International Law International Investment Arbitration
by
C.L. Lim, Jean Ho
  • LAST MODIFIED: 28 April 2016
  • DOI: 10.1093/obo/9780199796953-0135

Introduction

International investment arbitration is heterogeneous. At its core, it represents the settlement of international investment disputes between foreign investors and host States by arbitration. However, as there are different ways to institute arbitral proceedings, the structural and substantive aspects of international investment arbitration are colored by the mode of commencement of arbitration. An early iteration of international investment arbitration was the submission of investment claims to Mixed Claims Commissions. These had been established by a series of bilateral conventions concluded between the mid-1800s and the early 1900s in order to adjudicate disputes between the nationals of a party State to the convention and the other party State. The types of disputes that fell within the jurisdiction of a Commission were specified in the conventions and varied, depending upon which convention was invoked. This form of international investment arbitration never achieved great prominence because of the small number of investment claims heard but they were a useful source of early jurisprudence and the basic form has continued to be employed in various guises, most notably in the case of the subsequent Iran-US Claims Tribunal. In the early 21st century, however, the two dominant iterations of international investment arbitration are contractually based investment arbitration and treaty-based investment arbitration. In investment contract arbitration, the legal basis for the arbitration is an arbitration clause in a contract which is binding on all contracting parties. In investment treaty arbitration, however, the legal basis for arbitration is a binding offer in a treaty clause by a host State to arbitrate with all protected investors, which any protected investor is then free to accept or reject. For this reason, the latter has been referred to, sometimes derisively, as “arbitration without privity,” a phrase coined by Jan Paulsson. There is also a third category of consent to investment arbitration by acceptance of a unilateral offer of a State through domestic investment laws. Having said that, many investment treaties also record an agreement between the Contracting States to arbitrate disputes arising from the interpretation or application of the treaty. In sum, investment treaty arbitration encompasses investor-State arbitration, which may have a variety of legal bases, and also State-to-State arbitration.

The Birth and Evolution of International Investment Arbitration

The beginnings of international investment arbitration are closely tied to the evolution of the law on international protection of foreign investments and the early formation of the modern principles of State responsibility. Before international investment arbitration became de rigeur for investor-State disputes, an investor’s best hope of obtaining redress for the interference with his property or contractual rights by a host State lay in seeking the diplomatic protection of his home State. However, there was no guarantee of redress since the decision by the home State to confer diplomatic protection is discretionary and, even if the home State presented the claim on behalf of its national, there was no guarantee that the host State would entertain or satisfy the claim. Reliance on diplomatic protection and State-to-State dispute settlement rendered the law on investment protection highly unpredictable, even if the principles of State responsibility gradually developed through arbitral and judicial pronouncements. If investment protection was to be taken seriously, it became necessary to find other means of safeguarding foreign investments and investors. Other than the customary international law on the protection of aliens and their property, two other methods of investment protection emerged—contractual protection and treaty protection. While there are important differences between the two types of investment protection—such as how contractual obligations are governed by the proper law of the contract, while treaty obligations are governed by international law—they converge on provision for investor-State arbitration. As a result of this convergence, which was aimed at ensuring a more effective means of redress, international investment arbitration has eclipsed diplomatic protection as the prevailing mode of dispute settlement between investors and States. Enforcement of such awards is facilitated under Article 54 of the Convention on the Settlement of Disputes between States and Nationals of Other States of 1965 (the “ICSID” or “Washington” Convention [ICSID is the World Bank’s International Centre for the Settlement of Investment Disputes]), or in the case of non-ICSID arbitration, Article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention).

Works Dating 1970–2000

Pre-2000 works have focus on teasing out the key strands of investment protection. One strand is the shift in the mode of dispute resolution; from diplomatic protection (Borchard 1970), to international arbitration (which Schwebel 1987 addresses), to investor-State arbitration (see Toope 1990). Another is the international standard of compensation for expropriation which was debated in Schachter 1984 and Mendelson 1985. Yet another strand is the rise of institutional arbitration and perceptions of disciplinary bias in favor of First World investors. Dolzer and Stevens 1995 analyzes the phenomenon of treaty-based institutional arbitration, while Brower and Brueschke 1998 examines the impact of the Iran-United States Claims Tribunal on the law and procedure of international disputes. The question of disciplinary bias is studied by Shalakany 2000 who argues that the question of bias might be better characterized in terms of a distinct “disciplinary sensibility.”

  • Borchard, Edwin Montefiore. The Diplomatic Protection of Citizens Abroad: Or, The Law of International Claims. New York: Kraus, 1970.

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    One of the earliest and most thorough treatises on the law on diplomatic protection of aliens, as seen through the lens of US diplomatic practice. A vast range of topics, ranging from contract to personal injury claims, are covered.

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    • Brower, Charles N., and Jason D. Brueschke. The Iran-United States Claims Tribunal. The Hague: Martinus Nijhoff, 1998.

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      This book discusses not only the influence the tribunal has had on the formation of customary international law, but also questions of procedure.

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      • Dolzer, Rudolf, and Margrete Stevens. Bilateral Investment Treaties. The Hague: Kluwer Law International, 1995.

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        This has been an important work, and continues to be useful. It was prepared under the auspices of ICSID, documenting bilateral investment treaties (BITs)—which by that time numbered some 900 treaties between 150 countries—with the intention of being comprehensive. The authors provide commentary on the treaty texts as well as treaty practice.

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        • Mendelson, Maurice H. “Compensation for Expropriation: The Case Law.” American Journal of International Law 79 (1985): 414–420.

          DOI: 10.2307/2201711Save Citation »Export Citation »E-mail Citation »

          Mendelson’s reply to Schachter.

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          • Schachter, Oscar. “Compensation for Expropriation.” American Journal of International Law 78 (1984): 121–130.

            DOI: 10.2307/2202344Save Citation »Export Citation »E-mail Citation »

            The first part of the “Schachter-Mendelson debate” on the customary international standard of compensation for expropriation, discussing the Texaco v. Libya (1978) 17 International Legal Materials 3, and Aminoil v. Kuwait (1982) 21 International Legal Materials 976 arbitrations, and Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964) among other things.

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            • Schwebel, Stephen Myron. International Arbitration: Three Salient Problems. Cambridge, UK: Grotius, 1987.

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              This is a useful primer to international investment arbitration, written by an eminent authority in the field. Although published in 1987, one of the three salient problems discussed—whether the repudiation of an arbitration agreement by a State amounts to a denial of justice—raises the well-known but to date unresolved issue of whether a State’s international responsibility can be engaged for a breach of contract.

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              • Shalakany, Amr. “Arbitration and the Third World: Bias under the Scepter of Neo-Liberalism.” Harvard International Law Journal 41 (2000): 419–468.

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                Shalakany addresses Third World perceptions of disciplinary bias on the part of the community of international commercial and investment arbitrators. He argues that institutional and doctrinal biases do not fully explain skewed decisions, rather, claims of bias are best explained instead in terms of a private law “disciplinary sensibility” against public regulatory intervention which skews the institutional application of international investment law doctrines toward a conservative set of ideological preferences.

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                • Toope, Stephen J. Mixed International Arbitration. Cambridge, UK: Grotius, 1990.

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                  This is one of the earliest works on the phenomenon of arbitrations between States and foreign private parties. Its aim was to highlight the special difficulties of this form of arbitration, and it also provides case studies of International Chamber of Commerce (ICC) and ICSID arbitration, as well as cases heard before the Iran-US Claims Tribunal.

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                  Works Dating from 2000

                  Post-2000 works have instead devoted greater attention to the details of the key strands of investment protection identified in earlier works. Vandevelde 2010 and Brown 2013 demonstrate that such details may be found in the investment treaties in existence while Sornarajah 2004 argues that the details show a neo-liberal bent and are as such hostile to developing nations. Böckstiegel 2012 and Salacuse 2013 highlight the importance of the question of applicable law to investment, and especially contract-based, disputes. The evolving body of international investment law has also prompted different ways of understanding the impetus for change. Schill 2009 argues that change is the product of multilateralization through the burgeoning number of investment treaties; Douglas 2009 argues that change takes place within a framework of comprehensive rules; and Miles 2013 ties change in international investment law to changes in the surrounding sociopolitical environment.

                  • Böckstiegel, Karl-Heinz. “Commercial and Investment Arbitration: How Different Are They Today?” Arbitration International 28.4 (2012): 577–590.

                    DOI: 10.1093/arbitration/28.4.577Save Citation »Export Citation »E-mail Citation »

                    Adapted from the 2012 Lalive Lecture, this essay contains practical insights on the handling of international investment claims and useful discussion of the roles of international law and national law, the culture of arbitrator selection in investment arbitration, the wider scope for jurisdictional challenges in investment arbitration, and conferment of jurisdiction through the operation of most-favored-nation (MFN) clauses.

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                    • Brown, Chester, ed. Commentaries on Selected Model Investment Treaties. Oxford: Oxford University Press, 2013.

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                      This is a repository of State practice in connection with the various model BITs covering a wide range of States. The coverage given by the various authors is detailed and highly useful.

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                      • Douglas, Zachary. The International Law of Investment Claims. Cambridge, UK: Cambridge University Press, 2009.

                        DOI: 10.1017/CBO9780511581137Save Citation »Export Citation »E-mail Citation »

                        An original and indispensable work on the preliminary issues arising in the context of an investment claim, it compresses an exhaustive survey and consolidation of past trends, current debates, and future directions in international investment law into fifty-four “rules” of general applicability in the prosecution of investment claims. The presentation, which resembles Dicey, Morris, and Collins on The Conflict of Laws (London: Sweet & Maxwell, 2006) is a major contribution to the rendering of a rapidly evolving range of issues into some systematic form.

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                        • Miles, Kate. The Origins of International Investment Law. Cambridge, UK: Cambridge University Press, 2013.

                          DOI: 10.1017/CBO9781139600279Save Citation »Export Citation »E-mail Citation »

                          A rigorous study of how international investment law is capable of evolving in tandem with its changing sociopolitical environment. Given the shift from pure economic imperialism during the age of colonialism to the socially and environmentally conscious policies of postcolonial governments, Miles argues that there is potential for a previously investor-oriented international investment law to develop the capacity for social and environmental responsibility.

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                          • Salacuse, Jeswald W. The Three Laws of International Investment. Oxford: Oxford University Press, 2013.

                            DOI: 10.1093/law/9780199654567.001.0001Save Citation »Export Citation »E-mail Citation »

                            The author analyzes the regulation of foreign investment by contract, national law, and international law. As a contract is never a law unto itself, but dependent on national law or even international law, or sometimes a combination of the two for its validity and enforcement, this book constructs a conceptual framework for understanding the legal protection of foreign investment by explaining the interplay between national and international law and how they conflict or overlap in the pursuit of investment protection.

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                            • Schill, Stephan. The Multilateralization of International Investment Law. Cambridge, UK: Cambridge University Press, 2009.

                              DOI: 10.1017/CBO9780511605451Save Citation »Export Citation »E-mail Citation »

                              Schill’s central thesis is that through the multiplication of similar provisions in a multitude of BITs, international investment law is becoming homogenous. The avenues for multiplication include the MFN clause, which imports provisions from other treaties concluded by the host State which are more favorable to the investor to the present treaty, and the interpretation by arbitral tribunals of similar treaty provisions in a similar fashion. Neither of these points is original, but the book is a welcome modern defense of both points.

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                              • Sornarajah, Muthucumaraswamy. The International Law on Foreign Investment. 2d ed. Cambridge, UK: Cambridge University Press, 2004.

                                DOI: 10.1017/CBO9780511617027Save Citation »Export Citation »E-mail Citation »

                                This leading textbook argues that the current investment protection regime is largely shaped by the historical context of onerous North-South contracts and North-South treaties. It explains the foundations of the international law on investment protection as a branch of, an integrated system of, public international law, governed by the law of State responsibility, and cautions against viewing investment arbitration, albeit important for specialized study and international legal practice, as an isolated body of rules and principles.

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                                • Vandevelde, Kenneth J. Bilateral Investment Treaties: History, Policy, and Interpretation. New York: Oxford University Press, 2010.

