State-State Investment Arbitration as a Means of Reassertion of Control - From Antagonism to Dialogue

Abstract

International Investment Agreements (“IIAs”) usually provide for both investor-state and State-State arbitration without any further indication as to the relationship between the two. Standard state-state arbitration clauses permit any Contracting Party to seize a tribunal to settle any “dispute” with another Contracting Party as to the “application or interpretation” of the respective IIA. Such broad wording opens various possibilities for conflict with investor-State arbitration, e.g. if the investor’s home state introduces a parallel diplomatic protection claim or if the investor’s host State and respondent in the investor-state arbitration resorts to State-State arbitration in order to settle a matter of interpretation that is pertinent in the investor-State dispute. Beyond the issue of parallel proceedings, questions arise as to the effect of a State-State award, particularly pertaining to the interpretation of the IIA, in subsequent investor-state arbitrations where the interpretation of the same IIA clause is relevant for resolving the investor-State dispute. Are State-State interpretation awards binding on investor-State tribunals operating under the same IIA, do they only have to consider them or can they even completely ignore them? Depending on the answer to this and similar questions, State-State arbitration inheres a considerable potential for the Contracting Parties to reassert control over the IIA and/or investor-state arbitration – usually rather unilaterally than jointly. This chapter will first set out a typology of state-state claims based on their potential for a Contracting Party’s reassertion of control (B.). Thereinafter, section C will lay the groundwork for developing principles governing the relationship between state-state and investor-State arbitration by presenting five premises defining the architecture of such relationship. In section D, I will, first, set out and elaborate on the five principles that, to my mind, govern the interaction between the two different forms of arbitral dispute settlement most IIAs offer (D.(1)). Second, I will present the consequences that in my opinion should emanate from such principles and that should crystallize, so I contend, into a judicial dialogue between State-State and investor-State tribunals operating under the same IIA (D. (2)).