International Investment Tribunals Research Articles

The Reform of International Investment Law: Whose Rule of Law?

Abstract Public and political controversies over Investor–State Dispute Settlement (ISDS) have prompted reform processes in international investment law, at bilateral, regional and multilateral levels, with different actors shaping the future of international investment governance. In its essence, the options for the ISDS reform reflect the diverging perspectives on the rule of law in international law. Ultimately, they present a choice about who should control power over States’ action in issues of public importance – the States who have created the system, or international investment tribunals who have shaped the legal development of the system. This paper considers the application of the rule of law as a normative meta-principle to international investment law and its dispute settlement, and it sheds light on different perspectives of this concept, as they shape the ongoing ISDS reform(s).

The right to regulate and the interpretation of the WTO Agreement

ABSTRACT In contrast to international investment tribunals, World Trade Organization (WTO) adjudicators have been reluctant to acknowledge the inherent right to regulate under international law explicitly. Policy-based considerations arising from such a right have not been viewed as a standalone component under interpretive analyses in WTO dispute settlement. Instead, they have been integrated only to the extent they find expression in the treaty. This article explores how, on occasion, WTO adjudicators have departed from this orthodox approach by choosing to proactively interpret the WTO Covered Agreements in a way that presupposes a States’ right to regulate, even where this may seem contrary to, or unsupported by, the treaty text. In these cases, the question has not been whether such a right subsists within substantive WTO disciplines, but rather how such a right can be read into these disciplines in a manner that comports with the ordinary rules of treaty interpretation. While this unorthodox approach has resulted in interpretations that appear unclear and uncertain, these outcomes are ultimately explicable in terms of a general principle of regulatory autonomy that can form the basis for more principled interpretive choices.

Tackling Corruption in Foreign Investment: Insights from Investment Arbitration Cases

AbstractOver the last ten years, international investment tribunals have imported anti-corruption principles into the bilateral investment treaties (“BIT”) regime through the use of the doctrine of “unclean hands” and the requirement of “legality of the investment.” These principles have been invoked as a “trump card” defense by responding parties. In light of the rising case laws, the Article focuses on the success of the “trump card” defense of corruption invoked by host States. The Article makes several important findings. First, it shows that tribunals use the standard of a reasonable level of certainty to establish corruption – a standard below the “beyond reasonable doubt” standard employed in domestic criminal courts. At the same time, tribunals have discouraged mere insinuations of corruption without evidence. The Article also explains that this “trump card” defense is rarely successful owing to the minimal evidence offered by States in making allegations of corruption. Further, such a defense might place the entire burden of proof in rebutting corruption allegations on the investor even though the host State may have been complicit in the act. Fundamentally, the Article demonstrates that investment tribunals have not been able to effectively engage with corruption claims, due to the lack of enforceability of both the OECD Convention and the United Nations Convention against Corruption. However, this has not stopped the increasing use of the “trump card” defense. A separate mechanism such as introducing a corruption court could be a better alternative to deal with such claims.

Investment for Green Growth: An Analysis of the CAI Environmental Provisions

Abstract Since 2012, international investment tribunals have passed several awards highlighting the interaction between environmental obligations imposed upon foreign investors and the host State’s duties towards investors in terms of green investment. The EU-China Comprehensive Agreement on Investment (CAI) is a step forward in continuing the debate on environmental protection and conservation in the context of investment law. This article focuses on section IV subsection 2 of the CAI and analyses the relevant provisions of the CAI and other Sino-EU BITs having a potential impact on the development of environmental policy and climate change-related measures. This article references publicly available investor-State arbitration decisions to understand the ramifications of environmental standards on foreign investment policymaking. Further, this article also highlights the potential impact of the CAI on green investment and green financing measures undertaken by the European Commission.

