Investor-State Arbitration Research Articles

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.

The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards

This report is a supplement to the report by the same authors entitled “Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap” (“CIDS Report”). It analyzes in more depth one aspect already addressed in the CIDS Report, namely the composition of a multilateral investment court (or ITI) and of an appeal mechanism for investor-State awards (or AM). For that purpose, it carries out a comparative analysis of the composition of existing international adjudicatory bodies and in part also arbitral institutions, and seeks to chart the main options for the composition of a prospective ITI and AM. If States were to pursue a reform initiative aimed at institutionalizing investor-State dispute settlement through the creation of these types of adjudicatory bodies, adjudicators would no longer be appointed by disputing parties but would essentially (though nor necessarily exclusively) be chosen by the parties to the instrument establishing the new adjudicatory bodies (section II). This fundamental shift poses a myriad of questions, which the paper seeks to examine.

Growing Strictness in Conceptualizing Investment in Investor-State Arbitration: Focusing on the Romak and Poštová Awards

Growing Strictness in Conceptualizing Investment in Investor-State Arbitration: Focusing on the Romak and Poštová Awards

The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences, written by Taylor St John

The Rise of Investor-State Arbitration: Politics, Law, and Unintended Consequences, written by Taylor St John

Epilogue: 'Convergence' is a Many-Splendored Thing

This essay is a closing comment to a multi-authored collection of book chapters that explore the extent to which the adjudication of trade and investment disputes demonstrates that the respective regimes are ‘converging.’ It critically examines the scholarship, supported by many opponents of the ‘fragmentation’ of international law, that WTO and investor-state case law is becoming more harmonious procedurally and substantively. The essay urges caution in that respect. The choice between convergence or divergence is not a simple dichotomy subject to a simple ‘progressive’ conclusion in favor of the former. On the contrary, as is suggested by the nuanced essays in the book as well as empirical studies of the use of WTO case law in investor-state arbitrations, whether any particular ruling is an example of either convergence or divergence is a matter of perspective. The essay also considers why studies of the extent to which investor-state arbitrators cite to WTO case law are not conclusive on the question. Finally, the essay examines a recent WTO panel ruling, involving Ukraine’s claim against Russia, that interprets, for the first time, the GATT’s essential security exception (Art. XX) -- an exception that is becoming more common in contemporary international investment agreements. It contends that this important WTO ruling might be seen as evidence of ‘converging’ trade-investment law in only some respects. The essay concludes that the differing structures, litigants, and goals of the two forms of dispute settlement impose limits on the prospects of ‘converging’ interpretations,

The legitimacy crisis of investor-state arbitration and the new EU investment court system

In response to the ongoing legitimacy crisis of investor-state arbitration, the European Union (EU) developed a new model of investor-state dispute settlement (ISDS) that replaces international arbitration with a system of bilateral investment courts. In this article, we draw on literature on the role of legitimacy in driving institutional change in international institutions to explain the rise of the new EU model. We further examine the extent to which the new EU model is able to overcome this crisis, thereby potentially giving the ISDS a new legitimation. We argue that the new EU model in large part does provide a substantial response to several frequently contested legitimacy gaps of ISDS. At the same time, however, we suggest that the EU model does not effectively address the most fundamental criticism of ISDS, which questions the very existence of a specific judicial forum providing exclusive rights for international investors, particularly between states with highly developed economies and legal orders.

A Public Law View of the New Generation of FTAs

This article intends to consider what the new generation of FITs might signify for our understanding of public law. Rather than modelling international public law or questioning its legitimacy derived from national public law (or one independently generated), I want to focus on a ‘public law’ thread running through all of this. The analysis here traces the transliteration of investment protection arbitration from public international law to international public law. It begins first by briefly outlining the established position of foreign direct investment protection in public international law. It then reviews the public law character claimed for investor-state arbitration, a claim which is criticised. And finally the analysis considers how those public law elements can feed ‘international public law’. This points to forms of transnational legal pluralism and I consider at the end what the implications may be for a conception of state and law.

