Corruption in International Investment Arbitration

Empirical Findings on International Arbitration: An Overview

This concluding chapter emphasises the relevance of good faith to the integrity of the investment arbitration regime. It first considers the investment tribunals’ purposes for applying the principle of good faith in arbitration — to fill perceived gaps in treaty language, to protect host state values, to recognise the relationship between public international law in investment arbitration, and to legitimise investment decisions. It then examines the positive impact of good faith on international investment arbitration and how the principle establishes connections between private and public international law, between domestic laws and international law, and between the developed and developing narrative that emerges in the realm of international investment law. Finally, it explains why good faith is necessary in the dialogue of international law.

Investment arbitration, with its unique demands for transparency due to the public interest, is an especially promising arena for AI technologies. This transparency push and the judicialization of processes make investment arbitration increasingly amenable to technological innovations. However, the full potential of artificial intelligence (AI) in streamlining international investment arbitration case management remains largely untapped. The key to unlocking this potential lies in digitalization of data and procedures, and inter-institutional collaboration to share data. The literature regarding the use of technology in international arbitration mainly focuses on AI and its potential use in international arbitration in the future. While much of this literature speculates about the future, a holistic understanding of the present state of technology in international investment arbitration is crucial. This article spotlights the advancements achievable in case management in international investment arbitration using today’s available technologies. The current state of AI technology is primed for handling straightforward procedural tasks. Yet, these modest tasks occupy significant bandwidth in the agendas of arbitral institutions and tribunals. Once comprehensive digitalization is achieved, and AI technologies are integrated into international investment arbitration case management adeptly, that will be a significant step towards more expeditious and cost-effective arbitration procedures.

International Investment Arbitration: Development, Controversies, and Future Outlook

This chapter focuses on the impact of sanctions on international arbitration which can be provided for in contracts which have been targeted by the sanctions, or in international investment agreements. There are indeed many aspects to this interaction, both legal and practical. On a general jurisprudential level, economic sanctions highlight various complexities within the arbitral process, viz. the operation and interaction of various laws and legal systems (the lex arbitri and law governing the arbitration agreement, the substantive law of the contract and the law of the enforcing jurisdiction as well as overriding international law principles). These various laws may be in play throughout the process, to be applied not only by tribunals themselves during the course of proceedings, but also potentially by courts deciding or reviewing questions of jurisdiction and public policy (whether at the seat or in the enforcing jurisdiction). On a more practical level the increase in relatively recent sanctions regimes has led to growing discussion about the implications of these regimes for arbitrators and arbitral institutions.This chapter will discuss these two questions in two separate sections. The first section discusses the arbitrability of the dispute, the impact of sanctions on the jurisdiction of an arbitral tribunal, and the impact of sanctions on the enforcement of the arbitral award. The second section tackles the influence of sanctions on the conduct of arbitration proceedings. This chapter covers international arbitration in general, making no distinction between international commercial arbitration and international investment arbitration, the questions arising in both areas being of a similar nature, unless otherwise mentioned. This chapter however does not engage with the question of the effect of sanctions on the performance of contractual or other obligations which may have been affected by the imposed sanctions which is discussed elsewhere in this volume. Similarly, this chapter does not engage with the conformity of sanctions with international economic and trade law, notably in the context of the World Trade Organization, which is covered by Andrew Mitchell in his chapter in this volume.

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.

Despite its significant role in settling disputes between sovereign States and foreign investors, the international investment arbitration has been subject to substantial criticisms the most important of which is the inconsistency of awards in similar cases; a serious issue that dismantles the coherence and predictability of awards and undermines the legitimacy of international investment arbitration. In this article, the issues that give rise to the current crisis as well as the potential impacts of an appellate body to be established to review the inconsistent investment arbitration awards will be discussed. In the following, various options that can serve for this purpose will be theoretically and practically assessed. Eventually, after evaluating all the proposed options, the article concludes that the International Center for Settlement of Investment Disputes (ICSID) is the best option for this purpose in a manner that the Annulment Committee of ICSID is modified in order to transform into a comprehensive, fixed, and permanent appellate body acting within ICSID to review and, if necessary, correct the appealed awards. This proposal of course entails the structural modification of ICSID and thus requires the revision of ICSID Convention. Moreover, the article proposes a number of other suggested modifications to the ICSID Convention including expansion of appeal grounds, appointing fixed appellate judges familiar with public international law, preventing judges of the appellate body from simultaneously arbitrating other investment disputes, and fixing a deadline for the appellate body to decide.

