Mapping the future of investment treaty arbitration as a system of law.

Author:Banifatemi, Yas
Position:Proceedings of the One Hundred Third Annual Meeting of the American Society of International Law: International Law as Law

This panel was convened at 1:00 p.m., Friday, March 27, by its chair, Lucy Reed of Freshfields Bruckhaus Deringer US LLP, who introduced the panelists: Gabriela Alvarez-Avila of Curtis, Mallet-Prevost, Colt & Mosle LLP; Yas Banifatemi of Shearman & Sterling LLP; James Crawford of the University of Cambridge and Matrix Chambers; and Toby Landau QC of Essex Court Chambers. *


Ms. Reed began the panel by noting the significant challenges to investment treaty arbitration' s integrity as a system of law, including challenges to enforceability of awards, conflicting decisions, and certain states withdrawing from the International Centre for Settlement of Investment Disputes ("ICSID") and bilateral investment treaties ("BITs"). She posed the following questions: Are these growing pains or a sign of fundamental flaws? Will the new generation of investment treaties help resolve these problems?

Ms. Reed introduced the panelists as "card-carrying specialists" in investment treaty arbitration and public international law. Gabriela Alvarez-Avila served as counsel at ICSID for several years. Yas Banifatemi has been involved in several investment treaty arbitration cases, including the Yukos shareholder cases brought under the Energy Charter Treaty, and she has also served as an arbitrator. James Crawford, the former head of the Lauterpacht Research Centre for International Law, has served as an advocate and arbitrator in numerous investment treaty arbitrations and has served on ICSID annulment committees. Toby Landau is an advocate and arbitrator in a number of investment arbitration cases. Makhdoom Ali Khan, former Attorney General of Pakistan and advocate on several investment treaty cases, was unable to join the panel, but the panel had the benefit of several questions and issues he raised.

Ms. Reed suggested that before looking at the future, the panel might examine the current state of investment treaty arbitration. On the positive side, there is a growing number of cases and final awards. There is also a growing diversity of participants--different states are being sued, different nationalities are represented as investors, occasionally nationals of developing countries are going up against developed countries, and there are more regional trade agreements containing international arbitration mechanisms. It is both negative and positive that there are rich, and sometimes inconsistent, awards. There is a growing number of withdrawals from ICSID--including Bolivia and Ecuador (with respect to hydrocarbons), and Venezuela's denunciation of the Dutch BIT. There is resistance to enforcement of final awards from Argentina.

* Panelists' remarks were reported by Jim Secreto and Ruth Teitelbaum, Freshfields Bruckhaus Deringer US LLP.

([dagger]) Partner, Freshfields Bruckhaus Deringer US LLP (New York); Former President, ASIL.


Ms. Banifatemi addressed the question of whether investment treaty arbitration is a "system of law." If a "system of law" is defined as a body of rules and principles through which rights and obligations are established and justice is administered, then investment treaty arbitration is certainly a system of law.

However, whether investment treaty arbitration is its own system of law, a system that is autonomous and distinct from other types of international arbitration, is another question. There is certainly a specific feature in investment treaty arbitration: because it is based on international treaties and raises questions that can be resolved through the application of treaty law or the rules governing the international responsibility of states, international law will, by definition, apply to a great number of issues. This feature, however, does not make the process itself any different from the arbitral process generally. Investment treaty arbitration can be properly defined as a "sub-system" of international arbitration, which also covers international commercial arbitration and investment contractual arbitration.

In investment arbitration, the challenges to the legitimacy, transparency, and efficiency of the system are specific to the public nature of one of the parties, namely the defendant state. Although adjustments may be warranted depending on which aspect of the process one attempts to improve, dismantling the entire system to account for the public nature of one party could undermine international arbitration--the broader system--as a whole, by introducing aspects that may be specific to adjudication before international courts but that are not specific to international arbitration as a system.

This can be shown be focusing on each of the three elements constituting "investment treaty arbitration."

  1. Investment treaty arbitration. Does a distinction exist between commercial and investment arbitration?

    There is a difference in scope between the two, in that arbitrators in commercial arbitration deal with the parties' contractual or legal rights and obligations, whereas in investment arbitration, arbitrators decide the international responsibility of a host state based on its contractual or treaty commitments relating to investments (because investment arbitration concerns "investments," arbitral tribunals must ensure that the jurisdictional requirements regarding the existence of an investment are met).

    On the other hand, a number of important similarities illustrate the identity of the mechanism and processes between international commercial arbitration and international investment arbitration. First, no matter what system or sub-system is chosen, consent to arbitration is always needed. An arbitral tribunal that decides without ensuring the existence of a consent by both parties is simply exceeding its powers. In addition, consent is always specific to the parties and to the dispute between those parties. Despite pressure from civil society and third parties to enter the system, such parties should not have systematic and unlimited access to arbitral proceedings. Each arbitration concerns a dispute between two specific parties-that is what a tribunal decides--be it commercial or investment treaty arbitration, and this...

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