Non-Compliance with International Investment Arbitral Awards: Violation of State Obligations

Abstract

Sanctions can be seen as deterrents, as a means of rebalancing treaty benefits, or as penalties. The processes used to impose them can also vary widely (ranging from multilateral to unilateral, and including specialized institutions) and raise varying degrees of legitimacy concerns. In some instances, such as in the case of the suspension from the GSP program, there will be ‘‘innocent bystanders.’’ In other words, the suspension will hurt Argentinean traders who did not have anything to do with the investment disputes between U.S. investors and the Argentine government. Considering that investor-state arbitration under the ICSID Convention was designed to depoliticize investment disputes, close attention has to be paid to the consequences of using sanctions as a primary means to insure compliance with awards. At the same time, the risk that the Argentine example sets a precedent for recalcitrant states should not be discounted. In fact, it should be strongly discouraged by the more influential States to serve as an example for affected LDCs and developing economies that are unable to issue sanctions. In the alternative and more pertinent, let parties exercise autonomy at contracting stage for avoidance of endless attempts to execute in futility.