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The European Arbitration Review 2017

Reasserting Control Over State Consent to Investment Arbitration – Some Recent Trends in Treaty-Making

With the number of investment treaty arbitrations continuously rising to reach a total of 696 publicly known cases in January 2016,1 and a growing number of states – 107 – thus having to act as defendants in these proceedings, investment treaty-making is experiencing material changes. While the overall number of bilateral investment treaties (BITs) is still on the rise, the yearly number of additional investment treaties has declined2 and the United Nations Conference on Trade and Development (UNCTAD) has reported this as a shift from the ‘IIA [International Investment Agreement] rush’ in the 1990s to early 2000s to a period of ‘re-orientation’ during which states have focused on negotiations of a smaller number of treaties, sometimes at the regional level, with greater attention being devoted to the re-balancing of interests being protected in the treaties. Specifically, as explained by UNCTAD, ‘governments have entered into a phase of evaluating the costs and benefits of IIAs and reflecting on their future objectives and strategies as regards these treaties,’3 sometimes under mounting pressure from the civil society. As a result, states have paid particular care both to the scope of the substantive protections being granted to foreign investors and to any advance consent to investment treaty arbitration for any disputes arising with foreign investors.

This chapter examines the various ways in which states have sought to reassert control over their consent to investment arbitration. The analysis of recent investment treaties or investment chapters within free trade agreements, including model treaties, shows that states have increasingly sought to narrow the scope of their consent to investment arbitration or conditioned it on various prerequisites. Along the same lines, states have devised tools to filter or provide for disincentives for frivolous claims. States have also demonstrated a growing interest in developing tools to ensure that their position be heard throughout and after the arbitral process – specifically through non-disputing state submissions and potential appeal mechanisms. We set forth below a brief overview of a few options states have recently chosen in an attempt to reassert control over their consent to investment treaty arbitration:

  • narrowing the scope of their consent to arbitration through stricter jurisdictional requirements and carve-outs;
  • multiplying prerequisites for an investor to initiate arbitration, such as, for instance, exhaustion of local remedies, waiver clauses, statutes of limitations and requiring detailed notices of disputes;
  • limiting frivolous claims, through early dismissal mechanisms and cost-shifting; and
  • ensuring that the state’s views be heard throughout the arbitration process by way of non-disputing party submissions and binding inter-state interpretations, as well as thereafter with a potential appeal mechanism.

Narrowing the scope of state consent to investment arbitration

Although narrow jurisdictional clauses are not a new thing, and investment treaty tribunals regularly have to interpret such clauses,4 states have paid particular attention in recent model BITs and investment treaties to all aspects of a tribunal’s jurisdiction, including treaty provisions that would have a direct effect on the tribunal’s jurisdiction ratione materiae and ratione personae.

In particular, well aware of the continuing debate in investment treaty case law about the meaning of the open-ended asset-based definitions of the term ‘investment’ in IIAs and their interaction with the inherent or objective characteristics of an investment – contribution, duration and risk – a number of states chose to expressly provide for such conditions (sometimes in tandem with others). For example, the definition of investment in the finalised draft of February 2016 of the Comprehensive Economic and Trade Agreement between the European Union (EU) and Canada (CETA Finalised Draft or CETA)5 provides that ‘investment means every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.’6 Other recent investment treaties7 and model BITs8 provide for similar conditions for an investment to qualify for protection.

Learning from the aftermath of the various financial crises and examples of foreign investors seeking to bring international arbitration against states in relation to sovereign debt instruments,9 states have also in their recent agreements expressly excluded from the definition of investments sovereign bonds and/or pure portfolio investments.10

Along the same lines, states have learned from experience that including safeguards in their investment treaties against what is commonly referred to as ‘treaty shopping’ proves useful in circumscribing the scope ratione personae of their consent to investment treaty arbitration. In particular, in a growing number of recent investment treaties, corporate nationality is determined, inter alia, on the basis of the place of substantial business activities of the investor.11 In parallel, while they are not a new phenomenon in investment arbitration either,12 recent treaties also tend to include a denial-of-benefits clause, which allows a host state to deny an investor from the other contracting party the benefits of the treaty, including recourse to arbitration, if that investor is owned or controlled by investors of third states and does not have any substantial business activity in the host state.13

The EU-Singapore Draft Free Trade Agreement (FTA)14 further expressly provides for an arbitral tribunal’s power to decline jurisdiction in cases of belated corporate structuring or restructuring in cases where ‘[…] the dispute had arisen, or was very likely to arise, at the time when the claimant acquired ownership or control of the investment subject to the dispute, and the tribunal determines based on the facts that the claimant has acquired ownership or control of the investment for the main purpose of submitting the claim to arbitration under this Section.’15 Similar clauses have been included in treaties currently under negotiation by the European Union.16 This power has long been recognised by investment treaty tribunals discarding investment treaty claims for lack of jurisdiction ratione temporis17 or abuse of process in case of belated corporate restructuring,18 but some states have chosen to ‘codify’ this approach in their recent treaty-making.

