Treaty Arbitration Flashcards
Can the preamble itself be used for interpretation?
No, but it can be used to argue that there was a policy reason when the treaty was drafted.
Meaning of “privity” (German)
Interessensgemeinschaft
What does Gary Born mean with “constructive consent” or “arbitration without privity”?
A BIT is a standing offer to arbitrate. If a foreign investor believed its rights under the BIT or otherwise had been violated by the host state and wished to commence an arbitration, it had merely to accept the standing offer from the host state; at least on a theoretical level, that ‘offer’ and ‘acceptance’ gave rise to an arbitration agreement between the foreign investor and the host state, pursuant to which the foreign investor was able to pursue claims under the BIT against the host state.
What did Laurence Boisson De Chazournes about consent? When can it be expressed?
States enjoy flexibility regarding the expression of consent to arbitration. Consent can be expressed either before or after the dispute has arisen. In the latter case, consent to arbitration could be expressed through a compromis i.e., an agreement to arbitrate after the dispute between the host State and investor has arisen. Although such a
means is not common in investment arbitration, it nevertheless remains a way to express consent.
What forms of consent did Laurence Boisson De Chazournes describe?
1) Before the dispute (e.g., BIT)
2) After the dispute has arisen (in compromis)
3) National legislation (one-sided)
4) Host state-investor contract
What case supports Laurence Boisson De Chazournes’s contention that national legislation is a form of consent?
SPP v. Egypt.
Egypt claimed that the clause referring to ICSID was not self-executing and required a separate implementing agreement with the investor. In Egypt’s view, Law No. 43 was too ambiguous and equivocal to establish consent to ICSID arbitration. Rather, it was intended only to inform potential investors that ICSID arbitration was one of a variety of dispute settlement methods that investors may seek to negotiate with Egyptian authorities in appropriate circumstances.
The Tribunal rejected the idea that Art. 8 had the consequence only of informing potential investors of Egypt’s willingness, in principle, to negotiate a consent agreement. There was nothing in the legislation requiring a further ad hoc manifestation of consent to the Centre’s jurisdiction.
How did the World Bank Report on the ICSID Convention define consent?
What is the relevant ICSID Convention Article?
Consent of the parties is the cornerstone of the jurisdiction of ICSID.
Consent to jurisdiction must be given in writing and once given cannot be withdrawn unilaterally (Art. 25(1)).
What does “arbitration without privity mean”?
The parties (states) negotiate investment treaties in absence of the stakeholders (investors).
How did the World Bank Report on the ICSID Convention agree with the statement of Laurence Boisson De Chazournes?
Even in 1965 (see Report of the Executive Directors of the World Bank on the ICSID Convention), the drafters of the ICSID Convention anticipated that consent to ICSID arbitration might not be “expressed in a single instrument” (they were thinking in particular of domestic investment laws, rather than investment treaties)
In the 2000s and 2010s, which countries were arbitrated most against and why?
In the 2010s many claims were brought against Spain under the Energy Charter Treaty arising from Spain’s adjustments to existing incentives that had encouraged investment in Spain’s renewable energy sector. (In the 2000s many claims had been brought against Argentina arising from Argentina’s 2001 financial crisis).
The Netherlands is the second most frequent home state of claimants, why is this misleading?
Many multinational companies established holding companies/shell companies/mailbox companies in the Netherlands in order to access Netherlands investment treaties as “investors” of the Netherlands (many Netherlands investment treaties require only that an entity be incorporated in the jurisdiction to qualify as an investor).
Why is characterizing a decision “being in favor of an investor” misleading?
Characterizing a decision as being in favor of an investor can be misleading because in some
cases investors recover only a small fraction of the damages claimed.
What is the difference between the ICSID Convention and the New York Convention in terms of seat of arbitration?
There is no seat of arbitration under the ICSID convention.
When do the ICSID Additional Facility rules apply?
In cases where either the host state or the home state are not ICSID members, an investor can still choose ICSID additional facility rules.
What two obstacles does one face when choosing UNCITRAL rules in enforcement?
The losing party can request for the award to be set aside at the seat of arbitration.
Later, the losing party can request the enforcement to be stopped in the jurisdiction where the investor tries to enforce it (grounds for refusal).
Why did Spain have that many investment claims in the 2010s?
Spain had different incentives, subsidies. Encourage investment in renewable energy. Had a regime in place to invest into renewable energy sector. Following 2008 financial crisis.
Which are the important non-parties and signatories-only to the ICSID convention?
Non-parties: Brazil, India, Vietnam
Signatories only: Russia
ICSID has both conciliation and mediation. Which is more popular? What is the difference?
Conciliation is more structured than mediation.
Both are unusued.
What are the three sources of international agreements?
1) BITs
2) MITs
3) FTAs with Investment Provisions
The ICSID Convention contains procedural provisions, which was the failed pendant to establish a multilateral treaty with substantive provisions?