공기업의 행위에 따른 국제투자중재 인적관할권 성립 문제 - 중재 피신청인을 중심으로 -

오늘날 외국인 투자자가 체결하는 다수의 투자계약이 국가가 아닌 공기업과 이루어지고 있으며, 공기업의 행위로 인해 발생한 국제투자분쟁과 관련하여 외국인 투자자가 공기업의 국적국인 투자유치국을 상대로 중재를 신청하는 경우가 많이 있다. 2018년 6월 한국이 불리한 중재판정을 받은 Dayyani v. Korea 사건도 그 중 하나이며, 이 사건과 같이 공기업의 투자계약 위반행위로 인해 발생한 투자분쟁에서 외국인 투자자가 행위의 직접 당사자가 아닌 공기업의 국적국을 상대로 투자자-국가 분쟁해결(Investor-State Dispute Settlement, ISDS)을 청구하는 경우에는 공기업과 투자유치국의 관계를 둘러싼 다양한 국제법적 문제가 발생한다.BR 이 글에서는 그 중에서 국제투자중재의 인적관할권 성립 문제를 ICSID 중재 피신청인을 중심으로 살펴보았으며, 공기업이 피신청인이 되는 경우와 공기업의 행위로 인해서 그 국적국인 투자유치국이 피신청인이 되는 경우를 나누어 검토하였다. 특히 후자와 관련하여서는 관할권 성립 여부를 중재절차의 어느 단계에서 어떤 기준에 따라 검토해야 하는지 살펴보았다.BR 먼저 공기업이 국제투자중재 피신청인이 되는 경우는 흔하지는 않지만 ICSID 협약 제25조 제1항에 따라 지정된 기관이거나 BIT에 명문 규정이 있다면 공기업도 피신청인이 될 수 있다. 그러나 투자자의 입장에서는 중재판정을 이행할 능력이 있는 국가를 상대로 중재를 신청하는 것을 선호할 것이므로 공기업의 지정은 큰 실익이 없을 수 있다.BR 따라서 일반적으로 중재 신청인은 공기업의 국적국인 투자유치국을 상대로 분쟁을 회부하며, 이 때 관할권 성립 문제와 행위의 국가귀속 문제를 어떻게 구분해서 검토해야 하는지에 대한 질문이 제기된다. 관할권에 대한 항변이 제기되었을 때에는 이를 선결문제로 다루어 해당 공기업이 국가와 “명백히 관련이 없는 경우가 아니라면” 일응 관할권이 성립한다고 판단한 후에 본안에서 ILC 국가책임초안상 국가귀속에 관한 원칙을 적용하여 공기업 행위의 국가귀속 여부를 판단하고 관할권 문제도 확정하는 것이 적합할 것이다.

WTO Dispute Settlement, Investor-State Arbitration and Investment Courts: Exploring Themes of State Power, Adjudication & Legitimacy

U.S. assertion of political power in the World Trade Organization (WTO)’s appointment process reminds us of the tenuous balance that exists between state power, adjudication and legitimacy in WTO dispute settlement. Even more fundamentally, it prompts questions about whether reformation of investor-state dispute settlement based on the WTO’s dispute settlement mechanism will solve the legitimacy crisis (real or perceived) that currently threatens the international investment law regime. To address that question this paper explores the contours of state power and adjudication in the dispute settlement mechanisms underpinning the international trade and international investment law regimes. An overview of the historical development of dispute settlement mechanisms in each of these regimes reveals the existence of a long-standing tension between adjudication and sovereign regulatory authority, with the legitimacy of each regime coming under question. Responses to these so-called legitimacy crises vary between the international trade and international investment law regimes and, to some extent, depend on the power states have to respond to such crises. Whether innovations, such as the investment court established in the Comprehensive Economic Trade Agreement between Canada and the European Union, will solve international investment law’s legitimacy crisis remains an open question.

African States, Investor–State Arbitration and the ICSID Dispute Resolution System: Continuities, Changes and Challenges

Abstract Against the backdrop of growing public discourse about the usefulness, legitimacy and effectiveness of the investor-State dispute settlement (ISDS) system, this article reviews the participation of African States in international investment arbitration and analyzes some of the cases involving African States in claims initiated under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the “ICSID Convention”). Specifically, the article reviews ICSID cases involving African States in which decisions were reached on the merit [i.e. the tribunal determined whether the challenged measure breached any substantive obligation in an international investment agreement (IIA)]. Focus is on cases where claimants alleged violation of the fair and equitable treatment (FET) obligation and cases where expropriation, both direct and indirect were alleged. A review of cases involving African States suggests that there is no African peculiarity or specialty in terms of the awards and analysis of arbitral tribunals. In cases involving African States, ICSID tribunals appear to be guided primarily by the provisions of applicable texts (IIAs, contracts, and legislation) and ICSID case law rather than by the status of a Respondent State as developing or least developed. The paper raises important questions about the development dimension of the ISDS system or the lack thereof, and could contribute to current debates about ISDS reform and the need for sustainable development-oriented reform of IIAs more broadly. The paper also sheds light on the risks that broad and vague provisions in IIAs pose for host States and calls attention to the capacity constraints that limit meaningful IIA reform in Africa.

