International Arbitral Tribunals Research Articles

The Unresolved Conundrum of Contract-based and Treaty-based Claims – An Extra Element of Contention: Privity of Contract and Forum Selection Clauses in Investment Contracts

Investment contracts are of seminal importance in today’s economy and the case-law developed by investment treaty tribunals is increasingly called to find a solution to contentious issues. By reason of the way investment contracts, most remarkably concession contracts, are concluded, there is a particular legal notion that more and more often raises fundamental questions that touch upon state responsibility, attribution of conduct, consent to arbitration and competent fora, i.e. privity of contract. After an initial introduction to the topic, this contribution will particularly focus on the consequences the application of the doctrine bears in international investment arbitration where forum selection clauses are included in local contracts with the investor. This can in fact open the door to different scenarios, either broadening or reducing the scope of jurisdiction of international arbitral tribunals depending on the latter’s interpretation. Indeed, the undefined nature of the matter is material nowadays in discussions regarding this fundamental means of dispute resolution, that, despite the criticism it receives, remains an invaluable instrument to efficiently solve disputes and ultimately uphold the rule of law.

Arbitral Tribunal Power to Disqualify Unethical Counsel

In specific matters of conflicts of interest ethical issues in connection with the parties' legal representatives could occur in the course of arbitration proceedings. The purpose of this paper is to identify and investigate the current status of the arbitral tribunals and arbitral institutions power to sanction counsel’s misconduct in the event of conflicts of interest. Parties have a fundamental right to choose the counsel and in the same time the right to an independent and impartial tribunal, therefore the source of the arbitral tribunal power to disqualify a counsel is a hot topic. There are no express provisions granting arbitrators such power, only soft law instruments, but which have no binding effect as long as the parties do not agree on them. For these reasons, two renowned cases where international arbitral tribunals have dealt with the subject are examined. Developing “truly transnational” ethical rules and their implementation by the arbitral institutions might be a solution. Arbitral tribunals are establishing this issue on the basis of the undertaken and applied international soft law (professional guidelines) which gained credibility and popularity and also became accepted international standards in the arbitration field.

Is Investor–State Dispute Settlement (ISDS) Superior to Litigation Before Domestic Courts?

The mechanism of Investor–State Dispute Settlement (ISDS) allows private foreign investors to challenge government measures before an ad hoc international arbitral tribunal. ISDS has been in existence for a long time. Yet recently this mechanism has proven very controversial, notably in the European Union and then the United States, when it became part of the negotiations on a comprehensive free trade agreement (TTIP) between them. According to critics, ISDS unduly limits the policy space of the signatory governments, and suffers from inadequate procedures. Some have argued that foreign investor claims should be dealt with like other private claims, by domestic courts. Others have argued that domestic courts should not become involved at all, and that foreign investor claims should be dealt with exclusively by state-to-state dispute settlement. This debate about ISDS is actually connected to broader discussions in the EU about whether private parties (not just foreign investors) should be permitted to invoke international law before domestic courts. Efforts by the EU institutions to limit the impact of bilateral trade agreements have been under way, though mostly surreptitiously, for several years. This article seeks to analyze the merits and implications of this policy shift, while tracing the development of the European debate on ISDS.

Lock the Gate: Fracking, Investor-State Dispute Settlement, and the Trans-Pacific Partnership

