Arbitration under international investment agreements: a guide to the key issues 2nd edition katia y

https://ebookmass.com/product/arbitration-underinternational-investment-agreements-a-guide-to-the-key-

Instant digital products (PDF, ePub, MOBI) ready for you

Download now and discover formats that fit your needs...

International Commercial Contracts: Contract Terms, Applicable Law and Arbitration 2nd Edition Giuditta Cordero-Moss

https://ebookmass.com/product/international-commercial-contractscontract-terms-applicable-law-and-arbitration-2nd-edition-giudittacordero-moss/ ebookmass.com

International Energy Investment Law: The Pursuit of Stability 2nd Edition Peter Cameron

https://ebookmass.com/product/international-energy-investment-law-thepursuit-of-stability-2nd-edition-peter-cameron/

ebookmass.com

Financial Times Guide to Investment Trusts, The: Unlocking The City'S Best Kept Secret, 2nd Edition John C. Baron

https://ebookmass.com/product/financial-times-guide-to-investmenttrusts-the-unlocking-the-citys-best-kept-secret-2nd-edition-john-cbaron/ ebookmass.com (eBook PDF) Behavior Modification: What It Is and How To Do It 11th Edition

https://ebookmass.com/product/ebook-pdf-behavior-modification-what-itis-and-how-to-do-it-11th-edition/

ebookmass.com

Joe Higgins Search 02-Search for the Gatherers Irene Hill

https://ebookmass.com/product/joe-higgins-search-02-search-for-thegatherers-irene-hill/

ebookmass.com

Language Disorders from Infancy Through Adolescence E Book: Listening, Speaking, Reading, Writing, and Communicating 5th Edition, (Ebook PDF)

https://ebookmass.com/product/language-disorders-from-infancy-throughadolescence-e-book-listening-speaking-reading-writing-andcommunicating-5th-edition-ebook-pdf/

ebookmass.com

Tensors for Data Processing. Theory, Methods, and Applications Yipeng Liu

https://ebookmass.com/product/tensors-for-data-processing-theorymethods-and-applications-yipeng-liu/

ebookmass.com

Keyboarding and Word Processing Complete Course Lessons 1 110: Microsoft Word 2016 20th Edition, (Ebook PDF)

https://ebookmass.com/product/keyboarding-and-word-processingcomplete-course-lessons-1-110-microsoft-word-2016-20th-edition-ebookpdf/

ebookmass.com

Jim Hanvey, Detective Octavus Roy Cohen

https://ebookmass.com/product/jim-hanvey-detective-octavus-roy-cohen/

ebookmass.com

https://ebookmass.com/product/highland-defender-kathryn-le-veque-5/

ebookmass.com

ARBITRATION UNDER INTERNATIONAL INVESTMENT AGREEMENTS

ARBITRATION UNDER INTERNATIONAL INVESTMENT AGREEMENTS

A Guide to the Key Issues

Second Edition

Edited by Katia Yannaca- Small

1

Great Clarendon Street, Oxford, OX2 6DP, United Kingdom

Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2018

The moral rights of the authors have been asserted

First Edition publisthed in 2010

Second Edition published in 2018

Impression: 1

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above

You must not circulate this work in any other form and you must impose this same condition on any acquirer Crown copyright material is reproduced under Class Licence Number C01P0000148 with the permission of OPSI and the Queen’s Printer for Scotland

Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America

British Library Cataloguing in Publication Data Data available

Library of Congress Control Number: 2018936199

ISBN 978–0–19–875808–2

Printed and bound by CPI Group (UK) Ltd, Croydon, CR0 4YY

Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

To David, Alexander, Sophia and Ileana

FOREWORD TO THE FIRST EDITION

International investment arbitration has a lineage that may be traced to concession and other contracts of foreign investors with host governments. Disputes under those contracts gave rise to a small number of large arbitrations between the two World Wars and for some three decades after the Second World War. Only very large investors were normally in a position to persuade host governments to agree to arbitration of disputes that might arise under contracts between them. Implementation of the resultant arbitral obligations was in some cases significant: in others frustrated.

