Treaty Arbitration Flashcards
(166 cards)
1
Q
Can the preamble itself be used for interpretation?
A
No, but it can be used to argue that there was a policy reason when the treaty was drafted.
2
Q
Meaning of “privity” (German)
A
Interessensgemeinschaft
3
Q
What does Gary Born mean with “constructive consent” or “arbitration without privity”?
A
A BIT is a standing offer to arbitrate. If a foreign investor believed its rights under the BIT or otherwise had been violated by the host state and wished to commence an arbitration, it had merely to accept the standing offer from the host state; at least on a theoretical level, that ‘offer’ and ‘acceptance’ gave rise to an arbitration agreement between the foreign investor and the host state, pursuant to which the foreign investor was able to pursue claims under the BIT against the host state.
4
Q
What did Laurence Boisson De Chazournes about consent? When can it be expressed?
A
States enjoy flexibility regarding the expression of consent to arbitration. Consent can be expressed either before or after the dispute has arisen. In the latter case, consent to arbitration could be expressed through a compromis i.e., an agreement to arbitrate after the dispute between the host State and investor has arisen. Although such a
means is not common in investment arbitration, it nevertheless remains a way to express consent.
5
Q
What forms of consent did Laurence Boisson De Chazournes describe?
A
1) Before the dispute (e.g., BIT)
2) After the dispute has arisen (in compromis)
3) National legislation (one-sided)
4) Host state-investor contract
6
Q
What case supports Laurence Boisson De Chazournes’s contention that national legislation is a form of consent?
A
SPP v. Egypt.
Egypt claimed that the clause referring to ICSID was not self-executing and required a separate implementing agreement with the investor. In Egypt’s view, Law No. 43 was too ambiguous and equivocal to establish consent to ICSID arbitration. Rather, it was intended only to inform potential investors that ICSID arbitration was one of a variety of dispute settlement methods that investors may seek to negotiate with Egyptian authorities in appropriate circumstances.
The Tribunal rejected the idea that Art. 8 had the consequence only of informing potential investors of Egypt’s willingness, in principle, to negotiate a consent agreement. There was nothing in the legislation requiring a further ad hoc manifestation of consent to the Centre’s jurisdiction.
7
Q
How did the World Bank Report on the ICSID Convention define consent?
What is the relevant ICSID Convention Article?
A
Consent of the parties is the cornerstone of the jurisdiction of ICSID.
Consent to jurisdiction must be given in writing and once given cannot be withdrawn unilaterally (Art. 25(1)).
8
Q
What does “arbitration without privity mean”?
A
The parties (states) negotiate investment treaties in absence of the stakeholders (investors).
9
Q
How did the World Bank Report on the ICSID Convention agree with the statement of Laurence Boisson De Chazournes?
A
Even in 1965 (see Report of the Executive Directors of the World Bank on the ICSID Convention), the drafters of the ICSID Convention anticipated that consent to ICSID arbitration might not be “expressed in a single instrument” (they were thinking in particular of domestic investment laws, rather than investment treaties)
10
Q
In the 2000s and 2010s, which countries were arbitrated most against and why?
A
In the 2010s many claims were brought against Spain under the Energy Charter Treaty arising from Spain’s adjustments to existing incentives that had encouraged investment in Spain’s renewable energy sector. (In the 2000s many claims had been brought against Argentina arising from Argentina’s 2001 financial crisis).
11
Q
The Netherlands is the second most frequent home state of claimants, why is this misleading?
A
Many multinational companies established holding companies/shell companies/mailbox companies in the Netherlands in order to access Netherlands investment treaties as “investors” of the Netherlands (many Netherlands investment treaties require only that an entity be incorporated in the jurisdiction to qualify as an investor).
12
Q
Why is characterizing a decision “being in favor of an investor” misleading?
A
Characterizing a decision as being in favor of an investor can be misleading because in some
cases investors recover only a small fraction of the damages claimed.
13
Q
What is the difference between the ICSID Convention and the New York Convention in terms of seat of arbitration?
A
There is no seat of arbitration under the ICSID convention.
14
Q
When do the ICSID Additional Facility rules apply?
A
In cases where either the host state or the home state are not ICSID members, an investor can still choose ICSID additional facility rules.
15
Q
What two obstacles does one face when choosing UNCITRAL rules in enforcement?
A
The losing party can request for the award to be set aside at the seat of arbitration.
Later, the losing party can request the enforcement to be stopped in the jurisdiction where the investor tries to enforce it (grounds for refusal).
16
Q
Why did Spain have that many investment claims in the 2010s?
A
Spain had different incentives, subsidies. Encourage investment in renewable energy. Had a regime in place to invest into renewable energy sector. Following 2008 financial crisis.
17
Q
Which are the important non-parties and signatories-only to the ICSID convention?
A
Non-parties: Brazil, India, Vietnam
Signatories only: Russia
18
Q
ICSID has both conciliation and mediation. Which is more popular? What is the difference?
A
Conciliation is more structured than mediation.
Both are unusued.
19
Q
What are the three sources of international agreements?