Multiplying prerequisites to initiation of investor-state arbitration

Investor-state dispute resolution clauses have long contained prerequisites to the initiation of investor-state arbitration, such as cooling-off periods during which the investor must seek amicable settlement of the dispute19 and fork-in-the-road provisions20 requiring that the investor bring the dispute either before domestic courts or before an investment treaty tribunal. Recent treaty-making practice shows a tendency of states to provide for more complex investor-state dispute resolution clauses, multiplying the number of prerequisites and thereby allowing the state to reassert greater control over the process.

The gradual evolution of the language in the United States Model BITs is striking in this respect. While article VI of the 1984 United States Model BIT already included some prerequisites to initiation of investor-state arbitration, for example, consultation and negotiation prior to arbitration with a mandatory cooling-off period and a fork-in-the-road provision, the most recent US Model BIT, in addition to a cooling off-period, now provides for:

  • a detailed notice of dispute to be submitted at least 90 days before submitting the claim to arbitration, containing legal and factual basis for each claim, the relief sought and the approximate amount of damages claimed;21
  • a three-year statute of limitation since the claimant first acquired, or should have first acquired, knowledge of the alleged breach;22 and
  • a waiver by the claimant and the enterprise, on behalf of which the claimant brings the claim, of any right to pursue court or other dispute settlement proceedings with respect to any measure alleged to constitute a breach.23

Other recent investment treaties, such as the Canada-Serbia BIT, the Canada-Côte d’Ivoire BIT, the EU-Viet Nam Draft FTA, and CETA, include similarly complex dispute resolution clauses.24

Both the detailed notice of dispute and the three-year statute of limitation serve at bottom to limit the number of arbitrations being brought by narrowing the time frame to do so or by ensuring that the state be given enough time and notice to consider amicable settlement of the dispute once a dispute has been brought to its attention.

States may also choose to limit the number of parallel proceedings being brought against them by inserting waiver provisions. As explained by one commentator, ‘[b]y insulating the dispute to the specific claims of the investor-claimant against the host state away from other parallel proceedings or actions, waivers can be seen as a kind of jurisdictional control device where host states can avoid having to defend against a multiplicity of suits arising from substantially similar or identical facts, parties, and/or causes of action.’25 In that sense, waiver provisions as jurisdictional control mechanisms fall within the same category of clauses as fork-in-the-road provisions, which prevent investors from pursuing investment treaty arbitration once they have elected to bring the dispute before domestic courts.

The effectiveness of both waiver provisions and fork-in-the-road provisions, however, is highly dependent on the terms of the provisions themselves. In particular, states have learned again from experience that investment treaty tribunals may choose to interpret fork-in-the-road provisions in a formalistic manner by applying a formal triple identity test – identity of parties, causes of action and object – and accordingly have provided for fork-in-the-road provisions or waiver provisions that pertain to proceedings concerning ‘any measure’,26 the ‘same measure’,27 or the ‘same treatment’28 alleged to constitute a breach of the investment treaty.

For example, the EU-Singapore Draft FTA requires that (i) the claimant withdraw any pending claim before a domestic court or international tribunal concerning the same treatment that is alleged to breach the provisions of the agreement and to waive any right to pursue such claim in the future;29 and (ii) that no final award concerning the same treatment has been rendered in proceedings instigated by the claimant before another international tribunal established under this agreement, or any other treaty or contract.30

