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So far, Bolivia (2007), Ecuador (2009) and Venezuela (2012) have denounced the Convention on Settlement of Investment Dispute between States and Nationals of other States (the ICSID Convention). Although the ICSID Convention itself regulates the possibility of denouncing the ICSID Convention, different theories – which, in many cases, contain conflicting options – have arisen as regards the interpretation of the legal effects of denouncing the ICSID Convention.

Several issues have been discussed by ICSID Convention commentators, but they have mainly focused on the formation and revocation of consent in relation to investors. Although some of the theories support the contractual nature of the offer for ICSID arbitration contained in bilateral investment treaties (BITs) and in free trade agreements (FTAs) or in domestic laws, others claim that consent to international arbitration is an irrevocable obligation.

The different theories can be divided into four groups, as follows:

  • the contractual approach (ie, those that consider that the offer for ICSID arbitration can be revoked before it has accepted);
  • those that consider it a firm offer;
  • those that consider that it is not an offer but rather an international obligation derived from a unilateral act of state; and
  • those that consider that the ICSID arbitration offer is irrevocable if it creates lawful expectations.

For our part, we agree on the contractual nature of the arbitration offer made by states to investors. However, from our point of view, the arbitration offer can be irrevocable in those cases where lawful expectations have been created among investors.

Moreover, the obligation on ICSID’s jurisdiction is not only perfected when the investor accepts the offer, but rather when the BIT or FTA is ratified by both states. As from this very moment, each member state is obliged to reciprocally offer ICSID arbitration to the nationals of the other state.

So far, attention has focused on the possibility of revoking or not revoking the state’s consent in relation to the ‘direct beneficiary’ of the offer (ie, the investor in the investor– state relationship). However, article 72 not only refers to the investors’ rights; in fact, it also appears to refer to the obligations related to ICSID jurisdiction, perfected among member states before the denunciation of the ICSID Convention.

Different theories

Contractual approach but revocable offer

This theory, inspired by a clear-cut contractual perspective (offer-acceptance) and advanced by Professor Schreuer, does not confer much legal effect to the ‘offer’ that has not yet been accepted.

In fact, when referring to the interpretation of the word ‘consent’ in article 72, Professor Schreuer points out that, just as contracts are formed by an offer and a matching acceptance, the irrevocability of the offer of consent can only take place once such offer has been accepted and consent has therefore been ‘perfected’.1

Under this theory, article 72 refers to ‘perfected consent’. Therefore, it would only operate to preserve the rights and obligations of investors in respect of disputes in which both the host state and the investor have consented prior to receipt of the notice of denunciation by the depositary.2

Some have criticised this theory stating that using contractual analogy leads to the mistaken conclusion of identifying the term ‘consent’ with the notion of ‘common consent’ (consent by both parties to the dispute) or ‘arbitration agreement.’ This identification results in a ‘false analogy’ because in the ICSID Convention the word ‘consent’ is used to refer to ‘individual consent’ as much as it is used to refer to ‘common consent’.3

Firm offer

Professor Gaillard, without directly rejecting Professor Schreuer’s contractual approach, warns about the particular meaning that should be given to the word ‘consent’ in article 72. He contends that, regardless of denunciation of the Convention, the possibility of ICSID arbitration will depend on the wording used in ‘the arbitration clause’ contained in the applicable BIT or FTA.4

Mantilla-Serrano, following Gaillard’s path, argues that article 72 refers to unilateral or individual consent and not ‘common consent’. He points out that the contractual notions of offer and acceptance alongside article 25 of the Convention should not come into play because the binding force of the ICSID Convention after its denunciation is entirely governed by article 72 and not by article 25.5

International obligation derived from a unilateral act of the state

Nolan and Sourgens, on the other hand, contend that state consent expressed in a BIT, FTA or domestic law cannot be considered as a mere offer to arbitrate, not even as firm offer, but rather as an ‘independent international obligation’.6

Professor Hirsch, who had taken a similar view in the past, states that according to international law, also applicable to domestic legislations, the unilateral state consent to ICSID arbitration may be equivalent to an irrevocable unilateral act pursuant to international law and the doctrine of estoppel.7

This view is inspired on the general principle recognised by the International Law Commission stating that a unilateral declaration intended to produce legal effects to the state making the declaration cannot be revoked arbitrarily.8 References made in SPP v Egypt,9 Amco v Indonesia10 and the dissenting vote in Siag & Vecchi v Egypt,11 along with the International Court of Justice’s decision in Nuclear Test all seem to support this theory.12 But while some support this theory, others have criticised it.13