A
1) BITs
2) MITs
3) FTAs with Investment Provisions
20
Q
The ICSID Convention contains procedural provisions, which was the failed pendant to establish a multilateral treaty with substantive provisions?
A
1962 Organization for Economic Cooperation and Development Draft Convention on Investments Abroad
This actually came before the ICSID Convention. It paved the way for the ICSID convention.
21
Q
Meg Kinnear, The Role of ICSID in International Economic Law, J. Int’l Econ. L. (2023), what three factors did she attribute the success of the ICSID Convention to?
A
- Substantive obligations only, so states can negotiate treaties on individual basis
- Limit post-award remedy to annulment
- Simplified recognition and enforcement mechanism
This could be called the “modest approach”
22
Q
Name the relevant ICSID-provisions for jurisdiction, applicable law, annulment, and enforcement
A
Art. 25 - Jurisdiction
Art. 42 - Applicable law
Art. 52 - Annulment
Art. 53 & 54 - Enforcement
23
Q
What are the requirements for jurisdiction under the ICSID Convention?
A
- Legal dispute
- Arising out of
- An investment
- between a Contracting State
- and a national of another Contracting State
- which the parties consent to in writing
24
Q
What was the incentive for developing countries to join the ICSID convention?
A
remove the home State from investor-State disputes, depoliticize dispute resolution process
Developed states are not able to exert pressure during the proceedings.
25
According to Art. 42 of the ICSID Convention, which are the applicable laws for disputes?
1) Domestic law
2) General principles of international law
3) Customary international law
26
Why are annulments quite severe for the parties?
Parties have to go back to the beginning; years of arbitration are lost.
27
According to Art. 52 of the ICSID Convention, what are the grounds for annulment?
1) Tribunal was not properly constituted
2) Tribunal has manifestly exceeded its powers
3) There was corruption on the part of a member of the Tribunal
4) There was a serious departure from a fundamental rule of procedure
5) The award has failed to state the reasons on which it is based
28
What are the two problems with ICSID annulments?
1) The appellate body might review facts, which is not what ICSID intended.
2) There have been many successful annulments, which was not ICSID's intention.
29
One ground for annulment with ICSID is 3) There was corruption on the part of a member of the Tribunal, what is problematic about this?
Unclear if it has to be corruption with the current proceedings.
30
Art. 54 of the ICSID Convention deals with enforcement. What is the issue with ad interim measures?
Art. 54 speaks about "awards". Ad interim measures are not awards. So the application of ad interim measures through art. 54 is controversial.
31
What elements are considered the "modest approach"?
No substantive elements in the ICSID Convention
Consent must be found in other instruments
Law of the nation state only applies in absence of agreement
Simplified recognition and enforcement
Post-award remedies limited to annulment
32
What more than consent is required for jurisdiction under the ICSID Convention?
Art. 25 (Jurisdiction)
Same Article for Draft Articles (Necessity Defense)
33
BITs impose obligations onto states, but not onto investors. What is the new approach?
African Union. Recent treaty practice, obligations that run to investors. New African union treaties. Counterclaims can be made by states.
34
Does joining the ICSID convention mean that states have given consent to arbitrate?
No, the joining states have not submitted to any substantive provisions.
35
What is the thing that states give up by signing the ICSID convention?
Diplomatic protection.
36
How are state-investor contracts called?
Development contracts.
37
Can reservations to the ICSID convention be made?
Yes.
38
What are the three steps of interpretation under the VLT 31(1)?
Ordinary meaning
Context
Object and purpose
39
How can tribunal apply the Salini factors? (3)
1) Are the factors required?
2) Which factors are considered?
3) Are these binding factors?
40
What was the case with the government bonds?
Abaclat v. Argentina
41
Who were the parties and stakeholders in the Abaclat v. Argentina case?
What was the argument against the investment?
Argentina, foreign investors, underwriters, intermediaries
The argument was that the investors did not cause transfer of investments into the territory of Argentina, they are located outside of Argentina due to the choice of law agreements
42
What are the Salini factors?
(a) a substantial contribution of the investor
(b) a certain duration
(c) the existence of an operational risk
(d) a certain regularity of profit
(e) a contribution to the economic development of the host State
43
What was the dissenting opinion on Abaclat v. Argentina on the definition of investment?
“That the ICSID Convention does not provide an express definition of investment does not automatically imply that the definition is totally left to the BITs. This is because words have an **intrinsic meaning,** hence a limited and limiting one, however large and vague it may be.”
44
What is a sovereign debt exclusion? Where do we find this?
It's an exclusion of debt securities issued by a government or loans to a government.
Morocco - Nigeria BIT.
45
What is the double-barrelled approach?
It means that the definition of investment needs to satisfy both the ICSID (Salini Factors) and the one in the BIT.
46
What has been a development that can be considered a recognition of Salini factors?
They are being enshrined in some BITs.
47
How must the term "investment" be interpreted under the ICSID convention?
The term “investment” under ICSID Convention Article 25 must be interpreted as **having some meaning** (“ordinary meaning” under VCLT Article 31 as well as effectiveness/effet utile principle).
48
What is the relevant article for disputing parties to challenge the selection of an arbitrator?
