waiver of investors’ rights  10.119–​10.121 World Bank  3.08 Administrative Tribunal  4.77, 4.86 ICSID  1.07, 3.06, 3.12, 5.19, 6.70, 8.16, 8.19, 10.94 Operational Manual  29.86 world investment court  27.108 World Trade Organization  Appellate body  4.33, 4.52 discrimination  4.53

851

Dispute Settlement Understanding  1.112 national treatment  21.14–​21.16, 21.28–​21.29,  21.72 written obligations  16.20 written submissions  5.40–​5.43, 9.77–​9.112 Yukos arbitrations  2.26, 2.20, 2.29, 2.57, 2.72, 2.88