Proportionality and the fight against international tax abuse: comparative analysis of judicial review in EU, international investment and WTO law

ABSTRACT This contribution considers the use of the principle of proportionality to review measures combatting international tax abuse (avoidance and evasion). Our claim is that proportionality, which tends to be viewed as the key analytical tool to balance tax equity against the interests of taxpayers, is ill-suited to the review of such measures. This we will demonstrate from a theoretical angle, but also through the analysis of the CJEU, international investment tribunals and WTO adjudicatory bodies: rather than balancing tax certainty against tax equity or focusing on the efficiency of the anti-tax abuse measures in the pursuit of substantive policy goals (the types of enquires normally associated with proportionality), what we observe is an assessment and gradual demarcation of the rightful territorial extent of the State’s taxation powers.

ЛЕГІТИМНІ ОЧІКУВАННЯ ІНВЕСТОРІВ У СФЕРІ ВІДНОВЛЮВАНОЇ ЕНЕРГЕТИКИ

The article aims at studying the approaches of international investment tribunals to the definition and protection of the legitimate expectations of investors in the renewable energies sector in case where a host state changes or cancels the previously established investment incentive schemes. The author also provides recommendations for Ukrainian authorities regarding the treatment of investors in order to settle existing conflicts and prevent them in future. The research methodology consists of the system-structural method, methods of analysis and synthesis, comparative and prognostic methods. At the beginning of the 21st century, many countries (including those in the European Union) enacted schemes, such as feed-in tariffs (FITs) or other special rates, to encourage long-term investment in the renewables. Confronted with a global financial crisis in 2008–2009, however, many of these countries reduced or eliminated altogether their original investment incentive frameworks. These amendments have prompted a significant number of investment disputes based on claims of breaches of investors' legitimate expectations over the stability of remuneration schemes, alleged to amount to an infringement of the fair and equitable treatment (FET), under the second sentence of Article 10 (1) of the Energy Charter Treaty. Ukraine now faces the same problem in its own relations with investors in renewable energies. Therefore, it is necessary to carefully study the existing (particularly negative) foreign experience in order to mitigate the risks of both losing disputes and inhibiting the development of the "green" energy sector. In order for the state not to bear the burden of compensation payments over the lawsuits by investors, changes in the regulatory regime should be proportionate, reasonable, non-arbitrary and in the public interest, but not radical or unpredictable. At the same time, any lawsuit by an investor poses a risk for the state, since the outcomes of the investment disputes resolution are unpredictable. In this regard, proper communication and negotiations with investors are extremely important to prevent lawsuits, which also carry the danger of creating a negative information background for green energy.

Mass claims in international investment arbitration

Following the economic crisis in Argentina international investment tribunals faced a new challenge: mass claims characterized with multiple claimants bringing the significant amount of homogeneous investment protection claims against the host state. Neither the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, nor applicable bilateral investment treaties cover the tribunals’ power to resolve mass claims. They are silent on crucial questions of jurisdiction and consent and do not address important procedural issues either. In these circumstances arbitral tribunals face the inevitablegap-filling process, which boils down to the critically important question of legal nature of mass claims. If mass claims are nothing more than a mere variety of “ordinary” claims, than the issues of special or “secondary” consent are irrelevant, since the general consent for arbitration will suffice for the tribunal to find itself competent to resolve the dispute. By contrast, if mass claims are different in their legal nature from “ordinary” bi- or multiparty arbitration, they cannot “fit” into the scope of parties’ general consent. In controversial Abaclat decision the majority ruled that the questions of tribunal’s powers to decide on mass claim brought by Italian investors against Argentina pertain to the sphere of admissibility rather than jurisdiction. This analysis was not accepted by dissenting arbitrator G. Abi-Saab. Interestingly, other multi-party “Argentinian” awards followed the line of argument which significantly differed from both the majority opinion in Abaclat and G. Abi-Saab’s dissent. This only highlights the controversial nature of mass claims in international investment arbitration. This article is dedicated to analysis of jurisdictional issues raised in the course of “Argentinian” arbitrations. Since this analysis is strongly intertwined with two other systems of resolution of mass claims, namely American class arbitration and public international law mechanisms dealing with the compensations for states’ international wrongdoings, these two mechanisms are also explored to provide better context and understanding.