Contractual approach but irrevocable offer, if it has created legitimate expectations

As pointed out by Professor Schreuer: ‘Like any form of arbitration, investment arbitration is always based on an agreement.’14 Just as with commercial arbitration, an arbitration agreement may exist or be entered into without the existence of a previous contractual relationship between the parties.15

Nevertheless, article 25 should not come into play when determining whether or not the obligations arising out of consent to ICSID jurisdiction remain in force after its denunciation. In this regard, we agree with some commentators who argue that this matter is fully governed by article 72.16 But this does not mean that the contractual approach should not come into play when determining the formation of consent between states and investors.17

With the exception of mandatory arbitrations on specific subject matters, every arbitration (whether commercial or investment) presupposes an arbitration agreement.18

From our perspective, strictu sensu, a state’s unilateral offer to arbitrate is part of a bilateral or multilateral negotiation process between states. Since the primary goal of that offer is to create an act not unilateral in nature, it should be considered to be definitely closer to being an act of a conventional nature because the fundamental purpose of that act transcends the unilateral framework in which it is created.19

Under international contractual principles, an offer that has not yet been accepted can be irrevocable in some cases. Aside from the obvious cases,20 in our view, what makes an offer irrevocable is the legitimate expectations that offer has created.

The offer to arbitrate is irrevocable, even when there is no express provision ratifying it or a fixed term for its acceptance; provided the investor could reasonably assume that the offer was firm and has relied upon it when making his investments. As pointed out by Paulsson: ‘The respect for the legitimate and pre-established expectations is an essential requisite [to keep] healthy international relations.’21

The principle of ‘legitimate reliance’ is modernly considered one of the principles, not just of international law, but also of the regulatory activity of public entities which must act in good faith within a legally sound framework and comply with the legitimate expectations created in their citizens by their administrative or regulatory action.22

In short, the revocation of a state’s unilateral consent is arbitrary and thus ineffective when that offer created legitimate expectations in the investors when making their investments.

In fact, a state can hardly contend that a law whose main purpose is to promote foreign investments by affording them with protection through an offer to international arbitration could not create any legitimate expectations in foreign investors who actually made their investments before the revocation of such offer.23

Rights and obligations

Article 72 does not only refer to the investors’ rights; it also refers to the obligations related to ICSID jurisdiction, perfected among member states before the ICSID Convention denunciation. We are under the impression that little attention has been given to this second state–state relationship. Although the content of each BIT or FTA should be carefully analysed in case of significant differences between both documents, most BITs or FTAs contain bilateral obligations (state–state) whereby a state undertakes before any potential denunciation of the ICSID Convention to offer ICSID arbitration to the nationals of another member state. This obligation on ICSID’s jurisdiction is not perfected when the investor accepts the offer, but when the BIT or FTA is ratified by both states. As from this very moment, each member state is obliged to reciprocally offer ICSID arbitration to the nationals of the other state. It should be noted that it is not necessary for the investor to ask for ICSID arbitration in order for said obligation to arise or to be perfected. One thing is the fulfilment of an obligation; another thing is the origin of an obligation.

Moreover, the obligation to offer ICSID arbitration remains intact after the denunciation of the ICSID Convention for two reasons: it is enshrined in a treaty (BIT or FTA) that is independent of the ICSID Convention; and it is expressly stated so in article 72. Article 72 also represents an exception to the nationality requirements contemplated in article 25(1) of the ICSID Convention. If the obligation to offer ICSID arbitration to the nationals of another state was perfected before the notice of denunciation was given, then the state that denounced the ICSID Convention or a national of said state could become a party to ICSID arbitration.

The state–state obligations arising out of consent to ICSID jurisdiction providing for ICSID arbitration and contained in BITs ratified by Bolivia, Ecuador and Venezuela with other states, and even with each other, are still enforceable by investors despite these countries’ denunciations of the ICSID Convention.24

It is worth mentioning that the BITs entered into by Chile with Bolivia, Ecuador and Venezuela,25 respectively, all provide as dispute resolution forums either domestic courts of the host state or ICSID arbitration at the investor’s discretion. If the above interpretation does not prevail, then Chilean investors would be prevented from bringing their claims under arbitration and forced to submit their claims to Bolivian, Ecuadorian or Venezuelan courts, respectively.