Finally, whereas one of the main perceived advantages of investment treaty arbitration over diplomatic protection was the lack of a general requirement of exhaustion of local remedies,31 the so-called ‘backlash’ against investment treaty arbitration has led some states to provide for a requirement of prior resort to domestic courts or exhaustion of local remedies as part of their recent model treaties. For example, the 2016 Indian Model BIT requires that within one year from the time the measure became known, the investor ‘must first submit its claim before the relevant domestic courts or administrative bodies of the Defending Party for the purpose of pursuing domestic remedies in respect of the same measure or similar factual matters for which a breach of this Treaty is claimed.’32 While this obligation is on its face drafted as an obligation of prior resort to domestic courts, the model BIT refers to this obligation as one of exhaustion of local remedies unless ‘there are no available domestic legal remedies capable of reasonably providing any relief in respect of the same measure or similar factual matters for which a breach of this Treaty is claimed by the investor’33 or five years have elapsed after ‘exhausting all judicial and administrative remedies’ and ‘no resolution has been reached satisfactory to the investor.’34 Although it is likely that the language of such a clause will need to be amended and clarified during treaty negotiations, the purpose of such a clause is indeed to impose on the investor an obligation to resort to and exhaust all local remedies.

Another example of the requirement to exhaust local remedies is the 2012 Model BIT of the South African Development Community35 (the 2012 SADC Model BIT), which provides that an investor may not submit a claim to arbitration unless it ‘(i) has first submitted a claim before the domestic courts of the Host State for the purpose of pursuing local remedies, after the exhaustion of any administrative remedies, relating to the measure underlying the claim under this Agreement, and a resolution has not been reached within a reasonable period of time from its submission to a local court of the Host State’ or ‘the Investor demonstrates to a tribunal established under this Agreement that there are no reasonably available legal remedies capable of providing effective remedies of the dispute concerning the underlying measure, or the legal remedies provide no reasonable possibility of such remedies in a reasonable period of time.’36

Limiting frivolous claims, through early dismissal mechanisms and cost-shifting

In recent treaty-making, along with the provision of stricter jurisdictional requirements and conditions to submission of an arbitration, states also have in various instances included disincentives to frivolous claims by way of early dismissal mechanisms and cost-shifting provisions.

For just over 10 years now, the International Centre for Settlement of Investment Disputes (ICSID) has had a mechanism to summarily dismiss manifestly unmeritorious claims.37 Although other arbitration rules now include similar early dismissal mechanisms,38 far from all rules do. Inserting an early dismissal mechanism in the investment treaties itself allows states to provide for an early dismissal possibility for cases manifestly without legal merit, in particular those not brought under the ICSID Arbitration Rules.39 While such an early dismissal is extremely difficult to obtain,40 empowering investment treaty tribunals to do so irrespective of the applicable arbitration rules acts as a disincentive for claimants with unmeritorious claims.

Second, in line with a growing number of investment treaty tribunals that have applied the loser pays principle,41 states have inserted explicit cost-shifting provisions in their investment treaties whereby the losing party that has brought a frivolous claim or has engaged in serious procedural misconduct is condemned to pay the entire costs of the proceedings,42 including as a general rule attorneys’ fees.43 Such express provisions allow states to deter investors from bringing plainly unmeritorious claims by increasing the chances of potential cost-shifting.

Protecting the state’s treaty interpretation power during the arbitral proceedings

In line with NAFTA and CAFTA practice,44 some states have secured, in their recent investment treaties, the non-disputing state’s right to make submissions during the arbitral proceedings, and have in some instances gone further by granting states the possibility to adopt binding interpretations together with the other contracting parties to the agreement.

For example, the 2015 Australia-China FTA gives the non-disputing party the right to make oral and written submissions to the tribunal regarding the interpretation of the investment chapter.45 The treaty further provides that all joint interpretations of the treaty by the state parties are binding on the investment tribunals and offers the respondent state the possibility, when presented with an investor’s claim, to adopt a joint decision with the non-disputing party that the measure at issue is non-discriminatory and made for legitimate public welfare objectives (eg, protection of public health, safety or the environment), and accordingly does not fall within the arbitral tribunal’s jurisdiction.46 Article 9.18(3) entitled ‘Governing Law’ also makes clear that a ‘decision between the respondent and the non-disputing Party that a measure is [non-discriminatory and taken for legitimate public welfare objectives] shall be binding on a tribunal and any decision or award issued by a tribunal must be consistent with that decision.’