Under ICSID Convention Article 57, a disputing party can challenge an arbitrator by establishing
“any fact indicating a **manifest lack of the qualities** required by paragraph (1) of Article 14.”
That paragraph requires arbitrators to have “high moral character” and “recognized competence in the fields of law, commerce, industry or finance” and who “may be relied upon to exercise independent judgment.”
49
Under article 14 of the ICSID convention, there is an "independent judgement" requirement. What has case law shown?
The “independent judgment” requirement under Article 14 has been interpreted, on many occasions, as also requiring **impartiality.**
50
Compare the requirements for arbitrators under the ICSID Convention and the UNCITRAL Working Group III Draft Code of Conduct.
Art. 14 of the ICSID Convention requires arbitrators to have **“high moral character”** and **“recognized competence in the fields of law, commerce, industry or finance”** and who “may be relied upon to exercise independent judgment.”
Under the UNCITRAL Working Group III Draft Code of Conduct, the requirement of impartiality and independence includes obligations not to be **“influenced by loyalty”** to any **“person or entity”;** commentary further provides that **“impartiality”** means **“the absence of bias or predisposition”** of an arbitrator toward a disputing party or issues raised in the proceeding.
51
Why is it easier to challenge an arbitrator under UNCITRAL than under ICSID?
Under UNCITRAL : You don't have to demonstrate that there is an actual bias, there just needs to be** justifiable doubts** about their **impartiality** or **independence**.
Under ICSID Convention: You have to argue that the arbitrator lacks **independent judgement.** Meaning that they are actually not independent.
52
The UNCITRAL Working Group refers to what guidelines to assist in the determination of conflicts with independence or impartiality?
International Bar Association Guidelines on Conflicts of Interest in International Arbitration
Red list and orange list
53
Where did the predisposition discussion come from?
What are the meanings of independence and impartilality?
UNCITRAL Working Group III – Draft Code of Conduct for Arbitrators in International Investment
Dispute Resolution and Commentary (April 2023)
“**‘Independence’** refers to the **absence of any external control**, in particular the absence of relations with a disputing party that might influence an Arbitrator’s decision.
**‘Impartiality’** means the **absence of bias or predisposition** of an Arbitrator towards a disputing party or issues raised in the proceeding.”
54
What are the two absolute and the two relative obligations we discussed?
Relative: National treatment, most-favored nation treatment
Absolute: Fair and equitable treatment, minimum standard treatment
55
How to prove relative obligations?
1) Find a comparator
2) Prove that investor and comparator are in like circumstances
3) Need to prove that received treatment was less favorable
56
What has China done in its more recent investment treaty practice on national treatment?
China’s more recent investment treaty practice on national treatment occasionally has included “pre-establishment” protections, which protect investors that are seeking to invest in the host state (but have not yet made an investment).
57
How have states tried to weaken the national treatment?
States have often argued that a national treatment claim requires a **showing of nationality-based discrimination,** but investment treaties generally have not included language specifically addressing discrimination on account of nationality.
58
In Thunderbird, Canada argued that national treatment has to be nationality-based. What points did Canada use to make that argument?
The comparison is with a domestic investor. Although there is no such express language in the text, it can be implied using the ordinary meaning and the object of purpose interpretation.
However, the other side was successful in arguing the absence of text means that it should not be considered. Ordinary meaning.
59
What is the weapon against investment screening? Where has China applied that?
The substantive protections should span to the pre-establishment phase. Canada-China BIT.
60
"An investor is seeking to make but the host state has made some obstacle.” What does this language indicate?
Pre-establishment protection.
61
What are the four approaches for states to clarify obligations and protections?
1) More detailed provisions (e.g., MFN extra clause in Swiss BITs)
2) Footnotes
3) Drafter's note (TPP)
4) Joint interpretation mechanism (NAFTA)
62
What does "offensive" and "defensive" mean?
Offensive: protections of investors abroad
Defensive: protection of domestic interests
63
What novelty did the NAFTA introduce in terms of interpretation?
The parties could create joint interpretation (post ratification) which would then become binding for the tribunals.
64
Relative: National treatment, most-favored nation treatment
Absolute: Fair and equitable treatment, minimum standard treatment
Which of these are customary international law?
What practical result does that have?
Only the MST.
The minimum standard of treatment, as a general matter, is closely associated with customary international law, so use of the MST language in an investment treaty can be read as suggesting that the obligation is not autonomous (i.e., tied to customary international law).
65
If a claim is brought against a state for different treatment, who bears the burden of proof?
The state can argue that there was a legitimate reason for a different treatment, but the burden of proof lies on the state.
66
In the Thunderbird v. Mexico case, there were two potential points that the investors could have used to file a national treatment claim, but only used one. Which?
The comparator were two local gambling companies.
US investor identified two domestic investors also operating in the gaming industry. Mexican competitors have received injunctive relief in Mexican courts. We have not received that relief. Therefore, we were treated less favorably. But this is not what the lawyers did.
Comparators are still in operator. We have been shut down. Simple level, that’s the less favorable argument. Mexico has to acknowledge that this is true.
67
How are joint interpretations under the VLT considered?
For BITs, they should be considered under Art. 31(3)(b) VCLT.
