4
Consent to the arbitration
of investment disputes
Rule 20. The host contracting state party must have consented to the
arbitration of investment disputes with a claimant having
the nationality of another contracting state party pursuant
to the provisions of the investment treaty and, where relevant,
the ICSID Convention. Such consent must be valid at the
time the arbitration proceedings are commenced.1
Rule 21. In addition to the acquisition of an investment in the host
contracting state party pursuant to Rule 22 and Rule 23, the
claimant must have satisfied any conditions precedent to the
consent of the host contracting state party to the arbitration
of investment disputes as stipulated in the investment treaty.
A . T H E S C O P E O F I S S U E S R E L AT I N G TO C O N S E N T
317. Consent of the respondent host state to investor/state arbitration in the
investment treaty is the most important condition for the vesting of adjudicative
power in the tribunal. In the taxonomy outlined in Chapter 3, this has been
described as an issue of jurisdiction, together with issues relating to the proper
scope of that adjudicative power, which are dealt with in Chapters 6–8. The
existence of the arbitral tribunal’s adjudicative power is also predicated upon the
national of another contracting state to the investment treaty having made an
investment in the host contracting state. This second condition gives rise to a
great number of complexities that are examined in detail in Chapter 5. In
contrast, the range of issues pertaining to whether or not the respondent host
state has consented to the arbitration of investment disputes for the purposes of
Rule 20 is relatively narrow. In the vast majority of cases the question is
resolved simply by reference to an express provision of the investment treaty,
coupled by a verification that the investment treaty is in force for the relevant
contracting state parties. Exceptionally, questions might arise concerning the
geographical scope of the respondent state’s consent, such as for overseas
1
Zhinvali v Georgia (Preliminary Objections) 10 ICSID Rep 3, 98/407; Tradex v Albania
(Preliminary Objections) 5 ICSID Rep 47, 58.
151
territories in respect of which the respondent state exercises sovereign powers.2
Also, if the investment treaty envisages a form of provisional application, such
as the Energy Charter Treaty, this may entail a delicate inquiry as to whether the
consent of the respondent host state to investment arbitration is valid for the
adjudication of the particular investment dispute.3
318. The difficulty facing tribunals is one of characterisation: namely, whether
the particular issue alleged to constitute an impediment to the tribunal’s power
to adjudicate the investment dispute is one relating to the consent to investment
arbitration (jurisdiction),4
admissibility or seisin. The importance of distinguishing
jurisdictional issues from those pertaining to admissibility or seisin
was considered in Chapter 3.5
The task for this chapter is to distinguish those
conditions prescribed in an investment treaty that are properly characterised as
‘conditions precedent to the consent of the host contracting state party to the
arbitration of investment disputes’ for the purposes of Rule 21, from other
stipulations in the investment treaty that relate to the admissibility of claims
or the seisin of the tribunal. By ‘seisin’ of the tribunal is meant those procedural
steps that must be taken by the claimant to commence arbitration proceedings
before a tribunal constituted pursuant to an investment treaty.
(i) ‘Fork in the road’ provisions
319. Many investment treaties allow the investor to choose between different
judicial fora for the submission of the defined categories of investment dis-
putes.6
In accordance with what has come to be known as a ‘fork in the road’
clause, once that election is made by the investor, it is final and irrevocable.
If the investor’s election is not in favour of arbitration before an international
tribunal, then it precludes the tribunal’s jurisdiction over the same dispute.
An election in favour of the international tribunal is, therefore, a ‘condition
precedent to the consent of the host contracting state party to the arbitration of
investment disputes’ for the purposes of Rule 21.7
2
E.g. Petrobart v Kyrgyz Republic (Merits) (whether the UK had extended the application of the
BIT to Gibraltar).
3
E.g. Kardassopoloulos v Georgia (Preliminary Objections).
4
Such as a provision in the treaty requiring the exhaustion of local remedies before the commencement
of international arbitration: Maffezini v Spain (Preliminary Objections) 5 ICSID Rep 396,
403/35–6; TSA Spectrum v Argentina (Preliminary Objections) para. 107; Wintershall v Argentina
(Preliminary Objections) paras. 119–22.
5
See paras. 291 and 292 above.