Furthermore, under the 2015 Australia-China FTA, when a respondent asserts that certain measures fall within the annexed schedules of non-conforming measures, the tribunal shall, upon request of the respondent, request the interpretation of the state parties on the issue.47 This interpretation will be binding on the tribunal and ‘on the tribunal of any dispute subsequent to the date of the joint decision.’48

Similar provisions can also be found in the Republic of Korea-Viet Nam FTA,49 the Trans-Pacific Partnership (TPP),50 and some BITs, such as the Canada-Burkina Faso BIT51 or the South Korea-Turkey Investment Agreement.52 They are also included in the 2015 Draft Norway model BIT53 and in the EU’s latest proposal for the Transatlantic Trade and Investment Partnership (TTIP) chapter on investment.54

Enabling states to exert greater control over the outcome of proceedings

Although the view that there should be a mechanism for appealing awards, mainly to allow for greater harmonisation and coherence of the field,55 is not new, states in particular within the EU have only recently endorsed the view that such a permanent appeals mechanisms would be desirable. Specifically, the European Commission’s proposal of September 2015 for a so-called ‘Investment Court System’ has made its way into the CETA Finalised Draft and the EU-Vietnam Draft FTA. Pursuant to article 8.28 of CETA and article 13 of the EU-Vietnam Draft FTA, respectively, an award rendered by an arbitral tribunal constituted under the treaty will be subject to review by an ‘Appellate Tribunal’56 or ‘Appeal Tribunal.’57

Pursuant to article 8.28(2) of CETA, in addition to the grounds of annulment provided for in article 52(1) of the ICSID Convention,58 this Appellate Tribunal may ‘modify or reverse’ an award due to ‘errors in the application or interpretation of applicable law’ and ‘manifest errors in the appreciation of the facts, including the appreciation of relevant domestic law.’59 While the exact nature of the interaction between such an appeals mechanism and the existing annulment mechanisms in particular in the context of ICSID arbitrations remains to be seen,60 and has been the subject of some scepticism on the part of commentators,61 what is clear is that this Appellate Tribunal will be composed of persons appointed by the CETA contracting parties.

Significantly, CETA also includes a provision whereby investment disputes arising under the treaty will eventually be submitted to a permanent appellate body to be created by the contracting parties and undefined ‘other trading partners’.62 A similar provision can also be found in the 2012 US Model BIT,63 the 2012 SADC Model BIT,64 the TPP,65 and the EU-Viet Nam Draft FTA.66 Also, the five European signatories of the ‘Non-paper’ have alluded to the possibility of creating a permanent appeal mechanism in their common proposal of April 2016.67

The draft TTIP investment chapter presented by the European Commission goes even further than CETA in that instead of submitting a claim to a classical investment arbitration tribunal, the European Commission has proposed to create a ‘Tribunal of First Instance’,68 which is set to be composed of 15 permanent ‘judges’ appointed by the contracting parties to TTIP.69 It is unclear at this point whether these proposals will find their way into the final text of TTIP, which is currently still under negotiation.

There is no doubt, however, that by creating an appeals mechanism or ‘tribunals of first instance’ whose members are appointed by the contracting parties, states seek to both harmonise investment treaty case law and ensure greater control over the end result of the arbitral process.

Conclusion

In recent years, states have been exercising an increasingly active role in designing and reshaping the framework in which investment disputes between foreign investors and host states are adjudicated. States’ reassertion of control over their consent to arbitrate takes various forms, ranging from adding complex prerequisites before an investor is able to initiate an arbitration to giving states more power over how a treaty provision should or must be interpreted. This trend is driven both by developed countries, such as the United States and the European Union and its member states, and by developing countries, such as India or the member states of the South African Development Community, which make up an increasingly important part of world investment outflows.

The practical impact of this trend is difficult to predict at this early stage. One possible outcome could be that some investors will be more reluctant to have recourse to investor-state investment arbitration, due to the additional jurisdictional hurdles, costs and delays caused by the restrictive dispute resolution clauses. Another possible consequence could be that sophisticated investors will increasingly structure their investments abroad in such a way so as to fall under the protection of a treaty that is perceived as offering increased protections and fewer jurisdictional hurdles. The wide web of existing investment treaties will make it all but impossible to foreclose this possibility in the years and probably decades to come.