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                                  The author is both a former American treaty negotiator and law school dean. This book explores the content of BITs within their proper historical and political context. The author considers the significance of theory, treaty practice, and treaty interpretation as shaping factors. International investment arbitration is more than just a by-product of the turn from diplomatic to treaty protection for foreign investment. According to Vandevelde, it is a progenitor of legal development and change.

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                                  Adjectival and Procedural Laws Pertaining to Investment Arbitration

                                  The subject of investment arbitration concerns the pursuit of an international civil claim for a breach of international law entailing the responsibility of the host State. Historically, claims by foreign aliens for takings of property by host States contributed substantially to the development of the modern principles of international State responsibility. Initial codification work began by the International Law Commission (ILC) under the leadership of García-Amador as Special Rapporteur had been focused on such injury to aliens and their property and stultified progress, not least due to the centrality of the individual in advancing such a conception of the international law of State responsibility. Nonetheless, the principles of State responsibility, although no more important than the law of treaties, have played an essential gap-filling role in framing and shaping such claims. Invocation of such customary rules—and also the general principles of law recognized by civilized nations, on which see Bin Cheng, General Principles of Law as applied by International Courts and Tribunals (Cambridge, UK: Grotius, 1987, 163–253)—was, in all likelihood, necessitated by the relative sparseness of treaty provision during the formative period of the law on injury to aliens and their property. At the same time, promoting the growth of investment contract arbitration, and subsequently investment treaty arbitration, necessitated the development of new arbitral institutions and procedures beyond the rules available for State-to-State arbitration. There was inevitable adaptation from international commercial arbitration, but also necessary differences. For example, the rules on arbitrator conflicts for State-to-State arbitration may, and probably should, continue to differ from the rules developed under investor-State arbitration (see Republic of Mauritius v. United Kingdom of Great Britain and Northern Ireland in the Matter of an Arbitration Before an Arbitral Tribunal Constituted under Annex VII of the 1962 United Nations Convention on the Law of the Sea, Reasoned Decision on Challenge, PCA, 30 Nov. 2011). For these reasons, it is hoped that the following, on occasion necessarily selective, list of works will be useful. See also Mass Claims.

                                  State Responsibility

                                  The secondary rules governing the law of State responsibility for internationally wrongful acts are codified in the 2001 ILC Articles on State Responsibility. That said, attempts by the ILC at codification had begun in the 1970s. Over three decades, the principles governing the engagement of, reparation for, and circumstances precluding State responsibility were continually revisited and refined. Three of the most important works on the topic of State responsibility are Brownlie 1983, which examined the position pre-2001, and Crawford 2002 and Crawford 2013 which comment on the 2001 Articles on State Responsibility.

                                  • Brownlie, Ian. System of the Law of Nations, State Responsibility, Part I. Oxford: Oxford University Press, 1983.

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                                    This is the classic work on Part I of the ILC Articles on State Responsibility. Brownlie argues that State responsibility should be limited to the obligation to “make reparation, to compensate” (at page 33). The book is well-known for his defense of the theory of objective responsibility—i.e., regardless of fault or intent, or indeed motive notwithstanding their probative value—and perhaps also for the author’s views on the inflexibility of restitution as a remedy.

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                                    • Crawford, James. The International Law Commission’s Articles on State Responsibility: Introduction, Text and Commentaries. Cambridge, UK: Cambridge University Press, 2002.

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                                      An essential and authoritative aid to an understanding of the 2001 ILC Articles on State Responsibility.

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                                      • Crawford, James. State Responsibility: The General Part. Cambridge, UK: Cambridge University Press, 2013.

                                        DOI: 10.1017/CBO9781139033060Save Citation »Export Citation »E-mail Citation »

                                        While the law of State responsibility comprises secondary rules only, and treaty as well as custom supplies the primary rules which define the primary obligations applying to the host State, and also questions concerning the breach of an international investment obligation, other questions such as that of attribution would—and those concerning the customary international law defenses to a breach of an international legal obligation could—still arise.

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                                        Consent to Arbitration

                                        Consent to arbitration intersects with the forms of investment arbitration. As mentioned, the dominant forms in the early 21st century are investment contract and investment treaty arbitration. The question of consent to under these rubrics overlaps with the discussion in Investment Contract Arbitration and Investment Treaty Arbitration. However, it is useful to raise the issue of consent to arbitration at this juncture. A third form we have mentioned concerns a less frequent but no less important form of consent; namely, consent by way of acceptance of an offer to arbitrate by the host State which is contained in the host State’s domestic investment law. In fact, the first known arbitration without privity had involved this third form.

                                        • Ho, Jean. “The Meaning of ‘Investment’ in ICSID Arbitrations.” Arbitration International 26.4 (2010): 633–648.

                                          DOI: 10.1093/arbitration/26.4.633Save Citation »Export Citation »E-mail Citation »

                                          This article discusses the application by an ICSID tribunal of the view that there is an objective understanding of what an investment is, according to the so-called “Salini” criteria, and the rejection of that tribunal’s view by a majority ruling of the annulment committee.

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                                          • Potestà, Michele. “The Interpretation of Consent to ICSID Arbitration Contained in Domestic Investment Laws.” Arbitration International 27.2 (2011): 149–170.

                                            DOI: 10.1093/arbitration/27.2.149Save Citation »Export Citation »E-mail Citation »

                                            Discusses special problems posed by domestic law clauses that grant jurisdiction to ICSID, and the interpretation of such clauses with reference to the ILC “Guiding Principles applicable to unilateral declarations of States capable of creating legal obligations.”

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                                            Arbitration Procedure

                                            The following section lists notable works on topical procedural issues in international investment arbitration. It starts off with an overview and preliminary issues, followed by jurisdiction and admissibility, interim measures, damages and interest, costs, award enforcement and challenge, and concludes with miscellaneous procedural issues.

                                            Overview and Preliminary Issues

                                            Litigation strategy, such as choosing between ad hoc and institutional arbitration, is an important part of every international investment arbitration. Horn 2008 weighs the benefits and disadvantages of ad hoc investment arbitration under the UN Commission on International Trade Law (UNCITRAL) Arbitration Rules, while Webster 2012 describes the defining features of arbitration under the ICSID Convention. Webster 2009 addresses the issue of unmeritorious claims in investment arbitration. Giorgetti 2014 is a practitioner guide which fills an important gap in the literature.

                                            • Giorgetti, Chiara, ed. Litigating International Investment Disputes: A Practitioner’s Guide. Leiden, The Netherlands: Brill, 2014.

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                                              This book takes the reader through investment arbitration proceedings in a logical, sequential manner. It discusses such topics as the initial strategies and choices, pre-arbitration claimant representation, representing the respondent, arbitrator selection, preliminary matters and interim measures, written and oral proceedings, applicable law, evidentiary issues, costs, awards, discontinuance of proceedings, as well as enforcement and post-award remedies, and more.

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                                              • Horn, Norbert. “Current Use of the UNCITRAL Arbitration Rules in the Context of Investment Arbitration.” Arbitration International 24.4 (2008): 587–602.

                                                DOI: 10.1093/arbitration/24.4.587Save Citation »Export Citation »E-mail Citation »

                                                The North American Free Trade Agreement (NAFTA), the Energy Charter Treaty (ECT), and the ICSID Convention provide specialist regimes for investment arbitration, but in principle investment arbitration can take the form of other institutional or ad hoc arbitration. In the case of ad hoc arbitration, the UNCITRAL Arbitration Rules have been employed in almost up to a third of publicized cases, and the use of the UNCITRAL Arbitration Rules in investment arbitration is the subject of this article. In particular, Dr. Horn discusses the suitability of resort to the UNCITRAL Arbitration Rules in light of the greater involvement of national courts and national law.

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                                                • Webster, Thomas H. “Efficiency in Investment Arbitration: Recent Decisions on Preliminary and Cost Issues.” Arbitration International 25.4 (2009): 469–514.

                                                  DOI: 10.1093/arbitration/25.4.469Save Citation »Export Citation »E-mail Citation »

                                                  Useful discussion on how tribunals deal with unmeritorious claims. Webster concludes, on the basis of an empirical study, that the main sanction for umeritorious claims in investment arbitration is an award of costs against the party presenting the unmeritorious claim.

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                                                  • Webster, Thomas H. Handbook of Investment Arbitration. London: Sweet & Maxwell, 2012.

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                                                    This work, which focuses solely on ICSID arbitration, is a useful guide, not least for arbitrators and counsel, contained in a single volume. It contains a section discussing arbitration under selected BITs, and another containing useful appendices, including the 2010 International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration and the 2004 IBA Guidelines on Conflict of Interest in International Arbitration, and the 2001 ILC Articles on State Responsibility.

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                                                    Jurisdiction and Admissibility

                                                    Under general international law, the admissibility of a claim is often understood as the propriety of a court or tribunal examining the claim at a given time, while jurisdiction over a claim refers to the mandate that a court or tribunal has been conferred by the parties to hear the claim (James Crawford, Brownlie’s Principles of Public International Law [Oxford, UK: Oxford University Press, 2012], p. 693.) A claim that is found to be inadmissible by a court or tribunal at a given point in time may be admissible at a later date once the defect which led to the inadmissibility in the first place is cured. In investment treaty arbitration, a claim presented to the tribunal in contravention of an exclusive jurisdiction clause in the underlying investment contract has been found inadmissible for being premature (SGS v. Philippines, Decision of the Tribunal on Objections to Jurisdiction (El-Kosheri, Crawford, Crivellaro (partially dissenting)), 29 January 2004 (ICSID Case No. ARB/02/6)). However, once it can be shown that the agreed forum was approached by the claimant before investment treaty arbitration is reactivated, the claim becomes admissible. A claim over which a court or tribunal finds that it has no jurisdiction to decide cannot be resubmitted at a later date so long as its jurisdictional mandate remains unchanged. The limits of this mandate in investment claims are found in what host States offer in investment treaties to submit to arbitration. There are very few studies which explore in detail the distinction between a tribunal’s jurisdiction over and the admissibility of a claim. Together, the following three book chapters provide a thorough discussion.

                                                    • Paulsson, Jan. “Jurisdiction and Admissibility.” In Global Reflections on International Law, Commerce and Dispute Resolution: Liber Amicorum in Honour of Robert Briner. Edited by Gerald Aksen, Karl Heinz Bӧckstiegel, et al., 601–617. Paris: ICC, 2005.

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                                                      An early, concise attempt to unravel the distinction between a tribunal’s jurisdiction over a claim and the admissibility of a claim.

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                                                      • Waibel, Michael. “Investment Arbitration: Jurisdiction and Admissibility.” In International Investment Law: A Handbook. Edited by Marc Bungenberg, et al., 1212–1287. Oxford: Hart, 2015.

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                                                        The most up-to-date and comprehensive treatment of the topic, with extensive references to earlier works and decided cases and awards.

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                                                        • Williams, D. A. R. “Jurisdiction and Admissibility.” In The Oxford Handbook of International Investment Law. Edited by Peter Muchlinski, Federico Ortino, and Christoph Schreuer, 868–931. Oxford: Oxford University Press, 2008.

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                                                          A more detailed attempt to distinguish jurisdiction and admissibility incorporating discussion of investment treaty awards as illustration.

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                                                          Interim Measures

                                                          Interim measures are important to the smooth running of the arbitration process. They ensure that parties remain committed to their chosen forum and are barred from employing tactics with a view to obstructing and/or delaying the rendering and/or satisfaction of the final award. Mathews and Stewart 2009 considers the propriety of tribunal-ordered interim measures, while Lim 2014 considers court-ordered interim measures against foreign sovereigns which are intended to support arbitration proceedings.

                                                          • Lim, C. L. “Injuncting Foreign Sovereigns in Aid of Arbitration.” Law Quarterly Review 130 (2014): 193–197.

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                                                            This note summarizes and reviews in brief the State immunity regime in the United Kingdom, and like Commonwealth regimes, by discussing a recent Singapore case involving an application for a freezing order against a foreign State in aid of arbitration proceedings. Although the arbitration in that case was commercial in nature, the same principles apply to investment arbitrations in which curial assistance is sought in respect of interim measures.