6
E.g.: Chile Model BIT, Art. 8(3), UNCTAD Compendium (Vol. III, 1996) 147; Iran Model BIT, Art.
12(3), ibid. (Vol. VI, 2002) 483; Benin Model BIT, Art. 10(2) (‘Une fois qu’un investisseur a soumis
aux juridictions de la Partie contractante concernée, soit a l’arbitrage international, le choix de l’une
ou de l’autre de ces procédures reste définitif’), ibid. (Vol. IX) 283; China Model BIT 1997, Art. 9(2)
(‘Once the investor has submitted the dispute to the competent court of the Contracting Party
concerned or to the ICSID, the choice of one of the two procedures shall be final’), Appendix 5.
7
The ‘fork in road’ provision has been curiously described by one tribunal as a ‘matter of public
policy’: Maffezini v Spain (Preliminary Objections) 5 ICSID Rep 396, 410/63.
152 T H E I N T E R N AT I O N A L L AW O F I N V E S T M E N T C L A I M S
320. The ‘fork in the road’ is thus in reality a junction leading to several oneway
streets representing alternative judicial fora, which usually include a
combination of one or more of the following:8
– municipal courts of the host state;
– a court or tribunal previously chosen by the investor and the host state in a
forum selection clause;9
– international arbitration either in the form of an ad hoc arbitration pursuant
to the UNCITRAL Rules or institutional arbitration under the ICSID
Arbitration or Additional Facility Rules.
321. The rationale underpinning the ‘fork in the road’ provision in investment
treaties is clearly the avoidance of multiple proceedings in multiple fora in
relation to the same investment dispute. In more colloquial terms, it is designed
to prevent the investor having several bites at the cherry. The tribunal in Lauder
v Czech Republic described the purpose of the provision as follows:
The purpose of [the fork in the road provision in USA/Czech Republic
BIT] is to avoid a situation where the same investment dispute … is
brought by the same claimant … against the same respondent (a Party to
the Treaty) for resolution before different arbitral tribunals and/or different
state courts of the Party to the Treaty that is also a party to the dispute.10
322. The most detailed analysis of the ‘fork in the road’ is to be found in the
Vivendi v Argentina decisions.
322C. Compan˜ia de Aguas del Aconquija, SA and Compagnie
Ge´ne´rale des Eaux/Vivendi Universal v. Argentine Republic No. 111
The ‘fork in the road’ provision was contained in Article 8 of the Argentina/
France BIT:
1. Any dispute relating to investments, within the meaning of this agreement,
between one of the Contracting Parties and an investor of the
other Contracting Party shall, as far as possible, be resolved through
amicable consultations between both parties to the dispute.
2. If such dispute could not be resolved within six months from the time
it was stated by any of the parties concerned, it shall be submitted, at
the request of the investor:
8
Other examples of ‘fork in the road’ provisions may be found in the Energy Charter Treaty, Art.
26(2)(3), Appendix 3 and the following model BITs: Chile Model BIT, Art. 8(3), UNCTAD
Compendium (Vol. III, 1998) 147; Iran Model BIT, Art. 12(3), ibid. (Vol. VI, 2002) 483; Peru
Model BIT, Art. 8(3), ibid. 497; USA Model BIT, Art. 9(3), ibid. 507; Austria Model BIT, Art.
13, ibid. (Vol. VII) 265; Benin Model BIT, Art. 9(2), ibid. (Vol. VIII) 283.
9
The requirements for such a selection in an investment contract were considered in: Lanco v
Argentina (Preliminary Objections) 5 ICSID Rep 367, 377–8/24–8.
10
(Merits) 9 ICSID Rep 62, 85-6/161. See also Casado v Chile (Merits) paras. 482 et seq.
11
(Merits) 5 ICSID Rep 153; Vivendi v Argentina No. 1 (Annulment) 6 ICSID Rep 340.
C O N S E N T TO T H E A R B I T R AT I O N O F I N V E S T M E N T D I S P U T E S 153
– either to the national jurisdictions of the Contracting Party
involved in the dispute;
– or to international arbitration in accordance with the terms of
paragraph 3 below.
