Investment Arbitration Proceedings Research Articles

Article: German Federal Supreme Court Declares Intra-EU Investor-State ICSID Arbitration Inadmissible

In 2018, the Court of Justice of the European Union (CJEU) declared arbitration clauses in intra-EU bilateral investment treaties (BITs) incompatible with EU law, extending this ruling to multilateral investment protection agreements such as the Energy Charter Treaty (ECT) in 2021. Section 1032 II German Code of Civil Procedure (ZPO), a provision solely known to German law, allows for the invalidation of arbitration agreements even before the stage of enforcement. The Netherlands and Germany sought to apply this provision to intra-EU International Centre for Settlement of Investment Disputes (ICSID) arbitrations, resulting in conflicting decisions by the Higher Regional Court Cologne and the Court of Appeal Berlin. On 27 July 2023, the German Federal Supreme Court affirmed the inadmissibility of the intra-EU investor-state arbitrations at ICSID, aligning with the previous decisions of the Higher Regional Court Cologne and the CJEU. Among other considerations, the German Federal Supreme Court ruled on the applicability of section 1032 II ZPO to ICSID arbitration proceedings, primarily justifying its decision by emphasizing the primacy of EU law. This case note analyses the German Federal Supreme Court’s reasoning and provides insights into the practical implications and the broader impact on intra-EU investment arbitration proceedings.

Interpretation of “Investments” and “Investors” in the Russia-Belgium/Luxembourg BIT: Seeking Ways to Resolve the Case of NSD

The paper addresses jurisdictional issues on the case of NSD initiating investment arbitration against Belgium/Luxembourg. Under the Russia-Belgium/Luxembourg BIT, the states undertake to prevent expropriation of investments and, if it does happen, to pay timely and fair compensation. Such “expropriation” may also occur due to sanctions. Being a Russian intermediate custodian for a number of foreign securities, the NSD has accounts with the centralized European securities Euroclear/Clearstream depositories. Since the inclusion of the NSD in the list of entities provided for in Annex I of EU Regulation no. 269/2014 in June 2022, transactions with the securities were suspended, NSD’s account with Euroclear/Clearstream was blocked. Because the NSD accounts with foreign securities depositories were blocked, it became impossible to transfer non-Russian securities from a securities account opened with the NSD to another Russian or foreign securities depository. One of the ways to challenge the consequences of Euroclear/Clearstream actions is to file a claim with the investment tribunal against Belgium/Luxembourg. The case has two potential solutions: mass claim from the end-investors or one single claim by the NSD as a “nominee holder” of the end-investors’ securities. The first option might seem time- and resource-costly, which is why a claim by the NSD might seem more attractive. Hence, using the interpretation instruments of public international law, the paper aims at assessing the perspectives of initiating investment arbitration proceedings by the NSD, thereby focusing on interpretation of the two central terms in the Russia-Belgium/Luxembourg BIT — “investor” and “investment”. The paper concludes that prima facie the investment tribunal would have jurisdiction over the case rationae personae nonetheless the “nominee holder” status of the NSD, as well as jurisdiction ratione materiae, where the blocked securities could constitute an “investment” in the sense of the BIT. Consequently, the paper defines the legal capacity of nominee holders to initiate arbitration. Since the issue has never been raised before, the paper draws an analogy with the case law on shell companies.

Indirect Expropriation Clause Clarified in Recent Colombian BITs

Over the past two decades, Caribbean states have been faced with a significant number of investment arbitration proceedings in which investors have claimed that public interest regulatory measures constitute indirect expropriations of foreign investment. As a result, arbitral tribunals have ordered host states to pay heavy compensation to foreign investors. To preserve its right to regulate in the public interest, Colombia has clarified the indirect expropriation clause in most of its recent international investment agreements, clarifying the extent to which a public interest regulation that affects foreign investment constitutes an indirect expropriation. This article seeks to determine to what extent the new clauses of the Colombian agreements contribute to preserving the state’s right to regulate in the public interest.

ARBITRATION AND CORRUPTION: A TOOLKIT FOR ARBITRATORS

In international commercial or investment arbitration proceedings, the appointed arbitral tribunal may suspect or one of the parties may allege that corruption, especially in the form of foreign public bribery, has influenced the underlying dispute between the parties. Over the past 25 years, the international and domestic legal frameworks to combat economic crime, including foreign public bribery, have become much stronger. Arbitrators therefore cannot ignore suspicions or allegations of corruption but, at the same time, they have limited means to address such suspicions or allegations, and they have to handle conflicting priorities. In short, they are in a dilemma. After introducing the wider context of international commercial and investment arbitration, this article outlines the arbitrators’ dilemma in more detail and presents a current effort to draft a so-called toolkit for arbitrators. The toolkit aims to help arbitrators address corruption issues in a comprehensive manner and to find solutions in accordance with the applicable laws.