Two developments transformed this episodic scene. The first was the conclusion of the World Bank’s Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States, the ICSID Convention, which came into force in 1966. It provides a standing forum for the settlement of disputes between foreign investors and host governments. The second was the conclusion of bilateral investment treaties between states. By this writing, there are—counting agreements arising not only bilaterally but those from the Energy Charter Treaty, NAFTA, and CAFTA—some 2,700 such treaties in force. They are the main source of the jurisdiction of ICSID. But they are by no means simply procedural and jurisdictional in effect, because they provide standards for the treatment and taking of foreign investment that represent a remarkable advance on the contentious content of customary international law. By together enabling the foreign investor to require a host government to arbitrate disputes between them, on the basis of agreed international legal standards, a new era in international dispute settlement has opened. ICSID currently deals with as many cases as has the International Court of Justice in the whole of its history.

This cascade of international litigation has spawned a multiplicity of problems, procedural, jurisdictional, and substantive. This book analyses recurrent issues that arise in the disposition of those problems. Katia Yannaca-Small, drawing on her experience as a senior lawyer both of the OECD and ICSID, has assembled a group of knowledgeable and acute authors, many of them leading practitioners in this field, who address the most salient and persistent of those issues. And she herself has written six of the chapters, which tackle some of the most sensitive questions.

In the last few years, international investment arbitration has come under attack. The criticism, much of it uninformed, has a nationalistic and autarchic tinge. Two South American states members of ICSID, apparently under the influence of a third, have withdrawn from the treaty, giving reasons that would have warmed the heart of Carlos Calvo. The European Union is poised to displace bilateral investment treaties between its members by its own rules.

The adoption by the United States of a revised model bilateral investment treaty in 2004 was regressive, and current reconsideration in the Congress may lead the United States to resile further from its traditional support of foreign investment. Nevertheless, fresh bilateral investment treaties are being concluded, and international investment arbitration flourishes.

This valuable volume will assist the student and practitioner of international investment arbitration in understanding and addressing its primary problems, which are as complex as they are recurrent.

Stephen M Schwebel, Former President of the International Court of Justice

FOREWORD TO THE SECOND EDITION

When the first edition of this text was published a short seven years ago, it quickly became an authoritative reference guide for practitioners, academics, and tribunals on investorstate questions. While (relatively) little time has passed since publication of the first edition, international investment law and investor-state dispute settlement have continued to evolve rapidly.

Much of this change has been generated from the core of the discipline, through revision of international investment agreements. This has been accomplished by the adoption of new or revised ‘model’ treaties by numerous states, allowing them to update their obligations based on current policies and state-of-the-art phrasing. A similar exercise has occurred on a multilateral basis, where we have witnessed a trend towards negotiation of investment disciplines on a multi-party level. In particular, the European Union has negotiated and continues to negotiate a number of agreements with investment chapters.

The new generation agreements have addressed substantive and procedural matters, and their hallmark is an increasingly detailed elaboration of the obligations undertaken by states and the procedure available to ensure compliance with treaty undertakings. One good example of the new approach to substance has been elaboration of the ‘right to regulate’, confirming that states can take bona fide measures to act for the public good, without incurring an obligation to compensate for the effects of such measures. Another example has been sharpening the identification of who may invoke the protection of investment treaties, for example through revised definitions of ‘investment’ and ‘investor’, increased use of exhaustion of local remedies, and more frequent inclusion of denial of benefits clauses.

An equally significant evolution has occurred on the procedural side of investment treaties and in investment practice. For example, many states have taken a more proactive role in the supervision of treaties after ratification. This has been effected by committees’ supervising implementation of treaties, by according non-respondent treaty parties a right to participate in arbitrations, and by giving states the ability to make interpretive declarations about the meaning of a treaty. Another example has been the continuation of the move towards increased transparency, which started in the NAFTA cases and in the 2006 amendments to the ICSID Convention and Additional Facility arbitration rules. This evolution was furthered in 2014 with the UNCITRAL Rules on Transparency and the ratification of the Mauritius Convention in October 2017. Another striking procedural innovation is the policy of the European Union to conclude agreements with standing tribunals and appellate bodies. A scant eleven years ago an Appellate Facility proposal was suggested by ICSID but rejected by states as premature. By 2017, Canada and the European Union had agreed to a standing body to adjudicate investment disputes arising under their free trade agreement, with ICSID being named the Secretariat of that body. Perhaps the most significant procedural innovation is one that is ongoing: ICSID has embarked upon a procedure to amend its rules and regulations, and is consulting member states as well as the public for comments and proposals. These amendments will apply to new cases in accordance with Articles 33 and 44 of the ICSID Convention and could have a far-reaching effect, given that ICSID administers over 70 per cent of all investment arbitration.