Once an investor has submitted the dispute either to the jurisdictions
of the Contracting Party involved or to international arbitration,
the choice of one or the other of these procedures shall
be final.12
Paragraph 3 of Article 8 gives the investor the choice of either ad hoc
arbitration pursuant to the UNCITRAL Rules or ICSID arbitration. In
this case the claimants opted for the latter.
The interpretation given to this clause by the tribunal and the ad hoc committee
is strictly obiter, because the claimant was found to have made a valid choice
of ICSID arbitration and the jurisdiction of the tribunal over the investment
dispute submitted by the claimants was upheld.13
The mere existence of the
dispute resolution clause in the Concession Contract between the investor
and the Tucuma´n Province did not, therefore, constitute an election by the
investor in favour of the ‘national jurisdictions’ of Argentina. Both the tribunal
and the ad hoc committee did, nonetheless, consider the hypothetical
effect of the claimant bringing its contractual grievances relating to its investment
before the Tucuma´n courts in terms of the ‘fork in the road’ in Article 8
of the BIT, and came to opposite conclusions. This was despite the common
ground on the clear distinction between contractual claims and claims based
on the BIT. The tribunal found that, had the investor brought its contractual
claims to the Tucuma´n courts pursuant to the dispute resolution clause in the
Concession Contract, this would not have constituted a waiver of any right
subsequently to submit treaty claims to an international tribunal pursuant to
Article 8 precisely because of the different legal foundations of these causes of
action.14
The ad hoc committee, on the other hand, attached significance to
the broad formulation of Article 8(1) as it refers to ‘any disputes relating to
investments made under this Agreement’, thereby encompassing contractual
or treaty claims arising out of the same investment.15
Thus if the claimants
had brought contractual claims against the Tucuma´n Province before the
12
Vivendi v Argentina No. 1 (Annulment) 6 ICSID Rep 340, 355/53.
13
Ibid. 360–2/72–80.
14
The reasoning provided by the tribunal for this conclusion is sparse: ‘submission of claims
against Tucumán to the contentious administrative tribunals of Tucumán for breaches of the
contract, as Article 16.4 required, would not … have been the kind of choice by Claimants of
legal action in national jurisdictions (i.e. courts) against the Argentine Republic that constitutes
the “fork in the road” under Article 8 of the BIT, thereby foreclosing future claims under the
ICSID Convention.’ Vivendi v Argentina No. 1 (Merits) 5 ICSID Rep 299, 316/55.
15
Vivendi v Argentina No. 1 (Annulment) 6 ICSID Rep 340, 356/55. The ad hoc committee
compared Article 8 of the BIT with Article 11 of the same instrument containing a narrower
formulation for the submission of disputes to the state/state arbitration procedure which concerns
disputes ‘concerning the interpretation or application of this Agreement’ and also Article 1116 of
the NAFTA which allows an investor to submit to arbitration ‘a claim that another Party has
breached an obligation’ under Chapter 11 (ibid.).
154 T H E I N T E R N AT I O N A L L AW O F I N V E S T M E N T C L A I M S
Tucuma´n courts, it would have thereby foreclosed any recourse to an investment
treaty tribunal based on a different cause of action.16
323. If the ad hoc committee’s interpretation in Vivendi is correct, the ‘fork in
the road’ provision would undoubtedly have a chilling effect on the submission
of disputes by investors to domestic judicial fora even where the issues in
contention are purely contractual, tortious or even administrative, and clearly
within the domain of municipal law. One would expect, as a result, an increase
in claims simply not ripe for international adjudication on the merits. A claimant
investor’s premature recourse to an investment treaty tribunal, with the attendant
time and cost this involves, would be difficult to condemn as a matter of
policy because the investor would have a legitimate interest to avoid jeopardising
its ‘day in court’ before an international tribunal. This would put both parties
in a difficult position because the investor might be compelled to play what is
often its best litigation card too early before its main grievances have ripened
and thus risk having its treaty claims dismissed on the merits, whereas the host
state would be deprived of the opportunity to dispense adequate remedies
through its own courts and instead face more numerous and expensive international
proceedings. One can detect both these consequences in the Vivendi v
Argentina, SGS v Pakistan and SGS v Philippines cases.
