Introduction into International Investment Arbitration
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The challenges to International Investment Arbitration The Challenges to International Investment Arbitration
Transcript of Introduction into International Investment Arbitration
The challenges to International Investment Arbitration
The Challenges to
International Investment Arbitration
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Legal basis
Public international law: Treaties:
Bilateral (approx. 3000) Multilateral (NAFTA, the ECT)
Custom General principles of law
National law
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Individual vis-à-vis state in traditional international law Sovereign state as a central (almost exclusive) subject of international law
An individual protected by her state via diplomatic protection
Conclusion: No legal standing of an investor vis-à-vis state on international plane
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Disequilibrium 1
State
Individual
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Investor at the scene 1950’s onwards –empowering individual in international law (HR, investment protection)
the Barcelona Traction case (ICJ 1970) – an investor should have a legal position to defend her rights in lieu of her state
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Standards of protection under BITS Fair and equitable treatment Full protection and security MFN treatment National treatment No expropriation without compensation
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Arbitration as a neutralizing element Starting presumptions:
state immunity would prevent litigants from being heard in courts of another state
state courts would tend to tilt the equilibrium in favour of states in the disputes with foreign investors
Arbitration justice ≠ state justice (R. David,1985)
Implication: Arbitration provides neutral form
It is only investor who may initiate investment arbitration proceedings (hence not state)
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Arbitration “without privity” Consent to arbitration in a BIT, not in arbitration agreement
Each party gives consent to arbitration at a different point in time: State: by ratifying BIT Investor: by lodging notice of arbitration in a forum provided for in the BIT
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Implications Arbitration has become the prevaling, albeit not exclusive, DR method for investment disputes
Arbitration as a private-law element has entered the public domain (originally intended for commercial disputes)
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Disequilibrium 2
Individual
State
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Challenges External perspective Internal perspective
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External challenges The ever tighter grip of the EU (law) Issues of public interest (environment, health protection)
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EU law New exclusive competence regarding FDI after the Lisbon Treaty
The view that intra-EU BITs contradict purposes of the EU law (non-discrimination, free movement of capital)
MS are expected to withdraw from the intra-EU BITS
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Issues of public interest Environment: Chevron v. Equador Health protection: Phillip Morris v. Australia
Transparency: the UNCITRAL Draft Convention on Transparency in Treaty-based Investor-State Arbitration
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Internal challenges Access to justice: IA only for those born with the silver spoon in their mouth?
Detachment from general international law: The extent of state conduct’s review:
national courts’ decisions (Saipem v. Bangladesh)
Regulatory expropriation (solar energy – tax legislation)
Arbitral “precedent” vs. case “specific mandate” (M. W. Reismann) – the potential arbitrariness in decision-making
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Access to justice Poses no problem to most states But small investors – individuals have difficulty to finance IA: Counsel fees Arbitrators’ remuneration Administrative fees
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The review of sovereign conduct of states States tend to argue that the consent in
the BITs cannot go so far as to include all possible soveregn conduct of state organs
There is an exclusive domain within which states may do “whatever they wish”, and therefore cannot be held internationally responsible for the conduct falling therein
The issue: Are the states’ promises meaningful?
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The way forward? Thesis 1: The critique of IA is not wholly unfounded
Thesis 2: Arbitration as IDR should not be abandonded
The suggested reaction: should not be deferrence to states in decision-making by arbitrators
should not be denying the value of pacta sunt servanda
should be a fair decision-making: To apply and interpret applicable laws correctly
To balance the interests of both investor and state, including taking into account the investor’s conduct
To enhance access to justice for small investors
To raise transparency of IA
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Articles David, R. Arbitration in Internationl Trade (Kluwer Law and Taxation Publishers, Deventer/Boston, 1985)
Paulsson, J. “Arbitration without Privity” (1995) ICSID Review, Vol. 10 (2), pp. 232-257.
Paulsson, J. “The Power of States to Make Meaningful Promises ” (2010) J. Int. Disp. Settlement Vol. 1, pp. 341-352.
Pauwelyn, Joost “At the Edge of Chaos Foreign Investment Law as a Complex Adaptive System, How It Emerged and How It Can Be Reformed” (2014) ICSID Review, Vol. 29, No. 2, pp. 372-418.
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Cases 1 Antaris Solar GmbH (Germany) and Dr. Michael Göde (Germany) v. The Czech Republic (PCA) (solar energy)
Case Concerning The Barcelona Traction, Light and Power Company, limited, ICJ Reports, 1970 (fdiplomatic protection, legal standing of shareholders).
Chevron Corporation and Texaco Petroleum Corporation v. The Republic of Ecuador, UNCITRAL, PCA Case No. 2009-23 (environment).
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Cases 2 Philip Morris Asia Limited v. The Commonwealth of
Australia, UNCITRAL, PCA Case No. 2012-12 (tobacco product restrictions)
Saipem S.p.A. v. The People’s Republic of Bangladesh, ICSID case no. ARB/05/07 (interference into arbitration award).
Yukos Universal Limited (Isle of Man) and the Russian Federation , PCA Case No. AA 247, 18 July 2014 (tax issues, criminal law)
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Other materials Settlement of commercial disputes: Draft convention on transparency in treaty-based investor-State arbitration (UNCITRAL, 47th Session, New York,7-25 July 2014)
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