While treaties have evolved, the number of cases initiated by investors has continued at a steady pace. In fiscal year 2016, ICSID registered forty-eight cases, and had registered more than 620 cases in total by June 2017. About three-quarters of these cases were commenced

under treaties, predominantly bilateral investment treaties. However, a distinct trend towards the use of multilateral treaties is evident, with 31 per cent of the ICSID cases commenced in fiscal year 2016 having been initiated under the Energy Charter Treaty. Another new trend has been the diversification of respondents and claimants in investment cases: for the first time, western European Member States are being named in investment cases, while claimants increasingly come from developing and transition economies. One trend that has proved stable has been the outcome of cases: roughly 30–35 per cent of cases settle before an award is rendered, and of those cases where an award is rendered, roughly half uphold the claim while the other half dismiss the claim on jurisdictional or merits bases. The scope of issues raised in arbitration has also continued to expand, and the interplay between individual awards and systemic approaches to treaty drafting is clear.

As attested by the breadth and depth of the topics in this edition, investment treaties and arbitration continue to raise novel legal questions. The editor is an expert in the field, having dealt with investment law and procedure from the distinct perspectives of an international organization, an arbitral institution, a law firm representing both states and investors in individual cases, and as a professor of law. Her knowledge and expertise is evident throughout. In addition, the contributing authors are all well known in this discipline, with backgrounds and knowledge that bring an intelligent and up-to-date perspective on the most important questions in the field. Given this combination, it is certain that this edition will become equally authoritative as the first edition.

Meg Kinnear, Secretary-General, International Centre for Settlement of Investment Disputes, November 2017

ACKNOWLEDGEMENTS

The fast pace at which investor-state arbitration has been evolving in the last decade has made a second edition of this book an absolute necessity. Although its foundational elements have remained the same in the last eight years, the wealth of claims, awards, scholarly writings, policy reconsiderations, and recalibrations driven by concerns and criticisms, point to a system that has been maturing while changing at the same time. At the time of publication, it is still unknown where these changes will take it but, wherever this will be, the need to understand the key issues, as they evolve, will remain.

This second edition, following the path of the first, aims to serve as a guide on investment treaty arbitration not only for the knowledgeable sophisticated reader but also the newcomer to this field. This challenging task, to balance the educational and expert elements, could not have been achieved without the wonderful group of outstanding contributors who very graciously undertook this task with me again, with enthusiasm and no hesitation. I am also thankful to those who joined us in this second edition and enriched the book greatly. I am deeply grateful to all not only for their valuable contributions to this book but also for the collegiality and cooperation I have enjoyed with all of them throughout the years.

I take the opportunity to thank the many people at Oxford University Press who saw the need for a second edition and persuaded me to go ahead, as well as those who accompanied me throughout the process with great professionalism, advice, and patience. Jamie Berezin, Faye Mousley, Liana Green, and, during the last stretch, Catherine Rogers, who offered me wise support in the last, most demanding phase of the editing process. I express my appreciation to Newgen’s Nancy Rebecca for aptly managing the production process, and to Nicola Prior for copy-editing.

Last but not least, my utmost thanks and gratitude go to my husband, David Small, former General Counsel of the OECD, who not only greatly assisted with the editing of this volume but also never stopped encouraging me and supporting me. Without his support, this second edition would not have seen the light of day.

PART I INVESTMENT TREATIES AND THE SETTLEMENT OF INVESTMENT DISPUTES: THE FRAMEWORK

1. Bilateral Investment Treaties and Investment Provisions in Preferential Trade Agreements: Recent Developments in Investment Rule-making Roberto Echandi

II. BITs and Investment Provisions in PTAs: The Gradual Shift from Investment Protection to the Promotion of Liberalization of

2. The Energy Charter Treaty Emmanuel Gaillard and Mark McNeill

3. International Investment Dispute Settlement Mechanisms Ucheora Onwuamaegbu

IV.