"(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;"
68
An interpretive question that often arises is whether an FET/MST obligation is “autonomous”
(not tied to customary international law). The minimum standard of treatment, as a general matter,
is closely associated with customary international law, so use of the MST language in an
investment treaty can be read as suggesting that the obligation is not autonomous. What is a clear trend in FET/MST obligation?
A clear trend in recent investment treaty practice is to provide more detail with respect to the content of the FET/MST obligation. Many recent treaties address the issue of legitimate expectations in particular (whether, and under what circumstances, frustrating an investor’s legitimate expectations might violate the FET/MST obligation).
69
What is an example of a BIT that refers to customary international law in the MST?
China-Columbia BIT.
70
What does UNCTAD say about the interpretation of the FET standard?
First, with regard to the capacious (=umfassend) wording of most FET provisions, many tribunals have interpreted them broadly to include a variety of specific requirements including a State’s obligation to act **consistently, transparently, reasonably, without ambiguity, arbitrariness or discrimination, in an even-handed manner, to ensure due process in decision-making and respect investors’ legitimate expectations.”**
71
What does UNCTAD say about the legitimate expectations doctrine?
“When economic, regulatory, or other conditions general or specific to the investment undergo changes negatively affecting the investment’s value, they may be seen as a breach of legitimate expectations prevailing at the time the investment is made.”
72
How is equitable different from fair?
It's not entirely clear what the difference is. The terms are used interchangeably in practice.
73
When thinking about the customary international law case of MST, the Neer Case is the most cited one. Why is the case disliked?
Because it sets an unreasonably high standard for MST contained in the wording.
“the treatment of an alien, in order to constitute an **international delinquency,** should amount to an **outrage, to bad faith, to wilful neglect of duty, or to an insufficiency of governmental action so far short of international standards** that every reasonable and impartial man would readily recognize its insufficiency.”
74
Which case disaffirmed the high threshold requirement of the Neer case for the FET?
Pope & Talbot v. Canada
“[T]he Tribunal interprets Article 1105 to require that covered investors and investments receive the
benefits of the fairness elements under ordinary standards applied in the NAFTA countries, without any
threshold limitation that the conduct complained of be ‘egregious,’ ‘outrageous’ or ‘shocking,’ or
otherwise extraordinary.”
75
What prompted the first-ever joint interpretation under NAFTA?
The concerns of the NAFTA parties over Pope & Talbot, S.D. Myers, and other assumed deviations from the customary international law standard prompted the first and to date only binding "interpretation" of NATTA Chapter 11, which applies customary international law to limit the scope of "fair and equitable treatment" under international law.
76
How did NAFTA's joint interpretation in 2001 weaken the full protection and security and the FET standard?
The concepts of “fair and equitable treatment” and “full protection and security” do not require treatment in addition to or beyond that which is required by the customary international law minimum standard of treatment of aliens.
77
In what two ways was the Netherlands BIT novel?
1) It introduced an exhaustive list for measures that fall under the FET standard.
2) It codified the legitimate expectations doctrine.
78
What is the wording the Netherlands BIT uses for the codified legitimate expectations provision?
Specific representation made to investors.
79
What political interest does UNCTAD have?
Protecting developing countries' interests.
80
How could an argument be made that there exists a de facto doctrine of precedent? What case could be adduced?
TECMED v. Mexico
The tribunal cites many older cases to explain the scope of the FET and the deviation from the NEER case.
81
How is the MFN standard (compared the NT standard) "misused"?
Because it's mostly used to import provisions from other treaties.
82
What principle is often used by tribunals when interpreting MFN obligations? What does it say?
Investment arbitration tribunals often apply the **ejusdem generis** (like things from the same kind) principle when interpreting MFN provisions (“an MFN clause can attract the more favourable treatment available in other treaties only in regard of the **‘same subject matter’**, the ‘same category of matter’, or the ‘same class of matter’. (OECD, International Investment Law: A Changing Landscape (2005).
83
What are "Maffezini provisions" and where do they stem from?
“Maffezini” provisions in recent treaties (named after Maffezini v. Spain) clarify that “treatment” under an MFN provision does not extend to procedural provisions in investment treaties. In Maffezini v. Spain, the claimant was successful in introducing a better provision from another BIT, **thereby circumventing the requirement to go before a national tribunal first.**
84
What could be a potential argument to prevent the counterparty from importing a provision from a BIT with only state-state-dispute resolution mechanism?
Ejusdem generis: Could be used as a defense to stop a claimant's attempt to import a provision from a bilateral investment treaty only with a state-to-state dispute resolution mechanism.
85
What is the opinion we looked at for the MFN provision?
Prof. Stern's dissent in Impregilo v. Argentina.
86
What is Professor Stern's dissenting opinion on MFN clauses?
In her dissent in Impregilo v. Argentina, Prof. Stern argues that under international law, jurisdictional treatment is not “inherent” in substantive treatment (i.e. the existence of obligations does not imply the enforceability of those obligations); for that reason, Prof. Stern further argues, an MFN clause should not be able to modify the conditions that must be met to enforce obligations under a particular investment treaty.
