STUDYING LAW AT ROMA TRE
FALL SEMESTER
INTERNATIONAL ARBITRATION
The Protection of Foreign Investments under
International Law
Domenico Di Pietro
22 November 2010
The Protection Under Domestic Law and
Customary International Law
Domestic Law
• Procedural Protection (forum)
• Substantive Protection (applicable Law)
• State Immunity (jurisdiction and execution)
Customary International Law
• Limited Scope
- The “minimun standard” of protection (the Neer claim)
• Diplomatic Protection
- State intervention to defend citizen’s rights
- Discretionary only
- Commercially ineffective
The Creation of a Neutral Forum
The Washington (ICSID) Convention 1965
• International Arbitration and Conciliation instead of
Domestic Courts
• Ratified by as many as 145 States
• Incorporation of ICSID Centre
• Self-contained Instrument
• Identification of Applicable Law
• Enforcement Procedures
• Report of Executive Directors
Hardly ever used until the BIT boom in the early 90’s
The Need for Substantive Protection
The Bilateral Investment Treaty Boom
2500
2000
1500
1000
500
0
1959- 1970- 1980- 1990- 19991969 1979 1989 1998 2004
UNCTAD
The Procedural Protection Offered in the BITs
• Available Means of Dispute Resolution
- Domestic Courts
- ICSID Arbitration
- UNCITRAL Arbitration (ad hoc or administered)
- Main differences
• “Arbitration Without Privity”
• Mixed Nature
• Differences between ICSID and non-ICSID
Definition of Investment
Per investimento si intende, conformemente all’ordinamento giuridico del
Paese ricevente ed indipendentemente dalla forma giuridica prescelta o da
qualsiasi altro ordinamento giuridico di riferimento, ogni conferimento o bene
a. beni mobili ed immobili, nonché ogni altro diritto in rem,
b. azioni, quote societarie e ogni altra forma di partecipazione, anche se
minoritaria o indiretta, in società costituite nel territorio di un delle Parti
Contraenti;
c. obbligazioni, titoli pubblici o privati o qualsiasi altro diritto per prestazioni o
servizi che abbiano un valore economico, come altresì redditi capitalizzati;
d. crediti direttamente collegati ad un investimento
e. diritti d’autore, di proprietà industriale od intellettuale
f. ogni diritto di natura economica conferito per legge o per contratto, nonché
ogni licenza e concessione
The Substantive Protection Offered by BITs
The Definition of Investment
• Definition of Investment
• Extensive Interpretation by Arbitral Tribunals
• Customary International Law?
- Pros:
Harmonised provisions
most favoured nation clauses
- Cons:
opinio juris
specific and exceptional scope and purpose
The Substantive Protection Offered by BITs
• Expropriation Clause
- Direct and Indirect Expropriation
* Positive conducts and omissions
* Actual benefit to State of third parties is irrelevant
* Substantial degree of “Interference”
• National Treatment/ Anti-Discrimination Clause
- Repatriation of profits
- Tax disadvantages
• Most Favoured Nation Clause
- Strategic importance
• Fair and Equitable Treatment Clause
- What Standard?
- Investor’s Expectations?
• Umbrella Clause
The Increase in Investment Disputes
UNCTAD
Arbitration: the Most Popular Options
UNCTAD
The ICSID Convention
The Main Provisions
•
•
•
•
Article 25: ICSID Jurisdiction
Article 27: Diplomatic Protection
Article 42: Applicable Law
Articles 50, 51& 52: Interpretation, Revision &
Annulment
• Articles 53 & 54: Recognition & Enforcement
ICSID Arbitration - Article 25
1) ... any legal dispute arising directly out of an investment, between a
Contracting State (or any constituent subdivision) and a national of
another Contracting State, which the parties to the dispute consent
in writing to submit to the Centre.
(2) "National of another Contracting State" means:
a) any natural person who has the nationality of a Contracting State…
but does not include any person who had the nationality of the
Contracting State party to the dispute; and
(b) any juridical person which has the nationality of a Contracting
State… and any juridical person which has the nationality of the
Contracting State party to the dispute on that date and which, because
of “foreign control”, the parties have agreed should be treated as
a national of another Contracting State
(3) …
(4) Any Contracting State may…notify the Centre the classes of disputes
which it would or would not consider submitting to the Centre….
Article 27 ICSID
(1)No Contracting State shall give diplomatic protection or
bring an international claim in respect of a dispute which
one of its nationals and another Contracting State shall
have consented to submit or shall have submitted to
arbitration, unless such other Contracting State shall
have failed to abide by and comply with the award
rendered in such dispute
[…]
ICSID Arbitration
Applicable Law: Article 42
(1) The Tribunal shall decide a dispute in accordance with
such rules of law as may be agreed by the parties. In the
absence of such agreement, the Tribunal shall apply the
law of the Contracting State party to the dispute
(including its rules on the conflict of laws) and such rules
of international law as may be applicable (see Article
38 of the ICJ Statute).
(2) The Tribunal may not bring in a finding of non liquet on
the ground of silence or obscurity of the law.
(3) The provisions of paragraphs (1) and (2) shall not
prejudice the power of the Tribunal to decide a dispute ex
aequo et bono if the parties so agree
Article 52 ICSID: Annulment
(1) Either party may request annulment of the award
[…] on one or more of the following grounds:
(a) the Tribunal was not properly constituted
(b) the Tribunal has manifestly exceeded its powers
(c) there was corruption on the part of a member of
the Tribunal
(d) there has been a serious departure from a
fundamental rule of procedure
(e) that the award has failed to state the reasons on
which it is based
[…]
Recognition and Enforcement
Article 53: The award shall be binding and shall not be
subject to any appeal or to any remedy except those
provided for in this Convention […]
Article 54: Each Contracting State shall recognise an award
rendered pursuant to this Convention as binding and
enforce the pecuniary obligations imposed by that awards
within its territories as if it were a final judgment of a Court
in that State […]
Article 55: Nothing in Article 54 shall be construed as
derogating from the law in force in any Contracting State
relating to immunity of that State or of any foreign State
from execution