Implications of Investor-State Arbitration of IPR as an Investment From a Developing Countries Perspective

The article examines investment-related aspect of Intellectual Property Rights, especially from the perspective of dispute resolution process using the ISDS mechanism. The popularity in extrapolating arbitration of Investment dispute to IPR disputes, compels us to establish the grounds on which IPR is considered to be an “investment” from an investment law perspective. By articulating the various obligations of State and Investors in an Investment Treaty. The paper will evaluate if the same principle obligations are workable for an investment, that would pertain to any right arising from an IPR. It further outlines, how the obligations parlays in an investment arbitration from a developing countries perspective; given that various obligations of National Treatment, Non-Discrimination etc. are very differently observed with respect to developing countries. The paper will analyze using various case laws, to see the impact of having IPR as an “investment” and the scope available for improving the arbitrability of IPR by adopting various TRIPS provisions into the investment treaties. Especially, with the intent of protecting the fragile economy of developing countries

Provisional Measures in Investor-State Arbitration: States Playing Games in Local Courts by Invoking the Trump Card (Police Powers)

This paper outlines arbitral tribunals’ power to order provisional measures under the auspices of I.C.S.I.D. Arbitration; that is, investor-state arbitration. The scope of a tribunal’s power is cumbersome to discern, especially when there are possible interferences with state sovereignty. More recently, tribunals have ordered provisional measures to suspend a domestic criminal investigation or proceeding. Is this an infringement on a states sovereign prerogatives or a response to, for example, dilatory tactics by a rogue state? The crux of the issue is this: a state will always be in a position to utilize its prosecutorial powers in order to frustrate the arbitration by putting immense pressure on the investor, its employees, or its witnesses, in other words: “playing games” in local courts. In order to guarantee procedural integrity of the arbitration and, as a corollary, the legitimacy of investor-state arbitration in its entirety, the provisional measure is a practical tool that can be used effectively. On a similar vein, “sovereignty” should not force tribunals to tie their hands when serious interference with the arbitral procedure is making the procedure unfair at best,or a nullity at worst. However, legal text both empowers and constrains the tribunal. The I.C.S.I.D. Convention only allows a tribunal to “recommend” provisional measures. As seen in light of investor-state case law, in an informal (perhaps de facto) stare decisis context, a number of tribunals seem to have justified the ordering of provisional measures. In the shadow of this construction lurks the de-legitimizing of the entire investor-state arbitration system. At the same time, rogue sovereigns playing games in local courts have the same de-legitimizing effect.

Counterclaims in Investor-State Arbitration

This paper provides a comprehensive analysis of the legal regime governing counterclaims in investor-State disputes. It challenges the frequent presumption that the right to assert counterclaims is hindered by the fact that investment treaties impose no obligations on foreign investors and only protect their rights. The paper demonstrates that the right to assert counterclaims is a procedural right, and subject matter jurisdiction over counterclaims depends on whether the investor has breached obligations found in applicable law. The paper shows that foreign investors’ substantive obligations can be found in sources of international law other than investment treaties. The paper also highlights the difficulties of asserting counterclaims in non-commercial areas such as human rights and environmental protection. Finally, it also shows that tribunals may pierce the corporate veil of foreign investors in the context of counterclaims.

Australia’s Bilateral Investment Treaties: A Laid-Back Approach to Consent?

This article considers the requirement in a number of Australian investment treaties that a host state, following the referral of a dispute to arbitration before the International Centre for the Settlement of Investment Disputes, provide written consent to arbitration. The uncertainty around the practical operation of such provisions is problematic. It remains to be seen how International Centre for the Settlement of Investment Disputes (ICSID) tribunals will address this requirement as Australian investors become more engaged with investor-state arbitration. One would hope that a more ‘laid back’ approach to consent prevails.

Assessing the Rules of Appointing Arbitrators under the EU’s Investment Court System

In recent years investor–state arbitration has faced a number of criticisms, such as the pro-investor allegation, the lack of transparency and the regulatory chilling effect. In 2015, the EU proposed an Investment Court System (ICS) in the investment chapter of the Transatlantic Trade and Investment Partnership negotiated between the EU and the US. This new mechanism is designed to improve the investor–state dispute settlement mechanisms, in particular the investor–state arbitration. A unique feature of the ICS is that it deprives the right of the disputing parties to appoint arbitrators. This is an apparent departure from the common practice of conventional investor–state arbitration, such as that conducted under the rules of the International Centre for Settlement of Investment Disputes. This new approach seems to formulate itself on the pro-investor hypothesis that asserts that the appointment of an arbitrator by an investor will lead to the appointee’s bias in favour of the investor. This paper assesses whether such methodology is justifiable and necessary by discussing the pro-investor allegation and rebutting it with empirical evidence. This paper considers the challenge procedure as the more appropriate and practical safeguard against an arbitrator’s bias.