As an example, investors can only bring forth arguments under customary international law because the BIT exists. It is undeniable that these obligations exist, but the enforcement mechanism was agreed on.
87
What is opinio juris?
Out of a sense of legal obligation.
88
What two points did the Impregilo v. Argentina tribunal use to extend the scope of the MFN clause to import a better procedural provision?
1) “[T]he term ‘treatment’ is in itself wide enough to be applicable also to **procedural matters** such as dispute settlement.
2) The scope of Article 3(1) [the MFN clause] is “extremely broad, since it actually sets forth that the MFN treatment shall be **extended to all of the matters regulated by the BIT.** Such a broad scope clearly includes the dispute settlement provision of the BIT.”
89
With expropriation provisions, we have a similar issue as with FET/MST provisions, which?
Expropriation is a customary international law obligation that is normally included in investment treaties, in some form. It is not always clear, in a particular treaty, whether the Parties intended to codify their shared understanding of the customary international law obligation or, alternatively, to agree on a treaty standard that departs from the customary international law rule.
90
What has been the recent practice in regard to expropriation provisions in investment treaties?
Many recent investment treaties include various forms of exceptions to the expropriation obligation; such provisions often characterize acts that fall within the scope of an exception as not being “expropriatory."
91
What is the source of newer exproproation provisions in US treaties?
Many US investment treaties include factors for analyzing **indirect expropriation claims**; the factors track the factors set out by the U.S. Supreme Court in Penn Central v. Trans. Co. v. New York City (1978) for analyzing regulatory takings claims under domestic US law. The Penn Central factors have started to appear in investment treaties that do not include the United States, an example of treaty propagation.
92
What are the Hull factors?
The “Hull factors” refer to the elements of “prompt, adequate, and effective” compensation, which often appear in expropriation provisions in some form. “Hull” refers to Cordell Hull, the US Secretary of State who articulated the factors when discussing U.S. expropriation claims with Mexico.
Adequate – full compensation. US would take the position that just compensation.
Effective – ability to compensate. Transfer to outside the jurisdiction.
93
Is expropriation illegal under customary international law?
No, but four requirements must be met.
1. The expropriation must be undertaken for a public purpose
2. The expropriation must be carried out in accordance with the principles of due process
3. The expropriation must be non-discriminatory
4. The investor must receive compensation
94
How does UNCTAD define indirect expropriation?
"Measures taken by a state that **interfere** with property rights to such an extent that these rights are **rendered so useless** that they must be deemed to have been expropriated." (quoting Starett Housing)
95
Under customary international law, how does the compensation change if expropriation was legal or illegal?
* Legality → compensation is part of the **conditions** → primary norm that prohibits illegal expropriation
* Illegality → compensation is result of **wrongful act** → secondary norm → Chorzow Factory principles (incl. lost profits)
96
What are the Chorzow Factory principles?
‘reparation must, as far as possible, wipe out all the consequences of the illegal act and re-establish the situation which would, in all probability, have existed if that act had not been committed’ (restitution + lost profits)
97
There are two approaches in indirect expropriation that have emerged, what do they say and what are the cases?
**Police power doctrine:** any non-discriminatory measure which protects a public interest and which is enacted in accordance with due process does not constitute an indirect expropriation, no matter what its impact is.
In Methanex v USA, the arbitral Tribunal found that a Californian ban of the gasoline additive MTBE did not constitute an expropriation because the measure was adopted for a public purpose, was not discriminatory, and because no specific commitments had been given to the foreign investor.
Similarly, in Saluka v Czech Republic, the Tribunal said that the principle that a State does not commit an expropriation and is thus not liable to pay compensation to a dispossessed alien investor when it adopts general regulations that are ‘commonly accepted as within the police power of States’ forms part of customary international law today. (Note that it does not even address the discrimination issue. The problem with this case is that it does not specify if it's meant to be a departure from customary international law.)
**Sole effects doctrine:** This doctrine focuses on the effect of a state measure rather than its object in order to determine whether it constitutes an indirect expropriation.
Metalclad v Mexico: expropriation under NAFTA includes not only open, deliberate and acknowledged takings of property, such as outright seizure or formal or obligatory transfer of title in favour of the host State, but also covert or incidental interference with the use of property which has the effect of depriving the owner, in whole or in significant part, of the use or reasonably-to-be expected economic benefit of property even if not necessarily to the obvious benefit of host State.’
98
Delete
Delete
99
We looked at the US-Rwanda BIT for expropriation and reference to customary international law. What was the issue with this BIT provision?
In Article 1 of the Annex, the parties refer to customary international law. However, in the later articles the non-compensation seem to be a departure from international law. There is uncertainty. Do the rare circumstances refer back to the customary international law? It’s unclear.
100
The claimant, on his behalf, may submit to arbitration under Annex A a claim that the respondent has breached XXX except with respect to the establishment or the acquisition of an investment. What does that mean?
It's a protection against pre-establishment.
101
What is the wording that many newer BITs use to provide greater clarity?
"For greater certainty", this also means that it does not add new substantive protections, just clarifications.
102
What is the police powers defense?
The police powers defense is a customary international law defense that normally should be available to respondents even when an investment treaty does not include a police powers provision.
