Towards Consistency in International Investment Jurisprudence : A Preliminary Ruling System for ICSID Arbitration [1 ed.] 9789004337916, 9789004337909

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Towards Consistency in International Investment Jurisprudence

Nijhoff International Investment Law Series Series Editors Prof. Eric De Brabandere (Leiden University) Dr. Tarcisio Gazzini (University of Lausanne) Prof. Stephan W. Schill (University of Amsterdam) Prof. Attila Tanzi (University of Bologna) Editorial Board Andrea K. Bjorklund (Montreal) – Juan Pablo Bohoslavsky (El Bolsón, Río Negro) – Chester Brown (Sydney) – David Caron (London) – Patrick Dumberry (Ottawa) – Michael Ewing-Chow (Singapore) – Susan D. Franck (Lexington) – Ursula Kriebaum (Vienna) – Makane Mbengue (Geneva) – Catherine A. Rogers (Carlisle) – Christian Tams (Glasgow) – Andreas Ziegler (Lausanne)

VOLUME 7

The titles published in this series are listed at brill.com/iils

Towards Consistency in International Investment Jurisprudence A Preliminary Ruling System for icsid Arbitration By

Katharina Diel-Gligor

This book is based on a dissertation that was generously funded by the German National Academic Foundation. It was also supported by the International Max Planck Research School on Successful Dispute Resolution in International Law, Heidelberg / Luxembourg.

LEIDEN | BOSTON

Copyright and permission notice for pp. 249–270: International Dispute Settlement: Room for Innovations? (Rüdiger Wolfrum et al. eds.), Systemic Deficiencies of icsid Investment Arbitration? An Inspection of the Annulment Mechanism, Vol. 239, 2013, pp. 359–392, Katharina Diel-Gligor (© by Max-Planck-Gesellschaft zur Förderung der Wissenschaften e.V., to be exercised by Max-Planck-Institut für ausländisches öffentliches Recht und Völkerrecht, Heidelberg 2013). With permission of Springer. Library of Congress Cataloging-in-Publication Data Names: Diel-Gligor, Katharina, author. Title: Towards consistency in international investment jurisprudence : a preliminary ruling system for ICSID arbitration / by Katharina Diel-Gligor. Description: Leiden ; Boston : Brill Nijhoff, 2017. | Series: Nijhoff international investment law series ; volume 7 | Based on author’s dissertation (doctoral - Universität Heidelberg. Juristische Fakultät, 2014). | “Summary in German.” | Includes bibliographical references and index. Identifiers: LCCN 2017005022 (print) | LCCN 2017006423 (ebook) | ISBN 9789004337909 (hardback : alk. paper) | ISBN 9789004337916 (E-books) Subjects: LCSH: International commercial arbitration. | International Centre for Settlement of Investment Disputes. Classification: LCC K2400 .D457 2017 (print) | LCC K2400 (ebook) | DDC 346/.092--dc23 LC record available at https://lccn.loc.gov/2017005022

Typeface for the Latin, Greek, and Cyrillic scripts: “Brill”. See and download: brill.com/brill-typeface. issn 2351-9542 isbn 978-90-04-33790-9 (hardback) ISBN 978-90-04-33791-6 (e-book) Copyright 2017 by Koninklijke Brill nv, Leiden, The Netherlands. Koninklijke Brill nv incorporates the imprints Brill, Brill Hes & De Graaf, Brill Nijhoff, Brill Rodopi and Hotei Publishing. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill nv provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, ma 01923, usa. Fees are subject to change. This book is printed on acid-free paper and produced in a sustainable manner.

Contents Acknowledgements IX List of Abbreviations XI Introduction 1 a Subject Area: International Investment Law and Arbitration 1 B Central Problem: Inconsistency in International Investment Jurisprudence 2 C Central Goal: Targeted, Effective, and Feasible Approach for Reform 4 D Research Questions and Hypotheses 5 E Research Methods 7 F Course of Investigation 8 1 Contextual Framework and Object of Study 10 A Preliminary Considerations 10 B Contextual Framework: International Investment Law and Arbitration 11 i Development of (Inter-) National Investment Law and Policy 11 ii Development of International Investment Arbitration 38 C Object of Study: icsid Arbitration 47 i Basic Information 47 ii Relative Strengths and Weaknesses: Comparative Law Analysis of icsid and uncitral Arbitration 60 iii Summary and Evaluation 99 D Interim Conclusion 101 2 Problem Analysis: Inconsistency in icsid Investment Jurisprudence 103 A Preliminary Considerations 103 i “Consistency” and “Jurisprudence Constante” – Working Definitions and Premises 106 ii icsid Jurisprudence in the Focus of Criticism – Rationales 114 b Questions of Principle 117 i Is Jurisprudential Consistency Desirable at All? 117 ii Is the Inconsistency Criticism Appropriate at All? 127

vi

Contents

c

d

e

f

Forms of Inconsistencies 157 i Same Dispute, but Multiple Proceedings 157 ii Different Disputes, but Same Legal Issues 160 iii Temporal Distinction: Parallel vs. Successive Proceedings 162 Causes of Inconsistencies 163 i Systemic Causes: Basic Structures of icsid Arbitration 163 ii Methodological Causes: Legal Interpretation in icsid Arbitral Decisions 168 Occurences of Inconsistencies: Qualitative-Empirical Study 202 i Law Governing Jurisdiction 206 ii Procedural Law 236 iii Substantive Law 277 iv Summary and Evaluation 328 Interim Conclusion 332

3 Reform Proposal: Curing Inconsistent icsid Investment Jurisprudence 333 A Preliminary Considerations 333 B Overview of Reform Proposals to Enhance Consistency 335 i Instruments without icsid Specificity 336 ii Instruments with icsid Specificity 353 iii Evaluative Choice of the Preferable Instrument 388 C Preferable Reform Proposal: Draft of an icsid Preliminary Ruling System 391 i Conceptual Models 392 ii Legal Implementation 404 iii Basic Structures 412 iv Admissible Questions 420 v Submission of Questions 430 vi Course of Proceedings 439 vii Effect of Preliminary Rulings 442 viii Summary and Evaluation 448 D Interim Conclusion 451 Conclusion 452 A Final Summary 452 B Research Questions and Hypotheses: Answers and Confirmations 460 C Prospects and Outlook 461

Contents

Summary in German 464 Annex 473 A Annex to Chapter 1 473 B Annex to Chapter 2 477 C Annex to Chapter 3 492 Table of Cases 502 Bibliography 539 Index 586

vii

Acknowledgements This work was originally submitted as a dissertation to the Faculty of Law at Ruprecht-Karls-University Heidelberg in 2014. The doctorate has been ­successfully completed with the viva voce examination in 2015. The present version of the work has been comprehensively updated and is current as of September 2016. Further smaller updates were made up to December 2016. In April 2015, the dissertation was awarded the annual “Rolf und Lucia Serick-Preis” for the best doctoral thesis in the fields of research of the Heidelberg Institute for Comparative Law, Conflict of Laws and International Business Law. One year later, in April 2016, it was among the winners of the biennial “DISFörderpreis” awarded by the German Institution of Arbitration for outstanding academic work in the field of arbitration or alternative dispute resolution. While preparing this work I have received assistance from a number of people, though any errors are, of course, my own. First, I would like to express my gratitude and appreciation to my doctoral supervisor Prof. Dr. Dres. h.c. Herbert Kronke for his tremendous support and helpful guidance. His invaluable advice and expertise have contributed considerably to the success of this work. Special thanks are also owed to Prof. Dr. Dres. h.c. Burkhard Hess, who supported my work as the second supervisor. I would also like to thank Prof. Peter Winship for the prompt preparation of the linguistic evaluation of my work. This work was generously funded by the German National Academic Foundation. Support was also provided by the International Max Planck Research School for Successful Dispute Resolution (imprs-sdr), a doctoral programme organised by Heidelberg University, the Max Planck Institute for Comparative Public Law and International Law in Heidelberg, and the Max Planck Institute for International, European and Regulatory Procedural Law in Luxembourg. In this respect, I am particularly grateful for having the opportunity to participate in imprs seminars, which enabled fruitful discussions and exchanges with my fellow researchers, renowned professors, and practitioners. I am also thankful for the outstanding research environment at the mpi Heidelberg and their most helpful and skilled library team. Many thanks are also due to numerous esteemed friends and colleagues in Germany and in various other places in the world for enriching discussions and linguistic assistance as well as to the team at Brill/Nijhoff Publishing for their editorial work, without which this book could not have been published.

x

Acknowledgements

Last but not least, I am deeply grateful to my parents and siblings, who continuously accompanied and supported me on my way. And it is to my husband to whom I owe my deepest thanks for his loving help and his inexhaustible encouragement and patience. This work is dedicated to him. Katharina Diel-Gligor Berlin, December 2016

List of Abbreviations A

Conventions, Treaties, Statutes, and Rules

acia

AktG Amsterdam Treaty asean Agreement

cafta-dr

cjeu Rules of Procedure

cusfta

Drago-Porter Convention

echr

ecsc Treaty

asean Comprehensive Investment Agreement, 26 February 2009 (entry into force 29 March 2012) Aktiengesetz (German Stock Corporation Act), 6 September 1965, BGBl. i 1965, 1089 Treaty of Amsterdam, 2 October 1997 (entry into force 1 May 1999), oj C 340 (1997) Agreement between the Governments of Brunei Darussalam, the Republic of Indonesia, Malaysia, the Republic of Philippines, the Republic of Singapore, and the Kingdom of Thailand for the Promotion and Protection of Investments, 15 December 1987, 27 ilm 612 (1988) Dominican Republic-Central America Free Trade Agreement, 5 August 2004, 43 ilm 514 (2004) Rules of Procedure of the Court of Justice of the European Union, 29 September 2012 (entry into force 1 November 2012), oj L 265–1 (2012) Free Trade Agreement between the Government of Canada and the Government of the United States of America, 2 January 1988 (entry into force 1 January 1989), 27 ilm 281 (1988) Hague Convention ii of 1907 Respecting the Limitations of the Employment of Force for the Recovery of Contract Debts, 18 October 1907, 205 Con. ts 250 (1907) European Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature 4 November 1950 (entry into force 3 September 1953), ets No. 005 Treaty establishing the European Coal and Steel Community, 18 April 1951 (entry into force 25 July 1952, expiry 23 July 2002), 261 unts 140 (1957)

xii ect ec Treaty

eec Treaty/Rome Treaty

euratom Treaty

finsa

Geneva Convention

icc Arbitration Rules (2012) icj Statute

icsid afr

icsid Arbitration Rules

icsid Conciliation Rules

icsid Convention

icsid Institution Rules

List of Abbreviations Energy Charter Treaty, 17 December 1994 (entry into force 16 April 1998), 34 ilm 360 (1995) Treaty Establishing the European Community (consolidated version), 2 October 1997 (entry into force 1 May 1999), oj C 340 (1997); formerly eec Treaty/Rome Treaty Treaty Establishing the European Economic Community, 25 March 1957 (entry into force 1 January 1958), 298 unts 11 (1958) Treaty Establishing the European Atomic Energy Community, 25 March 1957 (entry into force 1 January 1958), 298 unts 167 (1958) us Foreign Investment and National Security Act of 2007, enacted 26 July 2007, Pub.L. 110–49, 121 Stat. 246 Geneva Convention on the Execution of Foreign Arbitral Awards, 26 September 1927, lnts 302 icc Rules of Arbitration, effective as of 1 January 2012 Statute of the International Court of Justice, San Francisco, 26 June 1945 (entry into force 24 October 1945), ts No. 993 icsid Additional Facility Rules, Doc. ICSID/11 (June 1979), as amended and effective 10 April 2006 icsid Rules of Procedure for Arbitration Proceedings, Doc. ICSID/15 (January 1985), as amended and effective 10 April 2006 icsid Rules of Procedure for Conciliation Proceedings, Doc. ICSID/15 (January 1985), as amended and effective 10 April 2006 icsid Convention for the Settlement of Investment Disputes between States and Nationals of Other States, Doc. ICSID/2 (18 March 1965), 575 unts 159 (1966), 4 ilm 532 (1965) icsid Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings, Doc.

List of Abbreviations

xiii

ICSID/15 (January 1985), as amended and effective 10 April 2006 ilc Draft Articles on State ilc, Draft Articles on the Responsibility of Responsibility States for Internationally Wrongful Acts, Report of the ilc on the Work of its Fifty-third Session, un gaor, Fifty-sixth Session, Supp. No. 10, 43, un Doc. A/56/10 (annexed to un Doc. 56/83, 12 December 2001) (2001) ilc Guiding Principles ilc, Guiding Principles Applicable to Unilateral Declarations of States Capable of Creating Legal Obligations, Doc. A/CN.4/L-703, ilc Report u.n. A/61/10 (2006) lcia Arbitration Rules (2014) lcia Arbitration Rules, effective 1 October 2014 Lisbon Treaty Treaty of Lisbon, 13 December 2007 (entry into force 1 December 2009), oj C 306 (2007) mai Multilateral Agreement on Investment, Draft Consolidated Text, 22 April 1998, DAFFE/MAI(98)7/REV1 Mauritius Transparency Convention un Convention on Transparency in TreatyBased Investor-State Arbitration, un ga Res. 69/116, un Doc. No. A/RES/69/116 (10 December 2014) nafta North American Free Trade Agreement, 17 December 1992 (entry into force 1 January 1994), Can.-Mex.-US, 32 ilm 289 (1993) New York Convention un Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958, 330 unts 38 (1959) Nice Treaty Treaty of Nice, 26 February 2001 (entry into force 1 February 2003), oj C 80 (2001) ospar Convention Convention for the Protection of the Marine Environment of the North-East Atlantic, 22 September 1992 (entry into force 25 March 1998), 2354 unts 67, 32 ilm 1069 (1993) Rome i Convention 1980 Rome Convention on the Law Applicable to Contractual Obligations (consolidated version), 26 January 1998, oj C 27/02 (1998), 34–46 scc Arbitration Rules (2010) scc Arbitration Rules, effective as of 1 January 2010

xiv sox

List of Abbreviations

us Sarbanes-Oxley Public Company Accounting Reform and Investor Protection Act of 2002, enacted 30 July 2002, Pub. L. No. 107–204, 116 Stat. 745 teu/Maastricht Treaty Treaty of the European Union, 7 February 1992 (en­try into  force 1 November 1993), oj C 191 (1992) amended by Amsterdam Treaty (1997), Nice Treaty (2001), Lisbon Treaty (2007) tfeu Treaty on the Functioning of the European Union (consolidated version), 13 December 2007 (entry into force 1 December 2009), oj C 326 (2012); formerly ec Treaty un Charter Charter of the United Nations, 26 June 1945 (entry into force 24 October 1945), 1 unts xvi (1946–1947) uncitral Arbitration Rules (1976) uncitral Arbitration Rules, ga Res. 31/98, un Doc. A/31/17 (1976), 28 April 1976 (entry into force 15 December 1976) uncitral Arbitration Rules (2010) uncitral Arbitration Rules, ga Res. 65/22, un Doc. A/65/465, 6 December 2010 (entry into force 15 August 2010) uncitral Model Law uncitral Model Law on International Commercial Arbitration, 21 June 1985, ga Res. 40/72, un gaor, 40th Sess., Supp. No. 17, Annex 1, un Doc. A/40/17 (1985) (amendment as of 7 July 2006) uncitral Rules on Transparency uncitral, Rules on Transparency in Treatybased Investor-State Arbitration, Annex i, 11 July 2013 (entry into force 1 April 2014) unclos un Convention on the Law of the Sea, 10 December 1982 (entry into force 16 November 1994), 1833 unts 3 (1994) unesco Convention unesco Convention Concerning the Protection of World Cultural and Natural Heritage 1972, 1037 unts 151 (1977) Vienna Convention/vclt Vienna Convention on the Law of the Treaties, 23 May 1969 (entry into force 27 January 1980), 1155 unts 331 (1980) wto dsu wto Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2

List of Abbreviations

wto wpar 1953 ilc Draft Convention

1962 psnr Resolution

1967 oecd Draft Convention

1974 erds Charter

1974 nieo Declaration

1974 nieo Program

1991 German Model bit

2004 Canada Model bit

2004 us Model bit

2005 uk Model bit

xv to the Agreement establishing the wto, 33 ilm 1226 (1994) wto Working Procedures for Appellate Review, 16 August 2010, WT/AB/wp/6 ilc Draft Convention on Arbitral Procedure, ilc Report, A/2456 (A/8/9), 1953, Chap. ii, para. 57 un-ga, Resolution 1803 (xvii) on Permanent Sovereignty over Natural Ressources, ga Res. 1803 (xvii), un Doc. A/5217/Supp. No. 17 (14 December 1962) Draft Convention on the Protection of Foreign Property, Resolution of the oecd Council, 12 October 1967, oecd Publication No. 23081 (1967), 7 ilm 117 (1968) un-ga, Resolution 3281 (xxix), Charter of Economic Rights and Duties of States, un Doc. A/RES/29/3281 (12 December 1974) un-ga, Resolution 3201 (S-vi), Declaration on the Establishment of a New International Economic Order, un Doc. A/RES/S-6/3201 (1 May 1974) un-ga, Resolution 3202 (S-vi), Program of Action on the Establishment of a New International Economic Order, un Doc. A/RES/S-6/3202 (1 May 1974) Treaty between the Federal Republic of Germany and [Country] Concerning the Encouragement and Reciprocal Protection of Investments, 1991 Agreement between Canada and [Country] for the Promotion and Protection of Investments, 2004 Treaty between the Government of the United States of America and the Government of [Country] concerning the Encouragement and Reciprocal Protection of Investment, 2004 Agreement between the Government of the United Kingdom of Great Britain and Northern

xvi

List of Abbreviations

2006 French Model bit

2008 German Model bit

2012 us Model bit

B

Ireland and The Government of [Country] for the Promotion and Protection of Investments, 2005, amended 2006 Draft Agreement between the Government of the Republic of France and the Government of the Republic of [Country] on the Reciprocal Promotion and Protection of Investments, 2006 Treaty between the Federal Republic of Germany and [Country] concerning the Encouragement and Reciprocal Protection of Investments, 2008 Treaty between the Government of the U ­ nited States of America and the Government of [Country] concerning the Encouragement and Reciprocal Protection of Investment, 2012

Journals and Reports

Am. Econ. Rev. Am. J. Comp. Const. L. Am. J. Comp. L. Am. J. Int’l L. Am. Rev. Int’l Arb. Am. U. Int’l L. Rev. Ann. Surv. Int’l & Comp. Law Arb. Arb. Int’l arsp Asian J. Int’l L. Asian J. wto & Int’l Health L. Pol’y asil Proc. Australian Int’l l.j. Berkeley J. Int’l L.

American Economic Review American Journal of Comparative Constitutional Law American Journal of Comparative Law American Journal of International Law American Review of International Arbitration American University International Law Review Annual Survey of International and Comparative Law Arbitration: The International Journal of Arbitration, Mediation and Dispute Management Arbitration International Archiv für Rechts- und Sozialphilosophie (Archive for Legal and Social Philosophy) Asian Journal of International Law Asian Journal of wto and International Health Law and Policy asil Proceedings Australian International Law Journal Berkeley Journal of International Law

List of Abbreviations Bond L. Rev. Brit. Yb. Int’l L. Case W. Res. J. Int’l L. cepmlp Ann. Rev. Chicago J. Int’l L. cml Rev. Colum. J. Transnat’l L. Corp. Gov. Duke l.j. Econ. Reform Today EuR (German J. Eur. L.) Eur. J. Int’l L. Finnish Yb. Int’l L. Fordham Int’l l.j. Fordham L. Rev. Ga. J. Int’l & Comp. L. gar Gaz. Pal. Geo. Wash. Int’l L. Rev. German l.j. German Yb. Int’l L. Hague Yb. Int’l L. Harv. Int’l l.j. Harv. L. Rev. icj Rep. icsid Rep.

icsid Rev. – filj ilm ilsa J. Int’l & Comp. L. Indian J. Int’l L.

xvii Bond Law Review British Yearbook of International Law Case Western Reserve Journal of International Law Centre for Energy, Petroleum and Mineral Law and Policy Annual Review Chicago Journal of International Law Common Market Law Review Columbia Journal of Transnational Law Corporate Governance Duke Law Journal Economic Reform Today Zeitschrift Europarecht (German Journal of European Law) European Journal of International Law Finnish Yearbook of International Law Fordham International Law Journal Fordham Law Review Georgia Journal of International and Comparative Law Global Arbitration Review Gazette du Palais George Washington International Law Review German Law Journal German Yearbook of International Law Hague Yearbook of International Law Harvard International Law Journal Harvard Law Review icj Reports of Judgments, Advisory Opinions and Orders Reports of Cases Decided under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965), Cambridge University Press, Cambridge icsid Review – Foreign Investment Law Journal International Legal Materials ilsa Journal of International and Comparative Law Indian Journal of International Law

xviii Int’l & Comp. l.q. Int’l Bus. Rev. Int’l J. Pol. Econ. Int’l L. Forum Int’l Law. Int’l Rev. L. & Econ. itn iusct Rep. J. Afr. & Int’l L. J. App. Pract. & Process J. Common Mkt. Stud. J. Comp. Econ. J. Dem. J. Info. Techn. J. Int’l Arb. J. Int’l Disp. Settlement J. Int’l Econ. L. J. World Inv. & Trade J. World Trade jdi L. & Bus. Rev. Am. L. & Ethics Hum. Rts. L. & Prac. Int’l Cts & Trib. L. Libr. J. Legal Hist. Rev. Legal Iss. Econ. Integr. Leiden J. Int’l L. Manchester J. Int’l Econ. L. Max Planck Yb. un L. Mexican L. Rev. Mgmt. Int’l Rev. Mich. J. Int’l L. Mich. L. Rev. Minn. J. Int’l L. Nat’l l.j. n.c.l. Rev.

List of Abbreviations International and Comparative Law Quarterly International Business Review International Journal of Political Economy International Law Forum (The Hebrew University of Jerusalem) The International Lawyer International Review of Law and Economics Investment Treaty News iusct Reports Journal of African and International Law Journal of Appellate Practice and Process Journal of Common Market Studies Journal of Comparative Economics Journal of Democracy Journal of Information Technology Journal of International Arbitration Journal of International Dispute Settlement Journal of International Economic Law Journal of World Investment and Trade Journal of World Trade Journal du Droit International Law and Business Review of the Americas Law and Ethics of Human Rights The Law and Practice of International Courts and Tribunals Law Library Journal Legal History Review Legal Issues of Economic Integration Leiden Journal of International Law Manchester Journal of International Economic Law Max Planck Yearbook of un Law Mexican Law Review Management International Review Michigan Journal of International Law Michigan Law Review Minnesota Journal of International Law National Law Journal North Carolina Law Review

List of Abbreviations Netherlands Yb. Int’l L. Nw. J. Int’l L. & Bus. ny l.j. nyu J. Int’l L. Pol. nyu L. Rev. oecd Fin. Mkt. Trends Oil, Gas & Energy l.j. Penn St. Int’l L. Rev. Pol. Res. Q. RdC

Rev. Int’l Pol. Econ. Santa Clara J. Int’l L. SchiedsVZ (German Arb. J.) Sri Lanka J. Int’l L. Stockholm Int’l Arb. Rev. Suffolk Transnat’l L. Rev. Sw. J. Int’l L. Sydney L. Rev. tdm Tex. Int’l l.j. Tul. L. Rev. uc Davis J. Int’l L. & Pol’y ucla J. Int’l L. Foreign Aff. Uniform L. Rev. UNSW L. J. us-Mex. l.j. U. Toronto L. Rev. Va. J. Int’l L. Vand. J. Transnat’l L. Vic. J. Schol. Vienna J. Int’l Const. L. Wm. & Mary L. Rev.

xix Netherlands Yearbook of International Law Northwestern Journal of International Law and Business New York Law Journal NYU Journal of International Law and Politics NYU Law Review oecd – Financial Market Trends Oil, Gas and Energy Law Journal Penn State International Law Review Political Research Quarterly Recueil des Cours de l’Académie de droit international de La Haye (Collected Courses of the Hague Academy of International Law) Review of International Political Economy Santa Clara Journal of International Law Zeitschrift für Schiedsverfahren (German Arbitration Journal) Sri Lanka Journal of International Law Stockholm International Arbitration Review Suffolk Transnational Law Review Southwestern Journal of International Law Sydney Law Review Transnational Dispute Management Texas International Law Journal Tulane Law Review uc Davis Journal of International Law and Policy ucla Journal of International Law and Foreign Affairs Uniform Law Review University of New South Wales Legal Journal United States-Mexico Law Journal University of Toronto Law Review Virginia Journal of International Law Vanderbilt Journal of Transnational Law Victorian Judicial Scholarship Vienna Journal on International Constitutional Law William and Mary Law Review

xx World Arb. & Med. Rev. World Dev. World Econ. Yale J. Int’l L. Yale Stud. World Pub. Order ZaöRV (Heidelberg J. Int’l L.)

ZEuS (J. Stud. Eur. L.) ZVglRWiss (J. Comp. L. Stud.)

List of Abbreviations World Arbitration and Mediation Review World Development World Economy Yale Journal of International Law Yale Studies in World Public Order Zeitschrift für ausländisches öffentliches Recht und Völkerrecht (Heidelberg Journal of International Law) Zeitschrift für Europäische Studien (Journal for Studies in European Law) Zeitschrift für Vergleichende Rechtswissenschaft (Journal for Comparative Law Studies)

C Other aaa icdr

American Arbitration Association’s International Centre for Dispute Resolution aba American Bar Association a.d. Anno Domini afr Additional Facility Rules alt. alternative approx. approximately asean Agreement of South East Asian Nations asil American Society of International Law Benelux Benelux Economic Union BGBl. Bundesgesetzblatt (German Federal Law Ga­ zette) biicl British Institute of International and Comparative Law bit bilateral investment treaty BVerfG Bundesverfassungsgericht (German Federal Con­ stitutional Court) BVerfGG Bundesverfassungsgerichtsgesetz (German Fed­ eral Constitutional Court Act) cacj Central American Court of Justice can Andean Community of Nations caricom Caribbean Community ccja Common Court of Justice and Arbitration

List of Abbreviations cemac

xxi

Communauté Économique et Monétaire de l’Afrique Centrale (Central African Economic and Monetary Community) cepej Commission Européenne pour l’Efficacité de la Justice (European Commission for the Efficiency of Justice) ceta Comprehensive Economic Trade Agreement cf. confer (compare) cfius Committee on Foreign Investment in the United States cfta Continental Free Trade Area CISS Agreement Comprehensive Import Supervision Service Agreement cjeu Court of Justice of the European Union comesa Common Market for Eastern and Southern Africa corp. corporation crcica Cairo Regional Center for International Commercial Arbitration dept. department eac Eastern African Community ecc Extraordinary Challenge Committee ecowas Economic Community of the West African States ECtHR European Court of Human Rights eec European Economic Community efta European Free Trade Association e.g. exempli gratia (for example) esma European Securities and Markets Authority etc. et cetera eu European Union euratom European Atomic Energy Community FCN Treaty Treaty of Friendship, Commerce and Navigation fdi foreign direct investment fet fair and equitable treatment fipa Foreign Investment Protection Agreement fn. footnote fps full protection and security fta Free Trade Agreement

xxii gatt gg IACtHR ibrd

List of Abbreviations

General Agreement on Tariffs and Trade Grundgesetz (German Basic Law) Inter-American Court of Human Rights International Bank of Reconstruction and Development icc International Chamber of Commerce icc Court icc International Court of Arbitration icj International Court of Justice icsid International Centre for the Settlement of Investment Disputes id. idem (the same) ida International Development Association i.e. id est (that is) ifc International Finance Corporation iia international investment agreement iisd International Institute for Sustainable Devel­ opment ila International Law Association ilc International Law Commission ilsa International Law Students’ Association imf International Monetary Fund ipa Investment Promotion Agency itlos International Tribunal of the Law of the Sea itn Investment Treaty News iusct Iran-United States Claim Tribunal jo Journal Officiel lcia London Court of International Arbitration lgdj La Librairie générale de droit et de jurisprudence lnts League of Nations Treaty Series ltd. limited M&A Mergers and Acquisitions mcci Moscow Chamber of Commerce and Industrie mercosur Mercado Común del Sur/Mercado Comum do Sul (Common Market of the South) mfn most favoured nation miga Multilateral Investment Guarantee Agency mit multilateral investment treaty nafta North American Free Trade Agreement nafta ecc nafta Extraordinary Challenge Committee nafta ftc nafta Free Trade Commission

List of Abbreviations

xxiii

no./nos. number/numbers nt national treatment NYU New York University oecd Organisation of Economic Corporation and Development ohada Organisation pour l’Harmonisation en Afrique du Droit des Affaires (Organisation for the Harmonization of Business Law in Africa) oj Official Journal para./paras. paragraph/paragraphs pca Permanent Court of Arbitration pcij Permanent Court of International Justice pr preliminary ruling Prof. Professor psi Agreement Pre-Shipment Inspection Agreement psnr Permanent Sovereignty over Natural Ressources ptia Preferential Trade and Investment Agreement rcep Agreement Regional Comprehensive Economic Partnership Agreement resp. respectively sadc Southern African Development Community scc Stockholm Chamber of Commerce siac Singapore International Arbitration Centre sica Sistema de la Integración Centroamericana (Central American Integration System) supp. supplement swf sovereign wealth fund tfta Tripartite Free Trade Area tjca Tribunal de Justicia de la Comunidad Andina (Court of Justice of the Andean Community) tnc transnationally operating corporations tpp Transpacific Partnership Agreement ts Treaty Series ttip Transatlantic Trade and Investment Partnership U. University UC Davis University of California, Davis ucla University of California, Los Angeles uemoa Union Économique et Monétaire Ouest Africaine (West African Economic and Monetary Union)

xxiv uk ukts un unasur uncitral un ga un gaor UN RIAA un sc unts us usd wto wto dsb

List of Abbreviations United Kingdom United Kingdom Treaty Series United Nations Unión de Naciones Suramericanas (Union of South American Nations) United Nations Commission on International Trade Law United Nations General Assembly United Nations General Assembly Official Records United Nations Reports of International Arbitral Awards United Nations Security Council United Nations Treaty Series United States us Dollar World Trade Organisation World Trade Organization Dispute Settlement Body

Introduction [A] law which a man cannot obey, nor act according to it, is void and no law: and it is impossible to obey contradictions, or act according to them. charles john vaughan, Thomas v. Sorrell (1677) referred to in lon fuller, The Morality of Law 33 (1964)

⸪ A

Subject Area: International Investment Law and Arbitration

International investment law and arbitration have undergone a highly remarkable evolution in the past few decades. Investment law has become one of the fastest growing domains of public international law, and investment arbitration has advanced to being the most popular mechanism of alternative dispute resolution with still increasing – albeit not undisputed – importance. This so far unparalleled development occurred in response to the evolving process of economic globalisation, which entailed major transformations in the different economic sectors. In particular the secondary sector underwent significant changes in that so called “global value chains”1 replaced the traditional operations of manufacturing ready-made goods in one place and trading them afterwards. Nowadays, the production process is split up into various production steps, which take place at different, geographically advantageous places around the world and which require the exchange of services and intermediate products.2 As a consequence, flows of foreign direct investment3 gained considerably in importance.4 This enhanced role of fdi is also reflected in the primary and tertiary sector, given that foreign investors have become more 1 For an overview of “global value chains” as a relatively recent economic phenomenon, see unctad, World Investment Report – Global Value-Chains: Investment and Trade for Development, 121–199 (2013). 2 Id. at x. 3 [Hereinafter fdi]. 4 For a study confirming a strongly positive correlation between the fdi stock of a country and its participation in global value chains, see unctad, Global Value Chains and Development – Investment and Value Added Trade in the Global Economy, 18–19 (2013).

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_002

2

introduction

and more active in resource extraction as well as in highly service-intensive ­businesses, such as tourism, health care, banking, and transportation. Targeted initiatives of less developed, capital-importing countries seeking to attract larger volumes of fdi flows have further stimulated this growth. Along with this increasing importance of fdi, the demand for a reliable, complete, and properly functioning legal framework governing and protecting foreign investment at the international level has also grown. The rather fragmented and vague customary investment law was thus complemented by international investment contracts, the parties of which are private investors and host States, as well as by international investment agreements,5 which are concluded between two sovereign States. The latter sort of bilateral agreements evolved, over time, into the main legal instrument of investment protection. Besides substantive standards of investment protection, iias also contain – in most cases – provisions allowing for the arbitral settlement of disputes that might arise between the host State and the foreign investor of the home State. Such clauses usually provide a choice between different fora of investment arbitration, the most prominent of which is the International Centre for the Settlement of Investment Disputes.6 Up to the present, the unprecedented growth of fdi – stimulated and supported by the dense network of iias – has induced a considerable number of investor-State disputes. The large majority of them have been brought before arbitral tribunals operating under the icsid Convention7 and its a­ ccompanying rules and regulations. The popularity of icsid arbitration, but also of investment arbitration in general, is due to the efficient and flexible mode of dispute resolution it offers, which allows foreign investors to bring claims against sovereign States independent from the latters’ rights of diplomatic protection or prior exhaustion of local remedies. B

Central Problem: Inconsistency in International Investment Jurisprudence

Notwithstanding these unique advantages and the singular success story, international investment arbitration has recently faced growing dissatisfaction from its users and from wide circles of scholars and commentators within 5 [Hereinafter iia]. 6 [Hereinafter icsid]. 7 icsid Convention for the Settlement of Investment Disputes between States and N ­ ationals of Other States, Doc. icsid/2 (18 March 1965), 575 unts 159 (1966), 4 ilm 532 (1965) [­ hereinafter icsid Convention].

Introduction

3

the legal community and the public at large. One major point of criticism concerns the outcomes of arbitral proceedings in the form of orders, decisions, and awards. Since these allegedly often suffer from contradictions and discrepancies in the interpretation of the relevant law, they are seen as producing inconsistencies in international investment jurisprudence. The high frequency with which norms and legal concepts which have an identical or largely similar substantive content – even if they might partially differ in formulation – are interpreted in diverging manners would clearly indicate, according to the critics,8 that jurisprudential inconsistencies are no longer an exceptional phenomenon, but a serious problem in the field of international investment arbitration. Critics believe that this inconsistency problem not only affects the adjudicative dimension of foreign investment, but also its politico-economic dimension.9 Private investors, being incapable of calculating the risk of their businesses abroad, could become more reluctant in their investment decisions; sovereign States, for their part, would run the danger of being sued for regulatory or legislative actions, since they are unable to assess their legal consequences on the level of investment adjudication.10 Accordingly, it is emphasised that the “[e]conomical and political stakes are high.”11 The present study addresses these serious allegations and discusses the question of whether the criticism of jurisprudential inconsistency in international investment arbitration is appropriate and valid. The purported inconsistent outcomes of arbitral investment proceedings are hence at the centre of the following analysis. For this purpose, icsid arbitration as the most frequented and tailor-made investment arbitration regime will be chosen as the exemplary model system by which the different key aspects of the inconsistency problem will be examined. These aspects comprise, first, the general desirability of jurisprudential consistency as well as the appropriateness of criticising inconsistent interpretative approaches. In this respect, the question arises as to whether it is desirable at all to answer identical legal questions in the same way, and, if so, whether it is appropriate at all to criticise the inconsistency of icsid jurisprudence, given that international investment arbitration is a highly complex and non-judicial mode of dispute settlement. Second, looking at the different forms and causes of inconsistent decisionmaking by arbitral tribunals promises to provide further insight. Hence, it will be examined how, i.e. in which categories, the alleged inconsistencies 8 9 10 11

For extensive literature references on inconsistency critics, see below Ch. 2.A. (fn. 438). Susan D. Franck, The Nature and Enforcement of Investor Rights Under Investment Treaties: Do Investment Treaties Have a Bright Future?, 12 uc Davis J. Int’l L. & Pol’y 47, 57 (2005). Id. at 57–58. Id. at 58.

4

introduction

come about and why, i.e. due to which structural and methodological reasons, arbitral tribunals diverge from prior interpretative approaches. Third, the specific instances of inconsistent icsid case law12 are of interest in order to assess the general state of icsid investment jurisprudence and the manifestations of inconsistencies therein. Therefore, the question of where, i.e. in which legal areas of international investment law, inconsistencies occur will also be examined in detail. These issues and further subordinate aspects will be considered when addressing the central question of the appropriateness and validity of the criticism that icsid investment jurisprudence is inconsistent. C

Central Goal: Targeted, Effective, and Feasible Approach for Reform

The in-depth examination of the reproach of inconsistency of international investment jurisprudence using the example of icsid case law serves to identify an allegedly core problem of investment arbitration and to analyse whether and in what qualitative dimension investment arbitration suffers from inconsistent decision-making. The findings of this comprehensive investigation shall then provide a basis to discuss possible strategies to resolve the problem. Amongst the various possibilities for improvement, the most promising instruments tailored to the specific characteristics of icsid will be selected, discussed and weighed against each other. In this manner, the most targeted, effective, and feasible approach for reform will be identified, further elaborated, and refined in an initial draft outline. Although a parallel implementation of several reform measures is not excluded per se, it appears useful to focus on one initiative in this work, in particular in view of the often reluctant attitude of the icsid member States towards reforms and the complexity of interests within the investment community. Nevertheless, whichever approach to reform will be selected, it should feature as much potential for improvement as possible. It should prove itself as particularly suitable to combat the root causes of the inconsistent arbitral jurisprudence, which will be identified in the problem analysis. In addition, it should ideally also cure further systemic deficiencies of the icsid regime which might be co-causative of conflicting arbitral outcomes, but which also constitute separate areas of concern. Synergistic effects could thus be ­expected. For instance, at present, the annulment mechanism is icsid’s main 12

In the following work, the term “icsid case law” will be used interchangeably with the term “icsid jurisprudence.”

Introduction

5

remedy of review, and the limited scope for review through this mechanism has led to both incorrect and inconsistent arbitral decisions in the past. On some occasions, in order to prevent substantively inaccurate outcomes, committee members have overstepped the tight boundaries of review and thus produced inconsistencies in the interpretation of the corresponding annulment grounds. An ideal reform approach with a high improvement potential might thus tackle not only the inconsistencies, but also the inaccuracies of arbitral decisions, which would, in turn, do away with the need to overextend the grounds for annulment. This being said, relief and innovation should not be sought at all cost. The overall conception of a reform model, which will be presented in a draft outline, should pay due respect to the existing fundamental structures, principles, and objectives of icsid investment arbitration. These must serve as the guiding foundation when drafting the specific terms to implement the preferred approach to reform. The regime will maintain its integrity and the characteristics that were crucial for its previous success only if interferences with the main features and policies of icsid arbitration are minimised. On the whole and in a more abstract sense, this dissertation aims to make a contribution to the further development and improvement of alternative dispute settlement in the sphere of international investment law, and, from a more comprehensive perspective, within the realm of international law in general. Since a higher level of consistency in arbitral investment jurisprudence will increase the predictability and reliability of arbitration processes and their outcomes, it is expected to foster the confidence of both private investors and States in the respective arbitration regimes. A sound and solid mode of dispute resolution is, in turn, beneficial for the protective effect of iias and, indirectly, for future flows of fdi. D

Research Questions and Hypotheses

In order to ensure a clear and systematic structure when addressing this central problem and when approaching this defined central goal, the present study is separated into three research questions and hypotheses, each of which will respectively be the principal issue considered in the following three chapters. When looking at the vast and ever increasing amount of investment case law stemming from different arbitral fora, it becomes obvious that the topic of inconsistency in international investment jurisprudence is a very broad and complex subject area. In order to be able to deal with this subject ­within the

6

introduction

framework of this work in a meaningful and useful manner, it must therefore be narrowed down to a manageable scope. This will be done by a substantiated choice of one of the numerous arbitral regimes, namely the icsid system, as the central object of study. The first question of research, being preliminary in character, is therefore concerned with the adequacy of this choice in view of the available alternative possibilities for selection. It asks whether, amongst the different arbitral regimes of investor-State dispute settlement, the icsid arbitration regime is the most suitable for the purpose of the following analysis. The corresponding research hypothesis, to be verified in the course of the first chapter, is thus as follows: The icsid regime is the most suitable object of study when analysing the problem of inconsistency in international investment jurisprudence. Once the object of research has been determined and reasons for its choice presented and explained, the central problem of this study, the deficiency of consistent international investment jurisprudence, will be addressed based on the example of icsid arbitration. Given that the criticism against conflicting orders, decisions, and awards rendered by icsid tribunals is growing, it is of interest to examine whether these charges have some merit. The second and key question of research, whose answer is decisive for the continuation of the investigation, is thus whether these critics are right in pointing out that the case law produced by the icsid arbitration regime suffers from serious inconsistencies. Accordingly, the research hypothesis to be proven in its various dimensions throughout the second chapter of this work reads: The increasing criticism levelled at the inconsistency in icsid investment jurisprudence is appropriate and valid. The answer to this question will lead to the third and last central question of research in this work, which concerns the possible approaches of reform. A multitude of models to remedy the deficiency of consistent investment jurisprudence in general and of icsid jurisprudence in particular has already been the subject of extensive debate. The time has thus come to review and evaluate the most relevant and prominent proposals in order to permit the most targeted, effective, and feasible amongst them to be put into practice. In that sense, the third and final question of research asks which of the reform approaches under discussion is preferable. The corresponding research hypothesis to be confirmed is the following:

Introduction

7

The preferable reform approach to cure the problem of inconsistency in icsid investment jurisprudence is to establish a preliminary ruling system. By addressing these three central questions of research and by testing the respective research hypotheses, it is hoped that at least parts of the veil of ambiguity and uncertainty hanging over the inconsistency debate in international investment arbitration will be lifted and that stimulus for an innovative solution to the problem will be provided. E

Research Methods

Different research methods will be applied when addressing these three hypotheses and their underlying research questions, each of which is to be presented in further detail in the respective chapter. In the first chapter, a strength-weakness analysis of the icsid regime will be undertaken in order to answer the question of its suitability as the object of study. To this end, the functional comparative method, focusing on the practical purpose and usefulness of the legal features under consideration, will be applied. The comparator regimes will be selected amongst commercial arbitration regimes, within which – besides private commercial disputes – a not insignificant number of investor-State disputes are adjudicated. Overall, the comparative methodological approach to the strengths and weaknesses of the icsid arbitration system is expected to highlight both its problematic and well-running features, as well as its potential for development. It will thus provide helpful information on the icsid regime’s eligibility for the intended investigation purposes. The second chapter is, in large parts, devoted to an examination of the actual manifestations of inconsistencies in arbitral investment jurisprudence. For this purpose, a qualitative-empirical analysis of icsid case law will be undertaken. By using representative cases, it will illustrate the various o­ ccurrences of discrepancies in the interpretation of norms, standards, and principles stemming from the different sources of international investment law. In order to also allow for a cautious quantitative estimation of the dimension of inconsistencies in the jurisprudence of icsid tribunals, the ­coverage of the study will be relatively broad. It will encompass the different legal sub-categories, namely investment law governing jurisdiction, procedural and substantive investment law. In that manner, the extraordinary dimensions of the problem, i.e. the wide extent of jurisprudential inconsistencies, will be revealed.

8

introduction

The third chapter, which – in its core part – presents a preliminary outline of the preferable reform approach to remedy the growing inconsistencies in icsid jurisprudence, will combine two different methodological approaches. One method includes a reform design by inference. This implies that the draft concept will be oriented towards comparable legal concepts or at least elements thereof, which stem from different legal contexts but have already proven successful therein. The other method consists in the orientation towards basic structures, principles, and policies of the icsid regime itself. This will allow the right balance between creating beneficial innovations and preserving systemic characteristics to be struck. F

Course of Investigation

As indicated, the following work will be divided into three main chapters, each of which will deal with one of the three research hypotheses and the underlying research questions. Building on one another, they shall – by degrees – contribute to the analysis and solution of the inconsistency problem in international investment arbitration. Chapter 1 introduces the subject of this work. It begins by describing the context in which the central topic of this research project is embedded. Having expounded on the general development of international investment law and arbitration throughout the past few decades, it will then turn to the icsid regime as the exemplary object of investigation chosen in this work. A presentation of its basic but unique features and its general manner of functioning, as well as a comparative strength-weakness analysis, will confirm the assumption that for purposes of this research project icsid arbitration is the most suitable object of study. Chapter 2 then focuses on the actual problem: inconsistency in international investment jurisprudence. Following some important preliminary clarifications on technical terms used and conceptual premises applied, four key issues raised by the phenomenon of inconsistent arbitral decisionmaking will be thoroughly examined. These include, first of all, the desirability of jurisprudential consistency and the appropriateness of criticising the lack thereof. The finding will form the basis for investigating the different forms, causes, and instances of inconsistencies in icsid investment arbitration. In particular, the last aspect will be illustrated by a qualitative-empirical analysis of icsid case law relating to the different sources and areas of international investment law. This methodology will allow for an evaluation of the state of

Introduction

9

icsid investment jurisprudence and, relatedly, of the validity of the criticism of inconsistency. Chapter 3, taking these findings into account, turns to possible remedies to the inconsistency problem. It starts out with a general overview of potential reform models and then selects the most promising, i.e. the most targeted, effective, and feasible, proposal with icsid-specificity for further discussion. The concept of a preliminary ruling system, which will emerge as the preferable one, will then be further refined in a draft outline. This draft will suggest its mode of implementation, its general structure and functioning, as well as the legal effects of preliminary rulings rendered by the competent body on interpretative questions for both the submitting arbitral tribunal as well as any future arbitral tribunal concerned with this issue.

chapter 1

Contextual Framework and Object of Study A

Preliminary Considerations

At the outset of this study, it seems advisable to briefly present the general development of international investment law and arbitration as a major legal phenomenon of our and future times with considerable political and economic repercussions. This broad thematic approach will facilitate the contextual embedment of the central topic of this research project, which is concerned with international investment jurisprudence and its (alleged) inherent inconsistencies. It will ensure a comprehensive and broadly-based understanding as well as an appropriate appreciation of the topic and its related problems. Furthermore, before engaging in the analysis of the key problem, light will also be shed on the icsid arbitration regime which has been chosen as the specific model for examining the problem of inconsistency and for which reform proposals will be developed. Outlining icsid’s specific structures, characteristics, and goals as well as its procedural advantages and disadvantages – ideally from a comparative law perspective – will provide an answer to the question of whether and why icsid arbitration is the most suitable and thus preferable object of investigation for the present purposes. The main reasons for this choice will thereby become apparent and comprehensible. In view of these considerations, this chapter begins with an historical outline of national and international investment law and policy, which will start in the 19th century and trace its development up to the present day, grouping the various stages according to the relevant politico-economic events. In parallel, the development of both the number of concluded iias and the flows of fdi, mirroring the respective state of the (inter-) national investment climate, will be delineated. Thereafter, attention will be directed to international investment arbitration and its advancement to the currently most popular, albeit not undisputed, method for the settlement of investor-State disputes (B.). Having established this general contextual framework, the icsid arbitration system, which forms the central object of this work, will be described in a second step. Following a brief presentation of basic information such as the history, general features and objectives, as well as some statistical caseload data, a strengthweakness analysis of the icsid arbitration regime will be undertaken. A comparative law perspective, taking into account alternative forms of investment

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_003

Contextual Framework And Object Of Study

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arbitration, will facilitate the assessment of the more or less advantageous icsid characteristics (C.). B

Contextual Framework: International Investment Law and Arbitration

As indicated, the contextual framework of this work may best be understood by tracing how national and international investment law and policy has developed from the 19th century until the present (I.). The picture will then be rounded out by illustrating the emergence of international investment arbitration, which is closely interlinked with a dynamic investment landscape (II.). i Development of (Inter-) National Investment Law and Policy The politico-economic significance of international investments and the attitude of States in their differing roles in this matter have undergone fundamental changes throughout the last century. These are reflected in the development of foreign investment law and policy on both the international and national level, which, in turn, govern the investment-specific relationships between sovereign States themselves and between host States and foreign investors. Not least, they are determinative for the global investment climate in general. 1 19th Century and First Half of the 20th Century The 19th century and the first half of the 20th century were marked by a policy divide between capital-importing and capital-exporting States,13 i.e. by an opposition of host State-friendly and investor-friendly investment policies. With the beginning decolonisation process, which started in the 19th century primarily in Latin American countries, the newly independent States started putting up resistance against the practice of the Western powers of evading and ignoring the local law when trading with and investing in these countries.14 Based on the doctrine of sovereignty of States and sovereign equality, 13

14

The expressions “capital-importing country/State” and “capital-exporting country/State” have been chosen as relatively neutral and investment-oriented terminology, which will be used synonymously with the comparable, yet more judgmental respective expressions “developing/low income country/State” and “industrial/high income country/State.” The World Bank definitions of these terms are available at (last visited September 2016). Surya P. Subedi, International Investment Law – Reconciling Policy and Principle 22 et seq. (Hart, Oxford, 3rd ed., 2016).

12

chapter 1

they advocated the rule of national law for both domestic and foreign investors.15 This “national standard” of treatment had first been postulated by the then leading Argentine jurist Carlos Calvo, whose teachings consisted of three central elements: (1) the principle of absolute legal equality of nationals and aliens, (2) the exclusivity of local law and jurisdiction, and (3) the rejection of diplomatic protection in case of disputes involving foreigners or their property.16 The rather radical position represented by the Calvo doctrine emerged not least within the context of the so called gunboat diplomacy, which had been practiced by all major capital-importing nations until this era was largely put to an end with the adoption of the Drago-Porter Convention in 1907.17 The Convention was designed to do away with the practice of violent debt collection by capital-importing States and to establish the possibility of investment arbitration between two sovereign States on behalf of their nationals.18 In this course, a new age of diplomatic protection came into being.19 It was dominated by the position of Western countries and scholars, who considered States as being bound by the International Minimum Standard in order to ensure that basic standards of justice and equity were met even if national law failed to meet this protective level.20 This view was also affirmed in 15 16

17

18

19

20

Id. at 29 et seq. See Carlos Calvo, Le Droit International Théorique et Pratique (6 Vol.) I/350 (para. 205), III/142 (para. 1280), VI/230 (para. 256) (Guillaumin, Paris, 5th ed., 1896). See also Wenhua Shan, Is Calvo Dead?, 55 Am. J. Comp. L. 123, 124–127 (2007); Wenhua Shan, From “North-South Divide” to “Private-Public Debate”: Revival of the Calvo Doctrine and the Changing Landscape in International Investment Law, 27 Nw. J. Int’l L. & Bus. 631, 632 (2007); Wil D. Verwey & Nico J. Schrijver, The Taking of Foreign Property under International Law: A New Legal Perspective?, xv Netherlands Yb. Int’l L. 3, 23 (1984). Hague Convention ii of 1907 Respecting the Limitations of the Employment of Force for the Recovery of Contract Debts, 18 October 1907, 205 Con. ts 250 (1907) [hereinafter Drago-Porter Convention]. Wolfgang Benedek, Drago-Porter Convention (1907), in The Max Planck Encyclopedia of Public International Law paras. 3–8 (Rüdiger Wolfrum ed., 2007), available at (last visited September 2016). See e.g. Edwin M. Borchard, Diplomatic Protection of Citizens Abroad or the Law of International Claims 354 (The Banks Law Publishing Co., New York, 1915 (1970 and 2003 reprint)), referred to in Subedi, International Investment Law 28. See e.g. Elihu Root, The Basis of Protection to Citizens Residing Abroad, 4 Am. J. Int’l L. 517, 517–528 (1910); Georg Schwarzenberger, International Law as Applied by International Courts and Tribunals, Vol. i 248 (Stevens & Sons, London, 3rd ed., 1957), referred to in Subedi, International Investment Law 24; Rudolf Dolzer & Christoph Schreuer, Principles of International Investment Law 2 (Oxford University Press, Oxford, 2nd ed., 2012).

Contextual Framework And Object Of Study

13

international adjudication.21 Although some Calvo-oriented State practices reappeared temporarily and in particular in the aftermath of the Bolshevik revolution in 1917 and during the Mexican nationalisation of oil in 1938, this opposing school of thought played an increasingly marginal role in this historical period.22 The doctrinal opposition of international investment policies, which has also been described as a “battle for international legitimacy,”23 was thus overcome – for the time being – in favour of the protective standard granted by customary international law.24 This standard was even further made concrete by the so called Hull formula, which required “prompt, adequate, and effective payment” for the expropriation of private property,25 and, on the whole, may be considered as the foundation of modern foreign investment law.26

21

22 23

24 25

26

Historically, the International Minimum Standard concerned the general status of aliens, their basic procedural rights, and their property rights; see id. at 3. For a comprehensive overview of this topic; see Andreas H. Roth, The Minimum Standard of International Law Applied to Aliens (Sijthoff, Leiden, 1949). See Mavrommatis Palestine Concessions (Greece v. uk), pcij, Judgment (30 August 1924), 1924 pcij Series B, No. 3 (on the doctrine of diplomatic protection); L. Fay H. Neer and Pauline Neer (us) v. United Mexican States (15 October 1926), us–Mexico General Claims Commission, 4 UN RIAA 60 (1926) [hereinafter Neer claim (1926)]; Harry Roberts (us) v. United Mexican States (2 November 1926), us–Mexico General Claims Commission, 4 un riaa 77 (1926) [hereinafter Roberts claim (1926)] (both on the International Minimum Standard), referred to in Subedi, International Investment Law 25, 28; Dolzer & Schreuer, P ­ rinciples of International ­I nvestment Law 3. Dolzer & Schreuer, Principles of International Investment Law 2–3. Andrew T. Guzman, Explaining the Popularity of Bilateral Investment Treaties, in The Effect of Treaties on Foreign Direct Investment – Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows 76 (Karl P. Sauvant & Lisa Sachs eds., 2009). Dolzer & Schreuer, Principles of International Investment Law 2. The Hull formula originated from a 1938 dispute between the us and Mexico about the confiscation of foreign oil properties. In one of his diplomatic notes to the Mexican government, the us Secretary of State, Cordell Hull, referred to international legal standards, which, in principle, permit the expropriation of foreign property, but require States to pay “prompt, adequate and effective compensation.” In this way, Hull expressed the “full compensation standard,” which had become widely accepted by the end of World War ii. The diplomatic exchange of notes between the American Secretary of State and the Mexican Minister of Foreign Affairs is reprinted in Green H. Hackworth, Digest of International Law 655–665 (us Gov. Print. Off., Washington, DC, 1942). See Andrew T. Guzman, Why ldcs Sign Treaties That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties, 38 Va. J. Int’l L. 639, 644–645 (1998); Subedi, International Investment Law 32–33. Subedi, International Investment Law 34.

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chapter 1

2 1950s to 1970s Throughout the post-war years, a significant shift of international investment policy back towards the “national protection” standard in the sense of the Calvo doctrine took place, which led to a rather reluctant, almost rejectionist investment climate in the 1960s and the early 1970s.27 This drastic change of opinion was mainly due to the intensified decolonisation process occurring in Africa and Asia: the newly emerging sovereign countries were finally able to officially voice their opinions and to contribute to the forming and shaping of international legal standards.28 They denied the validity of the then prevailing International Minimum Standard for the treatment of foreign investors, together with the Hull formula, as well as the competence of international courts in these matters, and, instead, propagated the national standard and the exclusive jurisdiction of domestic courts.29 Moreover, they insisted on the doctrine of Permanent Sovereignty over Natural Resources30 with the aim of achieving also economic independence from former colonial powers and their contractually persistent control over their natural resources.31 Since the un General Assembly32 was strongly impacted by capital-importing countries at that time, these were able to strengthen their ideological position by negotiating a series of resolutions, thereby successfully establishing a new regime of foreign investment law and policy.33 Following lengthy negotiations, the 1962 un Resolution 1803 (xvii) on the Permanent Sovereignty of States over their Natural Resources34 was adopted. While affirming the doctrine of psnr, on the one hand,35 it still accommodated the interests of both groups of States, i.e. the capital-importing States’ desire of economic self-determination and the capital-exporting States’ need of 27

Ibrahim F.I. Shihata, Promotion of Foreign Direct Investment – A General Account with Reference to the Role of the World Bank Group, 6 icsid Rev. – filj 484, 488 (1991). 28 Guzman, Explaining the Popularity of Bilateral Investment Treaties 76. 29 Patrick M. Norton, A Law of the Future or a Law of the Past? Modern Tribunals and the International Law of Expropriation, 85 Am. J. Int’l L. 474, 478 (1991); Stephen M. Schwebel, A bit about icsid, 7 tdm 1, 1, 2 (2010). 30 [Hereinafter psnr]. 31 Subedi, International Investment Law 37–38. 32 [Hereinafter un ga]. 33 Guzman, Explaining the Popularity of Bilateral Investment Treaties 77. 34 un-ga, Resolution 1803 (xvii) on Permanent Sovereignty over Natural Resources, ga Res. 1803 (xvii), un Doc. A/5217/Supp. No. 17 (14 December 1962) [hereinafter 1962 psnr Resolution]. 35 1962 psnr Resolution, Part 1, paras. 1–2.

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protection against expropriation, on the other hand. To this end, it stipulated that investments “shall be governed (…) by the national legislation in force, and by international law.”36 As regards expropriation, which was also subject to the mixed rule of national and international law, “appropriate compensation” was required.37 Due to this balanced approach, this resolution received wide acceptance and support by the international investment community which continues even until today.38 Some ten years later, this consensus on the state of principles of customary international law was disturbed when the capital-importing States gained the numerical majority in the un ga. Influenced by the 1973 oil crisis,39 which revived their endeavour for economic independence from Western States, they succeeded in getting the un Declaration on the Establishment of a New International Economic Order40 and, shortly thereafter, the un Charter of Economic Rights and Duties of States adopted.41 All major capital-exporting countries, by contrast, had voted against these resolutions or abstained from voting.42 36 1962 psnr Resolution, Part 1, para. 3. 37 1962 psnr Resolution, Part 1, para. 4. 38 Subedi, International Investment Law 38–40. For instance, in the case Texaco v. Libya, it was held that the psnr Resolution would mirror the present state of customary international investment law; see Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of the Libyan Arab Republic, ad hoc Award (19 January 1977), 53 ilr 389 (1977), para. 87, referred to in id. at 23. 39 The 1973 oil crisis, caused by the opec oil embargo against all Western countries acting in support of Israel during the Jom-Kippur war, led to an explosion of the oil prices, which hit capital-importing countries particularly hard. Since these were short of foreign exchange, they were forced to accumulate debt. See Kenneth J. Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation 59–60 (Oxford University Press, New York, 2010). 40 un-ga, Resolution 3201 (S-VI), Declaration on the Establishment of a New International Economic Order, un Doc. A/RES/S-6/3201 (1 May 1974) [hereinafter 1974 nieo Declaration]. The nieo Declaration was accompanied by a Program of Action; see un-ga, Resolution 3202 (S-VI), Program of Action on the Establishment of a New International Economic Order, un Doc. A/RES/S-6/3202 (1 May 1974) [hereinafter nieo-Program]. 41 un-ga, Resolution 3281 (xxix), Charter of Economic Rights and Duties of States, un Doc. A/RES/29/3281 (12 December 1974) [hereinafter 1974 erds Charter]. 42 In the vote concerning the erds Charter, for instance, Belgium, Denmark, Germany, Luxemburg, uk, and us voted against it; Austria, Canada, France, Ireland, Israel, Italy, Japan, the Netherlands, Norway, and Spain abstained from voting; see Subedi, International Investment Law 42 (fn. 14, 15). See also, for a general overview of both declarations, id. at 40–43.

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chapter 1

Their central tenet was the exclusion of the (co-) governance of international law over natural resources and related economic activities43 and over the expropriation of foreign property.44 Instead, the declarations affirmed the full and permanent sovereignty of every State in this respect, and thus the rule of national legal standards. Taking up the overarching goals of “equal-rights and self-determination of peoples,” which had been set out in the un Charter,45 the capital-importing States thus emphasised the need to control and regulate the activities of (predominantly Western) transnationally operating corporations46 in order to establish a better balance within the global economic order.47 43

nieo Declaration, para. 4 (e): “Full permanent sovereignty of every State over its natural resources and all economic activities. In order to safeguard these resources, each State is entitled to exercise effective control over them and their exploitation with means suitable to its own situation, including the right to nationalization or transfer of ownership to its nationals, this right being an expression of the full permanent sovereignty of the State. No State may be subjected to economic, political or any other type of coercion to prevent the free and full exercise of this inalienable right; (…).” 44 See erds Charter Art. 2 (c): “Each State has the right: (…) (c) To nationalize, expropriate or transfer ownership of foreign property, in which case appropriate compensation should be paid by the State adopting such measures, taking into account its relevant laws and regulations and all circumstances that the State considers pertinent. In any case where the question of compensation gives rise to a controversy, it shall be settled under the domestic law of the nationalizing State and by its tribunals, unless it is freely and mutually agreed by all States concerned that other peaceful means be sought on the basis of the sovereign equality of States and in accordance with the principle of free choice of means.” By excluding the relevance of international law for issues concerning foreign investment, it broke with the central principles set up by the Hull formula and made a step backwards to the Calvo era; see Subedi, International Investment Law 43. 45 Charter of the United Nations, 26 June 1945 (entry into force 24 October 1945), 1 unts xvi (1946–47) [hereinafter un Charter]. See un Charter Art. 55: “With a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote: (a.) higher standards of living, full employment, and conditions of economic and social progress and development; (b.) solutions of international economic, social, health, and related problems; and international cultural and educational co-operation; and (c.) universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion.” 46 [Hereinafter tnc]. 47 P.N. Agarwala, The New International Economic Order – An Overview ­106–109 (Pergamon Press, New York, 1983); F. Noel Dias, The nieo Revisited, 8 Sri Lanka J. Int’l L. 27, 36–39 (1996).

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At this point, the previously existing consensus within the un, which had been achieved as regards the 1962 psnr Resolution, was finally broken. In view of the strongly opposing positions on the 1974 nieo Declaration and the 1974 erds Charter, an agreement on a universal foreign investment policy seemed rather hopeless. Small rays of hope could yet be seen in the establishment of the icsid in 1965 as a depoliticised and impartial forum for investment arbitration, and in the emergence of the first iias granting substantive investment protection.48 Both were expected to have positive effects on flows of fdi and the international investment landscape in general. 3 1980s until the End of the 20th Century The 1980s marked the beginning of a new era of (inter-) national investment law and policy. After a long period of discord between capital-importing and capital-exporting States on the legal standards governing foreign investment, major economic and financial crises in many of the decolonialised countries forced them to reverse their position and to adopt a more cooperative and progressive attitude.49 Indeed, the 1980s brought numerous incentives for capital-importing States to rethink their economic policies: first, many of them were going through severe economic hardship caused by stagnant economies, massive amounts of foreign debt, as well as inefficiently operating public enterprises.50 This situation has also been labelled as “third-world debt crisis.”51 Second, in the context of the so called “Washington consensus,” Western intergovernmental financial institutions such as the World Bank and the International Monetary Fund52

This balancing of interests between capital-importing and capital-exporting States was to be achieved by a “un Code of Conduct for Transnational Corporations,” to be established by the un Commission on Transnational Corporations; see ctnc, Report on Second Session, 61 un escor, Supp. (No. 5) 3, un Docs. E/5782, E/C.10/16 (1976). Yet, in the absence of an agreement among States on the draft, it was eventually never ­adopted. See Subedi, International Investment Law 44–45. For a detailed overview of this topic, see Stephan Conrood, The United Nations Code of Conduct for Transnational Corporations, 18 Harv. Int’l L. J. 273, 273–308 (1977). 48 Schwebel, A bit about icsid 1, 3. 49 Subedi, International Investment Law 45–46. 50 Jeswald W. Salacuse, From Developing Countries to Emerging Markets: A Changing Role for Law in the Third World, 33 Int’l Law., 875, 882 (1999). 51 Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation 60. 52 [Hereinafter imf].

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put greater emphasis on neo-liberal concepts and thus made their development aid contingent upon significant changes in economic policies.53 They urged indebted countries to move away from public planning of economic development, to cease focusing on public sector enterprises as primary economic actors, and to reduce regulations and restraints on domestic and foreign private sector enterprises operating transnationally.54 Third, the collapse of the Eastern European and Soviet communist system, which culminated in the fall of the Berlin Wall in 1989, marking the end of the Cold War, had enormous repercussions in that it deprived the remaining States adhering to the ­socialist economic system of their ideological role model and sources of economic support.55 As a reaction to these drastic changes, many capital-importing countries started revising their attitude towards economic policy in general and on foreign investment in particular. They realised that the way out of their economic problems consisted in relinquishing public control, regulation, and compartmentalisation of the market and in turning towards deregulation, privatisation, and an open-market economy.56 Although the extent to which the ­individual countries implemented this new economic policy has varied,57 this general rethinking, which included the acceptance of primarily investorprotective (inter-) national investment law and policy, has contributed to a major transformation of the global investment climate.58 a Development of iias Along with this changing landscape of foreign investment law and policy, a dense network of iias emerged during the 1980s and 1990s, which became the new primary source of international investment law.59 53

Dolzer & Schreuer, Principles of International Investment Law 5; Salacuse, From Developing Countries to Emerging Markets, 883. 54 Salacuse, From Developing Countries to Emerging Markets, 877–879, 883. 55 Id. at 883. 56 Subedi, International Investment Law 46, pointing to the examples of India, Zambia, China, Vietnam, and the Andean countries. 57 Salacuse, From Developing Countries to Emerging Markets, 875, 886. 58 Subedi, International Investment Law 46. For an overview on the general development of international economic law up to this stage, see Surya P. Subedi, A Shift in Paradigm in International Economic Law: From Statecentric Principles to People-centred Policies, 10 Manchester J. Int’l Econ. L. 314, 314–335 (2013). 59 For an overview of the history of iias, see Kenneth J. Vandevelde, A Brief History of International Investment Agreements, 12 uc Davis J. Int’l L. & Pol’y 157, 157–194 (2005–2006).

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In the aftermath of the “Washington consensus,” many capital-importing States started to actively attract flows of foreign investment into their territories. They did so by granting extensive investment protection beyond domestic investment legislation or international custom by means of Preferential Trade and Investment Agreements,60 including separate investment chapters, and iias.61 These treaties contained substantive investment protections such as general standards of treatment and provisions on expropriation, e.g. the Hull formula.62 As a consequence, the discussions centred on details of treaty interpretation rather than on general questions of the state of international investment law, which – due to concessions made by the capital-importing countries – seemed largely settled at that time.63 Overall, the treaties seemed to be based on a bargain between the State parties involved, given that they reconciled the objective of capital-receiving countries to promote inflows of fdi with the interest of capital-sending countries in protecting outflows of fdi.64 This “duality of objectives” has also found expression in the title of iias, which often reads “Treaty for Encouragement and Reciprocal Protection of Investments.”65 Among the more common, investment-specific iias, bilateral investment treaties66 between only one home and one host State respectively have become the most widespread form of investment treaties. The popularity of bits 60 [Hereinafter ptia]. 61 Dolzer & Schreuer, Principles of International Investment Law 5; Subedi, International Investment Law 50. On the role and rise of iias and ptias, see Karl P. Sauvant, The Rise of International Investment, Investment Agreements and Investment Disputes, in Appeals Mechanism in International Investment Disputes (Karl P. Sauvant ed., 2008). 62 Dolzer & Schreuer, Principles of International Investment Law 5. For further information on the substance of bits, see Jeswald W. Salacuse, bit by bit: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries, 24 Int’l Law. 655, 664–673 (1990); Kenneth J. Vandevelde, Investment Liberalization and Economic Development: The Role of Bilateral Investment Treaties, 36 Colum. J. Transnat’l L. 501, 504–514 (1998). 63 Dolzer & Schreuer, Principles of International Investment Law 6. 64 Jeswald W. Salacuse & Nicholas P. Sullivan, Do bits Really Work?: An Evaluation of Bilateral Investment Treaties and Their Grand Bargain, 46 Harv. Int’l L. J. 67, 77–78 (2005). For an overview of possible explanations for the “treatification” of international investment law, see Jeswald W. Salacuse, The Treatification of International Investment Law: A Victory of Form over Life? A Crossroads Crossed?, 3 tdm 1, 1–17 (2006). 65 Salacuse, bit by bit: The Growth of Bilateral Investment Treaties and Their Impact on Foreign Investment in Developing Countries 655, 661–662. 66 [Hereinafter bit].

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contrasts with the so far more reluctant use of multilateral investment treaties,67 such as the ect68 or the nafta69 and the asean Investment Agreement70 on the regional level.71 Besides the greater complexity of negotiating multilateral treaties between a multitude of State parties, it is assumed that the “competitive dynamic” between rival host States striving to import foreign capital is another essential motive for preferring bits to mits.72 The era of this most popular type of iias began with the us Treaties of Friendship, 67 [Hereinafter mit]. 68 Energy Charter Treaty, 17 December 1994 (entry into force 16 April 1998), 34 ilm 360 (1995) (between the nations of Europe, including the former Communist bloc, as well as Japan and Australia) [hereinafter ect]. 69 North American Free Trade Agreement, 17 December 1992 (entry into force 1 J­anuary 1994), Can.–Mex.–U.S., 32 ilm 289 (1993) (between the United States, Canada, and ­Mexico) [hereinafter nafta]. 70 The Association of South East Asian Nations [hereinafter asean] concluded the Agreement between the Governments of Brunei Darussalam, the Republic of Indonesia, Malaysia, the Republic of Philippines, the Republic of Singapore, and the Kingdom of Thailand for the Promotion and Protection of Investments, 15 December 1987, 27 ilm 612 (1988) [hereinafter asean Investment Agreement]. 71 For an overview of existing (regional) mits, see Christopher Dugan et al., InvestorState Arbitration 54–75 (Oxford University Press, New York, 2008 (2011 reprint)). Attempts by the oecd to establish an all-embracing multilateral investment protection treaty failed twice in the 1960s and 1990s; see (1) Draft Convention on the Protection of Foreign Property, Resolution of the oecd Council, 12 October 1967, oecd Publication No. 23081 (1967), 7 ilm 117 (1968) [hereinafter 1967 oecd Draft Convention]; and (2) Multilateral Agreement on Investment, Draft Consolidated Text, 22 April 1998, DAFFE/ MAI(98)7/REV1 [hereinafter mai]. For an overview of the negotiations, problems, and failure of the mai, see e.g. Eric Neumayer, Multilateral Agreement on Investment: Lessons for the wto from the failed OECDnegotiations, 46 Wirtschaftspolitische Blätter 618, 618–628 (1999); Katia Tieleman, The Failure of the Multilateral Agreement on Investment (mai) and the Absence of a Global Public Policy Network (Case Study for the un Vision Project on Global Public Policy Networks) (2000), available at (last visited September 2016). 72 Guzman, Why lcds Sign Treaties That Hurt Them 639, 669–674, 679. For theoretical remarks on the “competitive dynamic” between potential host States and the resulting bit diffusion, see Zachary Elkins et al., Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960–2000, in The Backlash against Investment Arbitration – Perceptions and Reality 381–386 (Michael Waibel et al. eds., 2006). For further explanations on the “prevalence of bilateralism” within the investment treaty regime, see Jean-Frédéric Morin & Gilbert Gagné, What can Best Explain the Prevalence of Bilateralism in the Investment Regime?, 36 Int’l J. Pol. Econ. 53, 53–74 (2007).

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Commerce and Navigation,73 which were concluded predominantly in the late 18th and 19th century.74 The first modern bit was entered into by Germany and Pakistan in 1959.75 Although only a moderate number of bits were concluded before the 1990s,76 the annual number of newly signed bits grew explosively thereafter, reaching an historically unprecedented peak of 211 bits in 1996 and slowing down slightly by the end of this period.77 While, on the whole, only 385 73 [Hereinafter fcn Treaty]. The first fcn Treaty is said to have been concluded between France and the us in 1778, see Muthucumaraswamy Sornarajah, The International Law on Foreign Investment 180 (fn. 41) (Cambridge University Press, Cambridge, 3rd ed., 2010). 74 Arthur Nussbaum, A Concise History of the Law of Nations [Geschichte des Völkerrechts in gedrängter Darstellung] 226–230 (C.H. Beck, München, 1960), referred to in Alexandra N. Diehl, Auf der Spur eines Erfolgsmodells oder “Das dichte Spinnennetz der bits”, in Aktuelle Probleme und Entwicklungen im Internationalen Investitionsrecht – Tagungsband des 8. Graduiertentreffen im Internationalen Wirtschaftsrecht in Wien 2007 9 (Christina Knahr & August Reinisch eds., 2007). Since fcn Treaties were primarily devoted to trade and navigation, investment protection was no more than a side issue in these early agreements. Yet, the structure of their investment provisions has been adopted and refined by the modern bits; see id. at 9–10. 75 Germany-Pakistan bit (Agreement Between the Federal Republic of Germany and the Islamic Republic of Pakistan on the Encouragement and Reciprocal Protection of Investments, 25 November 1959, BGBl. ii 1961, 793). This first modern bit appears in a list of treaties in Athena J. Pappas, References on Bilateral Investment Treaties, 4 icsid Rev. – filj 189, 189, 194 (1989); see Sornarajah, The International Law on Foreign Investment 172 (fn. 1). Meanwhile, this treaty has been renegotiated and was superseded by the new 2009 Germany-Pakistan bit, see below fn. 1737. 76 See un Centre on Transnational Corporations and International Chamber of Commerce, Bilateral Investment Treaties: 1959–1992, 1–5 (1992): “Overall, the number of bilateral investment treaties signed has grown steadily from 83 treaties in the 1960s, to 176 in the 1970s, and 377 at the end of 1989. By early 1991, about 440 bilateral investment treaties had been concluded (…).” See also Antonio R. Parra, icsid and the Rise of Bilateral Investment Treaties: Will icsid be the Leading Arbitration Institution in the early 21st Century?, 94 asil Proc. 41, 41–43 (2000), who presents slightly different numbers: “By the end of the 1960s, sixty-five bits had been concluded. (…) During the 1970s, another eighty-six bits were signed. (…) The 1980s saw a dramatic increase in the number of bits produced, with 211 such treaties being concluded in those years.” 77 unctad, Quantitative Data on Bilateral Investment Treaties and Double Taxation Treaties (2002), available at (last visited August 2016).

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bits had been concluded from 1959 to 1989, their cumulative number rose to more than 1,800 by the end of 1999.78 b Development of fdi The changing landscape of foreign investment law and policy in many capitalimporting countries throughout the 1980s and 1990s, which correlated with the advance of economic globalisation79 was also accompanied by unprecedented developments of the global inward and outward flows of fdi. Certainly, the determinants of fdi are manifold. They consist, first and foremost, in “hard” economic factors of possible host States such as size and growth of domestic markets, their labour force potential, infrastructure and technological capacity, as well as the availability of natural resources.80 Nevertheless, “soft”

78

79

80

A slightly different number of 209 bits concluded in 1996 can be found in unctad, International Investment Arrangements: Trends and Emerging Issues, unctad Series on International Investment Policies for Development, 5 (2006). unctad, Quantitative Data on Bilateral Investment Treaties and Double Taxation Treaties (2002), available at (last visited August 2016). A slightly different number of 386 bits concluded between 1959 and 1989 can be found in Karl P. Sauvant & Lisa E. Sachs, bits, dtts and fdi flows: an Overview, in The Effect of Treaties on Foreign Direct Investment – Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows xxxiv (Karl P. Sauvant & Lisa E. Sachs eds., 2009). See Annex to Ch. 1 (i) / Figure 2 for a diagram depicting the annual and cumulative number of bits concluded between 1989 an 2015. Economic globalisation has been defined as an “increasing economic integration and interdependence of national economies across the world through a rapid increase in cross-border movement of goods, service, technology, and capital,” see Mohan Joshi Rakesh, International Business 10 (Oxford University Press, New Delhi/New York, 2009), who lists also various other approaches to this term, e.g. the definitions of the wto and the oecd. These locational advantages of a country or region are one of three sets of interdependent and interacting parameters within the scientific construct of the “eclectic paradigm,” also known as oli paradigm. The eclectic paradigm merges various different economic theories into one analytical framework. It asserts that the extent and structure of foreign production undertaken by multinational enterprises is determined by the three factors Ownership, Location, and Internalisation. Ownership specific advantages of investors include e.g. local knowledge and expertise, the locational attractiveness refers to the availability of resources, wages, and taxes, and the internalisation advantages pertains to the integration of intermediate product markets. See John H. Dunning, The Eclectic Paradigm

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factors such as the host States’ general (investment) policy framework are also of significance for the flows of fdi and their development.81 The interrelationship between bits, being an expression and concretisation of investor-­friendly investment laws and policies, and fdi has even been the object of several ecometric studies. Albeit varying as regards the degree of influence, most of the more recent research projects concurred in their finding that bits contribute – at least to a certain extent – to the growth of fdi.82 81

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as an Envelope for Economic and Business Theories of mne Activity, 9 Int’l Bus. Rev. 163, 163–164 (2000). Karl P. Sauvant, Driving and Countervailing Forces – A Rebalancing of National fdi Policies, in Yearbook on International Investment Law and Policy 2008–2009 222 (Karl P. Sauvant ed., 2009). Earlier ecometric studies on the relationship of bits and fdi flows published between 1998 and 2004 came to mixed conclusions, ranging from findings of no relationship at all, to results asserting a minor impact and even outcomes claiming a strong impact of bits on fdi flows. By contrast, subsequent studies undertaken from 2005 to 2008, which are known for their improved analysis techniques and the use of enlarged data bases, came to less ambiguous conclusions. They concurred in their findings that bits have some impact on fdi flows, but that other, macroeconomic determinants constitute the more crucial factors in this respect. For an overview of this topic and a survey of the studies published between 1998 and 2008, see unctad, The Role of International Investment Agreements in Attracting Foreign Direct Investment to Developing Countries, unctad Series of International Investment Policies for Development, 1–145, esp. 29–60 (2009). See also Vandevelde, Bilateral Investment Treaties: History, Policy and Interpretation 115–120. Giving due regard to the heterogeneous fdi determinants and the difficulties in data acquisition and analysis, the 2009 unctad Report explicitly acknowledges the complexity of the studies reviewed. Moreover, it adds a caveat with respect to general policy conclusions, given that ecometric modelling, by its very nature, is solely based on “a simplified description of a complex reality.” More precisely, in order to reach findings on the isolated role of bits, these empirical studies identify all other explanatory variables and then equalise their effect on fdi; see unctad, Role of iias in Attracting fdi, 56–58, esp. 56 (quotation) (2009). In addition, since bits are treated as if they were homogeneous, the impact of individual treaty provisions is not factored in; see Aishwarya Padmanabhan, Relationship Between fdi Inflows and Bilateral Investment Treaties/International Investment Treaties in Developing Economies: An Empirical Analysis, 8 (2011), available at (last visited September 2016). For further aspects that are generally excluded from said studies, but nevertheless are of impact on fdi, see Deborah L. Swenson, Why Do Developing Countries Sign bits?, 12 uc Davis J. Int’l L. & Pol’y 131, 153–154 (2005). The following studies have been reviewed in the 2009 unctad Report: unctad, ­Bilateral Investment Treaties in the Mid-1990s, 123–145 (1998); Rashmi Banga, Impact of Government Policies and Investment Agreements on fdi Inflows, Working Paper No. 116

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With this in mind, the turn of all major world economies towards neoliberal (investment) policies appears to have not only contributed to a considerable increase in the volume of fdi,83 but also to a downright competition for

83

(Indian Council for Research on International Economic Relations, New Delhi) (2003); Jennifer Tobin & Susan Rose-Ackerman, Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties, Working Paper No. 587, William Davidson Institute, University of Michigan Business School, Michigan (2003); Mary Hallward-Driemeier, Do Bilateral Investment Treaties Attract fdi? Only a Bit and They Could Bite, World Bank Policy Research Paper, wps 3121, Washington, dc (2003); Peter Egger & Michael Pfaffermayr, The Impact of Bilateral Investment Treaties on Foreign Direct Investment, 32 J. Comp. Econ. 788, 788–804 (2004); Tim Büthe & Helen V. Milner, Bilateral Investment Treaties and Foreign Direct Investment: A Political Analysis. A Revised Version of the Paper Presented at the Annual Meeting of the American Political Science Association (2004), in The Effects of Treaties on F­ oreign D irect Investment: Bilateral Investment Treaties, Double Taxation ­ Treaties, and Investment Flows (Karl P. Sauvant & Lisa E. Sachs eds., 2009); Salacuse & Sullivan, Do bits Really Work? 67, 67–130; Robert Grosse & Len J. Trevino, New Institutional Economics and fdi Location in Central and Eastern Europe, 45 Mgmt. Int’l Rev. 123, 123–145 (2005); Kevin P. Gallagher & Melissa B.I. Birch, Do Investment Agreements Attract Investment? Evidence from Latin America, 7 J. World Inv. & Trade 961, 961–974 (2005); Eric Neumayer & Laura Spess, Do Bilateral Investment Treaties Increase Foreign Direct Investment to Developing Countries?, 33 World Dev. 1567, 1567–1585 (2005); Jennifer Tobin & Susan Rose-Ackerman, Bilateral Investment Treaties: Do They Stimulate Foreign Direct Investment?, Mimeo, Yale University (2006); Peter Egger & Valeria ­Merlo, The Impact of Bilateral Investment Treaties on fdi Dynamics, 30 World Econ. 1536, ­1536–1549 (2007); Emma Aisbett, Bilateral Investment Treaties and Foreign Direct Investment: Correlation Versus Causation, cudare Working Paper 1032, University of California (2007); Jason W. Yackee, Do bits Really Work? Revisiting the Empirical Link between Investment Treaties and Foreign Direct Investment, Legal Studies Research Paper Series, Paper No. 1054, University of Wisconsin Law School (2007); Matthias Busse & Jens Koeniger, fdi Promotion through Bilateral Investment Treaties: More than a bit?, Kiel Working Papers, No. 1403, Kiel Institute for the World Economy (2007). For a more recent study which, inter alia, takes account of investors’ knowledge and appreciation of bits, but which finds no evidence of a meaningful impact of bits on fdi flows, see Jason W. Yackee, Do Bilateral Investment Treaties Promote Foreign Direct Investment? Some Hints from Alternative Evidence, 51 Va. J. Int’l L. 397, 397–442 (2010–2011). The economic term fdi describes “an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than that of the foreign direct investor (fdi enterprise or affiliate enterprise or foreign affiliate)”; see unctad, World Investment ­Report – Towards a New Generation of Investment Policies (Methodological Note), 3 (2012), r­ eferring to imf, Balance of Payment Manual, 6th edition (BPM6) (2009); oecd, Detailed Benchmark Definition of Foreign Direct Investment, 4th edition (2008).

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inflows of fdi as a source of capital from the mid-1980s on.84 While the world wide annual fdi inflows amounted to only usd 13,257 million in 1970, they quadrupled to usd 54,396 million in 1980 and then multiplied to usd 204,914 million in 1990.85 In 2000, the global fdi inflows reached a provisional peak of usd 1,358,820 million.86 During these three decades, only temporary minor set-backs in fdi inflows could be recorded.87 Apart from that, transnational investment grew by the massive factor of over 100. Altogether, since the 1980s, fdi has grown at a higher rate than world trade88 and – in some respects – even outstripped the latter in its importance in terms of delivering goods and services to foreign countries.89 It has hence evolved to an essential driving force As opposed to portfolio investments, which are rather focused on short-term profits, fdi requires a certain degree of control by the foreign investor over the fdi corporation, which is generally satisfied if the former owns at least 10% of the latter’s stock; see Rakesh, International Business 493. For a delimitation of both forms of investments, see id. at 492–493; imf, Balance of Payment Manual, 5th edition (BPM5), 86–94 (1993). For further elaborations on the different types of fdi, categorised e.g. by direction (inward – outward), by types of activity (horizontal – vertical – conglomerate), by sectors (industrial – non-industrial), by investment objectives (resource-seeking – market-­seeking – efficiency seeking), or by entry modes (greenfield investments – M&A), see Rakesh, International Business 496–506. 84 Subedi, International Investment Law 45. 85 unctadStat, fdi: Inward and outward flows and stock, Annual, 1970–2015 (2016), available at (last visited November 2016). See Annex to Ch. 1 (i) / Figure 3 for a diagram depicting the development of global annual inward fdi flows from 1970 to 2015. 86 See id. 87 1975 to 1976: fdi inflow decline by about 17%; 1981 to 1982 and 1982 to 1983: fdi inflow decline by about 15% a year on average; 1990 to 1991: fdi inflow decline by about 25%; see id. 88 Christian Tietje, International Investment Protection and Arbitration – Theoretical and Practical Perspectives 19 (Berliner Wissenschafts-Verlag, Berlin, 2008). 89 Sauvant, Rise of International Investment 6. As the author explains, “(…) roughly one third of word trade takes place as intra-firm trade (…), and the bulk of technology is transferred within the framework of the integrated international production system.” Even if there is no consensus on the inter-relationship between fdi and trade, it is increasingly assumed that fdi has a positive, stimulating effect on overall economic growth, including international trade. fdi and trade should hence be considered as related economic forces which interact and reinforce each other. See Edward G. Graham, Working Together: Foreign Direct Investment and Trade, Econ. Reform Today 29, 29 (1997). See also, for general elaborations on links between fdi and trade, wto-Secretariat, Trade and Foreign Direct Investment (1996), in parts available at (last visited September 2016).

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of open and integrated world markets and of global economic development in general.90 4 Early 21st Century until Today The liberalisation of (inter-) national law and policy on foreign investment, which began in the 1980s and progressed dynamically and unabatedly in the 1990s, continued even throughout the first decade of the 21st century and up to present, yet in a more heterogeneous politico-economic climate. On the one hand, both host and home countries kept and keep encouraging flows of global fdi. The majority of capital-importing countries aspires to attract foreign investments by shaping their investment legislation in a more open and investor-friendly manner and by concluding iias and pftias with extensive investment protections.91 In 2015, for instance, 85% of the registered changes in national investment policies were supportive of a more favourable global investment climate.92 Beyond that, many fdi recipients became even more proactive in that they started to advertise themselves by means of Investment Promotion Agencies.93 They have hence replaced “red tape with red carpet treatment” of private foreign investors.94 In addition, many capitalexporting countries engaged in the promotion of fdi by researching and informing about foreign investment opportunities as well as by granting insurance for related projects.95 On the other hand, however, new forms of resistance against this general trend towards a further liberalisation and facilitation of foreign investment have become more and more evident. They are reflected in national investment policies opposing or restraining such liberalisation. Of all investment-­ related measures adopted in national legislations throughout 2015, for 90 Sauvant, Rise of International Investment 6; Tietje, International Investment Protection 19. Besides fostering global economic growth, fdi contributes in particular to the economic progress of less developed countries or countries in transition. It is not merely a source of capital, but also entails transfers of advanced technology and knowledge resources from home to host States; see id. See also WTO-Secretariat, Trade and Foreign Direct Investment (1996). 91 Sauvant, Driving and Countervailing Forces 217–220. 92 unctad, World Investment Report – Investor Nationality: Policy Challenges, 90 (2016). 93 [Hereinafter ipa]. Sauvant, Driving and Countervailing Forces 220–222. The author describes these proactive measures as the “second generation” of strategies for promoting fdi. 94 Id. at 222. 95 Id. at 223.

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e­ xample, a share of 13,5% aimed at reinforcing investment regulations and restrictions.96 In comparison, in the year 2001, only about 2% of these measures were unfavourable for foreign investment.97 A counter-trend against investment liberalisation has thus emerged. Amongst the capital-importers, economically weaker countries, which are the typical fdi recipients, have begun adopting an increasingly rejectionist stance as regards economic globalisation in general and foreign investment in particular. This is, in part, due to the uncertainties and dependency structures fdi entails for them. Some of these countries had difficult experiences with relaxed investment policies, which implied constraints on their regulatory powers and of their sovereignty over natural resources. Concerns over economic exploitation and market monopolisation led several Latin American98 and African99 countries to revise the legal bases of ongoing investment projects – particularly of those involving extractive industries – and, in some extreme cases, to adopt nationalisation measures in this respect.100 Unexpectedly, economically stronger countries, who traditionally stood up for open, pro-investment policies, also joined these resurgent, protectionist tendencies.101 Their emerging scepticism about fdi relates primarily to cross-border mergers and acquisitions,102

96

unctad, wir, 90 (2016). For an overview of newly adopted restrictive or regulatory measures, see id. at 93–94. 97 Id. at 90. See Annex to Ch. 1 (i) / Figure 1 for a diagram depicting the development of national investment policies from 2001 to 2015. 98 E.g. Bolivia, Ecuador, Paraguay, and Venezuela. For a general overview of the development of fdi policy in Latin America, see Katia Fach Gómez & Catharine Titi, International Investment Law and isds: Mapping Contemporary Latin America, 17 J. World Inv. & Trade 515, 515–535 (2016); María José Luque Macías, Reliance on Alternative Methods for Investment Protection through National Laws, Investment Contracts, and Regional Institutions in Latin America, in Shifting Paradigms in International Investment Law  – More Balanced, Less Isolated, Increasingly Diversified (Steffen Hindelang & Markus Krajewski eds., 2016). 99 E.g. Congo and Liberia. For an overview of the development of fdi policy in South-Africa, see Sean Woolfrey, The Emergence of a New Approach in Investment Protection in South Africa, in Shifting Paradigms in International Investment Law – More Balanced, Less Isolated, Increasingly Diversified (Steffen Hindelang & Markus Krajewski eds., 2016). 100 Sauvant, Driving and Countervailing Forces 241. See also unctad, wir, 95–96 (2013). 101 Sauvant, Driving and Countervailing Forces 242. 102 [Hereinafter M&A].

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which raised strategic economic, political, and regulatory concerns.103 The us, for instance, as one of the leading economies, established new mechanisms of investment review in 2007, which serve to assess the impact of a transaction on national security interests.104 Comparable readjustments of national investment policies have been undertaken by Australia105 and Canada106 103 Sauvant, Driving and Countervailing Forces 242. For further elaborations on cross-border M&A as a form of fdi and the different types of acquirers, see id. at 235–239. According to unctad statistics, Australia, the us, and Canada “constitute the top three – both in number of deals withdrawn and in the value of those deals” among the target and home countries of cross-border M&As between 2008 and 2012; see unctad, wir, 96–100, esp. 98 (quotation) (2013). 104 The Committee on Foreign Investment in the United States [hereinafter cfius] has been formally established by the us Foreign Investment and National Security Act of 2007, enacted 26 July 2007, Pub.L. 110–49, 121 Stat. 246 [hereinafter finsa]; see Sauvant, Driving and Countervailing Forces 244–247. 105 Australia announced a new policy on sovereign fdi in 2008 under the Rudd (Labor) government, according to which any new foreign investment proposals had to be examined in the light of national interests; see id. at 247–248. Later on, the Gillard (Labor) government released a trade policy statement, wherein it stressed the principle of national treatment, and nothing beyond, for foreign businesses and rejected investor-State dispute resolution; see Gillard Government Trade Policy Statement, Trading Our Way to More Jobs and Prosperity, April 2011, available at (last visited September 2016), referred to in Stephan W. Schill & Marc Jacob, Trends in International Investment Agreeements, 2010–2011, in Yearbook on International Investment Law & Policy 2011–2012 158–159 (Karl P. Sauvant ed., 2013). The following Abbott (Liberal-National Coalition) government took a more moderate position with regard to investor-State dispute resolution by taking a contextual “case-by-case” approach, see Australian Government, Trade and Investment Topics, Investor-State Dispute Settlement, available at (last visited September 2016). By the end of 2015, the Turnbull (Liberal-National Coalition) government adopted further changes to the foreign investment framework in terms of notification and approval requirements for fdi, see Australian Government, Foreign Investment Reforms Fact Sheets, available at (last visited September 2016). For a general overview of fdi policies in the Asia-Pacific Region, see Leon E. Trakman & Kunal Sharma, Jumping Back and Forth between Domestic Courts and isds – Mixed Signals from the Asia-Pacific Region, in Shifting Paradigms in International ­Investment Law – More Balanced, Less Isolated, Increasingly Diversified (Steffen Hindelang & Markus Krajewski eds., 2016). 106 Canada amended its central statute on fdi, the Investment Canada Act, in 2009. In this course, it established “national security” as a new ground for investment review for all fdi in Canada and without any minimum threshold. At the end of 2012, the Canadian

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as industrialised economies and even by China107 and Russia108 as emerging economies.109 The European Union110 also became active and reacted to concerns of member States like Germany111 and France112 as regards opaque and disproportionate investments by sovereign wealth funds113 in national firms by adopting a communication on the need for a common European approach in this respect.114 In addition, many States have shown increasing

government released a policy statement and revised guidelines for investments by Stateowned enterprises, wherein a lower review threshold for State-owned enterprises (as opposed to non-State owned enterprises) has been suggested. In 2013, the corresponding Bill C-60 was tabled and adopted. See the website of the parliament of Canada, available at   (last visited September 2016). 107 China tightened its regulatory regime on fdi in that it introduced, inter alia, a national security review for “acquisitions of domestic enterprises by foreign investors that may have implications for national security” in its Anti-Monopoly Law in 2007, which came into effect in 2008; see Sauvant, Driving and Countervailing Forces 253–254. 108 Russia’s more restrictive attitude towards fdi is reflected, inter alia, in the establishment of an approval mechanism in 2008, which applies to all transactions between national enterprises and foreign investors that relate to national security concerns or important natural resources; see id. at 254–255. 109 Id. at 248–250, 253–255. 110 [Hereinafter eu]. 111 In order to thwart unfavourable foreign takeovers via M&As, the German government established a control mechanism for inward fdi by the Thirteenth Act amending the Foreign Trade and Payments Acts and the Foreign Trade and Payments Regulation, 18 April 2009, BGBl. i 2009, 770, available at (last visited September 2016); see Sauvant, Driving and Countervailing Forces 247–248. For further elaborations on this legislative reform, see Thomas Jost, Sovereign Wealth Funds and the German Policy Reaction, in Sovereign Investment: Concerns and Policy Reactions 453–461 (Karl P. Sauvant et al. eds., 2012). 112 Legislative action against uncontrolled M&As has also been taken by the French government, which set up authorisation procedures in its Decree No. 2005–1739, jorf No. 304, p. 20779, available at (last visited September 2016); see Sauvant, Driving and Countervailing Forces 248. 113 [Hereinafter swf]. 114 Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, A Common European Approach to Sovereign Wealth Funds, 27 February 2008, COM/2008/115 final (not published in oj), summary available at (last visited October 2016) referred to in Sauvant, Driving and Countervailing Forces 251.

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protectionist tendencies against outward fdi even in their role as capitalexporters. In particular the offshoring of large numbers of service sector jobs by national firms investing abroad and the corresponding pressures on employee’s wages in the domestic labour market have provoked concerns and stirred up debate on the regulatory framework for the outflow of investments.115 Thus, while investor-friendly laws and policies still widely prevail after more than three decades of investment liberalisation, indications of a backswing of the pendulum are perceivable.116 These consist in the strategic readjustment of national investment policies and the corresponding regulatory framework on fdi by a large number of States in their role as capital-importing and/or capital-exporting countries.117 This gradually resurgent active role of domestic governments in transnational investment projects is a move away from the “hands-off” approach to economic development and market forces practiced throughout the 1980s and 1990s.118 It may be traced back, in the first place, to negative experiences with more relaxed investment policies, which were intensified throughout the recent financial and economic crises.119 Beyond that, further impulses come from the emerging paradigm which deems public interests, such as the protection of labour rights and of health, security, and environmental standards, as of equal rank with economic growth.120 This new 115 Id. at 256–258. See also WTO-Secretariat, Trade and Foreign Direct Investment (1996). 116 Terminology inspired by Sauvant, Driving and Countervailing Forces 234. This latest trend has also been described as “revival of the Calvo doctrine” or “advent of ‘neo-NIEO,’” see Subedi, International Investment Law 8. 117 Sauvant, Driving and Countervailing Forces 233–234. 118 unctad, Towards a New Generation of International Investment Policies: unctad’s Fresh Approach to Multilateral Investment Policy Making, iia Issues Note No. 5, 3 (2013). 119 Id. 120 Id. For an overview of international initiatives to foster sustainable development in international investment law and policy, see unctad, wir, 103 (2016); Subedi, International Investment Law 60–76; Andrea Saldarriaga & Kendra Magraw, unctad’s effort to foster the relationship between international investment law and sustainable development, in International Investment Law and Development – Bridging the Gap 138–145 (Stephan W. Schill et al. eds., 2015), with elaborations on the unctad Investment Policy Framework for Sustainable Development. On the role of iias in promoting sustainable development, see unctad, wir, ­102–103 (2013); Wolfgang Alschner & Elisabeth Tuerk, The role of international investment agreements in fostering sustainable development, in International Investment Law within International Law 217–231 (Freya Baetens ed., 2013); Markus W. Gehring, Overcoming obstacles with opportunities: Trade and investment agreements for sustainable

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focus on sustainability issues is thus another driving force behind modern investment law and policy making. In sum, a new era of fdi regulation seems to have dawned. a Development of iias This readjustment of the investment law and policy framework of many capital-importing and also capital-exporting countries is reflected in the form and content as well as in the quantity of newly concluded iias. Concerning their form, a consolidating trend from bilateralism towards regionalism is prevalent. This is obvious in view of the fact that, of the ten non-BIT iias concluded in 2012, eight have been signed by groups of State actors in the same region.121 Moreover, more than 100 countries have recently been involved in more than 20 negotiations of regional investment treaties.122 The participating States appear to be motivated by the combined political and economic strengths and the benefits of regional co-operation when facing the constantly increasing global economic challenges and social imbalances.123 In addition to the regional agreements negotiated and concluded in Latin America,124 Africa,125 and Asia,126 Europe is contributing significantly to the

121 122

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124 125

development, in International Investment Law and Development – Bridging the Gap 93–124 (Stephan W. Schill et al. eds., 2015). On further facets of international investment law and sustainable development, see Steffen Hindelang & Markus Krajewski (eds.), Shifting Paradigms in International Investment Law – More Balanced, Less Isolated, Increasingly Diversified (Oxford University Press, Oxford, 2016). unctad, wir, 103 (2013). Id.; unctad, The Rise of Regionalism in International Investment Policymaking: Consolidation or Complexity?, iaa Issues Note No. 3, 1 (2013). According to unctad, the eu member States have been counted individually in this set of data. unctad, Towards a New Generation of International Investment Policies, iia Issues Note No. 5, 3 (2013). For an overview of current and past regional-level iia projects, see Hamed El-Kady, An International Investment Policy Landscape in Transition: Challenges and Opportunities, 10 tdm 1, 7–17 (2013); unctad, wir, 103–104 (2013); unctad, Rise of Regionalism, 2 (2013). For an overview of current regional-level iia reform projects, see unctad, wir, 112 (2016). See e.g. the establishment of the Pacific Alliance between Chile, Colombia, Peru, and Mexico in 2012 in Latin-America. See e.g. the signing of the Tripartite Free Trade Area [hereinafter tfta] in 2015 between the regional economic integration organisations Common Market for Eastern and Southern Africa, East African Community, and Southern African Development Community [hereinafter comesa, eac, and sadc] being an important building block of the

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regionalisation movement due to the new and exclusive fdi competence of the eu, which forms part of its Common Commercial Policy since the Lisbon Treaty entered into force in 2009 and which includes the power to conclude investment treaties.127 Equipped with the fdi competence, the eu engaged into negotiations with other regional alliances or with individual States. The most famous, but highly controversial examples of comprehensive eu fta projects are the Comprehensive Economic Trade Agreement128 signed with Canada and envisaged mega-regional trade agreement; the so-called African Continental Free Trade Area [hereinafter cfta]. 126 See e.g. the negotiations on the Regional Comprehensive Economic Partnership Agreement between the asean and six other countries from the Asian-Pacific region [hereinafter rcep Agreement]. For a discussion of the role of Asian actors in the development of international investment law, see Stephan W. Schill, Changing geography: prospects for Asian actors as global rule-makers in international investment law (4 July 2016), Columbia fdi Perspectives No. 177 (2016). 127 Treaty of Lisbon, 13 December 2007 (entry into force 1 December 2009), oj C 306 (2007) [hereinafter Lisbon Treaty]. The Common Commercial Policy is anchored in Art. 207 tfeu, which provides in para. 1 that “[t]he common commercial policy shall be based on uniform principles, particularly with regard to (…) foreign direct investment, (…). The common commercial policy shall be conducted in the context of the principles and objectives of the Union’s external action.” Cf. also eu Parliament and Council, Regulation (eu) No. 1219/2012 of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, oj 351/40 (2012), which lays the foundations of the new Common European Investment Policy (ceip). For discussions of the consequences of this shift of competences, see e.g. Philip Strik, Shaping the Single European Market in the Field of Foreign Direct Investment 67 et seq. (Hart, Oxford, 2014); Marc Bungenberg et al. (eds.), eu and Investment ­A greements  – Open Questions and Remaining Challenges (Nomos, BadenBaden, 2013); Marc Bungenberg & Christoph Herrmann (eds.), Common ­C ommercial Policy after Lisbon: In depth Analysis of legal Foundations for the eu’s International Economic Appearance (Springer, Heidelberg, 2013); Nikolaos Lavranos, Member States’ Bilateral Investment Treaties (bits): Lost in Transition?, 24 Hague Yb. Int’l L. 281, 281–311 (2012); August Reinisch, The eu on the Investment Path – Quo vadis Europe? The Future of eu bits and other Investment Agreements, 12 Santa Clara J. Int’l L. 111 (2014). For discussions on the rising regionalism in international investment policy making, see El-Kady, International Investment Policy Landscape in Transition 1, 7–9; unctad, wir, 104 (2013); unctad, Rise of Regionalism, 2–3 (2013). 128 [Hereinafter ceta]. Negotiations have been concluded in August 2014 and the revised text, which includes an Investment Court System in its investment chapter, has

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the Transatlantic Trade and Investment Partnership129 being negotiated with the us.130 On the interregional level, the Transpacific Partnership Agreement between twelve countries from the Asia-Pacific region and North-America, which had been negotiated since 2008, was signed in February 2016 by twelve Pacific Rim countries. If ratified successfully according to the national procedures of each member State, one of the largest multilateral trade and investment agreement would be established.131

been published on 29 February 2016. ceta was then adopted by the eu Council on 28 October 2016 and signed at the EU–Canada Summit on 30 October 2016. After approval by the eu Parliament, those parts of ceta falling under the exclusive eu competence will apply provisionally. Being proposed as mixed agreement by the eu Commission, its full entry into force depends on the ratification by all eu member State’s parliaments. The ceta text and the Joint I­ nterpretative Instrument are available at (last visited November 2016). With regard to ceta, the discussions have been particularly delicate in view of the fact that – apart from the ect – it will be the first comprehensive eu fta to contain a substantive investment protection chapter, see e.g. unctad, Rise of Regionalism, 3 (2013). Accordingly, it is considered to set up a global benchmark, a so called “gold standard,” for future eu iias. 129 [Hereinafter ttip]. The current state of negotiations is available at (last visited October 2016). If successfully concluded, ttip would represent the world’s largest free trade area and the most significant of all comprehensive ftas ever negotiated. The great economic importance derives from the fact that the eu and us together are generating 50% of the global gdp, although they only make up 11,8% of the world population, and that they have the most integrated economic relationship worldwide. See eu Commission, eu–us Trade Statistics, available at (last visited October 2016). 130 An important point in dispute is the legal nature of future comprehensive eu ftas, i.e. the question whether such ftas may be concluded by the eu alone due to exclusive competences according to Arts. 2 and 3 tfeu or whether consent of all eu member States is required for the conclusion of mixed agreements due to shared competences in the sense of Art. 4 tfeu. In order to obtain legal security, the eu Commission requested an opinion of the cjeu with respect to the eu–Singapore FTA (Free Trade Agreement between the European Union and the Republic of Singapore, authentic text as of May 2015), see Opinion 2/15: Request for an opinion submitted by the European Commission pursuant to Article 218(11) tfeu, available at (last visited October 2016). For extensive discussions on the problems related to mixed agreements in the field of eu external relations law, see Christophe Hillion & Panos Koutrakos (eds.), Mixed Agreements Revisited: The eu and its Member States in the World (Hart, Oxford, 2010). 131 [Hereinafter tpp]. The twelve tpp countries are Australia, Brunei, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the us, and Vietnam. Historically, the

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Although this regional approach is promising in that it might consolidate the highly complex and interwoven network of iias, it risks, at the same time, aggravating the complexity if it only adds another treaty-layer instead of replacing existing bits.132 Another aspect increasing complexity, which might also be a consequence of the rising regionalism, is that the new generation of bits is no longer concluded only by mixed State parties, but also groupinternally between traditionally capital-importing countries, on the one hand, and between traditionally capital-exporting countries, on the other hand.133 A further explanation of this phenomenon refers to the changing economic roles of States, which are manifest, for instance, in the increasing export activities of formerly typical capital-importers.134 In terms of substance, many of the iias negotiated since the turn of the century are characterised by a new emphasis on public interests and noneconomic concerns.135 Although iias in the traditional sense, focusing primarily on investment protection, still continue to flourish, the new awareness of social and environmental needs and the corresponding importance of a State’s right to regulate has triggered a certain shift away from this mindset – with a potential for development.136 In this context, countries such as Colombia, Egypt, India, Indonesia, Norway, Slovakia, South Africa, and the us undertook national policy reviews of their (model) bits, which were driven by key public values such as human rights and environmental sustainability, but also by compatibility concerns as regards national law and policy.137 The reform

tpp represents an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (tpsep oder P4) between Brunei, Chile, Singapore, and New Zealand, which entered into force in 2006. For a detailed discussion of tpp, see Leon E. Trakman, The Status of Investor-State Arbitration: Resolving Investment Disputes under the Transpacific Partnership Agreement, 48 J. World Trade 1, 1–29 (2014). See also unctad, Rise of Regionalism, 4 (2013). 132 El-Kady, International Investment Policy Landscape in Transition 1, 19–21. 133 unctad, Bilateral Investment Treaties 1995–2006: Trends in Investment Rule Making, 1 (2007): “The evolution of the bit universe is also due to the increase in bits concluded between developing countries. In 2005 alone, 20 such treaties were concluded; this brought their total number to 644, whereas ten years before only 161 had existed.” 134 Id.; Dolzer & Schreuer, Principles of International Investment Law 7–8. 135 Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 155; unctad, wir, 102–103 (2013). 136 Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 155, with examples for traditional-style bits concluded in 2010 and 2011. 137 unctad, wir, 109–110 (2016); Peter Muchlinski, Trends in International Investment Agreements: Calls for Reforms of Model Bilateral Investment Treaties in Norway, South Africa, and

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debates thus mainly aimed at narrowing and clarifying the scope of the pertinent bit provisions. As regards the quantity of investment treaties, since the beginning of the 21st century there has been a substantial reduction of bits concluded each year. While in 2000 the number of bits signed per annum still totalled 133, it decreased continuously throughout the following fifteen years, reaching a trough of not even one-sixth of that number, namely of only 20 bits, concluded in 2015.138 One factor contributing to this downward trend is the increasing State practice of substituting iias by domestic investment laws that contain similar, yet less encompassing protective standards.139 Nonetheless, the global network of bits in their cumulative number continues to grow – even if the growth rate is only comparable to the late 1980s.140 By the end of 2015, the overall number of bits amounted to almost 3,000, bringing the total number of iias to more than 3,300.141

138 139

140 141

the United States, in Yearbook on International Investment Law and Policy 2009–2010 55–81 (Karl Sauvant ed., 2010). The us review process, for instance, resulted in the replacement of the 2004 Model bit (Treaty between the Government of the United States of America and the G ­ overnment of [Country] concerning the Encouragement and Reciprocal Protection of Investment, 2004 [hereinafter 2004 us Model bit]) by the new 2012 Model bit (Treaty between the Government of the United States of America and the Government of [Country] concerning the Encouragement and Reciprocal Protection of Investment, 2012 [hereinafter 2012 us Model bit]); see e.g. Lise Johnson, The 2012 us Model bit and What the Changes (or Lack Thereof ) Suggest about Future Investment Treaties, viii Political Risk Insurance Newsletter 1, 1–5 (2012). The restrictive approach adopted in the new 2015 India Model bit (Model Text for the Indian Bilateral Investment Treaty [hereinafter 2015 India Model bit]) is considered as reaction to India losing the case White Industries Australia Ltd. v. Republic of India, uncitral Arbitration, Award (30 November 2011) [hereinafter White Industries v. India (Award)], wherein India was challenged for procedural delays in the Indian judicial system. For details on the content of the 2015 India Model bit, see Srividya Jandhyala, Bringing the state back in: India’s 2015 model bit (17 August 2015), Columbia fdi Perspectives No. 154 (2015); Gordon Blanke, India’s revised Model bit: Every bit worth it!, Kluwer Arbitration Blog (20 March 2016). unctad, wir, 101–102 (2016). Only in 2001 (as a statistical upwards outlier) the annual number of newly concluded bits amounted to 181. See e.g. the State practice of Bolivia, Ecuador, and South Africa. The Ecuadorian Constitutional Court has even declared the unconstitutionality of bits, see Subedi, International Investment Law 16, 19. unctad, wir, 101–102 (2013). unctad, wir, 101 (2016).

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b Development of fdi The unprecedented period of growth of the worldwide fdi, which lasted from the beginning of the 1970s until the end of the 1990s and which reached an historical peak at the turn of the millennium,142 was interrupted by two drastic economic downturns in the following decade. The first major recession lasted for three years in succession from 2001 to 2003, during which the global inflows of fdi fell by almost 60% to usd 550,589 million.143 The main reason for this downward development lies in the burst of the so called dot-com bubble in 2000, caused by speculative excesses in the new economic sector of digital information and communication technology, which induced a general slowdown in the world economy.144 After a period of recovery starting from 2004 and reaching its highpoint to date in 2007 with an annual fdi inflow of usd 1,902,244 million, the second major recession set in and caused fdi inflows to plummet by about 38%, i.e. to usd 1,181,412 million, in 2009.145 Again, the main causes derive from the global economic and financial crisis that took place from 2007 to 2008 and that affected all major economies worldwide.146 It was 142 See Ch. 1.B.I.3.b. 143 usd at current prices and current exchange rates. See UNCTADStat, fdi flows, Annual, 1970–2015 (2016), available at (last visited November 2016). See Annex to Ch. 1 (i) / Figure 3 for a diagram depicting the development of global annual inward fdi flows from 1970 to 2015. 144 For further information and analysis of the economic crisis 2000–2001, see Debra Howcroft, After the goldrush: deconstructing the myths of the dot.com market, 16 J. Info. Tech. 195, 195–204 (2001); Bernard Taylor, Corporate Governance: the crisis, investors’ losses and the decline in public trust, 11 Corp. Gov. 155, 155–163 (2003). Moreover, as far as the attacks of 11 September 2001 against the us contributed to economic insecurity and fragility, they may also have aggravated this downward cycle of fdi. Although various surveys conducted on this causality issue did not account for any effect on fdi projects, a number of findings still detected a certain reluctance of firms to implement their investment plans; see unctad, World Investment Report – Transnational Corporations and Export Competitiveness, 3–4 (2002). 145 usd at current prices and current exchange rates. See unctadstat, fdi flows, Annual, 1970–2015 (2016), available at (last visited November 2016). See Annex to Ch. 1 (i) / Figure 3 for a diagram depicting the development of global annual inward fdi flows from 1970 to 2015. 146 unctad, World Investment Report – Transnational Corporations, Agricultural Production and Development, 3–17 (2009), with further elaborations on the financial and economic crisis and the slowdown of fdi flows. See also Persephone Economou & Karl P. Sauvant, Recent Trends and Issues in Foreign Direct Investment, 2010, in Yearbook on

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triggered by a burst of another speculative bubble – this time caused by a massive overvaluation of the us housing and sub-prime mortgage market.147 Two years of recovery followed, bringing the inward fdi flows up to 1,566,839 million in 2011, before a further decline by 3,5% in comparision with the previous year was recorded in 2012.148 This recession was, for the first time, contrary to the general economic development as evidenced by the fact that global gdp, trade, and employment increased in the same period.149 It may hence be traced back to other, more indirect factors specific to fdi, such as the uncertainties caused by restrictive adjustments of the investment laws and policies of a large number of States.150 Following further downward trends in 2013 and 2014, the global fdi inflows recorded in 2015 rose by about 28% up to 1,762,155 million in comparison with the previous year, i.e. to the highest amount since the global economic and financial crisis in 2008 and 2009.151 The outlook for 2016, however, is less favourable since it is expected that fdi inflows will decrease by 10–15% due to the fragile

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149 150 151

International Investment Law and Policy 2010–2011 4–13 (Karl Sauvant ed., 2012). us Financial Crisis Inquiry Commission, The Financial Crisis Inquiry Report – Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, 413–439 (2011). The resulting real estate crisis first led to a liquidity bottleneck in the us banking system and then culminated in stock market volatility and in a worldwide breakdown of major financial institutions, of which at least some of the systemically most important ones were rescued through bail-outs by their respective national governments. A massive contraction in the real economy, including a significant fdi recession across all economic groups and sectors, followed as an aftershock; see id. For further information and analysis of the financial and economic crisis 2007–2008, see Jacopo Carmassi et al., The Global Financial Crisis: Causes and Cures, 47 J. Common Mkt. Stud. 977, 977–996 (2009); Adrian Blundell-Wignall et al., The Current Financial Crisis: Causes and Policy Issues, oecd – Fin. Mkt. Trends 1, 1–21 (2008). usd at current prices and current exchange rates. See UNCTADStat, fdi flows, Annual, 1970– 2015 (2016), available at (last visited November 2016). See Annex to Ch. 1 (i) / Figure 3 for a diagram depicting the development of global annual inward fdi flows from 1970 to 2015. unctad, wir, xii (2013). Id. usd at current prices and current exchange rates. See unctad, wir, 2 and Annex 1, 196 (2016); UNCTADStat, fdi flows, Annual, 1970–2015 (2016), available at (last visited November 2016).

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condition of the global economy – aggravated by geopolitical uncertainties and tensions.152 ii Development of International Investment Arbitration The liberalisation of (inter-) national investment law and policy since the beginning of the 1980s and the accompanying growth of both the number of concluded iias and the flows of fdi have obviously contributed to an increasing rate of international investment arbitration cases. Notwithstanding the question of whether a concrete causal link between iias and fdi exists,153 it is evident that, first, a larger quantity of foreign investment projects bears a larger potential for conflict and that, second, the availability of arbitration in investment treaties leads to an enhanced use of this remedy for the settlement of any disputes that may arise.154 Regarding the latter aspect, the lack of adequate alternative modes of dispute resolution adds to the increasing recourse to investment arbitration.155 1 Rush for Investment Arbitration Investment arbitrations involve conflicts between foreign investors and States or State entities who consented – mostly in advance in their investment agreements – to have any conflicts between them settled before administered or ad hoc arbitral tribunals. Notwithstanding the private nature of this dispute resolution mechanism, the conflicts themselves are of hybrid, semi-private and semi-public nature. On the one hand, the private economic interests of foreign investors, consisting in an undisrupted and autonomous operation of profitable investments, are at stake. By submitting their claims to investment arbitration, they provide themselves with access to a depoliticised, flexible, and effective mode of dispute settlement, which promises to protect their interests and which allows them to circumvent diplomatic protection processes as well as any biased or lengthy litigation in domestic judicial institutions.156 152 See unctad, wir, 23 (2016). As regards the upcoming years, “fdi flows are projected to resume growth at 5–10 per cent in 2017 and surpass $1.8 trillion in 2018, reflecting the projected increase in global growth.”; see id. at 24. 153 See Ch. 1.B.I.3.b. (in particular fn. 82). 154 Jeswald W. Salacuse, Explanations for the Increased Recourse to Treaty-Based Investment Dispute Settlement: Resolving the Struggle of Life Against Form?, in Appeals Mechanism in International Investment Arbitration 111–112 (Karl P. Sauvant ed., 2008). 155 Id. at 114–121, discussing alternative remedies for investor-State dispute settlement. 156 Nicolas Hachez & Jan Wouters, International investment dispute settlement in the twentyfirst century: does the preservation of the public interest require an alternative to the arbitral

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On the other hand, the disputes frequently relate to important public interests of the State party, given that the disputed investments are often made in the energy, mining, or infrastructure sector and thus involve basic national resources. They concern, e.g., the exploration of raw materials such as oil, gas, and minerals, the construction and maintainance of transportation systems and public roadways, as well as water and energy supply.157 Investments in these sectors require public information, participation, and control – not least in view of the fact that the outcomes of investor-State disputes may entail State liabilities that place heavy burdens on national finances.158 The host States’ advantages of submitting investment disputes to private arbitral tribunals are less obvious, since, at first sight, this implies forfeiting important privileges, such as sovereign immunity from foreign legal proceedings, which put States into a superior position. Given the interest in attracting fdi, however, they are willing to create a “friendly investment climate” by consenting to iias which foresee the possibility of private dispute settlement that is entirely independent from its national judicial system.159 In addition, it is in the interest of host States that home States of private investors, by agreeing to investment arbitration, similarly forego any rights of diplomatic protection or any international claims in support of their own nationals.160 Due to these mutual benefits and the lack of adequate alternatives, investment arbitration has advanced to the most used mode of investor-State dispute settlement by far. Its success is reflected in the number of iias stipulating arbitration as a remedy and in the quantity of treaty-based investment arbitration cases filed. Although there has been some volatility in the number of known cases initiated per year, the general trend is towards an ever increasing use of this mechanism. While in 2000 the number of claims was not much higher than 10, it already amounted to 40 cases in 2005 and, by the end of 2015, it reached a new record level of 70 new disputes being submitted to investment

model?, in International Investment Law within International Law 418–419 (Freya Baetens ed., 2013). 157 Daniel Barstow Magraw & Niranjali Manel Amerasinghe, Transparency and Public Participation in Investor-State Arbitration, 15 ilsa J. Int’l & Comp. L. 337, 339 (2008–2009). 158 Id. 159 Hachez & Wouters, Preservation of the public interest 418–419. 160 Cf. icsid Convention Art. 27. See also W. Michael Reismann, International Arbitration and Sovereignty, 18 Arb. Int’l 231, 235 (2002); Julian D.M. Lew et al., Comparative International ­C ommercial Arbitration 24 (Kluwer Law International, The Hague, 2004).

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arbitration.161 As can be seen, the number of investment arbitrations initiated per annum almost doubled in the last decade. Logically, also the cumulative number of known treaty-based investor-State disputes has increased. It was still below 60 in 2000, rose to more than 215 in 2005, and culminated in almost 700 cases as of 1 January 2016.162 Given the fact that not all arbitration fora maintain a public registry of the cases filed with them, it is very likely that the total number of investment arbitrations is even higher.163 2 Backlash against Investment Arbitration? Notwithstanding this unabated growth of the annual and cumulative number of mainly treaty-based investor-State arbitrations, this mode of dispute settlement is not universally acclaimed. Rather, in parallel to the increasing counter-­ reactions to the liberalisation trend in (inter-) national investment law and policy, the investment arbitration regime came under increasing criticism within the international investment community. The critics point to serious systemic deficiencies, such as the lack of mechanisms to ensure impartiality, independence and professional qualifications of arbitrators, the insufficient degree of transparency and public participation in arbitral decision-making, the vast scope of discretion of arbitrators and the limited possibilities of review of their decisions, and, not least, the proliferation of inconsistency in arbitral investment jurisprudence. These points of criticism are often raised in the context of a more abstract and fundamental critique, which is said to have culminated in the so called “legitimacy crisis”164 or “public law challenge”165 of 161 See unctad, Investor-State Dispute Settlement: Review of Developments in 2015, iia Issues Note No. 2, 2 (2016), available at (last visited August 2016). See also unctad Investment Dispute Settlement Navigator, available at (last visited August 2016). See Annex to Ch. 1 (i) / Figure 4 for a diagram depicting the annual and cumulative numbers of treaty-based investor-State arbitrations from 1987 to 2015. 162 To be more precise, 696 treaty-based investor-State disputes were filed as of 31 January 2016. See id. 163 See id. 164 The notion “crisis of legitimacy” has first been used by Charles N. Brower, A Crisis of Legitimacy, Nat’l L. J., B9 (2002); see Stephan W. Schill, Conceptions of Legitimacy in International Arbitration, in Pracitising Virtue – Inside International Arbitration 107 (David D. Caron et al. eds., 2015). 165 The alternate term “public law challenge” has been shaped by Stephan W. Schill, The public law challenge: Killing or rethinking international investment law? (30 January 2012), Columbia fdi Perspectives No. 58 (2012); Stephan W. Schill, Enhancing International

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investor-State arbitration.166 Scholars sharing this position find fault with the fact that investment arbitration has its roots in traditional commercial dispute settlement. According to them, due to this anchoring in the private sphere, the “arbitral model”167 suffers serious deficits as regards democratic values and the rule of law and, as a result, is unfit for State-related disputes. More precisely, the fact that private, one-off appointed arbitrators, whose independence and impartiality is largely unsecured, rule on acts of sovereign States in an insufficiently transparent manner, with very limited possibilities of review and often conflicting outcomes is claimed to “be at odds with the public character of investor-State disputes.”168 In addition, it is alleged that the power imbalances reflected in many iias continue within the system of arbitral dispute settlement, since the latter would have evolved under the influence of capitalexporting States and would continue to subtly privilege private investors’

Investment Law’s Legitimacy: Conceptual and Methodological Foundations of a New Public Law Approach, 52 Va. J. Int’l L. 57, 67 (2011). 166 See e.g. Susan D. Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions, 73 Fordham L. Rev. 1521, 1­ 521–1625 (2005); Gus van Harten, Investment Treaty Arbitration and ­P ublic Law (Oxford University Press, Oxford, 2007); Olivia Chung, The Lopsided International Investment Law Regime and Its Effect on the Future of Investor-State Arbitration, 47 Va. J. Int’l L. 953, 953–976 (2007); David Schneiderman, Constitutionalizing Economic Globalization – Investment Rules and Democracy’s Promise (Cambridge University Press, Cambridge, 2008); Charles N. Brower & Stephan W. Schill, Is Arbitration a Threat or a Boon to the Legitimacy of International Investment Law?, 9 Chicago J. Int’l L. 57, 57–102 (2009); William Burke-White & Andreas Von Staden, Private Litigation in a Public Sphere: The Standard of Review in Investor-State Arbitrations, 35 Yale J. Int’l L. 283, 287–296 (2010); Hachez & Wouters, Preservation of the public interest 421–426; Charles N. Brower & Sadie Blanchard, What’s in a Meme? The Truth about Investor-State Arbitration: Why It Need Not, and Must Not, Be Repossessed by States, 52 Colum. J. Transnat’l Law 689, 689–777 (2014); Charles H. Brower & Sarah Melikian, “We Have Met The Enemy And He Is us!” Is the industrialized North “Going South” on investor-State arbitration?, 31 Arb. Int’l 19, 19–26 (2015); James H. Carter, The Culture of Arbitration and the Defense of Arbitral ­Legitimacy, in Practising Virtue – Inside International Arbitration (David D. Caron et al. eds., 2015); Burkhard Hess, Die Legitimationskrise der Investitionsschiedsgerichtsbarkeit, in Herausforderungen an Staat und Verfassung – ­Völkerrecht – ­E uroparecht – Menschenrechte (Liber Amicorum für Torsten Stein zum 70. Geburststag) 163–175 (Christian Callies ed., 2015); Rainer Hofmann et al., International investment law and development: Friends or foes?, in I­ nternational ­I nvestment Law and Development – Bridging the Gap 27–29 (Stephan W. Schill et al. eds., 2015), with a focus on development concerns. 167 Terminology according to Hachez & Wouters, Preservation of the public interest 417, 421. 168 Id. at 421–434, esp. 424 (quotation).

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interests.169 Due to these and further deficiencies of this private form of investor-­State dispute settlement, repeated criticism has been voiced and calls for change and reform have become louder.170 In particular the recent negotiations of international investment agreements by the eu such as ceta and ttip, based on its newly acquired competence in the field of fdi, generated a vibrant public discourse about the system of investment arbitration in Europe171 – a 169 Gus van Harten, Private authority and transnational governance: the contours of the international system of investor protection, 12 Rev. Int’l Pol. Econ. 600, 612–615 (2005); Saldarriaga & Magraw, unctad’s effort to foster the relationship between international investment law and sustainable development 136–137. 170 The concerns regarding the current state of investor-State dispute settlement have mainly resulted in discussions on institutional reforms, see e.g. unctad, Reform of InvestorState-Dispute-Settlement: In Search of a Roadmap, iia Issues Note No. 3 (2013), but also in discussions on addressing questions of substantive standards, see Stephan W. Schill, The Sixth Path: Reforming Investment Law from Within, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 621–652 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015). 171 See e.g. a German newspaper article in reaction to the arbitration claim raised in Vattenfall ab and others v. Federal Republic of Germany, icsid Case No. arb/12/12: Frankfurter Rundschau (Jakob Schlandt), 15 Juristen gegen die Demokratie (23 March 2013): “Die Pro­ zesse wirken oft wie eine Karikatur eines rechtsstaatlichen Verfahrens. Ein Gericht gibt es nicht, sondern lediglich Schiedssprecher. Die Kanzleien und auch die Juristen wechseln munter die Rollen. Mal verteidigen sie einen Staat gegen eine Klage, mal vertreten sie das Unternehmen, mal sind sie der neutrale Schiedsrichter.” (“The proceedings often seem like a caricature of due process of law. There is no court, but only arbitrators. Law firms and lawyers are changing roles cheerfully. At times they defend a State against a claim, at times they represent the corporation, at times they are the neutral arbitrator.” [own translation]), available at: (last visited August 2016). See also The Economist, Investor-State Dispute Settlement: The Arbitration Game (11 October 2014): “If you wanted to convince the public that international trade agreements are a way to let multinational companies get rich at the expense of ordinary people, this is what you would do: give foreign firms a special right to apply to a secretive tribunal of highly paid corporate lawyers for compensation whenever a government passes a law to, say, discourage smoking, protect the environment or prevent a nuclear catastrophe. Yet that is precisely what thousands of trade and investment treaties over the past half century have done, through a process known as ‘investor-state dispute settlement,’ or isds.”, available at (last visited August 2016). For further European press commentaries, see e.g. Zeit (Alexandra Endres und Lukas Koschnitzke), Freihandelsabkommen – Wie Konzerne Staaten vor sich hertreiben – Immer mehr Konzerne verklagen ganze Staaten vor geheimen Schiedsgerichten auf

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discourse that had already been initiated on the other side of the Atlantic more than a decade ago.172 In the course of these latest discussions, some scholars have gone as far as to demand the replacement of investment arbitration by public adjudication

Schadensersatz in Milliardenhöhe (27 March 2014), available at (last visited August 2016); Süddeutsche Zeitung (Heribert Prantl), Freihandelsabkommen – Das globale Grundrecht auf ungestörte Investition (28 April 2014), available at (last visited August 2016); Público (Alejandro Lopez de Miguel), El tratado con eeuu será un arma de las multinacionales contra los estados europeos (2 June 2014), available at (last visited August 2016); The Guardian (Claire Provost and Matt Kennard), The obscure legal system that lets corporations sue countries (10 June 2015), available at (last visited August 2016); Le Monde (Florian Grisel and Thomas Schultz), Arbitrage d’investissement: corriger les modalités de fonctionnement pour éviter les abus (21 July 2015), available at (last visited August 2016). For further elaborations on ceta, ttip, and other eu negotiated comprehensive ftas, see Ch. 1.B.I.4.a. 172 See e.g. the following newspaper articles reflecting voices from the non-academic public sphere: New York Times (Anthony DePalma), nafta’s Powerful Little Secret: Obscure Tribunals Settle Disputes, But Go Too Far, Critics Say (11 March 2001): “Their meetings are secret. Their members are generally unknown. The decisions they reach need not be fully disclosed. Yet, the way a small group of international tribunals handles disputes between investors and foreign governments has led to national laws being revoked, justice systems questioned and environmental regulations challenged. And it is all in the name of protecting the rights of foreign investors (…).,” referred to in Michael Waibel et al. (eds.), The Backlash against Investment Arbitration – Perceptions and Reality xxxix (Wolters Kluwer International, Alphen aan den Rijn, 2010). New York Times (Editorial), The Secret Trade Courts (27 September 2004): “(…) the arbitration process itself is often one-sided, favoring well-heeled corporations over poor countries, and must be made fairer than it is today. Unlike trials, arbitrations take place in secret. There is no room in the process to hear people who might be hurt (…). There is no appeal. And the rules of the game are such that when companies seek to recover damages, arbitration panels tend to focus narrowly on the issue of whether a company’s profits were affected by a government action. They need not consider whether the action or law in question was necessary to protect the environment or public health, or even to stop a corporation’s harmful behavior.,” referred to in Jarrod Wong & Jason Yackee, The 2006 Procedural and Transparency-Related Amendments to the icsid Arbitration Rules:

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following the model of public international courts173 and thus appear to have inspired the ceta negotiations in the course of which a so called Investment Court System has been set up.174 Some States, in their roles as participants to the system, have even gone even further and expressed their dissatisfaction with the system of international investment arbitration by generally refusing it as a method for settling investor-State disputes.175 Model Intentions, Moderate Proposals, and Modest Returns, in Yearbook on International Investment Law and Policy 2009–2010 250 (Karl P. Sauvant ed., 2010). 173 See e.g. “Public Statement on the International Investment Regime” (31 August 2010), available at (last visited September 2016); “Statement of Concern about Planned Provisions on Investment Protection and Investor-State Dispute Settlement (isds) in the Transatlantic Trade and Investment Partnership (ttip)” (July 2014), available at (last visited September 2016). The statements have been released by groups of international scholars around Prof. Gus van Harten and Prof. David Schneiderman. For a public counter-position of international scholars, see “An open letter about investor-state dispute settlement” (20 April 2015), available at (last visited September 2016). 174 See European Commission, Press Release “ceta: eu and Canada agree on new approach on investment in trade agreement” (29 February 2016), available at (last visited August 2016): “ceta establishes a permanent Tribunal of fifteen Members which will be competent to hear claims for violation of the investment protection standards established in the agreement. The Members of the Tribunal competent to hear investment disputes will be appointed by the eu and Canada and will be highly qualified and beyond reproach in terms of ethics. Divisions of the Tribunal consisting of three Members will hear each particular case. (…) [T]he updated ceta text establishes (…) an Appellate Tribunal. It also addresses the relationship between the decisions of the Appellate Tribunal and the Tribunal. (…) The eu and Canada both share the objective of establishing a permanent multilateral investment court. The text of ceta recognises that such a multilateral mechanism will come to replace the bilateral mechanism established in ceta.” 175 Australia, for example, announced the discontinuation of its previous practice to include investor-State arbitration on a default basis in all iias and ptias under the Gillard (Labor) government in 2011; see Trade Policy Statement, Trading Our Way to More Jobs and Prosperity (12 April 2011), excerpts and analysis, available at (last visited August 2016). This statement represented a reaction to the challenges of the Australian Tobacco Plain Packaging Act 2011 by foreign investors in the Australian tobacco industry, see Philip Morris Asia Ltd. v. Commonwealth of Australia, uncitral Arbitration (pca Case No. 2012–12) [hereinafter Philip Morris v. Australia]. Although there was a return to including investor-State arbitration on an individual basis when the Abbott (Liberal-National Coalition) government came into power in 2013, a lively public

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This atmosphere of criticism, scrutiny, and even rejection of the system has led to a so-called “backlash” against investor-State arbitration, which dominates the current discussions within the investment community.176 The

debate on the system of investor-State arbitration is still ongoing – in particular in view of ttp and ongoing fta negotiations. For an overview on the latest developments and trends in Australia’s iia negotiations, see Luke Nottage, Towards a European model for investor-state disputes? East Asia Forum (1 July 2016), available at (last visited September 2016). Moreover, out of dissatisfaction with the current system of investor-State arbitration, the Latin American countries Bolivia, Ecuador, and Venezuela withdrew from icsid as the leading forum for this method of dispute settlement in 2007, 2009, and 2012 respectively; see below Ch. 2.B.I.2. (fn. 524). In addition, the Alianza Bolivariana para los Pueblos de Nuestra América (Bolivarian Alliance for the Peoples of Our Americas [hereinafter alba]), which includes these three countries, decided in 2013 to support the establishment of a regional arbitration centre for the resolution of investor-State disputes under the auspices of the Unión de Naciones Suramericanas [hereinafter unasur] as an alternative to icsid arbitration; see Declaration of the 1st Ministerial Meeting of the Latin American States affected by Transnational Interests, Guayaquil/Ecuador (22 April 2013), available at (last visited September 2016); see also Dan Beeton, alba Members Take the Lead in Crafting Alternatives in Arbitrating Investor-State Disputes (3 May 2013), available at (last visited September 2016). A further project aims at establishing a collaborative defence mechanism against investment arbitration proceedings initiated by foreign investors against Latin American countries, see Anoosha Boralessa, Alba establishes mechanisms for legal defense against arbitral claims filed by transnationals (23 April 2013, translated in July 2015), available at (last visited September 2016). For further examples of States that adopted a hostile stance towards investment arbitration and the resulting arbitration awards, see Chung, Lopsided International Investment Law Regime 953, 969. For an article which suggests that countries willing to exit the system of investment arbitration should renegotiate their bits instead of denouncing them or the icsid Convention itself, see Federico M. Lavopa et al., How to Kill a bit and Not Die Trying: Legal and Political Challenges of Denouncing or Renegotiating Bilateral Investment Treaties, 16 J. Int’l Econ. L. 869, 869–891 (2013). 176 See, instead of many, Waibel et al. (eds.), The Backlash against Investment ­A rbitration – Perceptions and Reality. For an overview of scientific contributions to the legitimacy debate, see fn. 166. See also the vivid discussions in online fora, e.g. Klaus Peter Berger and J. Ole Jensen, It Takes Pressure to Form Diamonds: The Changing Landscape of Dispute Resolution and its Implications for International Arbitration (23 May 2016), available at

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arguments brought forward by scholars in support of this “public law challenge” of investor-State arbitration have considerable merit. They highlight important aspects in view of the semi-public character of investor-State dispute settlement, which so far has not received sufficient respect and attention. Nevertheless, in view of the lack of adequate alternatives,177 it would be wrong to condemn this method of dispute resolution as a whole. Rather, these concerns should be taken as an inspiration for future reforms of investment arbitration, which should “enculturat[e] public law thinking.”178 One important starting point of such a reform initiative is the problem of inconsistent arbitral jurisprudence, which is a central concern of the current criticism and which affects both the public and even the private interests involved in investment arbitration processes.

; John Doe [pen name], Investor-state arbitration: rationale and legitimacy, VölkerRBlog (6 July 2016), available at , in reply to Christian Tietje, Investor-State Arbitration as Part of the International Rule of Law, VölkerRBlog (4 July 2016), available at ; Jochen von Bernstorff, Streitig­ keiten über gemeinwohlorientierte Regulierung von Investoren gehören im demokratischen Rechtsstaat vor die nationalen Gerichte, VerfBlog (15 May 2014), available at , in reply to Stephan W. Schill, Internationaler Investitionsschutz und Verfassungsrecht, VerfBlog (14 May 2014), available at , (all internet links: last visited August 2016). 177 See e.g. Christoph Schreuer, Do We Need Investment Arbitration?, in Reshaping the ­I nvestor-State Dispute Settlement System – Journeys for the 21st Century (Jean E. Kalicki & Anna Joubin-Bret eds., 2015), who notes that “at present, there is no substitute for investment arbitration. Despite its undeniable weaknesses, it is currently the only functioning system for the orderly settlement of the numerous disputes arising from foreign investments.”; Stephan W. Schill, Private Enforcement of International Investment Law: Why We Need Investor Standing in bit Dispute Settlement, in The Backlash Against Investment Arbitration – Perceptions and Reality 33–48 (Michael Waibel et al. eds., 2010), who outlines the insufficiencies of the available dispute settlement mechanisms in domestic law, in international customary law, and at the individual contractual level. 178 Schill, The public law challenge: Killing or rethinking international investment law? (30 January 2012). See also Schill, Enhancing International Investment Law’s Legitimacy 57, 57–102, who suggests the method of “comparative public law” to enhance the public dimension of international investment law and arbitration.

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Object of Study: icsid Arbitration

Having traced the historic and current development of (inter-) national investment law and policy, the accompanying development of iias and fdi, and, finally, the emergence and current state of international investment arbitration as the most popular method for the resolution of investor-State disputes, attention will now be directed to the icsid regime as the central object of investigation of this study. In a first step, basic information on its history, its general features and goals, as well as its caseload will be provided (I.). In a second step, keeping the question of the icsid’s suitability as the model system for this study in mind, the focus will be placed on a comparative law analysis, which measures the relative strengths and weaknesses of this arbitral regime against those of alternative forms of arbitration such as uncitral arbitration, icc arbitration, and scc arbitration (II.). i Basic Information Some elementary information on the past and present of icsid as an arbitral institution is helpful to fully comprehend its fundamental alignment, its general functioning, and the goals it pursues. Such basic understanding is, not least, an essential prerequisite for being able to recognise advantageous and disadvantageous developments of its arbitration regime, which, in turn, is of central importance to international investment jurisprudence and its general quality. 1 History Notwithstanding the still reluctant and divided political attitude towards fdi which prevailed amongst the un member States in the early 1960s,179 in 1961 the International Bank for Reconstruction and Development180 began to draw up what has later become the icsid.181 This initiative was primarily motivated by the need of developing countries for capital and knowledge transfer from developed countries, which, in turn, called for safeguards for international

179 See Ch. 1.B.I.2. 180 The International Bank of Reconstruction and Development [hereinafter ibrd] and the International Development Association [hereinafter ida] form the institution of the World Bank in its narrower sense. 181 The drafting history is fully documented in a four-volume collection, reprinted in 2001. Vol. 1: Analysis of Documents Concerning the Origin and the Formulation of the Convention; Vol. 2: Documents Concerning the Origin and the Formulation of the Convention; Vol. 3: French Version; Vol. 4: Spanish Version.

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investments, inter alia in the form of a dispute settlement mechanism located in a stable, neutral, and generally accepted facility.182 Based on a Working Paper presented by Aron Broches, the Preliminary Draft of the icsid Convention, which had been prepared by the World Bank’s Executive Directors,183 was discussed at four regional consultative meetings between 1963 and 1964, bringing together legal experts from 86 World Bank member countries.184 This cooperative process of forming and shaping the Convention allowed the interests and needs of its future member States to be taken into account and integrated.185 A report of the meetings’ deliberations, concluding that a convention on the settlement of investment disputes would be desirable, was then submitted to the Board of Governors of the World Bank, which, despite 21 counter-votes from Latin American countries, approved the drafting of such a convention by adopting a resolution in September 1964.186 In parallel, taking the regional conferences’ conclusions as a point of departure, the World Bank staff had worked out the official First Draft, which was submitted for review by a specialised Legal Committee of the Executive Directors and which, in its amended version, became the Revised First Draft.187 In March 1965, 182 Andreas F. Lowenfeld, The icsid Convention: Origins and Transformation, Ga. J. Int’l & Comp. L. 47, 49–50 (2009). 183 Preliminary Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of Other States (15 October 1963); see icsid, History of the icsid Convention, Vol ii: Documents Concerning the Origin and Formulation of the Convention, 184 (1968), referred to in Christoph Schreuer et al., The icsid Convention: A Commentary on the Convention on the Settlement of Investment Disputes between States and Nationals of other States 2 (Preamble, para. 3) (Cambridge University Press, Cambridge, 2nd ed., 2010 (2014 6th printing)). Aron Broches, former General Counsel of the World Bank, was the primary initiator of the icsid Convention and later became its “principal architect”; see id. at 2 (Preamble, para. 2). 184 These meetings took place in Addis Ababa, Santiago de Chile, Geneva, and Bangkok ­between December 1963 and May 1964; see Schreuer et al., icsid Commentary 2 (Preamble, para. 4). 185 Burkhard Schöbener & Lars Markert, Das International Centre for Settlement of Investment Disputes, 105 ZVglRWiss (J. Comp. L. Stud.) 65, 65, 68 (2006). It is not least due to this broad participation of future member States that the icsid advanced to an internationally accepted forum of investment arbitration. 186 Schreuer et al., icsid Commentary 2–3 (Preamble, para. 5); Lowenfeld, icsid Convention 47, 54–55. 187 Draft Convention on the Settlement of Investment Disputes between States and Nationals of other States (11 September 1964); see icsid, History, Vol. ii, 610 (1968), referred to in Schreuer et al., icsid Commentary 3 (Preamble, para. 6).

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following further deliberations and changes by the Executive Directors, they eventually completed the work with the formulation of a final text, which was approved by resolution.188 After ratification by the obligatory minimum of 20 member countries,189 the icsid Convention entered into force on 14 October 1966. At the end of 2016, 161 States have signed the icsid Convention. Among them, 153 have become contracting States by depositing their instruments of ratification, acceptance, or approval of this multilateral treaty.190 2 Structures, Characteristics, and Goals a Organisational Structures As one of the five international organisations belonging to the World Bank Group,191 icsid has its seat in Washington, dc at the World Bank headquarters. It consists of only two organs, the Administrative Council and the Secretariat, and maintains Panels of Conciliators and of Arbitrators. The Administrative Council, as the governing body, is “composed of one representative of each Contracting State,”192 each of whom has one vote with equal weight,193 and is ex officio chaired by the president of the World Bank,

188 189 190

191

192

193

Besides providing advice to the Executive Directors, the function of the Legal Committee on Settlement of Investment Disputes was to avoid an ideological confrontation or even a hardening of positions between capital-importing and capital-exporting countries; see Heleni Theodorou, Investitionsschutzverträge vor Schiedsgerichten 69 (Duncker und Humblot, Berlin, 2001). In addition, an important accompanying document, the Report of the Executive Directors, was adopted; see Schreuer et al., icsid Commentary 3 (Preamble, para. 9). See icsid Convention Art. 68 (2): “This Convention shall enter into force 30 days after the date of deposit of the twentieth instrument of ratification, acceptance or approval. (…).” See the information on the icsid website, available at (last visited November 2016). Canada became one of the latest members to the icsid Convention by depositing its instrument of ratification with the World Bank on 1 November 2013. In addition to the ibrd and ida, the World Bank Group comprises the icsid, the International Finance Corporation (ifc), and the Multilateral Investment Guarantee Agency (miga). See icsid Convention Art. 4 (1): “The Administrative Council shall be composed of one representative of each Contracting State. An alternate may act as representative in case of his principal’s absence from a meeting or inability to act.” See icsid Convention Art. 7: “(1) The Administrative Council shall hold an annual meeting and such other meetings as may be determined by the Council, or convened by the Chairman, or convened by the Secretary-General at the request of not less than five members of the Council. (2) Each member of the Administrative Council shall have one vote and, except as otherwise herein provided, all matters before the Council shall be decided

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who has no vote.194 The Council holds annual meetings and accomplishes functions such as the adoption of procedural regulations and rules and the annual budget and report of the Centre,195 as well as the election of the Secretary-­General and the Deputy Secretary-General.196 The responsibilities of the Chairman include default appointments of conciliators and arbitrators and appointments of ad hoc committee members.197 The Secretariat consists of legal and paralegal professionals as well as of support staff.198 It is headed by the Secretary-General as the legal representative and principal officer of icsid199 and the Deputy Secretary-General. The Secretary-General registers proceedings, authenticates arbitral awards,200 and maintains lists of the persons designated to a Panel.201 The general task of the Secretariat and its staff is to render administrative and organisational support for proceedings, e.g. by assisting in the constitution of arbitral tribunals and at hearings, by administrating the finances of cases, or by publishing case-related information.202 The Panels of Arbitrators and Conciliators are composed of persons “of high moral character and recognised competence in the field of law, industry or finance, who may be relied upon to exercise independent judgment”203 and who represent “the principal legal systems of the world and (…) the main forms of economic activity.”204 Each contracting State is allowed to designate four persons per panel and the Chairman of the Administrative Council may,

194 195 196 197 198 199 200 201 202

203 204

by a majority of the votes cast. (3) A quorum for any meeting of the Administrative Council shall be a majority of its members. (…).” This fair distribution of voting powers ensures the balancing of interests between capital-importing and capital-exporting countries; see k.v.s.k. Nathan, icsid Convention, The law of the International Centre for Settlement of Investment Disputes 53 (Juris Publishing, Yonkers (ny), 2000). See icsid Convention Art. 5. See icsid Convention Art. 6. See icsid Convention Art. 10 (1). See icsid Convention Arts. 30, 38 (1), 52 (3). See icsid Convention Art. 9. See icsid Convention Art. 11. See id. See icsid Convention Art. 16 (3). See the information on the organisational structure of icsid provided on the icsid Website, available at (last visited August 2016). See icsid Convention Art. 14 (1). See icsid Convention Art. 14 (2).

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in addition, designate ten persons to each panel.205 As regards the constitution of conciliation commissions and arbitral tribunals, the parties’ choice is not restricted to persons on these lists; the Chairman, by contrast, when appointing conciliators, arbitrators, or ad hoc committee members, may only chose among persons on the panel.206 The icsid dispute settlement procedures are exclusively reserved to investment disputes and they comprise conciliation and arbitration proceedings as well as proceedings under the icsid Additional Facility Rules. Conciliation proceedings, which are regulated in icsid Convention Chapter iii and in the icsid Conciliation Rules,207 are a rather rare phenomenon.208 Arbitration proceedings, by contrast, are much more frequent and thus the icsid’s main field of activity.209 icsid Convention Chapter iv and the icsid Arbitration Rules210 contain the relevant provisions. Proceedings under the Additional Facility Rules,211 which were first adopted in 1978, authorise the Centre to administer conciliation or arbitration proceedings between foreign investors and States that are not covered by the scope of the icsid Convention. These include legal disputes where “either the State party to the dispute or the State whose national is a party to the dispute is not a Contracting State” or which “do not arise 205 See icsid Convention Art. 13. These appointment provisions are intended to ensure a balanced composition of the panels – not least as regards their origin from capital-importing and capital-exporting countries; see icsid, History, Vol. ii, 382 (1968), referred to in Schreuer et al., icsid Commentary 50 (Art. 14, para. 11). Yet, in practice, a number of member States did not make use of their right; see Ibrahim F.I. Shihata & Antonio R. Parra, The Experience of the International Centre for Settlement of Investment Disputes, 14 icsid Rev. – filj 299, 310 (1999). A list of the contracting States which have designated panel members can be found on the icsid Website, available at (last visited November 2016). 206 See icsid Convention Arts. 31 (1), 40 (1), 52 (3). 207 icsid Rules of Procedure for Conciliation Proceedings, Doc. icsid/15 (January 1985), as amended and effective 10 April 2006 [hereinafter icsid Conciliation Rules]. 208 By 30 June 2016, only 1.4% of the cases registered were proceeded as icsid Convention conciliation cases; see icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2), 8 (2016). 209 By 30 June 2016, 89.5% of the cases registered were proceeded as icsid Convention arbitration cases; see id. See also below, Ch. 1.C.I.3. 210 icsid Rules of Procedure for Arbitration Proceedings, Doc. icsid/15 (January 1985), as amended and effective 10 April 2006 [hereinafter icsid Arbitration Rules]. 211 icsid Additional Facility Rules, Doc. icsid/11 (June 1979), as amended and effective 10 April 2006 [hereinafter icsid afr].

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directly out of an investment,” as well as “fact-finding proceedings.”212 Access to Additional Facility proceedings is subject to approval of the Secretary-­ General.213 Since the icsid Convention does not apply to proceedings conducted under the Additional Facility,214 the awards rendered are subject to domestic judicial review and enforceable under the 1958 un New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.215 Overall, the use of the icsid afr is still relatively low, yet with an upward trend.216 Beyond these different types of proceedings, the icsid is also involved in other activities in the field of investor-State dispute settlement. The Centre provides administrative services in ad hoc arbitrations under different, noninstitutional arbitration regimes, for instance, by acting as an appointing authority or by assisting in the convening of hearings.217 b

aa

Unique Characteristics Tailor-made System

A unique feature of icsid arbitration is that the regime has been specifically created for the purpose of adjudicating investment disputes. Being tailor-made, its fundamental structural and regulatory conception has been exclusively designed for the specific characteristics and requirements of arbitrations

212 See afr Art. 2. 213 See afr Art. 4. This approval requirement is meant to ensure, inter alia, that “the underlying transaction has features which distinguish it from an ordinary commercial transaction”; see afr Art. 4 (3). 214 See afr Art. 3. 215 un Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, 10 June 1958, 330 unts 38 (1959) [hereinafter New York Convention]. See Art. 19 of the icsid Arbitration (Additional Facility) Rules, Schedule C. See also Lucy Reed et al., Guide to icsid Arbitration 18–19 (Kluwer Law International, Alphen aan den Rijn, 2nd ed., 2011). 216 By 30 June 2016, 9.1% of the cases registered at the icsid were adjudicated as icsid Additional Facility conciliation (0.3%) and arbitration (8.8%) cases; see icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2) (2016). Proceedings under the afr are particularly interesting to States that are parties of the nafta or of the ect, but are not simultaneously contracting States of the icsid, since the former two mutilateral treaties provide for the option of icsid Additional Facility proceedings as dispute resolution method; see Reed et al., Guide to icsid Arbitration 17–19. 217 See the information on the organisational structure of icsid provided on the icsid Website, available at (last visited August 2016).

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involving private investors and States as parties. To that effect, the icsid Convention became the first, and thus groundbreaking multilateral treaty under which natural and legal persons received the right, in their capacity as investors in a foreign State, to bring “the equivalent of an action” against that State before an international arbitral tribunal.218 It thereby filled the competency gap in the structures of international investment law and dispute settlement, which had existed to that point.219 As a consequence, private investors no longer depended on their own States’ willingness to handle their dispute on the inter-State level pursuant to their rights of diplomatic protection;220 nor did they have to rely on any biased or insufficiently specialised domestic courts of the host State or even of a third country, whose decisions usually entailed immunity conflicts.221 The attribution of legal standing to aggrieved private investors removed them from the political and judicial influence of host States and led to a denationalisation and depolitisation of investment disputes.222 This being said, such depolitisation should not entirely ignore political considerations from the equation, given that investor-State disputes settled under the icsid regime inherently involve issues of public nature: investment tribunals review governmental action and their decisions and hence have extensive implications for the common good.223 icsid arbitral decision-making hence reaches beyond the level of the individual dispute and, much further, into spheres of global governance.224

218 Nigel Blackaby & Constantine Partasides, Redfern and Hunter on International Arbitration 54 (para. 1.186) (Oxford University Press, Oxford, 6th ed., 2015); Nathan, icsid Convention 51–52, esp. 52 (quotation). 219 Thomas Arnoldt, Praxis des Weltbankübereinkommens (icsid), Anwendbares Recht und Kontrollverfahren beim Internationalen Zentrum zur Beilegung von Investitionsstreitigkeiten 24 (Nomos, Baden-Baden, 1997). 220 Blackaby & Partasides, Redfern and Hunter on International Arbitration 54 (para. 1.186). 221 Arnoldt, Praxis des wbü (icsid) 24; Aron Broches, The Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 136 RdC 337, 349–350 (1972-II). 222 Nathan, icsid Convention 51; Shihata & Parra, Experience of the icsid 299, 356. 223 See e.g. Benedict Kingsbury & Stephan W. Schill, Investor-State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law, in Fifty Years of the New York Convention (icca Congress Series 14) 5–6 (Albert Jan van den Berg ed., 2009). See also Ch. 1.B.II.1. 224 Id.

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chapter 1 Delocalised, Self-contained System

Furthermore, icsid arbitration distinguishes itself from all other arbitral regimes by its delocalised, self-contained nature. In that sense, the proceedings administered by the Washington Centre are exclusively governed by the icsid Convention, its corresponding rules and regulations, and the procedural and substantive law chosen by the disputing parties. In procedural terms, this implies that icsid arbitration proceedings take place “in a context of truly international norms”225 and are “a-national”226 in that they are formally insulated from the situs and its lex arbitri.227 Therefore, in contrast to arbitrations under commercial arbitration regimes, where the law of the place of the arbitration generally governs – in conjunction with the respective set of arbitration rules – the arbitral procedure,228 icsid arbitrations are largely location-independent.229 Instead, according to icsid Convention Art. 44, the proceedings are conducted pursuant to the rules stipulated in the icsid Convention and “except as the parties otherwise agree, in accordance with the Arbitration Rules in effect on the date on which the parties

225 Georges R. Delaume, icsid Arbitration, in Contemporary Problems in International Arbitration 23 (Julian D.M. Lew ed., 1987). 226 Terminology according to William W. Park, National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration, 63 Tul. L. Rev. 647, 665 (1988–1989), who uses this term to characterise the legal nature of icsid arbitral awards. 227 See also Andrea K. Bjorklund, Mandatory Rules of Law and Investment Arbitration, 18 Am. Rev. Int’l Arb. 175, 185, 193 (2008). 228 For an overview of the role of lex arbitri in international commercial arbitration, see e.g. Blackaby & Partasides, Redfern and Hunter on International Arbitration 166–185 (paras. 3.37–3.90). For a comprehensive and critical review of the “delocalisation” debate in international commercial arbitration with case law and literature references, see Roy Goode et al., Transnational Commercial Law – Text, Cases, and Materials 579–590 (paras. 19.78–19.108) (Oxford University Press, Oxford, 2nd ed., 2015). 229 The procedural isolation from the forum State finds its limits in deviating party agreements that allow for recourse to domestic courts, e.g. to receive orders of provisional measures (see below Ch. 1.C.II.3.), and also at the stage of enforcement of an icsid award, which requires the involvement of domestic courts or comparable authorities according to icsid Convention Art. 54 (see below Ch. 1.C.II.6.). See also Schreuer et al., icsid Commentary 1120 (Art. 54, para. 10); Aron Broches, Awards Rendered Pursuant to the icsid Convention – Binding Force, Finality, Recognition, Enforcement, Execution, 2 icsid Rev. – filj 287–334, 288 (1987).

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consented to arbitration.”230 Given the parties’ right to shape their rules of procedure within the bounds of the icsid Convention and generally recognised procedural principles,231 the self-contained nature of the icsid regime does not exclude them from recourse to national law or to national courts, if they so agree.232 The procedural uncoupling of investment arbitration from the lex arbitri233 entails various benefits. Besides enhancing party autonomy,234 it leads to increased procedural efficiency, since most procedural acts and decisions are taken directly by the arbitral tribunal and no time-consuming request to or scrutiny by a national court is needed.235 Moreover, a “universal lex arbitri” protects against unexpected procedural interferences and contributes to legal

230 icsid Convention Art. 44: “Any arbitration proceeding shall be conducted in accor­ dance  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. If 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 the question.” 231 The parties’ right to establish their individual procedural rules within the bounds of the icsid Convention, as an expression of the principle of party autonomy, of course finds its limits in the “procedural magna carta of arbitration,” which encompasses the principle of procedural due process (i.e. the right to a proper notice of arbitration and to an adequate opportunity to present one’s case, see icsid Convention Art. 45 (1)), the right to a fair hearing, as well as the right to an independent and neutral decision maker; see Gautami S. Tondapu, International Institutions and Dispute Settlement: The Case of icsid, 22 Bond L.R. 81, 92 (2010). 232 Cf. e.g. concerning provisional measures, icsid Arbitration Rule 39 (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.” See Schreuer et al., icsid Commentary 675 (Art. 44, para. 3). 233 Blackaby & Partasides, Redfern and Hunter on International Arbitration 180 (para. 3.76), referring to Phillippe Fouchard, L’Arbitrage Commercial International 22–27 (Dalloz, Paris, 1965), who presents the concept of “un arbitrage international détaché de tous les cadres étatiques.” 234 Bjorklund, Mandatory Rules of Law and Investment Arbitration 175, 179, stating that “mandatory rules of law thwart party autonomy.” 235 See icsid Convention Art. 44 (2) in connection with icsid Arbitration Rule 19: “The Tribunal shall make the orders required for the conduct of the proceeding.”

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uniformity, neutrality, and reliability of the arbitral process.236 In that manner, the practice of arbitral “forum shopping”237 is avoided.238 cc

“World Bank Factor”

Finally, the “World Bank factor,”239 which alludes to the icsid’s institutional attachment to the World Bank Group, is a typical feature of icsid arbitration. It is generally assumed that this affiliation strongly supports the status and authority of icsid and the awards rendered by the arbitral tribunals under its aegis. In particular, capital-importing States, which often depend on the World Bank’s financial support, seem to fear that failure to respect an icsid award could have politico-economic implications on their creditworthiness and financial standing.240 They might hence be deterred from opposing decisions made to their disadvantage.241 The relatively high rate of compliance with icsid awards242 and the wide international acceptance of icsid as a forum for 236 Blackaby & Partasides, Redfern and Hunter on International Arbitration 179 (para. 3.73). 237 For an overview of this topic, see Richard H. Kreindler, “Arbitral Forum Shopping”: Observations on Recent Developments in International Commercial and Investment Arbitration, 16 Am. Rev. Int’l Arb. 157, 157–175 (2005). 238 A further facet of the self-contained nature of the icsid regime, which concerns the investment law applicable on the merits, is the concurrent integration of both national and international substantive law according to icsid Convention Art. 42 (1), 2nd sentence, unless the parties agreed otherwise. Although the determination of the relationship between these two legal bodies has led to controversies (see below Ch. 2.E.III.1.b.), the expressis verbis mention of international law facilitates its application, e.g. in a corrective function in case of subsequent abusive amendments to the host State’s legislation. This is in particular of importance in contract-based arbitrations, to which international law does not apply by virtue of customary international treaty law. Other arbitration regimes, by contrast, do not explicitly designate international law as applicable substantive law. For instance, the default rule in uncitral Arbitration Rules (2010) Art. 35 (1), 2nd sentence, merely foresees that “[f]ailing such designation by the parties, the arbitral tribunal shall apply the law which it considers applicable.” Also uncitral Arbitration Rules (1976) Art. 33, 2nd sentence, only stipulates that “[f]ailing such designation by the parties, the arbitral tribunal shall apply the law determined by the conflict of law rules which is considers applicable.” 239 See e.g. Reed et al., Guide to icsid Arbitration 9. 240 Id. at 9. 241 Nathan, icsid Convention 60. 242 See Constantine Partasides, who presents statistics according to which “more than 80 percent of icsid awards are enforced voluntarily.” in: Alison Ross, nicosia: Invest­ ment arbitration – a view from Cyprus, 6 gar (31 March 2011), referred to and quoted in

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investment arbitration hence appear to be attributable, at least in part, to the formal and political organisational links with the World Bank. c Overarching Goals As evinced by the Report of the Executive Directors, the primary purpose behind the creation of the icsid Convention consisted in the promotion of global economic development: therein, the establishment of an institutionalised forum specialised in the settlement of disputes between private investors and States was praised as “a major step toward promoting an atmosphere of mutual confidence and thus stimulating a larger flow of private international capital into those countries which wish to attract it.”243 This implies the assumption of a link between the commitment of capital-importing and capital-exporting countries to the icsid Convention and its mechanism of independent and impartial dispute settlement, on the one hand, and the stimulation of larger flows of fdi, on the other hand.244 Reliable dispute resolution devices were obviously considered as an elementary prerequisite of a favourable investment climate.245 This basic premise and the overarching goal of the icsid Convention is also reflected in its Preamble, wherein the contracting States gave the following motivations for their agreement to this multilateral treaty: Considering the need for international cooperation for economic development, and the role of private international investment therein; Bearing in mind the possibility that from time to time disputes may arise in connection with such investment between Contracting States and nationals of other Contracting States; Recognizing that while such disputes would usually be subject to national legal processes, international methods of settlement may be appropriate in certain cases; Attaching particular importance to the availability of facilities for international conciliation or arbitration to which Contracting States and

Antonio R. Parra, The History of icsid 314 (fn. 341) (Oxford University Press, ­Oxford, 2012). 243 World Bank, Report of the Executive Directors to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, icsid Rep., Vol. 1, para. 9 (1965). 244 Schreuer et al., icsid Commentary 4 (Preamble, para. 12). 245 Broches, The Convention on the Settlement of Investment Disputes 337, 343; Shihata, ­Promotion of Foreign Direct Investment 484, 505–507.

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nationals of other Contracting States may submit such disputes if they so desire; Desiring to establish such facilities under the auspices of the International Bank for Reconstruction and Development; (…).246 Accordingly, the icsid Convention and its arbitration regime are situated at an important crossover point in the complex interplay between international economic relations and cooperation, international capital flows, and global economic development. 3 Caseload Statistics Throughout its first three decades, from 1965 to 1995, a total of only 35 cases were adjudicated under the icsid Convention.247 In view of this hesitant initial use, which did not exceed one to two cases being registered per year, the icsid’s existence during that phase has been figuratively described as one of a “Sleeping Beauty.”248 In the late 1990s, the number of cases filed with the icsid began to rise slightly. From 1997 to 2002, the Centre already registered cases at an average rate of about one case per month; from 2003 to 2010, this rate went up to approximately two cases per month – with peaks of an average of more than 2.5 cases being registered per month in 2003 and 2007.249 From then on, the rate grew up to an average of more than three cases per month until, in 2015, a hitherto unparalleled number of 4.3 cases per month were registered, indicating a continuing growth trend.250 In absolute numbers, icsid had registered a total of 492 Convention Arbitration Cases as of 31 December 2015; added to this, seven cases had been registered as Convention Conciliation Cases and 50 as Additional Facility Cases, amounting to a total of 549 cases registered under the icsid regime,251 of which treaty-based investor-State dispute cases

246 icsid Convention, Preamble (emphasis as in the original). 247 icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2), 7 (2016). 248 Eloïse Obadia, icsid, Investment Treaties and Arbitration: Current and Emerging Issues, in Investment Treaties and Arbitration (asa Special Series No. 19) 67 (Gabrielle Kaufmann-Kohler & Blaise Stucki eds., 2002). 249 icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2), 7 (2016). 250 Id. See Annex to Ch. 1 (ii) / Figure 5 for a diagram depicting the development of icsid Convention arbitration cases per year from 1972 to 2015. 251 icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–1), 7–8 (2016). See Annex to Ch. 1 (ii) / Figure 6 for a diagram depicting the distribution of cases within the icsid Regime in absolute and also relative numbers by the end of 2015.

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comprised 432.252 Accordingly, in relation to the number of known treatybased investor-State dispute cases, totalling 696 by the end of 2015, icsid arbitration had a share of 62%.253 Alternative fora for investment arbitration were comparatively less in demand. Ad hoc investment arbitration cases under the uncitral Arbitration Rules254 amounted to 30.5% (212 cases), the share of institutional arbitrations under the scc Arbitration Rules255 made up 4.9% (34 cases), and the share of cases under the icc Rules of Arbitration256 was only 0.6% (4 cases).257 In view of the fact that more than half of the overall number of treaty-based investor-State dispute cases were settled under the icsid regime and that alternative forms of investment arbitration do not match this extremely high demand, it can – from a quantitative perspective – legitimately be designated as the leading forum for investor-State arbitration. The change of the global

252 Investment Dispute Settlement Navigator, available at (last visited August 2016). 253 unctad, Review of Developments in 2015, iia Issues Note No. 2, 1–2 (2016). See also unctad, wir, 104 (2016). 254 un Commission on International Trade Law [hereinafter uncitral]. See uncitral Arbitration Rules, ga Res. 31/98, un gaor, 31st Sess., Supp. No. 17, un Doc. A/31/17 (1976), 28 April 1976 (entry into force 15 December 1976) [hereinafter uncitral Arbitration Rules (1976)]; see also uncitral Arbitration Rules, ga Res. 65/22, un Doc. A/65/465, 6 December 2010 (entry into force 15 August 2010) [hereinafter uncitral Arbitration Rules (2010)]; both available at (last visited August 2016). 255 Stockholm Chamber of Commerce [hereinafter scc]. See scc Arbitration Rules, effective as of 1 January 2010 [hereinafter scc Arbitration Rules (2010)], available at (last visited August 2016). 256 International Chamber of Commerce (Paris) [hereinafter icc]. See icc Rules of Arbitration, effective as of 1 January 2012 [hereinafter icc Arbitration Rules], available at (last visited August 2016). 257 Investment Dispute Settlement Navigator, available at (last visited August 2016). The remaining 2% of the total number of known investor-State dispute cases (14 cases) were brought before other arbitral fora, notably the London Court of International Arbitration [hereinafter lcia], the Moscow Chamber of Commerce and Industry [hereinafter mcci], and the Cairo Regional Centre for International Commercial Arbitration [hereinafter crcica].