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                                                            • Mathews, Joe, and Karen Stewart. “Time to Evaluate the Standards for Issuance of Interim Measures of Protection in International Investment Arbitration.” Arbitration International 25.4 (2009): 529–552.

                                                              DOI: 10.1093/arbitration/25.4.529Save Citation »Export Citation »E-mail Citation »

                                                              Deals with the difficult question of interim measures by proposing standards for their issuance, thereby raising the question of internationally accepted criteria.

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                                                              Damages and Interest

                                                              The literature is vast. However, Whiteman 1937–1943 remains the classic work on damages in international law, while Ripinsky and Williams 2008 is emerging as the leading modern work on damages in international investment law. In contrast, less has been written on the topic of interest. Nevill 2007 examines international practice on the award of interest, while Mann 1987–1988 and Schwebel 2011 outline the circumstances under which compound interest should be awarded.

                                                              • Mann, F. A. “Compound Interest as an Item of Damage in International Law.” University of California Davis Law Review 21 (1987–1988): 577–586.

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                                                                A pithy contribution where the author argues that the principle of full compensation for wrongs suffered is the legal basis for the award of compound interest.

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                                                                • Nevill, Penelope. “Awards of Interest by International Courts and Tribunals.” British Yearbook of International Law 78 (2007): 255–341.

                                                                  DOI: 10.1093/bybil/78.1.255Save Citation »Export Citation »E-mail Citation »

                                                                  This is a detailed study on the ILC’s approach to the award of interest, both simple and compound, as an item of damages and the principles and policies applied or considered by international courts and tribunals in the award of pre-award and post-award interest.

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                                                                  • Ripinsky, Sergey, and Kevin Williams. Damages in International Investment Law. London: British Institute of International and Comparative Law, 2008.

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                                                                    Governments prefer paying monetary compensation, a monetary award is also more practical from the viewpoint of the investor when the investor-host State relationship has broken down, and there is in addition the lack of means to enforce restitutionary awards against States (pp. 57–58). This peerless modern work on the subject by Ripinsky and Williams has also benefited from the advice and contributions of many other distinguished experts at the Institute.

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                                                                    • Schwebel, Stephen M. “Compound Interest in International Law.” In Justice in International Law: Further Selected Writings. Edited by Stephen M. Schwebel, 302–313. Cambridge, UK: Cambridge University Press, 2011.

                                                                      DOI: 10.1017/CBO9780511793912.029Save Citation »Export Citation »E-mail Citation »

                                                                      A succinct discussion of authorities in favor of awarding compound interest. ILC Special Rapporteur Gaetano Arangio-Ruiz is credited with encouraging the award of compound interest when doing so would bring about full reparation to the injured State.

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                                                                      • Whiteman, Marjorie M. Damages in International Law. 3 vols. Washington, DC: US Department of State, 1937–1943.

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                                                                        The classic work on the subject.

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                                                                        Costs

                                                                        There is no set formula for awarding costs in international investment arbitration although the trend now favors “loser pays.” Webster 2009 analyzes the applicable principles and different approaches of arbitral tribunals to cost allocation.

                                                                        • Webster, Thomas H. “Efficiency in Investment Arbitration: Recent Decisions on Preliminary and Cost Issues.” Arbitration International 25.4 (2009): 469–514.

                                                                          DOI: 10.1093/arbitration/25.4.469Save Citation »Export Citation »E-mail Citation »

                                                                          A useful essay on the limited tools available for dealing with unmeritorious claims in ICSID arbitration, aside from an award of costs. It also discusses a growing receptiveness to the view that costs follow the event, summary awards, and the vexed question of the power to award security for costs.

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                                                                          Award Enforcement and Challenge

                                                                          Award enforcement is critical. The enforcement stage can be long and drawn-out, especially when the subject of enforcement is a State which does not voluntarily comply with the award or challenges the award. Burgstaller and Rosenberg 2011 examines how applications for annulment have affected the enforceability of awards rendered pursuant to the ICSID Convention. Fox and Webb 2013 examines how a State’s plea of sovereign immunity from execution could thwart a claimant’s attempts to satisfy an award against State-owned assets.

                                                                          • Burgstaller, Markus, and Charles B. Rosenberg. “Challenging International Arbitral Awards: To ICSID or not to ICSID?” Arbitration International 27.1 (2011): 91–108.

                                                                            DOI: 10.1093/arbitration/27.1.91Save Citation »Export Citation »E-mail Citation »

                                                                            The authors discuss the high incidence of challenges under ICSID’s specialized annulment procedure and raise it as a question pertaining to the choice of ICSID arbitration as opposed to the choice of non-ICSID arbitration with a seat in an arbitration-friendly jurisdiction.

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                                                                            • Fox, Hazel, and Philippa Webb. The Law of State Immunity. 3d ed. Oxford: Oxford University Press, 2013.

                                                                              DOI: 10.1093/law/9780199647064.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                              Where a non-ICSID award requires recognition and enforcement, or where both ICSID and non-ICSID awards require execution or attachment, questions of foreign State immunity could arise. This book is an important resource.

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                                                                              Other Procedural Issues

                                                                              Less common procedural issues in international investment arbitration are nonetheless given detailed treatment in Schreuer, et al. 2009.

                                                                              • Schreuer, Christoph H., with Loretta Malintoppi, August Reinisch, and Anthony Sinclair. The ICSID Convention: A Commentary. 2d ed. Cambridge, UK: Cambridge University Press, 2009.

                                                                                DOI: 10.1017/CBO9780511596896Save Citation »Export Citation »E-mail Citation »

                                                                                This is the authoritative work on the Convention which ICSID tribunals quote from. Chapters 4 to 7 address a wide spectrum of procedural issues that may arise in ICSID arbitrations. Procedural topics that receive less attention in current academic literature, such as qualities of arbitrators (Article 40), ancillary claims (Article 46), and revision of arbitral awards (Article 51), are carefully examined.

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                                                                                Investment Arbitration in Different Regions of the World

                                                                                Reception toward investment arbitration differs from region to region. The view is split in the Americas, with North America strongly in favor of investment arbitration in contrast with South America. Europe is currently in a midst of a debate over the pros and cons of investment arbitration, while Asia and Africa appear pro-investment arbitration for the time being, putting aside the latest developments in South Africa, India, and Indonesia. This diversity of views is captured in Garcia 2004 (BITs in South America), Burgstaller 2009 (BITs in Europe), Tietje and Wackernagel 2015 (enforcement of ICSID awards in Europe), Kim 2012 (investment arbitration in Asia), and Bosman 2013 (BITs and investment arbitration in Africa).

                                                                                • Bosman, Lise, ed. Arbitration in Africa: A Practitioner’s Guide. The Hague: Kluwer Law International, 2013.

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                                                                                  An extremely useful book on a region that has thus far been neglected in the context of investment arbitration. Parts 1–5 look at arbitration in south, west, east, north, and greater Africa, while Part 6 sets out the BITs concluded by and between African nations.

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                                                                                  • Burgstaller, Markus. “European Law and Investment Treaties.” Journal of International Arbitration 16.2 (2009): 181–216.

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                                                                                    The compatibility of investment treaties concluded between Member States of the European Union with EU law is a topical concern. This article considers the legal validity of intra-EU investment treaties under EC law and the options available to Member States should their treaty and EU law obligations come into conflict.

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                                                                                    • Garcia, Carlos G. “All the Other Dirty Little Secrets: Investment Treaties, Latin America, and the Necessary Evil of Investor-State Arbitration.” Florida Journal of International Law 16 (2004): 301–370.

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                                                                                      An informative study on why the South American economy could benefit from investment treaties and the reasons behind the escalating hostility toward investment arbitration.

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                                                                                      • Joongi, Kim. “A Pivot to Asia in Investor-State Arbitration: The Coming Emergence of Asian Claimants.” ICSID Review: Foreign Investment Law Journal 27.2 (2012): 399–415.

                                                                                        DOI: 10.1093/icsidreview/sis028Save Citation »Export Citation »E-mail Citation »

                                                                                        Argues on the basis of the small but growing number of Asian investors opting for investment arbitration that investment arbitration is set to expand in Asia.

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                                                                                        • Tietje, Christian, and Clemens Wackernagel. “Enforcement of Intra-EU ICSID Awards.” Journal of World Investment and Trade 16 (2015): 205–247.

                                                                                          DOI: 10.1163/22119000-01602001Save Citation »Export Citation »E-mail Citation »

                                                                                          Discusses the implications of the European Commission’s finding that award satisfaction by an EU Member State can amount to illegal State aid.

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                                                                                          Investment Contract Arbitration

                                                                                          In investment contract arbitration, the agreement to arbitrate is usually, but not always, found in an arbitration clause in an investment contract to which both investor and host State are parties. Regardless of where the prior agreement to arbitrate features, only parties in contractual privity can sue and be sued on a contract. This is because contractual obligations, including the obligation to arbitrate, are not owed to the world at large, but only parties in privity. In SPP v. Egypt (the “Pyramids Oasis Case”) (1991) 16 Yearbook of Commercial Arbitration 28, the claimants, who were signatories to an investment contract containing an arbitration clause, brought arbitration proceedings against Egypt, a non-signatory, claiming damages for a breach of contract by Egypt. The point of contention in the case was whether Ministerial endorsement of the contract with the words “approved, agreed and ratified” was sufficient to render Egypt as non-signatory privy to the contract. The arbitral tribunal held that, on the facts, Egypt was privy to the investment contract, but not every national court from whom enforcement of the award was sought agreed with the tribunal that there was privity of contract. Two principal concerns of foreign investors embroiled in contractual disputes with host States are the availability of redress if the investment is subject to host State laws, and the prospect of succeeding on a claim against the host State if the dispute has to be submitted to host State courts. With the exception of the fait du prince doctrine in French law, if the host State changes its law to the detriment of a foreign investor, host State courts tasked with applying domestic law are unlikely to indemnify the foreign investor for any loss suffered. One way out of this predicament is to remove the investment contract from the supervisory ambit of local laws and local courts, and subject it to a law and forum which the host State cannot modify at will. This may be achieved by identifying international law or some other “non-national law” (e.g., the “general principles of law,” the “principles of Islamic law,” etc.) as the law governing the investment contract. Doing so sidesteps host State laws. Providing for recourse to international arbitration in relation to disputes arising under the contract should an investor-State dispute arise ousts the jurisdiction of host State courts.

                                                                                          • Sornarajah, M. International Commercial Arbitration: The Problem of State Contracts. Singapore: Longman, 1990.

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                                                                                            This lesser-known text addresses the question of what is now commonly referred to as investment contract arbitration, although the title reveals the author’s strong position that investment contracts are not so easily susceptible to internationalization and that investment contract arbitration is, without more, a species of commercial arbitration governed by the principles of private, not public, international law.

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                                                                                            The Theories of Internationalization

                                                                                            There are several theories of internationalization, each propounded by a different scholar, or, in the case of the Vienna School, which espoused the writings of Hans Kelsen, by a group of scholars. It was the primary contention of the Vienna School that since the conduct of States was in reality driven by individuals, the ultimate objects of regulation by international law were individuals (Jochen von Bernstorff, The Public International Law Theory of Hans Kelsen [Cambridge, UK: Cambridge University Press, 2010], p. 72). While a different justification is offered for each theory of internationalization, all of these theories seek the same end of displacing host State law as the governing law of an investment contract, and either replacing the governing law with international law or ultimately upholding the contract under international law by some other means.

                                                                                            Classic Works

                                                                                            The earlier theorists of internationalization who spread or subscribed to the teachings of the Vienna School were Verdross 1927, Kunz 1925, Wehberg, Wengler 1972, and Lalive 1983. McNair 1957 envisaged internationalization as the solution to unsophisticated host State laws. In a similar vein, Weil 1969 argued that investment contracts should be internationalized as a matter of principle because international law offers greater protection than domestic law for an investor’s contractual rights. Mann 1960 supports internationalization if this is what the parties to the contract want. Von Mehren 1974 introduces a “substantive-rule technique” by which tribunals are encouraged to depart from a traditional conflict of laws analysis and identify as applicable the law which is best suited to the substance of the dispute at hand.