Notes

  1. UNCTAD, World Investment Report 2016, p. 104.
  2. UNCTAD, World Investment Report 2016, p. 101.
  3. UNCTAD, World Investment Report 2015, p. 124.
  4. For example, Tza Yap Shum v Republic of Peru, ICSID Case No. ARB/07/6, Decision on Jurisdiction and Competence of 19 June 2009; Quasar de Valors SICAV S.A. et al. (Formerly Renta 4 S.V.S.A et al.) v Russian Federation, SCC Case No. 24/2007, Award of 20 July 2012; Sanum Investments Limited v The Government of the Lao People’s Democratic Republic, PCA Case No. 2013-13, Award on Jurisdiction of 13 December 2013; European American Investment Bank AG (Austria) v The Slovak Republic, PCA Case No. 2010-17, Award on Jurisdiction of 22 October 2012.
  5. The text of CETA has undergone a ‘legal review’ process that culminated in February 2016, in the course of which significant amendments were made to its investment chapter, including the inclusion of a so-called ‘Investment Tribunal System’. On 5 July 2016, the European Commission issued a proposal for a Council decision authorising the signature of the treaty.
  6. CETA Finalised Draft (2016), article 9.1.
  7. For example, ASEAN–India Investment Agreement (2014), article 2(e); Australia–Republic of Korea Free Trade Agreement (FTA) (2014), article 11.28; Colombia–Turkey BIT (2014), article 1(4); Japan–Oman BIT (2015), article 1(a); Canada–Burkina Faso BIT (2015), article 1; Trans-Pacific Partnership (TPP) (2016), article 9.1
  8. For example, United States Model BIT (2012), article 1, South African Development Community (SADC) Model BIT (2012), article 2 (Asset-based definition of investment Options I(10) and II(7)); Norway Model BIT (2015), article 2(2) in fine; Azerbaijan Model BIT (2016), article 1(1).
  9. For example, Abaclat and Others v Argentine Republic, ICSID Case No. ARB/07/5; Ambiente Ufficio S.p.A and others v Argentine Republic, ICSID Case No. ARB/08/9; Poštová banka, a.s. and ISTROKAPITAL SE v The Hellenic Republic, ICSID Case No. ARB/13/8; Cyprus States Popular Bank v Greece, ICSID Case No. ARB/14/16.
  10. For example, United States–CAFTA-DR (2004), Annex 10-A; United States–Peru FTA (2006), Annex 10-F; United States–Colombia FTA (2006), Annex 10-F; CETA Finalised Draft (2016), Annex 8-B.
  11. For example, Colombia–Turkey BIT (2014), article 1(5)(b); Israel–Myanmar BIT (2014), article 1(1)(d)(2)(ii)(b); Canada–Burkina Faso BIT (2015), article 1 (definition of ‘investor of a party’); CETA Finalised Draft (2016), article 8.1 (definition of ‘enterprise of a party’).
  12. For example, United States–Egypt BIT (1986), article 1(1)(b); North American Free Trade Agreement (NAFTA) (1993), article 1113.
  13. For example, CAFTA-DR (2004), article 10.12(2); United States–Colombia FTA (2006), article 10.12(2); Canada–Côte d’Ivoire BIT (2014), article 18(1)(b); Japan–Kazakhstan BIT (2014), article 25(2); Canada–Serbia BIT (2014), article 19; Colombia–Turkey BIT (2014), article 13; China–South Korea FTA (2015), article 12.15(2); Republic of Korea–Vietnam FTA (2015), article 9.11(2); CETA Finalised Draft (2016), article 8.16.
  14. The EU–Singapore Draft FTA (2014) has been initialled, but has not been signed yet. The European Commission requested an opinion from the Court of Justice of the European Union (CJEU) to determine the exact nature of the agreement under EU law. At the time of writing, the CJEU has not yet issued its opinion (Case No. C-2/15).
  15. EU–Singapore Draft FTA (2014), article 9.17(6).
  16. The European Commission proposed a similar clause in September 2015 in its latest internal draft for the investment chapter of the draft Transatlantic Trade and Investment Partnership (the TTIP Draft Investment Chapter or TTIP) and in the EU–Vietnam Draft FTA. TTIP Draft Investment Chapter (2015), article 15; EU–Vietnam Draft FTA (2016), chapter 8, section III, article 17.
  17. For example, Salini Costruttori S.p.A. and Italstrade S.p.A. v The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction of 9 November 2004; Empresas Lucchetti, S.A. and Lucchetti Peru, S.A. v Republic of Peru, ICSID Case No. ARB/03/4, Award of 7 February 2005; ATA Construction, Industrial and Trading Company v The Hashemite Kingdom of Jordan, ICSID Case No. ARB/08/2, Award of 18 May 2010.