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investment climate, the proliferation of fdi and iias,258 and, not least, major financial and economic crises – like those of Mexico, East and Southeast Asia, Russia, Brazil, and Argentina,259 have considerably contributed to this respectable success story, which is so far unique in the landscape of investment arbitration. Metaphorically speaking, they were to icsid “what Prince Charming was to the Sleeping Beauty.”260 Overall, for the above reasons, the icsid regime and in particular the arbitral case law it produces merit specific attention when examining the problem of inconsistency in international investment jurisprudence. Relative Strengths and Weaknesses: Comparative Law Analysis of icsid and uncitral Arbitration Identifying the strengths and weaknesses of the legal conception of arbitral proceedings conducted under the icsid Convention and Arbitration Rules will permit a qualitative assessment of this dispute settlement mechanism. In that regard, it is important to consider that both the private and the public perspective are critical for the system’s success. On the one hand, the private investors’ perception of an arbitration regime plays an important role given the fact that, depending on the form of consent to arbitration, they have a say – and in many cases even the final say – in the choice between icsid and alternative fora for investor-State dispute settlement.261 Accordingly, it is vital ii

258 See Ch. 1.B. 259 The six major economic crises during the 1990s took place in Mexico in 1995, Thailand, Indonesia, and South Korea in 1997–1998, Russia in 1998, and Brazil in 1998–1999. For further details, see Lawrence H. Summers, International Financial Crises: Causes, Prevention, and Cures, 90 Am. Econ. Rev. 1, 3–7 (2000). A major economic crisis in the early 2000s occurred in Argentina in 2001–2002. For further details, see Hector E. Schamis, Argentina: Crisis and Democratic Consolidation, 13 J. Dem. 81, 81–94 (2002). See also Salacuse, International Investment Law 122. 260 Obadia, icsid, Investment Treaties and Arbitration 75. 261 At present, consent to investor-State dispute settlement is most frequently provided through arbitration clauses of iias. Therein, contracting States offer consent to arbitration under regimes of their choice, which needs to be perfected by the acceptance of the private investor. This is mostly done implicitly by initiating an arbitral proceeding under one of the available regimes. Consent to investor-State dispute settlement on the basis of domestic investment legislation, e.g. a national investment code, functions in a similar time-delayed manner, since the standing offer of consent expressed by the host State in its legislation still needs to be accepted on the part of the investor. Furthermore, but less frequently, consent may be provided directly in a contract between the private investor and the host State. See Christoph Schreuer, Consent to Arbitration, 2 tdm 1, 1–41 (2005 (updated 2007)).

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that the design of arbitration proceedings is satisfactory to their interests. On the other hand, the attitude of States towards an arbitration regime is essential for its success, since States decide on both their (continued) membership in the icsid Convention and the arbitral fora available in their instruments of consent.262 As a consequence, the public interests of States and their people also need to be reflected in the procedural design of arbitral mechanisms. Since the latter aspect tended to be marginalised in this originally private form of dispute settlement, it deserves special consideration. The strengths and weaknesses of the legal conception of icsid arbitration proceedings may best be analysed by using a comparative law method with a functional approach, i.e. by examining the features of the legal systems under comparison in reference to their purpose and utility.263 The comparison of legal regimes is traditionally considered as a useful tool to achieve a better understanding of the object of study, to assess its overall quality, to find solutions for existing problems, and to further its general development.264 The utility of this method has even been affirmed from the law-and-economicsperspective,265 which considers the comparative and competitive confrontation of rival judicial or regulatory systems, such as different forms and fora

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For further elaborations on the possible forms of consent to investment arbitration, see below Ch. 2.E.I.1. This being said, capital-importing States in particular are not always entirely free in their decision as to whether and in what form they consent to investment arbitration due to economic constraints. Goode et al., Transnational Commercial Law 143–145 (paras. 4.51–4.54). See also, for an extensive discussion of the method of functional legal comparison, Ralph Michaels, The Functional Method of Comparative Law, in The Oxford Handbook on Comparative Law 339–382 (Mathias Reimann & Reinhard Zimmermann eds., 2008). Goode et al., Transnational Commercial Law 124–142 (paras. 4.19–4.49), with detailed elaborations and literature references on the educational and practical aims of comparative law. See also Rolf A. Schütze, Schiedsgerichtsbarkeit und Rechtsvergleichung, 110 ZVglRWiss (J. Comp. L. Stud.) 89, 94, 97 (2011), with a general overview of law comparative methods in the realm of arbitration. See e.g. Friedrich A. von Hayek, Law, Legislation and Liberty – A new statement of the liberal principles of justice and political e­ conomy, Vol. 3: The Political Order of a Free People esp. 65 et seq. (Routledge & Kegan Paul, London, 1979) and his theory of legal change through c­ompetition, ­referred to in Martina Eckhardt, Explaining Legal Change  from an  Evolutionary Economics Perspective, 9 German L. J. 437, 446–449 (2008);  ­Thomas  W.  Wälde, ­Improving the Mechanism for Treaty Negotiation and Investment Disputes  – ­ Competition

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of investment arbitration, as a key to meaningful evaluation and continuous improvement.266 It is based on the assumption that, in order to successfully compete, arbitral regimes have to satisfy the interests and needs of their users; they thus endeavour to continuously enhance their quality.267 This form of development via comparison and competition hence ensures that legal regimes and their providers remain at the service of their users. Competitors are to be found in arbitration regimes that were originally tailored for commercial disputes.268 Indeed, while the regulatory framework of icsid governs the vast majority of investment disputes, the bulk of the remaining disputes is settled either ad hoc under the uncitral Arbitration Rules or in institutional arbitrations under, e.g., the icc Arbitration Rules or the scc ­Arbitration Rules.269 Since, according to statistics, investment arbitrations ­under the uncitral Arbitration Rules form the second biggest category,270 and given that the arbitration rules of the icc and the scc have, in many ways, been inspired by the example of the uncitral Arbitration Rules, investment arbitration proceedings governed by the uncitral Arbitration Rules271 will be the primary benchmark of comparison in the following analysis. Insofar as the icc Arbitration Rules and the scc Arbitration Rules – due to their revisions in 2012 and 2010 respectively or due to the revision of the uncitral Arbitration Rules in 2010 – show any material deviations, these will be pointed out. In view of the fact that both ad hoc and institutional arbitration are re­ presented among these different arbitral regimes under comparison, it should be noted that each of these forms has its specific advantages, which generally reflect the disadvantages of the respective other form. In institutionalised arbitrations, experienced and specialised staff provides administrative and organisational assistance throughout all stages of a proceeding and thereby assures an expeditious and reliable procedure, which is largely independent

and  Choice as the Path to Quality and Legitimacy, in Yearbook on International I­ nvestment Law and Policy 2008–2009 521 (Karl P. Sauvant ed., 2009). 266 Wälde, Improving the Mechanism 521. 267 Id. 268 For an overview of all major commercial arbitration institutions and their rules, see Karyl Nairn & Patrick Heneghan, Arbitration World – Institutional and j­urisdictional comparisons (European Lawyer Reference Series) (Thomson­Reuters, London, 4th ed., 2012). 269 See Ch. 1.C.I.3. 270 See Ch. 1.C.I.3. 271 In the following, reference will be made to the uncitral Arbitration Rules (2010). Insofar as the uncitral Arbitration Rules (1976) significantly deviate from these, such deviations will be pointed out.

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from cooperation between the two opposing sides of the conflict.272 This comprehensive support is not only beneficial to the arbitral tribunal itself, but also to the parties and their counsel, who can continuously avail themselves of a competent point of contact.273 Ad hoc arbitration, on the other hand, entails a greater degree of procedural flexibility of both tribunals and parties, which allows arbitrators and counsel to shape the procedure according to the individual characteristics and needs of the parties.274 These differences between ad hoc and institutional arbitration may be decisive factors in the choice of an arbitral regime. On the other hand, some of the respective (dis-) advantages may be evened out by the simple choice to proceed under ad hoc arbitration rules administered by a specialised arbitral institution such as the pca or also the icsid.275 Therefore, the following comparative law analysis will consider these aspects in a limited manner, i.e. only to the extent that the differences may not be entirely balanced by external administrative support. Only procedural features that are not affected by this kind of compensatory measures are deemed to be suitable for a legal comparison. More precisely, the comparative law analysis will first consider the requirements to establish jurisdiction (1.), then look at the timing of the constitution 272 Blackaby & Partasides, Redfern and Hunter on International A ­ rbitration 45 (para. 1.151). In ad hoc arbitration, difficulties in the cooperation between the disputing parties may be compensated by making use of an appointing authority (see e.g. Art. 6 of the uncitral Arbitration Rules (2010)). Institutions typically functioning as such “appointing authority” are the icc, the icsid, the lcia, the crcica, the American Arbitration Association’s International Centre for Dispute Resolution [hereinafter aaa icdr], the Singapore International Arbitration Centre [hereinafter siac], or the Swiss Chambers; the Permanent Court of Arbitration (The Hague) [hereinafter pca] has the dual role of designating appointing authorities in default of a party agreement and of acting as party-­ designated appointing authority; see Peter Sherwin et al., Proskauer on International Litigation and Dispute Resolution: Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes, Ch. 19 Sec. iii C.2. (2007); Thomas H. Webster, Handbook of uncitral Arbitration – Commentary, Precedents and Models for uncitral-based Arbitration Rules 102–112 (Art. 6, paras. 6–18 to 6–78) (Sweet and Maxwell, London, 2010). 273 Blackaby & Partasides, Redfern and Hunter on International Arbitration 46 (para. 1.153). 274 Id. at 53–54. For a further overview of the respective advantages and disadvantages of ad hoc and institutional arbitration, see Lew et al., Comparative International C ­ ommercial Arbitration 32–37. 275 See Ch. 1.C.I.2.a.

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of an arbitral tribunal (2.), the possibilities and effects of preliminary measures (3.), and the degree of procedural transparency (4.), thereafter, examine the review of awards (5.) as well as the recognition and enforcement of awards (6.), and, finally, the cost incurred by a proceeding (7.).276 1 Jurisdictional Requirements a icsid Arbitration icsid arbitration is well known for its twofold jurisdictional requirement,277 the so-called double “jurisdictional keyhole.”278 The wider keyhole, i.e. the lower threshold for jurisdiction, is the definition of the terms “investment” and “investor” as contained in the parties’ instrument of consent. The narrower keyhole is icsid Convention Art. 25 (1), which marks the outer, objective limits of jurisdiction and thus functions as a safeguard against improper claims.279 It stipulates that “[t]he 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, which the parties to the dispute consent in writing to submit to the Centre.”280 This provision does 276 Part of this comparative structure has been inspired by Stephen Jagusch & Jeffrey Sullivan, A Comparison of icsid and uncitral Arbitration, in The Backlash Against Investment Arbitration – Perceptions and Reality 79–109 (Michael Waibel et al. eds., 2010). 277 For further elaborations on the law governing jurisdiction in icsid arbitration, see below Ch. 2.E.I.1. See also Katharina Diel-Gligor, Competing Regimes in International Investment Arbitration: Choice between the icsid and Alternative Arbitral Systems, 22 Am. Rev. Int’l Arb. 677, 686, 693–698 (2011). 278 Terminology according to Aguas del Tunari s.a. v. Republic of Bolivia, icsid Case No. arb/02/3, Decision on Jurisdiction (21 October 2005) [hereinafter Aguas del Tunari v. ­Bolivia (Decision on Jurisdiction)], para. 278. The corresponding “two-fold test” was summed up in Československa obchodní banka, a.s. (csob) v. Slovak Republic, icsid Case No. arb/97/4, Decision on Jurisdiction (24 May 1999) [hereinafter csob v. Slovak Republik (Decision on Jurisdiction)], para. 68: “A twofold 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.” 279 Jagusch & Sullivan, A Comparison of icsid and uncitral Arbitration 88. 280 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)

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not, however, contain any further specifications of the terms “investment” and “legal dispute,” as the central elements of jurisdiction ratione materiae, or of the investor’s nationality requirement, being decisive for jurisdiction ratione personae.281 Therefore, Art. 25 (1) involves major difficulties regarding the determination of its actual meaning and thus caused heated debates amongst scholars and practitioners.282 icsid tribunals dealing with the interpretation of these vague terms have so far not been able to establish a reliable and generally accepted definition. They rather aggravated the problem by rendering conflicting decisions.283 b Alternative Forms of Arbitration Claims brought under the uncitral arbitration regime, by contrast, are only subject to a single, subjective “jurisdictional keyhole.” The requirements for jurisdiction to be established are generally defined in the arbitration agreement as contained in investment treaties or contracts or in national investment legislation. The uncitral Arbitration Rules (2010) do not impose any further objective jurisdictional hurdle to overcome: Art. 1 (1), dealing with the general scope of application of this set of rules, requires solely that the disputing parties agree “that disputes between them in respect of a defined legal relationship, whether contractual or not, shall be referred to arbitration under the uncitral Arbitration Rules.”284

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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.” Cf. World Bank, Report of the Executive Directors, para. 27 (1965): “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 not consider submitting to the Centre (Art. 25 (4)).” Yet, in view of discussions that took place during the drafting process of the Convention, it appears to be more accurate to add that, in fact, a number of attempts to define the term “investment” have been made, but that no consensus could be reached. See Schreuer et al., icsid Commentary 83–83 (Art. 25, paras. 3–6), 114–117 (Art. 25, paras. 113–121). See e.g. Devashish Krishan et al., Are the icsid Rules Governing Nationality & Investment Working? – Panel Discussion, in Investment Treaty Arbitration and International Law (Vol. i) 119–141 (Todd J. Grierson Weiler ed., 2008). For further literature references, see below Ch. 2.E.I.2.a.aa (fn. 885). For further elaborations on the inconsistent interpretation of the objective jurisdictional requirements, see below Ch. 2.E.I.2.a.aa. uncitral Arbitration Rules (2010) Art. 1: “(1) Where parties have agreed that disputes between them in respect of a defined legal relationship, whether contractual or not, shall

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Similarly, with regard to the alternative regimes of institutional arbitration, neither the icc Arbitration Rules (2012) nor the scc Arbitration Rules (2010) require more than a valid arbitration agreement between the parties, the jurisdictional scope of which encompasses the respective dispute to be settled under their respective regimes.285 c Comment In view of the still unclear objective jurisdictional requirements set out in the icsid Convention, claims submitted to the Washington Centre bear the risk of not overcoming this additional hurdle and thus of not falling within the scope of an icsid tribunal’s jurisdictional competence. In addition, the fact that host

be referred to arbitration under the uncitral Arbitration Rules, then such disputes shall be settled in accordance with these Rules subject to such modification as the parties may agree.” In comparison to uncitral Arbitration Rules (1976) Art. 1 (1), which contained the formula “in relation to that contract,” the revised version of uncitral Arbitration Rules (2010) Art. 1 (1) refers to disputes arising “in respect of a defined legal relationship, whether contractual or not.” This wording is intended to broaden the scope of application ratione materiae; see Paolo Michele Patocchi & Tilman Niedermaier, uncitral Rules, in Institutional Arbitration – Article-by-Article Commentary 1024–1025 (Art. 1, para. 32) (Rolf A. Schütze ed., 2013); David D. Caron & Lee M. Caplan, The uncitral Arbitration Rules – A Commentary 24–25 (Oxford University Press, Oxford, 2nd ed., 2013). See also Diel-Gligor, Competing Regimes 677, 688. 285 See icc Arbitration Rules (2012) Art. 6; scc Arbitration Rules (2010) Art. 2 (iv). A common feature of both arbitral institutions is that they empowered the scc Board and the icc International Court of Arbitration [hereinafter icc Court] respectively to take prima facie decisions on jurisdiction. The arbitral tribunals only undertake detailed examinations of their jurisdiction in case of an objection to jurisdiction by the respondent; see scc Arbitration Rules Art. 9 (i) in connection with Art. 10 (i); icc Arbitration Rules (2010) Art. 6 (4); and see Marie Öhrström, scc Rules, in Institutional Arbitration  – Article-by-Article Commentary 825 (Art. 10, para. 60) (Rolf A. Schütze ed., 2013); Andreas Reiner & Christian Aschauer, icc Rules, in Institutional ­A rbitration  – Article-by-Article Commentary 52–53 (Art. 6, paras. 127–131) (Rolf A. Schütze ed., 2013). This prima facie approach to the determination of jurisdiction finds a parallel in the icsid Secretary-General’s screening power according to icsid Convention Art. 36 (3), which foresees that he shall “register the request, unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre.” See on this topic Felipe Mutis Tellez, Prima Facie Decisions on Jurisdiction of the Arbitration Institute of the Stockholm Chamber of Commerce: Towards Consolidation of a “Pro Arbitration” Approach, 4 (2013), available at (last visited September 2016).

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States “almost routinely” object to jurisdiction often leads to a time-consuming and expensive bifurcation of the arbitral proceeding into a jurisdictional phase and a merits phase.286 In uncitral arbitration, by contrast, the single jurisdictional requirement of consent in the arbitration agreement leaves the determination of the jurisdictional scope of a future arbitral tribunal up to the disputing parties alone. These hence enjoy a comparatively high degree of party autonomy and of legal certainty as regards the eligibility of their conflict for the settlement under this arbitral regime. 2 Constitution of the Tribunal a icsid Arbitration With regard to the procedural effectiveness of arbitral dispute settlement, a speedy constitution of the arbitral tribunal is of utmost importance. In that sense, icsid Convention Art. 37 (1)287 stipulates that it “shall be constituted as soon as possible after registration of a request.” This general policy of timeeconomy is further defined for particular problem areas throughout the constituting process. In case the parties do not reach an agreement on the number of arbitrators or their method of appointment within 60 days from the date of registration of the arbitration request,288 either party may choose the default number of arbitrators set out in icsid Convention Art. 37 (2) (b)289 in connection with icsid Arbitration Rule 2 (3).290 If, thereafter, the actual appointment of the arbitrators to the tribunal is not made within another 30 days, the Chairman is charged with the task of appointing the arbitrator or arbitrators not yet appointed according to icsid Convention Art. 38,291 yet only “at the request of 286 Jagusch & Sullivan, A Comparison of icsid and uncitral Arbitration 88. 287 icsid Convention Art. 37 (1): “The Arbitral Tribunal (…) shall be constituted as soon as possible after registration of a request pursuant to Article 36.” 288 Cf. icsid Convention Art. 36. 289 icsid Convention Art. 37 (2) (b): “Where the parties do not agree upon the number of arbitrators and the method of their appointment, the Tribunal shall consist of three arbitrators, one arbitrator appointed by each party and the third, who shall be the president of the Tribunal, appointed by agreement of the parties.” 290 icsid Arbitration Rule 2 (3): “At any time 60 days after the registration of the request, if no agreement on another procedure is reached, either party may inform the SecretaryGeneral that it chooses the formula provided for in Article 37(2)(b) of the Convention. The Secretary-General shall thereupon promptly inform the other party that the Tribunal is to be constituted in accordance with that Article.” 291 icsid Convention Art. 38: “If the Tribunal shall not have been constituted within 90 days after notice of registration of the request has been dispatched (…), the Chairman shall, at the request of either party and after consulting both parties as far as possible, appoint the arbitrator or arbitrators not yet appointed. (…).”

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either party and after consulting both parties as far as possible.” Accordingly, in the not unusual event that the parties disagree on appointment issues, a minimum of 90 days will lapse from the registration of the arbitration request until the constitution of the arbitral tribunal. While there is no upper time limitation, this process takes up to 12 months in exceptional cases,292 and, on average, 171 days.293 b Alternative Forms of Arbitration Similar to the respective icsid provisions, the uncitral Arbitration Rules (2010) specify in Art. 7 (1)294 that a period of 30 days has to pass before the default rule on the number of arbitrators applies.295 In such a case, the panel shall be composed of three arbitrators. Concerning the actual appointment of arbitrators, Art. 9296 stipulates that further 30 days need to lapse before a designated appointing authority may be requested to appoint a missing second arbitrator the other party failed to select; it foresees an additional 30 day period to expire before the appointing authority may appoint the presiding arbitrator. 292 Schreuer et al., icsid Commentary 478 (Art. 37, para. 9). 293 See the study “Timing Tribunals: The Length of icsid Proceedings” (Allen & Overy llp, unpublished research on all icsid awards rendered up to 1 January 2008), referred to in Jagusch & Sullivan, A Comparison of icsid and uncitral Arbitration 82. For an overview of the institution of proceedings and the selection of arbitrators in icsid cases, see Shihata & Parra, Experience of the icsid 299, 306–314. 294 uncitral Arbitration Rules (2010) Art. 7 (1): “If the parties have not previously agreed on the number of arbitrators, and if within 30 days after the receipt by the respondent of the notice of arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators shall be appointed.” 295 This time period may be extended by agreement of the parties according to uncitral Arbitration Rules (2010) Art. 1 (1); see Patocchi & Niedermaier, uncitral Rules 1070 (Art. 7, para. 190). As compared to the 1976 version, this period has been extended by 15 days; see uncitral Arbitration Rules (1976) Art. 5: “If the parties have not previously agreed on the number of arbitrators (i.e. one or three), and if within fifteen days after the receipt by the respondent of the notice of arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators shall be appointed.” 296 uncitral Arbitration Rules (2010) Art. 9: “(2) If within 30 days after the receipt of a party’s notification of the appointment of an arbitrator the other party has not notified the first party of the arbitrator it has appointed, the first party may request the appointing authority to appoint the second arbitrator. (3) If within 30 days after the appointment of the second arbitrator the two arbitrators have not agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by the appointing authority in the same way as a sole arbitrator would be appointed under article 8.”

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Thus, if the parties disagree on appointment issues, the minimum amount of time required from the date of the notice of arbitration to the constitution of an arbitral tribunal amounts to 90 days, but is likely to be considerably higher in practice. It should be noted that, where the parties cannot reach an agreement on the appointing authority, another 30 days need to elapse before the Secretary-General of the pca may step in to designate the latter,297 unless a party already made the respective proposal in parallel with the appointment of the first arbitrator, so that the terms of 30 days will run in parallel. Finally, in the supposedly rare situation that an appointing authority fails to act, 30 more days have to pass before the Secretary-General of the pca may designate a substitute appointing authority.298 The constitution procedure of an arbitral tribunal in proceedings governed by the icc Arbitration Rules (2012) or the scc Arbitration Rules (2010) does not foresee a fixed default time period to pass before the number of arbitrators on a tribunal is to be determined by the icc Court or the scc Board of Directors respectively.299 Under the icc Arbitration Rules (2012), the panel consists solely of three arbitrators where warranted by the dispute.300 As regards the appointment of the co-arbitrators and the presiding arbitrator, the default appointment is made by the icc Court after 30 days have lapsed respectively.301 Under the scc Arbitration Rules, which stipulate the default number of three arbitrators,302 the co-arbitrators are appointed by the scc Board if the parties fail to do so within a period of 10 days.303 The presiding arbitrator, by contrast, is to be appointed directly by the scc Board.304 297 uncitral Arbitration Rules (2010) Art. 6 (2): “If all parties have not agreed on the choice of an appointing authority within 30 days after a proposal made in accordance with paragraph 1 has been received by all other parties, any party may request the Secretary-­ General of the pca to designate the appointing authority.” 298 uncitral Arbitration Rules (2010) Art. 6 (4): “Except as referred to in article 41, paragraph 4, if the appointing authority refuses to act, or if it fails to appoint an arbitrator within 30 days after it receives a party’s request to do so, fails to act within any other period provided by these Rules, or fails to decide on a challenge to an arbitrator within a reasonable time after receiving a party’s request to do so, any party may request the Secretary-General of the pca to designate a substitute appointing authority.” 299 [Hereinafter scc Board]. See icc Arbitrations Rules (2012) Art. 12 (2); scc Arbitration Rules (2010) Art. 12. 300 See icc Arbitrations Rules (2012) Art. 12 (2). 301 See icc Arbitrations Rules (2012) Art. 12 (2) and (5). 302 See scc Arbitration Rules (2010) Art. 12. 303 See scc Arbitration Rules (2010) Art. 13 (3) in connection with Art. 13 (2). 304 See scc Arbitration Rules (2010) Art. 13 (3).

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c Comment The timing of external, corrective actions to avoid persisting party disagreements on the constitution of the arbitral tribunal is largely comparable in icsid and uncitral arbitrations. Both regimes foresee a minimum of 90 days to lapse before a tribunal may be set up despite the parties’ failure to reach agreements on questions such as the number or the appointment of arbitrators. In arbitrations governed by the uncitral Arbitration Rules (2010), however, 30 to 60 days might be added if the Secretary-General of the pca needs to step in to designate the (substitute) appointing authority. Further additional expenditures of time in the default constitution process of uncitral arbitral tribunals relate to the fact that it may not fall back on a readily established list of qualified arbitrators, as is the case in icsid proceedings.305 Rather, the respective uncitral appointing authority is obliged to follow a lengthy “listprocedure” when appointing the presiding arbitrator, unless the parties agree otherwise or unless it is determined as inappropriate for the case.306 This additional formal precondition compensates the lack of institutional backup, but, at the same time, incurs further procedural delays. Alternative institutional arbitration proceedings under the icc or the scc regime, on the other hand, have proven to be the most time effective in terms of a tribunal’s constitution. If the parties disagree on the number and appointment of arbitrators, icc arbitrations require a minimum waiting period of 60 days, and scc arbitrations one of only 10 days, before a tribunal may be set up by the internal appointing authorities. These time periods may, of course, be 305 See icsid Convention Art. 40 (1): “Arbitrators may be appointed from outside the Panel of Arbitrators, except in the case of appointment by the Chairman pursuant to Article 38.” 306 See uncitral Arbitration Rules (2010) Art. 9 (3) in connection with Art. 8 (2), which states that: “(…) In making the appointment the appointing authority shall use the following list-procedure, unless both parties agree that the list-procedure should not be used or unless the appointing authority determines in its discretion that the use of the list-procedure is not appropriate for the case: (a) The appointing authority shall communicate to each of the parties an identical list containing at least three names; (b) Within fifteen days after the receipt of this list, each party may return the list to the appointing authority after having deleted the name or names to which he objects and numbered the remaining names on the list in the order of his preference; (c) After the expiration of the above period of time the appointing authority shall appoint the […] arbitrator from among the names approved on the lists returned to it and in accordance with the order of preference indicated by the parties (…); (d) If for any reason the appointment cannot be made according to this procedure, the appointing authority may exercise its discretion in appointing the sole arbitrator.” For further elaborations on the “list-procedure”, see Patocchi & Niedermaier, u ­ ncitral Rules 1074–1076 (Art. 8, paras. 210–218).

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extended if the parties agree that they need more time for their appointment of arbitrators.307 3 Provisional Measures a icsid Arbitration According to icsid Convention Art. 47,308 an arbitral 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,” unless the parties agree otherwise. The said measures may be initiated by either the arbitral tribunal or the parties.309 They are designed as “recommendations,” but are largely, yet not unanimously, considered to have binding effect in arbitral practice.310 As regards the conditions to be fulfilled for a provisional measure to be rendered, however, there is less interpretative consensus, leading to inconsistent jurisprudence in some respects.311 Moreover, in response to requests for provisional measures, arbitral tribunals only issue decisions that do not qualify as awards and that are hence rather unlikely to be enforced by domestic courts.312 In addition, arbitral tribunals are not entitled to order security for the cost incurred by such measures.313 Even though the disputing parties usually abide by these decisions in view of their general obligation not to frustrate the proceeding and to avoid negative impressions of the arbitral tribunal,314 the situation is different for ex parte provisional measures directed against third parties, which are beyond the tribunal’s jurisdiction.315 In view of such a scenario, the disputing parties may agree to have recourse to domestic courts316 307 See e.g. Öhrström, scc Rules 81 (Art. 13, para. 74). 308 icsid Convention Art. 47: “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.” This basic provision is further specified in icsid Arbitration Rule 39. 309 See icsid Arbitration Rule 39 (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.” 310 See below Ch. 2.E.II.2.a.aa. 311 For further elaborations on the inconsistent interpretation of the requirements for provisional measures by icsid tribunals, see below Ch. 2.E.II.2.a.aa. 312 Schreuer et al., icsid Commentary 766 (Art. 47, para. 25). 313 Jagusch & Sullivan, A Comparison of icsid and uncitral Arbitration 92. 314 Schreuer et al., icsid Commentary 764 (Art. 47, para. 16). 315 Blackaby & Partasides, Redfern and Hunter on International Arbitration 169 (para. 3.46). 316 See icsid Arbitration Rule 39 (6): “Nothing in this Rule shall prevent the parties, provided that they have so stipulated in the agreement recording their consent, from requesting

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in order to receive assistance from the court in the territory of which the concerned asset is located. b Alternative Forms of Arbitration In arbitrations under the uncitral Arbitration Rules (2010), Art. 26317 empowers the arbitral tribunal to render interim measures if otherwise “harm not adequately reparable by an award of damages is likely to result,” which “substantially outweighs the harm that is likely to result” to the opposing party, and if “there is a reasonable possibility that the requesting party will succeed on the merits of the claim.” The relatively wide range of interim measures stipulated in the said provision is thus contingent on the fulfilment of specific and comparatively strict conditions.318 Interim measures may be initiated solely by the requesting party and not by the arbitral tribunal itself. An obvious benefit is the legally binding effect of the interim measures a tribunal constituted under the uncitral Arbitration Rules may “order[].” Although the revised version of this set of rules no longer expressly speaks of an “interim award,”319 arbitral tribunals, being generally empowered to “make separate awards on different issues at different times,”320 are still considered to have the authority to do so.321 Such measures being issued in the form of awards are, as 317

318 319 320 321

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.” uncitral Arbitration Rules (2010) Art. 26 (extracts): “(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, (…). (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. (…) (6) The arbitral tribunal may require the party requesting an interim measure to provide appropriate security in connection with the measure. (…) (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.” See, by contrast, the less specific provision with respect to both the type of and requirements for interim measures in uncitral Arbitration Rules (1976) Art. 26 (1). See uncitral Arbitration Rules (1976) Art. 26 (2). See uncitral Arbitration Rules (2010) Art. 34 (1). See Caron & Caplan, uncitral Commentary 524.

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a ­consequence, more likely to be enforced before a domestic court under the New York ­Convention.322 The fact that the arbitral tribunal may order “appropriate security in connection with the measure”323 is also advantageous. Finally, the parties may, even absent a prior agreement, resort to domestic courts for such request.324 This freedom of choice of the parties, on the other hand, may be restricted by mandatory norms of the lex arbitri, which proscribe the issuance of interim measures by the arbitral tribunal.325 One important aspect as regards the alternative institutional arbitration regimes is that both the icc Arbitration Rules (2012) and the scc Arbitration Rules (2010) empower the arbitral tribunal to render interim measures in the form of an award.326 They are therefore equally capable of being enforced by national judicial authorities. c Comment Although provisional measures rendered by icsid tribunals have, in principle, the advantage of being part of its delocalised and self-contained system, this independence has several drawbacks and limitations. These consist, first, in the inconsistent construction of part of the preconditions to be fulfilled and in the lack of a formal legal foundation of their binding effect, given that – as opposed to the general practice – the explicit wording of icsid Convention 322 See New York Convention Art. 1: “This Convention shall apply to the recognition and enforcement of arbitral awards (…).” See id., referring to uncitral, Report of the Secretary-General on the Revised Draft Set of Arbitration Rules, 9th Session, Addendum 1 (Commentary), reprinted in (1976) vii uncitral Ybk 166, 176, un Doc. A/cn.9/112/Add.1 (1975): “In order to facilitate the enforcement of interim measures (…), paragraph 2 authorizes the arbitrators to establish these measures in the form of interim awards.” 323 See uncitral Arbitration Rules (2010) Art. 26 (6). 324 See uncitral Arbitration Rules (2010) Art. 26 (9). 325 Caron & Caplan, uncitral Commentary 529. The term “mandatory rule” (loi de police) has been defined as “imperative provision of law which must be applied to an international relationship irrespective of the law that governs that relationship”; see Pierre Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int’l 274, 275 (1986). Even if the arbitral tribunal itself derives its authority from the parties’ consent, it is generally accepted that arbitral tribunals – except for icsid tribunals – have the authority and obligation to apply mandatory laws of the lex arbitri, given that they are not the mere creatures of contract, but also serve a public function and the need to ensure that their awards are judicially enforceable; see Bjorklund, Mandatory Rules of Law and Investment Arbitration 175, 275–286, referring to Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., us Supreme Court, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). 326 See icc Arbitration Rules (2012) Art. 28 (1); scc Arbitration Rules (2010) Art. 32 (3).

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Art. 47 only allows a tribunal to “recommend” such measures. Second, security may not be demanded for provisional measures issued in icsid arbitrations, nor may they be enforced in domestic courts since they are not issued in the form of awards. Direct recourse to the national judicial system, e.g. in case of ex parte measures, is, then again, conditioned upon a prior party agreement. By contrast and despite being subject to stricter preconditions, interim measures ordered by an uncitral tribunal carry a considerably higher level of legal reliability, effectiveness, and security in that they are formally binding and enforceable as awards in domestic courts and, in addition, may be backed up by security. Moreover, direct requests of such measures from domestic judicial authorities are independent from any prior agreement between the parties.327 4 Transparency and Public Participation a icsid Arbitration In 2006, the Washington Centre reacted to the increasing demands for a greater respect of the public dimension of investor-State arbitration328 by amendments to the icsid Arbitration Rules,329 which primarily entailed expanding transparency and public participation. Ever since this reform, icsid arbitration has been considered a pioneer in the promotion of less confidential and more open and accessible investment arbitration proceedings. 327 For a law comparative analysis of provisional measures in investment arbitration and commercial arbitration with a particular focus on the respective role of national courts, see Franziska Edler, Die Aufhebung von Schiedssprüchen und der Erlass einstweiliger Massnahmen in Deutschland und Schweden – Ein ­R echtsvergleich vor dem Hintergrund der Investitionsschiedsgerichts­ barkeit 29–79 (Peter Lang, Frankfurt/Main, 2009). With regard to investment arbitration, the author stresses the limited use of applying for provisional measures at national courts, given that the host State concerned would invoke State immunity. 328 See e.g. oecd, Transparency and Third Party Participation in Investor-State Dispute Settlement Procedures, Statement by the oecd Investment Committee, Working Papers on International Investment, No. 2005/1 (2005), available at (last visited September 2016): “(…) additional transparency, in particular in relation to the publication of arbitral awards, subject to necessary safeguards for the protection of confidential business and governmental information, is desirable to enhance effectiveness and public acceptance of international investment arbitration, as well as contributing to the development of a public body of jurisprudence.,” referred to in Campbell McLachlan et al., International Investment Arbitration – Substantive Principles 57 (Oxford University Press, Oxford, 2007). 329 The amended icsid Arbitration Rules entered into force on 10 June 2006. For further information and discussion of that topic, see e.g. Wong & Yackee, The 2006 Procedural and Transparency-Related Amendments 233–274.

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The public registration of each arbitration request accepted by the icsid Secretariat330 and the maintenance of a publicly accessible register, in which “significant data concerning the institution, conduct and disposition of each proceeding” are entered,331 are features which have existed for even longer. Since 2006 the opportunities for public involvement have been facilitated and extended by conferring greater discretion to arbitral tribunals in this regard. According to icsid Arbitration Rule 32 (2),332 public access to oral hearings may now be permitted by the arbitral tribunal as long as none of the ­disputing

330 See icsid Administrative and Financial Regulation 22 (1): “The Secretary-General shall appropriately publish information about the operation of the Centre, including the registration of all requests for conciliation and arbitration and in due course an indication of the date and method of the termination of each proceeding.” See the lists of icsid pending and concluded cases, available at (last visited September 2016). 331 See icsid Administrative and Financial Regulation 23 (1): “The Secretary-General shall maintain (…) separate Registers for (…) requests for arbitration. In these he shall enter 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. On the Arbitration Register, he shall also enter, 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.” 332 icsid Arbitration Rule 32 (2): “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.” Under the 2003 version of this rule, the admission of third parties to hearings was contingent upon both the discretion of the tribunal and the consent of the parties. The first concluded case, to which the 2006 version of this rule applied, is Biwater Gauff v. Tanzania, wherein the tribunal, however, had to reject the petitioner’s request for access to oral hearings because of the claimant’s objection; see Biwater Gauff (Tanzania) v. United Republic of Tanzania, icsid Case No. arb/05/22, Procedural Order No. 5 (2 February 2007) [hereinafter Biwater Gauff v. Tanzania (Procedural Order No. 5)], para. 45. In view of this simple way to thwart public access, the new provision has met with inefficiency criticism; see Wong & Yackee, The 2006 Procedural and TransparencyRelated Amendments 258. Announcements of public hearings are made at the icsid Website, available at (last visited September 2016).

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parties objects. In addition, under icsid Arbitration Rule 37 (2),333 amicus c­ uriae briefs, i.e. submissions by third “persons or entities not parties to the dispute” may be allowed after prior consultation with both parties.334 Objections by the latter are ineffective. When making its discretionary decision, which should be guided by the added value the amicus curiae brief is expected to provide for the proceeding, the arbitral tribunal needs to ensure that the procedural integrity is not disrupted and that none of the parties suffers any undue or unfair disadvantage.335 The 2006 amendments also introduced a partial

333 icsid Arbitration Rule 37 (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.” 334 See icsid Arbitration Rule 37 (2). 335 See icsid Arbitration Rule 37 (2). In the years prior to the 2006 reform, two of the three icsid tribunals, when confronted with ngo petitions to present their arguments in the form of amicus curiae briefs, found that icsid tribunals in principle had the power to accept and consider this type of submissions pursuant to icsid Convention Art. 44. In their deliberations whether to grant the third-parties’ requests, the tribunals established the evaluation criteria that later found their way into icsid Arbitration Rule 37 (2) (a) to (c); see Suez, Sociedad General de Aguas de Barcelona, S.A., and Vivendi Universal, S.A. v. Argentine Republic (and joined case awg Group Ltd. v. Argentine Republic), icsid Case No. arb/03/19 (formerly Aguas Argentinas, S.A., Suez, Sociedad General de Aguas de Barcelona, S.A., and Vivendi Universal, S.A. v. Argentine Republic), Order in Response to a Petition for Transparency and Participation as Amicus Curiae (19 May 2005) [hereinafter Suez/Vivendi v. Argentina (Order on Petition for Transparency and Participation as Amicus Curiae)], para. 11; Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v. Argentine Republic, i­ csid Case No. arb/03/17 (formerly Aguas Provinciales de Santa Fe, S.A., Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales de Agua S.A. v. Argentine Republic), Order in Response to a Petition for Participation as Amicus Curiae (17 March 2006) [hereinafter Suez/InterAguas v. Argentina (Order on Petition for Participation as Amicus Curiae)], para. 16; but see Aguas del Tunari v. Bolivia (Decision on Jurisdiction),­

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disclosure duty with respect to any award rendered. Although the Washington Centre must not publish an award absent the parties’ consent pursuant to ­i csid Convention Art. 48 (5),336 it is required, according to icsid Arbitration Rule 48 (4),337 to “promptly include in its publications excerpts of the legal reasoning of the Tribunal.”338 Moreover, if icsid receives consent from both parties to publish an award or any records of the proceedings, it is obliged to “arrange the publication thereof, in an appropriate form with a view to furthering the development of international law in relation to investments.”339 In the absence of any such party agreement on the transparency or confidentiality, the icsid Convention does not hinder the parties from unilaterally disclosing the award340 or other relevant documents such as their pleadings.341



336 337

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340 341

para. 17 and Annex iii, wherein the request for amicus curiae submissions was rejected due to the missing consent by the parties. See, also for further comments on the cited case law, Christina Knahr, Transparency, Third Party Participation and Access to Documents in International Investment Arbitration, 23 Arb. Int’l 327, 334–343 (2007). See icsid Convention Art. 48 (5). icsid Arbitration 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.” The duty to publish the “legal reasoning” of the tribunal comprises both the disclosure of the “legal rules applied” and the logical steps made by the arbitrators to consider a particular rule as applicable; see Wong & Yackee, The 2006 Procedural and TransparencyRelated Amendments 260. See icsid Administrative and Financial Regulation 22 (2) (b). In general, the award is published in the icsid Review – Foreign Investment Law Journal or on the icsid website, available at (last visited September 2016). As for cases in which such party consent has not been provided, the icsid launched an initiative in 2010 to further increase the public availability of icsid case law. For this purpose, the Secretariat started contacting parties to concluded arbitrations to give their consent to the publication of the award or to a redacted version of it; see uncitral Working Group ii (Arbitration and Conciliation), Settlement of Commercial Disputes: Transparency in Treaty Arbitration – Comments by the International Centre for the Settlement of Investment Disputes (icsid), Doc. A/cn.9/WG.II/WP.167, 4 (2011). Schreuer et al., icsid Commentary 836 (Art. 48, para. 114), referring to Aron Broches, A Guide to Users of the icsid Convention, 8 (1) News from the icsid 5, 9 (1991). Schreuer et al., icsid Commentary 698 (Art. 44, para. 100), referring to the official annotations to the original icsid Arbitration Rules (1968), which emphasise in Note F to Rule 30 that the rules do neither enjoin the parties from publishing their pleadings, nor hinder them to keep these documents confidential; see icsid, Reports of Cases Decided under the Convention on the Settlement of Investment Disputes between States

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b Alternative Forms of Arbitration In July 2013, uncitral adopted the “Rules on Transparency in Treaty-based Investor-State Arbitration”342 and thereby ratified the work of its Working

and Nationals of other States, 1965, Vol. 1 (1993). See also Biwater Gauff (Tanzania) v. United Republic of Tanzania, icsid Case No. arb/05/22, Procedural Order No. 3 (29 September 2006) [hereinafter Biwater Gauff v. Tanzania (Procedural Order No. 3)], para. 121: “In the absence of any agreement between the parties (…), 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.” However, in order to avoid the unilateral disclosure of confidential information that could aggravate the dispute or harm the integrity of the proceedings, the other party may request the arbitral tribunal to render provisional measures pursuant to icsid Convention Art. 47. This preventive approach has been developed and confirmed in recent icsid case law. It has been argued that the decision on whether a document should be treated as confidential depends on its individual impact on the course of the proceedings and on the final award; see e.g. Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Decision on Request for Provisional Measures (9 December 1983) [hereinafter Amco v. Indonesia (i) (Decision on Request for Provisional Measures)]; Metalclad Corp. v. United Mexican States, icsid Case No. arb(af)/97/1, nafta, Award (30 August 2000) [hereinafter Metalclad v. Mexico (Award)], para. 13; The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, icsid Case No. arb(af)/98/3, nafta, Decision on Hearing of Respondent’s Objection to Competence and Jurisdiction (5 January 2001) [hereinafter Loewen Group v. us (Decision on Jurisdiction)], para. 26; Biwater Gauff v. Tanzania (Procedural Order No. 3), paras. 135–136. The described approach does not apply to general discussions on a pending icsid case. As has been ruled in several awards, there is no “general requirement that the Parties refrain entirely from every public utterance mentioning the existence, or speculating upon the possible outcome, of the proceedings”; see Metalclad Corp. v. United Mexican States, icsid Case No. arb(af)/97/1, nafta, Decision on a Request by the Respondent for an Order prohibiting the Claimant from Revealing Information (27 October 1997) [hereinafter Metalclad v. Mexico (Decision on Revealing of Information)], para. 4; see also Amco v. Indonesia (i) (Decision on Request for Provisional Measures), paras. 3–5; Biwater Gauff v. Tanzania (Procedural Order No. 3), para 149. But see Biwater Gauff v. Tanzania, (Procedural Order No. 3), para. 163 (d), which added that these discussions should be “restricted to what is necessary, and (…) not used as an instrument to antagonise the parties, exacerbate their differences, unduly pressure one of them, or render the resolution of the dispute potentially more difficult (…).” For the cited case law and further comments, see James Harrison, Recent Developments to Promote Transparency and Public Participation in Investment Treaty Arbitration, No. 2011/01 University of Edinburgh, School of Law, Working Paper Series 1, 6 (2011). 342 uncitral, Rules on Transparency in Treaty-based Investor-State Arbitration, in uncitral, Report of the United Nations Commission on International Trade Law, Forty-sixth

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Group ii (Arbitration and Conciliation).343 This set of rules, which came into effect in April 2014, entails a considerable opening-up of uncitral arbitration proceedings whose parties consist of a private investor and a sovereign State. The reform thus represents a significant policy departure away from the high degree of confidentiality in investor-State arbitrations under the u ­ ncitral Arbitration Rules in both their original 1976 version and their revised 2010 version. Being originally designed for the settlement of commercial disputes, these neither foresee a public registration of cases, nor do they provide the arbitral tribunals with the discretion to open hearings to the public or to allow amicus curiae briefs. Rather, they provide for in camera hearings344 and remain

Session (8–26 July 2013), Doc. A/68/17 (2013), Annex i, 11 July 2013 (entry into force 1 April 2014) [hereinafter uncitral Rules on Transparency]. For an analysis of the uncitral Rules on Transparency, see Dimitrij Euler et al. (eds.), Transparency in International Investment Arbitration: A Guide to the uncitral Investor-State Arbitration Rules (Cambridge University Press, Cambridge, 2015). 343 When deciding to undertake a modernisation of the more than 50 year old uncitral Arbitration Rules (1976), uncitral mandated the uncitral Working Group II (Arbitration and Conciliation), inter alia, to develop an instrument addressing the specific needs of investor-State arbitrations; see un-ga, un gaor, Sixty-first Session, Supp. No. 17 (Report of the un Commission on International Trade Law on the Work of its Fortieth Session), un Doc. A/62/17 (Part 1) (2007), para. 175. The Working Group acknowledged the “desirability of dealing with transparency in investor-State arbitration, which differ[s] from purely private arbitration, where confidentiality was an essential feature,” but found that “it would not be desirable to include specific provisions on treaty-based arbitration in the uncitral Arbitration Rules themselves”; see uncitral Working Group ii (Arbitration and Conciliation), Report of the Working Group on Arbitration and Conciliation on the Work of its Forty-eighth Session (4–8 February 2008), Doc. A./cn.9/646 (2008), paras. 57, 69. Therefore, it was decided to set up a separate instrument once the revision of the Arbitration Rules (1976) had been completed; see un-ga, un gaor, Sixty-third Session, Supp. No. 17 (Report of the United Nations Commission on International Trade Law on the Work of its Forty-first Session), un Doc. A/63/17 (2008), paras. 314, 316. The drafting process of the Rules on Transparency was, in many respects, oriented at the icsid transparency provisions. 344 See uncitral Arbitration Rules (2010) Art. 28 (3), 1st sentence (formerly Art. 25 (4)): “Hearings shall be held in camera unless the parties agree otherwise.” The scope of this regulation has so far been understood as encompassing not only the hearings as they physically take place, but also any transcripts of the hearings; see Webster, Handbook of uncitral Arbitration 410–411 (Art. 28, para. 28-27). The drafting history and the arbitral practice confirm that “[t]he phrase ‘in camera’ is clearly intended to exclude members of the public, i.e. non-party third persons such as [p]etitioners”; see Methanex Corporation v. United States of America, uncitral Arbitration

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silent on the issue of submissions by third parties.345 Regarding the publication of awards, uncitral Arbitration Rules (2010) Art. 34 (5)346 mandates the consent of both parties, unless “disclosure is required of a party by legal duty (…).” This newly added limitation of procedural confidentiality347 basically

(nafta), Decision of the Tribunal on Petitions from Third Persons to Intervene as Amici Curiae (15 January 2001) [hereinafter Methanex v. us (Decision on Intervention as Amici Curiae)], para. 41, referred to in Caron & Caplan, uncitral Commentary 607. Nevertheless, the disputing parties may still agree to open their hearings to third parties; see id. 345 A number of uncitral ad hoc tribunals have held, however, that arbitrators would have the authority to admit and consider the third-party submissions; see e.g. Methanex v. us (Decision on Intervention as Amici Curiae), paras. 47, 53; United Postal Service of America Inc. v. Government of Canada, uncitral Arbitration (nafta), Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae (17 October 2001) [hereinafter ups v. Canada (Decision on Intervention and Participation as Amici Curiae)], para. 61; Glamis Gold Ltd. v. United States of America, uncitral Arbitration (nafta), Decision on Application and Submission by Quenchan Indian Nation (16 September 2005) [hereinafter Glamis Gold v. us (Decision on Application and Submission by Quenchan Indian Nation)], para. 13. Most of them based their ruling on the tribunal’s discretionary power to organise and shape the arbitral procedure “in such manner as it considers appropriate” according to uncitral Arbitration Rules (1976) Art. 15 (1) (now Art. 17 (1)). The reaction of the State parties concerned was universally positive, see nafta Free Trade Commission Statement (Statement on Non-Disputing Party Participation), 44 ilm 796, No. 3 (May 2005); cf. also 2004 Canada Model bit/fipa Art. 39 (Agreement between Canada and [Country] for the Promotion and Protection of Investments, 2004 [hereinafter 2004 Canada Model bit/fipa]), and 2012 us Model bit Art. 28 (3), which both confer the power upon arbitral tribunals to accept amicus curiae submissions; see Eugenia Levine, Amicus Curiae in International Investment Arbitration: The Implications of an Increase in Third-Party Participation, 29 Berkeley J. Int’l L. 200, 208–209 (2011). Yet, in the course of the revision of the uncitral Arbitration Rules (1976), the proposal to incorporate an express power of the arbitral tribunal to accept amicus curiae submissions was ultimately not approved. Consequently, it is unclear, as two scholars remarked “[w]hether this is an indication of a high water mark in the participation of amici curiae in [unictral] investment treaty arbitration or simply an acknowledgement that general powers suffice for the purpose of permitting amici curiae participation”; see Boris Kasolowsky & Caroline Harvey, Amici Curiae in Investment Treaty Arbitrations: Authority and Procedural Fairness, Stockholm Int’l Arb. Rev. 1, 11 (2009). 346 uncitral Arbitration Rules (2010) Art. 34 (5): “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 or in relation to legal proceedings before a court or other competent authority.” 347 See uncitral Arbitration Rules (1976) Art. 32 (5): “The award may be made public only with the consent of both parties.”

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­rephrases “the fundamental rule of pre-emption” in Art. 1 (3)348 and thus serves primarily as clarification. While in icsid Arbitration, such disclosure restriction applies solely to the arbitral tribunal, in uncitral arbitration, even the parties themselves are prohibited from unilaterally releasing an award.349 In contrast to this general alignment towards procedural confidentiality, the newly established uncitral Rules on Transparency represent “a shift in the underlying presumption toward openness,”350 which runs as a common thread through the entire set of rules and, more than that, reflects the ongoing change of paradigm in public international law.351 As regards the commencement of an arbitral proceeding, for instance, Art. 2352 requires the parties to transmit the

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Besides national mandatory laws, limits may be set by judicial review or enforcement proceedings, since the involvement in legal proceedings before a court or a comparable authority in general justifies the publication of an award; see Webster, Handbook of uncitral Arbitration 509 (Art. 34, para. 34-134). uncitral Arbitration Rules (2010) Art. 1 (3)/UNCITRAL Arbitration Rules (1976) Art. 1 (2): “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.” See Caron & Caplan, uncitral Commentary 760 (quotation). Patocchi & Niedermaier, uncitral Rules 1208 (Art. 34, para. 637). Lise Johnson and Nathalie Bernasconi-Osterwalder, New uncitral Arbitration Rules on Transparency: Application, Content and Next Steps, itn (iisd), 7 (18 September 2013), available at (last visited September 2016). Cf. e.g. Anne Peters, Towards Transparency as a Global Norm, in Transparency in International Law (Andrea Bianchi & Anne Peters eds., 2013), who discusses the ongoing trend towards increased transparency in the different fields of public international law in the context of globalisation. The author explains this by developing the concept of “compensatory transparency,” which “is intended to compensate for transparency losses that are side-effects of globalization and privatisation”; see id. at 541–542. The global trend towards transparency in the field of investment law and arbitration is illustrated by the introduction of the uncitral Rules on Transparency and, building thereon, the eu Commission’s decision to include this set of rules into the ceta text – thus defining the transparency standard for its future iias; see the ceta text available at (last visited November 2016). For a discussion on this topic, see N. Jansen Calamita, Dispute Settlement Transparency in Europe’s Evolving Investment Treaty Policy, 15 J. World Inv. & Trade 645, 645–678 (2014). uncitral Rules on Transparency Art. 2: “Once the notice of arbitration has been received by the respondent, each of the disputing parties shall promptly communicate a copy of the notice of arbitration to the repository referred to under article 8. Upon receipt of the notice of arbitration from the respondent, or upon receipt of the notice of arbitration and a record of its transmission to the respondent, the repository shall promptly make available to the public information regarding the name of the disputing parties, the economic sector involved, and the treaty under which the claim is being made.”

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notice of arbitration to a repository, which “shall promptly make available to the public” basic case information. According to Art. 6,353 hearings shall be held openly as a matter of principle and only be restricted to the public in view of confidential information, procedural integrity, and logistical constraints. Art. 4354 and Art. 5355 provide the arbitral tribunal with the authority to accept written amicus curiae briefs as well as submissions from States which are not parties to the dispute but parties to the underlying treaty, as long as no adverse effects result for either the proceeding or the parties. In the latter case, the acceptance is even mandated if submissions on treaty interpretation are concerned.356 353 uncitral Rules on Transparency Art. 6: “(1) Subject to article 6, paragraphs 2 and 3, hearings for the presentation of evidence or for oral argument (‘hearings’) shall be public. (2) Where there is a need to protect confidential information or the integrity of the arbitral process pursuant to article 7, the arbitral tribunal shall make arrangements to hold in private that part of the hearing requiring such protection. (3) (…) However, the arbitral 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.” 354 uncitral Rules on Transparency Art. 4: “(1) After consultation with the disputing parties, the arbitral tribunal may allow a person that is not a disputing party, and not a non-disputing Party to the treaty (‘third person(s)’), to file a written submission with the arbitral tribunal regarding a matter within the scope of the dispute. (…) (5) The arbitral tribunal shall ensure that any submission does not disrupt or unduly burden the arbitral proceedings, or unfairly prejudice any disputing party. (6) The arbitral tribunal shall ensure that the disputing parties are given a reasonable opportunity to present their observations on any submission by the third person.” 355 uncitral Rules on Transparency Art. 5: “(1) The arbitral tribunal shall, subject to paragraph 4, allow, or, after consultation with the disputing parties, may invite submissions on issues of treaty interpretation from a non-disputing Party to the treaty. (2) The arbitral tribunal, after consultation with the disputing parties, may allow submissions on further matters within the scope of the dispute from a non-disputing Party to the treaty. In determining whether to allow such submissions, the arbitral tribunal shall take into consideration, among other factors it determines to be relevant, the factors referred to in article 4, paragraph 3, and, for greater certainty, the need to avoid submissions which would support the claim of the investor in a manner tantamount to diplomatic protection. (…) (4) The arbitral tribunal shall ensure that any submission does not disrupt or unduly burden the arbitral proceedings, or unfairly prejudice any disputing party. (5) The arbitral tribunal shall ensure that the disputing parties are given a reasonable opportunity to present their observations on any submission by a non-disputing Party to the treaty.” 356 See uncitral Rules on Transparency Art. 5 (2). For a discussion on the possibility of the non-disputing State party to make a submissions to the arbitral tribunal and the thereby expected harmonisation in treaty interpretation, see Gabriele Ruscalla, Transparency in International Arbitration: Any (Concrete) Need to Codify the Standard?, 3 Groningen J. Int’l L. 1, 15–22 (2015).

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­Regarding the disclosure of documents, Art. 3357 imposes the obligation to make available the pertinent documents, including awards, decisions, orders, pleadings of the parties, and transcripts of the hearings. In order to balance these transparency-friendly provisions against confidentiality concerns, they are subject to the exceptions laid down in Art. 7,358 namely “confidential or protected information,” “essential security interests,” and “integrity of the arbitral process.”359 The entire set of rules, which is incorporated into the uncitral Arbitration Rules (2010) via the newly inserted Art. 1 (4),360 is yet only applicable to uncitral arbitrations based on treaties that have been concluded after their entry into force in April 2014, unless the treaty parties decide to “opt out”; as for treaties concluded prior to the effective date, the treaty parties or the disputing parties may submit themselves to the rules by “opting in.”361 This latter option 357 uncitral Rules on Transparency Art. 3: “(1) Subject to article 7, the following documents shall 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 to the aforesaid documents and to expert reports and witness statements, if such table has been prepared for the proceedings, but not the exhibits themselves; any written submissions by the non-disputing Party(ies) to the treaty and by third persons, transcripts of hearings, where available; and orders, decisions and awards of the arbitral tribunal. (…).” 358 uncitral Rules on Transparency Art. 7: “(1) Confidential or protected information, as defined in paragraph 2 and as identified pursuant to the arrangements referred to in paragraphs 3 and 4, shall not be made available to the public pursuant to articles 2 to 6. (…) (5) Nothing in these Rules requires a respondent State to make available to the public information the disclosure of which it considers to be contrary to its essential security interests. (6) Information shall not be made available to the public pursuant to articles 2 to 6 where the information, if made available to the public, would jeopardise the integrity of the arbitral process as determined pursuant to paragraph 7. (...).” 359 See also Johnson, New uncitral Arbitration Rules on Transparency, 22–23 (18 September 2013). 360 uncitral Arbitration Rules (2010) Art. 1 (4): “For investor-State arbitrations initiated pursuant to a treaty providing for the protection of investments or investors, these Rules include the uncitral Rules on Transparency in Treaty-based Investors-State Arbitration (…), subject to article 1 of the Rules on Transparency.” 361 uncitral Rules on Transparency Art. 1: “(1) The uncitral Rules on Transparency in Treaty-based Investor-State Arbitration (‘Rules on Transparency’) shall apply to investorState arbitration initiated under the uncitral Arbitration Rules pursuant to a treaty providing for the protection of investments or investors (‘treaty’), concluded on or after 1st April 2014, unless the Parties to the treaty have agreed otherwise. (2) In investor-State arbitrations initiated under the uncitral Arbitration Rules pursuant to a treaty concluded before 1st April 2014, these Rules shall apply only when: (a) the parties to an arbitration (…) agree to their application in respect of that arbitration; or, (b) the Parties to

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has been made use of in the un Convention on Transparency in Treaty-Based Investor-State Arbitration (Mauritius Transparency Convention), which has been adopted by the un General Assembly on 10 December 2014 and opened for signature on 17 March 2015.362 In arbitral proceedings conducted under the icc Arbitration Rules (2012) and the scc Arbitration Rules (2010), no comparable provisions on transparency exist. These rules do not mandate the publication of basic information of a pending case or the award rendered at its conclusion. Regarding icc arbitrations, and in contrast to scc arbitrations,363 however, the disclosure of the award and other case-related documents by one of the parties or the arbitral tribunal is, as a general rule, not restricted.364 Moreover, both sets of rules do not provide the arbitral tribunal with the discretion to open hearings. Rather, consent of the disputing parties is required.365 As to the submission of amicus

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the treaty or, in the case of a multilateral treaty, the State of the claimant and the respondent State, have agreed after 1st April 2014 to their application. (…).” For early cases wherein the parties agreed to make use of the uncitral Rules on Transparency, see Iberdrola, s.a. and Iberdrola Energia. s.a.u. v. Plurinational State of Bolivia, pca Case No. 2015–05, Acta de Constitutión/Terms of Appointment (7 August 2015) [hereinafter Iberdrola v. Bolivia (Terms of Appointment)]; bsg Resources Ltd., bsg Resources (Guinea) Ltd. and bsg Resources (Guinea) sàrl v. Republic of Guinea, icsid Case No. arb/14/22, Procedural Order No. 2 on Transparency (17 September 2015) [hereinafter bsg v. Guinea (Procedural Order No. 2)] (application via uncitral Rules on Transparency Art. 1 (9)). un Convention on Transparency in Treaty-Based Investor-State Arbitration, un ga Res. 69/116, un Doc. No. A/RES/69/116 (10 December 2014) [hereinafter Mauritius Transparency Convention]. The uncitral Working Group II (Arbitration and Conciliation) prepared the draft of the Mauritius Transparency Convention, which State parties to treaties in existence prior to the effective date of the uncitral Rules on Transparency could sign in order to make them applicable to their treaty. Information on the current status of the Convention, i.e. on its current parties and signatories, is available at (last visited October 2016). See scc Arbitration Rules (2010) Art. 47: “Unless otherwise agreed by the parties, the scc and the Arbitral Tribunal shall maintain the confidentiality of the arbitration and the award.” In the icc Arbitration Rules (2012), confidentiality is not the general presumption. The arbitral tribunal is free to maximise the transparency of the process, unless a party raises a request for confidentiality pursuant to Art. 22 (3). The only exception is contained in Art. 11 (4), which provides that the reasons behind decisions on “the appointment, confirmation, challenge or replacement of an arbitrator (…) shall not be communicated.” See icc Arbitration Rules (2012) Art. 26 (3); scc Arbitration Rules (2010) Art. 27 (3).

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curiae briefs, the icc Arbitration Rules (2012) as well as the scc Arbitration Rules (2010) are silent.366 c Comment While icsid was the first to lift the veil of confidentiality in 2006, uncitral has joined up in 2014 and went even further in its approach to diminish the opaqueness of investment arbitrations in that it made the opening of hearings subject to the arbitral tribunal’s decision alone and mandated the disclosure of the award and numerous related documents. Initially, a major drawback mitigated the attractiveness of the uncitral Rules on Transparency. While the amended icsid Arbitration Rules apply, absent any deviating party agreement, to all proceedings to which the consent of the disputing parties had been perfected on the effective date (10 April 2006),367 the default applicability of the uncitral Rules on Transparency has been restricted to arbitrations based on a treaty that has been concluded after 1 April 2014. However, this limited scope of application may be remedied by the adoption of the Mauritius Transparency Convention, which makes the u ­ ncitral Rules on Transparency applicable to any investor-State dispute ensuing under iias concluded prior to the said key date and independent of the arbitral regime chosen.368 Accordingly, provided that the Mauritius Convention is signed and ratified by a sufficient number of States, icsid arbitration, which used to be the pioneer for open and accessible proceedings, will be caught up, if not overtaken with regard to the extent of document disclosure, by the uncitral 366 While an arbitral tribunal might certainly have the discretion to admit amicus curiae briefs if both parties agreed, it could – absent a provision comparable to icsid Arbitration Rule 37 (2) – probably not do so over a party’s objection, see Jean E. Kalicki, The Prospects for Amicus Submissions, Outside the icsid Rules, Kluwer Arbitration Blog (14 September 2012). As far as is known, the icc Court has twice admitted amicus curiae briefs in contract arbitrations, once by the eu Commission and once by a un agency, see id. 367 The date of perfection of consent usually coincides with the date of the initiation of the arbitral proceeding, see Schreuer et al., icsid Commentary 687 (Art. 44, para. 46). For elaborations on icsid Convention Art. 44, the “inter-temporal rule,” and the determination of the point of time from which on procedural changes to the icsid Arbitration Rules become effective for the disputing parties, see below Ch. 3.B.II.1.b.bb. (esp. fn. 1494). 368 See Mauritius Transparency Convention Art. 2 (1) and (2), which stipulate the “bilateral or multilateral application” for cases in which the host State-respondent and the home State of the investor-claimant are parties to the Convention and have “not made a relevant reservation” under Art. 3 (1), and the “unilateral offer of application” for cases in which only the host State-respondent is a party to the Convention, which has “not made a relevant reservation” under Art. 3 (1), and the investor-claimant agrees to the application.

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Rules on Transparency. In view of these modern, new transparency standards, the question arises of whether the icsid arbitration regime, in turn, is paying sufficiently tribute to the public interests involved in investment arbitrations. 5 Review of Awards a icsid Arbitration icsid Convention Art. 53 (1)369 ensures the finality of an icsid arbitral award by shielding it from any external review.370 Internal post-award remedies are, however, available, but limited to those exhaustively provided in icsid Convention Arts. 49 (2) to 52. They consist of requests for minor supplementations and rectifications,371 requests for interpretation,372 requests for revision based on a newly-discovered decisive facts,373 and, most importantly, requests for annulment.374 All these instruments have in common, first, that they are designed in a particularly narrow manner and, second, that requests for review are exclusively submitted to internal authorities, such as the arbitral tribunal or an ad hoc committee. 369 icsid Convention Art. 53 (1): “The award shall be binding on the parties and shall not be subject to any appeal or any other remedy except for those provided for in this Convention.” 370 Schreuer et al., icsid Commentary 1097 (Art. 53, para. 2). 371 icsid Convention Art. 49 (2): “The Tribunal upon the request of a party made within 45 days after the date on which the award was rendered may after notice to the other party decide any question which it had omitted to decide in the award, and shall rectify any clerical, arithmetical or similar error in the award. (…).” 372 icsid Convention Art. 50: “(1) If any dispute shall arise between the parties as to the meaning or scope of an award, either party may request interpretation of the award by an application in writing addressed to the Secretary-General. (…).” 373 icsid Convention Art. 51: “(1) Either party may request revision of the award by an application in writing addressed to the Secretary-General on the ground of discovery of some fact of such a nature as decisively to affect the award, provided that when the award was rendered that fact was unknown to the Tribunal and to the applicant and that the applicant’s ignorance of that fact was not due to negligence. (…).” 374 icsid Convention Art. 52: “(1) Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the Tribunal was not properly constituted; (b) that the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has been a serious departure from a fundamental rule of procedure; or (e) that the award has failed to state the reasons on which it is based. (…).” For further details on the icsid review system, see Broches, The Convention on the Settlement of Investment Disputes 337, 396–399; Reed et al., Guide to icsid Arbitration 159–165; for further elaborations on the icsid annulment remedy, see below Ch. 2.E.II.2.b.

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The first aspect, the narrow conception of the icsid review remedies and in particular of the annulment mechanism, is a double-edged sword: on the one hand, limiting the annulment review to violations of basic, mainly procedural principles and policies enhances the persistence of awards; on the other hand, this might be at the cost of substantive accuracy and fairness. Nevertheless, in contrast to more broadly designed remedies such as appellate review, which sacrifices finality for the sake of correctness, annulment allows these generally opposing principles to be reconciled, at least to a certain, limited extent.375 This being said, it must nonetheless be noted that the comparatively narrow conception of the annulment grounds has frequently been ignored by arbitral tribunals in practice, which has resulted in considerable inconsistencies in icsid annulment jurisprudence.376 The second aspect, the exclusive review by system-internal instruments, is an important manifestation of the autonomous, delocalised, and self-contained character of the icsid regime, which is based on sovereign consent. It means that challenges of awards do not need to be made through generally less efficient review proceedings in the national courts at the seat of arbitration, but may be brought, independently thereof, internally within the system itself. b Alternative Forms of Arbitration Awards rendered under the uncitral arbitration regime are “final” pursuant to Art. 34 (2) of the uncitral Arbitration Rules (2010).377 It is, however, only within the narrower context of the arbitral proceeding itself that an award becomes final once the decision of the arbitral tribunal becomes irrevocable.378 In the wider context of an arbitral proceeding, i.e. in the context of the external rules governing an arbitration proceeding, the finality of an award depends on the review concept foreseen in the lex arbitri.379 Since in most States, domestic courts are empowered – on request of one of the parties – to exercise control over arbitral awards rendered within their jurisdiction in “set aside” 375 Schreuer et al., icsid Commentary 903 (Art. 52, para. 15). See also Thomas Walsh, Substantive Review of icsid Awards: Is the Desire for Accuracy Sufficient to Compromise Finality?, 24 Berkeley J. Int’l L. 444, 458–459 (2006). 376 For further elaborations on the inconsistent interpretation of annulment grounds by icsid tribunals, see below Ch. 2.E.II.2.a.dd. and Ch. 2.E.II.2.b. 377 uncitral Arbitration Rules (2010) Art. 34 (2), 1st sentence: “All awards shall be made in writing and shall be final and binding on the parties.” 378 Caron & Caplan, uncitral Commentary 738–739. Besides the fulfilment of all formal requirements, this presupposes the parties’ knowledge of the tribunal’s decision via transmission in the sense of uncitral Arbitration Rules (2010) Art. 34 (6); see id. at 739. 379 Id. at 740. See also Blackaby & Partasides, Redfern and Hunter on International Arbitration 569–570 (paras. 10.01–10.05).

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­ roceedings, awards do not become final until the available remedies have p been exhausted.380 Accordingly, the award is subject to an external review mechanism, which varies depending on the situs of the arbitration. In many jurisdictions, however, the grounds for challenge have been inspired by those contained in the uncitral Model Law on International Commercial Arbitration,381 which, in turn, have been modelled along the lines of New York Convention Art. v.382

380 Caron & Caplan, uncitral Commentary 740. 381 uncitral Model Law on International Commercial Arbitration, 21 June 1985, ga Res. 40/72, un gaor, 40th Sess, Supp. No. 17, Annex 1, un Doc. A/40/17 (1985) (amendment 7 July 2006) [hereinafter uncitral Model Law]. For general comments on the uncitral Model Law, see Goode et al., Transnational Commercial Law 564–567 (paras. 19.26–19.34). See uncitral Model Law Art. 34 (2). For further comments on this provision, see Aron Broches, Commentary on the uncitral Model Law on International Commercial Arbitration 188–201 (Kluwer Law and Taxation, Deventer/Boston, 1990); Howard M. Holtzmann & Joseph E. Neuhaus, A Guide To The uncitral Model Law On International Commercial Arbitration: Legislative History And Commmentary 912–922 (Kluwer Law and Taxation, Deventer/Boston, 1989). 382 New York Convention Art. v: “(1) 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 (…) 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, (…); (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. (2) 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.”

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Although these grounds are narrowly tailored and largely limited to procedural errors, they mostly contain a vaguely formulated “public policy” exception383 as a gateway to substantive review. In that manner, States reserve their right of “ultimate control over the arbitral process.”384 Since a broad understanding of the concept of “public policy” as referring to domestic public policy would unduly compromise the finality of awards – not least because this would encourage abusive requests for review by the unsuccessful party385 – it is considered by most as comprising solely international public policy.386 Nevertheless and not least due to the lack of a commonly agreed definition, a certain “nebulousness” of this concept remains,387 leading to legal uncertainty and unpredictability. Challenges of awards rendered in institutional arbitrations under the icc Arbitration Rules (2012) and scc Arbitration Rules (2010) work in the same way, i.e. by external review in national courts.388 A particularity of the icc Arbitration Rules (2012) is, however, that it provides for an advance waiver of ­review

383 384 385

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387 388

See Blackaby & Partasides, Redfern and Hunter on International Arbitration 582 (para. 10.38). See more generally on the New York Convention Herbert Kronke et al. (eds.), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Wolters Kluwer, Austin/Boston/Alphen aan den Rijn, 2010). See New York Convention Art. v (2) (b). Audley Sheppard, Public Policy and the Enforcement of Arbitral Awards: Should there be a Global Standard?, 1 tdm 1, 1 (2004). Id.; Reinmar Wolff, Article v (2) (b), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – Commentary 406 (Art. v, para. 491) (Reinmar Wolff ed., 2012), with further elaborations on the general concept of “public policy.” Dirk Otto & Omaia Elwan, Article v (2), in Recognition and Enforcement of Foreign­ Arbitral Awards: A Global Commentary on the New York Convention 366–367 (Herbert Kronke et al. eds., 2010), with further references to related literature and case law; Albert Jan van den Berg, The New York Arbitration Convention of 1958 – Towards a Uniform Judicial Interpretation 361 (Kluwer Law and Taxation, Deventer/Boston, 1981), who points out that “even if public policy is acknowledged to be ‘international,’ its basis is national as it can be sanctioned only by a national judge.” See also Ulrich C. Meyer, The Enforcement of Annulled Arbitral Awards: Towards a Uniform Interpretation of the 1958 New York Convention, 3 Uniform L. Rev. 583, 596 (1998). Terminology inspired by Blackaby & Partasides, Redfern and Hunter on International Arbitration 598 (para. 10.84). See, on the effect of an award, icc Arbitration Rules (2012) Art. 34 (6), 1st sentence; scc Arbitration Rules (2010) Art. 40.

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by stipulating that the disputing parties are “deemed to have waived their right to any form of recourse insofar as such waiver can validly be made”389 under the applicable national law.390 c Comment The self-contained review system is one of the main characteristics of icsid arbitration. It entails that awards rendered by icsid tribunals are shielded against review by national courts and are solely subject to the limited control instances provided in the icsid Convention. The icsid regime thus offers a comparatively high degree of “external” finality and, more generally, of legal security for the successful party to an arbitration. A considerable drawback in icsid practice is, however, the inconsistent interpretation of the annulment grounds by arbitral tribunals, which tend to overstep the narrow limits set by the icsid Convention in order to compensate the lack of a substantive review. Awards rendered by ad hoc tribunals under the uncitral Arbitration Rules (2010) are less reliable in terms of finality. Although the uncitral regime guarantees “internal” finality in that it does not foresee any review on the level of the arbitration itself, the awards rendered by its tribunals are subject to review in national courts, which hence retain the ultimate control over the outcomes of arbitral proceedings conducted within their jurisdiction. 6 Recognition and Enforcement of Awards a icsid Arbitration Under icsid Convention Art. 54 (1),391 each contracting State, i.e. not only State parties to a dispute,392 is obliged to recognise and enforce awards “as if they were a final judgement of a court in that State.” Accordingly, a party seeking to obtain the redress awarded does not depend on the domestic law of the place of recognition and enforcement in order to obtain the sums awarded, 389 icc Arbitration Rules (2012) Art. 34 (6): “By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.” 390 For further comments, see Reiner & Aschauer, icc Rules 162–163 (Art. 34, paras. 689–692). 391 icsid Convetion Art. 54 (1): “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. (…).” 392 Broches, The Convention on the Settlement of Investment Disputes 337, 399–400.

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but only needs to submit a certified copy of the award to the competent national authority, which will then issue the requisite leave.393 Moreover, it does not risk any challenges of the award in domestic courts.394 The recognition and enforcement of icsid awards is thus largely shielded from external adverse effects and is therefore another important facet of the delocalisation of the icsid regime. It needs to be added, however, that automatic enforcement applies to pecuniary obligations only.395 This implies that awards containing non-pecuniary obligations – which are very rare though396 – are confirmed as authentic and acknowledged as res judicata,397 but that the national court will not render assistance in carrying it out, e.g. by imposing sanctions for noncompliance.398 Moreover, the enforcement obligation under icsid Convention Art. 54 (1) does not interfere with “the law in force in any Contracting State relating to immunity of that State (…) from execution.”399 Domestic law may hence apply at the stage of execution in order to protect the public property of the State involved.400 A contracting State’s failure to comply with the duty to recognise and enforce an award in its domestic courts constitutes a

393 icsid Convention Art. 54 (2): “A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General.” 394 Crina Baltag, Enforcement of Arbitral Awards Against States, 19 Am. Rev. Int’l Arb. 319, 395 (2008). 395 Schreuer et al., icsid Commentary 1136 (Art. 54, para. 72). 396 Id. at 1137 (Art. 54, paras. 76–79); Christoph Schreuer, Non-Pecuniary Remedies in icsid Arbitration, 20 Arb. Int’l 325, 329–331 (2004), referring to the rather exceptional example of Antoine Goetz and others v. Republic of Burundi, icsid Case No. arb/95/3, Award (10 February 1999) [hereinafter Goetz v. Burundi (Award)]. 397 Schreuer et al., icsid Commentary 1128–1129 (Art. 54, paras. 42–47). This limitation applies only to the enforcement of awards, which should not be confused with the recognition of awards as such. 398 On the difference between recognition and enforcement of awards in general, see Herbert Kronke, The New York Convention Fifty Years on: Overview and Assessment (Introduction), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 7–8 (Herbert Kronke et al. eds., 2010); Blackaby & Partasides, Redfern and Hunter on International Arbitration 610–612 (paras. 11.19–11.23). 399 See icsid Convention Art. 55; cf. also icsid Convention Art. 54 (3). 400 Giuliana Cane, The Enforcement of icsid Awards: Revolutionary or Ineffective?, 15 Am. Rev. Int’l Arb. 439, 446 (2004).

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breach of this multilateral treaty. In this event, the remedies of diplomatic protection and international claims are available pursuant to icsid ­Convention Art. 27.401 b Alternative Forms of Arbitration Unlike the icsid Convention, the uncitral Arbitration Rules (2010) do not accord the legal status of a final domestic court judgment to the awards rendered by an arbitral tribunal. Their recognition and enforcement thus depend on the national legislation of the enforcing country, and, where applicable,402 the conditions laid down in the New York Convention. Its central norm, Art. iii,403 obliges each contracting State “to recognize arbitral awards 401 icsid Convention Art. 27 (1): “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.” The icsid member States may also make use of icsid Convention Art. 64, which provides that: “[a]ny 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.”; see Schreuer et al., icsid Commentary 426 (Art. 27, para. 38). 402 A list of the New York Convention countries is available at (last visited September 2016). 403 New York Convention Art. iii: “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 in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition and enforcement of arbitral awards to which this Convention applies than are imposed on the recognition and enforcement of domestic arbitral awards.” The “binding” nature of an award relates to its legal force requiring the parties to comply with its terms. The prerequisite of “finality” of an award in the country of its origin, by contrast, has been abolished by the New York Convention, since it had led to a “double exequatur” requirement in the past under the preceding Geneva Convention (Convention on the Execution of Foreign Arbitral Awards, 26 September 1927, lnts 302). This implied that a party had to obtain a leave for enforcement from the country where the award was rendered in addition to the leave from the country where it was to be enforced. See van den Berg, The New York Arbitration Convention of 1958 – Towards a Uniform Judicial Interpretation 337; Andreas Börner, Article iii, in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 118–120 (Herbert Kronke et al. eds., 2010); Caron & Caplan, uncitral Commentary 741.

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as ­binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon.” Yet, according to Art. v,404 national courts are still empowered to refuse the recognition and/or enforcement of an award on one of the grounds listed therein. These comprise, first, certain procedural shortcomings to be pleaded by the parties,405 and second, concerns of arbitrability and public policy as grounds for an ex officio refusal.406 In view of this possibility of challenges throughout the enforcement proceedings and due to considerable variations within the respective national enforcement laws, the enforceability of an award under the New York Convention is, in comparison with the icsid regime, more uncertain. The recognition and enforcement procedure of awards rendered under the icc Arbitration Rules (2012) and the scc Arbitration Rules (2010) follows the same rules. It is based on the domestic legislation of the forum and, where applicable, harmonised by provisions of the New York Convention.407 c Comment Apart from the autonomous icsid review system, the icsid mechanism of direct and simple recognition and enforcement is another unique feature of this arbitration regime. Although this procedural stage requires, at some point, the “interaction of international and domestic law”408 and hence may not be considered as entirely self-contained,409 it is still isolated from the individual enforcement procedures in municipal courts. Recognition and enforcement of icsid awards are thus location-independent in that they are shielded from any outside interferences. Accordingly, even in this respect, icsid proceedings are rooted in a “truly international comprehensive arbitration system.”410 For further elaborations on the requirement of “bindingness” and its varying interpretations, see Dana H. Freyer & Hamid G. Gharavi, Finality and Enforceability of Foreign Arbitral Awards: From “Double Exequatur” to the Enforcement of Annuled Awards: A Suggested Path to Uniformity Amidst Diversity, 13 icsid Rev. – filj 101, 101–123 (1998). 404 For the text of New York Convention Art. v, see fn. 382. 405 See New York Convention Art. v (1) (a) to (e). For a discussion of New York Convention Art. v (1) (e), which lists the non-bindingness and the setting aside or suspension of the award in the country of its origin as grounds for refusal of recognition and enforcement, see Goode et al., Transnational Commercial Law 601–604 (paras. 19.136–19.137). 406 See New York Convention Art. v (2) (a) and (b). For further elaborations on the much debated “public policy” exception in New York Convention Art. v (2) (b), see Ch. 1.C.II.5.b. 407 See icc Arbitration Rules (2012) Art. 34 (6), 1st sentence; scc Arbitration Rules (2010) Art. 40. 408 Broches, Awards Rendered Pursuant to the icsid Convention 287, 288. 409 Schreuer et al., icsid Commentary 1120 (Art. 54, para. 10). 410 Cane, Enforcement of icsid Awards 439, 444.

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In contrast to this, the recognition and enforcement of awards rendered in uncitral arbitrations or, more generally, in non-ICSID arbitrations, is governed by national court proceedings and, in the majority of cases, by the New York Convention. Parties seeking to obtain the redress awarded are therefore faced with a considerable degree of legal uncertainty, which originates from the great variety of respective domestic procedures and from the risk that enforcement may be refused entirely, e.g. based on the vague and relatively wide “public policy” exception set out in the New York Convention. 7 Cost of Proceedings and Their Allocation a icsid Arbitration Institutional arbitrations under the icsid regime involve charges “for the use of the facilities of the Centre” pursuant to icsid Convention Art. 59.411 These are fixed in the icsid Schedule of Fees412 and consist of a non-refundable lodging fee of currently usd 25,000 in case of requests for the institution of arbitration proceedings413 and of an annually payable administrative fee of usd 32,000 at present.414 The default rule regarding fees and expenses payable to arbitrators is stipulated in icsid Convention Art. 60 (1).415 It obliges the arbitral tribunal to determine the remuneration of its members “within the limits established (…) by the Administrative Council and after consultation with the Secretary-General.” The different types of fees, expenses, and allowances are listed in the icsid Administrative and Financial Regulations416 and are concretised in the Schedule of Fees, which foresees, inter alia, a time-based fee of usd 3,000 “per day of meetings or other work performed in connection with 411 icsid Convention Art. 59: “The charges payable by the parties for the use of the facilities of the Centre shall be determined by the Secretary-General in accordance with the regulations adopted by the Administrative Council.” 412 The icsid Schedule of Fees is determined by the Secretary-General on a regular basis. Its latest version is effective as of 1 July 2016 and is available at (last visited September 2016). 413 See icsid Schedule of Fees, para. 1. The fee for other types of requests, e.g. for requests of annulment of an award, is only usd 10,000; see icsid Schedule of Fees, para. 2. See also icsid Administrative and Financial Regulation 16. 414 See icsid Schedule of Fees, para. 5. 415 icsid Convention Art. 60 (1): “Each Commission and each Tribunal shall determine the fees and expenses of its members within limits established from time to time by the Administrative Council and after consultation with the Secretary-General.” 416 See icsid Administrative and Financial Regulation 14. For an overview of the different possible methods of calculating arbitrators’ fees, see e.g. John Yukio Gotanda, Setting Arbitrators’ Fees: An International Survey, 33 Vand. J. Transnat’l L. 779, 782–788 (2000).

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the proceedings.”417 Finally, the assessment of the “expenses incurred by the parties” and the apportionment of “those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre” are left to the full discretion of the arbitral tribunal according to icsid Convention Art. 61 (2);418 the decision on cost and thus also the underlying reasons shall “form part of the award.”419 Although most of them follow the guiding principles established in the Convention’s travaux préparatoires and in arbitral practice when deciding the allocation of cost,420 the practice of icsid tribunals in allocating cost is far from consistent.421 b Alternative Forms of Arbitration In ad hoc arbitrations under the uncitral Arbitration Rules (2010), flat ­charges for the commencement or administration of an arbitral proceeding are inexistent. Administrative fees are only incurred if external institutional support is used to facilitate and expedite the proceeding. As regards the cost 417 See icsid Schedule of Fees, para. 3. Further specifications on fees, per diem subsistence allowances, travel expense reimbursements, etc. are set out in the Memorandum on the Fees and Expenses of icsid Arbitrators (6 July 2005), available at (last visited September 2016), referred to in Schreuer et al., icsid Commentary 1220 (Art. 60, para.7). 418 icsid Convention Art. 61 (2): “In the case of arbitration proceedings 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. Such decision shall form part of the award.” See also icsid Arbitration Rule 28. 419 See also icsid Convention Art. 48 (3), which requires that the award “shall state the reasons upon which it is based.” If the tribunal fails to do so, the award may be annulled by virtue of Art. 52 (1) (e). See Schreuer et al., icsid Commentary 1235 (Art. 61, para. 41). For empirical evidence on the practice of some tribunals to omit stating the reasons for their decision on cost allocation; see Thomas H. Webster, Efficiency in Investment Arbitration: Recent Decisions on Preliminary and Cost Issues, 25 Arb. Int’l 469, 494 (2009), referred to in Webster, Handbook of uncitral Arbitration Art. 42, para. 42-21. 420 Schreuer et al., icsid Commentary 1236 (Art. 61, para. 44), with further elaborations on these principles, which take into account the circumstances of the case, such as e.g. a party’s procedural misconduct or its success on the merits. 421 Webster, Efficiency in Investment Arbitration 469, 493–505, 507–511. For further elaborations on the inconsistency of cost allocation decisions rendered by icsid tribunals, see below Ch. 2.E.II.2.a.cc.

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arising in the course of an arbitral proceeding, Art. 40422 obliges the arbitral tribunal to fix them in the final award, i.e. places their determination in the full discretion of the latter. Unlike under the icsid regime, there is no numerical limitation in the form of a uniform fee schedule. In lieu thereof, Art. 41 (1)423 appeals to fairness and good faith of the arbitrators when determining their own fees and expenses, which “shall be reasonable in amount, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and any relevant circumstances of the case.” Moreover, Art. 41 (2),424 refers to the schedules and methods of fee determination used by a possible appointing authority, which shall be taken into consideration by the arbitral tribunal “to the extent that it considers appropriate in the circumstances of the case.” Arts. 41 (3) and (4),425 being fundamentally modified throughout 422 uncitral Arbitration Rules (2010) Art. 40 (2): “The term ‘costs’ includes only: (a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be fixed by the tribunal itself in accordance with article 41; (b) The reasonable travel and other expenses incurred by the arbitrators; (c) The reasonable costs of expert advice and of other assistance required by the arbitral tribunal; (d) The reasonable travel and other expenses of witnesses to the extent such expenses are approved by the arbitral tribunal; (e) 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; (f) Any fees and expenses of the appointing authority as well as the fees and expenses of the SecretaryGeneral of the pca.” 423 uncitral Arbitration Rules (2010) Art. 41 (1): “The fees and expenses of the arbitrators shall be reasonable in amount, taking into account the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and any relevant circumstances of the case.” 424 uncitral Arbitration Rules (2010) Art. 41 (2): “If there is an appointing authority and it applies or has stated that it will apply a schedule or particular method for determining the fees for arbitrators in international cases, the arbitral tribunal in fixing its fees shall take that schedule or method into account to the extent that it considers appropriate in the circumstances of the case.” 425 uncitral Arbitration Rules (2010) Art. 41 (3): “Promptly after its constitution, the arbitral tribunal shall inform the parties as to how it proposes to determine its fees and expenses, including any rates it intends to apply. Within 15 days of receiving that proposal, any party may refer the proposal to the appointing authority for review. If, within 45 days of receipt of such a referral, the appointing authority finds that the proposal of the arbitral tribunal is inconsistent with paragraph 1, it shall make any necessary adjustments thereto, which shall be binding upon the arbitral tribunal.” uncitral Arbitration Rules (2010) Art. 41 (4): “(a) When informing the parties of the arbitrators’ fees and expenses that have been fixed pursuant to article 40, paragraphs 2 (a) and (b), the arbitral tribunal shall also explain the manner in which the corresponding amounts have been calculated; (b) Within 15 days of receiving the arbitral tribunal’s

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the revisions of the uncitral Arbitration Rules in 2010, add further safeguards against excessive arbitrator fees by creating an ex ante duty to provide information on how a tribunal “proposes to determine its fees and expenses,” and an ex post explanation duty as to “the manner in which the corresponding amounts have been calculated.” In addition, both sorts of communications may be referred to the appointing authority – or, in the absence thereof or if the appointing authority fails to act timely, to the pca Secretary-General – for review and for binding adjustment thereto, if necessary.426 Finally, concerning the decision on costs, Art. 42 (1)427 sets up the basic rule that “[t]he cost of the arbitration shall in principle be borne by the unsuccessful party,” but, in the same vein, allows for derogations from this “cost follow the event” principle, if the arbitral tribunal determines “that apportionment is reasonable, taking into account the circumstances of the case.” This may be done even without stating any reasons.428 Since the said conditions are not further defined, arbitrators have a wide discretion on how to apportion the cost of arbitration between



determination of fees and expenses, any party may refer for review such determination to the appointing authority. If no appointing authority has been agreed upon or designated, or if the appointing authority fails to act within the time specified in these Rules, then the review shall be made by the Secretary-General of the pca; (c) If the appointing authority or the Secretary-General of the pca finds that the arbitral tribunal’s determination is inconsistent with the arbitral tribunal’s proposal (and any adjustment thereto) under paragraph 3 or is otherwise manifestly excessive, it shall, within 45 days of receiving such a referral, make any adjustments to the arbitral tribunal’s determination that are necessary to satisfy the criteria in paragraph 1. Any such adjustments shall be binding upon the arbitral tribunal; (…).” 426 For further elaborations on these newly established information duties and review remedies in uncitral Arbitration Rules (2010) Art. 41 (3) and (4), see Caron & Caplan, uncitral Commentary 856–862; Webster, Handbook of uncitral Arbitration 583–587 (Art. 41, paras. 41-29–41-55). uncitral Arbitration Rules (1976) Art. 39 (3) and (4), by contrast, foresees only “guidance from and non-binding consultation with the appointing authority”; see Caron & Caplan, uncitral Commentary 862–863, with further elaborations. 427 uncitral Arbitration Rules (2010) Art. 42 (1): “The costs of the arbitration shall in principle be borne by the unsuccessful party or parties. However, the arbitral tribunal may apportion each of such costs between the parties if it determines that apportionment is reasonable, taking into account the circumstances of the case.” 428 For empirical evidence on the practice of some tribunals to omit stating the reasons for their decision on cost allocation; see Webster, Efficiency in Investment Arbitration 469, 494, referred to in Webster, Handbook of uncitral Arbitration 593 (Art. 42, para. 42-21).

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the ­parties.429 This, however, has led to inconsistent decisions and, in consequence, to an unforeseeability of the cost burden to be borne by the parties.430 In institutional arbitrations under the icc Arbitration Rules (2012) or the scc Arbitration Rules (2010), administrative fees and the arbitrators’ fees are determined by the icc Court or the scc Board respectively on an ad valorem basis in accordance with graded schedules based on the amount in dispute.431 To cover the estimated cost of the arbitration, the said organs determine an advance on cost to be deposited by the parties.432 The decision on cost is, in both systems, at the full discretion of the arbitral tribunal.433 c Comment icsid arbitrations are, in terms of administrative cost of arbitration, characterised by the comparatively high and flat lodging and administrative fees. A further characteristic feature is the method of determining the arbitrators’ fees, which are calculated – independently from the amount in dispute – on the basis of a fixed and transparent daily rate that is below the average rate for legal counselling services.434 While in uncitral arbitrations, no comparable lump sum fees are charged at the initiation of a proceeding, the determination of the arbitrators’ fees, being in principle at the discretion of the tribunals without any limitation by fixed fee schedules, is rather opaque and incalculable. Although the information duties and review remedies established in the 429 Caron & Caplan, uncitral Commentary 866. Nevertheless, past uncitral jurisprudence has developed certain criteria for interpreting the expression “the circumstances of the case.” These comprise “the success of the parties on their claims, the conduct of the parties during the arbitral proceedings, the nature of the parties to the dispute, and the nature of the dispute resolution mechanism”; see id. at 870–875, esp. 870 (quotation), with reference, inter alia, to Development and Resources Corporation v. Government of the Islamic Republic of Iran, Award No. 485-60-3 (25 June 1990), reprinted in 25 iusct Rep. 20 (1990) (taking into account the success of the parties on their claims); Dadras International et al. v. Islamic Republic of Iran et. al., Award No. 567-213/215-3 (7 November 1995), reprinted in 31 iusct Rep. 127 (1995) (taking into account the conduct of the parties during the arbitral proceeding). 430 Id. at 866, with case law references. See also Webster, Efficiency in Investment Arbitration 469, 493–505, 512. 431 See icc Arbitration Rules (2012) Art. 37 (1); scc Arbitration Rules (2010) Art. 43 (2). In icc arbitrations, the claimant has to pay a non-refundable filing fee in the amount of usd 3,000, which will yet be credited to his advance on cost, see Reiner & Aschauer, icc Rules 168 (Art. 36, para. 712). 432 See icc Arbitration Rules (2012) Art. 36; scc Arbitration Rules (2010) Art. 45. 433 See icc Arbitration Rules (2012) Art. 37 (4); scc Arbitration Rules (2010) Art. 43 (5). 434 These comparatively low rates have been explained by the public nature of icsid arbitrators’ services; see Schreuer et al., icsid Commentary 1220 (Art. 60, para. 9).

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uncitral Arbitration Rules (2010) aim to mitigate the danger of abuses of the arbitrator’s financial decision making authority, it remains questionable whether they suffice, in particular since the parties might be hesitant to make use of their referral option for fear of antagonising the arbitral tribunal.435 The by far most significant cost factor of any investment arbitration, lies, however, in the fees and expenses incurred by the disputing parties. These arise independently of the respective arbitration regime and consist, before all, of the cost incurred for legal counseling and the preparation of legal opinions. ­According to oecd statistics,436 of the approx. 8 Million usd of average cost for an investment arbitration, a share of roughly 82% is generated by the ­charges for legal counsel and experts. The remaining percentage points are divided into around 16% for arbitrators’ fees and around 2% for administrative fees. As can be seen from this proportionate distribution of cost, the differences with regard to the institutional handling of administrative and arbitrator’s fees are of limited importance for the choice of an arbitration regime. The cost incurred by the disputing parties for their legal assistance and the allocation thereof are of much greater significance. In the latter respect, the icsid and uncitral arbitral regime share the problem of inconsistent decisions on cost allocation. Even if guiding principles have been developed throughout the icsid drafting history and in uncitral case law, and notwithstanding the basic premise that the cost shall be borne by the unsuccessful party in uncitral arbitration, the final decision on the apportionment of cost remains within the ultimate discretion of the arbitral tribunals and is thus unpredictable. iii Summary and Evaluation The previous section provided a general overview of the icsid regime, which is presently taking the lead in its capacity as a forum for the settlement of disputes between private investors and States. In a first step, basic aspects such 435 Webster, Handbook of uncitral Arbitration 578–579 (Art. 41, paras. 41-4–41-6), referring to uncitral Working Group II (Arbitration & Conciliation), Report of the Working Group on Arbitration and Conciliation on the Work of its Forty-eighth Session (4–8 February 2008) para. 20 (2008). 436 David Gaukrodger & Kathryn Gordon, Investor-State Dispute Settlement: A Scoping Paper for the Investment Policy Community, oecd Working Papers on International Investment 1, 19 (2012). The authors of the oecd study discuss, inter alia, the policy problems raised by high cost investment arbitration. These include disadvantages for developing countries in their role as respondents due to their generally limited legal expertise in that field, for small and medium-sized enterprises as claimants in view of their comparably small budget for lawsuits, and, in more general terms, for disputes involving small sums of money, see id. at 23–24.

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as the history, the central structures, characteristics and goals, and also the quantitative dimensions of arbitration under the icsid Convention were considered. Following on from this, the focus was laid on a qualitative strengths and weaknesses analysis of icsid arbitration proceedings and their legal conception. This analysis has been based on a comparative law approach, which included arbitration proceedings governed by the uncitral Arbitration Rules (2010) and, in a supplementary manner, also institutionalised arbitrations pursuant to the icc Arbitration Rules (2012) and the scc Arbitration Rules (2010) as comparators. It was found that the main weaknesses of icsid arbitration as compared to rival arbitration regimes consist in its inconsistently construed requirements for objective jurisdiction and for provisional measures and, in the latter respect, also in the missing possibility of court enforcement of such measures. As for transparency aspects, icsid arbitration, which used to be the pioneer for open and accessible proceedings, is expected to be caught up, or rather overtaken with regard to the extent of document disclosure, by the uncitral Rules on Transparency. This, however, is subject to the condition that a sufficient number of States decides, in the short- to medium-term, to sign and ratify the Mauritius Transparency Convention in order to extend the limited temporal scope of application to treaties concluded after 1 April 2014. Only then would this major shortcoming of effectiveness be offset. In terms of time required for the constitution of an arbitral tribunal and as regards cost ­incurred by arbitral proceedings, icsid and uncitral arbitration are largely on a par. As far as costs of proceedings and in particular their allocation are concerned, it is due to the inconsistent, discretion-based arbitral jurisprudence emanating from both regimes that no decisive difference may be established. The relative advantages of icsid arbitration pertain to the efficiency of the system, which relates back to the delocalised mechanisms of review and of recognition and enforcement of awards. Although, admittedly, the review system experienced considerable malfunctions in the past and thus has caused increasing calls for a broader, substantive review remedy, its narrowly tailored conception still yields the benefits of a self-contained system, which consist in particular in a high and reliable degree of “external” finality of awards. Finally and most importantly, the direct and automatic recognition and enforcement of awards by domestic courts, which shields icsid awards from outside interference by national enforcement proceedings and considerably adds to the general effectiveness of the system, is so far a unique and decisive feature in the competition between the various arbitration regimes. Both the quantitative and the qualitative aspects of icsid arbitration set out in the foregoing were decisive for the choice of this arbitral regime as the central object of study of this work. From a quantitative viewpoint, the icsid

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has continuously handled the by far highest caseload of investment arbitration as compared to alternative regimes. The resulting case law thus constitutes a sufficiently representative basis for analysing the problem of inconsistency in international investment jurisprudence. From a qualitative perspective, the icsid – being a prototype system for investor-State arbitration – is particularly suited for the settlement of this kind of disputes. Its specialised design, tailored to the needs of hybrid, semi-private and semi-public disputes, is reflected in various procedural features. These include the self-containedness of the arbitral procedure and the delocalised, direct enforcement mechanism. A further beneficial procedural feature consists in the relatively high degree of transparency, which takes into account the public interests regularly involved and which facilitates the public accessibility of awards and decisions – not least for purposes of scientific studies. The icsid regime hence appears to be suitable, if not predestined, to serve as the object of investigation of an analysis of inconsistency in international investment jurisprudence and of targeted legal reforms based thereon. Given that jurisprudential inconsistency is a complex phenomenon with far-reaching implications for procedural and substantive questions, proposals for reform may even cure many of the smaller-scale problems inherent to the icsid system. More consistent and coherent interpretations of central legal terms could help, for instance, to tackle the legal uncertainties arising from the objective jurisdictional requirements and the provisional measures requirements as contained in icsid Convention Arts. 25 (1) and 47, from the annulment grounds set out in icsid Convention Art. 52 (1), and from the rule on cost allocation stipulated in icsid Convention Art. 61 (2).437 In that manner, the pioneering and innovative role of icsid as the currently leading regime of international investment arbitration may be strengthened. D

Interim Conclusion

As seen, the overall development and advancement of international investment law and arbitration depends on various factors such as the development of national and international investment policies, flows of fdi, conclusions of iias, as well as the types and numbers of related disputes. The icsid arbitration regime, which is embedded within this general contextual framework, is presently the “market-leader” in terms of the volume of investment cases it 437 For the text of icsid Convention Art. 25 (1), see fn. 280; for the text of icsid Convention Art. 47, see fn. 308; for the text of icsid Convention Art. 52 (1), see fn. 374; for the text of icsid Convention Art. 61 (2), see fn. 418.

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handles. The system is unique in that it has been specifically tailored to the characteristics and needs of this sort of hybrid, i.e. semi-private and semipublic, disputes. Although the legal conception of icsid proceedings entails some weaknesses, its procedural strengths, lying primarily in the relatively high degree of transparency and the direct enforceability of awards, seem to outweigh these drawbacks. In view of these quantitative and qualitative advantages, the icsid regime is the most suitable and representative object of study for this work. It has been chosen as a model system for addressing the profound problem of inconsistency in international investment jurisprudence in general, given that many of the issues recur time and again in and across the various arbitration regimes. In addition, the analysis of inconsistencies in icsid jurisprudence will provide a basis for resolving further problems which are specific to icsid regime itself.

chapter 2

Problem Analysis: Inconsistency in icsid Investment Jurisprudence A

Preliminary Considerations

As explained in Chapter 1, the icsid arbitration regime – being tailored to the settlement of the increasing number of investor-State disputes – is the most suitable object of investigation for purposes of the present study and, in many respects, also the preferable forum of investment arbitration. It thus deserves particular attention and support. Although it has so far performed well as the leading regime of investor-State dispute settlement, several flaws in its general conception and its specific arrangement detract from the icsid’s general attractiveness and reputation among both its users and the general public. These include, on the one hand, a system-overarching conceptional imbalance as addressed by the “public law challenge,” and, on the other hand, a range of primarily procedural deficiencies. Both problem areas are intertwined and they overlap in certain areas. One interface is a large and ever-increasing problem, stretching even across the boundaries of specific arbitral systems: the perceived high degree of inconsistency of international investment jurisprudence in general and of icsid jurisprudence in particular.438 Some see this, to a greater or lesser extent, both as a 438 See e.g. Charles N. Brower & Jeremy K. Sharpe, Multiple and Conflicting International Arbitral Awards, 4 J. World Inv. & Trade 211, 211–222 (2003); James Crawford, Similarity of Issues in Disputes Arising under the Same or Similarly Drafted Investment Treaties, in Precedent in International Arbitration 97–103 (Yas Banifatemi & Emmanuel Gaillard eds., 2008); Mariel Dimsey, The Resolution of International Investment Disputes: Challenges and Solutions 35–100 (Eleven International Publishing, Utrecht, 2008); Rudolf Dolzer, Perspectives for Investment Arbitration: Consistency as a Policy Goal?, 11 tdm 1, 1–9 (2014); Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 47–99; Franck, The Legitimacy Crisis 1521, 1558–1582; John Gaffney, How Important it is to Develop a Coherent Case Law? The Role of Judicial Dialogue in Investment Arbitration, in Le droit européen et l’arbitrage d’investissement  – E ­ uropean Law and Investment Arbitration 44–77 (Catherine Kessedjian ed., 2011); Leah D. Harhay, Investment Arbitration in 2021: A Look to Diversity and Consistency, 18 Sw. J. Int’l L. 89, 89–101 (2011); Kaj Hobér, Reporting from the Arbitral Shop-Floor: Treaty Interpretation in Practice, in Practising Virtue – Inside International Arbitration 425

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chapter 2 (David D. Caron et al. eds., 2015); Johanna Kalb, Creating an icsid Appellate Body, 10 ucla J. Int’l L. Foreign Aff. 179, 186–200 (2005); Gabrielle Kaufmann-Kohler, Is Consistency a Myth?, in Precedent in International Arbitration 137–147 (Emmanuel Gaillard & Yas Banifatemi eds., 2008); Gabrielle Kaufmann-Kohler, In Search of Transparency and Consistency: icsid Reform Proposal, 2 tdm 1, 4–8 (2005); Howard Mann, Transparency and Consistency in International Investment Law: Can the Problem be Fixed by Tinkering?, in Appeals Mechanism in International Investment Disputes 219–220 (Karl P. Sauvant ed., 2008); Fiona Marshall, Defining New Institutional Options for Investor-State Dispute Settlement, iisd Paper 1, 27–57 (2009); August Reinisch, The Proliferation of International Dispute Settlement Mechanisms: The Threat of Fragmentation vs. the Promise of a More Effective System? – Some Reflections from the Perspective of Investment Arbitration, in International Law between Universalism and Fragmentation – ­F estschrift in Honour of Gerhard Hafner 114 (Isabelle Buffard et al. eds., 2008); Christoph Schreuer & Matthew Weiniger, Conversations Across Cases – Is There a Doctrine of Precedent in Investment Arbitration?, 5 tdm 1, 8–12 (2008); Christoph Schreuer, Why Still icsid?, 8 tdm 1, 6–7 (2011); Christoph Schreuer, Preliminary Rulings in Investment Arbitration, in Appeal Mechanism in International Investment Disputes 207–209 (Karl P. Sauvant ed., 2008); Christoph Schreuer, Revising the System of Review of Investment Awards, biicl Paper 1, 1–8 (2009); Muthucumaraswamy Sornarajah, A Coming Crisis: Expansionary Trends in Investment Treaty Arbitration, in Appeals Mechanism in International Investment Disputes 39–79 (Karl P. Sauvant ed., 2008); Christian Tams, An Appealing Option? The Debate about an icsid Appellate Structure, 57 Essays in Transnational Economic Law 1, 17–23 (2006); Aristidis Tsatsos, Die Rechtsprechung der icsid-Schiedsgerichte – Zwischen Homogenität und Heterogenität 44 et seq. (Humboldt University, Berlin, 2008). For counter-positions denying an immoderate level of inconsistency in arbitral investment jurisprudence and/or relying on a self-correction of inconsistencies over time, see e.g. Stanimir A. Alexandrov, On the Perceived Inconsistency in Investor-State Jurisprudence, in The Evolving International Investment Regime – Expectations, ­R ealities, Options 60–69 (José Alvarez et al. eds., 2011); Doak R. Bishop, The Case for an Appellate Panel and its Scope of Review, 2 tdm 8, 9 (2005); Judith Gill, Inconsistent ­Decisions: An Issue to be Addressed or a Fact of Life (biicl Investment Treaty Forum Conference), 2 tdm 12, 12–15 (2005); Barton Legum, Options to Establish an Appellate Mechanism for Investment Disputes, in Appeals Mechanism in International Investment Disputes 231–239 (Karl P. Sauvant ed., 2008); Jan Paulsson, Avoiding Unintended Consequences, in Appeals Mechanism in International Investment Disputes 241–265 (Karl P. Sauvant ed., 2008); Wälde, Improving the Mechanism 522–526; Stephan W. Schill, The Multilateralization of International Investment Law ­346–347, 356–357 (Cambridge University Press, Cambridge, 2009 (2014 reprint)). For a counter-position rejecting the claim for consistency in arbitral investment jurisprudence, see e.g. Irene M. Ten Cate, The Costs of Consistency: Precedent in Investment Treaty Arbitration, 51 Colum. J. Transnat’l L. 418, 418–478 (2013). The author takes the view that “a consistency norm is detrimental to the interests of both the parties to specific

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contributory cause and as a consequence of system-specific shortcomings. In that sense, it is alleged that the inconsistency problem currently constitutes a major problem of the regime of (icsid) investment arbitration. Awards and decisions rendered by arbitral tribunals and ad hoc committees are criticised for discrepancies and contradictions. It is claimed that their findings on identical or similar legal issues are in increasing tension with each other, perhaps even irreconcilably so. Some commentators actually speak of a “crisis of consistency.”439 In more metaphorical terms, the present degree of disagreement between arbitrators on fundamental legal issues has been described as “[a] carpet [which] looks very much as if different people have started from different ends without many common threads – a crazy quilt rather than a Persian rug.”440 The same commentator also described the thicket of investment arbitration decisions rendered within the last two decades as a “wilderness of single instances.”441 This criticism constitutes a major problem, since it implies that the system’s overall quality and continued success is being questioned. Yet, on the other hand, such criticism has the advantage that it heightens the level of attentiveness to the purported threat of inconsistency, which is useful for identifying and correcting potential systemic malfunctions. Chapter 2 will therefore engage in a detailed analysis of the inconsistency problem. In that manner not only the validity of the respective charges directed against the icsid regime will be assessed, but also a general problem diagnosis, being a precondition for any meaningful attempt to solve the issue, will be made.



disputes and the investment community at large” and supports her position by referring to (1) the complexity of international investment law, (2) party autonomy in international arbitration, and (3) the prevalence of accuracy and correctness over consistency and the associated qualities as continuity, predictability, equality, and perceived legitimacy. For argumentative replies to these and further counter-positions, see below Ch. 2.B.II. For a neutral position in the form of a stocktaking of the inconsistency debate, see Dolzer, Consistency as a Policy Goal? 1, 1–9. 439 Dimsey, The Resolution of International Investment Disputes 36. See also Louise Woods, Fit for Purpose? The eu’s Investment Court System, Kluwer Arbitration Blog (23 March 2016), who consideres the phenomenon of inconsistency of international investment jurisprudence as one of “isds’s greatest perceived flaws.” 440 James Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007). 441 Crawford, Similarity of Issues in Disputes 99, referring to Alfred Lord Tennyson’s poem “Aylmer’s Field” (1864).

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“Consistency” and “Jurisprudence Constante” – Working Definitions and Premises Some basic technical terms need to be introduced and clarified at the outset. First and foremost, the key term of this study, the notion of “consistency,” deserves particular attention. Although at first glance it appears synonymous with the notion of “coherence,” there are, in fact, important differences between the two terms. In an abstract sense, that is, isolated from any legal context, a reason, idea, or opinion is regarded as “consistent” if it is “always behaving or happening”.442 By contrast, a reason, idea, or opinion is considered to be “coherent” if “it is clear and carefully considered, and each part of it connects or follows in a natural or reasonable way.”443 In a general legal context, these terms have been used in a similar manner. The term “consistency” has been defined as requiring that “a rule (…) be [interpreted and] applied uniformly in every ‘similar’ or ‘applicable’ instance.”444 The term “coherence,” on the other hand, has been considered as describing the interpretation and application of legal rules in a manner that treats “like cases alike” so as to enhance the perception of fairness and justice within a legal system.445 In that sense, even different constructions of the same rules do not necessarily lead to incoherence and illegitimacy, as long as “the inconsistencies can be explained to the satisfaction of the community by a justifiable (i.e. principled) distinction.”446 Transferring this terminological distinction to the specific field of investment law and arbitration helps to explain the basic premise of this study. It is argued that arbitral tribunals, in order to ensure a consistent arbitral

i

442 Cambridge University Press, Cambridge Dictionaries Online, available at (last visited September 2016). 443 Id. 444 Thomas M. Franck, Fairness in International Law and Institutions 38 (Clarendon Press, Oxford, 1995). 445 Id. at 33, 38–41. See also Thomas M. Franck, The Power of Legitimacy among Nations 180–181 (Oxford University Press, New York, 1990), who states that coherence of a rule describes “its connectedness, both internally (among several parts and purposes of the rule) and externally (between one rule and other rules, through shared principles). This connectedness between rules united by underlying principles (…) manifests the existence of an underlying rule-skein which connects disparate ad hoc arrangements into a network of rules ‘governing’ a community of states (…).” 446 Franck, The Power of Legitimacy among Nations 163. Accordingly, “facially inconsistent decisions can become coherent and minimize the perceived injustice and unfairness”; see Franck, The Legitimacy Crisis 1521, 1585.

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j­urisprudence, should be ready to consider pre-existing case law and strive to conform with the legal interpretations set out therein to the extent possible when construing identical or largely similar norms featuring a “common denominator” in comparable cases. Yet, it would be a mistake to pursue consistency at any cost.447 For example, where an arbitral tribunal considers that the interpretative approaches and legal reasoning of a previous tribunal are materially incorrect or unconvincing, the arbitrators should obviously state their own differing position. However, they should provide reasoned explanations when deviating from a previous decision.448 By showing awareness of and respect for prior related case law, they allow the legal community to trace and understand their diverging legal reasoning and thus ensure a coherent development of international investment jurisprudence.449 This approach to arbitral jurisprudence is based on the doctrine of jurisprudence constante, which derives from the (French) civil law tradition. It requires courts – or, in the present context, investment arbitration tribunals – to ­retain the primacy of the codified or “treatified” sources of law, but, at the same 447 See Ralph Waldo Emerson, Essays: Self Reliance (First Series) (1841 (republished in 1847)): “A foolish consistency is the hobgoblin of little minds adored by little statesmen and philosophers and divines.,” referred to in Andrea Bjorklund, Practical and legal avenues to make the substantive rules and disciplines of international investment agreements converge, in Prospects in International Investment Law and ­Policy – World Trade Forum 197 (Roberto Echandi & Pierre Sauvé eds., 2013). See also Michael Ewing-Chow, Coherence, convergence and consistency in international investment law, in Prospects in International Investment Law and Policy – World Trade Forum 231–232 (Roberto Echandi & Pierre Sauvé eds., 2013), who encourages “good legal interpretations to replace bad ones” and, in this context, refers to the case law example of Brown v. Board of Education, us Supreme Court, 347 u.s. 483, 74 S. Ct. 686 (1954), wherein the Court overturned “a consistent but bad (both morally and in terms of policy) interpretation and made segregation illegal under the us Constitution.” 448 See the approach of John Rawls’ “doctrine of public reason,” which suggests that an increased level of legitimacy and stability might be achieved in a liberal society by justifying political and legal decisions in a manner that people with different political or moral views could accept; see John Rawls, Political Liberalism (Expanded Edition) 440 et seq. (Columbia University Press, New York, 2013), referred to in Ewing-Chow, Coherence, convergence and consistency in international investment law 229–230. 449 See also, for a similar position, Jan Paulsson, The Role of Precedent in Investment Arbitration, in Arbitration under International Investment Agreements – A Guide to the Key Issues (Katia Yannaca-Small ed., 2010): “(…) the importance of the pursuit of consistency is undeniable in rendering justice in the individual case. (…) 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).”

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time, to acknowledge and foster legal development “through the accretion of a consistent line of cases.”450 According to this principle and in contrast to the common law maxim of stare decisis in its historic version,451 courts are not required to strictly adhere “to a legal principle applied on one occasion in the past”; they rather shall “give great weight to a rule of law that is accepted and applied in a long line of cases (…) unless clear error is shown and injustice will arise from continuation of a particular rule of law.”452 Thus, arbitral tribunals 450 Andrea K. Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante, in International Economic Law: The State and Future of the Discipline 272–273 (Colin B. Picker et al. eds., 2008). 451 For definitions of the common law doctrine of stare decisis (et non quieta movere), see Alexander Boer, Legal Theory, Sources of Law, and the Semantic Web ­245–246 (ios Press, Amsterdam/Washington, dc, 2009): “Stare decisis, Latin for ‘to stand by that which is decided’ is the general maxim used in common law that when an issue has been settled by a court decision, it forms a precedent which [usually] is not a­ fterwards to be deviated by other courts.”; William M. Lile et al., Brief Making and the Use of Law Books 321 (West Publishing, St. Paul (mn), 5th ed., 1914): “The rule of adherence to judicial precedents finds its expression in the doctrine of stare decisis. This doctrine is simply that, when a point of principle of law has been once officially decided or settled by the ruling of a competent court (…), it will no longer be considered as open to examination or to a new ruling by the same tribunal, or by those which are bound to follow its adjudications, unless it be for urgent reasons and in exceptional cases.,” referred to in Bryan A. Garner, Black’s Law Dictionary 1626 (Thomson Reuters, St. Paul (mn), 10th ed., 2014). On the current doctrine of precedent in England including the role of the maxim of stare decisis, see Rupert Cross & J.W. Harris, Precedent in English Law (Clarendon, Oxford, 4th ed., 1991). 452 Garner, Black’s Law Dictionary 985. A further definition describes the underlying idea of the doctrine of juriprudence constante by the following positive correlation: “(…) the longer a series of identical decisions in identical cases based on the same legal rule by the courts becomes, the more determinative the decision found in the series becomes for future cases”; see Boer, Legal Theory, Sources of Law, and the Semantic Web 246, referred to in Todd J. Weiler, The Interpretation of International Investment Law – Equality, Discrimination and the Minimum Standards of Treatment in Historical Context 50–51 (Martinus Nijhoff Publishers, Leiden/Boston, 2013). Cf. also the notion of “path coherence,” which entails a largely similar concept as it describes “a process by which (…) adjudicators take into account relevant past decisions in order to assess whether similar reasoning may be adopted to decide a given case.” ­[emphasis added], see Valentia S. Vadi, Towards Arbitral Path Coherence & Judicial Borrowing: Persuasive Precedent in Investment Arbitration, 5 tdm 1, 5 (2008). Accordingly, “[a] conceptual difference between stare decisis and jurisdiction constante is that jurisdiction constante denies the possibility of courts deciding a case based

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are encouraged to consider prior decisions on identical or largely similar legal issues, provided that these are well-founded and persuasive.453 Reference to precedents, however, does not release them from the duty to back their decisions with norms from the body of applicable law.454 Ideally, and this extends beyond this classical concept of a jurisprudence constante, arbitral tribunals should be ready to adhere not only to “longstanding and consistent case law,” but also to first-time “leading case law.”455 The latter term refers to cases that are – albeit being the first to deal with a particular issue – considered to be particularly authoritative or persuasive, setting forth strong and convincing arguments and consequently being frequently cited by tribunals, (State) parties, international institutions, or legal scholars.456 By incorporating leading cases into their approach as well, arbitral tribunals may even contribute to the development of future consistent lines of case law.457 On the other hand, in the event that interpretations developed by previous cases are considered as flawed and erroneous, arbitral tribunals may and indeed must render their own judgment and depart from preceding rulings on condition that they give a detailed reasoning for their dissent.458 In addition to an in-depth presentation of the position adopted, a deviating ruling should take up the rejected precedents and rebut prior arguments or at least clarify the differences. To this end, an icsid tribunal itself fittingly held that: (…) although different tribunals constituted under the icsid system should in general seek to act consistently with each other, in the end it

on precedent alone, without appeal to a legal rule found in legislation, and denies that the court decision potentially creates a rule.”; see Boer, Legal Theory, Sources of Law, and the Semantic Web 246. 453 Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 272. 454 Boer, Legal Theory, Sources of Law, and the Semantic Web 246. 455 Terminology according to Ole Kristian Fauchald, The Legal Reasoning of icsid Tribunals – An Empirical Analysis, 19 Eur. J. Int’l L. 301, 337 (2008). 456 Id. 457 For detailed elaborations on the role of precedent in international investment arbitration and on the development of a system of de facto precedent, see below Ch. 2.D.II.2. 458 Thomas W. Wälde, The Specific Nature of Investment Arbitration – Report of the Director of Studies of the English-Speaking Section of the Centre, in New Aspects of International Investment Law (Hague Academy of International Law) 105 (Philippe Kahn & Thomas W. Wälde eds., 2007). By giving priority to correctness of arbitral decision-making, concerns that the adherence to the “case law method” could lead to a “tyranny of consistency over content” may be countered. See, for this criticism, Weiler, Interpretation of International Investment Law 54–56, esp. 55 (quotation).

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must be for each tribunal to exercise its competence in accordance with the applicable law (…). It must be initially for the control mechanisms provided for under the bit and the icsid Convention, and in the longer term for the development of a common legal opinion or jurisprudence constante, to resolve the difficult legal questions (…).459 This re-evaluation of the significance of previous, well-reasoned rulings might be the key to a settled460 and “persisting [arbitral] jurisprudence,”461 ensuring a consistent and coherent development of icsid case law.462 In order for such jurisprudence constante to emerge, investment arbitration needs to present a truly systemic character, which is not overly complex, in respect of both the arbitrators and the body of (treaty) law involved.463 In this regard, the non-permanent nature of arbitral tribunals as well as the complex network of the myriad of iias are critical aspects that deserve further 459 sgs Société Générale de Surveillance s.a. v. Republic of the Philippines, icsid Case No. arb/02/6, Decision on Jurisdiction (29 January 2004) [hereinafter sgs v. Philippines (Decision on Jurisdiction)], para. 97. 460 The goal of a “settled” investment jurisprudence is not comparable with a settled jurisprudence that could be achieved in a more unitary, e.g. domestic legal system. It rather aims at the establishment of common interpretative approaches to recurring core issues of international investment law and arbitration; cf. Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007), who speaks of “patterns of decisions” and of “an acceptable spectrum of views.” See also Ch. 2.B.II.1.b. 461 Michel Troper & Christophe Grzegorczyk, Precedent in France, in Interpreting Precedents – A Comparative Study 137 (D. Neil MacCormick & Robert S. Summers eds., 1997), referred to in Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 265. 462 In this sense, see aes Corporation v. Argentine Republic, icsid Case No. arb/02/17, Decision on Jurisdiction (26 April 2005) [hereinafter aes Corporation v. Argentina (Decision on Jurisdiction)], para. 33. This conception of the doctrine of jurisprudence constante, which ensures both consistency and coherence, may also counter criticism such as expressed by Zachary Douglas, Can a Doctrine of Precedent Be Justified in Investment Treaty Arbitration?, 25 icsid Rev. – filj 104 (2010). The author claims that “too much emphasis on an emerging jurisprudence constante may have the effect of undermining coherency for the sake of consistency.” His understanding of the said doctrine overlooks that, in doubt, coherence (in the sense of substantiated and thus justified deviations from prior case law) should have priority over consistency (in the sense of a uniform following of prior case law). 463 Jeffery P. Commission, Precedent in Investment Treaty Arbitration – A Citation Analysis of a Developing Jurisprudence, 24 J. Int’l Arb. 129, 135–142 (2007).

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­examination.464 An additional requirement and feature, which is already comparatively well-developed within the icsid regime and its reformed rules on transparency,465 is the public accessibility of arbitral awards and decisions.466 Returning now to the terminological and semantic differences between “consistency” and “coherence,” it should be noted that such distinction is rarely, if at all, made when addressing this problem of international investment jurisprudence. Instead, the specialist literature often seems to confuse the distinct notions467 or refer to this issue in a generalised manner as “the problem of inconsistency.”468 The tendency to address this phenomenon by using only the latter term might be due to the fact that some of the commentators focus solely on conflicting decisions without addressing the issue of whether or not the deviations are well and reasonably grounded. In other cases, the lack of terminological distinction appears to arise mainly for practical reasons, since the discussions of this topic reveal that the use of this term is not meant in the literal, narrow, but rather in a broader sense encompassing both “consistency” and “coherence.” This broader meaning becomes very clear when looking at the definitions provided by a prominent commentator, who describes “consistency” as “logical coherence among things or a uniformity of successive results”469 and who states that “consistency is about delivering coherent decisions and avoiding contradictory results that undermine the credibility of investment arbitration overall and jeopardise the development of investment law.”470 This study, by contrast, will use the narrower understanding of terms and maintain the terminological distinction between “consistency” and “coherence” set out in the foregoing. It will primarily focus on instances of ­non-uniform 464 See below Ch. 2.B.II.1.a. (“System”?) and Ch. 2.B.II.1.b (“Over-Complexity”?). 465 See Ch. 1.C.II.4.a. 466 Commission, Precedent in Investment Treaty Arbitration 129, 135–136. 467 See e.g. Dohyun Kim, The Annulment Committee’s Role in Multiplying Inconsistency in icsid Arbitration: The Need to Move Away from an Annulment-Based System, 86 nyu L. Rev. 242, 257–258 (2010), who appears to equate both terms when defining “coherence” as “the desirability of issuing decisions that are consistent with prior decisions rendered on similar facts.” 468 See e.g. Kaufmann-Kohler, Is Consistency a Myth? 137–147; Kaufmann-Kohler, In Search of Transparency and Consistency 1, 1–8; Nkaepe Etteh, Conflicting Decision in Investment Arbitration: How do Inconsistent Decisions Arise and How Can They Be Avoided?, cepmlp Ann. Rev. 1, 1–13 (2011); Harhay, Investment Arbitration in 2021: A Look to Diversity and Consistency 89, 89–101. 469 Kaufmann-Kohler, Is Consistency a Myth? 138. 470 Kaufmann-Kohler, In Search of Transparency and Consistency 1, 1.

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and conflicting, i.e. inconsistent, legal interpretation, as these run counter to the assumed primary jurisprudential objective of consistent decision-making. The desirability of consistency in the sense of decisions being harmoniously aligned with the interpretative rulings of pre-existing case law will, inter alia, be discussed from the perspectives of legal theory and sociology of law.471 In particular the latter discipline, which examines arbitral jurisprudence from the viewpoint of the affected community, shows that the mere occurrence of discrepancies in investment jurisprudence – notwithstanding the exact reasons behind it – is oftentimes sufficient to impair the general trust and confidence in icsid jurisprudence and hence the overall reputation and competitiveness of icsid as arbitral system. Inconsistent case law thus deserves particular attention and further investigation. However, apparently inconsistent decisions which, on closer inspection, turn out to still be coherent with previous case law, will be taken into account. More precisely, divergences from settled prior case law that are accompanied by extensive explanations and by references to rejected findings and rulings, i.e. substantiated inconsistencies, will be considered as at least mitigating circumstances. Although they contribute to the superficial appearance of inconsistent investment case law, they may not draw criticism since they ensure the correctness of arbitral decision-making and form an integral part of the concept of a jurisprudence constante. Finally, a further terminological clarification is of need. Since this study will focus on examining conflicting interpretations of identical or largely similar legal issues within the field of international investment law using icsid case law as an example,472 conflicts between different legal regimes in the sense of fragmented international law are beyond its scope. The term “fragmentation” describes the phenomenon of the “emergence of specialised and (relatively) autonomous rules or rule-complexes, legal institutions and spheres of legal practice,” which is mainly attributable to the increasing diversification of the international social world and its legal significance.473 Such specialist For an exactly reverse terminological concept, see van Harten, Investment Treaty Arbitration and Public Law 164, who defines coherence as “the capability of an adjudicative system to resolve inconsistencies that arise from different decisions, and to ensure that the law is interpreted in a uniform and relatively predictable manner to allow those affected by the rules to plan their conduct.” 471 See below Ch. 2.B.I.2. 472 See below Ch. 2.E. 473 ilc, Fragmentation of International Law: Difficulties Arising from Diversification and Expansion of International Law – Report of the Study Group of the International Law Commission, Finalized by Martti Koskenniemi, un Doc. A/cn.4/L.682, para. 8 (13 April 2006), available at (last visited September 2016).

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s­ub-systems developed from “general international law,” for instance in the form of international “trade law,” “human rights law,” “environmental law,” “European law,” “the law of the sea,” and also “investment law.”474 As they ­operate mostly in isolation from related sub-systems, fragmentation arises due to the different handling of rules or bodies of rules and the resulting loss of an “overall perspective on the law.”475 Thus, in contrast to the notion of “(in)consistency,” which describes the conflicting interpretation of legal norms within such sub-systems and, at most, their repercussions on other sub-systems or even subordinate levels,476 the term “fragmentation” refers to the structural conditions and problems477 of international law and the aggregate of its subsystems in general.478 474 Id. 475 Id. Normative conflicts arise generally on the relations between special and general law, between prior and subsequent law, between laws at different hierarchical levels, as well as regarding the relations of law to its general normative context; see id. at 16. 476 Notwithstanding this system-immanent approach, it is understood that international investment law must be interpreted in an integrative manner by taking into account the relevant rules of related areas of international law; see e.g. Anne van Aaken, Fragmentation of International Law: The Case of International Investment Protection, 17 Finnish Yb. Int’l L. 91, 92 (2008), with detailed elaborations on the opening clauses for procedural and substantive investment law. See also Ch. 2.D.II.1. 477 A remedy for this pervasive phenomenon of fragmentation is generally seen in the harmonious interpretation and systemic integration of international law. The latter principle, which is codified in vclt Art. 31 (3) (c), states that “international obligations are interpreted by reference to their normative environment (‘system’)”; see ilc, Fragmentation Report (13 April 2006), paras. 410 et seq., esp. para. 413 (13 April 2006). For further details on this principle and the text of the cited norm, see Ch. 2.D.II.1.a.aa. 478 For further elaborations on the theory and manifestations of fragmentation of international law, see e.g. van Aaken, Fragmentation of International Law 91, 91–130; Gerhard Hafner, Pros and Cons Ensuing from Fragmentation of International Law, 25 Mich. J. Int’l L. 849, 849–864 (2003–2004); Philippa Webb, Judicial Integration and Fragmentation in the International Legal System (Oxford University Press, New York, 2013); Patrick Daillier & Alain Pellet, Droit International Public 86–89 (para. 37) (lgdj, Paris, 8th ed., 2009); Joost Pauwelyn, Fragmentation of International Law, in The Max Planck Encyclopedia of Public International Law (Rüdiger Wolfrum ed., 2006), available at (last visited September 2016). For argumentations that reject the allegation of fragmentation of the body of international law, see Pierre-Marie Dupuy, L’unité de l’ordre juridique international – Cours général de droit international public, 297 RdC 9, 323–354 (2002); Christian Tomuschat, International Law as a Coherent System: Unity or Fragmentation?, in Looking to the Future: Essays on International Law in Honor of W. Michael Reisman (Mahnoush H. Arsanjani et al. eds., 2011).

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ii icsid Jurisprudence in the Focus of Criticism – Rationales Before engaging in the analysis of the criticism of inconsistent icsid jurisprudence, one might ask why the icsid regime has become a particular target of these charges or, to put it differently, whether the problem of inconsistent arbitral jurisprudence does not also exist to a comparable extent in other arbitral regimes. It is quite evident that there is no judicial or arbitral system of adjudication that might be deemed perfect in terms of the consistency of its outcomes. The phenomenon of conflicting or diverging results is thus well known in different fields of international adjudication, including international humanitarian law,479 international human rights,480 and international For a distinction between the fragmentation of international norms and international authority, see Tomer Broude, Fragmentation(s) of International Law: On Normative Integration as Authority Allocation, in The Shifting Allocation of Authority in International Law: Considering Sovereignty, Supremacy and Subsidiarity (Essays in honour of Professor Ruth Lapidoth) 99–120 (Tomer Broude & Yuval Shany eds., 2008). A practical and frequently cited example for the fragmentation phenomenon is the case Ireland v. United Kingdom (mox Plant), where three different institutional procedures have been initiated under three different treaty regimes: the unclos, the ospar Convention, and the ec and euratom Treaties. For further comparable case law, see Nikolaos Lavranos, Regulating Competing Jurisdictions Among International Courts and Tribunals, 68 ZaöRV (Heidelberg J. Int’l L.) 575, 576–605 (2008). 479 See the following classic examples: Military and Paramilitary Activities in and against Nicaragua Case (Nicaragua v. us), icj, Judgment on the Merits (27 June 1986), icj Rep. (1986) 14, paras. 115–116 (development of the “effective control test” to determine the application of international humanitarian law); and Prosecutor v. Tadić, icty, Appeals Chamber, Case No. IT-94-1-A (15 July 1999), para. 120 (rejection of the icj’s approach and adoption of the “overall control” test). Both cases are cited from August Reinisch, International Courts and Tribunals, Multiple Jurisdiction, in The Max Planck Encyclopedia of Public International Law para. 6 (Rüdiger Wolfrum ed., 2011), available at (last visited September 2016). 480 See the following classic examples: Hoechst ag v. Commission, Joined Cases C-46/87 and 227/88, ecr 2859 (1989) [hereinafter Hoechst] (holding that “private life” in the sense of echr Art. 8 (1) “may not be extended to business purposes”); and Niemietz v. Germany (Application No. 13710/88), ECtHR, Judgment (16 December 1992), Series A, No. 251-B (finding that “private life” in the sense of echr Art. 8 (1) may be extended to business activities); Orkem v. Commission, Case C-374/87, ecr 3283 (1989) [hereinafter Orkem] (holding that echr Art. 6 does not include the right not to give evidence against oneself); and

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trade law.481 Remaining within the realm of investment arbitration, not only icsid case law, but also the awards and decisions rendered under alternative regimes, e.g. under the unictral regime, struggle with similar difficulties.482 Yet considerably less attention has been devoted to inconsistent jurisprudence of tribunals governed by the uncitral arbitration regime, which – as the icsid arbitration regime’s biggest rival – again appears to be the most suitable benchmark for comparison. This might stem from the fact that confidentiality has always been a hallmark of commercial arbitration systems483 and that therefore, “[s]ome non trivial percentage” of ­(conflicting) arbitral outcomes

Funke v. France (Application No. 10828/84), ECtHR, Judgment (25 February 1993), Series A, No. 256-A (finding that echr Art. 6 comprised the right to remain silent and to not incriminate oneself). The above cases and explanations are cited from id. at para. 9. 481 See the following classic examples: Certain Softwood Lumber Products from Canada, ecc-2004-1904-01-usa (10 August 2005) (the nafta Committee confirmed that Canadian softwood lumber exports did not threaten to cause a material injury to us competitors); and United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, Recourse to Article 21.5 of the dsu by Canada, Report of the Panel, WT/DS277/RW (the wto panel found that these Canadian softwood lumber practices did threaten to cause material injury to us competitors and therefore justified us anti-dumping duties). Both cases are cited from id. at para. 11. 482 See the following classic examples: S.D. Myers, Inc. v. Canada, uncitral Arbitration (nafta), Partial Award (13 November 2000) [hereinafter S.D. Myers v. Canada (Partial Award)], paras. 262–263 (holding that the fet standard was to be read in conjunction with the introductory phrase “(…) treatment in accordance with international law” of nafta Art. 1105 (1)); and Pope & Talbot, Inc. v. Canada, uncitral Arbitration (nafta), Interim Award/ Phase ii (10 April 2001) [hereinafter Pope & Talbot v. Canada (Interim Award/Phase ii)], para. 110 (considering the fet standard as an “additive” standard to the minimum standards of treatment under customary international law); Lauder (us) v. Czech Republic, uncitral Arbitration, Award (3 September 2001) [hereinafter Lauder v. Czech Republic (Award)] (denying liability of the host State); and cme Czech Republic bv (Netherlands) v. Czech Republic, uncitral Arbitration, Partial Award (13 September 2001) [hereinafter cme v. Czech Republic (Partial Award)] (affirming liability of the host State). For further details on these parallel proceedings on the same investment dispute with contradictory outcomes; see Ch. 2.C.I. 483 For elaborations on the hitherto preponderantly opaque nature of uncitral arbitration and its reformed legal standard of transparency for treaty-based investor-State dispute settlement, see Ch. 1.C.II.4.b.

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remain often undisclosed and are hence not publicly known.484 Moreover, it might also result from the considerably smaller volume of uncitral investment arbitration cases, which similarly goes usually hand in hand with a lesser public familiarity with the corresponding case law. The icsid, by contrast, as the most frequented forum of investor-State dispute settlement, has been a pioneer in providing increased transparency in the pre- and post-award phase since the amendment to its Arbitration Rules in 2006.485 In particular post-award transparency, which facilitates public access to icsid awards and decisions, is in principle a welcome and important step towards a more consistent arbitral jurisprudence, given that arbitrators can access the relevant prior findings and may rule on their case in light of this case law.486 Yet, the icsid’s courageous move towards greater transparency served not only to facilitate the consistency of future case law, but also brought inconsistencies to light.487 The thus unveiled jurisprudential divergences tend to be perceived as even more fatal due to the lack of a substantive review system.488 From the icsid perspective, it therefore remains to be said that increased transparency has turned out to be both a blessing and a curse. As a result, icsid arbitration finds itself frequently confronted with charges of inconsistency, while investment arbitration under the uncitral Arbitration Rules, on the other hand, so far appears to have largely escaped from comparably serious accusations of conflicting case law. This differing public perception has apparently contributed to the fact that the general debate on inconsistency in international investment jurisprudence often centres on the icsid regime. In the following, four core issues relating to the charge of inconsistency of icsid jurisprudence will be closely examined. First of all, the crucial question of whether jurisprudential consistency is desirable at all will be addressed. This sets the stage for the related discussion of whether the criticism of inconsistency in investment arbitration is appropriate at all (B.). Under the premise that consistency of jurisprudence in general as well as in the p ­ articular case of 484 Gary B. Born & Ethan G. Shenkman, Confidentiality and Transparency in Commercial and Investor-State Arbitration, in The Future of Investment Arbitration 28 (Catherine A. Rogers & Roger P. Alford eds., 2010). 485 See Ch. 1.C.II.4.a. 486 See also, on the correlated drawbacks of confidentiality in investor-State arbitration, ­D imsey, The Resolution of International Investment Disputes 36–40. 487 See also Wälde, Improving the Mechanism 522; Dimsey, The Resolution of International Investment Disputes 39. 488 See Ch. 1.C.II.5.a.

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i­ csid arbitration is a desideratum and that the phenomenon of inconsistency in icsid case law need not be seen as predetermined by the system and thus as unavoidable, the different forms that inconsistency may take (C.) and the causes of inconsistent decision-making (D.) will then be analysed. Thereafter, a qualitative-empirical study of icsid case law will be undertaken in order to identify problem areas within the field of international investment law and to examine and expose the different approaches and structures of legal interpretation leading to diverging outcomes on identical or similar questions (E.). This will permit an assessment to be made of whether the charge of inconsistency levelled against icsid jurisprudence is valid and justified (F.). B

Questions of Principle

As pointed out above, it is vital for the subsequent examination and discussion of the alleged inconsistency of icsid case law to first answer the fundamental questions of whether there is a general need to handle identical legal issues in the same way (I.), and if – in view of the particular characteristics and structures of investment law and arbitration – the criticism of inconsistency in ­i csid jurisprudence is appropriate and reasonable (ii.). i Is Jurisprudential Consistency Desirable at All? The first aspect of this debate relates to the value of and need for jurisprudential consistency in investment arbitration and in legal systems in general. It concerns the question of whether a (more) consistent case law is actually a desirable goal. Such desirability will be discussed by briefly looking at it from the perspectives of legal theory and practice (1.) and sociology of law (2.). 1 Legal Theory and Legal Practice Perspective From the perspective of legal theory, the question of whether a legal system needs a certain degree of jurisprudential consistency, i.e. whether identical or largely similar legal issues should be treated in the same way, may be best addressed by looking at the relationship between abstract legal norms and how precedents are handled in practice.489 The legal philosopher Lon Fuller, in his much cited allegory on possible failures in making the law, illustrates this correlation by narrating how a reformconscious king, in his attempt to introduce a new legal system within his realm, 489 Kaufmann-Kohler, Is Consistency a Myth? 144; Gabrielle Kaufmann-Kohler, Arbitral Precedent: Dream, Necessity or Excuse?, 23 Arb. Int’l 357, 373–375 (2007).

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fails eight times.490 His disappointments were due, inter alia, to adjudication on an ad hoc, case-by-case basis and to the enactment of frequently changing or contradictory rules.491 Fuller explains that these sorts of mistakes do “not simply result in a bad system of law; it results in something that is not properly called a legal system at all (…).”492 According to him, the rule of law only exists if the corresponding legal norms are created and used in a regular and harmonious, hence consistent way and thus have an “inner morality.”493 The theoretical approach to adjudicatory interpretative practice developed by Ronald Dworkin follows similar directions. The legal theorist’s conception of “law as integrity,” which is primarily rooted in the common law system, demands that legal interpretation “combine backward- and forward-looking elements.”494 To illustrate this concept, he compares the judicial interpretative process with the authoring of a chain novel, and suggests that judges – like authors of a continuous plot – should, when adopting an interpretation, endeavour to make it “fit,” in particular with prior interpretations.495 In his view, legal interpretations adopted in the present must have “general explanatory power” with regard to past and also future legal constructions.496 This is the only way, according to Dworkin, that law and legal practice may appear as one whole entity in the sense of “the consistency of principles integrity requires.”497 In his discussion of Dworkin’s work, the contemporary legal philosopher Matthew H. Kramer agrees that “any viable legal system must be characterised by a substantial degree of settledness and regularity.”498 The author illustrates this point by referring to a model society in which the interpretation of the vast majority of the legal norms is controversial and unsettled in their day-to-day operation.499 Kramer concludes that a situation where “the legal 490 Lon L. Fuller, The Morality of Law 33–41 (Yale University Press, New Haven and London, 1964), referred to in Kaufmann-Kohler, Is Consistency a Myth? 144; KaufmannKohler, Arbitral Precedent 357, 373–375. 491 Fuller, The Morality of Law 33–41. 492 Id. at 39. 493 Id. at 42–44. 494 Ronald Dworkin, Law’s Empire 225–227, esp. 225 (quotation) (Harvard University Press, Cambridge, 1986). 495 Id. at 228–232. 496 Id. at 230. 497 Id. at 228. 498 Matthew H. Kramer, In Defense of Legal Positivism – Law Without Trimmings 142 (Oxford University Press, Oxford, 1999 (2013 paper back ed.)), referred to in Kaufmann-Kohler, Is Consistency a Myth? 144. 499 Kramer, In Defense of Legal Positivism – Law Without Trimmings 142.

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­consequences of people’s multitudinous actions are ordinarily (rather than occasionally) ‘up in the air’ and truly murky” would be a testimony of a “‘lawless’ (…) state of affairs” and not of a regime of law.500 Finally, going back in history, the 17th century philosopher John Locke in his Second Treatise on Civil Government had also articulated that the first precondition for successfully unifying men in a political society governed by a legal regime would be an “establish’d, settled, known Law, received and allowed by common consent to be the Standard of Right and Wrong, and the common measure to decide all Controversities between them.”501 He thus confirmed the desirability of consistent and predictable jurisprudence. Overall, legal theorists and philosophers502 seem to agree that the existence and sustainability of a legal regime itself are strongly contingent on a consistent and thus predictable conception and practical application of its general laws. Against this background, a younger, less developed and still evolving body of law, such as the body of international investment law, is considered to be most heavily dependent on these qualities of its dispute resolution system.503 Accordingly, adjudicators are urged to strive for a consistent and predictable case law by taking preceding jurisprudence into account.504 This theoretical perspective has been affirmed in legal practice by authoritative rulings of international courts and tribunals. In the past, prominent adjudicatory bodies have expressed their views on the question of whether international jurisprudence and justice require a certain degree of consistency 500 Id. In Matthew H. Kramer, Objectivity and the Rule of Law 111 (Cambridge University Press, New York, 2007), the authors similarly states that “the rule of law can never be realized without laws. Basic features of law, such as its regulatory and uniform applicability, would be altogether missing if a regime relied solely on situation-specific directives for the regulation of conduct.” 501 Peter Laslett, John Locke: Two Treatises of Government (1690) – A Critical Edition with an Introduction and Apparatus Criticus 368–369 (Ch. ix, para. 124) (Mentor Books/Cambridge University Press, New York, 1960), referred to in Kaufmann-Kohler, Is Consistency a Myth? 144. 502 See Kaufmann-Kohler, Is Consistency a Myth? 144, referring to the above cited authors and Michel van de Kerchove & François Ost, Legal System between Order and Disorder 135 (Clarendon Press, Oxford, 1994). 503 Noberto Bobbio, Nouvelles réflexions sur les normes primaires et secondaires, in La règle du droit 104 et seq. (Chaïm Perelman ed., 1971), referred to in Kaufmann-Kohler, Arbitral Precedent 357, 374–375. 504 See Kaufmann-Kohler, Is Consistency a Myth? 144, referring to the above cited authors and Brian Z. Tamanaha, On the Rule of Law 122–126 (Cambridge University Press, Cambridge, 2004).

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and answered it in the affirmative. Amongst others, the International Court of Justice505 has held that: (…) the justice of which equity is an emanation, is not abstract justice but justice according to the rule of law: which is to say that its application should display consistency and a degree of predictability; even though it looks with particularity to the peculiar circumstances of an instant case, it also looks beyond it to principles of more general application.506 In a similar manner, the European Court of Human Rights507 emphasised that: [w]hile the Court is not formally bound to follow any of its previous judgments, it is in the interests of legal certainty, foreseeability and equality before the law that it should not depart without cogent reasons, from precedents laid down in previous cases.508 Thus, not only legal philosophers and theorists but also internationally recognised judicial bodies have determined and confirmed the fundamental desirability and need of consistent jurisprudence. From these viewpoints, jurisprudential consistency may be considered not only as a desideratum, but as a basic requirement of a quasi-judicial system like international investment arbitration. 2 Sociology of Law Perspective Sociology of law involves the study of “human, individual and social behaviour in the light of law,”509 that is to say, of the “full social reality of law.”510 When 505 [Hereinafter icj]. 506 Continental Shelf (Libyan Arab Jamahira v. Malta), icj, Judgment (3 June 1985), icj Rep. (1985) 13, para. 45, referred to in Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 45. 507 [Hereinafter ECtHR]. 508 Stafford v. uk (Application No. 46295/99), ECtHR, Judgment (28 May 2002), Reports 2002IV, para. 68, referred to in Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 45–46. 509 Lucreţia Dogaru, Law’s Relations to Politics and Sociology, 18–19 Curentul Juridic 64, 68 (2004). 510 Georges Gurvitch, Sociology of Law 61 (Transaction Publishers, New Brunswick/ New Jersey, 2001): “The Sociology of Law is that part of the sociology of the human spirit which studies the full social reality of law, beginning with its tangible and externally observable expressions, in effective collective behaviors (…) and in the material basis (…).”

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evaluating the desirability and need of consistent jurisprudence from the perspective of sociology of law, the influence of the law’s consistency on people and the perception of the persons concerned are at the centre of analysis. The significance and weight of such social awareness has already been shown when discussing the reasons why icsid arbitration – and no other investment arbitration regime – is in the focus of the inconsistency debate.511 Scholars who looked at the phenomenon of jurisprudential inconsistency through this sociological lens found that it was closely linked to a perceived lack of determinacy, reliability, and predictability512 and to the impression of impaired equality and fairness513 of a legal regime, its institutions and disputesettlement proceedings.514 Moreover, and related thereto, inconsistent adjudication has been deemed as incompatible with the legitimate expectations of the parties to a dispute and as a risk to the general functioning of a legal community.515 511 See Ch. 2.A.II. 512 Franck, The Legitimacy Crisis 1521, 1584–1587; Kim, Annulment Committee’s Role in Multiplying Inconsistency 242, 257, referring to, inter alia, Franck, The Power of Legitimacy among Nations 49; Nienke Grossmann, Legitimacy and International Adjudicative Bodies, 41 Geo. Wash. Int’l L. Rev. 107, 115 et seq., 121 et seq. (2009). 513 See e.g. Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 266; L.  Yves Fortier, Investment Protection and the Rule of Law: Change or Decline?, biicl – 50th Anniversary Event Series 1, 15–16 (2009); Franck, The Legitimacy Crisis 1521, 1523, 1558; Kaufmann-Kohler, Is Consistency a Myth? 143–145; Kaufmann-Kohler, Arbitral Precedent 357, 378; Annie Leeks, The Relationship between Bilateral Investment Treaty Arbitration and the Wider Corpus of International Law: The icsid Approach, 65 U. Toronto L. Rev. 1, 34 (2007); August Reinisch, The Future of Investment Arbitration, in International Investment Law in the 21st Century – Essays in Honour of Christoph Schreuer 909, 916 (Christina Binder et al. eds., 2009); August Reinisch, Necessity in International Investment Arbitration – An Unnecessary Split of Opinions in Recent icsid Cases? Comments on cms and lg&e, 8 J. World Inv. & Trade 191, 212–214 (2007); Schreuer, Why Still icsid? 1, 6; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 10; Tams, An Appealing Option? 1, 17–18; Tsatsos, Rechtsprechung der icsidSchiedsgerichte 46. 514 See, in summary, Tams, An Appealing Option? 1, 17–18: “It is at this level that consistency plays an important role. In theory, it requires tribunals to interpret identical legal rules in an identical way. The underlying rationale may be explained as an issue of equality/fairness (i.e. similar cases should be treated similarly) or as one of predictability/reliability (parties should be in a position plausibly to evaluate their chances in arbitration).” [footnotes omitted]. 515 Catherine Kessedjian, To Give or Not to Give Precedential Value to Investment Arbitration Awards, in The Future of Investment Arbitration 54–55 (Catherine A. Rodgers & Roger P. Alford eds., 2010). On the “normative expectations” of disputing parties, see also

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The general qualities of determinacy, predictability, reliability, equality, and fairness of arbitral decision-making, which risk being impaired by inconsistent jurisprudence, are of utmost importance to the individuals and entities concerned by the resulting decisions and awards. They allow the stakeholders to adjust their socio-economic conduct and procedural strategies accordingly. They are even more essential in view of the young age of the still emergent field of investment law, which originates from multiple, partially fragmented sources, and the absence of hierarchical structures that could review and reverse any undue interpretative approaches. Arbitral case law that is perceived as consistent, reasonably predictable, and fair is thus crucial to investment law and arbitration. Without this perception, its reputation as a proper and legitimate legal regime will suffer and it will not be able to satisfy the reasonable expectations of its users.516 In view of the above, the lack of consistency and associated qualities of arbitral investment proceedings and jurisprudence is deemed to have a “detrimental impact upon those governed by the [corresponding] rules and their willingness and ability to adhere to such rules, which can lead to a crisis of legitimacy.”517 A legal system’s legitimacy thus presupposes and reflects the

Stephan W. Schill, System-Building in Investment Treaty Arbitration and Lawmaking, in ­International Judicial Lawmaking – On Public Authority And ­D emocratic Legitimation in Global Governance 170–171 (Armin von Bogdandy & Ingo Venzke eds., 2012). 516 Solely coherent, but still inconsistent case law, by contrast, does not appear to be able to fully satisfy the expectations of the system’s users. Although coherent jurisprudence is conclusively interconnected with prior related cases, it might not provide the reliability and stability of jurisprudential outcomes that investors and States are looking for. Therefore, the latter would most likely perceive inconsistent, but coherent case law not much different from inconsistent and incoherent case law, in particular since a comprehensive consideration of case law and its context requires broad expert knowledge and research. For a different view, see Franck, The Power of Legitimacy among Nations 180–181, who considers the coherence of rules (not jurisprudence though) as manifestation of “the existence of an underlying rule-skein which connects disparate ad hoc arrangements into a network of rules ‘governing’ a community of states, the members of which perceive the coherent rule system’s powerful pull towards voluntary compliance.” For elaborations on the question of whether one can speak of a “system” of investment law and arbitration, see Ch. 2.B.II.1.a. 517 Franck, The Legitimacy Crisis 1521, 1584: “Without the clarity and consistency of both the rules of law and their application, there is a detrimental impact upon those governed by the rules and their willingness and ability to adhere to such rules, which can lead to a crisis of legitimacy. Legitimacy depends in a large part upon factors such as determinacy and coherence, which can in turn beget predictability and reliability. (…) When these factors

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existence – or at least perception – of consistency, as well as determinacy, reliability, predictability,518 fairness, and equality. As implied, legitimacy is thus far more than “only a formal legal criterium [sic], but also a factual concept” which is contingent upon the fact that “the relevant communities accept – usually by respect, reputation and habit acquired by continuous use and familiarity – a new form of international decision-making.”519 Accordingly, the dimensions

are absent individuals, companies and governments cannot anticipate how to comply with the law and plan their conduct accordingly, thereby undermining legitimacy.” [footnotes omitted]. See also Charles N. Brower et al., The Coming Crisis in the Global Adjudication System, 19 Arb. Int’l 415, 418 (2003). Others authors, by contrast, do not yet speak about a systemic danger, but consider these developments as an impetus to discuss the quality of the icsid system, see e.g. Reinisch, The Future of Investment Arbitration 904–905: “(…) serious for the acceptance of investment arbitration in general is a potential loss of confidence stemming from incomprehensible, unpredictable, and/or contradictory decisions and awards. While some critics of investment arbitration have already started to speak of a legitimacy crisis, it is suggested here that this has not yet become a systemic danger. However, there are clearly a number of decisions and awards which have led to serious questions about the quality and predictability of this system of tailor-made dispute settlement.” [footnotes omitted]. See also Magraw & Amerasinghe, Transparency and Public Participation 337, 340; Aristidis Tsatsos, icsid Jurisprudence: Between Homogeneity and Heterogeneity – A Call for Appeal?, 6 tdm 1, 6 (2009); Monica C. Fernandez-Fonseca in: Monica C. Fernandez-Fonseca et al., Legitimacy And Inconsistency: Is Investment Arbitration Broken And If So, Can Or Should It Be Fixed?, in Investment Treaty Arbitration and International Law (Vol. iii) 286 (Ian A. Laird & Todd J. Weiler eds., 2010). 518 See e.g. Lucy Reed, The De Facto Precedent Regime in Investment Arbitration: A Case for Proactive Case Management, 25 icsid Rev. – filj 95, 99 (2010) on the benefits of predictability: “We now see investors chose not to initiate arbitrations because of lines of wellreasoned adverse decisions on jurisdictional issues. We occasionally also see an investor determined to pursue what might seem a doubtful case on the basis of one outlier, but powerfully reasoned award.” 519 See Thomas W. Wälde, International Investment Law: An Overview of Key Concepts and Methodology (Report of the 2004 Research Seminar on International Investment Law, Hague Academy of International Law), 4 tdm 1, 46–47 (2007); entire quote: “It is true that investment arbitral tribunals do not (…) take their power out of nowhere. They act on the basis of authority that is expressly assigned to them by legitimate governments that are party to the treaty setting up arbitral jurisdiction. Whatever their individual merits and wisdom, such governments will in most cases have internal democratic legitimacy and in almost all cases legitimacy under international law that is by far superior to the self-appointed guardians composing the inchoate and nebulous world of ‘civil society.’ As a form of dispute settlement that is freely chosen by independent governments, it is as legitimate as any other form of international adjudication. (…) But legitimacy is not only a formal legal criterium [sic], but also a factual concept; as such, it means mainly that the relevant

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of legitimacy are twofold. Taking the example of icsid, formal or positivistic legitimacy is provided by the member States’ ratification of the icsid Convention and conclusion of individual iias allowing for icsid arbitration; social legitimacy, on the other hand, is given if the authority of icsid tribunals as a decision-making instance is accepted and perceived as justified by its users as well as by the general public.520 Despite this conceptual distinction, the former legal dimension is closely intertwined with the latter factual dimension. The social legitimacy of the icsid regime and of investment arbitration regimes in general is determined and reflected by the conduct of different ­actors  – operating in different spheres – and their perception. First, private investors and their view of the functioning and outcomes of arbitral proceedings are important. As they mostly have the final say in the choice between the different arbitration regimes available for the resolution of an ongoing dispute, mistrust or declining confidence in a system plagued with inconsistencies could induce foreign investors to turn away from icsid arbitration – thus diminishing its social legitimacy.521 Likewise, the attitude of States towards an arbitration regime is equally significant. If these were increasingly dissatisfied with the icsid system due to, inter alia, concerns of inconsistency, they might refuse to enforce awards within their territory. This would be particularly detrimental since the icsid does not provide for remedies against non-­complying contracting States, but relies entirely on the “World Bank f­actor”522 in the sense of politico-economic leverage. Their willingness to respect and comply with the decisions rendered by the respective arbitral tribunals is thus vital ­communities accept – usually by respect, reputation and habit acquired by continuous use and familiarity – a new form of international decision-making.” [footnote omitted]. 520 Kim, Annulment Committee’s Role in Multiplying Inconsistency 242, 255–256. For a further definition of both dimensions of legitimacy, see Alba Ruibal, The Sociological Concept of Judicial Legitimacy: Notes of Latin American Constitutional Courts, 3 Mexican L. Rev. 343, 346 (2010): “Whereas the sociological perspective implies an external and relational dimension, a legal perspective implies an internal or intra-institutional point of view based on the logical analysis and comparison between (…) rules and the principles that govern it.,” referred to in Sergio Puig, Recasting icsid’s Legitimacy Debate: Towards a Goal-Based Empirical Agenda, 36 Fordham Int’l L. J. 465, 470–471 (2013). 521 Sébastien Manciaux, The Notion of Investment: New Controversies, 9 J. World Inv. & Trade 443, 448 (2008). The resulting mistrust bears the risk to not only deter investors from using the icsid system, but also from undertaking “risky endeavors in developing countries,” leading to a decrease of global fdi in the long run; see Marie-Louise M. Rodgers, Bilateral Investment Treaties and Arbitration: An Argument and a Proposal for the icsid’s Implementation of a System of Binding Precedent, 3 tdm 1, 1–2 (2008). 522 See Ch. 1.C.I.2.b.cc.

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for the functionality and effectiveness of the system.523 At worst, States might even withdraw from the Convention pursuant to Art. 71.524 This would not only 523 Kim, Annulment Committee’s Role in Multiplying Inconsistency 242, 256. See also Andrew P. Tuck, Investor-State Arbitration Revised: A Critical Analysis of the Revisions and Proposed Reforms to the icsid and uncitral Arbitration Rules, 13 L. & Bus. Rev. Am. 885, 922 (2007), who stresses the importance of the contracting States’ acceptance and recognition of the icsid’s authority as icsid “lacks institutional remedies against non-complying States to enforce an award within the framework of their national laws on sovereign immunity and existing treaty obligations.” 524 icsid Convention Art. 71: “Any contracting State may denounce this Convention by written notice to the depositary of this Convention. The denunciation shall take effect six month after receipt of such notice.” For instance, Bolivia justified its denunciation of the icsid Convention in 2007, which has been the first formal withdrawal by a member State, by pointing inter alia to the icsid’s inability to ensure a consistent development of its case law, leading to a lack of investment jurisprudence; see Marco Tulio Montanes, Introductory Note to Bolivia’s Denunciation of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 6 ilm 969, 970 (2007); Tsatsos, A Call for Appeal 1, 27. Certainly, the effects of Bolivia’s exit from the icsid system were not “dramatic in themselves,” but “the symbolic significance of this step should not be underestimated”, see Christoph Schreuer, Introduction: International Investment Law in Context, in International Investment Law in Context 5 (August Reinisch & Christina Knahr eds., 2008). In the aftermath of Bolivia’s denunciation, Ecuador and Venezuela were the first to express similar ambitions; see William Burke-White, The Argentine Financial Crisis: State Liability Under bits and the Legitimacy of the icsid System, 3 Asian J. wto & Int’l Health L. Pol’y 199, 223 (2008). They eventually proceeded to withdraw from the icsid Convention in 2009 and 2012; see Sergey Ripinsky, Venezuela’s Withdrawal From icsid: What it Does and Does Not Achieve, itn (iisd) (13 April 2012), available at (last visited September 2016). These denunciations going along with terminations of part of these countries’ bits may partially be interpreted as primarily politically motivated reaction to the high amount of icsid claims that had previously been filed against these Latin American countries, but they should also be taken as serious systemic criticism. For further details on these withdrawals from icsid as well as on the tendencies of retreat from investor-State arbitration of India, Australia, and the us, see Ling Ling He & Razeen Sappideen, Investor-State Arbitration under Bilateral Trade and Investment Agreements: Finding Rhythm in Inconsistent Drumbeats, 47 J. World Inv. & Trade 215, 215–241 (2013). For the legal effects of such withdrawal from the icsid Convention on investorState claims, see unctad, Denunciation of the icsid Convention and bits: Impact on Investor-State Claims, iia Issues Note No. 2, 1–11 (2010); Emmanuel Gaillard, The Denunciation of the icsid Convention, 4 tdm (originally published in: ny L. J.) 1, 1–3 (2007);

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lead to its social legitimacy being diminished, but also its formal, positivistic legitimacy, which is based on the legally effective consent of its member States. Moreover, the public perception within society must be taken into account, given that the settlement of investor-State disputes touches on not only private but also public interests and hence on competing stakes and values. Investment arbitration is thus said to be exposed to a “public law challenge,” in which public law values are increasingly advocated.525 Dissatisfaction due to perceived arbitrariness of conflicting decisions, which may be of enormous detrimental impact on the public welfare resources of a State, thus can be considered as one important factor that has lad to the swing in public opinion against investment arbitration. As a consequence and especially if this dissatisfaction reached the point where private investors, States, or the general public began to reject the icsid regime as a legitimate forum of dispute settlement, its ability to compete with alternative arbitral regimes could be materially impaired. Such weakening of social legitimacy risks, in addition, that the precedential weight of the legal reasoning and conclusions of icsid tribunals might be adversely affected.526

Nicolle Kownacki, Prospects for icsid Arbitration in Post-Denunciation Countries: An “Updated” Approach, 15 ucla J.  Int’l L. Foreign Aff. 529, 529–560 (2013). For a more general overview of the topic of denunciation from the icsid Convention, see Oscar M. Garibaldi, On the Denunciation of the icsid Convention, Consent to icsid Jurisdiction, and the Limits of the Contract Analogy, in International Investment Law in the 21st Century – Essays in Honour of Christoph Schreuer 251–277 (Christina Binder et al. eds., 2009); Eric David Kasenetz, Desperate Times Call for Desperate Measures: The Aftermath of Argentina’s State of Necessity and the Current Fight in the icsid, 41 Geo. Wash. Int’l L. Rev. 709, 745 (2011); Keyvan Rastegar, Denouncing icsid, in International Investment Law in the 21st Century, Essays in Honour of Christoph Schreuer 278–301 (Christina Binder et al. eds., 2009). 525 Schill, The public law challenge: Killing or rethinking international investment law? (30 ­January 2012). See also Ch. 1.B.II.2. 526 For further elaborations on the issue of precedents in international investment arbitration, see below Ch. 2.D.II.2. See also Burke-White, The Argentine Financial Crisis 199, 220–223; Wälde, International Investment Law: An Overview of Key Concepts and Methodology 1, 77: “The lack of de-facto legitimacy of investment tribunals, essential a function of the short time, ad-hoc nature and lack of familiarity of the wider public with their operations, heightens the vulnerability of the overall investment arbitration process to visible contradictions. This, in turn, requires (…) greater respect for authoritative and persuasive precedent – ‘jurisprudence constante,’ but also to a greater effort to address in the reasoning of awards not just the two parties, but also the wider professional public.”

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Considering this whole range of aspects, the social perception of a consistent investment jurisprudence is essential for the general acceptance, authority, and standing of a legal regime like the icsid and thus for its function and effect. While this observation applies primarily to the parties actively using the system, it is also valid for those who are only passively affected by the decisions. Hence, the sociology of law perspective similarly affirms the need and desirability of consistent interpretative approaches by arbitral tribunals. ii Is the Inconsistency Criticism Appropriate at All? Having assessed the general desirability of and need for consistency in international investment jurisprudence, the follow-up question arises as to whether it is at all appropriate to criticise the occurrence of inconsistent investment case law or whether, on the contrary, this phenomenon is inherent to the system of investment arbitration and thus must be accepted as a natural result. In this context, three related issues will be addressed. First, are the intricate features and complex structures of international investment law and arbitration, on the one hand, and the claim to consistency, on the other hand, compatible or are they mutually exclusive (1.)? Second, does the function and role of an arbitrator generally include a duty to strive for and support a consistent development of arbitral case law or is it limited to the mere settlement of individual disputes (2.)? And third, should conflicting investment jurisprudence be considered as a threat to the system of investment arbitration or rather as a welcome phenomenon for the sake of accuracy and correctness of decisions rendered (3.)? 1

Overly Complex System of International Investment Law and Arbitration? The appropriateness of criticising inconsistencies in international investment law and arbitration is, first of all, questionable in view of the extraordinary complexity of this legal area. Such complexity is due to the fact that non-­permanent investor-State arbitral tribunals settle a multitude of disputes involving multi-layered issues and concerning a variety of stakeholders. In addition, the resolution of these disputes is governed by multiple legal sources and has an impact on various legal levels.527 Among these different factors of complexity, the non-permanent nature of arbitral tribunals is the most obvious, given that there is neither a permanent court of arbitration nor an institutionally administered (semi-) permanent tribunal. Moreover, the large and continuously growing number of 527 See e.g. Magraw & Amerasinghe, Transparency and Public Participation 337, 340.

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­investment arbitration cases to be adjudicated by these tribunals is a statistically proven fact.528 The diversity of issues dealt with in investment arbitrations relates to the fact that fdi takes place in various economic sectors and is generally affected by related national measures. For instance, investments take place in mining and quarrying, in the manufacturing industry, in the fields of electricity, gas and water supply, and in the areas of construction, transport and ­communication.529 Examples for domestic decision-making and policy formulation with effects on foreign investors are (non-) extensions of licenses, cultural, environmental or health protective measures, or the use of extended legislative powers in case of economic emergencies.530 The different actors involved comprise investors with their private economic interests, States in their dual role as disputing parties with public economic interests and as sovereign States with public political interests, as well as third parties, industry, ngos, civil society,531 and arbitral tribunals themselves. In addition, the trend towards regionalism has given rise to a new set of institutional actors, as e.g. the eu532 and the aesan,533 which have lately become active in international investment (treaty) law.534 Traditional commercial ­arbitration, 528 See Ch. 1.B.II.1. 529 For an overview of the different industries in which fdi takes place, see the oecd.StatEx tracts-Website, available at (last visited in September 2016). 530 Schill, System-Building in Investment Treaty Arbitration and Lawmaking 137–138. 531 For elaborations on these non-parties, see Wälde, The Specific Nature of Investment Arbitration 92. 532 The intensified activities on the eu-level result from the Lisbon Treaty, which entered into force in December 2009 and which transferred the competences in the field of fdi from its member States to the eu. This includes, inter alia, the power to conclude investment treaties. See also above Ch. 1.B.I.4.a. and below Ch. 3.C.II.2. For further information on iia / comprehensive fta negotiation activities of the eu, see El-Kady, International Investment Policy Landscape in Transition 1, 7–9; Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 164–173. 533 The increased activities by the asean relate, inter alia, to the establishment of the asean Comprehensive Investment Agreement (26 February 2009 (entry into force 29 March 2012) [hereinafter acia]), and to the negotiations of the rcep Agreement, which commenced in 2013. For further information on activities of asean and other Asian regional actors, see e.g. El-Kady, International Investment Policy Landscape in Transition 1, 9–12; Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 174–175. 534 For an overview of new actors in the context of rising regionalism, see Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 163–177. See also Ch. 1.B.I.4.a.