                                                                                            • Kunz, Josef. “‘La primauté du droit des gens.” Revue du Droit International et de la Législation Comparée 6 (1925): 556–598.

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                                                                                              Another prominent follower of the Vienna School, Kunz, like Verdross, was of the view that the principle of pacta sunt servanda turned all contractual obligations owed by States to individuals into international obligations.

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                                                                                              • Lalive, Jean-Flavien. “Les contrats d’etat: Développements récents et perspectives d’avenir.” Recueil des Cours 181 (1983): 163–283.

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                                                                                                Lends support to the Vienna School. Argues that the effect of applying pacta sunt servanda to treaties and to contracts is exactly the same. Contracts concluded with States can be internationalized by virtue of the doctrine pacta sunt servanda.

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                                                                                                • Mann, Fritz Alexander. “State Contracts and State Responsibility.” American Journal of International Law 54 (1960): 572–591.

                                                                                                  DOI: 10.2307/2195308Save Citation »Export Citation »E-mail Citation »

                                                                                                  Argues that State contracts can be internationalized if parties expressly choose public international law as the governing law of the contract. (Friederich Alexander August Mann was perhaps better known as “F.A. Mann” or “Francis” or “Freddie Mann.”)

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                                                                                                  • McNair, Arnold. “The General Principles of Law Recognized by Civilized Nations.” British Yearbook of International Law 33 (1957): 1–19.

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                                                                                                    McNair argued that internationalization was the response to inadequate host State laws. Foreign investors could not be expected to deal with the vicissitudes of an undeveloped legal system and poor laws. Internationalization was thus synonymous with greater security for foreign investment.

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                                                                                                    • Verdross, Arthur. “La primauté du droit des gens et la conception unitaire du droit.” Recueil des Cours 16 (1927): 287–296.

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                                                                                                      A prominent follower of the Vienna School, Verdross harnessed Kelsen’s teachings in support of internationalization. Pacta sunt servanda, which Kelsen considered a basic norm of international law (Hans Kelsen, Principles of International Law. 2nd ed. [New York: Holt, Rinehart and Winston 1967], pp. 569–572) thus sanctioned the performance of obligations assumed by States toward individuals, in the same way that it did the performance of obligations assumed by States toward other States. By the same author: “Quasi-international Agreements and International Economic Transactions.” Yearbook of World Affairs (1964): 230–248

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                                                                                                      • von Mehren, Arthur Taylor. “Special Substantive Rules for Multistate Problems: The Role and Significance in Contemporary Choice of Law Methodology.” Harvard Law Review 88 (1974): 347–371.

                                                                                                        DOI: 10.2307/1340269Save Citation »Export Citation »E-mail Citation »

                                                                                                        Advocating a new approach to the choice of law problem of having a special substantive rule: “the distinguishing characteristic of the substantive-rule technique is its recognition that, on occasion, serious problems are created by regulating situations with significant multistate elements under rules and principles developed for comparable, fully domestic situations” (pp. 356–357).

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                                                                                                        • Wehberg, Hans. “Pacta Sunt Servanda.” American Journal of International Law 53 (1959): 775–786.

                                                                                                          DOI: 10.2307/2195750Save Citation »Export Citation »E-mail Citation »

                                                                                                          Lends support to the Vienna School. Argues that the effect of applying pacta sunt servanda to treaties and to contracts is exactly the same. Contracts concluded with States can be internationalized by virtue of the pacta sunt servanda doctrine.

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                                                                                                          • Weil, Prosper. “Problèmes relatifs aux contrats passés entre un etat et un particulier.” Recueil des Cours 128.3 (1969): 95–240.

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                                                                                                            Argues that internationalization is correct in principle because international law is the basic legal order, and correct in practice because international law better protects investors than any other legal order.

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                                                                                                            • Wengler, Wilhem. “Les accords entre etats et entreprises étrangères sont-ils des traités de droit international?” Revue Générale du Droit International Public 76 (1972): 313–345.

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                                                                                                              Also lends support to the Vienna School. Argues that the effect of applying pacta sunt servanda to treaties and to contracts is exactly the same. Contracts concluded with States can be internationalized by virtue of the doctrine pacta sunt servanda. Wengler argues that investment contracts are economic development agreements, and, due to their heightened significance for States, should be treated as though they are treaties.

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                                                                                                              Modern Works

                                                                                                              The modern theorists on internationalization build on and reiterate the works of earlier theorists. Leben 2010 argues in the manner of Verdross 1927 (cited under Classic Works) that internationalization is justified on the basis of the nature of the instrument being internationalized. Veeder 1998 revisits the “internationalization through general principles” approach as discussed in McNair 1957 (cited under Classic Works) while at the same time offering a critique of the Lena Goldfields v. USSR award. Alvik 2011 lists and evaluates the main theories of internationalization.

                                                                                                              • Alvik, Ivar. Contracting with Sovereignty. Oxford: Hart, 2011.

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                                                                                                                Chapter 3 contains a succinct overview of the major theories of internationalization.

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                                                                                                                • Leben, Charles. The Advancement of International Law. Oxford: Hart, 2010.

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                                                                                                                  Argues that when States contract as international persons with private persons, such contracts cannot be governed by host State law because “that would be to deny their very reason for being.” Contracts with States have to be internationalized in order to preserve their legal effect.

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                                                                                                                  • Veeder, V. V. “The Lena Goldfields Arbitration: The Historical Roots of Three Ideas.” International and Comparative Law Quarterly 47 (1998): 747–792.

                                                                                                                    DOI: 10.1017/S0020589300062527Save Citation »Export Citation »E-mail Citation »

                                                                                                                    An extended critique of the award rendered in the Lena Goldfields arbitration against Russia for the repudiation of a gold mining concession. Veeder argues that counsel for Lena Goldfields urged the tribunal to look beyond Russian law, which was the proper law of the concession, to determine Russia’s liability for breach. The tribunal’s willingness to consider general principles of law in its assessment of Russia’s liability for breach is an early example of “internationalization,” which Veeder likens to a “caveman’s discovery of fire.”

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                                                                                                                    Internationalization via an Arbitration Clause

                                                                                                                    In the landmark Texaco award (Award on the Merits, 19 January 1977, 17 International Legal Materials 1), the French arbitrator Rene-Jean Dupuy held that an investment contract could be “internationalized” if it contains an arbitration clause, or a choice-of-law clause referring to international law, or a stabilization clause which shields the investor from any future legislative changes that interfere with the investor’s contractual rights. When parties agree to arbitrate their disputes, they agree to remove their dispute from the jurisdiction of the courts and submit it to the exclusive jurisdiction of an arbitral tribunal. As many investment contracts contain an arbitration clause, the proposal that internationalization occurs whenever there is an arbitration clause envisages a vast number of internationalized contracts.

                                                                                                                    • Fatouros, A. A. “International Law and the Internationalized Contract.” American Journal of International Law 74 (1980): 134–154.

                                                                                                                      DOI: 10.2307/2200907Save Citation »Export Citation »E-mail Citation »

                                                                                                                      Highly critical of the Texaco award, and in particular, the ability of an arbitration clause to trigger internationalization. “The presence of an arbitration clause can hardly be construed as necessarily a sign of internationalization—are all charter parties entered into by [S]tates internationalized?” (p. 136).

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                                                                                                                      Internationalization via a Choice-of-Law Clause

                                                                                                                      When parties identify international law as the governing law or one of the governing laws of their contract, this, according to Dupuy in the Texaco award, is a clear sign that the parties intended their contract to be internationalized.

                                                                                                                      • Kjos, Hege Elisabeth. Applicable Law in Investor-State Arbitration. Oxford: Oxford University Press, 2013.

                                                                                                                        DOI: 10.1093/acprof:oso/9780199656950.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                                                                        Although Kjos’ central thesis is the dual application of national and international law as the lex causae in investor-State arbitration, she appears to accept that investment contracts are internationalized when parties expressly designate international law as the governing law in a choice-of-law clause.

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                                                                                                                        • Sornarajah, M. “The Myth of International Contract Law.” Journal of World Trade Law 15 (1981): 187–217.

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                                                                                                                          Calling the handful of arbitral awards where the tribunal identified international law as the proper law, overriding the parties’ express choice of national law, as “low order sources” of international law, Sornarajah questions the authoritativeness of precedents on internationalization. Moreover, unlike English contract law for instance, there is no such thing as an international contract law. Even if a contract was to be governed by international law, there are no rules specific or at least applicable to contracts concluded by States.

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                                                                                                                          Internationalization via a Stabilization Clause

                                                                                                                          Stabilization clauses purport to freeze an investment contract and its legal environment at the point in time when the contract was made. They insulate the contract from any changes brought about by the subsequent legislative activity of the host State. Since stabilization clauses are designed to defy changes in host State law, contracts containing stabilization clauses cannot be subject to host State law. Therefore, stabilization clauses provide a very strong justification for internationalization.

                                                                                                                          • Cassese, Antonio, ed. Five Masters of International Law. Oxford: Hart, 2011.

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                                                                                                                            Contains the transcript of an interview with Dupuy and valuable insights into the drafting of the Texaco award (p. 1–48).

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                                                                                                                            • Wälde, Thomas, and Georges Ndi. “Stabilizing International Investment Commitments: International Law versus Contract Interpretation.” Texas Journal of International Law 31 (1996): 215–268.

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                                                                                                                              Explains why the purported legal effect of stabilization clauses raises “one of the most complex issues in international economic law.”

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                                                                                                                              Investment Treaty Arbitration

                                                                                                                              With close to 3000 BITs currently in force, many early-21st-century investments potentially benefit from treaty protection. And as virtually all investment treaties provide for investor-State arbitration without requiring the investor to exhaust local remedies, investment treaty arbitration has become a leading mode of settling investor-State disputes. There are three unique aspects to investment treaty arbitration which distinguish it from investment contract arbitration. First, investment treaty arbitration permits arbitration without contractual privity. Investment treaties are concluded between States for the benefit of investors who are not, by definition, contracting parties to a treaty. Investment treaties do not themselves contain agreements between protected investors and host States to arbitrate, even if a separate contract of some sort between the State and the investor would lurk about in most situations except cases involving an investment through merger or acquisition (see Sornarajah 2004, cited under Works Dating from 2000). Instead, investment treaties contain standing offers by host States to arbitrate disputes with protected investors. Consent to arbitrate is perfected, not at the point in time when the treaty is concluded, but only at the point in time when a protected investor indicates its acceptance of the offer to arbitrate. Second, a tribunal’s jurisdiction over and the admissibility of a claim are not always determined with sole reference to the applicable investment treaty. This is unlike investment contract arbitration where the tribunal derives its mandate solely from the arbitration clause. While the scope of a tribunal’s mandate in investment treaty arbitration is delimited by what the host State has offered to submit to arbitration, factors other than how the offer to arbitrate is drafted are also relevant when establishing a tribunal’s jurisdictional competence. Third, investment treaties contain provisions conferring substantive protection on qualifying investments. The standard cause of action in investment treaty arbitration, unlike in investment contract arbitration, is a breach of treaty, rather than a breach of contract. The host State’s international responsibility is engaged when an investor establishes to the satisfaction of the tribunal that the host State has violated one or more of its treaty obligations.

                                                                                                                              ICSID, NAFTA Chapter 11, and Other Arbitrations

                                                                                                                              The vast majority of investment treaty arbitrations are conducted under the auspices of ICSID, since many States are signatories to the ICSID Convention. A number are conducted under the auspices of other institutions such as the ICC, the Stockholm Chamber of Commerce, and the London Court of International Arbitration. In an ICSID arbitration, the arbitral proceedings are governed by the ICSID Arbitration Rules. The applicable investment treaty/treaties in an ICSID arbitration can be bilateral or multilateral. An example of a multilateral, or at least regional, instrument is Chapter 11 of NAFTA. An ICSID arbitration applying the provisions of NAFTA Chapter 11 will be conducted in accordance with the ICSID Additional Facility Rules, and not the ICSID Arbitration Rules, because Mexico, a Contracting State to NAFTA, is not a Contracting State to the ICSID Convention. Alvarez and Park 2003 situates NAFTA arbitration within the landscape of investment treaty arbitration. The chapters in Weiler 2005 explore a whole gamut of contemporary issues arising from the leading ICSID and NAFTA awards.

