The Authority of Domestic Courts in Adjudicating International Investment Disputes: Beyond the Distinction between Treaty and Contract Claims

Abstract

While it is widely acknowledged that international tribunals may, depending on their jurisdictional entitlements, entertain treaty claims as well as claims arising out of breaches of contract, the exercise of jurisdiction by domestic courts has generally been deemed to be limited to matters of national law. What is more, domestic adjudication has generally been considered without consequence for the outcome of a number of international proceedings. However, is deference to international dispute settlement mechanisms really compatible with dispute settlement clauses contained in investment treaties and contractual agreements that foresee a role to be played by domestic courts? The answer attempted by this paper is in the negative. On the one hand, the identity of a legal dispute within the jurisdiction of different forums is not dependent on the cause of action that might be invoked, nor is the distinction between contract claims and treaty claims one that necessarily justifies the existence of two wholly separate layers of legal obligations. This may be illustrated through an assessment of how international jurisdictional entitlements exist and interact with specific dispute settlement clauses contained in contracts and treaties. On the other hand, where a distinction based on the causes of action might exist, municipal courts that deal strictly with matters of domestic law ought not to be deprived of influence on the outcome of international proceedings. In this regard, an analysis of the consequences for international tribunals of adjudication by municipal courts over derivative claims and investment disputes in general will be of avail.