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by contrast, is limited to two or more private parties on equal footing fighting solely for their own economic interests.535 Regarding the multiple legal sources involved, the complex nature of investment law and arbitration results mainly from the vast network of iias, which consists in large part of almost 3,000 bits as the principal legal basis for arising disputes and which continues to burgeon.536 This wide and multifaceted web of iias becomes even more byzantine due to the tendency to integrate international investment provisions in ptias and in view of the differing approaches to both bits and ptias.537 While the approaches to bits vary from a lean, oldfashioned style with rather ambiguous terms to a more detailed and elaborate, modern style with clearer terms,538 the ptia types of agreements vary primarily in the scope of provisions on investment protection contained therein.539 Finally, the rulings rendered by investment arbitral tribunals have a widespread effect in that they not only affect the disputing parties and their particular case, but also have an indirect impact beyond that on domestic investment law and policy as well as on international investment law and its development.540 a Legal “System”? In view of this extremely high complexity resulting from the above-mentioned structural features, can one actually speak of a legal “system” of investment law and arbitration? Does the enormous, atomised aggregate of iias being interpreted and applied by non-permanent tribunals entail any overarching structures that could justify such qualification? In order to approach this question, it appears reasonable to start out from the perspective of the general systems theory, which considers the term “system” as an organising principle that serves as a tool to describe and analyse society. It defines it as a set of elements and a set of relations that exist between the elements and that constitute the system’s structure.541 Niklas Luhmann, 535 536 537 538 539 540 541

Magraw & Amerasinghe, Transparency and Public Participation 337, 340. See Ch. 1.B.I.4.a. Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 143–158. Id. at 155–158, 178. Id. at 145–154. Id. at 136–139. See also below Ch. 2.D.II.2. Georg Klaus (ed.), Wörterbuch der Kybernetik (Vol. 2), Metasprache  – zyklisch permutierter Code 634 (Fischer, Frankfurt/Main, 1969), referred to in Alfred Büllesbach, Systemtheorie im Recht, in Einführung in die Rechtsphilosophie und Rechtstheorie der Gegenwart 429 (Arthur Kaufmann et al. eds., 8th ed., 2011).

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who decisively conceived and developed this theory, deems communication to be the core element of a social system that is delimitated by the distinction between the interior of the system itself and the exterior environment. According to him, information stemming from exterior sources is selected by and processed within the system according to its meaning (informative openness).542 More recently, Luhmann further developed this approach by assuming that the information filtered from the environment would then reproduce itself in operations of communication networks (operative closure).543 This auto-creative, self-referential process is what he called autopoiesis.544 When transferring this theory to the legal system as a structurally intertwined subsystem of the social system, Luhmann assumes that the law is being created by its own operations referring back and forward to its own other operations. Such recursive interlinkages of legal operations consist, for instance, in the selective reference of judgments to other prior judgements in their role as guiding precedents.545 Within the scope of these procedures, the core function of the legal system is to logically distinguish, in a binary code, between legal and illegal and to apply this code – in the form of self-constituted norms – to cases that emerge in the social system.546 In the context of international law, three basic elements of a legal “system” have been determined. These are “(1) a set of elements; (2) arranged in an order (characterized by the interaction between the different elements); and (3) possessing a certain degree of unity or cohesion (which facilitates the description of the elements as parts of the bigger whole).” Regarding the second element, legal theorists are divided on whether normative or institutional components are determinative. See Yuval Shany, The Competing Jurisdictions of International Courts and Tribunals 86–93, esp. 87 (quotation) (Oxford University Press, New York, 2003), referring to the works of (in the 2nd ed. 1994) Herbert L.A. Hart, The Concept of Law (The Clarendon Press, Oxford, 3rd ed., 2014); Hans Kelsen, Introduction to the Problems of Legal Theory (Clarendon Press, Oxford, 1934 (1992 reprint)); Joseph Raz, A Concept of a ­L egal System (Clarendon Press, Oxford, 2nd ed., 1980 (1990 reprint)); Santi ­R omano, L’ordre juridique (P. Gothot et L. François transl., Dalloz-Sirey, Paris, 2nd ed., 2002); Georges Abi-Saab, Cours général de droit international public, 207 RdC 9 (1987). 542 See Niklas Luhmann, Soziale Systeme: Grundriss einer allgemeinen Theorie (Suhrkamp, Frankfurt/Main, 1984). 543 See Niklas Luhmann, Das Recht der Gesellschaft 38 et  seq., esp. 76–83 (Suhrkamp, Frankfurt/Main, 1993), referred to in Büllesbach, Systemtheorie im Recht 447. 544 Term borrowed from cognitive biology scientists Humberto Maturana and Francisco Varela; see Büllesbach, Systemtheorie im Recht 446–447. 545 Luhmann, Das Recht der Gesellschaft 114–115. See also Gralf-Peter Callies, Lex Mercatoria: A Reflexive Law Guide To An Autonomous Legal System, 2 German L. J. para. 5 (2001). 546 Büllesbach, Systemtheorie im Recht 447–449.

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Building on Nikolas Luhmann’s descriptivist systems theory and on the normative discourse theory of one of his main critics, Jürgen Habermas,547 Gunther Teubner developed the concept of “reflexive law”548 and, in this context, asked for the exact meaning of evolutionary autonomy of a legal system.549 In his central thesis, he considers the reflexiveness of law as “leading to a new legal self restraint. Instead of taking a regulatory responsibility for the outcome of social processes, reflexive law restricts itself to the installation, correction and re-definition of democratic self-regulatory mechanisms.”550 According to Teubner, reflexive law thus entails three dimensions: first, its ability of systeminternal reflection and self-identification, second, its supportive, integrative role in the self-identifictation process of other social sub-systems, and third, the creation of self-regulating rules and procedures on the normative level.551 Teubner takes this reflexive law perspective as a starting point for his analysis of the development of global law towards an autonomous system. In his scientific treatise “Global Law without a State,”552 he suggests the emergence of a global legal order that exists without the backing support of a sovereign State, its instruments of power, and its institutions. His thesis is based on the premise that it is not State-driven politics, but rather global communicative networks built by civil society – be it in the commercial, technological, cultural, or academic sector – that are the main driving forces in the globalisation process.553 He understands globalisation of law as consequential effects of the said developments.554 Taking the system theory’s external perspective of “second order

547 Jürgen Habermas, Faktizität und Geltung: Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats (Suhrkamp, Frankfurt/ Main, 1992). See also Gralf-Peter Callies, Reflexive Transnational Law: The Privatisation of Civil Law and the Civilisation of Private Law, 23 Zeitschrift für Rechtssoziologie 185, 185–216 (2002). 548 Teubner takes up and further develops the theory of „responsive law“ by Philippe Nonet and Philip Selznick, who designed a legal development model structured in three stages, namely repressive, autonomous, and responsive law, see Philippe Nonet & Philip Seznick, Law and Society in Transition: Toward Responsive Law (Harper, New York, 1978 (2009 reprint)). 549 Gunther Teubner, Reflexives Recht, Entwicklungsmodell des Rechts in vergleichener Per­ spektive, arsp 13 (1982), referred to in Büllesbach, Systemtheorie im Recht 449. 550 Teubner, Reflexives Recht 13, 59. 551 Id. at 27. 552 Gunther Teubner, Global Bukowina: Legal Pluralism in a World Society, in Global Law without a State (Gunther Teubner ed., 1997). 553 Id. at 5–7. 554 Id. at 7.

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observation,”555 global law is considered to be autonomously, yet asymmetrically produced in “self-organized processes of structural coupling of law with ongoing globalized processes (…).”556 It “closes its meaning boundaries by the use of the legal/illegal binary code and reproduces itself by processing a symbol of global (not national) validity.”557 Within this framework, traditional legal instruments such as rule, control, and sanction are superseded by communication as the new core concept.558 Teubner uses the example of lex ­mercatoria to illustrate his theory, but stresses that it would stand as paradigmatic case for other new areas of global law emerging independently of national support.559 In the light of the abovementioned shift from norms to communications, a legal system is deemed to require only three basic communications in order to develop into an autonomous system, namely between claimants, defendants, and courts.560 The ratio decidendi of the resulting decisions – based on the binary code legal/illegal – will then, over time and if taken up in the following judgments, turn into norms as “a by-product of processing legal acts.”561 This continuous, but selective referencing to previous decisions, i.e. the autopoietic processing of legal communications, is what – from a reflexive law perspective – is considered as the key to developing an autonomous legal system.562 To be successful, a certain degree of consistency of the evolutionary decisionmaking563 as well as a certain continuity and publicity of the legal discourse564 are important prerequisites. As far as decision-making by arbitral investment tribunals is concerned, the alleged problem of inconsistency seems – at a first glance – to be incompatible with the emergence of an autonomous system of investment arbitration, given 555 Luhmann, Das Recht der Gesellschaft 61. According to Luhman, the „second order observation” describes the observation of the observation. While first order observations operate on the level of objective facts and describe what is observed, second order observations operate on the evaluative level and describes how it is observed. 556 Teubner, Global Bukowina 8. 557 Id. at 12. 558 Id. 559 Id. at 8–9. 560 Callies, Reflexive Transnational Law 185, 195. 561 Id. at 196. 562 Id. See also Luhmann, Das Recht der Gesellschaft 114. 563 Stefan Oeter, International Law and General Systems Theory, 44 German Yb. Int’l L. 72, 75 (2001). 564 Callies, Reflexive Transnational Law 185, 196–201.

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that strong communicative links are required for a legal system to evolve. However, even if such deficiency of arbitral jurisprudence proved true, this would not necessarily lead to the denial of the existence of a “system.” As is evident from the body of case law, many arbitral tribunals have, in fact, developed the habit of referring to prior arbitral awards regardless of whether these are based on a different bit or on a different set of facts.565 These references to prior cases might not always result in a consistent line of case law,566 but they prove that many arbitrators are well aware of their role and responsibility in the ongoing legal process of self-reproduction. There are thus visible tendencies, although still to be further expanded, to a de facto precedent regime,567 which is an essential prerequisite for more jurisprudential consistency and coherence. Furthermore, structural shortcomings appear to hinder the establishment of an autonomous legal system. The non-permanent, delocalised nature of arbitral tribunals as well as the partially still very limited degree of procedural transparency seem problematic.568 These weak points nevertheless do neither preclude the systemic character of investment law and arbitration. The lack of permanent, hierarchically structured tribunals may to a certain extent be compensated by arbitral institutions569 such as the icsid, icc, scc, or lcia, since they operate in the background of arbitration proceedings and hence provide for a certain continuity by fulfilling functions like the registration of a request for arbitration, the authentification of an award, or even the supervision with regard to form and substance of an award.570 In addition, the “increasing reliance on mutual observation and adaptation of the bodies and actors,” which led to the development of a de facto precedent regime, are considered as apt to

565 Schill, The Multilateralization of International Investment Law 367–368. 566 See below Ch. 2.D.II.2. 567 For further elaborations on the de facto precedent regime in international investment arbitration, see below Ch. 2.D.II.2. 568 See Ch. 1.C.II.2. and Ch. 1.C.II.4. 569 Callies, Reflexive Transnational Law 185, 198–199. 570 See e.g. icsid Convention Art. 11: “(…) [The Secretary General] shall perform the function of registrar and shall have the power to authenticate arbitral awards rendered pursuant to this Convention, and to certify copies thereof.”; icc Arbitration Rules (2012) Art. 33: “Before signing any award, the arbitral tribunal shall submit it in draft form to the Court. The Court 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. No award shall be rendered by the arbitral tribunal until it has been approved by the Court as to its form.”

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compensate the lack of institutionalised, hierarchical structures.571 Not least, it should also be noted that international arbitrators are meanwhile widely recognised by the legal community as autonomous organs of a distinct legal regime who, in the exercise of their functions, shape rules and specify standards that are determining for investor-State relations.572 Regarding procedural transparency, as seen,573 a substantial deficiency of public insight and participation in arbitral proceedings only exists in non-­ ICSID cases, which make up but a limited number of investment arbitrations. Of these non-ICSID cases, also those governed by the unictral Arbitration Rules may, in the future, no longer be criticised for an insufficient procedural transparency once the Mauritius Convention on Transparency will have entered into force. Ultimately, only cases brought under a different arbitration regime, such as the icc or scc Arbitration Rules, will remain open to criticism. Since these account only for a single-digit percentage rate574 of the annually filed investor-State cases, the publicity of investment arbitrations may be considered as sufficient to enable a related legal discourse. With regard to the immense aggregate of investment agreements, the legal theory perspective of international arbitration demands that – as a precondition for a body of legal provisions being designated as a legal system – “the rules in question […] operate in an interrelated manner following certain methods specifically belonging to the field of legal logic (…).”575 This claim of interrelated operations manifests obvious similarities with the concept of selfreproduction by self-reference as formed by the general systems theory set out above. The rules in question stem primarily from iias, and in particular bits, as the primary source of investment law. They appear to function, prima facie, solely in an isolated, self-contained manner without any interrelation. They seem to preclude per se any wider-reaching, interlocking structures. Yet, closer

571 Oeter, International Law and General Systems Theory 72, 76, referring to Teubner, Global Bukowina 20. 572 Emmanuel Gaillard, Legal Theory of International Arbitration 59 (Martinus Nijhoff, Leiden, 2010). 573 See Ch. 1. C.II.4. 574 See Ch. 1. C.I.3. 575 Gaillard, Legal Theory of International Arbitration 54. The author goes even further and draws a distinction between a “legal system” and a “legal order.” According to him, a legal system only qualifies as a legal order if it is able to answer any arising fundamental legal question of “its sources or its relations with other legal orders” and if it can reflect thereon, see id, at 58.

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analysis reveals that appearances can be deceiving.576 First, the great number and ­variety of iias are more than a set of independent treaties co-existing side-by-side. Albeit often differing in their individual wording, they contain similar content and structures and embody recurring fundamental standards and obligations, which have been designated as “core concepts” of international investment law.577 Second, the manner in which many arbitral tribunals interpret and apply provisions stemming from the myriad of iias confirms that these treaties are not entirely unconnected or isolated from each other. Tribunals often construe the protective standards contained therein by drawing cross-references to other (model) bits.578 This practice reflects that they understand these treaties and also their own decisions as parts that complement one another and constitute a whole.579 In this sense, the icsid tribunal in aapl v. Sri Lanka580 stated that a bit: (…) 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 (…), whether of international law character or of domestic law nature. It has thus been recognised even from the system theoretical viewpoint, that “there are signs of an ongoing evolution moving the development of such ‘global law’ beyond the state of an ‘uncoordinated patchwork.’”581 And since 576 See Ch. 2.B.II.1.b and Ch. 2.D.II.2. 577 Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 179. See also Schill, The Multilateralization of International Investment Law 65 et seq., esp. 117–120; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 153–154; Donald McRae, The wto Appellate Body: A Model for an icsid Appeals Facility?, 1 J. Int’l Disp. Settlement 1, 12–13 (2010). For further elaborations on the complexity of international investment law and in particular the vast network of iias, see Ch. 2.B.II.1.b. 578 Schill, The Multilateralization of International Investment Law 305– 314, 367, who labels this practice of investment tribunals as “cross-treaty interpretation.” 579 Id. at 367. 580 Asian Agricultural Products Ltd. v. Democratic Socialist Republic of Sri Lanka, icsid Case No. arb/87/3, Award (27 June 1990) [hereinafter aapl v. Sri Lanka (Award)], para. 21, referred to in Campbell McLachlan, Investment Treaties and General International Law, 57 Int’l & Comp. L. Q. 361, 369–370 (2008), who supports this position. 581 Oeter, International Law and General Systems Theory 72, 76, borrowing expressions from Teubner, Global Bukowina 20.

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it is States who conclude bits on the basis of their constitutionally anchored public authority, commentators have gone so far as to consider international agreements as “law-making treaties” by means of which emerges a formalised path of “legislative [global] law making.”582 In conclusion, it remains to be noted that international investment law and arbitration show a certain degree of convergence and homogeneity rather than solely divergence and heterogeneity with regard to both the underlying treaty regime583 and the arbitral jurisprudence based thereon. Unifying factors584 exist between the different bits and also between the different awards forming part of the large body of arbitral jurisprudence. They operate as ordering, “multilateralising”585 powers amidst loose structures and include in particular the de facto precedent regime as established by the continuous references of arbitral tribunals to previous decisions. Although still in need of improvement, these reciprocal references to other awards but also to other treaties can rightfully be considered as an autopoietic processing of legal communications being the key to the development of an autonomous legal system.586 The qualification of this current state of investment law and arbitration as a “system” is hence not presupposing a centralised or pre-determined arrangement; it is rather satisfied with decentralised, interactive, and self-organising structures that are flexible 582 Oeter, International Law and General Systems Theory 72, 77, borrowing expressions from Teubner, Global Bukowina 5. 583 Schill, System-Building in Investment Treaty Arbitration and Lawmaking 154; unctad, Bilateral Investment Treaties in the Mid-1990s, 143–144 (1998). See also Schill & Jacob, Trends in International Investment Agreeements, 2010–2011 179, who state that “[t]his nucleus [i.e. the core concepts of international investment law] (…) is based on various centripetal forces that counteract the centrifugal tendencies identified (…).” 584 Terminology borrowed from Oeter, International Law and General Systems Theory 72, 80. 585 See Schill, The Multilateralization of International Investment Law 65 et seq., esp. 117–120. 586 See above, esp. Callies, Reflexive Transnational Law 185, 195. A similar conclusion was reached by the ilc when considering international law in general; see ilc, Fragmentation of International Law: Difficulties Arising from Diversification and Expansion of International Law – Report of the Study Group of the International Law Commission, A/cn.4/L.702, para. 14 (1) (18 July 2006): “International law is a legal system. Its rules and principles (i.e. its norms) act in relation to and should be interpreted against the background of other rules and principles. As a legal system, international law is not a random collection of such norms. There are meaningful relationships between them.”

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to react to dynamic changes whilst ensuring a certain degree of inner cohesion and order.587 b “Over-Complexity”? Although the prevailing opinion is that the high degree of complexity featured by international investment law and arbitration does not exclude its qualification as a legal system, concerns persist as to whether this area of law is too complex and diverse to lay claim to a largely consistent arbitral jurisprudence. Is the body of investment law overly complex so that the criticism that the corresponding case law is inconsistent is inappropriate? Or, to put it differently, should the extraordinary intricacy of investment law be considered as a mitigating circumstance in respect of the charge of conflicting case law? As indicated, the complexity of international investment law and arbitration results from several factors which are indeed challenging, but which must be put into perspective. This applies, first, to the non-permanent nature of arbitral tribunals, given that the arbitrators sitting on icsid tribunals are generally recruited from a rather small group of persons. This trend of repeated appointments of arbitrators had already been observed in the early years of the rise of investment arbitration588 and has been confirmed by later studies.589 Second, 587 In this sense, see also Oeter, International Law and General Systems Theory 72, 79–80. Cf. also the concept of foreign investment law as a “complex adaptive system” coined by Joost Pauwelyn, At the Edge of Chaos?: Foreign Investment Law as a Complex Adaptive System, How It Emerged and How It Can Be Reformed, 29 icsid Rev. – filj 372, 372–418 (2014). For a counter-position considering that “speaking of international investment law as ‘a legal system’ would clearly be a depiction de lege ferenda,” see Steffen Hindelang, Study on Investor-State Dispute Settlement (isds) and Alternatives of Dispute Resolution in International Investment Law, in European Parliament, Directorate-General for External Policies, isds Provisions in the eu’s International Investment Agreements, 60 (2014), referring to Ten Cate, Costs of Consistency 418, esp. 425, with further references. 588 Shihata & Parra, Experience of the icsid 299, 311: “Altogether, 52 arbitral tribunals have been constituted in proceedings instituted pursuant to the Convention. Over 100 individuals have been appointed as arbitrators in such proceedings, several of them more than once.,” referred to in Commission, Precedent in Investment Treaty Arbitration 129, 138. 589 Commission, Precedent in Investment Treaty Arbitration 129, 138–139: “The appointments made thus far in pending icsid cases continue this trend. A review of the 103 pending icsid cases (ranging from cases registered in February 1997 to November 2006) reveals that 137 arbitrators accounted for the 284 appointments in pending cases (…). Of these 137 arbitrators, 32 of them account for 153 of the possible 284 appointments (54 percent). In fact, of the 32 arbitrators most frequently selected, the top 19 account for 114 of the 284 appointments (40 percent).”

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the large number of cases and the diversity of stakeholders, issues, and levels of legal impact of rulings of investment tribunals do not as such hinder a certain degree of consistency in arbitral jurisprudence. This is demonstrated, for example, by far more complex institutional and legal set-ups such as the eu, which managed to develop a largely harmonious and uniform body of law and jurisprudence.590 Third, many of the sources of the multi-faceted body of investment law have a general validity for any arbitral proceeding. For instance, unless the parties have agreed otherwise, the law of procedure of icsid proceedings is generally governed by the icsid Convention and the accompanying rules and regulations as unitary sources. Moreover, substantive international investment law stemming from international conventions, international custom, or general principles of law also represent uniform sources of law that are universally applicable. The remaining aspect meriting an in-depth look is the complexity associated with the vast number of iias. In this regard, it must be acknowledged that the individual provisions of different investment treaties contain different wordings and terms, even if they have similar basic structures and cover similar subjects.591 These variations are partly only arbitrary and hence of marginal importance, but, to a certain extent, are intended and therefore distinctive and significant.592 An example of the former case is the insignificant difference between “full protection and security” and “protection and full security.” An example of a significant variation in the wording of treaties, by ­contrast, can be found in the bits concluded by Singapore, where the ­wording See also Jeffery P. Commission, A Snapshot of icsid Arbitrators in Pending Cases, Kluwer Arbitration Blog (4 September 2009), wherein the author presents an updated review of icsid case law from 2009 and affirms the past trend. 590 The consistent interpretation of eu law by the member State courts is, to a large extent, owed to the system of preliminary rulings pursuant to tfeu Art. 267. For detailed elaborations on this mechanism, see below Ch. 3.C.I.2. 591 unctad, Bilateral Investment Treaties 1995–2006: Trends in Investment Rule Making, xiii (2007). See also Clint Peinhardt & Todd Allee, Different investment treaties, different effects (20 February 2012), Columbia fdi Perspectives No. 61, 1 (2012); Clint Peinhardt & Todd Allee, Devil in the details? The investment effects of dispute settlement variation in bits, in Yearbook on International Investment Law and Policy 2010–2011 837–840 (Karl P. Sauvant ed., 2012), referring to Sornarajah, The International Law on Foreign Investment 218; Bjorklund, Practical and legal avenues 182–183 (including a list of examples). 592 Alexandrov, Perceived Inconsistency 63; José Alvarez, The Emerging Foreign Direct Investment Regime, 99 asil Proc. 94, 97 (2005).

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for compensation upon expropriation varies depending on the contracting party: while the treaties concluded with Germany and the Netherlands refer to “just” compensation, the agreements with Switzerland and the United Kingdom require “adequate” and “effective” compensation. The bit with France includes the standard of “the commercial value of the assets on the day of the ­expropriation.”593 Such differences in the wording of treaty provisions must be respected by interpreting them individually and in conformity with the State parties’ intent. Apart from explicit and hence evident variations, even

593 unctad, Bilateral Investment Treaties in the Mid-1990s, 139 (1998). Germany–Singapore bit Art. 4 (1) (Treaty between the Federal Republic of Germany and the Republic of Singapore Concerning the Promotion and Reciprocal Protection of Investments, 3 October 1973, 1023 unts 229 (1976)); Netherlands–Singapore bit Art. ix (c) (Agreement on Economic Cooperation between the Government of the Kingdom of the Netherlands and the Government of the Republic of Singapore, 16 May 1972 (entry into force 7 September 1973)); Singapore–Switzerland bit Art. 4 (Convention between the Government of the Swiss Federation and the Government of the Republic of Singapore Concerning the Encouragement and the Reciprocal Protection of Investments, 6 March 1978 (entry into force 3 May 1978)); Singapore–uk bit Art. 5 (1) (Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Singapore for the Promotion and Protection of Investments, 22 July 1975, ukts No. 151 (1975)); France–Singapore bit Art. 4 (2) (Agreement between the Government of the French Republic and the Government of the Republic of Singapore on the Encouragement and the Protection of Investments, 8 September 1975, jo 7150 (1976)). There is no consensus in international law on the proper standard of compensation. The us and many capital-importing States consider an expropriated alien as being entitled, according to the Hull formula, to “prompt, adequate, and effective” compensation and hence favour a relatively high standard of full fair market value. By contrast, the Restatement (Third) of the Foreign Relations Law of the United States (1987), which intends to reflect international treaty practice and judicial practice, stipulates the lower standard of “just” compensation, which is considered as suggesting to include considerations beyond the market value, as e.g. extraordinary circumstances of State practice. A further, yet disputed standard of “appropriate” compensation is set out by the 1952 psnr Resolution. While some States found that this would refer to full compensation, others were of the opinion that it would include less. See Irmgard Marboe, Die Berechnung von Entschädigung und Schadensersatz in der internationalen Rechtsprechung 43 et  seq. (Peter Lang, Frankfurt am Main, 2009); McLachlan et al., International Investment Arbitration – Substantive Principles 316–319; Andrew Newcombe & Lluís Paradell, Law and Practice of Investment Treaties 377–379 (Wolters Kluwer, Austin (tx), 2009). See also Ch. 1.B.I.

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bits featuring identical or largely similar provisions do not inevitably need to be construed in the same way, since interpretation is not only determined by the wording of a norm, but also by its drafting history, systemic context, and telos.594 In view of these unique features of individual iias and notably bits, it has been alleged that the drive towards consistency would imply an attempt to unduly generalise these treaty provisions, treating them as if they stemmed from a single, standardised, and universally valid investment treaty.595 Yet, as supporters of this opposing view argue, each bit – and the cases settled under it – constitutes lex specialis, which mandates an individual and differentiated interpretation and application, and which therefore generally renders criticism of jurisprudential inconsistencies in that regard inappropriate.596 Arbitral tribunals should not be blamed for conflicting decisions; rather, the heterogeneity of outcomes would be predetermined by the complexity of this major source of international investment law. Clearly, taking the high degree of variation in the iia “micro-cosmos”597 into account, one can hardly expect the development of a consistent arbitral 594 Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 6: “[I]dentical or similar provisions of different treaties may not necessarily yield the same interpretative results once differences in the respective context, objects and purposes, subsequent practice of parties and travaux preparatoires have been taken into account,” referring, inter alia, to Ireland v. United Kingdom (mox Plant), itlos, Order of Provisional Measures (3 ­December 2001), 126 ilr (2005) 260, 273–274. 595 Alexandrov, Perceived Inconsistency 63. See also Patrick Juillard, Variation in the Substantive Provisions and Interpretation of International Investment Agreements, in Appeals Mechanism in International Investment Disputes 97 (Karl P. Sauvant ed., 2008), stating that “[a]rbitral tribunals cannot give uniform interpretations with respect to clauses that differ so vastly.” 596 Ieva Kalnina & Domenico Di Pietro, The Scope of icsid Review: Remarks on Selected Problematic Issues of icsid Decisions, in International Investment Law for the 21st Century – Essays in Honour of Christoph Schreuer 243 (Christina Binder et al. eds., 2009); Alexandrov, Perceived Inconsistency 63; Alvarez, The Emerging Foreign Direct Investment Regime 94, 97; McRae, The wto Appellate Body 1, 13; Hindelang, Study on isds and Alternatives of Dispute Resolution in International Investment Agreements, in ep, isds Provisions in the eu’s International Investment Agreements, 59–61 (2014). See also Magraw & Amerasinghe, Transparency and Public Participation 337, 340. The latter authors, however, hint that this argumentation is not convincing to them, see below fn. 599. 597 Terminology according to James Zhan et al., International Investment Rulemaking at the Beginning of the Twenty-First-Century: Stocktaking and Options for the Way Forward, in The Evolving International Investment Regime: Expectations, Realities, Options 199 (José Alvarez et al. eds., 2011).

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case law comparable to a jurisprudence constante in a unified jurisdiction with a uniform legal system.598 Yet, a global assertion that iias and in particular bits display too many diverging wordings to raise a claim for consistency appears to be too broad. Notwithstanding the uncontested existence of significant variations in treaty formulations requiring individual interpretation, many treaties feature identical or largely similar wording with non-material and hence insignificant variations, or they differ in significant details, but – nevertheless – raise similar interpretative questions in more general terms as to core concepts, i.e. recurring fundamental standards and obligations under international investment law.599 In unctad, The Development Dimension of International Investment Agreements, TD/B/C.II/MEM.3/2, para. 21 (2008), the iia network has been described in the following manner: “The system is universal, in that nearly every country has signed at least one bit and the majority of them are members to several, if not numerous, iias. The structure of agreements is atomized, that is, it consists of thousands of individual agreements that lack any system-wide coordination and coherence. The iia universe is multi-layered – as iias now exist at the bilateral, regional, intraregional, interregional, sectoral, plurilateral and multilateral level – and iias at different levels may overlap. The system is also multifaceted, meaning that iias include not only provisions that are specific to investment, but also rules that address other related matters, such as trade in goods, trade in services, intellectual property, labour issues or environmental protection.” 598 Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007). 599 See e.g. Franck, The Legitimacy Crisis 1521, 1619: “Giving the overwhelming similarity of the rights promulgated in investment treaties, it is vital to make a comprehensive effort to harmonize and clarify the development of these standards. Similar provisions of related investment treaties should be analyzed and applied in similar ways (…).”; Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 86: “(…) treaties have common roots and are intimately related. While not identical, the more than 2100 existing bits do have a high degree of uniformity in the substantive rights granted to investors.”; Magraw & Amerasinghe, Transparency and Public Participation 337, 340: “Because there are more than 2500 iias, one could argue that the inconsistent cases, or at least those between cases under different iias, are irrelevant because each iia and the cases under it constitute lex specialis. That is not convincing, however, because most of the disciplines read the same in different iias (…).”; Jeswald W. Salacuse, Towards a Global Treaty on Foreign Investment: The Search for a Grand Bargain, in Arbitrating Foreign Investment Disputes 60 (Norbert Horn ed., 2004): “Although the precise provisions of bits are not uniform, virtually all bits treat the same issues.”; Noah D. Rubins, The Evolution of Investment Arbitration in the u.s. ftas with Singapore and Chile, 1 tdm 1, 3 (2004): “Bilateral investment treaties (bits) vary somewhat, but share a general structure and most substantive elements.”; Antonio R. Parra, Applicable Substantive Law in icsid Arbitrations Initiated under Investment Treaties, 16 icsid Rev. – filj 20, 21 (2001): “The

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In a first step, this analysis will turn to iias whose wording is uniform or varies insignificantly. Their similarities are for the most part not coincidental, but due to the influence of pre-existing multilateral conventions and mits on model bits600 and vice versa.601 Likewise, at the bilateral level, partial resemblances between individual bits can be traced back to existing model bits.602 An example of the influence of multilateral legal frameworks of investment protection can already be found in the early years of investment law and arbitration. The similarity of many model bits, for instance, has been due to the guidance of the 1967 oecd Draft Convention on the Protection of Foreign Property, notwithstanding the fact that this attempt to draft a multilateral convention failed in the end.603 Moreover, the impact of multilateral treaties on model bits becomes visible when looking at the more recent provisions of the 2004 Canada and us Model bits, which show a remarkable similarity to the

substantive provisions of the treaties are, for the most part, similar in form and content.”; Wälde, Improving the Mechanism 530: “Although each investment treaty is different (and such differences may at times be significant), there is a common core of largely similar, if not identical provisions (…)”; Schill, The Multilateralization of International Investment Law 364: “(…) the myriad number of investment treaties are similar, and often identical, in structure, content, and objective.”; Reed, The De Facto Precedent Regime 95, 96–97: “(…) there are elastic legal concepts in investment treaties (…) that beg to be illuminated with reasoned findings by tribunals.” Part of the above quotations have been referred to in Commission, Precedent in Investment Treaty Arbitration 129, 141. See also Ch. 2.B.II.1.a. 600 Schill, The Multilateralization of International Investment Law 91–93. See also Campbell McLachlan, The Principle of Systemic Integration and Article 31 (3) (c) of the Vienna Convention, 54 Int’l & Comp. L. Q. 279, 283–284 (2005): “Each state brings to the negotiating table a lexicon which is derived from prior treaties (…) into which it has entered with other states. The resulting text in each case may be different. It is, after all, the product of specific negotiation. But it will inevitably share common elements with what has gone before.”, referred to in J. Romesh Weeramantry, Treaty Interpretation in Investment Arbitration 127 (Oxford University Press, Oxford, 2012). 601 unctad, Bilateral Investment Treaties in the Mid-1990s, 144 (1998). 602 Schill, The Multilateralization of International Investment Law 90–91. See also Kenneth J. Vandevelde, International Law Ten Years from Now: International Investment Law: Model Bilateral Investment Treaties: The Way Forward, 18 Sw. J. Int’l L. 307, 312 (2011): “The 2004 u.s. model has influenced the bit practice of other countries. (…) [I]nnovations that appear in the 2004 model are beginning to appear in the bit practice of other countries as well.” 603 1967 oecd Draft Convention, referred to in Schill, The Multilateralization of ­International Investment Law 91–93; Andrew Newcombe, Developments in iia treaty-making, in Improving International Investment Agreements 19 ­(Armand De Mestral & Céline Lévesque eds., 2013).

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wording of nafta Chapter 11, e.g. the provisions on standards of treatment or on the consolidation of proceedings.604 The nafta itself, in turn, resembles in The former author also mentions the Abs-Shawcross Draft, the predecessor of the 1967 oecd Draft Convention, as influential document for later model bits (Draft of a “Convention on Investments Abroad,” reprinted in unctad, International Investment Instruments: A Compendium, Vol. v, 395 (2000)). As an example for the alleged impact of these multilateral draft conventions, he refers to the concept of umbrella clauses, which had been established by Elihu Lauterpacht in the 1950s and which, lateron, was adopted in the said conventions and, eventually, in various national model bits; see Schill, The Multilateralization of International Investment Law 92. In addition, he points to the influence of multilateral treaties that future bit contracting parties were already part of, e.g. the Fourth acp-eec Convention (Lomé Convention) between developing countries from Africa, the Caribbean, and the Pacific Member States of the European Economic Community, signed 15 December 1989, 29 ilm 809 (1990); see id. at 92–93. 604 unctad, Bilateral Investment Treaties in the Mid-1990s, 144 (1998). See e.g. the mfn standard in nafta Art. 1103: “1. Each Party shall accord to investors of another Party treatment no less favorable than that it accords, in like circumstances, to investors of any other Party or of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments. 2. Each Party shall accord to investments of investors of another Party treatment no less favorable than that it accords, in like circumstances, to investments of investors of any other Party or of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.”; as compared to 2004 us Model bit Art. 4: “1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to investors of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory. 2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments in its territory of investors of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments.”; as compared to 2004 Canada Model bit Art. 4: “1. Each Party shall accord to investors of the other Party treatment no less favorable than that it accords, in like circumstances, to investors of any non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory. 2. Each Party shall accord to covered investments treatment no less favorable than that it accords, in like circumstances, to investments of investors of a non-Party with respect to the establishment, acquisition, expansion, management, conduct, operation, and sale or other disposition of investments in its territory.” See e.g. the consolidation provision in nafta Art. 1126 (2): “Where a Tribunal established under this Article is satisfied that claims have been submitted to arbitration under Article 1120 that have a question of law or fact in common, the Tribunal may, in the interests of fair and efficient resolution of the claims, and after hearing the disputing parties,

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many respects the wording of the 1994 us Model bit, e.g. with regard to establishment provisions and performance requirements.605 Last but not least, individual bits signed in the aftermath of the nafta negotiations bear remarkable similarities to this regional investment agreement606 – even where neither of the bit contracting parties is a party to the nafta.607 At the bilateral level, the similarities of individual bits have indubitably also been influenced by the set of model arbitration clauses for bits brought out by the icsid in 1969.608 In addition, the Model International Agreement on Investment for Sustainable Development released by the International Institute for Sustainable Development609 in 2005 has had considerable impact on the iia practice of States.610 In view of this growing number of States using prototype or model iias, commentators have even spoken of a “modelisation” trend in iia treaty making, though with the caveat that such modelisation may not equate with a standardisation of individual iias.611 Overall, the assumption of a general development towards increasingly diverging and complex iias must therefore be



by order: (a) assume jurisdiction over, and hear and determine together, all or part of the claims; or (b) assume jurisdiction over, and hear and determine one or more of the claims, the determination of which it believes would assist in the resolution of the others.” as compared to 2004 Canada Model bit Art. 32 (2): “Where a Tribunal established under this Article is satisfied that claims have been submitted to arbitration under Article 1120 that have a question of law or fact in common, the Tribunal may, in the interests of fair and efficient resolution of the claims, and after hearing the disputing parties, by order: (a) assume jurisdiction over, and hear and determine together, all or part of the claims; or (b) assume jurisdiction over, and hear and determine one or more of the claims, the determination of which it believes would assist in the resolution of the others.” 605 Id. Treaty between the Government of the United States of America and the Government of [Country] concerning the Encouragement and Reciprocal Protection of Investment, April 1994 [hereinafter 1994 us Model bit]; reprinted in id. at 287 (Annex ii). 606 Id. at 144, referring to the bits to which Canada is a party. 607 Id., referring to the El Salvador–Peru bit (Agreement between the Government of the Republic of Peru and the Government of the Republic of El Salvador on the Promotion and Reciprocal Protection of Investments, 13 June 1996 (entry into force 15 December 1996)) and its similarities with the nafta and us bits in terms of performance requirements and provisions on entry and stay of foreign personnel. 608 Newcombe, Developments in iia treaty-making 19–20. 609 [Hereinafter iisd]. The text of this model iia is available at (last visited September 2016). 610 Newcombe, Developments in iia treaty-making 20. 611 Id. at 19.

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somewhat put into perspective when considered in the context of counteracting tendencies of convergence. In a second step, the analysis will discuss iia provisions whose wording differs in significant details, but relates to similar underlying core concepts. These can primarily be found in the context of general standards of investor protection,612 e.g. the absolute standards of “fair and equitable treatment” and of “full protection and security,” the relative standards of “national treatment” and “most favoured nation treatment,”613 or the obligations related to expropriations.614 Other recurring key issues concern, e.g., performance requirements, transfer provisions, and the treatment of umbrella clauses.615 The latter example has been at issue in the conflicting sgs cases.616 Even though the wording of the umbrella clauses in the Switzerland–Pakistan bit and in the Switzerland–Philippines bits was not identical617 it differed only slightly and the clauses were generally comparable to the extent that both provided for the host State’s duty to observe contract-based undertakings, at least 612 The question of whether bits and the standards contained therein have crystallised, over time, into rules of international custom, is controversial, see e.g. Sornarajah, The International Law on Foreign Investment 218; McRae, The wto Appellate Body 1, 13. For a discussion of that question and further literature references, see also below Ch. 2.E.III.1.a.bb. 613 [Hereinafter fet, fps, nt, mfn]. 614 Crawford, Similarity of Issues in Disputes 102–103; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 163; Schill, The Multilateralization of International Investment Law 364; Leeks, Relationship between bit Arbitration and the Wider Corpus of International Law 1, 5–8. 615 Crawford, Similarity of Issues in Disputes 102–103; McRae, The wto Appellate Body 1, 12–13; Leeks, Relationship between bit Arbitration and the Wider Corpus of International Law 1, 5–8. 616 For a detailed discussion of the interpretation of umbrella clauses in the sgs cases and in further icsid case law, see below Ch. 2.E.I.2.b.bb. 617 Switzerland–Pakistan bit Art. 11: “Either Contracting Party shall constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the other Contracting Party.” (Agreement between the Swiss Confederation and the Islamic Republic of Pakistan on the Promotion and Reciprocal Protection of Investments, 11 July 1995 (entry into force 6 May 1996)). Switzerland–Philippines bit Art. x (2): “Each Contracting Party shall observe any obligation it has assumed with regard to specific investments in its territory by investors of the other Contracting Party.” (Agreement between the Swiss Confederation and the Republic of Philippines on the Promotion and Reciprocal Protection of Investments, 31 March 1997 (entry into force 23 April 1999)). .

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those relating to particular investments made by an investor.618 Consequently, both clauses raised the interpretative question of whether and to what exent such type of clause would have the effect that breaches of contractual commitments relating to (certain) investments would amount to breaches of the investment treaty. This common question concerning the general concept and function of umbrella clauses has been repeatedly posed in many treaty-based investment disputes and therefore allows for and requires consistent answers. Another example is the fet standard.619 A study on fet typology in selected iias found that the wording in these treaties varied considerably, ranging from fet mentioned alone or with a reference to international (customary) law, to fet combined with other standards of treatment such as fps, mfn or nt, to fet mentioned together with specific obligations or prohibitions.620 This trend to drafting more complex and detailed fet provisions is an indication of the vague and controversial content of this protective standard as found in many bits. While this obviously does not permit a clear cut definition fit for every individual fet clause, it still does not preclude drawing basic contours and pointing out the common understanding of the standard. In this vein, the tribunal in Saluka v. Czech Republic held that:621 [e]ven though Article 3 obviously leaves room for judgment and appreciation by the Tribunal, it does not set out totally subjective standards (…). As the tribunal in S.D. Myers has said, the ‘fair and equitable treatment’ standard does not create an ‘open-ended mandate to second-guess government decision-making.’ The standards (…), vague as they may be, are susceptible of specification through judicial practice and do in fact have sufficient legal content to allow the case to be decided on the basis of 618 For a similar view, see Weeramantry, Treaty Interpretation in Investment ­A rbitration 174; Juillard, Variation in the Substantive Provisions and Interpretation of iias 99. As the latter author stated, “the differences between the two clauses do not seem of such an import as to warrant different final resolutions.” 619 For further elaborations on the interpretation of the fet standard in icsid case law, see below Ch. 2.E.III.2.a.aa.aaa. 620 Ioana Tudor, The Fair and Equitable Treatment Standard in the International Law of Foreign Investment 15–52 (Oxford University Press, Oxford, 2008). See also, for examples of fet standard formulations in current treaty practice, ­u nctad, Fair and Equitable Treatment, unctad Series on Issues in International Investment Agreements ii (2012). 621 Saluka Investments bv v. Czech Repblic, uncitral Arbitration (pca), Partial Award (17 March 2006) [hereinafter Saluka v. Czech Republic (Partial Award)], para. 284 [footnotes omitted], referred to in Tudor, Fair and Equitable Treatment 155.

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law. Over the last few years, a number of awards have dealt with such standards yielding a fair amount of practice that sheds light on their legal meaning. To this end, arbitrators622 and scholars623 have begun to conceptualise and systemise common protective guarantees that are generally considered to be comprised by this standard. The categories they define consist, e.g., in the protection of legitimate expectations, of stability and transparency of the general legal framework conditions, of good faith, of due process, as well as in the protection against arbitrary or discriminatory measures and against denial of justice. Orienting the legal treatment of acts or omissions of host States at these categories would thus permit reaching more consistent results when interpreting and identifying the content of the fet standard in individual cases.624 622 See notably Técnicas Medioambientales Tecmed, s.a. v. United Mexican States, icsid Case No. arb(af)/00/2, Award (29 May 2003) [hereinafter Tecmed v. Mexico (Award)], paras. 153–154, which has been followed by a number of later tribunals, e.g. lg&e Energy Corp., lg&e Capital Corp. and lg&e International Inc. v. Argentine Republic, icsid Case No. arb/02/1, Decision on Liability (3 October 2006) [hereinafter lg&e v. Argentina (Decision on Liability)], para. 127; cms Gas Transmission Company v. Argentine Republic, icsid Case No. arb/01/8, Award (12 May 2005) [hereinafter cms v. Argentina (Award)], para. 279; mtd Equity Sdn. Bhd. and mtd Chile s.a. v. Republic of Chile, icsid Case No. arb/01/7, Award (25 May 2004) [hereinafter mtd v. Chile (Award)], para. 114. 623 See e.g. Dolzer & Schreuer, Principles of International Investment Law 145–160; Tilman Michael Dralle, Der Fair and Equitable Treatment-Standard im Investitionsschutzrecht am Beispiel des Schiedsspruchs Glamis Gold v. United States, 115 Beiträge zum Transnationalen Wirtschaftsrecht (Articles on Transnational Economic Law) 5, 18–30 (2011); McLachlan et al., International Investment Arbitration – Substantive Principles 235–243; Tudor, Fair and Equitable Treatment 154– 181; unctad, Fair and Equitable Treatment, unctad Series on Issues in International Investment Agreements ii, 29–32 (2012). See also Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 78–79. 624 Of course, as pointed out by Patrick Juillard in: Juillard, Variation in the Substantive Provisions and Interpretation of iias 89–90, 92–93, this possibility to reach more consistent interpretative results finds its limits in cases where fet clauses are concretised by specific prohibitions that reach far beyond the general understanding of this standard. See e.g. Art. 3 of the 2006 French Model bit (Draft Agreement between the Government of the Republic of France and the Government of the Republic of [Country] on the Reciprocal Promotion and Protection of Investments, 2006 [hereinafter 2006 French Model bit]): “(…) In particular though not exclusively, shall be considered as de jure or de facto impediments to fair and equitable treatment any restriction on the purchase or transport of raw materials and auxiliary materials, energy fuels, as well as the means of production

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In sum, it can be concluded that similarities – be it with regard to the individual wording of provisions or the general content – exist despite the intricate nature of the network of iias. They hence should be afforded the same respect as dissimilarities. This implies that they should be construed consistently where appropriate and reasonable.625 While this undertaking is not comparable to the degree of consistency that might be achieved in a unified jurisdiction with a uniform legal system, it may nonetheless establish “patterns of interpretation” with regard to the lowest common denominators of recurring provisions.626 By adopting this approach, ambiguous but recurring protective core standards and principles may be clarified through consistent and coherent interpretation.627 Thus, instead of “rejoicing a complete system of laissez faire,”628 there is a need to strive for a jurisprudence constante in the field of international investment arbitration and in particular in icsid jurisprudence. The fact that this is generally possible within the icsid regime is shown by the hitherto existing, although imperfect system of de facto precedent.629 Therefore, from this viewpoint, the question of whether the field of international investment law is too complex and diverse to allow for the development of consistent case law can be answered in the negative. Rather, the criticism of inconsistencies in arbitral investment jurisprudence is appropriate. In addition, having determined both the systemic character and the moderate complexity of investment law and arbitration, the critical preconditions for the emergence of a jurisprudence constante that have been set out above630 can be considered as given. Arbitrators may hence realistically and reasonably be 625

626 627

628 629 630

and operation of all types, any hindrance of the sale or transport of products within the country and abroad, as well as any other measures that have a similar effect. (…).” See also Ch. 2.B.I. For a caveat on this rule of equal treatment, see Douglas, Can a Doctrine of Precedent Be Justified in Investment Treaty Arbitration? 104, 109: “There is a deontological justification for deference to past decisions in the investment treaty context, and that is that fairness requires that like cases be treated alike. This is an inherent value to be promoted in adjudication. But it is not absolute. Deciding like cases in the same unjust way is obviously wrong. So fairness in this respect does not entail justice.” See Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007). See Franck, The Power of Legitimacy among Nations 61, who claims that indeterminate and vague rules may be clarified through consistent and coherent interpretation by legitimate authorities. Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007). See below Ch. 2.D.II.2. See Ch. 2.A.I.

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encouraged to take this legal doctrine into account – as an abstract, overarching goal of international investment arbitration – when rendering their rulings. 2 Solely Decision-making Function of Arbitrators? The appropriateness of criticising inconsistencies in arbitral investment jurisprudence is, moreover, controversial with regard to the role and function of arbitrators. More precisely, the controversy relates to the question of what exactly the tasks of an arbitrator involve: is their responsibility restricted to the settlement of the individual case at hand, i.e. are they solely servants of the parties? Or do they have a duty above and beyond that to ensure a consistent development of international investment law?631 The conception of an arbitrator’s role and function is closely linked to the overall understanding of the system of international (investment) arbitration. One point of view suggests treating arbitral proceedings – in spite of their similarities with judicial proceedings – primarily as the product of contract.632 Accordingly, in this view, the primary function of investment arbitral tribunals, although independent and neutral, is to provide a service to the parties, i.e. to settle their dispute, as specified in the arbitration agreement.633 To demand the fulfilment of more far-reaching, abstract tasks such as ensuring the development of a consistent case law would therefore be inappropriate, in particular since arbitration proceedings are not deemed to be on equal footing with judicial proceedings.634 This indicates that proponents of this position view 631 See also Reed, The De Facto Precedent Regime 95, 99. 632 Andrew T. Guzman, Arbitrator Liability: Reconciling Arbitration and Mandatory Rules, 49 Duke L. J. 1279, 1316 (1999–2000). 633 Catherine A. Rogers, The Vocation of the International Arbitrator, 20 Am. U. Int’l L. Rev. 957, 989–990 (2004–2005). The author is not sharing this view but presents it as a counterposition to her own position and refers to Guzman, Arbitrator Liability 1279, 1316–1324. See also Karl-Heinz Böckstiegel, ICC-Schiedsgerichtsbarkeit aus der Sicht einer Partei, in Recht und Praxis der Schiedsgerichtsbarkeit der Internationalen Handelskammer 88 (Karl-Heinz Böckstiegel ed., 1986): “Die Schiedsrichter müssen sich insbesondere im klaren sein, dass auch sie letztlich eine Dienstleistung zu erbringen haben, die zwar in Unabhängigkeit, aber unter dem Mandat und dem Vertrauen der Parteien zu leisten ist.” (“Arbitrators need to be particularly aware of the fact that they have to provide a service, which may be done independently from the disputing parties, but which is based on their mandate and their confidence.” [own translation]). 634 See e.g. the position taken in Stroh Container Co. (formerly known as Jos. Schlitz Brewing Company), Appellant v. Delphi Indus. Inc., Appellee, us Court of Appeals, 8th Cir. (1986), 783 F.2d 743, 751 n.12: “(…) the arbitration system is an inferior system of justice, structured without (…) accountability of judgment and rules of law.,” referred to in Susan Franck, The Role of International Arbitrators, 12 ilsa J. Int’l & Comp. L. 499, 505 (fn. 22) (2005–2006).

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arbitration mainly as a subject and operator, and not as a supply and source of law.635 Likewise, it is argued that an arbitrator sitting on a tribunal is not obliged or even expected to consider issues beyond the scope of the concrete case he is handling. As stated by the icsid tribunal in RosInvest v. Russia, “it is the primary function of this Tribunal to decide the case before it rather than develop[] further the general discussion on the applicability of [the standard of protection in question] (…).”636 The mandate of an arbitrator is thus considered as solely entailing a lawful inter partes decision of the case he is a­ djudicating – and not the development of international investment law by creating or following precedents. Due to this limited role, arbitrators should not be held accountable for inconsistent developments of arbitral case law. This position, while containing some valid points as to the primary function of arbitral dispute settlement, overlooks some important characteristics of international investment law and arbitration. It is a fact that legal norms applicable to a certain case at hand are rarely unambiguous and clear. On the contrary, they generally require specification through interpretation by the arbitrators sitting on investment tribunals. These interpretations have an enormous impact not only on the individual case at hand, but, beyond that, on subsequent cases due to de facto precedential effects637 and, in consequence, also on the development of both national and international investment law and jurisprudence.638 Thus, the shaping and refining of the rules and standards governing investor-State disputes coincides with a profound influence on different spheres of public (national and international) law.639 ­Additionally, 635 Thomas E. Carbonneau, Arbitral Law-Making, 25 Mich. J. Int’l L. 1183, 1202 (2003–2004). 636 RosInvest Co. uk Ltd. v. Russian Federation, scc Case No. V079/2005, iic 315 (2007), Decision on Jurisdiction (1 October 2007) [hereinafter RosInvest v. Russia (Decision on Jurisdiction)], para. 137: “However, since it is the primary function of this Tribunal to decide the case before it rather than developing further the general discussion on the applicability of mfn clauses to dispute-settlement-provisions, (…).” The said arbitral tribunal was presided by Prof. Karl-Heinz Böckstiegel, who affirmed his view in Karl-Heinz Böckstiegel, Aktuelle Probleme der Investitions-Schiedsgerichtsbarkeit aus der Sicht eines Schiedsrichters, 10 SchiedsVZ 113, 117 (2012). 637 Carbonneau, Arbitral Law-Making 1183, 1204; Rogers, Vocation of the International Arbitrator 957, 999–1000. For further elaborations on the de facto precedent effect, see below Ch. 2.D.II.2. 638 See Ch. 2.B.II.1.a. See also Schill, System-Building in Investment Treaty Arbitration and Lawmaking 137, 139. 639 Schill, The public law challenge: Killing or rethinking international investment law? (30 January 2012); Schill, System-Building in Investment Treaty Arbitration and Lawmaking 140.

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a further component of public impact relates to the semi-public nature inherent in investor-State disputes, which regularly affect not only the private interests of the investor, but also the public interests and goods associated with the State party.640 In other words, arbitrators, despite being primarily accountable for rendering decisions on the matters submitted to them, also operate in the framework of a larger adjudicatory system with public relevance.641 This contextualisation of arbitral decision-making has been appositely expressed by the tribunal in Glamis Gold v. us,642 which noted that: this Tribunal, in undertaking its primary mandate of resolving this particular dispute, does so with an awareness of the context within which it operates. The Tribunal emphasizes that it in no way views its awareness of the context in which it operates as justifying (or indeed requiring) a departure from its duty to focus on the specific case before it. Rather it views its awareness of operating in this context as a discipline upon its reasoning that does not alter the Tribunal’s decision, but rather guides and aids the Tribunal in simultaneously supporting the system of which it is only a temporary part. It is this broader perspective which helps to distinguish arbitrators from other providers of legal services and which is the basis for expanding the arbitrators’ obligations beyond the settlement of the individual dispute. Their responsibility is by no means limited to the boundaries of their contractual obligations towards the parties who choose to appoint them,643 i.e. to the mere resolution This “gradual entrenchment of investment arbitration as a stable system of governance in the field of foreign direct investment” and the accompanying exercise of adjudicatory power in the global and local public sphere has been described as “judicialisation” of the dispute settlement system; see Kim, Annulment Committee’s Role in Multiplying Inconsistency 242, 252–255. 640 In view of the fact that a large part of investor-State arbitrations concern basic supplies, such as water and energy, it is important to stress that these disputes reach beyond the settlement of individual conflicts and affect both domestic matters and external politicoeconomic relationships between States and private industries; see e.g. Schill, The public law challenge: Killing or rethinking international investment law? (30 January 2012). On the public dimension of investment arbitration, see also Ch. 1.B.II. 641 Carbonneau, Arbitral Law-Making 1183, 1204. 642 Glamis Gold Ltd. v. United States of America, uncitral Arbitration (nafta), Award (8 June 2009) [hereinafter Glamis Gold v. us (Award)], para. 7. 643 Carbonneau, Arbitral Law-Making 1183, 1204; Rogers, Vocation of the International Arbitrator 957, 984.

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of the individual dispute. Rather, it extends to the integrity of the wider system of international investment law and arbitration.644 Hence, when ruling on a case, arbitrators – as part of the investment law community645 – should not ignore generally accepted practices, but rather seek to conform to the interpretative approaches of other arbitral rulings646 or, if they disagree, articulate and explain the reasons for their deviation.647 In this manner, they contribute to the development of a consistent or at least coherent jurisprudence and, more generally, to the legitimacy of the legal system as a whole.648 See also id. at 991, stating that the parties’ submission of their dispute to arbitration implies their agreement to law-bound decisions subject to the constraints of the regime of international investment arbitration. 644 Jacques Werner, Making Investment Arbitration More Certain, 4 J. World Inv. & Trade 767, 786 (2003); Brigitte Stern, The Future of International Investment Law: A Balance Between the Protection of Investors and States’ Capacity to Regulate, in The Evolving International Investment Regime – Expectations, Realities, Options 186 (José Alvarez et al. eds., 2011). See also Yas Banifatemi, Consistency in investment rules interpretation, in Prospects in International Investment Law and Policy – World Trade Forum 226–227 (Roberto Echandi & Pierre Sauvé eds., 2013); Paulsson, The Role of Precedent in Investment Arbitration 718; W. Mark C. Weidemaier, Toward a Theory of Precedent in Arbitration, 51 Wm. & Mary L. Rev. 1895, 1949–1951 (2010). 645 Rogers, Vocation of the International Arbitrator 957, 1005. 646 Carbonneau, Arbitral Law-Making 1183, 1204. 647 It goes without saying that this endeavour to achieve consistency only concerns the abstract interpretation, not the concrete application of recurring legal standards and principles to the facts of the case. As regards the subsumption of facts under the applicable law, the arbitrator clearly is the ultimate decision-making authority. The finding of facts in the concrete case is at his exclusive discretion. Nevertheless, the activities of interpreting and applying international legal norms are not always clearly distinguishable. An approach to delimitation has been made by Anastasios Gourgourinis, The Distinction between Interpretation and Application of Norms in International Adjudication, 2 J. Int’l Disp. Settlement 31, 43–44 (2011). By reference to other authors, he defines the normative process of “interpretation” as the legal operation of constructing and determining the precise meaning of a rule without changing its meaning. The “application” of a norm, by contrast, is defined as the determination of the legal consequences a norm attaches to a particular fact. 648 Kramer, In Defense of Legal Positivism – Law Without Trimmings 143: “Though the regularity essential for the very existence of a legal system as such does pertain to the rationales for specific decisions, it pertains even more importantly to those decisions themselves. If most jural officials in a regime (…) disagreed with one another most of the time about the concrete legal implications of people’s actions, their treatment of those actions would be erratic and chaotic rather than norm-governed. Their regimes would not be a regime of law, where behaviour is generally subsumed under the regulating and guiding sway of norms.”

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Overall, in view of this close correlation between arbitral decision-making and investment law development, it appears reasonable to assume enhanced responsibilities and duties of arbitrators ruling on investor-State disputes. With this concept of the role and function of an arbitrator in mind, it is appropriate to criticise inconsistencies in arbitral investment jurisprudence. 3

Conflicting Jurisprudence as Welcome Phenomenon for the Sake of Correctness? The appropriateness of criticising inconsistencies in arbitral investment jurisprudence is, furthermore, questionable inasmuch as conflicting case law may promote intellectual dynamism and thus increase the chances of a “correct” decision-making. With this possible advantage in mind, should diverging decisions be perceived not as a threatening, but rather as a welcome phenomenon? In this sense, it has been argued that dissents from settled lines of case law would be a valuable tool for arbitral tribunals to articulate their position in the controversial discourse on core issues of investment law.649 Conflicting interpretations rendered by arbitral tribunals are considered as stimulating the “critical discourse” on different interpretative approaches650 and as important “driving forces” in the evolution towards the “proper interpretation” of key concepts of investment protection.651 In particular the fact that deviating arbitral tribunals generally express their disagreement in a rather abstract and systemcompatible manner and not in a purely case-specific way would indicate their willingness to foster the development of a system of de facto precedent, and, in the long run, of a jurisprudence constante.652 Such ambitions would not least be useful in view of the relatively young age of international investment law as a legal field: being still in its infancy, international investment law is mainly concerned with establishing its core concepts and corresponding i­nterpretative

649

650 651 652

See also, on the power of international arbitral tribunals to develop national and international public law, Otto Sandrock, Die Fortbildung des materiellen Rechts durch die Internationale Schiedsgerichtsbarkeit, in Rechtsfortbildung durch Internationale Schiedsgerichtsbarkeit 21–81 (Karl-Heinz Böckstiegel ed., 1989). Schill, The Multilateralization of International Investment Law 346; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 169; Ten Cate, Costs of Consistency 418, 420–422. See also Weiler, Interpretation of International Investment Law 122, who yet disagrees with this “‘progress by catastrophe’ line of reasoning.” Schill, The Multilateralization of International Investment Law 346. Id. Id. at 346–347, 356–357.

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approaches and is therefore open to new and guiding impulses.653 Against this background, contradictory interpretation and decision-making should be considered as constructive elements of a self-regulating mechanism or as “a form of checks and balances” that reveals over time which of the diverging approaches will prevail and ensures a certain quality of decision-making.654 Thus, while “perplexing outliers” could be expected to remain isolated instances, this position predicts that “dominant trends” will be consolidated in a process of “natural corrections.”655 Considering jurisprudential inconsistency as a “catalyst for legal development”656 might be appealing. In particular the basic assumption that the goal of achieving consistency should not take priority in all respects, but should leave room for other interests and values such as legal justice and an intertribunal dialogue,657 is certainly valid. Although arbitral tribunals should 653 Douglas, Can a Doctrine of Precedent Be Justified in Investment Treaty Arbitration? 104, 110; Banifatemi, Consistency in Investment Rules Interpretation 225–226. See also Federico Ortino in: Audley Sheppard et al., Precedent in Investment Arbitration, in Investment Treaty Law: Current Issues (Vol. iii) 318 (Andrea Bjorklund et al. eds., 2008): “Although this state of affairs may be seen as an example of ‘legal chaos’ (and to some extent it is), it may also be argued that there are important benefits of such chaotic state of affairs in international investment law. For example, the diversity of treaty language and the diversity of interpretation of this language (apparent chaos) represent a very useful learning ground for policy makers in the field.” However, at the same time, a lower level of development of a legal body of norms implies also an even higher importance of a predictable and consistent dispute resolution; see Bobbio, Nouvelles réflexions sur les normes primaires et secondaires 104 et seq., referred to in Kaufmann-Kohler, Arbitral Precedent 357, 374–375. 654 Schill, The Multilateralization of International Investment Law 357; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 169. See also Kaufmann-Kohler, Arbitral Precedent 357, 377, who describes this approach as arguing “that rule creation cannot be linear and that the road is necessarily bumpy, with dead ends and u-turns.”; and Gill, Inconsistent Decisions 12, 15, who expects that “over time the position in relation to many of these issues that are currently being debated will become more settled.” 655 Paulsson, Avoiding Unintended Consequences 252–258, esp. 252 (quotation). In that sense, the author states that “[a]ny significant legal evolution is a dialog between law-givers (read bit drafters) and law-appliers (read investment arbitrators) which perforce takes some time to yield dialectic conclusions – even more so in an international context.”; see id. at 244. 656 Terminology according to Weiler, Interpretation of International Investment Law 122. 657 Id. at 121–123.

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always endeavor to exercise “comity vis-à-vis prior decisions,”658 this principle finds its limits, as pointed out earlier,659 any time a legal reasoning rendered in an earlier case appears to be incorrect and thus unpersuasive to subsequent arbitral tribunals dealing with an identical or largely similar legal issue. In that event, the latter should refrain from aligning themselves with such precedent, but rather stick with their own position. Critical analysis and well-reasoned divergence are thus clearly preferable to blind conformism that risks generating incorrect results. Although causing inconsistency, this interpretative conduct of tribunals allows “good awards [to] chase the bad.”660 However, the crux of the matter is the critical analysis661 which should necessarily go along with any dissent. More precisely, for purposes of coherence, arbitral tribunals need to provide substantiated arguments for their deviation, including articulated rejections of precedents not followed. Although some tribunals have done so, many others either provide insufficient reasoning for their deviation or no explanation all.662 Therefore, conflicting decisions cannot be considered as beneficial per se, but should be treated with caution. They are only salutary to the extent that they use a far-reaching interpretative approach that goes beyond the individual case at hand, taking into account pre-existing case law and contributing to the coherent development of investment law and jurisprudence. Otherwise, case law risks ending up in a back-and-forth of individual decisions and reasoning, without any connection to precedent, and the development of a jurisprudence constante would become impossible. In the end, both consistency and coherence of investment jurisprudence would be jeopardised. A further important aspect as to the questionable value of conflicting decisions turns away from the law-development perspective and looks at the issue from the user’s point of view. Although, in the long run, well-substantiated interpretations that deviate from preceding ones might lead to not only correct and accurate, but also consistent investment jurisprudence, the repercussions occurring along the way, i.e. in the short- and medium-term, should not be underestimated. The users of an arbitral system plagued by conflicting, 658 Terminology according to id. at 124. 659 See Ch. 2.A.I 660 Jan Paulsson, International Arbitration and the Generation of Legal Norms: Treaty Arbitration and International Law, 3 tdm 1, 14 (2006): “(…) 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.” 661 Cf. Ten Cate, Costs of Consistency 418, 476, who speaks of an “explanatory burden.” 662 See below Ch. 2. D.II.2.

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inconsistent decisions are likely to perceive such inconsistency – even if based on coherent argumentations – as disadvantageous since it impairs legal certainty and predictability and frustrates their expectations. Hence, if the lawdeveloping process was left to continue as an uncontrolled “dialogue between ­tribunals”663 or – to put it more provocatively – on a trial-and-error basis,664 there is a considerable risk that this concept of “waiting for consistency”665 will cause harm to the general reputation and attractiveness of the respective investment arbitration regime in the eyes of its users.666 After all, jurisprudential conflict can not sweepingly be considered as a welcome phenomenon simply for the sake of correctness: a proper and sustainable development of a legal system requires more than dissenting from unconvincing prior rulings and promoting one’s own standpoint on an interpretative issue. What is at least equally important is a certain degree of coherence when doing so by substantiating a position adopted and by placing 663 Schill, The Multilateralization of International Investment Law 345. 664 The icsid case law has also been metaphorically described as “a primordial soup which we watch being stirred as some awards rise to the top and others fall to the bottom.” Another metaphor used to illustrate the development of icsid jurisprudence is a tennis match, i.e. the back and forth bouncing of answers to legal questions. See Reed, The De Facto Precedent Regime 95, 99–100. Moreover, the evolution of international investment law has been described by referring to the “Hayekian model for the evolution of common law as a system of experimentation and spontaneous self-ordering (…). In the competition of ideas, arguments, and judicial solutions, rules are identified as possible solutions, and are proposed, argued, and tested. Those rules that survive and find a strong enough following create ‘settled jurisprudence.’ It is a process of selection by survival of those rules and concepts that prove most useful to the relevant participant in this process.” See Wälde, Improving the Mechanism 516, referring to Friedrich A. von Hayek, Law, Legislation and Liberty – A new statement of the liberal principles of justice and political economy, Vol. 1: Rules and Order (Routledge & Kegan Paul, London, 1973). While this manner of law development might work within the common law system, which is governed by the doctrine of stare decisis and disposes of corrective instances of substantive review, the situation is different in the field of international investment law and arbitration. Although part of the investment tribunals tend to rely on prior decisions and thus contribute to a system of de facto precedent, they mostly do so without making necessary distinctions in fact and law and without paying due attention to the appropriate techniques of reasoning, see Commission, Precedent in Investment Treaty Arbitration 129, 154–156. 665 Kaufmann-Kohler, Is Consistency a Myth? 145: “(…) knowing that rule creation is not linear and that the road to consistency necessarily has dead-ends and u-turns.” 666 For elaborations on the possible consequences to be drawn by private investors and States, see Ch. 2.B.I.2.

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differing positions and rulings in relation thereto. If one adds the perspective of a system’s users to this, the need for reliability and consistency must be considered as part of the bargain. As a result, one may reasonably and appropriately criticise inconsistent and incoherent developments in international investment arbitration. C

Forms of Inconsistencies

When looking at conflicting decisions and awards rendered by investment tribunals, one notes that inconsistent arbitral investment jurisprudence manifests itself in different forms. These different appearances of inconsistency range from the scenario of one and the same dispute being adjudicated in multiple, often concurrent proceedings (I.) to the scenario of different disputes involving identical legal issues (II.).667 In addition, in view of the question of whether the criticism of inconsistency is appropriate, a further distinction must be made in terms of the point of time when a ruling was rendered (iii). i Same Dispute, but Multiple Proceedings The first category of investment proceedings leading to inconsistent outcomes is determined by procedural circumstances. It includes the constellation that multiple investment tribunals668 adjudicate – often concurrently – the same 667 The following categorisation is modelled in orientation at August Reinisch, The Issues Raised by Parallel Proceedings and Possible Solutions, in The Backlash against Investment Arbitration – Perceptions and Reality 115–117 (Michael Waibel et al. eds., 2010). 668 Given that this work focuses on inconsistencies in arbitral investment jurisprudence, this category only comprises parallel proceedings in different investment tribunals. The case of parallel proceedings in investment arbitral tribunals and municipal courts is of less relevance here. Elaborations thereon can be found in Zachary Douglas, The Hybrid Foundations of Investment Treaty Arbitration, 74 Brit. Yb. Int’l L. 151, 236–274 (2003), distinguishing “symmetrical conflicts” based on the same cause of action and “asymmetrical conflicts” pertaining to different causes of action. An example of such a parallel proceeding between an arbitral investment tribunal and a domestic court is cms v. Argentina. In this case, the icsid tribunal accepted its jurisdiction over the claim brought by cms notwithstanding the fact that tgn, an Argentinean corporation in which cms held 25% of the shares, had already brought proceedings in a different forum, i.e. in the Argentinean Federal Supreme court. The arbitrators based their decision on the lack of identity between the parties and on the classification of the different causes of action. See cms Gas Transmission Company v. Argentine Republic, icsid Case No. arb/01/8, Decision on Jurisdiction (17 July 2003) [hereinafter cms

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underlying dispute (and logically the same legal issues), but arrive at conflicting conclusions. The most popular example of such a scenario is not to be found in icsid jurisprudence, but in the uncitral cases Lauder/CME v. Czech Republic,669 which are considered as “cause célèbre” of inconsistent decisions resulting from parallel investment arbitration proceedings.670 Although the claimants, more precisely the controlling us shareholder of the parent company Ron Lauder and its Dutch subsidiary cme, and the legal bases, consisting in the Czech Republic–Netherlands bit and the Czech Republic–us bit,671 were different, both proceedings were brought against the same defendant, the Czech Republic, and concerned the same set of facts: Lauder’s investment in the form of shares in a Czech television company and the alleged breach of the company’s rights as exclusive broadcasting service provider. While the Lauder tribunal found no material violation of the corresponding bit and hence no liability of the Czech Republic, the cme tribunal established various breaches of the respective bit and held the respondent State liable for damages.672 These diverging outcomes weigh even more heavily as they were litigated with the involvement of mainly identical counsel.673 Parallel proceedings are primarily the result of procedural tactics employed by aggrieved investors, namely by bringing multiple claims in one and the same dispute on the basis of different legal instruments, e.g. an investment contract and an investment treaty674 or multiple investment treaties. The

v. Argentina (Decision on Jurisdiction)]. In view of the subsequent cases brought about by the Argentine economic and financial crisis, which consistently affirmed jurisdiction in comparable situations, the cms v. Argentina case was a watershed decision. See e.g. Enron Corporation and Ponderosa Assets, l.p. v. Argentine Republic, icsid Case No. arb/01/3, Decision on Jurisdiction (14 January 2004) [hereinafter Enron v. Argentina (Decision on Jurisdiction)]. 669 Lauder v. Czech Republic (Award); cme v. Czech Republic (Partial Award). 670 Reinisch, Necessity in International Investment Arbitration 191, 212. 671 Czech Republic–us bit (Treaty between the United States of America and the Czech and Slovak Federal Republic, 22 October 1991 (entry into force 19 December 1992)); Czech Republic–Netherlands bit (Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic, 29 April 1991 (entry into force 1 October 1992), 2242 unts 205 (2004)). 672 Lauder v. Czech Republic (Award), esp. 74; cme Czech Republic bv (Netherlands) v. Czech Republic, uncitral Arbitration, Final Award on Damages (14 March 2003) [hereinafter cme v. Czech Republic (Final Award)], esp. 161. 673 Reinisch, Necessity in International Investment Arbitration 191, 212–213. 674 For elaborations on this constellation, see Claire Debourg, Les contrariétés de décisions dans l’arbitrage international 255–257 (lgdj, Paris, 2012).

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objective of this tactic is to receive as many awards as possible and then pick the most beneficial one for enforcement. In order to achieve the necessary diversity of ratione personae jurisdiction, investors structure their investments through subsidiary corporations located in third States who are also party to a bit with the host State.675 To put it differently, they engage in a different “labeling” of the claimant.676 In the Lauder/CME v. Czech Republic case, for instance, one claim was brought by the affected corporation and the other claim was filed by the controlling shareholder. This so called “treaty shopping”677 by means of nationality planning, which is even encouraged by the generally 675 Dimsey, The Resolution of International Investment Disputes 71–72. 676 Carlos Ignacio Suarez Anzorena, Multiplicity of Claims under bits and the Argentine Case (biicl Investment Treaty Forum Conference), 2 tdm 20, 24 (2006). 677 The term “treaty shopping” is inspired by the term “forum shopping,” which is defined as “[t]he practice of choosing the most favourable jurisdiction or court in which a claim might be heard.”; see Garner, Black’s Law Dictionary 770. See also, for further explanations, Bjorklund, Practical and legal avenues 178. Representative examples of successful “treaty shopping” by the claimant can also be found in the following cases: Tokios Tokéles v. Ukraine, icsid Case No. arb/02/18, Decision on Jurisdiction (29 April 2004) [hereinafter Tokios Tokéles v. Ukraine (Decision on Jurisdiction)], paras. 21–71, (investor incorporated in Lithuania, but majority-controlled by Ukrainian nationals, sued Ukraine on the basis of the Lithuania–Ukraine bit and with regard to issues concerning its Ukrainian subsidiary); Saluka v. Czech Republic (Partial Award), paras. 172–244 (investor incorporated in the Netherlands, but fully owned and controlled by the uk parent-company, sued Czech Republic under Czech Republic–Netherlands bit); Ioan Micula, Viorel Micula, s.c. European Food s.a, s.c. Starmill S.R.L. and s.c. Multipack s.r.l. v. Romania, icsid Case No. arb/05/20, Decision on Jurisdiction and Admissibility (24 September 2008) [hereinafter Micula v. Romania (Decision on Jurisdiction)], paras. 53–116 (investor with former Romanian nationality, permanent residence and business operations in Romania sued Romania on the basis of the Sweden–Romania bit). For examples of cases wherein the arbiral tribunals set limits to the claimants a­ ttempts of “treaty shopping,” see Burimi srl and Eagle Games sh.a v. Republic of Albania, icsid Case No. arb/11/18, Award (29 May 2013) [hereinafter Burimi v. Albania (Award)], paras. 97–122 (investor Eagle Games incorporated in Albania, but majority-controlled by an Italian-Albanian dual national, sued Albania on the basis of the Albania-Italy bit); National Gas Company s.a.e. v. Arab Republic of Egypt, icsid Case No. arb/11/7, Award (3 April 2014) [hereinafter National Gas v. Egypt (Award)], paras. 73–149 (investor incorporated in Egypt, but ultimately majority-controlled by an Egyptian-Canadian dual national, sued Egypt on the basis of the Canada–Egypt bit). See also Philip Morris Asia Ltd. v. Commonwealth of Australia, uncitral Arbitration, pca Case No. 2012–12, Award on Jurisdiction and Admissibility (17 December 2015) [hereinafter Philip Morris v. Australia (Award on Jurisdiction)] (after losing a claim

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­liberal ­conception of personal jurisdiction in arbitral practice,678 bears a high risk of causing a multitude of proceedings with conflicting outcomes.679 ii Different Disputes, but Same Legal Issues The second category of inconsistent investment jurisprudence covers situations wherein identical or largely similar legal issues stemming from different disputes receive fundamentally different treatment when addressed by arbitral tribunals, mostly in successive proceedings. In view of the multitude of examples of this sort of interpretative conflict leading to inconsistent investment jurisprudence, a representative sample will be presented within the

in the Australian High Court against the Australian plain packaging legislation, the i­nvestor – having its parent-company incorporated in the us – initiated the arbitration proceeding via its subsidiary located in Hong Kong on the basis of the Australia–Hong Kong bit; the claim was eventually dismissed due to abusive corporate restructuring); Lone Pine Resources Inc. v. Government of Canada, uncitral Arbitration, icsid Case No. unct/15/2 (nafta) [hereinafter Lone Pine v. Canada] (in view of a Canadian legislation introducing a fracking moratorium in Québec, the parent company being incorporated in Canada initiated the arbitration proceeding via its subsidiary located in the us on the basis of nafta Chapter 11). 678 An example of the generous allocation of individual standing in investor-State arbitration is that even minority shareholders and holding companies are generally accepted as parties on the investor’s side. Hence, de facto identical parties are able to bring different claims in different fora pertaining to the same subject matter. See August Reinisch, The Use and Limits of Res Judicata and Lis Pendens, 3 L. & Prac. Int’l Cts. & Trib. 37, 74–76 (2004); Reinisch, The Future of Investment Arbitration 912–913. See also Schreuer et al., icsid Commentary 126–127, 176 (Art. 25, paras. 150, 329); Stanimir A. Alexandrov, The “Baby Boom” of Treaty-Based Arbitrations and the Jurisdiction of icsid Tribunals: Shareholders as “Investors” and Jurisdiction Ratione Temporis, 4 L. & Prac. Int’l Cts. & Trib. 19, 19–49 (2005). In view of this danger of abuse of corporate structures, it has been suggested to limit jurisdiction for claims by indirect investors (e.g. holding companies and ultimate beneficial owners) on policy grounds; see McLachlan et al., International Investment Arbitration – Substantive Principles 184–193, esp. 191. As an alternative, it has been proposed to develop specific rules on the admissibility of such claims; see Zachary Douglas, The International Law of Investment Claims 398–472 (Cambridge University Press, New York, 2009 (2012 reprint)). Both proposals have been referred to in Penelope Nevill, Treaty Interpretation and Troubled Treaty Regimes: The Case of International Investment Law, in State Responsibility and the Law of the Treaties 168 (Marcel Szabó ed., 2010). 679 For a position in favour of parallel proceedings as a means for investor protection, see Haig Oghigian & Mami Ohara, How to Deal with Zeus – Advocacy of Parallel Proceedings From an Investor’s Perspective, 10 tdm 1, 1–11 (2013).

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framework of an empirical analysis of icsid case law.680 One instance is worth being anticipated in this context, since it is a good example of the scenario where arbitral tribunals not only come to diverging conclusions as to identical interpretative legal questions, but even in view of identical factual settings.681 In the aftermath of the Argentine financial and economic crisis of 2001– 2002, multiple investment tribunals had to consider whether there was a state of necessity in Argentina during the said crisis and whether the defendant could legitimately invoke customary and treaty-based defences of necessity. While the interpretative approach taken by the tribunal in cms v. Argentina682 led to a rejection of both sorts of necessity defences, which it considered to be substantially governed by customary law only, the arbitrators that dealt with the lg&e v. Argentina case683 held that the preconditions of the two necessity defences, which it found to be governed by both customary law and treaty law respectively, had been fulfilled. Their differing views on the legal relationship between the two different sorts of necessity defences resulted not only in diverging legal interpretations, but also in diverging evaluations of an identical factual situation.684 As regards the identity or similarity of legal issues involved in different disputes, a further distinction may be made according to the underlying applicable law.685 If the governing law is identical in both cases, any inconsistencies arising from its interpretation can be categorised as “inconsistencies stricto sensu.” An example of this scenario consists in the conflicting interpretation of procedural provisions as stipulated in the icsid Convention, which are applicable to any icsid proceedings unless otherwise agreed by the parties. A further instance is the diverging construction of uniform sources of law, such as international conventions, international custom or general principles of law. On the other hand, if, due to variations in its wording, the governing law is not identical but nonetheless largely similar, inconsistencies occurring in the course of interpreting its common denominators belong to the category of “inconsistencies lato sensu.” A classic example of this constellation consists in the 680 681 682 683 684 685

See below Ch. 2.E. See Reinisch, Parallel Proceedings 116. cms v. Argentina (Award). lg&e v. Argentina (Decision on Liability). See also below Ch. 2.E.III.2.b.bb. The following categorisation has been inspired by Frank Spoorenberg & Jorge Viñuales, Conflicting Decisions in International Arbitration, 8 L. & Prac. Int’l Cts. & Trib. 91, 93 (2009). The exact scope of categories has yet been determined independently. See also below Ch. 2.E.IV. (fn. 1395).

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diverging interpretative approaches to protective standards in bits, which often show (minor) variations in their wording, but, still have – at least in parts – identical regulatory content.686 iii Temporal Distinction: Parallel vs. Successive Proceedings The forms of jurisprudential inconsistencies presented above differ not only in  respect of the underlying disputes, i.e. their identity or differences, but also in respect of the timing of the release of diverging decisions. In parallel proceedings, conflicting rulings are mostly rendered simultaneously or at a short interval. Accordingly, the arbitral tribunals involved are often not able to take account of the interpretative approaches previously adopted by other arbitral tribunals due to the temporal overlap.687 In these constellations, the problem of inconsistency is not primarily with the arbitrators and their methodological approaches, but rather with the underlying procedural framework which made such parallelism of proceedings possible. Successive proceedings,688 by contrast, are not affected by this problem of procedural timing. Arbitral tribunals dealing with an identical or largely similar interpretative issue one after another usually have the possibility of taking 686 The interpretation of protective standards in bits may also lead to inconsistencies stricto sensu if different arbitral tribunals arrive at diametrically opposing interpretations of one and the same bit clause, see e.g. Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, icsid Case No. arb/10/1, Award (2 July 2013) [hereinafter Kılıç İnşaat v. Turkmenistan (Award)], esp. para. 6.6; and Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, icsid Case No. arb/12/6, Decision on Jurisdiction (13 February 2015) [hereinafter Çap v. Turkmenistan (Decision on Jurisdiction)], esp. paras. 280–281. While the former tribunal found that Art. 7 of the Turkey–Turkmenistan bit contained a local litigation requirement, the latter tribunal concluded that recourse to local courts was only optional (Agreement between the Republic of Turkey and Turkmenistan concerning the Reciprocal Promotion and Protection of Investments, 2 May 1992 (entry into force 13 March 1997)). For an analysis of the interpretative approach to Art. 7 (2) of the Turkey-Turkmenistan bit taken by the tribunal in Kılıç İnşaat v. Turkmenistan, see Mahnoush H. Arsanjani & W. Michael Reisman, Babel and bits: Divergence Analysis and Authentication in the Unusual Decision of Kılıc v. Turkmenistan, in practising virtue – Inside International Arbitration 407–424 (David D. Caron et al. eds., 2015). 687 Schill, The Multilateralization of International Investment Law 341 (fn. 174), who refers to the example of the Lauder/CME v. Czech Republic case and points out that the respective rulings “where handed down independently within a matter of only ten days and, therefore, did not have a chance of interacting with one another.” 688 The category of “successive” proceedings also comprises parallel pending proceedings which are concluded successively, since in that case, the later tribunal is able to consider its predecessor’s ruling.

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prior case law into consideration when substantiating their rulings – whether they concur with or deviate from the prior arbitral tribunal’s decision. In other words, it is within their power to consciously avoid the occurrence of inconsistent or at least incoherent arbitral jurisprudence and to thereby support the further development of the system of de facto precedent.689 In such cases, it is thus less the procedural framework, but the arbitrators and their interpretative methods which should be criticised. D

Causes of Inconsistencies

The causes of conflicting results in arbitral investment jurisprudence may be categorised according to whether they are systemic causes, on the one hand, or methodological causes, on the other hand. Systemic causes will be determined by looking at the basic institutional structures of the icsid regime (I.). Against the backdrop of the overarching goal of developing a jurisprudence constante, for which the application of accurate interpretative techniques is crucial, the examination of methodological causes is of even greater interest. The methods of treaty interpretation applied by icsid tribunals will therefore be analysed in greater detail (ii.). i Systemic Causes: Basic Structures of icsid Arbitration As has been seen,690 the complexity of international investment law and arbitration does not per se hinder the development of a consistent icsid jurisprudence. Yet, without a doubt, these intricate and partially fragmented structures certainly do play their part in the occurrence of interpretative discrepancies. Above all, the multiplicity of legal sources as well as the diversity of stakeholders, legal issues, and effects contribute significantly to the problem of inconsistency. Besides these factors of complexity, the systemic structures of arbitration regimes contain within themselves further potential causes of inconsistent ­jurisprudence. In respect of the icsid regime, these include most notably the non-permanent nature of icsid tribunals (1.), the lack of 689 See below Ch. 2.D.II.2. This idea of supporting the system of de facto precedent is based on the general premise that a consistent or at least coherent investment jurisprudence requires that arbitral tribunals consider pre-existing case law and strive to conform with it when construing identical or largely similar norms, or, if they disagree, furnish a substantiated reasoning for their deviation. See Ch. 2.A.I. 690 See Ch. 2.B.II.1.

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c­ onsolidation p ­ rocedures (2.), the limited degree of transparency (3), and the limited scope of review (4). 1 Non-permanent Nature of Arbitral Tribunals The icsid system is based on institutionally supported arbitral tribunals and annulment committees. It operates with a large number of arbitrators on the same hierarchical level who work in varying compositions in each case. Accordingly, over time, different arbitrators decide on the same or at least very similar interpretative legal issues. This absence of a permanent tribunal and the corresponding personnel discontinuity result in a relatively low level of internal pressure towards “continuous collegiality”691 and stand in contrast to permanent judicial institutions such as the icj or the cjeu.692 Combined with the absence of a doctrine of binding precedent, these circumstances make it particularly difficult to develop consistent lines of case law.693 icsid arbitration and investment arbitration in general are thus particularly susceptible to discrepancies. As has been noted above,694 the fluctuation in arbitrators is mitigated by the fact that the arbitrators sitting on icsid tribunals are generally recruited from a rather small group of persons. The resulting tendency to repeated appointments may, to some extent, contribute to more consistency in the interpretative approaches taken by arbitral tribunals. Yet, on the other hand, concerns of personal reputation and reappointment may also counter the willingness to develop consistent case law.695 They risk inducing arbitrators to act according 691 Wälde, International Investment Law: An Overview of Key Concepts and Methodology 1, 77. 692 Christoph Schreuer, Diversity and Harmonization of Treaty Interpretation in Investment Arbitration, in Treaty Interpretation and the Vienna Convention on the Law of the Treaties: 30 Years on 139 (Malgosia Fitzmaurice et al. eds., 2010). 693 Schreuer, Revising the System 1, 4. See also Jack J. Coe Jr., The State of Investor-State-­ Arbitration – Some Reflections on Professor Brower’s Plea for Sensible Principles, 20 Am. U. Int’l L. Rev. 929, 946 (2005). See furthermore Wintershall Aktiengesellschaft v. Argentine Republic, icsid Case No. arb/04/14, Award (8 December 2008) [hereinafter Wintershall v. Argentina (Award)], para. 178, holding that “adjudications by ad hoc tribunals have proved to be an obstacle to the development of a jurisprudence constante.” On the other hand, critical voices point to the risks of more permanency in icsid arbitral panels. Even if overlapping panels of arbitrators promise to be advantageous in order to achieve enhanced consistency in arbitral case law, their repeatedly similar rulings risk – if erroneous – to gain inappropriate precedential authority. See Burke-White, The Argentine Financial Crisis 199, 222. 694 See Ch. 2.B.II.1.b. 695 Wälde, International Investment Law: An Overview of Key Concepts and Methodology 1, 8–10.

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to the appointing parties’ or the appointing institution’s expectations rather than to decide in conformity with existing case law.696 2 Lack of Consolidation Procedures A further, although supposably less weighty reason for the occurrence of conflicting case law relates to the fact that the icsid regulatory regime, in contrast to part of its competitor regimes,697 does not contain provisions on 696 Id. See also van Harten, Investment Treaty Arbitration and Public Law 167 et seq. A study has been undertaken as to the charge of politically biased arbitrators. This empirical work examined the influence of an arbitrator’s professional and personal background on the rulings rendered by investment arbitration tribunals. In addition to influences by policy views, common legal origins, and personal experiences, the study found a bias in favour of the parties that repeatedly appointed an arbitrator. See Michael Waibel & Yanhui Wu, Are Arbitrators Political?, asil Research Forum, ucla (5 November 2011), available at (last visited September 2016). For further criticism on the bias of investment arbitrators, see also Corporate Europe Observatory, Who guards the guardians? The conflicting interests of investment arbitrators (27 November 2012). For a study on the perceived bias of icsid arbitration in general and in comparison to other arbitration regimes (in particular with regard to the presence of Latin American respondents and the development status of respondents), see Susan D. Franck, The icsid Effect? Considering Potential Variations in Arbitration Awards, 51 Va. J. Int’l L. 825, 825–914 (2011). The quantitative empirical assessment, which tested pre-2007 icsid awards, did not find any statistical evidence supporting such a perception, with the exception that awards against low income countries tended to be higher than awards against high income countries. Yet, as the author states, the results of the said analysis need to be treated with caution due to the relatively small size of the sample population. 697 See e.g. the following procedural provisions: icc Arbitration Rules (2012) Art. 10: “The Court may, at the request of a party, consolidate two or more arbitrations pending under the Rules into a single arbitration, where: (a) the parties have agreed to consolidation; or (b) all of the claims in the arbitrations are made under the same arbitration agreement; or (c) where the claims in the arbitrations 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, and the Court finds the arbitration agreements to be compatible. In deciding whether to consolidate, the Court may take into account any circumstances it considers to be relevant, including whether one or more arbitrators have been confirmed or appointed in more than one of the arbitrations and, if so, whether the same or different persons have been confirmed or appointed. When arbitrations are consolidated, they shall be consolidated into the arbitration that commenced first, unless otherwise agreed by all parties.”

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c­ onsolidation procedures on the basis of which arbitral tribunals could merge two or more concurrently pending claims that are related in a certain manner into one single and unified procedure, e.g. where there is identity of parties, the same or similar underlying set of facts and/or the same or similar legal ­question.698 Due to this absence of a formal consolidation mechanism to which the parties would automatically consent by submitting their dispute to icsid arbitration, the powers of arbitral tribunals to consolidate parallel proceedings are very limited. They depend on the disputing parties’ individual consent on a case-by-case basis, which may be provided either ex ante by means of the arbitration agreement699 or (less likely) ex post by way of direct consent while the proceeding is pending.700 In view of this dependency on the disputing parties’ consent, relatively little use is made of consolidation techniques in icsid proceedings.701 Hence, given that “consolidation remains the exception and not the rule,”702 inconsistencies arising from parallel proceedings may not least be attributed to the fact that icsid lacks institutionalised and thus autonomous consolidation procedures.

698 699

700

701

702

scc Arbitration Rules (2010) Art. 11: “If arbitration is commenced concerning a legal relationship in respect of which an arbitration between the same parties is already pending under these Rules, the Board may, at the request of a party, decide to consolidate the new claims with the pending proceedings. Such decision may only be made after consulting the parties and the Arbitral Tribunal.” Katia Yannaca-Small, Consolidation of Claims: A Promising Avenue for Investment Arbitration?, in International Investment Perspectives 226–227 (oecd ed., 2006). For a proponent of the ex ante approach, i.e. the insertion of consolidation mechanisms in arbitration agreements, see Brower & Sharpe, Multiple and Conflicting International Arbitral Awards 211, 222. For examples of failed attempts to take the ex post approach, i.e. to reach a consent on consolidation while a proceeding is pending, see cme v. Czech Republic (Final Award), paras. 427–428, in view of Lauder v. Czech Republic, uncitral Arbitration, referred to in id. at 215; see also Sanum Investments Ltd. v. Lao People’s Democratic Republic, uncitral Arbitration (pca Case No. 2013 -13), Decision on Jurisdiction (13 December 2013) [hereinafter Sanum v. Laos (Decision on Jurisdiction)], para. 367, in view of Lao Holdings n.v. v. Lao People’s Democratic Republic, icsid Case No. arb(af)/12/6 [hereinafter Lao Holdings v. Laos]. However, it needs to be stressed that the even in arbitration regimes where consolidation provisions exist, it is very rare that the strict conditions, which must be cumulatively fulfilled absent both parties’ consent, are met. Jorge Viñuales, Conflicting Decisions in International Arbitrations, 8 L. & Prac. Int’l Cts. & Trib. 91, 100 (2009), referring to Gabrielle Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration: How Can Multiple Proceedings Arising from the Same or Related Situations Be Handeled Efficiently? Final Report on the Geneva Colloquium held on 22 April 2006, 21 icsid Rev. – filj 59, 80 (2006).

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3 Limited Degree of Post-award Transparency Even though the post-2006 icsid Arbitration Rules, namely Rules 32 (2), 37 (2), and 48 (4), already provide for a considerable degree of transparency in arbitral proceedings,703 access to rendered decisions and awards is still limited: icsid Arbitration Rule 48 (4) allows the Centre only to include an excerpt of the legal reasoning in its publications, unless the parties consent otherwise. As a consequence, subsequent arbitral tribunals only have access to incomplete abstracts of decisions and awards, which risk being cut off from important contextual aspects. Their factual and argumentative detachment from the actual case coupled with the lack of access to other pertinent documents submitted and issued in the course of the arbitral procedure risk hindering a comprehensive legal appreciation of the grounds and reasoning a decision is based on.704 This limited degree of post-award transparency might be another cause for the emergence of inconsistent jurisprudence.705 While the limits set on postaward transparency are certainly not a primary reason for inconsistent icsid jurisprudence, it still cannot be excluded that they are at least a co-causal factor. They thus need to be included into the overall assessment of causes. 4 Limited Scope of Review Another factor which can be considered as being concurrently causative for inconsistencies in icsid case law is the lack of sufficient mechanisms to correct erroneous results. icsid arbitration is a self-contained system, meaning that any awards rendered by its tribunals are only subject to the remedies provided in the Convention.706 Among them, the annulment review according to 703 For the text of these provisions and further elaborations on the aspect of transparency in icsid arbitration, see Ch. 1.C.II.4.a. 704 Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 88. The author also points to the underground trading of unpublished awards as another negative consequence of limited transparency in the post-award phase. The resulting unequal access to awards would disturb the equality of arms between the disputing parties as well as the general fairness of proceedings, since parties with exclusive knowledge of a disadvantageous award on a similar legal issue might conceal its existence and tribunals might hence be hindered from taking such ruling into consideration when deciding a case. On the concept of equality of arms, see Raymundo Treves, Equality of Arms in International Dispute Settlement (forthcoming); Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 86 (fn. 149), 92–93. 705 See e.g. Spoorenberg & Viñuales, Conflicting Decisions in International Arbitration 91, 97. 706 See icsid Convention Art. 53 (1). For the text of this provision, see fn. 369. For further elaborations on the icsid review remedies, see Ch. 1.C.II.5.a.

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icsid Convention Art. 52707 provides for the possibility of attacking deficient ­rulings – yet only in extremely limited, mainly procedure-related circumstances and notwithstanding factual or legal mistakes. Hence, only clear violations of one of the narrowly defined annulment grounds may be sanctioned by way of invalidating the respective award. Conflicting arbitral decisions that are found to be based on a materially wrong interpretative approach cannot simply be adjusted to harmonise them with prior “correct” case law. Moreover, it should be mentioned that the icsid system, in spite of these relatively weak ex post control mechanisms, does not provide for an ex ante reference mechanism which would allow arbitral tribunals to submit abstract legal questions to an authority that issues guiding interpretations to prevent legal errors.708 In sum, the ICSID-specific institutional and procedural features presented above bear a considerable potential to cause conflicting jurisprudential results. In view of this, the icsid arbitral system has been aptly described as providing “relatively few safeguards” to bring about consistency.709 It can hence be regarded as contributing to the “high risk environment”710 for inconsistent awards and decisions. Methodological Causes: Legal Interpretation in icsid Arbitral Decisions In addition to these structural aspects, further factors that appear to be contributory to the occurrence of consistencies in icsid arbitral jurisprudence are the methods of legal interpretation employed by arbitrators. iias and mainly bits constitute the major sources of substantive investment law, which even reflect  – to some extent – customary international law.711 The icsid

ii

707 For the text of icsid Convention Art. 52 (1), see fn. 374. For further elaborations on the topic of icsid annulment review, see Ch. 2.E.II.2.b. 708 Tams, An Appealing Option? 1, 18: “(…) with the potentional exception of interpretative notes under Art. 1131 nafta, there is no system of reference proceedings such as that under Art. 234 tec, by which lower tribunals can refer abstract question to a hierarchically superior instiution for (binding) interpretation.” For further elaborations on the topic of a possible icsid preliminary ruling system, see below Ch. 3.B.II.4. and Ch. 3.C. 709 Id. 710 Terminology according to Reinisch, The Future of Investment Arbitration 905, who used this expression in a comparable context. 711 The interpretation of international custom and general principles of law is debated though. According to some scholars, judicial interpretation of such “unwritten international norms” appears redundant; to them, international custom and general principles

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­ onvention and its related rules and regulations form the primary source of C procedural investment law. Accordingly, the interpretative approaches taken by arbitral tribunals to these different kinds of treaty norms appear to be the most indicative and relevant for the further analysis of the causes of jurisprudential inconsistency. Following a broad overview of the theory and practice of treaty interpretation (1.), particular attention will be paid to the treatment of precedent, which constitutes an especially important facet of the icsid interpretative practice with regard to the inconsistency problem (2.). 1 a

aa

Methods of Treaty Interpretation: Overview Theory of Treaty Interpretation

Interpretation Pursuant to vclt Arts. 31 to 33

There are three general approaches of interpretation of international (treaty) law to be distinguished: the objective approach relating to the wording, the subjective approach concerned with the underlying intention, and the teleological approach centring on the object and purpose of a (treaty) norm.712 These are reflected in the general, but non-exhaustive rules on treaty ­interpretation



of law are applicable than rather interpretable; see e.g. Gourgourinis, Distinction between Interpretation and Application 31, 36. Others, by contrast, consider these unwritten norms as interpretable; see e.g. Alexander Orakhelashvili, Interpretation of Acts and Rules in Public International Law 496–510 (Oxford University Press, New York, 2008). In general, it is occasionally difficult to clearly draw the conceptual line between the interpretation of a bit provision on the basis of customary international law and general principles of law, on the one hand, and the direct application of such unwritten legal norms, on the other hand; see August Reinisch, The Interpretation of International Investment Agreements, in International Investment Law – A Handbook 395 (Marc Bungenberg et al. eds., 2015). Tribunals may use them either as interpretative arguments when dealing with treaty provisions or as independent sources of substantive investment law; see Fauchald, The Legal Reasoning of icsid Tribunals 301, 309; van Aaken, Fragmentation of International Law 91, 100, referring to Jan Klabbers, Reluctant Grundnormen: Articles 31 (3) (c) and 42 of the Vienna Convention on the Law of Treaties and the Fragmentation of International Law, in Time, History and International Law 144 (Matthew C.R. ­Craven et al. eds., 2007); therein, Jan Klabbers states that “[i]n practice, …, there is a good chance that the two (interpretation and application) might lapse into each other – such would seem well-nigh inevitable, if only because it would be difficult to apply something without at the same time interpreting it, and to interpret a term without a context in which to apply it.” [footnote omitted]. 712 Malcolm N. Shaw, International Law 675–680, esp. 676 (Cambridge University Press, Cambridge, 7th ed., 2014).

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set out in Arts. 31 to 33 of the Vienna Convention of the Law of the ­Treaties.713 The said provisions represent codified pre-existing customary law and are 713 Id. at 133. Vienna Convention on the Law of the Treaties, 23 May 1969 (entry into force 27 January 1980), 1155 unts 331 (1980) [hereinafter vclt or Vienna Convention]. The applicability of the Vienna Convention is governed by vclt Art. 4: “Without prejudice to the application of any rules set forth in the present Convention to which treaties would be subject under international law independently of the Convention, the Convention applies only to treaties which are concluded by States after the entry into force of the present Convention with regard to such States.” According to the rule of non-retroactivity contained in the second part of this provision, the Vienna Convention, which entered into force in 1980 only, formally does not apply to the icsid Convention, whose entry into force dates back to 1966; see Schreuer et al., icsid Commentary 1105 (Art. 53, para. 30, fn. 32). Yet, pursuant to the first part of vclt Art. 4, any customary law or general legal principles that existed – albeit now codified in the Vienna Convention – independently before or after the Convention’s entry into force apply nonetheless; see Mark E. Villiger, Commentary on the 1969 Vienna Convention on the Law of the Treaties 110–111 (Art. 4, paras. 3–5) (Martinus Nijhoff, Leiden/Boston, 2009). Such customary basis exists or is currently emerging for a considerable number of vclt provisions, as e.g. vclt Arts. 27, 31–33, 41; see id. at 369 et seq., 415 et seq., 528 et seq. (on the corresponding articles). vclt Art. 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.” vclt Art. 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 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.” vclt Art. 33 (Interpretation of treaties authenticated in two or more languages): “(1.) When a treaty has been authenticated in two or more languages, the text is equally authoritative in each language, unless the treaty provides or the parties agree that, in case of

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widely recognised as binding interpretative parameters by international courts and arbitral tribunals.714

divergence, a particular text shall prevail. (2.) A version of the treaty in a language other than one of those in which the text was authenticated shall be considered an authentic text only if the treaty so provides or the parties so agree. (3.) The terms of the treaty are presumed to have the same meaning in each authentic text. (4.) Except where a particular text prevails in accordance with paragraph 1, when a comparison of the authentic texts discloses a difference of meaning which the application of articles 31 and 32 does not remove, the meaning which best reconciles the texts, having regard to the object and purpose of the treaty, shall be adopted.” For detailed comments on vclt Arts. 31–33, see e.g. id. at 415–462; Oliver Dörr & Kirsten Schmalenbach, Vienna Convention on the Law of Treaties – A Commentary 521–601 (Springer, Heidelberg, 2012); Richard Gardiner, Treaty ­I nterpretation 161–447 (Oxford University Press, New York, 2nd ed., 2015). For a brief introduction to the vclt, see Roy Goode et al., Transnational Commercial Law  – International Instruments and Commentary 1–6 (Oxford University Press, Oxford, 2nd ed., 2013). For discussions of the interpretation of iias under the vclt, see August Reinisch, The impact of international law on iia interpretation, in Improving International Investment Agreements 323–341 (Armand De Mestral & Céline Lévesque eds., 2013); Jeswald W. Salacuse, Law of Investment Treaties 155–173 (Oxford University Press, Oxford, 2nd ed., 2015). 714 Dörr & Schmalenbach, vclt Commentary 523–525 (Art. 31, para. 6); Orakhela­ shvili, Interpretation of Acts and Rules in Public International Law 309, 313–316; Tomuschat, International Law as a Coherent System: Unity or Fragmentation? 345. For instance, the icj, since 1989, applies continuously the interpretative rules set out by the Convention as codified customary law; see e.g. Arbitral Award of 31 July 1989 (Guinea-Bissau v. Senegal), icj, Judgment (12 November 1991), icj Rep. (1991) 53, para. 48: “These principles are reflected in Articles 31 and 32 of the Vienna Convention on the Law of the Treaties, which may in many respects be considered a codification of existing customary international law on the point.,” referred to in Dörr & Schmalenbach, vclt Commentary 523 (Art. 31, para. 6). icsid tribunals referring expressly to the vclt and its customary law character can be found in the following cases: aapl v. Sri Lanka (Award), para. 38: “(…) the first task of the Tribunal is to rule on the controversies existing in this respect by indicating what constitutes the true construction of the Treaty’s relevant provisions in conformity with the sound universally accepted rules of treaty interpretation as established in practice, adequately formulated by l’Institut de Droit International in its General Session in 1956, and as codified in Article 31 of the Vienna Convention on the Law of Treaties.”; Zhinvali Development Ltd. v. Republic of Georgia, icsid Case No. arb/00/1, Award (24 January 2003) [hereinafter Zhinvali v. Georgia (Award)], para. 303: “(…) the tribunal has decided to adhere to the general rules of interpretation set forth in Articles 31 and 32 of the 1969 Vienna Convention on the Law of the Treaties (…). These two provisions (…) are viewed as reflective of customary international law.”

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vclt Art. 31 (1) is the basic rule of treaty interpretation, which requires the reader to take into account, in bona fides, the “ordinary meaning,” the “context”, as well as the “object and purpose” of a treaty. icsid arbitrators should hence consider all three elements to the same effect: the wording of a treaty provision, its contextual and systematic embedment in the treaty as a whole, as well as its object and purpose. vclt Art. 31 (2) and (3) provide specifications of the contextual element. While para. 2 lists the integral parts of the treaty context to be taken into account, para. 3 specifies additional means of interpretation to be considered together with the context. Most importantly, the latter provision, in lit. (c), requires that “any relevant rules of international law applicable in the relations between the parties” be examined when interpreting an international treaty. This opens the doors to interpreting a treaty in light of the international legal system as a whole, including other treaties (preferably in pari materiae), customary international law, or general principles of law.715 ­Accordingly, the norm is viewed as an expression of the principle of systemic integration in treaty interpretation.716 vclt Art. 31 (4), which functions as exception to vclt Art. 31 (1), introduces a subjective element as means of interpretation. It stipulates that where the parties so agreed, treaty terms shall be given a special meaning by way of derogation from its ordinary meaning. vclt Art. 32, as a complement to vclt Art. 31, provides a non-comprehensive list of supplementary means of treaty interpretation, which includes historical aspects such as the travaux préparatoires717 and the circumstances of For a discussion of the general relationship between international conventions and usages in the context of transnational commercial law, see Roy Goode, Usage and Its Reception in Transnational Commerical Law, 46 Int’l & Comp. L.Q. 1, 20 (1997). The author answers the question of whether international conventions do actually reflect prior existing usages or rather change such usages in an integrative manner by pointing out that any convention is “a combination of rules that existed before, modifications of existing rules and entirely new rules.” 715 Dörr & Schmalenbach, vclt Commentary 560–568 (Art. 31, paras. 89–104). It is disputed whether cross-treaty interpretation according to vclt Art. 31 (3) (c) only allows resort to other international treaties if these are binding on all parties involved in the treaty at dispute (permissive approach), or whether it is sufficient that the treaty used as interpretative reference is merely binding on one of the parties (restrictive approach); see id. at 566 (Art. 31, para. 100). 716 Id. at 560–564 (Art. 31, paras. 89–96); McLachlan, Principle of Systemic Integration 279, 279–320. 717 For a brief presentation of this supplementary means of treaty interpretation with references to international case law, see Robert Jennings & Arthur Watts, Oppenheim’s International Law, Vol. 1, Parts 2 to 4 1277–1278 (Longman, Harlow, 9th ed., 1992).

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conclusion of a treaty. To round out the picture, vclt Art. 33 addresses the interpretation of treaties authenticated in two or more languages by determining which language version shall prevail in case of conflict and by setting out rules for dealing with linguistic differences.718 bb aaa

Uncodified Means of Interpretation Interpretative Principles and Maxims

Not all of the interpretative principles and maxims developed by the practice of international courts and tribunals have been explictly included to the vclt.719 This has been motivated by the fact that they do not form part of customary international law and thus lack general validity absent the treaty parties’ consent.720 Accordingly, recourse to these principles and maxims is at the discretion of international tribunals.721

718 For a brief presentation on the interpretation of plurilingual treaties with references to international case law, see id. at 1283–1284. 719 For a brief presentation of these interpretative principles and maxims with references to international case law, see id. at 1275–1282, referred to in Georg Dahm et al., Völkerrecht 647 (De Gruyter, Berlin, 2nd ed., 2002). 720 Dahm et al., Völkerrecht 647; Alfred Verdross & Bruno Simma, Universelles Völkerrecht 495–496 (para. 781) (Duncker und Humblodt, Berlin, 3rd ed., 1984 (2010 reprint)); Weeramantry, Treaty Interpretation in Investment Arbitration 148. For a critical view on the general recognition of these interpretative principles and maxims, see Rudolf Bernhardt, Die Auslegung völkerrechtlicher Verträge – insbesondere in der neueren Rechtsprechung internationaler Gerichte 175 et seq. (Heymann, Köln, 1963), referred to in Dahm et al., Völkerrecht 647; see also Matthias Herdegen, Interpretation in International Law, in The Max Planck Encyclopedia of Public International Law paras. 27–31 (Rüdiger Wolfrum ed., 2013), available at (last visited September 2016). For a view pointing to the possibility of classifying these principles and maxims as general principles of law in the sense of icj Statute Art. 38 (1) (c), see Andrea Saldarriaga, Investment Awards and the Rules of Interpretation of the Vienna Convention, 28 icsid Rev. – filj 197, 210 (2013). Statute of the International Court of Justice, San Francisco, 26 June 1945 (entry into force 24 October 1945), ts No. 993 [hereinafter icj Statute]. 721 Weeramantry, Treaty Interpretation in Investment Arbitration 148, who points out that the use of these principles and maxims may be justified “on the grounds that they are relevant rules of international law under Article 31 (3) (c) of the Vienna Convention or supplementary means of interpretation under Article 32.”

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Two prominent examples of non-codified principles of interpretation are the principle of restrictive interpretation and the principle of effectiveness.722 The former interpretative approach, also called in dubio mitius, aims at the best possible protection of the sovereignty of the parties involved and hence favours construing ambiguous treaty provisions to the least detriment of the sovereign State.723 It is relatively controversial in international legal science and jurisprudence.724 By contrast, the principle of effectiveness or ut res magis valeat quam pereat, which is related to the approach of teleological interpretation, is broadly recognised.725 It requires treaties to be interpreted in such a way as to give each provision the greatest possible effect.726 A more specific and narrow version of this principle is the effet utile argument. Its use is related to individual treaty provisions and is based on the premise that the interpretation of one norm shall not make other norms irrelevant and redundant.727 Examples of unwritten interpretative maxims are e contrario arguments and analogies. The former, also called expressio unius est exclusio alterius, suggest

722 For an extensive discussion of the said principles, see Hersch Lauterpacht, Restrictive Interpretation and the Principle of Effectiveness in the Interpretation of Treaties, 26 Brit. Yb. Int’l L. 48, 48–85 (1949). 723 Dörr & Schmalenbach, vclt Commentary 538–539 (Art. 31, para. 34). 724 Id. For instance, the icj, in a relatively recent ruling, rejected the principle of restrictive interpretation for purposes of treaty interpretation; see Navigational and Related Rights (Costa Rica v. Nicaragua), icj, Judgement (13 July 2009), icj Rep. (2009) 213, para. 48, referred to in id. 725 Id. at 539 (Art. 31, para. 35). It has been argued that the principle of effectiveness – as well as the corresponding rule that exceptions to general rules have to be interpreted in a restrictive manner – are only a special form of the teleological approach laid down in vclt Art. 31 (1); see id. at 549 (Art. 31, paras. 35–36). Yet, on the other hand, it has been stated that this principle would reach beyond a mere teleological argument as it also serves to ascertain the intended underlying meaning of a treaty provision; see Malgosia Fitzmaurice, The Practical Working of the Law of the Treaties, in International Law 182 (Malcom D. Evans ed., 4th ed., 2014); Orakhelashvili, Interpretation of Acts and Rules in Public International Law 394; both referring to Hugh W.A. Thirlway, The Law and Procedure of the International Court of Justice., 62 Brit. Yb. Int’l L. 1, 44 (1991). 726 Dörr & Schmalenbach, vclt Commentary 539 (Art. 31, para. 35). 727 Fauchald, The Legal Reasoning of icsid Tribunals 301, 317. Especially the cjeu uses the effet utile argument when construing eu law. For an extensive discussion of the use of this interpretative principle in cjeu jurisprudence, see Lovro Tomasic, Effet utile: Die Relativität teleologischer Argumente im Unionsrecht (C.H. Beck, München, 2013).

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that the express reference to one thing automatically excludes the relevance of another thing; the latter operate with conclusions by analogy, i.e. with ­reasoning and explanations by direct reference to substantially similar or dissimilar features of another rule.728 Specific forms of analogous interpretation are, for instance, the eiusdem generis approach, according to which general terms following more specific terms are to be applied only to items of the same genus as the preceding, more specific terms,729 and the a fortiori argument, which argues from greater to smaller (a maiore ad minus)730 or vice versa (a minore ad maius). Further maxims of legal interpretation concerning the interrelationship between laws are lex posterior (or, to use the entire phrase, lex posterior derogat legi priori), which provides that a later law shall have priority over an earlier law, and of lex specialis (or generalia specialibus non derogant), which requires that more a special law should override a more general law.731 bbb

General Practice, Legal Doctrine, Precedents

A further means of treaty interpretation is the “general practice” of States or international institutions in the sense of icj Statute Art. 38 (1) (b),732 which certainly includes the form of State practice specified in vclt Art. 31 (3) (b), 728 Fauchald, The Legal Reasoning of icsid Tribunals 301, 326–327. 729 Scott Brewer, Exemplary Reasoning: Semantics, Pragmatics, and the Rational Force of Legal Argument by Analogy, 109 Harv. L. Rev. 923, 937 (1996). 730 See e.g. Karl Larenz & Claus-Wilhelm Canaris, Methodenlehre der Rechtswissenschaft 208–210 (Springer, Berlin/Heidelberg/New York, 3rd ed., 1995). For a critical view on the analogy-related classification, see Thomas Kyrill Grabenhorst, Das argumentum a fortiori – Eine Pilot-Studie anhand der Praxis von Entscheidungsbegründungen 41 (Peter Lang, Frankfurt/Main, 1990). 731 Weeramantry, Treaty Interpretation in Investment Arbitration 148–151, who refers to these maxims in the context of international investment arbitration and points to the question of whether they require “equivalence in legal character” of the respective laws. As example, he points to the relation of a bit to the icsid Convention, which was at issue in Fraport ag Frankfurt Airport Services Worldwide v. Philippines, ­i csid Case No. arb/03/25, Award (16 August 2007) [hereinafter Fraport v. Philippines (i) (Award)], para. 305. 732 icj Statute Art. 38 (1): “The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: (…) (b.) international custom, as evidence of a general practice accepted as law; (…).” For the entire provision and remarks on its general significance, see below Ch. 2.E.III.1.a. (fn. 1193).

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but clearly also has a broader scope.733 It encompasses, for instance, decisions of domestic administrative bodies and judicial courts, other international treaties, such as bits,734 or acts that express an opinio juris.735 Moreover, legal doctrine, i.e. scholarly opinions, which can also be considered as falling within the scope of vclt Art. 32, may be taken into account as a “subsidiary means for the determination of the rules of law” in the sense of icj Statute Art. 38 (1) (d).736 Finally, precedents stemming primarily from other arbitral investment ­tribunals or from other international courts or tribunals play an important role for the interpretation of international (treaty) law. Since their interpretative treatment is particularly relevant for the establishment of consistent and coherent lines of arbitral investment jurisprudence, they will be dealt with separately.737 b Practice of Treaty Interpretation by icsid Tribunals The empirical analysis of the legal reasoning of icsid tribunals between 1998 and 2006 conducted by Ole Kristian Fauchald in 2008738 provides important 733 Fauchald, The Legal Reasoning of icsid Tribunals 301, 343–345. 734 Regarding interpretative recourses to identical or similar provisions in other treaties, e.g. in bits concluded by different parties or model bits, it is important that these are made with caution since otherwise, important differences in the wording, context and telos may be missed; see Weeramantry, Treaty Interpretation in Investment ­A rbitration 133–134. 735 Fauchald, The Legal Reasoning of icsid Tribunals 301, 344, who clarifies in this regard that, despite its broad scope, State practice needs to be distinguished from institutional practice exercised by organs acting independently from the member States and from acts adopted by non-governmental institutions. 736 icj Statute Art. 38 (1): “The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply: (…) (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.” For the entire provision and remarks on its general significance, see below Ch. 2.E.III.1.a. (fn. 1193). Weeramantry, Treaty Interpretation in Investment Arbitration 136–138. 737 See Ch. 2.D.II.2. 738 Fauchald, The Legal Reasoning of icsid Tribunals 301, 301–364. The study, covering a period of eight years, analysed 98 decisions in 72 different icsid cases, among them 28 decisions on the merits, 54 decisions exclusively on jurisdiction, eleven decisions on preliminary issues, one decision on the interpretation of an award, and four decisions on the annulment of awards. Complete references to these cases on which the respective findings are based can be found in the annex of the said study. For further, non-ICSID specific studies of interpretative approaches taken by investment tribunals, see Trinh Hai Yen, The Interpretation of Investment Treaties

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insights into the selection and use of methods of (treaty) interpretation by arbitral tribunals and, in the course of this, reveals significant methodological weaknesses in their interpretative approaches. As the author points out in the beginning, his study is meant to “provide a basis for addressing the extent to which icsid tribunals contribute to creating a predictable legal framework; (…) to a coherent development of international investment law; and whether icsid tribunals contribute to a ‘fragmentation’ of international law.”739 aa

Interpretation Pursuant to vclt Arts. 31 and 32

The categories of interpretative arguments addressed in the study have, in large part, been organised according to the general rules on treaty interpretation as stipulated in the vclt. Regarding the three components contained in the basic rule of vclt Art. 31 (1), it was found that, in the selected decisions, the arbitral tribunals clearly favoured the objective, language-based approach; yet, their reasoning has been criticised for not fully examining the wording, e.g.  by ­identifying alternative interpretations.740 The teleological approach, which was often difficult to distinguish from the subjective approach, was – according to the Fauchald study – used frequently, yet in a rather supplementary manner.741 Furthermore, it was noted that the arbitrators did not sufficiently explain how they determined the object and purpose of the treaty at hand, i.e. in what exact manner they arrived at their conclusion.742 It was also found that contextual arguments, i.e. “intrinsic” and “extrinsic” means of interpretation in the sense of vclt Art. 31 (2) and (3),743 were not used enough and, if so, that their use was not sufficiently detailed in view of the crucial role accorded to this approach in the Vienna Convention.744 In this respect, the study ­examined, inter alia, how icsid tribunals utilised international custom and general principles of law as interpretative arguments falling within the scope

32–100 (Brill Nijhoff, Leiden/Boston, 2014); Weeramantry, Treaty Interpretation in Investment Arbitration 153–218; Saldarriaga, Investment Awards and the Rules of Interpretation of the Vienna Convention 197, 197–217, esp. 203; Schreuer, Diversity and Harmonization 129–139. 739 Fauchald, The Legal Reasoning of icsid Tribunals 301, 301. 740 Id. at 315–316: “icsid tribunals in general indicated a clear preference for the objective approach to treaty interpretation.” 741 Id. at 322–324: “Object and purpose was used as an interpretative argument in 48 out of 98 decisions.” 742 Id. at 323–324. 743 Terminology according to Dörr & Schmalenbach, vclt Commentary 523 (Art. 31, para. 5). 744 Fauchald, The Legal Reasoning of icsid Tribunals 301, 319–322: “Altogether, contextual arguments were identified in 49 of the 98 decisions.”

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of “the relevant rules of international law” in vclt Art. 31 (3) (c). It was found that, while resorting relatively frequently to customary law, they did not or did not sufficiently analyse the rules they used in numerous cases.745 Similar findings were reached in respect of the general principles of law: none of the arbitral tribunals’ few decisions which referred to a general principle actually undertook an in-depth substantive analysis of the general principle at issue.746 Regarding the non-exhaustive list of supplementary means of treaty interpretation contained in vclt Art. 32, the study examined, among other things, the interpretative use of travaux préparatoires to a treaty. Only a small number of the cases that referred to preparatory work discussed these materials in depth.747 These were primarily used to determine the States’ underlying intentions with regard to procedural or jurisdictional questions and not for teleological clarification of substantive provisions.748 Moreover, the fact that at least some of the arbitral tribunals referred to such preparatory documents as the starting point or the essential argument of their analysis would indicate that they did not use them as only a supplementary means of interpretation, but rather applied them according to their practical ease of use.749 As a further aspect in the context of supplementary interpretative means, the study examined the use of the criterion of unreasonableness in the sense of vclt Art. 32 (b). It was found that this criterion was primarily used not as a supplementary, but as a main argument in order to reject undesirable interpretations of norms governing procedure 745 Id. at 324–325: “icsid tribunals resorted to customary international law as an interpretive argument in 24 of the 98 decisions examined. (…) The tribunals based their arguments on a thorough analysis of the status and content of the customary international law in only seven decisions. They made a summary analysis of the rules in eight decisions, and included no analysis of the rules in 13 decisions.” 746 Id. at 326: “(…) there was no thorough analysis of the content of the principles in any of the decisions (…)” The study’s concept of “general principles of law” pertains to “principles of law derived from national legal systems (…) which do not have the status of customary international law” [footnote omitted]; see id. at 310. 747 Id. at 349–350: “Preparatory work was used as an interpretive argument in 25 of the 98 decisions. There were few cases in which references to preparatory work were specific and discussed in detail.” [footnotes omitted]. It should be pointed out that the study undertaken by Fauchald classified the Report of the Executive Directors on the icsid Convention as an “agreement” in the sense of vclt Art. 31 (2) (a); see id. at 329–330. 748 Id. at 350–351. 749 Id. For further criticism on the interpretative use of travaux préparatoires by arbitral tribunals, see Mahnoush H. Arsanjani & W. Michael Reisman, Interpreting Treaties for the Benefit of Third Parties: The Salvors Doctrine and the Use of Legislative History in Investment Treaties, 104 Am. J. Int’l L. 597, 597–604 (2010).

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or jurisdiction, and that the decisions mostly lacked a comprehensive analysis of whether an adopted interpretation itself was reasonable.750 As for the overall use of the general rules of treaty interpretation set forth in the Vienna Convention, the empirical analysis concluded that, while about one third of the decisions under scrutiny contained formal references to the vclt, and mostly to its Art. 31 (1), only one fifth of the decisions went beyond that and made thorough and extensive use of these interpretative tools.751 Accordingly, icsid rulings would often lack due consideration and application of internationally recognised interpretative rules. This finding would signal a tendency towards a “self-contained regime” and therefore conflict with the objective of a formal integration of the icsid Convention into the general system of public international law.752 bb

Uncodified Means of Interpretation (Except Precedent)

As for interpretative principles and maxims beyond the unequivocal scope of the Vienna Convention, the Fauchald study first focused on the principles of restrictiveness and effectiveness. It found that arbitral tribunals were largely divided, but showed a general tendency to reject their application; only the rule of effet utile was used relatively frequently in support of the tribunals argumentations.753 And despite some striking scepticism as to its use for the interpretation of individual treaties, the icsid tribunals also explicitly relied on the e contrario argument in a significant number of cases.754 General practice outside the scope of vclt Art. 31 (3) (b) was found to be the most heterogeneous category in terms of content and in terms of use. As for State practice at the inter-State level, the greatest importance was attributed to bits, which were mainly used as essential arguments regarding procedural 750 Fauchald, The Legal Reasoning of icsid Tribunals 301, 354: “(…) arguments based on reasonableness could be identified in 36 of the 98 decisions. (…). Arguments based on reasonableness were mainly related to jurisdictional and procedural issues and less frequently related to substantive issues. (…) reasonableness was invoked most frequently to reject interpretations other than those preferred by the tribunals (…).” [footnotes omitted]. 751 Id. at 314: “References to Articles 31–33 of the vclt were found in 35 out of 98 decisions. (…) A clear majority of the references were limited to Article 31 (1) of the vclt. (…) If we look beyond these mere references to the vclt (…) and assess whether the tribunals made active use of the instruments in their reasoning, we can find elements of such application of Articles 31–33 of the vclt in 20 decisions.” [footnotes omitted]. 752 Id. at 313–314, referring to icsid Convention Art. 64, containing the right of the contracting States to submit contentious interpretative questions on the icsid Convention to the icj. 753 Id. at 317–319. 754 Id. at 326–327.

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or ­jurisdictional issues in cross-treaty interpretation.755 Reference to unilateral State practice, which comprises model investment treaties or legislative, executive, and judicial acts, for example, was made in almost one third of the cases examined; quite a considerable number of these decisions used domestic court decisions as interpretative aids.756 However, the icsid tribunals’ use of State practice was found to be of a rather general nature since they rarely undertook a comprehensive and in-depth assessment.757 Finally, the study also explored the use of legal doctrine, which turned out to be the second most commonly used interpretative argument – although the literature resorted to was limited to a rather small number of experts in investment law.758 Scholarly treatises were found to be used fairly often as an essential argument or as a starting point for interpretative argumentations and were also employed comparatively frequently with regard to questions of substantive law.759 cc Assessment

The overall findings of the empirical analysis of icsid case law conducted by Fauchald indicate that icsid tribunals use a wide variety of interpretative Criticism as regards the e contrario argument was, for instance, expressed by the arbitral tribunals in Enron v. Argentina (Decision on Jurisdiction), para. 46; Siemens ag v. Argentine Republic, icsid Case No. arb/02/8, Decision on Jurisdiction (3 August 2004) [hereinafter Siemens v. Argentina (Decision on Jurisdiction)], para. 140; Plama Consortium Ltd. v. Republic of Bulgaria, icsid Case No. arb/03/24, Decision on Jurisdiction (8 February 2005) [hereinafter Plama v. Bulgaria (Decision on Jurisdiction)], para. 203; and by Prof. Christoph Schreuer in: Schreuer, Diversity and Harmonization 135: “The problem with the expressio unius principle is not so much a lack of consistency of the tribunals but its limited usefulness. Whether the mention of one item (…) in a provision really excludes the relevance of other items depends very much on the particular circumstances and cannot be answered in a generalised way.” See Fauchald, The Legal Reasoning of icsid Tribunals 301, 326–327. 755 Fauchald, The Legal Reasoning of icsid Tribunals 301, 345–347: “Such treaties [bits] were used in 28 decisions, while tribunals referred to other investment-related instruments in 14 decisions. (…) In general, the instruments were much more often used as arguments in relation to jurisdictional and procedural issues (38 decisions) than in relation to substantive issues (12 decisions). (…) bits were more often used as essential arguments than the other treaties.” [footnotes omitted]. 756 Id. at 347–348: “Unilateral practice was used for interpretative purposes in 30 of the 98 decisions. (…) The relatively high number of references to domestic court decisions as compared to other categories of unilateral practice is remarkable.” 757 Id. at 349. 758 Id. at 351–352: “Legal doctrine was used in 73 out of 98 decisions. This made it the second most frequently used interpretative argument, second only to icsid case law.” 759 Id. at 352.

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a­ rguments. The comparatively most popular means of interpretation were – besides various forms of case law760 – legal doctrine, State practice, contextual and teleological arguments.761 In general, such a frequent and multifaceted use of interpretative tools may be perceived as signalling a certain “legislatororientation”762 of arbitral tribunals in the sense that the arbitrators are aware of the far-reaching implications of their decisions and their impact on the development of international investment law in the long term. However, the study found that, in practice, only a few arbitral tribunals undertook a sound and thorough assessments when applying their interpretative arguments.763 In many cases, the arbitral tribunals did not use these arguments in a classified order according to their systemic importance and rank, but rather according to the necessity for arguments in a particular case.764 Moreover, they tended to focus solely on the arguments produced by the parties,765 but did not undertake an independent examination as required by the general rules and principles of treaty interpretation.766 This “dispute-oriented”767 consultation-on-demand

760 See below Ch. 2.D.II.2.b. 761 Fauchald, The Legal Reasoning of icsid Tribunals 301, 356–357. Although Fauchald mentioned textual arguments as a favoured interpretative approach of icsid tribunals (see id. at 315–317), these were apparently not included in the final ranking of the most popular means of interpretation. 762 Terminology according to id. at 307, 357–358. 763 Id. at 314, 316, 323. 764 Id. at 307, 357. 765 Id. at 358. 766 Another factor for non-compliant interpretative approaches, which has been identified independently of the Fauchald study, relates to the icsid tribunals’ distinct pre-­ understandings. These would inevitably influence the process of interpretation, as each adjudicator would unconsciously be guided by his very own underlying assumptions and prejudgments; see Tsatsos, A Call for Appeal 1, 25–26. Pre-understandings are considered as being determined by “origin, education and social environment” and are distinguished into investor-friendly, State-friendly, or neutral approaches; see id. at 26; referring to ­L arenz & Canaris, Methodenlehre der Rechtswissenschaft 32; Wolfgang Gast, Juristische Rhetorik 264–265 (paras. 659–660) (C.F. Müller, Heidelberg, 5th ed., 2015). As a consequence, there would be a “split of the icsid jurisprudence into the different ideological streams,” which stands in contrast to the icsid’s official postulate of legal and economic neutrality; cf. World Bank, Report of the Executive Directors,, para. 13 (1965): “While the broad objective of the Convention is to encourage a larger flow of private international investment, the provisions of the Convention maintain a careful balance between the interests of investors and those of host States.,” referred to in Tsatsos, A Call for Appeal 1, 26. 767 Terminology according to Fauchald, The Legal Reasoning of icsid Tribunals 301, 307, 357–358.

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has resulted in considerable variations in the use of arguments768 and potentially also in the actual outcomes.769 Critics called this way of legal reasoning an “à la carte approach (…) whereby [many tribunals] appear to be willing to rely on any legitimate interpretation technique which supports a particular outcome without necessarily adhering to the principled approach of the Vienna Convention.”770 On the whole, it can be concluded that the assessment of icsid tribunals’ interpretative tendencies depends on the point of view. While the frequent references to case law as interpretative guidance indicate a farsighted “legislator-orientation,” the use of interpretative arguments with little regard to their position and importance within the canon of interpretation and without detailed analysis shows a tendency towards “dispute-orientation.”771 This widespread lack of a systematic interpretative approach, which manifests itself in the arbitrary choice of interpretative tools and the cursory legal examination accorded to a given interpretation, can be said to characterise the arbitral tribunals’ interpretative modi operandi and can hence be considered as one major cause for inconsistencies in icsid investment jurisprudence. 768 Id. at 357. 769 Some of the inconsistencies that are attributable to the unsystematic use of interpretation techniques and cursory legal examinations have been considered as justifiable at least on a smaller scale when looking at the basic rule of interpretation set out in vclt Art. 31 (1). As there is no hierarchical structure between the different elements contained therein, namely the “ordinary meaning,” the “context”, as well as the “object and purpose” of a treaty, it would be natural that tribunals do not treat them as possessing equal qualitative priority, but tend to give different weight to the single elements; see Tsatsos, A Call for Appeal 1, 28. While this interpretative flexibility provided by vclt Art. 31 (1) may justify some of the varying interpretative approaches, it remains a fact that many icsid tribunals use the interpretative arguments set forth in the vclt, if at all, solely at their own discretion – even when an hierarchical order had actually been established. This, for instance, has been the case with the overly extensive use of supplementary means of interpretation under vclt Art. 32, which are subordinate to the general rule in vclt Art. 31; see Fauchald, The Legal Reasoning of icsid Tribunals 301, 359 (fn. 303). Hence, whether the vclt leaves interpretative leeway or not appears to receive little attention in practice. 770 Reinisch, The Interpretation of International Investment Agreements 410. See also Gardiner, Treaty Interpretation 51, who analysed the legal interpretation in csob v. Slovak Republic (Decision on Jurisdiction) and concluded that “(…) one sees how many matters for interpretation were approached using appropriate elements of the Vienna rule. There was not, however, a systematic application of each part of the general rule, followed by assessment of whether to refer to supplementary means of interpretation (…). The tribunal applied such of the rules as were appropriate (…).” 771 Fauchald, The Legal Reasoning of icsid Tribunals 301, 357–358.

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2 Treatment of Precedent: Focus a Theory of Precedent in Investment Arbitration When interpreting the meaning of international investment law, it is not uncommon for arbitral tribunals to refer to and rely on precedents, i.e. “decided case[s] that furnish[] (…) a basis for deciding later cases involving similar facts or issues.”772 More precisely, the legal reasoning contained therein, which needs to be abstracted from the actual case, may supply the foundation for a later ruling.773 While the role of precedent is widely recognised not only in Anglo-American, but also in continental European law,774 it is still “a matter of considerable delicacy”775 in international investment arbitration – especially with regard to aspects like State autonomy,776 party autonomy,777 the

Some scholars suggest that this preference for fact-specific and case-specific reasoning may be traced back to the “commercial arbitration background” of many arbitrators, who are generally more concerned with an efficient settlement of the dispute than with the goal of systemic integration or with the abstract implications of their legal reasoning in a specific case; see e.g. Reinisch, The Interpretation of International Investment Agreements 407. See also the discussion of the role and function of arbitrators in Ch. 2.B.II.2. 772 Garner, Black’s Law Dictionary 1366. 773 See e.g. Lassa Oppenheim, The Science of International Law: Its Task and Method, 2 Am. J. Int’l L. 313, 341–344 (1908), elaborating on the manner in which arbitral awards should be used as interpretative guidance, referred to in Weiler, Interpretation of International Investment Law 54. 774 For a comparative analysis of concepts of precedent in the Anglo-American, French and German legal system, see Valériane König, Präzedenzwirkung internationa­ ler Schiedssprüche – Dogmatisch-empirische Analysen zur Handels- und Investitionsschiedsgerichtsbarkeit 9–29 (De Gruyter, Berlin/Boston, 2013). 775 Paulsson, International Arbitration and the Generation of Legal Norms 1, 2. On the various disputed aspects pertaining to the legal relevance of precedent; see Robert Alexy, A Theory of Legal Argumentation – The Theory of Rational Dicourse as Theory of Legal Justification 274–279 (Clarendon Press, Oxford, 1989), with further references. On the tension between treaty interpretation pursuant to the vclt and the role accorded to precedent, see Hindelang, Study on isds and Alternatives of Dispute Resolution in International Investment Agreements, in ep, isds Provisions in the eu’s International Investment Agreements, 66–69 (2014). 776 Paulsson, International Arbitration and the Generation of Legal Norms 1, 2: “(…) jealous sovereign states are (…) unwilling to submit to the elaboration of international law by anything resembling the accretion of binding precedents known as common law.” 777 Kessedjian, To Give or Not to Give Precedential Value to Investment Arbitration Awards 67: “(…) investment arbitrators have no duty to look at previous decisions unless those previous decisions are pleaded by the parties.”

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a­ rbitrators’ powers and functions,778 or the often debated systemic character of international investment law and arbitration.779 In spite of these concerns, the consideration of precedents by arbitral tribunals is crucial inasmuch as it is – similar to systematic interpretative techniques in general780 – a precondition for an harmonious and stable development of the body of investment (case) law. A more consistent and coherent arbitral jurisprudence on core interpretative issues can only emerge if arbitrators “[d]raw[…] on the experience of past decisions.”781 The interpretative relevance of arbitral precedents is neither addressed directly in the icsid Convention or Arbitration Rules, nor is it explicitly mentioned in the provisions on treaty interpretation contained in the Vienna Convention. Nevertheless, attempts to construe a legal basis have been made by taking vclt Art. 32 as a starting point and by linking it to icj Statute Art. 38 (1) (d).782 The tribunal in the nafta case Canadian Cattlemen, for example, held that: [vclt Art. 32] permits, as supplementary means of interpretation, not only preparatory work and circumstances of conclusion of the treaty, but indicates by the word ‘including’ that, beyond these two means expressly mentioned, other supplementary means may be applied. Article 38 of the Statute of the International Court of Justice provides that judicial decisions are applicable for the interpretation of public international law as ‘subsidiary means.’ Therefore, they must be understood to be also supplementary means of interpretation in the sense of Article 32 vclt.783 778 Weidemaier, Toward a Theory of Precedent in Arbitration 1895, 1949–1951, who discusses “the arbitrator’s role in fashioning norms concerning arbitral precedent.” See also Ch. 2.B.II.2. 779 See Ch. 2.B.II.1.a. 780 See Ch. 2.D.II.1.b. 781 Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 1. See also, on the importance of precedents for the development of law, König, Präzedenzwirkung internationaler Schiedssprüche 32–34. 782 For vclt Art. 32, see fn. 713; for icj Statute Art. 38, see below fn. 1193. Even if the icj Statute is not directly applicable to icsid investment arbitration, it still provides general guidance due to its “basic standing in international law,” see Fauchald, The Legal Reasoning of icsid Tribunals 301, 333. 783 Canadian Cattlemen for Fair Trade v. United States of America, uncitral Arbitration (nafta), Decision on Jurisdiction (28 January 2008) [hereinafter Canadian Cattlemen (Decision on Jurisdiction)], para. 50, referred to in Andres Rigo Sureda, Precedent in Investment Arbitration, in International Investment Law for the 21st Century – Essays in Honour of Christoph Schreuer 838 (Christina Binder et al. eds., 2009).

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However, since the explicit wording of icj Statute Art. 38 (1) (d), refers solely to “judicial decisions,”784 arbitral awards still need to be read into this provision. Such a broad interpretation has yet led to conflicting opinions of scholarly commentators.785 While some authors adopt a relaxed reading of the norm and consider arbitral awards as the “functional equivalent of ‘judicial decisions,’”786 others are hesitant787 or adhere to the strict wording and take the opposite view.788 Despite these controversial views of academic authorities, arbitral and even international judicial practice has broadly recognised precedents as a subsidiary interpretative means.789 Arbitral tribunals frequently 784 For general elaborations on the role of judicial precedent in international arbitration, see Gary B. Born, International Commercial Arbitration 3821–3823 (Kluwer Law International, Alphen aan den Rijn, 2nd ed., 2014). 785 For an overview of the discussion whether arbitral decisions can be considered as “judicial decisions” under icj Statute Art. 38 (1) (d), see Weiler, Interpretation of ­I nternational Investment Law 53–54. 786 See Tai-Heng Cheng, Precedent and Control in Investment Treaty Arbitration, 30 Fordham Int’l L. J. 1014, 1028–1029 (2006–2007), who argues that “pursuant to Article 31 of the Vienna Convention (…), Article 38 (1) (d) of the icj Statute should be interpreted in the context of the object and purpose of the icj Statute, as revealed, inter alia, by the text of the Statute itself. The icj Statute is almost completely deferential to State sovereignty. A State is not bound by any decision of the icj unless it has consented to the icj’s jurisdiction. Even with such consent, it is only bound as regards the dispute before the icj and no other dispute. Arbitral awards are the “functional equivalent of ‘judicial decisions.’” They are rendered only with the consent of the parties to the arbitration. In light of the preeminent position given to sovereignty and the explicit limitations on legal effects on non-parties to consensual dispute resolution, it is unlikely that, under Article 38, awards are meant to be more authoritative than judicial decisions.” [footnotes omitted]. See also Paulsson, International Arbitration and the Generation of Legal Norms 1, 3, referred to in Cheng, Precedent 1014, 1028–1029; Humphrey Waldock, General Course on Public International Law, 106-II RdC 1, 88, 92–93 (1962), referred to in Gilbert Guillaume, Can Arbitral Awards Constitute a Source of International Law under Article 38 of the Statute of the International Court of Justice?, in Precedent in International Arbitration 108 (Yas Banifatemi & Emmanuel Gaillard eds., 2008). 787 See Max Sørensen, Les Sources Du Droit International: Étude sur la Jurisprudence de la Cour Permanente de Justice Internationale 162–166 (Einar Munksgaard, Copenhagen, 1946), referred to in Guillaume, Can Arbitral Awards Constitute a Source of International Law (…)? 108. 788 See Julio A. Barberis, La jurisprudencia internacional como fuente de derecho de gentes según la Corte de La Haya, 31 ZaöRV (Heidelberg J. Int’l L.) 641, 643 (1971); Daillier & Pellet, Droit International Public 437 (para. 259); referred to in Guillaume, Can Arbitral Awards Constitute a Source of International Law (…)? 108. 789 For general elaborations on the role of arbitral precedent in international arbitration, see Born, International Commercial Arbitration 3823–3827.

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refer to prior arbitral case law,790 and the icj and its predecessor, the Permanent Court of International Justice,791 have made general but also specific references to decisions rendered by arbitral tribunals, which became more numerous after initial reticence.792 Regardless of their general acceptance and use as an interpretative means in arbitral practice, reliance on precedents is subject to certain restrictions. One is that the use of previous decisions as interpretative guidance always requires that a “significant legal connection” to the case at hand exists.793 Moreover, it must be borne in mind that decisions rendered by private arbitral tribunals are not, “in and of themselves, sources of law,” but solely “evidence of the rules of law” and their condition and state.794 Therefore, references to prior cases do not replace a sound and methodologically correct legal reasoning, which must

790 See below Ch. 2.D.II.2.b. 791 [Hereinafter pcij]. 792 For an example of general references to arbitral case law, see Factory at Chorzów (Germany v. Poland), pcij, Judgment (13 September 1928), 1928 pcij Series A, No. 17, 47; for an example of specific references to arbitral case law rendered in intergovernmental disputes, see Nottebohm (Liechtenstein v. Guatemala), icj, Judgment (Preliminary Objection) (18 ­November 1953), icj Rep. (1953) 111, 119; referred to in Guillaume, Can Arbitral Awards Constitute a Source of International Law (…)? 109. See also Pellet in: Andreas Zimmermann et al., The Statute of the International Court of Justice – A Commentary 858–859 (Art. 38, para. 317) (Oxford University Press, Oxford, 2nd ed., 2012). Nevertheless, the icj has maintained its reserved attitude in that it has not made any reference specifically to icsid case law so far; see Alain Pellet, 2013 Lalive Lecture – The Case Law of the icj in Investment Arbitration, 28 icsid Rev. – filj 223, 225–226 (2013). 793 Canadian Cattlemen (Decision on Jurisdiction), para. 209. 794 Fernandez-Fonseca et al., Legitimacy And Inconsistency 287. See also, as regards international judicial decisions, Daillier & Pellet, Droit International Public 439 (para 260): “Tous ces arguments ne suffisent toutefois pas à faire de la jurisprudence en tant que telle une source du droit international. Une jurisdiction, fût-elle la Cour internationale de Justice, ‘dit le droit existant et ne le légifère point. Cela est vrai même si la Cour, en disant et en appliquant le droit, doit nécessairement en préciser la portée et, parfois, en constater l’évolution’ (cij, avis du 8 juillet 1996, Licéité de la menace ou de l’emploi d’armes nucléaries, Rec. p. 237 [Legality of the Threat or Use of Nuclear Weapons, icj, Advisory Opinion (8 July 1996), icj Rep. (1996) 226]).” But see Luigi Condorelli, Conclusions générales, in The International Criminal Court and the Crime of Aggression 151 et seq. (Mauro Politi & Giuseppe Nesi eds., 2004), who describes case law as being of a “fonction de suppléance législative,” given that international courts and tribunals would tend to rely on case law in the absence of suitable treaty rules, referred to in Pellet, Case Law of the icj in Investment Arbitration 223, 228–229.

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also take into account that precedents are but supplementary means of interpretation and thus should not be used as essential arguments.795 Finally, but most importantly, there is no doctrine of precedent and hence no underlying maxim of stare decisis in international law.796 This absence of a duty to abide by previous decisions is codified in icj Statute Art. 59797 and even in icsid Convention Art. 53 (1).798 The autonomy from prior decisions has often been emphasised by icsid tribunals.799 For instance, in sgs v. Philippines, the arbitral tribunal held that: 795 See vclt Art. 32 and icj Statute Art. 38 (1) (d). For the text of these provisions, see fn. 713 and 1193. See also Julian Davis Mortenson, Case Comment Quiborax sa et al v Plurinational State of Bolivia: The Uneasy Role of Precedent in Defining Investment, 28 icsid Rev. – filj 254, 259–260 (2013). But see a commentator who adopts a practical perspective and contends that “Judgments of any court or tribunal are only, in simple cases, nothing more than the logical application of legal norms to given facts. In all other cases they contain a law creating element; the courts apply and create the law, in national as well as in international law. If a judgment, especially of the highest court, has pronounced legal rules and principles, legal certainty requires adherence to these rules and principles in other cases, unless compelling reasons militate in favour of changing the case law.,” see Brown, Art. 59 in: Zimmermann et al., icj-Statute Commentary 1444–1445 (Art. 59, para. 84), referred to (in the 1st edition, commented by Bernhardt) in Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 267. 796 See Ch. 2.A.I. 797 icj Statute Art. 59: “The decision of the Court has no binding force except between the parties and in respect of that particular case.” Following an a maiore ad minus argumentation, one can infer from this provision that if the icj is not bound by a “doctrine of precedent,” neither are ad hoc arbitral tribunals. 798 icsid Convention Art. 53 (1) stipulates that “[t]he award shall be binding on the parties (…).” As this provision limits the binding effect of an icsid award to the disputing parties, in reverse, an icsid award is not binding on any non-party to the arbitration. Thus, it is normally read as excluding a doctrine of precedent in icsid arbitration; see Kalnina & Di Pietro, The Scope of icsid Review: Remarks on Selected Problematic Issues of icsid Decisions 235; J. Romesh Weeramantry, The Future Role of Past Awards in Investment Arbitration, 25 icsid Rev. – filj 111, 114 (2010). See also Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 2. For the full text of icsid Convention Art. 53 (1), see fn. 369. 799 See e.g. Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Decision of the Ad hoc Committee on Annulment (16 May 1986) [hereinafter Amco v. Indonesia (i) (Decision on Annulment)], para. 44; Gas Natural sdg, s.a. v. Argentine Republic, icsid Case No. arb/03/10, Decision on Jurisdiction (17 June 2005) [hereinafter Gas Natural v. Argentina (Decision on Jurisdiction)], para. 52; El Paso Energy International Company v. Argentine Republic, icsid Case No. arb/03/15, Decision on Jurisdiction (27 April

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(…) there is no doctrine of precedent in international law, if by precedent is meant a rule of the binding effect of a single decision. There is no hierarchy of international tribunals, and even if there were, there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals.800 The logical consequence of the non-existence of a duty to refer to precedents is the absence of sanctions for failure to cite the relevant case law. Even if, in theory, an application for annulment under icsid Convention Art. 52 (1)801 is a conceivable remedy,802 it is highly improbable that an annulment c­ ommittee

2006) [hereinafter El Paso v. Argentina (Decision on Jurisdiction)], para. 39; l.e.s.i., S.p.A. and astaldi, S.p.A. v. People’s Democratic Republic of Algeria, icsid Case No. arb/05/3, Decision on Jurisdiction (12 July 2006) [hereinafter lesi astaldi v. Algeria (Decision on Jurisdiction)], para. 56; Pan American Energy llc and bp Argentina Exploration Company v. Argentine Republic, icsid Case No. arb/03/13, and bp Amercia Production Company, Pan American Sur srl, Pan American Fueguina srl, and Pan American Continental, icsid Case No. arb/04/8, Decision on Preliminary Objections (27 July 2006) [hereinafter Pan American Energy v. Argentina (Decision on Preliminary Objections)], para. 42; World Duty Free Company Ltd. v. Republic of Kenya, icsid Case No. arb/00/7, Award (4 October 2006) [hereinafter World Duty Free v. Kenya (Award)], para. 16; Tulip Real Estate and Development Netherlands b.v. v. Republic of Turkey, icsid Case No. arb/11/28, Decision on Bifurcated Jurisdictional Issue (5 March 2013) [hereinafter Tulip v. Turkey (Decision on Jurisdiction)], paras. 45–47. Part of the cited case law is referred to in Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 3–4. 800 sgs v. Philippines (Decision on Jurisdiction), para. 97 [footnote omitted]. 801 For the text of icsid Convention Art. 52 (1), see fn. 374. The failure to take into account previous cases cited by the parties could be considered as a failure to apply the proper law and therefore as a manifest excess of powers according to sub-para. (a), or as a violation of the right to be heard and hence as serious departure from a fundamental rule of procedure pursuant to sub-para. (d), or simply as failure to state reasons under sub-para. (e); see Judith Gill et al., Is There a Special Role for Precedent in Investment Arbitration?, 25 icsid Rev. – filj 87, 89 (2010). 802 A further possible remedy discussed in this context is an application for a supplementary decision pursuant to icsid Convention Art. 49 (2) in conjunction with Art. 48 (3). Yet, such a request for supplementation applies only to “unintentional omissions of technical nature,” whereas a request for annulment according to icsid Convention Art. 52 (1) is also suitable to remedy “a failure to address major facts and arguments which go to the core of the tribunal’s decision”; see Schreuer et al., icsid Commentary 860–862 (Art. 49, paras. 68–77, esp. para. 77), with further elaborations on this distinction. icsid Convention Art. 49 (2): “The Tribunal upon the request of a party made within 45 days after the date on which the award was rendered may after notice to the other party decide any question which it had omitted to decide in the award, and shall rectify

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would consider an omission to refer to previous decisions as constituting a violation of a ground for annulment.803 b Practice of icsid Tribunals As already indicated, despite the lack of a formal system of precedent, arbitral tribunals very frequently take account of precedents either on their own initiative or on the initiative of the parties804 when interpreting the applicable investment law. This has been affirmed by the Fauchald study,805 which also considered the manner in which the icsid tribunals under scrutiny made use of past arbitral and judicial case law, i.e. whether as an essential argument, a

any clerical, arithmetical or similar error in the award. Its decision shall become part of the award and shall be notified to the parties in the same manner as the award. (…).” icsid Convention Art. 48 (3): “The award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based.” 803 Hussein Nuaman Soufraki v. United Arab Emirates, icsid Case No. arb/02/7, Decision of the Ad hoc Committee on Annulment (5 June 2007) [hereinafter Soufraki v. uae (Decision on Annulment)], para. 128: “It is scarcely necessary to note that reasons set out in an icsid arbitral award do not become insufficient or inadequate under Article 52(1)(e) of the icsid Convention simply because such reasons are not documented by citations to the relevant case law or literature. Lack of references supporting a proposition in an award is not, by itself, a ground for annulment, particularly where such documentation is provided by the parties to the case in their memorials and counter-memorials, and relate to well-known propositions. It is also possible that a tribunal may give reasons for its award without elaborating the factual or legal bases of such reasons. So long as those reasons in fact make it possible reasonably to connect the facts or law of the case to the conclusions reached in the award, annulment may appropriately be avoided.” [footnotes omitted], referred to in Gill et al., Special Role for Precedent 87, 88–89. But see Wälde, The Specific Nature of Investment Arbitration 105–106: “Tribunals which deviate from established jurisprudence, without an extensive effort at reasoning, distinction and providing full hearing to the parties on their intention to deviate, might be considered to commit severe procedural and material rule breaches that could bring them into the visor of the – limited – procedures for judicial review and annulment.” 804 For an example of an icsid tribunal inviting the parties to comment on precedents, see Malaysian Historical Salvors sdn bhd v. Malaysia, icsid Case No. arb/05/10, Decision on Jurisdiction (17 May 2007) [hereinafter mhs v. Malaysia (Award)], paras. 49–52. 805 Fauchald, The Legal Reasoning of icsid Tribunals 301, 335: “Case law was used as an interpretative argument in 92 out of 98 decisions.” Furthermore, the empirical study on case law citation in investment treaty arbitration undertaken by Jeffery Commission presents statistics showing that “[i]n the time since 2001, the frequency of citation to icsid case law [by icsid tribunals] has increased exponentially (…).” For instance, the average number of references to icsid awards and decisions in icsid final awards rose from three in 2002 to 11.5 in 2005; see Commission, Precedent in Investment Treaty Arbitration 129, 149–150 (tables 4, 5).

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non-essential argument, or merely as a starting point of an interpretation.806 Yet, in other cases, the relevant preceding case law was not considered at all. The reference to and analysis of precedents – or the lack thereof – thus require further examination. aa Deference

If arbitral tribunals pay deference to prior case law, this is generally done by way of alignment due to persuasion (aaa.). Yet, respect for precedents may also be expressed by substantiated (bbb.) or concealed (ccc.) deviations from prior decisions. Arbitral precedents taken into account by icsid tribunals stem mainly from cases brought before the Washington Centre itself, but also originate in large part from uncitral arbitral tribunals and the Iran–us Claims Tribunal.807 Further relevant case law stems from international courts and tribunals such as, inter alia, the icj and its predecessor,808 the cjeu, the International Tribunal of the Law of the Sea,809 human rights courts like the ECtHR and the Inter-American Court of Human Rights,810 and also the wto Dispute Settlement Body.811

806 Fauchald, The Legal Reasoning of icsid Tribunals 301, 339–340. 807 Id. Of the 98 decisions examined in the Fauchald study, 30 referred to prior uncitral decisions (primarily relating to jurisdictional and procedural issues) and 22 referred to case law from the Iran–us Claims Tribunal (primarily relating to substantive issues); [hereinafter iusct]. In the latter respect, a study conducted by Gibson and Drahozal came to the conclusion that 44.7% of icsid awards on the merits rendered in the period from 1986 to 2006 cited awards issued by the iusct; see Christopher S. Gibson & Christopher R. Drahozal, Iran-United States Claims Tribunal Precedent in Investor-State Arbitration, 23 J. Int’l Arb. 521, 539–540 (2006). 808 For an overview of the manner and methods in which icsid tribunals resort to icj jurisprudence, see Pellet, Case Law of the icj in Investment Arbitration 223, 233–239. In conformity with the Fauchald study’s findings on the general interpretative methods applied by icsid tribunals (see Ch. 2.D.II.1.b.cc), Pellet describes the way in which icsid tribunals refer to icj jurisprudence as “pragmatic (…) without resorting to predetermined methods”; see id. at 239. 809 [Hereinafter itlos]. 810 [Hereinafter IACtHR]. 811 [Hereinafter dsb]. The wto dsb adopts panel reports and appellate reports according to wto dsu Arts. 16 (1), (4) and 17 (14) (wto Understanding on Rules and Procedures Governing the Settlement of Disputes, Annex 2 to the Agreement establishing the wto, 33 ilm 1226 (1994) [hereinafter wto dsu]).

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Alignment Due to Persuasion

Most often, arbitral tribunals dealing with precedents consider them as “persuasive authority”812 to the extent that they find them to be “instructive” or “a matter of inspiration.”813 A duty of the arbitral tribunal to defer to and align itself with solutions developed in a consistent series of cases has been assumed in exceptional cases only, unless compelling reasons required otherwise.814 A representative example of this majority view is the icsid award rendered in adc v. Hungary, wherein the tribunal held that: On these different sources of case law taken into account by icsid tribunals, see Fauchald, The Legal Reasoning of icsid Tribunals 301, 341–342; Weeramantry, Future Role of Past Awards 111, 118–119. Of the 98 decisions examined in the Fauchald study, 46 referred to icj and pcij decisions. 812 See below adc Affiliate Ltd. and adc & admc Management Ltd. v. Republic of Hungary, icsid Case No. arb/03/16, Award (2 October 2006) [hereinafter adc v. Hungary (Award)], para. 293. 813 See e.g. Liberian Eastern Timber Corporation (letco) v. Republic of Liberia, icsid Case No. arb/83/2, Award (31 March 1986) [hereinafter letco v. Liberia (Award)], 2 icsid Reports (1994) 352 (“instructive”); aes Corporation v. Argentina (Decision on Jurisdiction), paras. 30–32, esp. para. 31 (“matter of (…) inspiration”). See also Bayindir Insaat Turizm Ticaret Ve Sanayi a.s. v. Islamic Republic of Pakistan, icsid Case No. arb/03/29, Decision on Jurisdiction (14 November 2005) [hereinafter Bayindir v. Pakistan (Decision on Jurisdiction)], para. 76 (“carefuly consider (…) whenever appropriate”); Metalpar s.a. y Buen Aire s.a. v. Argentine Republic, icsid Case No. arb/03/5, Decision on Jurisdiction (27 April 2006) [hereinafter Metalpar v. Argentina (Decision on Jurisdiction)], para. 50 (“los razonamientos de algunos de esos tribunales son persuasivos et illustrativos”); bp America Production Company and others v. Argentine Republic, icsid Case No. arb/04/8, Decision on Preliminary Objections (26 July 2006) [hereinafter bp v. Argentina (Decision on Preliminary Objections)], para. 42 (“a reasonable assumption (…) [to] generally take into account the precedents set by other arbitral tribunals”). Part of the cited case law has been referred to in Rigo Sureda, Precedent in Investment Arbitration 836. 814 Saipem S.p.A. v. People’s Republic of Bangladesh, icsid Case No. arb/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures (21 March 2007) [hereinafter Saipem v. Bangladesh (Decision on Jurisdiction)], para. 67: “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.” [footnotes omitted, emphasis added]; see also, almost identically worded, Quiborax s.a.,

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(…) cautious reliance on certain principles developed in a number of those cases, as persuasive authority, may advance the body of law, which in turn may serve predictability in the interest of both investors and host States.815 Arbitral tribunals that consider prior rulings as convincing or at least influential include these precedents into their decision-making in various ways – ranging from an auxiliary use for clarification and support816 or a use by analogy817 to develop their own argumentation, to an adoption of the prior tribunal’s reasoning in its entirety without developing independent and individual arguments, i.e. an “abbreviation of reasoning.”818 Arbitral tribunals have even gone so far as



815 816

817

818

Non Metallic Minerals s.a. and Allan Fosk Kaplún v. Plurinational State of Bolivia, icsid Case No. arb/06/2, Decision on Jurisdiction (27 September 2012) [hereinafter Quiborax v. Bolivia (Decision on Jurisdiction)], para. 46. adc v. Hungary (Award), para. 293. See e.g. Azurix Corp. v. Argentine Republic, icsid Case No. arb/01/12, Award (14 July 2006) [hereinafter Azurix v. Argentina (Award)], para. 391: “The findings of other tribunals, and in particular of the icj, should be helpful to the Tribunal in its interpretative task.”; mhs v. Malaysia (Award), para. 56: “(…) an examination of similar cases decided by other icsid tribunals will assist in determining the correct approach to this question.” See e.g. Gas Natural v. Argentina (Decision on Jurisdiction), para. 36: “The Tribunal wishes to emphasize that it has rendered its decision independently, without considering itself bound by any other judgments or arbitral awards. Having reached its conclusions, however, the Tribunal thought it useful to compare its conclusion with the conclusions reached in other recent arbitrations conducted pursuant to the icsid Arbitration Rules and arising out of claims under contemporary bilateral investment treaties.”; aes Corporation v. Argentina (Decision on Jurisdiction), para. 31: “(…) Such precedents may also be rightly considered, at least as a matter of comparison and (…) of inspiration.” This passage has been described as illustrative example for “[t]he struggle aimed at striking a balance between the autonomy of each icsid tribunal and the need to take into account previous decisions”; see Kalnina & Di Pietro, The Scope of icsid Review: Remarks on Selected Problematic Issues of icsid Decisions 235. See e.g. Enron v. Argentina (Decision on Jurisdiction), para. 38: “(…) [T]he Tribunal does not intend to discuss again questions that have been amply considered in recent decisions. (…),” para. 39: “The reasoning supporting the above holdings will not be repeated for the sake of brevity. (…),” para. 40: “(…) the Tribunal in examining the claim and arguments of this case under international law, believes that in essence the conclusions and reasons of those decisions are correct.” For a critical view on such extensive reliance on precedents, see Schreuer, Diversity and Harmonization 143: “(…) an application for annulment that alleges an excess of powers or a failure to state reasons because the tribunal has simply relied on earlier decisions without making an independent decision or developing its own reasons is entirely

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to generally follow precedents as authoritative standards unless the disputing parties present convincing reasons for deviating therefrom.819 What all these different forms of interpretative argumentation have in common is that they express a general willingness to accord deference to relevant prior case law and to promote consistency and coherence in arbitral investment jurisprudence. bbb

Substantiated Deviation

Even if arbitral tribunals disagreed with the legal reasoning in prior rulings and adopted a different interpretative approach with regard to the same or largely similar legal question, some of them nevertheless managed to pay deference to prior decisions by distancing themselves from these earlier rulings and by substantiating their deviation.820 An example can be found in sgs v. Philippines, wherein the tribunal stated that:

possible. From the perspective of tribunals it seems wiser not to expose themselves to this charge.”, referred to in Fauchald, The Legal Reasoning of icsid Tribunals 301, 336. The categorisation of the persuasive use of precedent and part of the case law references are derived from Schill, The Multilateralization of International Investment Law 325–330; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 156–160. See also, for more detailed findings and further case law, Fauchald, The Legal Reasoning of icsid Tribunals 301, 335–336. 819 See e.g. Camuzzi International s.a. v. Argentine Republic, icsid Case No. arb/03/2, Decision on Jurisdiction, 11 May 2005 [hereinafter Camuzzi v. Argentina (i) (Decision on Jurisdiction)], para. 82: “The same conclusion has been shared by the tribunals in cms and Enron (Additional Claim), among various others. This Tribunal has no reason not to concur with that conclusion, even though some of the elements of fact in each dispute may differ in some respects. (…).” See Schill, The Multilateralization of International Investment Law 330–331; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 161–163. 820 See e.g. Azurix v. Argentina (Award), paras. 366–372; lg&e v. Argentina (Decision on Liability), para. 129. Both cases addressed the fet standard and deviated from the prior ruling in Alex Genin and others v. Republic of Estonia, icsid Case No. arb/99/2, Award (25 June 2001) [hereinafter Alex Genin v. Estonia (Award)], para. 367, wherein the tribunal had demanded “bad faith” of the host State for the fet standard to apply. While the tribunal in Azurix v. Argentina labelled the requirement of “bad faith” as a minority view and then followed the majority view, the lg&e v. Argentina tribunal considered the requirement of “bad faith” not as a an obligatory condition, but as merely one manner in which the fet standard could be breached; see Cheng, Precedent 1014, 136–137. See also Plama v. Bulgaria (Decision on Jurisdiction), paras. 183–227; Suez/InterAguas v. Argentina (Decision on Jurisdiction), paras. 62–66. Both cases dealt with the question of whether icsid jurisdiction could be based on the mfn clauses contained in the respective bits. The tribunal in Suez/InterAguas v. Argentina, before deviating from its

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(…) the present tribunal does not in all respects agree with the conclusions reached by the sgs v. Pakistan Tribunal on issues of the interpretation of arguably similar language in the Swiss–Philippines bit. This raises a question whether, nonetheless, the present Tribunal should defer to the answers given by the sgs v. Pakistan Tribunal. (…) In the Tribunal’s view, although different tribunals constituted under the icsid system should in general seek to act consistently with each other, in the end it must be for each tribunal to exercise its competence in accordance with the applicable law, which will by definition be different for each bit and each Respondent State.821 Having clarified its general understanding of an icsid tribunal’s role, responsibilities and rights, the arbitral tribunal then proceeded to critically examine the relevant pre-existing ruling and to establish its own, opposing argumentation and position in relation thereto.822 In this manner, arbitral tribunals demonstrate awareness of and respect for the pre-existing interpretative arguments they eventually reject. This indicates a general interest in fostering, if not consistent, then at least coherent lines of arbitral case law. ccc Concealed, Unsubstantiated Deviation (1) Distinction

An alternative manner to deal with precedents is to factually and/or legally distinguish a case from former cases that may be perceived as relevant.823 For

predecessor, undertook an extensive analysis of the latter’s ruling and, in addition to making textual distinctions between the two clauses involved, provided for substantiated explanations for its disagreement with the prior ruling. See also Schreuer, Diversity and Harmonization 144. 821 sgs v. Philippines (Decision on Jurisdiction), para. 97 [footnote omitted]. 822 For further elaborations on this case law example, see below Ch. 3.E.I.2.b.bb. 823 See e.g. Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Decision on Jurisdiction (25 September 1983) [hereinafter Amco v. Indonesia (i) (Decision on Jurisdiction)], para. 25 (ii); Autopista Concesionada de Venezuela, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. arb/00/5, Decision on Jurisdiction (27 September 2001) [hereinafter Autopista v. Venezuela (Decision on Jurisdiction)], para. 143; cms v. Argentina (Decision on Jurisdiction), paras. 43–44; cdc Group plc v. Republic of Seychelles, icsid Case No. arb/02/14, Decision of the Ad Hoc Committee on Annulment (29 June 2005) [hereinafter cdc v. Seychelles (Decision on Annulment)], para. 90; Continental Casualty Company v. Argentine Republic, icsid Case No. arb/03/9, Decision on Jurisdiction (22 February 2006) [hereinafter Continental Casualty v. Argentina (Decision on ­Jurisdiction)],

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instance, the tribunal in Jan de Nul v. Egypt made a lengthy factual distinction of the dispute at hand from a prior dispute by stating that: [t]he application to this case of the test adopted in Lucchetti leads to the conclusion that the present dispute is a new one. Indeed, in Lucchetti, the tribunal held that the relevant issue was whether ‘the facts or considerations that gave rise to the earlier dispute continued to be central to the later dispute.’ Specifically, the Lucchetti tribunal took into consideration the facts underlying each dispute and their “origin or source” (…). In the present case, the position is different. Admittedly, the previous dispute is one of the sources of the present dispute, if not the main one. It is clear, however, that the reasons, which may have motivated the alleged wrongdoings of the sca at the time of the conclusion and/or performance of the Contract, do not coincide with those underlying the acts of the organs of the Egyptian State in the post-contract phase of the dispute. [Thus], the present dispute must be deemed a new dispute.824 By showing awareness of relevant prior cases and by undertaking the effort to distinguish the case at hand therefrom, arbitral tribunals give due consideration to precedents and thus demonstrate their general interest in advancing a consistent and coherent development of arbitral jurisprudence.825

para. 75; Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios Integrales del Agua s.a. v. Argentine Republic, icsid Case No. arb/03/17 (formerly Aguas Provinciales de Santa Fe, s.a., Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios Integrales de Agua s.a. v. Argentine Republic), Decision on Jurisdiction (16 May 2006) [hereinafter Suez/InterAguas v. Argentina (Decision on Jurisdiction)], paras. 62–65; Sempra v. Argentina (Award), para. 346; Oko Pankki Oyj, vtb Bank (Deutschland) ag and Sampo Bank Plc v. Republic of Estonia, icsid Case No. arb/04/6 (formerly oko Osuuspankkien Keskuspankki Oyj and others v. Republic of Estonia), Award (19 November 2007) [hereinafter oko Pankki Oyj v. Estonia (Award)], para. 229. Parts of the cited case law have been referred to in Schill, The Multilateralization of International Investment Law 348–349; Rigo Sureda, Precedent in Investment Arbitration 836–838; Fauchald, The Legal Reasoning of icsid Tribunals 301, 338. 824 Jan de Nul n.v. and Dredging International n.v. v. Arab Republic of Egypt, icsid Case No. arb/04/13, Decision on Jurisdiction (16 June 2006) [hereinafter Jan de Nul v. Egypt (Decision on Jurisdiction)], paras. 126–127, referred to in Rigo Sureda, Precedent in Investment Arbitration 837. 825 See Schill, The Multilateralization of International Investment Law 347–349; Schill, System-Building in Investment Treaty Arbitration and Lawmaking 166; Rigo Sureda, Precedent in Investment Arbitration 836–838.