                                                                                                                              • Alvarez, Guillermo Aguilar, and William W. Park. “The New Face of Investment Arbitration: NAFTA Chapter 11.” Yale Journal of International Law 28 (2003): 365–408.

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                                                                                                                                This article considers the role and impact of NAFTA arbitrations on the broader landscape of investment arbitration and rulings in investment arbitration awards.

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                                                                                                                                • Weiler, Todd, ed. International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law. London: Cameron, 2005.

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                                                                                                                                  An illuminating collection of chapters written by leading scholars and practitioners; sheds light on the features of various fora in which investment claims are brought.

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                                                                                                                                  Arbitration without Contractual Privity

                                                                                                                                  When the agreement to arbitrate is located in a contract, only parties privy to that agreement are bound by an obligation to submit to arbitration. In investment treaty arbitration, contractual privity is replaced with a standing treaty offer by a host State to arbitrate and a subsequent acceptance by a protected investor of that offer.

                                                                                                                                  • Douglas, Zachary. “The Hybrid Foundations of Investment Treaty Arbitration.” British Yearbook of International Law 74.1 (2003): 151–289.

                                                                                                                                    DOI: 10.1093/bybil/74.1.151Save Citation »Export Citation »E-mail Citation »

                                                                                                                                    The first comprehensive study of the origins of, and the procedural and substantive issues that arise in, investment treaty arbitration.

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                                                                                                                                    • Paulsson, Jan. “Arbitration without Privity.” ICSID Review: Foreign Investment Law Journal 10.2 (1995): 232–257.

                                                                                                                                      DOI: 10.1093/icsidreview/10.2.232Save Citation »Export Citation »E-mail Citation »

                                                                                                                                      A seminal article and an indispensable introduction to what investment treaty arbitration is, and how it secures the protection of foreign investment through arbitration even in the absence of a contract between the investor and the host State.

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                                                                                                                                      The Scope of Submission to Arbitration

                                                                                                                                      In addition to the type or types of disputes that are deemed arbitrable, host States will offer to arbitrate only with protected investors and protected investments. The definition of a protected investor or a protected investment is usually found in the applicable investment treaty. However, when investment treaty arbitration is carried out under the auspices of an institution, such as the ICSID, the definition of a protected investor and a protected investment, if any, in the applicable institutional rules must also be satisfied before the tribunal’s jurisdiction over the dispute can be established.

                                                                                                                                      • Ho, Jean. “The Meaning of ‘Investment’ in ICSID Arbitrations.” Arbitration International 26.4 (2010): 633–648.

                                                                                                                                        DOI: 10.1093/arbitration/26.4.633Save Citation »Export Citation »E-mail Citation »

                                                                                                                                        This article discusses the application by an ICSID tribunal of the view that there is an objective understanding of what an investment is, according to the so-called “Salini” criteria, and the rejection of the Salini tribunal’s view by a majority ruling of the annulment committee.

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                                                                                                                                        • Potestà, Michele. “The Interpretation of Consent to ICSID Arbitration Contained in Domestic Investment Laws.” Arbitration International 27.2 (2011): 149–170.

                                                                                                                                          DOI: 10.1093/arbitration/27.2.149Save Citation »Export Citation »E-mail Citation »

                                                                                                                                          Discusses the special problems posed by domestic law clauses that grant jurisdiction to ICSID, and the interpretation of such clauses with reference to the ILC “Guiding Principles applicable to unilateral declarations of States capable of creating legal obligations.”

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                                                                                                                                          • Schreuer, Christoph. “Consent to Arbitration.” In The Oxford Handbook of International Investment Law. Edited by Peter Muchlinski, Federico Ortino, and Christoph Schreuer, 830–867. Oxford: Oxford University Press, 2008.

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                                                                                                                                            Lays down the different ways in which a host State can consent to arbitrate investment disputes with a foreign investor and explains how the scope of submission to arbitration in an investment treaty may be interpreted.

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                                                                                                                                            • Schreuer, Christoph H., with Loretta Malintoppi, August Reinisch, and Anthony Sinclair. The ICSID Convention: A Commentary. 2d ed. Cambridge, UK: Cambridge University Press, 2009.

                                                                                                                                              DOI: 10.1017/CBO9780511596896Save Citation »Export Citation »E-mail Citation »

                                                                                                                                              An extremely detailed review and discussion of the criteria for a protected investor and a protected investment pursuant to Article 25. See p. 71 et seq.

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                                                                                                                                              The State as Claimant

                                                                                                                                              Although protected investors are not obliged to submit to arbitration when a Contracting State initiates a claim under an investment treaty, the other Contracting State/s is/are. This is because investment treaties usually provide for State-State arbitration in addition to investor-State arbitration. In the case of State-to-State arbitration, the relevant treaty provision is equivalent to an agreement to arbitrate between the two or more Contracting States. Although the number of State-to-State investment arbitrations is much smaller than that of investor-State investment arbitrations, they raise a number of interesting issues such as the utility of State-to-State investment arbitration in light of its coexistence with investor-State arbitration. Roberts 2014 argues that State-to-State and investor-State arbitration are two sides of the same coin, while Trevino 2014 considers the complementarity of provisions on State-to-State and investor-State arbitration within the same treaty.

                                                                                                                                              • Roberts, Anthea. “State-to-State Investment Treaty Arbitration: A Hybrid Theory of Interdependent Rights and Shared Interpretive Authority.” Harvard International Law Journal 55.1 (2014): 1–70.

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                                                                                                                                                Welcomes the emergence of State-to-State arbitration as a prelude to a new era of investment treaty arbitration where a more balanced view of claimant rights, no longer the exclusive domain of investors, will be taken.

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                                                                                                                                                • Trevino, Clovis. “State-to-State Investment Treaty Arbitration and the Interplay with Investor-State Arbitration under the Same Treaty.” Journal of International Dispute Settlement 5.1 (2014): 199–233.

                                                                                                                                                  DOI: 10.1093/jnlids/idt027Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                  This article examines the interaction between State-to-State and investor-State arbitration under the same investment treaty and makes suggestions for coordinating inter-State and investor-State proceedings.

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                                                                                                                                                  The MFN Clause

                                                                                                                                                  While the vast majority of investment treaties provide for investor-State arbitration, not every treaty exempts the investor from resorting to local remedies, or at least from sitting out a prescribed cooling-off period, or provides for arbitration with a certain arbitral institution. As a result, investors dissatisfied with the mode or prescribed mode of dispute resolution provided for in an applicable treaty have invoked the MFN clause to import what they consider to be a more favorable dispute resolution clause from another investment treaty concluded by the host State. Whether an MFN clause can be used to alter the procedural requirements of a State’s offer to arbitrate in a particular treaty was considered in Emilio Agustín Maffezini v. The Kingdom of Spain (Decision of the Tribunal on Objections to Jurisdiction (Orrego Vicuña, Buergenthal, Wolf), 25 January 2000 (ICSID Case No. ARB/97/7)) and Plama Consortium Limited v. Republic of Bulgaria (Decision on Jurisdiction (Salans, van den Berg, Veeder), 8 February 2005 (ICSID Case No. ARB/03/24)).

                                                                                                                                                  • Paparinskis, Martins. “MFN Clauses and International Dispute Settlement: Moving Beyond Maffezini and Plama?” ICSID Review: Foreign Investment Law Journal 26.2 (2011): 14–58.

                                                                                                                                                    DOI: 10.1093/icsidreview/26.2.14Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                    Argues that MFN clauses should only be used to import more favorable substantive protection from other treaties. As a dispute settlement clause in a treaty offers procedural, not substantive, protection, it cannot be transposed from one treaty to another via an MFN clause. Moreover, there is no scientific way of determining if arbitrating under a particular institution is necessarily more favorable than arbitrating under another.

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                                                                                                                                                    • Radi, Yannick. “The Application of the Most-Favoured-Nation Clause to the Dispute Settlement Provisions of Bilateral Investment Treaties: Domesticating the ‘Trojan Horse.’” European Journal of International Law 18.4 (2007): 757–774.

                                                                                                                                                      DOI: 10.1093/ejil/chm031Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                      Provides an overview of the growing phenomenon of investors using MFN clauses to shop among treaties for the most favorable dispute settlement provision and critiques the decision in Plama v. Bulgaria.

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                                                                                                                                                      • Valenti, Mara. “The Most Favoured Nation Clause in BITs as a Basis for Jurisdiction in Foreign Investor-Host State Arbitration.” Arbitration International 24.3 (2008): 447–466.

                                                                                                                                                        DOI: 10.1093/arbitration/24.3.447Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                        Valenti addresses the question of the extension of the MFN clause to procedural matters as a question involving the proper interpretation of the specific MFN clause.

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                                                                                                                                                        Mass Claims

                                                                                                                                                        Argentina’s sovereign debt crisis, which affected hundreds of thousands of sovereign bondholders, fostered a new breed of investor claims—mass claims. This is where a large number of investors unite to bring a collective action, reminiscent of US class action lawsuits, against the host State. Despite attempts by three different tribunals to grapple with the issue (Abaclat & Others v. Argentina, Decision on Jurisdiction and Admissibility, 4 August 2011 (ICSID Case No. ARB/07/5); Ambiente Ufficio SpA & Ors v. Argentina, Decision on Jurisdiction and Admissibility, 8 February 2013 (ICSID Case No. ARB/08/9); Giovanni Alemanni & Others v. Argentina, Decision on Jurisdiction and Admissibility, 17 November 2014 (ICSID Case No. ARB/07/8)), it remains uncertain whether or how, if at all, mass claims can or should be included in or excluded from the scope of a host State’s submission to arbitration in an investment treaty.

                                                                                                                                                        • Rosenfeld, Friedrich. “Mass Claims in International Law.” Journal of International Dispute Settlement 4.1 (2013): 159–174.

                                                                                                                                                          DOI: 10.1093/jnlids/ids025Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                          Proposes that although there is currently no one-size-fits-all mass claim mechanism, existing techniques can be tailored in accordance with principles of economic analysis to suit all variations of a large number of claimants asserting claims under international law.

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                                                                                                                                                          • Strong, Stacie I. “From Class to Collective: The De-Americanization of Class Arbitration.” Arbitration International 26.4 (2010): 493–548.

                                                                                                                                                            DOI: 10.1093/arbitration/26.4.493Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                            Considers the extent to which collective actions in international arbitration mirror, and the extent to which they depart from, collective actions before domestic courts, as well as the enforceability of arbitral awards rendered by tribunals hearing collective claims.

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                                                                                                                                                            • Strong, Stacie I. Class, Mass, and Collective Arbitration in National and International Law. New York: Oxford University Press, 2013.

                                                                                                                                                              DOI: 10.1093/acprof:osobl/9780199772520.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                              A comparative survey of mass and collective claims with an emphasis on mass claims in investment treaty arbitration.

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                                                                                                                                                              Parallel Proceedings

                                                                                                                                                              Parallel proceedings in investment treaty arbitration occur when separate claims borne from the same factual matrix are brought against a host State. Parallel proceedings were brought respectively by CME (CME Czech Republic BV v. Czech Republic, Partial Award (Kühn, Schwebel, Hándl), 13 September 2001 (UNCITRAL)), a Dutch company, and Mr. Lauder (Lauder v. Czech Republic, Final Award (Briner, Cutler, Klein), 3 September 2001 (UNCITRAL)), a United States national and minority shareholder of CME, against the Czech Republic for the termination of a broadcasting license. Both claimants alleged that the termination was a violation of treaty obligations owed by the Czech Republic to protected investors, with CME invoking the Netherlands–Czech Republic investment treaty before a tribunal in Stockholm, and Mr. Lauder invoking the US–Czech Republic investment treaty before a London tribunal. Curiously, the Czech Republic refused to consolidate the two claims. The two awards on liability, rendered ten days apart, revealed diametrically opposed conclusions reached by the tribunals on the violation of very similar treaty obligations by the Czech Republic. CME prevailed in all of its treaty claims, while Mr. Lauder had earlier succeeded only on his claim for discriminatory and arbitrary treatment. It was not without some significance viewed from where the Czech Republic stood that Mr. Lauder had failed for lack of evidence that the actions of the Czech Republic had transferred, deprived, or interfered with Mr. Lauder’s property rights. An attempt was made before the Swedish courts to compel the Stockholm tribunal to take account of the London award, but failed on account of the fact that two different parties and two different treaties were involved. While both claims fell within the scope of submission to arbitration under the applicable treaty and therefore came within the jurisdictional competence of both tribunals, they both sought relief for the same grievance. The bringing of parallel proceedings may make tactical sense for an investor wishing to increase its chances of prevailing against the host State, but parallel proceedings are a drain on resources for both investors and host States.