103
In which BIT do we find wording that is associated with police powers defense?
The Switzerland-Uruguay BIT includes language that is often associated with the police powers defense: safeguarding “public security and order, public health or morality.” (Art. 2(1)).
104
Which case was discussed in regard to the police powers defense?
Philip Morris v. Uruguay
105
What were the parties' positions in Philipp Morris v. Uruguay?
➢ The claimants in Philip Morris v. Uruguay argue several possible limitations on a police powers defense, including **unreasonable government action, breach of specific commitments made to investors, and lack of proportionality.**
➢ The respondent in Philip Morris **acknowledges (!!!)** that the police powers defense should not be available if the host states has acted in bad faith or in a discriminatory manner.
106
Which tribunal used VCLT Article 31(3)(c) to include customary international law?
VCLT Article 31(3)(c). Take into account any relevant rules of international law applicable in the relations between the parties. The Philip Morris v. Uruguay tribunal used this to include customary international law.
107
Is the police powers or necessity defense easier to establish?
Police powers.
108
Why is the margin of appreciation doctrine nonsense?
It's taken from the European Court of Human Rights.
109
In theory and in practice, how are ICSID provisional measures used?
Although ICSID tribunals only have authority to “recommend” provisional measures under the ICSID Convention, many ICSID tribunals have found that they in fact have power to order provisional measures.
110
What is the cases we discussed for provisional measures?
Perenco v. Ecuador
Quiborax v. Bolivia
Tokio Tokeles v. Ukraine
111
Why did the tribunal in Perenco v. Ecuador find that provisional measures were adequate?
In support of its grant of provisional measures, the Perenco tribunal found that the **seizure of Perenco’s assets in Ecuador would effectively bring Perenco’s business in Ecuador “to an end”** and that such an **injury could not be “adequately compensated by an award** of damages should [Perenco’s] claim be ultimately upheld.”
112
In Quiborax, the tribunal found a different reason to apply provisional measures than the tribunal in Perenco v. Ecuador. Which?
The Quiborax tribunal found that the claimants had **“shown the existence of a threat to the procedural integrity of the ICSID proceedings,** in particular with respect to their right to **access to evidence through potential witnesses,”** and that measures intended to protect the procedural integrity of an arbitration are “urgent by definition.”
113
Where do we find provisional measures in UNCITRAL?
What are the grounds upon which provisional measures can be requested?
Which one is the easiest to get? Why?
Art. 26 UNCITRAL Rules
(a) **Maintain or restore the status quo pending** determination of the dispute;
(b) Take action that would **prevent**, or refrain from taking action that is likely to cause, (i) **current or imminent harm** or (ii) prejudice to the arbitral process itself;
(c) Provide a means of **preserving assets** out of which a subsequent award may be satisfied; or
(d) **Preserve evidence** that may be relevant and material to the resolution of the dispute.
(d) because subparagraph 3 does not apply to (d)
114
Where do we find provisional measures in ICSID? What is the woridng?
ICSID Convention Article 47
Except as the parties otherwise agree, the Tribunal may, if it considers that the circumstances so require, recommend any provisional measures which should be taken to preserve the **respective rights of either party**
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Which tribunal's decision clearly stated that an ICSID provisional measure is mandatory?
Tokio Tokeles v. Ukraine
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Art. 26 UNCITRAL Rules
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, (i) current or imminent harm or (ii) prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.
Which of these rules are not contained in Art. 47 of ICSID Convention?
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied;
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What are two examples of BITs where we see that the BITs do not allow tribunals to enjoin the application of measures?
China-Canada BIT
US-Rwanda BIT
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Perenco v. Ecuador and Quiborax v. Bolivia are two cases where tribunals granted provisional measures. What were the differences in the case?
Perenco: Imminent expropriation of assets valued over 300 M USD.
Quiborax: Criminal proceedings against claimant following arbitration.
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How are provisional measures called under ICSID and UNCITRAL?
UNCITRAL: Interim
ICSID: Provision
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What are the enforcement articles in the ICSID Convention?
What is the difference between the two articles?
Art. 53 - addresses parties
Art. 54 - addresses Contracting States
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What is the wording in Art. 54 of the ICSID Convention that leaves room for interpretation?
"as if it were a final judgement of the courts"
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What is a non-disputing party?
A non-disputing party, in the context of international arbitration or dispute resolution, refers to an individual or entity that is not directly involved as a claimant or respondent in the dispute being adjudicated by a tribunal. Despite not being a party to the dispute, a non-disputing party may have a **substantial** interest in the outcome of the case due to various reasons such as **economic, environmental, public policy implications, or legal rights** that could be affected by the tribunal's decision.
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Eventualliter in English
Argument in the alternative
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What was Argentina's position in Siemens v. Argentina versus the US position?
Argentina: Art. 53 and 54 must be read together. Gives the courts the chance to review.
US: Art. 54 separate. No review.
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In recognition and enforcement of foreign arbitral awards, we distinguish primary and secondary jurisdiction, what does it mean?
Primary jurisdiction: Jurisdiction of the seat.
Secondary jurisdiction: Of any other jurisdiction.