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Yet, on the other hand, the method of distinguishing cases on a factual or legal basis in order to maintain the unity of investment law may be abused as a method to avoid open conflicts or, in other words, to conceal an actual departure from interpretations in earlier rulings.826 In that manner, tribunals avoid the need to provide substantiated arguments for their disagreement. One instance of such “concealed, unsubstantiated deviation by distinction” is the case Salini v. Jordan wherein: [t]he tribunal observes that the circumstances of this case are different. Indeed, Article 3 of the bit between Italy and Jordan does not include any provision extending its scope of application to dispute settlement. It does not envisage “all rights or all matters covered by the agreement.” By referring to textual differences in the mfn clauses of the two bits, the arbitral tribunal wanted to distinguish the question on the application of the mfn clause in the case at hand from the one in the Maffezini case. Although, admittedly, differences in the wording of the two relevant clauses existed, they were hardly so pronounced that they could establish fundamental differences in the general scope of both clauses.827 Another instance is the case Plama v. Bulgaria, where the tribunal similarly dealt with the application of an mfn clause and distinguished the case at hand from the Maffezini case by alleging a purported rule-exception relationship between the two cases.828 More precisely, it held that “such exceptional circumstances should not be treated as a statement of general principle guiding future tribunals in other cases where exceptional circumstances are not present”; rather, it found that “the principle with multiple exceptions as stated by the tribunal in the Maffezini case should instead be a different principle with one, single exception.”829

826 Schill, The Multilateralization of International Investment Law 347–352. 827 Salini Costruttori S.p.A. and Italstrade S.p.A. v. Hashemite Kingdom of Jordan, icsid Case No. arb/02/13, Decision on Jurisdiction (29 November 2004) [hereinafter Salini v. Jordan (Decision on Jurisdiction)], para. 118, referred to in (and commented by) id. at 348–349. For further elaborations on this case law example, see below Ch. 2.E.III.2.b.aa. 828 Plama v. Bulgaria (Decision on Jurisdiction), paras. 217–224, referred to in (and commented by) id. at 350–352. 829 Plama v. Bulgaria (Decision on Jurisdiction), paras. 223–224.

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Pretended Agreement

A further category of hidden conflict encompasses tribunals that, in their theoretical elaborations, contend that their ruling is consistent with relevant prior case law. Yet, in their practical decision-making, they operate in the opposite manner, deviating de facto from the precedent they referred to ­beforehand. Examples for such divergence between the assertion and the actual decision, which merits a separate category of “concealed, unsubstantiated deviation by pretended agreement,” can be found in the annulment decisions rendered in Sempra v. Argentina and Enron v. Argentina. At the outset of their argumentation, both ad hoc committees stressed – in line with established arbitral ­practice830 – the limited function and scope of annulment review proceedings.831 For instance, the annulment committee ruling on the Enron v. Argentina award stated that: [a]n icsid award is not subject to any appeal or to any other remedy except those provided for in the icsid Convention. In annulment proceedings under Article 52 of the icsid Convention, an ad hoc committee is thus not a court of appeal, and cannot consider the substance of the dispute, but can only determine whether the award should be annulled on one of the grounds in Article 52 (1).832 Nevertheless, eventually both ad hoc committees adopted a wide scope of annulment review. In this way, they ended up imposing their own substantive viewpoint on the legal questions that had been at issue in the merits of the original cases and annulled the corresponding awards on that basis.833 Accordingly, what prima facie appeared as adherence to an established line of case law ultimately turned out as divergence. The annulment committees did so

830 See e.g. mine v. Guinea (Decision on Annulment), para. 4.05., which held in support of the limited annulment jurisdiction that: “Art. 52 I should be interpreted in accordance with its object and purpose, which excludes on the one hand (…) extending its application to the review of an award on the merits, and, on the other, an unwarranted refusal to give full effect to it (…).” 831 Sempra v. Argentina (Decision on Annulment), para. 76; Enron v. Argentina (Decision on Annulment), para. 65. 832 Enron v. Argentina (Decision on Annulment), para. 63 [footnotes omitted]. 833 Sempra v. Argentina (Decision on Annulment), paras. 186–210; Enron v. Argentina (Decision on Annulment), para. 173. For further elaborations on these case law examples, see below Ch. E.II.2.b.

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without giving rise to the appearance of it and, logically, without providing any reasons for their diverging legal position, i.e. in a disguised and unsubstantiated manner. bb

Lack of Deference: Ignoring, Unsubstantiated Deviation

At the other end of the spectrum and in contrast to this widespread tendency to pay deference to precedents, other icsid tribunals have been found to ­deviate from earlier relevant decisions without paying them any respect. They do so – whether consciously or unconsciously – without showing any awareness of their existence and hence without even naming them. Accordingly, they see no need to justify or conceal their dissent from precedents, and, as a result, do not provide sufficiently substantiated reasons, if any, for their d­ eviation.834 An instance of such lack of deference – or “ignoring, unsubstantiated deviation,” to coin a phrase – is the ruling of the lg&e v. Argentina tribunal835 on the relationship of the necessity defences invoked by the defendant host State. Therein, it was stated that: (…) the Tribunal considers that the protections afforded by Article xi have been triggered in this case (…), the Tribunal recognizes that satisfaction of the state of necessity standard as it exists in international law (reflected in Article 25 of the ilc’s Draft Article on State Responsibility) supports the Tribunal’s conclusion.836 This separate analysis and thus apparent distinction between the prerequisites of the treaty-based necessity exception and the necessity excuse under customary law stood in direct conflict with the ruling rendered by the cms v. Argentina tribunal, which appeared to conflate the two defences by examining the same preconditions in both cases.837 Nevertheless, the lg&e v. Argentina tribunal did not make a single mention thereof in its legal reasoning. It did not pay any deference to this pre-existing ruling – not even by an attempt to conceal its deviation – and, therefore, did not provide substantiated arguments for its departure.

834 Fauchald, The Legal Reasoning of icsid Tribunals 301, 338; Schreuer, Diversity and Harmonization 144. 835 For further elaborations on this case law example, see below Ch. 2.E.III.2.b.bb. 836 lg&e v. Argentina (Decision on Liability), para. 245 [footnote omitted]. 837 cms v. Argentina (Award), paras. 315–331, 353–378.

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cc Assessment

In view of the above and in light of the results of the Fauchald study,838 the existence of a “de facto precedent regime”839 is hardly deniable.840 Past decisions that dealt with recurring legal issues and that possess a sufficient persuasive authority are oftentimes referenced and followed by arbitral tribunals. An apparent incentive to do so lies in the fact that precedents provide guidance and orientation in their decision-making process. Other motivations may be seen, on the one hand, in their commitment towards the disputing parties that pleaded past decisions and hence demonstrated certain expectations towards the decision to be rendered, and, on the other hand, in their concern to be positioned in the mainstream of emerging jurisprudence.841 Given the p ­ rimary 838 Fauchald, The Legal Reasoning of icsid Tribunals 301, 335. 839 Terminology according to Reed, The De Facto Precedent Regime 95, 96. The author discusses “the existence of and the reasons for this de jure – de facto disconnect on the precedential value of prior decisions” and refers, in this respect, to further literature, such as Kaufmann-Kohler, Arbitral Precedent 357, 357–378; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 1–18; Paulsson, International Arbitration and the Generation of Legal Norms 1, 1–13; Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 265–280; Cheng, Precedent 1014, 1014–1049. For a critical view of the added value of expanding and fostering a de facto precedent regime in investment treaty arbitration, see Douglas, Can a Doctrine of Precedent Be Justified in Investment Treaty Arbitration? 104, 104–110. The author criticises, inter alia, the analytical distinction of de iure and de facto precedent systems. In support of his view, he refers to the modern positivist Herbert Hart in: Hart, The Concept of Law 56–57, 100–123 (1994), who – as the authors explains – considers even the common law doctrine of precedent as “a social fact rather than a primary rule of law,” since a judge’s deference to prior rulings should be seen as no more than a socially desirable appraisal of his fellow judge’s conduct. For a critical viewpoint on the existence of a de facto precedent regime in investment arbitration, see Pellet, Case Law of the icj in Investment Arbitration 223, 229. 840 See Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 8–9. See also König, Präzedenzwirkung internationaler Schiedssprüche 160–248, who undertakes an analysis of the qualitative and quantitative dimension of precedent effects in arbitral jurisprudence. 841 Thomas W. Wälde & Todd J. Weiler, Investment Arbitration under the Energy Charter Treaty in the light of new nafta Precedents: Towards a Global Code of Conduct for Economic Regulation, 1 tdm (also published in Gabrielle Kaufmann-Kohler & Blaise Stucki eds., Investment Treaties and Arbitration, asa Special Series No. 19, 159–221) 1, 5 (2004). In this article, the authors describe the desire of arbitrators to place their decisions in the mainstream of thinking and to “go with the flow,” because “‘odd cases’ outside a dominant, self-referencing trend” would be unlikely to appear again.

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goal of establishing a jurisprudence constante, the most powerful m ­ otive for aligning themselves with prior case law is perhaps the self-perception of arbitral tribunals as “agents of a treaty-overarching regime for the protection of foreign investment.”842 This is the case where precedent-oriented tribunals consider themselves as having an “obligation de moyens”843 – rather than (only) an “obligation de résultat”844 – in accomplishing their task of resolving investment disputes. They take into account any relevant previous rulings and thus assume a “legislator-oriented”845 responsibility to ensure and expand consistency and predictability in investment jurisprudence.846 Such responsibility has been affirmed by scholarly commentators who considered references to precedent as part of an arbitral tribunal’s duty to ensure due process847 or of its “moral obligation to strive for consistency and predictability.”848 This being said, any form of unqualified or “excessive reliance” on precedents that overlooks fundamental factual or legal differences of a dispute or that relies blindly on poorly reasoned decisions must be carefully avoided.849 This argumentation correlates with Jan Paulssons comparison of arbitral investment jurisprudence with a “Darwinian struggle.” According to Paulsson, “[t]he corpus of decided cases in the field of international investment arbitration is of recent vintage, but has come into existence 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 reality: the unfit will perish.” See Paulsson, International Arbitration and the Generation of Legal Norms 1, 4. 842 Schill, System-Building in Investment Treaty Arbitration and Lawmaking 161. 843 Terminology according to Kessedjian, To Give or Not to Give Precedential Value to Investment Arbitration Awards 67. 844 Terminology according to id. 845 Fauchald, The Legal Reasoning of icsid Tribunals 301, 357. 846 Weeramantry, Future Role of Past Awards 111, 116–117, with corresponding case law. 847 Paulsson, The Role of Precedent in Investment Arbitration 710. 848 Kaufmann-Kohler, Arbitral Precedent 357, 374, referring to Fuller, The Morality of Law 42. 849 Kalnina & Di Pietro, The Scope of icsid Review: Remarks on Selected Problematic Issues of icsid Decisions 236. It is important to not automatically assume a precedential effect of a related decision but to carefully distinguish between common issues and substantial differences of the corresponding legal bases; see Wälde & Weiler, Investment Arbitration under the Energy Charter Treaty in the light of new nafta Precedents 1, 5. See also Ch. 2.B.II. Otherwise, the mere “‘[r]epeating [of] decisions taken in other cases, without making the factual and legal distinctions’ will affect ‘the integrity of the international system for protection of investments’ and its jurisprudence. Simply, while ‘properly used precedent is of assistance,’ the misuse and mischaracterization of precedent could threaten the system itself.”; see Commission, Precedent in Investment Treaty Arbitration 129, 155, citing aes

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Interpretations of recurring legal issues should only be followed if they are actually applicable and also convincingly and proficiently reasoned.850 Otherwise, arbitral tribunals are encouraged to deviate openly from precedents in the form of sufficiently substantiated and well-reasoned dissents. When looking at the existing icsid case law, many of the substantiations provided are not satisfactory and still have potential for development. However, they support the given arbitral system of non-binding de facto precedent in that they help to distinguish “good” from “bad” decisions and contribute to developing arbitral jurisprudence in the “right” direction. Concealed, unsubstantiated deviations by means of distinction or pretended agreement, on the other hand, need to be treated with caution. Admittedly, such methods at least pay respect to relevant prior rulings and help to maintain the general impression of a unified and consistent case law, which is important for the competitiveness of an arbitral system. Yet, a closer look reveals that, in fact, arbitral tribunals adopting this manner of dealing with precedent depart from an established interpretation without providing substantiated reasons for this deviation. By doing so, they prevent recurring legal questions from being solved in an harmonious and consistent, or at least coherent, manner. Therefore, as a matter of fact, such rulings may be considered as a further cause of the problem of inconsistency in icsid arbitral jurisprudence. Ignoring, unsubstantiated deviations express an indifferent, unconcerned attitude towards earlier arbitral case law. Such lack of deference, which can be found in a range of cases, is unquestionably harmful to the de facto precedent system.851 Indeed, arbitral tribunals are often unable and/or unwilling to look beyond the arguments produced by the disputing parties and their own patterns of thinking. They are rightly criticised for being inflexible and tunnel-visioned when it comes to their arguments.852 Accordingly, this habit of departing from pre-existing jurisprudence without even any mention thereof may be considered as another major cause for the occurrence of inconsistencies in icsid arbitration.

Corporation v. Argentina (Decision on Jurisdiction), para. 22; Matthew Weiniger, Is Past Performance a Guide to Future Performance: Precedent in Investment Treaty Arbitration, biicl’s Seventh Investment Treaty Forum Public Conference: Procedural Aspects of Investment Treaty Arbitration (8 September 2006). 850 See Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante 272. 851 Crawford, Similarity of Issues in Disputes 103. 852 See e.g. Wälde, International Investment Law: An Overview of Key Concepts and Methodology 1, 12. See also Commission, Precedent in Investment Treaty Arbitration 129, 155, who states that this lack of scrutiny of the body of precedents could “necessitate recourse to one of the more institutional solutions to issues of inconsistency.”

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In sum, icsid jurisprudential practice managed to establish a “strong  – a­ lbeit imperfect and informal – norm of accounting for prior awards and providing reasons for following or departing from those awards.”853 Optimists consider this achievement as bearing, in principle, sufficient potential to develop a more consistent and reliable investment jurisprudence in the long run.854 They expect that even absent a formal obligation to take note of established lines of case law, arbitral tribunals will increasingly consider their decision-making as forming part of the wider system of investment arbitration and hence will progressively assume responsibility for a consistent development of investment jurisprudence. This observant approach counts on a “wait and see” strategy855 and thus entails the risk that the expected development may not occur856 – in particular with regard to the counter-tendencies and counterincentives pointed out above. Therefore, and given that the further dynamics of the system of de facto precedent will be (co-) decisive for the development of a jurisprudence constante, targeted and effective measures to strengthen the authority of precedents should be at the centre of interest when discussing the future of (icsid) investment arbitration.857 E

Occurences of Inconsistencies: Qualitative-Empirical Study

The fourth core issue deserving examination in view of the criticism of jurisprudential inconsistency pertains to the actual manifestations of discrepancies in the different areas of international investment law. For this purpose, a qualitative-empirical study of icsid case law will be undertaken. The study 853 Cheng, Precedent 1014, 1044. See also Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 9: “[A] de facto practice of precedent certainly exists. (…) Nonetheless, in some cases tribunals did not follow earlier decisions but adopt different solutions. At times they simply adopted a different solution without distancing themselves from the earlier decisions.” 854 See e.g. Reinisch, The Future of Investment Arbitration 915–916. See also Ch. 2.B.II.3. 855 See Ch. 2.B.II.3. for further discussion of this approach. 856 Kaufmann-Kohler, Is Consistency a Myth? 145. 857 See the reform discussions in Ch. 3 and in particular the suggested reform model of a preliminary ruling system as outlined in Ch. 3.C. A further proposal specifically aiming at the stimulation of the dynamics within the de facto precedent system is based on us legal practice and foresees the introduction of a “full disclosure” duty for counsels as regards adverse precedent, which would help not only the tribunal to evaluate the relevant case law, but also increase equality of arms between the disputing parties, see Reed, The De Facto Precedent Regime 95, 101–102.

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will highlight, in an exemplary manner, “where” inconsistent streams of jurisprudence – or at least initial tendencies of jurisprudential inconsistency – have occurred,858 i.e. in which subdomain of investment law and in relation to which interpretative questions. The choice of a primarily qualitative approach has been driven by methodological considerations. Qualitative studies have the advantage that they include a focused, in-depth analysis of the objects of investigation. They do not depend on statistical data and their quantification in a generally positivist manner, but rather attempt “to capture and categorize social phenomena and their meanings,”859 usually in an interpretive way. In other words, qualitative studies are not concerned with measuring the frequency with which a given phenomenon occurs in the sense of explanatory research, but rather with identifying the presence or absence of such phenomenon in the sense of exploratory research.860 Yet, purely qualitative studies do not allow for generalisations to the remaining data; they may solely provide an estimation of the diffusion and allocation of the occurrence under review.861 In order to strengthen such quantitative estimate as derivable from qualitative findings – yet without laying claim to any relevance in the statistical sense – the study will be structured according to the different categories of international investment law, namely the law governing jurisdiction (I.), procedural law (II.), and substantive law (III.). Within each category, an overview of various instances of occurrences of inconsistencies will be provided. This way of proceeding captures a broad spectrum of legal issues in international investment law giving rise to inconsistencies. It will provide some basis for a cautious assessment of the dimensions of inconsistency in icsid investment jurisprudence, although it should be borne in mind that this does not provide for statistically valid assessments or predictions. The study then turns to a detailed, qualitative analysis of at least 858 When speaking about only initial tendencies towards inconsistent lines of jurisprudence, as opposed to pronounced manifestations of inconsistent jurisprudential streams, this is due to the lack of a meaningful quantum of cases on the respective interpretative issue. Although diverging decisions therefore cannot yet be deemed to have resulted in inconsistencies in the form of concrete lines of jurisprudence, highlighting diverging tendencies at an early stage appears to be appropriate in view of possible conflicting developments of future case law on this legal issue. 859 Lisa Webley, Qualitative Approaches to Empirical Legal Research, in The Oxford Handbook of Empirical Legal Research 928 (Peter Cane & Herbert M. Kritzer eds., 2010). 860 Jerome Kirk & Marc L. Miller, Reliability and Validity in Qualitative ­R esearch 9 (Sage Publications, Beverly Hills, 1986). 861 Webley, Qualitative Approaches to Empirical Legal Research 934–935.

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one selected example of icsid case law per category. This will not only shed light on the concrete, individual circumstances leading to diverging lines of reasoning and eventually to conflicting results, but also serve to illustrate some of the causes of inconsistencies identified beforehand. Regarding the aspect of causality, the focus will, again, be placed on the treatment of precedent by arbitral tribunals, given that the manner in which the latter deal with prior case law is essential for the further development of the system of de facto precedent, on the basis of which a jurisprudence constante may emerge. The selected examples include “substantiated deviations” and “concealed, unsubstantiated deviations” as well as “ignoring, unsubstantiated deviations.”862 Speaking in more abstract terms of research design borrowed from empirical social research, the following study may best be described as “qualitative documentary research,” which involves the scientific analysis of “physically embodied or inscribed texts.”863 In the examination at hand, the documents subject to qualitative research are icsid decisions and awards. They were selected due to their representativity, on the one hand, and their usefulness with regard to the theoretical aspects to be demonstrated, on the other hand.864 Cases to be included in the in-depth qualitative examination should be suitable to serve as prime examples for inconsistencies in a particular legal field and also for one of the types of interpretative causes determined in the foregoing. It was thus the logic of “(proto) typical cases” which has been used as guidance for the selection of cases.865 In this sense, a “prototypical case” has 862 See Ch. 2.D.II.2.b. See Annex to Ch. 2 (i) for an overview of the basic concept and structure of the following qualitative-empirical study on icsid case law (in particular on the exemplary issues and causes of inconsistency presented therein). 863 John Scott, Documentary Research xx (Sage Publications Ltd, Plymouth, 2006). While many different types of documents exist and require a special handling, they share, however, common features. The assessment of their quality should be made by reference to four criteria: authenticity, credibility, representativeness, and meaning; their channel of access might be “proximate” (direct) oder “mediate” (indirect) and they are generally classified according to the dimensions “authorship” (personal/official) and “access” (closed/restricted/open); see id. at 3–22. The type of document forming the object of this research, namely the awards and decisions rendered by icsid tribunals, provide evidence of past legal reasoning and are hence accessible only in a “mediate” manner. They can be classified as official documents stemming from the semi-public sphere with open access or restricted access, e.g. for reasons of confidentiality. 864 Jason Seawright & John Gerring, Case Selection Techniques in Case Study Research – A Menu of Qualitative and Quantitative Options, 61 Pol. Res. Q. 294, 296 (2008). 865 Ran Hirschl, The Question of Case Selection in Comparative Constitutional Law, 53 Am. J. Comp. Const. L. 125, 142 (2005). See also Seawright & Gerring, Case Selection Techniques in

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been defined as serving as “a representative exemplar of other cases exhibiting similar pertinent characteristics.”866 In general, the study will focus primarily on manifestations of inconsistencies or, at any rate, tendencies towards inconsistencies as they occur to a competent, yet non-expert observer. This emphasis reflects the fundamental importance, desirability, and need of consistency in arbitral jurisprudence as determined in a preceding section from the perspectives of legal theory, legal practice, and sociology of law.867 For this reason, even instances of inconsistent, but – on closer inspection – coherent case law, such as instances of “substantiated deviation” will be included in the analysis. By the same token, it is, for present purposes, of subordinate importance to assess whether an interpretative approach taken by an arbitral tribunal was “correct” or not.868 ­Nevertheless, inconsistent, but coherent arbitral jurisprudence, which is mostly driven by concerns of correctness, will be taken into account as factors mitigating the criticism of inconsistency. Finally, due to the immense quantity of icsid case law and in view of the qualitative approach chosen, the study makes no claim to completeness, either with regard to the different legal issues, in which inconsistent interpretations can be found, or in terms of the corresponding case law. As has been indicated, the goal of the study is rather to provide a general, representative idea and impression of conflicting icsid jurisprudence in its qualitative dimension and, to the extent that the study is structured by legal fields where inconsistencies occurred, also from a quantitative viewpoint. In conclusion, it shall provide some indication and information as to whether the criticism of inconsistency in icsid case law is valid and justified. In order to facilitate the understanding of this overall concept and structure of the qualitative-empirical study, an overview in tabular form is provided in the annex of this work.869



Case Study Research 294, 296; John Gerring, Case Study Research – Principles and Practices 89, 91–93 (Cambridge University Press, New York, 2007). 866 Hirschl, The Question of Case Selection in Comparative Constitutional Law 125, 142. 867 See Ch. 2.B.I. 868 For a critical view on the striving for correctness by arbitral tribunals, see Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007): “According to an influential, it may be the dominant, view, it is an illusion to think that there is a right or correct method of resolving such issues as these. Arbitrators are not judges, there is no method of ensuring ‘correct’ decisions, there will be unresolvable disagreements at the general level between arbitrators depending on their own legal traditions and approaches.” 869 See Annex to Ch. 2 (i).

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i Law Governing Jurisdiction 1 Law Governing Jurisdiction in icsid Arbitration The icsid Convention contains several provisions on the jurisdiction of arbitral tribunals. Procedural aspects which are of relevance in the course of determining arbitral jurisdiction are set forth in Art. 36 (3),870 regulating the screening-power of the Secretary-General,871 and in Art. 41 (1),872 making the arbitral tribunal “the judge of its own competence.”873 The substantive conditions for an icsid tribunal to have adjudicative power to hear a case are stipulated in the much debated874 jurisdictional norm of Art. 25 (1),875 which sets out the requirements as to the subject of the matter in dispute, i.e. ratione 870 icsid Convention Art. 36 (3): “The Secretary-General shall register the request unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre. He shall forthwith notify the parties of registration or refusal to register.” The said provision is further specified in Rule 6 (1) of the icsid Rules of Procedure for the Institution of Conciliation and Arbitration Proceedings, Doc. icsid/15 (January 1985), as amended and effective 10 April 2006 [hereinafter icsid Institution Rules]. 871 For further elaborations on the Secretary-General’s screening power, see e.g. Sergio Puig & Chester Brown, The Secretary-General’s Power to Refuse to Register a Request for Arbitration under the icsid Convention, 27 icsid Rev. – filj 1, 1–20 (2012); Schreuer et al., icsid Commentary 468–474 (Art. 36, paras. 44–70). 872 icsid Convention Art. 41 (1): “The Tribunal shall be the judge of its own competence.” 873 Schreuer et al., icsid Commentary 82 (Art. 25, para. 2). The power of a tribunal to establish its own competence (in German KompetenzKompetenz), was first confirmed for international tribunals in Nottebohm (Liechtenstein v. Guatemala), icj, Judgment (Preliminary Objection) (18 November 1953), icj Rep. (1953) 111, 119: “Since the Alabama case, it has been generally recognized, following the earlier precedents, that, in the absence of any agreement to the contrary, an international tribunal has the right to decide as to its own jurisdiction and has the power to interpret for this purpose the instruments which govern that jurisdiction. This principle was expressly recognized in Articles 48 and 73 of the Hague Conventions of July 29th, 1899, and October 18th, 1907, for the Pacific Settlement of International Disputes (…). The Rapporteur of the Convention of 1899 had emphasized the necessity of this principle, presented by him as being ‘of the very essence of the arbitral function and one of the inherent requirements for the exercise of this function.’ This principle has been frequently applied and at times expressly stated.” 874 See below Ch. 2.E.I.2.a.aa. For an overview of the issues related to icsid Convention Art. 25 (1), see id. at 82–263 (Art. 25, paras. 1–634); for a critical discourse, see Krishan et al., Are the icsid Rules Governing Nationality & Investment Working? – Panel Discussion 119–141; Chittharanjan F. Amerasinghe, The Jurisdiction of the International Centre for the Settlement of Investment Disputes, 19 Indian J. Int’l L. 166, 166–227 (1979). 875 For the text of icsid Convention Art. 25 (1), see fn. 280.

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materiae, and as to the legal status of the parties to the dispute, i.e. ratione personae. Ratione materiae icsid jurisdiction is given “for any legal dispute arising out of an investment.”876 Ratione personae icsid jurisdiction exists if the parties are 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.” The permissive language of this provision leaves the definition of the crucial term “investment” open and, in addition, abstains from specifying the scope of the term “nationality.” However, the attempts of various icsid tribunals to give content to these undefined terms have ended up with diverging interpretative results. As previously seen,877 a double jurisdictional requirement must be fulfilled in order to establish jurisdiction in accordance with icsid Convention Art. 25 (1). This means that, in addition to the objective elements of jurisdiction ratione materiae and ratione personae, which are essential and cannot be waived, a subjective element in the form of the parties’ written consent must be ­given.878 Once such consent has been validly provided, it is irrevocable879 and is, by default, predefined as “exclusive” in icsid Convention Art. 26.880 The manner in which the consent must be given and the time of its perfection are variable. In the case of an investment contract, consent is completed at the time of its conclusion, whereas in case of investment treaties or domestic investment legislation, there is initially only a consent offer made unilaterally by the host State, which still needs to be accepted by the investor – usually at the moment of filing his claim, i.e. of initiating the arbitral proceeding.881 876 Schreuer et al., icsid Commentary 82 (Art. 25, para. 3). 877 See Ch. 1.C.II.1.a. 878 This consensual prerequisite was already emphasised by the World Bank Executive Directors in their 1965 Report, when it was stated that “[c]onsent of the parties is the cornerstone of the jurisdiction of the Centre,” see World Bank, Report of the Executive Directors, para. 23 (1965), referred to in Reed et al., Guide to icsid Arbitration 35. For further elaborations on the requirement of party consent, see id. at 35–42; Schreuer, Consent to Arbitration 1, 1–41. For the text of icsid Convention Art. 25 (1), see fn. 280. 879 See icsid Convention Art. 25 (1), 2nd sentence. 880 icsid Convention Art. 26: “Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy. A Contracting State may require the exhaustion of local administrative or judicial remedies as a condition of its consent to arbitration under this Convention.” For further elaborations on these two aspects, see Schreuer et al., icsid Commentary 254–263 (Art. 25, paras. 596–634), 351–402 (Art. 26, paras. 1–186). 881 Schreuer, Consent to Arbitration 1, 1–41, esp. 1–2. While investment contracts have been the standard vehicle of direct agreement in the earlier years of icsid arbitration, more recent developments show a clear trend to

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The jurisdictional scope of the party agreement may overlap with the jurisdictional scope set forth in the icsid Convention, but may also be narrower; only the outer limits of jurisdiction of the Centre, as stipulated in icsid Convention Art. 25, may not be transgressed.882 2 Examples of Inconsistencies a Overview of Issues Interpretative questions on both the objective elements of jurisdiction as contained in the icsid Convention and the subjective element of party consent have resulted in inconsistent jurisprudence. The former elements, which form the threshold requirement of the double-jurisdictional requirement of icsid, led to a split of opinions with respect to both jurisdiction ratione materiae and jurisdiction ratione personae (aa.). In regard to the latter element, a look at interpretative approaches to consent by unilateral State acts (bb.), waiting period clauses and compliance clauses (cc.), as well as umbrella clauses (dd.), as often contained in bits, will also reveal conflicting views. aa

icsid Jurisdictional Requirements

Instances of inconsistent case law can be found with regard to the determination of both jurisdiction ratione materiae and ratione personae. Jurisdiction ratione materiae is given, according icsid Convention Art. 25 (1), if the legal dispute submitted to the Washington Centre arose “directly out of an investment.”883 Faced with the definition of an “investment” in the sense of the icsid Convention, an arbitral tribunal has summed up the situation quite accurately by stating that:

consent “without privity,” i.e. through indirect agreement in investment protection instruments (Terminology according to Jan Paulsson, Arbitration without Privity, 10 icsid Rev. – filj 232, 232 (1995)). The icsid Statistics on the “Basis of Consent invoked to Establish icsid Jurisdiction in Registered icsid Cases” show that of all cases registred or administered by icsid as of 30 June 2016, bits have been by far the most frequently used instrument of consent (~60%), followed by investment contracts (~17%), mits (13%), and investment legislation (~10%). See icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2), 10 (2016). 882 Schreuer et al., icsid Commentary 83 (Art. 25, para. 6), referring to World Bank, Report of the Executive Directors, para. 25 (1965): “While consent of the parties is an essential prerequisite for the jurisdiction of the Centre, consent alone will not suffice to bring a dispute within its jurisdiction. In keeping with the purpose of the Convention, the jurisdiction of the Centre is further limited by reference to the nature of the dispute and the parties thereto.” 883 For the text of icsid Convention Art. 25 (1), see fn. 280.

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while a number of icsid tribunals have dealt with this notion, no unanimous approach has emerged so far from the existing case law. The proposed solutions are inconsistent, if not conflicting, and do not provide any clear guidance to future arbitral tribunals.884 In fact, the question of what constitutes an “investment” under the icsid Convention is one of the most controversial issues in icsid jurisdiction at least since the mid 1990s.885 One line of case law follows a “subjective approach” 884 Saba Fakes v. Republic of Turkey, icsid Case No. arb/07/20, Award (14 July 2010) [hereinafter Saba Fakes v. Turkey (Award)], para. 97. 885 For an overview and discussions on this topic, see e.g. Jan-Frederik Belling, Die ­J urisdiktion ratione materiae der icsid Schiedsgerichte unter besonderer Berücksichtigung des Investitionsbegriffs des Weltbanküber­ einkommens vom 18.03.1965 (Duncker & Humblot, Berlin, 2008); Walid Ben Hamida, La notion d’investissement: le chaos s’amplifie devant le cidri, Gaz. Pal. 3615, 3615–3621 (2009); Tony Cole & Anuj Kumar Vaksha, Power-Conferring Treaties: The Meaning of “Investment” in the icsid Convention, 24 Leiden J. Int’l L. 305, 305–330 (2011); Pierre-Emmanuel Dupont, The Notion of icsid Investment: Ongoing “Confusion” or “Emerging Synthesis”?, 12 J. World Inv. & Trade 245, 245–272 (2011); Joshua Fellenbaum, Putting the Needle to the Salini Bubble, in Investment Treaty Arbitration and International Law (Vol. v) (Todd J. Grierson Weiler & Ian A. Laird eds., 2012); Emmanuel Gaillard, 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 Christoph Schreuer 403–416 (Christina Binder et al. eds., 2009); Alex Grabowski, The Definition of Investment under the icsid Convention: A Defense of Salini, 15 Chicago J. Int’l L. 287, 287–309 (2014); Richard Happ, Der Begriff der Investition nach Art. 25 ICSID-Konvention, 2 Kölner Schriften zum Wirtschaftsrecht 136, 136–141 (2011); Martin Hunter & Alexei Barbuk, Reflections on the Definition of an Investment, in Global Reflections on ­I nternational Law, Commerce and Dispute Resolution, Liber Amicorum in Honour of Robert Briner 381–400 (Gerald Aksen ed., 2008); Michael Hwang, Recent Developments in Defining “Investment”, 25 icsid Rev. – filj 21 (2010); Sven Leif Erik Johannsen, Der Investitionsbegriff nach Art. 25 Abs. 1 der icsid Konvention, in Beiträge zum Transnationalen Wirtschaftsrecht 1–44 (Christian Tietje & Gerhard Kraft eds., 2009); Sungjin Kang, Definition of “Investment” under icsid Convention: Did we go beyond Salini?, in Investment Treaty Arbitration and International Law (Vol. v) (Todd J. Grierson Weiler & Ian A. Laird eds., 2012); Richard H. Kreindler, Are Tribunals Setting New Limits on Access to International Jurisdiction?, 25 icsid Rev. – filj 37, 37–43 (2010); Krishan, A Notion of icsid Investment 61–84; Manciaux, The Notion of Investment 443, 443–466; Julian Davis Mortenson, The Meaning of ‘Investment’: icsid’s Travaux and the Domain of International Investment Law, 51 Harv. Int’l L. J. 257, 257–318 (2010); Schreuer et al., icsid Commentary 128–134 (Art. 25, paras. 152–174); Monique Sasson, Substantive Law in Investment Treaty Arbitration – The Unsettled Relationship between International and Municipal Law 27–50 (Ch. 2, The

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and takes the view that the failure to provide for a definition of “investment” in the Washington Convention would indicate its drafters’ will that the decision of whether any particular transaction falls under the scope of jurisdiction ratione materiae should lie with the parties and their arbitration agreement.886



Notion of “Investment”) (Kluwer Law International, Alphen aan den Rijn, 2010); Mavluda Sattorova, Defining Investment Under the icsid Convention and bits: Of Ordinary Meaning, Telos, and Beyond, 2 Asian J. Int’l L. 267, 267–290 (2012); Brigitte Stern, Are There New Limits on Access to International Arbitration?, 25 icsid Rev. – filj 26, 26–36 (2010); Farouk Yala, The Notion of “Investment” in icsid Case Law: A Drifting Jurisdictional Requirement? Some “Un-Conventional” Thoughts on Salini, sgs, Mihaly, 22 J. Int’l Arb. 105, 105–126 (2005); Katia Yannaca-Small, Definition of “Investment”: An Open-ended Search for a Balanced Approach, in Arbitration under International Investment Agreements – A Guide to the Key Issues 243–269 (Katia Yannaca-Small ed., 2010); Krishan et al., Are the icsid Rules Governing Nationality & Investment Working? – Panel Discussion 119–141. 886 For case law following the “subjective approach,” see e.g. Lanco International Inc. v. Argentine Republic, icsid Case No. arb/97/6, Decision on Jurisdiction (8 December 1998) [hereinafter Lanco v. Argentina (Decision on Jurisdiction)], para. 48; Philippe Gruslin v. Malaysia, icsid Case No. arb/99/3, Award (27 November 2000) [hereinafter Gruslin v. Malaysia (Award)], para. 13.6.; Generation Ukraine, Inc. v. Ukraine, icsid Case No. arb/00/9, Award (16 September 2003) [hereinafter Generation Ukraine v. Ukraine (Award)], paras. 8.1–8.2; Azurix Corp. v. Argentine Republic, icsid Case No. arb/01/12, Decision on Jurisdiction (8 December 2003) [hereinafter Azurix v. Argentina (Decision on Jurisdiction)], paras. 50, 59–66; ibm World Trade Corporation v. Republic of Ecuador, icsid Case No. arb/02/10, Decision on Jurisdiction (22 December 2003) [hereinafter ibm v. Ecuador (Decision on Jurisdiction)], paras. 38–39; Fraport v. Philippines (i) (Award), para. 305; Biwater Gauff v. Tanzania (Award), paras. 310–318; Malaysian Historical Salvors sdn bhd v. Malaysia, icsid Case No. arb/05/10, Decision of the Ad Hoc Committee on Annulment (16 April 2009) [hereinafter mhs v. Malaysia (Decision on Annulment)], paras. 56–80; Mr. Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El Corporation v. Romania, icsid Case No. arb/10/13, Award (2 March 2015) [hereinafter Hassan Awdi v. Romania (Award)], paras. 197–199. The cited case law does not make a conceptual distinction between the objective criteria of jurisdiction as contained in the icsid Convention and the subjective criterion of party consent, but practically just ties icsid Convention Art. 25 (1) to consent. As a consequence, the requirements set out in Art. 25 (1) are considered as being fulfilled once both parties have agreed that the transaction in dispute is an investment. See Krishan, A Notion of icsid Investment 64–65. Scholarly commentators have voiced concerns with regard to this position, noting that the drafting history clearly indicates that access to icsid would not be available “for just any dispute that the parties may wish to submit”; see Schreuer et al., icsid Commentary 117 (Art. 25, para. 122). Others, by contrast, point to the drafting history in support of the position that the icsid member States meant to “leave [the term] ‘investment’ open ended”; see Mortenson, Meaning of ‘Investment’ 257, 257–318.

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By contrast, the dominating position taken in case law adopts an “objective approach,” which is based on the supremacy of the icsid Convention over any party agreement and therefore accords an authoritative and independent meaning to the notion of “investment” in icsid Convention Art. 25 (1).887 The latter approach is further split up into two interpretative streams, in particular as regards the so called Salini elements888 developed by case law. While one 887 For case law following the “objective approach,” see below fn. 889 and 890. Since the position adopted in these cases respects the conceptual distinction between the objective criteria of jurisdiction as contained in the icsid Convention and the subjective criterion of party consent, icsid Convention Art. 25 (1) is considered as marking the outer limits of icsid jurisdiction. See Krishan, A Notion of icsid Investment 65. 888 The Salini elements were initially developed by the Fedax tribunal as comprising (1) a substantial commitment, (2) a certain duration, (3) a certain regularity of profits and return, (4) an assumption of risk, and (5) a significance for the host State’s development; see Fedax n.v. v. Venezuela, icsid Case No. arb/96/3, Decision on Jurisdiction (11 July 1997) [hereinafter Fedax v. Venezuela (Decision on Jurisdiction)], para. 43. Later on, the eponymous Salini tribunal refined this test by reducing its components to four elements eliminating the element of regularity of profits and return; see Salini Costruttori S.p.A. and Italstrade S.p.A. v. Morocco, icsid Case No. arb/00/4, Decision on Jurisdiction (23 July 2001) [hereinafter Salini v. Marocco (Decision on Jurisdiction)], para. 52. The majority of subsequent tribunals followed this reduced four-element-approach based on the argument that the eliminated element would not always be critical; see e.g. mhs v. Malaysia (Award), para. 108. Yet, there are also diverging rulings in this respect: On the one hand, some tribunals have followed the initial five-prong-test, see e.g. sgs Société Générale de Surveillance s.a. v. Islamic Republic of Pakistan, icsid Case No. arb/01/13, Decision on Jurisdiction (6 August 2003) [hereinafter sgs v. Pakistan (Decision on Jurisdiction)], para. 133, fn. 153; Joy Mining Machinery Ltd. v. Arab Republic of Egypt, icsid Case No. arb/03/11, Decision on Jurisdiction (6 August 2004) [hereinafter Joy Mining v. Egypt (Decision on Jurisdiction)], para. 53; Helnan International Hotels A/S v. Arab Republic of Egypt, icsid Case No. arb/05/19, Decision on Jurisdiction (17 October 2006) [hereinafter Helnan v. Egypt (Decision on Jurisdiction)], para. 77. On the other hand, some tribunals have followed a three-prongtest (commitment/contribution – duration – risk), see e.g. Consortium Groupement l.e.s.i. – dipenta v. People’s Democratic Republic of Algeria, icsid Case No. arb/03/8, Award (10 January 2005) [hereinafter LESI DIPENTA v. Algeria (Award)], para. II. 2.2 c. 13 (iv); Bayindir v. Pakistan (Decision on Jurisdiction), paras. 131–137; Víctor Pey Casado and President Allende Foundation v. Republic of Chile, icsid Case No. arb/98/2, Award (8 May 2008) [hereinafter Pey Casado v. Chile (Award)], para. 233; Saba Fakes v. Turkey (Award), paras. 110–111; gea Group Aktiengesellschaft v. Ukraine, icsid Case No. arb/08/16, Award (31 May 2011) [hereinafter gea Group v. Ukraine (Award)], para. 151; Quiborax v. Bolivia (Decision on Jurisdiction), paras. 219–220; 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 (formerly ftr Holding s.a., Philip Morris Products s.a. and Abal Hermanos s.a. v. Oriental ­Republic

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strand, the so called “deductive method,” firmly adheres to the Salini elements understanding them as mandatory, cumulative jurisdictional criteria,889 the other, the so called “intuitive method,” tends to interpret the term “investment” rather broadly considering the Salini elements – if at all – as mere benchmarks or guidelines for the assessment of whether or not an investment is at issue.890

of Uruguay), Decision on Jurisdiction (2 July 2013) [hereinafter Philip Morris v. Uruguay (Decision on Jurisdiction)], paras. 207–209; kt Asia Investment Group b.v. v. Republic of Kazakhstan, icsid Case No. arb/09/8, Award (17 October 2013) [hereinafter kt Asia v. Kazakhstan (Award)], paras. 171–173; Poštová Banka, a.s. and Istrokapital se v. Hellenic Republic, icsid Case No. arb/13/8, Award (9 April 2015) [hereinafter Poštová Banka v. Hellenic Republic (Award)], paras. 351–371 (obiter dictum arguing on the basis of the “objective approach” without explicitely opting for it). See also, for tribunals applying the three-prong-test on treaty-based notions of “investment,” Nova Scotia Power Incorporated v. Bolivarian Republic of Venezuela, icsid Case No. arb(af)/11/1, Award (30 April 2014) [hereinafter Nova Scotia Power v. Venezuela (Award)], para. 84; Grupo Francisco Hernando Contreras, s.l. v. Republic of Equatorial Guinea, icsid Case No. arb(af)/12/2, Award (4 December 2015) [hereinafter Grupo Francisco v. Guinea (Award)], para. 140. 889 For case law considering the Salini elements as mandatory jurisdictional criteria, see e.g. Jan de Nul v. Egypt (Decision on Jurisdiction), para. 91; Patrick Mitchell v. Democratic Republic of the Congo, icsid Case No. arb/99/7, Decision of the Ad Hoc Committee on Annulment (1 November 2006) [hereinafter Mitchell v. Congo (Decision on Annulment)], paras. 30–33; Saipem v. Bangladesh (Decision on Jurisdiction), para. 99; mhs v. Malaysia (Award), para. 106 (e); Ioannis Kardassopoulos v. Republic of Georgia, icsid Case No. arb/05/18, Decision on Jurisdiction (6 July 2007) [hereinafter Kardassopoulos v. Georgia (Decision on Jurisdiction)], para. 116; Phoenix Action Ltd. v. Czech Republic, icsid Case No. arb/06/5, Award, (15 April 2009) [hereinafter Phoenix v. Czech Republic (Award)], para. 83; Saba Fakes v. Turkey (Award), para. 110; rsm Production Corporation v. Central African Republic, icsid Case No. arb/07/2, Decision on Jurisdiction and Responsibility (7 December 2010) [hereinafter rsm Production Corp. v. Central African Republic (Decision on Jurisdiction and Responsibility)], para. 55; Abaclat and Others v. Argentine Republic, icsid Case No. arb/07/5 (formerly Giovanna a Beccara and Others v. Argentine Republic), Dissenting Opinion of Arbitrator Prof. Georges Abi-Saab (28 October 2011) [hereinafter Abaclat v. Argentina (Dissenting Opinion Abi-Saab)], para. 52; kt Asia v. Kazakhstan (Award), para. 168; Poštová Banka v. Greece (Award), paras. 351–371 (obiter dictum arguing on the basis of the “objective approach” without explicitely opting for it). Terminology according to Gaillard, Identify or Define? Reflections on the Evolution of the Concept of Investment in icsid Practice 410–411. See also Krishan, A Notion of icsid Investment 66, with further case law references. 890 For case law considering the Salini elements as mere guiding benchmarks, see e.g. csob v. Slovak Republic (Decision on Jurisdiction), para. 64; rsm Production Corporation v. Grenada, icsid Case No. arb/05/14, Award (13 March 2009) [hereinafter rsm Production Corp. v. Grenada (Award)], para. 241; Pantechniki s.a. Contractors & Engineers v. Republic of Albania, icsid Case No. arb/07/21, Award (30 July 2009) [hereinafter Pantechniki

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Pursuant to icsid Convention Art. 25 (1), jurisdiction ratione personae may be established, if the legal dispute arose “between a Contracting State (…) and a national of another Contracting State.”891 With respect to the foreign ­national,



v. Albania (Award)], para. 43; Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, i­ csid Case No. arb/07/12, Decision on Jurisdiction (11 September 2009) [hereinafter Toto Costruzioni v. Lebanon (Decision on Jurisdiction)], paras. 81–84; Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, icsid Case No. arb/08/8, Decision on Jurisdiction (8  March 2010) [hereinafter Inmaris v. Ukraine (Decision on Jurisdiction)], para. 131; Alpha Projektholding GmbH v. Ukraine, icsid Case No. arb/07/16, Award (8 November 2010) [hereinafter Alpha Projektholding v. Ukraine (Award)], paras. 311–313; Malicorp Ltd. v. Egypt, icsid Case No. arb/08/18, Award (7 February 2011) [hereinafter Malicorp v. Egypt (Award)], para. 109; Abaclat and Others v. Argentine Republic, icsid Case No. arb/07/5 (formerly Giovanna a Beccara and Others v. Argentine Republic), Decision on Jurisdiction (4 August 2011) [hereinafter Abaclat v. Argentina (Decision on Jurisdiction)], paras. 362–363; Alapli Elektrik b.v. v. Republic of Turkey, icsid Case No. arb/08/13, Award (16 July 2012) [hereinafter Alapli Elektrik v. Turkey (Award)], para. 383; Ambiente Ufficio S.p.A. and others v. Argentine Republic, icsid Case No. arb/08/9 (formerly Giordano Alpi and others v. Argentine Republic), Decision on Jurisdiction (8 February 2013) [hereinafter Ambiente Ufficio v. Argentina (Decision on Jurisdiction)], para. 481; Philip Morris v. Uruguay (Decision on Jurisdiction), para. 206 (with tendencies towards the “subjective approach” in para. 200). Terminology according to Gaillard, Identify or Define? Reflections on the Evolution of the Concept of Investment in icsid Practice 407–410. See also Krishan, A Notion of icsid Investment 65–66, with further case law references. A further burgeoning issue of controversy on the notion of “investment” in icsid Convention Art. 25 (1) relates to the question of whether this notion encompasses security interests in sovereign debt bonds. For decisions answering in the affirmative, see e.g. Abaclat v. Argentina (Decision on Jurisdiction), paras. 343–351, 362–371; Ambiente Ufficio v. Argentina (Decision on Jurisdiction), paras. 415–472; for decisions answering in the negative, see e.g. Abaclat v. Argentina (Dissenting Opinion Abi-Saab), paras. 34–118 (emphasising the prerequisite of a territorial anchorage of the investment in the host State); Poštová Banka v. Greece (Award), paras. 360–371. For an overview on sovereign debt disputes and icsid arbitration, see Michael Waibel, Opening Pandora’s Box: Sovereign Bonds in International Arbitration, 101 Am. J. Int’l L. 711, 711–759 (2007). 891 For the text of icsid Convention Art. 25 (1), see fn. 280. For an overview and discussions on this topic, see e.g. Chittharanjan F. Amerasinghe, Jurisdiction Ratione Personae under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, 47 Brit. Yb. Int’l L. 227, 227–267 (1974–1975); Anthony Sinclair, icsid’s Nationality Requirements, in Investment Treaty Arbitration and International Law (Vol. i) 85–118 (Todd J. Grierson Weiler ed., 2008); Robert Wisner & Nick Gallus, Nationality Requirements in Investor-State Arbitration, 7 J. World Inv. & Trade 927, 927–945 (2004).

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icsid Convention Art. 25 (2)892 provides clarifications for both natural and juridical persons regarding the dates at which a certain nationality must be given, but contains no further definition of nationality or more precise criteria for the determination of nationality. Therefore, some of the interpretative approaches taken by icsid tribunals have led to inconsistencies, notably regarding the issue of foreign control over a juridical person in the sense of Art. 25 (2) (b) (2nd alt.). One discrepancy relates to the question of whether only direct control893 should be factored in or whether also indirect control894 suffices. Another disagreement concerns the nature and quality of control, namely whether a majority shareholding is decisive to assume control895 or whether other criteria, such as the powers, duties, and responsibilities in the management of a corporation in the sense of effective control are of relevance.896 892 icsid Convention Art. 25 (2): “‘National of another Contracting State’ means: (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 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, but does not include any person who on either date also had the nationality of the Contracting State party to the dispute; and (b) 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.” 893 See e.g. Amco v. Indonesia (i) (Decision on Jurisdiction), para. 14 (iii); Autopista v. Venezuela (Decision on Jurisdiction), paras. 83–87. 894 See e.g. Société Ouest Africaine des Bétons Industriels v. Senegal, icsid Case No. arb/82/1, Decision on Jurisdiction (1 August 1984) [hereinafter soabi v. Senegal (Decision on Jurisdiction)], paras. 35–38; Aguas del Tunari v. Bolivia (Decision on Jurisdiction), paras. 279–281, 319–323. For an overview of this issue and discussions of the corresponding case law, see Schreuer et al., icsid Commentary 320–323 (Art. 25, paras. 840–849); Sinclair, icsid’s Nationality Requirements 110–112. 895 See e.g. Amco v. Indonesia (i) (Decision on Jurisdiction), para. 14 (iii); Klöckner IndustrieAnlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, icsid Case No. arb/81/2, Award (21 October 1983) [hereinafter Klöckner v. Cameroon (Award)], 2 icsid Reports 15–16; Aguas del Tunari v. Bolivia (Decision on Jurisdiction), para. 264. In these cases, no other element of control apart from the percentage of share-ownership (and the related voting-rights) has been considered as decisive. 896 See e.g. soabi v. Senegal (Decision on Jurisdiction), paras. 35–41; Liberian Eastern Timber Corporation (letco) v. Republic of Liberia, icsid Case No. arb/83/2, Decision on

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Unilateral Consent in Domestic Investment Laws

In addition to inconsistencies resulting from conflicting interpretations of the objective criteria of jurisdiction under the icsid Convention, tendencies of inconsistency897 can also be found with regard to the subjective element of party consent and, more precisely, in cases where the aggrieved investor claims that the host State’s consent to arbitration is granted by virtue of its – ambiguously formulated – domestic legislation.898 icsid tribunals that had to rule on whether the provision in question was actually a standing unilateral offer by the host State or whether an additional ad hoc consent between the parties was required899 were divided as to the applicable standard of ­interpretation.

Jurisdiction (24 October 1984) [hereinafter letco v. Liberia (Decision on Jurisdiction)], 2 icsid Reports 351; Vacuum Salt Products Ltd. v. Ghana, icsid Case No. arb/92/1, Award (16 February 1994) [hereinafter Vacuum Salt v. Ghana (Decision on Jurisdiction)], paras. 43–44; Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings, Ltd. v. Federation of St. Kitts and Nevis, icsid Case No. arb/95/2, Award (13 January 1997) [hereinafter Cable tv v. St. Kitts and Nevis (Award)], paras. 5.13–5.22; cms v. Argentina (Decision on Jurisdiction), para. 51; Caratube International Oil Company llp v. Republic of Kazakhstan, icsid Case No. arb/08/12, Award (5 June 2012) [hereinafter Caratube v. Kazakhstan (Award)], paras. 380–407, esp. 382, 407; Hassan Awdi v. Romania (Award), para. 194. In these cases, further elements of control, such as the membership in the Board of Directors, i.e. decision-making and management powers, have been considered. For an overview of this issue and discussions of the corresponding case law, see Schreuer et al., icsid Commentary 323–329 (Art. 25, paras. 850–870); Sinclair, ­i csid’s Nationality Requirements 112–113. 897 Since, so far, the number of icsid decisions rendered on the interpretative standard applicable to ambiguous unilateral consent clauses in domestic legislation is limited, the consistency of these decisions is still difficult to assess. Due to this lack of a meaningful quantum of cases, diverging decisions cannot yet be deemed to have resulted in inconsistent lines of jurisprudence. However, highlighting diverging tendencies appears appropriate in view of possible future developments of case law on this legal issue. 898 For an overview and discussions on this topic, see Andrés A. Mezgravis, The Standard of Interpretation Applicable to Consent and its Revocation in Investment Arbitration, 8 tdm 1, 1–36 (2011); Michele Potestá, The Interpretation of Consent to icsid Arbitration Contained in Domestic Investment Laws, 27 Arb. Int’l 149, 149–170 (2011); Schreuer et al., icsid Commentary 196–205 (Art. 25, paras. 392–426); Carlos Ignacio Suarez Anzorena, Consent to Arbitration in Foreign Investment Laws, in Investment Treaty Arbitration and International Law (Vol. ii) 63–83 (Todd J. Grierson Weiler & Ian A. Laird eds., 2009); Weeramantry, Treaty Interpretation in Investment Arbitration 164–168. 899 While, on the one hand, some countries’ foreign investment laws stipulate clearly that they intended to provide unilateral consent (see e.g. Art. 8 (2) of the Albanian Law No. 7764, 2 November 1993: “(…) the foreign investor may submit the dispute for r­ esolution, and the

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While some arbitral tribunals considered national law as being the primary interpretative standard (or as being at least on equal footing with international law),900 others took the opposite view and found that this question was governed by international law.901 These latter tribunals, again, expressed themselves in different ways as to the exact category of principles of international law to be applied as the interpretative standard. They either deemed general principles of statutory interpretation as governing and considered

Republic of Albania hereby consents to submission thereof, to [icsid]”) or to reserve the decision to the State by requiring a separate, subsequent manifestation of consent (see e.g. Art. 23 (2) of the Tanzania Investment Act, 9 September 1997: “(…) as may mutually be agreed by the parties”), there are, on the other hand, domestic investment laws that lack such precise wording and hence require cautious interpretation by the arbitral tribunal. For these and further examples of consent clauses in domestic investment law, see Potestá, Interpretation of Consent 149, 154–160. For a more differentiated typology of domestic investment law providing for arbitration, see Suarez Anzorena, Consent to Arbitration in Foreign Investment Laws 70–73. 900 See e.g. Zhinvali Development Ltd. v. Republic of Georgia, icsid Case No. arb/00/1, Award (24 January 2003) [hereinafter Zhinvali v. Georgia (Award)], para. 339; Tradex Hellas s.a. v. Republic of Albania, icsid Case No. arb/94/2, Decision on Jurisdiction (24 December 1996) [hereinafter Tradex v. Albania (Decision on Jurisdiction)], p. 186. Cf. also Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, icsid Case No. arb/84/3, Dissenting Opinion of Arbitrator Dr. El Mahdi (14 April 1988) [hereinafter SPP v. Egypt (Dissenting Opinion Mahdi)], paras. 12 et seq. 901 See e.g. Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, icsid Case No. arb/84/3, Decision on Jurisdiction (14 April 1988) [hereinafter spp v. Egypt (Decision on Jurisdiction ii)], para. 61; csob v. Slovak Republic (Decision on Jurisdiction), para. 35; Venezuela Holdings, B.V., et al. (case formerly known as Mobil Corporation, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc.) v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/27, Decision on Jurisdiction (10 June 2010) [hereinafter Venezuela Holdings v. Venezuela (Decision on Jurisdiction)], para. 85; cemex Caracas Investments b.v. and cemex Caracas ii Investments b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/08/15, Decision on Jurisdiction (30 December 2010) [hereinafter Cemex v. Venezuela (Decision on Jurisdiction)], para. 79; Brandes Investment Partners, lp v. Bolivarian Republic of Venezuela, icsid Case No. arb/08/3, Award (2 August 2011) [hereinafter Brandes v. Venezuela (Award)], para. 81; Tidewater Investment srl and Tidewater Caribe, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. arb/10/5; Decision on Jurisdiction (8 February 2013) [hereinafter Tidewater v. Venezuela (Decision on Jurisdiction)], para. 102 (2). For an overview of this topic and discussions of parts of the cited case law, see Schreuer et al., icsid Commentary 248–251 (Art. 25, paras. 578–585). This being said, some of the tribunals gave their view of the role of national law, which they considered e.g. as subsidiarily relevant to determine “the intention of the State having formulated such acts/having made the relevant declarations” (see Venezuela Holdings

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“relevant rules of t­reaty interpretation and principles of international law applicable to unilateral declarations” only “where appropriate,”902 or, on the contrary, they found that principles of international law relating to unilateral declarations were primarily applicable.903 Some of the arbitral tribunals that adopted the latter position provided extensive reasons therefore. They found that a State’s unilateral declaration of consent to the jurisdiction of an international tribunal was governed primarily by the sui generis rules of icj Statute Art. 36 (2),904 which are applicable by analogy. The principles of v. Venezuela (Decision on Jurisdiction), para. 96 (i); Cemex v. Venezuela (Decision on Jurisdiction), para. 89 (a)) and “the existence and validity of the instrument at issue” (see Tidewater v. Venezuela (Decision on Jurisdiction), paras. 86, 102 (6)). 902 See e.g. spp v. Egypt (Decision on Jurisdiction ii), para. 61. 903 csob v. Slovak Republic (Decision on Jurisdiction), para. 35; Venezuela Holdings v. Venezuela (Decision on Jurisdiction), paras. 89–90, 91–95; Cemex v. Venezuela (Decision on Jurisdiction), paras. 82–83, 84–88; Tidewater v. Venezuela (Decision on Jurisdiction), paras. 93–100; ConocoPhillips Petrozuata b.v., ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Award (3 September 2013) [hereinafter ConocoPhillips v. Venezuela (Award)], paras. 233–237. 904 See e.g. Venezuela Holdings v. Venezuela (Decision on Jurisdiction), paras. 89–90, 91–95; Cemex v. Venezuela (Decision on Jurisdiction), paras. 82–83, 84–88; Tidewater v. Venezuela (Decision on Jurisdiction), paras. 93–100. icj Statute Art. 36 (2): “The states parties to the present Statute may at any time declare that they recognize as compulsory ipso facto and without special agreement, in relation to any other state accepting the same obligation, the jurisdiction of the Court in all legal disputes concerning: (a.) the interpretation of a treaty; (b.) any question of international law; (c.) the existence of any fact which, if established, would constitute a breach of an international obligation; (d.) the nature or extent of the reparation to be made for the breach of an international obligation.” These sui generis rules require to “interpret the relevant words of a declaration (…) in a natural and reasonable way, having due regard to the intention of the State concerned (…). The intention (…) may be deduced not only from the text of the relevant clause, but also from the context in which the clause is to be read, and an examination of evidence regarding the circumstances of its preparation and the purposes intended to be served.”; see Fisheries Jurisdiction (Spain v. Canada), icj, Judgment (Jurisdiction) (4 December 1998), icj Rep. (1998) 432, 453, para. 49. Despite these apparent inconsistencies regarding the applicable interpretative standards, to be fair it needs to be emphasised that the icsid tribunals dealing with the interpretation of Art. 22 of the Venezuelan Investment Law (Venezuelan Decree with rank and force of Law No. 356 on the Promotion and Protection of Investments, 3 October 1999), in particular Venezuela Holdings v. Venezuela (Decision on Jurisdiction); Cemex v. Venezuela (Decision on Jurisdiction); Tidewater v. Venezuela (Decision on Jurisdiction); opic Karimum Corporation v. Bolivarian Republic of Venezuela, icsid Case No. arb/10/14, Award (28 May 2013) [hereinafter opic Karimum v. Venezuela (Award)], ruled largely consistently on this issue. In the cases Venezuela Holdings v. Venezuela and Cemex v. Venezuela,

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international law applicable to unilateral declarations stricto sensu905 as codified in the ilc Guiding Principles,906 on the one hand, and those applicable to unilateral declarations formulated in the framework of a treaty as codified in the vclt,907 on the other hand, were considered not to be relevant. A further this appears to be due to the identity of the presiding arbitrator Gilbert Guillaume. In another case, Brandes v. Venezuela (Award), the tribunal made only cursory statements on this question. Some counter-examples of tribunals ruling inconsistently on the same domestic investment law, although under different arbitral regimes, are the cases Rumeli Telekom a.s. and Telsim Mobil Telekomunikasyon Hizmetleri a.s. v. Republic of Kazakhstan, icsid Case No. arb/05/16, Award (29 July 2008) [hereinafter Rumeli v. Kazakhstan (Award)], and Ruby Roz Agricol llp v. Republic of Kazakhstan, uncitral Arbitration, Decision on Jurisdiction (1 August 2013) [hereinafter Ruby Roz Agricol v. Kazakhstan (Decision on Jurisdiction)]. They concern conflicting interpretations given to the Investment Law of Kazakhstan (Kazakh Law on Foreign Investment, December 1994), which included a unilateral offer to arbitrate foreign investment cases, but which was repealed in 2003. While the icsid tribunal in Rumeli v. Kazakhstan (Award), paras 333–336, found that the offer would still be valid and that an investor could bring a claim against Kazakhstan although the latter had repealed its law, the uncitral tribunal in Ruby Roz Agricol v. Kazakhstan (Decision on Jurisdiction), paras. 149–168, held that there was no longer an offer, since Kazakhstan had repealed the law. 905 The term “unilateral declarations stricto sensu” refers to “purely unilateral acts” that are made outside of any treaty, see e.g. Tidewater v. Venezuela (Decision on Jurisdiction), para. 92. The principle that such declarations may generate binding erga omnes effects is recognised in international law and has been confirmed by icj case law, see e.g. Nuclear Tests (Australia v. France), icj, Judgment (20 December 1974), icj Rep. (1974) 253, para. 43; Nuclear Tests (New Zealand v. France), icj, Judgment (20 December 1974), icj Rep. (1974) 457, paras. 45–49; Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v. Rwanda), icj, Judgment (Jurisdiction and Admissibility) (3 February 2006), icj Rep. (2006) 6, 28, paras. 49–50. For elaborations on this topic and the related case law, see W. Michael Reisman & Mahnoush H. Arsanjani, The Question of Unilateral Governmental Statements as Applicable Law in Investment Disputes, in Völkerrecht als Weltordnung – Common Values in International Law, Festschrift für/Essays in Honour of Christian Tomuschat 412–418 (PierreMarie Dupuy et al. eds., 2006). 906 ilc, Guiding Principles Applicable to Unilateral Declarations of States Capable of Creating Legal Obligations, Doc. A/cn.4/L-703, ilc Report u.n. A/61/10 (2006) [hereinafter ilc Guiding Principles], available at (last visited September 2016). In case of doubt, and in contrast to the vclt, the ilc Guiding Principles opt for a restrictive approach; see ilc Guiding Principle 7. 907 It needs to be added that these tribunals, following the icj Fisheries Case, first rejected the relevance of the vclt for the interpretation of unilateral acts, but then acknowledged its applicability by analogy to the unilateral State declarations in question “‘(…) to the

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interpretative legal issue that has led to conflicting case law is the principle of effet utile. When interpreting unilateral consent clauses in domestic legislation, arbitral tribunals have, on the one end of the spectrum, fully adhered thereto,908 and, on the other end of the spectrum, decided not to apply this principle at all,909 whereas yet others have adopted an indifferent attitude.910 cc

Conditions of Consent in bits

Further examples of inconsistent icsid jurisprudence relate to the subjective, consensual prerequisites of jurisdiction as often contained in bits. They can be found within clauses stipulating procedural or substantive conditions relating to the consent given by the parties to the respective treaty. Procedural conditions are, for instance, contained in so called “waitingperiod clauses.”911 These are usually inserted in the respective dispute settlement clauses and make the initiation of an icsid proceeding contingent upon having attempted an amicable settlement for a certain period of time. Arbitral tribunals considering cases where the claimant did not comply with the waiting-period set out in such clauses have come to conflicting conclusions as regards the consequences of such non-observance. Some of the arbitral tribunals considered the compliance with waiting-periods as being part of the subjective jurisdictional requirements contained in bits and thus found that



908

909 910 911

extent compatible with the[ir] sui generis character’”; see Venezuela Holdings v. Venezuela (Decision on Jurisdiction), para. 96 (ii); Cemex v. Venezuela (Decision on Jurisdiction), para. 89 (b); Tidewater v. Venezuela (Decision on Jurisdiction), para. 96. See also Fisheries Jurisdiction (Spain v. Canada), icj, Judgment (Jurisdiction) (4 December 1998), icj Rep. (1998) 432, 453, para. 46. spp v. Egypt (Decision on Jurisdiction ii), para. 94; Tidewater v. Venezuela (Decision on Jurisdiction), para. 134; ConocoPhillips v. Venezuela (Award), para. 261; png Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, icsid Case No. arb/13/33, Award (5 May 2015) [hereinafter png sdp v. Papua New Guinea (Award)], ­paras. 266–269. Venezuela Holdings v. Venezuela (Decision on Jurisdiction), para. 118; Cemex v. Venezuela (Decision on Jurisdiction), paras. 104–112. Brandes v. Venezuela (Award), para. 115. For an overview of this topic, see e.g. Christoph Schreuer, Travelling the bit Route – Of Waiting Periods, Umbrella Clauses and Forks in the Roads, 5 J. World Inv. & Trade 231, 232– 239 (2004); Schreuer et al., icsid Commentary 237–239 (Art. 25, paras. 541–547). An example of a “waiting-period clause” can be found in nafta Arts. 1118 and 1120. Art. 1118: “The disputing parties should first attempt to settle a claim through consultation or negotiation.”; Art. 1120 (1): “(…) provided that six months have elapsed since the events giving rise to a claim, a disputing investor may submit the claim to arbitration  (…).”, ­referred to in id. at 237 (Art. 25, para. 542).

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the non-observance of the waiting period would affect their jurisdiction.912 Others, by contrast, drew a diametrically opposed conclusion. They viewed such clauses as a mere procedural requirement and, consequently, affirmed jurisdiction despite claimant’s non-compliance.913 Substantive conditions, on the other hand, are set up by so called compliance clauses or, used synonymously, in-accordance-with-the-law ­clauses.914 912 See e.g. Goetz v. Burundi (Award), paras. 90–93; Enron v. Argentina (Decision on Jurisdiction), para. 88; Burlington Resources Inc. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), icsid Case No. arb/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Decision on Jurisdiction (2 June 2010) [hereinafter Burlington v. Ecuador (Decision on Jurisdiction)], para. 315; Murphy Exploration and Production Company International v. Republic of Ecuador, icsid Case No. arb/08/4, Decision on Jurisdiction (15 December 2010) [hereinafter Murphy v. Ecuador (Decision on Jurisdiction)], paras. 147–157; Tulip v. Turkey (Decision on Jurisdiction), para. 72; 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 (21 December 2012) [hereinafter Teinver v. Argentina (Decision on Jurisdiction)], paras. 107–129. 913 See e.g. Wena Hotels v. Egypt (Decision on Jurisdiction), paras. 60–61; sgs v. Pakistan (Decision on Jurisdiction), para. 184; Bayindir v. Pakistan (Decision on Jurisdiction), para. 102; Abaclat v. Argentina (Decision on Jurisdiction), para. 565. For discussions on the cited case law, see Schreuer, Travelling the bit Route 231, 232– 239; Schreuer et al., icsid Commentary 237–239 (Art. 25, paras. 541–547). A comparable split of opinion exists on the requirement of recourse to local courts for a certain period of time. While part of the tribunals considers compliance with this requirement as a precondition for jurisdiction (see e.g. Wintershall v. Argentina (Award), para. 156; Daimler Financial Services ag v. Argentine Republic, icsid Case No. arb/05/1, Award (22 August 2012) [hereinafter Daimler v. Argentina (Award)], paras. 192–194; Teinver v. Argentina (Decision on Jurisdiction), paras. 130–136; Ambiente Ufficio v. Argentina (Decision on Jurisdiction), para. 596; Kılıç İnşaat v. Turkmenistan (Award), paras. 6.3.2–6.3.5), other tribunals view such clauses as non-mandatory, merely procedural provisions (see e.g. Abaclat v. Argentina (Decision on Jurisdiction), para. 590; Hochtief ag v. Argentine Republic, icsid Case No. arb/07/31, Decision on Jurisdiction (24 October 2011) [hereinafter Hochtief v. Argentina (Decision on Jurisdiction)], paras. 50, 96). 914 For an overview of this topic, see e.g. Andrea Carlevaris, The Conformity of Investments with the Law of the Host State and the Jurisdiction of International Tribunals, 9 J. World Inv. & Trade 35, 35–50 (2008); Katharina Diel-Gligor & Rudolf Hennecke, Investment in Accordance with the Law, in International Investment Law – A Handbook (Marc Bungenberg et al. eds., 2015); Anna Joubin-Bret, Admission and Establishment in the Context of Investment Protection, in Standards of Investment Protection 9–29 ­(August Reinisch ed., 2008); Christina Knahr, Investments “in accordance with host state law”, in International Investment Law in Context 27–42 (Christina Knahr & August Reinisch eds., 2008); Ursula Kriebaum, Illegal Investments, in Austrian Yearbook of

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Notwithstanding their sometimes limited leverage when negotiating an investment treaty,915 host States typically strive to insert this type of clause into a bit in order to limit their consent – and thereby the arbitral tribunal’s ­jurisdiction  – to investments made in conformity with their domestic law, that is to say to legal investments.916 When dealing with these types of bit provisions, icsid tribunals were divided, first, as to whether the prerequisite of legality is a matter of jurisdiction ratione materiae, i.e. a matter related to the notion of “investment,” in the sense of icsid Convention Art. 25 (1),917 or a question of jurisdiction ratione voluntatis, i.e. a question of consent, under the bit.918 Second, they differed as to the procedural stage for a­ ssessing the

915

916

917

918

International Arbitration 325–329 (Christian Klausegger et al. eds., 2010); Rahim Moloo & Alex Khachaturian, The Compliance with the Law Requirement in International Investment Law, 34 Fordham Int’l L. J. 1473, 1473–1501 (2011); Stephan W. Schill, Illegal Investments in International Arbitration, 11 L. & Prac. Int’l Cts. & Trib. 281, 281–323 (2012). Amin G. Forji, Attaching the Right Meaning to Typical Provisions of Bilateral Investment Treaties (bits): A Sketch, 3 J. Afr. & Int’l L. 555, 559 (2010); Chung, Lopsided International Investment Law Regime 953, 957–959. In-accordance-with-the-law clauses can typically be found in provisions stipulating the definition of the term “investment” or in provisions on the admission of investments. For an example of the former case, see Art. 1 (Definition of Terms) of the Germany– Philippines bit: “For the purpose of the Agreement, the term ‘investment’ shall mean every kind of asset accepted in accordance with the respective laws and regulations of either Contracting State (…)” (Agreement between the Federal Republic of Germany and the Republic of the Philippines for the Promotion and Reciprocal Protection, 18 April 1997 (entry into force 1 February 2000), BGBl. ii 1998, 27); for an example of the latter case, see Art. 2 of the Argentina–Netherlands bit: “[e]ither Contracting Party shall, within the framework of its laws and regulations, promote economic cooperation through the protection in its territory of investment of investors of the other Contracting Party. Subject to its right to exercise powers conferred by its laws or regulations, each Contracting Party shall admit such investments.” (Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Argentine Republic, 20 October 1992 (entry into force 1 October 1994)). See e.g. Toto Costruzioni v. Lebanon (Decision on Jurisdiction), para. 85; Phoenix v. Czech Republic (Award), para. 114; saur International s.a. v. Argentine Republic, icsid Case No. arb/04/4, Decision on Jurisdiction (6 June 2012) [hereinafter saur v. Argentina (Decision on Jurisdiction)], para. 308. See e.g. Tokios Tokéles v. Ukraine (Decision on Jurisdiction), para. 84; lesi–dipenta v. ­Algeria (Award), para. 24 (iii); Gas Natural sgd, s.a. v. Argentina (Decision on Jurisdiction), paras. 33–34; Bayindir v. Pakistan, (Decision on Jurisdiction), paras. 109–110; lesi astaldi v. Algeria (Decision on Jurisdiction), para. 83 (iii); Inceysa Vallisoletana s.l. v. Republic of El Salvador, icsid Case No. arb/03/26, Award (2 August 2006) [hereinafter Inceysa v. El Salvador (Award)], paras. 142–161; Saipem v. Bangladesh, (Decision on Jurisdiction),

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compliance of an investment. Some arbitral tribunals classified the legality requirement as a jurisdictional prerequisite,919 whereas others treated it as a question of admissibility in respect of the substantive protections of a treaty.920

paras. 120–124; Saba Fakes v. Turkey (Award), paras. 112–114, 121; Metal-Tech Ltd. v. Republic of Uzbekistan, icsid Case No. arb/10/3, Award (4 October 2013) [hereinafter Metal-Tech v. Uzbekistan (Award)], paras. 127–129. For a decision that appears to consider the prerequisite of legality as a matter of both jurisdiction ratione materiae and jurisdiction ratione voluntatis, see Fraport ag Frankfurt Airport Services Worldwide v. Philippines, icsid Case No. arb/11/12, Award (10 December 2014) [hereinafter Fraport v. Philippines (ii) (Award)], paras. 467, 468. 919 See e.g. Inceysa v. El Salvador (Award), paras. 142–161; Fraport v. Philippines (i) (Award), paras. 300, 306–307, 319, 323, 332, 335, 350, 383, 385, 396–398, 401–404; Alasdair Ross Anderson and others v. Costa Rica, icsid Case No. arb(af)/07/3, Award (19 May 2010) [hereinafter Anderson v. Costa Rica (Award)], para. 59; Saba Fakes v. Turkey (Award), paras. 112–115; Abaclat v. Argentina (Decision on Jurisdiction), paras. 381–386, 652–653; MetalTech v. Uzbekistan (Award), paras. 372–374; Fraport v. Philippines (ii) (Award), paras. 467, 468; Grupo Francisco v. Guinea (Award), paras. 142, 258–264. 920 See e.g. Plama v. Bulgaria (Decision on Jurisdiction), paras. 127–131, 228–229; Malicorp Ltd. v. Egypt (Award), paras. 117–120; The Rompetrol Group n.v. v. Romania, icsid Case No. arb/06/3, Award (6 May 2013) [hereinafter Rompetrol v. Romania (Award)], para. 175. See also Mamidoil Jetoil Greek Petroleum Products Societe s.a. v. Republic of Albania, icsid Case No. arb/11/24, Award (30 March 2015) [hereinafter Mamidoil v. Albania (Award)], para. 494, wherein the tribunal took into account the State’s legalisation offers as regards the illegal investment and thus held that “[i]n such circumstances, the legal significance of the absence of permits is to be determined as a question of merits (…) rather than this Tribunal’s jurisdiction.” Although icsid tribunals appear to be divided in this respect, to be precise it needs to be added that the reasoning that “compliance with the host State’s law constitutes a limit to jurisdiction ratione voluntatis is mainly found in cases in which the respective bit contained an express compliance clause.” By contrast, “where the relevant bit did not contain an express compliance clause, arbitral tribunals have generally tended to treat the question of compliance with the host State’s law as a merits issue.” Therefore, a certain regularity exists in this respect. See Diel-Gligor & Hennecke, Investment in Accordance with the Law 571. For an approach differentiating according to the manifestness of an investment’s illegality, see Phoenix. v. Czech Republic (Award), paras. 102, 104 (obiter dictum): “(…) the purpose of the international protection through icsid arbitration cannot be granted to investments that are made contrary to law. The fact that an investment is in violation of the laws of the host State can be manifest and will therefore allow the tribunal to deny its jurisdiction. Or, the fact that the investment is in violation of the laws of the host State can only appear when dealing with the merits, whether it was not known before that stage or whether the tribunal considered it best to be analyzed as the merits stage (…) [footnotes omitted].”; “There is no doubt that the requirement of conformity with the law

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Scope of Consent in bits: Umbrella Clauses

Finally, another instance of inconsistencies pertaining to the subjective prerequisite of jurisprudence can be found when looking at the construct of an “umbrella clause,”921 which is included in numerous bits for the purpose of providing additional protection to investment-related contractual commitments beyond the scope of an investment treaty.922 Differing positions have been taken by icsid tribunals as to the question of whether and to what extent such a clause would have the effect that a breach of contractual commitments amounts to a breach of the investment treaty. These positions can be condensed into two opposing views: those adopting a narrow interpretation at the one end of the spectrum, and those adopting a broad interpretation at the other end. According to proponents of the narrow interpretation, only breaches by a State acting in its sovereign capacity are of relevance; supporters

is important in respect of access to the substantive provisions on the protection of the investor under the bit. This access can be denied through a decision on the merits. However, if it is manifest that the investment has been performed in violation of the law, it is in line with judicial economy not to assert jurisdiction.” See also Gustav f.w. Hamester GmbH & Co kg v. Republic of Ghana, icsid Case No. arb/07/24, Award (18 Juni 2010) [hereinafter Hamester v. Ghana (Award)], para. 123; David Minnotte & Robert Lewis v. Republic of Poland, icsid Case No. arb(af)/10/1, Award (16 May 2014) [hereinafter Minotte & Lewis v. Poland (Award)], paras. 129–140. 921 For an overview and discussions of this topic, see e.g. J. Ole Jensen, Die Auslegung von Investitionsschutzabkommen am Beispiel der “umbrella clause”, Recht der internationalen Wirtschaft 277, 277–286 (2016); Hege Elisabeth Kjos, Applicable Law in Investor-State Arbitration: The Interplay Between National and International Law 247–253 (Oxford University Press, Oxford, 2013); Newcombe & ­Paradell, Law and Practice of Investment Treaties 437–478; Jonathan B. Potts, Stabilizing the Role of Umbrella Clauses in Bilateral Investment Treaties: Intent, Reliance, and Internationalization, 51 Va. J. Int’l L. 1005, 1005–1045 (2011); Sasson, Substantive Law in Investment Treaty Arbitration 173–194; Stephan W. Schill, Enabling Private Ordering: Function, Scope and Effect of Umbrella Clauses in International Investment Treaties, 18 Minn. J. Int’l L. 1, 1–97 (2009); Schreuer, Travelling the bit Route 231, 249–255; Thomas W. Wälde, The “Umbrella” Clause in Investment Arbitration, 6 J. World Inv. & Trade 183, 183–236 (2005); Weeramantry, Treaty Interpretation in Investment Arbitration 168–177; Katia Yannaca-Small, What About This “Umbrella Clause”?, in Arbitration under International Investment Agreements – A Guide to the Key Issues 479–503 (Katia Yannaca-Small ed., 2010); Katia Yannaca-Small, Interpretation of the Umbrella Clause in Investment Agreements, oecd Working Papers on International Investment, 1–22 (2006); Vlad Zolia, Effect and Purpose of “Umbrella Clauses” in Bilateral Investment Treaties: Unresolved Issues, 5 tdm 1, 1–55 (2005). 922 For elaborations on the concept and function of “umbrella clauses,” see below Ch. 2.E.I.2.b.aa.

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of the broad interpretation, on the other hand, consider any sort of contractual obligations and their breaches as being covered.923 A detailed analysis of the cases that established and followed these different lines of jurisprudence will be undertaken in the following section. b

aa

Example in Detail: Umbrella Clauses Concept and Function

“Umbrella clauses”924 can be found in a considerable number of bits. Their goal is to provide additional protection for contractual obligations (and unilateral undertakings) which the host State has assumed vis-à-vis its investors with regard to their investments.925 This is to be achieved by extending the protective scope of an investment treaty to these commitments. The construct is based on the assumption that jurisdiction ratione materiae under investment treaties is not uniformly limited to violations of substantive provisions of the bit itself. Rather, the “protective umbrella”926 of the treaty may also cover even breaches of other commitments related to the investment. Thus, the jurisdictional scope varies depending on whether a treaty contains an umbrella clause and, if so, in what version.927 In fact, the wording of this sort of provision is crucial for its interpretation and the legal consequences it entails for the parties to a dispute. A common formulation of an umbrella clause reads: “Each Contracting Party shall observe any obligation it has assumed with regard to investments in its territory (…).”928 923 For the corresponding icsid case law, see below Ch. 2.E.I.2.b.bb. See also Yannaca-Small, What About This “Umbrella Clause”? 486–487. 924 This sort of clause is also known as “observance-of-undertakings clause,” “sanctity-ofcontracts clause,” “mirror-effect clause”, or “pacta-sunt-servanda clause”; see id. at 479. 925 Id. at 480; Schreuer, Travelling the bit Route 231, 250. See also Newcombe & Paradell, Law and Practice of Investment Treaties 451–460, with case law references. 926 Schreuer, Travelling the bit Route 231, 250. 927 It is important to distinguish an “umbrella clause” from a “preservation of rights clause.” The latter type of bit clause entitles the foreign investor to claim the application of any legal rule contained in specific agreements, in the respective municipal law, and/or in international law providing for a treatment more favourable than is foreseen in the bit. Moreover, there is a difference between an “umbrella clause” and a “wide dispute resolution clause.” While the former requires the observance of specific undertakings entered into by the host State with regard to the protected investment, the latter foresees that any disputes, whether related to the investment or not, shall be submitted to the arbitral tribunal’s jurisdiction. See Newcombe & Paradell, Law and Practice of Investment Treaties 477–479. 928 1991 German Model bit Art. 8 (2) (Treaty between the Federal Republic of Germany and [Country] Concerning the Encouragement and Reciprocal Protection of Investments, 1991 [hereinafter 1991 German Model bit]).

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While some clauses are hardly distinguishable, others evince striking textual variations. The differences range from the duty imposed (“observe,” “respect,” “guarantee”), to the nature of the undertakings to be observed (“all obligations,” “particular commitments”) and their subject matter (“investments” in general, solely “specific investments,” “investors”), to the relation of the host State towards the undertaking (“assumed,” “entered into,” “have”).929 When interpreting a particular umbrella clause, it is necessary to pay respect to these textual nuances and also to the systemic placement within a bit in order to give a clause its individual scope and effect as intended by its drafters.930 However, in spite of this diversity on the small scale, experience has shown that umbrella clauses usually feature a common underlying concept. All of them are concerned with contractual obligations undertaken by the host State beyond the particular bit at hand and they all raise the question of whether and, if so, to what extent their breach might constitute a breach of the bit. Thus even if they vary in detail, questions as to their basic function and effect are generally comparable and should hence be interpreted consistently by the arbitral tribunals dealing with such clauses. The positions adopted in the academic discourse are largely consistent inasmuch as they agree that an umbrella clause in an investment treaty ­elevates and transforms contractual obligations between an investor and a host State into international law obligations931 and thereby provides additional protection to the investor.932 In arbitral practice, by contrast, no comparable c­ onsensus has 929 For an overview of the differing language of umbrella clauses as formulated in Model bits, see Yannaca-Small, Interpretation of the Umbrella Clause in Investment Agreements, 9–14; Newcombe & Paradell, Law and Practice of Investment Treaties 445–448. 930 Yannaca-Small, What About This “Umbrella Clause”? 483–485. See e.g. Noble Ventures, Inc. v. Romania, icsid Case No. arb/01/11, Award (12 October 2005) [hereinafter Noble Ventures v. Romania (Award)], para. 50; but see El Paso v. Argentina (Decision on Jurisdiction), para. 70, wherein the tribunal expresses doubts that the different wordings of umbrella clauses do in fact require different interpretations. 931 See e.g. Anthony Sinclair, The Origins of the Umbrella Clause in the International Law of Investment Protection, 20 Arb. Int’l 411, 412–413 (2004), referring to Elihu Lauterpacht (Elihu Lauterpacht, Advice to the Anglo-Iranian Oil Company 1953/1954), and Prosper Weil (Prosper Weil, Problèmes relatifs aux contrats passés entre un État et un particulier, 128 RdC 95, 130 (1969)); Ibrahim F.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 601 (Ibrahim F.I. Shihata ed., 1995), referred to in Yannaca-Small, Interpretation of the Umbrella Clause in Investment Agreements, 7–8. 932 F.A. Mann, British Treaties for the Promotion and Protection of Investments, 52 Brit. Yb. Int’l L. 241, 246 (1981); Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties 81–82 (Nijhoff, The Hague, 1995); Schreuer, Travelling the bit Route 231, 249,

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yet been established: icsid jurisprudence is divided into two lines of case law, which vary again in detail. bb

Case Law

aaa

Narrow Interpretation – sgs v. Pakistan

The most prominent examples of inconsistent case law, which are also the first cases to address the function and effect of an umbrella clause, are two decisions on the claims brought by the Swiss investor sgs Société Générale de Surveillance s.a., namely sgs v. Pakistan933 and sgs v. Philippines.934 These cases can be considered as the starting point of the opposing lines of icsid jurisprudence on this issue. In both cases, sgs alleged a violation of the umbrella clause stipulated in the respective underlying bit. While the wording of these two clauses was not identical, given that the clause in the SwissPakistan bit was formulated in a more sweeping, vaguer manner,935 they were still comparable as to their general underlying concept which concerned the extension of jurisdiction ratione materiae beyond the protective scope of the bit to the observance of contractual undertakings relating to (at least specific) investments.936 The first award that contained an extensive analysis of an umbrella clause was rendered by the tribunal in sgs v. Pakistan. In this case, the parties’ conflict involved a mutual contract, the Pre-Shipment Inspection Agreement,937

referred to in Yannaca-Small, Interpretation of the Umbrella Clause in Investment Agreements, 7–8. But see Pierre Mayer, La neutralisation du pouvoir normatif de l’État en matière de contrats d’État, jdi 5, 36–37 (1986), referred to in Yannaca-Small, Interpretation of the Umbrella Clause in Investment Agreements, 9. 933 sgs v. Pakistan (Decision on Jurisdiction). 934 sgs v. Philippines (Decision on Jurisdiction). 935 Switzerland–Pakistan bit (see fn. 617) Art. 11: “Either Contracting Party shall constantly guarantee the observance of the commitments it has entered into with respect to the investments of the investors of the other Contracting Party.” Switzerland–Philippines bit (see fn. 617) Art. x (2): “Each Contracting Party shall observe any obligation it has assumed with regard to specific investments in its territory by investors of the other Contracting Party.” 936 For an opposing view on the wording of these umbrella clauses, which consideres the textual differences as having considerable relevance, see Crawford, Similarity of Issues in Disputes 101. However, the author did not further elaborate on the manner in which these differences should have been respected when construing the general function and effect of umbrella clauses. 937 [Hereinafter psi Agreement].

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­relating to the provision of pre-shipment services by sgs, who believed that the unilateral termination by Pakistan was invalid and therefore unlawful and void. sgs therefore alleged that this gave rise to Pakistan’s liability for both breach of contract and breach of the Switzerland-Pakistan bit. Notwithstanding the fact that a contract-based commercial arbitration was already pending in Pakistan, sgs went on to initiate treaty-based investment arbitration at the icsid. In its claims, it alleged, inter alia, that Pakistan had violated the umbrella clause in Art. 11 of the bit. sgs argued that this clause had the legal effect of transmuting contract claims into treaty claims and would hence require the arbitral tribunal to exercise its jurisdiction also as regards any alleged breach of contract. Pakistan objected to the jurisdiction of the icsid tribunal. It based its contentions on the decision rendered by the Vivendi v. Argentina (i) annulment ­committee,938 which stated that in 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 in that contract.”939 Given that in the psi Agreement the parties had agreed to exclusively submit any dispute arising out of the contract to the psi Agreement arbitrator,940 the icsid ­tribunal – according to Pakistan – lacked jurisdiction. sgs countered this argument by citing another Vivendi v. Argentina (i) statement941 according to which an arbitral tribunal having jurisdiction under a treaty as to a BITlabelled claim did not have discretion to dismiss that claim on the grounds that it should be decided by the judicial body competent for contract claims.942 In its award, the sgs v. Pakistan arbitral tribunal sided with the respondent and firmly rejected jurisdiction over the contract claims. One of the main reasons for this decision was that the tribunal denied a transmutating effect of the umbrella clause unless “exceptional circumstances”943 were present. The first 938 sgs v. Pakistan (Decision on Jurisdiction), paras. 42, 50. 939 Compañía de Aguas del Aconquija s.a. and Vivendi Universal v. Argentine Republic, icsid Case No. arb/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and Compagnie Générale des Eaux v. Argentine Republic), Decision of the Ad hoc Committee on Annulment (3 July 2002) [hereinafter Vivendi v. Argentina (i) (Decision on Annulment)], para. 98. Yet, the original purpose of the “fundamental basis test,” as developed by the Vivendi v. Argentina (i) ad hoc annulment committee, was to determine whether a tribunal must decide on a claim’s merits, and not whether a tribunal has jurisdiction; see Matthew Wendlandt, sgs v. Philippines and the Role of icsid Tribunals in Investor-State Contract Disputes, 43 Tex. Int’l L. J. 523, 536–537, 538 (2008). 940 sgs v. Pakistan (Decision on Jurisdiction), para. 51. 941 Id., para. 94 and corresponding fn. 105. 942 Vivendi v. Argentina (i) (Decision on Annulment), paras. 72 et seq., esp. para. 102. 943 sgs v. Pakistan (Decision on Jurisdiction), para. 172.

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argument set out in support of this view was of textual nature. When considering the wording of the bit’s Art. 11, the arbitral tribunal found that the scope of this provision appeared “susceptible for almost indefinite expansion,”944 as it entailed potentially far-reaching and burdensome consequences for the contracting parties. Therefore, it concluded that this clause should only be given its broad literal effect if “clear and convincing evidence” that the creation and acceptance of new international obligations was really intended by the contracting parties could be adduced.945 The tribunal did not find such evidence. Second, the arbitral tribunal justified its restrictive interpretation by pointing to widely accepted and established principles of international law. In this context, it cited the Vivendi v. Argentina (i) annulment decision,946 which based its argumentation on ilc Draft Art. 3, stating that “[t]he characterization of an act of a State as internationally wrongful is governed by international law” and that “[s]uch characterization is not affected by the characterization of the same act as lawful by internal law (…).” Accordingly, the annulment committee concluded that “a violation of a contract entered into by a State with an investor of another State, is not, by itself, a violation of international law.”947 Its third argument touched upon the risk that a wide interpretation of the bit’s Art. 11, as suggested by the claimant, would render all the other standards of treatment as set forth in the treaty “substantially superfluous.”948 Furthermore, the arbitral tribunal stressed that a generous reading of the umbrella clause would bring about unjustified unilateral advantages to the investor as, by bringing a claim under an umbrella clause of an investment treaty, he “could always defeat the State’s invocation of the contractually specified forum.”949 Finally, the arbitral tribunal availed itself of a systematic argument. It noted that the umbrella clause was not systematically located with the substantive protection standards provided by the treaty and therefore could not be read as being meant to create substantive international obligations.950 Based on these arguments and guided by the interpretative principle in dubio mitius,951 the tribunal adopted a narrow reading of the umbrella clause in question and held

944 945 946 947 948 949 950 951

Id., para. 166. Id., para. 167. Vivendi v. Argentina (i) (Decision on Annulment), paras. 95–96. sgs v. Pakistan (Decision on Jurisdiction), paras. 147, 167. Id., para. 168. Id. Id., paras. 169–170. sgs v. Pakistan (Decision on Jurisdiction), para. 171.

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that “breaches of contract (…) are not automatically ‘elevated’ to the level of breaches of international treaty law.”952 Since this very first ruling on the function and effect of an umbrella clause, a number of icsid tribunals concerned with this issue joined the narrow interpretation adopted in sgs v. Pakistan. Nevertheless, the majority of these cases in line with sgs v. Pakistan refined this restrictive approach by adding the distinction between purely commercial breaches of a contract, involving State conduct in the State’s function as a merchant (acta iure gestionis), and governmental breaches of contracts, involving State conduct in the State’s function as a sovereign (acta iure imperii).953 Only significant contractual interferences by a State itself or its agencies have been considered as being encompassed by the protective scope of the umbrella clause. Ordinary commercial breaches of a contract were not deemed to trigger the treaty protection. bbb

Broad Interpretation – sgs v. Philippines

Shortly after the sgs v. Pakistan award had been rendered, another icsid tribunal with a different composition had to rule on the claims raised by sgs – this time against the host State Philippines. Again, a mutual contract between the parties on the provision of pre-shipment inspection services, the Comprehensive Import Supervision Service Agreement,954 was the point of contention. The investor-claimant’s request for arbitration to icsid was based on the allegation that the Philippines was in direct breach of both the concession contract and 952 Id., para. 166. Yet, the tribunal did not preclude per se the possibility that contractual violations might constitute a treaty violation, but placed this option under the reservation that “exceptional circumstances” were given, see id, para. 172. 953 See e.g. Waste Management, Inc. v. United Mexican States, icsid Case No. arb(af)/00/3 (nafta), Award (30 April 2004) [hereinafter Waste Management v. Mexico (Award)], para. 73; Joy Mining v. Egypt (Decision on Jurisdiction), paras. 72–81; Impregilo S.p.A. v. Islamic Republic of Pakistan, icsid Case No. arb/03/3, Decision on Jurisdiction (22 April 2005) [hereinafter Impregilo v. Pakistan (Decision on Jurisdiction)], para. 260; cms v. Argentina (Award), paras. 298–303; El Paso v. Argentina (Decision on Jurisdiction), paras. 81–82; Pan American Energy v. Argentina (Decision on Preliminary Objections), paras. 107–110; Bayindir Insaat Turizm Ticaret Ve Sanayi a.s. v. Islamic Republic of Pakistan, icsid Case No. arb/03/29, Award (27 August 2009) [hereinafter Bayindir v. Pakistan (Award)], para. 180; Sempra v. Argentina (Award), paras. 309–311; Tulip Real Estate and Development Netherlands b.v. v. Republic of Turkey, icsid Case No. arb/11/28, Award (10 March 2014) [hereinafter Tulip v. Turkey (Award)], paras. 354–356. According to this view, umbrella clauses are mere codifications of the protection provided by international customary law, i.e. they do merely provide protections against expropriation or sovereign interferences with investments; see Schill, The Multilateralization of International Investment Law 85. 954 [Hereinafter ciss Agreement].

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the Switzerland-Philippines bit for serious contractual payment arrears. sgs argued that “[t]he effect of an ‘umbrella clause’ such as article X(2) is to elevate a breach of contract claim to a treaty claim under international law”955 and that “the Tribunal’s jurisdiction extends beyond bit claims to ­contract claims, due to the reference in Article viii of the bit to ‘disputes with respect to investments.’”956 In support of a broad interpretation of the umbrella clause, it referred to the authority of numerous scholarly works, an ­u nctad publication on bit practice,957 and a survey of a number of bits.958 In its response, the Philippines contested that such clause would have the ­effect of adding further material protections to the bit. It relied on the decision in sgs v. Pakistan and joined the argument that such interpretation would render the substantive body of international law effectively meaningless “because the Claimant need no longer prove the additional element, it need only argue that a breach of a private commercial contract has been violated by a State and yet still be able to pursue its grievances in an international forum.”959 Moreover, it invoked the bit’s drafting history, which clearly demonstrated that the parties to the treaty “did not intend to include within the protection of the bit and international law, protections from breach of contract.”960 Also, in the view of the Philippines, vclt Art. 31 (1), “which requires that treaties shall be interpreted in good faith and in the light of their object and purpose, suggests that sgs’s contention cannot be upheld, unless there is clear evidence of the contracting Parties’ intention to produce such an unequal bargain, which has not been shown.”961 In its decision on objections to jurisdiction, the arbitral tribunal aligned itself with the position of the claimant and held that – in the absence of other factors962 – it could have jurisdiction on a breach-of-contract claim since “Art.  x (2) makes it a breach of the bit for the host State to fail to observe 955 956 957 958

959 960 961 962

sgs v. Philippines (Decision on Jurisdiction), para. 65. Id., para. 66. unctad, Bilateral Investment Treaties in the Mid-1990s, 54–56 (1998). sgs v. Philippines (Decision on Jurisdiction), para. 90: “Authorities relied on in support of a broad interpretation of that clause included Prosper Weil, Joachim Karl, (…), Ibrahim Shihata, F.A. Mann, M. Nash Leich, Dolzer & Stevens, Antonio Parra, and others, (…).” [footnotes omitted]. Id., para. 76. Id., para. 77. Id. When mentioning “other factors,” the sgs v. Philippines arbitral tribunal apparently had the issue of concurrent jurisdiction in mind, as the parties had included an express and exclusive forum selection clause into their contract. In this regard, the majority of the arbitral tribunal held that the general provisions of the bit, such as the umbrella clause, could not override or replace specific provisions of a particular contract. Hence, in the

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binding commitments, including contractual commitments, which it has assumed with regard to specific investments.”963 The tribunal’s examination of the function and effect of the umbrella clause started out with a rather global approach as it looked at the object and purpose of bits in general. In view of the fact that these treaties aim at the promotion and reciprocal protection of investments, it considered the incorporation of a host State’s binding commitments towards specific investments within the protective framework of a bit as entirely consistent with their higher objectives.964 A limitation of the umbrella clause’s effect to obligations under international law instruments, as asserted by the respondent-State, was hence firmly rejected, in particular as such contention would “read into that provision words of limitation which are simply not there.”965 Thereafter, the arbitral tribunal addressed the sgs v. Pakistan case as the only case which had so far dealt with that question. Even if it admitted that the umbrella clause in the Swiss-Pakistan bit was formulated somewhat more vaguely, it still considered it as generally comparable to the clause at hand966 and proceeded to critically analyse the arguments the other tribunal had relied on in support of its restrictive interpretation of the umbrella clause. Regarding the textual argument of the sgs v. Pakistan tribunal, it countered the purported danger of “indefinite expansion” by stressing that an umbrella clause would only relate to legal obligations vis-à-vis a specific investment and not to legal obligations of a general character.967 The argument based on the general principles of international law as confirmed by the Vivendi annulment decision was rebutted with the remark that this case was not concerned with an equivalent bit clause. The arbitral tribunal further observed that, according to the ilc’s commentary on ilc Draft Art. 3, such clause could have effect in the international legal context.968 With respect to

963 964 965 966 967 968

end, the arbitral tribunal found that it had jurisdiction over the breach-of-contract claim, but that this was not admissible in the light of the contractual jurisdiction clause. It therefore decided for a stay of the icsid case pending the outcome of the proceedings in the host State court. See sgs v. Philippines (Decision on Jurisdiction), paras. 136 et seq., 177. sgs v. Philippines (Decision on Jurisdiction), para. 126. sgs v. Philippines (Decision on Jurisdiction), paras. 116–117. Id., para. 118. Id., para. 119. Id., para. 121. Id., para. 122. In fn. 54, the arbitral tribunal cited the commentary on Art. 3 (7), which refers to the possibility that “the provisions of internal law (…) are actually incorporated in some form, conditionally or unconditionally, into that [sc. the international] standard.” See James Crawford, The International Law Commission’s Articles on State Responsibility – Introduction, Text and Commentaries 89 (Cambridge University Press, Cambridge, 2002).

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the systematic argument c­ oncerning the location of the umbrella clause at the end of the bit, it admitted that this point was legitimate, but could not be generalised to all investment treaties and, more importantly, could not outweigh the foregoing considerations.969 In concluding, the arbitral tribunal clarified that an umbrella clause’s function and effect was not the conversion of nonbinding national contractual concessions into binding international treaty obligations, as feared by the sgs v. Pakistan tribunal.970 While leaving the content and scope of domestic commitments unaffected, umbrella clauses concerned only the performance of an ascertained investment-related commitment.971 In other words, the sgs v. Pakistan tribunal stressed the distinction between responsibilities arising under domestic law and the determination of State responsibilities for these domestic responsibilities at the international level.972 The approach adopted by the sgs v. Philippines tribunal, being the second one concerned with the question of how to interpret an umbrella clause, was, again, joined by various arbitral tribunals.973 In contrast to the cases in line with sgs v. Pakistan, most of them agreed that any violation of a commitment 969 970 971 972

Id., para. 124. sgs v. Pakistan (Decision on Jurisdiction), para. 172. sgs v. Philippines (Decision on Jurisdiction), paras. 126, 128. Kjos, Applicable Law in Investor-State Arbitration 251–253. In this sense, see also Tulip v. Turkey (Award), paras. 350–353, holding that an umbrella clause would not cover violations of domestic investment laws; but see oi European Group b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/11/25, Award (2 March 2015) [hereinafter oi European Group v. Venezuela (Award)], paras. 589–592, upholding the umbrella clause claim based on the view that violations of domestic investment laws would be equivalent to violations of iias. 973 See e.g. Noble Ventures v. Romania (Award), paras. 59–61; lesi astaldi v. Algeria (Decision on Jurisdiction), para. 84 (ii); lg&e v. Argentina (Decision on Liability), paras. 164–175; Siemens v. Argentina (Award), paras. 204–205; Enron v. Argentina (Award), paras. 273–277; mtd v. Chile (Decision on Annulment), para. 73; cms v. Argentina (Decision on Annulment), para. 286; Duke Energy Electroquil Partners & Electroquil s.a. v. Republic of Ecuador, icsid Case No. arb/04/19; Award (18 August 2008) [hereinafter Duke Energy Electroquil v. Ecuador (Award)], paras. 317–325; Bureau Veritas, Inspection, Valuation, Assessment and Control, bivac b.v. v. Republic of Paraguay, icsid Case No. arb/07/9, Decision on Jurisdiction (29 May 2009) [hereinafter bivac v. Paraguay (Decision on Jurisdiction)], paras. 141–142; Toto Costruzioni v. Lebanon (Decision on Jurisdiction), paras. 201–202; sgs Société Générale de Surveillance s.a. v. Republic of Paraguay, icsid Case No. arb/07/29, Decision on Jurisdiction (12 February 2010) [hereinafter sgs. v. Paraguay (Decision on Jurisdiction)], paras. 166–171; Marion Unglaube v. Republic of Costa Rica, icsid Case No. arb/08/1, Award (16 May 2012) [hereinafter Unglaube v. Costa Rica (Award)], para. 190; edf International, s.a., saur International, s.a. and Léon Participations Argentinas, s.a. v. Argentine Republic, icsid Case No. arb/03/23, Award

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undertaken with regard to investments, be it of commercial or governmental nature, would be covered by the scope of the umbrella clause. Yet, some of the decisions stand in opposition to the ruling in sgs v. Philippines inasmuch as they speak of an “automatic” elevation and transformation of contract-based or legislation-based claims to treaty claims.974 The sgs v. Philippines tribunal and other subsequent tribunals, by contrast, explicitly maintained the distinction between contractual rights and claims, on the one hand, and treaty rights and claims, on the other hand.975 A further split of opinions, which is not necessarily congruent with the grouping of narrow and broad interpretations, relates to the question of whether contractual undertakings, in order to be covered by an umbrella clause, would necessitate privity between the contracting parties. One group of tribunals, which seems so far to be the majority, requires such privity. According to this point of view, only the direct investor may assert its contractual rights against the host State itself.976 The opposing viewpoint, by contrast, does not require contractual privity and maintains that, even where the contract in question was concluded by corporate subsidiaries of the investor or by a public



(11 June 2012) [hereinafter edf International v. Argentina (Award)], paras. 938–942; Bosh International, Inc. and b&p Ltd. Foreign Investments Enterprise v. Ukraine, icsid Case No. arb/08/11, Award (25 October 2012) [hereinafter Bosh/b&p v. Ukraine (Award)], para. 246. According to this view, umbrella clauses reach beyond the protection provided by international customary law, i.e. beyond protections against expropriation or sovereign interferences with investments; see Schill, The Multilateralization of International Investment Law 85. 974 See e.g. lg&e v. Argentina (Decision on Liability), para. 175, referred to in Sasson, Substantive Law in Investment Treaty Arbitration 181–183, 189–190. See also Zolia, Effect and Purpose of “Umbrella Clauses” 1, 42–47. 975 sgs v. Philippines (Decision on Jurisdiction), para. 126. See also e.g. Noble Ventures v. Romania (Award), paras. 53–55; mtd v. Chile (Decision on Annulment), para. 73; cms v. Argentina (Decision on Annulment), para. 286; Toto Costruzioni v. Lebanon (Decision on Jurisdiction), paras. 201–202; Unglaube v. Costa Rica (Award), para. 190; Bosh v. Ukraine (Award), para. 247. 976 See e.g. Impregilo v. Pakistan (Decision on Jurisdiction), para. 223; Azurix v. Argentina (Award), para. 384; Siemens ag v. Argentine Republic, icsid Case No. arb/02/8, Award (6 February 2007) [hereinafter Siemens v. Argentina (Award)], para. 204; cms v. Argentina (Decision on Annulment), para. 95 (c); Hamester v. Ghana (Award), para. 347; Burlington Resources Inc. v. Republic of Ecuador, icsid Case No. arb/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Decision on Liability (14 December 2012) [hereinafter Burlington v. Ecuador (Decision on Liability)], paras. 211–234.

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c­ orporation established by the host State, such claims may be covered by the umbrella clause due to international law rules of attribution.977 Finally, there is also conflicting case law regarding the relationship between a contractual forum selection and treaty-based arbitration. While one group of tribunals has held that investment treaty arbitrations dealing – via umbrella clauses – with alleged violations of contractual commitments could be initiated despite the existence of a forum selection clause in the corresponding contract,978 other arbitral tribunals have adopted a contrary view, holding that contractual forum selections would take priority over the choice of treatybased fora where violations of contractual obligations are invoked by means of umbrella clauses.979 cc

Summary and Interpretative Evaluation

In sum, there are two major streams of interpretation. One line of case law applies a rather restrictive approach in determining the function and effect of an umbrella clause. It originates in sgs v. Pakistan, which construed the clause 977 See e.g. cms v. Argentina (Award), para. 87; Noble Ventures v. Romania (Award), para. 68; Continental Casualty v. Argentina (Award), para. 296–297; Burlington Resources Inc. v. Republic of Ecuador, icsid Case No. arb/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Dissenting Opinion of Arbitrator Francisco Orrego Vicuña (8 November 2012) [hereinafter Burlington v. Ecuador (Dissenting Opinion Orrego Vicuña)], paras. 8–10. For further details and case law on this topic, see Newcombe & Paradell, Law and Practice of Investment Treaties 460–465. 978 See e.g. cms v. Argentina (Decision on Jurisdiction), paras. 70–76; Azurix v. Argentina (­Decision on Jurisdiction), paras. 75–81; Enron v. Argentina (Decision on Jurisdiction), paras. 89–94; sgs Société Générale de Surveillance s.a. v. Republic of the Philippines, i­ csid Case No. arb/02/6, Dissenting Opinion of Arbitrator Antonio Crivellaro (24 January 2004) [hereinafter sgs v. Philippines (Dissenting Opinion Crivellaro)], paras. 1–13; aes Corporation v. Argentina (Decision on Jurisdiction), paras. 90–99; Camuzzi v. Argentina (i) (­Decision on Jurisdiction), paras. 105–119; sgs v. Paraguay (Decision on Jurisdiction), paras. 138–142, referring to Compañía de Aguas del Aconquija s.a. and Vivendi Universal v. Argentine Republic, icsid Case. No. arb/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and Compagnie Générale des Eaux v. Argentine Republic), Award (21 November 2000) [hereinafter Vivendi v. Argentina (i) (Award)], paras. 53–54; Vivendi v. Argentina (i) (Decision on Annulment), paras. 102–103. See also, for a detailed discussion of this issue and further related case law, Schill, Function, Scope and Effect of Umbrella Clauses 1, 63–70. 979 See e.g. sgs v. Philippines (Decision on Jurisdiction), para. 138; Joy Mining v. Egypt (Decision on Jurisdiction), paras. 94–97; bivac v. Paraguay (Decision on Jurisdiction), paras. 148–159; Toto Costruzioni v. Lebanon (Decision on Jurisdiction), para. 202; Malicorp v. Egypt (Award), para. 103 (c); Bosh/b&p v. Ukraine (Award), paras. 251–259.

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narrowly as not imposing any duty to comply with investment-related undertakings, and which was subsequently relaxed by the governmental-breach approach, which excludes only purely commercial breaches of contract from the protective scope of an umbrella clause. The other, opposing line of case law was initiated by sgs v. Philippines. It supports the view of a broad interpretation of an umbrella clause in accordance with the literal and ordinary meaning of its terms. In this view, any commitments entered into in relation to an investment, even non-governmental ones, are comprised by such clauses and are hence covered by the protective umbrella of an investment treaty. These two contrasting positions as to the proper reading of umbrella clauses are an illustrative example of inconsistencies occurring in the interpretation of law governing jurisdiction in icsid arbitration. Although the treaty clauses in question had common denominators, which, in principle, should have motivated arbitral tribunals to strive to conform with relevant prior rulings, the tribunals adopted opposing positions on recurring key questions which are, at least in part, due to general interpretative flaws.980 This being said, a closer examination of the conflicting, but trend-setting sgs cases leads to the finding that the charge of inconsistency must be put into perspective in certain respects. Certainly, in spite of its knowledge of the restrictive position adopted by the sgs v. Pakistan tribunal in comparable circumstances, the tribunal in sgs v. Philippines ruled according to its conviction that a literal, broad interpretation was warranted981 and rendered a diametrically opposed ruling. It did so, 980 The arbitral tribunal in sgs v. Pakistan, for example, can be criticised for affording too much weight to the potential consequences of a broad interpretation of an umbrella clause, since such considerations should only be of supplementary significance in the sense of vclt Art. 32; see sgs v. Pakistan (Decision on Jurisdiction), paras. 166 (“susceptible for almost indefinite expansion”), 168 (“would amount to incorporating by reference an unlimited number of State contracts”; “tends to make Articles 3 to 7 of the bit substantially superfluous”). The arbiral tribunal in sgs v. Philippines devoted too little attention to the systematic considerations in the sense of vclt Art. 31 (1) made by its predecessor. It can be criticised for playing down the contextual location of an umbrella clause within a bit when stating 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 Swiss-Philippines bit merely because of its location.” [footnote omitted]; see sgs v. Philippines (Decision on Jurisdiction), para. 124. For a further analysis on interpretative deficiencies inherent to these two opposing lines of icsid jurisprudence on the function and effect of umbrella clauses, see Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 119–152; Jensen, Investitionsschutzabkommen am Beispiel der “umbrella clause” 277, 282–285. 981 Id., para. 119: “(…) Art. x (2) means what it says (…).”

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however, by distancing itself from the earlier ruling and by providing reasoned explanations when departing from the previous decision. It started out by noting that “(…) the present tribunal does not in all respects agree with the conclusions reached by the sgs v. Pakistan Tribunal on issues of the interpretation of arguably similar language in the Swiss–Philippines bit,”982 and then continued by reflecting on the role of a tribunal constituted under the icsid regime. It explicitly recognised the desirability and need to act consistently with prior rulings, but considered itself nonetheless as primarily self-determined and independent from other arbitral tribunals. Thereafter, in its actual legal reasoning on the question of jurisdiction under the umbrella clause, it proceeded to examine carefully and critically, argument by argument, the interpretation adopted by the sgs v. Pakistan tribunal. In this manner, it refuted the arguments in support of a restrictive textual interpretation according to the principle in dubio mitius and established an argumentative basis for its broader interpretation, which was apparently inspired by the principle of effectiveness. The tribunal in sgs v. Philippines thus clarified and substantiated its own understanding of the function and effect of an umbrella clause, but did so by continuously referring to and dissociating itself from the opposing position. In sum, although it clearly disagreed with the ruling of the preceding arbitral tribunal, it paid deference thereto and acted in accordance with its stated interest to foster, if not consistent, then at least coherent lines of arbitral case law and develop a jurisprudence constante.983 In sum, the criticism of inconsistency must be tempered to the extent that these cases are a classic example of a “substantiated deviation.” This way of dealing with precedents allows arbitral tribunals to adopt their own, allegedly correct interpretative approach whilst adhering to the system of de facto precedent and ensuring coherence of arbitral jurisprudence. ii Procedural Law 1 Procedural Law in icsid Arbitration The icsid Convention is mainly known as a source of procedural provisions for the settlement of investor-State disputes within its regime. It consists of a dense set of rules and regulations which is comprehensive and exhaustive and therefore cannot be affected by any domestic procedural norms. For instance, the icsid Convention governs requests for arbitration (Art. 36), the constitution of the tribunal (Arts. 37–39) as well as its powers and functions (Arts. 41–47), the award (Art. 48) and its recognition and enforcement (Arts. 982 sgs v. Philippines (Decision on Jurisdiction), para. 97. 983 Id., para. 97.

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53–55), remedies of review (Arts. 50–52), the replacement and disqualification of arbitrators (Arts. 56–58), and the cost of proceedings (Arts. 59–61). Even if these provisions already display a remarkable degree of specificity, the icsid Arbitration Rules, which are subsidiary and must be read in conjunction with the Convention, go into still further detail. According to icsid Convention Art. 44,984 the icsid Arbitration Rules are neither mandatory nor exhaustive. Unlike the procedural norms contained in the Convention, which are of binding character if not stated otherwise, the Arbitration Rules may be altered by the parties.985 They are free to make deviating agreements or to exclude these rules in their entirety or only in part. Moreover, the high density of procedural regulations cannot rule out the possibility that certain ambiguities or lacunae remain. For that reason, the arbitral tribunal has the authority to decide any remaining procedural question and to thereby fill potential regulatory gaps.986 This is usually done informally or via procedural orders.987 2 Examples of Inconsistencies a Overview of Issues Even if the icsid procedural law is spelled out in a relatively detailed manner in the icsid Convention and its related Arbitration Rules, there are still various vague or incomplete regulations that need to be clarified or complemented by legal interpretation and hence have considerable potential to produce inconsistencies. This is revealed when looking at such procedural aspects as provisional measures (aa.), arbitrator disqualifications (bb.), cost allocation (cc.), and annulment review (dd.). aa

Provisional Measures

icsid Convention Art. 47988 endows arbitral tribunals with the power to grant provisional measures. The preconditions for adopting such measures, ex officio or on the parties’ initiative, are prima facie jurisdiction to hear the case, circumstances that require provisional measures, and a right to be preserved.989 984 For the text of icsid Convention Art. 44, see fn. 230. 985 Schreuer et al., icsid Commentary 683 (Art. 44, para. 33). 986 See icsid Convention Art. 44. 987 Schreuer et al., icsid Commentary 689 (Art. 44, para. 55). 988 For icsid Convention Art. 47, see fn. 308. 989 Moritz Keller & Carsten Wendler-López, Is there a Common Approach to Provisional Measures? – An Overview of icsid Case Law, 9 SchiedsVZ 183, 183–194 (2011). The article served as a guidance for the following elaborations and in particular for the case law and literature cited in illustration thereof.

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One issue that has generated conflicting case law relates to the circumstances that justify the adoption of provisional measures. icsid tribunals concur on the criteria of “urgency” and “necessity,” but disagree about the conditions to be fulfilled in order to establish the latter criterion. While some tribunals required an “irreparable harm” that could not be compensated by a subsequent award of damages,990 others rejected this approach and contented themselves with the finding of “significant harm” by weighing the interests of both sides.991

990 See e.g. Tokios Tokéles v. Ukraine, icsid Case No. arb/02/18, Procedural Order No. 3 (18 January 2005) [hereinafter Tokios Tokéles v. Ukraine (Procedural Order No. 3)], para. 8; Plama Consortium Ltd. v. Republic of Bulgaria, icsid Case No. arb/03/24, Order on Provisional Measures (6 September 2005) [hereinafter Plama Consortium v. Bulgaria (Order on Provisional Measures)], para. 38; Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, icsid Case No. arb/06/1, Decision on Provisional Measures (17 August 2007) [hereinafter Occidental v. Ecuador (Decision on Provisional Measures)], paras. 59, 61, 87; cemex Caracas Investments b.v. and cemex Caracas ii Investments b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/08/15, Decision on Provisional Measures (3 March 2010) [hereinafter Cemex v. Venezuela (Decision on Provisional Measures)], para. 44; Tethyan Copper Company Pty Ltd. v. Islamic Republic of Pakistan, icsid Case No. arb/12/1, Decision on Provisional Measures (13 December 2012) [hereinafter Tethyan Copper v. Pakistan (Decision on Provisional Measures)], para. 146; Caratube International Oil Company llp and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13, Decision on Provisional Measures (4 December 2014) [hereinafter Caratube/Hourani v. Kazakhstan (Decision on Provisional Measures)], paras. 116–120. 991 See e.g. City Oriente Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. arb/06/21, Decision on Revocation of Provisional Measures (13 May 2008) [hereinafter City Oriente v. Ecuador (Decision on Revocation of Provisional Measures)], para. 72; Railroad Development Corporation v. Republic of Guatemala, icsid Case No. arb/07/23 (cafta-dr), Decision on Provisional Measures (15  ­October 2008) [hereinafter Railroad Development v. Guatemala (Decision on Provisional Measures)], para. 34; Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador, icsid Case No. arb/08/6, Decision on Provisional Measures (8 May 2009) [hereinafter Perenco v. Ecuador (Decision on Provisional Measures)], para. 43; Burlington Resources Inc. v. Republic of Ecuador, icsid Case No. arb/08/5 (formerly Burlington Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Procedural Order No. 1 (29 June 2009) [hereinafter Burlington v. Ecuador (Procedural Order No. 1)], para. 82; Burimi srl and Eagle Games sh.a v. Republic of Albania, icsid Case No. arb/11/18, Procedural Order No. 2 on Provisional Measures Concerning Security for Costs (3 May 2012) [hereinafter Burimi v. Albania (Procedural Order No. 2)], para. 35; png Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, icsid Case No. arb/13/33, Decision on Provisional Measures (21 January 2015) [hereinafter png v. Papua New Guinea (Decision on Provisional

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As to the right in need of preservation, there is dissent on the standard applicable to the right to non-aggravation of the dispute. On the one hand, some arbitral tribunals have supported a limited understanding according to which parties would only be protected from actions that make the resolution of the dispute more difficult.992 On the other hand, some arbitral tribunals have ruled in favour of a wider understanding according to which protection may be granted even against actions that aggravate the dispute in a general sense.993 A further division came up as to the factors to be considered when icsid t­ ribunals are requested to preserve the exclusivity of their proceeding by means of provisional measures: while some of the arbitral tribunals took a relatively broad approach as to the proximity of parallel proceedings,994 others limited their measures to proceedings with a high degree of connection to the pending ­i csid dispute, i.e. identical parties and/or subject matter.995 When

992

993

994

995

Measures)], para. 109; Hydro S.r.l and others v. Republic of Albania, icsid Case No. arb/15/28, Decision on Provisional Measures (3 March 2016) [hereinafter Hydro v. Albania (Decision on Provisional Measures)], paras. 3.31–3.41. See e.g. Amco v. Indonesia (i) (Decision on Provisional Measures), 1 icsid Report 412 (para. 5); Plama Consortium v. Bulgaria (Order on Provisional Measures), para. 45; Occidental v. Ecuador (Decision on Provisional Measures), para. 99. See e.g. Victor Pey Casado and President Allende Foundation v. Republic of Chile, icsid Case No. arb/98/2, Decision on Provisional Measures (25 September 2001) [hereinafter Pey Casado v. Chile (Decision on Provisional Measures)], paras. 73, 77; Oriente v. E­ cuador (­Decision on Revocation of Provisional Measures), para. 55; Burlington v. Ecuador (Procedural Order No. 1), paras. 61–68; Quiborax s.a., Non Metallic Minerals s.a. and ­Allan Fosk Kaplún v. Plurinational State of Bolivia, icsid Case No. arb/06/2, Decision on ­Provisional Measures (26 February 2010) [hereinafter Quiborax v. Bolivia (­Decision on Provisional Measures)], paras. 134–137. See e.g. sgs Société Générale de Surveillance s.a. v. Islamic Republic of Pakistan, icsid Case No. arb/01/13, Procedural Order No. 2 (16 October 2002) [hereinafter sgs v. Pakistan (Procedural Order No. 2)], para. 53 (“any other party”); Tokios Tokéles v. Ukraine (Procedural Order No. 3), para. 11 (“relate to the subject matter”). See e.g. Československa obchodní banka, a.s. (csob) v. Slovak Republic, icsid Case No. arb/97/4, Procedural Order No. 4 (11 January 1999) [hereinafter csob v. Slovak Republic (Procedural Order No. 4)], 2; Plama Consortium v. Bulgaria (Order on Provisional Measures), para. 43; Pey Casado v. Chile (Decision on Provisional Measures), para. 40; Perenco v. Ecuador (Decision on Provisional Measures), para. 61; Quiborax v. Bolivia (Decision on Provisional Measures), paras. 127–131; Caratube/Hourani v. Kazakhstan (Decision on Provisional Measures), paras. 139–140; Teinver s.a. and others v. Argentine Republic, icsid Case No. arb/09/1, Decision on Provisional Measures (8 April 2016) [hereinafter Teinver v. Argentina (Decision on Provisional Measures)], paras. 192–197. For an overview of key cases dealing with the protection of icisid jurisdictional exclusivity, see Rodrigo Gil, icsid Provsional Measures to Enjoin Parallel Domestic Litigation, 3 World Arb. & Med. Rev. 535, 550 et seq. (2009).

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it comes to the question of the legal authority of a provisional measure, even if it seems well established by case law and scholarly writing that these are not merely recommendations, but rather have compulsory effect,996 there are 996 See e.g. Emilio Agustín Maffezini v. Kingdom of Spain, icsid Case No. arb/97/7, Decision on Provisional Measures (28 October 1999) [hereinafter Maffezini v. Spain (Decision on Provisional Measures)], para. 9; Pey Casado v. Chile (Decision on Provisional Measures), paras. 17–26; Tokios Tokéles v. Ukraine, icsid Case No. arb/02/18, Procedural Order No. 1 (1 July 2003) [hereinafter Tokios Tokéles v. Ukraine (Procedural Order No. 1)], para. 4; Occidental v. Ecuador (Decision on Provisional Measures), para. 58; City Oriente Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. arb/06/21, Decision on Provisional Measures (19 November 2007) [hereinafter City Oriente v. Ecuador (Decision on Provisional Measures)], para. 52; Perenco v. Ecuador (Decision on Provisional Measures), para. 66; Burlington v. Ecuador (Procedural Order No. 1), para. 49; Tethyan Copper v. Pakistan (Decision on Provisional Measures), para. 120; rsm Production Corporation v. Saint Lucia, icsid Case No. arb/12/10, Decision on Request for Security for Costs (13 August 2014) [hereinafter rsm Production Corp. v. Saint Lucia (Decision on Request for Security for Costs)], para. 49; png v. Papua New Guinea (Decision on Provisional Measures), para. 102; Transglobal Green Energy, llc and Transglobal Green Energy de Panama, s.a. v. Republic of Panama, icsid Case No. arb/13/28, Decision on Provisional Measures Relating to Security for Costs (21 January 2016) [hereinafter Transglobal Green Energy v. Panama (Decision on Provisional Measures)], para. 25; Valle Verde Sociedad Financiera s.l. v. Bolivarian Republic of Venezuela, icsid Case No. arb/12/18, Decision on Provisional Measures (25 January 2016) [hereinafter Valle Verde v. Venezuela (Decision on Provisional Measures)], para. 75; United Utilities (Tallinn) b.v. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, icsid Case No. arb/14/24, Decision on Provisional Measures (16 May 2016) [hereinafter United Utilities v. Estonia (Decision on Provisional Measures)], para. 109; arguably also Spyridon Roussalis v. Romania, icsid Case No. arb/06/1, Decision on Provisional Measures (2 July 2009), unpublished [hereinafter Spyridon v. Romania (Decision on Provisional Meassures)]. For an overview and comments on the icsid decisions in support of this position, see Schreuer et al., icsid Commentary 764–765 (Art. 47, paras. 15–22). See also Charles N. Brower et al., The Power and Effectiveness of Pre-Arbitral Provisional Relief – The scc Emergency Arbitrator in Investor-State Disputes, in Between East and West: Essays in Honour of Ulf Franke 71 (Kaj Hobér ed., 2010). For scholarly positions in support of this view, see e.g. Zannis Mavrogordato & Gabriel Sidere, The Nature and Enforceability of icsid Provisional Measures, 75 Arb. 38, 41, 45 (2009); Francisco Orrego-Vicuña, The Evolving Nature of Provisional Measures, in Liber Amicorum Bernardo Cremades 950–952 (Miguel Ángel Fernández-Ballesteros ed., 2010); Ina Gätzschmann, Der vorläufige Rechtsschutz in Schiedsverfahren nach der icsid-Konvention 222–253, esp. 252–253 (Nomos, Baden-Baden, 2015).

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also opposing commentators’ views as well as some icsid cases that appear to imply that they are non-binding.997 As both sides have valid arguments for their respective approach,998 the evolution of a consistent and reliable jurisprudence is particularly complicated in this regard. bb

Disqualification of Arbitrators

icsid Convention Art. 57999 establishes the right of the disputing parties to challenge arbitrators appointed to a tribunal or a committee “for manifest 997 See e.g. csob v. Slovak Republic (Procedural Order No. 4), 2 (“recommends”); Československa obchodní banka, a.s. (csob) v. Slovak Republic, icsid Case No. arb/97/4, Procedural Order No. 5 (1 March 2000) [hereinafter csob v. Slovak Republic (Procedural Order No. 5)], 3 (“invites”); Azurix v. Argentina (Decision on Jurisdiction), para. 14 (“recommend,” “propose”); Bayindir v. Pakistan (Decision on Jurisdiction), para. 46 (“recommends”); Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, icsid Case No. arb/05/22, Procedural Order No. 1 (31 March 2006) [hereinafter Biwater Gauff v. Tanzania (Procedural Order No. 1)], paras. 88, 98 (“recommends”); Saipem v. Bangladesh (Decision on Jurisdiction), 49 (“recommendation”). For scholarly positions that indicate support for this view, see Jörn Griebel, Internationales Investitionsrecht 140 (München, C.H. Beck, 2008); Julian D.M. Lew, icsid Arbitration: Special Features and Recent Developments, in Arbitrating Foreign Investment Disputes 272 (Norbert Horn & Stephan Kröll eds., 2004); Torsten Lörcher, Neue Verfahren der Internationalen Streiterledigung 353 (Peter Lang, Frankfurt/Main, 1999); Schreuer et al., icsid Commentary 764 (Art. 47, para. 16). 998 Arguments raised in favour of a non-binding effect refer, inter alia, to the drafting history of icsid Convention Art. 47, since it would indicate that a large majority of the delegates consciously opted for the recommendatory nature of provisional measures; see Schreuer et al., icsid Commentary 764 (Art. 47, paras. 15–16). For an overview of the respective drafting history, Charles N. Brower & Ronald E.M. Goodman, Provisional Measures and the Protection of icsid Jurisprudential Exclusivity against Municipal Proceedings, 6 icsid Rev. – filj 431, 440–443 (1991). Proponents of a binding effect, by contrast, argue with the telos of provisional measures and draw analogies with the interpretation of Art. 41 of the icj Statute by the icj (see e.g. Pey Casado v. Chile (Decision on Provisional Measures), paras. 19–20, referring to LaGrand (Germany v. us), icj, Judgment (27 June 2001), icj Rep. (2001) 466); see Schreuer et al., icsid Commentary 765 (Art. 47, para. 19). 999 icsid Convention Art. 57: “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.”

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lack of the qualities required by paragraph (1) of Article 14,”1000 i.e. “high moral character and recognized competence in the fields of law, commerce, industry or finance” and reliability as to the “exercise [of] independent judgment.” Tendencies towards inconsistency can be found on various issues.1001 One example is the criterion of a “manifest lack” of the said qualities, which has been interpreted by some arbitral tribunals as requiring that “this lack [of impartiality and independence] be clearly and objectively established”1002 1000 icsid Convention Art. 14 (1): “Persons designated to serve on the Panels shall be persons of high moral character and recognized competence in the fields of law, commerce, industry or finance, who may be relied upon to exercise independent judgment. Competence in the field of law shall be of particular importance in the case of persons on the Panel of Arbitrators.” 1001 For an overview of the disqualification case law until early 2010, see Dimsey, The Resolution of International Investment Disputes 134–135 (including annex). For an overview of the disqualification case law until late 2012, see Saskia Klatte, Unabhängigkeit und Unparteilichkeit internationaler Schiedsrichter im zwischenstaatlichen und gemischten Verfahren 108–161 (Herbert Utz Verlag, München, 2014). On the topic of arbitrator challenges in icsid arbitration, see James Crawford, Challenges to Arbitrators in icsid Arbitration, in Practising Virtue – Inside International Arbitration 596–606 (David D. Caron et al. eds., 2015). On the topic of arbitrator challenges in general, see Karel Daele, Challenge and Disqualification of Arbitrators in International Arbitration (Wolters Kluwer Law and Business, Alphen aan den Rijn, 2012); Fernando A. Tupa, Arbitrator Challenges in Investment Arbitration: Is an Overhaul Needed?, in Investment Treaty Arbitration and International Law 29–66 (Ian A. Laird et al. eds., 2015); Charles B. Rosenberg, To Use a Cannon to Kill a Mosquito: Why the Increase in Arbitrator Challenges in Investment Arbitration Does Not Warrant a Complete Overhaul of the System, in Investment Treaty Arbitration and International Law 3–27 (Ian A. Laird et al. eds., 2015). 1002 Participaciones Inversiones Portuarias Sàrl v. Gabonese Republic, icsid Case No. arb/08/17, Decision on the Proposal to Disqualify an Arbitrator (12 November 2009) [hereinafter Participaciones Inversiones Portuarias v. Gabon (Decision on Disqualification)], para. 22; opic Karimum Corporation v. Bolivarian Republic of Venezuela, icsid Case No. arb/10/14, Decision on the Proposal to Disqualify Prof. Philippe Sands, Arbitrator (5 May 2011) [hereinafter opic Karimum v. Venezuela (Decision on Disqualification)], para. 45; Universal Compression International Holdings, slu v. Bolivarian Republic of Venezuela, icsid Case No. arb/10/9, Decision on the Proposal to Disqualify Prof. Brigitte Stern and Prof. Guido Santiago Tawil, Arbitrators (20 May 2011) [hereinafter Universal Compression v. Venezuela (Decision on Disqualification)], para. 71; Getma International and others v. Republic of Guinea, icsid Case No. arb/11/29, Decision on the Proposal to Disqualify Mr. Bernardo M. Cremades, Arbitrator (28 June 2012) [hereinafter Getma v. Equatorial Guinea (Decision on Disqualification)], para. 60.

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and which stands in opposition to the interpretation of other arbitral tribunals who considered an objective “appearance of bias” as sufficient.1003 ­Arbitral See also, although taking a little less severe approach requiring that the challenging party must establish the facts which make the alleged bias “highly probable,” Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Decision on the Proposal to Disqualify an Arbitrator (24 June 1982), not published [hereinafter Amco v. Indonesia (i) (Decision on Disqualification)], 8; Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. Argentine Republic (and joined case awg Group Ltd. v. Argentine Republic), icsid Case No. arb/03/19 (formerly Aguas Argentinas, s.a., Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. Argentine Republic), Decision on Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (12 May 2008) [hereinafter Suez/Vivendi v. Argentina (Decision on Disqualification ii)], para. 41; Tidewater Investment srl and Tidewater Caribe, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. arb/10/5, Decision on the Proposal to Disqualify Prof. Brigitte Stern, Arbitrator (22 December 2010) [hereinafter Tidewater v. Venezuela (Decision on Disqualification)], paras. 39–40; Nations Energy Inc. and others v. Panama, icsid Case No. arb/06/19, Decision on the Proposal to Disqualify Dr. Stanimir A. Alexandrov, Annulment Proceeding (7 September 2011) [hereinafter Nations Energy v. Panama (Decision on Disqualification)], paras. 31, 65–66; ConocoPhillips Petrozuata b.v., ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Decision on the Proposal to Disqualify L. Yves Fortier, q.c., Arbitrator (27 February 2012) [hereinafter ConocoPhilips v. Venezuela (Decision on Disqualification i)], para. 56. 1003 Hrvatska Elektroprivreda d.d. v. Slovenia, icsid Case No. arb/05/24, Tribunal’s Ruling regarding the participation of David Mildon q.c. in further stages of the proceedings (6 May 2008) [hereinafter Hrvatska Elektroprivreda v. Slovenia (Decision on Disqualification)], para. 22; edf International, s.a., saur International, s.a. and Léon Participations Argentinas, s.a. v. Argentine Republic, icsid Case No. arb/03/23, Challenge Decision Regarding Prof. Gabrielle Kaufmann-Kohler (25 June 2008) [hereinafter edf International v. Argentina (Decision on Disqualification)], para. 64; Perenco Ecuador Ltd. v. Ecuador and Empresa Estatal Petroleos del Ecuador, icsid Case No. arb/08/6, Decision on Challenge to Arbitrator (8 December 2009) [hereinafter Perenco v. Ecuador (Decision on Disqualification)], paras. 43–44; Urbaser s.a. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia ur Partzuergoa v. Argentine Republic, icsid Case No. arb/07/26, Decision on Claimant’s Proposal to Disqualify Prof. Campbell McLachlan, Arbitrator (12 August 2010) [hereinafter Urbaser v. Argentina (Decision on Disqualification)], para. 43. See also the more recent decisions taken by the Chairman of the Administrative Council, which “do not require proof of actual dependence or bias; rather it is sufficient to establish the appearance of dependence or bias,” see Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, icsid Case No. arb 12/20, Decision on the Parties’ Proposal to Disqualify a Majority of the Tribunal (12 November 2013) [hereinafter Blue Bank v. Venezuela (Decision on Disqualification)], paras. 59, 69; Burlington Resources Inc. v. Republic of Ecuador, icsid Case No. arb/08/5 (formerly Burlington

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tribunals also considered the question of whether the existence of a prior lawyer-client relationship would trigger a disqualification of an arbitrator and reached conflicting results.1004 Moreover, icsid tribunals have expressed ­Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)), Decision on the Proposal for Disqualification of Prof. Francisco Orrego Vicuña (13 December 2013) [hereinafter Burlington Ressources v. Ecuador (Decision on Disqualification)], paras. 66, 80; Repsol, s.a. and Repsol Butano, s.a. v. Argentine Republic, icsid Case No. arb/12/38, Decision on the Proposal to Disqualify a Majority of the Tribunal (13 December 2013) [hereinafter Repsol v. Argentina (Decision on Disqualification)], para. 71; Abaclat and Others v. Argentine Republic, icsid Case No. arb/07/5 (formerly Giovanna a Beccara and Others v. Argentine Republic), Decision on the Proposal to Disqualify a Majority of the Tribunal (4 February 2014) [hereinafter Abaclat v. Argentina (Decision on Disqualification)], para. 76; ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Decision on the Proposal to Disqualify a Majority of the Tribunal (4 May 2014) [hereinafter Conoco Phillips v. Venezuela (Decision on Disqualification ii)], para. 52; ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Decision on the Proposal to Disqualify a Majority of the Tribunal (1 July 2015) [hereinafter Conoco Phillips v. Venezuela (Decision on Disqualification iii)], para. 83. For decisions by the unchallenged arbitrators taking the same approach, see e.g. Caratube International Oil Company llp and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. arb/13/13, Decision on the Proposal for Disqualification of Mr. Bruno Boesch (20 March 2014) [hereinafter Caratube/Hourani v. Kazakhstan (Decision on Disqualification)], para. 57; ConocoPhillips Petrozuata b.v., ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/30, Decision on the Proposal to Disqualify L. Yves Fortier, q.c., Arbitrator (26 July 2016) [hereinafter ConocoPhilips v. Venezuela (Decision on Disqualification vi)], para. 12. Other tribunals have followed a similar approach, but added the requirements that the challenging party must establish facts entailing a “readily apparent and reasonable doubt,” see e.g. Compañía de Aguas del Aconquija s.a. and Vivendi Universal v. Argentine Republic, icsid Case. No. arb/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and Compagnie Générale des Eaux v. Argentine Republic), Decision on the Challenge to the President of the Committee (3 October 2001) [hereinafter Vivendi v. Argentina (Decision on Disqualification)], para. 25; sgs Société Générale de Surveillance s.a. v. Islamic Republic of Pakistan, icsid Case No. arb/01/13, Decision on Claimant’s Proposal to Disqualify Arbitrator (19 December 2002) [hereinafter sgs v. Pakistan (Decision on Disqualification)] 8 icsid Reports 402 (2005); Alpha Projektholding GmbH v. Ukraine, icsid Case No. arb/07/16, Decision on Respondent’s Proposal to Disqualify Arbitrator Dr. Yoram Turbowicz (19 March 2010) [hereinafter Alpha Projektholding v. Ukraine (Decision on Disqualification)], para. 37. 1004 For a decision considering the mere existence of such professional relationship as insufficient, see Amco v. Indonesia (i) (Decision on Disqualification), 6, stating that an arbitrator cannot be disqualified “for the only reason that some relationship existed between that

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diverging views on the issues of whether multiple appointments of the same arbitrator by the same parties would call into question an arbitrator’s impartiality or independence1005 and of whether an arbitrator should disclose even trivial facts.1006 cc

Allocation of the Cost of Proceedings

According to icsid Convention Art. 61 (2),1007 the allocation of the cost of proceedings, including the “expenses incurred by the parties, (…) the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre” is left to the full discretion of the arbitral tribunal. No default rule, such as the traditional “pay-your-own-way principle” or the “costfollow-the-event principle,” is provided.1008 Only the travaux préparatoires of

1005

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1007 1008

person and the party, whatever the character– even professional – or the extent of said relations.”, referred to in Michael Tupman, Challenge and Disqualification of Arbitrators in International Commercial Arbitration, 38 Int’l & Comp. L. Q. 26, 45 (1989). For a decision considering the mere existence of such professional relationship as sufficient, see Vivendi v. Argentina (Decision on Disqualification), para. 22: “That the advice was given on an unrelated matter, though a relevant factor, can hardly be sufficient. The fact remains that a lawyer-client relationship existed between the claimant and the arbitrator personally during the pendency of the arbitration; this must surely be a sufficient basis for a reasonable concern as to independence, unless the extent and content of the advice can really be regarded as minor and wholly discrete.” For decisions holding that there is no potential conflict of interest in unrelated cases, see Tidewater v. Venezuela (Decision on Disqualification), paras. 58–64; Universal Compression v. Venezuela (Decision on Disqualification), paras. 75–79. For a decision holding that there is a potential conflict of interest in unrelated cases, see opic Karimum v. Venezuela (Decision on Disqualification), para. 47. For a decision in favour of such disclosure, see Alpha Projektholding v. Ukraine (Decision on Disqualification), para. 66. For a decision against such disclosure, see Nations Energy v. Panama (Decision on Disqualification), para. 76. For the text of icsid Convention Art. 61 (2), see fn. 418. The “pay-your-own-way principle”, also referred to as the American Rule, generally leads to an unadjusted cost order. The “cost-follow-the-event principle,” also referred to as the English Rule, may lead to a fully/partially adjusted cost order or, due to mixed results, to a de facto unadjusted cost order. See e.g. Arthur W. Rovine, Allocation of Costs in Recent icsid Awards, in Practising Virtue – Inside International Arbitration ­659–660 (David D. Caron et al. eds., 2015); Kateryna Bondar, Allocation of costs in investorState and commercial arbitration: towards a harmonized approach, Arb. Int’l 45, 48–53 (2016). Examples of a de facto unadjusted cost order may be found in Metalpar s.a. and Buen Aire s.a. v. Argentine Republic, icsid Case No. arb/03/5, Award (6 June 2008) [hereinafter

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the i­ csid Convention contain some basic principles,1009 but their guidance has not yet led to a consistent and reliable arbitral jurisprudence. Instead, the decisions on cost allocation rendered by icsid tribunals often appear arbitrary. According to studies analysing the allocation of cost in icsid arbitration,1010 arbitral tribunals rendered unadjusted cost orders, i.e. cost orders splitting

Metalpar v. Argentina (Award)], para. 234; Pantechniki v. Albania (Award), paras. 103–104; Impregilo S.p.A. v. Argentine Republic, icsid Case No. arb/07/17, Award (21 June 2011) [hereinafter Impregilo v. Argentina (Award)], para. 385. For further examples, see Rovine, Allocation of Costs 673–675. For reform proposals for the icsid rules on cost allocation, see Matthew Hodgson, Costs in Investment Treaty Arbitration: The Case for Reform, 11 tdm 1, 6–9 (2014). For discussions on the pros and cons of the different approaches, see Baiju S. Vasani & Anastasiya Ugale, Cost allocation in investment arbitration: Back toward diversification (29 July 2013), Columbia fdi Perspectives No. 100 (2013); James Nicholson & John Gaffney, Cost allocation in investment arbitration: Forward toward incentivization (9 June 2014), Columbia fdi Perspectives No. 123 (2014); Inna Uchkunova & Oleg Temnikov, Allocation of Cost in icsid Arbitration, Kluwer Arbitration Blog (3 December 2014). 1009 Schreuer et al., icsid Commentary 1236 (Art. 61, para. 44), with further elaborations on these principles, which are oriented at e.g. a party’s procedural misconduct or its success on the merits. 1010 Lucy Reed, Allocation of Costs in International Arbitration, 26 icsid Rev. – filj 76, 76–87 (2011). The study consists of a review of 67 public icsid decisions on cost rendered between January 2004 and January 2010. The ratio is 64% of unadjusted cost orders to 36% of adjusted cost orders. Matthew Hodgson & Chopra Chand, icsid tribunals’ reasoning on costs: A survey of 145 public icsid awards up to 31 March 2014 (2014), available at (last visited August 2016). The study investigated 145 icsid awards rendered up to May 2014. The ratio is 63% of unadjusted cost orders to 37% of adjusted cost orders. Taking into account the de facto unadjusted cost orders based on an implicit application of the “cost-follow-theevent principle,” the study concludes that the modern approach of the “cost-follow-theevent principle” grew in popularity over the last years. In concrete figures, it finds that a total of 55% of the cases was based on the said approach (17%) or on a variant thereof (38%), namely the “relative success” approach, which takes into consideration the parties’ success on a disputed issue. Rovine, Allocation of Costs 658–688. The study investigated 88 public icsid awards rendered between June 2006 and December 2013. The ratio is 59% of unadjusted cost orders to 34% of adjusted cost orders (plus 7% of unclear cases). See also the earlier study Susan D. Franck, Empirically Evaluating Claims about Investment Treaty Arbitration, 86 n.c.l. Rev. 1, 69 (2007), according to which the ratio up to 2006 was 76% of unadjusted cost orders to 24% of adjusted cost orders.

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arbitration cost equally between the parties and ordering each party to pay for its own legal cost, in approx. 2/3 of the cases1011 and adjusted cost orders, 1011 See e.g. Industria Nacional de Alimentos, s.a. and Indalsa Perú, s.a. (formerly Empresas Lucchetti, s.a. and Lucchetti Perú, s.a.) v. Republic of Peru, icsid Case No. arb/03/4, Award (7 February 2005) [hereinafter Lucchetti v. Peru (Award)], p. 25; cms v. Argentina (Award), para. 138; Salini Costruttori S.p.A. and Italstrade S.p.A. v. Hashemite Kingdom of Jordan, icsid Case No. arb/02/13, Award (31 January 2006) [hereinafter Salini v. Jordan (Award)], para. 104; mhs v. Malaysia (Decision on Jurisdiction), para. 150; Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, l.p. v. Argentine Republic, icsid Case No. arb/01/3, Award (22 May 2007) [hereinafter Enron v. Argentina (Award)], para. 453; m.c.i. Power Group l.c. and New Turbine, Inc. v. Republic of Ecuador, icsid Case No. arb/03/06, Award (31 July 2007) [hereinafter mci Power Group v. Ecuador (Award)], para. 372; Sempra Energy International v. Argentine Republic, icsid Case No. arb/02/16, Award (28 September 2007) [hereinafter Sempra v. Argentina (Award)], p. 139; Duke Energy Electroquil v. Ecuador (Award), para. 490; l.e.s.i., S.p.A. and astaldi, S.p.A. v. People’s Democratic Republic of Algeria, icsid Case No. arb/05/3, Award (12 November 2008) [hereinafter lesi astaldi v. Algeria (Award)], para. 186; tsa Spectrum de Argentina s.a. v. Argentine Republic, icsid Case No. arb/05/5, Award (19 December 2008) [hereinafter tsa Spectrum v. Argentina (Award)], para. 180; Saipem S.p.A. v. People’s Republic of Bangladesh, icsid Case No. arb/05/07, Award (30 June 2009) [hereinafter Saipem v. Bangladesh (Award)], para. 215; Azpetrol International Holdings b.v., Azpetrol Group b.v. and Azpetrol Oil Services Group b.v. v. Republic of Azerbaijan, icsid Case No. arb/06/15, Award (8 September 2009) [hereinafter Azpetrol v. Azerbaijan (Award)], para. 107; Anderson v. Costa Rica (Award), paras. 62–64; ata Construction, Industrial and Trading Company v. Hashemite Kingdom of Jordan, icsid Case No. arb/08/2, Award (18 May 2010) [hereinafter ata Construction v. Jordan (Award)], p. 68; Tza Yap Shum v. Republic of Peru, icsid Case No. arb/07/6, Award (7 July 2011) [hereinafter Tza Yap Shum v. Peru (Award)], paras. 293–302; Rafat Ali Rizvi v. Republic of Indonesia, icsid Case No. arb/11/13, Decision on Jurisdiction (16 July 2013) [hereinafter Rizvi v. Indonesia (Decision on Jurisdiction)], para. 232. Dividing arbitration cost equally between the parties is a particular trend in annulment proceedings, as in e.g. Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, icsid Case No. arb/81/2, Decision of the Ad Hoc Committee on Annulment (3 May 1985) [hereinafter Klöckner v. Cameroon (Decision on Annulment)], para. 180; Wena Hotels Ltd. v. Arab Republic of Egypt, icsid Case No. arb/98/4, Decision of the Ad Hoc Committee on Annulment (5 February 2002) [hereinafter Wena Hotels v. Egypt (Decision on Annulment)], para. 112; Continental Casualty Company v. Argentine Republic, icsid Case No. arb/03/9, Decision of the Ad hoc Committee on Annulment (16 September 2011) [hereinafter Continental Casualty v. Argentina (Decision on Annulment)], paras. 280–286; see Ian A. Laird et al., International Investment Law and Arbitration: 2011 in Review, in Yearbook on International Investment Law and Policy 2011–2012 116–117 (Karl P. Sauvant ed., 2013); Matthew Hodgson, Counting the costs of investment treaty arbitration, gar News (24 March 2014).

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i.e. cost orders providing for a cost allocation in proportion to the outcome, in the remaining approx. 1/3 of the cases.1012 1012 For examples of a fully adjusted cost order imposing the cost in their entirety on the unsuccessful party, see e.g. cdc v. Seychelles (Decision on Annulment), paras. 88–91; Telenor Mobile Communications a.s. v. Republic of Hungary, icsid Case No. arb/04/15, Award (13 September 2006) [hereinafter Telenor v. Hungary (Award)], paras. 72 et seq., 103–107; adc v. Hungary (Award), paras. 536–543; Vivendi v. Argentina (ii) (Award), para. 10.2; Phoenix v. Czech Republic (Award), paras. 142, 148–152; Europe Cement Investment & Trade s.a. v. Republic of Turkey, icsid Case No. arb(af)/07/2, Award (13 August 2009) [hereinafter Europe Cement v. Turkey (Award)], paras. 175, 185–186; Cementownia “Nowa Huta” s.a. v. Republic of Turkey, icsid Case No. arb(af)/06/2, Award (17 September 2009) [hereinafter Cementownia v. Turkey (Award)], paras. 158, 177–178; Ioannis Kardassopoulos v. Republic of Georgia, icsid Case No. arb/05/18, Award (3 March 2010) [hereinafter Kardassopoulos v. Georgia (Award)], paras. 687–692; gea Group v. Ukraine (Award), paras. 364–366; Iberdrola Energía s.a. v. Republic of Guatemala, icsid Case No. arb/09/5, Award (17 August 2012) [hereinafter Iberdrola Energía v. Guatemala (Award)], paras. 515–518; referred to in Reed, Allocation of Costs in International Arbitration 76, 80–84; Rovine, Allocation of Costs 675–680, 687. In some of these cases, tribunals seem to be more inclined to burden the losing party with payment of the full cost if it was engaged in a form of “reprehensible misconduct”; see Reed, Allocation of Costs in International Arbitration 76, 84. For further elaborations on cost orders taking into account bad faith/misconduct of the parties, see Rovine, Allocation of Costs 670–671, 680–681; Bondar, Allocation of costs 45, 54–56. For examples of a partially adjusted cost order proportionate to the the degree of a party’s partial successfulness (also called cost allocation pro rata), see e.g. Československa obchodní banka, a.s. (csob) v. Slovak Republic, icsid Case No. arb/97/4, Award (29 December 2004) [hereinafter csob v. Slovak Republic (Award)], paras. 369–372; Champion Trading Company and Ameritrade International, Inc. v. Arab Republic of Egypt, icsid Case No. arb/02/9, Award (27 October 2006) [hereinafter Champion Trading v. Egypt (Award)], paras. 165–178; pseg Global Inc. and Konya Ilgin Elektrik Üretim Ve Ticaret Ltd. Sirketi v. Republic of Turkey, icsid Case No. arb/02/5, Award (19 January 2007) [hereinafter pseg v. Turkey (Award)], paras. 352–353; oko Pankki Oyj v. Estonia (Award), paras. 368–375; Desert Line Projects llc v. Republic of Yemen, icsid Case No. arb/05/17, Award (6 February 2008) [hereinafter Desert Line v. Yemen (Award)], paras. 302–304; Pey Casado v. Chile (Award), p. 232; Rumeli v. Kazakhstan (Award), para. 819; edf (Services) Ltd. v. Romania, icsid Case No. arb/05/13, Award (8 October 2009) [hereinafter edf v. Romania (Award)], paras. 321–329; Libananco Holdings Co. Ltd. v. Republic of Turkey, icsid Case No. arb/06/8, Award (2 September 2011) [hereinafter Libananco v. Turkey (Award)], paras. 557–569; Spyridon Roussalis v. Romania, icsid Case No. arb/06/1, Award (7 December 2011) [hereinafter Spyridon v. Romania (Award)], paras. 881–882; Caratube v. Kazakhstan (Award), paras. 485–495; Swisslion Doo Skopje v. Former Yugoslav Republic of Macedonia, icsid Case No. arb/09/16, Award (6 July 2012) [hereinafter Swisslion v. Macedonia (Award)], paras. 354–357; referred to in John Yukio Gotanda, Consistently Inconsistent: The Need for Predictability in Awarding Costs and Fees in Investment Treaty Arbitrations, 28 icsid Rev. – filj 420, 430–431 (2013); Rovine, Allocation of Costs 675–680, 687.

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Then again, in some cases, only the tribunal’s cost were awarded and each party had to bear its own cost,1013 or, vice versa, the unsuccessful party had to pay only the opposing party’s cost, while the tribunal’s cost were split ­equally.1014 No uniform, generally accepted and hence reliable approach in awarding fees and expenses is perceivable so far.1015 dd

Annulment Review

icsid Convention Art. 52 (1)1016 governs annulment reviews and sets forth the grounds on which an annulment of an icsid award may be based. The use of this review remedy and in particular the interpretation of the annulment grounds has so far induced a considerable number of conflicting decisions. While a large part of the ad hoc annulment committees stayed within the limited confines of this mechanism and construed the grounds for annulment restrictively as covering solely fundamental violations of procedural integrity, a still significant number of them extended the scope of review to substantive issues of fact and law in an appellate-like manner.1017 The cases that adopted these diverging approaches and that lead to inconsistent annulment jurisprudence will be analysed in detail in the following section. b Example in Detail: Annulment Proceedings A relatively recent series of annulment decisions is an illustrative and serious example of how interpretative deficiencies in the review phase of an arbitral proceeding may contribute to inconsistencies in icsid jurisprudence. Before addressing and evaluating the corresponding case law in detail (bb. and cc.), it seems advisable to briefly expound the concept and function of the icsid annulment system (aa.). aa

Concept and Function

Since the icsid regime is designed to preserve the finality of its awards,1018 icsid Convention Art. 53 (1) provides for their binding effect upon parties 1013 See e.g. Siemens v. Argentina (Award), para. 402; Bernardus Henricus Funnekotter and others v. Republic of Zimbabwe, icsid Case No. arb/05/6, Award (22 April 2009) [hereinafter Funnekotter v. Zimbabwe (Award)], para. 147, referred to in Gotanda, Need for Predictability in Awarding Costs and Fees 420, 432. 1014 See e.g. Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, icsid Case No. arb/05/15, Award (1 June 2009) [hereinafter Siag v. Egypt (Award)], paras. 630–631, referred to in id. 1015 Id. at 433. 1016 For the text of icsid Convention Art. 52 (1), see fn. 374. 1017 For the corresponding icsid annulment case law, see below Ch. 2.E.II.2.b.bb. 1018 Georges R. Delaume, The Finality of Arbitration Involving States: Recent Developments, 5 Arb. Int’l 21, 29 (1989).

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and prohibits submitting them “to any appeal or to any other remedy except those provided for in this Convention.”1019 Nonetheless, the parties are not entirely unprotected against defective or arbitrary awards. The self-contained review system of the icsid Convention foresees several remedies to ensure a minimum of correctness of a decision and amongst them, the annulment mechanism is the most drastic and popular means.1020 According to icsid Convention Art. 52 (1),1021 a request for annulment may be filed with an ad hoc committee of three persons appointed by the Chairman of the Administrative Council on specific and limited grounds. If a violation of one or more of these grounds is found, the ad hoc committee is authorised to annul the award. Annulment review is thus meant to provide corrective relief in case of severe violations of fundamental, mainly procedural principles and policies, and, at the same time, to preserve the finality of a ruling in all possible respects.1022 As to the nature of annulment, it is important to bear in mind that it is distinct from appeal in two ways. The first difference lies in the result of the process. While an appeals body may modify a decision under review and hence is able to replace deficient rulings by its own views on the merits, annulment only allows invalidation in whole or in part, requiring the dispute to be resubmitted to a new arbitral tribunal.1023 The second difference relates to aspects of the award under review. Appeal can be concerned with the substantive correctness of a legal decision; annulment, by contrast, merely considers the legitimacy of the process of decision, regardless of factual or legal errors.1024 Despite, or perhaps, due to this principally narrow conception of the icsid annulment mechanism, the use of this review tool has become a serious cause 1019 1020 1021 1022

For the text of icsid Convention Art. 53 (1), see fn. 369. See also Ch. 1.C.II.5.a. For the text of icsid Convention Art. 52 (1), see fn. 374. Schreuer et al., icsid Commentary 903 (Art. 52, para. 15), with reference, inter alia, to David Caron, Reputation and Reality in the icsid Annulment Process: Understanding the Distinction between Annulment and Appeal, 7 icsid Rev. – filj 21, 49 et seq. (1992). For discussions on the tension between finality and correctness in icsid arbitration, see Doak R. Bishop & Silvia M. Marchili, Annulment under the icsid Convention 17–22 (Oxford University Press, Oxford, 2013); Shotaro Hamamoto, New Challenges for the icsid Annulment System, in International Dispute Settlement: Room for Innovations? 395–400 (Rüdiger Wolfrum & Ina Gätzschmann eds., 2012); Ian A. Laird & Rebecca Askew, Finality versus Consistency: Does Investor-State Arbitration Need an Appellate System?, 7 J. App. Pract. & Process 285, 285–302 (2005); Walsh, Substantive Review of icsid Awards 444, 444–462. 1023 Caron, Reputation and Reality 21, 23–27. 1024 Id. For further elaborations on the difference between annulment and appeal, see Bishop & Marchili, Annulment under the icsid Convention 22–24.

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for concern. The problems which have arisen within this provisional framework will be developed in the following section. bb

Case Law

Until the early years of this millennium, the history of annulment proceedings under the icsid Convention used to be classified into three “generations”:1025 the first generation in 1985/1986 comprising Klöckner v. Cameroon (i)1026 and Amco v. Indonesia (i),1027 two decisions heavily criticised for their undue extension of the scope of annulment review, the second generation represented by the more cautious mine v. Guinea,1028 Klöckner v. Cameroon (ii),1029 and Amco v. Indonesia (ii)1030 from 1989 to 1992, and the third generation with Wena ­Hotels v. Egypt1031 and Vivendi v. Argentina (i)1032 in 2002, which were lauded 1025 Terminology and categorisation according to Christoph Schreuer, Three Generations of icsid Annulment Proceedings, in Annulment of icsid Awards 17–42 (Emmanuel Gaillard & Banifatemi Yas eds., 2004); Schreuer et al., icsid Commentary 913 (Art.  52, para. 32). See also, in line with this classification scheme, Irmgard Marboe, icsid Annulment Decisions: Three Generations Revisited, in International Investment Law for the 21st Century – Essays in Honour of Christoph Schreuer 200– 220 (Christina Binder et al. eds., 2009). For a proposal of an alternative method of categorisation, see Benjamin M. Aronson, A New Framework for the icsid Annulment Jurisprudence: Rethinking the “Three Generations”, 6 Vienna J. Int’l Const. L. 3, 3–40 (2012). The author suggests to classify the icsid annulment case law according of the methods of review employed. More precisely, the decisions should be differentiated according to whether they applied a narrow construction within the limits of Art. 52 (1) (e.g. Vivendi v. Argentina (i)), a wider construction without eventual annulment (e.g. cms v. Argentina; Vivendi v. Argentina (ii)), or a wider construction with eventual annulment similar to an appellate review (e.g. Klöckner v. Cameroon (i); Amco v. Indonesia (i)). 1026 Klöckner v. Cameroon (i) (Decision on Annulment). 1027 Amco v. Indonesia (i) (Decision on Annulment). 1028 Maritime International Nominees Establishment (mine) v. Republic of Guinea, icsid Case No. arb/84/4, Decision of the Ad Hoc Committee on Annulment (22 December 1989) [hereinafter mine v. Guinea (Decision on Annulment)]. 1029 Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, icsid Case No. arb/81/2, Decision of the Ad Hoc Committee on Annulment of Resubmitted Case (17 May 1990), unpublished [hereinafter Klöckner v. Cameroon (ii) (Decision on Annulment)]. 1030 Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Decision of the Ad Hoc Committee on Annulment of Resubmitted Case (17 December 1992), unpublished [hereinafter Amco v. Indonesia (ii) (Decision on Annulment)]. 1031 Wena Hotels v. Egypt (Decision on Annulment). 1032 Vivendi v. Argentina (i) (Decision on Annulment).

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for their balanced approach between the opposing principles of finality and correctness. Since then, the annulment decisions rendered in the aftermath were designated as “modern law of annulment,”1033 including the polarising rulings in Mitchell v. Congo1034 (2006) and mhs v. Malaysia1035 (2009), as well as the cms v. Argentina1036 decision (2007). Besides some other rulings that prompted concerns, in particular the annulment decisions in Sempra v. Argentina1037 and Enron v. Argentina (2010)1038 veered away from these emerging structures: by backsliding into old habits of expanding the scope of review, they caused considerable legal uncertainty and dismay in expert circles. In view of this re-abandonment of the tried and tested higher annulment threshold, some commentators already referred to these cases as a “fourth generation” of icsid annulment awards.1039 Yet, since the end of 2010, the annulment system seems to have put itself back onto the right path. The decisions rendered from then on may hence be labelled as the second phase of “modern law of annulment” – depending on the future development of icsid annulment case law.1040 For the purpose of clarity, a chart containing an overview of the icsid ­annulment case law discussed in the following section is provided in the ­annex of this work.1041 aaa

A Difficult Start – The First Generation

The first two annulment decisions in the icsid history, Klöckner v. Cameroon (i) and Amco v. Indonesia (i), caused mainly negative reactions and led some 1033 1034 1035 1036 1037 1038 1039

Schreuer et al., icsid Commentary 913 (Art. 52, para. 33). Mitchell v. Congo (Decision on Annulment). mhs v. Malaysia (Decision on Annulment). cms v. Argentina (Decision on Annulment). Sempra v. Argentina (Decision on Annulment). Enron v. Argentina (Decision on Annulment). Promod Nair & Claudia Ludwig, icsid Annulment Awards – The Fourth Generation?, 5 gar (28 October 2010). For an overview of the icsid annulment case law from Klöckner v. Cameroon (i) until Enron v. Argentina, see Bishop & Marchili, Annulment under the icsid ­C onvention 24–35. 1040 For further research providing an extensive overview of icsid annulment case law and related questions, see Antonio Crivellaro, Annulment of icsid Awards: Back to the “First Generation”?, in Liber Amicorum en l’honneur de Serge Lazareff 145–175 ­(Laurent Lévy & Yves Derains eds., 2011); Kalnina & Di Pietro, The Scope of icsid Review: Remarks on Selected Problematic Issues of icsid Decisions 221–250. 1041 See Annex to Ch. 2 (ii) containing a chart that shows the icsid annulment case law until ­September 2016.