C. International Court of Arbitration of the International Chamber of Commerce,

A. Commencement of Proceedings and the Role of the Institution in the Initial Determination of

C.

4. The Role of Precedent in Investment Treaty Arbitration Jan Paulsson

IX.

5. An Overview of Procedure in an Investment Treaty Arbitration Barton Legum I.

III.

6. Aspects of Procedure for Institution of Proceedings and Establishment of Tribunals in Investment Treaty Arbitration

Milanka Kostadinova

7. The Fate of Frivolous and Unmeritorious Claims

Katia

and David Earnest

IV.

A.

8. Challenges of Arbitrators in Investment Arbitration: Still Work in Progress? Loretta Malintoppi and Alvin Yap

II.

9. Piercing the Veil of Confidentiality: The Recent Trend towards Greater Public Participation and Transparency in Investment Treaty Arbitration Andrea J Menaker and Eckhard Hellbeck

II.

PART III GUIDE TO KEY JURISDICTIONAL ISSUES

10. Who is Entitled to Claim? The Definition of Nationality in Investment Arbitration Katia Yannaca-Small

11. The Meaning of ‘Investment’ in Investment Treaty Arbitration

Katia Yannaca-Small and Dimitrios Katsikis

II.

B.

C.

12. Bifurcation of Investment Disputes

13. Burden and Standard of Proof at the Jurisdictional Stage

Baiju S Vasani, Timothy L Foden, and Hafsa Zayyan

III. Who Bears the Burden of Proof at the Jurisdictional Phase?  13.06

A. The Claimant Bears the Burden of Proving the Tribunal’s Jurisdiction  13.06

B. Either Party Can Bear the Burden of Proving or Disproving the Tribunal’s Jurisdiction  13.14

C. The Respondent Bears the Burden of Proof

D. The Centrist Position: Neither Party Bears the Burden of Proving the Tribunal’s Jurisdiction

IV. Who Bears the Burden of Proof Regarding Specific Jurisdictional Objections?

A. The National Identity of the Natural Person Claimant is in Dispute

B. The Claim Does Not Arise out of an ‘Investment’

C. The Claimant is Not an ‘Investor’ Within the Meaning of the BIT/Treaty

D. Consent to Arbitrate

E. Case Already Litigated Through Domestic Courts

F. Dispute Arose Prior to the Entry of the BIT into Force

G. Dispute Barred by a Provision of the BIT/Treaty

V. Once the Tribunal Determines Who Has the Burden of Proof, What Standard of Proof Is Applicable at the Jurisdictional Phase?

A.

B.

14. Attribution: State Organs and Entities Exercising Elements of Governmental Authority Georgios

IV.

15. Breach of Treaty Claims and Breach of Contract Claims: When Can an International Tribunal Exercise Jurisdiction? Stanimir A Alexandrov

II. Treaty-based Tribunals’ Jurisdiction over Treaty Claims Arising out of an Underlying Contract

III. Treaty-based Tribunals’ Jurisdiction over ‘Purely’ Contractual Claims  15.20

A. Umbrella Clause Provisions as a Basis for Jurisdiction over Contract Claims

B. Provisions Granting Jurisdiction over ‘Any Disputes’

C. Provisions Granting Jurisdiction over Disputes Relating to ‘Investment Agreements’

IV. Distinguishing Between Breach of Treaty

A. The Power of Treaty-based Tribunals to Interpret Contracts

B. The Difficulty (and Irrelevance) of Attempting to Identify Contract Claims ‘Dressed’ as Treaty Claims

C. The Impact of Contractual Forum Selection Clauses on the Jurisdiction of Treaty-based Tribunals

D. The Role and Significance of ‘Fork-in-the-Road’ Provisions

16. The Umbrella Clause: Is the Umbrella Closing? Katia

17. Counterclaims in Investment Treaty Arbitration

Mark A Clodfelter and Diana Tsutieva

III. Counterclaims under the ICSID Convention

A. Introduction to Article 46

B. Counterclaims Arising Directly out of the Subject Matter of the Dispute

C. Counterclaims Within the Scope of the Parties’ Consent  17.37

D. Counterclaims Otherwise Within ICSID’s Jurisdiction

E.

