The Scope of an Investment Treaty Dispute Resolution Clause: It is Not Just a Question of Interpretation

Abstract

Investment treaties' provisions concerning the settlement of disputes between the foreign investor and the host contracting State may be drafted in different ways. In particular, they may cover a broad range of disputes: virtually all disputes concerning investments or only those arising from an alleged violation of the same treaty. In such a case, the contracting States' consent to arbitration may be given with regard to any substantive provision or be limited to some specific issues, usually those concerning expropriations or the payment of compensation following an act of expropriation. In the past, the Soviet Union followed such an approach. Today, even though States like the Russian Federation, other former Soviet Union countries and China have changed their attitude in that respect, arbitral tribunals may still be called upon to decide on their own jurisdiction on the basis of such ‘narrow-looking’ clauses. Obviously, foreign investors do not like dispute settlement provisions worded restrictively and they have made efforts to convince arbitral tribunals that their jurisdiction was not limited to the matters explicitly mentioned in the relevant dispute settlement provision, but extended to any alleged violation of the applicable treaty. Those arbitral tribunals which have been called upon to pronounce on the issue have not taken a consistent approach. Despite identical dispute settlement clauses, arbitral tribunals have reached different conclusions. In our opinion, the assessment of the scope of dispute settlement clauses within investment treaties is not just a question of treaty interpretation, as some tribunals maintain, but has also to do with policy considerations. In particular, the optional character of the host State's choice to submit to international adjudication must be taken into account. As a consequence, when assessing whether they have jurisdiction on the basis of such treaty clauses, arbitral tribunals are not allowed to expand their scope beyond the limits set out by the contracting States. Both an extensive interpretation of such clauses to include issues other than those expressly mentioned or the recourse to a broader dispute settlement provision through the MFN clause of the applicable treaty are unacceptable methods to settle the matter.