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commentators to call into question the effectiveness of icsid arbitration as a whole.1042 They were criticised for having undertaken a substantial review on the merits, thereby crossing the line between annulment and appeal and undermining one of the superior goals of arbitration – the finality of awards.1043 Some commentators even spoke of a “breakdown of the control mechanism in icsid arbitration”1044 or of “icsid losing its appeal.”1045 Only a few voices were raised in support of these rulings.1046 In Klöckner v. Cameroon (i), the arbitral tribunal found the host State to be relieved from its financial liabilities against the claimant-investor that arose out of several agreements on the construction and supply of a fertiliser plant in a joint venture with a Cameroonian company, since it considered the European investor as having failed to perform the contract.1047 Following an application for annulment by the unsuccessful party, the competent ad hoc committee declared the nullity of the respective award. It started its elaborations by emphasising that “the remedy provided by Article 52 (…) is in no sense an appeal against arbitral awards” and by pointing to the “very language” of the provision (e.g. “manifest excess of powers,” “serious departure from a fundamental rule of procedure,” “‘failure to state’ reasons”), which would demand “a cautious approach.”1048 Moreover, when discussing the claim of a manifest excess of powers, it held that “it is (…) not up to the ad hoc Committee (…) to say whether the contested award’s interpretation (…) is correct” and that “doubt or uncertainty that may have persisted in this regard (…) should be ­resolved ‘in ­favorem ­validitatis sententiae.’”1049 Yet, despite this restrained ­approach, the ad hoc committee then went on by reading icsid Convention Art. 52 as encompassing Arts. 42 and 48,1050 i.e. by reading these provisions 1042 Emmanuel Gaillard, Introduction, in Annulment of icsid Awards 5 (Emmanuel Gaillard & Yas Banifatemi eds., 2004). 1043 See the references to critics in Schreuer et al., icsid Commentary 912 (Art. 52, para. 29, fn. 63–64). 1044 W. Michael Reisman, The Breakdown of the Control Mechanism in icsid Arbitration, 1989 Duke L. J. 739, 739 (1989). 1045 Alan Redfern, icsid – Losing its Appeal?, 3 Arb. Int’l 98, 98 (1987). 1046 See the references to proponents in Schreuer et al., icsid Commentary 912 (Art. 52, para. 30). 1047 Klöckner v. Cameroon (i) (Award). 1048 Klöckner v. Cameroon (i) (Decision on Annulment), para. 3. 1049 Klöckner v. Cameroon (i) (Decision on Annulment), para. 52. 1050 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.”

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into the ­normative basis of the annulment mechanism. It justified this argumentation by contextual considerations according to vclt Art. 31 (1)1051 and by referring to the intent of the Convention’s drafters as well as to the principle of effectiveness as part of the customary principles of interpretation.1052 On the basis of this interpretative construct, the ad hoc committee annulled the award on two of the three invoked grounds. It held that the arbitral tribunal had failed to apply the proper law by postulating basic legal principles without reference to the applicable national law as is required by icsid Convention Art. 42 and that, as a consequence, it manifestly exceeded its powers in the sense intended by icsid Convention Art. 52 (1) (b).1053 Furthermore, it found that the award had failed to state reasons pursuant to icsid Convention Art. 52 (1) (e), because it neglected to provide answers to every question which had been submitted to it pursuant to icsid Convention Art. 48 (3).1054 Altogether, the ad hoc committee demonstrated a very technical understanding of the annulment mechanism. In its view, once a ground for annulment would be determined, this would “trigger[] inevitable and ‘automatic’ annulment” and thus leave no room for discretion by the annulment committee.1055 As to the first ground, critics pointed out that the arbitral tribunal had not failed to apply the proper law, but had only failed to substantiate it in an adequate way.1056 Moreover, it was criticised that the ad hoc committee missed to discuss the requirement of manifestness in this context.1057 Regarding the second ground, concerns were raised that this approach would allow nullification when there was only an insufficient statement of reasons, leading to the possibility to nullify whenever the ad hoc committee actually disagrees with the arbiral tribunal’s material reasoning.1058 More generally, criticism centred on the extremely broad interpretation of the narrowly designed grounds

1051 1052 1053 1054 1055 1056

1057 1058

icsid Convention Art. 48 (3): “The award shall deal with every question submitted to the Tribunal, and shall state the reasons upon which it is based.” For the text of vclt Art. 31 (1), see fn. 713. Klöckner v. Cameroon (i) (Decision on Annulment), paras. 58, 62. Klöckner v. Cameroon (i) (Decision on Annulment), paras. 67–79. Klöckner v. Cameroon (i) (Decision on Annulment), paras. 131–164. Klöckner v. Cameroon (i) (Decision on Annulment), para. 179. Schreuer et al., icsid Commentary 967 (Art. 52, paras. 236–237); Björn Pirrwitz, Annulment of Arbitral Awards under Art. 52 Washington Convention on the Settlement of I­ nvestment Disputes between States and Nationals of Other States, 23 Tex. Int’l L. J. 73, 103–107 (1988); Reisman, Breakdown 739, 765–770. Schreuer et al., icsid Commentary 942 (Art. 52, para. 152). William Laurence Craig, Uses and Abuses of Appeal from Awards, 4 Arb. Int’l 174, 210–211 (1988).

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for annulment1059 and on the committee’s “hair-trigger approach,”1060 which ­appeared to support automatic nullification once any defect was established. In Amco v. Indonesia (i), the original tribunal considered the seizure of a ­hotel, which was built and managed by a subsidiary of Amco Asia in a joint ­venture with an Indonesian company, and the cancellation of the corresponding licenses as unlawful in view of the host State’s international and national legal obligations and awarded damages to the us investor for the losses caused.1061 The ad hoc committee annulled the award on the same bases as the Klöckner v. Cameroon (i) annulment committee. In respect to the ­manifest-excess-of-powers ground, it held that the arbitral tribunal, despite having properly identified the applicable national law, had failed to apply some of its fundamental provisions when making calculations relevant to the dispute.1062 In addition, a failure to state reasons was seen in the arbitral tribunal’s ­omission to provide reasons for its calculations.1063 Again, this decision was criticised by numerous commentators.1064 It was stressed, for instance, that the arbitral tribunal had not, in fact, failed to apply the proper law, but had only misapplied one provision of that law.1065 Qualifying such mere misapplication as a complete failure to apply the proper law would disregard the required manifest character of such mistake.1066 Despite these reprehensions very similar to the Klöckner v. Cameroon (i) challenges,

1059

1060

1061 1062 1063 1064 1065 1066

In addition, it was pointed out that the icsid Convention would provide its own, d­ ifferent remedy in order to correct such kind of failure in Art. 49 (2); see Delaume, ­Finality 21, 31. See Klöckner v. Cameroon (i) (Decision on Annulment), paras. 58–59. The ad hoc ­committee read icsid Convention Art. 52 (1) as a type of renvoi to the rest of the icsid Convention and thus interpreted this provision as authorising it to examine a challenged award with all the standards contained therein. See Klöckner v. Cameroon (i) (Decision on Annulment), para. 179. According to the ad hoc committee, no qualitative aspects of a defect like significance or gravity were to be taken into account. Terminology according to Reisman, Breakdown 739, 762–763. Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Award (20 November 1984) [hereinafter Amco v. Indonesia (i) (Award)]. Amco v. Indonesia (i) (Decision on Annulment), paras. 95–96, 98. Amco v. Indonesia (i) (Decision on Annulment), paras. 97–98. See e.g. Jan Paulsson, icsid’s Achievements and Prospects, 6 icsid Rev. – filj 380, 388 et seq. (1991); Pirrwitz, Annulment of Arbitral Awards 73, 108–109. Schreuer et al., icsid Commentary 943 (Art. 52, para. 152); Pirrwitz, Annulment of Arbitral Awards 73, 108–109. Schreuer et al., icsid Commentary 943 (Art. 52, para. 152); Pirrwitz, Annulment of Arbitral Awards 73, 108–109.

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the Amco v. Indonesia (i) committee distinguished itself from the other ad hoc committee as regards the method applied to reach its constitutive conclusions. In contrast to the “hair-trigger approach” resulting in a nullification per se in case of any technical discrepancy, it applied a “material violation approach,” which required an inquiry into whether a formal mistake in fact caused injury to the party alleging it or distorted the award.1067 In total, the critics of both annulment decisions stressed that the ramifications were drastic. They effectively turned what was intended to be an ­emergency supervision tool to vindicate a party’s basic rights in case of outrageously irregular awards into an appellate-type of mechanism. Because this first generation of annulments was considered likely to be foundational to later proceedings, it was feared that Klöckner v. Cameroon (i) and Amco v. Indonesia (i) would counteract the finality of awards – one of icsid arbitration’s superior goals1068 – and thereby throw doubt upon the icsid system as a whole.1069 bbb

A Seemingly Balanced System

The criticisms of the first generation of icsid annulment jurisprudence ­having been unequivocal, subsequent ad hoc committees acted with significantly more moderation and thereby established a seemingly balanced system. A leading commentator1070 subdivided this process into a further two phases, the second and the third generation of annulment awards, followed by the so far not further classified “modern law of annulment.” (1)

The Second and Third Generation

The mine v. Guinea decision, as part of the second generation, demonstrated a much more cautious approach. It helped to clarify the annulment function 1067 Amco v. Indonesia (i) (Decision on Annulment), paras. 75, 78, 79. See Reisman, Breakdown 739, 775 et seq., esp. 776–777. 1068 Schreuer et al., icsid Commentary 912 (Art. 52, para. 29), with further references. 1069 Redfern, icsid – Losing its Appeal? 98, 117. icsid itself acknowledged this when the former Secretary General Ibrahim Shihata, at the 1986 Annual Meeting of the Administrative Council, referred to Klöckner v. Cameroon (i) and Amco v. Indonesia (i) and warned of the risk that “if parties, dissatisfied with an award, made it a practice to seek annulment, the effectiveness of the icsid machinery might become questionable and both investors and Contracting States might be deterred from making use of icsid arbitration”; see icsid, Summary Proceedings: ­Twentieth Annual Meeting; Annex A: Report of the Secretary-General, Doc.AC/86/4 (2 October 1986), referred to in Parra, The History of icsid 187. 1070 Schreuer, Three Generations; Schreuer et al., icsid Commentary 913 (Art. 52, para. 32).

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by reflecting on the question of how narrow or how broad the interpretation of the annulment grounds in icsid Convention Art. 52 (1) should be. The ad hoc committee held that “Art. 52 I should be interpreted in accordance with its object and purpose, which excludes on the one hand (…) extending its application to the review of an award on the merits, and, on the other, an unwarranted refusal to give full effect to it (…).”1071 It hence addressed the concerns raised by the interpretive breadth that had been suggested by the earlier decisions and turned away from the old interventionist approach.1072 This readjustment was also reflected by the refusal of the Klöckner v. Cameroon (ii) and Amco v. Indonesia (ii) ad hoc committees to annul the corresponding awards.1073 Ten years passed until Wena v. Egypt and Vivendi v. Argentina (i), the decisions representing the third generation, resumed this more moderate way of dealing with applications for annulment.1074 For most part, the ad hoc committees carefully stayed within the limits prescribed by icsid Convention Art. 52 (1) and rejected an overly strict approach.1075 They demonstrated that 1071 mine v. Guinea (Decision on Annulment), para. 4.05. 1072 Cf., in reaction to this decision, Paulsson, icsid’s Achievements and Prospects 380, 391, who spoke of a “salutory redirection” and of the establishment of “an appropriate balance of the tension between twin desires of finality and high quality of justice.” 1073 Klöckner v. Cameroon (ii) (Decision on Annulment); Amco v. Indonesia (ii) (Decision on Annulment). As noted by id., this alignment with the mine v. Guinea decision was not least due to the reappointment of two members of the ad hoc committee to the subsequent Klöckner v. Cameroon (ii) ad hoc committee and of one member of the ad hoc committee to the subsequent Amco v. Indonesia (ii) ad hoc committee. 1074 Wena Hotels v. Egypt (Decision on Annulment); Vivendi v. Argentina (i) (Decision on Annulment). 1075 In both decisions, the applications for annulment were rejected for the most part. Only in Vivendi v. Argentina (i) (Decision on Annulment), a partial annulment was made for manifest excess of powers. It concerned the part of the award wherein the tribunal, ­despite having accepted jurisdiction over Vivendi’s bits claims, declined to decide on them due to intertwined contract claims; see paras. 86 et seq., esp. 109–111. In this context, the annulment committee took a decision which was considered to be of high relevance for future arbitrations. It clarified the difference between treaty-based disputes and contract-based disputes as regards the different governing legal standards. The panel stated that “[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 (…)”; see para. 96. See also Stanimir A. Alexandrov, The Vivendi Annulment Decision and the Lessons for Future icsid Arbitrations – The Applicant’s perspective, in Annulment of icsid Awards 97, 110 et seq. (Emmanuel Gaillard & Yas Banifatemi eds., 2004).

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an icsid annulment committee will generally intervene on a party’s request, but only in a limited way to correct fundamental, non-trivial errors1076 and without reviewing the substantive correctness of an award.1077 Thereby, both ad hoc committees aimed to balance the tension between the competing goals of fairness and finality.1078 All in all, these two cases show that the icsid control system had – at least temporarily – found its proper modus operandi. As a consequence, annulment was no longer seen as unpredictable device, but as a useful remedy.1079 (2)

Modern Law of Annulment i

Since 2002, the bulk of the annulment decisions classified as “modern law of ­annulment” have adhered to this more sensitive method. Accordingly, the “icsid experiment seem[ed] back on track.”1080 A whole range of annulment committees, for instance those in cdc v. Seychelles,1081 Consortium rfcc v. Since then, this distinction was consistently confirmed in various cases. For a comprehensive overview of the corresponding case law, see Kaufmann-Kohler, Is Consistency a Myth? 137, 139. Nevertheless, Vivendi v. Argentina (i) (Decision on Annulment) was also criticised for having undertaken a “kind of analysis that (…) clearly goes beyond (…) the line that separates what is correct from what is illegitimate.” The ad hoc committee’s analysis of the award was accused for being strongly permeated “by the viewpoint of the ad hoc Committee as to what is correct and what is incorrect from a legal perspective.” See, also for further details on the points of criticism, Carlos Ignacio Suarez Anzorena, Vivendi v. Argentina: On the Admissibility of Requests for Partial Annulment and the Ground of a Manifest Excess of Powers, in Annulment of icsid Awards 123, 157 et seq., esp. 174–175 (Emmanuel Gaillard & Yas Banifatemi eds., 2004). 1076 Both tribunals rejected the “hair-trigger approach,” which referred to formal discrepancies, in favour of the “material violation approach,” which accords discretion to the annulment committee and which was first introduced in Amco v. Indonesia (i) (Decision on Annulment). See Wena Hotels v. Egypt (Decision on Annulment), para. 58; Vivendi v. Argentina (i) (Decision on Annulment), para. 63. Terminology according to Reisman, Breakdown 739, 762–763. 1077 Schreuer et al., icsid Commentary 913 (Art. 52, para. 32). 1078 See Hans van Houtte, Article 52 of the Washington Convention – A Brief Introduction, in Annulment of icsid Awards 11 et seq. (Emmanuel Gaillard & Yas Banifatemi eds., 2004), who described the handling of these opposing concepts as navigating between “the Scylla of complete fairness and the Charybdis of absolute finality.” 1079 Christoph Schreuer, icsid Annulment Revisited, 30 Legal Iss. Econ. Integr. 103, 121 (2003). 1080 W. Michael Reisman, Control Mechanisms in International Dispute Resolution, 2 us–Mex. L. J. 129, 133 (1994). 1081 cdc v. Seychelles (Decision on Annulment).

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M ­ orocco,1082 Repsol v. Ecuador,1083 mtd v. Chile,1084 Soufraki v. uae,1085 Lucchetti v. Peru,1086 Azurix v. Argentina,1087 mci v. Ecuador,1088 Rumeli v. Kazakhstan,1089 or Transgabonais v. Gabon1090 adopted this balanced, rather restrained approach and entirely rejected the applications for annulment. Their argumentation constantly reflected their consciousness of the limited and narrow mandate conferred by icsid Convention Art. 52 (1). Another modern annulment decision, cms v. Argentina,1091 by contrast, caused some concern. The ad hoc committee was criticised for having entered into a detailed discussion of how to interpret and apply the defence of “necessity” with regard to the relationship between treaty law and customary international law, which had been at issue in the underlying award.1092 Yet, ­despite 1082 Consortium r.f.c.c. v. Kingdom of Morocco, icsid Case No. arb/00/6, Decision of the Ad Hoc Committee on Annulment (18 January 2006), unpublished/excerpts only [hereinafter Consortium rfcc v. Morocco (Decision on Annulment)]. 1083 Repsol ypf Ecuador s.a. v. Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. arb/01/10, Decision of the Ad Hoc Committee on Annulment (8 January 2007) [hereinafter Repsol v. Ecuador (Decision on Annulment)]. 1084 mtd Equity Sdn. Bhd. and mtd Chile s.a. v. Republic of Chile, icsid Case No. arb/01/7, Decision of the Ad Hoc Committee on Annulment (21 March 2007) [hereinafter mtd v. Chile (Decision on Annulment)]. 1085 Soufraki v. uae (Decision on Annulment). 1086 Industria Nacional de Alimentos, s.a. and Indalsa Perú, s.a. (formerly Empresas Lucchetti, s.a. and Lucchetti Perú, s.a.) v. Republic of Peru, icsid Case No. arb/03/4, Decision of the Ad Hoc Committee on Annulment (5 September 2007) [hereinafter Lucchetti v. Peru (Decision on Annulment)]. 1087 Azurix Corp. v. Argentine Republic, icsid Case No. arb/01/12, Decision of the Ad Hoc Committee on Annulment (1 September 2009) [hereinafter Azurix v. Argentina (Decision on Annulment)]. 1088 m.c.i. Power Group l.c. and New Turbine Inc. v. Republic of Ecuador, icsid Case No. arb/03/6, Decision of the Ad Hoc Committee on Annulment, 19 October 2009 [hereinafter mci v. Ecuador (Decision on Annulment)]. 1089 Rumeli Telekom a.s. and Telsim Mobil Telekomunikasyon Hizmetleri a.s. v. Kazakhstan, icsid Case No. arb/05/16, Decision of the Ad Hoc Committee on Annulment (25 March 2010) [hereinafter Rumeli v. Kazakhstan (Decision on Annulment)]. 1090 Compagnie d’Exploitation du Chemin de Fer Transgabonais v. Gabonese Republic, icsid Case No. arb/04/5, Decision of the Ad Hoc Committee on Annulment (11 May 2010), unpublished/excerpts only [hereinafter Transgabonais v. Gabon (Decision on Annulment)]. 1091 cms v. Argentina (Decision on Annulment). 1092 Michael Reisman commented cms v. Argentina (Decision on Annulment) as “very strong move towards a more substantial appraisal of whether an award was correct”; R. Doak Bishop criticised the cms v. Argentina annulment committee members for “making gratuitous statements that they didn’t have to make” and for having “effectively de-legitimised

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this ambition to “correct” the substantive reasoning of the award, the ad hoc committee eventually only annulled part of the award1093 and upheld the original tribunal’s award of damages, stating that even in case that an “award contained manifest errors of law (…) [a] Committee cannot simply substitute its own view of the law and its own appreciation of the facts for those of the Tribunal,” except if in accordance with in the annulment grounds of icsid Convention Art. 52 (1).1094 It thereby emphasised the continuing practice in annulment proceedings “to distinguish between failure to apply the law and error in its application.”1095 In view of its adherence to the established annulment jurisprudence, the cms v. Argentina decision can still be considered as formally joining the consensus on the strict limits of the icsid annulment function by highlighting the difference between annulment and appeal.1096 On the other hand, given that the ruling practically and publicly attested that the original award had been founded on legal misconceptions, it is still worthy of criticism in view of the damage done to the legitimacy of the individual award and, more generally, the entire system.1097 the award”; both quoted in Sebastian Perry, Annulment committees and Nosferatu awards, 5 gar (24 May 2010). In contrast to the arbitral tribunal’s ruling, the ad hoc committee found the necessity exception clause contained in Art. xi of the bit and the necessity defence under customary international law contained in Art. 25 of the ilc Draft Articles on State Responsibility to be “substantially different.” It consequently held that the arbitral tribunal had committed a “manifest error of law.” See cms v. Argentina (Decision on Annulment), para. 130. For further details on the “necessity” debate in icsid case law, see below Ch. 2.E.II.2.b.bb.ccc and Ch. 2.E.III.2.b.bb. 1093 The application for annulment was rejected on all grounds but with regard to the arbitral tribunal’s ruling that the host State had breached the ‘umbrella clause’ in the ­applicable bit. As the ad hoc committee pointed out, this partial annulment left the award as a whole unaffected. See cms v. Argentina (Decision on Annulment), para. 99. 1094 cms v. Argentina (Decision on Annulment), para. 158. 1095 cms v. Argentina (Decision on Annulment), para. 50. 1096 Schreuer et al., icsid Commentary 915 (Art. 52, para. 40). 1097 Aronson, Rethinking the “Three Generations” 3, 14, 16; Leah D. Harhay, The Argentine ­Annulments: The Uneasy Application of icsid Article 52 in Parallel Claims, in Yearbook on International Investment Law and Policy 2011–2012 439 (Karl P. Sauvant ed., 2013), with further references. See also Bishop & Marchili, Annulment under the icsid Convention 29, stating that “[w]hat the icsid annulment committee did in practice was to provide an advisory opinion (…) as opposed to limiting its analysis and decision to the annulment mechanism under the Convention.,” with further references.

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Two further outliers clouded this so far homogenous picture of the emerging modern law of annulment in the icsid system. In Mitchell v. Congo,1098 the ad hoc committee also expressed its disagreement with the arbitral tribunal’s reasoning, namely the approach used to determine whether an “investment” in the sense of icsid Convention Art. 25 (1) had occurred. However, in contrast to the subsequent and more cautious cms v. Argentina ruling, it annulled the award on the ground that the arbitral tribunal mistakenly had accepted that an investment existed.1099 Given the fact that the definition of the term “investment” was explicitly left open by the drafters of the Convention and is still unsettled in icsid case law,1100 the investment community received this decision as an attempt to impose the ad hoc committee’s own views on the merits.1101 Similar criticism has been voiced in reaction to the mhs v. Malaysia annulment decision.1102 The ad hoc committee also discussed an issue of jurisdiction ratione materiae, but assumed that an investment had occurred and hence based its ruling on an opposite conclusion.1103 By referring to the appropriateness and coherence of the arbitral tribunals’ reasoning, as commentators admonished,1104 both ad hoc committees engaged in a substantive review of

1098 Mitchell v. Congo (Decision on Annulment), para. 47. 1099 Mitchell v. Congo (Decision on Annulment), para. 41. The ad hoc committee arrived at this conclusion as it found one of the “four characteristics” of an investment in the sense of Art. 25 (1) to be missing, namely the substantial contribution to the economic development of the host State. The annulment was based on the grounds of manifest excess of power and failure to state reasons as regards the acceptance of jurisdiction. 1100 Schreuer et al., icsid Commentary 114–117 (Art. 25, paras. 113–121). See also below Ch. 2.E.I.2.a.aa. 1101 See e.g. Walid Ben Hamida, Two Nebulous icsid Features: The Notion of Investment and the Scope of Annulment Control, 24 J. Int’l Arb. 287, 303 (2007). 1102 mhs v. Malaysia (Decision on Annulment). 1103 mhs v. Malaysia (Decision on Annulment), para. 80. The ad hoc committee, in a twoone decision, found that the tribunal manifestly exceeded its powers as it (a) failed to consider the broad and encompassing definition of “investment” in the underlying bit, (b) mistakenly elevated the interpretative criteria for Art. 25 (1) of the icsid Convention to jurisdictional conditions and “exigently interpreted the alleged condition of a contribution to the economic development of the host State so as to exclude small contributions,” and (c) drew conclusions without taking into account the icsid Convention’s travaux préparatoires with regard to central points. 1104 See e.g. Emmanuel Gaillard, A Black Year for icsid, 4 tdm 1, 4 (2007), comment on Mitchell v. Congo (Decision on Annulment).

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the award at hand. In this way, they adopted a role which was inconsistent with the general trend in annulment jurisprudence.1105 At that time, these deviations from the trend might still have been seen as inevitable and scattered malfunctioning of an evolving dispute settlement mechanism, most notably with regard to the predominantly balanced approaches in modern annulment awards before and after. On the other hand, however, commentators have considered the above annulment decisions, all dealing with the arbitral tribunals’ interpretation of the corresponding investment treaties, as indicative of a trend1106 to “something similar to an appellate review in international investment law.”1107 ccc

A Return to Old Habits – The Fourth Generation?

Although the criticism of the partial annulment in Helnan v. Egypt1108 has not been very pronounced, it can be considered as the prelude to the subsequent dyad of troublesome annulments rendered in the summer of 2010. At least some commentators rebuked the ad hoc committee for elevating the arbitral tribunal’s erroneous finding that the claimant had failed to exhaust local ­remedies to a “manifest excess of powers” in the sense of icsid Convention Art. 52 (1) (b).1109 As, however, the annulled part of the award did not contain a decisive finding, the decision attracted relatively little attention. 1105 Schreuer et al., icsid Commentary 915 (Art. 52, para. 40), who comments on the Mitchell v. Congo annulment decision and contrasts it with the so far established trend in annulment jurisprudence from the third generation on. 1106 Gaillard, A Black Year for icsid 1, 4, comment on Mitchell v. Congo (Decision on Annulment). 1107 Michael Reisman’s comment on cms v. Argentina (Decision on Annulment) and mhs v. Malaysia (Decision on Annulment), quoted in Perry, Annulment committees and Nosferatu awards. 1108 Helnan International Hotels A/S v. Arab Republic of Egypt, icsid Case No. arb/05/19, Decision of the Ad Hoc Committee on Annulment (14 June 2010) [hereinafter Helnan v. Egypt (Decision on Annulment)]. 1109 See Crivellaro, Annulment of icsid Awards: Back to the “First Generation”? 145, 162–164; Nair & Ludwig, icsid Annulment Awards. The Helnan v. Egypt tribunal, despite initially accepting that there was no requirement for the claimant to exhaust local remedies before starting the arbitration, eventually found “as matter of substance that the failure of Helnan to challenge the Ministerial decision in the administrative courts means that that decision ‘cannot be seen as a breach of Treaty.’”; see Helnan v. Egypt (Decision on Annulment), para. 46, referring to Helnan ­International Hotels A/S v. Arab Republic of Egypt, icsid Case No. arb/05/19, Award (3 July 2008) [hereinafter Helnan v. Egypt (Award)]. Hence, notwithstanding the express agreement of the contracting States in icsid Convention Art. 26 not to require the ­pursuit of

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Quite to the contrary, the following two icsid annulment awards, Sempra v. Argentina1110 and Enron v. Argentina,1111 raised a storm of criticism with regard to the scope of review adopted by the ad hoc committees. They were perceived as undermining the well-established limited character of the emergency review mechanism rooted in icsid Convention Art. 52 (1)1112 by converting it into de facto appellate proceedings.1113 Some commentators even asked whether there was an emerging “fourth generation” of icsid annulment jurisprudence and whether this new wave of annulment awards would necessitate reform.1114 Both cases were based on similar circumstances and facts. They arose out of Argentina’s unauthorised modifications and breaches of license contracts carried out by the government to deal with the unprecedented 2001–2002 ­financial and economic crisis. As a reaction, Sempra and Enron initiated icsid arbitrations alleging that Argentina had violated its obligations under the us–Argentina bit.1115 In response, Argentina justified its emergency measures by pleading defences under domestic law, customary international law, and the treaty. Among other matters, it referred to Art. xi of the bit, which provides that the treaty:

local remedies – unless otherwise stated – as a precondition to begin an arbitration, the tribunal read such pre-condition into the substantive cause of action; see Helnan v. Egypt (Decision on Annulment), para. 47. In view of this failure to apply icsid Convention Art. 26 (and Art. 9 of the bit on the parties’ consent to icsid arbitration), the ad hoc committee found that “the Tribunal has manifestly exceeded its powers within the terms of Article 52(1)(b) of the lCSID Convention.”; see Helanan v. Egypt (Decision on Annulment), para. 55. As commentators noted, the original award showed remarkable parallels with one rendered in Generation Ukraine v. Ukraine (Award), where the tribunal had similarly dismissed the claim for the investor’s failure to seek local redress against a decision by a low-level government official; see id. 1110 Sempra v. Argentina (Decision on Annulment). 1111 Enron v. Argentina (Decision on Annulment). 1112 Steven Smith & Kevin Rubino, Investors Beware: Enron and Sempra Annulment Decisions Bolster the State Necessity Defense While Showing New Uncertainty Regarding the Finality of icsid Arbitral Awards (11 August 2010), available at (last visited September 2016). 1113 Nair & Ludwig, icsid Annulment Awards. 1114 Id. 1115 Treaty between the United States of America and the Argentine Republic Concerning the Reciprocal Encouragement and Protection of Investment, 14 November 1991 (entry into force 20 October 1994), 31 ilm 124 (1992).

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(…) 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. A further similarity is that the arbitral tribunals concerned with these two cases both rejected Argentina’s plea of a state of necessity and rendered unanimous awards in favour of the claimant-investors.1116 Both arbitral tribunals considered the customary law standard of necessity as codified in Art. 25 of the ilc Draft Articles on State Responsibility1117 to determine whether the defence of necessity could be lawfully invoked.1118 When they found that the requirements were not met, they did not undertake a further separate analysis of the necessity exception clause stipulated in the relevant bit, “given that this ­Article does not set out conditions different from customary law in such regard.”1119 Interestingly, even if the ad hoc committees reviewed almost identical underlying awards and even if both ad hoc committees examined the necessity defence advanced by the host State, they followed entirely different paths in reaching their annulment decisions based, inter alia, on the manifest-excessof-powers ground in icsid Convention Art. 52 (1) (d). 1116 Enron v. Argentina (Award). 1117 ilc, Draft Articles on the Responsibility of States for Internationally Wrongful Acts, R ­ eport of the ilc on the Work of its Fifty-third Session, un gaor, Fifty-sixth Session, Supp. No. 10, 43, un Doc. A/56/10, annexed to un Doc. 56/83 (12 December 2001) [hereinafter ilc Draft Articles on State Responsibility], available at (last visited September 2016). ilc Draft Art. 25: “(1.) Necessity may not be invoked by a State as a ground for precluding the wrongfulness of an act not in conformity with an international obligation of that State unless the act: (a) is the only way for the State to safeguard an essential interest against a grave and imminent peril; and (b) 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. (2.) In any case, necessity may not be invoked by a State as a ground for precluding wrongfulness if: (a) the international obligation in question excludes the possibility of invoking necessity; or (b) the State has contributed to the situation of necessity.” 1118 For more detailed elaborations on the treatment of the defence of necessity in icsid case law, see below Ch. 2.E.III.2.b.bb. 1119 Sempra v. Argentina (Award), para. 388. See also Enron v. Argentina (Award), para. 339: “(…), there is no need to undertake a further judicial review under Article xi as this Article does not set out conditions different from custormary law in this respect.”

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The Sempra v. Argentina committee started out promisingly by holding that “[i]n line with the consistent, but not invariable, practice of ad hoc committees, this Committee will not express any views on aspects of the Tribunal’s reasoning on the merits.”1120 Yet, notwithstanding this preliminary remark based on established annulment jurisprudence, the ad hoc committee, in the further course of its argumentation, engaged in detailed elaborations on the content and the legal relationship of the relevant bit and the ilc Draft Articles on State Responsibility.1121 It eventually found that the arbitral tribunal had erred when it interpreted Art. xi of the bit on “necessity” as being governed by ilc Draft Art. 251122 and consequently did not consider the applicability of the bit provision.1123 In view of this “error in identifying and applying the applicable law,” the ad hoc committee concluded that this failure would amount to “an ­excess of powers within the meaning of the icsid Convention.”1124 This 1120 Sempra v. Argentina (Decision on Annulment), para. 76. 1121 Sempra v. Argentina (Decision on Annulment), paras. 192–204. In the ad hoc committee’s opinion, the tribunal wrongly conflated the relationship between necessity under a treaty and under customary international law. In this regard, it stated that “the Committee accepts, of course, that it may be appropriate to look to customary law as a guide to the interpretation of terms used in the bit. It does not, however, that customary law (in casu, Article 25 of the ilc Article) establishes a peremptory ‘definition of necessity and the conditions for its operation’”; see Sempra v. Argentina (­Decision on Annulment), para. 197, referring to Sempra v. Argentina (Award), para. 376. This indicates that, following the annulment decision rendered in cms v. Argentina, it applied the Primary-Secondary-Rule distinction, which identifies Art. xi of the bit as self-judging and thus as the primary applicable legal norm when examining the necessity defence. 1122 Sempra v. Argentina (Decision on Annulment), paras. 200–201. 1123 Sempra v. Argentina (Decision on Annulment), para 196. 1124 Sempra v. Argentina (Decision on Annulment), paras. 208–209. This finding is questionable with regard to the following statement in the original award, which was even quoted by the ad hoc committee. Therein, the original tribunal expounded that “[s]ince the Tribunal has found above that the crisis invoked does not meet the customary law requirements of Article 25 of the Articles on State Responsibility, it concludes that necessity or emergency is not conducive in this case to the preclusion of wrongfulness, and that there is no need to undertake a further judicial review under Article xi given that this Article does not set out conditions different from customary law in such regard.”; see Sempra v. Argentina (Award), para. 388. When reading this passage in an objective manner, it seems not clear at all that the Sempra v. Argentina tribunal in fact did apply customary international law to the exclusion of the bit. It rather appears that it proceeded on the assumption – regardless of whether rightly or wrongly – that the two regimes were equivalent and therefore undertook a combined analysis. In other words, it seems that the original tribunal actually applied Art. xi of the bit, but that it refrained

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way of i­ nterfering with the original tribunal’s legal reasoning strongly conflicts with the strictly limited annulment review permitted by icsid Convention Art. 52.1125 The Enron v. Argentina ad hoc committee took a different route. At the outset of its argumentation, it similarly expressed its accordance with prior arbitral practice by emphasising, in agreement with the mtd v. Chile annulment decision, that “annulment has a limited function since a committee ‘cannot substitute its determination on the merits for that of the Tribunal. Nor can it direct a Tribunal on a resubmission how it should resolve substantive issues in dispute.’”1126 In contrast to the argumentative conduct of the Sempra v. Argentina annulment committee, however, it pointed out that “the substantive operation and content of Article xi and the customary international law principles of necessity, and the interrelationship of the two, are issues that fall for decision by the tribunal.”1127 The ad hoc committee was thus of the opinion that it was the exclusive task of the arbitral tribunal to determine the legal relationship between the bit and the ilc Draft Articles on State Responsibility.1128 Irrespective thereof, it found that the arbitral tribunal had failed to apply properly the various elements contained in ilc Draft Art. 25, which – in its view – were essential for determining the necessity of a State’s actions under customary international law.1129 The annulment committee held, inter alia, that instead of uncritically relying on expert evidence, the arbitral tribunal should have engaged in a comprehensive interpretative legal analysis of the “only way” requirement and the expression “contributed to the situation of necessity” in the manner demonstrated by the ad hoc committee itself.1130 According to the ad hoc committee, these errors in the interpretation and application of law amounted to a complete failure to apply the proper law, which would, in turn, trigger the manifest-excess-of-powers ground in icsid Convention Art. 52 (1) (b).1131 As to both elements, the ad hoc committee effectively disregarded the

1125

1126 1127 1128 1129 1130 1131

from a separate analysis when it noticed a similar outcome to the one inferred from ilc Draft Art. 25. See Nair & Ludwig, icsid Annulment Awards. For a counter-position in support of the Sempra v. Argentina annulment committee, see Andreas von Staden, Towards Greater Doctrinal Clarity in Investor-State Arbitration: The cms, Enron, and Sempra Annulment Decisions, in Czech Yearbook of International Law 224 (Alexander J. Bělohlávek & Naděžda Rozehnalová eds., 2011). Enron v. Argentina (Decision on Annulment), para. 65. Enron v. Argentina (Decision on Annulment), para. 405. Enron v. Argentina (Decision on Annulment), para. 405. Enron v. Argentina (Decision on Annulment), paras. 355 et seq. Enron v. Argentina (Decision on Annulment), paras. 361–378, 385–393. Enron v. Argentina (Decision on Annulment), paras. 377, 393, 395.

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arbitral tribunal’s decision on evidence and replaced it with its own, differing determination of its probative value.1132 Furthermore, in order to clarify what it considered as the “proper construction of ilc Draft Art. 25,”1133 it introduced new inquiries and theories as to what the “correct interpretation”1134 should have involved. The annulment committee did not criticise the arbitral tribunal for failing to apply settled law, because there was not any settled law at that time.1135 It rather decided to annul the award for the arbitral tribunal’s failure to observe its retroactively formulated schemes of legal analysis,1136 which again stands in stark contrast to the limited annulment function as provided for in icsid Convention Art. 52.1137 As can be seen, the decisions of the Sempra v. Argentina and Enron v. Argentina committees to overturn, at least partially,1138 the original tribunals’ awards were not insignificantly determined by the ad hoc committee members’ own understanding of the law. Such blurring of the distinction between an exhaustive error-of-law review and the narrow review under the icsid regime1139 sharply contradicts established arbitral practice. For instance, the meaningful cms v. Argentina decision held in support of the limited a­ nnulment ­jurisdiction

In view of the “only way” requirement, the annulment committe held further that “[e]ven if, contray to all appearance, the Tribunal did apply the ‘only way’ requirement in Article 25(1)(a), the Committee considers that the Tribunal failed to state reasons for its decision. This constitutes a ground for annulment under Article 52(1)(e) of the icsid Convention.”; see Enron v. Argentina (Decision on Annulment), para. 378. In addition, the ad hoc committee also annulled “the Tribunal’s finding that Article xi of the bit was inapplicable in this case,” because this ruling was based on the tribunal’s prior finding that the requirements of ilc Draft Art. 25 were not satisfied; see Enron v. Argentina (Decision on Annulment), para. 405. 1132 This runs counter to icsid Arbitration Rule 34 (1), which states that “[t]he Tribunal shall be the judge of the admissibility of any evidence adduced and of its probative value.” 1133 Enron v. Argentina (Decision on Annulment), para. 377. 1134 Enron v. Argentina (Decision on Annulment), paras. 369, 386. 1135 Doak R. Bishop, The Fundamental Role of Fundamental Rules of Procedure – Recent Developments in Investment Arbitration Procedure, biicl Keynote Address – The 15th Investment Treaty Forum Public Conference, 9–10 (10 September 2010). 1136 Id. 1137 For a counter-position in support of the Enron v. Argentina committee, see von Staden, ­Towards Greater Doctrinal Clarity in Investor-State Arbitration: The cms, Enron, and ­Sempra Annulment Decisions 224–225. 1138 While the Sempra v. Argentina committee entirely annulled the award, the Enron v. Argentina committee only rendered a partial annulment. 1139 Nair & Ludwig, icsid Annulment Awards.

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that “[a] Committee cannot simply substitute its own view of the law (…) for those of the Tribunal.”1140 Another concern common to both annulment decisions relates to the longstanding principle that new issues or arguments, in the sense that they had not been advanced before the arbitral tribunal by a party, can under no circumstances be admitted by annulment committees.1141 This derives from the fundamental procedural right to be heard, which is not only a basic rule of fairness, but also puts limits on what an ad hoc committee can examine.1142 Despite this established principle, the annulment committees in both Sempra v. Argentina and Enron v. Argentina did the exact opposite by allowing the applicant to raise new arguments or even by creating their own arguments in support of the applicants and as a basis for their annulment decision.1143 Moreover and finally, also the fact that the ad hoc committees in Sempra v. Argentina and Enron v. Argentina found a “manifest excess of powers” invites criticism, given that the established and well-substantiated icsid annulment jurisprudence in comparable scenarios had ruled that the term “manifest” in icsid Convention Art. 52 (1) (b) would not indicate the seriousness of an excess of powers, but rather relate to its ease of perception.1144 This requirement 1140 cms v. Argentina (Decision on Annulment), para. 136. 1141 See mtd v. Chile (Decision on Annulment), paras. 52–54: “(…) an annulment proceeding (…) is a form of review on specified and limited grounds which take as their premise the record before the tribunal.”; Soufraki v. uae (Decision on Annulment), para. 37: “(…) the structure within which an icsid tribunal has to remain is defined by three elements: the imperative jurisdictional requirements, the rules on applicable law and the issues submitted to the arbitral tribunal”; cdc v. Seychelles (Decision on Annulment), para. 40: “Common examples for such excesses [of powers] are a Tribunal deciding questions not submitted to it (…).” See also Bishop, The Fundamental Role of Fundamental Rules of Procedure, 10–11 (10 September 2010). 1142 Id. at 10. 1143 Id. at 9, 11. The Sempra v. Argentina committee, in reply to respondent’s claim that several of the arguments raised by applicant were new and therefore inadmissible, found that “in so far as the arguments of Argentina can be said to be ‘new,’ they are a permissible development of Argentina’s arguments (…) and therefore admissible.”; see Sempra v. A ­ rgentina (Decision on Annulment), para. 184. The Enron v. Argentina committee based its annulment decision pursuant to icsid Convention Art. 52 (1) (b) primarily on the fact that the arbitral tribunal had failed to apply ilc Draft Art. 25, even though the applicant had never raised this argument; see Enron v. Argentina (Decision on Annulment), paras. 353, 393, 395. 1144 Schreuer et al., icsid Commentary 938–943 (Art. 52, paras. 134–154), with case law references.

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of a self-evident and readily identifiable excess was even recognised by the Sempra v. Argentina annulment committee in its theoretical considerations.1145 Accordingly, conducting a detailed and extensive analysis of the issues in question is and should not be necessary to detect such an excess within the meaning of icsid Convention Art. 52 (1) (b). Yet, this is what was done by the present committees. It is hence hardly justifiable to speak of a “manifest” excess. Apart from that, the annulments were based on the finding of a mere erroneous interpretation or non-application of a single rule of law, which – no matter how serious – normally cannot not be considered as a complete failure to apply the proper law and hence as triggering the manifest-excess-of-powers ground of icsid Convention Art. 52 (1) (b).1146 Therefore, the reasoning undertaken by the said ad hoc committees casts doubt on the integrity and l­ egitimacy of their annulment decisions.1147 A further decision that can be considered as having aggravated the malfunctioning of annulment review and hence as joining the so called fourth generation of icsid annulment jurisprudence is Vivendi v. Argentina (ii).1148 The annulment committee, albeit leaving the reasoning of the arbitral tribunal largely untouched, engaged in extensive criticism of the conduct of one of the arbitrators as well as in lengthy, textbook-fashioned elaborations on what reasonable diligence of international arbitrators should be like. The factual background for this excessive position statement was that said arbitrator failed to disclose her business connections to a company that held a small interest in Vivendi. The ad hoc committee, in concluding its criticism in this regard, held 1145 Sempra v. Argentina (Decision on Annulment), para. 211: “It should be noted (…) that it is necessary to observe the basic requirement of the vclt to seek the ‘ordinary meaning’ of the relevant term. In a literal sense ‘manifest’ is something which is ‘plain,’ ‘clear,’ ‘obvious,’ ‘evident’ i.e. easily understood or recognized by the mind.” [footnotes omitted], with case law references. 1146 See e.g. mine v. Guinea (Decision on Annulment), paras. 5.03–5.04; cms v. Argentina ­(Decision on Annulment), paras. 50, 136. See also Nair & Ludwig, icsid Annulment Awards. 1147 So far, the Enron v. Argentina committee is the only one to see a “manifest excess of powers” in the fact that the original tribunal examined ilc Draft Art. 25 with reference to the evidence and arguments brought before it. Also the Sempra v. Argentina committee stands alone in considering an arbitral tribunal’s discussion of Art. xi of the bit as nonapplication of the latter. 1148 Compañía de Aguas del Aconquija s.a. and Vivendi Universal s.a. v. Argentine Republic, icsid Case No. arb/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and ­Compagnie Générale des Eaux v. Argentine Republic), Decision of the Ad hoc Committee on Annulment (10 August 2010) [hereinafter Vivendi v. Argentina (ii) (Decision on Annulment)].

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that it “understands the argument that the (…) Tribunal was no longer properly constituted (…) and that there was a serious departure from a fundamental rule of procedure”; it therefore considered “that this could lead to annulment whenever justified within the context of the case under consideration.”1149 However, the annulment committee eventually rejected to annul the award based on the assumption that the arbitrator concerned had acted impartially and independently. In support of this upholding of the award, it briefly discussed some “other factors” such as the good faith of the arbitrator as regards the non-existence of the company’s holdings in Vivendi.1150 Obviously, the point that has led to controversies over this annulment decision is that the ad hoc committee, in the course of its extensive obiter dictum, noted that the award was – in theory – annullable due to violations of icsid Convention Art. 52 (1) (a) and (d), but then proceeded to reject the request for annulment. This arbitrariness is perplexing for the parties and is far less defensible than the annulment decision in cms v. Argentina, wherein the ad hoc committee, although having had the questionable ambition of “correcting” the substantive reasoning of the original tribunal, nonetheless stayed within the strict confines of the icsid annulment remedy and proceeded to hold that the award was not annullable.1151 A further annulment decision dating from the same year is Fraport v. Philippines (i).1152 Since this decision, once again, displays tendencies of interventionism in substantive matters, it has been criticised for inappropriately undertaking a certain degree of review on the merits and for making gratuitous statements on various other aspects of the arbitral tribunal’s holding.1153 1149 Vivendi v. Argentina (ii) (Decision on Annulment), para. 232. 1150 Vivendi v. Argentina (ii) (Decision on Annulment), paras. 233–238. 1151 Lucy F. Reed & Girogio Francesco Mandelli, Ad hoc or ad arbitrium? An Audit of Recent icsid Annulment Decisions, in Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2011 82 (Arthur W. Rovine ed., 2012). For further criticism, see Aronson, Rethinking the “Three Generations” 3, 12–17, esp. 16. Therein, the author criticises both the Vivendi (ii) v. Argentina and the cms v. Argentina annulment decisions, yet without distinguishing between them, as having “served to delegitimize the tribunal decisions and jeopardize the enforcement and finality of icsid awards.” 1152 Fraport ag Frankfurt Airport Services Worldwide v. Republic of the Philippines, icsid Case No. arb/03/25, Decision of the Ad hoc Committee on Annulment (23 December 2010) [hereinafter Fraport v. Philippines (i) (Decision on Annulment)]. 1153 See e.g. Fraport v. Philippines (i) (Decision on Annulment), paras. 180 et seq. See also Reed & Mandelli, Ad hoc or ad arbitrium? An Audit of Recent icsid Annulment Decisions 87; Nassib G. Ziadé et al., Recent Trends in International Investment Treaty Law, 105 asil Proc. 325, 338 (2011).

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Modern Law of Annulment ii

This phase of repeated derogations from the narrow scope of icsid Convention Art. 52 (1), which took place throughout the year 2010,1154 was curbed by the subsequent series of annulment decisions, including Duke v. Peru,1155 Togo Electricité v. Togo,1156 Continental Casualty v. Argentina,1157 aes ­Summit

1154

1155

1156

1157

For further comments on the annulment decision, see the Letter from Mr. Jose ­ nselmo I. Cadiz, Solicitor General, Republic of the Philippines, to the icsid AdministraA tive Council (27 June 2011) in icsid-Secretariat, Background Paper on Annulment For the Administrative Council of icsid, Annex 2 (10 August 2012): “The ad hoc Committee reached its decision to annul by exceeding its authority, usurping the powers and duties of the Tribunal, and denying the parties the opportunity to comment on the basis for its decision. The Committee acted as a court of appeal, conducting its own de novo assessment of the evidence and annulling on the basis of its disagreement with the Tribunal’s determinations of points of law and findings of fact. It based its decision to annul not only on its improper and mistaken assessment of the legal determination by a State Prosecutor without permitting the parties to comment fully on its approach, but also on an erroneous application of the ‘serious departure’ ground set forth in Article 52(1)(d). It also improperly and gratuitously criticized the Award on issues already fully litigated by the parties and decided by the Tribunal.” It should, however, be pointed out that Mr. Cadiz had an interest in the case. This series of flawed annulment decisions has been interrupted by the ruling in Sociedad Anónima Eduardo Vieira v. Republic of Chile, icsid Case No. arb/04/7, Decision of the Ad hoc Committee on Annulment (10 December 2010) [hereinafter Vieira v. Chile (Decision on Annulment)]. Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, icsid Case No. arb/03/28, Decision of the Ad hoc Committee on Annulment (1 March 2011) [hereinafter Duke v. Peru (Decision on Annulment)]. Togo Electricité and GDF-Suez Energie Services v. Republic of Togo, icsid Case No. arb/06/7, Decision of the Ad hoc Committee on Annulment (6 September 2011) [hereinafter Togo Electricité v. Togo (Decision on Annulment)]. Continental Casualty v. Argentina (Decision on Annulment). Although the underlying award was, as other cases before, concerned with the legal relationship between the different forms of “necessity” defences based on treaty law and on customary international law, the ad hoc committee refrained from a substantive review of the tribunal’s interpretative approach thereto. Accordingly, in contrast to the annulment decisions rendered in cms v. Argentina, Sempra v. Argentina, and Enron v. Argentina, the ad hoc committee in Continental Casualty v. Argentina was the first that entirely stayed within the boundaries of its mandate in this respect. See also the comments in Harhay, The Argentine Annulments 436–437.

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v. ­Hungary,1158 Pey Casado v. Chile,1159 rsm v. Central African Republic,1160 Libananco v. Turkey,1161 Malicorp v. Egypt,1162 and Lemire v. Ukraine.1163 The interpretative approaches (re-)adopted therein and in further decisions ­rendered

1158 aes Summit Generation Ltd. and aes-Tisza Erömü Kft. v. Republic of Hungary, icsid Case No. arb/07/22, Decision of the Ad Hoc Committee on Annulment (29 June 2012) [hereinafter aes Summit v. Hungary (Decision on Annulment)]. For a case comment, see Aniruddha Rajput, Case Comment: aes Summit Generation Limited and AES-Tisza Erömü Kft v Hungary – The Scope of ad hoc Committee Review for Manifest Excess of Powers and Failure to State Reasons, 28 icsid Rev. – filj 273, 273–278 (2013). 1159 Víctor Pey Casado and President Allende Foundation v. Republic of Chile, icsid Case No. arb/98/2, Decision of the Ad Hoc Committee on Annulment (18 December 2012) [hereinafter Pey Casado v. Chile (Decision on Annulment)]. In view of the partial annulment on the basis of, inter alia, Art. 52 (d), it is notable that the ad hoc committee held that it had “no discretion to annul an award if a serious departure from a fundamental rule of procedure is established”; see Pey Casado v. Chile (Decision on Annulment), para. 80. This view stands in conflict with an established line of case law which adopted the view that, in particular in consideration of the wording of Art. 52 (3), ad hoc committees would have the discretion of whether to annul an award or not; see Schreuer et al., icsid Commentary 1035–1038 (Art. 52, paras. 472–477). Yet, it acknowledged the existence of such opposing case law and justified its departure by stating that “[s]ome committees, however, have expressed the view that this reasoning does not apply to Article 52(1)(d) as the requirement of a ‘serious’ departure already incorporates the substantiality of the impact. Therefore, if such ground is established, it requires annulment ipso facto.” [footnotes omitted]; see Pey Casado v. Chile (Decision on Annulment), para. 79. This payment of deference to prior decisions via substantiation of divergence evinces the ad hoc committee’s endeavour for coherence. For further comments on this decision, see Herbert Smith Freehills Arbitration Notes, Partial annulment of icsid award against Chile (17 January 2013), available at (last visited September 2016). 1160 rsm Production Corporation v. Central African Republic, icsid Case No. arb/07/2, Decision of the Ad Hoc Committee on Annulment (20 February 2013) [hereinafter rsm Production Corp. v. Central African Republic (Decision on Annulment)]. 1161 Libananco Holdings Co. Ltd. v. Republic of Turkey, icsid Case No. arb/06/8, Decision of the Ad Hoc Committee on Annulment (22 May 2013) [hereinafter Libananco v. Turkey ­(Decision on Annulment)]. 1162 Malicorp Ltd. v. Arab Republic of Egypt, icsid Case No. arb/08/18, Decision of the Ad Hoc Committee on Annulment (3 July 2013) [hereinafter Malicorp v. Egypt (Decision on Annulment)]. 1163 Joseph Charles Lemire v. Ukraine, icsid Case No. arb/06/18, Decision of the Ad hoc Committee on Annulment (16 July 2013) [hereinafter Lemire v. Ukraine (Decision on Annulment)].

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in the following years1164 are significantly more moderate, in particular as they  stay within the limits of the narrowly drafted annulment grounds and 1164 Impregilo S.p.A. v. Argentine Republic, icsid Case No. arb/07/17, Decision of the Ad hoc ­Committee on Annulment (24 January 2014) [hereinafter Impregilo v. Argentina (Decision on Annulment)]; Caratube International Oil Company llp v. Republic of Kazakhstan, icsid Case No. arb/08/12, Decision of the Ad hoc Committee on Annulment (21 February 2014) [hereinafter Caratube v. Kazakhstan (Decision on Annulment)]; sgs Société Générale de Surveillance s.a. v. Republic of Paraguay, icsid Case No. arb/07/29, Decision of the Ad hoc Committee on Annulment (19 May 2014) [hereinafter sgs v. Paraguay (Decision on Annulment)]; Alapli Elektrik b.v. v. Republic of Turkey, icsid Case No. arb/08/13, Decision of the Ad hoc Committee on Annulment (10 July 2014) [hereinafter Alapli Electrik v. Turkey (­Decision on Annulment)]; El Paso Energy International Company v. Argentine Republic, icsid Case No. arb/03/15, Decision of the Ad hoc Committee on Annulment (22 September 2014) [hereinafter El Paso v. Argentina (Decision on Annulment)]; Daimler Financial Services ag v. Argentine Republic, icsid Case No. arb/05/01, Decision of the Ad hoc Committee on Annulment (7 January 2015) [hereinafter Daimler v. Argentina (Decision on Annulment)]; Iberdrola Energía s.a. v. Republic of Guatemala, icsid Case No. arb/09/5, Decision of the Ad hoc Committee on Annulment (13 January 2015) [hereinafter Iberdrola v. Guatemala (Decision on Annulment)]; Señor Tza Yap Shum v. Republic of Peru, icsid Case No. arb/07/6, Decision of the Ad hoc Committee on Annulment (12 February 2015) [hereinafter Tza Yap Shum v. Peru (Decision on Annulment)]; Kılıç Ĭnşaat Ĭthalat Ĭhracat Sanayi Ve Ticaret Anonim Şirketi v. Turkmenistan, icsid Case No. arb/10/1, Decision of the Ad hoc Committee on Annulment (14 July 2015) [hereinafter Kılıç İnşaat v. Turkmenistan (Decision on Annulment)]; Tulip Real Estate and Development Netherlands b.v. v. Republic of Turkey, icsid Case No. arb/11/28, Decision of the Ad hoc Committee on Annulment (30 December 2015) [hereinafter Tulip v. Turkey (Decision on Annulment)]; Adem Dogan v. Turkmenistan, icsid Case No. arb/09/9, Decision of the Ad hoc Committee on Annulment (15 January 2016) [hereinafter Adem Dogan v. Turkmenistan (Decision on Annulment)]; Total s.a. v. Argentine Republic, icsid Case No. arb/04/1, Decision of the Ad hoc Committee on Annulment (1 February 2016) [hereinafter Total v. Argentina (Decision on Annulment)]; edf International s.a., saur International s.a. and León Participaciones Argentinas s.a. v. Argentine Republic, icsid Case No. arb/03/23, Decision of the Ad hoc Committee on Annulment (5 February 2016) [hereinafter edf International v. Argentina (Decision on Annulment)]; Ioan Micula, Viorel Micula, s.c. European Food s.a, s.c. Starmill s.r.l. and s.c. Multipack s.r.l. v. Romania, icsid Case No. arb/05/20, Decision of the Ad hoc ­Committee on ­Annulment (26 February 2016) [hereinafter Micula v. Romania (Decision on Annulment)]; Antoine Abou Lahoud and Leila Bounafeh-Abou Lahoud v. Democratic Republic of the Congo, icsid Case No. arb/10/4, Decision of the Ad hoc Committee on Annulment (29 March 2016) [­hereinafter Abou ­Lahoud v. Congo (Decision on Annulment)]; teco Guatemala Holdings, llc v. Republic of Guatemala, icsid Case No. arb/10/23, Decision of the Ad hoc Committee on Annulment (5 April 2016) [hereinafter teco v. Guatemala (Decision on Annulment)]; Poštová Banka, a.s. and Istrokapital se v. Hellenic Republic, icsid Case No. arb/13/8, Decision of the Ad Hoc Committee on Annulment (29 September 2016) [hereinafter Poštová Banka v. Hellenic Republic (Decision on Annulment)].

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thereby respect the exceptional nature of the icsid annulment mechanism. This ­re-balanced annulment jurisprudence suggests that a further realignment is in process and therefore might be referred to as the “modern law of annulment ii.”1165 cc

Summary and Interpretative Evaluation

On the whole, icsid annulment jurisprudence suggests that the scope of ­annulment review in general and the interpretation of the individual grounds in particular are still not clearly defined. Case law initially developed from a very broad reading of the annulment powers in the “first generation” to a more cautious and narrow approach in the “second generation” and “third generation.” Apart from a few diverging decisions, the following series of “modern law of annulment” confirmed the limited function of annulment as a merely procedural review mechanism, so that for some period of time, the role of ad hoc committees and the way of construing annulment grounds appeared to be settled. Yet, this seemingly well-established consensus was then shaken by decisions that, besides other shortcomings, readopted the interventionist approach of the “first generation” and engaged in a substantive, not purely procedural manner of review – thus straying from the narrow limits of the icsid review remedy. They represent further views in a series of fluctuating positions on the proper functioning of the annulment remedy pursuant to ­i csid ­Convention Art. 52 (1) and have been designated as forming the “fourth generation” of annulment case law. However, from then on, a second series of “modern law of annulment” – putting the annulment system back on the right track – has emerged. It remains to be seen whether the interpretation (re)established therein will prevail as the authoritative interpretation for the long term, or whether the aberrations of ad hoc committees to an appellatelike review will continue. Having determined the existence of inconsistencies in icsid annulment jurisprudence, it is now of interest to shed light on the causes for these discrepancies in the construction of the grounds for annulment. Besides general flaws 1165 However, at least in one recent annulment decision, Occidental v. Ecuador, the interpretation of the scope the annulment ground in icsid Convention Art. 52 (1) (b) entails a negative connotation, given that the 40-pages-long detailed and extensive review of the tribunal’s reasoning on jurisdiction seems hardly compatible with the requirement of a “manifest” excess of the tribunal’s powers. See Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, icsid Case No.  arb/06/11, Decision of the Ad hoc Committee on Annulment (2 November 2015) [hereinafter Occidental v. Ecuador (Decision on Annulment)].

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in the choice and application of interpretative arguments,1166 the icsid case law addressed in the foregoing sections also shows deficiencies in the methods applied when dealing with precedents. The annulment decisions rendered by 1166 The Klöckner v. Cameroon (i) ad hoc committee, for instance, stated that “in accordance with principles of interpretation that are recognized generally – for example by Article 31 of the Vienna Convention on the Law of Treaties – Article 52 on the annulment of awards must be interpreted in the context of the Convention and in particular of Articles 42 and 48, and vice versa.”; see Klöckner v. Cameroon (Decision on Annulment i), para. 58. This “inclusive,” broad interpretative approach has been criticised for overlooking the “plain meaning” of icsid Convention Art. 52, which would rather speak for an “exclusive,” narrow conception of Art. 52 (1); see Reisman, Breakdown 739, 789–790. Such narrow interpretative approach finds support in historical facts as e.g. the deliberations that surrounded the 1953 ilc Draft Convention and its provisions on annulment (ilc Draft Convention on Arbitral Procedure, ilc Report, A/2456 (A/8/9), 1953, Chap. ii, para. 57 [hereinafter 1953 ilc Draft Convention]), which later were included in the 1963 preliminary draft of the icsid Convention (Preliminary Draft of a Convention on the Settlement of Investment Disputes between States and Nationals of other States, 15 October 1963, in: icsid, History, Vol. ii, 184–235 (1968)). More precisely, the ilc opted against any appellate remedy, but for a validity control of arbitral awards “within rigidly fixed limits.” See ilc, Yearbook of the International Law Commission, Documents of the Fifth Session Including the Report of the Commission to the General Assembly, Vol. i un Doc. A/cn.4/ser.A/1953, 211 (1953), referred to in icsid-Secretariat, Background Paper on Annulment For the Administrative Council of icsid, 5–6 (10 August 2012). Further historic evidence can be found in the travaux préparatoires of the icsid Convention, during which the majority of the delegates rejected the suggestion to add the “erroneous application of the law,” i.e. substantive violations of the law, to the ground for annulments, see icsid, History, Vol. ii, 853–854 (1968), referred to in Hamamoto, New Challenges for the icsid Annulment System 396–397. The ad hoc committee’s invocation of the contextual argument that the norms in question would be “part of the same system” has been criticised as unsuitable to justify the broad reading of icsid Convention Art. 52 (1) that it adopted. It has been considered as unconvincing in view of the much closer positioning of icsid Convention Art. 53, which is located in even the same section and which embodies the principle of finality in icsid arbitration by prescribing that icsid awards be binding and by prohibiting any appellate review. The contextual consideration of icsid Convention Arts. 42 and 48 alone thus seems to be rather one-sided and driven by corrective motivations as regards the legal reasoning of the original tribunal; see Schreuer et al., icsid Commentary 967 (Art. 52, para. 237). In addition, the critics pointed out that construing icsid Convention Art. 52 (1) inclusively would indicate the underlying assumption that the violation of any other article of the icsid Convention is also a possible ground for annulment; this, by contrast, would stand in opposition to icsid Convention Art. 44, which implied that all procedural norms except icsid Convention Arts. 41 to 47 are dispositive and may be waived by the disputing parties; see Reisman, Breakdown 739, 789–790.

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the ad hoc committees in Sempra v. Argentina and Enron v. Argentina seem to be most informative in this regard. As seen, both annulment committees commenced their rulings auspiciously by emphasising the restricted function of the annulment mechanism. This would imply that they could not replace the original tribunals’ legal viewpoint with their own views on the legal issues in question.1167 Thus, the annulment committees appeared to align themselves with established prior practice in this regard, e.g. with the mtd v. Chile annulment decision, which was explicitly mentioned. In addition to these indications, the Enron v. Argentina ad hoc committee specifically stated that annulment committees should “have regard to relevant previous icsid awards and decisions, including other annulment decisions, as well as to other persuasive authorities.”1168 However, their following argumentations showed that this was actually not the case. While the Sempra v. Argentina ad hoc committee put forward its differing opinion on the legal relationship of the provisions on necessity set forth in the respective bit and in the ilc Articles,1169 the Enron v. Argentina ad hoc committee imposed its viewpoint on the “proper construction of ilc Draft Art. 25.”1170 This divergence between saying one thing and ­doing the opposite is what has been categorised as “concealed, unsubstantiated deviation” from precedents “by pretended agreement”: tribunals or

1167 1168

1169 1170

Finally, as also asserted by critics, the ad hoc committee did not take into account the primary object and purpose of the icsid review mechanism, which consists in providing relief in emergency situations that involve severe violations of fundamental, mainly procedural policies and which stands in contrast to the ad hoc committee’s literal invitation of “claims for nullification of the award”; see id. at 790; Schreuer et al., icsid Commentary 903 (Art. 52, para. 15), with reference, inter alia, to Caron, Reputation and Reality 21, 49 et seq. In sum, the interpretative methods used by the Klöckner v. Cameroon (i) committee seem to lack rigorous systematic analysis. Rather, the methods of interpretation appear to have been chosen in view of the desired outcome of the case and then applied in a cursory manner without in-depth discussions. See Sempra v. Argentina (Decision on Annulment), para. 76; Enron v. Argentina (Decision on Annulment), para. 65. Enron v. Argentina (Decision on Annulment), para. 66. The annulment committee continued that “[a]lthough there is no doctrine of binding precedent in the icsid arbitration system, the committee considers that in the longer term, there should develop a jurisprudence constante in relation to annulment proceedings.” [footnote omitted]. Sempra v. Argentina (Decision on Annulment), paras. 186–210. Enron v. Argentina (Decision on Annulment), para. 377. This split between the theoretical description of the mandate of an annulment committee and the practical exercise thereof has also been been pointed out in Harhay, The Argentine Annulments 431–437.

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ad hoc committees pretend to adopt established lines of case law but, in the end, act in just the opposite manner.1171 Although such manner of dealing with prior case law does not prima facie suggest inconsistencies, a closer look reveals that, in fact, the rulings are both inconsistent and incoherent with the invoked preceding case law. iii Substantive Law 1 Substantive Law in icsid Arbitration As has been noted,1172 the main purpose of the icsid Convention is to provide a procedural legal framework for arbitration proceedings.1173 Nevertheless, icsid Convention Art. 42 (1)1174 also contains important guidance as to the substantive law applicable to the merits of an icsid investment dispute. This provision governs the scenarios of both presence and absence of a choice of law by the parties. The 1st sentence of icsid Convention Art. 42 (1) requires the arbitral tribunal to decide a dispute according to the applicable substantive law chosen by the parties. It is based on the premise that the disputing parties are free to decide autonomously on the “rules of law” they consider most suitable for the settlement of any future conflict.1175 Absent such party agreement, the 2nd sentence of icsid Convention Art. 42 (1) becomes relevant. It instructs 1171 See Ch. 2.D.II.2.b.aa.ccc. Another instance of such discrepancies between theoretical statements and practical behaviour can be detected with regard to the requirement of “manifestness” in Art. 52 (1) (b). Although the correct meaning of this term as estabished by prior case law has been emphasised by the Sempra v. Argentina committee (Sempra v. Argentina (Decision on ­Annulment), para. 211), it did not respect this in its actual findings. 1172 See Ch. 2.E.I. 1173 See Schreuer et al., icsid Commentary 550 et seq. (Art. 42, para. 1). 1174 For the text of icsid Convention Art. 42 (1), see fn. 1050. 1175 The determination of the primarily applicable law by an autonomous decision of the ­parties is comparable to other fora and procedures of investment arbitration. See e.g. uncitral Arbitration Rules (1976) Art. 33 (1), 1st sentence: “The arbitral tribunal shall apply the law designated by the parties as applicable to the substance of the dispute.” [emphasis added]; see also uncitral Arbitration Rules (2010) Art. 35 (1), 1st sentence: “The arbitral tribunal shall apply the rules of law designated by the parties as applicable to the ­substance of the dispute.” [emphasis added]. Commentators have emphasised that the term “rules of law” should be considered as broader than the term “law” since it could even comprise a combination of different laws of different origin or a law in force at a particular point of time; see Ibrahim F.I. Shihata & Antonio R. Parra, Applicable Substantive Law in Disputes between States and Private Foreign Parties: The Case of Arbitration under the icsid Convention, 9 icsid Rev. – filj 183, 189 (1994); Richard H. Kreindler, The Law Applicable to International Investment Disputes,

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the arbitral tribunal to 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 interpretation of both the 1st sentence1176 and the 2nd sentence1177 of icsid Convention Art. 42 (1) have brought up several unresolved questions. A very prominent professional discourse in this context is concerned with the question of whether a party agreement pursuant to Art. 42 (1), 1st sentence, has to be express or whether an implied agreement would also be sufficient to trigger the said norm. Arbitral tribunals have so far accepted an implicit choice of law, but have taken differing approaches to reach this conclusion.1178 in Arbitrating Foreign Investment Disputes 407 (Norbert Horn & Stephan Kröll eds., 2004). 1176 For instance, there is the question of whether an arbitral tribunal should apply the chosen body of law with or without its conflict-of-laws rules. In contrast to the 2nd sentence of the said norm, there is no explicit reference to the private international law of the applicable law. On the one hand, this less precise formulation could be interpreted in a sense that it allows parties to choose less than a whole legal system, e.g. only particular provisions, and thus as including conflict-of-law rules; see Broches, The Convention on the Settlement of Investment Disputes 337, 390–391. Yet, on the other hand, if following an argumentum e contrario as regards the 2nd sentence of the said article, the textual ­difference between these two provisions would require strictly respecting the parties’ express choice of an applicable law and thus would bar the uncertainty and vagueness of a renvoi to another legal system; see David J. Branson & Richard E. Wallace, Choosing the Substantive Law to Apply to International Commercial Arbitration, 27 Va. J. Int’l L. 39, 44–45 (1986); Moshe Hirsch, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes 130–132 (Martinus Nijhoff, ­Dordrecht, 1993). For further controversial aspects on icsid Convention Art. 42 (1), 1st sentence, see below Ch. 2.E.III.1.b. 1177 For controversial aspects on icsid Convention Art. 42 (1), 2nd sentence, see below Ch. 2.E.III.1.b. 1178 Some of the icsid tribunals considered the invocation of a body of substantive law in the parties’ pleadings as a choice of applicable law or simply as an affirmation of the tribunal’s determinations on the applicable law; see e.g. aapl v. Sri Lanka (Award), ­paras. 20, 24; Amco v. Indonesia (i) (Award), para. 148; Wena Hotels Ltd. v. Arab Republic of Egypt, icsid Case No. arb/98/4, Award (8 December 2000) [hereinafter Wena Hotels v. Egypt (Award)], para. 79; Enron v. Argentina (Award), paras. 206–207. An opposing view, stressing the de facto obligatory character of pleadings in adversarial proceedings, which forbids considering them as implicit choice of law, was adopted in Asian Agricultural Products Ltd. v. Republic of Sri Lanka, icsid Case No. arb/87/3, Dissenting Opinion of Arbitrator Samuel K.B. Asante (15 June 1990) [hereinafter aapl v. Sri Lanka (Dissenting Opinion Asante)]. For scholarly commentators sharing this position, see e.g. Leeks, Relationship between bit Arbitration and the Wider Corpus of International

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Although it is in general desirable to respect the concept of party autonomy in the ­context of international arbitration, there is also the risk that a party agreement might be wrongly assumed, thereby thwarting the parties’ free will.1179 Law 1, 14–15; Virtus Chitoo Igbokwe, Determination, Interpretation, and Application of Substantive Law in Foreign Investment Treaty Arbitrations, 23 J. Int’l Arb. 267, 282 (2006). Some icsid tribunals, on the other hand, interpreted the fact that the dispute arose under an international investment treaty as the parties’ implicit agreement to decide the case according to the choice of law clause contained therein; see Goetz v. Burundi (Award), para. 94; Middle East Cement Shipping and Handling Co. s.a. v. Arab Republic of Egypt, icsid Case No. arb/99/6, Award (12 April 2002) [hereinafter Middle East Cemenent v. Egypt (Award)], para. 87; Siemens v. Argentina (Award), para. 76. For scholarly commentators that disagreed with this position in view of the difference between the parties to the bit and the parties to the dispute based on such bit, see e.g. Leeks, Relationship between bit Arbitration and the Wider Corpus of International Law 1, 15. Nonetheless, it is generally accepted that the material regulations of these treaties are applicable even absent an express stipulation; see Schreuer et al., icsid Commentary 578 (Art. 42, para. 89). Further icsid tribunals considered the reliance on an international investment treaty as the parties’ implicit choice of international law; see e.g. Middle East Cement v. Egypt (Award), para. 87; mtd v. Chile (Award), paras. 86–87; csob v. Slovak Republic (Award), para. 63. For a scholarly position in support of an implicit choice of international law, see e.g. Parra, Applicable Substantive Law in icsid Arbitrations Initiated under Investment Treaties 20, 21. Yet other icsid tribunals assumed an implied choice of law on the basis of a reference to single norms or specific parts of domestic legislation, as was the case in letco v. Liberia (Award), 2 icsid Reports 358–359. A contrary position thereto, finding that references to specific texts of the host State’s legislation would not necessarily amount to a general choice of that law, was taken by Autopista Concesionada de Venezuela, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. arb/00/5, Award (23 September 2003) [hereinafter Autopista v. Venezuela (Award)], para. 97. An approach developed by scholarly commentators in the context of contract arbitration takes the 2nd sentence of Art. 3 (1) of the 1980 Rome Convention on the Law Applicable to Contractual Obligations (consolidated version), 26 January 1998, oj C 27/02 (1998), 34–46 [hereinafter Rome i Convention] as a guidance, which provides that “the choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case.” See Shihata & Parra, Applicable Substantive Law 183, 190. This idea has been criticised for trying to clarify the term of an implicit choice of law with the even more unclear criterion of “reasonable certainty”; see Igbokwe, Determination, Interpretation, and Application 267, 281. For further comments and literature references on this topic and the cited case law, see Schreuer et al., icsid Commentary 570–580 (Art. 42, paras. 62–95). 1179 Moreover, Art. 42 (1), 2nd sentence, could become m ­ eaningless if an implicit choice of law could be construed easily; see Leeks, Relationship between bit Arbitration and the Wider ­Corpus of International Law 1, 15; Igbokwe, Determination, Interpretation, and Application 267, 283.

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Given the complexity and hybrid nature of the substantive law applicable to investment disputes, it appears useful to briefly sketch out its different categories and sources of law as well as their interrelationship. a International Law When looking at the regime of international investment law and arbitration, it is obvious that international law – as embodied in iias and in particular in bits – plays a central role as a source of substantive law. The boom of bits, which has so far resulted in almost 3,000 treaties concluded between home and host States up to today,1180 has made them advance to the most important instrument of consent1181 and investment protection. Therefore, since more than two decades, bits have been widely recognised as the “primary source of applicable legal rules”1182 in treaty-based investment arbitration. They constitute lex specialis, so to speak, and prevail unless other sources of substantive investment law turn out to be more appropriate.1183 In spite of bits forming the major source of substantive international investment law, they do not exhaustively regulate all aspects of the ­investor-State relationship, but provide solely for a basic set of protective standards.1184 ­Accordingly, as confirmed by icsid case law, bits have to be seen in the “wider juridical context in which rules from other sources are integrated through ­implied incorporation methods or by direct reference to certain s­ upplementary rules.”1185 These rules may belong to domestic1186 or – as of interest in this­ 1180 See Ch. 1.B.I.4.a. 1181 See Ch. 2.E.I. 1182 See e.g. aapl v. Sri Lanka (Award), paras. 20, 38; Wena Hotels v. Egypt (Award), para. 78; referred to in Newcombe & Paradell, Law and Practice of Investment ­T reaties 91. 1183 Id. 1184 Id. at 91–92. 1185 aapl v. Sri Lanka (Award), para. 21. See also Parra, Applicable Substantive Law in icsid Arbitrations Initiated under Investment Treaties 20, 21: “The treaty being an instrument of international law, it is (…) implicit in such cases that the arbitrators should have recourse to the rules of general international law to supplement those of the treaty.”; and Prosper Weil, The State, the Foreign Investor, and International Law: The No Longer Stormy Relationship of a Ménage À Trois, 15 icsid Rev. – filj 401, 412 (2000): “[There is a] trend (…) toward icsid arbitration governed by international law by virtue of the fact that the bit implicitly or explicitly provides that disputes must be settled not only on the basis of the provisions of the treaty itself, but also, and more generally, on the basis of the principles and rules of international law.”; both quotes have been referred to in Newcombe & Paradell, Law and Practice of Investment Treaties 99. 1186 See below Ch. 2.E.III.1.b.

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s­ection – to international law. Since bits as international treaties are “governed by international law,”1187 the latter legal order is generally consulted to decide whether a State incurred international responsibility for a breach of the bit and to determine the legal consequences of such breach, i.e. the international responsibility in the form of e.g. reparation or compensation.1188 In the icsid context, international law in general and bits in particular have a dual affiliation, i.e. two gateways to the body of applicable substantive law. On the one hand, they may be chosen by the parties to the dispute pursuant to icsid Convention Art. 42 (1), 1st sentence. If an instrument of consent provides for an express choice of law, it usually includes international law as one of the relevant sources of law to be taken into consideration.1189 Moreover, as has been seen,1190 it is generally accepted in treaty-based arbitrations that the substantive rules comprised in a bit apply due to the implicit consent which is considered as given when a claim is filed on the basis of such treaty. On the other hand, in default of any choice of law – be it explicit or implicit – by the disputing parties, the 2nd sentence of Art. 42 (1) obliges the arbitral tribunal to consider, inter alia, the “rules of international law” when deciding on the merits of case. This express reference to the body of international law is so far unique within the field of investment arbitration.1191 As demonstrated by 1187 See vclt Art. 31 (3) (c), see fn. 713. 1188 Newcombe & Paradell, Law and Practice of Investment Treaties 98–100, with reference, inter alia, to the ilc Draft Articles on State Responsibility. 1189 See e.g. uk–Argentina bit Art. 8: “The arbitral tribunal shall decide the dispute in accordance with the provisions of this Agreement, the laws of the Contracting Party involved in the dispute (…), the terms of any specific agreement included in relation to such investment, and the applicable principles of international law.” (Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Argentina for the Promotion and Protection of Investments, 11 December 1990), referred to in Blackaby & Partasides, Redfern and Hunter on International Arbitration 464 (para. 8.62). 1190 See Ch. 2.E.III.1. (fn. 1178). See also Schreuer et al., icsid Commentary 578 (Art. 42, para. 89). 1191 No other set of arbitral rules contains a comparable, express reference to international law. See e.g. uncitral Arbitration Rules (2010) Art. 35 (1), 2nd sentence: “Failing such designation by the parties, the arbitral tribunal shall apply the law which it determines to be appropriate.”; scc Arbitration Rules (2010) Art. 22 (1): “In the absence of such agreement, the Arbitral Tribunal shall apply the law or rules of law which it considers to be most appropriate.”; lcia Arbitration Rules (2014) Art. 14.5: “The Arbitral Tribunal shall have the widest discretion to discharge these general duties, subject to such mandatory law(s) or rules of law as the Arbitral Tribunal may decide to be applicable; (…).” (lcia Arbitration Rules, effective 1 October 2014 [hereinafter lcia Arbitration Rules]); referred

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the icsid Convention’s drafting history, the expression is meant to comprise “bilateral investment treaties between the State party to the dispute and the State whose national was a party to the dispute.”1192 Due to the rather unspecific references to the “rules of international law,” the exact content and scope of this source of substantive law appears quite vague. It has, however, been specified in the Report of the Executive Directors to the icsid Convention, wherein they state that “[t]he term ‘international law’ as used in this context should be understood in the sense given to it by Article 38(1) of the Statute of the International Court of Justice, allowance ­being made for the fact that Article 38 was designed to apply to inter-State disputes.”1193 Even if it is questionable whether the enumeration of categories of international law contained in this norm is still appropriate to reflect the intertwined and multilayered field of today’s international legal practice, it to (partially in older versions of the arbitration rules) in Leeks, Relationship between bit Arbitration and the Wider Corpus of International Law 1, 10–11. Yet, in spite of this express reference, icsid tribunals have shown the tendency to give no or only very little consideration to international law in its wider sense. If they happen to take it into account, this is often limited to norms of treaty interpretation as codified in the vclt, to customary international law comprising standards of treatment, and to procedural rules of international arbitration. This overlooks that international investment law forms only a part of the wider corpus of international law and that a host State might have obligations under international law beyond the scope of international investment law in its narrower sense; see id. at 19–35. For an overview of the advancement of international law “from a controversial and unwanted intruder in the relationship between the (…) host State and the foreign private investor into a most welcome partner,” see Weil, The State, the Foreign Investor, and International Law 401, 416. 1192 icsid, History, Vol. ii, 984 (1968), referred to in Schreuer et al., icsid Commentary 605 (Art. 42, para. 171). 1193 World Bank, Report of the Executive Directors, para. 40 (1965), referred to in Schreuer et al., icsid Commentary 604 (Art. 42, para. 169). icj Statute Art. 38 (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; (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.” Art. 38 of the icj Statute is generally considered as establishing the classic, yet ­non-exhaustive sources of international law. It is hence of universal relevance at the international level.

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provides at least some basic guidance for icsid tribunals as regards the different sources of international law to be taken into account.1194 These categories include international conventions (aa.), international custom (bb.), and general principles of law (cc.). aa

International Conventions

bb

International Custom

While the importance of the wide variety of bilateral and multilateral investment treaties, including e.g. the nafta, the ect, and the mercosur Investment Protocols,1195 is incontestable, there is also a range of other international conventions that are of relevance for an arbitral decision on the merits. These include first and foremost the Vienna Convention as one of the most frequently cited international, non-investment specific conventions in the framework of international investment law,1196 even though it is – formally – not directly applicable to arbitrations under the icsid Convention.1197 Other examples of international commitments between States which have been taken into ­account by icsid arbitrators are un human right treaties1198 and the 1972 unesco World Heritage Convention.1199 Likewise, even customary international law is of significance as a source of substantive law for the settlement of investment disputes. Besides serving as interpretative guidance for arbitral tribunals when construing specific contract, treaty, or domestic legal provisions,1200 it is often applied to fill in gaps in

1194 1195 1196 1197 1198

Schreuer et al., icsid Commentary 604 (Art. 42, para. 170). Id. at 604 (Art. 42, para. 171). Id. at 604 (Art. 42, para. 173), with case law references. On the applicability of the Vienna Convention, see Ch. 2.D.II.1.a.aa. (fn. 713). See e.g. cms v. Argentina (Award), paras. 114, 121; Azurix v. Argentina (Award), paras. 254– 261; Siemens v. Argentina (Award), paras. 75, 79; referred to in Schreuer et al., icsid Commentary 605 (Art. 42, para. 173). 1199 unesco Convention Concerning the Protection of World Cultural and Natural Heritage 1972, 1037 unts 151 (1977) [hereinafter unesco Convention]. See e.g. spp v. Egypt (Award), paras. 75–78, referred to in id. at 605–606 (Art. 42, para. 174). 1200 Moshe Hirsch, Sources of International Investment Law, Int’l L. Forum 1, 9 (2011). See e.g. Phoenix v. Czech Republic (Award), para. 75: “It is not disputed that the interpretation of the icsid Convention and of the bit is governed by international law, including the customary principles of interpretation embodied in the Vienna Convention on the Law of Treaties and the general principles of international law.,” referred to in id.

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case of lacunae of the lex specialis laid down in iias.1201 Furthermore, certain iias do explicitly refer to customary international law. The 2004 us Model bit, for example, provides that “[e]ach party shall accord to covered investments treatment in accordance with customary international law (…).”1202 One prominent example of a rule of customary international law is the ­International Minimum Standard, which had already been recognised in the 18th century and which was further developed – and also strongly challenged1203 – during the 19th and 20th century.1204 Due to its continuous use in the context of fdi, this standard has advanced to a well-accepted international legal principle inasmuch as it governs the State-treatment of aliens and their property and investments.1205 Other examples of international custom To be precise, international custom, when solely used as interpretative guidance for the construction of another provision, does not come into play as an applicable substantive source of law in its narrower sense. For elaborations on the distinction between the interpretation and the application of legal norms, see Ch. 2.B.II.2 (fn. 647). See also Gourgourinis, Distinction between Interpretation and Application 31, 31–57. 1201 Hirsch, Sources of International Investment Law 1, 8. See e.g. Enron v. Argentina (Award), para. 334: “(…) a treaty regime specifically dealing with a given matter will prevail over more general rules of customary law. (…) But the problem is that the Treaty itself did not deal with these elements. The Treaty thus becomes inseparable from the customary law standard insofar as the conditions for the operation of state of necessity are concerned (…).”, referred to in id. 1202 2004 us Model bit Art. 5 (Minimum Standard of Treatment): “(1.) Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security.” 1203 Capital-importing countries, and in particular Latin American countries, challenged the International Minimum Standard throughout the first half of the 20th century and attempted to replace it by the rule of national treatment instead. See Ch. 1.B.I.1. For further details, see Marcella Klein Bronfman, Fair and Equitable Treatment: An Evolving Standard, 10 Max Planck Yb. un L. 609, 664–665 (2006). 1204 See Neer claim (1924); Roberts claim (1926); referred to in Katia Yannaca-Small, Fair and Equitable Treatment Standard in International Investment Law, oecd Working Papers on International Investment, 9–10 (2004). Both cases dealt with the protection of natural persons and hence were of little relevance for the determining the content of the standard in the context of investment disputes. Nevertheless, the Neer claim (1924) in particular represents a landmark case since it was the first to pronounce that the International Minimum Standard would be the benchmark for the treatment of aliens and their property. 1205 Klein Bronfman, Fair and Equitable Treatment 609, 664–665; Newcombe & Paradell, Law and Practice of Investment Treaties 235–238. The International Minimum Standard has been defined as a “norm of customary international law which governs the treatment of aliens, by providing for a minimum set

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as applied by icsid tribunals are the principles of State responsibility,1206 the maxim of respect of acquired rights,1207 the doctrine of necessity and its ­consequences,1208 as well as some of the principles codified in the vclt.1209 In view of the immense number of bits containing the same or at least largely similar provisions, a debate has arisen on whether these treaties not only refer to customary international law, but have actually crystallised into

1206 1207 1208

1209

of principles which States, regardless of their domestic legislation and practices, must ­respect when dealing with foreign nationals and their property.”; see Yannaca-Small, fet Standard in International Investment Law, 8 (fn. 32), with references to further definitions. The older, classical definition of the minimum standard of treatment can be found in Roth, The Minimum Standard of International Law Applied to Aliens 127: “[T]he minimum 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 the nations.” Yet, the precise content of this standard is very complex and in continuous flux, thereby making it difficult to determine; see e.g. Mondev v. us (Award), para. 125; adf Group Inc. v. United States of America, icsid Case No. arb(af)/00/1 (nafta), Award (9 January 2003) [hereinafter adf v. us (Award)], para. 179: “(…) 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 claim was rendered. For both customary international law and the minimum standard of treatment of aliens it incorporates, are constantly in a process of development.”, referred to in Yannaca-Small, fet Standard in International Investment Law, 15–18. Still, it can be made tangible by looking at the different intertwined and interlocking elements which the International Minimum Standard has been found to include in the context of foreign investors and their investments. For instance, State responsibility may arise for denial of justice, for expropriation without due compensation, or for any form of arbitrariness, discrimination, or injury; see Newcombe & Paradell, Law and Practice of Investment Treaties 238; Schreuer et al., icsid Commentary 606 (Art. 42, para. 175). Thus, while the International Minimum Standard in itself can be considered as absolute standard, each situation requires a specific rule of international law to ensure that minimum of level of treatment; see Alireza Falsafi, The International Minimum Standard of Treatment of Foreign Investor’s Property, 30 Suffolk Transnat’l L. Rev. 317, 355 (2006–2007). See e.g. spp v. Egypt (Award), para. 85; Tokios Tokéles v. Ukraine (Decision on Jurisdiction), para. 102; Azurix v. Argentina (Award), paras. 92, 102. See e.g. Amco v. Indonesia (i) (Award), para. 248 (v). See e.g. cms v. Argentina (Award), paras. 304–331; Enron v. Argentina (Award), paras. 294– 313; Sempra v. Argentina (Award), paras. 333–354, 392–397. See, for further examples and the cited case law, Schreuer et al., icsid Commentary 606–607 (Art. 42, para. 177). See e.g. the principles contained in vclt Arts. 27, 31–33, 41. For further explanations on the relationship of the vclt and international custom, see fn. 713.

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rules of international custom themselves.1210 This equation of bits with customary law would have the consequence that a host State would be obliged to accord certain protective standards even if they had not been included into the governing investment agreement. The majority of scholarly commentators have expressed critical views on this question, in particular in view of the conditions required to identify bits as customary international law.1211 Their concerns point to the high number, complexity, and variation of bits, which would be irreconcilable with the objective requirement of a “general practice,” and to the fact that, in subjective terms, contracting States were more driven by economic interests and constraints than by a perceived legal duty.1212 Nevertheless, it has been admitted that bits so far have considerably contributed 1210 For an overview of this debate and further references, see Patrick Dumberry, Are bits Representing the “New” Customary International Law in International Investment Law?, 28 Penn St. Int’l L. Rev. 675, 675–701 (2010). For commentators in support of equating bits with international custom, see e.g. Mann, British Treaties for the Promotion and Protection of Investments 241, 249–251; Lowenfeld, icsid Convention 47, 58–60; for (the majority of) commentators arguing against this equation, see e.g. Dumberry, Are bits Representing the “New” Customary International Law? 675, 684–693; Guzman, Why lcds Sign Treaties That Hurt Them 639, 684–685; B ­ ernard Kishoiyan, The Utility of Bilateral Investment Treaties in the Formulation of Customary International Law, 14 Nw. J. Int’l L. & Bus. 327, 327–375 (1993–1994); Subedi, International Investment Law 178–182. 1211 According to icj Statue Art. 38 (1) (b), the two basic requirements for the formation of new international custom are an objective “general practice” in the sense of a constantly and uniformly developing State practice including physical acts, judgments, legislation, or even declarations (usus), which has to be subjectively “accepted as law” in the sense that States consider this practice as authoritative (opinio juris). See Subedi, International Investment Law 178–179; Hirsch, Sources of International Investment Law 1, 10. See also North Sea Continental Shelf (Germany v. Netherlands), icj, Judgment (20 ­February 1969), icj Rep. (1969) 3, where the icj set out its approach to determine whether a certain State practice became a rule of general customary international law. It stated, in para. 72, that “(…) the provision concerned should (…) be of a fundamentally normcreating character such as could be regarded as forming the basis of a general rule of law.” Moreover it required, in paras. 73–74, that there should be a “widespread and representative participation” in such normative State practice, which should be “both extensive and virtually uniform in the sense of the provision invoked; − and should moreover have occurred in such a way as to show a general recognition that a rule of law or legal obligation is involved.” Regarding the subjective element, it emphasised, in para. 77, that: “[n] ot only must the acts concerned amount to a settled practice, but they must also be such, or be carried out in such a way, as to be evidence of a belief that this practice is rendered obligatory by the existence of a rule of law requiring it.” 1212 Dumberry, Are bits Representing the “New” Customary International Law? 675, 684–693.

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to the shaping and developing and even to the preservation of some basic principles of international custom.1213 cc

General Principles of Law

Unlike international conventions and customary international law, which emerge on the international level, general principles of law do usually arise from domestic legal systems and are then transposed into international law.1214 They relate to rather broad, abstract legal principles1215 and are particularly useful in legal fields involving non-State actors, as is the case in international investment law.1216 Despite being formally on the same footing with the other categories of international law as listed in the icj Statute, they often function as gap-fillers in case of non liquet situations.1217 Moreover, although general principles of law have significantly contributed to the early phase of the development of international investment law and investor-State arbitration, as is evidenced by the practice of the iusct in the pre-bit era,1218 they tend to be neglected by today’s arbitral tribunals.1219 One reason for this reluctance to 1213 Id. at 681. 1214 Schreuer et al., icsid Commentary 607–608 (Art. 42, para. 178); Hirsch, Sources of  International Investment Law 1, 14; Wälde, The Specific Nature of Investment Arbitration 100. The recognition of principles that emerged in national legal systems is verified by means of comparative research. Furthermore, these principles have to be considered as appropriate for being applied in the international realm; see Hirsch, Sources of International Investment Law 1, 13–14. 1215 Hirsch, Sources of International Investment Law 1, 13. 1216 Schreuer et al., icsid Commentary 607–608 (Art. 42, para. 178). The difference between international custom and general principles of law is explained in Guillaume, Can Arbitral Awards Constitute a Source of International Law (…)? 106: “While general principles of Public International Law are enshrined in international custom, and for advocates of jus cogens, may be considered as ‘peremptory norms of international law,’ general principles of law are common to national legal systems and transposable to Public International Law.” 1217 Schreuer et al., icsid Commentary 607–608 (Art. 42, para. 178); Hirsch, Sources of International Investment Law 1, 13. 1218 Schreuer et al., icsid Commentary 607–608 (Art. 42, para. 178); Hirsch, Sources of International Investment Law 1, 16, referring to literature on general principles of law and the practice of the Iran–us Claims Tribunal, as e.g. Grant Hanessian, “General Principles of Law” in the Iran-U.S. Claims Tribunal, 27 Colum. J. Transnat’l L. 309, 326–344 (1988–1989); John R. Crook, Applicable Law in International Arbitration: The Iran-U.S. Claims Tribunal Experience, 83 Am. J. Int’l L. 278, 292–299 (1989). 1219 Fauchald, The Legal Reasoning of icsid Tribunals 301, 326, referred to in Hirsch, Sources of International Investment Law 1, 16.

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use general principles of law as an interpretative tool has been the increased emergence of “hard” investment law in the form of iias or arbitral decisions relying on customary law, which is said to lessen the need for residual rules derived from general principles of law.1220 It has also been attributed to their indefiniteness and vagueness running counter to the need of certainty, stability, and reliability in international investment law and arbitration.1221 Examples of general principles of law applied in icsid jurisprudence include the principles of good faith,1222 estoppel,1223 the contract law principle pacta sunt servanda,1224 unjust enrichment,1225 the general principles of due process,1226 and res judicata.1227 b National Law and Its Relationship with International Law As seen, international law, together with national law, constitutes the “wider juridical context” in which iias and in particular bits are embedded.1228 The role of domestic law is mainly to provide, in an early phase of analysis, the substance to key terms and concepts contained in investment agreements. Since investment treaties, contracts, or legislation generally do not contain any detailed substantive rules on the subject matter they cover, municipal law is consulted to determine whether the protected rights and interests validly

1220 Hirsch, Sources of International Investment Law 1, 17. 1221 Id. at 17–18. 1222 See e.g. Amco v. Indonesia (i) (Decision on Jurisdiction), para. 47; Inceysa v. El Salvador (Award), paras. 230 et seq.; Sempra v. Argentina (Award), para. 297; Phoenix v. Czech Republic (Award), para. 77. 1223 See e.g. Amco v. Indonesia (I) (Decision on Jurisdiction), para. 47; Klöckner v. Cameroon (i) (Decision on Annulment), para. 123; csob v. Slovak Republik (Decision on Jurisdiction), para. 47. 1224 See e.g. Amco v. Indonesia (i) (Award), para. 248. 1225 See e.g. Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. arb/81/1, Award in Resubmitted Case (5 June 1990) [hereinafter Amco v. Indonesia (ii) (Award)], paras. 154–156; spp v. Egypt (Award), paras. 247–249; Inceysa v. El Salvador (Award), paras. 253–257. 1226 See e.g. Amco v. Indonesia (i) (Award), paras. 199–201; Amco v. Indonesia (i) (Decision on Annulment), paras. 75–79. 1227 See e.g. Waste Management, Inc. v. United Mexican States, icsid Case No. arb(af)/00/3, Decision of the Tribunal on Mexico’s Preliminary Objection concerning the Previous Proceedings (26 June 2002) [hereinafter Waste Management v. Mexico (ii) (Decision on Mexico’s Preliminary Objection)], para. 39. See, for further examples and parts of the cited case law, Schreuer et al., icsid Commentary 608–609 (Art. 42, para. 180). 1228 See appl v. Sri Lanka (Award), para. 21. See also Ch. 2.E.III.1.a.

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exist and to specify their legal characteristics and qualities.1229 For instance, a bit defines and limits what rights qualify as an “investment” and hence enjoy the protection it affords; still, questions as to whether and to what extent such rights validly exist, in whom they vest, and by which contractual and proprietary rights they are governed may only be answered by recourse to domestic legislation.1230 In a later phase of analysis, once a breach of such validly existing rights protected by a bit has been established, international law is then consulted to determine the international responsibility and the legal consequences incurred by such breach of a bit.1231 Accordingly, national law plays a major role as regards factual issues of investment disputes. It provides the legal framework against which the protections granted by investment agreements must be tested.1232 Nevertheless, as confirmed by icsid case law, municipal law – in its function of giving substance to international law – should not be considered as being limited to a mere matter of fact: on the contrary, at least in the context of international investment law, domestic legislation should be interpreted and applied as applicable law.1233 This view is supported by the principle iura novit curia, which 1229 Newcombe & Paradell, Law and Practice of Investment Treaties 92–95; Sasson, Substantive Law in Investment Treaty Arbitration xxv–xxviii. 1230 Newcombe & Paradell, Law and Practice of Investment Treaties 92–95. 1231 See Ch. 2.E.III.1.a. 1232 Blackaby & Partasides, Redfern and Hunter on International Arbitration 467 (para. 8.70). 1233 In the practice of the icj and its predecessor, the pcij, as well as other international tribunals, municipal law is considered as a mere matter of fact; see e.g. German Interests in Polish Upper Silesia (Germany v. Poland), pcij, Judgment (25 May 1925), 1926 pcij Series A, No. 7, 19; Nottebohm (Liechtenstein v. Guatemala), icj, Judgment (Second Phase) (6 April 1955), icj Rep. (1955) 4, 20–21, 24–26; Anglo-Iranian Oil Co. (uk v. Iran), icj, Judgment (Jurisdiction) (22 July 1952), icj Rep. (1952) 93, 106–107. To that effect, “a national law is generally regarded as a fact with reference to which rules of international law have to be applied, rather than as a rule to be applied on the international plane as a rule of law (…)” [footnote omitted]; see Robert Jennings & Arthur Watts, Oppenheim’s International Law, Vol. 1, Introduction and Part 1 83 (Longman, Harlow, 9th ed., 1992); see also James Crawford, Brownlie’s Principles of Public International Law 51–55, esp. 52–54 (Oxford University Press, New York, 7th ed., 2012). For icsid case law in support of this position, see e.g. Noble Ventures v. Romania (Award), para. 53; Alpha Projektholding v. Ukraine (Award), paras. 232–233; referred to in Kjos, Applicable Law in Investor-State Arbitration 254. For the counter-position in the context of international investment law, see e.g. Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 2 (2007); Blackaby & Partasides, Redfern and Hunter on International Arbitration 467–468 (paras. 8.70–8.72); Newcombe & Paradell,

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requires the arbitral tribunal to apply – and not merely consider – the proper law to arguments made, claims advanced, or defences raised by the parties.1234 Law and Practice of Investment Treaties 95; Kjos, Applicable Law in Investor-State Arbitration 256, referring to C. Wilfred Jenks, Prospects of International Adjudication 603 (Stevens, London, 1964); Ivar Alvik, The Hybrid Nature of Investment Treaty Arbitration: Straddling the National/International Divide, in The New International Law: An Anthology 91, 96 (Christoffer Conrad ­Eriksen & Marius Emberland eds., 2010). See also ilc, Draft Articles on the Responsibility of States for Internationally Wrongful Acts, with commentaries, Yearbook of the ilc, Vol. ii, Part. ii, Commentary (7) on Art. 3 (2001): “Especially in the fields of injury to aliens and their property and of human rights, the content and application of internal law will often be relevant to the question of international responsibility. In every case it will be seen on analysis that either the provisions of internal law are relevant as facts in applying the applicable international standard, or else that they are actually incorporated in some form, conditionally or unconditionally, into that standard.,” referred to in Kjos, Applicable Law in Investor-State ­A rbitration 241. For icsid case law in support of this counter-position, see e.g. Sempra v. Argentina (Award), para. 235: “(…) domestic law is not confined in scope of application to the determination of factual questions. It indeed has a broader role, as is evident from the pleadings and arguments of the parties to this very case. The License is itself governed by the legal order of the Argentine Republic, and it must be interpreted in its light.” See also Enron v. Argentina (Award), para. 206; Total s.a. v. Argentine Republic, icsid Case No. arb/04/01, Decision on Liability (27 December 2010) [hereinafter Total v. Argentina (Decision on Liability)], para. 39. The cases have been referred to in id. at 255–256, with further case law references. 1234 Newcombe & Paradell, Law and Practice of Investment Treaties 88–90, 95. But see cme v. Czech Republic (Final Award), para. 411: “This does not mean that a tribunal is bound to research, find and apply national law which has not been argued or referred to by the parties and has not been identified by the parties and the Tribunal to be essential to the Tribunal’s decisions.” Moreover, such direct or indirect applicability of domestic law is not without limits: to the extent that it is entirely unreasonable or circumvents the application of international law, it must be disregarded in order to ensure the primacy of international law; see Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 2 (2007); Newcombe & Paradell, Law and Practice of Investment Treaties 96–97; Sasson, Substantive Law in Investment Treaty Arbitration 201; Schreuer et al., icsid Commentary 585–586 (Art. 42, para. 112). For icsid case law in support of this position, see e.g. Compañia del Desarrollo de Santa Elena s.a. v. Republic of Costa Rica, icsid Case No. arb/96/1, Award (17 February 2000) [hereinafter Santa Elena v. Costa Rica (Award)], para. 64: “To the extent that there may be any inconsistency between the two bodies of law, the rules of public international law must prevail.” See also letco v. Liberia (Award), p. 358; spp v. Egypt (Award), para. 84;

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As is the case for international law, domestic law also has two possible gateways to be applied in an icsid investment dispute as part of the body of applicable substantive law. It is either applicable by explicit or implicit choice of law in the sense of icsid Convention Art. 42 (1), 1st sentence or, absent such choice, according to the default rule set forth in icsid Convention Art. 42 (1), 2nd sentence. In the event that, pursuant to the 1st sentence of icsid Convention Art. 42 (1), the parties referred to both national and international law on equal terms, arbitral practice so far has tended to apply both legal orders in parallel1235 or to formally apply only one legal order but at the same time to refer to the “normative convergence” between the two legal orders.1236 If the parties ­exclusively chose international law as the applicable law to the merits of a ­dispute, ­domestic law may still apply. This might be indirectly, e.g. via umbrella clauses, in a complementary manner to fill lacunae of international law by way of r­ envoi,1237 or in a corrective role pursuant to international public policy considerations1238 or “in accordance with the law” clauses.1239 On the other hand,

1235 1236 1237

1238

1239

Autopista v. Venezuela (Award), para. 207; Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, icsid Case No. arb/03/28, Decision on Jurisdiction (1 February 2006) [hereinafter Duke Energy v. Peru (Decision on Jurisdiction)], para. 162; referred to in id. at 583–585 (Art. 42, paras. 106–111). See also the elaborations below (fn. 1243–1245) on the default scenario according to icsid Convention Art. 42 (2), 2nd sentence. Kjos, Applicable Law in Investor-State Arbitration 275–293, with detailed case law references. For elaborations on the renvoi mechanism, as understood in public international law, see Sasson, Substantive Law in Investment Treaty Arbitration 198–206, referring to Barcelona Traction, Light and Power Company, Ltd. (Belgium v. Spain), icj, Judgment (Second Phase) (5 February 1970), icj Rep. (1970) 3. ila Committee on International Commerical Arbitration, Final Report on Public Policy as a Bar to Enforcement of International Arbitral Awards, New Delhi Conference 2002 (2002), availabe at (last visited September 2016): “[T]he expression ‘international public policy’ is to be understood in the sense given to it in the field of private international law; namely that part of the public policy of a State, which, if violated, would prevent a party from invoking foreign law or foreign judgment or foreign award. It is not to be understood (…) as referring to a public policy which is common to many States (which is better referred to as ‘transnational public policy’) or to public policy which is part of ­public international law. International public policy is generally considered to be narrower in scope than domestic public policy.” [footnotes omitted]; Kjos, Applicable Law in Investor-State Arbitration 98 (fn. 279). Kjos, Applicable Law in Investor-State Arbitration 240–270.

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if the disputing parties selected solely national law, international law may ­nevertheless apply indirectly, e.g. when it has been incorporated as an integral part of the domestic legal system.1240 In addition, international law may play a role as a complementary source of law if the relevant domestic legal order is fragmentary, or as a controlling instance whenever the application of national law would lead to intolerable consequences in that it would not grant “minimum standards” of investment protection under international custom.1241 Absent any choice of law by the parties, national law may be applied on the basis of icsid Convention Art. 42 (1), 2nd sentence. This provision adopted a system of concurrent laws1242 in that it provides that “the law of the contracting State party to the dispute” and “such rules of international law as may be applicable” shall govern. It does not, however, clarify the relationship between domestic and international law. As a consequence, a variety of d­ iffering ­positions

1240 Id. at 181–187; Schreuer et al., icsid Commentary 582 (Art. 42, paras. 100–102), with case law references. The latter author adds, as a caveat, that the effect of such incorporation of international law into national law may vary greatly, depending on the status international law enjoys under the respective domestic constitution. 1241 Kjos, Applicable Law in Investor-State Arbitration 189–197; Schreuer et al., icsid Commentary 585–586 (Art. 42, paras. 112–115). Whether international law is applicable even though it was not included in the parties’ explicit choice of applicable law is still a disputed question. Scholars and commentators who reject its applicability base their position mainly on the principle of party autonomy; see e.g. Okezie Chuckwumerije, International Law and Article 42 of the icsid Convention, 14 J. Int’l Arb. 79, 69 (1997); Nagla Nassar, Internationalization of State Contracts: icsid, The Last Citadel, 14 J. Int’l Arb. 185, 196–199 (1997). Yet, the large majority of authors and icsid tribunals take an opposite view and argue that international law is still of relevance, since international minimum standards would retain their mandatory character; see e.g. Peter Feuerle, International Arbitration and Choice of Law under Art. 42 of the Convention on the Settlement of Investment Disputes, 4 Yale Stud. World Pub. Order 89, 103–113 (1977); Elihu Lauterpacht, The World Bank Convention on the Settlement of International Investment Disputes, in Récueil d’ Études de Droit International en Hommage à Paul Guggenheim 656–658 (Institut de Hautes Études Internationales Génève ed., 1968). For an overview of this controversy, with further references, see Schreuer et al., icsid Commentary 583–587 (Art. 42, paras. 104–115). In the case of treaty-based arbitrations, this question is less urgent since international law may be invoked on the basis of customary international treaty law, which is reflected in the vclt; see Blackaby & Partasides, Redfern and Hunter on International Arbitration 465 (para. 8.64). 1242 Blackaby & Partasides, Redfern and Hunter on International Arbitration 198–199 (para. 3.138).

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have been developed, ranging from a parallel application,1243 to a supplemental and corrective application,1244 to an autonomous application1245 of these two bodies of law. 1243 According to the proponents of a parallel application, both the host State’s law and international law need to be respected when deciding a case. A parallel application of both bodies of law can specifically be found in the older icsid case law; see e.g. Adriano Gardella S.p.A. v. Côte d’Ivoire, icsid Case No. arb/74/1, Award (29 August 1977) [hereinafter Adriano Gardella v. Côte d’ Ivoire], para. 4.3; s.a.r.l. Benvenuti & Bonfant v. People’s Republic of the Congo, icsid Case No. arb/77/2, Award (8 August 1980) [hereinafter Benvenuti & Bonfant v. Congo (Award)], para. 4.64; Société Ouest Africaine des Bétons Industriels v. Senegal, icsid Case No. arb/82/1, Award (25 February 1988) [hereinafter soabi v. Senegal (Award)], para. 5.01.; referred to in Schreuer et al., icsid Commentary 618–620 (Art. 42, paras. 206–213). A representative example of this position is the award in Amco v. Indonesia (i), wherein the tribunal repeatedly held that, in default of a choice of law by the parties, it was obliged to consider both domestic and international law in a balanced and equitable manner; see Amco v. Indonesia (i) (Award), para. 148. This position not only deems international law as on equal footing with the host State’s national law, but also tests the legal questions at hand cumulatively against both sources of law. The lack of remarks on a hierarchy of norms would indicate an understanding of their horizontal relationship and parallel applicability. 1244 The supplemental and corrective approach is rooted in the drafting history of the icsid Convention, where it was emphasised that international law, in the context of the 2nd sentence of icsid Convention Art. 42 (1), will function as gap-filler in case of lacunae in the primarily applicable domestic law and as corrective for potential inaccuracies of the latter body of law; see icsid, History, Vol. ii, 804 (1968), referred to in Schreuer et al., icsid Commentary 353 (Art. 42, para. 204). The ad hoc committee in Klöckner v. Cameroon (i) was the first to adopt this position in practice; see Klöckner v. Cameroon (i) (Decision on Annulment), para. 69. Many of the cases rendered subsequently similarly considered international law as being of only secondary importance; see e.g. agip S.p.A. v. People’s Republic of the Congo, icsid Case No. arb/77/1, Award (30 November 1979) [hereinafter agip v. Congo], paras. 79–88; Amco v. Indonesia (i) (Decision on Annulment), para. 20; Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, icsid Case No. arb/84/3, Award (20 May 1992) [hereinafter spp v. Egypt (Award)], paras. 222, 232–234; Tradex Hellas s.a. v. Republic of Albania, icsid Case No. arb/94/2, Award (29 April 1999) [hereinafter Tradex v. Albania (Award)], paras. 135–136; Autopista v. Venezuela (Award), para. 102; referred to in id. at 620–626 (Art. 42, paras. 214–229). Likewise, numerous commentators and writers adhere to this approach; see id. at 626 (Art. 42, paras. 231–232). 1245 The method of autonomous application of the two bodies of substantive law has p ­ rimarily developed in the context of treaty arbitrations. Similarly to the parallel-application approach, this approach is based on the premise that domestic law and international law are on a par with each other. However, it does not require that both bodies of law need to be respected equally when deciding a dispute. Rather, it allows a different body of law to be applied for each element of a case. This approach of a mixed application of domestic

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Having regard to the foregoing general remarks on substantive law in icsid arbitration, it becomes apparent that the provisions contained in icsid Convention Art. 42 (1), 1st sentence and 2nd sentence, bear a considerable potential to engender conflicting interpretations. This central norm regulating the applicable substantive law in icsid arbitration is thus, in itself, another source and instance of inconsistencies in icsid investment jurisprudence. 2 Examples of Inconsistencies a Overview of Issues The following sections will examine instances of inconsistencies that have occurred when construing norms or principles pertaining to the different categories of substantive legal sources. In view of the great variety of sources, the overview of issues will be limited to the most significant ones, namely to substantive standards of investment protection as contained in bits (aa.) and international custom (bb.). aa aaa

Standards of Protection as Contained in bits Fair and Equitable Treatment

Classic examples of jurisprudential inconsistencies can be found in the interpretation of recurring legal issues related to substantive standards of investment protection that are granted to foreign investors in modern iias and, above all, in bits. A very controversial and thus prominent issue concerns the legal nature and concept of the fet standard.1246 This protective standard a­ ccords and international law was first adopted by the ad hoc committee in Wena Hotels v. Egypt; see Wena Hotels v. Egypt (Decision on Annulment), paras. 39, 40, and was then endorsed as a more pragmatic and less doctrinal method by many of the subsequent bit arbitrations; see e.g. lg&e v. Argentina (Decision on Liability), para. 96; cms v. Argentina (Award), para. 116; Azurix v. Argentina (Award), paras. 66–67; Sempra v. Argentina (Award), paras. 235–236; referred to in Schreuer et al., icsid Commentary 627–630 (Art. 42, paras. 236–244). Similarly, scholars welcomed this approach since it gives greater discretionary powers to arbitrators; see e.g. Emmanuel Gaillard & Yas Banifatemi, The Meaning of “And” in Art. 42 (1), Second Sentence, of the Washington Convention, 18 icsid Rev. – filj 375, 382 et seq. (2003), referred to in Schreuer et al., icsid Commentary 627–628 (Art. 42, para. 237). 1246 For an overview and discussions on this topic, see e.g. Rudolf Dolzer, Fair and Equitable Treatment: Today’s Contours, 12 Santa Clara J. Int’l L. 7, 7–33 (2014); Rudolf Dolzer, Fair and Equitable Treatment: A Key Standard in Investment Treaties, 39 Int’l Law. 87, 90–100 (2005); Marc Jacob & Stephan W. Schill, Fair and Equitable Treatment: Content, Practice, Method, in International Investment Law – A Handbook 700–763 (Marc Bungenberg et al. eds., 2015); Klein Bronfman, Fair and Equitable Treatment 609, 663–676; Srilal M.

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an absolute, non-contingent protection to foreign investors. Apart from nafta practice, which applies the official interpretation of the fet standard released by the nafta Free Trade Commission to nafta Art. 1105 (1),1247 and with the exception of bits that expressly equate the fet standard with the ­International ­Perera, Equity-Based Decision Making and the Fair and Equitable Treatment Standard: Lessons From the Argentine Investment Disputes – Part ii, 13 J. World Inv. & Trade 442, 446–461 (2012); Christoph Schreuer, Fair and Equitable Treatment in Arbitral Practice, 6 J. World Inv. & Trade 357, 359–367 (2005); Tudor, Fair and Equitable Treatment 56 et seq; Katia Yannaca-Small, Fair and Equitable Treatment Standard, in Standards of Investment Protection 113–118 (August Reinisch ed., 2008); Yannaca-Small, fet Standard in International Investment Law, 8–25; Dolzer & Schreuer, Principles of International Investment Law 134–139; Newcombe & Paradell, Law and Practice of Investment Treaties 263–275. Being one of the broadest and most frequently pleaded standard of protection, the relationship between the fet standard and the host State’s right to regulate is a frequent topic of dicsussion. For arbitral jurisprudence on this issue, see the case law analysed in Dolzer, Fair and Equitable Treatment: Today’s Contours 7, 27–29. The ceta text, being the eu’s first comprehensive fta negotiated with a G8-country, shows a reaction to the criticism of the vague contours of the fet standard. Therein, breaches of that standard have been limited to an exhaustive list of types of host State’s behaviour, such as denial of justice, fundamental breach of due process, manifest arbitrariness, targeted discrimination, or abusive treatment of investors. Legitimate expectations may only be invoked “where a Party made a specific representation to an investor to induce a covered investment,” see the ceta text available at (last visited November 2016). 1247 [Hereinafter nafta ftc]. nafta Art. 1105 (1): “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.” nafta ftc Note of Interpretation of 31 July 2001 (Minimum Standard of Treatment in Accordance with International Law): “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).” For further elaborations on the nafta ftc, see below Ch. 3.B.I.1.a. (fn. 1420). See e.g. Mondev v. us (Award), paras. 100–125; adf v. us (Award), paras. 175–186; The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, icsid Case No. arb(af)/98/3 (nafta), Award (26 June 2003) [hereinafter Loewen Group v. us (Award)], paras. 124–128; Waste Management v. Mexico (Award), paras. 90–91. See also Metalclad

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Minimum Standard,1248 icsid tribunals have given varying responses as to this interpretative question. While some of the arbitral tribunals have taken a rather narrow interpretative approach and measured the fet standard strictly against the customary International Minimum Standard,1249 others construed the fet standard more expansively as part of general international law1250 or even as an autonomous treaty standard to be applied in addition to general international law.1251 Further arbitral tribunals considered distinguishing ­between these

1248

1249

1250

1251

Corp. v. United Mexican States, icsid Case No. arb(af)/97/1 (nafta), Challenge to the Arbitral Award in the Supreme Court of British Columbia, 2001 bcsc 664 (2 May 2001) [hereinafter Metalclad v. Mexico (Challenge to Award)], paras. 61–65. See e.g. 2004 us Model bit Art. 5: “(1.) Each Party shall accord to covered investments treatment in accordance with customary international law, including fair and equitable treatment and full protection and security. (2.) For greater certainty, paragraph 1 prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments. 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. (…),” referred to in Klein Bronfman, Fair and Equitable Treatment 609, 665. See e.g. American Manufacturing & Trading, Inc. v. Democratic Republic of the Congo, icsid Case No. arb/93/1, Award (21 February 1997) [hereinafter amt v. Congo (Award)], para. 6.06; Alex Genin v. Estonia (Award), para. 367; El Paso Energy International Company v. Argentine Republic, icsid Case No. arb/03/15, Award (31 October 2011) [hereinafter El Paso v. Argentina (Award)], paras. 331–337. For parts of the cited case law and comments thereon, see Dolzer & Schreuer, Principles of International Investment Law 137; Yannaca-Small, fet Standard in International Investment Law, 13–15. For further elaborations on the International Minimum Standard, see Ch. 2.E.III.1.a.bb. For support of this position, see e.g. 1967 oecd Draft Convention, oecd Publication No. 23081 (1967), 7 ilm 117 (1968), at 120, referred to in Schreuer, Fair and Equitable Treatment in Arbitral Practice 357, 361. See e.g. Compañía de Aguas del Aconquija s.a. and Vivendi Universal s.a. v. Argentine Republic, icsid Case No. arb/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and Compagnie Générale des Eaux v. Argentine Republic), Award (20 August 2007) [hereinafter Vivendi v. Argentina (ii) (Award)], para. 7.4.7.; Enron v. Argentina (Award), para. 258; Sempra v. Argentina (Award), para. 302; Joseph Charles Lemire v. Ukraine, icsid Case No. arb/06/18, Decision on Jurisdiction and Liability (14 January 2010) [hereinafter Lemire v. Ukraine (Decision on Jurisdiction and Liability)], paras. 247–255. For parts of the cited case law and comments thereon, see Dolzer & Schreuer, Principles of International Investment Law 137. See e.g. Tecmed v. Mexico (Award), para. 155; mtd v. Chile (Award), paras. 110–112; lg&e v. Argentina (Decision on Liability), paras. 125–131; pseg v. Turkey (Award), para. 239; oko

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­different forms of interpretation to be irrelevant.1252 Tendencies of disagreement, yet not in the same dimension, have also occurred as to “more concrete principles”1253 covered by the fet standard: for instance, as ­regards the protection of the investor’s legitimate expectations, arbitral tribunals took diverging views in cases were claimants based their allegedly ­legitimate ­expectations on general informal representations and statements made by the host State1254 or Pankki Oyj v. Estonia (Award), paras. 217–230; Bayindir v. Pakistan (Award), para. 164; Total v. Argentina (Decision on Liability), paras. 206–207. For parts of the cited case law and comments thereon, see id. For scholarly support of this position, see e.g. Mann, British Treaties for the Promotion and Protection of Investments 241, 244; Dolzer & Stevens, Bilateral Investment Treaties 60; Stephen C. Vasciannie, The Fair and Equitable Treatment Standard in International Investment Law and Practice, 70 Brit. Yb. Int’l L. 99, 139–144 (1999); Theodore Kill, Don’t Cross the Streams: Past and Present Overstatement of Customary International Law in Connection with Conventional Fair and Equitable Treatment Obligations, 106 Mich. L. Rev. 853, 853–880 (2008); unctad, Fair and Equitable Treatment, unctad Series on Issues in International Investment Agreements, 40 (1999); partially referred to in Schreuer, Fair and Equitable Treatment in Arbitral Practice 357, 360–361. 1252 See e.g. cms v. Argentina (Award), paras. 282–284; Azurix v. Argentina (Award), para. 361; Biwater Gauff v. Tanzania (Award), paras. 591–592; Rumeli v. Kazakhstan (Award), para. 611; apparently also Gold Reserve v. Bolivarian Republic of Venezuela, icsid Case No. arb(af)/09/1, Award (22 September 2014) [hereinafter Gold Reserve v. Venezuela (Award)], para. 567; 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 (formerly ftr Holding s.a., Philip Morris Products s.a. and Abal Hermanos s.a. v. Oriental Republic of Uruguay), Award (8 July 2016) [hereinafter Philip Morris v. Uruguay (Award)], paras. 317– 319, considering the International Minimum Standard, due to its evolution over time, to be equivalent to the modern fet standard. 1253 Schreuer, Fair and Equitable Treatment in Arbitral Practice 357, 373–374. 1254 See e.g. mtd v. Chile (Award), paras. 63, 125, 133, 156–158, esp. 158; lg&e v. Argentina (Decision on Liability), paras. 50, 175; Sempra v. Argentina (Award), para. 141; Joseph Charles Lemire v. Ukraine, icsid Case No. arb/06/18, Award (28 March 2011) [hereinafter Lemire v. Ukraine (Award)], paras. 69–70; holding that general representations were sufficient to base an investor’s legitimate expectations thereon; as opposed to Metalclad v. Mexico (Award), paras. 85–89; pseg v. Turkey (Award), para. 241; Duke Energy v. Ecuardor (Award), para. 351; Jan de Nul n.v. and Dredging International n.v. v. Arab Republic of Egypt, icsid Case No. arb/04/13, Award (6 November 2008) [hereinafter Jan de Nul v. Egypt (Award)], para. 263, Continental Casualty Company v. Argentine Republic, icsid Case No. arb/03/9, Award (5 September 2008) [hereinafter Continental Casualty v. Argentina (Award)], para. 261; gea Group v. Ukraine (Award), paras. 272–283; El Paso v. Argentina (Award), paras. 395–396; Minotte & Lewis v. Poland (Award), para. 193; Gold Reserve v. Venezuela (Award), para. 571; holding that a certain specificity of a host State’s representations would be required in order to base an investor’s legitimate expectations thereon. Part of the case law

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on the stability of the host State’s legal order.1255 In addition, there has been disagreement on the question of whether legitimate expectations would also include the host State’s observance of contractual undertakings.1256 Ultimately, consensus has not been reached either on the question of whether

has been referred to in Michele Potestá, Legitimate Expectations in Investment Treaty Law: Understanding the Roots and the Limits of a Controversial Concept, 28 icsid Rev. – filj 88, 107–108 (2013). 1255 See e.g. cms v. Argentina (Award), paras. 266–284; lg&e v. Argentina (Decision on ­Liability), paras. 125, 131; Enron v. Argentina (Award), paras. 251–268, esp. 260–261; Lemire v. Ukraine (Award), paras. 69–70; Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador, icsid Case No. arb/08/6, Decision on Remaining Issues of Jurisdiction and Liability (12 September 2014) [hereinafter Perenco v. Ecuador (Decision on Jurisdiction)], para. 562; holding that investors may generally expect a stable regulatory framework in the host State; as opposed to pseg v. Turkey (Award), paras. 250, 254; Parkerings-Compagniet v. Lithuania (Award), para. 333; Continental Casualty v. Argentina (Award), para. 258; El Paso v. Argentina (Award), para. 352; edf v. Romania (Award), para. 217; Total v. Argentina (Decision on Liability), paras. 115, 120; Impregilo v. Argentina (Award), para. 291; Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, icsid Case No. arb/07/12, Award (7 June 2012) [hereinafter Toto Costruzioni v. Lebanon (Award)], para. 244; Ioan Micula, Viorel Micula, s.c. European Food S.A, s.c. Starmill S.R.L. and s.c. Multipack S.R.L. v. Romania, icsid Case No. arb/05/20, Award (11 December 2013) [hereinafter Micula v. Romania (Award)], para. 529; holding that – subject to exceptions – investors may only expect a stable regulatory framework in the host State if specific commitments were made by the host State. Part of the case law has been referred to in id. at 110–117. 1256 See e.g. Waste Management v. Mexico (Award), para. 115; Parkerings-Compagniet as v. ­Republic of Lithuania, icsid Case No. arb/05/8, Award (11 September 2007) [hereinafter Parkerings-Compagniet v. Lithuania (Award)], paras. 344–345; Duke Energy Electroquil v. Ecuador (Award), para. 342; edf v. Romania (Award), paras. 215–269; Hamester v. Ghana (Award), para. 335; Impregilo v. Argentina (Award), para. 292; Bureau Veritas, Inspection, Valuation, Assessment and Control, bivac b.v. v. Republic of Paraguay, icsid Case No. arb/07/9, Further Decision on Jurisdiction (9 October 2012) [hereinafter bivac v. ­Paraguay (Further Decision on Jurisdiction)], paras. 254–280; holding that contractual obligations under national law and legitimate expectations under international law are distinct; as opposed to sgs v. Philippines (Decision on Jurisdiction), para. 162; Rumeli v. Kazakhstan (Award), para. 615; Impregilo S.p.A. v. Argentine Republic, icsid Case No. arb/07/17, ­Dissenting Opinion of Arbitrator Charles N. Brower (21 June 2011) [hereinafter Impregilo v. Argentina (Dissenting Opinion Brower)], paras. 3, 15; holding that a violation of contractual obligations may give rise to a claim for a breach of the fet standard as contained in bits.

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g­ overnmental actions in accordance with national law would require a bona fides purpose in order to conform with the fet standard.1257 bbb

National Treatment

Further tendencies towards inconsistency1258 have been shown by icsid tribunals concerned with the interpretation of the anti-discriminatory nt standard, which accords the same treatment to foreign investors as to host State nationals in “like circumstances.”1259 For instance, some arbitral tribunals have held that the comparative term of “like circumstances” must be understood restrictively in the sense that only exactly the same businesses would be a permissible benchmark.1260 Other arbitral tribunals, on the other hand, have interpreted the term more broadly as including the whole business or economic sector.1261 1257 See e.g. Noble Ventures v. Romania (Award), paras. 181–182, holding that governmental actions would not violate the fet standard as long as they were in accordance with the respective national law; as opposed to mtd v. Chile (Award,), paras. 188–189, holding that, in addition and inter alia, a bona fides public purpose of governmental actions would be required. Both cases have been referred to in Cheng, Precedent 1014, 1033–1034. 1258 Since, to date, the number of icsid decisions dealing explicitly with the following issues concerning the nt standard is still modest, the consistency of the corresponding decisions is difficult to assess. Due to the lack of a meaningful quantum of cases, diverging decisions cannot yet be deemed to have resulted in inconsistent lines of jurisprudence. However, highlighting diverging tendencies appears appropriate in view of possible future developments of case law on this standard of protection. 1259 For an overview and discussions on this topic, see unctad, National Treatment, unctad Series on Issues in International Investment Agreements, 1–70 (1999). See also Andrea K. Bjorklund, The National Treatment Obligation, in Arbitration under International Investment Agreements – A Guide to Key Issues 411–444 (Katia Yannaca-Small ed., 2010); Andrea K. Bjorklund, National Treatment, in Standards of Investment Protection 29–58 (August Reinisch ed., 2008); Dolzer & Schreuer, Principles of International Investment Law 198–206; Newcombe & Paradell, Law and Practice of Investment Treaties 147–191. 1260 For tribunals following the so called autonomous approach, see e.g. Marvin Roy Feldman Karpa v. United Mexican States, icsid Case No. arb(af)/99/1, Award (16 December 2002) [hereinafter Feldman v. Mexico (Award)], paras. 170–172 (exporters/resellers of cigarettes); adf v. us (Award), paras. 155–157 (implicitly: steel fabrication and manufacturing industries); Bayindir v. Pakistan (Award), paras. 389, 402 (implicitly: constructors of larger infrastructure projects). 1261 For tribunals following the so called sectoral approach, see e.g. Champion Trading v. Egypt (Award), para. 130, referring to Pope & Talbot v. Canada (Interim Award/Phase ii), para. 78; Corn Products International, Inc. v. United Mexican States, icsid Case No. arb(af)/04/1 (nafta), Decision on Responsibility (15 January 2008) [hereinafter Corn Products v. Mexico

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In addition, opinions have differed with respect to the question of whether wto ­jurisprudence on “like products” in the sense of 1994 gatt Art. iii.41262 would be of relevance for the interpretation of the nt standard as contained in iias.1263 ccc

Most Favoured Nation

The mfn standard of treatment – a non-discriminatory standard granting protection against treatment less favourable than that accorded to foreign investors from third countries1264 – has also been interpreted in conflicting manners. The main issue leading to jurisprudential inconsistency concerns the

(Decision on Responsibility)], para. 120; Total v. Argentina (Decision on Liability), paras. 213–215. See also Apotex Holdings Inc. and Apotex Inc. v. United States of America, icsid Case No. arb(af)/12/1, Award (25 August 2014) [hereinafter Apotex v. us (Award)], para. 8.43, wherein the tribunal eventually denied the existence of “like circumstances” due to differences in the applicable regulatory regime. This latter aspect has also been used as a comparator by the tribunals in Feldman v. Mexico (Award), paras. 167–169; adf v. us (Award), paras. 155–157. 1262 1994 gatt Art. III:4: “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use. (…).” 1263 For cases answering in the affirmative, see e.g. Feldman v. Mexico (Award), para. 165; Corn Products v. Mexico (Decision on Responsibility), paras. 121–123. For a case answering in the negative, see e.g. Bayindir v. Pakistan (Award), para. 402. 1264 For an overview and discussions on this topic, see unctad, Most-Favoured-Nation Treatment, unctad Series on Issues in International Investment Agreements ii, 1–116 (2010). See also Zachary Douglas, The mfn Clause in Investment Arbitration: Treaty Interpretation Off the Rails, 2 J. Int’l Disp. Settlement 97, 97–113 (2011); Christopher Greenwood, ­Reflections on the ‘Most Favoured Nation’ Clause in Bilateral Investment Treaties, in ­P ractising Virtue – Inside International Arbitration 556–564 (David D. Caron et al. eds., 2015); Julie A. Maupin, mfn-based Jurisdiction in Investor-State Arbitration: Is there any Hope for a Consistent Approach?, 14 J. Int’l Econ. L. 157, 157–190 (2011); Stephan W. Schill, Allocating Adjudicatory Authority: Most-Favored-Nation Clauses as a Basis of Jurisdiction – A Reply to Zachary Douglas, J. Int’l Disp. Settlement 353 (2011); Andreas R. Ziegler, MostFavoured-Nation (mfn) Treatment, in Standards of Investment Protection 59–86 (August Reinisch ed., 2008); Dolzer & Schreuer, Principles of International Investment Law 206–212; McLachlan et al., International Investment Arbitration – Substantive Principles 254–257; Newcombe & Paradell, Law and Practice of Investment Treaties 193–231; Weeramantry, Treaty Interpretation in Investment Arbitration 177–182.

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scope of mfn provisions: arbitral tribunals have been divided on the question of whether mfn clauses also import jurisdictional protection, in particular dispute settlement provisions, from “comparator”1265 investment treaties, or whether they only cover substantive protection. A detailed analysis of the lead cases establishing the different lines of jurisprudence and further relevant case law will be undertaken below.1266 bb aaa

Doctrines of International Custom Doctrine of Indirect Expropriation

The doctrine of indirect expropriation, a concept which comprises various forms of indirect takings, such as “de facto,” “disguised,” “consequential,” “regulatory,” and “creeping” expropriations,1267 is one instance of a doctrine of international custom which is interpreted inconsistently or at least with tendencies towards inconsistencies.1268 Conflicting case law can be found in particular with regard to the question of whether a measure is a compensable indirect expropriation or only a non-compensable regulatory measure, since icsid tribunals have not yet reached consensus on the applicable method to determine what constitutes an indirect expropriation. While the apparent majority of arbitral tribunals follows the sole-effects doctrine and accordingly examines

1265 Weeramantry, Treaty Interpretation in Investment Arbitration 177. 1266 See below Ch. 2.E.III.2.b.aa.bbb. 1267 Anne Hoffmann, Indirect Expropriation, in Standards of Investment Protection 153 (August Reinisch ed., 2008). 1268 For an overview and discussions on this topic, see Rudolf Dolzer & Felix Bloch, Indirect Expropriation: Conceptual Realignments?, 5 Int’l L. Forum 55, 155–165 (2003); L. Yves Fortier & Stephen L. Drymer, Indirect Expropriation in the Law of International Investment, 19 icsid Rev. – filj, 293–327 (2004); Hoffmann, Indirect Expropriation 151–170; Christina Knahr, Indirect Expropriation in Recent Investment Arbitration, 6 tdm 1, 1–18 (2009); Ursula Kriebaum, Regulatory Takings: Balancing the Interests of the Investor and the State, 8 J. World Inv. & Trade 717, 717–744 (2007); Ben Mostafa, The Sole Effects Doctrine, Police Powers and Indirect Expropriation under International Law, 15 Australian Int’l L. J. 267, 267–296 (2008); W. Michael Reisman & Robert D. Sloane, Indirect Expropriation and its Valuation in the bit Generation, 74 Brit. Yb. Int’l L. 115, 115–150 (2003); Katia YannacaSmall, Indirect Expropriation and the Right to Regulate: How to Draw the Line?, in Arbitration under International Investment Agreements – A Guide to Key Issues 445–477 (Katia Yannaca-Small ed., 2010); Dolzer & Schreuer, Principles of International Investment Law 98–129; Newcombe & Paradell, Law and Practice of Investment Treaties 321–398; McLachlan et al., International Investment Arbitration – Substantive Principles 265–313; Subedi, International Investment Law 99–104.

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only the effects of such measures,1269 other arbitral tribunals have introduced additional testing elements. These include the proportionality test as adopted by the echr, ­pursuant to which a tribunal considers not only the private, but also the public interests involved and affected,1270 or the requirement that a 1269 According to the sole effects doctrine, the crucial criterion in determining whether a State measure amounted to an indirect expropriation is the effect of the interference with the property right in question. This doctrine dates back to the Norwegian Shipowners’ Claims (Norway v. us), pca Case No. 1921-01, Award (13 October 1922), 1 un riaa 307, 325 (1922). The iusct, over the last decades, has consistently applied this doctrine in a considerable number of cases involving questions of expropriation; see e.g. Starrett Housing Corp. v. Islamic Republic of Iran, Interlocutory Award No. itl 32-24-1 (19 December 1983), reprinted in iusct Rep. 122, 154 (1983-IV); Tippetts, Abbett, McCarthy, Stratton v. tams-affa Consulting Engineers of Iran, Award No. 141-7-2 (22 June 1984), reprinted in iusct Rep. 219, 225 (1983-VI). See e.g. spp v. Egypt (Award), para. 164; Santa Elena v. Costa Rica (Award), para. 71; Metalclad v. Mexico (Award), para. 111; Generation Ukraine v. Ukraine (Award), para. 20.32; adc v. Hungary (Award), paras. 423–424; Mitchell v. Congo (Decision on Annulment), para. 53; Siemens v. Argentina (Award), para. 270; Enron v. Argentina (Award), para. 244; Tokios Tokéles v. Ukraine, icsid Case No. arb/02/18, Award (26 July 2007) [hereinafter Tokios Tokéles v. Ukraine (Award)], para. 120; Vivendi v. Argentina (ii) (Award), paras. 7.5.20–7.5.21; Biwater Gauff v. Tanzania (Award), para. 463; Spyridon v. Romania (Award), paras. 328, 330; Venezuela Holdings, b.v., et al. (case formerly known as Mobil Corporation, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc.) v. Bolivarian Republic of Venezuela, icsid Case No. arb/07/27, Award (9 October 2014) [hereinafter Venezuela Holdings v. Venezuela (Award)], para. 286. 1270 The proportionality test entails a balancing and weighing of the State measures amounting, in principle, to an indirect expropriation against the public interest presumably protected by such State actions. The latter type of consideration, i.e. the relevance of context and purpose of the State measure, is the central element of the police-powers doctrine, which stands in opposition to the sole-effects doctrine. The ECtHR was the first to introduce this proportionality analysis in international adjudication; see e.g. Sporrong and Lönnroth v. Sweden (Application No. 7151/75), ECtHR, Judgment (23 September 1982), ­Series A, No. 52, para. 69; James and others v. uk (Application No. 8793/79), ECtHR, Judgment (21 February 1986), Series A, No. 98, para. 50. For a detailed discussion of the doctrine of proportionality, see Caroline Henckels, Indirect Expropriation and the Right to Regulate: Revisiting Proportionality Analysis and the Standard of Review in Investor-State Arbitration, 15 J. Int’l Econ. L. 223, 223–255 (2012). See e.g. Tecmed v. Mexico (Award), para. 122; Azurix v. Argentina (Award), para. 312; Fireman’s Fund Insurance Company v. United Mexican States, icsid Case No. arb(af)/02/01 (nafta), Award (17 July 2006) [hereinafter Fireman’s Funds v. Mexico (Award)], para. 176; Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, icsid Case No. arb(af)/04/05 (nafta), Award (21 November 2007) [hereinafter Archer v. Mexico (Award)], para. 250; lg&e v. Argentina (Decision on Liability), paras. 194– 195; Continental Casualty v. Argentina (Award), para. 276; Total v. Argentina (Decision on

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State measure  has to interfere with the investor’s reasonable and legitimate expectations.1271 Further disagreement has arisen as to the general factors indicating an indirect expropriation. Although there is a consensus as to the requirement of a high intensity and severity of a State measure’s inference,1272 arbitral tribunals are divided on the time period the measure had to be in place in order to constitute an expropriation. While some arbitral tribunals have found that a measure has to be “permanent” or “irreversible,”1273 others have considered even “temporary” measures to be sufficient.1274 Another controversial issue is the standard of compensation for expropriation according to customary international law. Some of the arbitral tribunals L­ iability), para. 197; El Paso v. Argentina (Award), paras. 234–240; Philip Morris v. Uruguay (Award), paras. 287–307, esp. 306 (obiter dictum). For tribunals drawing a stricter distinction between non-compensable police power measures and compensable indirect expropriations without balancing the interests involved, see e.g. Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios Integrales del Agua s.a. v. Argentine Republic, icsid Case No. arb/03/17 (formerly Aguas Provinciales de Santa Fe, s.a., Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios Integrales de Agua s.a. v. Argentine Republic), Decision on Liability (30 July 2010) [hereinafter Suez/InterAguas v. Argentina (Decision on Liability)], para. 128; Burlington v. Ecuador (Decision on Liability), paras. 471–473; Quiborax s.a., Non ­Metallic Minerals s.a. and Allan Fosk Kaplún v. Plurinational State of Bolivia, icsid Case No. arb/06/2, Award (16 September 2015) [hereinafter Quiborax v. Bolivia (Award)], para. 238. 1271 See e.g. Metalclad v. Mexico (Award), paras. 103, 107; Tecmed v. Mexico (Award), para. 122; Azurix v. Argentina (Award), paras. 316–323; Fireman’s Funds v. Mexico (Award), para. 176; lg&e v. Argentina (Decision on Liability), para. 190; Railroad Development Corporation v. Republic of Guatemala, icsid Case No. arb/07/23 (cafta-dr), Award (29 June 2012) [hereinafter Railroad Development v. Guatemala (Award)], paras. 116–123. But see Continental Casualty v. Argentina (Award), para. 279; Sempra v. Argentina (Award), para. 288; El Paso v. Argentina (Award), para. 227, showing that the investor’s expectations are already protected by other investment protection rules, e.g. the fet standard. For parts of the cited case law and comments thereon, see Mostafa, Indirect Expropriation under International Law 267, 284–285. 1272 For an overview of related case law, see Knahr, Indirect Expropriation 1, 15–17; YannacaSmall, Indirect Expropriation and the Right to Regulate: How to Draw the Line? 464–467; Dolzer & Schreuer, Principles of International Investment Law 112–113. 1273 See e.g. Tecmed v. Mexico (Award), para. 116; lg&e v. Argentina (Decision on Liability), para. 193; Alpha Projektholding v. Ukraine (Award), para. 410; Total v. Argentina (Decision on Liability), para. 196. 1274 See e.g. Wena Hotels v. Egypt (Award), para. 99; Middle East Cement v. Egypt (Award), para. 107.

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c­ onsidered the standard of “appropriate” compensation as set out in the 1962 un Resolution 1803 (xvii) as governing;1275 others, by contrast, referred to a “full” fair market value compensation – partially adjusted by equity considerations – in the sense of the Hull formula.1276 bbb

Doctrine of Necessity and Related Issues

Further inconsistencies in icsid jurisprudence on customary international law relate to the doctrine of necessity, which is frequently invoked by host States to escape from liability for measures causing a detriment to the investor.1277 The assessment of the relationship between this customary international law defence of “state of necessity” on the one hand, and “security exception clauses” as used in the international treaty practice on the other hand, has led to ­diverging case law in icsid jurisprudence.1278 Some of the arbitral ­tribunals faced with 1275 See e.g. Amco v. Indonesia (Award), para. 188; letco v. Liberia (Award), Sec. IV-1 (obiter dictum); spp v. Egypt (Award), para. 183. 1276 See e.g. Santa Elena v. Costa Rica (Award), para. 71; Tecmed v. Mexico (Award), paras. 189–190; Siemens v. Argentina (Award), para. 353. For parts of the cited case law on this issue and an extensive analysis thereof, see Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 152–183. 1277 See Burleigh Cushing Rodick, The Doctrine of Necessity in International Law (Columbia University Press, New York, 1928); Orakhelashvili, Interpretation of Acts and Rules in Public International Law 208–221, esp. 213–214. 1278 For an overview and discussions on this topic, see Alberto Alvarez-Jiménez, The Interpretation of Necessity Clauses in Bilateral Investment Treaties after the Recent icsid Annulment Decisions, in Yearbook on International Investment Law and Policy 2010–2011 419–450 (Karl P. Sauvant ed., 2012); Javier El-Hage, How Many Tribunals Apply the Customary Necessity Rule to the Argentine Cases? An Analysis of icsid Decisions with Respect to the Interaction between Article xi of the u.s.-Argentina bit and the Customary Rule of Necessity in Yearbook on International Investment Law and Policy 2011–2012 447–483 (Karl P. Sauvant ed., 2013); Amin G. Forji, Drawing the Right Lessons from icsid Jurisprudence on the Doctrine of Necessity, 76 Arb. 44, 44–57 (2010); Sarah F. Hill, The “Necessity Defense” and the Emerging Arbitral Conflict in its Application to the u.s.-Argentina Bilateral Investment Treaty, 13 L. & Bus. Rev. Am. 547, 547–567 (2007); Kasenetz, Desperate Times Call for Desperate Measures 709, 709–747; Antoine Martin, Investment Disputes after Argentina’s Economic Crisis: Interpreting bit Non-precluded Measures and the Doctrine of Necessity under Customary International Law, 29 J. Int’l Arb. 49, 49–70 (2012); August Reinisch, Necessity in Investment Arbitration, 41 Netherlands Yb. Int’l L. 137, 137–158 (2010); Reinisch, Necessity in International Investment Arbitration 191, 191–214; Nicholas Song, Between Syclla and Charybdis: Can a Plea of Necessity Offer Safe Passage to States in Responding to an Economic Crisis without Incurring Liability to Foreign Investors?, 19 Am. Rev. Int’l Arb. 235, 235–267 (2008); Sujitha R. Subramanian, Too Similar or Too Different: State of Necessity as Defence under Customary International Law and the

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such combined pleas of necessity did not undertake a separate analysis of the preconditions of each legal basis, but conflated them and linked them together in their examination; others, by contrast, treated the concepts separately from each other and even classified them into different categories according to their function and nature. These interpretative methodologies will be examined in further detail below.1279 The standard of review applicable to a State’s public regulatory activities provides another example of inconsistencies in the context of the doctrine of necessity, even though it is formally independent therefrom. The divergent attitudes of icsid tribunals on this issue crystallised mainly in the arbitrations initiated against Argentina due to its politico-economic crisis of 2001 and 2002. In these cases, the arbitrators had to analyse and assess Argentina’s policy choices in view of the necessity defences it raised. While some of the arbitral tribunals, mainly the earlier ones, applied the strict no-other-means-available standard,1280 later arbitral tribunals rejected this approach, yet without clearly adopting an alternative standard of review developed in public international adjudication.1281 Rather, they proceeded to borrow from and combine elements of more deferential standards, such as the least-restrictive-alternative test, the margin of appreciation, and good faith review.1282 b Examples in Detail Two selected examples of inconsistencies in icsid case law arising from the interpretation of substantive law will be presented and examined more closely

1279 1280

1281

1282

­Bilateral Investment Treaty and their Relationship, 9 Manchester J. Int’l Econ. L. 68, 68–91 (2012); Michael Waibel, Two Worlds of Necessity in icsid Arbitration: cms and lg&e, 20 Leiden J. Int’l L. 637, 637–648 (2007); Jorge Viñuales, State of Necessity and Peremptory Norms in International Investment Law, 14 L. & Bus. Rev. Am. 79, 79–103 (2008); Dolzer & Schreuer, Principles of International Investment Law 184–187, 188–190; Newcombe & Paradell, Law and Practice of Investment Treaties 495–497, 516–524; Subedi, International Investment Law 229–232. See below Ch. 2.E.III.2.b.bb. See e.g. cms v. Argentina (Award), para. 324; Enron v. Argentina (Award), para. 308; Sempra v. Argentina (Award), paras. 350–351; Impregilo v. Argentina (Award), paras. 351–352. See also the non-Argentina case Biwater Gauff v. Tanzania (Award), para. 515. See e.g. lg&e v. Argentina (Decision on Liability), paras. 214 (good faith review), 238–239 (least restrictive alternative test), 257 (margin of appreciation); Continental Casualty v. Argentina (Award), paras. 181, 187 (margin of appreciation, good faith review), 198–231 (least restrictive alternative test). For the cited case law, comments thereon, and further discussion of this issue, see BurkeWhite & Von Staden, Private Litigation in a Public Sphere 283, 297–301, 323–328.

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to further elaborate on the above survey. These relate to mfn-clauses (aa.), which are representative of standards of investment protection as contained in bits, and the defence of necessity (bb.), which is representative of doctrines of customary international law. aa aaa

Standards of Protection: Example of mfn Clauses Concept and Function

mfn clauses have a long-standing tradition in international trade and investment law. While they first became known in commercial treaties, they also advanced to a characteristic element of mits and bits throughout the last decades.1283 The ilc, in 1978, defined the mfn treatment granted in such clauses as a “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.”1284 Accordingly and as with the nt standard, mfn is a relative standard which aims at avoiding discriminatory treatment of foreign investors as compared to some third State’s investors.1285 This is achieved, in the case of mfn, by importing protective standards from more favourable provisions provided by domestic law or “third-party treaties” into the “basic treaty” provided that these concern – ­according to the ejusdem generis principle – the same subject matter.1286 The basic treaty thus becomes, via mfn clauses, a “dynamic source of law.”1287 As is the case with other protective standards, the formulations of mfn clauses adopted in treaty practice may vary.1288 Typically, these clauses refer 1283 For elaborations on the historical development of mfn clauses, Ziegler, Most-FavouredNation (mfn) Treatment 61–64; Newcombe & Paradell, Law and Practice of Investment Treaties 198–200, with further references. 1284 ilc, Draft Articles on Most Favoured Nation Clause, Thirtieth Session, 8th May–28th July 1978, Supplement No. 10, un Doc. A/33/10, 2 Yearbook of the ilc, 8 (1978), Art. 5. 1285 In that sense, the function of this standard of protection has been concisely described as consisting in “the elimination of discrimination, the correction of oversights and the adaptation of treaties to changing circumstances.”; see Georg Schwarzenberger, The MostFavoured-Nation Standard in British State Practice, 22 Brit. Yb. Int’l L. 96, 100 (1945). 1286 Ziegler, Most-Favoured-Nation (mfn) Treatment 64, 74. 1287 Id. at 65. 1288 See Señor Tza Yap Shum v. Republic of Peru, icsid Case No. arb/07/6, Decision on Jurisdiction (19 June 2009) [hereinafter Tza Yap Shum v. Peru (Decision on Jurisdiction)], para. 198: “Cada clausula de la nmf es un mundo, que exige una interpretación individualizada, para determinar cuál es su ámbito de aplicación.” [footnote omitted], referred to in Dolzer & Schreuer, Principles of International Investment Law 207.

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generally to “treatment” not less favourable than that accorded to investors of third States; other versions speak broadly of “all matters subject to this agreement.”1289 In order to avoid interpretations running counter to the intention of contracting States, many modern treaties are more precise and specify which investment-related matters they comprise or exclude (e.g. “as regards (…) management, maintenance, use, enjoyment or disposal of their investments”).1290 Yet, unfortunately, only a few treaties contain clarifications on whether they also extend beyond substantive guarantees to include jurisdictional matters (e.g. dispute settlement provisions) as well.1291 This frequent lack of specificity on the scope of mfn obligations stipulated in investment treaties has led to conflicting interpretations. While substantive standards of protection were generally considered as being included without any discussion, opinions differed as to whether mfn clauses would even cover dispute settlement provisions in the absence of an express reference.1292 In other words, arbitral tribunals disagreed as to whether such mfn clauses could

1289 Id. at 207–208, referring to the following examples: 2008 German Model bit Art. 3 (“treatment”) (Treaty between the Federal Republic of Germany and [Country] Concerning the Encouragement and Reciprocal Protection of Investments, 2008), available at (last visisted December 2016); Argentina–Spain bit Art. iv (2) (“all matters subject to this agreement”) (Agreement between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments, 3 October 1991 (entry into force 28 September 1992) 1699 unts 202 (1992)). 1290 See Argentina–uk bit Art. 3 (2) (Agreement between the Government of the United Kingdom and Northern Ireland and the Government of the Republic of Argentina for the Promotion and Protection of Investments, 11 December 1990 (entry into force 19 February 1993), ukts No. 41 (1993)), referred to in id. at 208. For an exemplary overview of specifications of the scope of mfn clauses, see Ziegler, Most-Favoured-Nation (mfn) Treatment 75–84. For a categorisation of different types of mfn clauses (“broad,” “general,” “tied to fet,” “narrow”), see Maupin, mfn-based Jurisdiction 157, 163–172. 1291 See e.g. 2005 uk Model bit Art. 3 (3): “For avoidance of doubt, it is confirmed that the treatment provided for in paragraphs (1) and (2) above shall apply to the provisions of Articles 1 to 11 of this Agreement” (Arts. 8 and 9 contain dispute settlement provisions.) (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, 2005, amended 2006 [hereinafter 2005 uk Model bit]), referred to in Subedi, International Investment Law 93. 1292 Dolzer & Schreuer, Principles of International Investment Law 270–271.

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serve as a basis for arbitral jurisdiction even if the basic treaty itself did not contain a consent clause. bbb (1)

Case Law Expansive Interpretation – Maffezini v. Spain

The Maffezini v. Spain case,1293 which established one school of thought on the interpretation of mfn clauses, concerned a dispute between the Kingdom of Spain and an Argentine national, Emilio Agustín Maffezini. Maffezini had invested into a joint-venture enterprise specialising in the production and distribution of chemical products and the case centred around the treatment he had received when he decided to retreat from the project.1294 In his request for arbitration, Maffezini asserted that the mfn clause contained in the ­Argentina–Spain bit1295 allowed him to rely on the more favourable exhaustion-of-local-remedies clause provided by a third-party treaty, which foresaw a waiting period of only six month and not eighteen month before referring his claim to an icsid tribunal.1296 Spain countered with the contention that Maffezini’s expansive interpretation would stand in contrast to the ejusdem generis principle, which foresaw that mfn clauses “can only operate in respect of the same matter and cannot be extended to matters different from those envisaged by the basic treaty,” i.e. “not to procedural or jurisdictional ­questions.”1297 In addition, it claimed that, in general, anti-discriminatory provisions only covered substantive matters.1298 The arbitral tribunal, when addressing this issue, sided with the claimant’s position. It based its legal reasoning mainly on the Ambatielos arbitral award,1299 wherein the Arbitration Commission had found that the extension of the mfn clause to questions of the “administration of justice” was compatible with the ejusdem generis principle, since dispute settlement provisions 1293 Emilio Agustín Maffezini v. Kingdom of Spain, icsid Case No. arb/97/7, Decision on Jurisdiction (25 January 2000) [hereinafter Maffezini v. Spain (Decision on Jurisdiction)]. 1294 icsid, Emilio Agustín Maffezini v. Kingdom of Spain, icsid Case No. arb/97/7, Introductory Note, available at (last visited September 2016). 1295 Agreement between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments, 3 October 1991 (entry into force 28 September 1992) 1699 unts 202 (1992). 1296 Maffezini v. Spain (Decision on Jurisdiction), para. 40. 1297 Id., para. 41. 1298 Id., para. 42. 1299 Ambatielos Claim (Greece v. uk), icj, Award (6 March 1956), XII un riaa 83 (1963) ­[hereinafter Ambatielos Claim (Award)], 83–153.

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aiming at the protection of the commercial rights guaranteed under a treaty formed part of the subject matter protected.1300 In view of this ruling, the arbitral tribunal held that, although the mfn clause at hand did not expressly provide that dispute settlement was covered, “there are good reasons to conclude that today dispute settlement arrangements are inextricably related to the protection of foreign investors” and that, in consequence, dispute settlement provisions stipulated in a third-party treaty that are more favourable than those set forth in a basic treaty “may be extended to the beneficiary of the most favored nation clause.”1301 Thus, taking a broad and inclusive intention of the treaty parties for granted and driven by considerations of the object and purpose of the treaty, it ruled in favour of mfn-based jurisdiction subject to the limits placed by public policy considerations, and affirmed its jurisdictional competence.1302 This expansive, teleological approach to treaty interpretation has been followed by a number of subsequent icsid tribunals.1303 Some of them were similarly based on the mfn provision of the Argentina–Spain bit,1304 while 1300 Ambatielos Claim (Award), 109–110, referred to in Maffezini v. Spain (Decision on Jurisdiction), para. 49. 1301 Maffezini v. Spain (Decision on Jurisdiction), paras. 54, 56. 1302 Id., paras. 62–64. 1303 See e.g. Siemens v. Argentina (Decision on Jurisdiction), paras. 102–103; Gas Natural v. Argentina (Decision on Jurisdiction), paras. 24–31, 41–49; Camuzzi International s.a. v. Argentine Republic, icsid Case No. arb/03/7, Decision on Jurisdiction (10 June 2005) [hereinafter Camuzzi v. Argentina (ii) (Decision on Jurisdiction)], paras. 16–17, 28; Suez/ InterAguas v. Argentina (Decision on Jurisdiction), paras. 52–66; Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. Argentine Republic (and joined case awg Group Ltd. v. Argentine Republic), icsid Case No. arb/03/19 (formerly Aguas Argentinas, s.a., Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. ­Argentine Republic) Decision on Jurisdiction (3 August 2006) [hereinafter Suez/Vivendi v. Argentina (Decision on Jurisdiction)], paras. 52–68; Impregilo v. Argentina (Award), paras. 95–108; Hochtief ag v. Argentine Republic, icsid Case No. arb/07/31, Decision on Jurisdiction (24 October 2011) [hereinafter Hochtief v. Argentina (Decision on Jurisdiction)], paras. 77–99; Daimler Financial Services ag v. Argentine Republic, icsid Case No. arb/05/1, Dissenting Opinion of Arbitrator Charles N. Brower (15 August 2012) [hereinafter Daimler v. Argentina (Dissenting Opinion Brower)], paras. 1–38; Teinver v. Argentina (Decision on Jurisdiction), paras. 159 et seq. Parts of the cited case law and comments thereon may be found in Ziegler, Most-Favoured-Nation (mfn) Treatment 84–85. 1304 Besides Maffezini v. Spain (Decision on Jurisdiction), also Gas Natural v. Argentina (Decision on Jurisdiction), Suez/InterAguas v. Argentina (Decision on Jurisdiction), and Suez/ Vivendi v. Argentina (Decision on Jurisdiction) dealt with the mfn clause as contained

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others involved different, more narrowly formulated mfn clauses.1305 However, they all had in common that they adopted the liberal view manifested in the Maffezini v. Spain award and agreed that foreign investors may invoke jurisdiction based on mfn clauses even if these do not expressly state so.1306 Their approach has been labelled as “provisional” or “plausible,” since they had the tendency “to allow [mfn-based] jurisdiction unless persuaded that the contracting state parties to the bit actively intended to exclude it.”1307 (2)

Restrictive Interpretation – Salini v. Jordan

Another school of thought as regards the question of mfn-based jurisdiction was established in the Salini v. Jordan1308 case. The underlying dispute turned on Jordan’s refusal to pay an outstanding invoice submitted by the Italian construction company Salini Costruttori S.p.A. for the contract-based work it had completed in the Karameht Dam Project. In its request for arbitration, the in Art. 4 (2) of the Argentina–Spain bit (Agreement between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments, 3 October 1991 (entry into force 28 September 1992) 1699 unts 202 (1992)); see Newcombe & Paradell, Law and Practice of Investment Treaties 209. 1305 The mfn clause at issue in Maffezini v. Spain (Decision on Jurisdiction) referred to “all matters subject to this Agreement”; see Argentina–Spain bit Art. 4 (2) (see fn. 1304 directly above). The mfn clause discussed in Siemens v. Argentina (Decision on Jurisdiction) and Hochtief v. Argentina (Decision on Jurisdiction), on the other hand, applied only to the “treatment” of investments and “activity in connection with investments”; see Argentina–Germany bit Art. 3 (1) and (2) (Treaty between the Federal Republic of ­Germany and the Argentine Republic on the Encouragement and Reciprocal Protection of ­Investments, 9 April 1991 (entry into force 8 November 1993), 1910 unts 198 (1996)). See Weeramantry, Treaty Interpretation in Investment Arbitration 178–179. 1306 See also Tecmed v. Mexico (Award), para. 69: “(…) [The tribunal] deems that matters relating to the application over time of the Agreement, which involve more the time dimension of application of its substantive provisions rather than matters of procedure or jurisdiction, due to their significance and importance, go to the core of matters that must be deemed to be specifically negotiated by the Contracting Parties.” Accordingly, in principle, the tribunal seems to agree with the expansive interpretation of mfn clauses in jurisdictional or procedural matters, but denies its use as a vehicle to achieve a retroactive application of a bit, unless this temporal aspect has been specifically agreed between the treaty parties. For further comments on this decision, see Newcombe & Paradell, Law and Practice of Investment Treaties 222–223. 1307 Maupin, mfn-based Jurisdiction 157, 179–180, referring to the analysis undertaken in Oil Platforms (Islamic Republic of Iran v. us), icj, Preliminary Objection, Separate Opinion of Judge Higgins (12 December 1996), icj Rep. (1996) 849, para. 9. 1308 Salini v. Jordan (Decision on Jurisdiction).

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claimants relied on the mfn clause contained Art. 3 of the Italy–Jordan bit1309 in order to establish the subjective element of jurisdiction, i.e. the host State’s consent to icsid arbitration. In the claimants’ view, the more favourable dispute settlement provisions provided by a third-party treaty applied also to the Italy-Jordan bit by virtue of the mfn clause, thereby granting access to icsid;1310 any contractual agreements providing for a different dispute settlement mechanism no longer applied.1311 The defendant, by contrast, contended that the said mfn clause did not allow the claimants to “avail themselves of more advantageous dispute settlement provisions in other bilateral investment treaties.”1312 In its ruling, the arbitral tribunal ultimately agreed with the host State. It held that the mfn clause of the Italy–Jordan bit “does not apply insofar as dispute settlement clauses are concerned” and thus denied jurisdiction for the contract-based dispute.1313 Its legal reasoning referred to the precedents created in the Ambatielos and in the Maffezini v. Spain cases. As regards the Ambatielos case, the arbitral tribunal pointed out that the ruling of the Arbitration Commission was not applicable to the case at hand since, in that case, the claimant had invoked the application of substantive provisions, such as a treatment in accordance with “justice,” “right” and “equity,” and not jurisdictional provisions.1314 Furthermore, it also made reference to the dissenting opinion of the icj judgment which had initially determined the obligation to arbitrate this case, wherein the dissenting judges had stated that the mfn clause in question “promises most-favored-nation treatment only in matters of commerce and navigation,” but not with respect to “the administration of justice.”1315 With respect to the Maffezini v. Spain decision, the arbitral tribunal primarily relied on the breadth of the mfn provision at issue in that case, concluding that, due to the different, narrower formulation of the mfn clause

1309 Agreement between the Government of the Hashemite Kingdom of Jordan and the Government of the Italian Republic on the Promotion and Protection of Investments, 21 July 1996. 1310 Salini v. Jordan (Decision on Jurisdiction), para. 21. 1311 Id. 1312 Id., para. 23. 1313 Id., para. 119. 1314 Id., para. 112. 1315 Ambatielos Claim (Greece v. uk), icj, Joint Dissenting Opinion of Judges Mc Nair, ­Basdevant, Klaestad, Read (19 May 1953), icj Rep. (1953) 25 [hereinafter Ambatielos Claim (Joint Dissenting Opinion Mc Nair, Basdevant, Klaestad, Read)], referred to in Salini v. J­ ordan (Decision on Jurisdiction), para. 106.

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in the present Salini v. Jordan case, the circumstances of both cases were not comparable – thus justifying a different ruling.1316 Finally, the arbitral tribunal noted that neither was there any indication that the parties to the bit had intended that the clause should also apply to jurisdictional issues, nor had the claimant provided any evidence of any practice within the two contracting States that would support their claims.1317 The restrictive, literal approach exemplified by the Salini v. Jordan tribunal was adopted by a range of subsequent icsid tribunals.1318 The mfn clauses they dealt with were, in scope, generally comparable to the mfn clauses that were at issue in a large number of the cases which had been decided in the opposite way.1319 In line with the Salini v. Jordan tribunal, these arbitral tribunals argued that an mfn clause, in order to provide for jurisdiction, should leave no doubt as to whether it was meant to comprise dispute settlement 1316 Salini v. Jordan (Decision on Jurisdiction), paras. 117–118. 1317 Id., para. 118. 1318 See e.g. Plama Consortium v. Bulgaria (Decision on Jurisdiction), paras. 183–227; Telenor v. Hungary (Award), paras. 81–101; Wintershall v. Argentina (Award), paras. 158–167; Tza Yap Shum v. Peru (Decision on Jurisdiction), paras. 189–220; Impregilo S.p.A. v. Argentine Republic, icsid Case No. arb/07/17, Dissenting Opinion of Arbitrator Brigitte Stern (21 June 2011) [hereinafter Impregilo v. Argentina (Dissenting Opinion Stern)], paras. 1–110; Hochtief ag v. Argentine Republic, icsid Case No. arb/07/31, Dissenting Opinion of Arbitrator J. Christopher Thomas, q.c. (7 October 2011) [hereinafter Hochtief v. Argentina (Dissenting Opinion Thomas)], paras. 1–83; Daimler v. Argentina (Award), paras. 160–278, 281; Kılıç İnşaat v. Turkmenistan (Award), para. 7. Interestingly, Prof. Domingo Bello Janeiro, who formed part of the majority in Daimler v. Argentina (Award), took an opposite position in the earlier Siemens v. Argentina (Decision on Jurisdiction), notwithstanding the fact that both cases concerned the mfn clause in Art. 3(1) and (2) of the Argentina-Germany bit. Moreover, it should be emphasised that both the expansive interpretations adopted in Siemens v. Argentina (Decision on Jurisdiction) and Hochtief v. Argentina (Decision on Jurisdiction) and the restrictive interpretations adopted in Wintershall v. Argentina (Award) and Daimler v. Argentina (Award) are based on the same mfn clause in the ArgentinaGermany bit. Parts of the cited case law and comments thereon may be found in Ziegler, Most-Favoured-Nation (mfn) Treatment 84–85. 1319 See the classification of arbitral investment case law on the question of mfn-based jurisdiction according to the underlying type of mfn clause in Maupin, mfn-based Jurisdiction 157, 189 (Appendix A). The chart shows that the large majority of cases are comparable in that they involved “general” mfn clauses, i.e. clauses that do not apply broadly to “all matters,” but that refer in a general manner to “treatment” without defining the meaning of this term more precisely.

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­provisions.1320 Since the threshold for an arbitral tribunal to find mfn-based jurisdiction is thus relatively high in that it requires jurisdiction to be affirmatively established, this interpretative approach has been labelled as “affirmative” or “definitive.”1321 ccc

Summary and Interpretative Evaluation

On the whole, the case law dealing with mfn clauses and with the question of whether these may even serve as a legal basis to establish jurisdiction is split into two major schools of thought.1322 One school, which was established in the Maffezini v. Spain case, adopts an expansive and rather liberal interpretation, attaching great value to the object and purpose of iias. It takes the view that mfn clauses are, unless expressly stated otherwise, suited to import more favourable dispute settlement provisions from third-party treaties. The school of thought established in the Salini v. Jordan case stands in stark contrast to this line of icsid jurisprudence. Its narrower, restrictive interpretative approach is primarily focused on the actual language of the mfn clauses in question. It supports the view that mfn-based jurisdiction should not be established unless the wording of the pertinent clause clearly and unambiguously allows for such transfer of provisions governing the settlement of disputes. When taking a closer look at the two different lines of jurisprudence, they may be further subdivided according to the underlying jurisdictional question. icsid tribunals that adopted the expansive interpretative approach generally dealt with claimants’ attempts to avoid local remedy requirements by invoking an mfn clause.1323 By contrast, icsid tribunals following the restrictive interpretative approach were mainly concerned with claimants’ attempts to

1320 Weeramantry, Treaty Interpretation in Investment Arbitration 180–181. 1321 Maupin, mfn-based Jurisdiction 157, 179–180, referring to the analysis undertaken in Oil Platforms (Islamic Republic of Iran v. us), icj, Preliminary Objection, Separate Opinion of Judge Higgins (12 December 1996), icj Rep. (1996) 849, para. 9. 1322 A further split of opinions with regard to the scope of mfn clauses relates to the question of whether an umbrella clause may be imported into a bit via an mfn clause, see e.g. edf International v. Argentina (Award), para. 929; Mr. Franck Charles Arif v. Republic of Moldova, icsid Case No. arb/11/23, Award (8 April 2013) [hereinafter Arif v. Moldova (Award)], para. 396 (both affirming); Siag v. Egypt (Award), paras. 463–464; İçkale İnşaat Ltd. Şirketi v. Turkmenistan, icsid Case No. arb/10/24, Award (8 March 2016) [hereinafter İçkale v. Turkmenistan (Award)], paras. 326–332 (both rejecting); Abaclat v. Argentina (Decision on Jurisdiction), paras. 316–318, 331–332 (issue left open absent a pure contract claim). 1323 Maupin, mfn-based Jurisdiction 157, 168–169; Newcombe & Paradell, Law and Practice of Investment Treaties 208 et seq.