324. Such a development is not inevitable. A ‘fork in the road’ provision cannot,
by any reasonable interpretation of this type of clause, prevent an investor from
bringing a treaty claim in respect of a grievance unrelated to a different grievance
that was previously submitted to a domestic court, even if such complaints relate
to the same investment. For instance, an application by the investor to an administrative
court to challenge an increase in the municipal rates for the disposal of
waste from the investor’s factory cannot prevent the investor from bringing a
claim to an international tribunal for the wholesale expropriation of the factory a
week later by a presidential decree. These grievances would constitute different
‘investment disputes’ for the purposes of the provision. This point merely illustrates
the fact that the generality of the ‘fork in the road’ clause must be subject
to some limitations. It is more than plausible, and certainly desirable, to further
distinguish ‘investment disputes’ by the object of the claim.17
To take the
previous example, the investor’s swift administrative court application might
be partially successful in reducing the municipal charges. But the unforeseen
burden of this additional expense might nevertheless destroy the financial
viability of the factory so that it ultimately must be closed down. The investor
then brings a claim for a breach of the national treatment standard in the relevant
investment treaty, having discovered that no other factory in the same industry
16
Ibid.
17
There is equivocal support for such an approach in: Olguín v Paraguay (Preliminary Objections)
6 ICSID Rep 156, 162/30; Genin v Estonia (Merits) 6 ICSID Rep 236, 291–2/330–4;
C O N S E N T TO T H E A R B I T R AT I O N O F I N V E S T M E N T D I S P U T E S 155
was subject to the hike in municipal rates. These two claims presented to two
different judicial fora address the same measure attributable to the host state in
relation to the same investment. But they are easily conceptualised as different
‘investment disputes’ under the ‘fork in the road’ provision because the object
of the claim is different: before the administrative court it is to quash an
administrative decision; whereas before the investment treaty tribunal it is to
obtain compensation for prejudice to an investment.
325. This approach of focusing on the object of the claim is preferrable to a test
based upon the legal nature of the obligation forming the basis of the claim.18
If the preclusive effects of the ‘fork in the road’ provision can be avoided simply
by pleading different types of causes of action, then it will be interpreted out
of practical existence. For instance, if a claimant were to sue the host state for
damages in the tort of conversion in a municipal court and then attempt to
sue for the same damages in a claim for expropriation before an international
tribunal, this earlier claim would constitute an earlier election of a judicial forum
for the purposes of a ‘fork in the road’ provision.
326. An analysis of investment treaties reveals that the ‘fork in the road’ provision
is often embedded in treaties which allow the investor to invoke the jurisdiction of
an international tribunal with respect to a broad sphere of ‘investment disputes’
that contemplates both municipal and international law claims.19
This gives rise
to the possibility of parallel claims and hence a more acute need to regulate the
competing jurisdictions through the ‘fork in the road’ mechanism.20
Treaties that
confine the scope of any submission to international arbitration exclusively
to claims based on the minimum treaty standards do not usually contain a ‘fork
18
The approach favoured in: Vivendi v Argentina No. 1 (Annulment) 6 ICSID Rep 340, 356/55;
CMS v Argentina (Preliminary Objections) 7 ICSID Rep 494, 511/80 (‘Decisions of several
ICSID tribunals have held that as contractual claims are different from treaty claims, even if there
had been or there currently was a recourse to the local courts for a breach of contract, this would
not have prevented submission of the treaty claims to arbitration’); Middle East Cement v Egypt
(Merits) 7 ICSID Rep 178, 187/71; Lauder v Czech Republic (Merits) 9 ICSID Rep 62, 86/
162–3; Azurix v Argentina (Merits) para. 90; Enron v Argentina (Merits) paras. 97–8. In contrast,
in Desert Line v Yemen (Merits) the object of the claim submitted to domestic arbitration appears
to have been different to the claim submitted to investment treaty arbitration for the purposes of
the purported ‘fork in the road’ provision in Art. 11 of the Oman/Yemen BIT: the claim before the
BIT tribunal was a denial of justice in respect of the failure of the Yemeni Government to respect
the award rendered by the domestic arbitral tribunal (ibid. para. 136).
19
See, e.g.: Chile Model BIT, Art. 8(3), UNCTAD Compendium (Vol. III, 1996) 148; Peru Model
BIT, Art. 9(1), (Vol. VI, 2002) 497; USA Model BIT, Art. 9(3), ibid. 507; Austria Model BIT, Art.