                                                                                                                                                              • Hóber, Kaj. “Res Judicata and Lis Pendens in International Arbitration.” Recueil des Cours 366 (2014): 99–406.

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                                                                                                                                                                A detailed consideration of the effectiveness of res judicata and lis pendens, as well as consolidation, as techniques for controlling multiple, parallel proceedings in international arbitration. Sets out the criteria that must be met before courts and tribunals can dismiss or stay current proceedings on the basis of res judicata or lis pendens.

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                                                                                                                                                                • MacLachlan, Campbell. “Lis Pendens in International Litigation.” Recueil des Cours 336 (2008): 199–554.

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                                                                                                                                                                  A comprehensive overview of how the principle of lis pendens, or suit pending elsewhere, regulates parallel proceedings in international litigation. MacLachlan argues that courts and tribunals should not insist on the exact identity of the parties and of the causes of action before staying current proceedings in view of a parallel suit pending elsewhere, when a claimant employs the high risk strategy of suing in multiple forums.

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                                                                                                                                                                  • Waibel, Michael. “Coordinating Adjudication Processes.” In The Foundations of International Investment Law. Edited by Zachary Douglas, Joost Pauwelyn, and Jorge E. Viñuales, 499–530. Oxford: Oxford University Press, 2014.

                                                                                                                                                                    DOI: 10.1093/acprof:oso/9780199685387.003.0017Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                    Takes CME v. Czech Republic and Lauder v. Czech Republic as the starting point to study the phenomenon of decisional fragmentation due to the bringing of parallel proceedings in investment treaty arbitration. Argues that parallel investment arbitrations should be carefully coordinated so as to avoid overprotecting investors.

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                                                                                                                                                                    Merits

                                                                                                                                                                    Investment treaty arbitrations are usually bifurcated into two phases—the jurisdiction and admissibility phase, and the merits phase. In order to prevail, an investor not only has to persuade the tribunal that it has jurisdiction over the dispute, but also that the host State has violated treaty obligations. Pleadings in the merits phase clash over the liability of the host State, mostly for a breach of treaty, but also for a breach of contract.

                                                                                                                                                                    The Contract Claim/Treaty Claim Distinction

                                                                                                                                                                    In investment treaty arbitration, in particular ICSID arbitration, foreign investors can bring claims against host States for a breach of contract (Zachary Douglas, “Investment Treaty Arbitration and ICSID.” In James Crawford, Alain Pellet, and Simon Olleson, eds., The Law of International Responsibility [Oxford, UK: Oxford University Press, 2010], p. 815). The distinction between a contract claim and a treaty claim lies in the nature of the obligation that may be owed by the host State. If the obligation is contractual, as presented in a contract claim, the law applicable to the merits of the claim is the proper law of the underlying contract. If the obligation is spelled out in a treaty, as presented in a treaty claim, the law applicable to the merits of the claim is international law. The different applicable laws in contract claims and treaty claims were set out in Compañia de Aguas del Aconquija SA and Vivendi Universal v. Argentina, Decision on Annulment (Fortier, Crawford, Fernández Rozas), 3 July 2002 (ICSID Case No. ARB/97/3).

                                                                                                                                                                    • Crawford, James. “Treaty and Contract in Investment Arbitration.” Arbitration International 24.3 (2008): 351–374.

                                                                                                                                                                      DOI: 10.1093/arbitration/24.3.351Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                      Reiterates the contract claim/treaty claim distinction and argues against viewing umbrella clauses in investment treaties as tools for internationalizing contractual obligations. Outlines the four interpretive “schools of thought” on umbrella clauses.

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                                                                                                                                                                      • Shany, Yuval. “Contract Claims vs Treaty Claims: Mapping Conflicts between ICSID Decisions on Multisourced Investment Claims.” American Journal of International Law 99 (2005): 835–851.

                                                                                                                                                                        DOI: 10.2307/3396671Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                        Proposes that tribunals which refuse to hear contract claims submitted to investment treaty arbitration adopt a “disintegrationist” approach to dispute settlement, while tribunals that are willing to consider such claims after any contractually agreed forum, if any, has first been approached by the investor, adopt an “integrationist approach.”

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                                                                                                                                                                        Treaty Claim: Umbrella Clause

                                                                                                                                                                        A typical umbrella clause provides that the host State shall observe any obligation it may have entered into with respect to a protected investment or a protected investor. Umbrella clause claims are often, if not always, brought in conjunction with contract claims. If an umbrella clause secures every obligation owed by a host State to an investor, its reach arguably extends to contractual obligations, turning every contractual obligation into a treaty obligation. However, despite investors claiming textual support for this position, whether a breach of contract ipso facto is a breach of an umbrella clause remains a controversial issue.

                                                                                                                                                                        • Schill, Stephan. “Enabling Private Ordering: Function, Scope and Effect of Umbrella Clauses in International Investment Treaties.” Minnesota Journal of International Law 18 (2009): 1–98.

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                                                                                                                                                                          Discusses the existing and extensive literature on umbrella clauses. Argues that umbrella clauses enable “private ordering” by empowering private investors to hold States accountable before investment treaty tribunals for any opportunistic behavior, regardless of whether the promise or undertaking repudiated was given in a State’s commercial or sovereign capacity.

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                                                                                                                                                                          • Sinclair, Anthony. “The Origins of the Umbrella Clause in the International Law of Investment Protection.” Arbitration International 20.4 (2004): 411–434.

                                                                                                                                                                            DOI: 10.1093/arbitration/20.4.411Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                            Traces the birth and genesis of umbrella clauses, from their beginning as a stabilization clause in a concession contract concluded between the Anglo-Iranian Oil Company and the Government of Iran, to the debate over their inclusion, legal validity, and effect in various draft multilateral investment protection conventions, and finally, to their noticeable presence in a large number of BITs and ongoing significance to investment protection.

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                                                                                                                                                                            Treaty Claim: Fair and Equitable Treatment

                                                                                                                                                                            The obligation to accord fair and equitable treatment to protected investments and investors requires a host State to, among other things, maintain transparency in its dealings with the investor, refrain from arbitrary and discriminatory conduct, respect due process, and more controversially perhaps, meet an investor’s legitimate expectations. The evolving content of fair and equitable treatment as a treaty standard, as well as its relationship to the customary international minimum standard, has attracted considerable academic attention.

                                                                                                                                                                            • Diehl, Alexandra. The Core Standard of International Investment Protection: Fair and Equitable Treatment. The Hague: Kluwer Law International, 2012.

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                                                                                                                                                                              Argues that the fair and equitable treatment standard has, by virtue of being the standard most frequently found to have been breached by host States, eclipsed other treaty standards like full protection and security to become the centerpiece of investment protection.

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                                                                                                                                                                              • Dolzer, Rudolf. “Fair and Equitable Treatment: Today’s Contours.” Santa Clara Journal of International Law 12 (2014): 7–33.

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                                                                                                                                                                                Discusses how the fair and equitable treatment standard has moved to center stage over the years, and its capacity to extend to a wider range of activities than the other rules. In particular, cases to which the standard could apply include those which may not yet even have been expressed. Nonetheless, the known categories are discussed in this up-to-date survey which gives considerable attention to the subcategories of the subhead of legitimate expectations under the fair and equitable treatment head of claim.

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                                                                                                                                                                                • Fietta, Stephen. “Expropriation and the ‘Fair and Equitable’ Standard: The Developing Role of Investors’ ‘Expectations’ in International Investment Arbitration.” Journal of International Arbitration 23.5 (2006): 375–399.

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                                                                                                                                                                                  Argues that the frustration of an investor’s legitimate expectations by a host State will become the main ground on which fair and equitable treatment is breached, but counsels that legitimate expectations do not arise in the abstract, only pursuant to specific commitments made by the host State to the investor.

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                                                                                                                                                                                  • Kläger, Roland. Fair and Equitable Treatment in International Investment Law. Cambridge, UK: Cambridge University Press, 2011.

                                                                                                                                                                                    DOI: 10.1017/CBO9780511974915Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                    Like Tudor, Kläger argues that the interpretation of the fair and equitable treatment standard should be decoupled from the interpretation of the international minimum standard.

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                                                                                                                                                                                    • Paparinskis, Martins. The International Minimum Standard and Fair and Equitable Treatment. Oxford: Oxford University Press, 2013.

                                                                                                                                                                                      DOI: 10.1093/acprof:oso/9780199694501.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                      Delves into the historical sources of the fair and equitable treatment standard to argue that it grew from and is a more refined expression of the international minimum standard. Unlike Tudor and Kläger, Paparinskis adopts the view that the fair and equitable treatment standard should be interpreted in light of the international minimum standard.

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                                                                                                                                                                                      • Schreuer, Christoph. “Fair and Equitable Treatment in Arbitral Practice.” Journal of World Investment and Trade 6.3 (2005): 357–386.

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                                                                                                                                                                                        Surveys arbitral practice on fair and equitable treatment and identifies the main categories of host State conduct that might fall short of this treatment standard.

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                                                                                                                                                                                        • Sornarajah, M. “The Fair and Equitable Standard of Treatment: Whose Fairness? Whose Equity?” In Investment Treaty Law: Current Issues. Vol. 2, Nationality and Investment Treaty Claims and Fair and Equitable Treatment. Edited by Frederico Ortino, et al., 167–181. London: British Institute of International and Comparative Law, 2007.

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                                                                                                                                                                                          Takes the view that host States have subjected themselves to the capricious discretion of tribunals.

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                                                                                                                                                                                          • Sureda, Andrés Rigo. Investment Treaty Arbitration: Judging under Uncertainty. Cambridge, UK: Cambridge University Press, 2012.

                                                                                                                                                                                            DOI: 10.1017/CBO9781139136792Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                            There is a valuable discussion by Dr. Sureda of the vagueness of the fair and equitable treatment standard including whether it reflects the customary minimum standard of treatment, the degree of discretion conferred upon tribunals, and the exercise of such discretion.

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                                                                                                                                                                                            • Tudor, Ioana. The Fair and Equitable Treatment Standard in the International Law of Foreign Investment. Oxford: Oxford University Press, 2008.

                                                                                                                                                                                              DOI: 10.1093/acprof:oso/9780199235063.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                              The first monograph to explore the relationship between the fair and equitable treatment standard and the customary international minimum standard. Argues that the fair and equitable treatment standard is an autonomous standard and should be interpreted independently from the international minimum standard.

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                                                                                                                                                                                              • Vasciannie, Stephen. “The Fair and Equitable Treatment Standard in International Investment Law and Practice.” British Yearbook of International Law 70.1 (1999): 99–164.

                                                                                                                                                                                                DOI: 10.1093/bybil/70.1.99Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                A pioneering study on the definition and application of the fair and equitable treatment standard.

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                                                                                                                                                                                                • Yannaca-Small, Katia. “Fair and Equitable Treatment Standard: Recent Developments.” In Standards of Investment Protection. Edited by August Reinisch, 111–130. Oxford: Oxford University Press, 2008.

                                                                                                                                                                                                  DOI: 10.1093/acprof:oso/9780199547432.003.0006Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                  This chapter contains a good discussion of the overlap between the fair and equitable treatment standard and the full protection and security standard, especially in areas such as the host States’ obligation to ensure a stable legal and commercial environment for foreign investment.