Such a result would not only be absurd but would violate the legitimate expectations of Chilean investors who invested in these countries with the firm belief that future disputes would be submitted to a neutral forum such as international arbitration.26

The same thing can be said with respect to French and Peruvian investors. The Venezuela–France and Ecuador–Peru BITs also provide for ICSID arbitration or domestic courts as the only valid forums for resolving disputes.27

An even more absurd result would be produced in BITs providing for ICSID arbitration as the ‘only’ valid forum for resolving investment disputes. This appears to be the case with the Venezuela–Germany BIT.28 An alternative interpretation proposes the use of the most-favoured nation (MFN) clause present in other BITs as a mean to avoid such an unjust result.29 However, the procedural use of MFN clauses is still a highly debatable issue among tribunals.30

It is also worth adding that the vast majority of BITs contain survival clauses of 10 to 15 years in benefit of the investments made before their termination or denunciation. Such an extension in their validity also includes ICSID arbitration.31

Consequently, any revocation of an offer to arbitrate that already created legitimate expectations in foreign investors must be considered arbitrary and invalid.32 This means that future investors in Bolivia, Ecuador and Venezuela seem to be the ones really affected by the Convention’s denunciation since no legitimate expectations have been created in them.

Only future BITs or FTAs entered into by Bolivia, Ecuador and Venezuela with other states will be affected by the ICSID Convention’s denunciation.

Practical implications

It should be noted that most BITs and FTAs, besides the ICSID Supplementary Mechanism, contemplate alternative arbitration forums – such as UNCITRAL – in the event that ICSID arbitration is not available, whereas other treaties provide for a hierarchy of forums whereby some have priority over others (ie, the investor must first exhaust a particular forum to submit its disputes and can only make use of the remaining forums in the event of unavailability of the first forum). The latter example is the case for the majority of BITs ratified by Venezuela.33

In our opinion, the existing interpretation difficulties cannot be constructed as non-availability of ICSID arbitration. It is worth highlighting what was stated in the Nova Scotia v Venezuela case. Here, the meaning of ‘availability’ of the Supplementary Mechanism was analysed. The plaintiff argued that it meant ‘ready for its immediate use’ or ‘something with good chances of success’. It supported its position by expert statements, such as those made by Professor Rudolph Dolzer, who came to the conclusion that the ICSID Supplementary Mechanism cannot be considered available when ‘reasonable doubt’ exists as to whether or not the parties can use it. The court rejected the arguments put forward by the plaintiff and established that ‘available’ refers to the possibility of exercising the right to start an arbitration proceeding, whether under the ICSID regulations or under the Supplementary Mechanism Regulations.

As we can see, depending on how the treaty has been drawn up, resorting to some of these alternative forums could be a serious mistake if ICSID arbitration is actually available because they may lack jurisdiction. As is often the case, the easy path does not seem to be a good option, neither for investors that wish to avoid engaging in the aforesaid discussion, nor for states that wish to avoid acquired international commitments.34