There has been much debate about the relationship between international trade, the environment, biodiversity protection, and climate change.The Obama Administration has pushed such issues into sharp relief, with its advocacy for sweeping international trade agreements, such as the Trans-Pacific Partnership and the Trans-Atlantic Trade and Investment Partnership. There has been much public concern about the impact of the mega-trade deals upon the protection of the environment. In particular, there has been a debate about whether the Trans-Pacific Partnership will promote dirty fracking. Will the Trans-Pacific Partnership transform the Pacific Rim into a Gasland?There has been a particular focus upon investor-state dispute settlement being used by unconventional mining companies. Investor-state dispute settlement is a mechanism which enables foreign investors to seek compensation from national governments at international arbitration tribunals. In her prescient 2009 book, The Expropriation of Environmental Governance, Kyla Tienhaara foresaw the rise of investor-state dispute resolution of environmental matters. She observed:'Over the last decade there has been an explosive increase of cases investment arbitration. This is significant in terms of not only the number of disputes that have arisen and the number of states that have been involved, but also the novel types of dispute that have emerged. Rather than solely involving straightforward incidences of nationalization or breach of contract, modern disputes often revolve around public policy measures and implicate sensitive issues such as access to drinking water, development on sacred indigenous sites and the protection of biodiversity.'In her study, Kyla Tienhaara observed that investment agreements, foreign investment contracts and investment arbitration had significant implications for the protection for the protection of the environment. She concluded that ‘arbitrators have made it clear that they can, and will, award compensation to investors that claim to have been harmed by environmental regulation.’ She also found that ‘some of the cases suggest that the mere threat of arbitration is sufficient to chill environmental policy development.’ Tienhaara was equally concerned by the ‘possibility that a government may use the threat of arbitration as an excuse or cover for its failure to improve environmental regulation.’ In her view, ‘it is evident that arbitrators have expropriated certain fundamental aspects of environmental governance from states.’ Tienhaara held: ‘As a result, environmental regulation has become riskier, more expensive, and less democratic, especially in developing countries.’ This article provides a comparative analysis of the battles over fracking, investment, trade, and the environment in a number of key jurisdictions – including the United States, Canada, Australia, and New Zealand. Part 1 focuses upon the United States. Part 2 examines the dispute between the Lone Pine Resources Inc. and the Government of Canada over a fracking moratorium in Quebec. Part 3 charts the rise of the Lock the Gate Alliance in Australia, and its demands for a moratorium in respect of coal seam gas and unconventional mining. Part 4 focuses upon parallel developments in New Zealand. This article concludes that Pacific Rim countries should withdraw from investor-state dispute settlement procedures, because of the threat posed to environmental regulation in respect of air, land, and water.

Intertemporality and international investment arbitration: protecting the jurisdiction of established tribunals

The backlash against investor–State arbitration is building, to the point that some commentators even talk about termination or amendment of investment treaties in order to strip international arbitral tribunals of their jurisdiction after the arbitration process already has started. This suggestion has been made in the context of the Philip Morris Asia plain packaging ICSID arbitration involving the Australia–Hong Kong bilateral investment treaty (BIT). This suggestion raises a number of interesting issues for international law and dispute settlement, especially in relation to the limits of the intertemporal rule. States are free to agree to amend or terminate treaties, including ones relating to investment, even before they expire. Such amendments or termination do not have retroactive effects unless the parties to the treaty agree otherwise. This same freedom is available to states in relation to investment treaties. However, the analysis may vary in the context of investor–State arbitration. An arbitration clause in an investment treaty represents an offer made by those states to arbitrate disputes with investors. When investors accept that offer, the consent to arbitrate becomes perfected and cannot be withdrawn unless both parties to the arbitration—the investor and the host state—agree. This conclusion is based on the principle of irrevocability of the consent to arbitrate, which is a pillar of arbitration law and also is established in Article 25 of the ICSID Convention. Moreover, the applicable law to the dispute would be the law that was binding on the parties at the moment of the acts that created the dispute. The same principle applies in state responsibility disputes. Therefore, the argument that Australia simply can amend its BIT with Hong Kong to stop the Philip Morris arbitration might be incorrect. This article explores these issues. (ICSID) Convention on the Settlement of Investment Disputes between States and Nationals of other States (1965), art 25, 71–72 Philip Morris Asia Limited v The Commonwealth of Australia, PCA Case No. 2012–12 Vienna Convention on the Law of Treaties (1969), arts 24, 11, 28, 31, 39, 42, 54, 59, 70 Australia -Hong Kong Bilateral Investment Treaty (1993) Sanum Investments Limited v Lao People's Democratic Republic, PCA Case No 2013–13 Aguas del Tunari, SA v Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Respondent's Objections to Jurisdiction, IIC 8 (2005) NAFTA (North American Free Trade Agreement) Free Trade Commission, Notes of Interpretation of Certain Chapter 11 Provisions (2001) Azurix Corp v Argentina, ICSID Case No. ARB/01/12, Decision on Jurisdiction, IIC (2003) Island of Palmas Case (or Miangas), United States v Netherlands, Award (1949) Pan American Energy LLC v Plurinational State of Bolivia, ICSID Case No ARB/10/8