The Valuation Date of an Unlawfully Expropriated Property in International Investment Arbitration: A Critique of Acquisitive Valuation

Abstract The valuation date of an expropriated property is considered a major element in the calculation of compensation. Some international investment tribunals, relying on the standard set by the Permanent Court of International Justice (PCIJ) in the Chorzów Factory case, have adopted a dual standard for determining the valuation date and have switched between the date of taking and the date of award to secure the highest amount of compensation in cases of unlawful expropriation. For the proponents of this method, it helps to distinguish between compensation for lawful and unlawful expropriations. This article labels such an approach as ‘acquisitive valuation’ and challenges its legal justification. It shows that acquisitive valuation is associated with punitive damages and fails to comply with the standard set out in the Chorzów Factory case. Using the ex post information is similarly to be avoided under that standard. Finally, although mindful of the hindsight issue, the article advocates the adoption of the date of taking as the valuation date in both lawful and unlawful expropriations. The extension of the scope of damages, including the loss of profit and consequential damages, if incurred, to the point in time when the investment was reasonably expected to continue instead of limiting the compensation to the fair market value of investment at the date of taking would more properly reflect the difference between lawful and unlawful expropriations.

Developing Human Right Norms for Investor-State Arbitration: The Needed Panacea for Environmental Injustice?

The dissatisfaction of States and some non-State actors with investor-State arbitration has deepened over the years. This has resulted in agitations for the reform of investor-State dispute settlement. Part of the reform agenda is the need for international investment tribunals to be required to consider human right norms, in appropriate cases, in the determination of arbitration matters before them. This is because, as good as the idea of protecting foreign investments is, if it is not put in its right perspective, it may lead to good government policies and the human rights of indigenes of host communities being sacrificed on the ‘altar’ of investment protection. Thus, this work aims at contributing to the ongoing debate on the need for international investment tribunals to always take public interest into account when deciding disputes before them. In that regard, this work examines the connection between human rights and investor-State arbitration, with particular focus on how these evolving human right norms would produce the needed panacea for environmental injustice. Although the ongoing agitations for reform transcend investor-State arbitration, this work in limited to discussing the specific issue of the need for investor-State arbitration tribunals to be required to give adequate consideration to human right norms in the determination of the matters that come before them. In this work, we used qualitative methodology based on doctrinal approach. The research design used is content analysis, which helps in describing the connection between human rights and investor-State arbitration as well as the concept of developing human right norms in investor-State arbitration. Keywords: Environmental injustice, Human right norms, Investment, Investor-State arbitration, Public interest DOI: 10.7176/JLPG/111-06 Publication date: July 31 st 2021

Counterclaims: a Critical Analysis of Article 6 of the 2019 The Hague Resolution of the Institut de Droit International on the ‘Equality of Parties before International Investment Tribunals’

Abstract This article addresses the complex topic of counterclaims in investment arbitration by critically assessing and commenting Article 6 of the 2019 The Hague Resolution of the Institut de Droit International (IDI) on the ‘Equality of Parties before International Investment Tribunals’ paragraph by paragraph.

Notion of Direct Investment in Non-ICSID Investment Treaty Arbitration

In recent times, the importance of foreign investments becomes vital in the world’s economy. The mutual cooperation between developed and developing countries by signing the bilateral and multilateral treaties with its own dispute settlement mechanisms is growing significantly. Due to the fact mentioned above, the frame- work gives the possibilities for both - investors and host states to protect their rights in the international forum. The present research is related to the importance of the notion of “Investment” in International Investment Arbitration, its implications, and the current trends on the definition itself. This issue is very important, as it is a threshold jurisdictional question for the International Investment Tribunal’s jurisdiction. The paper discusses the Bilateral Investment Treaties, their legal nature, and the expediency of their conclusion. The issue of Notion of direct investment in bilateral investment treaties will also be detailed in the paper, moreover, there will be an overview of different types of BIT definitions on the example of different countries’ BIT practice. A very comprehensive discussion will be followed on the best practices established by the International Investment Tribunals regarding the definition of “investment”. In the end, the author will analyze whether or not there is a common/universal notion of investment in Investor-State disputes.