  1. See Schreuer, Malintoppi, Reinisch and Sinclair, The ICSID Convention: A Commentary, Cambridge University Press 2001, p. 1280, para 6. Also see Sander, Barrie, ‘Venezuela’s denunciation of ICSID: the consequences’, Global Arbitration Review, Volume 7, Issue 2, 14 February 2012.
  2. Id. The depositary of the ICSID Convention is the International Bank for Reconstruction and Development, also known as the World Bank.
  3. See Garibaldi, Oscar, ‘On the Denunciation of the ICSID Convention, Consent to ICSID Jurisdiction, and the Limits of the Contract Analogy’, TDM 1 (2009),
  4. Gaillard, Emmanuel, ‘The Denunciation of the ICSID Convention’, New York Law Journal, 26 June 2007, Vol. 237 No. 122.
  5. See Mantilla-Serrano, Fernando, ‘La denuncia de la Convención de Washington, ¿Impide el recurso al CIADI?’, Revista Peruana de Arbitraje, No. 6, 2008, p. 214.
  6. Nolan, Michael and Sourgens, F G, ‘The Interplay Between State Consent to ICSID Arbitration and Denunciation of the ICSID Convention: The (Possible) Venezuela Case Study’, TDM, Provisional Issue, September 2007.
  7. See Hirsch, Moshe, The Arbitration Mechanism of the International Centre for the Settlement of Investment Disputes, Martinus Nijhoff Publishers, 1993, pp. 53–54.
  8. Working Group Report of the International Law Commission, 58th Session (1 May to 9 June and 3 July to 11 August of 2006), par 4.
  9. Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt, ICSID Case No. ARB/84/3.
  10. Amco Asia Corporation and others v Republic of Indonesia, ICSID Case No. ARB/81/1.
  11. Waguih Elie George Siag and Clorinda Vecci v Arab Republic of Egypt, ICSID Case No. ARB/05/15.
  12. Case Concerning Nuclear Test (Australia v France), Judgment of 20 December 1974, ICJ, Rep.1974.
  13. In favor Tejera, Victorino, ‘Do Municipal Investment Laws Always Constitute a Unilateral Offer to Arbitrate? The Venezuelan Investment Law: A Case Study’, Investment Treaty Arbitration and International Law, edited by Ian A Laird and Todd J Weiler, JurisNet, LLC, New York, 2009, pp. 109–118. Against this position, see Suárez Anzorena, Ignacio. ‘Consent to Arbitration in Foreign Investment Laws’, Investment Treaty Arbitration and International Law, 2009, pp. 78–79. This author considers that the existence and the scope of consent to investment arbitration contained in a domestic investment law can only be determined in accordance with the framework under which it was issued, in other words, pursuant to domestic law and considers a ‘fallacy of presumption’ to characterise a domestic law as a unilateral obligation governed by international law.
  14. Schreuer, Christoph, ‘Consent to arbitration (updated 02/2007)’, TDM 5 (2005), p. 1,
  15. Such is the case for commercial arbitrations arising out of, for example, tort cases to determine liability or damages. And that is the case for most investment arbitrations which arise to determine the potential international liability of a state.
  16. Mantilla Serrano, Fernando. ‘La denuncia de la Convención de Washington...’, op cit, p. 214.
  17. Against this view, see Mantilla Serrano, Fernando, ‘La denuncia de la Convención de Washington…’, op cit, p. 214.
  18. Youssef, Karim, Consent in Context: Fulfilling the Promise of International Arbitration (Multiparty, Multi-Contract, and Non-Contract Arbitration), West Thomson, 2009, pp. 55–56 citing Adam Samuel, Jurisdictional Problems in International Commercial Arbitration: A Study of Belgian, Dutch, English, French, Swedish, Swiss, US and German Law, 1989, p. 96.
  19. Mezgravis, Andrés, ‘The Standard of Interpretation Applicable to Consent and its Revocation in Investment Arbitration’, TDM 2 (2011), pp. 13–14.
  20. When the offer expressly provides for its irrevocability for a certain period of time.
  21. Paulsson, Jan, ‘El Poder de los Estados para hacer Promesas Significativas a los Extranjeros’, TDM 1 (2009), p. 21,
  22. See Rumeli Telekom AS and Telsim Mobil Telekomunikasyon Hizmetleri AS v Republic of Kazakhstan, ICSID Case No. ARB/05/16, Award, 29 July 2008. In this case, the tribunal held that independent of article 6(1), it is also well established in international law that a state may not take away accrued rights of foreign investor by domestic legislation abrogating the law granting these rights. In contrast, see Ruby Roz Agricol LLP v Republic of Kazakhstan, UNCITRAL Award on Jurisdiction of 1 August 2013, where it was rejected the argument that the foreign investor had ‘accrued right’ to arbitration since the arbitration clause in the FIL calls for the right to arbitration to be perfected by the investor’s written consent, not by an investment or by a claim arising. Hence, the tribunal held that the offer is required to be accepted in writing before it was withdrawn. To support this argument, the tribunal cited Schreuer, Christoph, ‘The ICSID Convention: A Commentary: a Commentary on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States’, 2nd edition 2009, para 618.
  23. See Mezgravis, Andrés and González, Carolina, ‘Denunciation of the ICSID Convention: Two problems, one seen and one overlooked’, TDM 7 (2012), p10. See also Mezgravis, Andrés, ‘The Standard of Interpretation Applicable to Consent...’, op cit, p31. The Spanish version can be found in Revista Internacional de Arbitraje. Legis, Número 13, Bogotá, July–December 2010. Also in Revista Ecuatoriana de Arbitraje (2011).