  18. For example, Phoenix Action, Ltd. v The Czech Republic, ICSID Case No. ARB/06/5, Award of 15 April 2009; Chevron Corporation and Texaco Petroleum Company v The Republic of Ecuador, PCA Case No. 2009-23, Third Interim Award on Jurisdiction and Admissibility of 27 February 2012; Achmea B.V. v The Slovak Republic, PCA Case No. 2013–12, Award on Jurisdiction and Admissibility of 20 May 2014; Philip Morris Asia Limited v The Commonwealth of Australia, PCA Case No. 2012-12, Award on Jurisdiction and Admissibility of 17 December 2015.
  19. For example, United–States Poland BIT (1990), article IX(2); Germany–China BIT (2003), article 9(2); Netherlands–Chile BIT (1998), article 8(2); France–Morocco BIT (1996), article 11(2); Canada–Poland BIT (1990), article 9(2); Italy–Argentina BIT (1990), article 8(1); Thailand–Egypt BIT (2000), article 10(2).
  20. For example, Chile–Indonesia BIT (1999), article XIII(3); Albania–Greece BIT (1991), article 10(2); United States–Ecuador BIT (1993), article VI(2); Italy–Lebanon BIT (1997), article 7(2).
  21. United States Model BIT (2012), article 24(2). An identical provision was already included in the 2004 US Model BIT.
  22. United States Model BIT (2012), article 26(1).
  23. United States Model BIT (2012), article 26(2)(b).
  24. Canada–Serbia BIT (2014), article 22; Canada–Côte d’Ivoire BIT (2015); EU–Vietnam Draft FTA (2016), chapter 8, section III, articles 8 and 9; CETA Finalised Draft (2016), article 8.22. In addition, CETA obliges the investor to undergo a detailed and compulsory consultation procedure and to request a determination as regards the appropriate respondent before initiation an arbitration procedure. CETA Finalised Draft, articles 8.19 and 8.21.
  25. D A Desierto, ‘Host State Controls over the Offer to Arbitrate: Waivers Against Parallel Actions in Investor-State Arbitration’, Kluwer Arbitration Blog, 10 August 2016.
  26. For example, Australia–China FTA (2015), article 9.14(2)(d)(ii); China–South Korea FTA (2015), article 12.2(6); TPP (2016), article 9.21(2)(b)(ii).
  27. EU–Vietnam Draft FTA (2016), chapter 8, section III, article 8(1): ‘A claimant may not submit a claim to the Tribunal if the claimant has a pending claim before any other domestic or international court or tribunal concerning the same measure as that alleged to be inconsistent with the provisions referred to in Article 1(1) (Scope) and the same loss or damage, unless the claimant withdraws such pending claim.’
  28. EU–Singapore Draft FTA (2014), article 9.17(1)(f).
  29. EU–Singapore Draft FTA (2014), article 9.17(1)(f): ‘Any claim may be submitted to arbitration under this Section only if: […] (f) the claimant: (i) withdraws any pending claim submitted to a domestic court or tribunal concerning the same treatment as alleged to breach the provisions of Section A (Investment Protection); and (ii) declares that it will not submit such a claim before a final award has been rendered pursuant to this Section.’
  30. EU–Singapore Draft FTA (2014), article 9.17(1)(h).
  31. See, C Schreuer, ‘Calvo’s Grandchildren: The Return of Local Remedies in Investment Arbitration’, The Law and Practice of International Courts and Tribunals, vol. 4(2005), n. 1, p. 1; C Dugan, D Wallace et al, Investor-State Arbitration, Oxford University Press (2008), p. 357.
  32. India Model BIT (2016), article 15.1.
  33. India Model BIT (2016), article 15.1.
  34. India Model BIT (2016), article 15.2.
  35. The SADC is composed of 15 member states, namely Angola, Botswana, the Democratic Republic of the Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
  36. SADC Model BIT (2012), article 28(4)(b).
  37. ICSID Arbitration Rules, Rule 41(5). The amendment to the ICSID Convention, Regulations and Rules, including Rule 41(5), became effective on 10 April 2006.
  38. For example, the recent 2016 Singapore International Arbitration Centre (SIAC) Investment Arbitration Rules also provide for a similar mechanism in rule 25.
  39. For example, EU–Vietnam Draft FTA (2016), chapter 8, section III, article 19.
  40. In 10 years, only two cases have been dismissed on the basis of ICSID Arbitration Rule 41(5). Global Trading Resource Corp. and Globex International, Inc. v Ukraine, ICSID Case No. ARB/09/11, Award of 1 December 2010; Rachel S. Grynberg, Stephen M. Grynberg, Miriam Z. Grynberg and RSM Production Company v Grenada, ICSID Case No. ARB/10/6, Award of 10 December 2010.