13, ibid. (Vol. VII) 265 (but only if the dispute has been submitted to a municipal court and a
judgment has been rendered); Benin Model BIT, Art. 9(2), ibid. (Vol. IX) 283.
20
A novel solution to this problem that may not deter recourse to the local courts may be found in
the Finland Model BIT: ‘An investor who has submitted to a national court may nevertheless
have recourse to one of the arbitral tribunals mentioned in paragraphs 2(b) to (d) of this Article
[ICSID, ICSID Additional Facility and UNCITRAL] if, before a judgment has been delivered on
the subject matter by a national court, the investor declares not to pursue the case any longer
through national proceedings and withdraws the case’, Art. 9(3), ibid. (Vol. VII, 2002), 292.
156 T H E I N T E R N AT I O N A L L AW O F I N V E S T M E N T C L A I M S
in the road’ provision. The risk of competing jurisdictions still exists because, in
‘monist’ jurisdictions where treaties become part of domestic law and thus
enforceable before municipal courts, the investor could bring claims based explicitly
on the treaty standards in multiple fora. This remedial possibility is unlikely
to be often utilised by investors in practice, and there is no reported precedent
to date. The ‘fork in the road’ clause is therefore less relevant to such treaties.
(ii) Requirement of waiver of local remedies
327. The most notorious example of a requirement to waive local remedies21
is
Article 1121 of NAFTA, which is entitled ‘Conditions Precedent to Submission
of a Claim to Arbitration’ and directs claimants to:
[W]aive their right to initiate or continue before any administrative
tribunal or court under the law of any Party, or other dispute settlement
procedures, any proceedings with respect to the measure of the disputing
Party that it alleged to be a breach of an obligation under the NAFTA.22
328. This provision does not relate to the consent of the contracting state parties
of NAFTA to the arbitration of investment disputes; rather it is a rule concerned
with the seisin of the tribunal. It is a procedural formality that must be complied
with in order to commence an arbitration under Chapter 11 of NAFTA.
329. In Waste Management v Mexico No. 1,23
the status of Article 1121 of
NAFTA and its scope divided the tribunal. The majority appears to have considered
non-compliance with Article 1121 as negating its jurisdiction, whereas
the dissenter characterised the issue as one of admissibility.24
The majority’s
approach led to the draconian result that non-compliance in this case compelled
the claimant investor to commence fresh arbitration proceedings.25
Labelling the
issue as one of admissibility would have avoided this result, but it is an inaccurate
label: admissibility goes to the suitability of the particular claim for adjudication;
whereas the failure to comply with Article 1121 had nothing to do with any defect
in the formulation of the claim under Chapter 11 of NAFTA. What was in issue
was whether the tribunal had been properly seised of the claim.26
21
See also: ibid.; UNCTAD Compendium (Vol. VII) 292; Canada Model BIT, Arts. 26(1)(e), 26(2)
(e), ibid. (Vol. XIV) 239–40.
22
Article 1121 exempts ‘proceedings from injunctive, declaratory or other extraordinary relief,
not involving the payment of damages, before an administrative tribunal or court under the law of
the disputing Party’. See Appendix 3. A similar provision in Art. 10.18.2 of the Free Trade
Agreement between the Dominican Republic, Central America and the USA (CAFTA) was
considered in: Railroad v Guatemala (Preliminary Objections).
23
(Merits) 5 ICSID Rep 443.
24
Waste Management v Mexico No. 1 (Merits: Dissenting Opinion) 5 ICSID Rep 462, 478–80/
56–63.
25
Which it promptly did: Waste Management v Mexico No. 2 (Preliminary Objections) 6 ICSID
Rep 549.
26
See further: Ethyl v Canada (Preliminary Objections) 7 ICSID Rep 12, 40/91; Mondev v USA
(Merits) 6 ICSID Rep 192, 203/44.