1962 Organization for Economic Cooperation and Development Draft Convention on Investments Abroad
This actually came before the ICSID Convention. It paved the way for the ICSID convention.
Meg Kinnear, The Role of ICSID in International Economic Law, J. Int’l Econ. L. (2023), what three factors did she attribute the success of the ICSID Convention to?
- Substantive obligations only, so states can negotiate treaties on individual basis
- Limit post-award remedy to annulment
- Simplified recognition and enforcement mechanism
This could be called the “modest approach”
Name the relevant ICSID-provisions for jurisdiction, applicable law, annulment, and enforcement
Art. 25 - Jurisdiction
Art. 42 - Applicable law
Art. 52 - Annulment
Art. 53 & 54 - Enforcement
What are the requirements for jurisdiction under the ICSID Convention?
- Legal dispute
- Arising out of
- An investment
- between a Contracting State
- and a national of another Contracting State
- which the parties consent to in writing
What was the incentive for developing countries to join the ICSID convention?
remove the home State from investor-State disputes, depoliticize dispute resolution process
Developed states are not able to exert pressure during the proceedings.
According to Art. 42 of the ICSID Convention, which are the applicable laws for disputes?
1) Domestic law
2) General principles of international law
3) Customary international law
Why are annulments quite severe for the parties?
Parties have to go back to the beginning; years of arbitration are lost.
According to Art. 52 of the ICSID Convention, what are the grounds for annulment?
1) Tribunal was not properly constituted
2) Tribunal has manifestly exceeded its powers
3) There was corruption on the part of a member of the Tribunal
4) There was a serious departure from a fundamental rule of procedure
5) The award has failed to state the reasons on which it is based
What are the two problems with ICSID annulments?
1) The appellate body might review facts, which is not what ICSID intended.
2) There have been many successful annulments, which was not ICSID’s intention.
One ground for annulment with ICSID is 3) There was corruption on the part of a member of the Tribunal, what is problematic about this?
Unclear if it has to be corruption with the current proceedings.
Art. 54 of the ICSID Convention deals with enforcement. What is the issue with ad interim measures?
Art. 54 speaks about “awards”. Ad interim measures are not awards. So the application of ad interim measures through art. 54 is controversial.
What elements are considered the “modest approach”?
No substantive elements in the ICSID Convention
Consent must be found in other instruments
Law of the nation state only applies in absence of agreement
Simplified recognition and enforcement
Post-award remedies limited to annulment
What more than consent is required for jurisdiction under the ICSID Convention?
Art. 25 (Jurisdiction)
Same Article for Draft Articles (Necessity Defense)
BITs impose obligations onto states, but not onto investors. What is the new approach?
African Union. Recent treaty practice, obligations that run to investors. New African union treaties. Counterclaims can be made by states.
Does joining the ICSID convention mean that states have given consent to arbitrate?
No, the joining states have not submitted to any substantive provisions.
What is the thing that states give up by signing the ICSID convention?
Diplomatic protection.
How are state-investor contracts called?
Development contracts.
Can reservations to the ICSID convention be made?
Yes.
What are the three steps of interpretation under the VLT 31(1)?
Ordinary meaning
Context
Object and purpose
How can tribunal apply the Salini factors? (3)
1) Are the factors required?
2) Which factors are considered?
3) Are these binding factors?
What was the case with the government bonds?
Abaclat v. Argentina
Who were the parties and stakeholders in the Abaclat v. Argentina case?
What was the argument against the investment?
Argentina, foreign investors, underwriters, intermediaries
The argument was that the investors did not cause transfer of investments into the territory of Argentina, they are located outside of Argentina due to the choice of law agreements
What are the Salini factors?
(a) a substantial contribution of the investor
(b) a certain duration
(c) the existence of an operational risk
(d) a certain regularity of profit
(e) a contribution to the economic development of the host State
What was the dissenting opinion on Abaclat v. Argentina on the definition of investment?
“That the ICSID Convention does not provide an express definition of investment does not automatically imply that the definition is totally left to the BITs. This is because words have an intrinsic meaning, hence a limited and limiting one, however large and vague it may be.”
What is a sovereign debt exclusion? Where do we find this?
It’s an exclusion of debt securities issued by a government or loans to a government.
Morocco - Nigeria BIT.
What is the double-barrelled approach?
It means that the definition of investment needs to satisfy both the ICSID (Salini Factors) and the one in the BIT.
What has been a development that can be considered a recognition of Salini factors?
They are being enshrined in some BITs.
How must the term “investment” be interpreted under the ICSID convention?
The term “investment” under ICSID Convention Article 25 must be interpreted as having some meaning (“ordinary meaning” under VCLT Article 31 as well as effectiveness/effet utile principle).
What is the relevant article for disputing parties to challenge the selection of an arbitrator?
