Update: International Arbitration between Foreign Investors and Host States (Investor-State Arbitration)
By Hernando Otero and Omar García-Bolívar
Hernando Otero is an international trade, investment and dispute resolution attorney with experience as counsel of record and as arbitrator in international arbitrations between foreign investors and host States under the ICSID Convention, ICSID Additional Facility and the UNCITRAL Arbitration Rules. He is licensed to practice in Colombia, New York State and the District of Columbia. He holds a Master of Laws degree in International Law from New York University's School of Law and a bachelor's degree in law from Universidad de los Andes in Bogotá-Colombia.
Omar García-Bolívar is an international lawyer and public policy consultant. He is also an international arbitrator listed with several arbitration fora. He is admitted to practice law in Venezuela, New York State, District of Columbia and the United States Court of International Trade. He holds law degrees from University of Edinburgh, Southern Methodist University and Universidad Católica Andrés Bello in Caracas-Venezuela.
Table of Contents
International arbitration between a foreign investor and a host State is the product of the consent of the parties. That consent may take the form of a contractual provision (including those in a legal stability contract) or a subsequent arbitral agreement but increasingly it is the result of a foreign investor accepting a State’s standing offer to arbitrate a dispute in national legislation or in a bilateral investment or a free trade agreement (with the investor’s country of nationality).
The most reliable approach to confirm which international investment agreements are in force is to check with the relevant national institutions (normally ministries of foreign affairs, finance or trade). Increasingly these institutions post this information online. Some notable examples include the Office of the US Trade Representative , Canada’s Department of Foreign Affairs and International Trade , the European Commission and the UK’s Foreign and Commonwealth Office .
That said there are a number of free online databases that offer a good starting point. The most up to date database of bilateral investment treaties is the United Nations Conference on Trade and Development’s (or UNCTAD) Investment Treaties Online . The World Bank’s Center for Settlement of Investment Disputes also has a record of bilateral investment agreements but does not have copies of the texts. For its part, Kluwerarbitrationlaw.com i s a subscriber service but allows users to freely consult its Bilateral Investment Agreement register (but not the text of the agreement).
A number of free trade agreements also have investment chapters that provide for the arbitration of disputes between foreign investors and host States. The World Trade Organization’s Regional Trade Agreements Information System is a reliable source on existing free trade agreements. The Organization of American States’ Foreign Trade Information System (or SICE) has a comprehensive database (including texts) of both bilateral investment and free trade agreements but only of OAS member countries. Finally, the Asia-Pacific Economic Cooperation forum for its part has published a useful resource in the 2010 Guide to Investment Regimes of APEC Member Economies . In all cases, each agreement must be reviewed to confirm whether it affords foreign investors the choice of submitting their claims against host states to international arbitration.
International contracts, national legislation and international investment agreements that provide for international arbitration between foreign investors and host States identify an arbitral institution or rules for the proceedings. International investment agreements frequently provide the Claimant with a choice two or more institutions or rules.
A common institutional choice is the World Bank’s International Center for Settlement of Investment Disputes or ICSID. The ICSID is an arbitral forum in which independent arbitral tribunals, conciliation commissions and fact-finding committees resolve investment disputes between a foreign investor and a host State.
ICSID arbitration most often takes place under the Convention on the Settlement of Investment Disputes between States and National of other States (or ICSID Convention) and the ICSID Rules of Procedure for Arbitration Proceedings (ICSID Arbitration Rules). The ICSID Convention is an international treaty ratified and in force for 150 States . A claimant may only submit an arbitral claim under the ICSID Convention and the ICSID Rules of Procedure for Arbitration (ICSID Arbitration Rules) when both the country of nationality of the investor and the host State are parties to the ICSID Convention. An ICSID Convention arbitral award may not be appealed or subjected to other recourse except to an Annulment request for limited grounds under the Convention. In addition a final ICSID Convention arbitral award shall be recognized and its pecuniary obligations enforced by every ICSID Convention party as a final judgment of one of its courts.