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                                                                                                                                                                                                  Treaty Claim: Expropriation

                                                                                                                                                                                                  Expropriation refers to the taking or substantial deprivation of the enjoyment of property by the State. Expropriation can be direct or indirect. Indirect expropriation may occur when the host State’s interference devalues property while leaving control and access rights over the property intact. Indirect expropriation may also occur over a period of time during which the sum of a series of actions, which alone are not expropriatory, result in an expropriation. In this case, indirect expropriation is also called constructive or creeping expropriation. Expropriation is not in and of itself unlawful under international law. Investment treaties protect investors from the expropriation of their investments without appropriate compensation, in the absence of public purpose, and in disregard of due process. Investment treaties usually adopt the Hull formula of “prompt, adequate, and effective” compensation for expropriation. However, as there is no model method of quantifying compensation for expropriation, there can be considerable uncertainty over whether this criterion of legality is satisfied.

                                                                                                                                                                                                  • Christie, George. “What Constitutes a Taking of Property under International Law?” British Yearbook of International Law 38 (1962): 307–338.

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                                                                                                                                                                                                    A seminal article that distills indicia from case law on when governmental measures that interfere with alien property without affecting title to property, can nonetheless be characterized as an expropriation.

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                                                                                                                                                                                                    • Fachiri, Alexander. “International Law and the Property of Aliens.” British Yearbook of International Law 10 (1929): 32–55.

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                                                                                                                                                                                                      This article is a powerful response to the argument advanced by John Fischer Williams in an earlier article that international law does not recognize an alien’s right to property. Fachiri dissects the authorities relied on by Williams and concludes that they do not in fact support the point the Williams was making. Instead, these very same authorities point to the right to property as a fundamental right of aliens, whose violation is sanctionable under international law.

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                                                                                                                                                                                                      • Reinisch, August. “Expropriation.” In The Oxford Handbook of International Investment Law. Edited by Peter Muchlinski, Federico Ortino, and Christoph Schreuer, 407–458. Oxford: Oxford University Press, 2008a.

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                                                                                                                                                                                                        The subject is the author’s forte, and this is a comprehensive overview of the categories of expropriation including indirect, creeping, and regulatory expropriation giving a useful account of the prerequisites, or “crucial elements,” for a finding of indirect expropriation. It contains treatment of arbitral and judicial practice up to that point.

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                                                                                                                                                                                                        • Reinisch, August. “Legality of Expropriations.” In Standards of Investment Protection. Edited by August Reinisch, 171–204. Oxford: Oxford University Press, 2008b.

                                                                                                                                                                                                          DOI: 10.1093/acprof:oso/9780199547432.003.0009Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                          The prerequisites for a lawful expropriation remain a live subject. This book chapter gives an account of the criteria under both international custom and treaty law. There is also a discussion of the implications of legality/illegality of an expropriation from the perspective of remedies.

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                                                                                                                                                                                                          • Reisman, W. Michael, and Robert D. Sloane. “Indirect Expropriation and Its Valuation in the BIT Generation.” British Yearbook of International Law 74 (2003): 115–150.

                                                                                                                                                                                                            DOI: 10.1093/bybil/74.1.115Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                            This article first defines and distinguishes indirect expropriations, creeping expropriations, and consequential expropriations before proposing that methods of valuing expropriated property should be tailored to the type of expropriation in question.

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                                                                                                                                                                                                            • Sabahi, Borzu. Compensation and Restitution in Investor-State Arbitration: Principles and Practice. Oxford: Oxford University Press, 2011.

                                                                                                                                                                                                              DOI: 10.1093/acprof:oso/9780199601189.001.0001Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                              This monograph chronicles the development of the international law on reparation and its application in investment treaty arbitration. Chapters 5, 6, and 7 are useful reference points for the principles, heads, and mitigation of compensation in investor-State disputes.

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                                                                                                                                                                                                              • Wälde, Thomas, and Abba Kolo. “Environmental Regulation, Investment Protection and ‘Regulatory Taking’ in International Law.” International and Comparative Law Quarterly 50 (2001): 811–848.

                                                                                                                                                                                                                DOI: 10.1093/iclq/50.4.811Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                This article examines the limits imposed by international law on environmental regulation that interferes with a foreign investor’s property rights. The authors examine a host of factors, including a State’s contractual commitments to an investor, that may impact a finding of whether governmental regulation amounts to a compensable expropriation.

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                                                                                                                                                                                                                • Weston, Burns. “‘Constructive Takings’ under International Law: A Modest Foray into the Problem of ‘Creeping Expropriation.’” Vanderbilt Journal of International Law 16 (1975–1976): 103–175.

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                                                                                                                                                                                                                  A dated but nonetheless useful study of decisional trends which assist in determining when non-compensable government regulations undertaken in the exercise of police powers cross the line into compensable expropriation.

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                                                                                                                                                                                                                  Treaty Claims: Full Protection and Security, National Treatment, Discrimination, Arbitrariness

                                                                                                                                                                                                                  Full protection and security and arbitrariness are absolute standards of protection whereas national treatment and discrimination are relative or contingent standards. Full protection and security is lacking when the physical, legal, or economic security is compromised by the action or inaction of the host State. Arbitrariness, or capricious behavior on the part of the host State, is rarely seen, rarely proved, and therefore infrequently pleaded in investment treaty arbitration. The national treatment standard requires the host State to treat foreign investors at least as favorably as domestic investors. Host State conduct is discriminatory if no reasonable justification is offered for treating investors in like circumstances differently.

                                                                                                                                                                                                                  • Bishop, Doak R., James R. Crawford, and W. Michael Reisman. Foreign Investment Disputes: Cases, Materials and Commentary. 2d ed. The Hague: Kluwer Law International 2014.

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                                                                                                                                                                                                                    Provides relevant excerpts from the small pool of arbitral awards where claims on full protection and security, national treatment, discrimination, and arbitrariness were made.

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                                                                                                                                                                                                                    • Bjorklund, Andrea K. “National Treatment.” In Standards of Investment Protection. Edited by August Reinisch, 29–58. Oxford: Oxford University Press, 2008.

                                                                                                                                                                                                                      DOI: 10.1093/acprof:oso/9780199547432.003.0003Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                      Provides a concise conceptual introduction which includes treatment of the history of the concept of national treatment, the forms of treaty clauses, including the distinction between pre- and post-establishment treatment, and the foundational NAFTA case law in the field.

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                                                                                                                                                                                                                      • Moss, Giudetta Cordero. “Full Protection and Security.” In Standards of Investment Protection. Edited by August Reinisch, 131–150. Oxford: Oxford University Press, 2008.

                                                                                                                                                                                                                        DOI: 10.1093/acprof:oso/9780199547432.003.0007Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                        Provides a good introduction and overview, together with a useful treatment of the growing overlap with fair and equitable treatment.

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                                                                                                                                                                                                                        • Schreuer, Christoph. “The Protection of Investments in Armed Conflicts.” Transnational Dispute Management 3 (2012): 30.

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                                                                                                                                                                                                                          A good essay by a distinguished author on the application of the full protection and security standard in situations of armed conflict. It includes a treatment of war clauses, general security exceptions, and force majeure.

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                                                                                                                                                                                                                          Defenses to Treaty Claims: Necessity and Non-Precluded Measures

                                                                                                                                                                                                                          Common defenses that the host State will raise in response to a treaty claim include the defense that the measures complained of were taken out of necessity, and the defense that the measures complained of are not precluded by the applicable treaty in the first place. Waibel 2007 discusses the use of the defense of necessity when there is an economic crisis, while Burke-White and von Staden 2008 discusses the application of non-precluded measures provisions in investment treaties.

                                                                                                                                                                                                                          • Burke-White, William W., and Andreas von Staden. “Investment Protection in Extraordinary Times: The Interpretation and Application of Non-Precluded Measures Provisions in Bilateral Investment Treaties.” Virginia Journal of International Law 48 (2008): 307–410.

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                                                                                                                                                                                                                            This article argues that tribunals should accord host States relying on the defense of non-precluded measures a margin of appreciation when assessing the validity of this defense.

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                                                                                                                                                                                                                            • Waibel, Michael. “Two Worlds of Necessity in ICSID Arbitration.” Leiden Journal of International Law 20 (2007): 637–648.

                                                                                                                                                                                                                              DOI: 10.1017/S0922156507004293Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                              Waibel is critical of the use of the defense of necessity as a shield to State responsibility, arguing that the customary international law understanding of necessity is not sophisticated enough to help tribunals determine whether emergency recovery measures are necessary in light of Argentina’s economic meltdown.

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                                                                                                                                                                                                                              The Backlash against International Investment Arbitration

                                                                                                                                                                                                                              The edifice of international investment arbitration has its critics. Although perceptions of a system heavily weighted in favor of foreign investors are challenged by empirical studies which point to a balanced win-loss outcome for investors and States, doubts over the longevity of the system, and disenchantment with its trends and workings remain. This is the focal point of discussion in Waibel, et al. 2010. As States are respondents in international investment arbitration and are called to justify their treatment of an aggrieved investor/s before a panel of arbitrators, there is a very public dimension to private adjudication. International investment arbitration, in particular investment treaty arbitration, will flourish only if States are still willing to arbitrate disputes with foreign investors. States are free to exit the system and some Latin American States have already taken the lead in expressing disapproval by terminating their investment treaties. Other States are reconsidering the actual benefit that international investment arbitration brings to the promotion and protection of foreign investment. As there is no formal system of precedent in international arbitration, no tribunal is strictly bound by the findings of an earlier tribunal. Although international investment arbitration tribunals do consider, cite, and even follow earlier awards, there is no convergence toward a common position on many topical issues in international investment law. Concerns over the incoherent development of the law are compounded by the revelation that most arbitrator appointments in international investment arbitration fall on a small, select group of individuals. These private individuals, whose awards undoubtedly shape international investment law, wield great power over States as public law adjudicators.

                                                                                                                                                                                                                              • Waibel, Michael, Asha Kaushal, Kyo-Hwa Chung, and Claire Balchin, eds. The Backlash against Investment Arbitration. The Hague: Kluwer Law International, 2010.

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                                                                                                                                                                                                                                This book, which grew out of a conference held at Harvard Law School in 2008, represents a serious attempt to respond to the critics of investment arbitration. Over thirty-one chapters, topical problems such as inflexible treaty provisions and allowance for forum shopping are discussed with a view to their amelioration and eventual resolution.

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                                                                                                                                                                                                                                Perceptions of Investor Overprotection

                                                                                                                                                                                                                                Perceived expansionist trends in investment treaty interpretation, ostensibly for the benefit of investors, have to be balanced against empirical and sociological studies which suggest that the body of international investment arbitration awards do not exhibit a firm pro-investor bias.

                                                                                                                                                                                                                                Empirical Studies

                                                                                                                                                                                                                                Existing empirical studies appear divided on the subject of a pro-investor bias on the part of arbitral tribunals hearing investor-State disputes. The Franck 2009 study discounts the relevance of a host State’s developmental status to the outcome of the dispute, implying that arbitrators are not necessarily more sympathetic toward investors investing in developing economies. The Kapeliuk 2010 study argues that elite investment arbitrators do not favor investors. Finally, the van Harten 2012 study discerns from treaty interpretation trends a systemic bias in favor of investors.

                                                                                                                                                                                                                                • Franck, Susan D. “Development and Outcomes of Investment Treaty Arbitration.” Harvard International Law Journal 50.2 (2009): 435–490.

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                                                                                                                                                                                                                                  An empirical study which tests the hypothesis of a direct correlation between the developmental status of a respondent State to an investment treaty arbitration, the developmental status of the presiding arbitrator, and the outcome of the dispute. The findings suggest that there is no direct correlation between developmental status and outcome. Therefore, at the macro-level at least, the system is not skewed toward the developed world.

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                                                                                                                                                                                                                                  • Kapeliuk, Daphne. “The Repeat Appointment Factor: Exploring Decision Patterns of Elite Investment Arbitrators.” Cornell Law Review 96 (2010): 47–90.

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                                                                                                                                                                                                                                    This article relies on empirical research to show that elite investment arbitrators are not biased in favor of investors. Kapeliuk also argues that, far from engendering bias, the system incentivizes arbitrators to remain impartial in order to maintain their professional reputations and ensure repeat appointments.