C O N S E N T TO T H E A R B I T R AT I O N O F I N V E S T M E N T D I S P U T E S 157
330. In relation to the scope of Article 1121, the majority in Waste Management
found that there was an overlap between the Mexican court and domestic
arbitration proceedings brought by Waste Management27
relating to noncompliance
with the obligations of guarantor assumed under a line of credit
agreement with the state owned entity, on the one hand, and the submission to
the ICSID tribunal, on the other, because ‘both legal actions have a legal basis
derived from the same measures’.28
By pursuing these proceedings simultaneously,
Waste Management’s conduct was found to be incompatible with the
terms of Article 1121.29
The majority was correct to point out that:
It is clear that the provisions referred to in the NAFTA constitute obligations
of international law for NAFTA signatory States, but violation of the
content of those obligations may well constitute actions proscribed by
Mexican legislation in this case, the denunciation of which before several
courts or tribunals would constitute a duplication of proceedings.30
331. In contradistinction, the dissenting opinion accentuated the difference
in the causes of action in the different fora as being ‘local commercial claims
in the Mexican tribunals, and international treaty claims before this Tribunal’.31
The claimant’s concurrent legal proceedings in local fora could not, on this
basis, fall within the purview of the waiver requirement in Article 1121. And the
reason the dissenter’s interpretation must be rejected is that no local court
proceedings would ever fall within the scope of Article 1121.
(iii) Periods for negotiation before commencing arbitration
proceedings
332. The preponderance of BITs contain provisions that direct the disputing
parties to attempt to resolve their differences by negotiation before arbitration
proceedings are instituted at the election of the claimant investor.32
Minimum
27
More precisely, Waste Management’s Mexican subsidiary.
28
Waste Management v Mexico No. 1 (Merits) 5 ICSID Rep 443, 457–9/27.
29
Ibid. 460–1/31.
30
Ibid. 460/28.
31
Waste Management v Mexico No. 1 (Merits: Dissenting Opinion) 5 ICSID Rep 462, 464/8, 470/
28 (‘There must be, and is, a distinction to be drawn in juridical terms between the legal
obligations of Mexico under Mexican law and the legal obligations of Mexico under its international
treaty obligations imposed by NAFTA’).
32
Asian–African Legal Consultative Committee Model BIT, Art. 10(ii), UNCTAD Compendium,
(Vol. III, 1996), 121; Chile Model BIT, Art. 8(1), ibid. 147; China Model BIT, Art. 9(1), ibid. 154;
Switzerland Model BIT, Art. 8(1), ibid. 180; Egypt Model BIT, Art. 8(1), ibid. (Vol. V, 2000) 296;
France Model BIT, Art. 8, ibid. 305; Indonesia Model BIT, Art. 8(1), ibid. 313; Jamaica Model
BIT, Art. 10(1), ibid. 321; Malaysia Model BIT, Art. 7(3)(a), ibid. 329; Sri Lanka Model BIT, Art.
8(1), ibid. 343; Cambodia Model BIT, Art. 8(1), ibid. (Vol. VI, 2002) 466; Croatia Model BIT,
Art. 10(1), ibid. 476; Iran Model BIT, Art. 12(1), ibid. 482; Peru Model BIT, Art. 8(1), ibid. 497;
Austria Model BIT, Art. 12(1), ibid. (Vol. VII) 264; Belgo-Luxembourg Economic Union Model
BIT, Art. 10(1), ibid. 275; Denmark Model BIT, Art. 9(1), ibid. 283; Finland Model BIT, Art. 10
158 T H E I N T E R N AT I O N A L L AW O F I N V E S T M E N T C L A I M S
time periods are usually prescribed for this purpose.33
The following example is
taken from the UK Model BIT (2005):
Disputes … which have not been amicably settled shall, after a period of
three months from written notification of a claim, be submitted to international
arbitration if the [investor] so wishes.34
333. The question that has arisen in several cases is whether the claimant’s
failure to adhere to the prescribed period for negotiation before commencing
arbitration proceedings against the host state creates an impediment to the
tribunal exercising jurisdiction or constitutes a breach of a procedural rule
(1), ibid. 293; Germany Model BIT 1998, Art. 11(1), ibid. 301; Turkey Model BIT, Art. 7(1),
ibid. (Vol. VIII) 284; Greece Model BIT, Art. 10(2), ibid. 292; Benin Model BIT, Art. 10(1), ibid.
(Vol. IX) 283; Burundi Model BIT, Art. 10(2), ibid. 292; Mauritius Model BIT, Art. 8(1), ibid.