IV.

C. The 1976 UNCITRAL Rules: Implied Modification by State Parties

D. The Connection Requirement under the New and Old UNCITRAL Rules  17.88

E. Conclusion  17.94

V. Moving Forward: Greater Expectations in Counterclaim Practice  17.95

18. The State’s Corruption Defence, Prosecutorial Efforts, and Anti-corruption Norms in Investment Treaty Arbitration

Charles N Brower and Jawad Ahmad

II. Binary Outcomes of the Corruption Defence—Can the Playing Field be Levelled?

A. Preliminary Remarks Regarding Jurisdiction, Admissibility, and Merits

B. Illegality Where There Is a Legality

C. Illegality Where There Is No Legality Clause

D. The State’s Obligation to Prosecute or Investigate and the Corruption Defence

III. Anti-corruption Norms in Recent Investment Agreements

B. Independent Anti-corruption Provisions—the Japanese Treaties

C. Anti-corruption Norms as a Part of Corporate Social Responsibility (CSR)—the

IV.

PART IV GUIDE TO KEY SUBSTANTIVE ISSUES

19. The Law Applicable in Investment Treaty Arbitration Yas Banifatemi

III. Determination of the Applicable Law by the Arbitrators in the Absence of the Parties’ Agreement

IV. Implications of the Specific Nature of Investment Treaties in the Choice of Law Process  19.22

20. Fair and Equitable Treatment: Have Its Contours Fully Evolved? Katia Yannaca-Small I. Introduction

II. Does FET Refer to Customary International Law or Is It an Autonomous Standard?  20.08

A. The NAFTA Tribunals  20.12

B. Non-NAFTA Tribunals  20.20

C. What Difference Does It Make Whether Fair and Equitable Treatment Refers to the Minimum Standard of Customary Law?  20.25

III. The Normative Content of the Fair and Equitable Treatment Standard  20.28

A. Denial of Justice, Due Process  20.31

B. Transparency, Stability, and Legitimate Expectations  20.45

C. Obligation of Vigilance and Protection  20.87

D. Lack of Arbitrariness and Non-discrimination  20.90

IV. Conclusion  20.98

21. The National Treatment Obligation

Andrea K Bjorklund

D.

E.

22. Indirect Expropriation and the Right to Regulate: Has the Line Been Drawn?

Katia Yannaca-Small

VI. Criteria Indicating Whether

D.

23. The MFN Clause and Its Evolving Boundaries

Abby Cohen Smutny, Petr Polášek, and Chad Farrell I.

A.

B.

IV.

V.

PART V REMEDIES AND COSTS

24. Interim Relief in Investment Treaty Arbitration Gabrielle Kaufmann-Kohler, Aurélia Antonietti, and Michele Potestà

I.

II.

A.

C.

III.

IV.

A.

C.

V.

VI.

VII.

VIII.

A.

IX.

25. Compensation and Damages in Investment Treaty Arbitration Irmgard Marboe

26. Third-party Funding in Investment Treaty Arbitration Nigel Blackaby and Alex Wilbraham

VIII.

PART

27. Annulment of ICSID Awards: Is it Enough or Is Appeal around the Corner?

Katia Yannaca-Small

II. Scope and Application of Annulment under the ICSID Convention

A. Annulment: An Exceptional Recourse?

B. Annulment versus Appeal: A Thin Line in ICSID Annulment Proceedings

III. The

V. The Quest for Coherence and Consistency: Proposals for an Appeal Mechanism

A. Past and Current Efforts to include Provisions on the Establishment of an Appeal Mechanism in Investment Agreements

28. Review of non-ICSID Awards by National Courts Kaj Hobér and Nils Eliasson

C.

29. Enforcement of Investment Treaty Awards August Reinisch

30. A Practical Guide: Research Tools in International Investment Law Julien Fouret

C.