Is the balance getting better? An update on the issue of gender diversity in international arbitration

Since the publication of ‘Getting a Better Balance on International Arbitration Tribunals’ in Arbitration International Volume 28 Issue 4 in 2012, there has been increasing focus in the arbitration community on the issue of improving diversity among counsel and arbitrators alike, particularly in relation to gender diversity. In this article, Lucy Greenwood and Mark Baker update and expand upon the research which underpinned their original article. They demonstrate that greater diversity has been shown to improve the quality of decision-making within corporations. Increasing diversity of arbitral decision-makers may result in enhanced quality of deliberations and awards. The authors consider that responsibility lies with arbitral institutions to track and information about the gender of party- and institution-appointed arbitrators in arbitrations they administer. However, ultimate responsibility for meaningful change lies with those making the appointments. They must acknowledge the value of diversity in its own right and as a factor influencing the quality of decision-making processes.

Disqualifying Counsel for Conflict of Interest in International Arbitration: Tribunals’ Powers and Limits

ABSTRACT: Ethical issues in connection with the parties' legal representatives may arise in the course of arbitration proceedings in particular matters of conflict of interest. This article examines the specific question of whether arbitral institutions and arbitrators have power to sanction counsel's misconduct especially in the event of conflict of interest. Such power is weighed against parties' fundamental right to choose legal representation and the absence of express provisions granting arbitrators such power in most of the major international arbitration rules and arbitration legislations. International "soft law" instruments which may provide for such powers do not have a binding effect unless embedded in parties' agreement. The article also looks at the very few cases where international arbitral tribunals have dealt with the subject under the arbitration rules of the International Centre for Settlement of Investment Disputes (ICSID), the International Chamber of Commerce (ICC) and UNCITRAL. The arbitrators in these cases have applied different set of international and national rules and have reached different outcomes to the issue. Therefore, developing "truly transnational" ethical rules and an independent body with power to enforce might be needed. Meanwhile, it is submitted that arbitrators have no other choice than determining these matters based on "soft law" instruments and other professional guidelines which remain the widely accepted international standards in the industry.

Contingent Institutions: The Reputational Impact of Investor-State Disputes

To what extent do alleged violations of international commitments damage state reputation? This paper explores this question with specific reference to investor-state disputes arising under the protection of international investment agreements. Existing theory assumes that institutionalization of international commitments raises the ex post costs of defection, including reputational damage, thereby creating strong incentives for state compliance. We modify this expectation by arguing that the reputational consequences of treaty violations are contingent on institutional rules and information flows. Drawing on a replication of prior research linking investor-state disputes with reduced FDI as well as an original analysis of their impact on investment reputation, we show that the impact of investor-state disputes has been relatively marginal over the 1987-2011 time period, with reputational effects only beginning to materialize in recent years. This temporal variation reflects changes in the rules governing the transparency of international arbitral tribunals as well as expanded media coverage of investment disputes. The central implication of these findings for the broader body of literature on international institutions is that reputational mechanisms for effective treaty enforcement cannot be taken as given but are heavily contingent on institutional design and associated information costs.

Introduction to Volume 18, 2015

With this issue, the Journal of International Economic Law proudly launches its 18th volume. Our objective continues to aim at providing a diverse selection of international economic law subjects, focusing attention on topics of current discussion and debate. In this first issue of the 18th volume of the Journal, readers will find the now traditional opening essay embodying some personal perspectives of a leading scholar. This year, Professor Thomas Cottier provides a stimulating essay on the common law of international trade and the future of the World Trade Organisation (WTO), discussing new modes of negotiations towards a more sectoral approach and the extension of dispute settlements to include Free Trade Agreements (FTAs). A number of stimulating articles on varied subjects follow the opening essay. These articles include a suggestion to use the creative economy as a new paradigm for the regulation of global trade, discussing large questions linking important changes in trade, technologies, and industries (and the industry convergence that has followed) with cognition and efforts to linguistically grasp these concepts (and the regulatory divergence that has sometimes followed). A more focused look at trade examines international trade in legal services in the context of the Association of Southeast Asian Nations (ASEAN) with particular reference to Singapore. Illustrations of the WTO’s extension to adjacent areas can be seen in an article addressing mechanism available to the WTO to deal with the impact of exchange rates on trade (including a discussion of the prerogatives of the WTO and International Monetary Fund (IMF) in judging such issues) and another comparing adjudication in the WTO to international investment arbitral tribunals in the context of protection of cultural heritage. Investment treaties also provide the basis for another of our articles which presents an index of the most important elements of these now extremely numerous and important agreements. The current interaction between the German Constitutional Court and the Court of Justice of the European Union regarding the European Central Bank’s Outright Monetary Transaction (OMT) policy provides the basis for an article showing a new and still developing context for international economic law.

