INTERNATIONAL INVESTMENT AGREEMENTS AND INVESTOR-STATE ARBITRATION LECTURE 2. Investor-State Arbitration Sergey Ripinsky International Investment Agreements Section Division on Investment and Enterprise Geneva, 4 May 2012

Historical context Previously, two options available to a foreign investor: Seek relief in the local courts or administrative tribunals of the host state. Request diplomatic protection by home government. Need for a neutral forum that would: Allow direct claims by investors Be impartial and independent Consist of highly-qualified specialists Fast Cheap

1965 ICSID Convention “A-national” forum to administer investment disputes Part of the World Bank group Can be engaged if both disputing parties consent to arbitration Each disputing party appoints one arbitrator Awards are enforceable in all ICSID Contracting States (147)

ICSID and UNCITRAL – key differences Institutional v. ad hoc Nationality of arbitrators Arbitrator fees Confidentiality Review of awards Enforcement of awards

Statistics of IIA-based disputes 2011 46 new known cases filed (34 of them in ICSID) In 38 cases, respondents are developing or transition economies: e.g., Venezuela (10), Ecuador (4), Egypt (4), Peru (3) and Poland, Philippines and Turkmenistan (2 each) 35 of the 46 new cases filed by investors from developed countries.

Known investor-State disputes 1987-2011

Distribution of claims by economic sector (ICSID statistics)

Largest pending IIA claims Yukos shareholders v. Russia $114 billion in damages claimed Conoco Philips v. Venezuela Around $30 billion in damages claimed

Public interest disputes: examples Philip Morris v. Uruguay, Philip Morris v. Australia, (challenges the countries’ anti-smoking policies) Vattenfall v. Germany (nuclear phase-out) Abaclat et al v. Argentina (sovereign debt) Chemtoura v. Canada (pesticide ban)

Criticisms of IIA arbitration High costs Slow Severance of relationship between investor and host State Issuance by tribunals of inconsistent decisions: (1) divergent interpretations of identical treaty provisions, and (2) differences in the assessment of identical facts Secrecy: especially important when public-interest measures at stake. Damages paid from the public pocket. A club: same people serve as arbitrators in some cases and as counsel in others. Party appointments: emergence of “pro-State” or “pro-investor” arbitrators. 10