WEEK 1
International investment arbitration- A procedural mechanism that allows an investor from one state to bring arbitral proceedings
directly against the state in which it has invested.
- Between an investor and a state (foreign investor and a host state); Leads to binding outcomes (so no mediation, good
offices…); Neutrality of the tribunal; Party autonomy; Procedural flexibility (seat, time frame, scope, language, appoint
arbitrators, applicable law…); Binding and enforceable award.
INVESTOR-STATE ARBITRATION VS COMMERCIAL ARBITRATION
In common Different
- Procedure for settlement of disputes where parties grant - Procedurally: nature of disputes- commercial arbitration
arbitrators the power to issue a binding decision that is arises from commercial/contractual relationships while
enforceable investment involves a private party and a sovereign state-
- Investment arbitration piggybacks on rules and asymmetrical relationship between two parties
structure of international commercial arbitration instead - Consent source, disputes’ nature, private/public procedure
of adopting a court-based model - Investment arbitration increasingly moves towards models of
international judicial review of governmental conduct
TRIBUNALS’ POWER TO RENDER AN AWARD
Jurisdiction: Consent is paramount, goes back to the origins of arbitration as a system of dispute settlement that is based on
consent (UNCITRAL AR art.1). Art.25(1) ICSID Convention: 1) Any legal dispute; 2)Arising directly out of an investment; 3)
Between a contracting state and a national of another contracting state; 4) Consent (“in writing”)
1. The initiation of arbitration proceedings (Conditions depend on the instrument; Waiting periods?; Emergency
arbitrators? (Separate procedure that can speed up the process))
Procedural Steps of Arbitration
2. Notice of arbitration/request for arbitration (Request for interim measures; Answer)
3. Selection of arbitrators. Choice of arbitrators: Party agreement/UNCITRAL: co-arbitrators or appointing authority/
ICSID: chairperson of Administrative council
4. Challenge or removal of arbitratorsà Tactic to delay the proceedings (especially states no interest to be fast)
5. First session with tribunal
6. Written submissions (Memorial, counter-memorial…)
7. The hearing (Witness and experts)
8. Post-hearing activity (Post hearing submissions; Deliberations)
9. Decision or award (Separate award on damages?)
10. Post-award remedies by tribunal
11. Annulment?
12. Enforcement?
CONSENT
- When consent is given, no party can withdraw from it unilaterallyà irrevocability in pacta sunt servanda.
- Host state expresses consent: 1) via treaties, 2) national laws, 3) direct agreements with the investor.
- Investors must consent to arbitration: in contractual agreements consent is implied by the agreement. Under treaties investor
consents by either bringing a claim or providing a notice via communication letter prior to filing a claim.
1
, Arbitration clauses often included in contracts concluded by investors and statesà providing consent to the arbitral forum
Agreements for future disagreements.
State and
- Parties can agree to submit a dispute that has already arisen to arbitration by means of compromis.
Investor
Benefit of direct agreement: the possibility to custom-tailor dispute resolution provisions; parties free to negotiate narrow
arbitration clauses, including specific types of disputes.
Parties’ consent doesn’t have to be recorded in a single instrument- suffices that its interpretation in good faith shows that
the parties agreed to ICSID arbitration, for the ICSID Tribunal to have jurisdiction over them (Amco v Indonesia)
Venezuela Holdings 2010 Jurisdiction para85
Consent in State
1) Offer by Host State: offer is unequivocal + no further actions on behalf of parties.
Legislation
- Text of law can limit categories of investors/type of investment, regarding which it consents to arbitral jurisdiction (can
preclude some investors from participating)
2) Acceptance by Investor: Ways to accept: submitting request for arbitration (but offer can be altered/ revoked at any time
before it’s acceptedà advisable to consent earliest possible); through investment agreement with host State; through a
simple communication to host State; through statement contained in application for investment license.
States may express a public offer to arbitrate in dispute resolution provisions of a BIT or MIT.
Consent Through BITs or
è More controversial because agreement is made between states- while it is interpreted as unilateral act of state,
investor is a 3rd party beneficiary of treaty protections,.
Consent - Scope of dispute resolution provisions tailored to include all kinds of potential disputes (or arbitration
in BTs clause more narrow to encompass only certain types).
MITs
- Another potential issue- if host state decides to withdraw from or denounces the treaty.
Consent - NAFTA provides that state parties consent to submit disputes to arbitration. Also investor must also
in MTs consent to arbitral forum.
- ECT contains unconditional consent to arbitration for disputes that fall within treaty. Dispute resolution
provision of ECT is broad- encompasses consent for four different arbitral fora.
Issue arises when investor concludes a contract with the state which contains an exclusive dispute resolution clause as well
Forum Clause
as next to the dispute resolution provision in a protection treaty.
Choice-of-
Exclusive
Vivendi tribunal: while purely contract claims may be limited by the exclusive choice-of-forum clause, the claims arising
out of BIT protections do not fall under this clause and may be litigated pursuant to the treaty dispute resolution provisions.
The distinction between a contract claim, and treaty claim is not obvious, especially when umbrella clause.à Some
tribunals concluded that umbrella clause elevates contract claims to the status of treaty claims.
Under ICSID, moment of consent also triggers: investor’s nationality has to satisfy the BIT and ICSID conditions.
Consent Becomes
Where there are other jurisdictional requirements that are not satisfied at the moment of investor’s acceptance, consent to
Perfected
jurisdiction becomes perfected when the last condition is satisfied.àAfter state may not withdraw its offer, whether by
changing its legislation/denouncing the BIT.
- State is equally precluded from indirectly revoking its consent, especially it can’t rely on art.25(4) notification to
exclude a specific class of disputes from its consent.