The Admissibility of Evidence in ICSID Arbitration: Considering the Validity of WikiLeaks Cables as Evidence

This article examines the admissibility of WikiLeaks diplomatic cables as evidence in international arbitral tribunals. Following the ICSID Tribunal's recent Decision in ConocoPhillips v Venezuela, Venezuela challenged the Decision utilizing WikiLeaks diplomatic cables containing confidential communications between ConocoPhillips' counsel and representatives from the US Embassy. This raises significant questions regarding what types of evidence are admissible in arbitral proceedings. Traditional international legal principles would point to such diplomatic communications being clearly inadmissible. However, the question is far less clear in a transnational arbitration, where the tribunal has the final authority over admitting evidence without being bound by international law. This article begins by considering the treatment of such evidence under international legal concepts and cases. It will then examine how such evidence has been treated by tribunals thus far within the developing transnational legal order. It will conclude by postulating how future ICSID tribunals might treat the admissibility and authenticity of WikiLeaks diplomatic cables.

The role of the UNIDROIT Principles of International Commercial Contracts in international contract practice: the UNIDROIT Model Clauses

In 2013, the International Institute for the Unification of Private Law (Unidroit) drafted and published the Model Clauses for the Unidroit Principles of International Commercial Contracts (PICC). This article examines the significance, scope, and effect of these Model Clauses for international contract practice. A basic distinction is drawn between the use of these clauses before domestic courts and international arbitral tribunals. In addition, the article explores the use of the PICC as a means to supplement or interpret uniform law instruments such as the UN Convention on Contracts for the International Sale of Goods.

Abuse of Process in International Investment Arbitration

Abuse of process has been regularly invoked before international arbitral tribunals to dismiss investment claims. Because of its multifaceted character, the concept deserves a careful analysis in the light of international and comparative law. In investment arbitration, it ismentioned sometimes as amere preoccupation justifying the teleological interpretation of a treaty, sometimes as the motive for the adoption of a newarbitration rule, and sometimes as a legal principle limiting access to arbitration. This article studies the different situations deemed to be abusive in the practice of investment tribunals, ranging from frivolous claims to conduct undermining the integrityof the arbitral procedure.An overall analysis reveals the main features of abuse of process as a legal principle, and its potentialities for the emergence of a system of investment arbitration.

Applicable Law in Disputes Concerning Economic Sanctions: A Procedural Framework for Arbitral Tribunals

As the recent economic sanctions decided by the United States and the European Union against, Russia may soon be expected to lead to disputes either by commercial arbitrations or sometimes also by investment arbitrations, this paper shortly outlines the procedural framework and major considerations for international arbitral tribunals, if economic sanctions are somehow relevant aspects of the dispute they have to decide. The determination of the law to be applied by arbitral tribunals with regard to economic sanctions is subject to a number of considerations and scenarios with some complexity. Not all effects and results can easily be determined by the parties and their lawyers in advance in a contract or before a given dispute at hand. Tribunals have discretion in a number of scenarios. As a rule of thumb, that discretion is smaller if the economic sanctions are provided in the procedural or substantive law directly found to be applicable to the dispute at hand. And the discretion is wider with regard to economic sanctions by third states where Article 7 of the Rome Convention has to be applied.