299; Mongolia Model BIT, Art. 8(2), ibid. 306; Sweden Model BIT, Art. 8(1), ibid. 313; Bolivia
Model BIT, Art. 10, ibid. (Vol. X) 282; Burkina Faso Model BIT, Art. 9(1), ibid. 291; Guatemala
Model BIT, Art. 8, ibid. (Vol. XII) 292; Italy Model BIT, Art 10(1), ibid. 301; Kenya Model BIT,
Art. 10(a), ibid. 308; Uganda Model BIT, Art. 7(1), ibid. 317; Romania Model BIT, Art. 9(1),
ibid. (Vol. XIII) 291; Canada Model BIT, Art. 25, ibid. (Vol. XIV) 239; USA Model BIT (2004),
Art. 23, Appendix 11; France Model BIT (2006), Art. 8, Appendix 6; Germany Model BIT
(2005), Art. 11(2), Appendix 7; China Model BIT (1997), Art. 9(1), Appendix 5; NAFTA Art.
1118, Appendix 3, Energy Charter Treaty, Art. 26(1), Appendix 4.
33
Asian-African Legal Consultative Committee Model BIT, Art. 10(2), UNCTAD Compendium
(Vol. III, 1996) 121; Chile Model BIT, Art. 8(1), ibid. 147; China Model BIT, Art. 9(3), ibid. 155;
Germany Model BIT (1991), Art. 11(2), ibid. 172; Switzerland Model BIT, Art. 8(2), ibid. 180;
UK Model BIT (1991), Art. 8(3), ibid. 189–90; USA Model BIT (1994), Art. 9(3)(a), ibid. 201;
Egypt Model BIT, Art. 8(2), ibid. (Vol. V, 2000) 296; France Model BIT (1999), Art. 8, ibid. 305;
Indonesia Model BIT, Art. 8(2), ibid. 313; Jamaica Model BIT, Art. 8(2), ibid. 322; Malaysia
Model BIT, Art. 7(3)(a), ibid. 329; Sri Lanka Model BIT, Art. 8(2), ibid. 343; Cambodia Model
BIT, Art. 8(2), ibid. (Vol. VI, 2002) 466; Croatia Model BIT, Art. 10(1), ibid. 476; Iran Model
BIT, Art. 11(2), ibid. 482–3; Peru Model BIT, Art. 8(2), ibid. 497; USA Model BIT (1994;
revised 4/1998), Art. 9(3)(a), ibid. 507; Austria Model BIT, Art. 12(2), ibid. (Vol.VII) 264;
Belgo-Luxembourg Economic Union Model BIT, Art. 10(2), ibid. 275; Denmark Model BIT,
Art. 9(2), ibid. 283; Finland Model BIT, Art. 9(2), ibid. 292; Germany Model BIT (1998), Art. 11
(1), ibid. 301; South Africa Model BIT, Art. 7(1), ibid. (Vol. VIII) 276; Turkey Model BIT, Art. 7
(2), ibid. 284; Benin Model BIT, Art. 10(2), ibid. (Vol. IX) 283; Burundi Model BIT, Art. 10(3),
ibid. 292; Mauritius Model BIT, Art. 8(2), ibid. 299; Mongolia Model BIT, Art. 8(2), ibid. 306;
Sweden Model BIT, Art. 8(2), ibid. 313; Bolivia Model BIT, Art. 10, ibid. (Vol. X) 282; Burkina
Faso Model BIT, Art. 9(2), ibid. 292; Guatemala Model BIT, Art. 8, ibid. (Vol. XII) 292; Italy
Model BIT, Art 10(3), ibid. 301; Uganda Model BIT, Art. 7(2), ibid. 317; Ghana Model BIT, Art.
