1. James D. Fry & Odysseas G. Repousis
The University of Hong Kong
Stripping the Jurisdiction from Established Investment Arbitral Tribunals
James D. Fry & Odysseas G. Repousis
ILA Regional Conference - Cape Sounion, Greece
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2. Investment Arbitration: Current State and Backlash
Backlash against International Investment Law?
Against what?
Amplitude?
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3. Investment Arbitration: Current State and Backlash
Backlash against International Investment Law?
Specific Concerns:
i) Withdrawal from the ICSID Convention
Bolivia
Ecuador
Venezuela
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4. Investment Arbitration: Current State and Backlash
Backlash against International Investment Law?
Specific Concerns:
i) Withdrawal from the ICSID Convention
ii) European Policy towards BITs
European Parliament resolution of Apr. 6, 2011
Interpretation of EU law
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5. Investment Arbitration: Current State and Backlash
Backlash against International Investment Law?
Specific Concerns:
i) Withdrawal from the ICSID Convention
ii) European Policy towards BITs
iii) Australia’s opposition towards investor-State clauses
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6. Investment Arbitration: Current State and Backlash
iii) Australia’s opposition towards investor-State clauses
Need to renegotiate old BITs to remove access to investment arbitration:
Kyla Tienhaara (ANU)
Luke Nottage (UOS)
Goal – stop future arbitrations and existing arbitrations
Context of Argument?
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7. Philip Morris Asia Arbitration
Brought under the 1993 Hong Kong-Australia BIT
Over the alleged expropriation of intellectual property by Australia through its laws on the plain packaging of tobacco
Pending
Notice of Arbitration - December 21, 2011
Procedural Order on Seat of Arbitration (Singapore) - October 26, (6 more procedural orders)
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8. General Questions
What will happen to investors who invested under those treaties and have not started an arbitration process yet? (II)
What will happen if investors already have started an arbitration process? (III)
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9. Inter-temporal Principle
Max Huber in the 1949 Island of Palmas arbitration:
Contemporary interpretation – viewing facts “in light of the law contemporary with it [the fact], not the law in force at the time when a dispute arises or falls to be settled”
Evolutionary interpretation – “The same principle which subjects the act creative of a right to the law in force at the time the right arises demands that the existence of the right, in other words its continued manifestation, shall follow the conditions required by the evolution of law.”
2-element approach confirmed by scholars and case law (Higgins, Elias, Fitzgerald)
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10. What will happen to investors who have not started an arbitration.
A. Powers of the states
B. Temporal Effects
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11. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
VCLT Art 39 - “A treaty may be amended by agreement between the parties.”
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12. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
2. Interpretation
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13. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
2. Interpretation
3. Termination
VCLT Art. 42(2) – “The termination of a treaty, its denunciation or the withdrawal of a party, may take place only as a result of the application of the provisions of the treaty or of the present Convention.”
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14. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
2. Interpretation
3. Termination
B. Temporal Effects:
VCLT art. 28 applies: Temporal Effect of Entry into Force – flexible  Flexible Temporal Effects for Amendment, Interpretation or Termination
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15. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
2. Interpretation
3. Termination
B. Temporal Effects:
1. Prospective effect
2. From the moment of amendment
3. Retroactive effect
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16. What will happen to investors who have not started an arbitration.
A. Powers of the states:
1. Amendment
2. Interpretation
3. Termination
B. Temporal Effects:
VCLT Art. 70(1) – “Unless the treaty otherwise provides or the parties otherwise agree, the termination of a treaty under its provisions or in accordance with the present Convention:
(a) releases the parties from any obligation further to perform the treaty;
(b) does not affect any right, obligation or legal situation of the parties created through the execution of the treaty prior to its termination.
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17. What will happen to investors who have not started an arbitration.
Can states terminate the rights given to third parties by the treaty?
YES, either through termination, amendment, or interpretation, inasmuch as each simply requires the agreement of the parties.
BUT it is not that easy where an arbitration has already started. WHY?
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18. What will happen to investors who have started an arbitration.
Host of different ways to interpret:
VCLT Art 31(1) - A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
VCLT Art 31(2) – Context – other agreements relating to that treaty
VCLT Art 31(3) – Subsequent Agreements and Subsequent Practice
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19. What will happen to investors who have started an arbitration.
VCLT Art 31(3) – Subsequent Agreements and Subsequent Practice:
There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation.
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20. What will happen to investors who have started an arbitration.
Observations on VCLT Art 31
No Hierarchy
Reflects the inter-temporal principle in interpreting law
Later agreements and practice are not binding on the way the tribunal interprets the law (including determinations over its jurisdiction, especially once it has determined it has jurisdiction).
Tribunals can give weight to common positions, but investment tribunals have a stricter approach
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21. What will happen to investors who have started an arbitration.
Example 1 – Aguas del Tunari v. Bolivia arbitration
Dutch ministers said in parliament that the Netherlands-Bolivia BIT was not applicable to the dispute.
Bolivia said it agreed
Tribunal said “it is the Tribunal, and not the contracting parties, that is the arbiter of its jurisdiction”, and continued with the arbitration.
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22. What will happen to investors who have started an arbitration.
Example 2 – NAFTA Free Trade Commission
Interpretation of NAFTA Article 1105(1) on the meaning of the “fair and equitable treatment” standard to mean the customary international law standard for the minimum standard of treatment – high standard that required bad faith (Neer arbitration of the 1920s)
Later NAFTA tribunals interpreted this interpretation from an evolutionary perspective (2nd element of the inter-temporal principle)
Mondev –“reasonable evolutionary interpretation of Article 1105(1)”
ADF – customary international law is not “frozen in time” and that it had evolved since Neer. Law is not a “static photograph”.
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23. Consent to Arbitrate and Perfected Consent
Dual Role of Dispute Settlement Clause
regulates the procedure to settle disputes
Acts as consent of the states to arbitrate disputes involving the investors of the other state
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24. Consent to Arbitrate and Perfected Consent
Dual Role of Dispute Settlement Clause
Consent to Arbitration Not in a Single Instrument
Investor consent given through written acceptance of the offer to arbitrate (Schreuer)
Amending or terminating a BIT retroactively not the same as withdrawing consent to arbitration
Need the investor’s agreement to end arbitration once consent has been perfected
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25. Consent to Arbitrate and Perfected Consent
Parties to the arbitration are the investor and the respondent state, not the two states.
Example - once the investor’s consent to arbitration has been given, the state of the investor’s nationality cannot provide diplomatic protection or bring an international claim (ICSID Conv art. 27)
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26. Consent to Arbitrate and Perfected Consent
Parties to the arbitration are the investor and the respondent state, not the two states.
Irrevocability comes into effect once the consent has been perfected, or in other words, when it has been given by both parties
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27. Consent to Arbitrate and Perfected Consent
Parties to the arbitration are the investor and the respondent state, not the two states.
Irrevocability comes into effect once the consent has been perfected, or in other words, when it has been given by both parties
Only the parties to the arbitration can withdraw their consent to arbitration
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28. Conclusions States may amend or terminate a treaty;
Amendment or termination does not have retroactive effects, unless the parties agree otherwise;
The inclusion of investor-state arbitration clauses in international investment agreements acts as an offer made by those states to arbitrate disputes with investors;
When investors accept that offer to arbitrate, the consent to arbitration is perfected;
The parties to the arbitration are the investor and the state; and
Once the parties to the arbitration have consented to arbitration, their consent is irrevocable.
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29. Thank you
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