Stayin' Alive?: BG Group, PLC v. Republic of Argentina and the Vitality of Host-Country Litigation Requirements in Investment Treaty Arbitration

Over the last few decades, international arbitration has emerged as the preferred mechanism for resolving high-stakes international investment disputes. Last Term the Supreme Court of the United States decided BG Group, PLC v. Republic of Argentina, the first case the Court had ever heard concerning an international arbitration award rendered pursuant to an investment treaty dispute. The bilateral investment treaty (BIT) at issue expressly required litigation in a host-country's courts prior to international arbitration, but petitioner BG Group sought arbitration directly against Argentina without first seeking recourse in the Argentine courts. The arbitral tribunal held that failure to fulfill this condition did not strip it of jurisdiction and the tribunal reached the merits, finding in favor of BG. Because the parties chose the United States as the seat of arbitration, Argentina began proceedings in the U.S. national courts to vacate the award. On March 5, 2014, the Supreme Court ruled not to vacate, relying chiefly on the premise that fulfillment of the litigation requirement in the BIT was a procedural precondition to arbitration and thus a question for an arbitrator, not a court, to decide. But what about the text of the BIT, which plainly insists on host-country litigation prior to arbitration? What about the broader criticism that the current investment treaty arbitration (ITA) regime shortchanges host-country sovereignty in order to please foreign investors? Or that host-country courts are better positioned than international arbitral tribunals to decide questions of host-country law? These concerns deserve a response if ITA is to maintain its prominence. Thus, in addition to exploring the implications of the Court's decision for ITA and international commercial arbitration, this Note proposes an improved host-country litigation requirement, arguing that countries should learn from BG Group and seek to implement or improve host-country litigation requirements in their BITs.

Counterclaims in International Law

Counterclaims are claims raised by respondents. Various international courts and tribunals have expressed their jurisdiction to hear counterclaims as an emanation of their inherent powers, even though their constitutive instruments are silent. Modern rules of court often contain provisions on counterclaims. So do the principal instruments and rules regulating international investment arbitration and international commercial arbitration. Counterclaims allow a tribunal to streamline and simplify the settlement of complex international disputes, where parties each present claims related to the same underlying dispute. However, respondent States may opportunistically squeeze tenuously related ‘counterclaims’ within the ambit of the jurisdiction established over the principal claim. This chapter addresses the role of counterclaims before the ICJ and international investment arbitration tribunals.

Declaratory Relief in International Commercial Arbitration

Declaratory relief has become a common remedy in international arbitration. While it is widely accepted that arbitral tribunals have the power to render declaratory awards, it is controversial whether the granting of declaratory relief is subject to the same or similar restrictions in international arbitration as before state courts. This article examines the nature of and the limits on declaratory relief and proposes a systematic and user-friendly approach to dealing with requests for declaratory relief before international arbitral tribunals. While, absent an agreement of the parties to the contrary, the specific requirements for declaratory actions before state courts do not apply in international arbitration, the general principle of good faith draws the boundaries of the admissibility of requests for declaratory relief. As a minimum standard, a request for declaratory relief should meet three basic criteria: (i) The legal position of (one of) the parties to the arbitration is in dispute; (ii) the requested declaration is suitable to resolve the dispute; and (iii) the declaratory award will serve a practical purpose.

The Great Recession and the New Frontiers of International Investment Law: The Economics of Early Warning Models and the Law of Necessity

The Great Recession has prompted unparalleled economic research on the causes and handling of crises. It is then important for international investment law to catch up with the new conceptual developments. This article is an attempt in this direction. Its first part presents a description of one of the main tools to avoid economic collapses— early warning models (EWMs)—which have received increasing attention by the European Central Bank, the International Monetary Fund (IMF), and the Fed. This part also presents the debate among economists about the meaningfulness of EWMs. The second part shows how international investment law should respond to this debate and proceed with an assessment of the role that EWMs may have in the interpretation of emergency clauses in BITs and the customary rule of necessity. In particular, this part deals with the question of what happens in international legal terms when a State, which relies on EWMs to adopt measures aimed at preventing a crisis, adversely affects foreign investors. The section also discusses the level of deference that investor/State tribunals may accord to States relying on EWMs when taking economic preventive action and illustrates how international arbitration tribunals should deal with debates on the quality of the given EWMs. “Everything is fragmented and fluid and unstable and hopeful and dangerous. We have insights and connections and blank spaces and questions,” said the Egyptian writer Ahdaf Soueif. 1 While she refers to the Arab Spring, her words also apply to its contemporary opposite: the Western winter—the Great Recession, the current

The Roots of Historic Title: Non-Western Pre-Colonial Normative Systems and Legal Resolution of Territorial Disputes