  41. For example, Phoenix Action, Ltd. v The Czech Republic, ICSID Case No. ARB/06/5, Award of 15 April 2009, paragraphs 151–152; Europe Cement Investment & Trade S.A. v Republic of Turkey, ICSID Case No. ARB(AF)/07/2, Award of 13 August 2009, paragraphs 185–186; Saba Fakes v Republic of Turkey, ICSID Case No. ARB/07/20, Award of 14 July 2010, paragraphs 153–155; Libananco Holdings Co. Limited v Republic of Turkey, ICSID Case No. ARB/06/8, Award of 2 September 2011, paragraph 563.
  42. For example, South Korea–Vietnam FTA (2015), article 9.23(5); CETA Finalised Draft (2016), article 8.39(5);
  43. CETA Finalised Draft (2016), article 8.39(5); EU–Vietnam Draft FTA (2016), chapter 8, section III, article 27(4).
  44. For instance, in Railroad Development Corporation v Republic of Guatemala, ICSID Case No. ARB/07/23, both El Salvador and Honduras made a submission as non-disputing parties on 1 January 2012. In TECO Guatemala Holdings LLC v Republic of Guatemala, ICSID Case No. ARB/10/23, the United States made a non-disputing party submission on 23 November 2012. In Chemtura Corporation v Government of Canada, UNCITRAL, the United States made a non-disputing party submission on the relationship between NAFTA’s most-favoured-nation clause and the treaty’s fair and equitable treatment clause.
  45. Australia–China FTA (2015), article 9.16(2).
  46. Australia–China FTA (2015), article 9.11(4).
  47. Australia–China FTA (2015), article 9.19(1).
  48. Australia–China FTA (2015), article 9.19(2) and (3).
  49. Republic of Korea–Vietnam FTA (2015), article 9.23(1): ‘Upon request of the Tribunal, on written notice to the disputing parties, the non-disputing Party may make oral or written submissions to a Tribunal on a question of interpretation of this Agreement[…].’ Article 9.24(1): ‘The interpretation by the Joint Committee of a provision of this Agreement shall be binding on a Tribunal established under this Section and an award under this Section shall be consistent with that interpretation.’
  50. TPP (2016), article 9.23(2): ‘A non-disputing Party may make oral and written submissions to the tribunal regarding the interpretation of this Agreement.’ Article 9.25(3): ‘A decision of the Commission on the interpretation of a provision of this Agreement under Article 27.2.2(f) (Functions of the Commission) shall be binding on a tribunal, and any decision or award issued by a tribunal must be consistent with that decision.’
  51. Canada–Burkina Faso BIT (2015), articles 33 and 34.
  52. South Korea–Turkey Investment Agreement (2015), article 1.17(15), article 1.17(16).
  53. Draft Norway Model BIT (2015), article 13(2): ‘An interpretation by the Joint Committee of a provision of this Agreement shall be binding on a Tribunal established under this Section.’
  54. TTIP Draft Investment Chapter (2015), chapter 2, section 3, article 22(3): ‘The Tribunal shall accept or, after consultation with the disputing parties, may invite written or oral submissions on issues relating to the interpretation of this Agreement from the non-disputing Party. The Tribunal shall ensure that the disputing parties are given a reasonable opportunity to present their observations on any submission by the non-disputing Party.’ Article 13(5): ‘Where serious concerns arise as regards matters of interpretation relating to [the Investment Protection or the Resolution of Investment Disputes and Investment Court System Section of this Agreement], the [] Committee may adopt decisions interpreting those provisions. Any such interpretation shall be binding on the Tribunal and the Appeal Tribunal. The [] Committee may decide that an interpretation shall have binding effect from a specific date.’
  55. On this topic, see GAR Live BITs 2015 Conference in Washington, DC, and the panel discussion on the topic: ‘The reaction to contemporary jurisprudence – time to move from hegemony and fragmentation to harmonisation?’
  56. CETA Finalised Draft (2016), article 8.28(1): ‘An Appellate Tribunal is hereby established to review awards rendered under this Section.’ However, this Tribunal will only begin to operate once the CETA Joint Committee adopts a decision setting out its functioning and financing in more detail, pursuant to CETA Finalised Draft (2016), article 8.28(7).
  57. EU–Vietnam Draft FTA (2016), chapter 8, section III, article 13(1): ‘A permanent Appeal Tribunal is hereby established to hear appeals from the awards issued by the Tribunal.’