2022 ICSID Regulations and Rules: Towards Efficiency and Consistency in Investment Arbitration Proceedings

2022 ICSID Regulations and Rules: Towards Efficiency and Consistency in Investment Arbitration Proceedings

Human Rights and Investment Arbitration – Fields of Interaction

The main scientific purpose of this article is to identify and analyse legal issues that arise between human rights and investment arbitration. At first glance, these two branches of public international law remain completely unrelated and do not have any significant features in common. However, it appears that despite this distinction, there is an interaction between investment arbitration and human rights, which implies a number of significant legal problems. These problems can possibly include the violation of human rights of citizens of the state hosting an investment by a foreign investor. On the other hand, a state can be unable to fulfil its legal obligations regarding human rights due to the necessity to protect foreign investment as agreed in investment treaties or, to the contrary, it may violate its contractual obligations towards an investor and afterwards defend itself throughout arbitration proceedings by stating that this violation has been necessary in order to protect human rights. It turns out that all parties to the dispute, both investors and host States – occasionally turn to human rights in order to reinforce their respective positions. The interaction between human rights and investment arbitration is of a very complex nature and although it is more and more often emphasized that it may occur, the situations in which this occurrence is likely to happen are not entirely clear yet. The author, after presenting some general remarks on the interaction between human rights and investment arbitration, discusses the most common scenarios in which human rights issues may appear in the course of investment arbitration proceedings. Finally, she concludes that there do exist some fields of interaction between human rights and investment arbitration as well as situations in which the conflict between them may appear. Identifying these conflicts would help to understand the complex relationship between the two legal regimes in question. It will also lay the foundation for further research on how to ensure the ultimate scope of human rights protection throughout the different stages of investment arbitration proceedings.

How to Enforce the Achmea Judgment – Tools for EU Member States before, during and after Investment Arbitration Proceedings Brought by an Investor from Another EU Member State

Arbitration tribunals, in particular those established under the ICSID Convention, refuse to adhere to the judgment of the Court of Justice of the European Union in Achmea. Are EU Member States at their mercy? So goes the story presented at conferences and roadshows, as well as in academic publications, which often point to the special protection that ICSID awards enjoy pursuant to Articles 53 and 54 of the ICSID Convention (this element is also often recalled by ICSID tribunals in awards in reaction to arguments based on Union law, in particular the unenforceability of intra-EU awards). This article sets out effective weapons that EU Member States may deploy prior to, during, and after the arbitration procedure, in order to enforce effectively the judgment in Achmea.

How to Enforce the Achmea Judgment – Tools for EU Member States before, during and after Investment Arbitration Proceedings Brought by an Investor from Another EU Member State

Arbitration tribunals, in particular those established under the ICSID Convention, refuse to adhere to the judgment of the Court of Justice of the European Union in Achmea. Are EU Member States at their mercy? So goes the story presented at conferences and roadshows, as well as in academic publications, which often point to the special protection that ICSID awards enjoy pursuant to Articles 53 and 54 of the ICSID Convention (this element is also often recalled by ICSID tribunals in awards in reaction to arguments based on Union law, in particular the unenforceability of intra-EU awards). This article sets out effective weapons that EU Member States may deploy prior to, during, and after the arbitration procedure, in order to enforce effectively the judgment in Achmea.

Investment Arbitration and Police Powers: Emerging Issues

The doctrine of police powers is increasingly raised as a defence by host States in investment arbitration proceedings, in particular in the context of claims with an environmental component. The succinct analysis below highlights that while the doctrine can effectively be enforced by arbitral tribunals in determining that a measure taken by a host State and resulting in loss of property of an investor does not constitute expropriation, certain concerns with the application of this doctrine must still be addressed. The limitations to the police powers, as well as the issue of burden of proof, as recently discussed in Les Laboratoires Servier v. Poland, are few of the matters of concern. Further, the discussion is even more timely in the context of the investor-State dispute settlement reform and the discussions in the UNCITRAL Working Group III.

The Role of Amici Curiae in Light of Recent Developments in Investment Treaty Arbitration: Legitimizing the System?