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Article for recognition and enforcement in New York Convention
Art. V
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What are the five reasons under which according to Art. V arbitral awards MUST be set aside?
Incapacity or invalidity of the arbitration agreement under applicable law
Lack of proper notice or opportunity to present case
Award beyond the scope of submission
Procedural irregularities in composition of tribunal or arbitral procedure
Non-binding or set aside award
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What are the two reasons under which according to Art. V arbitral awards MAY be set aside?
The subject matter of the dispute is not capable of settlement by arbitration under the law of the country where enforcement is sought.
Enforcement of the award would be contrary to the public policy of the country where enforcement is sought.
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Non-binding or Set Aside Award: The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority in the country where the award was made.
This provision in Art. V has given rise to many debates, why?
If the award has been set aside in the seat, has the court still the power to enforce? Some countries will
still enforce the award despite it was set aside. France.
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Why is it dangerous to rely on UNCITRAL model law for setting aside procedures?
Because UNCITRAL model law is just a model law. Countries may have deviated from the model law (added or removed grounds for setting aside).
UNCITRAL model law is harmonization.
New York Convention is unification.
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Do ICSID rules apply under additional facilities?
No, they are not under ICSID Convention.
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Are annulment procedures reviews of substantive or procedural law?
Which provisions are problematic?
The exclusive grounds for annulment under ICSID Convention Article 52 are procedural in nature and do not extend to substantive review, although Article 52(b) (Tribunal manifestly exceeded its powers) and Article 52(e) (award fails to state the reasons on which it was based) can provide ICSID ad hoc Committees with some flexibility in terms of the scope of their review.
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For ICSID ad hoc Committees, what is the key distinction under Article 52(b)?
For ICSID ad hoc Committees, a key distinction under Article 52(b) is between the **misapplication of law** (which does not fall within the scope of Article 52(b)) and the **failure to apply the law** (or the application of the wrong law) (which might fall within the scope of Article 52(b)).
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What did the ICSID ad hoc Committee in CMS Gas v. Argentina find?
The ICSID ad hoc Committee in CMS Gas v. Argentina found that the tribunal had committed **manifest errors of law** (when failing to analyze/decide whether both the treaty defense on essential security and the customary international law defense on necessity should apply) but had not **manifestly exceeded its powers** under Article 52(b) (because the tribunal merely misapplied the law).
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Misapplying the law vs. failing to apply the law. Sometimes testing the boundaries that the tribunal is crossing the line into substantive review. Which case would call for a more substantive review?
Failing to apply the law.
In CMS Gas v. Argentina, the tribunal did not annul the award because the tribunal had misapplied the law, not failed to apply the law.
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Manifest error of law and Manifest excess of powers. What do these two mean?
Manifest error of law = Cryptic, defective application of law
Manifest excess of powers = Failure to apply the law
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In CMS v. Argentina, the tribunal noted that “[t]he discussion on necessity and emergency is not confined to customary international law as there are also specific provisions of the Treaty dealing with this matter."
How would the discussion have been different if the provision was a self-judging provision? What would have been the necessary wording?
If the treaty would have said that **the “Contracting Party” considers.** That is the kind of language that is considered self-judging. This language is absent. Not a self-judging provision.
If you have a self-judging provision, when the host state adopted these measures, just need to check if it was acting in good faith.
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In CMS Gas v. Argentina, Argentina raised the necessity defence. Where can we find this?
Draft Articles on Responsibility of States for Internationally Wrongful Acts, art. 25
However, these are not binding.
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Mexico v. Metalclad was governed by the ICSID Additional Facility, why was it possible for Mexico to seek setting aside the award?
The seat of arbitration was Canada (Vancouver); The Mexico v. Metalclad decision illustrates how arbitrations conducted under the ICSID Additional Facility rules do not fall within the scope of the ICSID Convention; Mexico was able to seek set aside of the award by the domestic courts in the seat of arbitration (Vancouver).
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Does the UNCITRAL model law allow for substantive review for setting aside?
No, but it's possible that states allow that as they can deviate from the model law.
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NAFTA Article 1105: Minimum Standard of Treatment
1. Each Party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security.
In Mexico v. Metalclad, what did the Court in Vancouver find during its setting aside proceedings? In which case did we have a similar finding?
The tribunal incorrectly imposed a **(non-existent) transparency obligation** under Article 1105. This was a **misapplication of law, not a failure to apply the law,** and does not justify setting aside the award. The tribunal applied the correct rule but misinterpreted it, which is not grounds for setting aside the award under section 34(2)(a)(v) of the International CAA, which pertains to procedural non-compliance with the parties' agreement. **CMS Gas v. Argentina.**
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What is Brazil's novel approach to investment protection?
Instead of relying on formal arbitration, Brazil emphasizes **cooperation and investment facilitation agreements** aimed at enhancing regulatory predictability and administrative efficiency.
Despite lacking traditional ISDS mechanisms, Brazil ensures enforcement of investment obligations under international standards through **domestic legal frameworks and diplomatic channels.**
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What are the four fronts at which changes take place?
1) Reform ISDS
2) International court: EU
3) State to state
4) Back to basics
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What are the four approaches which UNCTAD tries to follow to revise ISDS?
