INTERNATIONAL ARBITRATION The Protection of Foreign Investments under International Law Domenico Di Pietro STUDYING LAW AT ROMA TRE FALL SEMESTER 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 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