Carlo de Stefano’s recent book, Attribution in International Law and Arbitration, deals with the ever-relevant issue of attribution in international law, with a particular focus on international investment arbitration.2 Aspects of public international law such as State responsibility and attribution can hardly be considered new or unexplored; however, these topics have become particularly important in the era of investment arbitration.3 In this sense, this book represents a much-needed comprehensive and contemporary monograph on the topic of attribution in investment arbitration. De Stefano’s book consists of two main parts: the first dealing with attribution in public international law generally (chapter II), and the second addressing attribution in the particular system of international investment arbitration (chapter III). Through this approach, and by moving from general to more specific analysis, de Stefano examines, first and foremost, whether the general rules of attribution are in principle applicable in investment arbitration. Secondly,...

The pressure on international arbitral tribunals to decide on requests for interim measures in high stakes international arbitration is likely to grow rapidly as the global economy continues to weaken and the number of investment disputes, both before the International Centre for Settlement of Investment Disputes (ICSID) tribunals and ad hoc tribunal proceedings under United Nations Commission on International Trade Law (UNCITRAL) Rules, increases. Although the individual decisions of the tribunals are not binding on one another, it is generally accepted that from these decisions there is the development of a special jurisprudence in investment arbitration. The danger inherent in this situation is that all decisions of all tribunals ‘have in principle equal status as concerns the potential for normative influence’. This influence will only increase as more awards are available for review. Recently, in Sergei Paushok, CJSC Golden East Company and CJSC Vostokneftegaz Company, Claimants v. Government of Mongolia (‘Paushok v. Mongolia’), a 2008 ad hoc investment arbitration conducted under UNCITRAL Rules, the tribunal entered an interim award without reference to any specific authority but nonetheless applied a list of criteria taken from international investment arbitration jurisprudence as a guide to its decision-making. Using Paushok v. Mongolia as a framework, the authors have critically evaluated tribunals’ reliance on what they deem ‘leading authority’ and the reasoning process used. From this analysis, the authors propose standards for tribunals to consider in the application for issuance of interim measures in international investment arbitration under both ICSID and UNCITRAL Rules and discuss how each factor should be analysed, as well as the quantum of proof required for each. At a minimum, the authors hope that their proposed standards provoke discussion on whether there is in actuality a set of internationally recognised standards to be met before a tribunal will issue an order in support of interim measures, and if so what should provide the basis for that standard.

The article is dedicated to analyzing the issue of determining the boundary of the legitimacy of state measures in regulating and controlling foreign investments within national jurisdiction, in accordance with national laws and regulations, and in line with national objectives and priorities. Additionally, this article reviews key regulatory trends in the international legal sphere concerning the protection of foreign investments. Through the analysis, the content of the main issues in international investment law has been clarified, including the protection of foreign investments and the differentiation (legal classification) of state actions that constitute indirect expropriation, discrimination, unfair treatment, or other violations of international obligations under international investment agreements. Such actions create the right to challenge them through international arbitrations, potentially leading to compensation obligations. On the other hand, state measures taken within their right to regulate in the public interest are not subject to compensation. Moreover, previously published theoretical insights regarding the interaction between the legal regime of foreign investment (international investment treatment) and the state guarantees for the protection of foreign investments have been importantly refined. Relevant examples are provided concerning both these guarantees and the key approaches to forming a regulatory framework for the domestic regulation of foreign investments, including their admission and restrictions. The first approach assumes that special regulations apply to foreign investors, partially overlapping with those established for national investors. In developing countries in Africa, Latin America, and Asia, special foreign investment laws typically exist, which may include separate laws or investment codes. The second approach is more characteristic of countries with developed economies. Under this approach, legislators do not establish special laws governing foreign investments but introduce significant restrictions. Such restrictions usually apply to specific industries or sectors in which foreign participation may be entirely prohibited or limited. Additionally, investment activities may require obtaining special permits, and states may implement special screening mechanisms. But the key research finding is that national law establishes the legal framework for creating the general legal regime of foreign investment, which is realized, among other things, through the sub-institution of state guarantees for the protection of foreign investments. This sub-institution may and may not be even directly linked to the actual implementation of foreign investments, but always exists in national legislations. It is also worth noting that the prevailing trend is the continuous development of national foreign investment legislation to implement policies that contribute to global economic growth and the overall welfare of the population. An empirical legal indicator of this trend is the gradual disappearance of differences between legal regimes for national and foreign investors, facilitated by the introduction of legal mechanisms for foreign investor access. Key words: international investment law, international investments, investment treatment, bilateral/multilateral investment treaties, international investment arbitration, state guarantees for the protection of foreign investments.