Under ICSID Convention Article 57, a disputing party can challenge an arbitrator by establishing
“any fact indicating a manifest lack of the qualities required by paragraph (1) of Article 14.”
That paragraph requires arbitrators to have “high moral character” and “recognized competence in the fields of law, commerce, industry or finance” and who “may be relied upon to exercise independent judgment.”
Under article 14 of the ICSID convention, there is an “independent judgement” requirement. What has case law shown?
The “independent judgment” requirement under Article 14 has been interpreted, on many occasions, as also requiring impartiality.
Compare the requirements for arbitrators under the ICSID Convention and the UNCITRAL Working Group III Draft Code of Conduct.
Art. 14 of the ICSID Convention requires arbitrators to have “high moral character” and “recognized competence in the fields of law, commerce, industry or finance” and who “may be relied upon to exercise independent judgment.”
Under the UNCITRAL Working Group III Draft Code of Conduct, the requirement of impartiality and independence includes obligations not to be “influenced by loyalty” to any “person or entity”; commentary further provides that “impartiality” means “the absence of bias or predisposition” of an arbitrator toward a disputing party or issues raised in the proceeding.
Why is it easier to challenge an arbitrator under UNCITRAL than under ICSID?
Under UNCITRAL : You don’t have to demonstrate that there is an actual bias, there just needs to be** justifiable doubts** about their impartiality or independence.
Under ICSID Convention: You have to argue that the arbitrator lacks independent judgement. Meaning that they are actually not independent.
The UNCITRAL Working Group refers to what guidelines to assist in the determination of conflicts with independence or impartiality?
International Bar Association Guidelines on Conflicts of Interest in International Arbitration
Red list and orange list
Where did the predisposition discussion come from?
What are the meanings of independence and impartilality?
UNCITRAL Working Group III – Draft Code of Conduct for Arbitrators in International Investment
Dispute Resolution and Commentary (April 2023)
“‘Independence’ refers to the absence of any external control, in particular the absence of relations with a disputing party that might influence an Arbitrator’s decision.
‘Impartiality’ means the absence of bias or predisposition of an Arbitrator towards a disputing party or issues raised in the proceeding.”
What are the two absolute and the two relative obligations we discussed?
Relative: National treatment, most-favored nation treatment
Absolute: Fair and equitable treatment, minimum standard treatment
How to prove relative obligations?
1) Find a comparator
2) Prove that investor and comparator are in like circumstances
3) Need to prove that received treatment was less favorable
What has China done in its more recent investment treaty practice on national treatment?
China’s more recent investment treaty practice on national treatment occasionally has included “pre-establishment” protections, which protect investors that are seeking to invest in the host state (but have not yet made an investment).
How have states tried to weaken the national treatment?
States have often argued that a national treatment claim requires a showing of nationality-based discrimination, but investment treaties generally have not included language specifically addressing discrimination on account of nationality.
In Thunderbird, Canada argued that national treatment has to be nationality-based. What points did Canada use to make that argument?
The comparison is with a domestic investor. Although there is no such express language in the text, it can be implied using the ordinary meaning and the object of purpose interpretation.
However, the other side was successful in arguing the absence of text means that it should not be considered. Ordinary meaning.
What is the weapon against investment screening? Where has China applied that?
The substantive protections should span to the pre-establishment phase. Canada-China BIT.
“An investor is seeking to make but the host state has made some obstacle.” What does this language indicate?
Pre-establishment protection.
What are the four approaches for states to clarify obligations and protections?
1) More detailed provisions (e.g., MFN extra clause in Swiss BITs)
2) Footnotes
3) Drafter’s note (TPP)
4) Joint interpretation mechanism (NAFTA)
What does “offensive” and “defensive” mean?
Offensive: protections of investors abroad
Defensive: protection of domestic interests
What novelty did the NAFTA introduce in terms of interpretation?
The parties could create joint interpretation (post ratification) which would then become binding for the tribunals.
Relative: National treatment, most-favored nation treatment
Absolute: Fair and equitable treatment, minimum standard treatment
Which of these are customary international law?
What practical result does that have?
Only the MST.
The minimum standard of treatment, as a general matter, is closely associated with customary international law, so use of the MST language in an investment treaty can be read as suggesting that the obligation is not autonomous (i.e., tied to customary international law).
If a claim is brought against a state for different treatment, who bears the burden of proof?
The state can argue that there was a legitimate reason for a different treatment, but the burden of proof lies on the state.
In the Thunderbird v. Mexico case, there were two potential points that the investors could have used to file a national treatment claim, but only used one. Which?
The comparator were two local gambling companies.
US investor identified two domestic investors also operating in the gaming industry. Mexican competitors have received injunctive relief in Mexican courts. We have not received that relief. Therefore, we were treated less favorably. But this is not what the lawyers did.
Comparators are still in operator. We have been shut down. Simple level, that’s the less favorable argument. Mexico has to acknowledge that this is true.