10(1), ibid. (Vol. XIII) 283; Romania Model BIT, Art. 9(2), ibid. 291; Canada Model BIT, Art. 26
(1)(b), 26(2)(b), ibid. (Vol. XIV) 239–40; USA Model BIT (2004), Art. 24(3), Appendix 11;
France Model BIT (2006), Art. 8, Appendix 6; UK Model BIT (2005), Art. 8(1), Appendix 10
(‘Disputes … which have not been amicably settled shall, after a period of three months from
written notification of a claim, be submitted to international arbitration if the [investor] so wishes’);
Germany Model BIT (2005), Art. 11(2), Appendix 7; China Model BIT (1997), Art. 9(2),
Appendix 5 (‘If the dispute cannot be settled through negotiations within six months from the
date it has been raised by either party to the dispute, it shall be submitted by the choice of the
investor’) ; NAFTA, Art. 1120(1)(a), Appendix 3; Energy Charter Treaty, Art. 26(2), Appendix 4
(‘If such disputes can not be settled according to the provisions of paragraph (1) within a period of
three months from the date on which either party to the dispute requested amicable settlement, the
Investor party to the dispute may choose to submit it for resolution’).
34
Art. 8(1), Appendix 10.
C O N S E N T TO T H E A R B I T R AT I O N O F I N V E S T M E N T D I S P U T E S 159
relating to the seisin of the tribunal. The answer is that it clearly goes to the
seisin of the tribunal rather than its jurisdiction. It would be extraordinary, for
instance, if the court at the seat of the arbitration could entertain an application
to quash the tribunal’s award because it deemed the dispute to have arisen too
early, or ruled that any negotation was futile in light of the host state’s conduct.
And yet that would be the consequence of characterising the issue as one of
jurisdiction. Moreover, there is no doubt that a failure to observe a time period
for negotiation can be cured by a party’s subsequent conduct, such as by
instituting fresh proceedings after the expiry of that period. As the Permanent
Court of Justice remarked:
[T]he Court cannot allow itself to be hampered by a mere defect of form,
the removal of which depends solely on the party concerned.35
334. Most tribunals have considered that a provision prescribing a time period
for negotiation is procedural and therefore capable of being waived or cured
by subsequent conduct.36
This practice can be endorsed but subject to the
following caveat. Too often tribunals have been prepared to declare the prospect
of any negotiations to be futile in circumstances where the claimant investor has
made no real attempt to engage the host state in bona fide negotiations. Whilst a
provision calling for negotiations over a prescribed period of time is procedural,
it should not be rendered a dead letter by condoning a dispute resolution strategy
that leaves no room for an amicable settlement. If proceedings are instituted
by the claimant investor before the expiry of the prescribed period, then the onus
is on the claimant to demonstrate with clear evidence that any further negotiations
with the respondent host state would be futile. If this burden of proof is
not discharged, then the tribunal should stay its proceedings to allow a bona fide
negotiation between the parties to proceed. Where the claimant is unable to
demonstrate that it has made any effort to engage the host state in settlement
discussions, then the tribunal’s stay might be accompanied by an adverse order on
costs against the claimant in relation to the preliminary phase of the arbitration.37
35
Certain German Interests in Polish Upper Silesia (Germany v Poland) 1925 PCIJ (Ser. A) No. 6
(Jurisdiction) 14; Military and Paramilitary Activities in and against Nicaragua (Nicaragua v
USA) 1984 ICJ Rep 392, 427–9 (Jurisdiction and Admissibility).
36
Ethyl v Canada (Preliminary Objections) 7 ICSID Rep 12, 37/77, 38–9/84; Wena v Egypt
(Preliminary Objections) 6 ICSID Rep 74, 87; Lauder v Czech Republic (Merits) 9 ICSID Rep
62, 88–91/181–97; SGS v Pakistan (Preliminary Objections) 8 ICSID Rep 406, 448-9/184
(‘Tribunals have generally tended to treat consultation periods as directory and procedural rather
than as mandatory and jurisdictional in nature. Compliance with such a requirement is, accordingly,
not seen as amounting to a condition precedent for the vesting of jurisdiction’): Biwater v Tanzania
(Merits) para. 343. Those tribunals that have interpreted such a provision as jurisdictional include:
Goetz v Burundi (Merits) 6 ICSID Rep 5, 31–3/90–3; Enron v Argentina (Preliminary Objections)
11 ICSID Rep 273, 291/88; LESI (Dipenti) v Algeria (Preliminary Objections) para. 32(iv);
Occidental Ecuador No. 2 (Preliminary Objections) para. 94.
37
As in: Ethyl v Canada (Preliminary Objections) 7 ICSID Rep 12, 39–40/87–8.
160 T H E I N T E R N AT I O N A L L AW O F I N V E S T M E N T C L A I M S