International Investment Arbitration

Empirical Findings on International Arbitration: An Overview

Illegal Investments in International Arbitration

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 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.

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.

This article argues that while a mutually beneficial relationship can be cultivated between international investment arbitration and anti-corruption policies, the recent emergence of a state-invoked 'corruption defence' as a complete defence to liability for alleged breach of investment protection obligations may hamper the sustainability and effectiveness of such a relationship. In the context of a corrupt host state, for instance, and particularly a corrupt developing host state, the growing use of this defence may arguably frustrate the objectives of both foreign investment protection and anti-corruption policies. This was the case, for instance, in the 2006 investment arbitration World Duty Free Co. Ltd. v. Republic of Kenya, in which the arbitral tribunal accepted the corruption defence invoked by Kenya as a complete defence to the investor's claims of alleged breach of investment protection obligations. In so doing, the tribunal arguably disregarded the potentially detrimental effects such a decision may have on Kenya's ability to fight corruption and attract further foreign investment, both of which are of crucial importance to its future development. This article argues, therefore, that investment arbitration tribunals ought to proceed with caution when permitting a corrupt host state, and particularly a developing one, to rely on the corruption defence, and ought to devise alternative remedies to the complete rejection of the claims where investor corruption is established.

International Investment Arbitration: Development, Controversies, and Future Outlook

The proper allocation of interpretive authority between states and arbitral tribunals is central to current debates about investment treaty arbitration. States traditionally have given arbitrators broad latitude to interpret and apply international investment agreements. But as states gain greater experience with international investment arbitration, they are reclaiming interpretive authority from arbitrators as part of states’ broader reform efforts. To that end, states have devised at least four treaty-drafting techniques: interpretive guidelines, which tell tribunals how to interpret important treaty provisions, such as indirect expropriation, national treatment, and fair and equitable treatment; interpretive clarifications, which provide “greater certainty” on the meaning of investment protections in new treaties and interpretive gloss on existing treaties; interpretive indicators, which may tilt the interpretive balance toward the drafting states’ policy preferences, such as environmental protection; and interpretive markers, which record in the travaux préparatoires states’ preferred treaty interpretations. These drafting techniques can be enormously important. They may curtail arbitrators’ interpretive discretion, influence the interpretation of prior investment treaties, and even alter the outcome of arbitral cases. These techniques starkly illustrate the move from a traditional “delegation” model of IIAs to a more “prescriptive” model. Given their increasing use, these techniques are likely to affect the development of international investment law and arbitration for years to come.

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.

This text presents a study on corruption in international investment arbitration. The book considers the limited effectiveness of efforts to combat transnational corruption in international law and the emergence of international investment arbitration as a singular means for effective control of corruption within the international legal order. The case law on corruption by investment tribunals is studied exhaustively, jurisprudential trends are identified, and reforms aimed at enhancing the effectiveness and fairness of investment arbitration as a mechanism to combat corruption are proposed. The book is divided into three parts. Part I focuses on the phenomenon of corruption in foreign investment and attempts at its control through international law. Part II analyses the available case law in international investment arbitration dealing with corruption. The text identifies nine distinct trends emerging from the case law and provides a table summarizing the key areas of corruption decision-making and each relevant tribunal's approach, which is an invaluable tool for practitioners engaging in ‘live’ issues of corruption within arbitral proceedings. Part III reflects on the implications of these trends for both the ‘supply’ and ‘demand’ sides of corruption in international law, and proposes a integrative framework of decision for corruption issues in international investment 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.

Arbitrators form the cornerstone of the international commercial and investment arbitration regimes. In an age of globalized business, the path to becoming an international arbitrator, analysed from a legal profession perspective, is a growing area of interest. This study, using an interview-based methodology, seeks to shed light on the process of becoming an international arbitrator today. The focus is primarily on independent arbitrator practices, which consist of individuals who are not associated with a firm but might be affiliated with a barrister or arbitration chambers, and who dedicate the majority of their professional activity to sitting as an independent arbitrator in both the commercial and investment arbitration contexts. It analyses the reasons that motivate individuals to go ‘solo’ and the challenges that these individuals face after founding their practices. Additionally, information on the economics of an independent arbitrator practice and the management of case flow is provided. Through their interviews, respondents provide tips on business development and growth of successful independent arbitrator practices. This information is then analysed to provide key takeaways on the business models of modern international arbitrators. Finally, the study offers insights on the impact of these independent arbitrator practices on the questions of diversity and double hatting in international arbitration.

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,...

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.

This paper analyses Colombia’s experiences with international arbitration in disputes with foreign investors. Three periods of roughly 30 years were chosen: a) diplomatic protection of great powers’ expatriates in Latin America (Colombia) in the era of Imperialist rivalry: the last decades of the nineteenth century and the early years of the twentieth. This protection (sometimes with naval interventions) was meant to uphold a minimum standard of treatment for foreigners and gave rise to the Calvo doctrine as its counter-current protecting Latin American economic sovereignty; b) interregnum between the 1960s and 1980s: Calvo (prevalent in Latin America) reincarnated in an economic emancipation drive by postcolonial countries at the United Nations. Yet, the doctrine suffered a setback in the World Bank where the Icsid Convention was adopted despite a collective No vote by Latin American members on an earlier draft in Tokyo; c) investor-state arbitration under international investment agreements: expansion and retreat, from 1990 to present. Expansion of such agreements and emergence of a kind of arbitral case-law occurred between the early 1990s (when the Latin American mainstream abandoned Calvo) and the late 2000s. Counter-currents appeared since the early 2000, including treaty clarifications, public policy carve-outs, and withdrawals of Latin American, North American and European states. This periodization allows for comparing Colombia’s international investment arbitration consents, relevant awards, treaties, legislation and constitutional case-law over time.