CASE PREPARATION
The preparation of the case: the period from the inception of the dispute to the first procedural session with tribunal. During it
parties select counsel to represent them, conduct initial analysis of case, select arbitrators and decide on the specific procedure
for the arbitration.
Initial assessment for the claimant For the respondent
- Preparation period begins when problem arises with its - The prep period commences when the relevant ministry
investment and they realize that investment treaty may receives this notice of dispute.
either provide a solution or assist in resolution of the case. - Long periods of inactivity on state side can leave state with
- Sometimes several treaties available to investor compressed period for preparation (normally a disadvantage)
Cost Arbitration under ICSID rules may be significantly less expensive, than UNCITRAL (ICSID has set fee
Implications schedule that establishes hourly fees for tribunal members; while UNCITRAL Rules allow arbitrators to set
Selection Of Arbitration
their own fees; in SCC, arbitrators’ fees are set by the Board of Directors of the SCC).
Jurisdictional Additional jurisdictional requirements by ICSID can add to complexity of procedure and result in dismissal
Requirements of certain claims that could go forward under other rules; SCC and UNCITRAL: no additional requirements
Rules
for jurisdiction, tribunal will have jurisdiction over any claim meeting requirements of the investment treaty.
Enforcement Under ICSID: award not subject to review in national courts, they are obligated to enforce ICSID awards as
and Review if they were a judgement of a court of first instanceà a considerable advantage for the investor.
Mechanism SCC and UNCITRAL awards subject to annulment proceedings in national court of the place of arbitration.
Transparency ICSID rules provide for a public docket describing cases registered, developments, excerpts of reasoning.
SCC rules: presumption that hearings will be private and don’t address other questions of transparency.
2
, After 2013 UNCITRAL amendment, parties’ written submissions and other key documents made available
to general public, hearings public, and the tribunal may allow amicus curiae submissions.
Request for arbitration: document that commences arbitration proceedings under ICSID and SCC
Arbitration
Response (UNCITRAL it’s notice of arbitration).
Request
Thereto
And
For
Start of arbitration: UNCITRAL arbitrations begin as soon as notice of arbitration is received by respondent;
SCC begin on date when the request for arbitration is received by SCC; ICSID commence when Se-Gen of
ICSID registers the request.
Usually 3 arbitrators. Claimant names 1st arbitrator in request for arbitration, then respondent names 2nd.
Selection Of
Arbitrators
Presiding arbitrator appointed either by agreement of parties or arbitrators.
Restrictions regarding nationality:
- 3-person ICSID: national of State party to dispute can’t arbitrate without agreement of other party; 3-
person SCC: presiding arbitrator can’t have nationality of any party to dispute unless otherwise agreed
or deemed appropriate by the SCC; UNCITRAL: no nationality restrictions
First session: 6-12 weeks after tribunal been constituted and all arbitrators confirm their appointment
Arbitration is flexible:
First Session
With The
Tribunal
- Advantage: possible to design a procedure that takes into account specific needs of the case at hand.
- Disadvantage: if party doesn’t have a clear idea, it can agree to a procedure that doesn’t suit its needs.
Principal procedural issues that arise at the first session: 1)language of proceedings; 2) place of arbitration;
3)confidentiality of information; 4)scheduling of written submissions; 5)collection of documentary evidence;
6) organizing testimonial evidence, before and at the evidentiary hearing.
WRITTEN AND ORAL SUBMISSIONS
Written Take form of 4 substantial pleadings: i) memorial/statement of claim, ii) counter-memorial/statement of defense, iii)
Submissions reply, iv) rejoinder.
Statement of claim and statement of defense: present entirety of arguments and evidence offered by each party.
Reply and rejoinder responsive pleadings, with responsive witness statements, expert reports, documentary evidence.
Hearing Occasion for parties to engage tribunal with respect to essential issues, for witnesses to be cross-examined.
To preserve due process rights and protect integrity of the awards
Hearing is critical part of case: arbitrators focus most on case and begin deliberations on its outcome.
POST-HEARING ACTIVITY
è period between end of hearing and issuance of award, and activity relating to recognition and enforcement of award.
Pre-award Parties file their statements of costsà provide summary of costs incurred, incl arbitration costs and legal fees.
Activity ICSID doesn’t provide default rule for allocation of costs, leaving it to tribunal discretion; SCC allows tribunals to
apportion costs between parties; UNCITRAL costs borne by unsuccessful party (no guidance to legal fees incurred by
each party, decision being left to tribunals).
Post-Award Arbitral award is final and binding on parties
Activity Losing party invariably considers whether sufficient legal grounds exist to annul or set aside the award, or to seek its
correction.
WEEK 2
Reasons for 1.Investment is governed by domestic law (property and contractual rights) à domestic courts deal with those
Parallel 2.Jurisdictional overlap between different mechanisms: investment arbitration alternative to local litigation
Proceedings: 3.Investment doesn’t operate in vacuum but in the framework of host state’s legal system;
4.Concurrent availability of dispute settlement fora (wide definition of investors; claims can be brought by different
entities in investment structure)
CONTRACT DEVICES:
Contractual Application in practice à Vivendi v Argentina
Exclusive - Contractual exclusive jurisdiction clauses can affect jurisdiction of treaty tribunals regarding contract claims
Jurisdiction - SGS v Philippines 138ff considerations (also paras98 and 101): Binding + exclusive jurisdiction clause in
Clauses contract respected, unless overridden by another provision; BITs as general framework instruments don’t
override contractual clauses.
One way to bring contract claims to investment tribunal- to use the broad generic “all disputes” provisions; other-
umbrella clause (treaty obligation requires state to observe obligations entered into with investor)
- Problem with umbrella clauses: Elevates contract breaches into treaty breaches
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