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o­ vercome a limited scope of subject matter jurisdiction via an mfn clause.1324 Such appearance of consistency within these sub-categories of arbitral case law on questions of mfn-related jurisdiction is deceptive, since closer investigation reveals that arbitral tribunals belonging to one sub-category have actually voiced strong criticism of the positions taken by arbitral tribunals of the other sub-category on the other sort of sub-question, and vice versa.1325 This indicates that, had the arbitrators adjudicating one mfn-based related question been concerned with the respective other sort of question, they would have decided differently. Moreover, two arbitral tribunals which had been concerned with a question belonging to the sub-category “exhaustion of local remedies” came to diametrically opposed conclusions in spite of the fact that they dealt with an identical mfn clause stemming from the same bit.1326 In addition, in another two decisions belonging to the said sub-category, dissenting opinions conflicting with the majority position have been voiced.1327 As can be seen, a common position has not yet taken root in the circles of arbitrators – even when breaking down broader issues into more detailed sub-questions.1328 More precisely, the questions mostly focused on the possibility of reducing the 18-month waiting period before filing an arbitral claim, which is foreseen in some of the Argentina bits, to a shorter waiting period by invoking a third-party bit concluded with Argentina. 1324 Maupin, mfn-based Jurisdiction 157, 168–169; Newcombe & Paradell, Law and Practice of Investment Treaties 210 et seq. More precisely the questions were concerned with narrow scopes of jurisdiction ratione materiae, e.g. covering only compensation for expropriation, and the possibility of widening these scopes to other protective standards, e.g. fet or fps, on the basis of thirdparty bits. 1325 See e.g. Salini v. Jordan (Decision on Jurisdiction), para. 115: “The current Tribunal shares the concerns that have been expressed in numerous quarters with regard to the solution adopted in the Maffezini case.”, referred to in Maupin, mfn-based Jurisdiction 157, 168–169. 1326 See Siemens v. Argentina (Decision on Jurisdiction) as opposed to Wintershall v. Argentina (Award), referred to in id. at 168. 1327 See Impregilo v. Argentina (Dissenting Opinion Stern) and Hochtief v. Argentina (Dissenting Opinion Thomas). 1328 A further controversial issue concerning mfn clauses came up in Garanti Koza llp v. Turkmenistan, icsid Case No. arb/11/20. The mfn clause of the respective bit contained an express reference to the dispute settlement provisions of that bit. However, the arbitrators disagreed on the scope of this mfn clause extending to j­urisdiction. The majority held that it would also extend to different arbitration systems stipulated in another treaty; see Garanti Koza llp v. Turkmenistan, icsid Case No. arb/11/20, Decision on Jurisdiction (3 July 2013) [hereinafter Garanti v. ­Turkmenistan (Decision on Jurisdiction)], paras. 40–97. The dissenting arbitrator, on the other hand, found that it would

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Having thus determined jurisprudential inconsistencies as regards the recurring legal question of mfn-based jurisdiction absent any clear specifications on the scope of generally formulated mfn clauses, it is of interest to examine the interpretative and argumentative techniques applied by the arbitral tribunals when reaching their conflicting conclusions. The decisions rendered by the arbitral tribunals that established the two opposing schools of thought – the Maffezini v. Spain and Salini v. Jordan tribunals – appear to be most informative in this respect. Besides being tainted with several general interpretative flaws,1329 they are of exemplary significance for one of the previously identified causes of inconsistencies. As has been seen, the tribunal in Salini v. Jordan refused to import more favourable dispute settlement provisions from a third-party treaty by means of the mfn clause. In doing so, it was at pains to emphasise the fundamental differences that would distinguish its case from the case Maffezini v. Spain. It did so by pointing to the distinct language of the mfn clauses involved in both cases. In its view, the expansive interpretation adopted in the Maffezini v. Spain case was justifiable in consideration of the broad wording of the mfn clause in the Argentina–Spain bit, which referred to “[a]ll matters subject to this Agreement.”1330 Since the Italy–Jordan bit did not provide for such comprehensive protection, but covered only the “treatment (…) accorded to investments,” it could not be interpreted in a comparably broad manner.1331 It is questionable, however, whether these textual differences are sufficient to support and justify such diametrically ­opposed conclusions regarding the breadth of the clauses’ protective scopes. As stated by a scholarly commentator, “it is difficult to see to what extent the formulation of the mfn clause in the Italian-Jordanian bit differs in scope from the ­parallel

not allow to replace one arbitration system by another and thereby “‘import’ consent to ­i csid arbitration to a treaty regime that does not contain such consent”; see Garanti Koza llp v. Turkmenistan, icsid Case No. arb/11/20, Dissenting Opinion of Arbitrator Prof. Laurence Boisson de Chazournes (3 July 2013) [hereinafter Garanti v. Turkmenistan (­Dissenting Opinion Boisson de Chazournes)], p ­ aras. 53–71, esp. para. 71 (v) (quotation). 1329 While the tribunal in Maffezini v. Spain (Decision on Jurisdiction), for example, can be criticised for tending to afford too much weight to the (historical) object and purpose of iias, the tribunal in Salini v. Jordan (Decision on Jurisdiction) devoted too much attention to textual considerations. For a further analysis of general interpretative deficiencies inherent to these two lines of icsid jurisprudence on the question of mfn-based jurisdiction, see Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 89–119. 1330 Salini v. Jordan (Decision on Jurisdiction), para. 117. 1331 Id., paras. 118–119.

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clause in the Spanish-Argentina bit.”1332 Furthermore, it should be noted that the finding of the tribunal in Maffezini v. Spain was not primarily motivated by textual considerations, but, more generally, by the overall object and purpose of modern mfn clauses.1333 Therefore, instead of being owed to mere linguistic differences, it appears that the divergent conclusions are rather due to fundamental disagreements on the general protective function and scope of mfn provisions. This strategy to avoid the impression of disagreement, which was employed by the tribunal in Salini v. Jordan, is what has been categorised as “concealed, unsubstantiated deviation” from precedents “by distinction.”1334 Arbitral tribunals try to uphold the perception of consistency of investment jurisprudence by pointing to alleged factual or legal differences between the case they adjudicate and potential comparator-cases. These purported differences allow them to deviate from prior rulings without being required to provide substantiated reasons for their conflicting interpretative approaches. Such artificially created appearances of jurisprudential unity, which are used to mask actual disagreement, are thus one of the causative factors of jurisprudential inconsistency. bb aaa

International Custom: Example of the Defence of Necessity Concept and Function

Under customary international law, a State may invoke several circumstances precluding wrongfulness for conduct which would otherwise incur responsibility for the breach of international obligations.1335 These circumstances may be pleaded to shield liability for physical or regulatory protective measures of either defensive or offensive nature against serious and impending threats.1336 They are codified and thus confirmed by the ilc Draft Articles on State

1332 Schill, The Multilateralization of International Investment Law 349, referring to Berschader and Berschader v. Russian Federation, scc Case No. 080/2004, iic 314 (2006), Award and Correction (21 April 2006) [hereinafter Berschader v. Russia (Award)], paras. 177–182, as an example of a general legal reasoning on the issue of mfnbased jurisdiction as opposed to the legal reasoning in Salini v. Jordan (Decision on Jurisdiction), which is mainly based on textual specificities of individual iias. 1333 Maffezini v. Spain (Decision on Jurisdiction), paras. 54–55. 1334 See Ch. 2.D.II.2.b.aa.ccc(1). 1335 Newcombe & Paradell, Law and Practice of Investment Treaties 510. 1336 Hill, The “Necessity Defense” and the Emerging Arbitral Conflict in its Application to the u.s.Argentina Bilateral Investment Treaty 547, 551.

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­Responsibility1337 and include consent, self-defence, force majeure, distress, counter-measures, and the doctrine of necessity, which is frequently used, but is a very controversial excuse for an act of a State. For instance, it is highly disputed whether and to what extent an insolvent debtor State may object to the claims of its private bond creditors by raising the plea of necessity.1338 In this respect, the State’s contractually based payment obligations towards the debtor, the “contrat privé,” are at odds with its public obligation to ensure the subsistence of its population, the “contrat social.”1339 Despite this field of tension between public international law and private law, the defence of necessity is widely and expressly recognised as a principle 1337 See ilc Draft Articles on State Responsibility Arts. 20–25. 1338 Marc-Philippe Weller, Die Grenze der Vertragstreue von (Krisen-) Staaten, Zur Einrede des Staatsnotstands gegenüber privaten Anleihegläubigern 3 (Mohr Siebeck, Tübingen, 2013). 1339 Id. at 3–6. Even the German Federal Constitutional Court was divided when deciding in proceedings conducted pursuant to gg Art. 100 (2) on the question of whether Argentina was allowed to raise the defence of necessity under customary international law against claims of German private bondholders. See the Argentina Necessity Case, Order of the Second Senate, BVerfGE 118, 124, 2 BvM 1/03 (8 May 2007). The majority replied in the negative by holding that “an economically or financially defined state of necessity can (…) not be pled by a state vis-à-vis private individuals so long as there is no rule under international customary law which recognises the transferability of the defence of necessity from relationships under international law to relationships under private law.” (para. 67) Judge Lübbe-Wolf, by contrast, answered affirmatively in her dissenting opinion and confirmed “a general rule of international law according to which a state can also assert the plea of state necessity before national courts” (para. 95), allowing Argentina to suspend its fulfillment obligations vis-à-vis private individuals as long as necessary to ensure “the precedence of elementary common-good interests – in particular with regard to the protection of life and health” (para. 85). See also Stephan W. Schill, German Constitutional Court Rules on Necessity in Argentine Bondholder Case, 11 asil Insights (2007), who elaborates on the Court’s assessment of the relevant icsid jurisprudence: “In particular, the majority refused to view the practice of international courts and tribunals as sufficient evidence to conclude that necessity under international law could be invoked in relationships that were governed by domestic private law. It decided that decisions by the icj and itlos did not constitute relevant practice in this context, as they concerned inter-State proceedings exclusively governed by international law. Similarly, investor-State disputes under investment treaties, such as the cms and the lg&e rulings, were considered inconclusive because the investor, although acting as a private individual, alleges violations of a bit and therefore invokes a violation of international law and does not bring a private law claim.”

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within the realm of customary international law, including by (international) courts1340 and scholars.1341 It is usually invoked in economic, environmental, or military contexts.1342 The pertinent norm, ilc Draft Art. 25 (1),1343 describes necessity as “a ground for precluding the wrongfulness of an act not in conformity with an international law obligation,” but sets out a high threshold for its invocation. The restrictive conditions for its use are reflected in the negative wording of this provision and the rigorous, cumulative conditions it stipulates. In order to be covered by the defence of necessity, a State act has to be “the only way” to protect “an essential interest” against “grave and imminent peril” and must not impair any comparable interests “of the State or States towards which the obligation exists, or of the international community as a whole.” Moreover, a plea of necessity may be precluded by opposing “international obligations” or if a State has “contributed to the situation of necessity.” icsid tribunals engaged with the interpretation of these constitutive elements were largely unanimous as regards their general content. For instance, even if they eventually had diverging views on their application in substantially similar situations,1344 they agreed, in theory, that the “only way requirement” would 1340 See e.g. Gabčíkovo-Nagymaros Project (Hungary v. Slovakia), icj, Judgment (25 September 1997), icj Rep. (1997) 7, para. 51; M/V Saiga (No. 2) (St. Vincent and the Grenadines v. Guinea), itlos, Judgment (1 July 1999), 38 ilm 1323 (1999), paras. 132–134; Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, icj, Advisory Opinion (9 July 2004), 43 ilm 1009 (2004), para. 140. For an overview of the jurisprudence on the plea of necessity, see ilc Report, 53rd Sess., un gaor, 56th Sess., Supp. No. 10, un Doc. A/56/10 (2001), Commentary on ilc Draft Art. 25, pp. 194–206, paras. 1–20. 1341 See e.g. Rodick, Doctrine of Necessity 1 et  seq; Antonio Cassese, International Law 255–257 (Oxford University Press, Oxford, 2nd ed., 2005); Karl Doehring, Völkerrecht paras. 750 et seq. (C.F. Müller, Heidelberg, 2nd ed., 2004). 1342 Kasenetz, Desperate Times Call for Desperate Measures 709, 721, with examples for each sort of context. 1343 For the text of ilc Draft Art. 25, see fn. 1117. 1344 For an example of a diverging application of the “only way” requirement in a substantially similar factual situation, see e.g. cms v. Argentina (Award), para. 323 (indirectly denying that there was only one way for Argentina to respond to its politico-economic crisis), as opposed to lg&e v. Argentina (Decision on Liability), para. 257 (considering Argentina’s “economic recovery package” as “the only means to respond to the crisis”). For an example of a diverging application of the “grave and imminent peril” requirement in a substantially similar factual situation, see e.g. cms v. Argentina (Award), paras. 320–321 (finding the Argentine economic situation as not “severe” enough to qualify), as opposed to lg&e v. Argentina (Decision on Liability), para. 257 (considering the Argentine economic emergency as sufficient to constitute a “grave and imminent peril”).

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exclude the application of the necessity defence whenever any other lawful means exists, even if it is more costly or less convenient.1345 There is also agreement that cases of economic emergencies can meet the high threshold of “grave and imminent peril.”1346 The relationship between the customary international law defence of a “state of necessity,” on the one hand, and “security exception clauses” as contained in iias, on the other hand, is less clear. The latter sort of clauses, which are also and more generally called “non-precluded measures clauses,” are frequently used in treaty practice to carve out measures for safeguarding essential national security interests from an iia’s protective scope.1347 They typically consist of three basic elements: (1) a “nexus requirement,” i.e. the requirement that the measures at issue are necessary for a specified objective, (2) the “scope of applicability,” i.e. the determination of whether the exception applies to the whole treaty or only to parts of it, and (3) a list of “permissible objectives,” i.e. the objectives that may be pursued within the scope of the clause.1348 The legal consequence of security exception clauses and of non-precluded measures clauses in general is that no violable obligation exists whenever a measure falls within their scope.1349 The defence of necessity pursuant to international custom, by contrast, is conceptionally different in that it only applies to preclude international State responsibility once a breach of a treaty obligation has already occurred. The interplay of these different sorts of necessity defences and the assessment of their relationship has given rise to conflicting interpretative approaches in past icsid jurisprudence. As will be seen in the following case law analysis, this question was at issue in a series of investment claims brought against Argentina in the aftermath of its politico-economic crisis which took place at the turn of the 21st century.

1345 See e.g. cms v. Argentina (Award), para. 324, LG&E v. Argentina (Decision on Liability) para. 250. 1346 See e.g. cms v. Argentina (Award), para. 319; lg&e v. Argentina (Decision on Liability), para. 251. See also ilc, Draft Articles on the Responsibility of States for Internationally Wrongful Acts, with commentaries, Yearbook of the ilc, Vol. ii, Part. ii Commentary (15) on Art. 25 (2001). 1347 Newcombe & Paradell, Law and Practice of Investment Treaties 488–491, listing several examples of security exception clauses in iia treaty practice. 1348 Burke-White, The Argentine Financial Crisis 199, 206–207. 1349 Newcombe & Paradell, Law and Practice of Investment Treaties 483.

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In response to its financial and economic crisis of 2001–2002, Argentina enacted a Public Emergency Law1350 in order to achieve economic and political stability.1351 It contained three concrete counter-measures: the de-coupling of the Argentine peso from the us dollar,1352 the “pesification” of all financial liabilities,1353 and the freezing of tariff rates at the level of January 2002.1354 These sovereign State acts, even if driven by the motivation to protect national public interests, stood in a tense relationship with the interests of foreign investors, given that they affected the economic foundations of the various bits Argentina had concluded over the last decades.1355 Especially us investors in the gas industry suffered heavy losses due to changes in the calculation of prices. In reaction, a flood of claims was filed against Argentina before the icsid.1356 All of these claims involved largely comparable factual backgrounds and legal pleadings. The aggrieved us investors alleged breaches of the bit obligations, such as the standard of lawful expropriation, the fet standard, the standard of non-discriminatory treatment, or umbrella clauses. Argentina invoked two different defences for the actions it had undertaken in response to its 1350 Public Emergency and Exchange Regime Reform Act, Law No. 25/561, 7 January 2002, [29810] b.o. 1 (Arg), containing a declaration of a state of emergency until 10 December 2003. 1351 For detailed information on the causes and effects of the Argentine politico-economic crisis, see Kasenetz, Desperate Times Call for Desperate Measures 709, 712–714. 1352 Only a few years earlier, in the beginning of the 1990s, Argentina had adopted the Convertibility Law (Law No. 23/928, 27 March 1991, amended by Law No. 25/445, 21 June 2001) in order to alleviate its fiscal and economic crisis stemming from the 1980s. Aiming to attract fdi and to curb inflation, it prescribed, inter alia, the privatisation of various industrial sectors and the coupling of the Argentine peso to the us dollar at a one-to-one ratio. 1353 As a consequence of the termination of the “convertibility system,” the Argentine peso devaluated significantly against the us dollar, down to a three-to-one ratio. However, the Public Emergency Law obliged private utility companies to keep applying the conversion rate of one-to-one, which led to considerable income reductions. This mechanism has been called “pesification.” 1354 Due to the freezing of tariff rates, certain periodic adjustments were no longer possible, e.g. adjustments of the gas tariffs based on the us inflation rate. For further details of the Public Emergency Law, see Kasenetz, Desperate Times Call for Desperate Measures 709, 714–715. 1355 For an overview of the total number of bits concluded by Argentina, see (last visited September 2016). 1356 For an overview of the more than 50 pending and concluded icsid arbitrations against Argentina, see the icsid webpage at (last visited September 2016).

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precarious financial situation. On the one hand, Argentina based its defence on the security exception clause set forth in Art. xi of the 1991 Argentina–us bit,1357 which it considered as self-judging and as allowing measures conflicting with treaty obligations to be taken provided that these are “necessary for the maintenance of public order (…) or the [p]rotection of (…) essential security interests.”1358 On the other hand, it relied on the doctrine of necessity under customary international law as embodied in ilc Draft Art. 25 and argued that its regulatory acts in the context of the 2001–2002 financial and economic crisis had been taken to “safeguard an essential interest” – the Argentine fiscal and economic system – “against a grave and imminent peril.”1359 Their wrongfulness as well as any consequential responsibility should therefore be precluded. The icsid tribunals adjudicating these cases agreed that the Argentine crisis management had substantially deteriorated the legal framework on the basis of which foreign investments had been made and thereby, in principle, had breached the fet standard and the umbrella clause stipulated in the pertinent bit.1360 This unanimity came to an end in the arbitral tribunals’ findings on the pleas of necessity – more precisely in their assessment of the relationship between the treaty-based exception and the codified customary international law excuse.1361 They adopted doctrinally divergent interpretative approaches. This resulted in contradictory conclusions with regard to the defences invoked by the defendant, not to mention the question of compensation. 1357 Treaty Concerning the Reciprocal Encouragement and Protection of Investment, Argentine–us, Washington, dc, 14 November 1991 (entry into force 20 October 1994) 31 ilm 124 (1992). Argentina–us bit Art. xi: “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.” 1358 See Argentina–us bit Art. xi. 1359 See ilc Draft Art. 25. For the text of this provision, see fn. 1117. 1360 See e.g. cms v. Argentina (Award), paras. 266 et seq., 296 et seq.; lg&e v. Argentina (Decision on Liability), paras. 121 et seq., 169 et seq. 1361 The norms at issue – the treaty law exception clause and the codified customary international law defence – entail questions on both the interpretation of international conventions and the interpretation of customary international law. As regards the latter, the debate on whether the interpretation of international custom and general principles of law is possible at all has been outlined in fn. 711. In the cases at hand, this fundamental question is less significant, since they are primarily concerned with the interpretation of the relationship of the two norms.

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chapter 2 Conflation of Defences – cms v. Argentina

The first case in the aftermath of the Argentine economic crisis was initiated  by  the cms Gas Transmission Company, a Michigan corporation that held  almost one third of the shares of a privatised Argentine gas company. It  ­asserted  that, inter alia, the Argentine tariff adjustment formula for gas transportation violated protective standards of the Argentina–us bit.1362 Argentina argued that it enacted the contested measures in a state of necessity under  Art.  xi of the Argentina–us bit and also pursuant to ilc Draft Art. 25.1363 In its holding, the arbitral tribunal did not explicitly analyse the relationship between these two legal regimes. Rather, it confined itself to the examination of the question whether the requirements of the codified necessity defence in Art. 25 of the ilc Draft Articles on State Responsibility had been met, which it answered in the negative.1364 Subsequent to this finding, the arbitral tribunal undertook a separate review of the conditions set out in Art. xi of the Argentina–us bit, but did so by following the same approach it used when examining the necessity defence under ilc Draft Art. 25.1365 It hence appeared to conflate the prerequisites of the treaty exception with those of the customary law excuse.1366 Its failure to distinguish between the different standards is demonstrated by several of its statements.1367 As to the question of whether a state of necessity would, in theory, relieve a State from its duty to

1362 1363 1364 1365 1366

cms v. Argentina (Award), paras. 84 et seq. cms v. Argentina (Award), paras. 304–312. cms v. Argentina (Award), paras. 315–331. cms v. Argentina (Award), paras. 353–378. In literature, this approach has been described as methodology of “confluence,” see Jürgen Kurtz, Adjudging the Exceptional at International Investment Law: Security, Public Order and Financial Crisis, 59 Int’l & Comp. L. Q. 325, 341–351 (2010). See also Rudolf Dolzer, Emergency Clauses in Investment Treaties: Four Versions, in Looking to the Future: Essays on International Law in Honour of W. Michael Reisman 713, 716 (Mahnoush H. Arsanjani ed., 2011). 1367 See e.g. cms v. Argentina (Award), para. 308: “The Respondent has also invoked in support of its contention the existence of a state of necessity under both customary international law and the provisions of the Treaty. In so doing, the Respondent has raised one fundamental issue in international law.”; para. 374: “(…) It is a substantive review that must examine whether the state of necessity or emergency meets the conditions laid down by customary international law and the treaty provisions and whether it thus is or is not able to preclude wrongfulness.”

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pay compensation, it considered ilc Draft Art. 27 (b)1368 as govering and thus answered this question in the negative as well.1369 This approach was confirmed and further expanded by the arbitral tribunals adjudicating the Enron v. Argentina and Sempra v. Argentina cases.1370 Both arbitral tribunals addressed the relationship of the necessity defences under Art. xi of the Argentina–us bit and ilc Draft Art. 25. They agreed that, in theory, “the treaty regime is different and separate from customary law as it is lex specialis.”1371 Yet, since they were of the view that the relevant treaty did not “deal with the legal elements necessary for the legitimate invocation of the state of necessity,”1372 they found themselves constrained to have recourse to the requirements of a state of necessity under customary international law.1373 Thus, in practice, they considered the treaty defence as “inseparable from the customary law standard”1374 inasmuch as the conditions for its exercise were concerned. The result was that they eventually conflated the exception based on treaty law and the excuse rooted in customary international law. (2)

Differentiation of Defences – lg&e v. Argentina

Further foreign investors affected by the Argentine economic crisis were lg&e Energy Corp. and lg&e Capital Corp., two Kentucky-based corporations, and lg&e International, which was incorporated in Delaware.1375 lg&e held interests in three Argentine local gas distribution companies and claimed that the host State, by enacting its Public Emergency Law, had breached the bit and had considerably impaired its investments.1376 Argentina responded with arguments similar to those raised in the cms case and, again, based its 1368 ilc Draft Art. 27 (b): “The invocation of a circumstance precluding wrongfulness in accordance with this chapter is without prejudice to: (…) (b) the question of compensation for any material loss caused by the act in question.” 1369 cms v. Argentina (Award), paras. 383–394, esp. para. 388: “(…) the plea of state of necessity may preclude the wrongfulness of an act, but it does not exclude the duty to compensate the owner of the right which had to be sacrificed.” 1370 Enron v. Argentina (Award); Sempra v. Argentina (Award). 1371 Enron v. Argentina (Award), para. 334; Sempra v. Argentina (Award), para. 377, in consideration of the expert opinion of Dean Slaugther and Prof. Burke-White. 1372 Sempra v. Argentina (Award), para. 388; see also Enron v. Argentina (Award), para. 334. 1373 Enron v. Argentina (Award), paras. 333–334; Sempra v. Argentina (Award), paras. 375–376. 1374 Enron v. Argentina (Award), para. 334; Sempra v. Argentina (Award), para. 376. 1375 lg&e v. Argentina (Decision on Liability), para. 1. Hereinafter, the claimants will be referred to collectively as “lg&e.” 1376 lg&e v. Argentina (Decision on Liability), paras. 2, 9.

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j­ustification on the necessity defence according to both customary law as ­reflected in ilc Draft Art. 25 and treaty law pursuant to Art. xi of the Argentina– us bit.1377 In its findings, the lg&e v. Argentina tribunal did not follow the interpretative approach taken by the cms v. Argentina tribunal as regards the relationship of these necessity defences, but conducted a differentiated and separate examination of the two grounds raised by the respondent. In a first step, it considered the security exception clause independently from the state of necessity under customary law1378 and found that “the protections afforded by Article xi have been triggered in this case, and are sufficient to excuse Argentina’s liability.”1379 Thereafter, in a second step, it engaged in an independent analysis of the different prerequisites of a state of necessity under customary international law pursuant to ilc Draft Art. 251380 and held that “satisfaction of the state of necessity standard as it exists in international law (…) supports the Tribunal’s conclusion.”1381 The lg&e v. Argentina tribunal thereby treated the exception clause contained in the bit, in both theory and practice, as lex specialis to the excuse under customary law and thus strictly differentiated both sorts of necessity defences.1382 Although the arbitral tribunal ultimately ended up ruling in favour of the investor-claimant, it still found the host State to be excused for the period between 1 December 2001 and 26 April 2003 and 1377 lg&e v. Argentina (Decision on Liability), paras. 201–202. 1378 lg&e v. Argentina (Decision on Liability), paras. 229–244. This individual analysis of the bit security exception clause is in line with the lg&e tribunal’s denial of a self-judging nature of this provision. In this regard, it agreed with the cms tribunal, which also considered the security exception clause as non-self-judging, but on different grounds. While the cms tribunal based its conclusion on a comparison of the clause’s wording with explicitly self-judging clauses of other international law instruments such as the gatt (see cms v. Argentina (Award), paras. 367–373), the lg&e tribunal considered the parties’ subjective understanding of that clause at the moment of conclusion of the treaty as crucial (see lg&e v. Argentina (Decision on Liability), para. 212). The majority of icsid tribunals concerned with the interpretation of security exception clauses as contained in bits supported this position in view of the otherwise extremely high degree of State autonomy to judge on its own acts, which would risk to run counter the protective telos of bits. But see Sempra v. Argentina (Decision on Annulment), para. 204. 1379 lg&e v. Argentina (Decision on Liability), para. 245. 1380 lg&e v. Argentina (Decision on Liability), paras. 246–258. 1381 lg&e v. Argentina (Decision on Liability), para. 245. 1382 In literature, this approach has been described as the methodology of “the treaty exception as lex specialis”; see Kurtz, Adjudging the Exceptional at International Investment Law 325, 351–356. See also Dolzer, Emergency Clauses in Investment Treaties 713, 714–716.

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therefore deducted the corresponding amount of losses from the total sum of damages.1383 This demonstrates the arbitral tribunal’s position as to the compensation issue: it was of the view that ilc Draft Art. 27 (b) was inapplicable and that the state of necessity established according to the treaty-based exception clause relieved a State from its financial liabilities.1384 Several subsequent icsid decisions, namely the awards rendered in ­Continental Casuality v. Argentina and in El Paso v. Argentina as well as the decisions annulling the cms v. Argentina and Sempra v. Argentina awards,1385 adopted and refined the differentiating approach established by the lg&e v. Argentina tribunal. All of them agreed with the position that the two necessity defences invoked by Argentina entail different conditions of application and thus need to be treated separately from each other.1386 In cms v. Argentina (Decision on Annulment) and Continental Casualty v. Argentina (Award), the arbitrators went even one step further and classified them in different categories according to their nature and function: while the treaty exception was a primary rule exempting a party from its treaty obligations and thus precluding the possibility of a violation of the treaty provisions at all, the excuse under customary law was of secondary nature as it only precluded wrongfulness once a treaty v­ iolation had occurred.1387 Accordingly and in opposition to the 1383 lg&e v. Argentina (Decision on Liability), para. 266. 1384 lg&e v. Argentina (Decision on Liability), paras. 260, 261. For the text of ilc Draft Art. 27 (b), see fn. 1368. 1385 cms v. Argentina (Decision on Annulment); Continental Casualty v. Argentina (Award); Sempra v. Argentina (Decision on Annulment); El Paso v. Argentina (Award). The ad hoc committees in Enron v. Argentina (Decision on Annulment) and Continental Casualty v. Argentina (Decision on Annulment) did not take a stand on the arbitral tribunals’ interpretation of the relationship between the different grounds Argentina’s necessity defence was based on. 1386 cms v. Argentina (Decision on Annulment), para. 130; Continental Casualty v. Argentina (Award), para. 167 (fn. 242); Sempra v. Argentina (Decision on Annulment), para. 200; El Paso v. Argentina (Award), paras. 588 et seq. See also Total v. Argentina (Decision on Liability), paras. 219 et seq., in view of which it must be emphasised that a different bit has been applicable in this case, namely the Argentina–France bit (Agreement between the Government of the Argentine Republic and the Government of the Republic of France for Reciprocal Protection and Promotion of Investments, 3 July 1991 (entry into force 3 March 1993), 1728 unts 282 (1993)). 1387 cms v. Argentina (Decision on Annulment), para. 129; Continental Causality v. Argentina (Award), paras. 167–168; El Paso v. Argentina (Award), paras. 552–555. In legal literature, this approach has been described as the methodology of “separating primary and secondary application”; see Kurtz, Adjudging the Exceptional at International Investment Law 325, 356–370.

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­position adopted by the ad hoc committee in Mitchell v. Congo,1388 the secondary ranked defence under customary law only came into play if the primary ranked treaty-based defence was found to be unsuccessful. ccc

Summary and Interpretative Evaluation

The rulings of the icsid tribunals and committees presented above show a clear split of opinion on the relationship between the security exception clause as stipulated in Art. xi of the corresponding Argentina–us bit and the necessity excuse under customary law as embodied in Art. 25 of the ilc Draft Articles on State Responsibility. While the line of cases preceded by the cms v. Argentina award conflates these two legal concepts, the line of case law established by the lg&e v. Argentina award distinguishes between the different defences and their respective prerequisites and considers the treaty exception as lex specialis to the excuse under customary law. On account of this initial conflict of views, the icsid tribunals and committees that had to rule on this recurring interpretative question in subsequent periods were similarly divided. While the icsid tribunals following the position taken in the cms v. Argentina award fully agreed with that arbitral tribunal, a large portion of the icsid tribunals and committees joining the approach applied in the lg&e v. Argentina award – in spite of endorsing the fundamental distinction between the two necessity defences – went on to refine the “lex specialis methodology” in the course of which the related, yet conceptually more differentiated “primary-secondary-application methodology” was established. This split of opinions is even more unsatisfactory and surprising in view of the fact that, in part, identical arbitrators were sitting on the panels that rendered conflicting decisions.1389 The situation is compounded by the fact that all cases involved the exact same legal basis, i.e. the Argentina–us bit and customary international law, and related to the same factual background, i.e. the disadvantages foreign investors in the gas industry suffered during the Argentine politico-economic crisis at the turn of the millennium. The two diverging streams of interpretation are hence a particularly striking example of 1388 Mitchell v. Congo (Decision on Annulment), para. 55: “[T]he Committee finds (…) that Article x (1) of the Treaty [i.e. the security exception clause] is a provision (…) which precludes the wrongfulness of the behavior of the State in certain exceptional circumstances, and not a provision which delimits the scope of application of the Treaty.” [footnote omitted]. 1389 For example, icj Judge Francisco Rezek served as an arbitrator in both cms v. Argentina (Award) and lg&e v. Argentina (Award). Another instance are the cases lg&e v. Argentina (Award) and Enron v. Argentina (Award), where Prof. Albert Jan van den Berg was involved as an arbitrator.

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inconsistent icsid jurisprudence concerning customary international law and its relationship to international treaty law. It is thus of interest to take a closer look at the methods of interpretation used in order to determine possible flaws in their choice and application.1390 As was the case in the preceding example, the lead cases of the opposing interpretative streams seem to be most instructive when it comes to the determination of methodological causes for inconsistencies relating to the treatment of precedents. It is remarkable that the tribunal in lg&e v. Argentina, throughout its legal reasoning on the interrelationship of the different necessity defences invoked by the defendant, did not mention or refer to the cms v. Argentina award even a single time although the arbitral tribunal in charge of that case had dealt with the exact same interpretative issue.1391 However, since one of the arbitrators sat on both icsid tribunals, it must be assumed that it did so consciously rather than unconsciously. A similar pattern of conduct can be detected when looking at the reasoning adopted in Enron v. Argentina. When dealing with the different necessity defences and their interplay, the arbitrators sitting on the tribunal did not show the any awareness of the opposing ruling rendered by the tribunal in the ­preceding lg&e v. Argentina case. As again, one of the arbitrators involved sat on both tribunals, there can be no question of the latter arbitral tribunal’s knowledge of the prior ruling. Both arbitral tribunals departed from the respective previous rulings without making any effort to provide reasons for their divergent legal standpoint, nor did they try to disguise their deviation. This way of dealing with ­precedent – or rather the omission to do so – is what has been categorised as “ignoring, unsubstantiated deviation.”1392 Arbitral tribunals grouped into this category do not pay any deference to prior decisions, whether consciously – as in the present cases – or unconsciously. They simply and conveniently ignore

1390 Examples for interpretative flaws, more precisely for an excessive expansion of the limited role of annulment committees when dealing with the question of the necessity defences raised by the host State, can also be found in the decisions rendered by cms v. Argentina (Decision on Annulment) and Sempra v. Argentina (Decision on Annulment). For further elaborations thereon and the corresponding criticism, see Ch. 2.E.II.2.b.bb. For a further analysis of interpretative deficiencies inherent to the two opposing lines of icsid jurisprudence on the relationship of the treaty-based and customary necessity defences, see Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 183–203. 1391 For further remarks on this omitted reference, see Newcombe & Paradell, Law and Practice of Investment Treaties 106; Kessedjian, To Give or Not to Give Precedential Value to Investment Arbitration Awards 47; Tsatsos, A Call for Appeal 1, 22. 1392 See Ch. 2.D.II.2.b.bb.

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any opposing arguments voiced by preceding arbitral tribunals and silently diverge from their rulings. They omit any references to other relevant rulings, they break off any links to potentially established lines of jurisprudence. As a result, these arbitral tribunals complicate the handling of precedents for future arbitral tribunals and impede the emergence of an at least coherent icsid jurisprudence. The interpretative conduct shown by the arbitrators sitting on the tribunals in lg&e v. Argentina and Enron v. Argentina is hence exemplary of a major causative factor of jurisprudential inconsistency. iv Summary and Evaluation The qualitative-empirical study of icsid case law undertaken in the foregoing illustrated, “where” the asserted inconsistencies – or at least initial tendencies towards inconsistent lines of jurisprudence – have occurred in the field of international investment law and which interpretative issues they relate to. The study was broadly divided into the categories of law governing jurisdiction, procedural and substantive investment law. Within each category, an overview of examples of inconsistent jurisprudence was presented before focusing on one or two representative instances. In this manner, both a general – albeit statistically unsecured – impression of the dimensions of inconsistencies and detailed insights into the specific instances of inconsistencies in icsid investment jurisprudence were provided. The selected examples analysed in detail comprised the interpretation of umbrella clauses, annulment grounds, the protective standard of mfn treatment and the necessity defence.1393 Two aspects need to be pointed out regarding their selection. The first aspect pertains to the uniformity/variability of the underlying norms and concepts. On the one hand, the examples of inconsistent interpretations of annulment grounds and of the necessity defence involve uniform normative or conceptual legal bases.1394 They hence belong to 1393 The classification of the selected examples into different legal categories is not always definite. While the annulment grounds and the necessity defence clearly form part of procedural and substantive (customary) law respectively, the legal nature of umbrella and mfn clauses is less unequivocal, since they can be classified either as law governing jurisdiction in that they may extend the scope of a tribunal’s jurisdiction, or as substantive (treaty) law given that they may provide for additional substantive protection. For purposes of this study, they have been allocated to the category they are most well-known for. Nevertheless, in consideration of the related interpretative issues under discussion, a different allocation would have also been possible. Their categorisation should hence be considered as flexible. 1394 More precisely, the legal basis of the annulment grounds is Art. 52 of the icsid Convention; the legal bases of the necessity defence are Art. 25 of the ilc Draft Articles and

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the category of “inconsistencies stricto sensu.”1395 Since these jurisprudential inconsistencies cannot be justified by claiming that investment law is overly complex,1396 they weigh particularly heavy. On the other hand, the instances of conflicting interpretations of umbrella and mfn clauses are based on partly identical, but mostly varying norms and thus may be classified as “inconsistencies lato sensu.” However, as explained earlier, the differences in the wording of the corresponding provisions do not a priori mean that they cannot be interpreted in a consistent manner, since the norms have common denominators and hence raise recurring and fundamental legal questions.1397 The second aspect relates to the question of “why” inconsistencies occur. Since one of the main reasons has been found to lie, inter alia, in the manner arbitral tribunals deal with precedents and given that, in turn, the improvement and development of the system of de facto precedent would contribute significantly to combating and curbing the problem inconsistent icsid jurisprudence, each qualitative example of inconsistent case law has been selected to illustrate one of these typical causes. These comprise the categories of “substantiated ­deviation” and “concealed, unsubstantiated deviation” as well as “ignoring, unsubstantiated deviation.”1398 As far as the category of “substantiated deviation” has been addressed, it needs to be emphasised once again that the study – being primarily concerned with manifestations of inconsistencies as they factually appear – included this sort of rulings, but took into account their contribution to jurisprudential coherence when evaluating their interpretative handling of precedents. In sum, it should be noted that inconsistent icsid jurisprudence can be found in all areas of international investment law. The corpus of case law Art. xi of the Argentina–us bit (Treaty Concerning the Reciprocal Encouragement and Protection of Investment, Argentine–us, Washington, dc, 14 November 1991 (entry into force 20 October 1994) 31 ilm 124 (1992)). 1395 It needs to be emphasised that the categorisation of “inconsistencies stricto sensu” and “inconsistencies lato sensu,” being inspired by Spoorenberg & Viñuales, Conflicting Decisions in International Arbitration 91, 93 (see Ch. 2.C.II. (fn. 685)), considers both identically worded norms and uncodified, but recurring doctrines of customary law and general principles of law as belonging to the former category and solely differently worded norms as belonging to the latter category. 1396 See Ch. 2.B.II.1. 1397 See Ch. 2.B.II.1. 1398 See Ch. 2.D.II.2.b. See Annex to Ch. 2 (i) for an overview of the basic concept and structure of the qualitative-empirical study on icsid case law (in particular on the exemplary issues and causes of inconsistency presented therein).

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­appears to be incrementally permeated with inconsistencies or at least tendencies towards inconsistencies. This continuing trend is affirmed by both issues of disagreement which have recently arisen, e.g. relating to the disqualification of arbitrators or to unilateral consent clauses, and recent case law on already existing issues of conflict. Hence, icsid jurisprudence may, in certain respects, legitimately be described as “a crazy quilt rather than a Persian rug,” which appears to be woven by different actors with differing approaches, concepts, and goals.1399 Nevertheless, it would be an exaggeration to speak of a “crisis of consistency,”1400 since in many other instances, icsid tribunals have developed quite consistent lines of jurisprudence. Some examples of consistent decisions have been touched on throughout the study,1401 others are dealt with elsewhere in secondary literature.1402 In addition and as has been pointed out earlier, even for hierarchically structured jurisdictions within a uniform legal system on the national or international level, it is unrealistic to expect the emergence of an entirely consistent body of case law.1403 Inconsistency will inevitably always form part of the process of the development of law within a 1399 Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007), who described the body of (icsid) investment case law as “[a] carpet [which] looks very much as if different people have started from different ends without many common threads – a crazy quilt rather than a Persian rug.” 1400 Dimsey, The Resolution of International Investment Disputes 36. 1401 See e.g. the consistent line of cases dealing with the interpretation of the unilateral consent clause as contained in Art. 22 of the Venezuelan Investment Law (Ch. 2.E.I.2.a.bb.); the consensus as to the requirement of a high intensity and severity of a State measure’s inference as a criterion for an indirect expropriation (Ch. 2.E.III.2.a.bb.aaa.); the general agreement between tribunals that an implicit choice of law is covered by icsid Convention Art. 42 (1), 1st sentence (Ch. 2.E.III.1.). 1402 See e.g. Kaufmann-Kohler, Is Consistency a Myth? 138–141, referring to the general distinction between treaty and contract claims and to the rejection of bad faith as a requirement for a violation of the fet standard of protection as examples of consistent icsid jurisprudence; Pellet, Case Law of the icj in Investment Arbitration 223, 224, referring to the recognition of the ius standi of shareholders and to the binding force of provisional measures. See also Paulsson, Avoiding Unintended Consequences 241, who relativises the inconsistency criticism by distinguishing between the different occurrences of inconsistencies. In that sense, the author stated that “[t]here is no reason to be alarmed about inconsistent obiter dicta. Irreconcilable differences in rationes decidendi have been far rarer than supposed.” 1403 See Ch. 2.B.II.1.b. As regards the significance of the systemic context within the inconsistency debate, Prof. Thomas Wälde even stated that “[t]he glass that is seen by critics as half-empty can thus also be seen as half-full: it is surprising (…) that the progress of investment ­arbitration

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­legal regime.1404 Nevertheless, the fact that it is impossible to achieve perfection should not hinder aspirations to reach a greater degree of consistency – in particular since the desirability and need of this jurisprudential quality have been affirmed, inter alia, from the viewpoint of legal theory and sociology of law in the foregoing.1405 The latter discipline also includes the perspective of the system’s users, whose general perception of this quality of arbitral decisionmaking is important for the attractiveness and thus for the overall prospects of success of an arbitral system within the competition of regimes. Inconsistency of arbitral decisions should thus not be considered as a “fact of life” to be simply accepted or left to itself in the hope that “it may in any event be the case that over time the position in relation to many of the issues that are currently being debated will become more settled,”1406 but rather should be addressed in a purposeful, systematic, and strategic way. In addition, at least coherence of arbitral jurisprudence is, in principle, fully achievable in that arbitral tribunals – except for concurrently pending and concluded proceedings – usually have the opportunity to provide substantiated reasoning in case they deviate from precedent. Finally, an increase of both consistency and coherence will move icsid case law closer to the overarching objective of a jurisprudence constante.

through now mostly public and much debated awards tends to produce, in many areas, consensus expressed in settled jurisprudence.” (see Wälde, Improving the Mechanism 522–523). In the same vein, Prof. August Reinisch stated that “(…) it is almost surprising that the actual level of fragmentation and inconsistency is relatively low and that most of the other dangers associated with the proliferation of dispute settlement, such as forum shopping and multiplication of proceedings, have materialized only to a limited degree.” (see Reinisch, Parallel Proceedings 115). Moreover, Prof. Andrea Bjorklund observed that “[w]ithout a hierarchical system topped by a tribunal that can issue authoritative, binding decisions, the fits-and-starts progress towards a more uniform jurisprudence is not surprising.” (see Bjorklund, Practical and legal avenues 187). 1404 Monica C. Fernandez-Fonseca in: Fernandez-Fonseca et al., Legitimacy And Inconsistency 286; Tams, An Appealing Option? 1, 23; Wälde, Improving the Mechanism 522; Schreuer, Preliminary Rulings 209. 1405 See Ch. 2.B.I. 1406 Gill, Inconsistent Decisions 12, 15: “Are inconsistent decisions an issue to be addressed or a fact of life? For the reasons I have given, I think that they do give rise to issues that we need to be alive to, but, ultimately I have to come to the conclusion that they are just a fact of life.” See also Spoorenberg & Viñuales, Conflicting Decisions in International Arbitration 91, 112, who speaks of “the prize that must be paid, the flip side of the coin, for the advantages entailed by international arbitration.”

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Interim Conclusion

In the course of the detailed analysis of the inconsistency problem in icsid jurisprudence, four core questions relating to the charge of inconsistent decision-making have been addressed and answered in the affirmative. They concerned, first of all, the general desirability and need for jurisprudential consistency from the perspective of various legal disciplines as well as the appropriateness of criticising inconsistent outcomes of investment arbitration. In the latter respect, the charge of inconsistency could not be rebutted, neither by the defences invoking the complexity of the system and the limited function and role of arbitrators, nor by the alleged advantages stemming from inconsistent decision-making. Based on this finding, the discussions of the forms and causes of jurisprudential inconsistencies drew the conclusion that conflicting interpretations of recurring, identical, or largely similar norms and principles, which need to be distinguished from discrepancies in their factual application, may be traced back to both structural and methodological factors. Amongst the methodological causes, the manner in which arbitral tribunals deal with precedents turned out to be of particular impact for the current state of investment jurisprudence and in view of the key objective to develop a jurisprudence constante. Lastly, the qualitative-empirical study highlighted occurrences of conflicting case law within different legal areas and showed that the phenomenon of jurisprudential inconsistency is a widespread and major problem in international investment law and arbitration. In sum, it remains to be noted that the criticism of inconsistency in icsid jurisprudence is valid and justified.

chapter 3

Reform Proposal: Curing Inconsistent icsid Investment Jurisprudence A

Preliminary Considerations

The occurrence of inconsistencies in icsid investment jurisprudence, as has been demonstrated in Chapter 2, is a highly topical phenomenon, which has attracted severe, but valid and justified criticism. In order to ensure that i­ csid arbitration as the leading system of investment arbitration – and investorState arbitration in general – will continue to build on its strong performance portrayed in Chapter 1, this grave deficiency urgently needs to be remedied. As early as 2004, the icsid Secretariat has shown awareness of this problem in its discussion paper “Possible Improvements of the Legal Framework for ­i csid Arbitration.” Although it claimed that “[s]ignificant inconsistencies have not to date been a general feature of the jurisprudence of icsid,” it nonetheless recognised that “there clearly is scope for inconsistencies to develop.”1407 Lateron, in August 2012, the icsid Secretariat released a “Background Paper on Annulment For the Administrative Council of icsid.”1408 The paper, which has the appearance of a manual on the icsid annulment mechanism, provides detailed information on its genesis and its procedure. On several occasions, it 1407 icsid-Secretariat, Discussion Paper: Possible Improvements of the Framework for icsid Arbitration, 15 (22 October 2004). See also Tsatsos, A Call for Appeal 1, 1–2. 1408 icsid-Secretariat, Background Paper on Annulment For the Administrative Council of icsid, 1–52 (10 August 2012). As the paper states in para. 1, “[t]he icsid Secretariat has prepared this paper to assist Contracting States with a matter raised by the delegation of the Republic of the Philippines (‘the Philippines’) at the 45th Annual Meeting of the icsid Administrative Council on September 23, 2011.” More precisely, the Philippines had criticised the annulment process and, in a proposal, had requested the Administrative Council to first assess the annulment remedy under icsid Convention Art. 52 and then release interpretative guidelines by exercising its authority under icsid Convention Art. 6 (3). All this occurred in the context of the annulment decision in Fraport ag Frankfurt Airport Services Worldwide v. Republic of the Philippines, icsid Case No. arb/03/25, and the arbitration proceeding Fraport ag Frankfurt Airport Services Worldwide v. Republic of the Philippines, icsid Case No. ARB/11/12. See also Ch. 2.E.II.2.b.bb.ccc. (fn. 1153). icsid Convention Art. 6 (3): “The Administrative Council shall also exercise such other powers and perform such other functions as it shall determine to be necessary for the implementation of the provisions of this Convention.”

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_005

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points out that “annulment is a limited and exceptional recourse” and that an ad hoc committee’s function is limited to “safeguard[ing] against ‘violation of the fundamental principles of law governing the Tribunal’s proceedings’”1409 and underpins these statements by references to the icsid drafting history and icsid case law. The paper, which was issued in the aftermath of the abovedescribed upheavals in annulment jurisprudence,1410 reads like a reaction to the overly broad use of the annulment device by past ad hoc committees. And, more than that, it resembles an admission of the existence of persisting problems in the icsid annulment practice, which, over time, have led to farreaching inconsistencies in that area of icsid jurisprudence. This approach, while well-meant as a precedent-oriented guidance for future arbitral tribunals, seems inadequate to effectively address the problem of inconsistent icsid jurisprudence. In view of the gravity and the advanced state of this problem not only in annulment case law, but in all areas of international investment law, more than non-authoritative, interpretative guidance on punctual aspects is required. This urgent need has also been pointed out by unctad when launching its annual World Investment Report, where it cited the inconsistency of investment jurisprudence as one of the major systemic deficiencies currently facing investment arbitration and suggested a number of avenues of reform that have been discussed in this context in recent times.1411 Since the icsid regime makes up the lion’s share of investment arbitration,1412 it is a reasonable starting-point for a targeted and effective program of reform capable of tackling the main causes of the inconsistency problem. It should not be left to itself in its current conception in the hope that future legal developments will produce self-correcting effects. While it cannot be excluded that such an approach may eventually lead to the desired result, it is too long-termed and vague to rely on. Rather, the process of legal development by arbitral tribunals, which is enormously important for the advancement of international investment law, should be optimised by means of targeted, effective, and feasible reform instruments that rectify undesirable trends and support the further development of a well-functioning system of icsid ­arbitration.1413 Past and current developments in case law have rendered such reform urgent. 1409 1410 1411 1412 1413

Id. at 49, referring to icsid, History, Vol. ii, 218–219 (1968). See Ch. 2.E.II.2.b.bb. unctad, wir, 111–117 (2013). See Ch. 1.C.I.3. Cf. Fauchald, The Legal Reasoning of icsid Tribunals 301, 358: “(…) while it can be concluded that icsid tribunals’ use of interpretive arguments indicates that they contribute

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In search of the ideal reform concept, Chapter 3 will provide an overview of representative reform models suitable to achieving the goal of a more consistent investment jurisprudence. These may be split into two subgroups, consisting of reform instruments without any specific orientation towards the icsid regime, on the one hand, and reform instruments specifically tailored to the needs of the icsid regime, on the other hand. The presentation and discussion of these different reform models will help to give a general idea of their underlying concepts and to evaluate them on this basis. By comparing the different approaches and by weighing them against each other, the question of the most promising and preferable approach to cure the inconsistency problem will eventually be answered (B.). The chosen reform model will then be further elaborated and refined in a draft outline. Therein, an initial conceptual proposal regarding its practical implementation as well as its general structure and functioning will be provided (C.). B

Overview of Reform Proposals to Enhance Consistency

As indicated, the following overview of reform models aiming at an enhancement of consistent icsid jurisprudence will comprise proposals with and without icsid specificity. Since this work focuses on the icsid arbitration regime as the central object of investigation, reform instruments featuring a systemindependent, decentralised approach will be dealt with in a rather concise, survey-like manner only (i.). Reform instruments with an icsid-specific approach, on the other hand, will be considered in greater detail.1414 Following

significantly to the long-term development of international investment law, it can also be observed that the tribunals in general have significant potential for increasing their contribution.” 1414 For discussions of some of these reform approaches, see Reinisch, The Future of Investment Arbitration 909–916; Schreuer, Diversity and Harmonization 145–151; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 12–18; Kaufmann-Kohler, In Search of Transparency and Consistency 1, 4–8. In addition, various so far less prominently discussed approaches have been developed and suggested in specialist literature, which will not be elaborated in further detail. For instance, the discussions on the creation of a supreme/world/international investment court with comprehensive jurisdiction over investor-State disputes gained momentum the course of the legitimacy debate; see e.g. Gabriele Kaufmann-Kohler & Michele Potestá, 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, cids Research Paper, 33–68

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a presentation of their general concepts, a discussion of core aspects such as their efficiency, their feasibility, and further advantages and disadvantages will provide information on their suitability for the intended reform (ii.). i Instruments without icsid Specificity Manifold reform proposals considered as suitable to curbing inconsistencies in investment jurisprudence have been discussed in scholarly literature. Suggestions made without specific references to a particular arbitral system are generally meant to operate independently of any institutional restructuring or changes in the arbitral regulatory framework. They function in a decentralised manner and rely on the self-initiative of States in their role as parties to iias, of arbitral tribunals, and also of scholars. 1 Interpretation and Revision of iias by States a Interpretative Statements Being the “masters” of their treaties, States could become proactive by issuing interpretative notes on ambiguous terms in the iias they concluded.1415

(2016); Eduardo Zuleta, The Challenges of Creating a Standing International Investment Court, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 403–423 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); John Templeman, Towards a Truly International Court of Arbitration, 30 J. Int’l Arb. 197, 197–220 (2013); van Harten, Investment Treaty Arbitration and Public Law 180–184, with further references; Gus van Harten, A Case for an International Investment Court, Society of International Economic Law (siel) Inaugural Conference Paper (2008), available at (last visited September 2016); unctad, Reform of Investor-State-Dispute-Settlement, iia Issues Note No.  3, 9 (2013). See also the common objective of Canada and the eu set out in ceta Art. 8.29 and the Joint Interpretative Instrument to establish a Multilateral Investment Court, see Ch. 1.B.II.2. (fn. 174). See furthermore EU-Vietnam FTA Ch. 8.II, Sec. 3.4, Art. 15 (Free Trade Agreement between the European Union and the Socialist Republic of Vietnam, agreed text as of January 2016). Further proposals include the institution of Advocates-General based on the model of tfeu Art. 252; see Tsatsos, A Call for Appeal 1, 30; Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 211; Gaffney, How Important it is to Develop a Coherent Case Law? 71–73; and the creation of an International Investment Law Commission; see Luis González García, Making Impossible Investor-State Reform Possible, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 435–436 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015). 1415 unctad, Interpretation of iias: What States Can Do, iia Issues Note No. 3, 1–16 (2011). See also unctad, wir, 108 (2013); Banifatemi, Consistency in Investment Rules Interpretation 221–225; Michael Ewing-Chow & Junianto James Losari, Which Is to Be the Master? Extra-Arbitral Interpretative Procedures for iias, in Reshaping the InvestorState  Dispute Settlement System – Journeys for the 21st Century 91–114

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Although they have generally transferred the power of deciding treaty-based disputes to the arbitral tribunal, States remain an interpretative authority for clarifying the language and meaning of their treaties.1416 Hence, a “constructive dialogue”1417 between investment tribunals and treaty parties regarding the interpretation of applicable iias could take place in the pre-dispute stage, during the proceedings, and/or in the post-dispute stage. Especially in the predispute phase,1418 contracting States are free to issue joint and authoritative

(Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Tomoko Ishikawa, Keeping Interpretation in Investment Treaty Arbitration “on Track”: The Role of State Parties, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 139–148 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Anthea Roberts, Recalibrating interpretive authority (20 January 2014), Columbia fdi Perspectives No. 113 (2014). For a critical view, see Brower & Blanchard, What’s in a Meme? The Truth about Investor-State Arbitration 689, 767–772. For a further-reaching approach which suggests the outsourcing of treaty interpretation to specialised agencies of the State parties or to international organisations as expert interpreters, see Anne van Aaken, Delegating Interpretative Authority in Investment Treaties: The Case of Joint Administrative Commissions, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 1–23 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015). For a differently oriented, yet related, icsid-specific approach which suggests the adoption of interpretative resolutions on the icsid Convention by the icsid Administrative Council, see Roberto Castro de Figuriedo, Fragmentation and Harmonization in the icsid Decision-Making Process, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 525–529 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015). 1416 unctad, Interpretation of iias, iia Issues Note No. 3, 3 (2011), referring to Delimitation of the Polish-Czechoslovakian Frontier (Question of Jaworzina), pcij, Advisory Opinion (6 December 1923), 1923 pcij Series B, No.8, para. 80: “(…) it is an established principle that the right of giving authoritative interpretation of a legal rule belongs solely to the person or body who has power to modify or suppress it” and its affirmation, inter alia, by Kasikili/Sedudu Island (Botswana/Namibia), icj, Judgment (13 December 1999), icj Rep. (1999) 1045, para. 63. For detailed elaborations on the interpretative power of the (State) parties to an iia, see also Anthea Roberts, Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States, 104 Am. J. Int’l L. 179, 185–195 (2010). 1417 Roberts, Power and Persuasion in Investment Treaty Interpretation 179, 193, referred to in unctad, Interpretation of iias, iia Issues Note No. 3, 3 (2011). 1418 In theory, the States’ ability of issuing joint interpretative notes may also extend to the period during the dispute (see also below). Yet, an agreement is more unlikely and, in that presumably rare case, there is the risk that respondent States in their hybrid function as party to the treaty and party to the dispute take advantage of that role to the detriment of claimant-investors; see Schreuer, Diversity and Harmonization 148.

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interpretative statements regardless of whether the corresponding treaty foresees this possibility.1419 These may be issued ad hoc or based on an institutionalised forum for consultation, e.g. a standing committee comparable to the nafta ftc.1420 In addition to such subsequent agreement and practice 1419 ilc, Yearbook of the International Law Commission, Vol. ii, un Doc. A/CN.4/SER.A/1999/ Add.I (Part 2), 125 (Rule 1.5.3) (1999): “The interpretation resulting from an interpretative declaration made in respect of a bilateral treaty by a State or an international organization party to the treaty and accepted by the other party constitutes the authentic interpretation of that treaty.” referred to in unctad, Interpretation of iias, iia Issues Note No. 3, 11 (2011). This possibility notwithstanding, some iias contain clauses that expressly stipulate the option of releasing joint interpretations. The 2004/2012 us Model bits, for instance, state in Art. 30 (3) that “[a] joint decision of the Parties, each acting through its representative designated for purposes of this Article, declaring their interpretation of a provision of this Treaty shall be binding on a tribunal, and any decision or award issued by a tribunal must be consistent with that joint decision.” Another example is the Czech Republic–Netherlands bit which states in Art. 9 that “[e]ither Contracting Party may propose the other Party to consult on any matter concerning the interpretation or application of the Agreement. The other Party shall accord sympathetic consideration to and shall afford adequate opportunity for such consultation.” (Agreement on Encouragement and Reciprocal Protection of Investments between the Kingdom of the Netherlands and the Czech and Slovak Federal Republic, 29 April 1991 (entry into force 1 October 1992), 2242 unts 224 (2004)). In cme v. Czech Republic, the contracting States issued a common position on the basis of this clause that had been taken into consideration by the arbitral tribunal; see cme v. Czech Republic (Final Award), paras. 87–93, referred to in id. Further recent examples of iias that contain clauses empowering the contracting States to issue joint interpretative statements of a legally binding character are the ceta and the tpp; see unctad, Taking Stock of iia Reform, iia Issues Note No. 1, 8 (2016), with more examples. 1420 The nafta ftc is a standing body based on nafta Art. 1131 (2) in conjunction with Art. 2001. It is composed of government representatives of each of the three member States: Canada, the us, and Mexico. It is vested with the right to issue binding notes of interpretation for nafta Chapter 11 tribunals. The only note of interpretation issued so far dates back to 2001 and concerns the availability of arbitration documents as well as the International Minimum Standard of treatment of aliens as contained in nafta Art. 1105 (1); see Ch. 2.E.III.2.a.aa.aaa. For an overview of the discussion of that prerogative, see Charles H. Brower ii., Structure, Legitimacy, and nafta’s Investment Chapter, 36 Vand. J. Transnat’l L. 37, 78–86 (2003). In brief, while acknowledging the great theoretical promise for enhancing the legitimacy of investor-State-arbitration, the author takes a negative view of the ftc. He criticises the Commission’s interpretations for their lack of textual determinacy and hence the failure to perform the intended function of eliminating the doctrinal incoherence “that gnaws at

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in the sense of vclt Art. 31 (3) (a) and (b),1421 the contracting States may release their travaux préparatoires as a supplementary means of interpretation according to vclt Art. 32 or publish unilateral declarations that indicate their intentions while negotiating and concluding the treaty.1422 With regard to the period during the dispute, some treaties foresee a renvoi of certain questions back to the contracting parties in order to receive their joint interpretation.1423 Beyond that, on the unilateral level, there is the possibility of an i­ nterpretative submission by the non-disputing State party to the arbitral tribunal.1424 The

the legitimacy of Chapter 11 tribunals.” With regard to these deficiencies, Brower identifies the lack of accountability, transparency, and democratic participation in the course of the ftc’s proceedings as factors which enabled the Commission to issue notes “out of the blue.” Further areas of concerns are the difficulty to clearly define and allocate the respective powers between the ftc, Chapter 11 tribunals and domestic courts, the question of whether the Commission’s interpretations apply only prospectively or also to arbitrations already pending, and the distinction between bona fide interpretation and ultra vires amendments. For further literature references as to the ftc legitimacy debate, see Roberts, Power and Persuasion in Investment Treaty Interpretation 179, 181 (fn. 10). For brief elaborations on the ftc reform approach in general, see Banifatemi, Consistency in Investment Rules Interpretation 217–219; Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 93–94; Franck, The Legitimacy Crisis 1521, 1604–1606. 1421 For a detailed discussion of the methodological assessment and the possible types of subsequent agreements and practice related to investment treaties, see Roberts, Power and Persuasion in Investment Treaty Interpretation 179, 207–224. 1422 unctad, Interpretation of iias, iia Issues Note No. 3, 11–12 (2011). 1423 The Uruguay–us bit provides an example in Art. 31: “(1) Where a respondent asserts as a defense that the measure alleged to be a breach is within the scope of an entry set out in Annex i, ii, or iii, the tribunal shall, on request of the respondent, request the interpretation of the Parties on the issue. The Parties shall submit in writing any joint decision declaring their interpretation to the tribunal within 60 days of delivery of the request. (2) A joint decision (…) shall be binding on the tribunal, and any decision or award issued by the tribunal must be consistent with that joint decision. If the Parties fail to issue a decision within 60 days, the tribunal shall decide the issue.”(Treaty between the United States of America and the Oriental Republic of Uruguay concerning the Encouragement and Reciprocal Protection of Investment, 4 November 2005 (entry into force 1 November 2006), 44 ilm 268 (2005)). Id. at 12, 14. 1424 Schreuer, Diversity and Harmonization 146; unctad, Interpretation of iias, iia Issues Note No. 3, 14 (2011). An early example of an iia provision vesting the non-disputing State party with the right to submit unilateral statements of interpretation to the arbitral tribunal is contained in the Canada–Peru bit Art. 35 (1): “On written notice to the disputing parties, the

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disputing State party, by contrast, whose statements would inevitably be perceived as self-interested,1425 has the option to invoke the advice of the experts that negotiated the iia for the contracting parties.1426 Finally, in the post-­ dispute phase, the States may issue joint or unilateral comments on the award rendered by the arbitral tribunal and thereby provide an orientation for interpretations in future arbitral proceedings.1427 Despite the obvious potential of this reform proposal, which is relatively uncomplicated and practicable, which strengthens public policy interests, and which is efficient in terms of time and cost,1428 certain downsides need to be taken into consideration. These include the danger of interpretative inactivity

non-disputing Party may make submissions to a Tribunal on a question of interpretation of this Agreement.” (Agreement between Canada and the Republic of Peru for the Promotion and Protection of Investments, 14 November 2006 (entry into force 20 June 2007)), referred to in id. A more recent example may be found in uncitral Rules on Transparency Art. 5 (1). For a discussion on the thereby expected harmonisation in treaty interpretation, see Ruscalla, Transparency in International Arbitration 1, 15–22. An example of a non-disputing party that intervened by means of an interpretative statement without any permissive treaty clause is the case Aguas del Tunari S.A. v. Bolivia (Decision on Jurisdiction), paras 249–263, referred to in unctad, Interpretation of iias, iia Issues Note No. 3, 14 (2011). Yet, the arbitral tribunal considered the information submitted by the Netherlands as irrelevant. An example of both a non-disputing and a disputing party rendering interpretative statements while the dispute was pending – yet only after the crucial Decision on Jurisdiction had already been rendered – is the case Sanum v. Laos, uncitral, pca Case No. 2013–13. In the following set-aside proceeding, the Singapore High Court admitted the interpretative statements in the form of two diplomatic letters as subsequent agreements according to vclt Art. 31 (3) (a). 1425 Schreuer, Diversity and Harmonization 146. 1426 unctad, Interpretation of iias, iia Issues Note No. 3, 14 (2011), referring to the example of Tza Yap Shum v. Republic of Peru (Decision on Jurisdiction), paras. 210–212. 1427 Id. at 15; Schreuer, Diversity and Harmonization 147, referring to sgs v. Pakistan (Decision on Jurisdiction). In this exemplary case, Switzerland sent a letter to the icsid Secretariat wherein it complained that the arbitral tribunal had not tried to obtain the Swiss authorities’ opinion on the interpretation of the bit’s umbrella clause in question before it rendered its ruling. In an interpretative note attached to this letter, it objected to the narrow construction of the umbrella clause by the arbitral tribunal; see Note on the Interpretation of Article 11 of the Bilateral Investment Treaty between Switzerland and Pakistan, attached to the Letter of the Swiss Secretariat for Economic Affairs to the icsid ­Deputy-Secretary General dated 1 October 2003, published in Mealey’s International Arbitration Report, February 2004. 1428 unctad, Interpretation of iias, iia Issues Note No. 3, 4, 15 (2011).

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as well as abusive interpretation, given that States have a dual role as treaty parties and respondents. Moreover, they bear the risk of frustrating investors’ legitimate expectations and of undermining the arbitral tribunal’s dispute settlement authority.1429 In addition, interpretative statements could lead to de facto amendments to iias1430 or – vice versa – could turn out to be ineffective due to interpretative ignorance by arbitral tribunals. A final problematic aspect relates to the scope of this reform approach. Although iias represent the primary source of international investment law, they by far do not cover the entire vast range of jurisdictional, procedural, and substantive legal issues which require interpretative guidance. This lack of comprehensiveness is a further reason to continue the search for wider-reaching reform models. b Clarifying and Supplemental Revisions An approach going beyond mere interpretative guidance has been proposed by so called “legislative” reformers. They require States to consider their proposed new iias or to review their iias already in place and insert substantive clarifications for any vague terms with a high potential to produce inconsistencies.1431 This could be achieved either positively by specifying and defining the content of a particular treaty provision or negatively by providing an exhaustive list of what is excluded.1432 It has been suggested, as an alternative to a modification of the (draft) treaty itself, to adopt complementary instruments such as side-agreements or understandings that address issues which need clarification. Such instruments ought to be taken into consideration by arbitral tribunals pursuant vclt Art. 31 (2) and (3).1433 Yet, the shortcomings of this approach are considerable. They include the “risk of over-definition,” which may produce even more disputed issues, as well as the practical difficulty of renegotiating and amending or supplementing almost 3,000 bits.1434

1429 Roberts, Power and Persuasion in Investment Treaty Interpretation 179, 182–185, esp. 183. 1430 unctad, Interpretation of iias, iia Issues Note No. 3, 4–5 (2011); Ewing-Chow & Losari, Extra-Arbitral Interpretative Procedures for iias 109–112. 1431 Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 84–85; George Kahale iii, Is Investor-State Arbitration Broken? 9 tdm 1, 34 (2012). See also Roberts, Recalibrating interpretive authority (20 January 2014). 1432 unctad, Interpretation of iias, iia Issues Note No. 3, 8 (2011). Revising iias to make them uniform, however, should not be the goal since this would not only limit a State’s regulatory freedom, but would also counteract the individual regulatory needs of specific investments; see Bjorklund, Practical and legal avenues 176–180. 1433 unctad, Interpretation of iias, iia Issues Note No. 3, 7 (2011). 1434 Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 85.

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When drafting and (re-)negotiating their investment treaties, States could also make use of their instructive leverage on the formal conditions under which a potential investment arbitration will be heard by incorporating provisions on the consolidation and/or the transparency of arbitral proceedings.1435 Moreover, they could provide for the option of appellate review of investment treaty awards.1436 Their readiness to do so could be fostered by “soft law” instruments, e.g. declarations, recommendations, or guidelines, issued by intergovernmental organisations such as the World Bank, the imf, or the oecd, or by model clauses made available by the icsid.1437 Such instruments would function as a vehicle to put informal market pressure on State actors.1438 As regards the inclusion of provisions on the consolidation of multiple investment claims, good examples can be found in the nafta1439 as well as in 1435 For a comparable suggestion of shaping and tailoring the existing system of investor-State dispute settlement by means of iia provisions, see unctad, Reform of Investor-StateDispute-Settlement, iia Issues Note No. 3, 5–7 (2013). For more detailed elaborations on the concepts of consolidation and post-award transparency and their possible impact on a more consistent icsid jurisprudence, see the related icsid-specific reform proposals in Ch. 3.B.II.1. (consolidation) and Ch. 3.B.II.2. (post-award transparency). 1436 For elaborations on the concept of introducing an appellate review mechanism, see the icsid-specific reform proposals in Ch. 3.B.II.3. 1437 Carl Sebastian Zöllner, Das Transparenzprinzip im Internationalen Wirtschaftsrecht – Konturen und Perspektiven des transparenzrelevanten Einwirkens transnationaler Vorgaben auf die innerstaatliche Rechts- und Verwaltungspraxis 303–307 (Universitätsverlag Halle-Wittenberg, Halle an der Saale, 2009), referring to World Bank, Legal Framework for the Treatment of Foreign Investment, Vol. ii, Report to the Development Committee and Guidelines on the Treatment of Foreign Direct Investment, 38 (1992); oecd, Declaration on International Investment and Multinational Enterprises, 15 ilm, 961 (1976). 1438 Zöllner, Das Transparenzprinzip im Internationalen Wirtschaftsrecht 303–307. 1439 nafta Art. 1126: “(…) (2.) Where a Tribunal established under this Article is satisfied that claims have been submitted to arbitration under Article 1120 that have a question of law or fact in common, the Tribunal may, in the interests of fair and efficient resolution of the claims, and after hearing the disputing parties, by order: (a) assume jurisdiction over, and hear and determine together, all or part of the claims; or (b) assume jurisdiction over, and hear and determine one or more of the claims, the determination of which it believes would assist in the resolution of the others. (3.) A disputing party that seeks an order under paragraph 2 shall request the Secretary-General to establish a Tribunal and shall specify in the request: (a) the name of the disputing Party or disputing investors against which the order is sought; (b) the nature of the order sought; and (c) the grounds on which the order is sought. (…).”

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iias drafted by the nafta parties1440 and concluded with third parties.1441 They allow a disputing party to request consolidation of two or more claims “that have a question of law or fact in common” and thereby help to avoid inconsistencies arising from parallel proceedings.1442 Concerning the enhancement of procedural transparency, States could insert provisions into their iias that provide for public access to arbitration related documents and information.1443 These should preferably be disclosed 1440 See 2004 Canada Model bit Art. 32; 2012 us Model bit Art. 33. 1441 See e.g. Canada–Chile fta Art. G-27 (Free Trade Agreement between the Government of Canada and the Government of the Republic of Chile, 5 December 1996 (entry into force 5 July 1997)); Japan–Mexico fta Art. 83 (Free Trade Agreement between Japan and the United Mexican States, 17 September 2004 (entry into force 1 April 2005)); Morocco–us fta Art. 10.24 (Free Trade Agreement between Morocco and the United States of America, 15 June 2004 (entry into force 1 January 2006)). The cited ftas are available at (last visited September 2016). The above examples are referred to in Yannaca-Small, Consolidation of Claims 230–231. See also Antonio Crivellaro, Consolidation of Arbitral and Court Proceedings in Investment Disputes, 4 L. & Prac. Int’l Cts. & Trib. 371, 401–410 (2005). Another, albeit less common way to achieve a consolidation of two parallel claims is by party agreement recorded in a procedural order of the arbitral tribunal, as was the case in Churchill Mining plc and Planet Mining Pty Ltd. v. Republic of Indonesia, icsid Case No. ARB/12/14 and 12/40 (formerly Churchill Mining plc v. Republic of Indonesia), Procedural Order No. 4 (18 March 2013) [hereinafter Churchill Mining and Planet Mining v. Indonesia (Procedural Order No. 4)], para. 1. 1442 Alternative options to avoid parallel claims consist in including waiver provisions in iias prohibiting any other, substantially similar claims from being brought in different arbitral fora from the outset, or in the inclusion of fork-on-the-road provisions in iias, which preclude the re-litigation of the substantially same disputes in other arbitral fora; see Crivellaro, Consolidation 371, 395–398; Dimsey, The Resolution of International Investment Disputes 76–86; Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration 59, 67–68; McLachlan et al., International Investment Arbitration – Substantive Principles 128–129. Nevertheless, given that this study focuses on inconsistencies in icsid investment jurisprudence and possible options of avoidance, these reform proposals are unsuitable in that they are not able to remedy the parallelism of proceedings within the same arbitration forum. 1443 Franck, The Legitimacy Crisis 1521, 1617; Harrison, Transparency and Public Participation in Investment Treaty Arbitration 1, 8–14. Again, another, less frequent way to increase the level of transparency is by party agreement after the initiation of proceedings to be recorded in a procedural order of the arbitral tribunal, as was the case in Churchill Mining and Planet Mining v. Indonesia, Procedural Order No. 1 (6 December 2012), para. 19.1: “icsid shall publish all procedural

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upon completion of a case1444 and include any written submissions to the arbitral tribunal, the correspondence of the parties, minutes, records and transcripts of the hearings, and – most importantly – the orders and decisions and the award rendered by the arbitral tribunal.1445 Here again, the nafta1446 as well as bilateral (model) iias adopted or concluded by Canada and the us1447 may serve as a model for this legislative approach. By virtue of these disclosure

orders, decisions, and award related to the proceeding.” This was agreed despite the fact that the Indonesia-uk bit does not stipulate any express transparency-related duties (Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Indonesia for the Promotion and Protection of Investments, 27 April 1976 (entry into force 24 March 1977), ukts No. 62 (1977)). See ia Reporter, Australian investor in troubled Indonesia mining project files its own claim at icsid; parties to parallel claim agree to some transparency (2 January 2013), available at (last visited September 2016). 1444 For the differentiation between pre- and post-award transparency and the corresponding advantages and disadvantages, see Ch. 3.B.II.2.a. 1445 For a possible formulation, see unctad, Transparency, unctad Series on Issues in International Investment Agreements ii, 76 (2012). 1446 nafta, Annex 1137.4 (Publication of an Award): “Where Canada is the disputing Party, either Canada or a disputing investor that is a party to the arbitration may make an award public. Where Mexico is the disputing Party, the applicable arbitration rules apply to the publication of an award. Where the United States is the disputing Party, either the United States or a disputing investor that is a party to the arbitration may make an award public. This provision has been specified by the binding nafta ftc interpretative statement from 31 July 2001 (see fn. 1420), which stipulates that “[e]ach Party agrees to make available to the public in a timely manner all documents submitted to, or issued by, a Chapter 11 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.” 1447 See 2004 Canada Model bit Art. 38 (3); 2012 us Model bit Art. 29. See also e.g. Canada– Peru fta Art. 835 (3)–(8) (Free Trade Agreement between the Government of Canada and the Government of the Republic of Peru, 29 May 2008 (entry into force 1 August 2009)); Singapore–us fta Art. 15.20 (Free Trade Agreement between Singapore and the United States of America, 6 May 2003 (entry into force 1 January 2004)). The cited ftas are available at (last visited September 2016). The above examples are referred to in Andrea J. Menaker, Piercing the Veil of Confidentiality: The Recent Trend Towards Greater Public Participation and Transparency in Investor-State Arbitration, in Arbitration under International Investment Agreements – A Guide to the Key Issues 138–139 (Katia Yannaca-Small ed., 2010).

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requirements, future arbitral tribunals will gain facilitated access to prior rulings and thus will be enabled and encouraged to take them into consideration, thereby promoting the de facto precedent system as emerging in international investment jurisprudence. Examples for the inclusion of appellate review options in iias can be found in some of the modern bits and comprehensive ftas1448 – in particular those concluded by the us.1449 This feature traces back to the 2004 us Model bit, which has meanwhile been replaced by the 2012 us Model bit.1450 While the former required the parties to “strive” to have an appellate body review their awards within a fixed 3-year-period, the latter chose more neutral terms and merely encourages the parties to “consider” such option.1451 1448 See e.g. ceta Art. 8.28: “(1.) An Appellate Tribunal is hereby established to review awards rendered under this Section. (2.) The Appellate Tribunal may uphold, modify or reverse the Tribunal’s award based on: (a) errors in the application or interpretation of applicable law; (b) manifest errors in the appreciation of the facts, including the appreciation of relevant domestic law; (c) the grounds set out in Article 52(1) (a) through (e) of the icsid Convention, in so far as they are not covered by paragraphs (a) and (b). (…).” 1449 See e.g. Uruguay–us bit, Annex E (Treaty between the United States of America and the Oriental Republic of Uruguay concerning the Encouragement and Reciprocal Protection of Investment, 4 November 2005 (entry into force 1 November 2006), 44 ilm 268 (2005)); Chile–us fta Art. 10.19 (10) and Annex 10-H (Free Trade Agreement between the Government of the Republic of Chile and the Government of the United States of America, 6 June 2003 (entry into force 1 January 2004)); referred to in Michael K. Tracton, Provisions in the New Generation of u.s. Investment Agreements to Achieve Transparency and Coherence in Investor-State Dispute Settlement, in Appeals Mechanism in International Investment Disputes 202–203 (Karl P. Sauvant ed., 2008), with reference to further examples. 1450 See Ch. 1.B.I.4.a. (fn. 137). 1451 2004 us Model bit Art. 28 (10): “If a separate multilateral agreement enters into force between the Parties that establishes an appellate body for purposes of reviewing awards rendered by tribunals constituted pursuant to international trade or investment arrangements to hear investment disputes, the Parties shall strive to reach an agreement that would have such appellate body review awards rendered under Article 34 in arbitrations commenced after the multilateral agreement enters into force between the Parties.“; which is supplemented by Annex D: “Within three years after the date of entry into force of this Treaty, the Parties shall consider whether to establish a bilateral appellate body or similar mechanism to review awards rendered under Article 34 in arbitrations commenced after they establish the appellate body or similar mechanism.” 2012 us Model bit Art. 28 (10): “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. (…).”

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The cafta-dr1452 is hence a more interesting example, since it foresees the concrete constitution of a “negotiating group” to create an appellate body and even lists a range of specific aspects to be considered during the development process, e.g. “the nature and composition,” “the applicable scope and standard of review,” “transparency of proceedings,” and “the effect of decisions by an appellate body or similar mechanism.”1453 On the whole, leaving aside the indisputable advantages of institutional independence1454 and individual practicability as well as the binding effect on arbitral tribunals and disputing parties, the reform proposal also has several drawbacks. First, the approach depends heavily on the individual State’s willingness to become proactive for resolving the problem of jurisprudential inconsistency in investment arbitration.1455 Second, the flipside of a decentralised concept is that it risks being an insular solution. Even if States were active, this would be limited to their bi- or multilateral investment agreements

1452 1453

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See Dany Khayat et al., us Bilateral Investment Treaties: Recent Developments (11 June 2012), available at (last visited September 2016). Dominican Republic-Central America Free Trade Agreement, 5 August 2004, 43 ilm 514 (2004) [hereinafter cafta-dr]. cafta-dr, Annex 10-F: “1. 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. 2. 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 by the Parties, in accordance with Article 22.2 (Amendments), the Agreement shall be so amended.” See oecd, Transparency and Third Party Participation, 11–12 (para. 44) (2005). For instance, Japan and Thailand rejected the approach led by Canada, the us, and Norway by leaving the issue of transparency to the applicable arbitration rules; cf. Agreement between Japan and the Kingdom of Thailand for an Economic Partnership (3 April 2007) Art. 106, referred to in Born & Shenkman, Confidentiality and Transparency 33.

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or, at most, to their model bits, with possible spill-over effects. Apart from that, their measures would remain non-holistic and create the risk of further fragmentation of the complex and multifaceted iia structures.1456 This could, at worst, lead to further inconsistencies in arbitral jurisprudence. 2 Unwritten Procedural Tools of Arbitral Tribunals Arbitral tribunals, for their part, have several procedural mechanisms at their disposal beyond the formally applicable arbitration rules to curb the occurrence of inconsistencies. One option relates to their manner of dealing with the doctrines of lis alibi pendens and res judicata.1457 So far, these have been interpreted and applied rather reluctantly with strict adherence to the tripleidentity test, which requires identity of (1) the parties, (2) the object/matter claimed (petitum), and (3) the ground/cause of action (causa petendi).1458 However, in view of the generally liberal conception of personal jurisdiction over investment claims,1459 a less formalistic and more liberal interpretation is demanded since this would enable them to unfold their effect and to eliminate 1456 See e.g., Tams, An Appealing Option? 1, 13: “If appeals structures were to be established by different investment treaties, there might eventually even be not one single, but different appeals facilities, possibly functioning according to different rules and standards. These factors in turn considerably reduce the appeal (if one may put it that way) of an appeals facility.” 1457 The doctrine of lis pendens prevents the initiation of a new proceeding while a lawsuit between the same parties on the same subject matter is already pending before a different court or tribunal; see Reinisch, Use and Limits of Res Judicata and Lis Pendens 37, 43–44. The doctrine of res judicata has two kinds of effects. First, it prevents a case on which a final decision has been rendered from being raised again. Second, it ensures that this final decision is binding inter partes; see Crawford, Brownlie’s Principles of Public International Law 59–61, esp. 60; Dimsey, The Resolution of International Investment Disputes 87; Bernard Hanotiau, Complex Arbitrations – ­M ultiparty, Multicontract, Multi-issue and Class Actions 241 (para. 516) (Kluwer Law International, The Hague, 2005). For further elaborations on the legal nature and applicability of these doctrines, see Reinisch, Use and Limits of Res Judicata and Lis Pendens 37, 44–50; Campbell McLachlan, Lis pendens in International Litigation (Martinus Nijhoff, Leiden/Boston, 2009); McLachlan et al., International Investment Arbitration – Substantive Principles 81–83. 1458 Dimsey, The Resolution of International Investment Disputes 89; Reinisch, Use and Limits of Res Judicata and Lis Pendens 37, 50–70 (with case law references). According to the triple-identity test, even if two claims are on the same subject matter, but are brought under both a contract and a bit or under two different bits and by differently labelled parties, the preclusive effect of the doctrines does not apply. 1459 See Ch. 2.C.I.

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the risk of competing jurisdictions and parallel investment arbitration proceedings.1460 This could be achieved by a more fact-oriented use which takes into account the de facto identity of disputing parties1461 or the identity of the dispute according to the “same State measure” criterion.1462 Alternatively, arbitral tribunals could depart from formal criteria on the whole and decide to stay their proceedings on the basis of discretionary considerations.1463 Another procedural option of arbitral tribunals to prevent inconsistencies arising from parallel proceedings is the proactive use of alternative consolidation techniques. Even if not formally obligatory under the applicable arbitration rules, they could, ex officio, scrutinise a pending claim for a potential connectedness with others and, where appropriate, invite the parties to give their consent to consolidate stricto sensu.1464 Alternatively, arbitral tribunals could revert to the informal variant of de facto consolidation.1465 This method The generous allocation of individual legal standing by arbitral tribunals encourages a “(re-)labelling” of the claimant. Investors thus have a strong incentive to structure their investments through subsidiary corporations located in third States which have concluded a bit with the host State. They thereby achieve the diversity of ratione personae necessary to initiate parallel claims. 1460 See e.g. the parallel proceedings in the Lauder/cme v. Czech Republic arbitrations; see Ch. 2.C.I. 1461 Reinisch, The Future of Investment Arbitration 914; Reinisch, Use and Limits of Res Judicata and Lis Pendens 37, 76; Spoorenberg & Viñuales, Conflicting Decisions in International Arbitration 91, 98–99. 1462 Crivellaro, Consolidation 371, 414. 1463 Reinisch, The Future of Investment Arbitration 914, referring to Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, icsid Case No. ARB/84/3, Decision on Jurisdiction (27 November 1985) [hereinafter spp v. Egypt (Decision on Jurisdiction i)], para. 84: “When the jurisdictions of two unrelated and independent tribunals extend to the same dispute, there is no rule of international law which prevents either tribunal from exercising its jurisdiction. However, 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 the other tribunal.”; Ireland v. uk (mox Plant), unclos Arbitration (pca), Order No. 3 (24 June 2003), 42 ilm (2003) 1187, para. 28: “(…) bearing in mind considerations of mutual respect and comity which should prevail between judicial institutions both of which may be called upon to determine rights and obligations as between two States, the Tribunal considers that it would be inappropriate for it to proceed further with hearing the Parties on the merits of the dispute (…). Moreover, a procedure that might result in two conflicting decisions on the same issue would not be helpful to the resolution of the dispute between the Parties.” 1464 For further elaborations on the topic of formal consolidation, see Ch. 2.D.I.2 and below Ch. 3.B.II.1. 1465 For further elaborations on the topic of de facto consolidation, see below Ch. 3.B.II.1. Spoorenberg & Viñuales, Conflicting Decisions in International Arbitration 91, 108–110; Yannaca-Small, Consolidation of Claims 232–233.

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similarly requires the cooperation of the disputing parties, who need to choose the same arbitrators as in a preceding, relevant case. Once such a “repeat-­ tribunal” has been established, the arbitrators sitting thereon would need to align themselves with the interpretative approaches adopted in the previously rendered ruling.1466 Nevertheless, these institution-independent, decentralised approaches, which build on the opportunities of arbitral tribunals to curb the occurrence of parallel arbitral proceedings, seem to lack effectiveness. Experience teaches that arbitral tribunals are, in practice, rather reluctant to stay or consolidate their arbitral proceeding in view of the existence of another, virtually identical pending claim1467 or prior decision.1468 The hesistant use of the doctrine of 1466 The following icsid case law is exemplary for de facto consolidations: Camuzzi v. Argentine Republic, icsid Case No. ARB/03/2; Sempra v. Argentina, icsid Case No. ARB/03/7; Salini v. Marocco, icsid Case No. ARB/02/13; Consortium rffc v. Morocco, icsid Case No. ARB/00/6; Electricidad Argentina, S.A., and edf International, S.A. v. Argentine Republic, icsid Case No. ARB/03/22 [hereinafter Electricidad Argentina v. Argentina]; edf International v. Argentina, icsid Case No. ARB/03/23 (cases brought against Argentina by two electricity distribution companies); Suez/InterAguas v. Argentina, icsid Case No. ARB/03/17; Aguas Cordobesas, S.A., Suez, and Sociedad General de Aguas de Barcelona, S.A. v. Argentine Republic, icsid Case No. ARB/03/18 [hereinafter Aguas Cordobesas v. Argentina]; Suez/Vivendi v. Argentina, icsid Case No. ARB/03/19 (cases brought against Argentina by three water services companies). For the cited case law and further comments thereon, see Yannaca-Small, Consolidation of Claims 232–233. 1467 See e.g. cme v. Czech Republic (Partial Award), para. 412: “[S]hould two different Treaties grant remedies to the respective claimants deriving from the same facts and circumstances, this does not deprive one of the claimants of jurisdiction, if jurisdiction is granted under the respective Treaty.” referred to in Born, International Commercial Arbitration 3807; cme v. Czech Republic (Final Award), para. 427: “At the hearing the Respondent declined anew to accept any of the Claimant’s alternative proposals, which were recapitulated in the Claimant’s letter to the Tribunal of November 10, 2000, under the heading “Coordination of this proceeding with Lauder v. the Czech Republic”: (i) to have the two arbitrations consolidated into a single proceeding, (ii) to have the same three arbitrators appointed for both proceedings, (iii) to accept the Claimant’s nomination in this proceeding of the same arbitrator that Mr. Lauder nominated in the London proceeding, (iv) to agree that the parties to this arbitration are bound by the London Tribunal’s determination as to whether there has been a Treaty breach, (v) that after the submission of the parties’ respective reply memorials and witness statements in this arbitration, the hearing be postponed until after the issuance of an award in the London Arbitration.” referred to in Yannaca-Small, Consolidation of Claims 230. 1468 Born, International Commercial Arbitration 3776–3777, with references to (commercial) arbitral case law.

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lis alibi pendens appears to be due to the (still) weak signals of recognition of the former doctrine as a general principle of international law,1469 to the uncertain consequences of litispendence once it would be established,1470 and, not least, to the tendency of public international tribunals to assume a separate cause of action for each treaty-based claim.1471 With regard to the doctrine of res judicata, for its part being widely recognised as a general principle of law in the sense of icj Statute Art. 38 (1) (c),1472 there is a lack of consensus on its scope of application between civil law and common law jurisdictions and even between jurisdictions belonging to the same legal tradition, which results 1469 Neither the judgments of the pcij (e.g. German Interests in Polish Upper Silesia (Germany v. Poland), pcij, Judgment, (25 May 1925), 1926 pcij Series A, No. 7), nor the adoption of the un Charter (cf. un Charter Art. 95), did provide an answer to the question of whether lis pendens is a general principle of law in the sense of icj Statute Art. 38 (1). So far, only the unclos arbitral tribunal in The mox Plant Case (Ireland v. uk), unclos Arbitration (pca), pca Case No. 2002-01, Order No. 3 (24 June 2003), 42 ilm (2005) 1187, paras. 20–30, and various investment arbitration tribunals, e.g. spp v. Egypt (Decision on Jurisdiction i), para. 84, have made explicit use of this principle with regard to proceedings in a separate legal order. See McLachlan, Lis pendens in International Litigation 346–352. See also Shany, The Competing Jurisdictions of International Courts and Tribunals 244: “(…) it looks as if existing case-law on the question of lis alibi pendens is also too scarce and non-definitive to establish the existence of (…) a general rule or principle of international law, in the relations between international courts and tribunals. Nonetheless (…) one can make a plausible case that lis alibi pendens may qualify as a general principle of law, recognized by most legal systems, at least with respect to intra-systematic jurisdictional competition.” referred to in McLachlan, Lis pendens in International Litigation 353. 1470 Absent a treaty obligation to respect the principle of lis alibi pendens, not only tribunals in Civil Law and Common Law States handeling international cases, but also international arbitral tribunals consider the stay of a proceeding on this ground “as a matter of discretion, not obligation”; see again The mox Plant Case (Ireland v. uk), unclos Arbitration (pca), pca Case No. 2002-01, Order No. 3 (24 June 2003), 42 ilm (2005) 1187, paras. 20–30; spp v. Egypt (Decision on Jurisdiction i), para. 84; but see Southern Bluefin Tuna Case (Australia and New Zealand v. Japan), unclos Arbitration (icsid), Award on Jurisdiction and Admissibility (4 August 2000), para. 54. All cases are referred to in McLachlan, Lis pendens in International Litigation 357. 1471 See The mox Plant Case (Ireland v. uk), itlos, Order of Provisional Measures (3 December 2001) 126 ilr (2005) 260, para. 51; cme v. Czech Republic (Final Award), para. 433, referred to in id. at 358–359. 1472 See e.g. the Dissenting Opinion of Judge Anzilotti in Interpretation of Judgments Nos. 7 and 8 Concerning the Case Factory at Chorzów (Germany v. Poland), pcij (16 December 1927), 1927 pcij Series A, No. 11, 27, referred to in Reinisch, Use and Limits of Res Judicata and Lis Pendens 37, 46, with further references.

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in an only “minimal concept” – in the sense of a low international common denominator – of the latter doctrine.1473 In more general terms, the restrained attitude of arbitral tribunals has been explained by pointing out that “arbitration is a contractual mechanism to which parties have committed themselves, in large part to obtain a speedy and efficient decision, and, therefore, (…) this mechanism should only be suspended in unusual circumstances.”1474 3 Scholarly Systematisation, Analysis, and Comments A further suggestion, which relies on the initiative of the scholarly community, takes account of the exploding, almost unmanageable proportions of the emerging investment jurisprudence. This speed and quantity combined with the lack of any hierarchical order make it more and more difficult for arbitral tribunals to maintain an overview and to construe the relevant law in consideration of established lines of reasoning. It has therefore been suggested that academics should face this challenge. By analyzing and evaluating the constantly growing body of case law, academic commentators could help to organise and clarify the different interpretative approaches taken by prior arbitral tribunals and thereby provide important guidance and orientation for the legal reasoning of future arbitral arbitral tribunals.1475 More precisely, they could create new instruments of systematisation, e.g. legal citation indices. These should be based on a system of “head notes” and “key numbers”

1473 See e.g. Yuval Sinai, Reconsidering Res Judicata: A Comparative Perspective, 21 Duke J. Comp. & Int’l L. 353, 353–400 (2011); Biset Sena Günes, Res Judicata in International Arbitration: To What Extent Does an Arbitral Award Prevent the Re-Litigation of Issues? 6 tdm 1, 4–10 (2015). 1474 Born, International Commercial Arbitration 3807, referring to a quote from Gabrielle Kaufmann-Kohler & Laurent Lévy, Insolvency and International Arbitration, in The Challenges of Insolvency Law Reform in the 21st Century – Facilitating Investment and Recovery to Enhance Economic Growth 269 (Henry Peter et al. eds., 2006) [footnotes omitted], stating that “In particular, [the tribunal] should take into account that a stay should be granted only in exceptional circumstances. This is because the stay is contrary to one of the objectives of arbitration, which is to enable a speedy resolution of the dispute.” Moreover, the fact that an arbitral tribunal’s decision to abstain from staying a proceeding is not subject to an appellate scrutiny but “to only minimal review in annulment proceedings” has also been identified as a further cause of the problem, see Born, International Commercial Arbitration 3808. 1475 Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 97–98; Franck, The Legitimacy Crisis 1521, 1613–1614.

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that indicates how preceding tribunals handled recurring interpretative questions.1476 In that way, the problem of spotting pre-existing case law on a particular legal question could be remedied. In addition, disagreements that might arise amongst scholarly commentators are generally considered as being more beneficial than harmful, because “healthy debates” provide valuable intellectual inspiration for arbitrators adjudicating a related case.1477 Their discourse is even formally recognised as a subsidiary means for construing the rules of law pursuant to icj Statute Art. 38 (1) (d).1478 Two aspects appear particularly critical in this regard. One is the questionable degree of influence and effectiveness of “soft” mechanisms like academic literature and case law digests, since it remains within the discretion of the arbitral tribunal whether or not to take them into account. Another point relates to the quantity and quality of academic literature in this legal area. Critical voices point out that, in recent times, the topicality of international investment arbitration has led to an exploding, unmanageable volume of specialist literature, whose benefit for the general scientific debate is, at times, questionable.1479

1476 Commission, Precedent in Investment Treaty Arbitration 129, 157, referring to Patti Odgen, “Mastering the Lawless Science of Our Law”: A Story Of Legal Citation Indexes, 85 L. Libr. J. 1, 2, 18 (1993), with explanations on the historical development of legal citation indices and a definition quoted from Encyclopedia of Library and Information Science 16 (1971): “[A] citation index is a structured list of all the citations in a given collection of documents. Such lists are usually arranged so that the cited document is followed by the citing documents.” An example of such index is the non-profit Digest of International Investment Jurisprudence by the International Investment Law Centre Cologne (University of Cologne), available at (last visited September 2016). 1477 Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 98; Franck, The Legitimacy Crisis 1521, 1614. 1478 icj Statute Art. 38 (1) “The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply (…) (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.“; see Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 97; Franck, The Legitimacy Crisis 1521, 1613. 1479 See e.g. the scholarly discussion presented in Katharina Diel-Gligor & Christoph Hölken, 4. Tagung des Krickenbecker Kreises zum Internationalen Investitionsrecht auf Schloss Krickenbeck am Niederrhein, 10 SchiedsVZ 211, 215 (2012).

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ii Instruments with icsid Specificity Having considered reform instruments which do not focus on a particular investment arbitration regime, but which rely on the individual initiative of States, arbitral tribunals, and scholars, the following section will focus on reform models specifically tailored to the icsid system and its unique characteristics and features. These reform models foresee a centralised initiation by icsid itself as an institution. While their implementation thus faces higher formal hurdles, they avoid – as solutions from a single source – any further fragmentation of the system itself, its legal sources, and its wider context of public international law. The icsid-specific reform models that will be examined here include formal consolidation proceedings (1.), increased postaward transparency (2.), an appellate mechanism (3.), and a preliminary ruling system (4.). Following a presentation of the basic concept of each proposal, its suitability to remedy the inconsistency problem in icsid jurisprudence will be examined. In this context, several criteria will be considered to evaluate whether a reform model is suited to the requirements. The feasibility of the respective proposal, i.e. the options for implementation of the corresponding mechanism, as well as its effectiveness, i.e. the capacity to combat the root causes of the problem, will be of primary interest. Beyond that, general pros and cons, in particular in view of possible synergistic effects on other areas of concern, will be discussed. 1 Consolidation of Proceedings a Concept One approach aiming at the prevention of inconsistencies involves the establishment of compulsory consolidation provisions for parallel icsid arbitration proceedings.1480 This procedural instrument serves to consolidate two or more 1480 See e.g. Reinisch, The Future of Investment Arbitration 912; Kaufmann-Kohler, In Search of Transparency and Consistency 1, 8. Since this work focuses on inconsistencies in icsid investment jurisprudence and avenues to avoid this, the present reform proposal is limited to the consolidation of parallel icsid arbitration proceedings. For an overview and discussions of the consolidation of arbitration and court proceedings and of related arbitration proceedings pending in different (investment and commercial arbitration) fora, see Crivellaro, Consolidation 371, 371–420; Emmanuel Gaillard, The Consolidation of Arbitral Proceedings and Court Proceedings, 14 icc International Court of Arbitration Bulletin, Special Supplement: Complex Arbitrations 35, 35–42 (2003); Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration 59, 59–125.

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concurrently pending claims into one unified proceeding.1481 Besides consolidation stricto sensu, there is also the possibility of de facto consolidation on the initative of the icsid Secretariat, in the course of which the claims remain formally independent, but are effectively heard by the same arbitral tribunal.1482 The requirements for a formal consolidation of multiple claims are twofold. First, as an objective requirement, the cases at issue need to feature common elements: they need to be based on the same underlying fact pattern and/or concern related factual or legal questions; an identity of one or more parties, however, is not necessary.1483 Second, the subjective, albeit not undisputed1484 requirement is that all disputing parties need to consent, either directly or indirectly by means of the arbitration agreement or the applicable arbitration rules.1485 b Discussion aa

Effectiveness: Ability to Combat Root Causes

Inconsistencies resulting from parallel proceedings that were even concluded at the same time are due rather to procedural shortcomings than to 1481 Yannaca-Small, Consolidation of Claims 226. See also Ch. 2.D.I.2. A common example of formally consolidated investment cases are the so called “Softwood lumber” cases; see Canfor Corporation v. United States of America, Tembec et al. v. United States of America, and Terminal Forest Products Ltd. v. United States of America, uncitral Arbitration (nafta), Order of the Consolidation Tribunal (7 ­September 2005) [hereinafter Softwood Lumber Cases (Order of Consolidation)]. 1482 See Ch. 3.B.I.2. 1483 Yannaca-Small, Consolidation of Claims 227: “In essence, consolidation of claims may arise between two parties where there is a multiplicity of contracts or claims, or between a multiplicity of parties based on a single claim or a multiplicity of claims.” 1484 It is disputed whether there is actually a consent requirement for the consolidation of investment arbitration proceedings and if so, whether such consent needs to be explicit or whether implicit consent is sufficient. For a position denying the necessity of party consent, see Crivellaro, Consolidation 371, 415; for a position affirming the necessity of party consent (yet without giving reasons), see Reinisch, The Future of Investment Arbitration 912. For a brief overview of conflicting nafta jurisprudence on this issue, see YannacaSmall, Consolidation of Claims 235–236. 1485 Yannaca-Small, Consolidation of Claims 228–230. Examples for this sort of provisions in arbitration agreements exist in both mits and bits. For instance, nafta Art. 1126 allows for consolidation on the initiative of the arbitral tribunal or by request of a party if the claims submitted “have a question of law or fact in common.” Similarly, the us Model bit in its 2004 and 2012 versions contains the option of consolidation in Art. 33. For parallel proceedings where the consolidation of two partially overlapping claims failed because the respective bits contained no indirect consent ex ante and the

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i­nterpretative misconduct of arbitrators, who technically have no chance to take into account each other’s temporally overlapping rulings.1486 The reform model of procedural consolidation therefore suggests improvements of the corresponding procedural framework. It thus addresses systemic rather than interpretative-methodological causes. Regarding the range of systemic co-causative factors determined in the foregoing chapter,1487 jurisprudential inconsistencies that occur specifically because of the lack of formal consolidation procedures within the icsid regulatory framework would be tackled. bb

Feasibility: Options for Implementation

As has been stated, the formal consolidation of investment arbitration proceedings requires, inter alia, the disputing parties’ consent as a legal basis. It can be provided either directly in the arbitration agreement or indirectly by default arbitration rules which provide for the option of consolidation stricto sensu. The former alternative bears the risk of fragmentation and inefficiency and is thus comparatively unattractive.1488 The latter alternative requires the establishment of a consolidation procedure within the icsid regulatory regime, which so far does not have provisions on the basis of which parallel claims could be consolidated. Since the icsid Convention is silent on that matter, i.e. does not prohibit the consolidation of concurrent claims, a consolidation procedure could be set up in conformity with the status quo of the icsid Convention via amendments to the icsid Arbitration Rules. This would necessitate a two-thirds majority decision of the Administrative Council – as icsid’s representative body1489 – according to icsid Convention Art. 6 (1) (c),1490 which empowers the Administrative Council to “adopt the rules of procedure for (…) arbitration proceedings.” The icsid Arbitration 1486 1487 1488

1489 1490

respective respondent States refused to give their direct consent ex post, i.e. while the proceedings were pending, see Ch.2 D.I.2 (fn. 700). See Ch. 2.C.III. See Ch. 2.D.I. See Ch. 3.B.I.1.b. On the difficulty of obtaining a party agreement allowing for consolidation, see Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 95–97. See icsid Convention Art. 4 (1). For the text of this provision, see fn. 192. icsid Convention Art. 6 (1): “Without prejudice to the powers and functions vested in it by other provisions of this Convention, the Administrative Council shall: (a) adopt the administrative and financial regulations of the Centre; (b) adopt the rules of procedure for the institution of conciliation and arbitration proceedings; (c) adopt the rules of procedure for conciliation and arbitration proceedings (hereinafter called the Conciliation Rules and the Arbitration Rules); (…). The decisions referred to in sub-paragraphs (a), (b), (c) and (f) above shall be adopted by a majority of two-thirds of the members of the Administrative Council.”

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Rules first came into effect on 1 January 1968 and, since then, have been modified in 1984, 2003, and 2006 on this basis.1491 This practice shows that the term “adoption” has been interpreted as also encompassing any later amendments to this set of rules. It is also in conformity with the icsid drafting history, during which it was emphasised that the separate adoption of rules of procedure, i.e. independent of the icsid Convention, would allow for more flexibility with regard to later amendments.1492 Therefore, icsid Convention Art. 6 (1) (c) is a suitable legal basis for the implementation of a formal consolidation procedure via amendments to the icsid Arbitration Rules.1493 The modified version of the icsid Arbitration Rules would have prospective effect only. Pursuant to icsid Convention Art. 44, the rules governing an arbitration proceeding are always those “in effect on the date on which the parties consented to arbitration,” which is generally the date of submission of the request of arbitration.1494 Accordingly, the revised version of the icsid Arbitration Rules would only be effective for any arbitral proceeding initiated after its entry into force. cc

General Pros and Cons

Besides the expected increase of consistency, further advantageous aspects of procedural consolidations consist in savings of time and cost or, more generally, in an improved economy of procedure of arbitral dispute settlement. Yet, on the other hand, the allocation of cost incurred between the parties, unless

1491 Schreuer et al., icsid Commentary 683–684 (Art. 44, paras. 34–36). 1492 See the statements of Aron Broches in: icsid, History, Vol. ii, 79, 327–328, 382–383, ­479–480, 515, 560, 572 (1968), referred to in Schreuer et al., icsid Commentary 23 (Art. 6, para. 10). 1493 At the substantive level, icsid Convention Art. 26, providing that “[c]onsent of the parties to arbitration under this Convention shall (…) be deemend consent to such arbitration to the exclusion of any other remedy,” has been considered as “important reference point as a ‘policy of consolidation’ that serves to avoid the duplication of proceedings”; see Crivellaro, Consolidation 371, 388. 1494 For the text of icsid Convention Art. 44, see fn. 230. During the icsid drafting history, the determination of the point of time from which procedural changes to the icsid Arbitration Rules would become effective for the parties was a highly controversial question. In particular, it was debated whether the date relevant should be when consent was offered or when consent was perfected by acceptance; see Schreuer et al., icsid Commentary 687 (Art. 44, para. 43). Given that a considerable amount of time can pass between the offer of consent by one party, mostly the host State, and the acceptance of such consent by the other party, mostly the private investor, it was of utmost importance to decide with precision. Following a lengthy deliberation process, it was agreed that the decisive date is the date on which both parties have

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formally regulated, might lead to administrative complications.1495 Moreover, it cannot be taken for granted that consolidated proceedings automatically reduce expenses of time and cost. Depending on the complexity of the case and the number of parties involved, they might turn out to be even lengthier and more expensive than separate proceedings.1496 Another considerable drawback of consolidating parallel arbitral proceedings is that it might be achieved at the expense of basic procedural rights. For instance, due process maxims like the opportunity to be heard or the right to equal treatment risk being infringed in a situation of a single party joining a mass claim or being opposed to multiple parties.1497 In addition, the parties’ individual rights to participate in the appointment of arbitrators and in the constitution of the arbitral tribunal run the risk of being violated.1498 Consolidating related claims may furthermore raise issues of confidentiality. If directly competing investor-claimants were participating in the same arbitral proceedings, they would risk the disclosure of confidential information, e.g. on intellectual property, business plans, or cost-benefit calculations.1499 In that event, confidential information would need to be protected by procedural orders that allow for separate hearings or restricted access to documents where necessary.1500

given their consent; see icsid, History, Vol. ii, 946–948 (1968), referred to in Schreuer et al., icsid Commentary 687 (Art. 44, para. 44). Hence, in doubt, it is the day when the second party accepted the first party’s earlier consent and thereby perfected the consent requirement. In general, this is the date when the request for arbitration is submitted; see id. at 687 (Art. 44, paras. 45–46). Taking account of these considerations, the final version of the “inter-temporal rule” in Art. 44 was adopted; see id. at 686 (Art. 44, para. 42). 1495 Yannaca-Small, Consolidation of Claims 238. 1496 Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration 59, 83–84. 1497 Id. at 85. 1498 See icsid Convention Art. 37 (2) (a): “The Tribunal shall consist of a sole arbitrator or any uneven number of arbitrators appointed as the parties shall agree.” See Yannaca-Small, Consolidation of Claims 236. 1499 Id. at 237; Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration 59, 84; Etteh, Conflicting Decision in Investment Arbitration 1, 12. 1500 Yannaca-Small, Consolidation of Claims 237–238; Kaufmann-Kohler et al., Consolidation of Proceedings in Investment Arbitration 59, 84–85; both referring to Softwood Lumber Cases, Order of Consolidation, paras. 138, 141, 143, 147. For a constellation in which confidentiality concerns have been considered as outweighing the benefits of a consolidation, see Corn Products International, Inc. v. United Mexican States, icsid Case No. ARB(AF)/04/1 (nafta), and Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, icsid Case No. ARB(AF)/04/5 (nafta), Order of the Consolidation Tribunal (20 May 2005) [hereinafter Corn Products v. Mexico and Archer v. Mexico (Order of the Consolidation Tribunal)], referred to in Etteh, Conflicting Decision in Investment Arbitration 1, 12.

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2 Post-Award Transparency a Concept Another reform model aiming to prevent inconsistent jurisprudence involves the idea of improving the current level of post-award transparency.1501 Facilitated public access to case-related documents would enable subsequent icsid tribunals to contextually reconstruct concluded cases and to appreciate the interpretative approaches taken therein in a more holistic and comprehensive manner. By the same token, case law references in the pleadings of disputing parties would be facilitated. Precedents would gain more attention and persuasive impact.1502 An increased degree of transparency is therefore considered to be an important precondition for “a rigorous debate about strengths and weaknesses of awards, which could contribute to ‘the development of a common legal opinion of jurisprudence constante (…)’”1503 and to the promotion of a more consistent icsid investment jurisprudence.1504 In concrete terms, the public dissemination in the post-award stage could be enhanced by mandating the prompt publication of not only excerpts of the award,1505 but also other pertinent documents,1506 such as written 1501 For a reform proposal addressing specifically the level of post-award transparency in investor-State arbitration, see Born & Shenkman, Confidentiality and Transparency 5–42, esp. 41–42. 1502 Wälde, Improving the Mechanism 550. 1503 Tams, An Appealing Option? 1, 38–39, referring to sgs v. Philippines (Decision on Jurisdiction), para. 97. 1504 For literature pointing out the positive impact of transparency on a consistent development of arbitral jurisprudence, see e.g. Born & Shenkman, Confidentiality and Transparency 41; Cindy Buys, The Tensions between Confidentiality and Transparency in International Arbitration, 14 Am. Rev. Int’l Arb. 121, 136 (2003); John R. Crook, Joint Study Panel on Transpar­ency in International Commercial Arbitration, 15 ilsa J. Int’l & Comp. L. 361, 365 (2008–2009); Franck, Nature and Enforcement of Investor Rights Under Investment Treaties 47, 89; Christina Knahr & August Reinisch, Transparency versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise, 6 L. & Prac. Int’l Cts. & Trib. 97, 111 (with further references), 115 (2007); Magraw & Amerasinghe, Transparency and Public Participation 337, 350–351; oecd, Transparency and Third Party Participation, 11 (para. 42) (2005); Hans Smit, Breach of Confidentiality as a Ground for Avoidance of the Arbitration Agreement, 11 Am. Rev. Int’l Arb. 567, 567 (2000); Tams, An Appealing Option? 1, 38–39. For more general considerations on the benefits of increased post-award transparency, see Schreuer et al., icsid Commentary 838–839 (Art. 48, paras. 123–129), who emphasises the positive impact on the general integritiy, quality, and reliability of the icsid arbitration process. 1505 Cf. icsid Arbitration Rule 48 (4). For the text of this provision, see fn. 337. 1506 An exemplary level of post-award transparency can be found in the documentation of the State-to-State icsid administered arbitration entitled “News Release” concerning the Southern Bluefin Tuna Case (Australia and New Zealand v. Japan), unclos Arbitration

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pleadings and memorials, correspondence of the parties, minutes, records, and transcripts of the hearings, and not least procedural orders, directions and decisions of the arbitral tribunal other than awards.1507 On the basis of this case-related information, subsequent arbitral tribunals would then be in a position to reconstruct, where necessary, the factual and legal context of the published excerpts of an award. For this purpose, Regulation 22 (2) (c) of the icsid Administrative and Financial Regulations, which currently requires the consent of both disputing parties as a precondition for the publication of “the minutes and other records of proceedings,”1508 would need to be modified to the effect that this provision will stipulate a list of the said case-related documents and impose a duty of post-proceeding publication on the Washington Centre.1509 It should also ­foresee exceptions for safeguarding any sensitive and protected information1510 of the investor or of the State involved. The revision and formulation of this rule might be inspired by comparable ­provisions in the newly released uncitral Rules on Transparency, which provide for a comparable degree of ­transparency – balanced by a range of e­ xemptions – as regards case-related (icsid), available at (last visited September 2016). 1507 Past icsid practice shows that decisions other than awards, e.g. decisions on jurisdiction (icsid Convention Art. 41) or provisional measures (icsid Convention Art. 47), have been treated like awards, i.e. their publication has been made contingent upon the parties’ consent; see Schreuer et al., icsid Commentary 837–838 (Art. 48, para. 121). Since this high level of post-award confidentiality is not expressly mandated by icsid Convention Art. 48 (5), it is arguable that the public dissemination of these sorts of decisions does not contravene the said provision. 1508 icsid Administrative and Financial Regulation 22 (2): “If both parties to a proceeding consent to the publication of: (a) reports of Conciliation Commissions; (b) arbitral awards; or (c) the minutes and other records of proceedings, the Secretary-General shall arrange for the publication thereof, in an appropriate form with a view to furthering the development of international law in relation to investments.” 1509 In addition, in view of the fact that almost half of the total number of icsid proceedings are discontinued before the release of a final award and often without memorialisation according to icsid Arbitration Rule 43 (2), the establishment of a duty of the arbitral tribunal “to embody such settlement in an award,” which would then also be subject to the duty to publish excerpts of the legal reasoning of an award pursuant to icsid Arbitration Rule Art. 48 (4), seems worth considering. On the problem of abandoned proceedings, see Wong & Yackee, The 2006 Procedural and Transparency-Related Amendments 261. icsid Arbitration Rule 43 (2): “If the parties file with the Secretary-General the full and signed text of their settlement and in writing request the Tribunal to embody such settlement in an award, the Tribunal may record the settlement in the form of its award.” 1510 Born & Shenkman, Confidentiality and Transparency 42.

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information.1511 This set of rules issued by uncitral does not, however, distinguish between pre-award and post-award transparency. Nevertheless, given that a release of such documents while the case is pending could provoke public debates, which risk prejudicing the proceeding by unduly influencing the arbitrators’ decision-making process and (re-)politicising the investment dispute,1512 it is recommended that the duty to publish should apply only after the proceedings have been closed. b Discussion aa

Effectiveness: Ability to Combat Root Causes

As was the case with the proposal to establish compulsory consolidation provisions for parallel proceedings, the present reform proposal addresses causes that are rooted in the procedural framework of icsid arbitrations. More precisely, it tackles the problem of insufficient access to pre-existing rulings and its related information or, more generally, of limited post-award transparency, which has been classified as a system-immanent cause in the foregoing 1511 See in particular uncitral Rules on Transparency Arts. 3 and 7. 1512 Noah D. Rubins, Opening the Investment Arbitration Process: At What Cost, for What Benefit?, in The International Convention on the Settlement of Investment Disputes – Taking Stock after 40 Years 217–219 (Rainer Hofmann & Christian Tams eds., 2007). See also Abaclat and Others v. Argentine Republic, icsid Case No. ARB/07/5 (formerly Giovanna a Beccara and Others v. Argentine Republic), Procedural Order No. 3 (27 January 2010) [hereinafter Abaclat v. Argentina (Procedural Order No. 3)], para. 81: “Due consideration must also be paid to the stage of the proceedings, i.e., to whether disclosure happens while proceedings are still ongoing or after their closure. While proceedings are still ongoing, considerations such as ensuring the orderly unfolding of the arbitration and the respect of the Parties’ equality of rights, avoiding the exacerbation of the dispute, etc. carry more weight and therefore require more caution than once the procedure has been completed and an award has already been rendered.” A detailed distinction between the pre- and post-award phase was also made in Biwater Gauff v. Tanzania (Procedural Order No. 3). On the one hand, it allowed for the publication of decisions, orders, and directions of the arbitral tribunal during pendency of the proceedings in order to make the basis of legal reasoning comprehensible for third parties; see id., paras. 152–154. On the other hand, regarding documents produced during the proceedings by the opposing party, written memorials, and other communication between the parties and/or the arbitrators, the arbitral tribunal found that “[t]he interests of transparency are here outweighed” and ordered that these “categor[ies] of documents should be restricted, pending conclusion of the proceedings”; see id., paras. 156–163. See also Knahr & Reinisch, Transparency versus Confidentiality 97, 106–109.

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­chapter.1513 By contrast, it has little to do with the interpretative methodological co-causative factors identified beforehand. bb

Feasibility: Options for Implementation

Again, the legal basis for the suggested increase of post-award transparency can be established either individually by means of party consent in the corresponding arbitration agreement1514 or – in a more uniform and icsid-­ specific manner – via modification of the respective arbitration rules. The latter alternative is viable since the outlined proposal does not foresee the mandatory publication of the entire award, but limits itself to a duty to publish case-­related documents and decisions subject to restrictions on sensitive information. Accordingly, it does not conflict with icsid Convention Art. 48 (5)1515 and therefore does not require an amendment to the icsid Convention, which is generally considered to be extremely burdensome, if not impossible to achieve.1516 Rather, it could be implemented by a decision of the Administrative Council pursuant to icsid Convention Art. 6 (1) (a),1517 i.e. by modifying the relevant provisions in the icsid Administrative and Financial Regulations.1518

1513 See Ch. 2.D.I.3. 1514 See Ch. 3.B.I.1.b. 1515 icsid Convention Art. 48 (5): “The Centre shall not publish the award without consent of the parties.” 1516 For elaborations on the option of an amendment to the icsid Convention pursuant to Arts. 65 and 66 and the difficulties associated therewith, see below Ch. 3.B.II.3.b.bb.aaa. 1517 For the text of icsid Convention Art. 6 (1), see fn.1490. For elaborations on icsid Convention Art. 6 (1), see Ch. 3.B.II.1.b.bb. See also Schreuer et al., icsid Commentary 22 (Art. 6, para. 4), who refers to icsid, History, Vol. ii, 38, 40 (1968) to point out that the Administrative Council’s power accorded by icsid Convention Art. 6 (1) (a) also includes the power to amend the icsid Administrative and Financial Regulations. As an alternative, the adoption of a concept of negative consensus, which includes the rebuttable presumption of the disputing parties’ consent to the full disclosure of an award, was discussed but eventually rejected during the drafting of the icsid Convention; see id. at 817–818, 948–949, 987, referred to in Schreuer et al., icsid Commentary 835 (Art. 48, para. 109). 1518 In regard to the scenario of discontinued proceedings (see above, fn. 1509), a duty to embody the settlement of the dispute into an award could also be implemented by the Administrative Council on the basis of icsid Convention Art. 6 (1) (c) via amendments to icsid Arbitration Rules 43 (2) and 48 (4).

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In addition to the expected beneficial impact on jurisprudential consistency, an elevated degree of post-award transparency could, over time, enhance the overall predictability of icsid case law, expedite and facilitate proceedings, and, ultimately, lead to savings of time and cost.1519 A less advantageous aspect of extensive publication of case-related documents has to do with concerns about confidentiality. Since the balance between procedural transparency and confidentiality is a sensitive issue in the field of international investment law and arbitration,1520 some commentators advocate – as a complement to and compensation for enhanced post-award transparency – a simultaneous reduction of pre-award transparency, i.e. during the more delicate phase of pendency of an arbitral proceeding.1521 More precisely, to ensure that the proceedings remain neutral, they suggest cutting back the possibilities of open hearings and amicus curiae submissions according to icsid Convention Arts. 32 (2) and 37 (2), since these would risk (re-)politicising the dispute settlement proceeding, thereby compromising its

1519 Schreuer et al., icsid Commentary 839 (Art. 48, para. 128). For a discussion of the pros and cons of transparency in investment arbitration in general, see Rubins, Opening the Investment Arbitration Process 213–222. 1520 The contradictory nature of procedural confidentiality and transparency has its roots in the opposing principles of party autonomy and public information and participation. While, on the one hand, the private investor and the State deliberately decide to settle their dispute at a neutral institution free from any sovereign interference or diplomatic hurdles, the semi-public nature of investor-State arbitrations, on the other hand, entails a broad impact on both the law and practice of the sovereign State itself as well as its civil society who will pay for any liability through public funds. For a general discussion of these competing interests in investor-State arbitration, see e.g. Buys, Tensions between Confidentiality and Transparency 121, 134–138; Mabel I. Egonu, Investor-State Arbitration Under icsid: A Case for Presumption Against Confidentiality?, 24 J. Int’l Arb. 479, 487–488 (2007); Yves Fortier, Arbitrating in the Age of Investment Treaty Disputes, 31 UNSW L. J. 282, 282–291 (2008); Magraw & Amerasinghe, Transparency and Public Participation 337, 345–356. For further elaborations on the conflicting concepts of procedural transparency and confidentiality, see Ch. 1.C.II.4. 1521 Born & Shenkman, Confidentiality and Transparency 39–42. In line with this distinction between pre- and post-award transparency, Biwater Gauff v. Tanzania (Procedural Order No. 3), para. 140: “Once the arbitration has finally concluded, most restrictions would not normally continue to apply. While the proceedings remain pending, however, there is an obvious tension between the interests in transparency and in procedural integrity.”

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­procedural integrity and impairing its time and cost efficiency.1522 While these neutrality and integrity concerns have some merit, the impact of third parties’ access to hearings and of amicus curiae briefs should not be overstated, in particular in view of their limited information on a pending case. The protection of public interests and democratic values as well as the goal of developing a jurisprudence constante should be sufficient grounds to justify weakening the proceedings’ secrecy in the post-award stage even without a compensatory higher degree of confidentiality in the pre-award phase.1523 3 Appellate Mechanism a Concept The most prominent reform proposal to mitigate the inconsistency problem takes a remedial rather than a preventive approach and pleads for a fundamental modification of the current icsid review system. It foresees the creation of a system-immanent appellate body whose main functions would be to ensure the procedural and substantive correctness of icsid case law by reviewing awards and correcting factually or legally defective awards in its own rulings.1524 This corrective effect would immediately entail an enhanced

1522 Id. at 40. For further scholarly criticism on the current icsid pre-award transparency provisions, see Rubins, Opening the Investment Arbitration Process 217–222; Wong & Yackee, The 2006 Procedural and Transparency-Related Amendments 168–171. Even numerous icsid tribunals have displayed relatively strong reservations with respect to the publication of materials or information on a pending arbitration; see e.g. Metalclad v. Mexico (Decision on Request of Respondent), para. 10; Loewen Group v. us (Decision on Jurisdiction), para. 26. See also Biwater Gauff v. Tanzania (Procedural Order No. 3), para. 136: “It is self-evident that the prosecution of a dispute in the media or in other public fora, or the uneven reporting and disclosure of documents or other parts of the record in parallel with a pending arbitration, may aggravate or exacerbate the dispute and may impact upon the integrity of the procedure.” They base their concerns on considerations of procedural efficiency, integrity, manageability, order, and the goal of preventing aggravation of the dispute due to public pressure; see Born & Shenkman, Confidentiality and Transparency 36. 1523 See e.g., in support of this position, Tuck, Investor-State Arbitration Revised 885, 887: “Indeed, from a procedural perspective, disputes to which a state is a party involve questions of law or public interest that are distinct from arbitration between private commercial parties. This fundamental difference between state and commercial arbitrations has direct implications for the conduct of the arbitration.” 1524 For a general overview and discussions on this reform proposal, see e.g. Kristina Andelić, Why icsid Doesn’t Need an Appellate Procedure, and What to Do Instead, in Reshaping

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degree of coherence1525 and, over time, also a higher level of consistency of icsid jurisprudence. aa

icsid Discussion Paper

In 2004, the icsid itself released a Discussion Paper,1526 which foresaw the establishment of an Appeals Facility. This suggestion was made on the occasion of the then-current phenomenon of more and more countries signing bits with provisions on an appellate mechanism for review of investment

the Investor-State Dispute Settlement System – Journeys for the 21st Century 496–505 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Banifatemi, Consistency in Investment Rules Interpretation 219; Gabriel Bottini, Reform of the Investor-State Arbitration Regime: The Appeal Proposal, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 455–473 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); David A. Gantz, An Appellate Mechanism for Review of Arbitral Decisions in Investor-State Disputes: Prospects and Challenges, 39 Vand. J. Transnat’l L. 39, 39–76 (2006); William H. Knull iii & Noah D. Rubins, Betting the Farm on International Arbitration: Is it Time to Offer an Appeal Option?, 11 Am. Rev. Int’l Arb. 531, 531–565 (2000); Laird & Askew, Finality versus Consistency 285, 285–302; Jasmin Lee, Introduction of an Appellate Review Mechanism for International Investment Disputes: Expected Benefits and Remaining Tasks, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 474–495 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Eun Young Park, Appellate Review for Investor-State Arbitration, in Reshaping the Investor-State Dispute Settlement System – Journeys for the 21st Century 443–454 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Asif H. Qureshi, An Appellate System in International Investment Arbitration?, in The Oxford Handbook of International Investment Law 1154–1170 (Peter Muchlinski et al. eds., 2008); Karl P. Sauvant, Appeals Mechanism in International Investment Disputes (Oxford University Press, New York, 2008); Debra P. Steger, Enhancing the Legitimacy of International Investment Law by Establishing an Appellate Mechanism, in Improving International Investment Agreements 247–264 (Armand De Mestral & Céline Lévesque eds., 2013); Christian Tams, Is there a Need for an icsid Appellate Structure?, in The International Convention on the Settlement of Investment Disputes (icsid) – Taking Stock after 40 Years 223–246 (Rainer Hofmann & Christian Tams eds., 2007); Tams, An Appealing Option? 1, 10–37; Walsh, Substantive Review of icsid Awards 444, 454–461; Yannaca-Small, Annulment of icsid Awards 243–269. For further references, see Schreuer et al., icsid Commentary 1034 (Art. 52, para. 460). 1525 Schreuer, Revising the System 1, 2. 1526 icsid-Secretariat, Discussion Paper: Possible Improvements of the Framework for icsid Arbitration (22 October 2004), available at (last visited September 2016).

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­arbitration awards.1527 The icsid interpreted this development as signalling significant interest in that option and explained that the establishment of such a mechanism might prevent the development of inconsistencies and enhance the general acceptance of investor-State-arbitration.1528 According to the paper, ideally, such an Appeals Facility should be “designed not only for the use in conjunction with a form of icsid arbitration, but also for other forms of arbitration proceedings arising from investment treaties.”1529 The paper’s Annex expounded the possible features of a future icsid Appeals Facility. Among other things, it addressed the structure and functioning of a single Appeals Panel, which should be composed of 15 authorised experts from different countries and consist of a staggered board of permanent members, with eight persons serving for three years and the remaining persons being elected for six years each.1530 The ad hoc appeals tribunals would then be individually constituted for each single case by appointment of three members.1531 The scope of appellate review should encompass clear errors of law, serious errors of fact, as well as the five annulment grounds listed in icsid Convention Art. 52.1532 Appeals tribunals should be able to uphold, modify, reverse, or annul the initial award; and, in case of a modification or reversal that disposes of the dispute, the awards rendered in second instance would then be the final award with binding effect for the parties.1533 The parties requesting review should be required to advance the fees and expenses incurred on appeal as well as a bank guaranty as security for the amount granted in the award.1534 The Annex also addressed the administrative role of the icsid Secretariat. It set forth the Secretary-General’s power to approve requests and to constitute the arbitral tribunal, and it foresaw that the Secretariat should provide the administrative services it usually offers to icsid Convention and Additional Facility proceedings.1535 In order to ensure speedy proceedings, time limits should be set for the individual procedural steps.1536

1527 Id. at 14, para. 20; Annex, para. 1. For further elaborations on the stipulation of appellate review options in iias, see Ch. 3.B.I.1.b. 1528 Id. at 15, paras. 22–23. 1529 Id. at 15–16, para. 23. 1530 Id. at Annex, paras. 1, 5. 1531 Id. at Annex, para. 6. 1532 Id. at Annex, para. 7. 1533 Id. at Annex, para. 9. 1534 Id. at Annex, para. 10. 1535 Id. at Annex, paras. 11–12. 1536 Id. at Annex, para. 12.

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In spite of this enthusiastic reform initiative, the subsequent icsid Working Paper of 20051537 abruptly took the wind out of the sails and put the plans for an Appeals Facility on hold. It was marked by the icsid Secretariat’s consultation process with member States, private investors, ngos, and scholars, who reacted reservedly to this proposal and “considered that it would be premature to attempt to establish such an icsid mechanism at this stage, particularly in view of the difficult technical and policy issues raised in the Discussion Paper.”1538 Since then, no more official statement as to this reform model was released by the icsid. bb

Excursus: Comparable Review Remedies in International Trade Dispute Resolution

Experience in the field of international trade dispute resolution allows drawing parallels and it provides helpful information regarding the proposal to create a substantive review mechanism in the field of international investment law. Therefore, a brief comparative law study of review remedies established in the framework of the Canada-United States Free Trade Agreement1539 (predecessor of the current nafta) and of the World Trade Organisation1540 might provide insight as to the appropriate design of an icsid appellate body.1541 While the cusfta/nafta review remedy rather serves as a warning example of what should be avoided (aaa.), the wto Appellate Body is a model of an appeals mechanism in support of a more consistent body of jurisprudence (bbb.). aaa

cusfta/nafta

According to cusfta Art. 1904 (1),1542 the disputing parties were allowed to submit administrative decisions by domestic courts of either country to 1537 icsid-Secretariat, Working Paper: Suggested Changes to the icsid Rules and Regulations (12 May 2005), available at (last visited September 2016). 1538 Id. at 4, para. 4. 1539 Free Trade Agreement between the Government of Canada and the Government of the United States of America, 2 January 1988 (entry into force 1 January 1989), 27 ilm 281 (1988) [hereinafter cusfta]. 1540 [Hereinafter wto]. 1541 This law-comparative approach has been developed by Kalb, icsid Appellate Body 179, 209–214. 1542 cusfta Art. 1904 (1): “As provided in this Article, the Parties shall replace judicial review of final antidumping and countervailing duty determinations with binational panel review.”

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binational review and to thereby replace “judicial review of final antidumping and countervailing duty determinations.” The decisions rendered by the binational review panel, composed of five members including at least two nationals from each State,1543 were binding,1544 but could still be challenged before an Extraordinary Challenge Committee1545 pursuant to Art. 1904 (13).1546 However, the review by such committees, which used to consist of three panellists chosen from a roster of ten persons, among them five us American federal judges and five Canadian judges,1547 was restricted to certain limited circumstances which resemble the icsid annulment grounds in that they did not include any substantive, factual, or legal errors by the lower body.1548 Accordingly, one cannot speak of an appeal in the conventional sense.1549 Moreover 1543 cusfta Annex 1901.2: “(1) Prior to the entry into force of this Agreement, the Parties shall develop a roster of individuals to serve as panelists in disputes under this Chapter. (…) (2) A majority of the panelists on each panel shall be lawyers in good standing. Within 30 days of a request for a panel, each Party shall appoint two panelists, in consultation with the other Party. (…) (3) Within 55 days of the request for a panel, the Parties shall agree on the selection of a fifth panelist. If the Parties are unable to agree, the four appointed panelists shall select, by agreement, from the roster the fifth panelist within 60 days of the request for a panel. If there is no agreement among the four appointed panelists, the fifth panelist shall be selected by lot on the 61st day from the roster, excluding candidates eliminated by peremptory challenges.” 1544 cusfta Art. 1904 (9): “The decision of a panel under this Article shall be binding on the Parties with respect to the particular matter between the Parties that is before the panel.” 1545 [Hereinafter ecc]. 1546 cusfta Art. 1904 (13): “Where, within a reasonable time after the panel decision is issued, a Party alleges that: (a) (i) a member of the panel was guilty of gross misconduct, bias, or a serious conflict of interest, or otherwise materially violated the rules of conduct, (ii) the panel seriously departed from a fundamental rule of procedure, or (iii) the panel manifestly exceeded its powers, authority or jurisdiction set forth in this Article, and (b) any of the actions set out in subparagraph (a) has materially affected the panel’s decision and threatens the integrity of the binational panel review process, that Party may avail itself of the extraordinary challenge procedure set out in Annex 1904.13.” 1547 cusfta Annex 1904.13: “(1) The Parties shall establish an extraordinary challenge committee, comprised of three members, within fifteen days of a request pursuant to paragraph 13 of Article 1904. The members shall be selected from a ten-person roster comprised of judges or former judges of a federal court of the United States of America or a court of superior jurisdiction of Canada. Each Party shall name five persons to this roster. Each Party shall select one member from this roster and the third shall be selected from the roster by the two members chosen by the Parties or, if necessary, by lot from the roster.” 1548 Kalb, icsid Appellate Body 179, 213. 1549 Michael Valihora, nafta Chapter 19 or the wto’s Dispute Settlement Body: A Hobson’s Choice for Canada Perspective, 30 Case W. Res. J. Int’l L. 447, 461 (1998).

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and in contrast to the icsid annulment mechanism, a review by the ecc was only requested in three cases, and each time the request was rejected for not meeting the threshold of an extraordinary challenge set forth in nafta Art. 1904 (13).1550 This manner of handling requests for review was heavily criticised, inter alia, for being infused with political motives of the respective national majority of judges.1551 The nafta, which succeeded the cusfta, maintained these basic structures. It confirmed the ecc’s general conception as a limited review mechanism in nafta Art. 1904 (13) and incorporated similar modes of panel composition in its Annex.1552 Still, the nafta shows some important modifications:1553 first, it extended the time limit for an ecc review,1554 second, it allowed for a legal and factual analysis underlying the findings and conclusions of the panel’s decision “in order to determine whether one of the grounds set out in Article 1904(13) has been established,”1555 and third, it permitted a party to request a 1550 See Fresh, Chilled, or Frozen Pork from Canada, ECC-91-1904-01-USA (14 June 1991); Live Swine from Canada, ECC-93-1904-01-USA (8 April 1993); Certain Softwood Lumber Products from Canada, ECC-94-1904-01-USA (3 August 1994) [hereinafter Softwood Lumber iii]. In his famous dissenting opinion from the cusfta ecc decision reviewing the panel decision in Softwood Lumber iii, the retired us Circuit Judge Malcom Wilkey expressed his dissatisfaction with the narrow scope of review which implied that even “egregiously erroneous results” of interpreting the law would not be reviewed by the ecc. He also pointed out that the panel failed to apply the correct standard of review and that some of the panelist suffered from serious conflicts of interests. See Softwood Lumber iii, paras. 11–17, 31–37, 71–85, referred to in Kalb, icsid Appellate Body 179, 213–214. 1551 Herbert C. Shelley et al., The Standard of Review Applied by the United States Court of Appeals for the Federal Circuit in International Trade and Customs Cases, 45 Am. U. Int’l L. Rev. 1749, 1810 (1996), referred to in Kalb, icsid Appellate Body 179, 214. 1552 nafta Art. 1904 (13): “Where, within a reasonable time after the panel decision is issued, an involved Party alleges that: (a) (i) a member of the panel was guilty of gross misconduct, bias, or a serious conflict of interest, or otherwise materially violated the rules of conduct, (ii) the panel seriously departed from a fundamental rule of procedure, or (iii) the panel manifestly exceeded its powers, authority or jurisdiction set out in this Article, for example by failing to apply the appropriate standard of review, and (b) any of the actions set out in subparagraph (a) has materially affected the panel’s decision and threatens the integrity of the binational panel review process, that Party may avail itself of the extraordinary challenge procedure set out in Annex 1904.13.” 1553 Valihora, nafta Chapter 19 or wto’s Dispute Settlement Body 447, 462–463. 1554 nafta Annex 1904.13.2: “The Parties shall establish by the date of entry into force of the Agreement rules of procedure for committees. The rules shall provide for a decision of a committee within 90 days of its establishment.” 1555 nafta Annex 1904.13.3: “Committee decisions shall be binding on the Parties with respect to the particular matter between the Parties that was before the panel. After examination

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review of a determination if it believed that the panel had failed to apply the correct standard of review.1556 In spite of these changes, which suggest a shift to appellate-like proceedings,1557 this concept has been perceived as insufficient to cure a flawed system. In fact, the problems related to the ecc can be considered as having persisted, given that none of the requests submitted so far has been accepted.1558 The experience of cusfta/nafta shows that using the kind of a two-tiered system described above to settle international political conflicts between States implies the risk of aggravating the discrepancies instead of facilitating their conciliation.1559 Moreover, the very rare use of this mechanism, resulting from its (initially) very narrow grounds of review, precluded the development of a consistent case law. The lesson learnt for the creation of a potential icsid appellate body is, inter alia, that it must be composed of politically neutral personnel and that the grounds of review need to be considerably broader. bbb

wto

The wto Appellate Body,1560 by contrast, is known for its success in promoting a consistent and coherent jurisprudence, even when the underlying conflict comprises politically sensitive issues.1561 It attained this positive impact without explicitly having the development of law as an objective; rather, it was



of the legal and factual analysis underlying the findings and conclusions of the panel’s decision in order to determine whether one of the grounds set out in Article 1904(13) has been established, and on finding that one of those grounds has been established, the committee shall vacate the original panel decision or remand it to the original panel for action not inconsistent with the committee’s decision; if the grounds are not established, it shall deny the challenge and, therefore, the original panel decision shall stand affirmed. (…)” 1556 nafta Art. 1904 (13) (a) (iii): “the panel manifestly exceeded its powers, authority or jurisdiction set out in this Article, for example by failing to apply the appropriate standard of review.” 1557 John Mercury, Chapter 19 of the u.s.-Canada Free Trade Agreement 1989–95: A Check on Administered Protection? 15 Nw. J. Int’l L. & Bus. 525, 600 (1995). 1558 See Grey Portland Cement and Clinker from Mexico, ECC-2000-1904-01-USA (30 October 2003); Pure Magnesium from Canada, ECC-2003-1904-01-USA (7 October 2004); Certain Softwood Lumber Products from Canada, ECC-2004-1904-01-USA (10 August 2005). 1559 Kalb, icsid Appellate Body 179, 214. 1560 For a general overview on the structure and functioning of the wto Appellate Body, see Peter van den Bossche, The Law and Policy of the World Trade Organization – Text, Cases and Materials 231–243 (Cambridge University Press, Cambridge, 3rd ed., 2013). 1561 Kalb, icsid Appellate Body 179, 210.

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created as a corrective counterbalance to the establishment of the wto system of mandatory and binding dispute settlement.1562 It was meant to vest the States with a safeguard against “wrong” panel decisions.1563 A number of factors contributed to its success. In the first place, there are certain structural aspects set out in the wto dsu. One is the Appellate Body’s mandate which clearly extends to issues of law and legal interpretation1564 and hence avoids any greater doubts about its scope of review. Another factor is the composition of its membership of seven neutral and broadly representative experts from the relevant field,1565 whose random appointment to the three-person-panels prevents predictions on who will be sitting in a certain division.1566 All written pleadings are considered and, subsequent to the hearing, discussed by all members of the Appellate Body together1567 in order to 1562 McRae, The wto Appellate Body 1, 2. 1563 Id. 1564 Id. at 3–4. dsu Art. 17.6: “An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel.” which is generally read in conjunction with dsu Art. 3.2: “The dispute settlement system of the wto is a central element in providing security and predictability to the multilateral trading system. The Members recognize that it serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance with customary rules of interpretation of public international law. Recommendations and rulings of the dsb cannot add to or diminish the rights and obligations provided in the covered agreements.” 1565 Id. at 4. dsu Art. 17.3: “The Appellate Body shall comprise persons of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally. They shall be unaffiliated with any government. The Appellate Body membership shall be broadly representative of membership in the wto. All persons serving on the Appellate Body shall be available at all times and on short notice, and shall stay abreast of dispute settlement activities and other relevant activities of the wto. They shall not participate in the consideration of any disputes that would create a direct or indirect conflict of interest.” In general, this body is composed of one eu member, one us member, one Latin American member, one African member, and two or three (South-East) Asian members; see id. 1566 Id. at 5. 1567 wto Working Procedures for Appellate Review, 16 August 2010, wt/ab/wp/6 [hereinafter wpar], Rule 4: “(1) To ensure consistency and coherence in decision-making, and to draw on the individual and collective expertise of the Members, the Members shall convene on a regular basis to discuss matters of policy, practice and procedure.

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ensure full consideration of any disputed aspect in a manner commensurate with its cultural or regional particularities.1568 Furthermore, strict time limits contribute to efficient and expeditious appellate proceedings.1569 Other advantageous factors relate to its manner of use: since the high, but always manageable volume of cases concerns provisions stemming from a limited number of wto Agreements, the Appellate Body was able to render consistent rulings on recurring legal issues.1570 In addition, it managed to resolve non-regulated procedural issues, to develop a predictable and reliable approach to treaty interpretation, and to establish its role as a much respected and authoritative body within the system.1571 These factors of success of the wto Appellate Body should be taken into account when creating a possible future icsid appeals mechanism. They include the enlarged scope of legal review, the manner of the body’s composition and functioning, as well as the time limitations. Beyond that, there is a range of other, less tangible and hence not formally transferable determinants. One is the basic structure of the underlying legal system, which consists – in contrast to the vast body of (bilateral) investment law – of a limited number of wto agreements.1572 Another is the institutionalisation of the wto Appellate Body as the “guardian”1573 of the wto legal system. If it had not been assigned this role, it could have ended up as being only a “second voice”1574 to the panels’

(2) The Members shall stay abreast of dispute settlement activities and other relevant activities of the wto and, in particular, each Member shall receive all documents filed in an appeal. (3) In accordance with the objectives set out in paragraph 1, the division responsible for deciding each appeal shall exchange views with the other Members before the division finalizes the appellate report for circulation to the wto Members. This paragraph is subject to paragraphs 2 and 3 of Rule 11. (4) Nothing in these Rules shall be interpreted as interfering with a division’s full authority and freedom to hear and decide an appeal assigned to it in accordance with paragraph 1 of Article 17 of the dsu.” 1568 McRae, The wto Appellate Body 1, 5. 1569 Id. dsu Art. 17.5: “As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. (…) When the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the dsb in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days.” 1570 Id. at 5–6. 1571 Id. at 6–9. 1572 For a list of wto agreements covered by the dsu, see dsu Appendix 1. 1573 Terminology according to McRae, The wto Appellate Body 1, 14. 1574 Terminology according to id. at 16.

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decisions. All these parameters taken together, whether formally controllable or not, are crucial for a possible icsid appellate body’s capacity to generate consistency in investment case law. b Discussion aa

Effectiveness: Ability to Combat Root Causes

Despite being taken off the icsid agenda in 2005, the reform proposal of establishing an icsid appellate mechanism has not sunk into oblivion; there is still heated debate about the potential advantages and disadvantages entailed by such an institutionalised review system.1575 A key aspect to be considered throughout such debates is the ability of the suggested reform model to combat the root causes of inconsistent icsid jurisprudence. Regarding the systemic causes determined in the foregoing chapter,1576 the proposal of establishing a two-tier system would, in the first place, remedy the limitedness of the current icsid review system and the corresponding problem of inconsistency due to incorrect awards. With two levels of dispute settlement – the arbitral tribunal in the first instance and the appeals panel in the second instance – the likelihood of substantially correct awards being rendered would significantly increase.1577 In addition, the reform approach appears apt to remedy the inconsistencies stemming from the non-permanent nature of arbitral tribunals. By furnishing a future appeals body with a certain degree of personal and structural continuity, it could ensure the permanency required to establish consistent and coherent lines of investment jurisprudence.1578 1575 For positions rejecting this reform model, see e.g. Paulsson, Avoiding Unintended Consequences 258 et seq; Legum, Appellate Mechanism 231 et seq.; for positions in favour thereof, see e.g. Franck, The Legitimacy Crisis 1521, 1606 et seq., 1617 et seq; Kalb, icsid Appellate Body 179, 201 et seq. See also the relatively recent reactivation of the proposal to introduce an appeals facility in investor-State dispute settlement in unctad, Reform of Investor-State-DisputeSettlement, iia Issues Note No. 3, 8–9 (2013). 1576 See Ch. 2.D.I. 1577 Andrea K. Bjorklund, The Continuing Appeal of Annulment: Lessons from Amco Asia and cme, in International Investment Law and Arbitration: Leading Cases from the icsid, nafta, Bilateral Treaties and Customary International Law 515 (Todd J. Weiler ed., 2005); Yannaca-Small, Annulment of icsid Awards 630. This increased chance of “getting the answer right” is not least due to the fact that an appeals panel would be in the advantageous position of already having an (ideally) elaborate and fully-reasoned arbitral award before it, which would enable it to focus on the critical issues only; see Tams, An Appealing Option? 1, 28. 1578 Tsatsos, A Call for Appeal 1, 33.

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Concerning the methodological causes,1579 a substantive review of defective awards by an appellate body also bears the potential to overcome general interpretative flaws in the approaches taken by ordinary arbitral tribunals. If the professionals sitting on the individual appeal panels are selected according to their theoretical and practical expertise in international investment law and arbitration, there is a high probability that they will use sound techniques of interpretation that may serve as a guiding example for subsequent arbitral tribunals. bb

Feasibility: Options for Implementation

aaa

Amendment to the icsid Convention

The reform model of establishing an icsid appellate mechanism foresees submitting icsid awards to appeal, i.e. to substantive review. It would therefore clearly contravene icsid Convention Art. 53 (1), which provides that awards “shall not be subject to any appeal or to any other remedy except those provided for in this Convention.”1580 Therefore the implementation of the said reform proposal would require fundamental changes to the icsid Convention as the basic regulatory framework of icsid arbitration. A simple amendment to the icsid Arbitration Rules would be clearly insufficient. The alternative consisting in the decentralised creation of an appeals mechanism and individual party consent within the respective arbitration agreements bears the risk of fragmentation and inefficiency and is thus comparatively unattractive.1581 In view of the above, the most effective method of implementing an icsid appeals mechanism would be by amending the icsid Convention. A set of norms establishing and governing the structure and functioning of an appellate body

This could be achieved by means of a standing body or through composition of members drawn from a moderately sized appeals panel; see Tams, An Appealing Option? 1, 26. The suggestion of appointing three arbitrators from a panel of 15 (see icsid-­ Secretariat, Discussion Paper: Possible Improvements of the Framework for icsid Arbitration, Annex, para. 5 (22 October 2004)) has been adjudged as being inappropriate for the goal of increasing consistency in icsid jurisprudence; see Schreuer, Diversity and Harmonization 150. 1579 See Ch. 2.D.II. 1580 For the text of icsid Convention Art. 53 (1), see fn. 369. The remedies in the post-award phase are laid down in icsid Convention Art. 50 (Interpretation), Art. 51 (Revision), and Art. 52 (Annulment). 1581 See Ch. 3.B.I.1.b.

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would need to be inserted into the icsid Convention and to be further specified in icsid secondary law. Yet, such amendment, which would be governed by icsid Convention Arts. 65 and 66,1582 is extremely difficult and burdensome if not impossible to achieve. icsid Convention Art. 66 puts forward two cumulative requirements. First, there needs to be acceptance of the proposal by a two-thirds majority of the Administrative Council’s members. Second, if this condition was fulfilled, the proposed amendment would need to be circulated for ratification, acceptance, or approval by all current contracting States. The amended version of the Convention would come into effect thirty days thereafter and become binding solely for cases based on consent perfected after that date.1583 As can be seen, the requirement of unanimous approval by all icsid contracting States makes the prospects for achieving an amendment extremely dim.1584 In particular in view of the results of the icsid Secretariat’s 1582 icsid Convention Art. 65: “Any Contracting State may propose amendment of this Convention. The text of a proposed amendment shall be communicated to the SecretaryGeneral not less than 90 days prior to the meeting of the Administrative Council at which such amendment is to be considered and shall forthwith be transmitted by him to all the members of the Administrative Council.” icsid Convention Art. 66: “(1) If the Administrative Council shall so decide by a majority of two-thirds of its members, the proposed amendment shall be circulated to all Contracting States for ratification, acceptance or approval. Each amendment shall enter into force 30 days after dispatch by the depositary of this Convention of a notification to Contracting States that all Contracting States have ratified, accepted or approved the amendment. (2) No amendment shall affect the rights and obligations under this Convention of any Contracting State or of any of its constituent subdivisions or agencies, or of any national of such State arising out of consent to the jurisdiction of the Centre given before the date of entry into force of the amendment.” 1583 This rule of non-retroactivity contained in icsid Convention Art. 66 (2) stands in support of the icsid Convention’s policy to leave untouched the legal framework in force at the time when consent to icsid arbitration was provided; see Schreuer et al., icsid Commentary 1265 (Art. 66, para. 7). 1584 For a debate on the question of whether an amendment to the icsid Convention actually requires unanimous agreement of all member States, see the debate between Aron Broches and Michael Reisman in: Reisman, Breakdown 739, 806; Aron Broches, Observations on the Finality of icsid Awards, 6 icsid Rev. – filj 321, 374–375 (1991); W. Michael Reisman, Repairing the icsid’s Control System: Some Comments on Aron Broches’ Observations on the Finality of icsid Awards, 7 icsid Rev. – filj 196, 209–210 (1992); Aron Broches, On the Finality of Awards: A Reply to Michael Reisman, 8 icsid Rev. – filj 92, 100–101 (1993); partially referred to in Schreuer et al., icsid Commentary 1265 (Art. 66, para. 4). For an attempt to attenuate the rigidity of icsid Convention Art. 66, see Tsatsos, Rechtsprechung der icsid-Schiedsgerichte 216–221. In order to soften the

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past survey, wherein private investors and member States were consulted on this issue,1585 it scarcely seems realistic to believe that the necessary unanimous consent would be reached.1586 bbb

Inter Se Modification of the icsid Convention

An alternative, though less expedient method is an implementation via inter se modification of the icsid Convention by only the “willing” member States. This would require at least two States to modify the common multilateral treaty among them by consenting to an additional protocol to the icsid Convention,1587 which could be prepared as a universally accessible version by the icsid Secretariat and adopted by the icsid Administrative Council. “Agreements to modify multilateral treaties between certain of the parties only” are governed by customary law codified in vclt Art. 41 (1),1588 which stipulates, inter alia, that the modification of a multilateral treaty by two or more of the parties is only possible if the modification in question is “not prohibited by the treaty” and if it “does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.”1589 Given that icsid Convention Art. 53 (1) explicitly excludes “any appeal” or “any other remedy except those provided for in this Convention,” it could be convincingly argued that the introduction of an appellate mechanism via inter se modification of the icsid Convention infringes this prohibition and, moreover, is not consistent with the Convention’s telos of providing efficient arbitral proceedings and final awards.1590 ­principle of pacta sunt servanda, the author refers to the telos of the icsid Convention, the international law principle of systemic integration (cf. vclt Art. 31 (3) (c)), and the maxim of good faith (“Treu und Glauben”). 1585 See icsid-Secretariat, Working Paper: Suggested Changes to the icsid Rules and Regulations, para. 4 (12 May 2005). 1586 Schreuer et al., icsid Commentary 1034 (Art. 52, para. 460). 1587 Bishop, The Case for an Appellate Panel and its Scope of Review 8, 10; Tams, An Appealing Option? 1, 12. See also Schreuer, Revising the System 1, 2, 6. 1588 vclt Art. 41 (1): “Two or more of the parties to a multilateral treaty may conclude an agreement to modify the treaty between themselves alone if: (…) (b) the modification in question is not prohibited by the treaty and: (i) does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations; (ii) does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.” 1589 See Schreuer et al., icsid Commentary 1105 (Art. 53, para. 30). 1590 Schreuer, Revising the System 1, 2. For a counter-position, see Kaufmann-Kohler & Potestá, Introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap, 82–85.

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Further difficulties relate to the additional protocol which the Administrative Council would have to adopt in order to enable the envisaged inter se modification. icsid Convention Art. 6 (3) furnishes this organ with the authority to “exercise such other powers (…) as it shall determine to be necessary for the implementation of the provisions of this Convention.”1591 By adopting the additional protocol as the legal basis of the inter se modification, the Administrative Council would establish a substantive review mechanism which runs counter to the explicit prohibition of “any appeal or any other remedy except those provided for in this Convention.”1592 It is thus difficult to justify how an appeals facility could be brought in line with, let alone be “necessary” for, the implementation of the principle of finality embodied in icsid Convention Art. 53.1593 Finally, given that the operative effect of the reform model would entirely depend on the treaty parties’ willingness to adopt the additional protocol, the suggested implementation method risks being ineffective. Moreover, if only some icsid member States were willing to consent to such additional

1591 icsid Convention Art. 6 (3): “The Administrative Council shall also exercise such other powers and perform such other functions as it shall determine to be necessary for the implementation of the provisions of this Convention.” A decision based on icsid Convention Art. 6 (3) requires a simple “majority of the votes cast” with a quorum of the “majority of its members” according to icsid Convention Art. 7 (2) and (3). For the text of icsid Convention Art. 7, see fn. 193. The rather general formulation of this norm raises the question of its relationship with other, more specific norms furnishing the icsid Administrative Council with competences. A systematic interpretation provides clarification: Art. 6 (1) states that the competences listed in this article shall be “without prejudice to the powers and functions vested in it by other provisions of this Convention” and thus implies that Art. 6 (3) does not refer to these other competences, but rather provides for “additional powers.” The latter provision is so to speak an enlargement of competences, a residual clause, as regards functions that are necessary for the carrying out of the icsid Convention. See Schreuer et al., icsid Commentary 26–27 (Art. 6, paras. 24, 26). 1592 See icsid Convention Art. 53 (1). 1593 For the text of icsid Convention Art. 53 (1), see fn. 369. In the past, the competences accorded by icsid Convention Art. 6 (3) have been interpreted as including the power to adopt the icsid Additional Facility Rules. Given that these Rules govern arbitral proceedings that fall out of the jurisdiction of icsid tribunals and that the Additional Facility administers proceedings independently from the icsid Convention, it is questionable how their establishment could be considered as “necessary for the implementation of the provisions of this Convention”; see Schreuer et al., icsid Commentary 27 (Art. 6, para. 26).

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protocol, an inter se modification could lead to a further fragmentation of the icsid investment regime and, in terms of case law, to a further increase – not decrease – of inconsistency.1594 cc

General Pros and Cons

Apart from the anticipated enhancement of consistency and coherence, further benefits pertain to the expectation that, following the example of the wto Appellate Body, an icsid appeals instance served by highly skilled and respected lawyers would build up a considerable authority in the course of time,1595 which could far exceed the annulment committees’ public esteem. Such an image re-launch could remedy the growing dissatisfaction of some of the contracting States with the dysfunctionality of the current icsid review system.1596 Less welcome, however, is the interference of the reform approach with the principle of finality. As evinced by icsid Convention Art. 53 (1),1597 the icsid Convention’s drafters clearly opted to give priority to the finality of awards over their correctness. The binding and final nature of icsid awards and their nonaccessibility for substantive review1598 aim at an efficient, one-tiered dispute 1594 See e.g. Tams, An Appealing Option? 1, 13, who notes when discussing the implementation modalities of a possible appellate mechanism that “if the appeals option depended on the provisions of investment treaties or a Protocol to the Convention, icsid would offer a ‘piecemeal appeal,’ open in some, but not in all disputes.” 1595 Audley Sheppard & Hugo Warner, Appeals and Challenges to Investment Treaty Awards: Is it Time for an International Appellate System? – Editorial Note (biicl Investment Treaty Forum Conference), 2 tdm 3, 4 (2005), referred to in Tams, icsid Appellate Structure 242. 1596 See Ch. 2.E.II.2.b and Ch. 3.A. (esp. fn. 1408). As an expression of its dissatisfaction with the icsid annulment mechanism, Argentina even threatened to re-admit national court review of icsid awards; see Tams, icsid Appellate Structure 29, referring to Carlos Alfaro, icsid Arbitration and bits Challenged by the Argentine Government and its Supreme Court, 2 Oil, Gas & Energy L.J. 1, 1–4 (2004). Even if an appeals mechanism could not entirely shield against such outside interference, the mere availability of substantive review could help to convince national judges to exercise restraint in investment arbitration matters; see Kalb, icsid Appellate Body 179, 207; Yannaca-Small, Annulment of icsid Awards 630. 1597 For the text of icsid Convention Art. 53 (1), see fn. 369. 1598 Since the icsid Convention’s drafters intended to “provide emergency relief for egregious violations of a few basic principles while preserving the finality of the decision in most respects,” they voted against any substantive review and for a narrowly tailored procedural review by means of annulment proceedings under Art. 52. See Schreuer et al., icsid Commentary 903–904 (Art. 52, para. 15), with reference, inter alia, to Reisman, Breakdown 739, 749–755.

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settlement system that distinguishes itself from judicial proceedings.1599 An enlargement of the scope of review by establishing a second tier of substantive decision-making and the resulting increase of review requests1600 would therefore clearly contravene the icsid’s historic alignment towards finality as a fundamental policy of the system. As a consequence, a loss of trust in the icsid institution as a whole by its users and the entire investment community might take place.1601 A further related aspect is the time and cost efficiency of icsid dispute settlement. Regarding time, several provisions within the icsid Convention point to its drafter’s efforts to minimise the duration of arbitral proceedings: Art. 38,1602 for instance, stipulates a time-limit for the institution of proceedings, and Art. 45 (2)1603 contains measures to deter parties from frustrating a proceeding. Even if it is debatable whether the present icsid regime actually meets the goal of reasonably expeditious proceedings, it is evident that a two-tiered system would prolong the time lapsed before a definite decision on the merits could be rendered.1604 In addition, the option of substantive review risks being abused as a delaying tactic.1605 As for cost, it is obvious that prolonged arbitral proceedings would significantly increase expenses. This 1599 Yannaca-Small, Annulment of icsid Awards 631. 1600 Walsh, Substantive Review of icsid Awards 444, 460. The relation between the scope of review and the number of requests for review is demonstrated by statistical data. For instance, in the decade from 2001 to 2010, the average application rate for icsid annulments stood at 27.1%, while the average application rate for wto appeals amounted to 65.9%. See icsid-Secretariat, The icsid Caseload – Statistics (Issue 2016–2), 17 (2016); wto Dispute Settlement Statistics, available at (last visited August 2016). 1601 Tams, An Appealing Option? 1, 16. 1602 icsid Convention Art. 38: “If the Tribunal shall not have been constituted within 90 days after notice of registration of the request has been dispatched by the Secretary-General (…), or such other period as the parties may agree (…), the Chairman shall (…) appoint the arbitrator or arbitrators not yet appointed. (…).” 1603 icsid Convention Art. 45 (2): “If a party fails to appear or to present his case at any stage of the proceedings the other party may request the Tribunal to deal with the questions submitted to it and to render an award. (…).” 1604 Tams, An Appealing Option? 1, 14–15; Yannaca-Small, Annulment of icsid Awards 631. 1605 Although unsuccessful applicants for appeal will ultimately pay for the delay in the form of an award of interest and by bearing the opposing parties’ cost, the delay alone could still be enough of an incentive. Most delays are motivated by political or economic realities. These are, for instance, the hope for a change of government during the appeals proceeding or the goal of reaching a negotiated settlement of the award and paying a reduced amount. Other reasons are shortfalls in liquidity or the strategy of using a stay of

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stands in contrast to the icsid philosophy of providing for inexpensive proceedings.1606 As a consequence, smaller, less solvent users might be deterred. If these were financially no longer able to assert their rights, their bargaining position would be significantly weakened.1607 Thus, while much depends on the concrete shaping of an appeals facility,1608 it is undeniable that such a reform of the icsid system would make its use more time-consuming and expensive and, in a certain respect, less attractive.1609 4 Preliminary Ruling System a Concept A final reform proposal to resolve the problem of inconsistency consists in the idea of establishing a preliminary ruling1610 system within the icsid regime,1611 which aims at avoiding inconsistent arbitral jurisprudence from the outset.

enforcement to remove assets from the claimant’s reach. A safeguard to mitigate this risk of abuse and to deter abusive applications might be to require the party seeking a stay of enforcement to issue a bond or to give a guarantee. See Claudia Salomon & Kate Knox, Options for Change in the Annulment Process, 2 gar (1 February 2007). 1606 South Centre Analytical Note, Developments on Discussion for the Improvements of the Framework for icsid Arbitration and the Participation of Developing Countries, SC/ TADP/AN/INV/1, 17 (para. 59) (2005). 1607 Tams, An Appealing Option? 1, 15–16. 1608 In order to avert the risk of time and cost inefficiency, time limits comparable to those of the wto Appellate Body and regulations on cost should be set up; see icsid-Secretariat, Discussion Paper: Possible Improvements of the Framework for icsid Arbitration, Annex, paras. 10, 12 (22 October 2004). 1609 Tams, An Appealing Option? 1, 15–16. 1610 [Hereinafter pr]. 1611 As far as is known, the first scholar who put forward the idea of establishing an icsid pr system was Gabrielle Kaufmann-Kohler, see Kaufmann-Kohler, In Search of Transparency and Consistency 1, 8; Gabrielle Kaufmann-Kohler, Annulment of icsid Awards in Contract and Treaty Arbitrations: Are there Differences? in Annulment of icsid Awards (Emmanuel Gaillard & Yas Banifatemi eds., 2004). The idea has been taken up and refined by Christoph Schreuer; see Schreuer, Preliminary Rulings 207–212; Schreuer, Revising the System 1, 4–7; Schreuer, Diversity and Harmonization 150–151; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 17–18; Christoph Schreuer, Coherence and consistency in international investment law, in Prospects in International Investment Law and Policy – World Trade Forum 400–401 (Roberto Echandi & Pierre Sauvé eds., 2013). See also Kaufmann-Kohler & Potestá, Introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap, 48–50; Antonio R. Parra, Advancing Reform  at icsid, in Reshaping the Investor-State Dispute Settlement

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It would operate preventively by addressing the problem before it occurs – that is during pendency of proceedings.1612 The concept foresees the establishment of a reference procedure – modelled on the pr system of the eu1613 – as a tool at the disposal of any icsid tribunal adjudicating a case. More precisely, the arbitral tribunals would be vested with the right and/or duty to suspend their proceedings and to submit fundamental, newly occurring, or already disputed legal questions to an authoritative, semi-permanent body established for that purpose.1614 The pr body, being composed of highly qualified legal experts, would then issue an opinion on that abstract question of law.1615 As soon as such ruling was rendered, the original arbitral tribunal would continue its proceedings.1616 In its decision-making process, it would then – preferably on a mandatory basis – take into account the guidelines set out within the ex ante interpretation.1617 Beyond that, the opinion rendered by the pr body should have a certain binding quality – to be further determined – for future arbitral tribunals dealing with identical or largely comparative legal issues. The establishment and use of such a substantive “preview” mechanism promises to progressively generate well-founded and guiding interpretations of recurring norms and principles of international investment law and to thereby suppress inconsistencies in icsid case law. In the long run, the icsid regime could be expected to undergo a comprehensive and substantial harmonisation in the adjudication of investment disputes. This would be achieved without curtailing the factual decision-making competence of the arbitral tribunals and without any interference with fundamental systemic policies.1618 In order to expand its benefits and to avoid further fragmentation in international (investment) law, an icsid pr system should ideally be also available to investment arbitrations under different regimes, e.g. icc and scc arbitrations or ad hoc arbitrations under the uncitral Arbitration Rules.1619 The aim should



System – Journeys for the 21st Century 581 (Jean E. Kalicki & Anna Joubin-Bret eds., 2015); Tsatsos, A Call for Appeal 1, 30–31; Tams, An Appealing Option? 1, 44–45. 1612 Schreuer, Revising the System 1, 4; Schreuer, Preliminary Rulings 209. 1613 For detailed elaborations on the eu pr system, see below Ch. 3.C.I.2. 1614 Schreuer, Revising the System 1, 5–6; Schreuer, Preliminary Rulings 211; Schreuer, Diversity and Harmonization 151; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 18. 1615 Schreuer, Preliminary Rulings 212; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 8; Schreuer, Diversity and Harmonization 151. 1616 Schreuer, Preliminary Rulings 211; Schreuer, Revising the System 1, 5. 1617 Schreuer, Preliminary Rulings 212; Schreuer, Diversity and Harmonization 151. 1618 Schreuer, Preliminary Rulings 212; Schreuer, Revising the System 1, 6. 1619 Schreuer, Revising the System 1, 6.