  58. ICSID Convention, article 52(1): ‘Either party may request annulment of the award by an application in writing addressed to the Secretary-General on one or more of the following grounds: (a) that the Tribunal was not properly constituted; (b) that the Tribunal has manifestly exceeded its powers; (c) that there was corruption on the part of a member of the Tribunal; (d) that there has been a serious departure from a fundamental rule of procedure; or (e) that the award has failed to state the reasons on which it is based.’
  59. CETA Finalised Draft (2016), article 8.28(2)(a) and (b).
  60. CETA provides that if an award is appealed before the Appellate Tribunal, said decision is not subject to annulment before ICSID in accordance with article 52 of the ICSID Convention. CETA Finalised Draft (2016), article 8.28(9)(d), read in conjunction with article 8.41(3). Interestingly, the EU–Vietnam Draft FTA (2016) does not address the interaction between the ICSID annulment procedure and the appeals mechanism. However, the EU–Vietnam Draft FTA (2016) provides that a final award shall not be ‘subject […] to annulment’, which can reasonably be understood to preclude recourse to the ICSID annulment procedure. EU–Vietnam Draft FTA (2016), chapter 8, section III, article 31(1)(b). In both instances, these provisions could be difficult to enforce where the states parties to those treaties are also contracting parties to the ICSID Convention.
  61. For example, C Lévesque, ‘The European Union Commission Proposal for the Creation of an ‘Investment Court System’: The Q and A that the Commission Won’t Be Issuing’, Kluwer Arbitration Blog, 6 April 2016.
  62. CETA Finalised Draft (2016), article 8.29: ‘The Parties shall pursue with other trading partners the establishment of a multilateral investment tribunal and appellate mechanism for the resolution of investment disputes. Upon establishment of such a multilateral mechanism, the CETA Joint Committee shall adopt a decision providing that investment disputes under this Section will be decided pursuant to the multilateral mechanism and make appropriate transitional arrangements.’
  63. United States Model BIT (2012), article 28(10): ‘In the event that an appellate mechanism for reviewing awards rendered by investor-state dispute settlement tribunals is developed in the future under other institutional arrangements, the Parties shall consider whether awards rendered under Article 34 should be subject to that appellate mechanism.’
  64. SADC Model BIT (2012), article 29.20: ‘If a separate, multilateral or bilateral agreement enters into force between the State Parties that establishes an appellate body for purposes of reviewing awards rendered by tribunals constituted pursuant to international trade or investment arrangements to hear investment disputes, the State Parties shall strive to reach an agreement that would have such appellate body review awards rendered under this Agreement in arbitrations commenced after the multilateral agreement enters into force between the State Parties.’
  65. TPP (2016), article 9.23(11): ‘In the event that an appellate mechanism for reviewing awards rendered by investor-State dispute settlement tribunals is developed in the future under other institutional arrangements, the Parties shall consider whether awards rendered under Article 9.29 (Awards) should be subject to that appellate mechanism.’
  66. EU–Vietnam Draft FTA (2016), chapter 8, section III, article 15.
  67. Council of the European Union, General Secretariat, Trade Policy Committee, Intra-EU Investment Treaties, Non-paper from Austria, Finland, France, Germany and the Netherlands, 7 April 2016, p. 5, paragraph 12, third bullet point.
  68. TTIP Draft Investment Chapter (2015), chapter 2, section 3, article 9.
  69. TTIP Draft Investment Chapter (2015), chapter 2, section 3, article 9(2): ‘The […] Committee shall, upon the entry into force of this Agreement, appoint fifteen Judges to the Tribunal. Five of the Judges shall be nationals of a Member State of the European Union, five shall be nationals of the United States and five shall be nationals of third countries.’

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Cleary Gottlieb is organised and operated as a single, integrated global partnership with more than 1,200 lawyers located in major financial centres around the world. Recognised as a leading international law firm, we have helped shape the globalisation of the legal profession for 70 years.

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