ICSID Center arbitration may also take place pursuant to the ICSID Additional Facility Rules when either the country of nationality of the investor or the host State (but not both) is not a party to the ICSID Convention (as has frequently been the case with some arbitration under NAFTA). In contrast to awards issued under the ICSID Convention, the losing party may attempt to set aside or annul an ICSID Additional Facility award or that of issued in other arbitral forums (see below, sections II, B and C) in the place of arbitration or attempt to challenge or block its enforcement.
Another common choice provided in international investment agreements is to submit an arbitral claim under the 2010 United Nations Commission on International Trade Law Arbitration Rules (or UNCITRAL Arbitration Rules). The Rules provide for a non-institutional procedural framework for proceedings. The parties in dispute however often resort to arbitral institutions such as the ICSID or the Permanent Court of Arbitration to assist the administration of proceedings.
3.3. Stockholm Chamber of Commerce, International Chamber of Commerce and others.
The Arbitration Institute of the Stockholm Chamber of Commerce and the International Chamber of Commerce International Court of Arbitration (ICC Court) are increasingly common choices. The ICC Court’s 2012 rules (in particular take into consideration important issues in investor-State arbitration. Other arbitral centers have occasionally been chosen (e.g. London Court of International Arbitration ) or are positioning themselves are attractive regional fora.
There are a number of sources that provide copies of awards and decisions. The ICSID website is a fundamental source for ICSID awards and decisions , and procedural details of ongoing ICSID proceedings. There are however a number of non-institutional sources. For example Investment
is a reliable and free database of newly released awards and decisions. The Investment Claims website provides free access to decisions and fee-based access to head notes and analysis.
There are also some helpful treaty-specific sources. The State parties to the North American Free Trade Agreement (through the NAFTA Free Trade Commission) agreed to make available to the public in a timely manner all documents submitted to, or issued by, an investment dispute arbitral tribunal, with certain exceptions for confidential business information under the applicable arbitration rules. As a result, the US Department of State (Office of the Legal Advisor) , Canada’s Department of Foreign Affairs and International Trade , and Mexico’s Secretaría de Economía have very comprehensive databases of NAFTA proceedings. This approach has been embraced in the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). For its part, the Energy Charter Secretariat maintains its own database of claim particulars.
Keeping up with the increasing number of awards, decisions and orders may be challenging. There are a number of resources that facilitate the task. International Arbitration Case Law is a free service with case summaries in English, Spanish and French. UNCTAD’s Database of Treaty-Based Investor-State Dispute Settlement Cases provides case abstracts for key procedural or substantive issues. The UNCTAD’s Division on Investment and Enterprise also periodically publishes topical overviews and analyses. For its part, the International Institute for Sustainable Development publishes the Investment News and Resources newsletter and thematic overviews on international investment. Finally, the subscriber Investment Arbitration Reporter is perhaps the best source for the latest developments in the field.
· Bishop, R. Doak, et. al., Foreign investment disputes: cases, materials and commentary, The Hague: Kluwer Law International, 2005.
· Brown, Chester, Commentaries on selected model investment treaties, Oxford University Press, 2013.
· Dolzer, Rudolph, Principles of international investment law, Oxford University Press, 2012.
· McLachlan, Campbell, et al., International investment arbitration: substantive principles, Oxford; New York: Oxford University Press, 2007.
· Hamilton, Jonathan, et. al., Latin American investment protections: comparative perspectives on laws, treaties, and disputes for investors, states and counsel, Martinus Nijhoff Publishers, 2012
· Reed, Lucy, et.al. Guide to ICSID arbitration, Alphen aan den Rijn, The Netherlands: Kluwer Law International, 2011.
· Schreuer, Christoph, et. al., The ICSID Convention: a commentary on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Cambridge; New York: Cambridge University Press, 2009.
· Vandevelde, Kenneth J., Bilateral investment treaties: history, policy, and interpretation, Oxford; New York: Oxford University Press, .2010.