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be to establish a single pr body vested with the power to decide on questions in all sorts of investment disputes, notwithstanding the respective arbitration regime chosen by the parties. The option of establishing an icsid pr system had already been discussed during the drafting process of the icsid Convention.1620 However, in contrast to the reform approach being currently debated, the idea was that one of the concerned contracting States,1621 the arbitral tribunal, or even the Centre itself1622 should be allowed to refer any question concerning the application and interpretation of the Convention to the icj.1623 The underlying motives for this proposal were the potentially insufficient legal expertise of the arbitrators in the field of international law and the securing of a uniform construction of the icsid Convention.1624 Yet, in the end, this plan failed due to various reasons. One cause was certainly the lack of an appropriate provision in the icj Statute upon which any prs rendered by the Court could have been based.1625 Also, 1620 Id., referring to Schreuer et al., icsid Commentary 1259 (Art. 64, paras. 7–11), with further references. 1621 icsid, History, Vol. ii, 353, 357, 439–440, 441, 532 (1968), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 8). 1622 icsid, History, Vol. ii, 279, 280, 291, 420, 532–533, 578 (1968), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 8). 1623 icsid, History, Vol. ii, 279–280, 290, 292, 354, 437, 440, 532, 577–578, 906 (1968), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 8). The draft for such additional provisions on the interpretation of the icsid Convention reads as follows: “(…) 2. (1) If in the course of any arbitral proceeding pursuant to this Convention a question arises between the parties thereto concerning the interpretation or application of this Convention, and the arbitral tribunal is of the opinion that the question has merit and may affect the outcome of the proceedings, the tribunal shall suspend the proceedings for a period of three months. (2) If within that period the tribunal shall have been notified that the International Court of Justice has been seized of the question by the States concerned, the arbitral proceeding shall remain suspended as long as the question is pending before the International Court of Justice. (3) If the tribunal shall not have been notified, the arbitral proceedings shall be resumed at the expiration of the aforesaid period.” See icsid, History, Vol. ii, 290, 532 (1968). 1624 icsid, History, Vol. ii, 291, 355, 420 (1968), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 8). 1625 The issue of an appropriate legal basis for references of interpretative questions to the icj had primarily been discussed with regard to its power to render advisory opinions. Art. 36 (2) of the icj Statute stipulates that “the states parties to the present Statute may declare that they recognize as compulsory ipso facto (…), in relation to any other

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in a more general respect, it was feared that this option could be abused to deal with inter-State controversies in the course of a case brought before the icsid or to cause procedural delays or frustration of icsid proceedings.1626 Nevertheless, this initiative still signals a then existing awareness of possible interpretative difficulties, which later turned out to become a serious consistency issue. b Discussion aa

Effectiveness: Ability to Combat Root Causes

The reform approach of introducing an icsid pr proceeding appears suitable to combat both the systemic and the methodological root causes of the problem of jurisprudential inconsistency.

state accepting the same obligation, the jurisdiction of the Court in all legal disputes c­ oncerning: a. the interpretation of a treaty (…).” Yet, this provision allows neither nonState parties nor the arbitral tribunal to seek an advisory opinion or even a preliminary ruling. Art. 64 (2) of the icj Statue, on the other hand, allows the Court to “give an advisory opinion on any legal question at the request of whatever body may be authorized by or in accordance with the Charter of the United Nations to make such a request.” Such authority is based on Art. 96 of the un Charter, which, inter alia, foresees that “specialized agencies,” if authorised by the un ga, may request advisory opinions of the icj on legal questions pertaining to their respective scope of activity. However, the icsid neither has the status of such specialised un agency as defined in Art. 57 (1) of the un Charter, nor is it expected to attain it. Although the World Bank has the status of a specialised un agency, the icsid – being “a separate international institution” – is not permitted to file requests for advisory opinions or prs via the World Bank, as the latter – pursuant to Art. 96 (1) of the un Charter – is only allowed to do so “on legal questions arising within the scope of [its] activities.” See Schreuer et al., icsid Commentary 1261–1262 (Art. 64, paras. 16–20), with further references. un Charter Art. 96: “(1) The General Assembly or the Security Council may request the International Court of Justice to give an advisory opinion on any legal question. (2) Other organs of the United Nations and specialized agencies, which may at any time be so authorized by the General Assembly, may also request advisory opinions of the Court on legal questions arising within the scope of their activities.” un Charter Art. 57 (1): “The various specialized agencies, established by intergovernmental agreement and having wide international responsibilities, as defined in their basic instruments, in economic, social, cultural, educational, health, and related fields, shall be brought into relationship with the United Nations in accordance with the provisions of Article 63.” 1626 icsid, History, Vol. ii, 290, 354, 439, 578 (1968), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 9).

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As far as the systemic factors determined in the foregoing chapter are concerned,1627 the envisaged reference procedure would compensate for the restrictions imposed by the current non-substantive icsid review system in that the interpretations rendered in prs would provide guidance to future arbitral tribunals and prevent incorrect and therefore often inconsistent interpretative approaches. In other words, the “preview” of abstract and central legal issues will do away with the need for a substantive review. Furthermore, the envisaged semi-permanent conception of a future pr body would also mitigate the problem of the discontinuity of the personnel of ad hoc arbitral tribunals. With regard to the methodological factors which have been determined as co-causative for the occurrence of inconsistencies,1628 it is expected that the interpretative approaches taken in the rulings of a pr body staffed by In this context, it appears appropriate to briefly differentiate between pr reform models being discussed here and references according to icsid Convention Art. 64. The latter norm provides for jurisdiction of the icj in case of “a dispute arising between Contracting States concerning the interpretation or application” of the icsid Convention. (For the full text of this provision, see fn. 401). As explained in the Report of the Executive Directors, this norm does not “empower a State to institute proceedings before the Court in respect of a dispute which one of its nationals and another Contracting State have consented to submit or have submitted to arbitration, since such proceedings would contravene the provisions of Article 27, unless the other Contracting State had failed to abide by and comply with the award rendered in that dispute.” see icsid, Reports of Cases Decided under the Convention on the Settlement of Investment Disputes between States and Nationals of other States, 1965, Vol. 1, 32–33 (1993), referred to in Schreuer et al., icsid Commentary 1260 (Art. 64, para. 11). In this way, it was clarified that Art. 64-references are not meant as a mechanism to receive any kind of ruling with regard to a pending case. Nor does it provide for a substantive ex post review option for an award rendered; see icsid, History, Vol. ii, 274, 423, 424, 429/430, 438–440, 534, 578, 993, 1030 (1968), referred to in Schreuer et al., icsid Commentary 1260–1261 (Art. 64, paras. 12–13). Rather, the provision refers to situations in which a host State does not comply with an icsid award in the enforcement stage. Only in this case may diplomatic protection in the sense of icsid Convention Art. 27 be granted and thus trigger the right to referral of the dispute to the icj. For further elaborations on icsid Convention Arts. 64 and 27 and the role of the icj in icsid arbitration, see Gauthier Vannieuwenhuyse, Bringing a Dispute Concerning icsid Cases and the icsid Convention Before the International Court of Justice, 8 L. & Prac. Int’l Cts. & Trib. 115, 115–141 (2009). For a position in favour of a pr System in investment arbitration involving the icj as pr body, see Gaffney, How Important it is to Develop a Coherent Case Law? 63–68. 1627 See Ch. 2.D.I. 1628 See Ch. 2.D.II.

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­ igh-calibre experts will help to overcome flawed interpretation techniques h employed by arbitral tribunals. Depending on the ultimate details of the arrangement of such a pr system, it also bears a considerable potential to cure deficiencies in the treatment of precedents by arbitral tribunals.1629 bb

Feasibility: Options for Implementation

aaa

Inter Se Supplementation of the icsid Convention

In contrast to the reform proposal suggesting the establishment of an appellate body, a pr system would neither subject icsid awards “to any appeal,” nor would it conflict with any of the remedies foreseen for the icsid postaward phase.1630 Consequently, it would harmonise with the principle of finality anchored in icsid Convention Art. 531631 and could be created without any changes to the Centre’s basic legal framework. Rather, its implementation could take place either by means of an additional protocol to the icsid Convention1632 or through changes or supplements to the icsid Arbitration Rules by decision of the icsid Administrative Council.1633 Implementing a pr mechanism by adopting an additional, supplementary protocol to the icsid Convention, which sets out its general features and functions,1634 implies that icsid member States would individually consent to this multilateral agreement. As was the case with the proposal to establish an icsid appellate mechanism,1635 such a protocol-like treaty could be drafted by the Secretariat and would then need to be adopted by the Administrative Council pursuant to icsid Convention Art. 6 (3).1636 1629 The role of precedents could be strengthened, for instance, if all arbitral tribunals intending to deviate from established lines of case law would be subject to a duty to submit the respective question to the pr body. For more details on a possible design of a future pr system and its ability to cure methodological deficiencies in the treatment of precedents by arbitral tribunals, see below Ch. 3.C. 1630 See Ch. 3.B.II.3.b.bb. 1631 For the text of icsid Convention Art. 53 (1), see fn. 369. Schreuer, Diversity and Harmonization 151; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 18; Schreuer, Preliminary Rulings 212; Schreuer, Revising the System 1, 4. 1632 Schreuer, Revising the System 1, 6. 1633 Id.; Tams, An Appealing Option? 1, 45. 1634 Schreuer, Revising the System 1, 6. 1635 See Ch. 3.B.II.3.b.bb.bbb. 1636 For the text of icsid Convention Art. 6 (3), see fn. 1591. For further elaborations on this legal basis, see Ch. 3.B.II.3.b.bb.bbb. (esp. fn. 1591).

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Irrespective of whether or not this sort of inter se supplementation would be governed by vclt Art. 41,1637 it is evident that, in contrast to the preceding reform proposal, a pr system is neither “prohibited by the treaty” nor does it “relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.”1638 Quite the contrary and in accordance with icsid Convention Art. 6 (3), preliminary references are expected to foster more consistent (or at least coherent), final arbitral decisions, while also aiding the arbitral tribunals in the principal proceeding in their endeavour to render correct awards. Accordingly, such an approach is supported by the object and purpose of the icsid Convention as the constituent treaty of the Washington Centre. The considerable advantage of this mode of implementation is that it operates on the level of primary law and hence does not run the danger of being criticised for illegitimately amending the latter by the back door.1639 Then again, the risk of ineffectiveness and fragmentation entailed by such an inter se implementation technique limits the attractiveness of this method.1640 bbb (1)

Changes or Complements to the icsid Arbitration Rules Changes – “Opt out”

A pr system could also be implemented through amendments to the icsid Arbitration Rules by a two-thirds majority decision of the Administrative Council pursuant to icsid Convention Art. 6 (1) (c). This provision has served repeatedly as a legal basis for amendments to the icsid Arbitration  Rules in past practice.1641 Once these amendments become 1637 For the text of vclt Art. 41 (1), see fn. 1588. According to Dörr & Schmalenbach, vclt Commentary 699 (Art. 39, para. 1), “(…) the term modification, employed in Art. 41, refers to an inter se agreement concluded between certain States Parties intended to vary provisions of a multilateral treaty in their mutual relations.” Since the additional protocol establishing the pr system would not vary, but rather supplement the icsid Convention, the applicability of vclt Art. 41 to the suggested inter se supplementation appears implausible or at least debatable. 1638 vclt Art. 41 (1) (b) (ii). For the text of this provision, see fn. 1588. 1639 For a discussion of the drawbacks of the implementation approach operating on the level  of secondary law, i.e. on the level of the icsid Arbitration Rules, see below Ch. 3.C.II.1.b. 1640 See Ch. 3.B.II.3.b.bb.bbb. For a discussion of the drawbacks of the implementation approach forseeing an inter  se supplementation of primary law, i.e. of the icsid Convention, see below Ch. 3.C.II.1.a. 1641 For the text of icsid Convention Art. 6 (1), see fn.1490. For elaborations on icsid Convention Art. 6 (1), see Ch. 3.B.II.1.b.bb.

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­effective,1642 all those parties wanting to avoid the applicability of the pr procedure to their disputes would have to “otherwise agree,”1643 i.e. they would need to explicitly exclude this system of preliminary references. In practice, this means that the contracting States would need to include an opt-out clause within the procedural provisions of their corresponding iias. Notwithstanding the general formal legality of the thus established legal basis for a pr procedure, critical voices claim that utilising such technique for making major structural adjustments to icsid arbitration proceedings would be an overuse, if not abuse, of the Administrative Council’s powers accorded in the icsid Convention. This reproach and the debate of whether an implementation of a pr system via amendments to the icsid Arbitration Rules is covered – in form and substance – by the said competences or whether it entails an illegitimate formal evasion and/or substantive exceedance of the i­csid Convention requires further discussion.1644 (2)

Complements – “Opt in”

As an alternative to the implementation based on a default applicability of the modified icsid Arbitration Rules described above, a pr system could also be established through merely optional complements to this set of procedural rules to be adopted by a decision of the Administrative Council pursuant to icsid Convention Art. 6 (3).1645 According to this approach, the future pr mechanism would be formally decoupled from the automatically applicable icsid Arbitration Rules. In order to render it applicable to an icsid arbitration proceeding, the disputing parties would need to explicitly consent to it. In practical terms, the contracting States would need to actively submit themselves to the pr system by including an opt-in clause in their iias. This formal detachment and the requirement of a positive consent would not invalidate the criticism of an illegitimate formal evasion of the icsid Convention. Nonetheless, it would at least attenuate the perceived restriction of party autonomy entailed by the proposal to change the icsid Arbitration Rules with a general validity for future cases absent an opt-out clause in the 1642 For elaborations on icsid Convention Art. 44, the “inter-temporal rule,” and on the determination of the point of time from which on procedural changes to the icsid Arbitration Rules would become effective for the parties, see Ch. 3.B.II.1.b.bb. (esp. fn. 1494). See also below Ch. 3.C.VII.1. 1643 See icsid Convention Art. 44. 1644 For the discussion of this aspect, see below Ch. 3.C.II.1. 1645 For the text of icsid Convention Art. 6 (3), see fn. 1591. For further elaborations on this legal basis, see Ch. 3.B.II.3.b.bb.bbb. (esp. fn. 1591) and Ch. 3.B.II.4.b.bb.aaa.

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corresponding iia. However, the dependence on the parties’ willingness to participate in the referral procedure would logically weaken the effectiveness of this reform. cc

General Pros and Cons

Similar to the reform proposal of an icsid appellate mechanism, an icsid pr system that issues guiding interpretations by high profile experts is expected to be accepted and respected not only by arbitral tribunals, but also by the system’s users and the entire investment community. This would have positive repercussions on the general authority and standing of the icsid regime and improve compliance with its arbitral tribunals’ rulings. A further, outstanding strength of a pr system is its capacity to balance and combine the basic arbitral policies of correctness and finality. First, the interpretative legal guidance provided by a panel of experts during pendency of a proceeding would facilitate the substantive accuracy of awards. Second, due to the fact that – in contrast to the proposal of an icsid appellate body – the suggested reform model acts ex ante and is thus devoid of any ex post scrutiny of arbitral decisions, it would not question the principle of finality of awards as codified in icsid Convention Art. 53 (1).1646 A point which may give rise to some skepticism is the additional time and cost entailed by the envisaged pr procedure. Undoubtedly, the referral to receive an interpretative ex ante ruling would involve losses in both dimensions.1647 Yet, the expected burdens are presumably far more moderate than the expenditures of time and cost in ex post review proceedings, given that these re-litigate an already decided case in its entirety1648 and risk being frequently used as a remedy by the losing party. Ex ante proceedings, by contrast, would primarily provide one-off clarifications of abstract and recurring legal questions.1649 Also, the additional time consumed by a pr referral might often 1646 Schreuer, Diversity and Harmonization 151; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 18; Schreuer, Preliminary Rulings 212; Schreuer, Revising the System 1, 4. For the text of icsid Convention Art. 53 (1), see fn. 369. 1647 Cf., in the eu law context, Udo Kornblum, Private Schiedsgerichte und Art. 177 ewgv – Zur Befugnis bzw. Verpflichtung privater Schiedsgerichte, Vorabentscheidungen des EuGH einzuholen, in Jahrbuch für die Praxis der Schiedsgerichtsbarkeit 1988 108 (Ottoarndt Glossner ed., 1989). 1648 Schreuer, Preliminary Rulings 212; Schreuer & Weiniger, Doctrine of Precedent in Investment Arbitration? 1, 18; Schreuer, Diversity and Harmonization 151. 1649 Cf. e.g. the acte éclairé exemption of the duty to submit a question which is included in the following draft of a pr system; see below Ch. 3.C.V.1.a.bb.

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be compensated by an easier and thus more expeditious decision-making process of the original tribunal. iii Evaluative Choice of the Preferable Instrument In the foregoing section, a broad spectrum of reform proposals aiming at an increase of consistency in icsid arbitral case law has been presented. Following an overview of approaches without icsid-specificity, i.e. independent of an institutionally-supported, centralised implementation, four reform models with icsid-specificity, i.e. specifically tailored to the characteristics, structures, and needs of the icsid regime, have been presented in a more detailed manner. The latter group consisted of proposals to establish formal consolidation proceedings, to increase the degree of post-award transparency, to establish an appellate mechanism and to introduce a pr system. Each of the concepts for reform carries with it a range of strengths and weaknesses. There is thus certainly no ideal, single solution to remedy the systemic deficiency of consistency in international investment arbitration and in particular in icsid arbitration. A complementary initiation of several institutional reform measures therefore appears desirable. Their combined effect would be an ideal way to respond to this overarching problem. This being said, there is presumably little realistic chance to accomplish more than one of the presented measures in a first reform initiative – in particular in view of the fairly complex nature of this legal field, which is marked by a plurality of interests and actors and in view of the generally rather long and cumbersome reform process within the icsid regime. It therefore seems appropriate to select and focus on the most promising instrument of reform in the following analysis and draft outline. Among the approaches to reform presented above, the non-icsid specific proposals are characterised by their emphasis on the leverage of system-­ independent measures. They offer a comparatively high degree of flexibility and pragmatic solutions, but their effectiveness is relatively limited since they depend on the goodwill of individual actors. Moreover, they run the risk of inducing further fragmentation in the field of international (investment) law. As a consequence and bearing the focus of this work on icsid arbitration in mind, the icsid-specific reform models suggested above shall be at the centre of interest. One aspect these reform proposals have in common is that they are institutionally supported. It can therefore be expected that their implementation will be well managed and that, as a consequence, they will be effective and reliable. When evaluating the different icsid-specific approaches, the criterion of effectiveness with regard to their scope and directness of impact appears to be

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most informative as a first step. The proposals envisaging procedural consolidation and post-award transparency resemble each other in this respect. The consolidation concept is relatively limited in its scope of impact, since it only addresses inconsistencies arising out of concurrently pending proceedings concluded at the same time. While this scenario is more common between an arbitral tribunal and a judicial court, it has so far been a rare occurrence between two arbitral tribunals.1650 The transparency concept, on the other hand, is relatively limited in its directness of impact, given that it only addresses a more indirectly operating co-causative factor, namely the insufficient accessibility of arbitration-related documents. More precisely, an increased degree of post-award transparency is expected to be of a solely indirect, uncontrollable impact as it would remain within the discretion of the individual arbitral tribunal whether or not to take the additionally available information into account and, along with this, whether or not to make the effort to reconstruct the factual and legal context of a preceding award using the said case-related documents.1651 In sum, in view of their rather limited scope and directness of impact respectively, neither of these two reform proposals appears to have the potential to address the problem of jurisprudential inconsistency in a sufficiently comprehensive and effective manner. Although they might still serve as complementary reform measures, they are unsuited to being placed at the centre of a reform project. More encompassing reform concepts, by contrast, can be found in the reform models suggesting the introduction of an icsid appellate mechanism and an icsid pr system. A feature these models have in common is that they address the same systemic causes identified in this work, more precisely the lack of personnel continuity and the narrowness of review remedies in icsid arbitration. In addition, these approaches also tackle methodological causes such as flawed interpretation techniques.1652 Furthermore, both mechanisms 1650 See Douglas, The Hybrid Foundations of Investment Treaty Arbitration 151, 241–259. 1651 It has also been argued that the difference between a requirement to publish merely excerpts of the legal reasoning or the entire award should not be overrated, since even the former, more limited obligation would involve both the indication of the legal rules applied as well as the “legal path” – including a representation of the facts – which was followed by the arbitral tribunal to arrive at the decision rendered; see Wong & Yackee, The 2006 Procedural and Transparency-Related Amendments 260. Moreover, past experience shows that most awards are released unilaterally or bilaterally by the disputing parties; see Schreuer et al., icsid Commentary 839 (Art. 48, para. 129). 1652 See Ch. 3.B.II.3.b.aa. and Ch. 3.B.II.4.b.aa.

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have a direct and broad impact in that, depending on their ultimate design, the respective (p)reviews would cover the entire field of international investment law and have a certain binding effect for arbitral tribunals. Having narrowed down the choice of icsid-specific reform approaches, a second criterion of evaluation, which takes account of the available modes of implementation, will be considered. In this regard, the reform model foreseeing a pr procedure for icsid arbitrations offers the clear advantage that it does not – unlike the reform model of an icsid appellate mechanism – stand in opposition to the clear wording of the icsid Convention1653 and may hence be fully and universally integrated into the icsid procedural regime without any formal, practically unattainable amendments to its basic treaty. The alternative options of inter se modification/supplementation of the icsid Convention are comparatively less attractive in view of the accompanying risk of ineffectiveness and fragmentation. In addition, a substantive review system would entail a fundamental subversion of the icsid policy of finality. Its implementation via inter se modification of the icsid Convention would thus risk conflicting with icsid Convention Art. 6 (3)1654 as well as vclt Art. 41 (1).1655 On the whole, the reform approach aiming at the introduction of an ­i csid pr system is the preferable one. It distinguishes itself by a considerable degree of effectiveness in that it acts directly, comprehensively and addresses not only systemic, but also methodological root causes and specifically flaws in the treatment of arbitral precedents. Due to its preventive mode of operation, it features the unique capacity of combining the promotion of the correctness of arbitral awards with the preservation of their finality. In contrast to an appeals mechanism, which would entail a substantive review of awards and hence interfere with the original arbitral tribunal’s decision, the ex ante rulings to be rendered by a pr body would be substantially detached from the concrete case and thus be solely concerned with the abstract legal interpretation of the norms and principles in question. Not least, due to the fact that it respects the principle of finality enshrined in the icsid Convention, the reform model is also comparatively unproblematic to realise. All these aspects taken together make up the advantages of a pr mechanism. They are hence worth the effort of undertaking a reform process and, once this will be accomplished, of moderate “investments” of time and cost in future, newly-shaped icsid proceedings. 1653 See Ch. 3.B.II.3.b.bb and Ch. 3.B.II.4.b.bb. 1654 For the text of icsid Convention Art. 6 (3), see fn. 1591. 1655 For the text of vclt Art. 41 (1), see fn. 1588.

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Preferable Reform Proposal: Draft of an icsid Preliminary Ruling System

In answer to the need of an adequate reform concept to remedy the increasing discrepancies in icsid jurisprudence and in view of the particular suitability of an ex ante rulings mechanism for this purpose, a detailed draft of an icsid pr system will be presented in the following. From a methodological viewpoint, two basic techniques will be used when elaborating the draft proposal. One is the orientation towards and borrowing of elements from comparable mechanisms in different legal contexts. A considerable part of the outline will be modelled along the lines of the well-established eu pr proceeding set out in the tfeu.1656 To a lesser extent, recourse will also be had to structural features of wto dispute settlement, more precisely to the composition and functioning of the wto Appellate Body. By basing the reform proposal on these existing mechanisms anchored in positive law and by transferring and adapting relevant aspects to the icsid system, it will be built on a solid and tested foundation. In methodological terms, this way of proceeding may be described as reform design by inference. A second basic technique consists in designing the pr system in reference to the fundamental structures, principles, and policies of the icsid arbitration regime. These are, for instance, the limited number of icsid organs and panels, as well as the basic principles of party autonomy, economy of procedure, and finality of awards. This way of proceeding aims to preserve the integrity of the icsid system, including all those characteristics that have fostered its previous success. The constitutive characteristics of the following draft of an icsid pr mechanism lie in its neutral setup and its configuration as an interlocutory, cooperative, and case-detached proceeding.1657 Its goals consist in the creation and safeguarding of a consistent and coherent icsid jurisprudence by providing interpretative support to arbitral tribunals.1658 When developing its practical 1656 Treaty on the Functioning of the European Union (consolidated version), 13 December 2007 (entry into force 1 December 2009), oj C 326 (2012) [hereinafter tfeu], formerly ec Treaty, as amended and renamed by the Lisbon Treaty. 1657 Cf. Thomas Groh, Die Auslegungsbefugnis des EuGH im Vorabentscheidungsverfahren – Plädoyer für eine zielorientierte Konzeption 211 (Duncker & Humblot, Berlin, 2005). 1658 Id. Such support would ease the interpretative burden of arbitral tribunals and, at the same time, preserve the importance of de facto precedents. It is hence compatible with

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implementation, arrangement, and functioning, both technical formalities and substantive principles and policies of international investment arbitration will be taken into account. Ultimately, it needs to be emphasised that the following draft constitutes an initial attempt to outline such an icsid pr system.1659 It thus does not claim perfection or completeness but rather is intended to stimulate debate and constructive criticism. The individual aspects addressed in the outline comprise the models on which an icsid pr system can be based (i.), its legal implementation and basic structures (ii. and iii.), the modes of admission and submission of referral questions (iv. and v.), the course of pr proceedings (vi.), and finally the effects of a pr rendered (vii.). For reasons of clarity, parts of the draft will be presented in schematic diagrams and charts to be found in the annex of this work.1660 i Conceptual Models When drafting a pr system, it is not necessary to “reinvent the wheel.” Rather, historical and current reference procedures, their advantages and disadvantages, may serve as an orientation for conceptualising such a mechanism within the icsid regime. 1 Historic Prototypes in National Law The earliest pr procedures date back to the Roman Empire and consists in the practice of the Imperial Chancery to issue rescripts upon request by a disputing party or a private judge.1661 Such imperial instructions provided decisive interpretations of ambiguous legal norms and had to be respected in the factual decisions of the respective pending cases.1662 They were based on the concept of a two-stage process which entailed an in iure proceeding (­concerning



two usually opposing viewpoints: the view contesting a law-developing function of arbitral tribunals, see e.g. Böckstiegel, Investitions-Schiedsgerichtsbarkeit aus der Sicht eines Schiedsrichters 113, 117, and the view advocating the development of law by arbitral tribunals, see e.g. Rogers, Vocation of the International Arbitrator 957, 1005. See also Ch. 2.B.II.2. 1659 Although the design of a future pr system should also consider its suitability for use by non-icsid arbitral regimes, this initial draft will begin with an icsid-specific conception, which might be complemented and expanded later on. 1660 See Annex to Ch. 3, which contains graphical overviews consisting of (i) a diagram of the basic structures of the pr system, (ii) a “decision tree” on the admissibility of a pr question, and (iii) a chart depicting the course of the pr procedure. 1661 Laurens Winkel, Das Vorabentscheidungsverfahren beim Europäischen Gerichtshof und dessen historische Vorbilder, 75 Legal Hist. Rev. 231, 233–235 (2007). 1662 Id. at 233.

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matters of law) before the praetor and an apud iudicem proceeding (concerning matters of fact) before the iudex and which endured until the reign of Diocletian.1663 In 454 A.D., this rescript practice had been confirmed in a constitution enacted by the emperors Valentinian and Marcian.1664 Moreover, it was continued by the pontifical decretals of the medieval church. Here, too, a party to the dispute or a judge asked the highest instance for legal advice.1665 A younger, but still historic prototype dating from the end of the 18th century is the French référé législatif.1666 Pursuant to this procedure and in accordance with Montesquieu’s treatise “De l’Esprit des lois,” a judge presiding over a case should refer unclear issues in new legislation to the Cour de Cassation, which was considered as a State authority empowered to discipline judges in the ordinary courts.1667 In the same era, a comparable procedure can be found in the Prussian “Allgemeines Landrecht” of 1794.1668 Yet, in contrast to the postrevolutionary France, the legislature of the enlightened absolutism in Prussia foresaw a referral of interpretative questions to the legislative committee itself. It did not build on Montesquieu’s doctrine of the separation of powers, but rather continued the tradition of Roman rescript practice.1669 1663 Id. at 233–234. 1664 Id. at 234, referring to C. 1,14,9: “Leges sacratissimae quae constringunt omnium vitas, intellegi ab omnibus debent, ut universi praescripto earum manifestius cognito vel inhibita declinent vel permissa sectentur. Si quid vero in isdem legibus latum fortassis obscurius fuerit oportet id imperatoria interpretatione patefieri duritiamque legum nostrae humanitati incongruam emendari.” 1665 Id. at 234–235. 1666 Id. at 235–236. The French procedure of référé législatif has been in force from 1790 to 1837. 1667 Id., referring to Boudewijn Bouckaert, De exegetische school 191–194 (Kluwer, Antwerpen, 1981). Yet initially the Tribunal de Cassation had not been considered as part of the judicial authority, but as an organ of legislation. 1668 Winkel, Vorabentscheidungsverfahren beim EuGH und historische Vorbilder 231, 236–237. 1669 Id. at 237. Much more recent concepts of reference procedures can be found in international treaty law. The Austrian-German Treaty on proprietary relationships of 1957 (Vertrag zwischen der Bundesrepublik Deutschland und der Republik Österreich zur Regelung vermögensrechtlicher Beziehungen, 15 June 1957, BGBl. ii 1958, 130) and the “Saarvertrag” between Germany and France of 1956 (Vertrag zwischen der Bundesrepublik Deutschland und der Französischen Republik zur Regelung der Saarfrage, 27 October 1956, BGBl. ii 1956, 1832) are good examples for bilateral treaties establishing pr mechanisms that provide for binding legal interpretations. While the former treaty foresaw the establishment of an arbitral tribunal to rule on mandatory referrals by national courts and administrative bodies concerning the applicability and interpretation of the treaty itself, the latter treaty gave the opportunity to the higher Saarland courts to submit fundamental

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2 eu Law The most influential concept of a pr proceeding has been developed in eu primary law, which is considered as having been inspired by constitutionality  review mechanisms in eu member States,1670 e.g. the German concrete judicial review pursuant to gg Art. 100 (1), BVerfGG Para. 13 No. 11,1671 or the Italian incidental system of judicial review pursuant to Costituzione Art. 134, Legge costituzionale No. 1 (9 February 1948) Art. 1, and Legge costi­ tuzionale No. 87 (11 March 1953) Art. 23.1672 The archetype of the most

questions on the interpretation of French law, which was applicable in Saarland at that time, to a mixed French-German tribunal. See Morten Broberg & Nils Fenger, Preliminary References to the European Court of Justice 4 (Oxford University Press, Oxford, 2nd ed., 2014); Christian Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 23–24 (Heymann, Köln, 1964). See also, on the Saarvertrag, Groh, Die Auslegungsbefugnis des EuGH im Vorabentscheidungsverfahren – Plädoyer für eine zielorientierte Konzeption 213–214. 1670 David Anderson & Marie Demetriou, References to the European Court 5–6 (Sweet and Maxwell, London, 2002); Tomuschat, Die gerichtliche Vorabent­ scheidung nach den Verträgen über die europäische Gemeinschaft 25–28. 1671 Grundgesetz [German Basic Law; hereinafter gg] Art. 100 (1): “If a court concludes that a law on whose validity its decision depends is unconstitutional, the proceedings shall be stayed, and a decision shall be obtained from the Land court with jurisdiction over constitutional disputes where the constitution of a Land is held to be violated, or from the Federal Constitutional Court where this Basic Law is held to be violated. This provision shall also apply where the Basic Law is held to be violated by Land law and where a Land law is held to be incompatible with a federal law.”; translation by Christian Tomuschat and David P. Currie, available at (last visited August 2016). For further details on the German concrete judicial review mechanism, see e.g. Hans D. Jarass & Bodo Pieroth, Grundgesetz für die Bundesrepublik Deutschland 1031–1042 (Art. 100, paras. 1–22) (Beck, München, 13th ed., 2014). That comparison falls short, however, as the German review of constitutionality entails only an examination of the contested norm’s validity. Questions relating to the interpretation of constitutional norms are handled pursuant to gg Art. 100 (3), BVerfGG Para. 13 No. 13; see Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 25. 1672 Costituzione della Repubblica Italiana [Italian Constitution] Art. 134: “The constitutional court decides: disputes concerning the constitutionality of laws and acts with the force of law adopted by state or regions; conflicts arising over the allocation of powers between branches of government within the state, between the state and the regions, and between regions; on accusations raised against the president in accordance with the constitution.” available at (last visited September 2016).

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popular1673 eu pr system was contained in the Treaty establishing the European Coal and Steel Community.1674 ecsc Treaty Art. 41 provided for the mandatory reference of questions on the validity of Community acts to the cjeu; the power to rule on interpretative legal questions, by contrast, had been left with the individual national courts of the member States.1675 Due to the narrow scope of this pr procedure, however, it was rarely used.1676 This practice changed dramatically in the course of the establishment of the European Economic Community1677 and the European Atomic Energy Community,1678 since the corresponding treaties1679 set up a pr procedure which also allowed for references of interpretative questions. According to the current tfeu Art. 267,1680 which was originally eec Treaty Art. 177 and later ec Treaty For further details on the Italian incidental judicial review, see Gianluca Gentili, Concrete Control of Constitutionality in Italy (Comparing Constitutional Adjudication), U. Trento, Dpt. of Legal Sciences, Faculty of Law 1, 5–7 (2008). Again, this review procedure relates solely to questions on the validity of norms, see Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 27. 1673 For a list of comparable pr procedures in eu treaties and conventions, see Anderson & Demetriou, References to the European Court 3. 1674 Treaty establishing the European Coal and Steel Community, 18 April 1951 (entry into force 25 July 1952, expiry 23 July 2002), 261 unts 140 (1957) [hereinafter ecsc Treaty]. 1675 ecsc Treaty Art. 41: “The Court shall have sole jurisdiction to give preliminary rulings on the validity of the acts of the High Authority and of the Council where such validity is in issue in proceedings brought before a national court or tribunal.” See Anderson & Demetriou, References to the European Court 6. 1676 Id., with references to the corresponding case law. 1677 [Hereinafter eec], established by the Treaty Establishing the European Economic Community, 25 March 1957 (entry into force 1 January 1958), 298 unts 11 (1958) [hereinafter eec Treaty]. 1678 [Hereinafter euratom], established by the Treaty Establishing the European Atomic Energy Community, 25 March 1957 (entry into force 1 January 1958), 298 unts 167 (1958) [hereinafter euratom Treaty]. 1679 Cf. ecc Treaty Art. 177 and euratom Treaty Art. 41. 1680 tfeu Art. 267: “The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties; (b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union; Where such a question is raised before any court or tribunal of a Member State, that court or tribunal may, if it considers that a decision on the question is necessary to enable it to give judgment, request the Court to give a ruling thereon. Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy un­der national law, that court or tribunal shall bring the matter before the Court. If such a question is raised in a case pending before a court or tribunal of a Member State with regard to a per­son in custody, the Court of Justice of the European Union shall act with the minimum of delay.”

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Art. 234,1681 any court or tribunal1682 of an eu member State may, at its  dis­ cretion, decide to suspend its proceedings and request a ruling on a ­question 1681 Treaty Establishing the European Community (consolidated version), 2 October 1997 (entry into force 1 May 1999), oj C 340 (1997) [hereinafter ec Treaty]; formerly ecc Treaty, as amended and renamed by the Treaty of the European Union, 7 February 1992 (entry into force 1 November 1993), oj C 191 (1992) [hereinafter teu/Maastricht Treaty]. 1682 While the exact scope of the term “court or tribunal” in the sense of tfeu Art. 267 will remain in flux due to the great variety of judiciary bodies within the different eu member States, the cjeu has set out a range of constituent criteria. Pursuant to its case law, it is vital to consider a number of aspects, “such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent.”; see Dorsch Consult Ingenieurgesellschaft mbH v. Bundesbaugesellschaft Berlin mbH, Case C-54/96, ecr i–4961 (1997) [hereinafter Dorsch], para. 23, referring, inter alia, to Vaasen-Göbbels (a widow) v. Management of the Beambtenfonds voor het Mijnbedrijf, Case C-61-65, ecr 261 (1966) [hereinafter Vaasen]. But see Broekmeulen v. Huisarts Registratie Commissie, Case C-246/80, ecr 2311 (1982) [hereinafter Broekmeulen], para.17, wherein the cjeu set out more lenient criteria, namely the recognition of a body’s judicial function by the member State, an adversarial procedure, and the statutory power to render legally binding decisions. It did not require the body in question to have compulsory jurisdiction or to cooperate with public authorities. As to domestic commercial arbitral tribunals of eu member States, the cjeu has consistently ruled that these would not qualify as a “court or tribunal” in the sense of tfeu 267; see e.g. Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern ag & Co kg and Reederei Friedrich Busse Hochseefischerei Nordstern ag & CoKG, Case C-102/81, ecr 1095 (1982) [hereinafter Nordsee/Nordstern], paras. 7–16. ; Eco Swiss China Time Ltd. v. Benetton International nv, Case C-126/97, ecr I-3055 (1999) [hereinafter Eco Swiss], para. 28; Denuit and Cordonnier v. Transorient Mosaïque Voyages et Culture s.a., Case C-125/04, ecr I-923 (2005) [hereinafter Denuit and Cordonnier], paras. 13–16. But see Handels-og Kontorfunsktionaerernes Forbund i Danmark v. Dansk Arbejdsgiverforening for Danfoss, Case C-109/88, ecr 3220 (1989) [hereinafter Danfoss], para. 7, wherein the cjeu ruled that the arbitration board in question was entitled to submit a preliminary reference because its jurisdiction was compulsory. Moreover, commentators argue that the rulings rendered by the cjeu as regards ­commercial arbitral tribunals must not necessarily be applied one-to-one to investment arbitral tribunals due to the considerable functional and institutional differences between these forms of arbitration, see e.g. Jürgen Basedow, eu Law in International Arbitration: Referrals to the European Court of Justice, 32 J. Int’l Arb. 367, 367–386 (2015); Alexander Friedrich, Vorabentscheidungsersuchen bilateraler Investitionsschutzpanels an den EuGH bei Intra-eu bits?, ZEuS (J. Stud. Eur. L.) 295, 312–331 (2010); Steffen Hindelang, Circumventing Primacy of eu Law and the cjeu’s Judicial Monopoly by Resorting to Dispute Resolution Mechanisms Provided for in Inter-se Treaties? The Case of Intra-eu Investment Arbitration, 39 Legal Iss. Econ. Integr. 179, 201–205 (2012); Miloš Olík & David Fyrbach, The Competence of Investment Arbitration Tribunals to Seek Preliminary

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concerning the interpretation or the validity of eu law from the cjeu “if it considers that a decision on the question is necessary to enable it to give judgment.”1683 A member State court or tribunal is obliged to request a pr on such question only where it is also the court or tribunal of last instance.1684 The cjeu then rules on the submitted legal issue and remits it to the requesting national court, which will then render its decision in the light of the cjeu’s ruling.1685 The wording of tfeu Art. 267 clarifies that the pr mechanism is not an appeals procedure, since it is the court, not the dissatisfied parties, which must initiate the necessary procedural steps.1686 Furthermore, the cjeu does not have the power to render its own decision in place of the national court. It only rules ex ante a court’s decision on the specific legal issues submitted.1687 In general, the tfeu pr mechanism helps to avoid divergent legal interpretations by the various national courts and thereby ensures the uniform development of eu law.1688 It nonetheless retains the independence of these member State courts.1689 Accordingly, the tfeu pr mechanism is based on the cooperative division of tasks, with the cjeu ruling on matters of law and the national Rulings, in Czech Yearbook of International Law 191–203 (Alexander Bělohlávek & Naděžda Rozehnalova eds., 2011); Konstanze von Papp, Clash of “Autonomous Legal Orders”: Can eu Member State Courts Bridge the Jurisdictional Divide between Investment Tribunals and the ecj? A Plea for Direct Referral from Investment Tribunals to the ecj, 50 cml Rev. 1039, 1066–1076 (2013). See also Opinon of Advocate General Wathelet (17 March 2016), para. 59 (fn. 34), in Genentech Inc. v. Hoechst GmbH, formerly Hoechst ag, SanofiAventis Deutschland GmbH, Case C-567/14, not yet published in ecr (2016) [hereinafter Genentech]. 1683 See tfeu Art. 267, 2nd sentence, at fn. 1680. 1684 See tfeu Art. 267, 3rd sentence, at fn. 1680. 1685 Further elaborations on details of the eu pr proceeding, e.g. admissible questions, the right and duty to refer a question, the legal and temporal effect of such rulings and possible sanctions for non-compliant member States, see below Ch. 3.C.II. et seq. 1686 Trevor Hartley, The Foundations of European Community Law – An Introduction to the Constitutional and Administrative Law of the European Union 281 (Oxford University Press, Oxford, 8th ed., 2014). 1687 Id. at 287. 1688 See e.g. Rheinmühlen Düsseldorf v. Einfuhr- und Vorratsstelle für Getreide und Futtermittel, Case C-166/73, ecr 33 (1974) [hereinafter Rheinmühlen Düsseldorf], para. 2; HoffmannLa Roche v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH, Case C-107/76, ecr 957 (1977) [hereinafter Hoffmann-La Roche], para. 5; International Chemical Corporation v. Amministrazione delle finanze dello Stato, Case C-66/80, ecr 1191 (1981) [hereinafter International Chemical Corporation], para. 11. 1689 John Fairhurst, Law of the European Union 188 (Pearson Education, Harlow, 11th ed., 2016), referring to De Coster v. Collège des Bourgmestres et Échevins de Watermael-Boitsfort, Case C-17/00, ecr I-9445 (2001) [hereinafter De Coster] on the concept of “court or tribunal” in general.

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courts deciding on matters of fact when applying the law.1690 Moreover, prs rendered under tfeu Art. 267 and its normative precursors help to ensure the supremacy and the direct effect of eu law, which form the basic principles of legal development within the Union.1691 The success of the eu pr procedure is reflected by the fact that almost all major policies and principles established by the cjeu were decided in the context of such rulings.1692 In addition, prs make up the majority of all cases heard by that court.1693 In 2015, for instance, 436 of 713 cases brought before the cjeu (approx. 61%) were references for prs,1694 and the trend is still rising.1695 As can be seen, the pr procedure is of fundamental importance for the law-­developing function of the cjeu. 3 International Law Due to its success, the eu pr procedure has served as a model for establishing a dialogue between national and international courts and tribunals and for harmonising the interpretation and application of norms in a common legal system. a Regional Integration Systems Numerous regional integration systems have adopted comparable procedures of judicial cooperation,1696 though they vary in their conditions for a referral, the binding nature of a ruling, and the availability of remedial action. A first group comprises regional economic integration agreements that include referral procedures under which an international court or tribunal is consulted on a facultative basis. The consulted institution then issues mere 1690 Id. at 177; Anderson & Demetriou, References to the European Court 26. 1691 See e.g. Flaminio Costa v. enel, Case C-6/64, ecr 585 (1964) [hereinafter Costa/enel], 594; nv Algemene Transport- en Expeditie Onderneming van Gend en Loos v. Nederlandse administratie der belastingen, Case C-26/62, ecr 1 (1963) [hereinafter Van Gend en Loos], 12–13; referred to in Anderson & Demetriou, References to the European Court 4. 1692 Id. at 25; Jürgen Schwarze, Art. 267 aeuv, in eu-Kommentar 2226–2227 (para. 6) (Jürgen Schwarze et al. eds., 3rd ed., 2012); Josephine Steiner & Lorna Woods, eu Law 224 (Oxford University Press, Oxford, 12th ed., 2014). 1693 Schwarze, Art. 267 aeuv 2226–2227 (para. 6); Fairhurst, Law of the European Union 180. 1694 cjeu, Annual Report 2015 – The Year in Review, Luxembourg, 27 (2016). 1695 Schwarze, Art. 267 aeuv 2226–2227 (Art. 267, para. 6). 1696 For an extensive overview of regional intergration systems that adopted a judicial ­cooperation procedure following the example of the eu pr system, see Roberto Virzo, The Preliminary Rulings Procedures at International Regional Courts and Tribunals, 10 L. & Prac. Int’l Cts. & Trib. 285, 285–313 (2011).

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opinions, i.e. rulings of only advisory character. This mechanism is employed by mercosur,1697 the efta States,1698 and ohada.1699 While the mercosur procedure does not foresee any remedial action for judgments of national courts conflicting with mercosur law, efta and ohada provide for infringement proceedings,1700 on the one hand, and review powers,1701 on the other hand, as regards decisions of domestic courts that allegedly violate the corresponding regional agreements.1702 A second group comprises regional agreements on economic integration that confer on their supra-regional courts and tribunals the authority to issue prs of binding nature. With the exception of the pr procedures of e­ cowas1703 and sica,1704 the use of these mechanisms is compulsory for courts and

1697 Mercado Común del Sur (Spanish) or Mercado Comum do Sul (Portuguese) [hereinafter mercosur]. See Art. 2 of the Olivos Protocol for the Settlement of Disputes in mercosur, 18 February 2003 (entry into force 1 January 2004), 42 ilm 2 (2003), which allows the mercosur member States’ courts and tribunals to request advisory opinions from the Tribunal Permanete de Revisión. 1698 European Free Trade Agreement [hereinafter efta]. See Art. 34 of the esa/Court Agreement (Establishment of a Surveillance Authority and a Court of Justice, 2 May 1992 (entry into force 1 January 1994), oj L 344/1 (1994)), which allows the efta States’ courts and tribunals to request advisory opinions from the efta Court. 1699 Organisation pour l’Harmonisation en Afrique du Droit des Affaires [hereinafter ohada]. See Art. 14 of the ohada Treaty (Treaty establishing the Organization for the Harmonization of Business Law in Africa/Treay of Port-Louis, 17 October 1993 (entry into force 18 September 1995), oj of ohada No. 4 (1997)). 1700 See Art. 31 of the esa/Court Agreement, which vests the efta Surveillance Authority with the power to enact infringement proceedings against any efta member State suspected of having violated an obligation under the esa/Court Agreement or the eea Agreement (Agreement on the European Economic Area, 2 May 1992 (entry into force 1 January 1994), oj L 1/1 (1994)). 1701 See Arts. 14 (3) and 15–20 of the ohada Treaty, which provide the Common Court of Justice and Arbitration [hereinafter ccja] with the power to review second or last instance decisions of ohada States’ courts and tribunals – inter alia if appealed by one of the parties due to alleged violations or improper interpretations and applications of ohada treaty law. 1702 Virzo, pr Procedures at International Regional Courts and Tribunals 285, 289–296. 1703 Economic Community of the West African States [hereinafter ecowas]. See Art. 10 (f) of the Protocol on the Community Court of Justice (Protocol A/P.1/7/91 ecowas, 6 July 1991, as amended by Supplementary Protocol A/SP.1/01/05 ecowas, 19 January 2004), which provides ecowas States’ domestic courts and tribunals with the opportunity to request a pr from the Community Court of Justice. 1704 Sistema de la Integración Centroamericana [hereinafter sica].

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tribunals which consider a question of interpretation and application of treaty law as necessary for their judgment and/or, in some of these systems, for courts and tribunals of last resort – mostly without regard to their considerations.1705 Nonetheless, the remedial actions available in case of a violation of the duty to request a pr vary according to the regional agreement: no specific remedy exists in the caricom,1706 sadc,1707 and the Benelux1708 See Art. 22 (f) of the cacj Statute (Statute of the Central American Court of Justice, 10 December 1992 (entry into force 2 February 1994) 34 ilm 928 (1995)), which provides sica States’ domestic courts and tribunals with the opportunity to request a pr from the Central American Court of Justice [hereinafter cacj]. 1705 Virzo, pr Procedures at International Regional Courts and Tribunals 285, 297–301, 305–308. 1706 Caribbean Community [hereinafter caricom]. See Arts. 211 (1) (c), 211 (2), and 214 of the caricom Treaty (Revised Treaty of Chaguaramas Establishing the Caribbean Community Including the caricom Single Market and Economy, 5 July 2001 (entry into force 4 Feburary 2002), 2259 unts 293 (2006)) and the identically worded Arts. xii (1) (c), xii (2), and xiv of the Agreement Establishing the Caribbean Court of Justice (Agreement Establishing the Caribbean Court of Justice, 14 February 2001 (entry into force 23 July 2003), 2255 unts 319 (2005)), which oblige all caricom States’ domestic courts and tribunals to request a pr from the Caribbean Court of Justice, if they consider a question on the interpretation and application of treaty law as necessary for their judgment. 1707 Southern African Development Community [hereinafter sadc]. See Rule 75 of the Rules of Procedure of the sadc Tribunal attached to the Windhoek Protocol on the sadc Tribunal (Windhoek Protocol on the Tribunal of the Southern African Development Community, 7 August 2000 (entry into force 14 August 2001)), which obliges all sadc States’ domestic courts and tribunals to request a pr from the sadc Tribunal, if they consider this as necessary to enable them to give judgment. 1708 Benelux Economic Union [hereinafter Benelux]. See Art. 6 (2) and (3) of the Treaty Concerning the Establishment and Statute of a Benelux Court of Justice, 31 March 1965 (entry into force 1 January 1974), 924 unts 4 (No. 13176) (1981), which provides Benelux States’ domestic courts and tribunals with the opportunity to request a pr from the Benelux Court of Justice, if they consider a question on the interpretation and application of treaty law as necessary for their judgment. Courts or tribunals of last resort are obliged to do so. The exceptions to references set out in Art. 6 (4) of the said treaty are particular to the pr proceeding before the Benelux Court of Justice. Under this norm a domestic court or tribunal may refrain from submitting a question to the Benelux Court of Justice, “if it believes that the question of interpretation which has arisen is not such as to give rise to a reasonable doubt” (cf. acte clair doctrine, Ch. 3.C.V.1.a.aa.) or “if the case is particularly urgent in nature.” In addition, “[i]t may p ­ roceed with the case if it concurs with the solution previously given by the Benelux Court of Justice in connection with another dispute or in an advisory opinion.” (cf. acte éclairé doctrine, Ch. 3.C.V.1.a.bb.). As can be seen, the Benelux Court of Justice has been modelled on the cjeu pr system.

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system, whereas the eac,1709 comesa,1710 uemoa,1711 and cemac1712 treaties as well as the Cartagena Agreement1713 foresee specifically tailored infringement proceedings.1714

See also Groh, Die Auslegungsbefugnis des EuGH im Vorabentscheidungsverfahren – Plädoyer für eine zielorientierte Konzeption 211–212. 1709 East African Community [hereinafter eac]. See Art. 34 of the eac Treaty (Treaty for the Establishment of the East African Community, 30 November 1999 (entry into force 7 July 2000)), which obliges all eac States’ domestic courts and tribunals to request a pr from the eac Court of Justice, if they consider a question on the interpretation and application of treaty law or on the validity of related regulations, directives, decisions, or actions as necessary for their judgment. For provisions on infringement proceedings, see Art. 29 of the eac Treaty. 1710 Common Market for Eastern and Southern Africa [hereinafter comesa]. See Art. 30 of the comesa Treaty (Treaty Establishing the Common Market for Eastern and Southern Africa, 5 November 1993 (entry into force 8 December 1994), 33 ilm 1067 (1994)), which obliges comesa States’ domestic courts and tribunals to request a pr from the comesa Court of Justice, if they consider a question on the interpretation and application of treaty law or on the validity of related regulations, directives, and decisions as necessary for their judgment. Moreover, courts or tribunals of last resort are obliged to do so regardless of their considerations. For provisions on infringement proceedings, see Art. 25 of the comesa Treaty. 1711 Union Économique et Monétaire Ouest Africaine [hereinafter uemoa]. See Art. 12 of the First Protocol to the uemoa Treaty (Treaty Establishing the West African Economic and Monetary Union, 10 January 2004 (entry into force 1 August 2004)), which obliges uemoa States’ domestic courts and tribunals to request a pr from the uemoa Court of Justice, if they consider a question on the interpretation of treaty law or on the validity of related actions as necessary for their judgment. Moreover, courts or tribunals of last resort are obliged to do so regardless of their considerations. For provisions on infringement proceedings, see Art. 14 of the First Protocol to the uemoa Treaty. 1712 Communauté Économique et Monétaire de l’Afrique Centrale [hereinafter cemac]. See Art. 17 of the cemac Court of Justice Statute (Agreement on the Court of Justice of The Economic Community of Central African States, 5 July 1996 (entry into force 5 February 1998)), which obliges cemac States’ domestic courts and tribunals to request a pr from the cemac Court of Justice, if they consider a question on the interpretation of treaty law or on the validity of related actions as necessary for their judgment. Moreover, courts and tribunals of last resort are obliged to do so regardless of their position, unless they have to rule “à charge d’appel.” For provisions on infringement proceedings, see Art. 19 of the cemac Court of Justice Statute. 1713 Andean Community of Nations [hereinafter can]. See Art. 33 of the tjca-can Treaty (Treaty Creating the Court of Justice of the Cartagena Agreement as Amended by the Cochabamba Protocol, 10 March 1996, Gaceta Oficial

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As experience with these different modes of judicial cooperation in regional integration systems shows,1715 the aim of achieving a consistent and harmonious interpretation of the respective body of law is best served if the fullest possible effect of a reference mechanism is ensured. This requires the specification of situations which demand a compulsory submission of a question for a pr, a binding effect of the rulings rendered and, if necessary, tools to remedy non-compliance. b International Courts Also on the level of internationally operating courts, there have been efforts to reform the respective systems by introducing or extending comparable referral mechanisms. However, the rulings mostly have only an advisory, non-binding effect.1716 Regarding the icj, some of its former presidents have repeatedly suggested permitting international courts and tribunals to seek the Court’s advisory opinion as to interpretative questions of public international law, which is currently only reserved to the un ga and the un sc as well as to authorised organs and specified agencies according to un Charter Art. 96.1717 A more extensive

del Tratado de Cartagena, Year xiii, No. 273 (1997)), which obliges can States’ domestic courts and tribunals to request a pr from the Court of Justice of the Andean Community (Tribunal de Justicia de la Comunidad Andina) [hereinafter tjca], if they consider a question on the interpretation and application of treaty law as necessary for their judgment. Moreover, courts or tribunals of last resort are obliged to do so regardless of their considerations. For provisions on infringement proceedings, see Arts. 23 et seq. of the tjca-can Treaty. 1714 Virzo, pr Procedures at International Regional Courts and Tribunals 285, 297–301, 305–308; Karen J. Alter, The Global Spread of European Style International Courts, 7 Northwestern University School of Law (Faculty Working Papers) 1, 10–11 (2011). 1715 Virzo, pr Procedures at International Regional Courts and Tribunals 285, 309–310. 1716 For a discussion of the role of advisory opinions for the development of international law, see Karin Oellers-Frahm, Lawmaking Through Advisory Opinion, in International Judicial Lawmaking – On Public Authority and Democratic Legitimation in Global Governance 69–97 (Armin von Bogdandy & Ingo Venzke eds., 2012). 1717 See e.g. Address by H.E. Judge Gilbert Guillaume, President of the International Court of Justice, to the United Nations General Assembly, 26 October 2000, referred to in Reinisch, Proliferation of International Dispute Settlement Mechanisms 121. The author also points out that a similar concept had already been proposed in Art. 96 of the 1948 Havana Charter (un Doc.E/CONF.2/78 (1948)), which foresaw referral powers to the icj for the then envisaged International Trade Organization. For the text of un Charter Art. 96, see fn. 1625.

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proposal to broaden the advisory jurisdiction of the icj was made by the American Bar Association in 1981: it suggested the “expansion of the advisory opinion jurisdiction of the International Court of Justice to include questions of international law referred by national courts.”1718 A respective reform of the ECtHR has taken on concrete form by opening the ratification process of Draft Protocol 161719 to the European Convention of Human Rights1720 by its member States.1721 This additional protocol foresees the enlargement of the Court’s authority to provide for advisory opinions pursuant to echr Arts. 47 to 49,1722 which has so far been restricted to specific See also the plea for providing (inter-) national judicial tribunals with access to the icj for advisory opinions on unsettled questions of international law, in Leo Gross, The International Court of Justice: Consideration of Requirements for Enhancing its Role in the International Legal Order, 65 Am. J. Int’l L. 253, 323 (1971). For a plea to open the icj advisory proceedings to national courts of the highest instance, see Hersch Lauterpacht, Decisions of Municipal Courts as a Source of International Law, 10 Brit. Yb. Int’l L. 65, 94–95 (1929). For a short overview of the icj’s power to deliver advisory opinions and its past advisory activities, see Oellers-Frahm, Lawmaking Through Advisory Opinion 71–72. 1718 [Hereinafter aba]. aba, Summary of Action of the House of Delegates, Midyear Meeting 12, Chicago, 1982, referred to in Louis B. Sohn, Broadening the Advisory Jurisdiction of the International Court of Justice, 77 Am. J. Int’l L. 124, 126–129 (1983). For an extensive discussion of this proposal, see Stephen M. Schwebel, Preliminary Rulings by the International Court of Justice at the Instance of National Courts, 28 Va. J. Int’l L. 495, 495–506 (1988). 1719 Council of Europe, Parliamentary Assembly (Committee on Legal Affairs and Human Rights), Draft Protocol No. 16 to the Convention for the Protection of Human Rights and Fundamental Freedoms, Doc. 13220, 5 June 2013. 1720 European Convention for the Protection of Human Rights and Fundamental Freedoms, open for signature 4 November 1950 (entry into force 3 September 1953), ets No. 005 [hereinafter echr]. 1721 The ratification process of Protocol 16 was opened on 2 October 2013; see the press release of the Council of Europe available at (last visited September 2016). As of December 2016, 16 member countries have signed the protocol, of which six have also ratified it. The current status of the ratification process is available at (last visited December 2016). 1722 echr Art. 47: “(1) The Court may, at the request of the Committee of Ministers, give advisory opinions on legal questions concerning the interpretation of the Convention and

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­interpretative questions by the Committee of Ministers of the Council of Europe and which has led only to few requests in the past.1723 Once the protocol has been ratified by ten member States to the Convention, the highest national courts and tribunals will also be allowed to request opinions on fundamental questions relating to the interpretation of the echr from the ECtHR.1724 Multiple reform proposals to this effect had already been made almost since the Convention’s entry into force, though without receiving the necessary support.1725 ii Legal Implementation Since a pr system works well to harmonise eu and regional law, it might also be apt to promote consistency in international investment jurisprudence. In this regard, the icj has proven unsuitable as a pr facility for icsid purposes, which is bound up with the fact that such a function could not be brought into line with the Court’s statute.1726 Therefore and since no other international

the protocols thereto. (2) Such opinions shall not deal with any question relating to the content or scope of the rights or freedoms defined in Section i of the Convention and the protocols thereto, or with any other question which the Court or the Committee of Ministers might have to consider in consequence of any such proceedings as could be instituted in accordance with the Convention. (3) Decisions of the Committee of Ministers to request an advisory opinion of the Court shall require a majority vote of the representatives entitled to sit on the Committee.” echr Art. 48: “The Court shall decide whether a request for an advisory opinion submitted by the Committee of Ministers is within its competence as defined in Article 47.” echr Art. 49: “Reasons shall be given for advisory opinions of the Court. (1) If the advisory opinion does not represent, in whole or in part, the unanimous opinion of the judges, any judge shall be entitled to deliver a separate opinion. (2) Advisory opinions of the Court shall be communicated to the Committee of Ministers.” 1723 For a short overview of the ECtHR’s power to deliver advisory opinions and its past advisory activities, see Oellers-Frahm, Lawmaking Through Advisory Opinion 72–73. 1724 For further elaborations and a discussion of this reform project, see Kanstants Dzehtsiarou, Advisory Opinions: More Cases for the Already Overburdened Strasbourg Court (31 May 2013), available at (last visited September 2016). 1725 See e.g. Council of Europe, Consultative Assembly, 11th Ordinary Session, Document No. 1062, 24 November 1959, referred to in Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 24; Council of Europe, Parliamentary Assembly, Recommendation No. 1020 (1985) on the desirability of empowering the European Court of Human Rights to give preliminary rulings at the request of a national court, 19th Sitting, Doc. No. 5459, 2 October 1985. 1726 See Ch. 3.B.II.4.a. and in particular fn. 1625. See also Schreuer, Revising the System 1, 6.

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adjudicatory body has a comparable adequacy or enjoys a comparable legitimacy, it is advisable to create a genuine icsid pr system. The first hurdle to be taken is the legal implementation of such a system. Since the most realistically achievable mechanisms presented earlier1727 have their respective advantages and disadvantages, the crucial question as to which one is preferable arises. In order to determine the most adequate strategy, it is useful to maintain the categorisation by points of departure, namely the distinction between the implementation approach taking the icsid Convention as a starting point, i.e. the inter se supplementation of the Convention, and those approaches based on the icsid Arbitration Rules, i.e. the changes or supplements to the said rules. All of the presented methods abstain from the idea of individually stipulating the innovative procedural provisions in the iias themselves. Rather, they are based on a central draft of the revised rules of arbitral procedure to be elaborated by the icsid Secretariat and affirmed by the icsid Administrative Council.1728 They thereby avoid an excessive splintering of the reform concept into multiple versions and rely on the necessary institutional support. 1 Available Strategies and Topics of Discussion a Implementation via Inter se Supplementation of icsid Convention Since amending the icsid Convention is unquestionably unrealistic, only the implementation technique providing for a mere inter se supplementation of the icsid Convention by a “coalition of the willing” is worth further consideration. This approach, though, bears a risk of fragmentation. Even in the long run, one cannot expect that it will be homogeneously and comprehensively implemented by all contracting States. Hence it may aggravate the problem of disintegration in international investment law. In the same vein, the pr system would lack the effectiveness needed to achieve the intended results. The approach operating on the level of the icsid Arbitration Rules, by ­contrast, would allow for a universal and effective implementation of the envisaged pr system. Obviously, this is only true for an amendment to the procedural rules according to icsid Convention Art. 6 (1) (c),1729 which implies an automatic applicability to any future icsid arbitration in the absence of an opt-out clause in the underlying instrument of consent. The adoption of a solely optional pr system based on opt-in clauses pursuant to icsid Convention

1727 See Ch. 3.B.II.4.b.bb. 1728 See Ch. 3.B.II.4.b.bb. 1729 For the text of icsid Convention Art. 6 (1), see fn. 1490

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Art. 6 (3),1730 on the other hand, equally risks ending up in a piecemeal approach with limited effectiveness, although it presumably would still be easier to mobilise member States to modify their individual iias than to consent to a momentous supplement to the icsid Convention. b Implementation via the icsid Arbitration Rules Complements and changes to the icsid Arbitration Rules are a formally legal and hence practicable way to implement a pr system in the icsid regime. However, it may be criticised that the introduction of new systemic elements via the icsid Arbitration Rules, i.e. on the level of secondary law and based on a mere two-thirds majority in the Administrative Council, evades the higher formal requirement of unanimous consent for amending the icsid Convention and, beyond that, exceeds its substantive regulatory boundaries. The reproach of a formal evasion of the consent requirement as a democratic element of the icsid Convention is invalid, at least in view of the proposal to adopt an icsid pr system pursuant to icsid Convention Art. 6 (3), which is only optional. This model of implementation foresees the option to “opt in” to complements of the icsid Arbitration Rules and would hence be based on the individual consent of icsid contracting States. Drawing on the approving or disapproving reaction of these member States, it may then be considered whether to proceed to a full scale implementation, yet including an “opt out” option, pursuant to icsid Convention Art. 6 (1) (c). Concerning the charge of an excessive extension of the general regulatory framework of the icsid Convention, it is essential to determine whether establishing an icsid pr mechanism could still be qualified as a reasonable modification of a primarily procedural nature or whether it would constitute a too extensive structural modification in the institutional architecture of the system.1731 There is a fine line between a legitimate complement to or change of the icsid Arbitration Rules in the sense of an adjustment to the current 1730 For the text of icsid Convention Art. 6 (3), see fn. 1408. 1731 See e.g. Lars Markert in: Diel-Gligor & Hölken, 4. Tagung des Krickenbecker Kreises 211, 212; Yun-I Kim & Levent Sabanogullari, 3. Tagung Junger Investitionsrechtler auf Schloss Krickenbeck am Niederrhein, 9 SchiedsVZ 221, 223 (2011). Moreover, in the commentary on icsid Convention Art. 44, Schreuer et al. state that the rules of procedure to be adopted on this basis “(…) could not be inconsistent with the Convention but would only implement or supplement it in matters of detail.“; see Schreuer et al., icsid Commentary 683 (Art. 44, para. 32). For an (indirect) position statement, see Tams, An Appealing Option? 1, 45: “(…) it would require an amendment of the icsid’s institutional set-up.”

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needs, and an illegitimate, excessive complement or change, which would constitute an infringement of the icsid Convention. The question of whether the implementation of a pr procedure by complementing or amending the icsid Arbitration Rules pursuant to icsid Convention Art. 6 constitutes an ultra vires act ultimately depends on the concrete practical arrangement of the mechanism. In order to prevent an excess of powers, it would need to build upon existing structures: it would have to avoid creating any additional, entirely new organs or bodies and abstain from any profound modifications of the rights and obligations of the member States.1732 Otherwise this approach to implementation risks entailing a formally legal, but substantively illegitimate exceedance of the icsid Convention. An inter se supplement of the icsid Convention, by contrast, is not expected to face the criticism of a formal evasion and substantive over-extension of this basic legal framework, given that an additional protocol would be legitimised by the consent of contracting States wanting to make use of the pr system and that it would operate on the level of primary law. 2 Preferable Strategy: Two-Step Approach In sum, both the implementation via inter se supplements of the icsid Convention and also by changing or complementing the icsid Arbitration Rules would be practicable. Each proposal has its particular advantages, of which the best possible use should be made. However, each proposal also has considerable downsides, whose repercussions should be kept to a minimum. An advisable strategy to achieve the full comprehensiveness and effectiveness of an amendment to the icsid Arbitration Rules, while at the same time mitigating the accompanying risk of an illegitimate formal evasion and/or substantive extension of the icsid Convention would hence be a step-by-step approach that consecutively combines the Art. 6 (3) opt-in concept with the Art. 6 (1) (c) opt-out concept.1733 The first phase of this approach foresees implementing a merely optional icsid pr procedure in the form of a decoupled complement to the icsid Arbitration Rules to be created by a decision of the Administrative Council according to icsid Convention Art. 6 (3). Parties willing to submit their dispute to the referral procedure would have to actively “agree otherwise” in their underlying instrument of consent pursuant to icsid Convention Art. 44.1734

1732 Lars Markert in: Diel-Gligor & Hölken, 4. Tagung des Krickenbecker Kreises 211, 212; Kim & Sabanogullari, 3. Tagung Junger Investitionsrechtler 221, 223. 1733 For a detailed presentation of these two concepts, see Ch. 3.B.II.4.b.bb.bbb. 1734 For the text of icsid Convention Art. 44, see fn. 230.

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Since this is normally an iia,1735 the opt-in mechanism would not only preserve the principle of party autonomy, but also respect the will of host States in their triple function as disputing parties, iia parties, and members of the icsid Convention. Over time, the insertion of such pr consent clauses into newly concluded or revised bits and mits could become a regular practice. As far as the renegotiation of existing bits is concerned, the revision of nine to 15 bits per year since 2000,1736 amounting to 132 bits by the end of 2008,1737 may be perceived as being indicative of a trend to modernise and update earlier (model) agreements, which offers unique opportunities to disseminate pr consent clauses and to promote and accelerate their incorporation into iias. This tendency to revise and renegotiate bits will be considerably enhanced by the expected replacement of more than 1,200 extra eu-bits by future eu-negotiated bits as a consequence of the newly acquired eu competence over fdi under the Lisbon Treaty of December 2009.1738 As far as newly concluded bits are concerned, the adoption of pr consent clauses could be encouraged by including them into Model bits, which are known to have an impact – in the sense of positive 1735 An agreement to the optional pr procedure requires States to include such a clause in the respective iia. This would provide the basis for a temporally delayed consent by private investors, which is generally implicitly contained in the request for icsid arbitration. A recent example of a reform of the international investment arbitration regime by using an opt-in approach is the Mauritius Transparency Convention, see Ch. 1.C.II.4.b. However, in that case, the agreement is provided globally for pre-existing iias, i.e. for iias concluded prior to 1 April 2014, by a State’s accession to the Convention itself as a multilateral treaty. 1736 unctad, World Investment Report – Investing in a Low-Carbon-Economy (2010). 1737 unctad, Recent Developments in International Investment Agreements, iia Monitor No. 3, 6 (2009), referred to in Newcombe, Developments in iia treaty-making 22. The latter author, for instance, points to the renegotiation of the 1959 Germany– Pakistan bit (see fn. 75), which was superseded by the new 2009 Germany–Pakistan bit (Agreement between the Federal Republic of Germany and the Islamic Republic of Pakistan on the Encouragement and Reciprocal Protection of Investments, 1 December 2009, BGBl. ii 2011, No. 20, 704). A further example of bit revisions is the amendment of more than 20 bits by the Czech Republic in May 2004 following its eu accession; see unctad, wir, 108 (2013). Between 2012 and 2015, approx. 20 new iias were concluded to replace existing iias, amounting to 8% of all new iias concluded in that period; see unctad, Taking Stock of iia Reform, iia Issues Note No. 1, 8 (2016). 1738 For further elaborations on this new eu competence, see also Ch. B.I.4.a. (fn. 127). The term ”extra eu-bits” refers to bits in force between eu member States with third countries. Cf. eu Parliament and Council, Regulation (eu) No. 1219/2012 of 12 December 2012 establishing transitional arrangements for bilateral investment agreements between Member States and third countries, oj 351/40 (2012).

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spillover effects – on other individual bits.1739 Moreover, the icsid could support the development of a routine by issuing model clauses which suggest how consent to the pr system can be drafted.1740 It is also conceivable that the ­i csid Secretariat might release recommendations of the pr procedure as well as explanations of the anticipated increase of jurisprudential consistency, e.g. in the form of a background report.1741 Lastly, it should be noted that, even without such external incentives, States are expected to recognise the advantages of a pr mechanism in icsid arbitration, given that a well-functioning and attractive system of investor-State dispute settlement is an important precondition to attract fdi to or send out fdi from their countries. Foreign investors will be more eager to invest only if they perceive the available mode and system of dispute settlement as reliable and predictable. It is hoped that the practice of opting into the applicability of the pr procedure thus developed will be suitable to qualify as “subsequent practice” in the application of the icsid Convention according to vclt Art. 31 (3) (b)1742 For a comprehensive overview of the consequences of this shift of competences on fdi, see Lavranos, Member States’ Bilateral Investment Treaties (bits): Lost in Transition? 281, 281–311. For the repercussions of the extended eu competence on existing treaties and the future practice of treaty-making, see Armand De Mestral, The evolving role of the European Union in iia treaty-making, in Improving International Investment Agreements 42–58, esp. 55–58 (Armand De Mestral & Céline Lévesque eds., 2013). The incorporation of icsid pr consent clauses and even of general icsid consent clauses into future eu-negotiated iias could, of course, only have effect if an eu member State who is also an icsid contracting State is selected as respondent in a given case. On the determination of the respondent and the division of financial responsibility between the eu and its member States, see European Parliament and Council, Regulation (eu) No. 912/2014 of the European Parliament and of the Council of 23 July 2014 establishing a framework for managing financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party (2014). 1739 See Ch. 2.B.II.1.b. 1740 See e.g. the icsid Model Clauses on the icsid Homepage which range from basic submission clauses to clauses related to the rules of procedure, available at (last visited September 2016). Although parties to investment disputes are known to “rarely agree on modifications of the Arbitration Rules as part of their consent agreement” (see Schreuer et al., icsid Commentary 680 (Art. 44, para. 25)), this tendency might not prove to be true if these modifications would not require specifying any deviating procedural regulations, but merely inserting a reference clause. 1741 The suggested background paper could be based on the following role models: icsidSecretariat, Background Paper on Annulment For the Administrative Council of icsid (10 August 2012); icsid-Secretariat, Background Paper on Annulment for the Administrative Council of icsid (5 May 2016) (2016). 1742 For the text of vclt Art. 31 (3), see fn. 713.

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in that it becomes relevant as “objective evidence of the understanding of the parties as to the meaning of the treaty.”1743 While there is an ongoing controversy over the breadth of the role of subsequent practice, which centres on the question of whether it may even lead to an informal modification of an international treaty or not,1744 it is generally recognised as a tool of authentic treaty interpretation.1745 1743 Report of the International Law Commission on the work of its eighteenth session, Part. ii, in: ilc, Yearbook of the International Law Commission, Vol. ii, un Doc. A/CN.4/SER.A/1966/Add.1, 221–222 (para 15) (1966), referred to in Roberts, Power and Persuasion in Investment Treaty Interpretation 179, 200. The difference between the concept of “subsequent practice” according to vclt Art. 31 (3) (b) and the concept of “subsequent agreements” according to vclt Art. 31 (3) (a) lies in the “evidentiary value” of the parties conduct, which is lower in the former case and higher in the latter case; see Georg Nolte, Jurisprudence of the International Court of Justice and Arbitral Tribunals of Ad Hoc Jurisdiction Relating to Subsequent Agreements and Subsequent Practice – Introductory Report for the ilc Study Group on Treaties over Time, in Treaties and Subsequent Practice (Georg Nolte ed., 2013). 1744 For discussions on this question with further literature references, see e.g. Marcelo G. Kohen, Keeping Subsequent Agreements and Practice in Their Rights Limits, in Treaties and Subsequent Practice 35–38 (Georg Nolte ed., 2013); Gerhard Hafner, Subsequent Agreements and Practice: Between Interpretation, Informal Modification, and Formal Amendment, in Treaties and Subsequent Practice 114–117 (Georg Nolte ed., 2013); Jörg Kammerhofer, Uncertainty in International Law – A Kelsian perspective 125–135 (Routledge, Abingdon, 2011). The possibility that subsequent practice may modify an international treaty, which was proposed by the ilc in Draft Art. 38 at the Vienna Conference, was rejected by a majority of the participating States; see Draft Art. 38 of the Draft Articles on the Law of Treaties with Commentaries, reproduced in un, Conference on the Law of Treaties, Official Records, First Session (26 March-24 May 1968 and 9 April-22 May 1969), un Doc. A/ CONF.39/11/Add.2, 55 (1968), referred to in Nolte, Introductory Report 200–201. Domestic courts share this negative attitude by emphasising that treaty modifications would require a formal agreement of the same legal nature and under the same legal conditions as the original one; see e.g. Out-of-Area Missions, German Federal Constitutional Court, Decision of the Second Senate, BVerfGE 90, 286, 2 BvE 3/92, 5/93, 7/93, 8/93 (12 July 1994), referred to in Hafner, Subsequent Agreements and Practice 116. Leading international courts, by contrast, admitted (at least implicitly) the possibility of treaty modification via subsequent practice; see e.g. Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), icj, Advisory Opinion (21 June 1971), icj Rep. (1971) 16; Öcalan v. Turkey (Application No. 46221/99), ECtHR, Judgment (12 May 2005), Reports 2005-IV, referred to in id. at 117. 1745 Kammerhofer, Uncertainty in International Law – A Kelsian perspective 125; Villiger, vclt Commentary 432 (Art. 31, para. 23).

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The preconditions for this interpretative approach consist in the objective element of “subsequent practice in the application of the treaty” and in the subjective element of “the agreement of the parties regarding its interpretation.”1746 The first element requires an externally visible activity or omission of State parties that relates to the application of the relevant treaty and shows a certain continuity.1747 However, it is not necessary that all parties to the treaty participate in that practice.1748 The second condition is considered to be fulfilled if the non-involved parties at least “acquiesce” in the conduct of the other parties, i.e. if they do not actively object to it and hence tacitly approve it.1749 In the event that the number of icsid member States consenting to the pr procedure via opt-in clauses in their iias were to increase, the requirement of a discernible and consistent action which is tacitly accepted by other icsid member States might be met.1750 Thus, after a certain lapse of time, the “subsequent practice” of parties to the treaty – being “their own masters”1751 – would ideally support an interpretation of the icsid Convention as to allow or at least tolerate the possibility of pr references during arbitral proceedings. Such interpretative argumentation would pay due respect to the contemporary conditions, needs, and usages of the investment community and, as a countermovement to the tendency of treaty petrification, allow finding innovative and modern solutions to persisting problems.

1746 See vclt Art. 31 (3) (b). 1747 Dörr & Schmalenbach, vclt Commentary 554–557 (Art. 31, paras. 76–81); Villiger, vclt Commentary 431 (Art. 31, para. 22). See also Hafner, Subsequent Agreements and Practice 109–113, esp. 112 (quotation): “(…) such practice must be concordant, common, and consistent.” 1748 Nolte, Third Report 309. 1749 Villiger, vclt Commentary 431 (Art. 31, para. 22); Dörr & Schmalenbach, vclt Commentary 559–560 (Art. 31, paras. 86–88). See also the statement of the ilc with regard to the expression “understanding of the parties” in vclt Draft Art. 27 (3) (b), which subsequently became vclt Art. 31 (3) (b), in ilc, Yearbook of the International Law Commission, Vol. ii, un Doc. A/CN.4/SER.A/1966/ Add.1, 222 (para. 15) (1966): “It considered that the phrase ‘the understanding of the parties’ necessarily means ‘the parties as a whole.’ It omitted the word ‘all’ merely to avoid any possible misconception that every party must individually have engaged in the practice where it suffices that it should have accepted the practice.” referred to in Nolte, Introductory Report 192, with further elaborations on the role of silence or omission for the parties’ common agreement in the sense of vclt Art. 31 (3) (b). 1750 Otherwise, “such practice may still serve as a supplementary means of interpretation according to [vclt] Article 32 (…).”; see Villiger, vclt Commentary 432 (Art. 31, para. 22). 1751 Id. at 429 (Art. 31, para. 16).

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Based on these developments, the implementation of the pr procedure qua formal amendment to the icsid Arbitration Rules according to icsid Convention Art. 6 (1) (c),1752 still including an opt-out option, could then take place in the second phase of the suggested two-step approach. Supported by the interpretative argument of subsequent practice according to vclt Art. 31 (3) (b), the pr procedure could be implemented as an automatically applicable and universally valid mechanism without facing the criticism that the implementation of the pr system illegitimately evades or exceeds the icsid Convention as the basic regulatory framework of icsid arbitration. As for its temporal effects, the amended version of the icsid Arbitration Rules would only apply prospectively, i.e. ex nunc, to cases based on consent perfected after its entry into force according to the “inter-temporal rule” stipulated in icsid Convention Art. 44.1753 iii Basic Structures Having addressed the problem of the technique for implementation, the next step is to outline the conception, composition, and functioning of the icsid pr mechanism.1754 For that purpose, it seems advisable to use largely comparable and already tested structures in the field of international dispute settlement as an orientation. 1 Conceptual Framework a Panel of Experts Regarding the conceptual framework of an icsid pr system, account should be taken of a possible conflict with icsid Convention Art. 3, which states that “[t]he Centre shall have an Administrative Council and a Secretariat and shall maintain a Panel of Conciliators and a Panel of Arbitrators.” It provides that the icsid regime does not allow for more than two organs and one panel out of which arbitrators may be recruited. The creation of a further independent 1752 Since an amendment to the icsid Arbitration Rules pursuant to Art. 6 (1) (c) requires a two-thirds majority of the members of the Administrative Council, it would even be based on a qualified democratic vote of this representative organ. 1753 For the text of icsid Convention Art. 44, see 230. For elaborations on icsid Convention Art. 44, the “inter-temporal rule,” and on the determination of the point of time from which on procedural changes to the icsid Arbitration Rules would become effective for the parties, see Ch. 3.B.II.1.b.bb. (esp. fn. 1494). The temporal scope of application of the amended version of the icsid Arbitration Rules must, however, be distinguished from the temporal effect of pr rulings to be rendered. For further discussion of the latter point, see below Ch. 3.C.VII.1. 1754 See Annex to Ch. 3 (i) for a diagram of the basic structures of the pr system.

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organ or panel would contravene this norm, which forms part of the icsid’s regulatory basis. Accordingly, a possible way to establish a future pr mechanism within the institutional limitations set by the icsid Convention would be to design a Panel of Experts – out of which the future members of the pr Committee would be selected – not as an independent panel, but only as a non-autonomous sub-panel of the Panel of Arbitrators.1755 In that manner, the limited number of icsid organs and panels would be respected. Given the considerable and far-reaching legal, political, and economic significance of the decisions to be taken by the members of such a Panel of Experts in the course of pr proceedings, it seems appropriate to raise the overall level of qualification in comparison to the “ordinary” members of the Panel of Arbitrators, who may be appointed to arbitral tribunals and annulment committees. Only leading and recognised authorities with broad knowledge and expertise in the fields of international investment law and public international law in general should be admitted to fill such a position.1756 Such a scrutiny for the said qualifications should be conducted by the icsid Secretariat on the basis of objective and transparent standards to be set up and published by the latter. Every arbitrator deemed suitable to serve on a pr Committee should then be assigned by the Chairman of the Administrative Council to a special pool, the Panel of Experts. b pr Committee Similarly, the pr Committee which would actually rule on the referral questions, should be conceptually interconnected with the constitution of the arbitral tribunal or annulment committee1757 hearing a particular case. More 1755 The composition and the mode of appointment to the Panel of Arbitrators is governed by icsid Convention Arts. 12 et seq. 1756 In the unlikely event that all persons serving on the Panel of Arbitrators turned out to be insufficiently qualified for this purpose, the Administrative Council could make use of its power to select ten members of the panel according to icsid Convention 13 (2) after expiry of the current appointment period and thereby provide for more qualified personnel. Moreover, as this would also be in the interest of the icsid member States, it is not unlikely that these would also reconsider their choice of panel members according to icsid Convention Art. 13 (1). icsid Convention Art. 13: “(1) Each Contracting State may designate to each Panel four persons who may but need not be its nationals. (2) The Chairman may designate ten persons to each Panel. The persons so designated to a Panel shall each have a different nationality.” 1757 Although icsid annulment committees are solely concerned with interpretative questions on the grounds for annulment or other procedural issues, the telos of pr systems

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precisely, the predetermined pr Committee1758 should only be formally in existence from the moment in which an arbitral tribunal is constituted. It would thus be deemed, by way of a legal fiction, as being set up simultaneously with each arbitral tribunal comparable to an “annex” to the latter.1759 With regard to this conceptual proposal, it is important to point out that the experts sitting on the pr Committee would not in any manner interfere with the powers vested in the arbitral tribunal to decide the concrete case submitted to it. Rather, as will be further elaborated below, they would decide solely on abstract legal questions arising in the context of a pending case.1760 icsid arbitration would thus feature an internal pr system based on a conceptual framework that allows establishing this mechanism without creating any additional and autonomous organs or panels. It would respect the institutional limits under the icsid Convention and preserve the process of individual dispute settlement by independent arbitral tribunals operating within its realm.1761 2 Practical Arrangement of a pr Committee and Its Divisions Considerations concerning the precise composition and functioning of the pr Committee and its divisions should primarily be driven by the superior goal of enhancing the consistency of icsid jurisprudence. This aim would be best served by providing for a certain degree of permanency in the membership of the pr Committee, which should – at the same time – be balanced by some variation in order to avoid the development of timeworn structures, entrenched positions, or fraternisation. Both aspects could best be reconciled by providing for term-limits for the pr Committee members.

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requires that these should be integrated into the reform model in same way as arbitral tribunals. In the interest of simplification, anytime the following text mentions arbitral tribunals in their relation to the pr system, it shall be deemed as also referring to annulment committees. For its composition and functioning, see below Ch. 3.C.III.2. Since such linking of the formation of the pr Committee with the institution of the arbitral tribunal would be of merely temporal and technical nature, it would not risk conflicting with icsid Convention Arts. 37–40 (Constitution of the Tribunal), which are generally not open to any modification in the sense of icsid Convention Art. 44 (“except as the parties otherwise agree”); see Schreuer et al., icsid Commentary 679 (Art. 44, para. 20). See Ch. 3.C.IV.1.a. See also Schreuer, Revising the System 1, 6.

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Such a semi-permanent composition is reminiscent of the Appellate Body within the wto dispute settlement system.1762 This ex post review mechanism will serve as a useful basic orientation when outlining the composition and functioning of a future icsid ex ante “pre” view mechanism. a The wto Appellate Body as a Model As seen earlier,1763 the wto Appellate Body consists of seven members “of [the] highest caliber,”1764 i.e. “of recognized authority, with demonstrated expertise in law, international trade and the subject matter of the covered agreements generally.”1765 In addition, its members have to be “broadly representative” of the wto membership and shall hence be neither affiliated with any State government nor involved in any dispute settlement that could give rise to a conflict of interest.1766 The dsb appoints these persons for a term of office of four years with the possibility of a one-time reappointment1767 and the members elect their Chairman among themselves for a one-time renewable term of one year.1768 1762 A comparably hybrid concept was also developed by the icsid in its 2004 Discussion Paper, which expounded the possible features of an icsid Appeals Facility and foresaw a semi-permanent membership of the Appeals Panel with staggered terms of office; see icsid-Secretariat, Discussion Paper: Possible Improvements of the Framework for icsid Arbitration, Annex (22 October 2004). However, this concept has not been chosen to serve as a model in this context as it remained a draft which was never tested in practice and hence has not generated any empirical data. 1763 See Ch. 3.B.II.3.a.bb.bbb. 1764 Decision on the Establishment of the Appellate Body, Recommendations by the Preparatory Committee for the wto approved by the Dispute Settlement Body, 10 February 1995, WT/DSB/1 (19 June 1995), para. 4, available at (last visited September 2016). 1765 dsu Art. 17.3. For the text of this provision, see fn. 1565. 1766 dsu Art. 17.3. For the text of this provision, see fn. 1565. 1767 dsu Art. 17.2.: “The dsb shall appoint persons to serve on the Appellate Body for a fouryear term, and each person may be reappointed once. However, the terms of three of the seven persons appointed immediately after the entry into force of the wto Agreement shall expire at the end of two years, to be determined by lot. Vacances shall be filled as they arise. A person appointed to replace a person whose term of office has not expired shall hold office for the remainder of the predecessor’s term.” 1768 wpar Rule 5: “(1) There shall be a Chairman of the Appellate Body who shall be elected by the Members. (2) The term of office of the Chairman of the Appellate Body shall be one year. The Appellate Body Members may decide to extend the term of office for an additional period of up to one year. However, in order to ensure rotation of the Chairmanship, no Member shall serve as Chairman for more than two consecutive terms. (…).”

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In order to ensure both a certain continuity and variation of the membership, it is foreseen that groups of three and of four persons each rotate alternately in a two-year rhythm.1769 Appeals submitted to the wto Appellate Body are not heard and decided en banc,1770 but in “division[s] consisting of three Members,” which are selected “on the basis of rotation, while taking into account the principles of random selection, unpredictability and opportunity for all Members to serve regardless of their national origin”1771 In order to integrate the individual and collective expertise of the entire Appellate Body into the decision process and “[t]o ensure consistency and coherence in decision-making,” the division hearing the appeal shall “exchange views with the other Members before the division finalizes the appellate report.”1772 The decision shall preferably be taken by consensus or – if unavoidable – by majority vote.1773 The Appellate Body then has to submit its report to the dsb within 60, at maximum 90, days.1774 The expenses incurred by the members serving on the Appellate Body are borne by the wto.1775 1769 dsu Art. 17.2. For the text of this provision, see fn. 1767. 1770 van den Bossche, Law and Policy of the wto 259. 1771 dsu Art. 17.1 and wpar Rule 6 (1) and (2). dsu Art. 17.1: “A standing Appellate Body shall be established by the dsb. The Appellate Body shall hear appeals from panel cases. It shall be composed of seven persons, three of whom shall serve on only one case. Persons serving on the Appellate Body shall serve in rotation. Such rotation shall be determined in the working procedures of the Appellate Body.” wpar Rule 6: “(1) In accordance with paragraph 1 of Article 17 of the dsu, a division consisting of three Members shall be established to hear and decide an appeal. (2) The Members constituting a division shall be selected on the basis of rotation, while taking into account the principles of random selection, unpredictability and opportunity for all Members to serve regardless of their national origin. (…).” 1772 wpar 4 (3) in connection with Rule 4 (1). For the text of wpar Rule 4, see fn. 1567. In addition, according to wpar Rule 4 (1), all members of the Appellate Body shall “convene on a regular basis to discuss matters of policy, practice and procedure.” See also Meinhard Hilf & Stefan Oeter, wto-Recht, Rechtsordnung des Welthandelsrecht 180–181 (sec. 7, para. 41) (Nomos, Baden-Baden, 2nd ed., 2010). 1773 wpar Rule 3 (2): “The Appellate Body and its divisions shall make every effort to take their decisions by consensus. Where, nevertheless, a decision cannot be arrived at by consensus, the matter at issue shall be decided by a majority vote.” Dissenting opinions may be expressed anonymously according to wpar Rule 17 (11). 1774 dsu Art. 17.5. For the text of this provision, see fn. 1569. 1775 dsu Art. 17.8: “The expenses of persons serving on the Appellate Body, including travel and subsistence allowance, shall be met from the wto budget in accordance with criteria

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Since its creation in 1995 as the outcome of the 1986–1994 Uruguay Round of Multilateral Trade Negotations,1776 the wto Appellate Body and its collegial decision-making process have met with great success. Its achievements have been primarily ascribed to the timeliness, unity, and consistency of its reports. These qualities are considered as being due to the ease and flexibility of decisions taken by small-sized divisions, to the persuasive consultation process with non-division members, to the consensus rule for decisions taken by divisions, and to the self-restraint of its members with regard to dissents from majority positions.1777 b Transfer of Features to the icsid pr Committee and Its Divisions In view of these particularly successful features of the wto Appellate Body, it seems indeed appropriate to selectively draw on them when developing a model of a future icsid pr Committee and its divisions. First, the committee should also be composed of seven internationally representative, neutral,1778 to be adopted by the General Council, based on recommendations of the Committee on Budget, Finance and Administration.” 1776 See the Final Act embodying the results of the Uruguay Round of Multilateral Trade Negotiations, which includes the Agreement Establishing the World Trade Organization, 33 ilm 1141 (1994). 1777 Alberto Alvarez-Jiménez, The wto Appellate Body’s Decision Making Process: A Perfect Model for International Adjudication?, 12 J. Int’l Econ. L. 289, 289–331 (2009), with detailed examinations on the functioning of the wto Appellate Body’s collegial decision making process. 1778 In order to guarantee neutral experts without any conflict of interest, the background information accompanying a question submitted to the pr Committee should be provided anonymously; see below Ch. 3.C.IV.3. In addition, members of the pr Committee should be obliged to declare any bias, e.g. due to prior involvement as party-appointed arbitrator in a case dealing with a similar legal issue. In this context, an important question is whether the appointment of the members of a future pr Committee should exclude any parallel professional activities as arbitrators. On the one hand, if they were allowed to do so, their availability would naturally not be guaranteed due to potential conflicts of interest and/or because of double-involvements in both the referring arbitral tribunal and the pr Committee. Efficient rules on the exchange of personnel would thus be of need. On the other hand, if their professional activities as an arbitrator were limited to their position as members of such a committee, the system would (absent a high retainer fee) certainly not attract the most experienced and qualified arbitrators because they may not be willing or able to dedicate themselves exclusively to a function within the pr body. Moreover, this construction would lead to the creation of two “castes” of arbitrators, “an upper caste with super-arbitrators and a lower caste of inferior arbitrators”; see Kaufmann-Kohler, In Search of Transparency and

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and highly qualified1779 lawyers. This unequal number of members, which is not too large and not too small, will ensure the practicability of collegiality while, at the same time, still providing a relatively broadly-based and knowledgeable expertise. Yet, in contrast to the wto practice of appointing the members of the Appellate Body by the dsb1780 and also in deviation from the mode of appointment to icsd annulment committees by the Chairman of the Administrative Council,1781 a more democratic and transparent selection process appears to be preferable.1782 To that end, the icsid Administrative Council,

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Consistency 1, 5–6, who makes these statements in the context of discussing the composition of an potential icsid appellate body. One solution suggests staffing the body with national judges who are well-­experienced with the review of awards and could “act as guardians over jurisdiction and due process”; see Wälde, Improving the Mechanism 505, 549, who presents this suggestion in the context of discussing the proposal to establish a standing icsid annulment committee. This proposal has to be dealt with carefully since it bears the risk of (re-)politicising the arbitral process. See Ch. 3.C.III.1.a. dsu Art. 17.2. For the text of this provision, see fn. 1767. icsid Convention Art. 52 (3): “On receipt of the request the Chairman shall forthwith appoint from the Panel of Arbitrators an ad hoc Committee of three persons. None of the members of the Committee shall have been a member of the Tribunal which rendered the award, shall be of the same nationality as any such member, shall be a national of the State party to the dispute or of the State whose national is a party to the dispute, shall have been designated to the Panel of Arbitrators by either of those States, or shall have acted as a conciliator in the same dispute. The Committee shall have the authority to annul the award or any part thereof on any of the grounds set forth in paragraph (1).” See e.g. the criticism of the lack of transparency in the appointment process to the wto Appellate Body in Hilf & Oeter, wto-Recht 180 (sec. 7, para. 40). See also the more general criticism regarding an alleged political bias in the icsid appointment process in van Harten, Investment Treaty Arbitration and Public Law 169–171. The author points out that the Chairman of the Administrative Council, who is vested with the power to appoint the members of ad hoc committees, generally “owes his (…) position to the major capital-exporting states.” More precisely, he refers to the fact that the Administrative Council “is chaired ex officio by the President of the World Bank, who is nominated by the us government and confirmed by the Bank’s Board of Directors, and who is by convention a us national.” An illustrative example of criticism as to the appointment of icsid ad hoc committee members is the reaction of the unsuccessful investor-claimant Grynberg in the icsid arbitration rsm Production Corp. v. Grenada, icsid Case No. ARB/05/14, which resulted in a lawsuit against the icsid, icsid’s Secretary General, and the World Bank Group filed at the us District Court for the District of Columbia on 29 May 2013. However, the claim was eventually withdrawn on 25 September 2013 due to alleged improvements of the

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being composed of “one representative of each Contracting State,”1783 should hold elections on the pr Committee’s membership at its annual or specifically arranged meetings.1784 Such elections, however, bear the risk of an unequal allocation of the personnel en banc, i.e. a prevalence of members associated with only one politico-economic category of contracting States.1785 Therefore, to ensure a balanced composition, the icsid Secretariat should be required to act correctively where an election results in more than four of the seven seats being filled with candidates from the same politico-economic background. In that case, the remainder of seats needs to be occupied by the highest ranked candidates of the underrepresented country category. Once such a banc of experts is established, its members should – following the wto approach – elect their Chairman from amongst themselves. Lastly, the pr Committee members should serve for a term of office of six years. Their terms of office should be staggered two years apart for groups of two persons at a time.1786 In this manner, a sufficient and reliable level of continuity, but also a certain degree of flexibility and diversification, will be ensured. Interpretative rulings on a question referred to the pr Committee should not be made en banc, but – along the lines of wto law – in divisions comprising three experts, which should be composed on a case-by-case basis and according to the principle of random rotation. The President of a pr Division shall be determined by lot. Such modus operandi serves the unpredictability of the composition of the division and the equal opportunity for members of the pr Committee. In addition, it seems advisable to also require a consultation process to take place between both the members of the pr Division themselves and the members of the entire pr Committee. Regarding the latter, the company’s fortunes in the host State. For further elaborations on this topic, see ia Reporter, Energy company drops lawsuit against icsid as fortunes turn in relation to disputed concession in Central African Republic (28 October 2013). 1783 See icsid Convention Art. 4 (1). For the text of this provision, see fn. 192. 1784 See icsid Convention Art. 7 (1). For the text of this provision, see fn. 193. 1785 Such country categories should be set up and assigned by the icsid Secretariat. They could be based, for instance, on a differentiation between capital-importing and capitalexporting countries, or, more generally, between low, middle, or high income countries. See e.g. the World Bank’s classification of world economies by analytical income categories (low, middle, high income), available at (last visited September 2016). 1786 Two of the six ordinary members would rotate every second year. Only the Chairman should have the possibility of a one-time renewal of his term of office by vote of the pr Committee’s members. The option of such second term is meant to ensure more continuity.

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professional exchange should not only pertain to a particular case but also include general discussions of the most recent issues in related fields of practice and science. This sort of consultation practice and the consensual – or at least majority – decision-making, which is another feature to be transferred from the wto model, are essential preconditions for consistent and coherent prs. Regarding the timeliness of a pr rendered by a competent division, it is advisable to set even tighter time limits than those applicable to the wto Appellate Body. A period of 60, at maximum 70 days ought to be foreseen in order to ensure an efficient and expeditious working pr mechanism.1787 The allocation of cost should, as far as possible, be determined separately from the original arbitral proceeding. It should take into account that the pr system and the interpretations of abstract legal questions it renders1788 primarily benefit the consistency of icsid jurisprudence and hence the well-functioning of the entire system. Accordingly, and given that the disputing parties already contribute their part by making sacrifices of time, it appears appropriate to finance the cost incurred out of the World Bank’s budget. Ultimately, despite all theoretical considerations, practical experience and adjustment will be required to verify and optimise the functionality of this draft over time. iv Admissible Questions In order to ensure an appropriate and effective functioning of the pr system and to prevent any procedural delays due to excessive use of this mechanism, it is necessary to lay down the general conditions of admissibility of a pr request.1789 Unless these are met, the pr Division should refuse to admit the referral and, where appropriate, return it to the arbitral tribunal for revision. The conditions will be developed along the lines of the successful eu model.1790 1 Subject of a Question a Questions of Legal Interpretation A first condition concerns the subject of a preliminary reference, which should be limited to questions on the interpretation of international investment law

1787 1788 1789 1790

In the initial pr Committee – in order to get the rotation process going – the terms of two persons should expire after two years and of another two persons after four years. The concerned persons will be selected by lot. See dsu Art. 17.2. For the text of this provision, see fn. 1767. See below Ch. 3.C.VI.2. See below Ch. 3.C.IV. See Annex to Ch. 3 (ii) for a “decision tree” on the admissibility of a pr question. See Ch. 3.C.I.2. See also, instead of many, Schwarze, Art. 267 aeuv 2227 (para. 6).

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(and related issues) that come up in a given case. Arbitral tribunals should be allowed to make a referral if the construction of a respective norm or principle raises significant uncertainties, doubts, or difficulties.1791 By contrast, pr proceedings should exclude both questions on the validity of legal provisions and principles as well as questions of fact relating to a pending case. The prohibition to rule on the validity of international investment law relates to the fact that it is beyond an arbitral tribunal’s authority to assess the lawfulness of international treaties or of international legal practice of sovereign States.1792 The interpretation of such norms and principles, by contrast, is an indispensable prerequisite for their application in a dispute resolution process and thus falls within the competence of arbitral tribunals.1793 The constraint pertaining to the submission of legal, not factual issues, which is based on eu law,1794 stems from the endeavour to respect paramount principles 1791 See e.g. Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 113–123, on the attribute of “doubtfulness.” 1792 Moreover, the body of international investment law, in particular the icsid Convention and the iias which mainly constitute this body of law, can be considered as the equivalent of eu primary law (rather than of eu secondary law), which, under tfeu 267 (cf. “interpretation of the Treaties”), is likewise not subject to judicial (validity) review; see e.g. Ulrich Ehricke, Art. 267 aeuv, in euv/aeuv – Vertrag über die Europäische Union und Vertrag über die Arbeitsweise der Europäischen Union 2315– 2316 (para. 13) (Rudolf Streinz ed., 2nd ed., 2012). 1793 Cf. e.g. Harvard Research in International Law, Draft Convention on the Law of Treaties, 29 Am. J. Int’l L. 657, 975–976 (1935), on the interpretation of international treaties: “[I]n so far as treaties in their international aspect are concerned, they may be authoritatively interpreted by the parties themselves through mutual agreement, either directly and through the ordinary channels of international relations, or indirectly as the result of recourse to good offices, mediation, or conciliation. Or they may be interpreted by an international organ or agency, permanent or ad hoc, to whose decision and interpretation the parties to the dispute agree to submit.” referred to in Weeramantry, Treaty Interpretation in Investment Arbitration 31. The experts sitting in the pr Division should be required to take into consideration any relevant pre-existing interpretations developed in arbitral and judicial case law (see below Ch. 3.C.IV.2.c.). In addition, they should consider any interpretative statements issued by or on behalf of the contracting parties to international treaties – in particular as regards the icsid Convention and the relevant bit – in order to duely respect their underlying motives and intentions (see Ch. 3.B.I.1.a). 1794 See e.g. Bernhard Wegener, Art. 267 aeuv, in euv/aeuv – Das Verfassungsrecht der Europäischen Union mit Europäischer Grundrechtecharta; ­Kommentar 2346 (para. 3) (Christian Callies et al. eds., 4th ed., 2011).

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and policies of international arbitration to the greatest possible extent. These include the principle of party autonomy – in particular the parties’ right to settlement of the dispute by the appointed arbitrators – and the principle of independence of arbitrators. Since pr Divisions would only decide on legal questions formulated with a certain degree of abstractness and as far as possible detached from the underlying dispute, they would leave the ultimate decision-making authority of the arbitral tribunal1795 as to the concrete subject matter untouched. Arbitrators would remain competent to determine the applicable law for a dispute and to apply it to the relevant facts, i.e. they would not be deprived of basic adjudicatory competences.1796 They would also retain a considerable interpretative impact, given that references for a pr would not only be limited to specific circumstances, but would also be influenced by the manner the arbitral tribunal formulates and comments on a referral question.1797 b Questions Pertaining to International Investment Law Since the sources of international investment law are manifold,1798 it is important to distinguish the different components of this wide body of law and to specify which legal issues and norms would be suitable for interpretation by a pr Division. Without doubt, investment-related questions pertaining to international law and in particular to public international law should generally qualify as admissible objects of referral. Such norms could stem from the icsid Convention itself and its related regulations and rules or from iias as a major source of substantive investment law. They could also come from general international law, which includes international conventions, international custom, and general principles of law pursuant to Art. 38 (1) of the icj Statute.1799 A more critical component of the body of international investment law is domestic investment legislation.1800 In this regard, it seems advisable to briefly cast another glance at the eu pr system. According to teu Art. 13 (2), 1st sentence, and Art. 19 (3) (b),1801 the cjeu has no jurisdiction over the national 1795 1796 1797 1798

See icsid Convention Art. 42 (1): “The tribunal shall decide a dispute (…).” See Schreuer, Revising the System 1, 5. For further remarks on the wording of a pr reference, see directly below Ch. 3.C.IV.3. For detailed elaborations on the different sources of international investment law, see Ch. 2.E. See also Wälde, The Specific Nature of Investment Arbitration 94–106. 1799 For the text of icj Statute Art. 38 (1), see fn. 1193. 1800 See Ch. 2.E.III.1.b. 1801 teu Art. 13 (2), 1st sentence: “Each institution shall act within the limits of the powers conferred on it in the Treaties.”

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law of the eu member States; questions relating to the interpretation of such municipal law cannot be submitted for a pr under tfeu Art. 267.1802 Otherwise, the cjeu would exceed its powers and infringe national sovereignty. The Court’s competence is thus limited to eu law in order to ensure its harmonious and uniform interpretation and application. For similar reasons, the interpretation of national law by an icsid pr Division should be inadmissible. Construing domestic investment legislation on an international level would, in all likelihood, involve a de facto binding effect for the concerned icsid member States, since it is impossible to isolate interpretations that emerged in the context of international investment law and arbitration from either national law or the interpretative approaches developed on the national level. The resulting infringement of State sovereignty would constitute an ultra vires act. Norms stemming from national law should thus not qualify as admissible objects of referral. Exceptions to this rule are nevertheless conceivable. They concern “Janusfaced” norms1803 which, despite being of domestic nature in principle, reach into the field of international investment law in that they regulate issues with direct relevance on the international level. This is the case, for example, with unilateral consent clauses to investment arbitration, which can be found in national investment legislation.1804 In order to determine whether a clause of this kind may be read as conferring jurisdiction on an arbitral tribunal, it might need to be construed by arbitral tribunals on the international level. Recurring legal questions in this regard, e.g. which standard of interpretation is to be applied, should consequently be admissible for pr referrals. If such a question happens to involve purely national legal issues, the pr Division should extract tfeu Art. 19 (3): “The Court of Justice of the European Union shall, in accordance with the Treaties: (a) rule on actions brought by a Member State, an institution or a natural legal person; (b) give preliminary rulings, at request of courts of Member States, on the interpretation of Union law or the validity of acts adopted by the institutions, (c) rule in other cases provided for in the Treaties.” 1802 Ehricke, Art. 267 aeuv 2316 (para. 14); Schwarze, Art. 267 aeuv 2230 (para. 15), referring to Mrs M.K.H. Hoekstra (née Unger) v. Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten, Case C-75/63, ecr 347 (1964) [hereinafter Unger], para. 3; Costa/enel, 592–593; Graham J. Wilson v. Ordre des avocats du barreau de Luxembourg, Case C-506/04, ecr I-8613 (2006) [hereinafter Wilson], para. 34; Liga Portuguesa de Futebol Profissional and Bwin International Ltd. v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, Case C-42/07, ecr I-7633 (2009) [hereinafter Liga Portuguesa], para. 37. 1803 The terminology has been inspired by Andreas Piekenbrock, Vorlagen an den EuGH nach Art. 267 aeuv im Privatrecht, 46 EuR 317, 350–352 (2011). 1804 For further elaborations on this topic, see Ch. 2.E.I.2.a.bb.

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from the partially inadmissible question those legal issues which pertain exclusively to international law.1805 2 Quality and Context of a Question In view of the multiple legal sources and in particular of the extensive network of bits, a proliferation of pr references by arbitral tribunals is not unlikely. However, a pr mechanism is neither conceived to handle questions that are not of direct relevance to a pending case, nor is it designed to answer questions that are too detailed or too case specific. Rather, it is intended to establish “patterns of interpretation”1806 on common and fundamental and hence recurring legal questions and standards that are material to a case at hand. Furthermore, in terms of time, a pr system should avoid causing any inappropriate procedural delays of the original proceeding or furthering inconsistent interpretations due to concurrently pending pr proceedings. To prevent a flood of undesirable, inexpedient submittals, it is essential to set out clear-cut criteria as to the quality and context of an admissible question. Questions with unsuitable features would hence be filtered out. In case of doubt, the ultimate decision on the admissibility of a question should lie within the discretion of the respective pr Division. An interpretative question should therefore only be admissible for referral to the pr Division if it concerns a legal issue with material relevance for the pending case and with general and fundamental importance for the development of international investment law, – (i) which arises for the first time before an arbitral tribunal, or – (ii) which has already occurred on repeated occasions and has led either to an inconsistent line of investment jurisprudence or to a consistent line of investment jurisprudence from which the referring arbitral tribunal intends to deviate significantly.1807 a Legal Issue with Material Relevance for the Pending Case As is the case under eu law, a legal issue should only be referred to the pr Committee if – in the opinion of the arbitral tribunal – it materially affects the outcome of the original proceeding.1808 In other words, any such question 1805 See Costa/enel, 593. 1806 See Crawford, Treaty and Contract in Investment Arbitration (22nd Freshfields Lecture on International Arbitration), 3 (2007). 1807 See also Schreuer, Revising the System 1, 5. 1808 See e.g. Klaus-Dieter Borchardt, Art. 267 aeuv, in EU-Verträge; Kommentar 2703–2704 (para. 24) (Carl-Otto Lenz et al. eds., 6th ed., 2013); Schwarze, Art. 267 aeuv 2237–2238

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shall be concerned with the interpretation of legal provisions the adjudicating arbitral tribunal considers as necessary to resolve the dispute.1809 The conferral of this discretionary power upon the tribunal is motivated by the fact that it has comprehensive knowledge of the factual and legal details of the case and is therefore ideally suited to evaluate the materiality of a submitted question. The considerations leading the arbitral tribunal to the assumption of material relevance should be laid down in a statement accompanying the question referred.1810 Notwithstanding this assessment prerogative of the arbitral tribunal, the respective pr Division should – in the course of verifying the admissibility of a submission it receives – still ascertain objectively whether there is a sufficient link with the subject matter of the case at hand and confirm that the interpretative question is not merely of artificial or hypothetic nature.1811 Lastly, the pr Division should be obliged to reject a preliminary reference if the question has become moot due to settlement, amendment of claims, or any sort of discontinuance of the arbitration proceedings.1812

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1810 1811

1812

(para. 37); Ehricke, Art. 267 aeuv 2323 (paras. 35–36); Anderson & Demetriou, References to the European Court 108–113; Manfred Dauses, Das Vorabentscheidungsverfahren nach Art. 177 EG-Vertrag – Ein Leitfaden für die Praxis 94–102 (C.H. Beck, München, 1995). See e.g. Luigi Benedetti v. Munari F.lli s.a.s., Case C-52/76, ecr 163 (1977) [hereinafter Benedetti], para. 12; Pasquale Foglia v. Mariella Novello. Case C-244/80, ecr 3045 (1981) [hereinafter Foglia ii], para. 15. See also Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 123–126, on the attribute of “necessity.” See Anderson & Demetriou, References to the European Court 113–114. On this separation of functions in eu law, see e.g. Van Gend en Loos, 11; Costa/enel, 593, referred to in Dauses, Vorabentscheidungsverfahren nach Art. 177 e­ g-Vertrag 98. See also Borchardt, Art. 267 aeuv 2704–2706 (paras. 25–28); Schwarze, Art. 267 aeuv 2238 (paras. 38–39); Ehricke, Art. 267 aeuv 2323 (para. 36); Anderson & Demetriou, References to the European Court 114–119; Luigi Malferrari, Zurückweisung von Vorabentscheidungsersuchen durch den EuGH  – Systematisierung der Zulässigkeitsvoraussetzungen und Reformvorschläge zu Art. 234 eg-Vertrag 274–275 (Nomos, Baden-Baden, 2004); Steiner & Woods, eu Law 231–234; Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag. See e.g. Pasquale Foglia v. Mariella Novello, Case C-104/79, ecr 745 (1980) [hereinafter Foglia I], para. 10, referred to in id. at 104–105. Anderson & Demetriou, References to the European Court 114; Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag 99, referring to Fratelli Pardini SpA v. Ministero del commercio con l’estero und Banca Toscana ( filiale di Lucca), Case C-338/85, ecr 2041 (1988) [hereinafter Pardini], 2074.

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b Legal Issue with a General and Fundamental Importance The requirement of a general and fundamental relevance of the legal issue for the development of international investment law – whose existence should similarly be controlled by the competent pr Division – is meant to ensure a certain degree of abstractness and general significance of the legal question submitted for a pr. It guarantees that the pr procedure is not abused as a tool to shift the work of arbitral tribunals to pr divisions or to elucidate singular legal aspects of an individual case, but that it is consulted for general questions of widespread interest beyond the individual level. This restriction derives from the fact that only questions of a certain universality bear a potential to recur and to cause inconsistent arbitral rulings. Hence, they might cause the need for adjusting and revising the development of icsid jurisprudence. The legal field of international investment law has a special potential to bring forth non-transferable referral questions due its highly complex and partially fragmented sources. bits, for instance, are usually the product of individual negotiations between contracting States which are characterised by particular inter-State relationships, investment policies, and interests.1813 They thus contain numerous individually stipulated and varying provisions. On the other hand, as seen,1814 bits also exhibit more generally formulated and recurring provisions, e.g. concerning the treaty’s protective scope and standards.1815 Although these can also display certain differences, they often raise questions of a more general character, which are perfectly suited for referrals. International conventions, international custom, and general principles of law, by contrast, encompass universally applicable investment law, which, by its very nature, is of general and fundamental importance. c Context of Pre-existing Case Law A legal issue submitted to the pr Committee to obtain interpretative guidance should further be embedded in a certain context of pre-existing case law. By taking into account prior arbitral cases concerned with identical or Conversely, unless the original proceeding is already concluded, it should be within the arbitral tribunal’s discretion to decide on the timing of a preliminary reference. See also Ch. 3.C.V.2. See e.g. Irish Creamery Milk Suppliers Association et.al. v. Government of Ireland et al.; Martin Doyle et al. v. An Taoiseach et al., Cases C-36 and 71/80, ecr 735 (1981) [hereinafter Irish Creamery Milk Suppliers], paras. 7–9, referred to in id. at 98–99. 1813 Reed et al., Guide to icsid Arbitration 60. 1814 See Ch. 2.B.II.1. 1815 Reed et al., Guide to icsid Arbitration 60.

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comparable questions, an unnecessary second-guessing of established arbitral jurisprudence can be avoided. On the one hand, this may be achieved by admitting only questions that arise for the first time or that have led to inconsistent results in past case law. Legal issues should qualify as “new” or “first instances” only if they are materially different from those previously ruled on by an arbitral tribunal, i.e. if they do not vary merely in small elements and details. When doubts arise on whether the question concerns a first instance issue, the pr Divisions should apply a relatively strict rather than lenient standard to prevent any illegitimate interference with settled arbitral jurisprudence. Legal issues should be considered as having led to “an inconsistent line of investment jurisprudence” as soon as at least two conflicting decisions have occurred in order to avoid further disorientation. By restricting pr referrals to these two categories of legal issues, the risk of undermining any existing consistent lines of case law will be avoided. On the contrary, the resulting pr might place the development of future case law on the right track straight from the outset or correct any undesirable developments. On the other hand, recurring questions should be admissible whenever the competent arbitral tribunal intends to depart from a pre-existing, settled, and consistent line of arbitral jurisprudence. Legal issues should qualify as being settled by past decisions as long they resemble a prior legal issue in all substantive respects. Minor differences in detail should be irrelevant. By allowing for preliminary references even in case of disagreement with pre-existing, established, and consistent arbitral jurisprudence, the material correctness of such case law could be double-checked and, if necessary, corrected. By tying these criteria to pre-existing arbitral case law, the legal development forged by prior case law will be duly respected. Moreover, these criteria foster the evolving system of de facto precedent, which implies that decisions rendered by icsid tribunals and committees – while in theory not having any binding precedential value in the sense of a maxim of stare decisis – are considered and taken up as guidance by arbitrators adjudicating subsequent cases.1816 In line with this, requests for pr should generally be inadmissible if the legal issue in question has already been settled by a consistent line of icsid jurisprudence on materially identical questions and remains uncontested by the arbitral tribunal most recently concerned with it. It should not be second guessed by a pr Division in that case.1817 1816 See Ch. 2.D.II.2. 1817 In this regard and for the restriction regarding pre-existing consistent icsid jurisprudence and a pre-existing pr, see also the elaborations on the acte éclairé exemption below, Ch. 3.C.V.1.a.bb.

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Context of the Ongoing Proceeding

No Questions Relating to a Request for Provisional Measures

Another prudent precondition of admissibility is that the legal issue in question does not directly relate to a request for provisional measures in the sense of icsid Convention Art. 47.1818 This negative requirement for the admissibility of a question takes account of the fact that provisional measures are generally requested and granted if they are considered as necessary and urgent to prevent irreparable harm to the respective rights of a party.1819 The admission of a pr request concerning a provisional measure, by contrast, would take additional time and thus risk frustrating its object and purpose. In turn and for the same reason, icsid tribunals should remain authorised to recommend provisional measures even when the proceedings have been stayed due to a pr referral.1820 In exceptional cases, however, a question referred for a pr which concerns a provisional measure should be admissible. This should be the case if it can be anticipated that the referral question will no longer be at issue in the subsequent principal proceeding. In such a scenario, the pr Committee shall decide such questions according to an expedited pr procedure for matters of exceptional urgency.1821 bb

No Pending pr Proceeding on an Identical Legal Issue

Finally, where there is another ongoing arbitral proceeding that involves a pr proceeding already concerned with an identical or comparable legal issue, subsequent pr requests on the issue should be ruled inadmissible. If arbitral tribunals were allowed to make a reference in such a situation, this would result in parallel proceedings which might produce inconsistent rulings. Moreover, the 1818 For the text of icsid Convention Art. 47, see fn. 308. Cf., in the eu law context, Wegener, Art. 267 AEUV 2355 (para. 30); Schwarze, Art. 267 aeuv 2240 (para. 46). 1819 Schreuer et al., icsid Commentary 776 (Art. 47, para. 64). 1820 Cf. cjeu, Information Note on References from National Courts for a Preliminary Ruling, oj C 160, para. 27 (2011). 1821 Such expedited pr procedure could be modelled after the example of the Rules of Procedure of the [European] Court of Justice, 25 September 2012, oj L 265–1 (2012) [hereinafter cjeu Rules of Procedure] Art. 105: “(1) At the request of the referring court or tribunal or, exceptionally, of his own motion, the President of the Court may, where the nature of the case requires that it be dealt within a short time (…) decide that a reference for a preliminary ruling is to be determined pursant to an expedited procedure derogating from the provisions of these Rules. (…).” See also Fairhurst, Law of the European Union 181–182.

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initiation of simultaneous pr proceedings would run counter to the arbitral principle of procedural efficiency and economy.1822 3 Drafting of a Question The conditions for a question’s admissibility presented in the foregoing section place specific demands on the formal conception and content of a referral question, which might also be borrowed from the eu context. The concrete question should be drafted in an abstract, clear, and simple, but sufficiently precise manner.1823 Since the pr Divison will not render any entirely abstract legal interpretations or concrete factual decisions, but rather provide legal guidance to an arbitral tribunal in the interpretation of case-related norms,1824 the formulation of a submitted question should be neither too general nor too specific. It is also anticipated that any associated minor legal issues have been sorted out. Further criteria are a self-explanatory formulation and a sufficient separation from any accompanying material.1825 The draft of a question should be accompanied by a statement wherein the arbitral tribunal expounds the material relevance of the interpretative legal issue for the pending case, its general and fundamental importance with respect to international investment law, as well as the reasons which caused it to seek a pr.1826 Additionally and most importantly, the referring arbitrators should add a brief statement to such addendum wherein they explain how they believe the submitted question should be answered.1827 The arbitral tribunal should, moreover, give a brief summary of the factual findings, the identified applicable law, the most cogent and relevant arguments of the disputing parties and of third parties,1828 and a procedural record.1829 By means of this concise but complete background information, the pr Division 1822 Piekenbrock, Vorlagen an den EuGH nach Art. 267 aeuv im Privatrecht 317, 338. 1823 cjeu, Information Note on References from National Courts for a Preliminary Ruling, oj C 160, para. 21 (2011). 1824 Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 127. 1825 cjeu, Information Note on References from National Courts for a Preliminary Ruling, oj C 160, para. 24 (2011). 1826 See Ch. 3.C.IV.2.a. 1827 cjeu, Information Note on References from National Courts for a Preliminary Ruling, oj C 160, 23 (2011). 1828 These arguments should also contain any statements made by the disputing parties and also by third parties in their pleadings or by amicus curiae as to the alleged duty of the arbitral tribunal to submit an admissible question to the pr Committee, see below Ch. 3.C.V.2.

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will be informed of the entire complexity of the corresponding case, which is necessary to render an adequate and helpful answer. Ultimately, the concise background information should be rendered in anonymised form to avoid possible conflicts of interest of pr Division experts1830 or infringements of confidentiality obligations. A wrong or unintelligible wording of a question or incomplete supporting documents should, however, not result in the referral being dismissed as inadmissible. Rather, the pr Division should return any ambiguous request and instruct the referring arbitral tribunal to reformulate or clarify the question or to submit the missing supporting documents within a fixed time limit.1831 v Submission of Questions A further aspect to be addressed relates to the right and/or duty of an arbitral tribunal to submit pr references to the pr Committee. Moreover, light will be shed on the role of the disputing parties and third party interveners. 1 Right and Duty of Arbitral Tribunals The determination of whether an arbitral tribunal should have not only the right but also the duty to submit an admissible question to the pr Committee should be guided by the overall objective and purpose of establishing a pr mechanism. In respect thereof, it should be recalled that the primary goal of the reform is to increase consistency of icsid jurisprudence as regards the interpretation of international investment law. As discernible from icsid Convention Art. 53 (1),1832 the icsid system is designed as a single-tier mechanism. The awards rendered by an icsid tribunal 1829 cjeu, Information Note on References from National Courts for a Preliminary Ruling, oj C 160, para. 22 (2011). 1830 As on average, far more than 100 cases are pending in front of icsid tribunals at any given time, it is rather unlikely that the disputing parties’ identity might be deduced from the information on the factual background of a case. See the list of pending cases on the icsid website, available at (last visited September 2016). In eu law, by contrast, anonymity of the disputing parties is only granted if ordered by the domestic court in the original proceeding or if considered necessary by the cjeu; see cjeu Rules of Procedure Art. 95. On the issue of neutrality of PR Division members, see above Ch. 3.C.III.2.b. (fn. 1778). 1831 Cf. also cjeu Rules of Procedure Art. 101 (1) (Request for Clarification): “Without prejudice to the measures of organisation of procedure and measures of inquiry provided for in these Rules, the Court may, after hearing the Advocate General, request clarification from the referring court or tribunal within a time-limit prescribed by the Court.” 1832 For the text of icsid Convention Art. 53 (1), see fn. 369.

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are not subject to any substantive review and are hence final. They can only be declared void by an icsid annulment committee, whose review is limited to very basic and mostly procedural issues.1833 As a consequence, the major portion of crucial interpretative questions is decided by icsid tribunals in the first and final instance. Whether the envisaged increase of consistency – going along with an enhanced predictability and correctness – of icsid investment jurisprudence may be achieved thus strongly depends on the condition that not only icsid annulment committees but also, first and foremost, icsid tribunals1834 have a right and duty1835 to refer any admissible question to the pr Committee.1836 Abstaining from such obligatory submission would risk 1833 See Ch. 2.E.II.2.b.aa. 1834 In the following, the term “arbitral tribunal” will stand for both, arbitral tribunals and annulment committees. 1835 It is understood that such duty to submit is always contingent upon the arbitral tribunal’s conviction that a pr is indispensable in order to be able to render an award on the pending case, see Ch. 3.C.IV.2.a. Cf. cilfit, para. 10: “(…) it follows form the relationship between the second and third paragraphs of Article 177 that courts or tribunals referred to in the third paragraph have the same discretion as any other national court or tribunal to ascertain whether a decision on a question of Community law is necessary to enable them to give judgment. Accordingly, those courts or tribunals are not obliged to refer to the court of justice a question concerning the interpretation of Community law raised before them if that question is not relevant, that is to say, if the answer to that question, regardless of what it may be, can in no way affect the outcome of the case.” referred to in Fairhurst, Law of the European Union 193, with further elaborations. 1836 Whether a referral duty even for icsid tribunals would be comparable, in the broader sense, with the eu concept of a pr mechanism is debatable. tfeu Art. 267, 3rd sentence contains a referral duty for courts or tribunals of member States against whose decisions “there is no judicial remedy under national law.” The question of what exactly is comprised by the term “judicial remedy” is not conclusively established due to the fact that remedies vary from member State to member State. Yet, it is clear that it has to be interpreted in the meaning of eu law and that it only refers to ordinary means of legal redress, i.e. remedies entailing a factual and legal or only legal review by the same court or tribunal or by a court or tribunal of higher instance. Extraordinary legal remedies, i.e. remedies with an only limited or specific effect (as e.g. the German constitutional complaint according to gg Art. 93 (1) No. 4 lit. a in connection with BVerfGG Paras. 13 No. 8 lit. a, 90 et seq.) do not fall within the scope of the term “judicial remedy” in tfeu Art. 267. See e.g. Borchardt, Art. 267 aeuv 2710 (para. 41); Ehricke, Art. 267 aeuv 2325 (para. 42); Andreas Middeke, Das Vorabentscheidungsverfahren, in Handbuch des ­R echtsschutzes in der Europäischen Union 258 (para. 62) (Hans-Werner Rengeling et al. eds., 3rd ed., 2014); Schwarze, Art. 267 aeuv 2239–2240 (para. 44); Wegener, Art. 267 AEUV 2354 (para. 26); Dauses, Vorabentscheidungsverfahren nach Art. 177

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rendering the pr system ineffective. However, at the same time, the relatively stringent conditions of admissibility would ensure a moderate and purposeful use of this mechanism. Solid exemptions from the duty to submit should prevent redundant referrals. a Exemptions from the Duty to Submit The admissibility of a referral question does not necessarily correspond to a duty to refer a question to the pr Committee. Under certain circumstances, an arbitral tribunal should be exempt from its obligation to submit a pr request although the admissibility requirements listed in the preceding section are cumulatively met. These exemptions, which – in most cases – do not affect the arbitral tribunal’s right to submit such a question,1837 can again be borrowed eg-­Vertrag 111–112; Matthias Pechstein, eu-Prozessrecht 411 (paras. ­828–829) (Mohr Siebeck, Tübingen, 4th ed., 2011). For a different view on the meaning of “judicial remedy” in the sense of tfeu Art. 267, which deems the review of eu law as decisive, see Piekenbrock, Vorlagen an den EuGH nach Art. 267 aeuv im Privatrecht 317, 332–333. The icsid annulment mechanism is the only remedy of legal review within the icsid system. It may only produce relief against procedural deficiencies. (See icsid Convention Art. 53 (1), see also Timo Marauhn, Streitbeilegung in den Internationalen Wirtschaftsbeziehungen 55 (Mohr Siebeck, Tübingen, 2005); Rolf Schwartmann, Private im Wirtschaftsvölkerrecht 95 (Mohr Siebeck, Tübingen, 2005)). Since this review is not undertaken by the icsid tribunal itself, but by a specifically composed ad hoc committee belonging to the same and not to a higher legal instance, the annulment mechanism appears to more closely resemble an extraordinary remedy than an ordinary legal remedy in the judicial sense. Accordingly, there is no legal recourse against awards rendered by icsid tribunals comparable to “judicial remedies” referred to in tfeu Art. 267, 3rd sentence. Their referral duty would thus conceptionally be in conformity with eu law. Parallels with the eu law concept can also be found when looking at the object and purpose of imposing a referral duty. According to the cjeu in Parfums Christian Dior sa and Parfums Christian Dior bv v. Evora bv, Case C-337/95, ecr I-6013 (1997) [hereinafter Parfums Christian Dior], para 25: “[i]t is clear from the case-law that the particular purpose of the third paragraph of Article 177 is to prevent a body of national case-law that is not in accord with the rules of Community law from coming into existence in any Member State (…),” referred to in Pechstein, eu-Prozessrecht 410 (para. 826). Similarly, the imposition of a referral duty in the icsid system would, inter alia, be intended to prevent any deviation from established icsid investment jurisprudence without providing for substantiated and convincing reasons. 1837 For cases in which an arbitral tribunal refers a question although it is exempt from the duty to submit (because the answer to an identical or comparable question has already been rendered by a pr Division or because it is obvious), it is conceivable to establish a

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from eu law and, more generally, be derived from the maxim interpretatio cessat in claris.1838 aa

Acte clair on an Objective Basis

bb

Acte éclairé by pr Divisions

The first exemption, which is also based on cjeu jurisprudence and more precisely on the acte clair doctrine developed in the cilfit case, comprises situations where the answer to an interpretative issue is “so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised is to be resolved.”1839 In order to guarantee that such an evaluation is based on objective criteria,1840 the arbitral tribunal would need to “be convinced that the matter is equally obvious”1841 to other arbitral tribunals. This will ensure that arbitrators keep their independence to the greatest possible extent and that pr Divisions are moderately used and can render decisions expeditiously. Given the extremely limited review remedy in icsid arbitration, this exemption should, however, be used restrictively and with the greatest caution. The second exemption is inspired by the acte éclairé doctrine, which has been decisively shaped by the cjeu in its Da Costa and cilfit judgments. Therein, the Court held that national courts were not obliged to refer a question to the cjeu to obtain interpretative guidance whenever it is materially identical with simplified procedure modelled after the example of cjeu Rules of Procedure Art. 99, according to which “the Court may at any time (…) decide to rule by reasoned order.” This implies that it would, in particular, refer to a pr it previously rendered on the same or largely similar interpretative question. See also Fairhurst, Law of the European Union 181. 1838 Clausdieter Schott, Interpretatio cessat in claris – Auslegungsfähigkeit und Auslegungsbedürftigkeit in der juristischen Hermeneutik, in Theorie der Interpretation vom Humanismus bis zur Romantik – Rechtswissenschaft, Philosophie, Theologie (Beiträge zu einem Interdisziplinären Symposion in Tübingen, 29. September bis 1. Oktober 1999) (Jan Schröder ed., 2001), referred to in Winkel, Vorabentscheidungsverfahren beim EuGH und historische Vorbilder 231, 232. 1839 Srl cilfit and Lanificio di Gavardo SpA v. Ministry of Health, Case C-283/81, ecr 3415 (1982), para. 16 [hereinafter cilfit]. See also Broberg & Fenger, Preliminary References to the cjeu 235–255; Pechstein, eu-Prozessrecht 414–415; Dauses, Vorabentscheidungsverfah­ ren nach Art. 177 eg-Vertrag 113–116; Schwarze, Art. 267 aeuv 2240–2241 (para. 47); Wegener, Art. 267 AEUV 2356 (para. 32); Ehricke, Art. 267 aeuv 2326–2327 (para. 47); Borchardt, Art. 267 aeuv 2712–2713 (para. 45). 1840 Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag 116–117. 1841 Id.

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a question that has already been decided in a previous pr.1842 Using this jurisprudence and the subsequently established practice as a model, icsid tribunals should be exempt from their duty to submit referrals for legal issues that have been elucidated previously by a pr rendered in a similar case. Nevertheless, the optional right to lodge a request should remain unaffected, given that the arbitral tribunal could raise some new, compelling arguments.1843 In that case, the pr Division should admit the question and restate the substance of earlier rulings for any recurring issues.1844 The second group of acte éclairé cases developed by the cjeu in the cilfit case, which refers to the situation that the answer to a question can be clearly deduced from earlier arbitral jurisprudence (and not from an earlier pr),1845 should – in the icsid context – not lead to an exemption of the duty to submit, but rather to the inadmissibility of a referral, unless an icsid tribunal intends to deviate from the established interpretation. This difference in treatment is driven by the endeavour to foster the development of a system of de facto precedent, which respects consistent lines of case law rendered by previous arbitral tribunals, and to avoid any nonessential1846 and time consuming second-guessing of such interpretations by pr Divisions.1847 b Violation of the Duty to Submit A further point to be addressed is the need for and the type of remedies against violations of an arbitral tribunal’s evident duty to submit a question for a pr. This would be the case if a tribunal arbitrarily omits to submit a question although a legal matter in question is admissible for preliminary reference and no exemptions to its submittal duty apply.1848 1842 Da Costa en Schaake nv, Jacob Meijer nv, Hoechst-Holland nv v. Nederlandse administratie der belastingen, Case C-28-30/62, ecr 31 (1963) [hereinafter Da Costa], 38; cilfit, para. 13. See also Broberg & Fenger, Preliminary References to the cjeu 233–234; Pechstein, eu-Prozessrecht 414–415; Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag 115; Schwarze, Art. 267 aeuv 2240–2241 (para. 47); Wegener, Art. 267 AEUV 2356 (para. 32); Ehricke, Art. 267 aeuv 2326–2327 (para. 47). 1843 Cf. Da Costa, 38; cilfit, para. 15. 1844 Cf. Da Costa, 38–39, referred to in Fairhurst, Law of the European Union 194. 1845 cilfit, para. 14. 1846 “Nonessential” refers to the case that the arbitral tribunal most recently concerned with a similar and settled legal issue had no essential objections to the interpretative approach established by its predecessors. 1847 See also Ch. 3.C.IV.2.c. 1848 In the eu law context, a standard of arbitrariness has been developed by the German Federal Constitutional Court. According to the Court, this obligation is breached when

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In the scenario that the proceeding is still pending, one conceivable remedy consists in setting up infringement proceedings within the regulatory framework of the pr mechanism, i.e. via the icsid Arbitration Rules. Taking eu law as a model, and, more precisely, tfeu Arts. 258–260,1849 such a proceeding could be conducted before the pr Committee, which would need to investigate any complaint and decide whether the corresponding Arbitration Rules have been infringed. If so, the arbitral tribunal would be prompted to take the the interpretation and application of tfeu Art. 267 “no longer appear to be comprehensible and are manifestly untenable”; see Honeywell, German Federal Constitutional Court, Order of First Senate, BVerfGE 126, 286, 2 BvR 2661/06 (6 July 2010), para. 88. The corresponding categories of such violations of the duty to refer a question for a pr are a “fundamental disregard for the obligation to make a submission,” a “deliberate deviation without a willingness to make a submission,” and the “incompleteness of the case-law.” For further elaborations on the approach taken by the German Federal Constitutional Court, see Regina Valutytė, Legal Consequences for the Infringement of the Obligation to Make a Reference for a Preliminary Ruling under Constitutional Law, 19 Jurisprudencija – Mykolas Romeris University 1171, 1173–1177 (2012). 1849 Cf. Gerhard Köbler v. Republik Österreich, Case C-224/01, ecr I-10239 (2003) [hereinafter Köbler]; Comission v. Italian Republic, Case C-129/00, ecr I-14637 (2003) [hereinafter Commission/Italy]. tfeu Art. 258: “If the Commission considers that a Member State has failed to fulfil an obligation under the Treaties, it shall deliver a reasoned opinion on the matter after giving the State concerned the opportunity to submit its observations. If the State concerned does not comply with the opinion within the period laid down by the Commission, the latter may bring the matter before the Court of Justice of the European Union.” tfeu Art. 259: “A Member State which considers that another Member State has failed to fulfil an obligation under the Treaties may bring the matter before the Court of Justice of the European Union. Before a Member State brings an action against another Member State for an alleged infringement of an obligation under the Treaties, it shall bring the matter before the Commission. The Commission shall deliver a reasoned opinion after each of the States concerned has been given the opportunity to submit its own case and its observations on the other party’s case both orally and in writing. (…).” tfeu Art. 260: “(1) If the Court of Justice of the European Union finds that a Member State has failed to fulfil an obligation under the Treaties, the State shall be required to take the necessary measures to comply with the judgment of the Court. (2) If the Commission considers that the Member State concerned has not taken the necessary measures to comply with the judgment of the Court, it may bring the case before the Court after giving that State the opportunity to submit its observations. It shall specify the amount of the lump sum or penalty payment to be paid by the Member State concerned which it considers appropriate in the circumstances. If the Court finds that the Member State concerned has not complied with its judgment it may impose a lump sum or penalty payment on it. (…)”

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relevant action to conform to its duty. Despite the expected benefits of such a compliance mechanism, several aspects remain difficult. First, there is the question of who should be authorised to initiate an infringement proceeding against an arbitral tribunal. Neither the Chairman of the Administrative Council, who is usually not familiar with the mostly confidential details of the pending cases, nor the disputing parties themselves appear to be suitable initiators of such proceedings. Regarding the latter, a right to initiate infringement proceedings vested in a single party would risk abusing this right as a delay tactic, whilst a right linked to a joint initiation by both parties would, in practice, rarely be used. A second question concerns situations where the arbitral tribunal fails to comply with the instruction to refer a question for a pr, given that sanctions, e.g. the disqualification of the non-complying tribunal, would exceed the competences a pr Committee might justifiably exercise within the legal confines of the icsid Convention. In the scenario that the proceeding is already concluded and that a final award has been rendered by the offending tribunal, another possible remedy is a request for annulment, e.g. on the grounds “that there has been a serious departure from a fundamental rule of procedure”1850 or “that the award has failed to state the reasons on which it is based”1851 according to icsid Convention 1850 A “fundamental rule of procedure” that could be claimed to have been violated by a tribunal that arbitrarily failed to submit an admissible, non-exempted question is “the right to a lawful judge” (resp. “the right to a lawful arbitrator”), which is closely related to the right to a fair trial and which is a fundamental procedural right in most civil law countries, see cepej, Armenia: The organisation of courts – Expert Report of the cepej/coe visit to Armenia 14–17 April 2009, cepej-coop (2009)3, para. 7 (2009), available at (last visited September 2016). In the context of eu law, the German Federal Constitutional Court has considered a national court’s failure to comply with tfeu Art. 267 (3) as a denial of this right, which is anchored in the German Constitution (gg Art. 101 (1)); see Solange ii – Wünsche Handelsgesellschaft, German Federal Constitutional Court, Order of Second Senate, BVerfGE 73, 339, 2 BvR 197/83 (22 October 1986); Honeywell, German Federal Constitutional Court, Order of First Senate, BVerfGE 126, 286, 2 BvR 2661/06 (6 July 2010); referred to in Valutytė, Legal Consequences for the Infringement 1171, 1174–1175. Whether the “right to a lawful arbitrator” would be covered by icsid Convention Art. 52 (d) has not yet been the object of icsid case law. Yet, given that this norm is primarily meant to include fundamental principles of procedure (see Schreuer et al., icsid Commentary 979–980 (Art. 52, para. 279)), such an interpretation is conceivable. 1851 An arbitral tribunal’s failure to comply with its duty to submit although at least one disputing party asked it to do so in its pleadings (on the role of disputing parties, see directly below Ch. 3.C.V.2.) could also qualify as a failure “to state the reasons.” Such an approach

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Art. 52 (1) (d) and (e).1852 However, given that the interpretation of the scope of annulment grounds is a controversial issue in icsid jurisprudence, it is debatable whether the violation of an arbitral tribunal’s duty to refer would be covered by these norms. Moreover, if this latter question on the interpretation of the icsid annulment grounds were deemed admissible for an icsid pr referral, the pr Committee would end up deciding on a matter concerning its own impact on the icsid arbitration system. In sum, it seems that none of the remedial options touched upon promises to produce adequate relief. Putting this aside, it is questionable whether there is a need at all for formal remedies against violations of an arbitral tribunal’s evident duty to submit. In view of the currently prevailing voluntary compliance of arbitral tribunals with the presently existing arbitration rules, which is supposedly mainly motivated by their respect towards the parties and the icsid regulatory system and, not least, by reappointment concerns,1853 it seems more appropriate to eschew, for the time being, establishing any formal remedy and to rely on a continuation of the past compliance practice. After all, it is not unlikely that sanctioning violations of the duty to submit would – absent any formal measure – ultimately be taken over by the “market,” because future disputing parties would certainly be reluctant to appoint noncompliant arbitrators. 2 Role of Disputing and Non-Disputing Parties Given that preliminary references are supposed to establish a cooperative dialogue between arbitral tribunals and pr Divisions,1854 the influence of the would require a broad interpretation of this annulment ground, i.e. to cover not only the failure to state reason, but also to address every question submitted to the tribunal. In the past, the majority of annulment committees concerned with this issue agreed with such a broad interpretation, see Schreuer et al., icsid Commentary 1015–1017 (Art. 52, paras. 406–413). 1852 For the text of icsid Convention Art. 52 (1), see fn. 374. A less appropriate ground for annulment would be icsid Convention Art. 52 (1) (b) (manifest excess of powers), since past icsid case law treated only the non-application of the proper law in toto as amounting to an excess of powers, and not of solely individual provisions of it, as would be the case for the breach of specific icsid Arbitration Rules. See id. at 964–965 (Art. 52, paras. 226–232). 1853 See Constantine Partasides, who presented statistics according to which “more than 80 percent of icsid awards are enforced voluntarily.” in: Ross, nicosia: Investment arbitration – a view from Cyprus, referred to and quoted in Parra, The History of icsid 314 (fn. 341). See also the elaborations on the “World Bank factor” in Ch. 1.C.I.2.b.cc. 1854 Cf., in the eu law context, Ehricke, Art. 267 aeuv 2314 (para. 7); Schwarze, Art. 267 aeuv 2226 (para. 4); Wegener, Art. 267 AEUV 2344–2345 (para. 1).

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disputing parties, who previously consented to pr proceedings, should be kept to a minimum. A further argument in support of such a restrictive policy is that the prs rendered will be addressed to the submitting arbitral tribunal only and therefore lack any direct effect for the parties to the original proceeding.1855 This restraint should be welcomed not least for reasons of economy of procedure. It is therefore recommended that parties should not be entitled to refer questions on their own initiative.1856 The disputing parties could, however, prompt the arbitral tribunal to lodge a referral by explaining in their pleadings filed during the written procedure1857 why they believe the arbitrators are obliged to make use of the pr mechanism with regard to a certain interpretative legal question.1858 In addition, the parties to the dispute should be allowed to present and explain their respective position during the oral hearings.1859 Nevertheless, the arbitral tribunal should 1855 See Ch. 3.C.IV.1.a. and Ch. 3.C.VII.2. 1856 Cf., in the eu law context, e.g. Schwarze, Art. 267 aeuv 2236 (para. 34). 1857 icsid Arbitration Rule 31: “(1) In addition to the request for arbitration, the written procedure shall consist of the following pleadings, filed within time limits set by the Tribunal: (a) a memorial by the requesting party; (b) a counter-memorial by the other party; and, if the parties so agree or the Tribunal deems it necessary: (c) a reply by the requesting party; and (d) a rejoinder by the other party. (…) (3) A memorial shall contain: a statement of the relevant facts; a statement of law; and the submissions. A counter-memorial, reply or rejoinder shall contain an admission or denial of the facts stated in the last previous pleading; any additional facts, if necessary; observations concerning the statement of law in the last previous pleading; a statement of law in answer thereto; and the submissions.” 1858 A comparable form of party initiative for the referral of an interpretative question by an arbitral tribunal to a competent authority is contained in the unclos; see Art. 188 (2.) (b): “If, at the commencement of or in the course of such arbitration, the arbitral tribunal determines, either at the request of any party to the dispute or proprio motu, that its decision depends upon a ruling of the Seabed Disputes Chamber, the arbitral tribunal shall refer such question to the Seabed Disputes Chamber for such ruling.” The regulatory background of this provision is unclos Art. 188 (2.) (a), 1st sentence, which foresees that disputes between State parties concerning the interpretation or application of a mutual contract on activities of exploration or exploitation in the international seabed area shall be submitted to binding commercial arbitration. This is subject to the condition that one party files a request for arbitration and that the parties did not agree otherwise beforehand. However, as seen, the jurisdiction of the arbitral tribunal does not extend to any question of interpretation of the Convention. unclos Art. 188 (2.) (a), 2nd sentence, states that questions on the interpretation of Part xi of the Convention, if arising in front of a commercial arbitral tribunal, “shall be referred to the Seabed Disputes Chamber for a ruling.” 1859 icsid Arbitration Rule 32 (1): “The oral procedure shall consist of the hearing by the Tribunal of the parties, their agents, counsel and advocates, and of witnesses and experts.”

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not be required to await the inter partes hearing; instead, it should have the discretion to determine the appropriate procedural phase for a pr referral.1860 Likewise, the arbitral tribunal should have sole discretion over whether or not to submit a question. Non-disputing parties that have already been admitted by the arbitral tribunal as amici curiae may “file a written submission with the Tribunal regarding a matter within the scope of the dispute” according to Arbitration Rule 37 (2).1861 They should similarly be allowed to take a stand in their briefs as to a possible duty of the arbitral tribunal to submit a certain interpretative legal question to the pr Committee. The reasoning behind this proposal is that third parties might provide additional knowledge and perspectives that are potentially helpful to the arbitral tribunal’s deliberations.1862 It goes without saying that the arbitral tribunal’s freedom of decision regarding the eventual referral of a pr request would remain unaffected. vi Course of Proceedings The practical arrangement of the course of a pr proceeding should be based on the interests of procedural efficiency and economy. These principles, which are characteristic for arbitral dispute settlement, should hence provide guidance when determining the administration, type, and timing of icsid pr proceedings.1863 1 Administration and Type of Proceedings pr proceedings should be administered by the icsid Secretariat and its Secretary-General, who is in charge of the Centre’s administration “in ­

1860 Cf. cjeu judgments wherein the Court did not consider an ex parte hearing as a bar to a preliminary reference but rather left the decision as regards the appropriate stage of the original proceeding for a submission to the national court; see e.g. Eurico Italia Srl v. Ente Nazionale Risi, Case C-332/92, ecr I-771 (1994) [hereinafter Eurico], para. 11; Simmenthal SpA v. Amministrazione delle Finanze dello Stato, Case C-70/77, ecr 1453 (1978) [hereinafter Simmenthal], para. 9; Politi S.A.S. v. Ministero delle Finanze della Repubblica Italiana, Case 43/71, ecr 1039 (1971) [hereinafter Politi S.A.S.], para. 5. However, the cjeu expressed its view that it is at least desirable to conduct an inter partes hearing prior to a preliminary reference, cf. eg. Eurico, para. 11; Simmenthal, para. 10. 1861 Arbitration Rule 37 (2). For the text of this provision, see fn. 333. 1862 See Schreuer et al., icsid Commentary 706–707 (Art. 44, paras. 126, 128), referring to Suez/Vivendi v. Argentina (Order on Petition for Transparency and Participation as Amicus Curiae), para.13; Biwater Gauff v. Tanzania (Procedural Order No. 5), para. 50. 1863 See Annex to Ch. 3 (iii) for a chart depicting the course of the pr procedure.

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a­ ccordance with the provisions of this Convention and the rules adopted by the Administrative Council.”1864 After a pr request has been filed, the Secretariat will, inter alia, be responsible for its registration, the composition of the pr Division, individual notifications, and the electronic publication of the anonymised request and the pr ultimately rendered.1865 It is advisable to lay out the procedure as non-adversarial and in writing only. This reflects the fact that pr proceedings aim to efficiently and objectively answer interpretative legal questions, which are decoupled – as far as possible – from the underlying case.1866 Accordingly, the parties to the original dispute should not have party status therein,1867 which would entail e.g. the right to be heard or the right to produce evidence in support of a claim. Nevertheless, using eu law as a model,1868 potentially interested persons and entities should be authorised to file written submissions to the pr Division1869 1864 icsid Convention Art. 11, 1st sentence: “The Secretary-General shall be the legal representative and the principal officer of the Centre and shall be responsible for its administration, including the appointment of staff, in accordance with the provisions of this Convention and the rules adopted by the Administrative Council.” The wto Appellate Body, by contrast, has its own Secretariat, which is independent from the wto Secretariat according to dsu Art. 17.7: “The Appellate Body shall be provided with the appropriate administrative and legal support as it requires.” In the icsid context, no obvious grounds exist why the icsid Secretariat, which would not have any influence on the politically sensitive appointment of pr Committee members, should not assume this task – in particular in view of the limited number of admissible organs according to icsid Convention Art. 3. 1865 For more detailed elaborations on the course of pr proceedings and the tasks of the icsid Secretariat therein, see Ch. 3.C.VI.2. 1866 See Ch. 3.C.IV.1.a. 1867 Cf., in the context of eu law, Tomuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 144–146, 172, with further references. 1868 Cf. cjeu Rules of Procedure Art. 96 (Participation in preliminary ruling proceedings): “Pursuant to Article 23 of the Statue, the following shall be authorised to submit observations to the Court: (a) the parties to the main proceedings, (b) the Member States, (c) the European Commission, (d) the institution which adopted the act the validity or interpretation of which is in dispute, (…).” 1869 In order to ensure a feasible workload and objectivity of the pr Division, the icsid ­Secretariat should screen any submission for relevance, clearness, and conciseness and anonymise it if necessary. Submissions should be also made available to the remaining members of the pr Committee. As an incentive for third parties to contribute to the decision-making process of the pr Divisions, their submissions could be published on the icsid website once the pr is rendered – on request even as non-anonymised data.

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at their own cost.1870 These include the disputing parties, the icsid member States, the institutions and entities which adopted the legal norms in question (if different),1871 the amici curiae to the original proceeding, and any other qualified third party.1872 Their observations are expected to provide valuable expertise and perspectives for the pr Division’s deliberations, whilst preserving the neutral, independent, and objective character of reference procedures. 2 Timing of Proceedings A pr proceeding should not exceed 60, at maximum 70 days, i.e. nine to ten weeks.1873 Once an arbitral tribunal has determined its duty to make a referral, it should stay its proceedings and file a pr request with the icsid Secretariat. Within one week, the latter should register the request and send a notice of request to the potentially interested persons and entities listed in the foregoing section, compose the pr Division on the basis of a random choice, and finally publish the anonymised request and the composition of the pr Division on the icsid website. During the second and third week, the said potentially interested persons and entities should have the possibility to submit their observations with the Secretariat. After being screened for relevance and clearness, these observations will be forwarded to the pr Division and the remaining pr Committee members on day 21. During week four, the pr Division will verify the admissibility of the request. If all conditions were unambiguously met, it should immediately start its consultations. In case it determined a need for reformulation or clarification or for adding further supporting documents though, the request should be returned for a revision or completion by the arbitral tribunal within ten days. In weeks five to seven or six to eight respectively, consultations will take place within the pr Division itself and the entire pr Committee. In case a request has been returned to and revised by the arbitral tribunal, any prior written submissions may also be revised and resubmitted 1870 Cf. cjeu Rules of Procedure Art. 140 (Costs of interveners): “(1) The Member States and institutions which have intervened in the proceedings shall bear their own costs. (…).” Cf. also Anderson & Demetriou, References to the European Court 239–240. 1871 In most cases, the icsid member States are not only the norm creators of the icsid regulatory framework, but also of iias and other international treaties. 1872 Given that pr proceedings are, in substance, largely detached from the underlying arbitration and are intended to provide guidance to future arbitrations, third-party submissions should not be subject to conditions similar to those in icsid Arbitration Rule 37 (2) for the admission of amici curiae; see Ch. 3.C.V.2. Third-party submissions – preferably from academia – to pr Divisions should rather be accepted without conditions. 1873 See Ch. 3.C.III.2.b.

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during this consultation period. Finally, in week nine or ten respectively, the pr will be rendered and forwarded to the icsid Secretariat, which will circulate the pr to the original arbitral tribunal as well as the disputing parties and publish the pr and the written submissions electronically on the icsid website. vii Effect of Preliminary Rulings The possible effect of an interpretative ruling rendered by a pr Division, which is crucial for the overall effectiveness of this reform approach, needs to be determined in both its temporal and legal dimensions. 1 Temporal Effect As opposed to the temporal scope of the suggested amendments to the icsid Arbitration Rules, which would only cover arbitral claims based on consent perfected after their entry into force pursuant to icsid Convention Art. 44,1874 the interpretative rulings rendered by a pr Division should be of retroactive effect in that they would also apply to legal relationships established before the date of consent to icsid arbitration (and to the amended Arbitration Rules). Such pre-existing legal relationships are usually given if the underlying instrument of consent is an iia. In that event, a pr rendered should be decisive for the rights and obligations stipulated in such iia from the moment of its entry into force. Such ex tunc effect, inspired by eu law,1875 is driven by the motivation to impart the greatest possible effectiveness to prs. However, if the legal relationship was established in good faith and if the disputing party concerned anticipates extremely grave consequences to result from the ruling, a pr Divisions might consider stipulating an exceptional temporal limitation of the legal effect of its ruling in the pr it renders.1876 1874 For the text of icsid Convention Art. 44, see 230. For elaborations on icsid Convention Art. 44, the “inter-temporal rule,” and on the determination of the point of time from which on procedural changes to the icsid Arbitration Rules would become effective for the parties, see Ch. 3.B.II.1.b.bb. (esp. fn. 1494). 1875 See e.g. Amministrazione delle finanze dello Stato v. Denkavit italiana Srl., Case C-61/79, ecr 1205 (1980) [hereinafter Amministrazione delle finanze dello Stato/Denkavit], para. 16; Amministrazione delle finanze dello Stato v. Srl Meridionale Industria Salumi, Fratelli Vasanelli and Fratelli Ultrocchi, Joined Cases C-66, 127 and 128/79, ecr 1237 (1980) [hereinafter Amministrazione delle finanze dello Stato/Salumi], para. 9, referred to in Anderson & Demetriou, References to the European Court 343. See also Broberg & Fenger, Preliminary References to the cjeu 455; Pechstein, eu-Prozessrecht 433–435; Schwarze, Art. 267 aeuv 2248–2249 (para. 72); Borchardt, Art. 267 aeuv 2721–2722 (paras. 61–63), with further references. 1876 Cf. e.g., in the eu law context, Gabrielle Defrenne v. Société anonyme belge de navigation aérienne Sabena, Case C-43/75, ecr 455 (1976) [hereinafter Defrenne], paras. 69–75, referred to in Anderson & Demetriou, References to the European Court 345.

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2 Legal Effect Regarding the legal effect of a pr, a distinction should be made between the effect on the original proceeding (a.) and on any subsequent proceedings treating similar or comparable legal issues (b.). a Original Proceeding In view of the pr mechanism’s telos, which consists in increasing interpretative consistency in icsid arbitral jurisprudence, and in consideration of the fact that the pr rendered are to a certain, albeit strictly limited extent, influenced by the factual outlines of the respective case, it is strongly advisable that prs should be legally binding for the submitting arbitral tribunal.1877 The same effect should apply for any future arbitral tribunal hearing the same specific case, e.g. a tribunal ruling on a case that has been annulled previously. If the decision of whether or not to comply with a pr remained within the discretion of these tribunals, the reform model would risk being devoid of effectiveness and meaning.1878 Such inter partes effect1879 implies that the competent 1877 Cf., in the eu law context, Milch-, Fett- und Eierkontor GmbH v. Hauptzollamt Saarbrücken, Case C-29/68, ecr 165 (1969) [hereinafter Milch-, Fett- und Eierkontor GmbH], para. 3. Cf. also Borchardt, Art. 267 aeuv 2719 (para. 55); Schwarze, Art. 267 aeuv 2247 (para. 69); Ehricke, Art. 267 aeuv 2332 (para. 68); Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag 148–149; Pechstein, eu-Prozessrecht 429–430; Wegener, Art. 267 AEUV 2362–2363 (para. 47). 1878 This bindingness of a pr for original arbitral tribunals is certainly the most reasonable solution for the scenarios that pre-existing case law is inconsistent or is consistent but induces the arbitral tribunal to diverge. In the scenario that the pr committee is the first to be concerned with an interpretative legal issue, it is also conceivable to render such a pr with a Comply-or-Explain requirement, see below Ch. C.VII.2.b.aa.ccc. In that manner, arbitral tribunals would retain the opportunity to develop a consistent line of jurisprudence without any guidance from the pr committee. 1879 The term inter partes, and also its counterpart erga omnes, are borrowed from the legal terminology surrounding the eu pr mechanism. Although, in the strict sense, the expression inter partes (lat. “between the parties”) refers to a binding effect between the parties to a dispute, the term is used in this context to express the binding effect for the original arbitral tribunal as opposed to any subsequent arbitral tribunal. Given that the parties to the original proceeding do not possess party status in the pr proceeding, the interpretative rulings rendered therein logically have no direct legal effect for them. Only the ruling of the arbitral tribunal adjudicating their case is of binding nature for them; cf., in the eu law context, Tomuschat, Die ge­ r ichtliche Vorabentscheidung nach den Verträgen über die europäische Gemeinschaft 173). The same applies for the expression erga omnes (lat. “towards all”), which – as used here – refers to a binding effect not for the parties to any subsequent proceeding, but for any subsequent arbitral tribunal concerned with an identical or comparable legal issue.

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arbitral tribunal is required to apply the given interpretation of the legal norm or principle in question when deciding the concrete case at hand. Using eu law as a model, it should be exempt from this obligation in the exceptional circumstance that it no longer considered the legal question as relevant for the decision-making process.1880 In addition, whenever the rendered ruling did not produce the expected clarification of the issue, the arbitral tribunal should be allowed to resubmit the question.1881 b Subsequent Proceedings The decision of whether a pr should be of binding or only persuasive authority is less obvious for subsequent arbitral tribunals concerned with an identical or largely comparable interpretative question, which, however, has no further relationship with the original proceeding in the course of which the legal issue was initially referred for a pr. aa Available Options and Topics of Discussion aaa Formal erga omnes Effect

One option is to attribute a binding effect erga omnes to any ruling rendered by a pr Committee. Every subsequent arbitral tribunal dealing with materially identical legal questions would then have to render a decision in conformity with the corresponding prior pr even if the latter was rendered in a different proceeding. This would, on the one hand, be a guarantor for achieving the goal of a more harmonised and consistent icsid jurisprudence – in particular in view of the fact that icsid arbitration is a single-tier proceeding lacking any substantive review. On the other hand, a formal erga omnes effect on all subsequent, non-referring arbitral tribunals would imply that the pr Committee itself would be bound de facto by its previous rulings without having the opportunity to readjust or reverse its position for compelling reasons in the future.1882 It would hence risk inducing legal petrification instead of fostering a dynamic case law which evolves towards a jurisprudence constante.

1880 Cf., instead of many, Dauses, Vorabentscheidungsverfahren nach Art. 177 eg-Vertrag 149. 1881 Id. 1882 This being said, in the interest of promoting a consistent and coherent interpretation of international investment law, particular restraint is required with regard to later corrections of any previous ruling. Cf., in the eu law context, Anderson & Demetriou, References to the ­E uropean Court 324–325.

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bbb Relaxed erga omnes Effect

A way to mitigate a universal, formally strictly binding effect, but, at the same time, to support the authority of prior prs is to relax the erga omnes effect. This conception of legal bindingness is modelled on the example of eu law1883 and takes up the idea of a cooperative dialogue between arbitral tribunals and the pr Committee. It implies that subsequent arbitral tribunals are considered as being in principle bound by previously rendered prs, but that they are allowed to resubmit any question already decided if they take the argumentatively well-founded view that the legal opinion contained therein is incorrect or no longer viable. Such ascription of a certain “precedential authority”1884 to a pr would, in principle, allow combining the generally opposed objectives of consistency and correctness. Still, it would lead to a relatively far-reaching curtailment of interpretative autonomy and flexibility of future arbitral tribunals whenever a legal issue has been decided by a pr Committee – in particular since they could shy away from the effort of making another pr referral in the event that they disagree.1885 However, as the reform model is based on an amendment to the icsid Arbitration Rules, it should avoid any inordinate repercussions on the icsid Convention and its basic structures and principles. It therefore seems advisable to ensure that the effective impact on subsequent, non-­referring arbitral tribunals is moderated. 1883 Cf. e.g. Da Costa, 38; cilfit, para. 15. See also Ulrich Ehricke, Die Bindungswirkung von Urteilen des EuGH im Vorabent­ scheidungsverfahren nach deutschem Zivilprozeßrecht und nach Gemeinschaftsrecht: Vortrag gehalten am 17. Dezember 1996, 364 Vorträge, Reden und Berichte aus dem Europa-Institut: Sektion Rechtswissenschaft, Europa-Institut (Saarbrücken) 1, 42–44 (1997); T ­ omuschat, Die gerichtliche Vorabentscheidung nach den Verträgen über die ­e uropäische Gemeinschaft 185–187; Dauses, Vorabent­ scheidungsverfahren nach Art. 177 eg-Vertrag 153–155; Anderson & Demetriou, References to the European Court 335–336; Wegener, Art. 267 AEUV 2362 (para. 49); Borchardt, Art. 267 aeuv 2720 (para. 60); Schwarze, Art. 267 aeuv 2248 (para. 71); Ehricke, Art. 267 aeuv 2334 (para. 72). 1884 Anderson & Demetriou, References to the European Court 336. The exemption of the arbitral tribunals’ duty to submit under the acte éclairé doctrine, which provides relief from this obligation for all legal points that have been sufficiently elucidated in a previous pr, is in line with this “precedential authority” of pr. See Ch. 3.C.V.1.a.bb. 1885 Such universal impact supposes of course that the second step of implementation, i.e. changes to the icsid Arbitration Rules according to icsid Convention Art. 6 (1), will be realised. See Ch. 3.C.II.2.

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chapter 3 Comply-or-Explain Mechanism

A less intrusive regulatory approach, which is still capable of ensuring the pr system’s effectiveness, is borrowed from company law – more precisely from national corporate governance codices,1886 which have their roots in part in the uk Cadbury Report dating from 1992.1887 Their enforcement concept foresees that, in principle, the signatories’ compliance with the best practice recommendations set out in the respective codices is voluntary, but that any non-compliance must be disclosed, specified, and explained by giving the underlying reasons.1888 If transferred to the icsid context, this so called comply-or-explain mechanism would imply a duty to provide substantiated explanations for any subsequent arbitral tribunal that decides to diverge from a previously rendered pr. Since non-referring arbitral tribunals would be allowed to deviate from a pr on a relevant legal issue, a comply-or-explain mechanism could not guarantee a consistent development of future icsid case law. Nevertheless, given that a duty to explain makes departures from a prior pr relatively inconvenient, such deviations are expected to be the exception (e.g. in extraordinarily polarising cases) rather than the rule. Thus, this approach manages to combine reliability of icsid jurisprudence with a sound measure

1886 See e.g. the uk Stewardship Code (adopted by the Financial Reporting Council in September 2012, replacing, in parts, the uk Combined Code of Corporate Governance from June 1998); the German Corporate Governance Codex (adopted by Regierungskommission in February 2002, last amended in May 2013, legally founded on AktG Art. 161). Cf. also the enforcement mechanism for guidelines and recommendations of the European Securities and Markets Authority [hereinafter esma], see Alexander Frank, Die Rechtswirkungen der Leitlinien und Empfehlungen der Europäischen Wertpapier- und Marktaufsichtsbehörde 125–127 (Nomos, Baden-Baden, 2012). Cf., in contrast, the mandatory compliance system of e.g. the us Sarbanes-Oxley Public Company Accounting Reform and Investor Protection Act of 2002, enacted 30 July 2002, Pub. L. No. 107–204, 116 Stat. 745 [hereinafter sox]). 1887 Report of the Committee on the Financial Aspects of Corporate Governance, 1 December 1992 (consolidated in the Combined Code in June 1998) [hereinafter Cadbury Report]. 1888 See e.g. uk Stewardship Code, Sec. “Comply of Explain,” para. 3: “Those signatories that choose not to comply with one of the principles, or not to follow the guidance, should deliver meaningful explanations that enable the reader to understand their approach to stewardship. In providing an explanation, the signatory should aim to illustrate how its actual practices contribute to good stewardship and promote the delivery of the institution’s or its clients’ investment objectives. They should provide a clear rationale for their approach.” See also Sridhar Arcot et al., Corporate governance in the uk: Is the comply or explain approach working? Int’l Rev. L. & Econ. 193, 194 (2010).

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of flexibility, or, in other words, achieving the objectives of consistency and correctness without risking disproportionate interference with non-referring arbitral tribunals’ interpretative authority. bb

Preferable Option of a Comply-or-Explain Mechanism

As already indicated, a comply-or-explain mechanism would, in comparison to a formal or relaxed erga omnes effect, ultimately provide fewer safeguards that subsequent arbitral tribunals would actually align themselves with any pre-existing prs on the legal issues they are dealing with. Nonetheless, it opens up the opportunity to reconcile the binding effect of prs for original arbitral tribunals, going along with a certain limitation of their interpretative authority, with a persuasive effect of prs for subsequent arbitral tribunals, which – notwithstanding the explanatory hurdle they need to take – remain in principle free to deviate and follow their own views. Accordingly, once an interpretation set out in a pr has found its way into arbitral jurisprudence via the decision of the original, referring tribunal, it would then be in the hands of “the market” to decide whether it will prevail.1889 This being said, there is still a high probability that the majority of subsequent arbitral tribunals will for various reasons choose to “comply,” and not to “explain.” One is that the pr will be rendered by selected legal experts with a wealth of experience as to the proper use of interpretative techniques, including the treatment of precedents, and a broad specialist knowledge of the state of scholarly debates on the legal issues they are concerned with. It is therefore highly likely that their interpretations will, as a general rule, be sound and conclusive and will, in all likelihood, gain widespread acceptance. Another reason is that the comply-or-explain requirements of publicly disclosing and substantiating any divergence from a recommended interpretation will generate a certain degree of coercive pressure.1890 This could be intensified by introducing a duty to publish the explanations of deviating arbitral tribunals as part of the award’s excerpts pursuant to icsid Arbitration Rule 48 (4).1891 Although it has been argued that such a constraint could lead to “an overly mechanical and uniform approach (…) – a mere “‘box-ticking’ excercise,”1892 it appears more 1889 Madeleine Ronquez, The Business Case for Sustainable Finance in South Africa, in The Business Case for Sustainable Finance 138 (fn. 22) (Iveta Cherneva ed., 2012). 1890 eu Commission, Internal Market Directorate General, Comparative Study Of Corporate Governance Codes Relevant to the European Union And Its Member States, Final Report and Annexes i–iii, 2, 69 (2002). 1891 For the text of icsid Arbitration Rule 48 (4), see fn. 337. 1892 eu Commission, Comparative Study Of Corporate Governance Codes, 2 (2002).