Amicable Settlements in Investor-State Disputes: Empirical Analysis of Patterns and Perceived Problems

This article empirically analyses investor-state arbitration cases that settle amicably after the arbitration has commenced but before the final award is rendered. The study investigates whether and to what extent some common criticisms of amicable settlements are evident in practice. It examines four research questions that correspond with the major critiques of amicable settlements in investor-state dispute settlement: (1) Is the amicable dispute settlement mechanism unsuitable for certain types of investor-state disputes? (2) Do amicable settlements impede transparency? (3) Does amicable settlement pay less compared to when the investor wins through an award? (4) Is the non-enforceability of settlement agreements a problem in practice? The findings suggest that not all these purported problematic aspects of amicable dispute settlement mechanisms are as evident in practice as is commonly believed.

WTO 분쟁해결 제도와 투자자-국가 중재 제도의 조화 : 담배 상표 및 포장 규제를 중심으로

WTO 분쟁해결 제도와 투자자-국가 중재 제도의 조화 : 담배 상표 및 포장 규제를 중심으로

Reasons not to exit? A survey of the effectiveness and spillover effects of international investment arbitration

One of the most important characteristics of an investment treaty is that often it grants aggrieved investors access to international arbitration. This arbitration system does not require a foreign investor to petition his home state in order to bring claims against a host state, and provides an alternative to resolving disputes in the host state’s local court. Although international investment arbitration is beneficial for countries in terms of foreign direct investment, it has been accused of not being transparent or effective especially in relation to environment or public health cases. Some countries expressed their discomfort with the current international investment law regime by radical exit solutions such as denunciation of the Convention on the settlement of investment disputes between states and nationals of other states, rejection of investor-state dispute settlement provisions and unilateral denunciation of investment treaties. Based on a vast law, economics and political science literature, this paper proposes arguments to examine these criticisms. First, it is argued that investor-state arbitration is currently a concern in both developing and developed countries. Second, although assessing the spillover effects of arbitration outcomes on some dimensions of public interests such as the environment or public health is not straightforward, the uncertainty that leads to arbitrariness and sometimes inconsistencies in arbitral decision-making exists and needs to be properly identified. Finally, this article argues that exit is not efficient at either the national or international levels, and that it is possible for countries to adapt the current regime to new situations without wholesale exit.

Taxation Measures under the Energy Charter Treaty after the Yukos Awards Articles 21(1) and 21(5) Revisited

Abstract As the number of investment arbitrations under the Energy Charter Treaty has soared in recent years, parties and arbitrators have faced arguments concerning its Article 21 on taxation measures, which had seldom been applied before. In 2014, the tribunal ruling on the Yukos trilogy held that even though Article 21 excludes taxation from the scope of the treaty, the carve-out could apply “only to bona fide taxation actions, i.e., actions that are motivated by the purpose of raising general revenue for the State”. Article 21 also provides that in cases regarding expropriation “[t]he Investor or the Contracting Party alleging expropriation shall refer the issue of whether the tax is an expropriation or whether the tax is discriminatory to the relevant Competent Tax Authority. Failing such referral by the Investor” in cases of investor-state arbitration, the tribunal “shall make a referral to the relevant Competent Tax Authorities”. The Yukos tribunal considered said referral to be a futile exercise when it is unequivocal that the host State acted in bad faith towards the foreign investor. As a consequence of the Yukos trilogy, the Energy Charter Secretariat has published a report on the issue that recommends potential amendments to clarify Article 21. A number of investor-state arbitral tribunals have also addressed these issues since the Yukos trilogy. Taking a public international law approach, this article critically explores awards and decisions rendered by those tribunals, paying particular attention to their findings on Article 21 vis-à-vis the sovereign power to tax. This article concludes that recent awards dealing with Article 21 arguments have struck an appropriate balance between the prerogatives of States and their obligations under the Energy Charter Treaty. Thus, the article affirms that no amendment seems necessary.

Principles of Evidence in Public International Law as Applied by Investor-State Tribunals: Burden and Standards of Proof

AbstractPrinciples of Evidence in Public International Law as Applied by Investor-State Tribunalsexplores the fundamental principles of evidence and how these principles relating to burden of proof and standards of proof are derived.By tracing the applications of major principles recognized by the International Court of Justice and applied by investor-state tribunal jurisprudence, the authors offer valuable insight into the interpretation, understanding, and nuances of indispensable principles of evidence, an area that has been ignored in both investor-state arbitration and public international law more generally. Each principle is analyzed through historical and modern lenses to provide clarity and cohesion in understanding how fundamental principles of evidence will affect evidentiary dispositions of parties in investment arbitration and public international law cases.