Equality of Parties before International Investment Tribunals: The Institute of International Law Resolution 2019

<i>Equality of Parties before International Investment Tribunals: The Institute of International Law Resolution 2019</i>

EIGHTEENTH COMMISSION: Equality of Parties before International Investment Tribunals

Journal Article EIGHTEENTH COMMISSION: Equality of Parties before International Investment Tribunals: Institute of International Law Get access ICSID Review - Foreign Investment Law Journal, Volume 35, Issue 1-2, Winter/Spring 2020, Pages 426–433, https://doi.org/10.1093/icsidreview/siaa052 Published: 25 March 2021

Bilateral Investment Treaties and the Increase in Egyptian Appearances before International Arbitration Tribunals

Bilateral investment treaties (BITs), as the name indicates, are meant to govern investment relations between two signatory states. In this context, Egypt holds a significant place among all respondent states, having to face a very high number of legal issues from foreign investors. These cases are pending before several international investment tribunals and Egypt is facing claims of over USD 20 billion annually from its foreign investors. In spite of such a grim situation, there are legal arbitrations that have increased the appearance of Egypt in international arbitration forums. There are several reasons for such a situation to arise, mainly because of the governmental measures towards foreign investors and interests. This article argues that in spite of the unspecified criteria shown towards foreign investors, the Bilateral Investment Treaty's items have played a vital role in increasing Egyptian appearances.

Hagia Sophia at ICSID? The Limits of Sovereign Discretion

The paper focuses on an underdeveloped area of jurisprudence in international economic law, that of the remit of sovereign discretion on cultural and religious grounds when it intersects with investor protections under international law. An investigation on the limits of sovereign discretion on issues of religion and culture is the next frontier in debates on investor state dispute settlement. While issues of expropriation, the meaning of fair and equitable treatment, exclusions from protection based on public policy, or on grounds of national security, have been thoroughly examined by international investment tribunals; this aspect of public policy that relates to culture and religion leaves many key issues unexplored. The paper explores options in investment arbitration for foreign investors affected by changes brought about by sovereign decisions based on religious and cultural grounds, shedding light in this politically and emotionally charged corner of international economic law. The paper initiates this discussion by investigating the possibility that the Switzerland-Turkey BIT of 1988 may offer bases for compensation to SICPA, the -till recently- operator of the Hagia Sophia museum in Istanbul, a world heritage site of global religious and cultural significance transformed again into an operational place of worship in 2020.

International arbitration as a means to protect human rights: analysis of the Hague Rules on Business and Human Rights Arbitration

This article analyses the Hague Rules on Business and Human Rights Arbitration that were published in December 2019. The Hague Rules state how arbitration proceedings should resolve disputes arising from the influence of commercial activity in general on human rights. The purpose of the article is to assess the efficiency of the Hague Rules in settling such disputes by examining their features. The first part of the article studies the possibility of referring human rights disputes to international arbitration. In particular, the author examines the current practice of international investment tribunals and specifies the following situations where arbitrators deal with issues of human rights violations: to accept jurisdiction over counterclaims by host states against foreign investors; to interpret and provide guidance for establishing international investment law standards; to reasonably reduce the amount of compensation awarded to foreign investors in the event of violation by the host state. The author also emphasises that the application of the Hague Rules will enable tribunals to fully exercise their jurisdiction over human rights disputes and to examine such disputes on their merits. Having established the general possibility of referring human rights disputes to international arbitration, the author proceeds by analysing certain features of the Hague Rules, and then considering provisions on the importance of collaborative settlement mechanisms, special requirements to arbitrators, culturally appropriate arbitration proceedings, the possibility of bringing multiparty claims, enhanced requirements to the transparency of the arbitration proceedings and other issues. Finally, the author delves into certain challenges that may impede the practical application of the Hague Rules. In particular, such challenges may include: the fact that the Hague Rules do not solve the problem of the companies’ lack of obligations to protect human rights; the problem of enforcing awards taken in accordance with the Hague Rules; the hindered access of individuals to arbitration proceedings. Despite the above challenges, the author concludes that the Hague Rules may become a rather powerful instrument as an additional mechanism to resolve human rights disputes.