1) Abolish ISDS
2) Standing ISDS tribunal (with appellate level)
3) Limited ISDS (must exhaust local remedies first, exclusions)
4) Improved ISDS (increase states' control, enhancing suitability and partiality)
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What are five ways UNCTAD attempts to improve states' role in proceedings?
Enabling State Parties to issue joint treaty interpretations binding on tribunals (done in NAFTA)
Requiring certain questions to be submitted to State Parties for joint determination (presumalbly **during proceedings**)
Enabling **non-disputing** State Parties to participate in the proceedings
Enabling disputing parties to **review and comment** on the draft arbitral award
Enabling the respondent State to **submit counterclaims**
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How does UNCTAD propose to improve the suitability and impartiality of arbitrators?
Including rules on qualifications of arbitrators, a code of conduct and/or rules on conflicts of interest
Prohibiting "double-hatting" of arbitrators/adjudicators (simultaneously acting as counsels or experts in other ISDS proceedings)
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What are four ways UNCTAD proposes to increase efficiency?
Enabling early dismissal of manifestly unmeritorious (frivolous) claims
Enabling consolidation of related claims
Establishing a time limit on the maximum duration of ISDS proceedings
Allowing for voluntary non-binding ADR procedures to resolve investor-State disputes
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What proposal does China support in revision?
China argues that the existing investment treaty arbitration regime lacks an “appropriate errorcorrecting mechanism” and would support “the study of a permanent appeal mechanism as a
reform proposal for resolving the main problems in the current ISDS regime.”
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Why does the EU state that a standing mechanism is necessary?
The European Union argues that a standing mechanism is necessary to achieve **predictability** and **certainty** in investor-state arbitration.
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What is the "open architecture" approach the EU proposes for its standing mechanism?
The EU’s “open architecture” approach allows for some flexibility with respect to participation in a standing mechanism; for example, states might opt to join only an appellate-level mechanism, or might only participate in state-to-state dispute resolution.
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How has the EU's requirement on public international law knowledge changed since its submission in 2019?
The EU argued in its 2019 submission that for adjudicators, public international law expertise was “necessary given the public international law foundations of the regime,” but the draft statute on a standing mechanism recently released by WGIII merely identifies public international law expertise **as one of several preferred areas of expertise** for adjudicators.
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How does the EU argue that independence from governments would be achieved in the standing mechanism?
Would investors agree with this?
The EU argues that “independence from governments would be ensured through a long-term non-renewable term of office [. . .] combined with a robust and transparent appointment process.”
Many investors would likely disagree.
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What does the EU proposal say on party autonomy?
Not much to say about party autonomy. EU is not very focussed on party autonomy.
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What are the two topics (issues) in arbitration proceedings that have been written about? Which has been written about a lot, which little? What's the EU's promise on these two issues?
Lack of consistency has been written about a lot.
Not a lot is written about correctness.
The Standing Mechanism will solve both issues.
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According to the EU proposal, what kind of review would the appellate tribunal do, what not?
Yes to: Error of law (including procedural shortcomings) or manifest errors in the appreciation of facts.
No: De novo review of facts.
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How did the EU proposal solve the double hatting problem?
The arbitrators would not be allowed to have any outside activities (except for teaching).
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What are the two proposals of the EU in terms of enforcement?
1) Create its own enforcement mechanism (without domestic review, analogous to ICSID)
2) Subsume awards under New York Convention as tribunal would be a "permanent arbitral body"
However, would this still be a arbitral body?
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What did China criticize on the Draft Statute on the Standing Mechanism for the Resolution of International Investment Disputes?
Appointment process for arbitrators lacks reflection of professional requirements in international public law.
Absence of a code of conduct for arbitrators in investment arbitration.
Arbitrator-appointing bodies' procedures are not sufficiently transparent.
Potential conflicts of interest due to arbitrators also practicing as investment arbitration lawyers.
Limited pool of experts in investment arbitration, predominantly from developed countries.
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What arbitration bodies are usually in BITs? (4)
Where would a UNCITRAL Standing Mechanism fit in?
Ad hoc
UNCITRAL
ICSID
ICC
The Standing Mechanism does not fit in anywhere.
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What is UNCITRAL's idea how the Standing Mechanism would leverage existing treaties?
You join this standing mechanism, you consent to first-instance tribunal. In addition, you can provide a list and submit that list to the standing mechanism. This is the **issue of transferring jurisdiction.** This is not OK because the other party in a BIT would have to consent too.
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What can be said about the grounds of appeal of the UNCTIRAL Standing Mechanism compared to ICSID annulment and the New York Convention?
They are far broader and stretch to substantive review.
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What was the key policy goal of the ICSID convention?
Create a rule-based dispute resolution, de-policitize the process
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What are the three stages in arbitration?
1) Jurisdiction
2) Merits
3) Quantum
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Once the award has been rendered, there are three more stages. Which?
Recognition: Acknowledgment of the validity and authenticity of the arbitral award.
Enforcement: Ensuring the award has the same legal effect as a domestic court decision.
Execution: Taking legal steps to obtain satisfaction from the losing party in compliance with the arbitral award.