AbstractThe validity of historic or ancient title to territory has been tested in numerous international judicial proceedings, both in the International Court of Justice and in international arbitration. Historic title usually originates in ancient normative systems, including tributary, feudal, sultanate, and Islamic systems that predate the Western international legal system. Nevertheless, the rules against which historic title has been tested in international judicial proceedings generally require that the original titleholder be a state or a central authority that exercised territorial sovereignty over a defined space to the exclusion of other sovereign powers. The rules that apply specifically to these ancient normative systems, where allegiance to authority was personal or religious rather than territorial, have been seen as irrelevant compared to the more contemporary determinations of historic title. The only exceptions have been the French medieval customary normfrankalmoign, which the international arbitral tribunal in theMinquiers and Ecrehoscase cited as evidence that the English king exercised territorial sovereignty over the disputed islands, and the personal allegiance of theOrang Lautto the Sultan of Johore, coupled with the recognition accorded to the latter by the great maritime powers, which the International Court of Justice inMalaysiav.Singaporefound sufficient to prove the historic title of Malaysia over Pedra Branca/Pulau Batu Puteh and Middle Rocks. The principles by which historic title were adjudicated in these cases appear to be the same principles by which the Western powers dealt with the claims of the People's Republic of China and Vietnam to the Paracel Islands and the Spratly Islands, not only during the colonial period but also after the Second World War. This analysis suggests how the International Court of Justice or an international arbitral tribunal might, if given the opportunity, resolve these South China Sea disputes. Readers might also find this analysis to be particularly relevant to other disputes involving historic title, including the East China Sea disputes, although the focus of this article is on the South China Sea disputes. States and other commentators are left to rely on their own preferences and allegiances in reaching their own normative conclusions using the novel analysis provided by this article.

Enforcing Pacta Sunt Servanda? Conoco-Phillips and Exxon-Mobil Versus the Bolivarian Republic of Venezuela

In 2007, the government of Venezuela decided to re-structure certain oil projects, known as Associations, so as to bring them in line with the 2001 Hydrocarbons Law. In response, ExxonMobil and ConocoPhillips decided to exit Venezuela. Supposedly motivated by a commitment to uphold the principle of sanctity of contract, the companies subsequently initiated a series of arbitrations involving some of the largest claims ever put before international tribunals. However, the bargains that the companies insist they are defending are not reflected in the agreements that they had actually signed. Thus, these arbitrations amount to an attempt on the part of these companies to use international arbitral tribunals to re-draft on their behalf the contracts they had negotiated, so as to secure a windfall (which they had never bargained for) upon their exit from Venezuela.

International Arbitration: A New Mechanism to Settle Intra-State Territorial Disputes between States and Secessionist Movements? The Divorce of Sudan and South Sudan and the Abyei Question

In 2008, the Government of Sudan (GoS) and the Sudan People's Liberation Movement/Army (SPLM/A) submitted an arbitration agreement with the Permanent Court of Arbitration (PCA) in The Hague. In a unique fast track procedure, an international arbitration tribunal had to determine in accordance with the Comprehensive Peace Agreement (CPA) of 2005, in particular the Abyei Protocol and Abyei Appendix, the Interim National Constitution (INC) and general principles of law, whether the Abyei Border Commission (ABC) exceeded its mandate, which was to define and demarcate the area of the nine Ngok Dinka chiefdoms transferred to Kordofan in 1905. In case of excess, the parties entrusted the tribunal with redefining the boundaries of the disputed territory based on the parties’ submissions. To guarantee the transparency of the procedure and to generate acceptance by all stakeholders on the ground, all hearings and documents were made publically available. The procedure and the more than 200-pages-long final Award from July 2009 constitute an illustrative example of an international dispute settlement procedure dealing with an intra-state (territorial) dispute between a state and a secessionist movement. The paper asks why and how the parties initiated the arbitration procedure and evaluates the still disputed status of the Abyei Region and the record of the parties’ (non-)compliance with the Abyei Award and its role in the ongoing status-negotiations between Sudan and the newly independent South Sudan. By inter alia taking a comparative perspective with other international dispute settlements the paper critically discusses the legal-political implications of the Abyei Arbitration and whether it could serve as a model or lesson learned when it comes to the effectiveness and success of international arbitration and its potential contribution to the settlement of intra-state (territorial) disputes.