  24. See article 9(3) of the BIT between Ecuador and Venezuela, which provides for ICSID arbitration as the first venue. Therefore, the obligation arising out of consent to ICSID jurisdiction between Ecuador and Venezuela to provide for ICSID arbitration to the their respective nationals was perfected between the said states when the BIT entered into force (1 February 1995), that is to say, before Ecuador’s and Venezuela’s denunciation of the ICSID Convention. Therefore, it is covered by article 72 of the ICSID Convention. It is important to note that in 2009 the Ecuadorian President requested before the National Assembly the denunciation of 13 BITs entered into by Ecuador with Germany, the United Kingdom and Northern Ireland, Finland, China, Switzerland, Chile, Venezuela, Sweden, USA, Canada, the Netherlands, Argentina and France under the argument that the ICSID arbitration clauses were incompatible with the recently approved Constitution. Such request was later returned since it required the previous and binding ruling of the Constitutional Court which later ruled the unconstitutionality of the BITs with Germany, UK and Northern Ireland, and later China, Finland, Switzerland, Chile, France, Canada, Sweden, the Netherlands, USA and Venezuela. They were later returned to the National Assembly which we understand approved the termination of the BITs with Germany, UK and Northern Ireland, China, Finland and Switzerland. In this regard, see To the best of our knowledge, the BIT between Ecuador and Venezuela has not yet been terminated by Ecuador. See In any event, it is important to notice that the majority of all of these BITs, including the BIT between Ecuador and Venezuela, contain a survival clause of 10 years for investments made before termination.
  25. See article X.2.a and b of the BIT between Bolivia and Chile; article X.2 and 3 of the BIT between Ecuador and Chile, and article 8.2 of the BIT between Venezuela and Chile. We understand the BIT between Ecuador and Chile has not yet been terminated by Ecuador’s National Assembly. In any event, article XI (2) of this BIT contains a 10-year survival clause protecting Chilean investments made before termination.
  26. In this regard, see Sornarajah, M, The International Law on Foreign Investment, Cambridge University Press, Third Edition, p. 250 which states: Arbitration, in a neutral State before a neutral tribunal, has traditionally been seen as the best method of securing impartial justice to him [foreign investor]. Where an international treaty backs him up by creating an obligation on the host state to submit to any arbitral proceedings brought against it by the foreign investor, a major step could be said to have been taken towards investment protection.
  27. See article 8.2 of the BIT between Venezuela and France, and article 8.2 of the BIT between Ecuador and Peru.
  28. See article 10.2 of the BIT between Venezuela and Germany.
  29. Gaillard, ‘The Denunciation of the ICSID Convention…’ op cit, supra note 4.
  30. Alschner, Wolfgang; Berdajs, Ana; and Lanovoy, Vladyslav, ‘Legal basis and effect of denunciation under international investment agreements’, Graduate Institute of International and Development Studies, Geneva, 2010, pp. 38–39 and note 62.
  31. See, for example, article 14.3 of the BIT between Venezuela and Netherlands providing for a survival clause of 15 years in respect of investments made before the date of termination, which in the case of Venezuela occurred on 30 April 2008.
  32. In this regard, see Mezgravis, Andrés, ‘The Standard of Interpretation Applicable to Consent...’ op cit, pp. 33–35 which states: For this reason, it is submitted that the purported revocation of the offer to arbitrate contained in article 22 of the Venezuelan Investment Law through the mentioned decision No. 1541 of the Supreme Tribunal of Justice [ruling that article 22 does not contain a standing offer to ICSID arbitration] is clearly arbitrary and ineffective for those investors who made their investments in Venezuela before the publication of that decision. For investments made after the publication of the decision the matter is more complicated and debatable. There are two important reasons in support of the ineffectiveness of the revocation in such scenario: i) article 22 has not been repealed, and ii) the interpretation made by the Venezuelan Supreme Tribunal of Justice is not binding on ICSID tribunals; in fact, the decision itself recognises it.
  33. Out of the 25 ratified BITs (including the BIT with the Netherlands which was terminated effective as of 1 November 2008), the majority, that is, 16, contain dispute resolution clauses providing for a hierarchy of arbitral forums (ie, first ICSID, second ICSID Additional Facility and third UNCITRAL ad hoc arbitration), while only three BITs can be regarded as alternative within the investor’s discretion (ie, BITs with Iran, Argentina and Russia, although the latter appears to require some level of cooperation from the host state). On the contrary, in Ecuador’s and Bolivia’s case, most BITs provide for alternative arbitration forums in the investor’s discretion.
  34. See: Mezgravis, Andrés and González, Carolina. ‘Denunciation of the ICSID Convention...’, op cit, p16.

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