Abstarct Recent developments in investment arbitration and international investment law, in general, are prompting the review of the role of amici curiae in investment arbitration proceedings. The latest initiatives addressing the challenges to the investor-State dispute settlement (‘ISDS’) system, including under the auspices of the UNCITRAL Working Group III, alluded to the participation of the amici in ISDS proceedings. The new generation of international investment agreements (‘IIAs’) is also tackling an enhanced role of amicus curiae, whereas the proposal for the amendment of the ICSID Arbitration Rules includes sizeable amendments to Rule 37(2), to reflect these developments and other concerns raised so far in the practice. This paper addresses the role of amici curiae in these turbulent times for ISDS, emphasizing that, before anything, the role of these non-disputing parties is to assist arbitral tribunals.

The Proliferation of Joint Interpretation Clauses in New International Investment Agreements: A Mixed Blessing?

Abstract Joint interpretation clauses (JICs) are among the most controversial control mechanisms on the interpretative powers of tribunals brought by the current wave of reform of the investor–State dispute settlement system (ISDS). Literally proliferating in the new generation of international investment agreements (IIAs), these clauses give contracting States the power to issue joint interpretations (JIs) that are expressly recognized as binding upon dispute settlement bodies and may even be issued in relation to matters pending before such bodies. This article discusses several issues raised by the ‘authentic interpretation’ enhanced by JICs. In the first part, JICs are assessed against the background of the general rule on treaty interpretation, including, in particular, subsequent agreements under article 31(3)(a) of the 1969 Vienna Convention on the Law of Treaties. The second part of the article addresses the tensions between judicial bodies and treaty parties sharing the interpretative authority over IIAs and investigates whether there are any limitations on the interpretative powers of States under JICs. The third part is devoted to the impact of JIs on the proper conduct of investment arbitration proceedings, considering the participation of private actors (the investors) in the proceedings and the ‘dual role’ of States (as treaty parties and respondents) in this field. The concluding part of the article speculates whether a greater institutionalization of the international investment regime is likely to prompt more frequent forms of judicial reactions against ‘ill-perceived’ JIs and fuel the tension between States and dispute settlement bodies.

Investment Arbitration and Police Powers: Emerging Issues

The doctrine of police powers is increasingly raised as a defence by host States in investment arbitration proceedings, in particular in the context of claims with an environmental component. The succinct analysis below highlights that while the doctrine can effectively be enforced by arbitral tribunals in determining that a measure taken by a host State and resulting in loss of property of an investor does not constitute expropriation, certain concerns with the application of this doctrine must still be addressed. The limitations to the police powers, as well as the issue of burden of proof, as recently discussed in Les Laboratoires Servier v. Poland, are few of the matters of concern. Further, the discussion is even more timely in the context of the investor-State dispute settlement reform and the discussions in the UNCITRAL Working Group III.

On judicial autonomy and the autonomy of the parties in international adjudication, with special regard to investment arbitration and ICSID annulment proceedings

AbstractThe article addresses the relationship between judicial autonomy and the autonomy of the parties principles. The issue is not addressed so much through the lens of the procedural rules on the conduct of the proceedings, as through the prism of the general principles of adjudication which dictate the boundaries of judicial, or arbitral, decision-making. The focus will be on the combination between the principles ne, ultra and infra, petita and non liquet as they flow from the consensual nature of international adjudication and arbitration, on the one hand, and the principle jura novit curia which mirrors the autonomy of the judicial function, on the other. The analysis does not draw from national legal systems, nor from commercial arbitration. Due to the significantly different configuration of the principles at issue in different jurisdictions, it will focus on international litigation as an autonomous phenomenon. It will address firstly inter-state adjudication and then international investment arbitration. Special attention will be given to the ICSID system in consideration of its unique annulment mechanism. The article draws from researched case law an encouragement, if not simply the need, for international adjudicative bodies to undertake a proactive attitude in the conduct of the proceedings. More generally potentials emerge from the analysis, to the effect that not only inter-state adjudication may impact on investor-state arbitration, but also vice versa.

ICSID Arbitration Reform: Mapping Concerns of Users and How to Address Them

This paper summarises key practical concerns of some members of the Investment Treaty Forum related to ICSID arbitration, as well as a wider community of experts, how the ICSID reform proposals address these concerns and makes suggestions for further improvement. The paper looks at key concerns of ICSID arbitration users such as timely appointment of arbitrators and challenges to it, over-committed arbitrators and their conflicts of interest, access to emergency arbitrators and fast-track arbitration procedure, procedure for summary rejection of claims and amicable settlement of disputes, consolidation of proceedings, allocation of costs and security for costs, timely rendering of awards and consistency of ICSID annulment decisions. The paper also includes a comparison between the ICSID Arbitration Rules and other major arbitration rules designed for investment arbitration proceedings: the UNCITRAL Arbitration Rules, the Arbitration Institute of the Stockholm Chamber of Commerce Arbitration Rules (SCC Rules), and the 2017 EU-Canada Comprehensive Economic and Trade Agreement (CETA).