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                                                                                                                                                                                                                                    • van Harten, Gus. “Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of Investment Treaty Arbitration.” Osgoode Hall Law Journal 50.1 (2012): 211–268.

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                                                                                                                                                                                                                                      An empirical study that tests the hypothesis of systemic bias against States in investment treaty arbitration by examining arbitrator behavior. Unlike the Franck study above, van Harten looks at interpretation trends rather than outcomes. The findings here suggest perceptible bias in favor of claimants in general, and in favor of claimants from Western capital-exporting States in particular.

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                                                                                                                                                                                                                                      Sociological Studies

                                                                                                                                                                                                                                      A number of works attempt to study and unravel the ideological underpinnings of international investment arbitration. Dezalay and Garth 1996 examines how ideological forces have shaped the growth of the industry of investment arbitration. Sornarajah 2012 argues that clashes in ideology will eventually tear the system of investment arbitration apart. Gaillard 2015 studies the actors in investment arbitration, and considers how norms are created and refined through the advancement of certain personally held beliefs.

                                                                                                                                                                                                                                      • Dezalay, Yves, and Bryant G. Garth. Dealing in Virtue: International Commercial Arbitration and the Construction of a Transnational Legal Order. Chicago: University of Chicago Press, 1996.

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                                                                                                                                                                                                                                        Notwithstanding its title, there is no better sociological work on the growth of investment arbitration as an industry, and its true roots. The authors discuss the modern role of international law firms, London sets of barristers’ chambers and the Swiss arbitration boutiques (although that discussion is now dated), the “internationalization of private law,” investment contracts, and globalization (“the acceleration of the internationalization of economies”) through the General Agreement on Tariffs and Trade (GATT)/World Trade Organization (WTO) and NAFTA. NAFTA and the World Bank receive fairly prominent treatment, and the book provides some interesting accounts of arbitrators and well-known arbitrations.

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                                                                                                                                                                                                                                        • Gaillard, Emmanuel. “Sociology of International Arbitration.” Arbitration International 31.1 (2015): 1–17.

                                                                                                                                                                                                                                          DOI: 10.1093/arbint/aiv021Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                                          The author is a leading practitioner in investment arbitration who is also known for his scholarly work. This article is a transcript of the 2015 Freshfields Lecture where the author introduces the actors and rituals in international arbitration before exploring how norms are generated amidst the pursuit of varying ideals, values, and beliefs by these actors and during these rituals.

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                                                                                                                                                                                                                                          • Sornarajah, M. “Revolution or Evolution in International Investment Law: The Descent into Normlessness.” In Evolution in Investment Treaty Law and Arbitration. Edited by Chester Brown and Kate Miles, 631–657. Cambridge, UK: Cambridge University Press, 2012.

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                                                                                                                                                                                                                                            Captures the ongoing struggle between arbitrators seeking to give ideological interpretations to investment treaties and States seeking to curb expansionist trends in treaty interpretation. Sornarajah argues that the struggle triggers a “descent into normlessness” which permeates and undermines the entire system of investment arbitration.

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                                                                                                                                                                                                                                            Politicization of Investor-State Disputes

                                                                                                                                                                                                                                            States are not powerless against expansionist trends in investment treaty interpretation. What States can create they can dismantle. And in the case of growing disenchantment with international investment arbitration, States, as treaty parties, can aid tribunals with treaty interpretation. States can also review and revise their treaty practice to limit recourse by investors to investor-State arbitration.

                                                                                                                                                                                                                                            • Roberts, Anthea. “Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States.” American Journal of International Law 104 (2010): 179–225.

                                                                                                                                                                                                                                              DOI: 10.5305/amerjintelaw.104.2.0179Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                                              Eloquently argues that States have the means and wherewithal to influence treaty interpretation. They can do so by withdrawing from the system of investment treaty arbitration that they created, or by participating in the interpretive process. One manifestation of the former is the denunciation of the ICSID Convention or the termination of BITs. One manifestation of the latter is to issue an interpretive note.

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                                                                                                                                                                                                                                              Fragmented Arbitral Jurisprudence

                                                                                                                                                                                                                                              The absence of a formal system of precedent in international investment arbitration has resulted in a host of conflicting decisions.

                                                                                                                                                                                                                                              • Cheng, Tai Heng. “Precedent and Control in Investment Treaty Arbitration.” Fordham International Law Journal 30.4 (2006): 1014–1049.

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                                                                                                                                                                                                                                                Although there is no formal system of precedent in international arbitration, Cheng describes the existence of an informal but imperfect system of precedent in investment treaty arbitration. Respect for precedent can be enhanced through positive reinforcement among arbitrators, the careful selection of arbitrators by parties and counsel, and the exercise of self-regulation and self-restraint by the arbitrators.

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                                                                                                                                                                                                                                                • Fauchald, Ole Kristian. “The Legal Reasoning of ICSID Tribunals: An Empirical Analysis.” European Journal of International Law 19.2 (2008): 301–364.

                                                                                                                                                                                                                                                  DOI: 10.1093/ejil/chn011Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                                                  An empirical study of over one hundred awards on the interpretive arguments used by ICSID tribunals in light of the principles of treaty interpretation enshrined in the Vienna Convention on the Law of Treaties. The findings suggest that ICSID tribunals, despite being ad hoc tribunals relying on different legal sources, are already gravitating toward a common methodology of international law.

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                                                                                                                                                                                                                                                  • Franck, Susan D. “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions.” Fordham Law Review 73 (2005): 1521–1626.

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                                                                                                                                                                                                                                                    This article is the first to link the emergence of conflicting decisions on a point of law and a “legitimacy crisis” in investment treaty arbitration. It argues that legitimacy can be restored with the creation of a permanent appellate body empowered to conduct substantive review, and thereby ensure consistency in legal rulings, of all investment treaty awards.

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                                                                                                                                                                                                                                                    Private Law-Makers for Public Law Adjudication

                                                                                                                                                                                                                                                    International investment arbitration has been regarded as a species of public law adjudication because the conduct of a State toward a private entity comes under scrutiny. This has prompted on the one hand, remarks that arbitrators are ill-equipped to discharge the same functions as national judges, and on the other hand, suggestions that arbitrators can simply apply public law principles developed by domestic and regional courts, such as the principle of proportionality, to investor-State disputes.

                                                                                                                                                                                                                                                    • Schill, Stephan W, ed. International Investment Law and Comparative Public Law. Oxford: Oxford University Press, 2010.

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                                                                                                                                                                                                                                                      A large collection of essays that examines the relationship between international investment arbitration and domestic judicial review of governmental conduct. The similarities between international investment arbitration and public law adjudication may foster the transplantation of generally recognized public law principles from the domestic to the international plane.

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                                                                                                                                                                                                                                                      • van Harten, Gus. Investment Treaty Arbitration and Public Law. Oxford: Oxford University Press, 2007.

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                                                                                                                                                                                                                                                        The leading monograph on investment treaty arbitration as a species of public law adjudication. The author is essentially critical of how arbitrators have discharged their judging function in investment treaty arbitration. The absence of accountability, openness, coherence, and independence (all essential features of public law adjudication) in investment treaty arbitration is proof of a system that is critically flawed.

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                                                                                                                                                                                                                                                        • van Harten, Gus, and Martin Loughlin. “Investment Treaty Arbitration as a Species of Global Administrative Law.” European Journal of International Law 17 (2006): 121–150.

                                                                                                                                                                                                                                                          DOI: 10.1093/ejil/chi159Save Citation »Export Citation »E-mail Citation »

                                                                                                                                                                                                                                                          This is the first article to assimilate investment treaty arbitration to judicial review of administrative action on the basis that both systems are designed “to control the exercise of public authority” (p. 146).

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                                                                                                                                                                                                                                                          Termination of BITs

                                                                                                                                                                                                                                                          The surest way for a State to turn its back on investment treaty arbitration is to terminate its existing investment treaties. Ecuador and South Africa have already proceeded to do so. A number of other States like Bolivia and Indonesia (at least according to some current reports) are expected to follow suit. That said, a State is not freed from its obligations under the treaty immediately upon notice of termination. The various issues raised by investment treaty termination are considered in Carska-Sheppard 2009.

                                                                                                                                                                                                                                                          • Carska-Sheppard, Andrea. “Issues Relevant to the Termination of Bilateral Investment Treaties.” Journal of International Arbitration 26.6 (2009): 755–771.

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                                                                                                                                                                                                                                                            Carska-Sheppard favors States renegotiating, rather than terminating, their investment treaties. Political sensitivities counsel the maintenance, rather than the destruction, of the investor-State relationship.

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                                                                                                                                                                                                                                                            Further Readings in International Investment Arbitration

                                                                                                                                                                                                                                                            International investment arbitration develops principally through arbitral awards. In order to understand international investment arbitration, an understanding of its basic building blocks, arbitral awards, is indispensable. The following is a list of one edited book and six textbooks which categorize and discuss the most important awards by topic. Some textbooks run into multiple editions. They attest to the vast potential of international investment arbitration as a field of research as international investment law evolves and matures.

                                                                                                                                                                                                                                                            Electronic Resources

                                                                                                                                                                                                                                                            Electronic research is now an important part of research into international investment arbitration. The digitization of journals, books, academic proceedings, arbitral awards, and other documents has allowed electronic research to take root. This final section introduces, in alphabetical order, the key databases and electronic resources on international investment arbitration.

                                                                                                                                                                                                                                                            • HeinOnline.

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                                                                                                                                                                                                                                                              A subscription database with one of the largest collections of US-based international and comparative law journals. Also contains a full record of the proceedings of the American Society of International Law. Fully searchable using key words.

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                                                                                                                                                                                                                                                              • Institut de Droit International.

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                                                                                                                                                                                                                                                                This is a private think-tank comprising distinguished scholars whose resolutions, while not binding, have nonetheless played a role in shaping international investment law. Resolutions are searchable through a thematic index and by year.

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                                                                                                                                                                                                                                                                • Investment Arbitration Reporter.

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                                                                                                                                                                                                                                                                  A subscription news service with the latest updates and developments in the world of international investment arbitration. It is also usually the first to publish the texts of awards which parties have agreed to make publicly available.

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                                                                                                                                                                                                                                                                  • Investor-State Law Guide.

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                                                                                                                                                                                                                                                                    A subscription database of publicly available investment arbitration awards, investment treaties and miscellaneous investment law-related documents. It contains useful features such as a very detailed subject tree and a jurisprudence citator which pinpoints where and when a given award has been cited in subsequent awards. All materials are fully searchable using key words.

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                                                                                                                                                                                                                                                                    • ITALaw.

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                                                                                                                                                                                                                                                                      A free and large repository of publicly available investment arbitration awards, investment treaties, and miscellaneous investment law–related documents and literature. A recent upgrade allows users to search the texts of all the awards on the website.

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                                                                                                                                                                                                                                                                      • KluwerArbitration.

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                                                                                                                                                                                                                                                                        This is a subscription database with a blog, a well-curated collection of digitized books, and specialist arbitration journals such as Arbitraje: Revista de Arbitraje Comercial y de Inversiones, Revista Brasileira de Arbitragem, and Revue de l’Arbitrage. Fully searchable using key words.

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                                                                                                                                                                                                                                                                        • LexisNexis France.

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                                                                                                                                                                                                                                                                          A subscription database of French-language journals, including the Journal du Droit International. Fully searchable using key words.

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                                                                                                                                                                                                                                                                          • Oxford Scholarship Online.

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                                                                                                                                                                                                                                                                            A subscription database which houses the leading generalist and specialist journals which publish works on international investment arbitration, including the British Yearbook of International Law, the European Journal of International Law, Arbitration International, and the Journal of International Dispute Settlement. Articles can be accessed online in advance of the print publication. Fully searchable using key words.

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                                                                                                                                                                                                                                                                            • Westlaw.

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                                                                                                                                                                                                                                                                              This is a subscription database with possibly the largest collection of law journals, legislation, treatises, and judicial decisions from the United Kingdom and former Commonwealth jurisdictions. It is fully searchable through the use of key words.

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