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likely – in particular in view of the successful example of corporate governance codices – that the duty to explain will function in a way that separates the wheat from the chaff. In other words, it is expected that only the arbitral tribunals holding a strong counter-position, which is based on well-considered, strong, and conclusive arguments and which may withstand public scrutiny, will depart from prs. In the less likely event that an arbitral tribunal actually chooses to deviate, it would, in its explanatory statement, need to engage in a critical examination and reflection of the rejected pr. In that manner, it would stimulate and contribute to the discourse on core questions of legal interpretation in international investment law. Since the pre-existing pr would serve as a starting point and guide, the discussion is highly likely to move away from the “ping-pong” or “trial-and-error” methods practiced in the past. Rather, it is expected to evolve in a constructive, purposeful, and effective manner towards sustainable, wellfounded, and correct solutions.1893 For the above reasons, of the three concepts on the legal effect of pre-existing prs on subsequent, non-referring arbitral tribunals, the comply-or-explain mechanism appears to best suit the needs and core policies of icsid investment arbitration. It rejects a broad-brush, conformist approach, but is by no means comparable to the current laissez-faire approach.1894 It therefore appears apt to strike the right balance between interpretative alignment and autonomous, yet well-reasoned deviation, i.e. between consistency and coherence. viii Summary and Evaluation The draft concept presented in the previous sections addressed the cornerstones of a future icsid pr mechanism. After taking a brief look at historic and contemporary models with a focus on the successful eu pr system, which is anchored in tfeu Art. 267,1895 the preferable technique of legal implementation of a pr system as well as its possible basic structures were 1893 Id. at 69. In the event of non-observance of this duty to soundly explain a divergence from a previous pr, it is conceivable that the corresponding award could be opened for annulment proceedings according to icsid Convention Art. 52 (1) (e) for failure to state reasons. Alternatively, absent any authority to monitor whether statements have been provided and if so, the quality of the explanations contained therein, such control could be left to the “market” (see Arcot et al., Corporate governance in the uk 193, 200), which might sanction violations of the duty to explain by no longer choosing disobedient arbitrators. For further elaborations on the question of how to react to infringements against the pr system, see Ch. 3.C.V.1.b. 1894 See Ch. 2.B.II.1. 1895 For the text of tfeu Art. 267, see fn. 1680.

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­presented. Regarding the former aspect, a two-step approach was recommended. This approach foresees opt-in complements to the icsid Arbitration Rules in a first step and – building on an expected “subsequent practice” in the sense of vclt Art. 31 (3) (b) – opt-out changes of the icsid Arbitration Rules in a second step. Concerning its practical arrangement, special attention was devoted to designing the procedural features of a future pr system with a view to optimally adapting it to the icsid Convention and its limited number of independently operating organs and entities. It was suggested that this could be achieved by coupling the required Panel of Experts as a sub-panel to the already existing Panel of Arbitrators and by temporally and technically interconnecting the formal establishment of the pr Committee to that of the arbitral tribunal. The semi-permanent composition of the pr Committee and its structuring into pr Divisions was inspired by the proven model of the wto’s appeal mechanism as existing within the framework of the wto dispute settlement system. Based on this conceptual framework, the issues of admission and submission of referral questions were examined. As set out in the draft proposal, the right to submit a legal interpretative question should require the cumulative fulfilment of a series of conditions – ranging from a case-related material relevance and a general and fundamental importance of the legal issue in question to the context of pre-existing case law and of the ongoing proceeding. The duty to submit, which in general is deemed to exist for any admissible question, should be suspended whenever an interpretative question has been answered by a previous pr or is blatantly evident. If, on the other hand, the answer to an interpretative question can already be clearly deduced from earlier, well-established icsid jurisprudence and the competent arbitral tribunal does not intend to deviate therefrom, it should not only be exempt from an obligatory referral, but rather the referral should be inadmissible. Finally, in a last step, the course of a pr proceeding and the temporal and legal effect of a resulting ruling were delineated. The temporal effect of a pr was determined to operate even ex tunc, unless an exception is given. As for the legal impact of a pr, it seems advisable to foresee a binding legal effect for the original arbitral tribunal and a persuasive legal effect – combined with a comply-or-explain mechanism – for subsequent arbitral tribunals. Following this detailed description of a possible future icsid pr system, the annex to Chapter 3 sets out a draft proposal for an amendment to the icsid Arbitration Rules based on the considerations and insights gained in this study.1896 1896 See Annex to Ch. 3 (iv) containing a draft amendment to the icsid Arbitration Rules.

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With this sort of practical arrangement of a future icsid pr system in mind, it is now possible to elaborate in further detail how precisely the suggested reform model would remedy the causes of inconsistency determined in Chapter  2.1897 As regards the systemic reasons discussed previously, the conception of the pr Committee as a staggered-board with a two-year duration of membership promises a continuity in personnel whilst preserving a certain degree of flexibility. This would mitigate the problem associated with the non-permanent nature of arbitral tribunals and the resulting inconsistencies. In addition, given the fact that the pr Committee would be composed of representatively selected, neutral, and highly qualified professionals, its interpretative rulings can be expected to have a positive, guiding effect on arbitral tribunals. It would thereby counteract erroneous interpretative approaches and reduce the need for substantive review remedies within the icsid regime. The problems pertaining to the limited scope of annulment review, the resulting incorrect awards, and inconsistencies arising therefrom would hence be cured in a preventive manner. Since prs rendered are intended to serve as a methodological model for arbitral tribunals and their interpretative approaches, they would also help to tackle the methodological root causes of jurisprudential inconsistency. Besides interpretative flaws of a more general nature, the particular deficiencies in the treatment of pre-existing case law would be addressed. Being one of the primary reasons for conflicting case law, these have been at the centre of the preceding analysis of causes.1898 Among the various forms of the inadequate handling of precedents, the phenomenon of “ignoring, unsubstantiated deviation,” being most harmful for the further evolution of the system of de facto precedent, would be systematically combated. First, any arbitral tribunal intending to depart from a longstanding line of arbitral jurisprudence would be obliged to submit the interpretative question at issue to the pr Committee and to comply with the latter’s ruling.1899 Second, any subsequent arbitral tribunal intending to depart from an already rendered pr – and, more importantly, from arbitral jurisprudence that has already developed on that basis – would be required to either comply with the interpretative approach set out therein or to provide substantiated and conclusive reasons for the divergence. The comply-or-explain mechanism thus ensures that arbitral tribunals intending to deviate from interpretations established by a pr remain free to do so, subject to the condition that they substantiate their departure.1900 Speaking 1897 1898 1899 1900

See Ch. 2.D. See Ch. 2.D.II.2. See Ch. 2.C.VII.2.a. See Ch. 2.C.VII.2.b.bb.

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in more abstract terms, this way of proceeding promotes both jurisprudential consistency via compliance and jurisprudential coherence via explanations. The phenomenon of “concealed, unsubstantiated deviation,” by contrast, is much more difficult to control by the ex ante remedy of a pr system, since intentions to disguise are, in general, only discernible at a later stage. Nevertheless, as seen,1901 there are different options for remedial action against arbitral tribunals that clandestinely deviate in violation of their duty to either submit a critical question to receive a pr or to obey the comply-or-explain rule with respect to a pr which has already been rendered. These include infringement and annulment proceedings. Before formally establishing such repressive measures, however, it remains to be seen whether these will actually be necessary. In view of the fact that icsid tribunals have generally complied with the applicable arbitration rules reasonably well, it can be expected that this practice will be extended to a future pr system as well. D

Interim Conclusion

As has been established, a wide range of possible reform measures to cure the systemic deficiency of consistency in icsid jurisprudence is available for selection. Amongst them, the concept of a pr system has proven to be the most suitable and thus preferable option, in particular since it manages to balance the principles of finality and correctness and thus promises to promote both consistency and coherence, which form the basic elements of the overarching goal of a jurisprudence constante. It has therefore been examined how this approach might best be put into practice. The resulting reform proposal has, in part, been inspired by two models with a proven track record: the eu pr system and, more selectively with regard to comparable features, the wto Appellate Body. Nonetheless and most importantly, the elementary structures and core principles of icsid investment arbitration – as they currently exist – have been taken into consideration throughout the draft proposal as a reference point and basic guide. Only if the interferences with fundamental properties and policies are kept to the minimum necessary level will icsid investment arbitration preserve the characteristics which made it successful, namely the efficient, proficient, and fair settlement of investment disputes, which provides justice to the parties and fosters economic prosperity.1902

1901 See Ch. 2.C.V.1.b. 1902 See Reisman, Breakdown 739, 788.

Conclusion A 1.

2.

3.

4.

Final Summary Chapter 1 The politico-economic significance of international investment and the attitude of States in respect thereof have undergone fundamental changes throughout the last century. These changes are reflected in the development of foreign investment law and policy on both the international and national level, which govern the investment-specific relationship not only between sovereign States but also between States and private foreign investors. The post-war and decolonialisation years, i.e. the 1950s to 1970s, were still dominated by a rather reluctant, almost rejectionist investment climate due to the discord between capital-importing and capital-exporting countries. Thereafter, the advance of globalisation in the 1980s and 1990s, which was coupled with a turn of all major world economies towards economic neo-liberalism, marked the beginning of a new era of progressive and cooperative international investment policy. Along with this, a dense network of iias emerged as the primary source of international investment law and global fdi flows increased considerably. It is generally assumed that the liberalisation of international investment law and policy, which continued throughout the first decade of the 21st century and up to present and which was accompanied by the growth of both the number of iias and the flows of fdi, has contributed to the increasing rate of international investment arbitration cases. This assumption, however, does not address the hitherto unresolved issue of whether a concrete causal link between iias and fdi exists. In addition, the dramatic advancement of investment arbitration to the most widely used mechanism of investor-State dispute settlement may be traced back to qualities such as neutral and efficient decision-making and specialist expertise. However, it must be noted that the global liberalisation process took place in a rather heterogeneous politico-economic climate due to some counter-movements in national investment policies. This situation is being reflected in the form, content, and quantity of newly concluded iias. Moreover, the global economic and financial crisis in 2007/2008 negatively affected fdi flows. In parallel to these increasing counter-reactions to the liberalisation trend, a backlash tendency against investor-State

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_006

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arbitration has developed. The ­so-called “legitimacy crisis” or “public law challenge,” which has recently been intensified by the ttip and ceta debate, finds fault with the fact that ­investment arbitration has its roots in traditional commercial dispute settlement. It is therefore seen as suffering from serious deficits as regards democratic values and the rule of law and being unfit for State-related disputes. 5. Despite all legitimate criticism of the investment arbitration regime, which is certainly not fully adapted to the particularities of semi-public ­investor-State disputes, it would, nevertheless, be wrong to condemn this method of dispute settlement as a whole. Rather, and in view of the lack of adequate alternatives, these concerns should be taken as an inspiration to reform the system of ­investment arbitration. 6. Investigating the overarching problem of inconsistency in arbitral investment jurisprudence is a promising starting point for such reform initiative. 7. For this purpose, the tailor-made icsid arbitration regime is deemed a suitable object of study. In quantitative terms, case load statistics show that the large majority of investment arbitration is brought before icsid tribunals. In qualitative terms, a comparative strengths-weaknesses analysis of icsid arbitration proceedings leads to the conclusion that icsid arbitration is preferable to uncitral arbitration, the latter being the second most frequented forum of investment arbitration. 8. In particular, its prototypical design for hybrid, semi-private and semipublic disputes was decisive for the choice of this arbitral regime as the central object of study. Further relative strengths of icsid proceedings pertain to its “self-containedness,” which has a variety of impacts: in addition to the procedural independence from the situs of arbitration and its lex arbitri, it entails, inter alia, the direct enforceability of arbitral awards, all of which add considerably to the general efficiency of icsid arbitration. 9. The relative weaknesses of icsid arbitration lie in its rather vague and uncertain requirements for objective jurisdiction and provisional measures. A  further deficiency in comparison with competing investment arbitration r­ egimes is the problem of the ineffectiveness of provisional measures due to the inability to obtain judicial enforcement. 10. The icsid regime is on a par with its rival regimes in view of time and cost. With regard to the latter aspect, this is due to the fact that the largest expense category of investment arbitration is the cost for legal counsel, which is determined independently of the cost schedules of the respective arbitration regime.

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As far as procedural transparency is concerned, the well-established and widely applicable icsid transparency provisions still seem to trump the newly introduced, but – for the time being – barely applicable uncitral Rules on Transparency in treaty-based investor-State arbitration.

Chapter 2 12. In terminological respects, the analysis and discussion of inconsistency in icsid investment jurisprudence is based on the distinction between the ­notion of “inconsistency,” referring to conflicting legal interpretations as they occur, and the notion of “incoherence,” referring to conflicting legal interpretations that are not comprehensible even when taking the contextual circumstances into account. 13. Taking up the doctrine of jurisprudence constante, arbitral tribunals should strive for consistent arbitral outcomes by looking at precedents and by aligning themselves consistently with pre-existing interpretations. This central premise, however, must be tempered in that arbitral tribunals are nevertheless encouraged to make this alignment contingent upon the persuasiveness and well-foundedness of such prior decisions. Whenever these appear to be flawed and erroneous, arbitral tribunals should deviate therefrom and follow their own interpretative approaches, but should do so in a substantiated, comprehensible, and thus coherent manner. Consistency should not be pursued at the cost of correctness. 14. For a thorough analysis, the different facets of jurisprudential inconsistency and the criticism voiced in this respect are of interest. One facet relates to questions of principle, which question the general desirability of jurisprudential consistency and the appropriateness of criticising the lack thereof. 15. As far as the question of the general desirability of a consistent arbitral jurisprudence is concerned, a multi-perspective analysis leads to the conclusion that consistent judicial and arbitral decision-making is vital for the general success of a legal regime and thus desirable. Legal theorists and philosophers agree that the existence and sustainability of a legal regime itself are strongly contingent on a consistent and thus predictable conception and practical application of its general laws. Furthermore, authoritative rulings of international courts and arbitral tribunals point out that jurisprudential consistency may be considered not only as a desideratum, but as a basic requirement of a (quasi-) judicial, still developing system like international investment arbitration. The sociology of law perspective adds that the social perception of a consistent jurisprudence

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is essential for the general legitimacy, authority, and standing of a legal regime. 16. The question dealing with the appropriateness of the inconsistency criticism can also be answered in the affirmative. Neither the allegation of over-complexity of international investment law and arbitration, nor the claim that  an arbitrator’s function would be limited to mere decisionmaking on a case-by-case basis, is convincing. The same applies to any alleged ­beneficial effect that may result from conflicting jurisprudence. Rather, the ­critical ­preconditions for the emergence of a jurisprudence constante are present within the manageable complexity of the arbitral system, and arbitrators have responsibilities not only within the boundaries of their contractual obligations towards the parties, but also for ensuring the integrity and development of the wider system of international investment law and arbitration. Last but not least, although dissents from unconvincing prior rulings may promote correctness, the resulting inconsistencies can only be viewed positively if this is done in a coherent manner, i.e. by substantiating a conflicting position adopted and by putting the dissent into the context of prior differing positions and rulings. 17. As regards the possible forms of inconsistency, conflicting decisions ­occur either in one and the same dispute being arbitrated in multiple proceedings, or in different disputes concerning identical or largely similar legal issues. Regarding the latter category, a further distinction needs to be made between “inconsistencies stricto sensu,” arising from interpretations of identical norms, and “inconsistencies lato sensu,” stemming from differently worded, but largely comparable norms featuring a common denominator. A further category of forms of inconsistencies that goes beyond the identity or difference of the underlying dispute takes account of the timing of conflicting decisions, i.e. whether they were rendered simultaneously or successively. In this respect, a­ rbitral tribunals and their interpretative methods may only be legitimately criticised for inconsistent decisions rendered on a time-delayed basis, given that it is logically impossible to take concurrently rendered decisions into account. 18. A further key aspect in the examination of jurisprudential inconsistency concerns the different causes of inconsistent decision-making. These may be divided into two categories, namely structural causes and methodological causes. With regard to the former category, several icsid-specific institutional and procedural features can be identified as causal factors, including the non-permanent nature of arbitral tribunals, the restrictiveness of review remedies, the lack of consolidation procedures, and the limited degree of transparency. Regarding the latter category of causes,

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an oftentimes insufficiently systematic and thus improper use of interpretative arguments is striking. In particular, the interpretations of iias, as the primary source of international investment law, are often contrary to the general rules and principles of treaty interpretation codified in the Vienna Convention. They are driven by the necessity for arguments to reach a certain result in a particular case rather than by the systemic importance and rank of the individual arguments. 19. Amongst these methodological deficiencies, the treatment of precedent deserves a closer study, given that the development of the emerging system of de facto precedents is of tremendous importance for achieving a more consistent and coherent icsid jurisprudence. 20. In view of the different methods applied by arbitral tribunals when dealing with prior decisions, two interpretative categories – “deference” and “­ignorance” – need to be distinguished for purposes of systematisation and analysis. Regarding the category of deference, arbitral tribunals are found to pay deference to precedent either by alignment due to persuasion, by substantiated d­ eviation, or by concealed deviation. Of these sub-categories, the former two are unquestionably favourable for the development of consistent, or at least coherent, arbitral jurisprudence. The sub-category of concealed deviation, however, needs to be considered with scepticism, given that, contrary to the prima facie appearance of due respect to precedents, e.g. by pretended agreement, in practice arbitral tribunals often deviate from relevant prior cases without providing substantiated reasons. As regards the category of ignorance, arbitral tribunals are found to refuse to look beyond the arguments produced by the disputing parties or their own patterns of thinking, whether knowingly or unknowingly. This habit of ignoring pre-existing precedent is clearly detrimental to advancing consistency and coherence in investment arbitration. It has hence been labelled as ignoring, unsubstantiated deviation. 21. As regards the concrete occurrences of conflicting interpretations in icsid decisions and awards, the results of a qualitative-empirical case law analysis show that jurisprudential inconsistencies exist with respect to legal ­issues stemming from the entire field of investment law. They comprise, to name only the most striking ones, the interpretative approaches to umbrella clauses in the field of law governing jurisdiction, the diverging manners of construing annulment grounds in the field of procedural law, and the interpretation of the mfn standard and the necessity defence in the field of substantive law. Moreover, the ways in which arbitral tribunals handle precedents in the course of their legal reasoning are found to cover all the categories identified, that is to say

Conclusion

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“substantiated deviation,” “concealed, unsubstantiated deviation,” and “ignoring, unsubstantiated deviation.” However, although rulings falling into the category of “substantiated deviation” lead to jurisprudential inconsistency, they need to be put into perspective by factoring in their contribution to jurisprudential coherence. 22. According to these findings, it must be noted that the corpus of icsid ­jurisprudence shows inconsistencies in different forms, due to different causes, and relating to different areas of international investment law. On the other hand, consistent lines of jurisprudence equally exist in some degree. Thus, while speaking of a true “crisis of consistency” would go too far, it has become clear that targeted countermeasures are clearly needed. Chapter 3 23. Although there is no ideal, single solution to remedy the overarching problem of jurisprudential inconsistency in investment arbitration, a complementary initiation of several institutional reform measures in this fairly complex legal field is not especially realistic. Accordingly, the most promising and thus preferable reform model needs to be identified on the basis of different general criteria, such as expediency, effectiveness, and feasibility. 24. Reform instruments without icsid-specificity include clarifying interpretations and modifications of iias by States, unwritten procedural means at the disposal of arbitral tribunals based on the doctrines of lis pendens and res judicata or on consolidation techniques, and the systematisation and analysis by science and scholarship. These system-independent measures offer a c­ omparatively high degree of flexibility and pragmatic solutions, but their ­effectiveness depends on the goodwill of individual actors and they risk inducing further fragmentation in the field of international (investment) law. 25. Reform instruments with icsid-specificity, i.e. specifically tailored to the characteristics, structures, and needs of the icsid regime, include the formal consolidation of proceedings, the increase of post-award transparency, the well-known option of introducing an appellate mechanism, and the so far less well-known model of establishing a pr system within the icsid arbitration regime. Since these system-dependent measures would receive institutional support by the icsid, it can be expected that their implementation would be well managed. 26. The proposals envisaging procedural consolidation and post-award ­transparency bear the disadvantage of having a rather limited scope

458

27.

28.

29. 30.

31.

Conclusion

and limited directness of impact. While the consolidation concept only tackles the rather rare form of inconsistency arising out of concurrently pending proceedings concluded at the same time, the transparency concept only approaches an indirect, co-causative factor, namely the insufficient accessibility of arbitration-related documents being an obstacle for arbitral tribunals to take ­precedents into account. The reform models suggesting the introduction of an icsid appellate mechanism and an icsid pr system are, by contrast, more encompassing in that they aim to overcome a wider range of deficiencies. They address the lack of personnel continuity and the flawed interpretation techniques of arbitral tribunals as well as the narrowness of the icsid review remedies. In addition, due to its preventive mode of operation, a pr procedure offers the advantage that – unlike an appellate mechanism – it does not stand in opposition to the clear wording of icsid Convention Art. 53, which enshrines the principle of finality of icsid awards. It may hence be integrated into the icsid procedural regime without any formal, practically unattainable amendments to its basic treaty. The qualitative assessment of the possible remedies to counter the inconsistency problem ultimately led to the choice of an icsid pr system. This reform concept distinguishes itself by a considerable degree of effectiveness in that it acts directly and comprehensively and addresses not only systemic, but also methodological root causes and flaws in the treatment of arbitral precedents. The constitutive characteristics of an icsid pr system lie in its neutral setup and its configuration as an interlocutory, cooperative, and casedetached proceeding. Historic and contemporary prototypes of pr procedures may serve as an orientation for conceptualising such mechanism within the icsid regime. Amongst the various conceptual models, the successful eu pr system p ­ ursuant to tfeu Art. 267, which helps to avoid divergent legal interpretations by eu member State courts and thus to ensure the uniformity of eu law, is certainly the leading example. Of the possible techniques for legal implementation, a two-step approach is found to be the most suitable. The reform would first provide opt-in complements to the icsid Arbitration Rules pursuant to icsid Convention Art. 6 (3) and then, based on the expected “subsequent practice” of the icsid member States, switch over to opt-out amendments of the icsid Arbitration Rules pursuant to icsid Convention Art. 6 (1) (c). As for its temporal effect, the amended version of the icsid Arbitration Rules would only apply prospectively, i.e. ex nunc, to cases based on c­ onsent

Conclusion

32.

33.

34.

35.

459

perfected after its entry into force according to the inter-temporal rule laid down in icsid Convention Art. 44. Regarding the basic structures and procedural features of such a pr system, the main body, the pr Committee, should be composed of seven semipermanent members to be elected from a Panel of Experts. The Panel of ­Experts, in turn, should be designed as a sub-panel to the already existing Panel of Arbitrators. Based on a legal fiction, the pr Committee should be deemed as formally in existence – comparable to an “annex” – whenever an arbitral tribunal is constituted. Using this legal construction facilitates compliance with the icsid Convention, which establishes a limited number of organs and entities. The pr Committee should then be subdivided into pr Divisions, which should be composed – on a random, case-bycase basis – of three persons to decide on the concrete referral questions. Details on the composition and functioning are to be borrowed from the model of the wto Appellate Body. As to the modalities of admitting and submitting referral questions, the  right to submit a legal interpretative question – pertaining to international investment law and raising significant doubts or difficulties amongst the arbitrators that are adjudicating the case – should require the cumulative fulfillment of a range of conditions. These include a material relevance of the legal issue for the pending case, its general and fundamental importance, as well as its first-time occurence or, alternatively, its repeated occurrence in an inconsistent line of case law or in a consistent line of case law the arbitral tribunal is unwilling to align itself with. Once the admissibility of the question has been determined, a duty to submit should apply, unless the interpretative question is blatantly evident from the outset or has already been clarified by a previous pr. Relying on the prevailing voluntary compliance of icsid tribunals with the icsid Convention and its related rules and regulations, formal remedies against violations of the duty to submit are not foreseen for the time being. Finally, the draft outline of an icsid pr system also has to deal with the effects of a pr rendered in both its temporal and legal dimension. The temporal effect of a PR is determined to operate ex tunc, i.e. to extend also to legal relationships established before the date of consent to icsid arbitration, unless an exception applies. With regard to the legal effect, a differentiation according to the role of the arbitral tribunals affected by a pr has to be made: a binding legal effect is foreseen for any original arbitral tribunal, i.e. for any tribunal that submitted a question to receive a pr; a solely persuasive effect, combined with a comply-or-explain mechanism, is

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Conclusion

suggested for any subsequent arbitral tribunal dealing with an identical or largely similar legal issue. In that manner, it is expected that a more consistent and – given the option of substantiated deviations – coherent development of investment case law will develop. In short, it is expected that it will bring icsid practice closer to the goal of a jurisprudence constante. B

Research Questions and Hypotheses: Answers and Confirmations

Using the example of icsid arbitration, the present work addressed the topic of inconsistency in international investment jurisprudence by means of three research questions, which have been formulated in the form of concise working hypotheses. The first research question concerned the adequacy of the choice of icsid arbitration as the central object of research – in particular in view of the available alternative possibilities for selection. In the course of the presentation and analysis of this arbitral regime in Chapter 1, a range of outstanding qualities of the icsid system, such as its tailor-made design being specifically configured to the characteristics and needs of investor-State disputes, its various procedural strengths, and its relatively high and still increasing caseload, could be determined. In confirmation of the first hypothesis, the icsid arbitration system was thus deemed to be the comparatively most advantageous and representative regime for the settlement of investor-State disputes and, accordingly, the most suitable object of study for addressing the problem of inconsistency in international investment jurisprudence. The second and key research question asked whether the charges of inconsistent outcomes directed against international investment jurisprudence in general and icsid jurisprudence in particular are justified. Following the examination of four key issues concerning the phenomenon of inconsistent investment jurisprudence in Chapter 2, it was established that jurisprudential inconsistency is in fact an overarching and serious problem, which is worthy of criticism and which occurs in different forms and reflects and exacerbates other systemic shortcomings within the icsid regime. Diverging answers to identical or largely similar legal questions are mainly caused by structural shortcomings and flawed interpretative methods. This in turn has the consequence that conflicting, inconsistent, or at least incoherent decisions increasingly wind their way through many areas of icsid case law. The growing criticism levelled at the inconsistency in icsid investment jurisprudence was therefore, in confirmation of the second hypothesis, found to be appropriate and warranted.

Conclusion

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The third and last research question, which concerned the most suitable reform proposal to cure the deficiency of consistent arbitral outcomes, was addressed in the framework of Chapter 3. Of the wide range of possible reform proposals presented therein, establishing a pr system appeared – in confirmation of the third hypothesis – to be the most targeted, effective, feasible, and thus preferable approach to alleviate the problem of jurisprudential inconsistency in icsid case law. It bears the unique potential to concurrently increase the level of both consistency and correctness, whilst respecting core principles and policies of international investment arbitration. From a long term perspective, it will contribute to the development of a jurisprudence constante. C

Prospects and Outlook

In spite of the considerable remedial and innovative potential of an icsid pr system, the reform concept presented here might require readjustment when tested and tried in practice and is, accordingly, open for follow-up discussions, refinements, and supplemental measures. Moreover, additional reform measures flanking a pr system, such as the establishment of formal consolidation procedures or the increase of post-award transparency, should be taken into consideration as useful complements to the principal reform approach ­pursued in this study. They might accelerate the progress in combating the inconsistency problem – specifically in its procedural dimensions – and expedite the development of a more consistent and coherent icsid jurisprudence. Last but not least, consideration should be given to how such a pr system might best be made available to investment arbitrations conducted under different arbitral regimes, e.g. icc and scc arbitrations or ad hoc arbitrations under the uncitral Arbitration Rules, in order to ensure that jurisprudential consistency will develop even across systems. Further research and discussion are therefore encouraged and advised. Whatever package of reform will be implemented in the future, it is always vital to avoid radical measures that would excessively interfere with the existing structures, principles, and policies of the icsid regime. Rather, in view of the success of icsid arbitration as the currently leading system for the s­ ettlement of investor-State disputes, these fundamental features should be respected to the greatest possible extent and used as principal guidance.1903 The process of shaping and implementing reform measures should thus be carried out with caution, avoid being overly intrusive and take into account the need for the 1903 Id. at 787.

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system’s integrity. Otherwise, the “cure could be worse than the disease.”1904 Moreover and in reaction to the currently ongoing “public law challenge,” any reform should pay particular attention to the public dimension of investment disputes. In that manner, the existing imbalances between the different interests at stake could be reduced. Finally, it should be recalled that perfection is neither possible nor desirable, given that consistency in the sense of fully uniform interpretative approaches to central legal issues of investment law would eventually be at the expense of correctness. Therefore, as emphasised at the outset and throughout this study, the possibility of a well-reasoned divergence in substance should always be left to the discretion of arbitral tribunals. Such non-uniform, yet argumentatively interlinked and thus coherent arbitral jurisprudence is one of the core ideas underlying the doctrine of jurisprudence constante. When balancing and adjusting the selected approach for harmonising the adjudication of investment disputes, it might also be helpful to take into account the scope and gravity of the inconsistency problem. As has been pointed out earlier, it would be exaggerated to speak of a “crisis of consistency.” ­Although the increasing occurrences of jurisprudential inconsistencies are alarming and require action, the corresponding criticism needs to be ­somewhat put into ­perspective, given that icsid tribunals have also managed to produce some quite consistent and settled lines of jurisprudence. This is even more remarkable in view of the relatively loose and complex field of international investment law and it has led optimistic voices to consider the glass as being half full rather than half empty.1905 Notwithstanding these positive developments and the ­continuing success of the icsid regime, it remains a fact that investment arbitration in general and icsid arbitration in particular have to face remarkable challenges in recent times, one of which is the problem of increasingly inconsistent interpretative approaches to identical or largely similar legal issues. The resulting insecurity and dissatisfaction of the system’s users may have ­adverse consequences on the readiness of States to submit themselves to this private mode of investment dispute settlement and, accordingly, on the readiness of private investors to undertake new foreign investments. This, in turn, risks decreasing the flows of fdi, which are a cornerstone of global economic development. To counter these effects, it is unquestionably imperative that well-balanced and well-considered measures be adopted to stabilise the general legal framework of international investment law and in particular the mechanisms for the 1904 Legum, Appellate Mechanism 231. 1905 Wälde, Improving the Mechanism 522–523.

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settlement of investor-State disputes. This understanding is even r­ eflected in the icsid Convention itself, which emphasises the importance of “the availability of facilities for international (…) arbitration” for prosperous international economic relations, including “private international investment.”1906 Inconsistency and incoherence, by contrast, have the opposite effect: they destabilise and even undermine the general authority and legitimacy of a l­egal regime. Targeted and effective reforms are thus indispensable to carefully prevent ­international investment law and its jurisprudential sources of influence from being riddled with inconsistencies, since – in the words of Charles John Vaughan – a “law which a man cannot obey, nor act according to it, is void and no law, and it is impossible to obey contradictions, or act according to them.”1907

1906 icsid Convention, Preamble. 1907 Charles John Vaughan, Thomas v. Sorrell (1677), referred to in Lon Fuller, The Morality of Law 33 (1964).

Summary in German Konsistenz der Entscheidungen internationaler Investitionsschiedsgerichte als Zielvorgabe: Vorschlag eines Vorabentscheidungssystems für die icsid-Schiedsgerichtsbarkeit Die Dissertation adressiert die Problematik inkonsistenter Entscheidungen durch internationale Investitionsschiedsgerichte am Beispiel von icsidSchiedssprüchen. Im Zentrum der Arbeit steht die umfassende Untersuchung der Frage, ob und inwieweit der Vorwurf der Inkonsistenz investitionsrechtlicher Schiedssprechung berechtigt ist – eine Frage, wie sie sich aktuell verstärkt in juristischen Fachdiskussionen wiederfindet und die selbst in die öffentliche Debatte zur Investor-Staat-Schiedsgerichtsbarkeit Eingang gefunden hat. Die Arbeit diskutiert zunächst die Grundsatzfrage der generellen Kritisierbarkeit inkonsistenter Investitionsschiedssprechung und beleuchtet sodann die verschiedenen Erscheinungsformen und Ursachenzusammenhänge dieses Phänomens. Hieran anknüpfend werden mögliche Reformansätze dargestellt und deren Potential, die Entwicklung einer konsistenteren und damit vorhersehbareren und verlässlicheren Investitionsschiedssprechung zu begünstigen, evaluiert. Das im Ergebnis von der Verfasserin präferierte Reformmodell, welches die Entwicklung eines icsid-Vorabentscheidungssystems vorsieht, wird abschließend im Detail diskutiert und im Rahmen eines Konzeptentwurfs konkretisiert. Das erste Kapitel dient der Einführung in das Gebiet des Investitionsschutzrechts und der Investitionsschiedsgerichtsbarkeit. Die zentrale Thematik der Arbeit wird somit eingebettet in die historische Entwicklung des internationalen Investitionsschutzrechts und des diesbezüglichen wirtschaftspolitischen Klimas auf nationaler und internationaler Ebene vom 19. Jahrhundert bis in die Gegenwart. Vor diesem Hintergrund wird zudem die Entwicklung von vornehmlich bilateralen Investitionsschutzabkommen sowie von Direktinvestitionsströmen und -beständen dargestellt. Letztere gelten als eine wichtige Triebfeder des globalen wirtschaftlichen Wachstums. Der in den vergangenen Jahren rasante Anstieg des weltweiten Volumens ausländischer Direktin­ ves­ti­tionen und die zunehmenden Streitigkeiten zwischen ausländischen ­Investoren und Gaststaaten haben zu einer bemerkenswerten Entwicklung der internationalen Investitionsschiedsgerichtsbarkeit beigetragen. Ab Mitte der 1990er Jahre avancierte diese zum meist genutzten, jedoch nicht unumstrittenen ­Mechanismus für die Beilegung von Investor-Staat-Streitigkeiten. © koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_007

Summary In German

465

Anschließend wendet sich die Arbeit der icsid-Schiedsgerichtsbarkeit als das Investor-Staat-Streitbeilegungsmodell zu, anhand dessen exemplarisch die Inkonsistenzproblematik der internationalen Investitionsschiedssprechung analysiert und Reformvorschläge entwickelt werden. Das unter Führung der Weltbank im Jahr 1965 geschaffene und in Washington, dc ansässige icsid wurde als Schiedszentrum eigens für die Beilegung von Investitionsstreitigkeiten konzipiert und ist das bislang führende Forum für Investor-StaatSchiedsverfahren. Einführend werden zunächst seine Entstehungsgeschichte sowie die grundlegenden Strukturen, Merkmale und Zielsetzungen skizziert. Zudem soll ein statistischer Überblick zur Zahl der dort registrierten Fälle einen Eindruck von dessen quantitativer Bedeutung vermitteln. Schließlich gibt eine rechtsvergleichende Analyse von icsid-Schiedsverfahren einerseits und uncitral-, icc- und scc-Schiedsverfahren andererseits – d.h. Verfahren nach Schiedsordnungen, die genuin für die Handelsschiedsgerichtsbarkeit entwickelt wurden – Aufschluss über die qualitativen Stärken und Schwächen dieses Systems. Die relativen Schwächen von icsidSchiedsverfahren liegen danach in den vagen Zuständigkeitsvoraussetzungen nach Art. 25 (1) icsid-Konvention sowie in den unklaren Bedingungen für Erlass, Wirkung und Durchsetzbarkeit vorläufiger Maßnahmen gemäß Art. 47 icsid-Konvention. Gleichauf mit konkurrierenden Regimes sind icsidSchiedsverfahren mit Blick auf Zeit- und Kostenaspekte. Eine bis dato relative Stärke der unter der Ägide der Weltbank geführten Schiedsverfahren besteht in deren Transparenzniveau. Dies wird aufgrund der beschränkten Anwendbarkeit der neuen uncitral-Transparenzregeln für Investor-StaatSchiedsverfahren (2014) bis zur Ratifikation der Mauritius-­ TransparenzKonvention durch eine hinreichende Zahl von Vertragsstaaten älterer Investitionsschutzabkommen vorerst auch ein Alleinstellungsmerkmal bleiben. Ein weiterer Vorteil von i­ csid-Schiedsverfahren besteht schließlich in deren weitgehender Unabhängigkeit von nationalem Verfahrensrecht – insbesondere mit Blick auf die Anerkennung und Vollstreckung von icsid-Schiedssprüchen über Zahlungsansprüche in den einzelnen icsid-Vertragsstaaten. Sowohl der quantitative Stellenwert von icsid-Schiedsverfahren, der eine gewisse Repräsentativität dieses Investor-Staat-Streitbeilegungsmodells gewährleistet, als auch die beschriebenen qualitativen Verfahrensaspekte im Vergleich zu Wettbewerber-Regimen waren insgesamt ausschlaggebend für die Wahl dieses schiedsgerichtlichen Regimes als zentralen Untersuchungsgegenstand der Arbeit. Das zweite Kapitel bildet den Rahmen für eine umfassende Analyse und Diskussion der Problematik inkonsistenter icsid-Schiedssprechung. Zu Beginn

466

Summary in German

werden zentrale Begriffe eingeführt und grundlegende Prämissen e­ rläutert, auf welchen die weitere Untersuchung aufbaut. In terminologischer Hinsicht wird der Unterschied zwischen „Inkonsistenz“ als konfligierende Rechtsauslegung im engeren Sinne und „Inkohärenz“ als konfligierende R ­ echtsauslegung im weiteren Sinne verdeutlicht. Während eine Wertung als „inkonsistente“ interpretative Entscheidung nur die Tatsache des Abweichens von anderen Entscheidungen als solche beschreibt, werden bei einer Wertung als „inkohärente“ interpretative Entscheidung auch die kontextuellen ­Gegebenheiten berücksichtigt. Im letzteren Fall kann beispielsweise die ­Offenlegung von Erwägungsgründen für eine Abweichung von einer bereits existierenden Interpretationslinie dazu führen, dass eine an sich inkonsistente – da konfligierende  – Entscheidung dennoch als kohärent zu bewerten ist. Denn die Bezugnahme, wenn auch im negativen Sinne, knüpft in gewisser Hinsicht an Vorgängerentscheidungen an und erzeugt somit einen Zusammenhang zwischen zwei konfligierenden Interpretationen. Der Inkonsistenz- bzw. Inkohärenzvorwurf bezieht sich somit – vor allem in Anbetracht der schiedsrichterlichen Entscheidungsautonomie über den konkreten Fall – nicht auf Unterschiede in der Rechtsanwendung, d.h. in Entscheidungen über identische oder im Wesentlichen gleichgelagerte Sachverhalte. Vielmehr beschränkt sich dieser auf Unterschiede in der Rechtsauslegung identischer oder im Wesentlichen vergleichbarer Normen und Rechtsprinzipien. Die Linderung derartiger interpretativer Defizite und die zu erstrebende konsistente bzw. kohärente Rechtsprechungsentwicklung stehen im Zentrum der Doktrin der jurisprudence constante. Nach dieser der kontinentaleuropäischen Rechtstradition entstammenden Theorie sind Schiedsgerichte primär dazu angehalten, sich bereits etablierten Interpretationslinien anzuschließen und damit eine konsistente Schiedssprechungsentwicklung zu fördern. Gleichzeitig sollten sie ihre diesbezügliche Entscheidung jedoch immer von der Fundiertheit und Überzeugungskraft der Vorgängerentscheidungen abhängig machen. Sofern ihnen diese als fehlerhaft oder irrig erscheinen (wie etwa wegen unzureichender Beachtung der allgemein anerkannten Regeln der völkerrechtlichen Vertragsauslegung im Sinne der Wiener Vertragsrechtskonvention), so sollten sich die Schiedsgerichte im Zweifel nicht scheuen, ihrer abweichenden eigenen Überzeugung zu folgen – vorausgesetzt dies geschieht in einer wohl fundierten und nachvollziehbaren, d.h. kohärenten Weise. ­Konsistenz sollte nicht auf Kosten der Richtigkeit einer interpretativen Entscheidung erzielt werden. Vor dem Hintergrund dieser dogmatischen Zielsetzung untersucht die ­Arbeit in der Folge die verschiedenen Facetten inkonsistenter Schiedssprechung. Eingangs werden die Grundsatzfragen erörtert, ob die Konsistenz von

Summary In German

467

Schiedssprüchen generell ein erstrebenswertes Ziel ist und, hiermit verknüpft, ob und inwieweit Inkonsistenzen der investitionsrechtlichen Schiedssprechung generell kritisierbar sind. Zur Beantwortung der ersten Frage werden Rechtstheorie und -praxis sowie rechtssoziologische Sichtweisen konsultiert mit dem Ergebnis, dass die Konsistenz gerichtlicher und schiedsgerichtlicher Rechtsprechung unerlässlich für ein wohl funktionierendes Rechtssystem ist. Mit Blick auf die zweite Frage nach der generellen Kritisierbarkeit inkonsistenter investitionsrechtlicher Schiedssprechung werden die in der wissenschaftlichen Fachdebatte vorgebrachten Gegenargumente diskutiert. Die Verweise auf eine übermäßige Komplexität des internationalen Investitionsschutzrechts, auf die rein streitentscheidungsbezogene Funktion von Schiedsrichtern oder auf vermeintlich positive Auswirkungen inkonsistenter Schiedssprechung im Sinne eines Korrekturmechanismus vermögen jedoch allesamt nicht zu überzeugen. Die inkonsistente Entwicklung der Investitionsschiedssprechung ist somit im Grunde als kritisierbar zu erachten. Ein weiterer Kernaspekt der Problemanalyse umfasst mögliche Erscheinungsformen von Inkonsistenzen. Konfligierende Schiedssprüche können sich entweder auf ein und denselben, vor unterschiedlichen Schiedsgerichten anhängig gemachten Rechtsstreit beziehen oder aus verschiedenen Rechtsstreitigkeiten herrühren, die identische oder im Wesentlichen vergleichbare Auslegungsfragen zum Gegenstand haben. Im letzteren, häufiger auftretenden Fall ist überdies zu unterscheiden zwischen Inkonsistenzen stricto sensu, d.h. identische Normen und Prinzipien betreffend, und Inkonsistenzen lato sensu, d.h. unterschiedlich formulierte, jedoch in ihrem rechtlichen Kerngehalt ­vergleichbare Normen betreffend. Schließlich ist auch die Differenzierung von inkonsistenten Entscheidungen in zeitlicher Hinsicht von Bedeutung, denn nur bei sukzessive ergehenden Schiedssprüchen haben die mit dem späteren Fall befassten Schiedsrichter überhaupt die Möglichkeit, die relevanten Vorgängerentscheidungen in ihre Entscheidungserwägungen mit einzubeziehen. Schiedsrichter in parallel zum Abschluss gebrachten Verfahren haben diese Möglichkeit hingegen nicht und sind insofern in dieser Hinsicht auch nicht kritisierbar. Im Rahmen der Problemanalyse werden des Weiteren die möglichen strukturellen und methodischen Ursachen inkonsistenter Schiedssprüche untersucht. Als strukturelle Ursachen kommen die nicht ständige Besetzung der icsid-Schiedsgerichte und die begrenzten Rechtsbehelfsmöglichkeiten gegen icsid-Schiedssprüche wie auch die fehlenden prozessrechtlichen Möglichkeiten der Verfahrenskonsolidierung und das immer noch beschränkte Maß an Verfahrenstransparenz in Betracht. Die methodischen Ursachen liegen in erster Linie in der oft wenig systematischen Verwendung i­nterpretativer

468

Summary in German

­ rgumente. Insbesondere bei der Auslegung von bi- und multilateralen A ­Investitionsschutzabkommen, welche als Hauptquelle des modernen internationalen Investitionsschutzrechts gelten, konnten Verstöße gegen die in der Wiener Vertragsrechtskonvention kodifizierten völkerrechtlichen Auslegungsregeln festgestellt werden. Die Verstöße waren meist darauf zurückzuführen, dass sich die Verwendung der Auslegungsregeln mehr an den individuellen argumentativen Bedürfnissen mit Blick auf einen konkreten Fall als an deren Stellenwert innerhalb des Regelkanons orientierte. Unter den verschiedenen methodischen Defiziten analysiert die Arbeit schwerpunktmäßig die Umgangsweise von Schiedsgerichten mit Vorgängerentscheidungen, die inhaltlich identische oder im Wesentlichen vergleichbare Auslegungsfragen betreffen. Der Schwerpunktsetzung liegt die Erwägung zugrunde, dass sich ein ­adäquater(er) Umgang mit Vorgängerentscheidungen positiv auf die ­weitere Entwicklung des sogenannten de facto-Präzedenzsystems innerhalb der icsid-Schiedssprechung auswirken könnte. Dies ließe wiederum ein höheres Maß an Konsistenz und Kohärenz der Entscheidungen der icsidSchiedsgerichte erwarten. Die unterschiedlichen Umgangsformen mit den besagten Vorgängerentscheidungen lassen sich unter Verwendung der übergeordneten Kategorien „Achtung“ und „Ignoranz“ systematisieren. Entscheidungen, die der ersten Kategorie angehören, zollen relevanten Schiedssprüchen vorhergehender Schiedsgerichte insofern Respekt, als dass sie sich deren Interpretation entweder aus Überzeugung anschließen oder von dieser unter Nennung von ­stichhaltigen Gründen oder aber unter Angabe von Vorwänden abweichen. Während die beiden erstgenannten Verhaltensformen sich griffig als „Anpassung aus Überzeugung“ und „substanziierte Abweichung“ beschreiben lassen und einer konsistenten oder zumindest kohärenten Entwicklung der Schiedssprechung zuträglich sind, ist die letztgenannte Verhaltensform „verschleiernder, unsubstanziierter Abweichung“ von fragwürdigerer Natur: Schiedsgerichte suggerieren oftmals, sich einer bestehenden Interpretationslinie anzuschließen, folgen letztlich aber ohne hinreichende Begründung ihrer eigenen, abweichenden Überzeugung. Alternativ geben diese Schiedsgerichte vermeintliche Unterschiede zu bereits in konsistenter Schiedssprechung entschiedenen Auslegungsfragen vor und verschleiern auf diese Weise ihre nicht hinreichend begründete Abweichung. Entscheidungen, die hingegen der zweiten übergeordneten Kategorie angehören, stehen einer konsistenteren und kohärenteren Schiedssprechung noch stärker entgegen. Denn Schiedsgerichte, die das Verhalten einer „ignorierenden, unsubstanziierten Abweichung“ aufweisen, sind weder um eine Begründung noch um eine Verschleierung ihrer unbegründeten Abweichung bemüht. Sie zollen somit ihren Vorgängerentscheidungen

Summary In German

469

keinerlei Respekt, sondern ignorieren diese schlicht, indem sie keinen Bezug auf diese nehmen. Ob diese Ignoranz bewusst oder unbewusst erfolgt, bleibt dabei häufig offen. Zumindest zeigen diese Schiedsgerichte keinerlei Bewusstsein über den Umstand ihrer Divergenz. Schließlich untersucht die Arbeit auch die konkreten Erscheinungen konfligierender Interpretationen in icsid-Schiedssprüchen. Die diesbezüglich durchgeführte qualitativ-empirische Analyse deckt das gesamte Gebiet des Investitionsschutzrechts ab. Sie wurde nach zuständigkeitsbezogenen, verfahrens- und materiellrechtlichen Rechtsfragen strukturiert. Innerhalb ­ der einzelnen Kategorien werden zunächst überblicksartig Beispiele inkonsistenter Schiedssprechung aufgezeigt, um anschließend einige davon aufzugreifen und im Detail zu analysieren und evaluieren. Diese ausführlicher behandelten Beispiele umfassen Auslegungsfragen zur zuständigkeitsbezogenen Wirkung von Schirmklauseln, zu den in den verfahrensrechtlichen ­Vorschriften der icsid-Konvention enthaltenen Annullierungsgründen sowie zu den materiellrechtlichen Schutzstandards der Meistbegünstigung und der Notstandseinrede. Dabei war die Auswahl nicht nur durch die Zugehörigkeit dieser Rechtsfragen zu den verschiedenen investitionsschutzrechtlichen Bereichen motiviert, sondern auch durch deren Repräsentativität mit Blick auf die ­verschiedenen im Vorhergehenden dargestellten Formen und Ursachen inkonsistenter Interpretationen. Als Ergebnis der zentralen Problemanalyse bleibt festzuhalten, dass ­inkonsistente icsid-Schiedssprechung in verschiedenen Formen, aufgrund verschiedenster Ursachen sowie in den unterschiedlichen Bereichen des ­Investitionsschutzrechts auftritt und die diesbezügliche Kritik somit berechtigt ist. Gleichzeitig existieren jedoch durchaus konsistente oder zumindest kohärente Interpretationslinien zu diversen Auslegungsfragen, so dass es verfehlt wäre, bereits von einer „Inkonsistenzkrise“ der icsid-Schiedssprechung zu sprechen. Dennoch sind angesichts der signifikanten Menge inkonsistenter und auch inkohärenter Schiedssprüche zielgerichtete Gegenmaßnahmen erforderlich. Das dritte Kapitel ist somit der Aufgabe gewidmet, systemverträgliche und gleichsam realisierbare, wirkungsvolle Reformmaßnahmen zu eruieren, um dem Inkonsistenzproblem der icsid-Schiedssprechung Abhilfe zu leisten. Der erste Teil des Kapitels beinhaltet einen breitgefächerten Überblick über verschiedene mögliche Reformansätze. Zunächst werden Reformkonzepte ohne icsid-Spezifität vorgestellt. Diese bestehen z.B. in klarstellenden Interpretationen oder Modifikationen von Investitionsschutzabkommen durch die jeweiligen Vertragsstaaten, in ungeschriebenen verfahrensrechtlichen

470

Summary in German

­Möglichkeiten sowie auch in der wissenschaftlichen Systematisierung, Analyse und Kommentierung von Schiedssprüchen. Anschließend wird der Fokus auf Reformmodelle mit icsid-Spezifität ­gerichtet. Zunächst werden mögliche icsid-spezifische Reformkonzepte vorgestellt und sodann verschiedene Auswahlkriterien wie deren Eignung zur effektiven Ursachenbekämpfung, deren Umsetzbarkeit sowie allgemeine Vorund Nachteile diskutiert. Konkret werden die Vorschläge der Einführung eines formellen verfahrensrechtlichen Konsolidierungsmechanismus, der Erhöhung der Verfahrenstransparenz in der Phase nach Erlass eines S­ chiedsspruchs, der Etablierung einer Berufungsinstanz sowie der Einführung eines Vorabent­ scheidungssystems behandelt. Auf Basis der zu den einzelnen Reformmodellen präsentierten Informationen wird schließlich ein Vergleich und eine ­Abwägung der einzelnen Konzepte vorgenommen, woraus letztlich das Konzept eines Vorabentscheidungssystems nach Vorbild des eu-Rechts als der am besten geeignete Ansatz hervorgeht. Anknüpfend an dieses Auswahlergebnis dient der zweite Teil des dritten Kapitels der weiteren Ausarbeitung und Verfeinerung des Modells eines icsid-Vorabentscheidungssystems. Auf einen kurzen Überblick zu historischen und modernen Vorbildern mit schwerpunktmäßiger Betrachtung des eu-Vorabentscheidungsverfahrens folgen Erwägungen zu den möglichen Implementierungstechniken innerhalb des icsid-Regimes. Diese kommen letztlich zu dem Ergebnis, dass ein stufenweiser Ansatz die größte Verträglichkeit mit bestehenden Strukturen sowie auch eine größtmögliche Effektivität der Reformmaßnahme ermöglicht. Konkret soll das neue Vorabentscheidungssystem zunächst im Wege eines die icsid-Schiedsordnung ergänzenden Protokolls etabliert werden. Diesem müssten die icsid-Vertragsstaaten durch eine explizite „opt in“-Erklärung zustimmen. Basierend auf der somit im Laufe der Zeit zu erwartenden „späteren Übung” im Sinne des Art. 31 (3) (b) der Wiener Vertragsrechtskonvention soll dann, nach angemessener Zeit, in einem nächsten Schritt eine konkrete Änderung der icsid-Schiedsordnung im Sinne von Art. 6 (1) (c) der icsid-Konvention vorgenommen werden. Diejenigen icsid-Vertragsstaaten, die nicht am Vorabentscheidungssystem teilnehmen wollen, müssten dies ab diesem Zeitpunkt durch eine explizite „opt out“Erklärung kund tun. Nach erfolgreicher Implementierung wären sodann die grundlegenden verfahrensrechtlichen Strukturen zu definieren. Als wichtigstes Gremium soll ein semi-permanent besetztes Vorabentscheidungskomitee fungieren, dessen Mitglieder aus einem Expertenpanel – als Untergliederung des icsidSchiedsrichterpanels – gewählt werden. Im Wege einer rechtlichen Fiktion gilt dieses jeweils ab Konstituierung eines Schiedsgerichts als formal existent.

Summary In German

471

Auf diese Weise werden die bestehenden Strukturen des icsid-Regimes – insbesondere die nach Art. 3 der icsid-Konvention beschränkte Zahl zulässiger Organe – angemessen berücksichtigt. Kommt es im Rahmen eines vor einem Schiedsgericht anhängigen Schiedsverfahren zur Vorlage einer Rechtsfrage, so soll hierfür individuell und zufallsbasiert eine mit jeweils drei Mitgliedern des Vorabentscheidungskomitees besetzte Vorabentscheidungseinheit gebildet werden, die über das jeweilige Vorabentscheidungsersuchen entscheidet. Im Rahmen dieses Entscheidungsprozesses soll ein Konsultationsprozess mit den jeweils übrigen Mitgliedern des ­Vorabentscheidungskomitees verpflichtend sein. Struktur und Funktionsweise des künftigen icsid-Vorabentscheidungssystems wurden durch das Modell des wto-Berufungsgremiums inspiriert. Auf Grundlage dieses Rahmenkonzeptes werden schließlich die Modalitäten zu Vorlagerechten und -pflichten von icsid-Schiedsgerichten entwickelt. Zunächst stellt sich die Frage nach dem Recht zur Vorlage einer investitionsschutzrechtlichen Auslegungsfrage. Die Vorlage einer Auslegungsfrage durch ein Schiedsgericht soll dann zulässig sein, wenn deren Beantwortung erhebliche Zweifel oder Schwierigkeiten mit sich bringt. Weitere kumulativ zu erfüllende Voraussetzungen sollen in der grundlegenden Relevanz für die Entscheidung des konkreten Rechtsstreits sowie in der allgemeinen und elementaren Bedeutung für die weitere Entwicklung des Investitionsschutzrechts liegen. Schließlich muss die Auslegungsfrage erstmals auftreten, in der Vergangenheit zu konfligierenden Interpretationen geführt haben oder das mit dem betreffenden Fall befasste Schiedsgericht muss Abweichungstendenzen von einer bereits etablierten Interpretationslinie aufzeigen. Aus dem Recht zur Vorlage soll sich angesichts des lediglich einstufigen icsid-Verfahrens ohne Instanzenzug immer dann eine Pflicht zur Vorlage ergeben, wenn nicht die am eu-rechtlichen Vorbild orientierten Ausnahmen des acte clair oder des acte éclairé greifen. icsid-Vorabentscheidungen sollen in zeitlicher Hinsicht ex tunc-Wirkung besitzen, d.h. dass diese grundsätzlich auch für solche Rechtsbeziehungen ­Wirkung entfalten sollen, die zeitlich vor der Zustimmung der Streitparteien zum Schiedsverfahren – etwa im Rahmen eines bestehenden Investitionsschutzabkommens – etabliert wurden. Die umfassende Wirkung von erlassenen ­Vorabentscheidungen ist allerdings streng von der ex nunc-Anwendbarkeit der um das Vorabentscheidungssystem ergänzten icsid-Schiedsordnung gem. Art. 44 icsid-Konvention zu unterscheiden. Deren Geltung beschränkt sich auf Schiedsverfahren, in denen die Zustimmung zur ­i csid-Schiedsgerichtsbarkeit nach Inkrafttreten der modifizierten icsid-Schiedsordnung erteilt wurde. In rechtlicher Hinsicht sollen icsid-Vorabentscheidungen nur für die ­vorlegenden Schiedsgerichte Bindungswirkung besitzen; für alle später mit

472

Summary in German

derselben Auslegungsfrage befassten Schiedsgerichte sollen diese nur auf Basis eines „comply-or-explain”-Mechanismus Verbindlichkeit besitzen. Auf diese Weise soll eine konsistentere („comply”) bzw. bei Abweichungen zumindest kohärentere („explain”) Entwicklung der icsid-Schiedssprechung erreicht werden, welche zugleich eine Annäherung an das Ziel einer jurisprudence constante ermöglicht.

Annex A

Annex to Chapter 1

i

International Investment Law and Arbitration

Year Number of countries that introduced changes Number of regulatory changes Liberalization/promotion Restriction/regulation Neutral/indeterminate

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 45 51 43 59 79 77 70 49 40 46 54 51 57 60 41 46 81 75 5 1

97 85 2 10

94 79 12 3

125 113 12 0

164 142 20 2

144 118 25 1

126 104 22 0

79 58 19 2

68 51 15 2

89 61 24 4

116 77 33 6

86 62 21 3

92 65 21 6

88 64 21 3

72 52 11 9

96 71 13 12

100

Per cent (%)

80 60 40

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

0

2000

20

Year

Figure 1

Development of National Investment Policies, 2000–2015 Source: unctad, Investment Policy Monitor database/World Investment Report, 90–92 (Table III.1) (2016).

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_008

annex

300

3000

250

2500

141

93

1000

2015

2013

27 30 25 22

2014

36

2011

2010

45

2012

63

2009

2003

2001

2002

1999

2000

1997

1998

1995

1996

1993

1994

1991

1992

1990

0

64

49

72

88 81 81 76

2007

101

100

50

1500

132

2008

109

124

2005

151

150

2000

185

175 176

2006

177

Cumulative number of BITs

208

2004

193

200

1989

Annual number of BITs

474

500

0

Year Annual BITs

Cumulative BITs

Figure 2  Development of bits, 1989–2015 Source: unctad IIA Navigator, available at (last visited August 2016). 2,200,000 2,000,000 1,800,000

USD in millions*

1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

0 Year *current prices and current exchange rates as of November 2016

Figure 3  Development of Inward fdi Flows, 1970–2015 Source: unctadStat, FDI, Inward and outward flows and stock, annual, 1970–2015, available at (last visited November 2016).

2015

2013

2014

2011

2012

2010

2009

2007

2008

2005

2006

2003

0 2004

50

0 2001

100

5 2002

150

10

1999

200

15

2000

250

20

1997

300

25

1998

350

30

1995

400

35

1996

450

40

1993

500

45

1994

550

50

1991

600

55

1992

650

60

1990

700

65

1989

750

70

1987

800

75

1988

Annual number of cases

80

Cumulative number of cases

475

annex

Year ICSID

Non-ICSID

All cases cumulative

Figure 4  Development of Treaty-based Investor-State Arbitrations, 1987–2015 (to the extent known) Source: unctad isds Navigator, available at (last visited August 2016).

icsid Arbitration 60 50

50 40

40

20

14

10 0

32

30

30

1 0

4

2 1 2 1 2 0 0 0 1

4

0 1

4

18

33

21

24

21

20

23

38

35

25

8 8 8 9 2 1 2 3 3 0 1 0 0

1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Annual number of ICSID Convention arbitration cases

ii

Year

Figure 5  icsid Caseload Statistic, 1972–2015 Source: icsid, The icsid Caseload – Statistics, 8 (Issue 2016–2).

476

annex 8; 1,4% 52; 9,1%

510; 89,5%

Convention Arbitration Cases Convention Conciliation Cases Additional Facility Cases

Figure 6  icsid Cases registered as of 31 December 2015 (absolute and relative numbers) Source: icsid, The icsid Caseload – Statistics, 8 (2016–2).

477

annex

B

Annex to Chapter 2

i

Overview of Qualitative-Empirical Study on icsid Case Law

Source of International Investment law

Overview of Issues of Inconsistencies Examplary Issue of Inconsistency

Examplary Cause of Inconsistency

Jurisdictional Requirements Unilateral Consent in Domestic Investment Laws Conditions to Consent in bits Scope of Consent in bits: Umbrella Clauses

Umbrella Clauses

Substantiated Deviation (*)

Annulment Proceedings

Concealed, Unsubstantiated Deviation by Pretended Agreement

mfn

Concealed, Unsubstantiated Deviation by Distinction

Law governing Jurisdiction

Procedural Law Provisional Measures Disqualification of Arbitrators Cost Allocation Annulment Proceedings

Substantive Law Protective Standards fet nt mfn

International Custom Doctrine of Indirect Expropriation Doctrine of Necessity

Legend: (*) inconsistency, yet coherence

Doctrine of Necessity Ignoring, Unsubstantiated Deviation

478 ii

annex

Overview of icsid Annulment Case Law

Case

Decision on Annulment

Applicant

Committee Members

Klöckner v. Cameroon (i), icsid Case No. ARB/81/2

3 May 1985

Claimant

Lalive (Swiss), El-Kosheri (Egyptian), Seidl-Hohenv. (Austrian)

Amco v. Indonesia (i), icsid Case No. ARB/81/1

16 May 1986

Respondent

Seidl-Hohenv. (Austrian), Feliciano (Philippine), Girardina (Italian)

mine v. Guinea, icsid Case No. ARB/84/4

22 Dec. 1989 Respondent (partial)

Sucharitkul (Thai), Broches (Dutch), Mbaye (Sengalese)

Klöckner v. Cameroon (ii), icsid Case No. ARB/81/2 (unpublished)

17 May 1990

Sucharitkul (Thai), Giardina (Italian), Mbaye (Sengalese)

Amco v. Indonesia (ii), icsid Case No. ARB/81/1

17 Dec. 1992 Both

Sucharitkul (Thai), Fatouros (Greek), Schindler (Swiss)

Wena Hotels v. Egypt, icsid Case No. ARB/98/4

5 Feb. 2002

Respondent

Kerameus (Greek), Bucher (Swiss), Orrego Vicuña (Chilean)

Vivendi v. Argentina (i), icsid Case No. ARB/97/3

3 July 2002

Claimant (partial)

Fortier (Canadian), Crawford (Australian), Fernández-Rozas (Spanish)

cdc v. Seychelles, icsid Case No. ARB/02/14

29 June 2005 Respondent

Consortium rfcc v. Morocco, 18 Jan. 2006 icsid Case No. ARB/00/6 (excerpts)

Both (Claimant: partial)

Claimant

Brower, Ch. N. (us), Hwang (Singaporean), Williams (New Zealand) Hanotiau (Belgian), Fatouros (Greek), Berman (British)

479

annex

Annulment yes

Generation Scope of Review no

x Art. 52(1)(b,e)

broad 1st

x partial Art. 52(1)(b,e)

x

x

x partial Art. 52(1)(e)

2nd

x

x Suppl. Award Art. 52(1)(d)

narrow

unknown

x Award

x

x

x

3rd

x partial Art. 52(1)(b)

x

x

x

x

mod. i

x

(x)

480

annex

Case

Decision on Annulment

Applicant

Committee Members

Patrick Mitchell v. Congo, icsid Case No. ARB/99/7

11 Nov. 2006

Respondent

Dimolitsa (Greek), Dossou (Beninese), Giardina (Italian)

Repsol v. Ecuador, icsid Case. No. ARB/01/10

8 Jan. 2007

Respondent

Kessler (us), Bernardini (Italian), Biggs (Chilean)

mtd Equity v. Chile, icsid Case No. ARB/01/7

21 March 2007

Respondent

Guillaume (French), Crawford (Australian), Ordoñez Noriega (Colombian)

Soufraki v. United Arab Emirates, icsid Case No. ARB/02/7

5 June 2007

Claimant

Feliciano (Philippine), Nabulsi (Jordanian) [*], Stern (French)

Lucchetti v. Peru, icsid Case No. ARB/03/4

5 Sept. 2007

Claimant

Danelius (Swedish), Giardina (Italian), Berman (British) [*]

cms v. Argentina, icsid Case No. ARB/01/8

25 Sept. 2007 Respondent

Guillaume (French), Elaraby (Egyptian), Crawford (Australian)

mhs v. Malaysia, icsid Case No. ARB/05/10

16 April 2009 Claimant

Schwebel (us), Shahabuddeen (Guyanese) [*], Tomka (Slovak)

Azurix v. Argentina, icsid Case No. ARB/01/12

1 Sept. 2009

Respondent

Griffith (Australian), Ajibola (Nigerian), Hwang (Singaporean)

mci v. Ecuador, icsid Case No. ARB/03/6

19 Oct. 2009

Claimant

Hascher (French), Danelius (Swedish), Tomka (Slovak)

481

annex Annulment yes

Generation Scope of Review no

x Art. 52(1)(b,e)

broad

narrow

x

x

x

x

x

x

x

x

x

x partial Art. 52(1)(e)

x Art. 51(1)(b)

x Art. 52(1)(b)

x

x

x

x

x

482

annex

Case

Decision on Annulment

Applicant

Committee Members

Rumeli v. Kazakhstan, icsid Case No. ARB/05/16

25 March 2010

Respondent

Schwebel (us), McLachlan (New Zealand), Silva Romero (Colombian)

Transgabonais v. Gabon, icsid Case No. ARB/04/5 (excerpts)

11 May 2010

Respondent

Berman (British), El-Kosheri (Egyptian), Knieper (German)

Helnan v. Egypt, icsid Case No. ARB/05/19

14 June 2010 Claimant

Schwebel (us), Ajibola (Nigerian), McLachlan (New Zealand)

Sempra v. Argentina, icsid Case No. ARB/02/16

29 June 2010 Respondent

Söderlund (Swedish), Edward (British), Jacovides (Cypriot)

Enron v. Argentina, icsid Case No. ARB/01/3

30 July 2010

Respondent

Griffith (Australian), Robinson (Jamaican), Tresselt (Norwegian)

Vivendi v. Argentina (ii), icsid Case No. ARB/97/3

10 Aug. 2010 Respondent

El-Kosheri (Egyptian), Jacovides (Cypriot), Dalhuisen (Dutch) [+]

Vieira v. Republic of Chile, icsid Case No. ARB/04/7

10 Dec. 2010 Claimant

Söderlund (Swedish), Bernardini (Italian), Silva Romera (Colombian/French)

Fraport v. Philippines (i), icsid Case No. ARB/03/25

23 Dec. 2010 Claimant

Tomka (Slovak), Hascher (French), McLachlan (NewZealand)

483

annex Annulment yes

Generation Scope of Review no

broad

x

x

x

(x)

x partial Art. 52(1)(b)

4th

x

x Art. 52(1)(b)

x

x partial Art. 52(1)(b)

x

x

x

x Art. 52(1)(d)

narrow

x

mod. ii

x

x

484

annex

Case

Decision on Annulment

Applicant

Duke v. Peru, icsid Case No. ARB/03/28

1 March 2011 Respondent

McLachlan (NewZealand), Hascher (French), Tomka (Slovak)

Togo Electricité v. Togo, icsid Case No. ARB/06/7

6 Sept. 2011

Van den Berg (Dutch), Bermann (British), Knieper (German)

Continental Casualty v. Argentina, icsid Case No. ARB/03/9

16 Sept. 2011 Both (partial) Griffith (British), Söderlund (Swedish), Ajibola (Nigerian)

aes Summit v. Hungary, icsid Case No. ARB/07/22

29 June 2012 Claimant

Hanotiau (Belgian), Knieper (German), Yusuf (Somali)

Pey Casado v. Chile, icsid Case No. ARB/98/2

18 Dec. 2012 Respondent

Fortier (Canadian), Bernardini (Italian), Sadek El-Kosheri (Egyptian)

rsm Prod. Corp. v. Central African Republic, icsid Case No. ARB/07/2

20 Feb. 2013

Claimant

Cremado (Spanish), Ahmed (Somali), Mantilla-Serrano (Colombian)

Libananco v. Turkey, icsid Case No. ARB/06/8

22 May 2013

Claimant

Rigo Sureda (Spanish), Danelius (Swedish), Silva Romero (Colombian/French)

Malicorp v. Egypt, icsid Case No. ARB/08/18

3 July 2013

Respondent

Rigo Sureda (Spanish), Alexandrov (Bulgarian), Silva Romero (Colombian/French)

Respondent

Committee Members

485

annex Annulment yes

Generation Scope of Review no

broad

narrow

x

x

x

x

x

x

x

x

x partial Art. 52(1)(d,e)

x

x

(x)

x

(x)

x

x

486

annex

Case

Decision on Annulment

Applicant

Committee Members

Lemire v. Ukraine, icsid Case No. ARB/06/18

16 July 2013

Respondent

Wobeser (Mexican), Kettani (Moroccan), Zuleta (Colombian)

Impregilo v. Argentina, icsid Case No. ARB/07/17

24 Jan. 2014

Respondent

Oreamuno (Costa Rican), Zuleta (Colombian), Cheng (Chinese)

Caratube v. Kazakhstan, icsid Case No. ARB/08/12

21 Feb. 2014

Claimant

Fernández-Armesto (Spanish), Abraham (Malaysian), Danelius (Swedish)

sgs v. Paraguay, icsid Case No. ARB/07/29

19 May 2014

Respondent

Oreamuno (Costa Rican), Yusuf (Somali), Zuleta (Colombian)

Alapli Electrik v. Turkey, icsid Case No. ARB/08/13

10 July 2014

Claimant

Hanotiau (Belgian), Böckstiegel (German), Khan (Pakistani)

El Paso v. Argentina, icsid Case No. ARB/03/15

22 Sept. 2014 Respondent

Oreamuno (Costa Rican), Cheng (Chinese), Knieper (German)

Daimler v. Argentina, icsid Case No. ARB/05/01

7 Jan. 2015

Claimants

Zuleta (Colombian), Feliciano (Philipine), Khan (Pakistani)

Iberdrola v. Guatemala, icsid Case No. ARB/09/5

13 Jan. 2015

Claimant

Barros Bourie (Chilean), Bernadini (Italian), Shaw (Uruguayan)

Tza Yap Shum v. Peru, icsid Case No. ARB/07/6

12 Feb. 2015

Respondent

Hascher (French), McRae (Canadian/ New Zealand), Hóber (Swedish)

487

annex Annulment yes

Generation Scope of Review no

broad

narrow

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

x

488 Case

annex Decision on Annulment

Applicant

Committee Members

Kılıç İnşaat v. Turkmenistan, 14 July 2015 icsid Case No. ARB/10/1

Claimant

Rigo Sureda (Spanish), Böckstiegel (German), Shin (Korean)

Occidental v. Ecuador, icsid Case No. ARB/06/11

2 Nov. 2015

Respondent

Fernández-Armesto (Spanish), Feliciano (Philippine), Oreamuno (Costa Rican)

Tulip v. Turkey, icsid Case No. ARB/11/28

30 Dec. 2015 Claimants

Tomka (Slovak), Booth (British), Schreuer (Austrian)

Adem Dogan v. Turkmenistan, icsid Case No. ARB/09/9

15 Jan. 2016

Respondent

Bernadini (Italian), Khan (Pakistan), Van Haersolte-Van Hof (Dutch)

Total v. Argentina, icsid Case No. ARB/04/1

1 Feb. 2016

Respondent

Zuleta (Colombian), Castellanos H. (Guatemalan), Cheng (Chinese)

edf International v. Argentina, icsid Case No. ARB/03/23

5 Feb. 2016

Respondent

Greenwood (British), Cheng (Chinese), Taniguchi (Japanese)

Micula v. Romania, icsid Case No. ARB/05/20

26 Feb. 2016

Respondent

Wobeser (Mexican), Cremades (Spanish), Yusuf (Somali)

Abou Lahoud v. Congo, icsid Case No. ARB/10/4

29 March 2016

Respondent

Kettani (Moroccan), Hóber (Swedish), Knieper (German)

489

annex Annulment yes

Generation Scope of Review no x

x partial Art. 52(1)(b)

broad

narrow x

x

x

x

x

x

x

x

x

x

x

x

x

x

490

annex

Case

Decision on Annulment

Applicant

Committee Members

teco v. Guatemala, icsid Case No. ARB/10/23

5 April 2016

Respondent

Hanotiau (Belgian), Oyekunle (Nigerian), Sachs (German)

Poštová banka v. Hellenic Republic, icsid Case No. ARB/13/8

29 Sept. 2016 Claimants

Kettani (Moroccan), Edward (British), Shin (Korean)

Legend: (x) no definite assessment possible due to publication of excerpts only [*] dissenting opinion [+] additional opinion Discontinued icsid annulment proceedings were not included. (Status as of September 2016)

491

annex Annulment yes

Generation Scope of Review no

x partial Art. 52(1)(d,e)

broad

narrow x

x

x

492

annex

C

Annex to Chapter 3

I

Basic Structures of an ICSID PR System

Secretariat

Administrative Council

(ICSID Convention Arts. 4 et seq.)

(ICSID Convention Arts. 9 et seq.)

Chairman

Secretary General

Panel of Arbitrators

(ICSID Convention Arts. 12 et seq.)

objective and transparent scrutiny

assignment Panel of Experts

appointment

adjustment of election results

election legal fiction

PR Committee

Arbitral Tribunal (ICSID Convention Arts. 37–38; default scenario) or

Annulment Committee

random composition

(ICSID Convention Art. 52)

PR PR Division

consultation

493

annex

II

Admissible Questions to an ICSID PR System

Does the question concern the interpretation – not validity – of international investment law?

No

Does the interpretation of such norms or principles – not facts – raise significant uncertainties, doubts, or difficulties? Yes Does the question concern a legal issue with material relevance for the pending case? general and fundamental importance in international investment law?

No

Yes Does this legal issue arise for the first time before an arbitral tribunal? OR Has this legal issue already occurred in the past on repeated occasions and led to an inconsistent line of case law involving at least two conflicting decisions? or led to a consistent line of case law from which the referring arbitral tribunal intends to deviate?

No

Yes Is there is no other concurrently pending PR proceeding concerned with an identical or comparable legal issue? Is there no direct relation of the legal issue to a request for a provisional measure in the sense of ICSID Convention Art. 47? Or, if so, can it be anticipated that the referral question will no longer be at issue in the subsequent principal proceeding?

No

Yes Did the referring arbitral tribunal draft the question in an abstract, clear and simple, but sufficiently precise manner? Is the submitted question accompanied by a statement as to the material relevance and the general and fundamental importance of the legal issue, the reasons which caused it to seek for a PR, and how the question submitted should be answered in its opinion and an anonymised background information including a brief summary of the factual findings, the identified applicable law, the most cogent and relevant arguments of the disputing parties and of third parties, and a procedural record?

No

Yes + admissible question

– admissible question

494 III Day 0–7 (week 1)

annex

Course of Proceedings in an icsid pr System Procedural stage

stay of proceedings and filing of request for pr by the arbitral tribunal or annulment committee with icsid Secretariat → icsid Secretariat – registers the request and sends notice of request to the potentially interested persons and entities – composes pr Division on the basis of a random choice and informs pr Committee about the result – publishes anonymised request and composition of pr Division on the icsid website 7–21 anonymised, written submissions by the potentially interested (week 1–3) persons and entities → icsid Secretariat – collects written submissions and screens them for relevance and clearness – anonymises written submissions if necessary – forwards written submissions to the pr Division on day 21 21–28 examination of admissibility pr request by pr Division (week 4) if (+) start of consultations if (−) due to obvious inadmissibility → rejection of pr request if (−) due to need for reformulation/clarification/ supplementation: → return of pr request for revision or completion within 10 days 29–49 39–59 consultations – within pr Division in division meetings (week 5–7) (week – with pr Committee in committee meetings 6–8/9) (in parallel, if pr request was returned for revision or completion: possibility to submit revised versions of written submissions) 50–60 60–70 drafting and rendering of pr to be forwarded to the icsid Secretariat (week 8/9) (week 8/9–10) → icsid Secretariat – circulates pr to original arbitral tribunal or annulment committee and the disputing parties – publishes pr and written submissions on the icsid website

495

annex

Draft Amendment to the icsid Arbitration Rules for the Implementation of an ICSID PR System (based on tfeu Art. 267, cjeu Rules of Procedure Arts. 99, 105, wto dsu Art. 17 and the wto wpar Rules)

IV

icsid Arbitration Rules Chapter v – Particular Procedures 1. 2.

3.

Preliminary Rulings [hereinafter pr] Rule 1 The Panel of Experts The Panel of Experts shall be set up as a sub-panel affiliated with the Panel of Arbitrators. The Members of the Panel of Experts shall be recruited from the Panel of Arbitrators. Only leading and recognised authorities with broad knowledge and expertise in the fields of international investment law and public international law in general shall be admitted to fill such position. The scrutiny for the said qualifications shall be conducted by the Secretariat on the basis of objective and transparent standards to be set up and published by the Secretariat. The selected arbitrators shall then be assigned to the Panel of Experts by the Chairman of the Administrative Council. The Members of the Panel of Experts shall be eligible to serve on the pr Committee.

Rule 2 The pr Committee 1. The pr Committee shall be deemed as being formally in existence from the moment in which the arbitral tribunal1 of any particular case is constituted. 2. The pr Committee shall be composed of seven internationally representative, impartial, and highly qualified Members. They shall be elected from the Panel of Experts by the Administrative Council at its annual or specifically arranged meetings. In the event that an election results in more than four of the seven seats being filled with candidates from the same politico-economic origin, the Secretariat 1 In the following, the term “arbitral tribunal” will stand for both, arbitral tribunals and annulment committees.

496

annex

shall act correctively by filling the remainder of seats with the highest ranked candidates from other country categories. The politico-economic categories shall be set up and assigned by the Secretariat, which shall use the World Bank’s classification of world economies by analytical income categories as basic criterion. 3. Once the membership of the pr Committee is established, its Members shall elect their Chairperson from among themselves. 4. The pr Committee Members shall serve for a term of office of six years. Their terms of office shall be staggered two years apart for groups of two persons at a time. In the first pr Committee, the terms of two Members shall expire at the end of two years and the terms of another two Members shall expire at the end of four years. The Members concerned by this shortened term of office shall be determined by lot by the Secretariat. The term of office of a person selected to fill a vacancy shall last for the remainder of the respective predecessor’s term. Only the term of office of the Chairman may be extended for one additional term by vote of the other pr Committee Members. 5. Scholarly discussions shall take place between the Members of the pr Committee on a regular basis not only in view of particular cases pending before an arbitral tribunal but also more generally to exchange views on the most recent developments in practice and research.

Rule 3 The pr Divisions 1.

2. 3.

1.

prs shall not be made en banc, but in pr Divisions comprising three pr Committee Members. They shall be composed on a case-by-case basis and according to the principle of random rotation. The President of a pr Division shall be determined by lot. A consultation process shall take place between both the Members of the pr Division themselves and the Members of the entire pr Committee. The Members of the pr Division shall not in any manner interfere with the ­power vested in the arbitral tribunal regarding the principal proceeding. They shall only decide on abstract legal questions arising in the context of such case.

Rule 4 Admissible Questions A question submitted to the pr Committee shall be admissible for a pr if it concerns the interpretation of international investment law and if it raises significant doubts or difficulties among the arbitrators of the referring arbitral tribunal. Questions on the validity of norms and principles of international investment

annex

2.

3.

497

law, questions on the interpretation of national law without direct references to the international level, and mere questions of fact shall be inadmissible. When deciding on the admissibility of a question, the pr Division shall furthermore consider whether the following conditions are met: (a) the question is of material relevance for the outcome of the case pending before the arbitral tribunal in the sense that there is a sufficient link with the subject matter of the case, that the question is not merely of artificial or hypothetic nature, and that the question has not become moot due to settlement, amendment of claims, or any sort of discontinuance of the arbitration proceedings; (b) the question is of general and fundamental importance within the realm of international investment law in the sense that it concerns central legal issues of widespread interest beyond the individual case; (c) the substantive context of pre-existing arbitral jurisprudence does not indicate otherwise in the sense that the legal issue (aa) arises for the first time, i.e. is materially different from legal issues previously ruled on by arbitral tribunals in that it varies not merely in small elements and details; or (bb) has already occurred on repeated occasions in the past and (aaa) has led to an inconsistent line of arbitral jurisprudence with at least two conflicting decisions, or (bbb) has led to a consistent line of arbitral jurisprudence on interpretative issues that resemble the legal issue in question in all substantive respects, but the competent arbitral tribunal intends to depart from this pre-existing line of arbitral jurisprudence; (d) the procedural context of the ongoing arbitral proceeding does not indicate otherwise in the sense that (aa) there is not another concurrently pending arbitral proceeding that involves a pr proceeding concerned with an identical or comparable legal issue; (bb) the legal issue in question does not directly relate to a request for a provisional measure in the sense of icsid Convention Art. 47. A question referred for a pr which concerns a provisional measure shall only be admissible if it can be anticipated that the referral question will no longer be at issue in the subsequent principal proceeding. The pr Committee shall decide such questions according to an expedited pr procedure pursuant to Rule 9 (1). Referral question shall be formulated in an abstract, clear and simple, but sufficiently precise manner. Any associated minor legal issues shall be left out. An

498

4.

1. 2.

1.

2.

annex a­ ccompanying statement shall contain the reasons which prompted the ­referring arbitral tribunal to inquire about the interpretative issue as well as elaborations on how they believe the submitted question should be answered. An accompanying background information shall contain a brief and anonymised summary of the relevant findings of fact, the identified applicable law, the most cogent and relevant arguments of the disputing parties and of third parties, and a procedural record. A wrong or unintelligible wording of a question or incomplete supporting documents shall not result in the referral being dismissed as inadmissible. Rather, the pr Division shall instruct the referring arbitral tribunal to reformulate or clarify the question or to submit the missing supporting documents within a fixed time limit.

Rule 5 Right and Duty to Submit a Question Arbitral tribunals shall have the right and duty to submit any admissible question to the pr Committee. Arbitral tribunals shall be exempt from their duty to submit an admissible question to the pr Committee, if one of the following exceptions applies: (a) the interpretative issue in question has been elucidated previously in a similar case by the respective pr Division (acte éclairé); (b) the interpretative issue in question is so obvious that it leaves no reasonable doubt as to the manner in which it should be answered (acte clair).

Rule 6 Participation of Disputing Parties and Non-Parties The disputing parties to the original proceeding may explain in their pleadings filed to the arbitral tribunal during the written procedure in the principal proceedings why they believe the arbitrators are obliged to make use of the pr mechanism with regard to a certain interpretative legal question. They may also present and explain their respective positions during the oral hearings. Non-disputing parties that have been admitted as amici curiae to the original proceeding according to Arbitration Rule 37 (2) may take a stand in their written submissions as to the arbitral tribunal’s alleged duty to submit a certain interpretative legal question to the pr Committee.

499

annex 3.

1. 2.



Once a pr proceeding is pending, the following potentially interested persons and entities shall be authorised to file written submissions to the pr Division at their own cost: (a) the disputing parties to the original proceeding, (b) the icsid member States, (c) the institutions which adopted the legal norms in question (if different from (b)), (d) the amici curiae to the original proceeding and any other qualified third party.

Rule 7 Administration of Proceedings pr proceedings shall be administered by the Secretariat and its SecretaryGeneral. After a pr request has been filed, the Secretariat shall be responsible for: (a) the registration of the pr request, (b) the notification of the pr request and, if applicable, the pr request in its revised version to the potentially interested persons and entities listed in Rule 6 (3), (c) the composition of the pr Division, (d) the electronic publication of (aa) the anonymised pr request(s), (bb) the composition of the pr Division, (cc) any shortened time limits in case of an expedited procedure, and (dd) any written submissions, (e) the notification of the pr rendered to the original arbitral tribunal and to the disputing parties, (f) the electronic publication of the pr rendered, (g) any other administrative tasks in support of the functioning of the pr proceedings.

Rule 8 Course and Timing of Proceedings

1. A pr proceeding shall not exceed the duration of nine weeks, at maximum ten weeks. 2. Once an arbitral tribunal has determined its duty to refer a question for a pr, it shall stay its proceedings and file a pr request with the Secretariat.

500 3.

4.

5.

6.

7.

1.

2.

annex Within one week, the Secretariat shall register the pr request and send a notice of request to the potentially interested persons and entities listed in Rule 6 (3), compose the pr Division on the basis of a random, but transparent choice, and finally publish the anonymised request and the composition of the pr Division on the icsid website. During the second and third week, the potentially interested persons and entities listed in Rule 6 (3) shall have the possibility to submit their observations with the Secretariat. After being screened for relevance and clearness, these shall be forwarded to the pr Division and the remaining pr Committee Members no later than day 21. During week four, the pr Division shall verify the admissibility of the request. Where all conditions have been unambiguously met, it shall immediately start its consultations. Where the pr Division determines a need for reformulation or clarification or for adding further supporting documents, the request shall be returned for revision by the referring arbitral tribunal within ten days. During weeks five to seven or six to eight respectively, consultations shall take place within the pr Division and the entire pr Committee. Where a request has been returned to and revised by the referring arbitral tribunal, any prior written submissions may also be revised and resubmitted during this consultation period. In week nine or ten respectively, the pr shall be rendered and forwarded to the Secretariat, which shall circulate the pr to the original arbitral tribunal as well as the disputing parties and publish the pr and any written submissions electronically on the icsid website.

Rule 9 Special Procedures Where the nature of the case requires that it be dealt within a short time, the President of the pr Division may decide that a reference for a pr is to be determined by an expedited procedure. In that event, the President shall immediately fix shortened time limits derogating from the time limits set out in Rule 8. These time limits shall not be shorter than half of the length of the respective regular time limits and be immediately published electronically on the icsid website. Written observations submitted to the pr Division shall be limited to essential points of law raised by the request for a pr. Where a question referred for a pr is identical to a question on which another pr Division has already ruled, where the reply to such a question may be clearly deduced from prior arbitral jurisprudence or where the answer to such a question leaves no reasonable doubt, the pr Division may at any time decide in a

501

annex

simplified procedure. In that event, the pr Division may derogate from the time limits set out in Rule 8. It may immediately render its ruling without prior consideration of written submissions and without consultations within the pr Division and the entire pr Committee.



Rule 10 Cost of Proceedings

The cost incurred by the pr system shall be financed out of the World Bank’s budget.



Rule 11 Effects of a Preliminary Ruling

1. A pr shall be legally binding for the submitting arbitral tribunal and also for any future arbitral tribunal hearing the same specific case. Such arbitral tribunal shall be obliged to apply the interpretation of the legal norm or principle rendered by the pr Division when deciding the case in the principal proceeding. It shall, however, be exempt from this obligation in the exceptional circumstance that it no longer considers the legal question as relevant for the decision-making process. Where the pr failed to clarify the referred issue, the referring arbitral tribunal shall be entitled to resubmit the question. 2. A pr shall have only persuasive effect for any subsequent arbitral tribunal concerned with an identical or largely comparable interpretative question, which has no further relationship with the original proceeding in the course of which the legal issue has initially been referred for a pr. If such arbitral tribunal decides to diverge from a previously rendered pr, it shall, however, provide substantiated explanations for its deviation. 3. In temporal terms, the interpretative rulings rendered by a pr Division shall also apply to legal relationships established prior to the date of consent to icsid arbitration and its regulatory framework.2 Where the legal relationship was established in good faith and where the disputing party concerned anticipates extremely grave consequences to result from the ruling, the pr Divisions shall consider stipulating an exceptional temporal limitation of its ruling.

2 This retroactive, ex tunc effect of a pr must be strictly distinguished from the nonretroactive, ex nunc applicability of a complemented or amended version of the icsid Arbitration Rules, which would apply only to cases based on consent perfected after their entry into force pursuant to icsid Convention Art. 44.

Table of Cases A

Investment Arbitration: Awards and Decisions

The arbitral awards and decisions listed below, unless unpublished, can be found at the following sources: Electronic sources: –  i csid, available at (last visited December 2016) – Investment Treaty Arbitration, available at (last visited December 2016) Print sources: icsid Reports, Vol. 1 (1993) et seq. icsid Review – Foreign Investment Law Journal, Vol. 1 (1986) et seq. i icsid and icsid Additional Facility aapl v. Sri Lanka Asian Agricultural Products Ltd. v. Democratic Socialist Republic of Sri Lanka, icsid Case No. ARB/87/3 – Dissenting Opinion of Arbitrator Samuel K.B. Asante (15 June 1990) – Award (27 June 1990) Abaclat v. Argentina Abaclat and Others v. Argentine Republic (formerly Giovanna a Beccara and Others v. Argentine Republic), icsid Case No. ARB/07/5 – Procedural Order No. 3 (27 January 2010) – Decision on Jurisdiction (4 August 2011) – Dissenting Opinion of Arbitrator Prof. Georges Abi-Saab (28 October 2011) – Decision on the Proposal to Disqualify a Majority of the Tribunal (4 February 2014) adc v. Hungary adc Affiliate Ltd. and adc & admc Management Ltd. v. Republic of Hungary, icsid Case No. ARB/03/16 – Award (2 October 2006)

© koninklijke brill nv, leiden, ���7 | doi 10.1163/9789004337916_009

Table Of Cases

503

Adem Dogan v. Turkmenistan Adem Dogan v. Turkmenistan, icsid Case No. ARB/09/9 –  Decision of the Ad hoc Committee on Annulment (15 January 2016) adf v. us adf Group Inc. v. United States of America, icsid Case No. ARB(AF)/00/1 (nafta) – Award (9 January 2003) Adriano Gardella v. Côte d’Ivoire Adriano Gardella S.p.A. v. Côte d’Ivoire, icsid Case No. ARB/74/1 – Award (29 August 1977) aes Summit v. Hungary aes Summit Generation Ltd. and aes-Tisza Erömü Kft. v. Republic of Hungary, icsid Case No. ARB/07/22 – Decision of the Ad Hoc Committee on Annulment (29 June 2012) aes Corporation v. Argentina aes Corporation v. Argentine Republic, icsid Case No. ARB/02/17 – Decision on Jurisdiction (26 April 2005) agip v. Congo agip S.p.A. v. People’s Republic of the Congo, icsid Case No. ARB/77/1 – Award (30 November 1979) Aguas Cordobesas v. Argentina Aguas Cordobesas, s.a., Suez, and Sociedad General de Aguas de Barcelona, s.a. v. Argentine Republic, icsid Case No. ARB/03/18 Aguas del Tunari v. Bolivia Aguas del Tunari s.a. v. Republic of Bolivia, icsid Case No. ARB/02/3 – Decision on Jurisdiction (21 October 2005) Alapli Elektrik v. Turkey Alapli Elektrik b.v. v. Republic of Turkey, icsid Case No. ARB/08/13 – Award (16 July 2012) – Decision of the Ad hoc Committee on Annulment (10 July 2014)

504

Table of Cases

Alex Genin v. Estonia Alex Genin and others v. Republic of Estonia, icsid Case No. ARB/99/2 – Award (25 June 2001) Alpha Projektholding v. Ukraine Alpha Projektholding GmbH v. Ukraine, icsid Case No. ARB/07/16 – Decision on Respondent’s Proposal to Disqualify Arbitrator Dr. Yoram Turbowicz (19 March 2010) – Award (8 November 2010) Ambiente Ufficio v. Argentina Ambiente Ufficio S.p.A. and others v. Argentine Republic, icsid Case No. ARB/08/9 (formerly Giordano Alpi and others v. Argentine Republic) – Decision on Jurisdiction (8 February 2013) Amco v. Indonesia Amco Asia Corp. and others v. Republic of Indonesia, icsid Case No. ARB/81/1 – Decision on the Proposal to Disqualify an Arbitrator (24 June 1982), unpublished – Decision on Jurisdiction (25 September 1983) – Decision on Request for Provisional Measures (9 December 1983) – Award (20 November 1984) – Decision of the Ad hoc Committee on Annulment (16 May 1986) – Award in Resubmitted Case (5 June 1990) – Decision of the Ad Hoc Committee on Annulment in Resubmitted Case (17 December 1992) amt v. Congo American Manufacturing & Trading, Inc. v. Democratic Republic of the Congo, icsid Case No. ARB/93/1 – Award (21 February 1997) Anderson v. Costa Rica Alasdair Ross Anderson and others v. Costa Rica, icsid Case No. ARB(AF)/07/3 – Award (19 May 2010) Apotex v. us Apotex Holdings Inc. and Apotex Inc. v. United States of America, icsid Case No. ARB(AF)/12/1 – Award (25. August 2014)

Table Of Cases

505

Archer v. Mexico Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc. v. United Mexican States, icsid Case No. ARB(AF)/04/05 (nafta) – Order of the Consolidation Tribunal (20 May 2005) – Award (21 November 2007) Arif v. Moldova Mr. Franck Charles Arif v. Republic of Moldova, icsid Case No. ARB/11/23 – Award (8 April 2013) ata Construction v. Jordan ata Construction, Industrial and Trading Company v. Hashemite Kingdom of Jordan, icsid Case No. ARB/08/2 – Award (18 May 2010) Autopista v. Venezuela Autopista Concesionada de Venezuela, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/00/5 – Decision on Jurisdiction (27 September 2001) – Award (23 September 2003) Azpetrol v. Azerbaijan Azpetrol International Holdings b.v., Azpetrol Group b.v. and Azpetrol Oil S­ ervices Group b.v. v. Republic of Azerbaijan, icsid Case No. ARB/06/15 – Award (8 September 2009) Azurix v. Argentina Azurix Corp. v. Argentine Republic, icsid Case No. ARB/01/12 – Decision on Jurisdiction (8 December 2003) – Award (14 July 2006) – Decision of the Ad Hoc Committee on Annulment (1 September 2009) Bayindir v. Pakistan Bayindir Insaat Turizm Ticaret Ve Sanayi a.s. v. Islamic Republic of Pakistan, ­i csid Case No. ARB/03/29 – Decision on Jurisdiction (14 November 2005) – Award (27 August 2009) Benvenuti & Bofant v. Congo s.a.r.l. Benvenuti & Bonfant v. People’s Republic of the Congo, icsid Case No. ARB/77/2 – Award (8 August 1980)

506

Table of Cases

bivac v. Paraguay Bureau Veritas, Inspection, Valuation, Assessment and Control, bivac b.v. v. ­Republic of Paraguay, icsid Case No. ARB/07/9 – Decision on Jurisdiction (29 May 2009) – Further Decision on Jurisdiction (9 October 2012) Biwater Gauff v. Tanzania Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, icsid Case No. ARB/05/22 – Procedural Order No. 1 (31 March 2006) – Procedural Order No. 3 (29 September 2006) – Procedural Order No. 5 (2 February 2007) – Award (24 July 2008) Blue Bank v. Venezuela Blue Bank International & Trust (Barbados) Ltd. v. Bolivarian Republic of Venezuela, icsid Case No. ARB 12/20 – Decision on the Parties’ Proposal to Disqualify a Majority of the Tribunal (12 November 2013) Bosh/B&P v. Ukraine Bosh International, Inc. and B&P Ltd. Foreign Investments Enterprise v. Ukraine, icsid Case No. ARB/08/11 – Award (25 October 2012) bp v. Argentina bp America Production Company and others v. Argentina, icsid Case No. ARB/04/8 – Decision on Preliminary Objections (26 July 2006) Brandes v. Venezuela Brandes Investment Partners, lp v. Bolivarian Republic of Venezuela, icsid Case No. ARB/08/3 – Award (2 August 2011) Burlington v. Ecuador Burlington Resources Inc. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador), icsid Case No. ARB/08/5 (formerly ­Burlington ­Resources Inc. and others v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (PetroEcuador)) – Procedural Order No. 1 (29 June 2009) – Decision on Jurisdiction (2 June 2010)

Table Of Cases

507

– Dissenting Opinion of Arbitrator Francisco Orrego Vicuña (8 November 2012) – Decision on Liability (14 December 2012) – Decision on the Proposal for Disqualification of Prof. Francisco ­Orrego Vicuña (13 December 2013) Burimi v. Albania Burimi srl and Eagle Games SH.A v. Republic of Albania, icsid Case No. ARB/11/18 – Procedural Order No. 2 on Provisional Measures Concerning Security for Costs (3 May 2012) – Award (29 May 2013) bsg v. Guinea bsg Resources (Guinea) Ltd. and bsg Resources (Guinea) sàrl v. Republic of Guinea, icsid Case No. ARB/14/22 – Procedural Order No. 2 on Transparency (17 September 2015) Cable tv v. St. Kitts and Nevis Cable Television of Nevis, Ltd. and Cable Television of Nevis Holdings, Ltd. v. ­Federation of St. Kitts and Nevis, icsid Case No. ARB/95/2 – Award (13 January 1997) Camuzzi v. Argentina (i) Camuzzi International s.a. v. Argentine Republic, icsid Case No. ARB/03/2 – Decision on Jurisdiction (11 May 2005) Camuzzi v. Argentina (ii) Camuzzi International s.a. v. Argentine Republic, icsid Case No. ARB/03/7 – Decision on Jurisdiction (10 June 2005) Çap v. Turkmenistan Muhammet Çap & Sehil Inşaat Endustri ve Ticaret Ltd. Sti. v. Turkmenistan, ­i csid Case No. ARB/12/6 – Decision on Jurisdiction (13 February 2015) Caratube v. Kazakhstan Caratube International Oil Company llp v. Republic of Kazakhstan, icsid Case No. ARB/08/12 – Award (5 June 2012) – Decision of the Ad hoc Committee on Annulment (21 February 2014)

508

Table of Cases

Caratube/Hourani v. Kazakhstan Caratube International Oil Company llp and Devincci Salah Hourani v. Republic of Kazakhstan, icsid Case No. ARB/13/13 – Decision on the Proposal for Disqualification of Mr. Bruno Boesch (20 March 2014) – Decision on Provisional Measures (4 December 2014) cdc v. Seychelles cdc Group plc v. Republic of Seychelles, icsid Case No. ARB/02/14 – Decision of the Ad Hoc Committee on Annulment (29 June 2005) Cementownia v. Turkey Cementownia “Nowa Huta” s.a. v. Republic of Turkey, icsid Case No. ARB(AF)/06/2 – Award (17 September 2009) cemex v. Venezuela cemex Caracas Investments b.v. and cemex Caracas ii Investments b.v. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/08/15 – Decision on Provisional Measures (3 March 2010) – Decision on Jurisdiction (30 December 2010) Churchill Mining and Planet Mining v. Indonesia Churchill Mining plc and Planet Mining Pty Ltd. v. Republic of Indonesia, ­i csid Case No. ARB/12/14 and 12/40 (formerly Churchill Mining plc v. Republic of Indonesia) – Procedural Order No. 1 (6 December 2012) – Procedural Order No. 4 (18 March 2013) csob v. Slovak Republic Československa obchodní banka, a.s. (csob) v. Slovak Republic, icsid Case No. ARB/97/4 – Procedural Order No. 4 (11 January 1999) – Decision on Jurisdiction (24 May 1999) – Procedural Order No. 5 (1 March 2000) – Award (29 December 2004) Champion Trading v. Egypt Champion Trading Company and Ameritrade International, Inc. v. Arab Republic of Egypt, icsid Case No. ARB/02/9 – Award (27 October 2006)

Table Of Cases

509

City Oriente v. Ecuador City Oriente Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. ARB/06/21 – Decision on Provisional Measures (19 November 2007) cms v. Argentina cms Gas Transmission Company v. Argentine Republic, icsid Case No. ARB/01/8 – Decision on Jurisdiction (17 July 2003) – Award (12 May 2005) – Decision of the Ad Hoc Committee on Annulment (25 September 2007) ConocoPhillips v. Venezuela ConocoPhillips Petrozuata b.v., ConocoPhillips Hamaca b.v. and ConocoPhillips Gulf of Paria b.v. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/07/30 – Decision on the Proposal to Disqualify L. Yves Fortier, q.c., Arbitrator (27 February 2012) – Award (3 September 2013) – Decision on the Proposal to Disqualify a Majority of the Tribunal (4 May 2014) – Decision on the Proposal to Disqualify a Majority of the Tribunal (1 July 2015) – Decision on the Proposal to Disqualify L. Yves Fortier, q.c., Arbitrator (26 July 2016) Consortium rfcc v. Morocco Consortium r.f.c.c. v. Kingdom of Morocco, icsid Case No. ARB/00/6 – Decision of the Ad Hoc Committee on Annulment (18 January 2006), unpublished/ excerpts only Continental Casualty v. Argentina Continental Casualty Company v. Argentine Republic, icsid Case No. ARB/03/9 – Decision on Jurisdiction (22 February 2006) – Award (5 September 2008) – Decision of the Ad hoc Committee on Annulment (16 September 2011) Corn Products v. Mexico Corn Products International, Inc. v. United Mexican States, icsid Case No. ARB(AF)/04/1 (nafta) – Order of the Consolidation Tribunal (20 May 2005) – Decision on Responsibility (15 January 2008)

510

Table of Cases

Daimler v. Argentina Daimler Financial Services ag v. Argentine Republic, icsid Case No. ARB/05/01 – Dissenting Opinion of Arbitrator Charles N. Brower (15 August 2012) – Award (22 August 2012) – Decision of the Ad hoc Committee on Annulment (7 January 2015) Desert Line v. Yemen Desert Line Projects llc v. Republic of Yemen, icsid Case No. ARB/05/17 – Award (6 February 2008) Duke Energy v. Peru Duke Energy International Peru Investments No. 1 Ltd. v. Republic of Peru, icsid Case No. ARB/03/28 – Decision on Jurisdiction (1 February 2006) – Decision of the Ad hoc Committee on Annulment (1 March 2011) Duke Energy Electroquil v. Ecuador Duke Energy Electroquil Partners & Electroquil s.a. v. Republic of Ecuador, icsid Case No. ARB/04/19 – Award (18 August 2008) edf International v. Argentina edf International, s.a., saur International, s.a. and Léon Participations A ­ rgentinas, s.a. v. Argentine Republic, icsid Case No. ARB/03/23 – Challenge Decision Regarding Prof. Gabrielle Kaufmann-Kohler (25 June 2008) – Award (11 June 2012) – Decision of the Ad hoc Committee on Annulment (5 February 2016) edf v. Romania edf (Services) Ltd. v. Romania, icsid Case No. ARB/05/13 – Award (8 October 2009) Electricidad Argentina v. Argentina Electricidad Argentina, s.a., and edf International, s.a. v. Argentine Republic, icsid Case No. ARB/03/22 El Paso v. Argentina El Paso Energy International Company v. Argentine Republic, icsid Case No. ARB/03/15 – Decision on Jurisdiction (27 April 2006)

Table Of Cases

511

– Award (31 October 2011) – Decision of the Ad hoc Committee on Annulment (22 September 2014) Enron v. Argentina Enron Corporation and Ponderosa Assets, l.p. v. Argentine Republic, icsid Case No. ARB/01/3 – Decision on Jurisdiction (14 January 2004) – Award (22 May 2007) – Decision of the Ad Hoc Committee on Annulment (30 July 2010) Europe Cement v. Turkey Europe Cement Investment & Trade s.a. v. Republic of Turkey, icsid Case No. ARB(AF)/07/2 – Award (13 August 2009) Fedax v. Venezuela Fedax n.v. v. Venezuela, icsid Case No. ARB/96/3 – Decision on Jurisdiction (11 July 1997) Feldman v. Mexico Marvin Roy Feldman Karpa v. United Mexican States, icsid Case No. ARB(AF)/99/1 – Award (16 December 2002) Fireman’s Funds v. Mexico Fireman’s Fund Insurance Company v. United Mexican States, icsid Case No. ARB(AF)/02/01 (nafta) – Award (17 July 2006) Fraport v. Philippines (i) Fraport ag Frankfurt Airport Services Worldwide v. Philippines, icsid Case No. ARB/03/25 – Award (16 August 2007) – Decision of the Ad hoc Committee on Annulment (23 December 2010) Fraport v. Philippines (ii) Fraport ag Frankfurt Airport Services Worldwide v. Philippines, icsid Case No. ARB/11/12 – Award (10 December 2014)

512

Table of Cases

Funnekotter v. Zimbabwe Bernardus Henricus Funnekotter and others v. Republic of Zimbabwe, icsid Case No. ARB/05/6 – Award (22 April 2009) Garanti v. Turkmenistan Garanti Koza llp v. Turkmenistan, icsid Case No. ARB/11/20 – Decision on Jurisdiction (3 July 2013) –  Dissenting Opinion of Arbitrator Prof. Laurence Boisson de Chazournes (3 July 2013) Gas Natural v. Argentina Gas Natural sdg, s.a. v. Argentine Republic, icsid Case No. ARB/03/10 – Decision on Jurisdiction (17 June 2005) gea Group v. Ukraine gea Group Aktiengesellschaft v. Ukraine, icsid Case No. ARB/08/16 – Award (31 May 2011) Generation Ukraine v. Ukraine Generation Ukraine, Inc. v. Ukraine, icsid Case No. ARB/00/9 – Award (16 September 2003) Getma v. Guinea Getma International and others v. Republic of Guinea, icsid Case No. ARB/11/29 – Decision on the Proposal to Disqualify Mr. Bernardo M. Cremades, ­Arbitrator (28 June 2012) Goetz v. Burundi Antoine Goetz and others v. Republic of Burundi, icsid Case No. ARB/95/3 – Award (10 February 1999) Gold Reserve v. Venezuela Gold Reserve v. Bolivarian Republic of Venezuela, icsid Case No. ARB(AF)/09/1 – Award (22 September 2014) Grupo Francisco v. Guinea Grupo Francisco Hernando Contreras, s.l. v. Republic of Equatorial Guinea, ­i csid Case No. ARB(AF)/12/2 – Award (4 December 2015)

Table Of Cases

513

Gruslin v. Malaysia Philippe Gruslin v. Malaysia, icsid Case No. ARB/99/3 – Award (27 November 2000) Hamester v. Ghana Gustav f.w. Hamester GmbH & Co kg v. Republic of Ghana, icsid Case No. ARB/07/24 – Award (18 Juni 2010) Hassan Awdi v. Romania Hassan Awdi, Enterprise Business Consultants, Inc. and Alfa El Corporation v. Romania, icsid Case No. ARB/10/13 – Award (2 March 2015) Helnan v. Egypt Helnan International Hotels A/S v. Arab Republic of Egypt, icsid Case No. ARB/05/19 – Decision on Jurisdiction (17 October 2006) – Award (3 July 2008) – Decision of the Ad Hoc Committee on Annulment (14 June 2010) Hochtief v. Argentina Hochtief ag v. Argentine Republic, icsid Case No. ARB/07/31 – Dissenting Opinion of Arbitrator J. Christopher Thomas, q.c. (7 October 2011) – Decision on Jurisdiction (24 October 2011) Hrvatska Elektroprivreda v. Slovenia Hrvatska Elektroprivreda d.d. v. Slovenia, icsid Case No. ARB/05/24 – Tribunal’s Ruling regarding the participation of David Mildon q.c. in further stages of the proceedings (6 May 2008) Hydro v. Albania Hydro S.r.l and others v. Republic of Albania, icsid Case No. ARB/15/28 – Decision on Provisional Measures (3 March 2016) Iberdrola Energía v. Guatemala Iberdrola Energía s.a. v. Republic of Guatemala, icsid Case No. ARB/09/5 – Award (17 August 2012) – Decision of the Ad hoc Committee on Annulment (13 January 2015)

514

Table of Cases

ibm v. Ecuador ibm World Trade Corporation v. Republic of Ecuador, icsid Case No. ARB/02/10 – Decision on Jurisdiction (22 December 2003) İçkale v. Turkmenistan İçkale İnşaat Ltd. Şirketi v. Turkmenistan, icsid Case No. ARB/10/24 – Award (8 March 2016) Impregilo v. Pakistan Impregilo S.p.A. v. Islamic Republic of Pakistan, icsid Case No. ARB/03/3 – Decision on Jurisdiction (22 April 2005) Impregilo v. Argentina Impregilo S.p.A. v. Argentine Republic, icsid Case No. ARB/07/17 – Award (21 June 2011) – Dissenting Opinion of Arbitrator Brigitte Stern (21 June 2011) – Dissenting Opinion of Arbitrator Charles N. Brower (21 June 2011) – Decision of the Ad hoc Committee on Annulment (24 January 2014) Inceysa v. El Salvador Inceysa Vallisoletana s.l. v. Republic of El Salvador, icsid Case No. ARB/03/26 – Award (2 August 2006) Inmaris v. Ukraine Inmaris Perestroika Sailing Maritime Services GmbH and Others v. Ukraine, ­i csid Case No. ARB/08/8 – Decision on Jurisdiction (8 March 2010) Jan de Nul v. Egypt Jan de Nul n.v. and Dredging International n.v. v. Arab Republic of Egypt, icsid Case No. ARB/04/13 – Decision on Jurisdiction (16 June 2006) – Award (6 November 2008) Joy Mining v. Egypt Joy Mining Machinery Ltd. v. Arab Republic of Egypt, icsid Case No. ARB/03/11 – Decision on Jurisdiction (6 August 2004)

Table Of Cases

515

Kardassopoulos v. Georgia Ioannis Kardassopoulos v. Republic of Georgia, icsid Case No. ARB/05/18 – Decision on Jurisdiction (6 July 2007) – Award (3 March 2010) Kılıç İnşaat v. Turkmenistan Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ­i csid Case No. ARB/10/1 – Award (2 July 2013) – Decision of the Ad hoc Committee on Annulment (14 July 2015) Klöckner v. Cameroon Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camerounaise des Engrais, icsid Case No. ARB/81/2 – Award (21 October 1983) – Decision of the Ad hoc Committee on Annulment (3 May 1985) – Decision of the Ad Hoc Committee on Annulment in Resubmitted Case (17 May 1990), unpublished kt Asia v. Kazakhstan kt Asia Investment Group b.v. v. Republic of Kazakhstan, icsid Case No. ARB/09/8 – Award (17 October 2013) Lahoud v. Congo Antoine Abou Lahoud and Leila Bounafeh-Abou Lahoud v. Democratic Republic of the Congo, icsid Case No. ARB/10/4 – Decision of the Ad hoc Committee on Annulment (29 March 2016) Lanco v. Argentina Lanco International Inc. v. Argentine Republic, icsid Case No. ARB/97/6 – Decision on Jurisdiction (8 December 1998) Lao Holdings v. Laos Lao Holdings n.v. v. Lao People’s Democratic Republic, icsid Case No. ARB(AF)/12/6 Lemire v. Ukraine Joseph Charles Lemire v. Ukraine, icsid Case No. ARB/06/18 – Decision on Jurisdiction and Liability (14 January 2010) – Decision of the Ad hoc Committee on Annulment (16 July 2013)

516

Table of Cases

LESI DIPENTA v. Algeria Consortium Groupement L.E.S.I. – DIPENTA v. People’s Democratic Republic of Algeria, icsid Case No. ARB/03/8 – Award (10 January 2005) LESI astaldi v. Algeria L.E.S.I., S.p.A. and astaldi, S.p.A. v. People’s Democratic Republic of Algeria, icsid Case No. ARB/05/3 – “Decision” (12 July 2006) – Award (12 November 2008) letco v. Liberia Liberian Eastern Timber Corporation (letco) v. Republic of Liberia, icsid Case No. ARB/83/2 – Decision on Jurisdiction (24 October 1984) – Award (31 March 1986) Libananco v. Turkey, Libananco Holdings Co. Ltd. v. Republic of Turkey, icsid Case No. ARB/06/8 – Decision of the Ad Hoc Committee on Annulment (22 May 2013) lg&e v. Argentina lg&e Energy Corp., lg&e Capital Corp. and lg&e International Inc. v. Argentine Republic, icsid Case No. ARB/02/1 – Decision on Liability (3 October 2006) Loewen Group v. us The Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ­i csid Case No. ARB(AF)/98/3 (nafta) – Decision on Hearing of Respondent’s Objection to Competence and Jurisdiction (5 January 2001) – Award (26 June 2003) Lucchetti v. Peru Industria Nacional de Alimentos, s.a. and Indalsa Perú, s.a. (formerly Empresas Lucchetti, s.a. and Lucchetti Perú, s.a.) v. Republic of Peru, icsid Case No. ARB/03/4 – Award (7 February 2005) – Decision of the Ad Hoc Committee on Annulment (5 September 2007)

Table Of Cases

517

Maffezini v. Spain Emilio Agustín Maffezini v. Kingdom of Spain, icsid Case No. ARB/97/7 – Decision on Provisional Measures (28 October 1999) – Decision on Jurisdiction (25 January 2000) Malicorp v. Egypt Malicorp Ltd. v. Arab Republic of Egypt, icsid Case No. ARB/08/18 – Award (7 February 2011) – Decision of the Ad Hoc Committee on Annulment (3 July 2013) Mamidoil v. Albania Mamidoil Jetoil Greek Petroleum Products Societe s.a. v. Republic of Albania, ­i csid Case No. ARB/11/24 – Award (30 March 2015) mci Power Group v. Ecuador m.c.i. Power Group l.c. and New Turbine, Inc. v. Republic of Ecuador, icsid Case No. ARB/03/06 – Award (31 July 2007) – Decision of the Ad Hoc Committee on Annulment (19 October 2009) Metalclad v. Mexico Metalclad Corp. v. United Mexican States, icsid Case No. ARB(AF)/97/1 (nafta) – Decision on a Request by the Respondent for an Order prohibiting the Claimant from Revealing Information (27 October 1997) – Award (30 August 2000) – Challenge to the Arbitral Award in the Supreme Court of British Columbia, 2001 bcsc 664 (2 May 2001) Metalpar v. Argentina Metalpar s.a. y Buen Aire s.a. v. Argentine Republic, icsid Case No. ARB/03/5 – Decision on Jurisdiction (27 April 2006) – Award (6 June 2008) Metal-Tech v. Uzbekistan Metal-Tech Ltd. v. Republic of Uzbekistan, icsid Case No. ARB/10/3 – Award (4 October 2013)

518

Table of Cases

mhs v. Malaysia Malaysian Historical Salvors sdn bhd v. Malaysia, icsid Case No. ARB/ 05/10 – Decision on Jurisdiction (17 May 2007) – Decision of the Ad Hoc Committee on Annulment (16 April 2009) Micula v. Romania Ioan Micula, Viorel Micula, s.c. European Food s.a, s.c. Starmill s.r.l. and s.c. Multipack s.r.l. v. Romania, icsid Case No. ARB/05/20 – Decision on Jurisdiction and Admissibility (24 September 2008) – Award (11 December 2013) – Decision of the Ad hoc Committee on Annulment (26 February 2016) Middle East Cement v. Egypt Middle East Cement Shipping and Handling Co. s.a. v. Arab Republic of Egypt, icsid Case No. ARB/99/6 – Award (12 April 2002) mine v. Guinea Maritime International Nominees Establishment (mine) v. Republic of Guinea, icsid Case No. ARB/84/4 – Decision of the Ad Hoc Committee on Annulment (22 December 1989) Minotte & Lewis v. Poland David Minnotte & Robert Lewis v. Republic of Poland, icsid Case No. ARB(AF)/10/1 – Award (16 May 2014) Mitchell v. Congo Patrick Mitchell v. Democratic Republic of the Congo, icsid Case No. ARB/99/7 – Decision of the Ad Hoc Committee on Annulment (1 November 2006) mtd v. Chile mtd Equity Sdn. Bhd. and mtd Chile s.a. v. Republic of Chile, icsid Case No. ARB/01/7 – Award (25 May 2004) – Decision of the Ad Hoc Committee on Annulment (21 March 2007)

Table Of Cases

519

Mondev v. us Mondev International Ltd. v. United States of America, icsid Case No. ARB(AF)/99/2 (nafta) – Award (11 October 2002) Murphy v. Ecuador Murphy Exploration and Production Company International v. Republic of Ecuador, icsid Case No. ARB/08/4 – Decision on Jurisdiction (15 December 2010) Nations Energy v. Panama Nations Energy Inc. and others v. Panama, icsid Case No. ARB/06/19 – Decision on the Proposal to Disqualify Dr. Stanimir A. Alexandrov, Annulment Proceeding (7 September 2011) National Gas v. Egypt National Gas Company s.a.e. v. Arab Republic of Egypt, icsid Case No. ARB/11/7 – Award (3 April 2014) Noble Ventures v. Romania Noble Ventures, Inc. v. Romania, icsid Case No. ARB/01/11 – Award (12 October 2005) Nova Scotia Power v. Venezuela Nova Scotia Power Incorporated v. Bolivarian Republic of Venezuela, icsid Case No. ARB(AF)/11/1 – Award (30 April 2014) Occidental v. Ecuador Occidental Petroleum Corporation and Occidental Exploration and Production Company v. Republic of Ecuador, icsid Case No. ARB/06/1 – Decision on Provisional Measures (17 August 2007) – Decision of the Ad hoc Committee on Annulment (2 November 2015) oi European Group v. Venezuela oi European Group b.v. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/11/25 – Award (2 March 2015)

520

Table of Cases

oko Pankki Oyj v. Estonia oko Pankki Oyj, vtb Bank (Deutschland) ag and Sampo Bank Plc v. Republic of Estonia, icsid Case No. ARB/04/6 (formerly oko Osuuspankkien Keskuspankki Oyj and others v. Republic of Estonia) – Award (19 November 2007) opic Karimum v. Venezuela opic Karimum Corporation v. Bolivarian Republic of Venezuela, icsid Case No. ARB/10/14 – Decision on the Proposal to Disqualify Prof. Philippe Sands, Arbitrator (5 May 2011) – Award (28 May 2013) Pan American Energy v. Argentina Pan American Energy llc and bp Argentina Exploration Company v. Argentine Republic, icsid Case No. ARB/03/13, and bp Amercia Production Company, Pan American Sur srl, Pan American Fueguina srl, and Pan American Continental, icsid Case No. ARB/04/8 – Decision on Preliminary Objections (27 July 2006) Pantechniki v. Albania Pantechniki s.a. Contractors & Engineers v. Republic of Albania, icsid Case No. ARB/07/21 – Award (30 July 2009) Parkerings-Compagniet v. Lithuania Parkerings-Compagniet as v. Republic of Lithuania, icsid Case No. ARB/05/8 – Award (11 September 2007) Participaciones Inversiones Portuarias v. Gabon Participaciones Inversiones Portuarias sÀrl v. Gabonese Republic, icsid Case No. ARB/08/17 – Decision on the Proposal to Disqualify an Arbitrator (12 November 2009) Perenco v. Ecuador Perenco Ecuador Ltd. v. Republic of Ecuador and Empresa Estatal Petróleos del Ecuador, icsid Case No. ARB/08/6 – Decision on Provisional Measures (8 May 2009) – Decision on Challenge to Arbitrator (8 December 2009) – Decision on Remaining Issues of Jurisdiction and Liability (12 September 2014)

Table Of Cases

521

Pey Casado v. Chile Víctor Pey Casado and President Allende Foundation v. Republic of Chile, icsid Case No. ARB/98/2 – Decision on Provisional Measures (25 September 2001) – Award (8 May 2008) – Decision of the Ad Hoc Committee on Annulment (18 December 2012) Philip Morris v. Uruguay 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 (formerly ftr Holding s.a., Philip Morris Products s.a. and Abal Hermanos s.a. v. Oriental Republic of Uruguay) – Decision on Jurisdiction (2 July 2013) – Award (8 July 2016) Phoenix v. Czech Republic Phoenix Action Ltd. v. Czech Republic, icsid Case No. ARB/06/5 – Award (15 April 2009) Plama Consortium v. Bulgaria Plama Consortium Ltd. v. Republic of Bulgaria, icsid Case No. ARB/03/24 – Order on Provisional Measures (6 September 2005) – Decision on Jurisdiction (8 February 2005) png sdp v. Papua New Guinea png Sustainable Development Program Ltd. v. Independent State of Papua New Guinea, icsid Case No. ARB/13/33 – Decision on Provisional Measures (21 January 2015) – Award (5 May 2015) Poštová Banka v. Hellenic Republic Poštová Banka, a.s. and Istrokapital se v. Hellenic Republic, icsid Case No. ARB/13/8 – Award (9 April 2015) – Decision of the Ad Hoc Committee on Annulment (29 September 2016) pseg v. Turkey pseg Global, Inc., The North American Coal Corporation, and Konya Ingin ­Electrik Üretim ve Ticaret Ltd. Sirketi v. Republic of Turkey, icsid Case No. ARB/02/5 – Award (19 January 2007)

522

Table of Cases

Quiborax v. Bolivia Quiborax s.a., Non Metallic Minerals s.a. and Allan Fosk Kaplún v. Plurinational State of Bolivia, icsid Case No. ARB/06/2 – Decision on Provisional Measures (26 February 2010) – Decision on Jurisdiction (27 September 2012) – Award (16 September 2015) Railroad Development v. Guatemala Railroad Development Corporation v. Republic of Guatemala, icsid Case No. ARB/07/23 (cafta-DR) – Decision on Provisional Measures (15 October 2008) – Award (29 June 2012) Respsol v. Ecuador Repsol ypf Ecuador s.a. v. Empresa Estatal Petróleos del Ecuador (Petroecuador), icsid Case No. ARB/01/10 – Decision of the Ad Hoc Committee on Annulment (8 January 2007) Repsol v. Argentina Repsol, s.a. and Repsol Butano, s.a. v. Argentine Republic, icsid Case No. ARB/12/38 – Decision on the Proposal to Disqualify a Majority of the Tribunal (13 December 2013) Rizvi v. Indonesia Rafat Ali Rizvi v. Republic of Indonesia, icsid Case No. ARB/11/13 – Decision on Jurisdiction (16 July 2013) Rompetrol v. Romania The Rompetrol Group n.v. v. Romania, icsid Case No. ARB/06/3 – Award (6 May 2013) rsm Production Corp. v. Central African Republic rsm Production Corporation v. Central African Republic, icsid Case No. ARB/07/2 – Decision on Jurisdiction and Responsibility (7 December 2010) – Decision of the Ad Hoc Committee on Annulment (20 February 2013) rsm Production Corp. v. Grenada rsm Production Corporation v. Grenada, icsid Case No. ARB/05/14 – Award (13 March 2009)

Table Of Cases

523

rsm Production Corp. v. Saint Lucia rsm Production Corporation v. Saint Lucia, icsid Case No. ARB/12/10 – Decision on Request for Security for Costs (13 August 2014) Rumeli v. Kazakhstan Rumeli Telekom a.s. and Telsim Mobil Telekomunikasyon Hizmetleri a.s. v. Kazakhstan, icsid Case No. ARB/05/16 – Award (29 July 2008) – Decision of the Ad Hoc Committee on Annulment (25 March 2010) Saba Fakes v. Turkey Saba Fakes v. Republic of Turkey, icsid Case No. ARB/07/20 – Award (14 July 2010) Saipem v. Bangladesh Saipem S.p.A. v. People’s Republic of Bangladesh, icsid Case No. ARB/05/07 – Decision on Jurisdiction and Recommendation on Provisional Measures (21 March 2007) – Award (30 June 2009) Salini v. Jordan Salini Costruttori S.p.A. and Italstrade S.p.A. v. Hashemite Kingdom of Jordan, icsid Case No. ARB/02/13 – Decision on Jurisdiction (29 November 2004) – Award (31 January 2006) Salini v. Morocco Salini Costruttori S.p.A. and Italstrade S.p.A. v. Morocco, icsid Case No. ARB/00/4 – Decision on Jurisdiction (23 July 2001) Santa Elena v. Costa Rica Compañia del Desarrollo de Santa Elena s.a. v. Republic of Costa Rica, icsid Case No. ARB/96/1 – Award (17 February 2000) saur v. Argentina saur International s.a. v. Argentine Republic, icsid Case No. ARB/04/4 – Decision on Jurisdiction (6 June 2012)

524

Table of Cases

Sempra v. Argentina Sempra Energy International v. Argentine Republic, icsid Case No. ARB/02/16 – Award (28 September 2007) – Decision of the Ad Hoc Committee on Annulment (29 June 2010) sgs v. Pakistan sgs Société Générale de Surveillance s.a. v. Islamic Republic of Pakistan, icsid Case No. ARB/01/13 – Procedural Order No. 2 (16 October 2002) – Decision on Claimant’s Proposal to Disqualify Arbitrator (19 December 2002) – Decision on Jurisdiction (6 August 2003) sgs v. Paraguay sgs Société Générale de Surveillance s.a. v. Republic of Paraguay, icsid Case No. ARB/07/29 – Decision on Jurisdiction (12 February 2010) – Decision of the Ad hoc Committee on Annulment (19 May 2014) sgs v. Philippines sgs Société Générale de Surveillance s.a. v. Republic of the Philippines, icsid Case No. ARB/02/6 – Decision on Jurisdiction (29 January 2004) – Dissenting Opinion of Arbitrator Antonio Crivellaro (29 January 2004) Siag v. Egypt Waguih Elie George Siag and Clorinda Vecchi v. Arab Republic of Egypt, icsid Case No. ARB/05/15 – Award (1 June 2009) Siemens v. Argentina Siemens ag v. Argentine Republic, icsid Case No. ARB/02/8 – Decision on Jurisdiction (3 August 2004) – Award (6 February 2007) soabi v. Senegal Société Ouest Africaine des Bétons Industriels v. Senegal, icsid Case No. ARB/82/1 – Decision on Jurisdiction (1 August 1984) – Award (25 February 1988)

Table Of Cases

525

Soufraki v. uae Hussein Nuaman Soufraki v. United Arab Emirates, icsid Case No. ARB/02/7 – Decision of the Ad hoc Committee on Annulment (5 June 2007) spp v. Egypt Southern Pacific Properties (Middle East) Ltd. v. Arab Republic of Egypt, icsid Case No. ARB/84/3 – Decision on Jurisdiction (27 November 1985) – Decision on Jurisdiction and Dissenting Opinion of Arbitrator Dr. El Mahdi (14 April 1988) – Award (20 May 1992) Spyridon v. Romania Spyridon Roussalis v. Romania, icsid Case No. ARB/06/1 – Decision on Provisional Measures (2 July 2009), unpublished – Award (7 December 2011) Suez/InterAguas v. Argentina Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios ­Integrales del Agua s.a. v. Argentine Republic, icsid Case No. ARB/03/17 (formerly Aguas Provinciales de Santa Fe, s.a., Suez, Sociedad General de Aguas de Barcelona s.a., and InterAguas Servicios Integrales de Agua s.a. v. Argentine Republic) – Order in Response to a Petition for Participation as Amicus Curiae (17 March 2006) – Decision on Jurisdiction (16 May 2006) – Decision on Liability (30 July 2010) Suez/Vivendi v. Argentina Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. Argentine Republic (and joined case awg Group Ltd. v. Argentine Republic), icsid Case No. ARB/03/19 (formerly Aguas Argentinas, s.a., Suez, Sociedad General de Aguas de Barcelona, s.a., and Vivendi Universal, s.a. v. Argentine Republic) – Order in Response to a Petition for Transparency and Participation as Amicus Curiae (19 May 2005) – Decision on Jurisdiction (3 August 2006) – Decision on Second Proposal for the Disqualification of a Member of the Arbitral Tribunal (12 May 2008)

526

Table of Cases

Swisslion v. Macedonia Swisslion Doo Skopje v. Former Yugoslav Republic of Macedonia, icsid Case No. ARB/09/16 – Award (6 July 2012) Tecmed v. Mexico Técnicas Medioambientales Tecmed, s.a. v. United Mexican States, icsid Case No. ARB(AF)/00/2 – Award (29 May 2003) teco v. Guatemala teco Guatemala Holdings, llc v. Republic of Guatemala, icsid Case No. ARB/10/23 – Decision of the Ad hoc Committee on Annulment (5 April 2016) Teinver v. Argentina 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 (21 December 2012) – Decision on Provisional Measures (8 April 2016) Telenor v. Hungary Telenor Mobile Communications a.s. v. Republic of Hungary, icsid Case No. ARB/04/15 – Award (13 September 2006) Tethyan Copper v. Pakistan Tethyan Copper Company Pty Ltd. v. Islamic Republic of Pakistan, icsid Case No. ARB/12/1 – Decision on Provisional Measures (13 December 2012) Tidewater v. Venezuela Tidewater Investment srl and Tidewater Caribe, c.a. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/10/5 – Decision on the Proposal to Disqualify Prof. Brigitte Stern, Arbitrator (22 December 2010) – Decision on Jurisdiction (8 February 2013) Togo Electricité v. Togo Togo Electricité and gdf-Suez Energie Services v. Republic of Togo, icsid Case No. ARB/06/7 – Decision of the Ad hoc Committee on Annulment (6 September 2011)

Table Of Cases

527

Tokios Tokéles v. Ukraine Tokios Tokéles v. Ukraine, icsid Case No. ARB/02/18 – Procedural Order No. 1 (1 July 2003) – Decision on Jurisdiction (29 April 2004) – Procedural Order No. 3 (18 January 2005) – Award (26 July 2007) Total v. Argentina Total s.a. v. Argentine Republic, icsid Case No. ARB/04/01 – Decision on Liability (27 December 2010) – Decision of the Ad hoc Committee on Annulment (1 February 2016) Toto Costruzioni v. Lebanon Toto Costruzioni Generali S.p.A. v. Republic of Lebanon, icsid Case No. ARB/07/12 – Decision on Jurisdiction (11 September 2009) Tradex v. Albania Tradex Hellas s.a. v. Republic of Albania, icsid Case No. ARB/94/2 – Decision on Jurisdiction (24 December 1996) – Award (29 April 1999) Transgabonais v. Gabon Compagnie d’Exploitation du Chemin de Fer Transgabonais v. Gabonese ­Republic, icsid Case No. ARB/04/5 – Decision of the Ad Hoc Committee on Annulment (11 May 2010), ­unpublished/excerpts only Transglobal Green Energy v. Panama Transglobal Green Energy, llc and Transglobal Green Energy de Panama, s.a. v. Republic of Panama, icsid Case No. ARB/13/28 – Decision on Provisional Measures Relating to Security for Costs (21 January 2016) tsa Spectrum v. Argentina tsa Spectrum de Argentina s.a. v. Argentine Republic, icsid Case No. ARB/05/5 – Award (19 December 2008) Tulip v. Turkey Tulip Real Estate and Development Netherlands b.v. v. Republic of Turkey, icsid Case No. ARB/11/28 – Decision on Jurisdiction (5 March 2013)

528

Table of Cases

– Award (10 March 2014) – Decision of the Ad hoc Committee on Annulment (30 December 2015) Tza Yap Shum v. Peru, Tza Yap Shum v. Republic of Peru, icsid Case No. ARB/07/6 – Decision on Jurisdiction (19 June 2009) – Award (7 July 2011) – Decision of the Ad hoc Committee on Annulment (12 February 2015) Unglaube v. Costa Rica Marion Unglaube v. Republic of Costa Rica, icsid Case No. ARB/08/1 – Award (16 May 2012) United Utilities v. Estonia United Utilities (Tallinn) b.v. and Aktsiaselts Tallinna Vesi v. Republic of Estonia, icsid Case No. ARB/14/24 – Decision on Provisional Measures (16 May 2016) Universal Compression v. Venezuela Universal Compression International Holdings, slu v. Bolivarian Republic of Venezuela, icsid Case No. ARB/10/9 – Decision on the Proposal to Disqualify Prof. Brigitte Stern and Prof. Guido Santiago Tawil, Arbitrators (20 May 2011) Urbaser v. Argentina Urbaser s.a. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia ur Partzuergoa v. Argentine Republic, icsid Case No. ARB/07/26 – Decision on Claimant’s Proposal to Disqualify Prof. Campbell McLachlan, Arbitrator (12 August 2010) Vacuum Salt v. Ghana Vacuum Salt Products Ltd. v. Ghana, icsid Case No. ARB/92/1 – Award (16 February 1994) Valle Verde v. Venezuela Valle Verde Sociedad Financiera s.l. v. Bolivarian Republic of Venezuela, icsid Case No. ARB/12/18 – Decision on Provisional Measures (25 January 2016) Vattenfall ab v. Germany Vattenfall ab and others v. Federal Republic of Germany, icsid Case No. ARB/12/12

Table Of Cases

529

Venezuela Holdings v. Venezuela Venezuela Holdings, b.v., et al. (case formerly known as Mobil Corporation, Venezuela Holdings, b.v., Mobil Cerro Negro Holding, Ltd., Mobil ­Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil ­Venezolana de Petróleos, Inc.) v. Bolivarian Republic of Venezuela, icsid Case No. ARB/07/27 – Decision on Jurisdiction (10 June 2010) – Award (9 October 2014) Vieira v. Chile Sociedad Anónima Eduardo Vieira v. Republic of Chile, icsid Case No. ARB/04/7 – Decision of the Ad hoc Committee on Annulment (10 December 2010) Vivendi v. Argentina Compañía de Aguas del Aconquija s.a. and Vivendi Universal v. Argentine Republic, icsid Case. No. ARB/97/3 (formerly Compañía de Aguas del Aconquija, s.a. and Compagnie Générale des Eaux v. Argentine Republic) – Award (21 November 2000) – Decision on the Challenge to the President of the Committee (3 October 2001) – Decision of the Ad hoc Committee on Annulment (3 July 2002) – Award (20 August 2007) – Decision of the Ad hoc Committee on Annulment (10 August 2010) Waste Management v. Mexico Waste Management, Inc. v. United Mexican States, icsid Case No. ARB(AF)/00/3 (nafta) – Decision of the Tribunal on Mexico’s Preliminary Objection concerning the Previous Proceedings (26 June 2002) – Award (30 April 2004) Wena Hotels v. Egypt Wena Hotels Ltd. v. Arab Republic of Egypt, icsid Case No. ARB/98/4 – Decision on Jurisdiction (29 June 1999) – Award (8 December 2000) – Decision of the Ad Hoc Committee on Annulment (5 February 2002) Wintershall v. Argentina Wintershall Aktiengesellschaft v. Argentine Republic, icsid Case No. ARB/04/14 – Award (8 December 2008)

530

Table of Cases

World Duty Free v. Kenya World Duty Free Company Ltd. v. Republic of Kenya, icsid Case No. ARB/00/7 – Award (4 October 2006) Zhinvali v. Georgia Zhinvali Development Ltd. v. Republic of Georgia, icsid Case No. ARB/00/1 – Award (24 January 2003) ii uncitral Canadian Cattlemen v. us Canadian Cattlemen for Fair Trade v. United States of America, uncitral Arbitration (nafta) – Decision on Jurisdiction (28 January 2008) cme v. Czech Republic cme Czech Republic bv (Netherlands) v. Czech Republic, uncitral Arbitration – Partial Award (13 September 2001) – Final Award (14 March 2003) Glamis Gold v. us Glamis Gold Ltd. v. United States of America, uncitral Arbitration (nafta) – Decision on Application and Submission by Quenchan Indian Nation (16 September 2005) – Award (8 June 2009) Lauder v. Czech Republic Lauder (us) v. Czech Republic, uncitral Arbitration – Award (3 September 2001) Methanex v. us Methanex Corporation v. United States of America, uncitral Arbitration (nafta) – Decision of the Tribunal on Petitions from Third Persons to Intervene as Amici Curiae (15 January 2001) Philip Morris v. Australia Philip Morris Asia Ltd. v. Commonwealth of Australia, uncitral Arbitration (pca Case No. 2012–12) – Award on Jurisdiction and Admissibility (17 December 2015)

Table Of Cases

531

Pope & Talbot v. Canada Pope & Talbot, Inc. v. Canada, uncitral Arbitration (nafta) – Interim Award/Phase ii (10 April 2001) Ruby Roz v. Kazakhstan Ruby Roz Agricol llp v. Republic of Kazakhstan, u n c i t r a l Arbitration – Decision on Jurisdiction (1 August 2013) Saluka v. Czech Republic Saluka Investments bv v. Czech Republic, uncitral Arbitration (pca) – Partial Award (17 March 2006) Sanum v. Laos Sanum Investments Ltd. v. Lao People’s Democratic Republic, UNCITRAL Arbitration (PCA Case No. 2013–13) – Decision on Jurisdiction (13 December 2013) S.D. Myers v. Canada S.D. Myers, Inc. v. Canada, uncitral Arbitration (nafta) – Procedural Order No. 16 (8 May 2000) – Partial Award (13 November 2000) Softwood Lumber Cases Canfor Corporation v. United States of America, Tembec et al. v. United States of America, and Terminal Forest Products Ltd. v. United States of America, uncitral Arbitration (nafta) – Order of the Consolidation Tribunal (7 September 2005) ups v. Canada United Postal Service of America Inc. v. Government of Canada, uncitral Arbitration (nafta) – Decision of the Tribunal on Petitions for Intervention and Participation as Amici Curiae (17 October 2001) White Industries v. India White Industries Australia Ltd. v. Republic of India, u n c i t r a l Arbitration – Award (30 November 2011)

532

Table of Cases

iii scc Berschader v. Russia Berschader and Berschader v. Russian Federation, scc Case No. 080/2004, iic 314 (2006) – Award and Correction (21 April 2006) RosInvest v. uk RosInvest Co. uk Ltd. v. Russian Federation, scc Case No. V079/2005, iic 315 (2007) – Decision on Jurisdiction (1 October 2007) B

cusfta/nafta Chapter 19 and ecc Decisions

Certain Softwood Lumber Products from Canada, ecc-94-1904-01-usa (3 August 1994) Certain Softwood Lumber Products from Canada, ecc-2004-1904-01-usa (10 August 2005) Fresh, Chilled, or Frozen Pork from Canada, ecc-91-1904-01-usa (14 June 1991) Grey Portland Cement and Clinker from Mexico, ecc-2000-1904-01-usa (30 October 2003) Live Swine from Canada, ecc-93-1904-01-usa (8 April 1993) Pure Magesium from Canada, ecc-2003-1904-01-usa (7 October 2004) C

wto Dispute Settlement Body

United States – Investigation of the International Trade Commission in Softwood Lumber from Canada, Recourse to Article 21.5 of the dsu by Canada, Report of the Panel, WT/DS277/RW D

iusct

The cases listed below can be found at the following electronic source: iusct Homepage, available at (last visited December 2016) Dadras International et al. v. Islamic Republic of Iran et al., Award No. 567213/215-3 (7 November 1995), reprinted in 31 iusct Rep. 127 (1995)

Table Of Cases

533

Development and Resources Corporation v. Government of the Islamic Republic of Iran, Award No. 485-60-3 (25 June 1990), reprinted in 25 iusct Rep. 20 (1990) Starrett Housing Corp. v. Islamic Republic of Iran, Interlocutory Award No. itl 32-24-1 (19 December 1983), reprinted in 4 iusct Rep. 122 (1983) Tippetts, Abbett, McCarthy, Stratton v. tams-affa Consulting Engineers of Iran, Award No. 141-7-2 (22 June 1984), reprinted in 6 iusct Rep. 219 (1984) E

pcij/icj

The cases listed below can be found at the following electronic source: icj Homepage, available at (last visited December 2016) Ambatielos Claim (Greece v. uk), icj, Joint Dissenting Opinion of Judges Mc Nair, Basdevant, ­Klaestad, Read (19 May 1953), icj Rep. (1953) 25 Anglo-Iranian Oil Co. (uk v. Iran), icj, Judgment (Jurisdiction) (22 July 1952), icj Rep. (1952) 93 Arbitral Award of 31 July 1989 (Guinea-Bissau v. Senegal), icj, Judgment (12 November 1991) icj Rep. (1991) 53 Armed Activities on the Territory of the Congo (New Application: 2002) (Democratic Republic of the Congo v. Rwanda) icj, Judgment (Jurisdiction and Admissibility) (3 February 2006), icj Rep. (2006) 6 Barcelona Traction, Light and Power Company, Ltd. (Belgium v. Spain), icj, Judgment (Second Phase) (5 February 1970), icj Rep. (1970) 3 Continental Shelf (Libyan Arab Jamahira v. Malta), icj, Judgment (3 June 1985), icj Rep. (1985) 13 Delimitation of the Polish-Czechoslovakian Frontier (Question of Jaworzina), pcij, Advisory Opinion (6 December 1923), 1923 pcij Series B, No. 8 Factory at Chorzów (Germany v. Poland), pcij – Dissenting Opinion of Judge Anzilotti in Interpretation of Judgments Nos. 7 and 8 (16 December 1927), 1927 pcij Series A, No. 11 – Judgment (13 September 1928), 1928 pcij Series A, No. 17 Fisheries Jurisdiction (Spain v. Canada), icj, Judgment (Jurisdiction) (4 December 1998), icj Rep. (1998) 432 Gabčíkovo-Nagymaros Project (Hungary v. Slovakia), icj, Judgment (25 September 1997), icj Rep. (1997) 7 German Interests in Polish Upper Silesia (Germany v. Poland), pcij, Judgment (25 May 1925), 1926 pcij Series A, No. 7

534

Table of Cases

Kasikili/Sedudu Island (Botswana v. Namibia), icj, Judgment (13 December 1999), icj Rep. (1999) 1045 LaGrand (Germany v. us), icj, Judgment (27 June 2001), icj Rep. (2001) 466 Legal Consequences for States of the Continued Presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970), icj, Advisory Opinion (21 June 1971), icj Rep. (1971) 16 Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, icj, Advisory Opinion (9 July 2004), 43 ilm 1009 (2004) Legality of the Threat or Use of Nuclear Weapons, icj, Advisory Opinion (8 July 1996), icj Rep. (1996) 226 Mavrommatis Palestine Concessions (Greece v. uk), pcij, Judgment (30 ­August 1924), 1924 pcij Series B, No. 3 Military and Paramilitary Activities in and against Nicaragua Case (Nicaragua v. us), icj, Judgment on the Merits (27 June 1986), icj Rep. (1986) 14 Navigational and Related Rights (Costa Rica v. Nicaragua), icj, Judgment (13 July 2009), icj Rep. (2009) 213 North Sea Continental Shelf (Germany v. Netherlands), icj, Judgment (20 February 1969), icj Rep. (1969) 3 Nottebohm (Liechtenstein v. Guatemala), icj – Judgment (Preliminary Objection) (18 November 1953), icj Rep. (1953) 111 – Judgment (Second Phase) (6 April 1955 ), icj Rep. (1955) 4 Nuclear Tests (Australia v. France), icj, Judgment (20 December 1974), icj Rep. (1974) 253 Nuclear Tests (New Zealand v. France), icj, Judgment (20 December 1974), icj Rep. (1974) 457 Oil Platforms (Islamic Republic of Iran v. us), icj, Preliminary Objection, Separate Opinion of Judge Higgins (12 December 1996), icj Rep. (1996) 847 F

itlos

The cases listed below can be found at the following electronic source: itlos Homepage, available at (last visited December 2016)

Table Of Cases

535

M/V Saiga (No. 2) Case (St. Vincent and the Grenadines v. Guinea), itlos, Judgment (1 July 1999), 38 ilm 1323 (1999) The mox Plant Case (Ireland v. uk), itlos, Order of Provisional Measures (3 December 2001), 126 ilr (2005) 260 G

ECtHR

The cases listed below can be found at the following electronic source: ECtHR Homepage, available at (last visited December 2016) Funke v. France (Application No. 10828/84), ECtHR, Judgment (25 February 1993), Series A, No. 256-A James and others v. uk (Application No. 8793/79), ECtHR, Judgment (21 February 1986), Series A, No. 98 Niemietz v. Germany (Application No. 13710/88), ECtHR, Judgment (16 December 1992), Series A, No. 251-B Öcalan v. Turkey (Application No. 46221/99), ECtHR, Judgment (12 May 2005), Rep. 2005-IV Sporrong and Lönnroth v. Sweden (Application No. 7151/75), ECtHR, Judgment (23 September 1982), Series A, No. 52 Stafford v. uk (Application No. 46295/99), ECtHR, Judgment (28 May 2002), Rep. 2002-IV H

cjeu

The cases listed below can be found at the following electronic source: cjeu Homepage, available at (last visited December 2016) Amministrazione delle finanze dello Stato v. Denkavit italiana Srl., Case C-61/79, ecr 1205 (1980) Amministrazione delle finanze dello Stato v. Srl Meridionale Industria Salumi, Fratelli Vasanelli and Fratelli Ultrocchi, Joined Cases C-66, 127 and 128/79, ecr 1237 (1980) Broekmeulen v. Huisarts Registratie Commissie, Case C-246/80, ecr 2311 (1982) Comission v. Italian Republic, Case C-129/00, ecr I-14637 (2003)

536

Table of Cases

Da Costa en Schaake nv, Jacob Meijer nv, Hoechst-Holland nv v. Nederlandse administratie der belastingen, Case C-28-30/62, ecr 31 (1963) De Coster v. Collège des Bourgmestres et Échevins de Watermael-Boitsfort, Case C-17/00, ecr I-9445 (2001) Denuit and Cordonnier v. Transorient Mosaïque Voyages et Culture s.a., Case C-125/04, ecr I-923 (2005) Dorsch Consult Ingenieurgesellschaft mbH v. Bundesbaugesellschaft Berlin mbH, Case C-54/96, ecr i–4961 (1997) Eco Swiss China Time Ltd. v. Benetton International nv, Case C-126/97, ecr I-3055 (1999) Eurico Italia Srl v. Ente Nazionale Risi, Case C-332/92, ecr I-771 (1994) Flaminio Costa v. enel, Case C-6/64, ecr 585 (1964) Fratelli Pardini SpA v. Ministero del commercio con l’estero und Banca toscana ( filiale di Lucca), Case C-338/85, ecr 2041 (1988) Gabrielle Defrenne v. Société anonyme belge de navigation aérienne Sabena, Case C-43/75, ecr 455 (1976) Genentech Inc. v. Hoechst GmbH, formerly Hoechst ag, Sanofi-Aventis Deutschland GmbH, Case C-567/14, not yet published in ecr (2016) Gerhard Köbler v. Republik Österreich, Case C-224/01, ecr I-10239 (2003) Graham J. Wilson v. Ordre des avocats du barreau de Luxembourg, Case C-506/04, ecr I-8613 (2006) Handels-og Kontorfunsktionaerernes Forbund i Danmark v. Dansk Arbejdsgiverforening for Danfoss, Case C-109/88, ecr 3220 (1989) Hoechst ag v. Commission, Joined Cases C-46/87 and 227/88, ecr 2859 (1989) Hoffmann-La Roche v. Centrafarm Vertriebsgesellschaft Pharmazeutischer Erzeugnisse mbH, Case C-107/76, ecr 957 (1977) International Chemical Corporation v. Amministrazione delle fianze dello Stato, Case C-66/80, ecr 1191 (1981) Irish Creamery Milk Suppliers Association et al. v. Government of Ireland et al.; Martin Doyle et al. v. An Taoiseach et al., Cases C-36 and 71/80, ecr 735 (1981) Liga Portuguesa de Futebol Profissional and Bwin International Ltd. v. Departamento de Jogos da Santa Casa da Misericórdia de Lisboa, Case C-42/07, ecr I-7633 (2009) Luigi Benedetti v. Munari F.lli s.a.s., Case C-52/76, ecr 163 (1977) Milch-, Fett- und Eierkontor GmbH v. Hauptzollamt Saarbrücken, Case C-29/68, ecr 165 (1969) Mrs M.K.H. Hoekstra (née Unger) v. Bestuur der Bedrijfsvereniging voor Detailhandel en Ambachten, Case C-75/63, ecr 347 (1964)

Table Of Cases

537

Nordsee Deutsche Hochseefischerei GmbH v. Reederei Mond Hochseefischerei Nordstern ag & Co KG and Reederei Friedrich Busse Hochseefischerei Nordstern ag & CoKG, Case C-102/81, ecr 1095 (1982) nv Algemene Transport- en Expeditie Onderneming van Gend en Loos v. Nederlandse administratie der belastingen, Case C-26/62, ecr 1 (1963) Orkem v. Commission, Case C-374/87, ecr 3283 (1989) Parfums Christian Dior sa and Parfums Christian Dior bv v. Evora bv, Case C-337/95, ecr I-6013 (1997) Pasquale Foglia v. Mariella Novello, Case C-104/79, ecr 745 (1980) Pasquale Foglia v. Mariella Novello, Case C-244/80, ecr 3045 (1981) Pedro iv Servicios sl v. Total España sa, Case C-260/07, ecr I-2437 (2009) Politi s.a.s. v. Ministero delle Finanze della Repubblica Italiana, Case C-43/71, ecr 1039 (1971) Rheinmühlen Düsseldorf v. Einfuhr- und Vorratsstelle für Getreide und Futtermittel, Case C-166/73, ecr 33 (1974) Simmenthal SpA v. Amministrazione delle Finanze dello Stato, Case C-70/77, ecr 1453 (1978) Srl CILFIT and Lanificio di Gavardo SpA v. Ministry of Health, Case C-283/81, ecr 3415 (1982) Telemarsicabruzzo SpA and Others v. Circostel, Ministero delle Poste e Telecomunicazioni and Ministero della Difesa, Joined Cases C-320 to 322/90, ecr I-393 (1993) Vaasen-Göbbels (a widow) v. Management of the Beambtenfonds voor het Mijnbedrijf, Case C-61-65, ecr 261 (1966) I

National Courts and Tribunals

i Germany Solange ii – Wünsche Handelsgesellschaft, German Federal Constitutional Court, Order of Second Senate, BVerfGE 73, 339, 2 BvR 197/83 (22 October 1986) Out-of-Area Missions, German Federal Constitutional Court, Decision of the Second Senate, BVerfGE 90, 286, 2 BvE 3/92, 5/93, 7/93, 8/93 (12 July 1994) Argentina Necessity Case, German Federal Constitutional Court, Order of the Second Senate, BVerfGE 118, 124, 2 BvM 1/03 (8 May 2007) Honeywell, German Federal Constitutional Court, Order of First Senate, BVerfGE 126, 286, 2 BvR 2661/06 (6 July 2010)

538

Table of Cases

ii us Brown v. Board of Education, us Supreme Court, 347 u.s. 483, 74 S.Ct. 686 (1954) Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., us Supreme Court, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) Stroh Container Co. v. Delphi Indus. Inc., us Court of Appeals, 8th Cir., 783 F.2d 743 (1986) J

Other

i International Criminal Tribunal for the Former Yugoslavia Prosecutor v. Tadić, icty, Appeals Chamber, Case No. IT-94-1-A (15 July 1999) ii icsid Administered Cases Lone Pine Resources Inc. v. Government of Canada, uncitral Arbitration, ­i csid Case No. UNCT/15/2 (nafta) Southern Bluefin Tuna Case (Australia and New Zealand v. Japan), unclos Arbitration (icsid), Award on Jurisdiction and Admissibility (4 August 2000) iii pca Administered Cases (except for uncitral Arbitrations) Iberdrola, s.a. and Iberdrola Energia. s.a.u. v. Plurinational State of Bolivia, pca Case No. 2015–05, Acta de Constitutión/Terms of Appointment (7 August 2015) Norwegian Shipowners’ Claims (Norway v. us), pca Case No. 1921-01, Award (13 October 1922), 1 UN RIAA 307 (1922) The mox Plant Case (Ireland v. uk), unclos Arbitration (pca), pca Case No. 2002–01, Order No. 3 (24 June 2003), 42 ilm (2005) 1187 iv Other Ad hoc and Institutional Arbitrations Ambatielos Claim (Greece v. uk), Award (6 March 1956), XII UN RIAA 83 (1963) Sanum Investments Ltd. v. Laos (under China-Laos bit) Texaco Overseas Petroleum Company and California Asiatic Oil Company v. Government of the Libyan Arab Republic, ad hoc Award (19 January 1977), 53 ilr 389 (1977) v International Claims Commissions L. Fay H. Neer and Pauline Neer (us) v. United Mexican States (15 October 1926), US–Mexico General Claims Commission, 4 UN RIAA 60 (1926) Harry Roberts (us) v. United Mexican States (2 November 1926), US–Mexico General Claims Commission, 4 un riaa 77 (1926)

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Index Amicus Curiae Briefs 76, 79–80, 82, 83 n. 357, 84–85, 362–363, 439 Annulment Review case law 251–274 generations 252–258, 262–270 modern law of annulment 258–262, 271–274 concept and function 249–251, 418 general scope of icsid annulment review 167–168, 249–251, 253–254, 255 n. 1059, 257–260, 263, 266–267, 270, 275–276 n. 1166 scope of icsid annulment grounds 188–189, 254, 262, 268–269, 274 n. 1165, 463 n. 1850, 437 n. 1852, 436–437, 448 Appellate Review characteristics 87, 250 icsid arbitration 363–366, 372–379 international trade law 366–372, 415–417 Arbitral Tribunal ad hoc v. institutional 62–63, 63 n. 272 composition 51, 164 constitution 67–71, 357, 413–414 non-permanent nature 110, 127, 133, 137, 164–165, 372, 450 Bilateral Investment Treaties (bits) see also iias Canada Model bit 80 n. 345, 142–143, 144 n. 604, 343 n. 1440, 344 n. 1447 French Model bit 147 n. 624, 224 n. 928 German Model bit 224 n. 928, 307 n. 1289 India Model bit 34–35 n. 137 Model bits 34, 135, 142, 225 n. 929, 347, 408–409 uk Model bit 307 n. 1291 us Model bit 34–35 n. 137, 80 n. 345, 142–144, 284, 296 n. 1248, 343 n. 1440, 344 n. 1447, 345, 354 n. 1485

us treaties on friendship, commerce and navigation 20 Calvo Doctrine 12–14, 16 n. 44, 30 n. 116 Coherence of Jurisprudence see Incoherence of Jurisprudence Compliance Clauses see In-Accordance-with-the-Law Clauses Confidentiality 77–81, 83, 85, 115, 357, 359 n. 1507, 362–363, 430 see also Transparency Consistency of Jurisprudence see Inconsistency of Jurisprudence Consolidation of Proceedings de facto 354, 348–349 formal / stricto sensu 143, 165–166, 342–343, 348, 353–357, 388–389 Cost of Proceedings case law 246–249 commercial arbitration 95–98 cost-follow-the-event principle 97, 245, 247–248 discretion 95–97 fee schedule 94, 96 icsid arbitration 94–95, 245–246 pay-your-own-way principle 245–247 Correctness 153–156, 167, 205, 250–252, 258, 334, 363, 372, 377, 383, 385, 387, 390, 427, 431, 445, 447–448 Court of Justice of the European Union (cjeu) investment arbitration 33 n. 130, 190 preliminary ruling procedure 394–398, 422–423, 431–432 n. 1836, 433–434, 442, 445 Defence of Necessity case law 161, 198, 259–260, 264–266, 276, 285, 304–305, 320–328 concept and function 316–319 Disqualification of Arbitrators 237, 241–245, 330 Drago-Porter Convention 12 European Court of Human Rights ­(ECtHR) 120, 302 n. 1270, 403–404

Index Expropriation compensation 139 concept and function 13–19, 139 indirect expropriation 301–304 sole effects doctrine 301–302 police powers doctrine 302 n. 1270 proportionality approach 302–303 Fair and Equitable Treatment (fet) case law 193 n. 820, 294–299, 330 n. 1402 concept and function 146–147, 294–299 legitimate expectations 121, 147, 297–298 Foreign Direct Investment (fdi) hard economic factors 22 historical development 1–2, 22–26, 36–38, 42, 128 relationship to bits 23, 23–24 n. 82 soft factors 22–23 Free Trade Agreements (ftas) Comprehensive Economic Trade ­Agreement (ceta) 32–33, 42–44, 81 n. 351, 294–295 n. 1246, 337–338 n. 1419, 345 n. 1448 Transatlantic Trade and Investment ­Partnership (ttip) 32–33, 42–44 Transpacific Partnership (tpp) 33–34 Full Protection and Security (fps) 138, 145 Hull Formula 13–14, 16, 19, 139 n. 593, 304 In-Accordance-with-the-Law Clauses 220–222 Incoherence of Jurisprudence 106–107, 108 n. 452, 111–112, 122 n. 516, 148, 152, 156–157, 163, 176–177, 184, 193–195, 201, 205, 236, 261, 277, 328–329, 331, 363–363, 369, 372, 377, 385, 391, 416, 420, 448, 451 Inconsistency of Jurisprudence causes 163–202 methodological 176–182 systemic 163–168 treatment of precedent 183–202 complexity 127–129, 137–149, 163, 286, 329, 347, 388, 426 decision-making function 53, 124, 149–153, 202, 380, 422 desirability 117–127 legal theory 119 John Locke 119

587 Lon Fuller 117–118 Mathew Kramer 118 Ronald Dworkin 118 sociology of law 120–127 forms 157–163 parallel proceedings 162, 166, 239, 343, 348, 354–355, 428 same dispute 157–160 same legal issue 160–162 lato sensu 161–162, 329 stricto sensu 161, 328–329 successive proceedings 162–163 fragmentation 112–113 occurrences 202–331 law governing jurisdiction 208–234 procedural law 237–277 substantive law 294–328 problem 4–5, 10, 40, 46, 60, 101, 114–116 system 129–137 terminology 106–107, 111–112 welcome phenomenon 153–157 International Centre for the Settlement of Investment Disputes (icsid) Additional Facility Rules 51–52, 58, 365, 376 n. 1593 International Centre for the Settlement of Investment Disputes (icsid) Arbitration arbitration rules 54–56, 355–356 caseload statistics 58–60 goals 57–58 history of icsid Convention 47–49 organs 49–51, 391, 407, 412–414, 449 self-contained system 54–55, 87, 90, 93, 100–101, 167, 179, 250 strength-weakness analysis 7, 60–64 tailor-made system 3, 52–53 International Chamber of Commerce (icc) Arbitration 59, 62, 66, 69–71, 73, 84–85, 89–90, 93, 98 International Court of Justice (icj) 120, 164, 171 n. 714, 174 n. 724, 179 n. 752, 185 n. 786, 186, 187 n. 797, 190, 206 n. 873, 289 n. 1233, 311, 317 n. 1339, 381–383, 402–404 International Investment Agreements (iias) bilateralism 19–22, 35, 140–141 n. 597 historical development 18–22, 31–35 human rights 34 interregional treaties 33, 140–141 n. 597

588 International Investment Agreements (iias) (cont.) investment promotion and protection 19, 26, 57–58, 231 multilateralism 20, 140–141 n. 597 regionalism 31–33, 140–141 n. 597 revision 341–347 sustainability 34 International Investment Arbitration competing regimes 62–63 de-politisation 53, 17, 38 historical development 38–46 backlash 40–46 rush 38–40 hybrid nature 38 legitimacy (crisis) 40–46, 122–126 public law challenge 40–46, 34–35 Interpretation of Treaties authentic language 173 by contracting States 336–341 context 172, 177 general practice 175–176, 177–179 international custom 177–178 legal doctrine 176, 180 objective approach 169, 172, 177 precedent see Precedent subjective approach 169, 177 supplementary means of interpretation 172–173, 178–179 travaux préparatoires 172, 178 unreasonableness 178 teleological approach 169, 172, 177 uncodified means of interpretation 173– 176, 179–180 analogy 174–175 e contrario arguments 174–175, 179 lex posterior maxim 175 lex specialis maxim 175 restrictive interpretation / in dubio mitius 174, 179 principle of effectiveness / ut res magis valeat quam pereat 174, 179 Vienna Convention on the Law of the Treaties (vclt) 169–173, 184 Investment Law historical development 11–18, 26–31 law governing jurisdiction see Jurisdiction

Index procedural law icsid arbitration 236–237 lex arbitri 54–55, 73, 87 substantive law icsid arbitration 277–293 international law 280 icj Statute (Art. 38) 175–176, 184–185, 282, 350, 352, 422 international conventions 283 international custom 283–287 general principles of law 287, 350 national law 288–293 domestic investment law 215–219 Investment Policy capital-exporting countries 11, 14–15, 17, 30, 34, 57 capital-importing countries 2, 11–12, 14–19, 26–36, 56–57, 284 n. 1203 historical development 11–18, 26–31 liberalisation 17–18, 26 nationalism 11–12, 14–17, 26–30 Investor-State Arbitration see International Investment Arbitration Iran-United States Claims Tribunal ­(iusct) 190, 287, 302 n. 1269 Jurisdiction case law 208–214 commercial arbitration 65–66 icsid arbitration 64–65, 206–208 jurisdiction ratione materiae 206–208, 221 jurisdiction ratione personae 207–208, 213–214 jurisdiction ratione voluntatis 221 objective approach / Salini elements 211–212 subjective approach 209–210 Jurisprudence Constante Doctrine 107–112, 140–141, 148, 153, 155, 163, 199–202, 204, 236, 331, 358, 363, 444 Lis Pendens 347–350 Lisbon Treaty 32, 128 n. 532, 408 Mauritius Convention see Transparency Model bits see bits

Index Most Favoured Nation (mfn) Treatment case law 193–194 n. 820, 196, 300, 301, 308–316 concept and function 306–308 Multilateral Investment Agreements (mits) see also iias Association of South East Asian ­Nations (asean) 20 Energy Charter Treaty (ect) 20, 32–33 n. 128, 52 n. 216, 283 North American Free Trade Agreement (nafta) 20, 52 n. 216, 142–144, 283, 295, 338, 342–344, 354 n. 1485, 366–369 Multilateral Agreement on Investment (mai) 20 n. 71 National Treatment (nt) 28 n. 105, 284 n. 1203, 299–300 New International Economic Order (nieo) 15–17 New York Convention see Recognition and Enforcement of Awards Precedent de facto precedent regime 133, 136, 148, 153, 161, 199, 201–202, 204, 236, 329, 345, 427, 434, 450 deference 190–198 alignment due to persuasion 191– 193, 200 concealed, unsubstantiated deviation 194–198, 201, 451  distinction 194–196, 315–316  pretended agreement 197–198, 276–277 substantiated deviation 155, 193–194, 200–201, 236 ignoring, unsubstantiated deviation 198, 201, 327–328, 450 investment arbitration 183–189 stare decisis maxim see Stare Decisis Maxim Preliminary Ruling System admissible questions 420–430 basic structures 412–420 conceptual models 380, 392–404

589 course of proceedings 439–442 eu law (Art. 267 tfeu) 380, 394–398, 420, 432–433, 445 legal effect 443–448 legal implementation 384–387, 404–412 submission of questions 430–439 temporal effect 442 wto Appellate Body see Appellate ­Review; wto Provisional Measures case law 238–241 commercial arbitration 72–73 icsid arbitration 71–72, 237 legal effect 239–241 urgency and necessity 238–239 Recognition and Enforcement of Awards commercial arbitration 92–93 icsid arbitration 90–92 New York Convention 52, 72–73, 88, 92–93 self-contained system see icsid Arbitration Res Iudicata 91, 288, 347–348, 350–351 Research Methods qualitative-empirical analysis 7 (proto) typical cases 7, 204–205 qualitative documentary research 204–205 reform design by inference 8, 391 strength-weakness analysis 7, 60–64 functional comparative method 61 Review of Awards annulment see Annulment Review appeal see Appellate Review finality 86–87, 89–90 self-contained system see icsid Arbitration Stare Decisis Maxim 108, 156 n. 664, 187, 427 see also Precedent Stockholm Chamber of Commerce (scc) Arbitration 59, 62, 66, 69–71, 73, 84–85, 89–90, 93, 98 System see also Inconsistency of Investment Jurisprudence systems theory 129–137

590 System (cont.) autopoiesis 130, 132, 136 globalisation 131–132, 135–136 Gunther Teubner 131–132 Jürgen Habermas 131 Niklas Luhmann 129–130 systematisation 351–352 Third-Party Participation 75–76, 79, 363, 439 see also Amicus Curiae Briefs Transparency see also Confidentiality commercial arbitration 79–81, 84–85 icsid arbitration 74–77, 111, 116, 358–363 lack of 40–41, 133–134, 167 Mauritius Convention 83–85, 408 n. 1735 post-award transparency 116, 167, 343–345, 358–363, 388–389 uncitral Transparency Rules 2014 78–79, 81–86

Index Umbrella Clauses case law 145–146, 223–224, 226–236 concept and function 224–226 Unilateral Consent Clauses 215–219, 330, 423 United Nations Commission on International Trade Law (uncitral) Arbitration 59, 62, 65, 68–69, 72–73, 78–84, 87–89, 92–93, 95–97, 115–116, 158–160, 190, 380 Vienna Convention on the Law of the Treaties (vclt) see Interpretation of Treaties Waiting-Period Clauses 219–220 World Bank investment law and policy 17–18, 48–49, 342, 419 n. 1785, 420 World Bank factor 56–57, 124 World Trade Organisation (wto) appellate body 369–372, 377, 391, 415–417 dispute settlement body 190, 300