Global Public Goods, Global Commons, Fundamental Values and International Investment Law: the Responses of the New Generation of International Economic Law Agreements and Investment Arbitration Proceedings

Global Public Goods, Global Commons, Fundamental Values and International Investment Law: the Responses of the New Generation of International Economic Law Agreements and Investment Arbitration Proceedings

Eu Law Constraints on Intra-eu Investment Arbitration?

This article questions whether the law of the European Union (eu) can impose jurisdictional constraints on so-called intra-eu investment arbitration proceedings. Would an arbitral tribunal hearing an intra-eu case under either a bilateral investment treaty (bit) or under the Energy Charter Treaty (ect) have to declare itself incompetent to conduct the case proceedings owing to the operation of eu law? This article subjects that proposition to criticism, finding that, for a number of reasons, connected either with the drafting of the bit or the ect or the operation of general principles of international law, it does not withstand scrutiny. An arbitral tribunal seized of a treaty claim under a bit or the ect cannot rely on eu law to negate rights expressly granted under the instrument providing for its jurisdiction.

Cultural Heritage Challenges in Investment Arbitration: Review of Valentina Vadi'sCultural Heritage in International Investment Law and Arbitration

International investment law is usually oriented to protect investors while cultural heritage law focuses on the protection of unique items and activities of cultural value. These two subsystems coexist and increasingly intersect within the international legal system, mainly in the context of investment arbitration proceedings, where domestic cultural policies are balanced against the interests and rights of foreign investors. The interplay between these subsystems entails legal complexities and challenges and, as a result of the increasing number of cultural heritage disputes, demands new approaches in the fields of cultural governance, international relations and dispute settlement. These issues are thoroughly addressed by Valentina Vadi in her bookCultural Heritage in International Investment Law and Arbitration(Cambridge University Press 2014).

Some Observations on the Significance of Local Law for Energy Contracts: The Example of Norwegian Law

In the past years it has been increasingly questioned whether investment arbitration is the appropriate dispute resolution mechanism capable of striking a balance between the conflicting interests in safeguarding investors’ acquired rights and expectations on the one hand, and ensuring the host state’s right to regulate for the purpose of protecting the public interest on the other hand. This article analyses the significance of local law and local circumstances, which often are only considered as a first, necessary step preceding the institution of investment arbitration proceedings, but under some circumstances may turn out to be so attractive, that they even may substitute investment arbitration. The main point of the paper is that investment arbitration, or the larger concept of investor-state dispute settlement, is not the only mechanism available to foreign investors. Local law may provide remedies that are at least as interesting as, if not more interesting than, investment arbitration.

Empirical Findings on International Arbitration: An Overview

This chapter surveys the existing empirical literature on international arbitration. It seeks to be thorough but does not claim to be comprehensive. The chapter focuses on quantitative rather than qualitative empirical studies, and covers studies both of international commercial arbitration and international investment arbitration. Part I describes empirical research on the use of arbitration to resolve transnational disputes — in particular, the extent to which parties use arbitration clauses in international contracts, why they do so, and the frequency of international commercial and investment arbitration proceedings. Part II examines arbitral procedures, and Part III considers the applicable law in international commercial arbitration. Part IV looks at the demographics of international arbitrators, with emphasis on their diversity (or lack thereof), and arbitrator decisionmaking, in particular potential biases of party-appointed arbitrators, whether arbitrators make compromise awards, and the psychological aspects of arbitrator decisionmaking. Part V looks at the controversy over studies of outcomes in investment arbitrations. Finally, Part VI examines empirical studies of compliance with and enforcement of international arbitration awards, while Part VII considers their precedential effect, if any.

Revisiting Res Judicata and Lis Pendens in Investor-State Arbitration

Questions concerning res judicata and lis pendens in investment arbitration proceedings remain a subject of academic discussions, particularly with regard to the application of the “triple identity test”. The necessity of a more coherent approach to the matter is a pressing issue amidst the criticisms of the investor-state arbitration system as a whole. Finding viable solutions to prevent multiple/parallel proceedings and contradicting decisions is crucial in further strengthening the rule of law in investment arbitration.