Crimea-Related Investment Arbitration Cases against Russia before International Investment Arbitration Tribunals

INTRODUCTION. The article is devoted to the analysis of the position of the Russian Federation in ten investment cases initiated by Ukrainian investors after the events in Crimea in 2014. The article also highlights current trends in the issue of confidentiality of international investment disputes. The authors analyze whether Russian strategy is effective based on the experience of foreign states, and also make assumptions about the enforceability of arbitration awards. Where the tribunals rendered awards on the merits, the authors highlight the problem of recognition and enforcement, and also assess Russia’s the arguments to set aside these awards.MATERIALS AND METHODS. This study is based on arbitral awards and information from public sources,including official press releases and interviews with Russian representatives in connection with the pending investment disputes. The authors employed the historical method, as well as such general scientific methods as analysis, synthesis, analogy, description, modeling.RESEARCH RESULTS. The result of the study is the identification and formulation of patterns in investment disputes with respect to investments in Crimea to which Russia as a party of Russia, the identification of typical arguments of the parties and the conclusions of arbitral tribunals on this type of disputes.DISCUSSION AND CONCLUSIONS. Having analysed the awards rendered against Russia by international investment tribunals, the authors presented an overview of the parties’ arguments that were presented when the arbitration considered the issue of jurisdiction and resolved the dispute on the merits. The authors assessed these arguments in terms of their credibility on the basis of existing in international investment case-law.

The (Ir)relevance of Transnational Public Policy in Investment Treaty Arbitration – A Reply to Jean-Michel Marcoux

Abstract In his article ‘Transnational Public Policy as a Vehicle to Impose Human Rights Obligations in International Investment Arbitration’, Jean-Michel Marcoux investigates whether international investment tribunals can rely on transnational public policy to impose human rights obligations on investors. While I generally side with the idea that international human rights as such are highly relevant in (some) international investment arbitrations, I argue in this article that transnational or truly international public policy as a concept is largely, and as a matter of principle, irrelevant in investment treaty arbitration. Secondly, even if one were to accept that transnational public policy has a role to play, I question the usefulness of framing various human rights issues as questions of ‘transnational public policy’.

A Duty to Consult Foreign Investors When Changing the Regulatory Framework? Implications for Non-Communicable Disease Prevention and Beyond

Abstract Several decisions of international investment tribunals can be read as suggesting that the fair and equitable treatment standard may oblige governments to consult foreign investors in the course of developing new laws and policies. This position would significantly expand the concept of fair and equitable treatment, and goes far beyond what most domestic legal systems require of governments. Generally speaking, there may be sound instrumental and normative reasons for engaging in consultation with affected stakeholders in the course of legislative and policy development. However, with the exception of treaty provisions that otherwise so provide, no duty of consultation in the lawmaking process arises from fair and equitable treatment clauses, customary international law or general principles of law. Therefore, industries such as the tobacco industry are unlikely to succeed in a claim of failure to properly engage in consultation in the process of lawmaking.

ALGUNAS NOTAS SOBRE LAS TENDENCIAS JURISPRUDENCIALES APLICABLES A LA REGULACIÓN DEL ARBITRAJE ESTABLECIDO EN EL TRATADO INTEGRAL Y PROGRESISTA DE ASOCIACIÓN TRANSPACÍFICO (CPTPP / TPP-11)

This paper aims to provide an overview of the case-law trends of international investment tribunals, concerning the provisions governing the dispute resolution mechanisms for conflicts arising between investors and States in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. In particular, these notes address investment arbitration and are intended to provide notions regarding its preliminary requirements; the period of limitation of claims; waivers as a mechanism to ensure the exclusivity of arbitration; and; the possibility of Host States to file counter-claims.