This chapter discusses the role of civil society in international investment arbitration. Much of the civil society focus on international arbitration has been on the investor–state dispute settlement (ISDS) process included in many international investment agreements. However, the historical role of commercial arbitration as the progenitor of investment treaty arbitration and the procedural and structural links between ISDS and commercial arbitration are important for the discussions on civil society engagement. Civil society recognized early on the problems of using a commercial arbitration model for investment arbitration, which involves public law matters, and concluded that this created a misappropriation of a tool that up to that time had only been used for private commercial purposes or very well-defined state-to-state purposes. The crossing of these purposes and actors to create public law arbitration between investors and states is what created this sense of misappropriation and led to a spotlight being shone on the regime by civil society. The chapter then looks back at the beginnings of civil society engagement with international arbitration through the experience with investment treaties, including the advancement of transparency and the ability to submit amicus curiae briefs.

The development of international economic relations has led to the emergence of independent dispute resolution mechanisms such as the Dispute Settlement Body of the World Trade Organization (DSB WTO) and international investment arbitration. However, in recent years there has been an increasing number of disputes with similar factual circumstances that were referred simultaneously to the DSB WTO and to international investment arbitration. As a result, procedural and substantive overlaps between the two fora have emerged. Whether this trend has a positive or negative effect is still an open question. On the one hand, the fact that the resolution of an international dispute may be considered by several international judicial bodies gives a disputing party the possibility of choosing a specialized forum, which makes the final outcome more efficient. On the other hand, the existence of several dispute resolution bodies that consider disputes arising from similar factual backgrounds further exacerbates the fragmentation of international economic law. This article is devoted to an analysis of jurisdictional aspects of the DSB WTO and international investment arbitration in the context of possible overlaps in both their procedural and substantive parts. The analysis reveals that the doctrines of res judicata and systematic interpretation do not provide effective remedies to prevent and overcome the overlaps between the DSB WTO and international investment arbitration. The authors believe that the problem of overlapping jurisdictions of the DSB WTO and international investment arbitration can be solved if a prior decision by one forum is evaluated by the other forum as factual evidence in the dispute and if an interpretation made by one forum is taken into account by the other forum in its decision-making.

Illegal Investments in International Arbitration

The years 2015 and 2016 saw dynamic and significant developments in international investment law and arbitration. This chapter discusses some notable decisions and developments in the case law that occurred during this period. It focuses on decisions that: are novel; address topical issues; may impact subsequent case law as a result of, amongst others, the interpretation of multilateral treaties or the development of legal doctrines; were particularly high-profile or garnered significant public attention; and/or may shape the development of the investor–state arbitration regime. The chapter is divided into six parts: security for costs; disclosure of third-party funding; strategic investment structuring to benefit from investment treaty protection; the first decisions issued in the Energy Charter Treaty (ECT) disputes against Spain; host states' right to regulate; and the enforcement and set-aside of arbitral awards.

International investment law has in recent years become a topic of great practical and academic importance, as the thousands of international investment treaties have given rise to hundreds of investor-state arbitrations, and innumerable books and articles. But fundamental questions concerning the regulatory character of international investment law, and what its aims and objectives are, remain the subject of contestation reflected in a variety of policy debates and in competing historical narratives regarding the development of the field. This article contends that two ‘public–private’ distinctions or antinomies lie behind this indeterminacy, at international investment law’s uncertain foundations—the first dealing with the characterization of international investment law as a form of ‘public’ or ‘private’ law, and the second dealing with the balance that international investment law strikes between ‘public’ and ‘private’ interests or objectives. A number of disputed issues in international investment law and arbitration, which are presented at the surface as merely technical problems, may in reality, it is argued, be products of these deeper underlying theoretical uncertainties.