The Challenges of Globalization for International Economic Law: New Issues
| Author | Francisco Orrego Vicuna |
| Position | Juge et ancien President du Tribunal administratif de la Banque mondiale. Professeur à l' Université du Chili et Directeur de l' Institut des relations intenationales de l'Université du Chili. |
| Pages | 190-241 |
Page 190
Whoever1 drafted the text of the first bilateral investment treaty could not have imagined how popular his or her work would become. It has been copied by the thousands and found its way into not less than 2000 treaties today in force, in addition to it being reflected in various multilateral treaties dealing also wholly or in part with investments,2 It has been interpreted and reinterpreted by numerous international tribunals and some domestic courts.
Along this process, which is not long in time, a number of issues have been clarified, either in terms of the development of new approaches or understandings or of the placing of limits to some inevitable exaggerations that happen occasionally. The aggregate of developments have meant that the settlement of disputes relating to foreign investments has become truly global in the past decade, both in the meaning of substantive law and also in respect of important jurisdictiona! questions. It is also opening the way for new developments concerning other important international activities, such as trade. It might well happen that in the long term these unfolding arrangements will also apply to a variety of aspects that today appear exclusively related to domestic law and jurisdictions.
This lecture purports to examine the main issues characterizing this evolution, with particular reference to those decisions of ICSID tribunals that have to a significant extent influenced a change in perspective, not only in respect of the extent of bilateral investments treaties and related instruments but also of the very meaning of international law in some aspects. In spite of critical perceptions, that are not entirely wrong in some matters,3 the end result of such a process has helpedPage 191thus far to reach a balance between the right of host States to undertake regulatory functions in the public interest and the right of foreign investors to carry on their business without arbitrary or unlawful interference.
On a number of occasions the State Party to the ICSID Convention that is brought to court by an investor raises the question that it has not expressly consented to the submission of that particular dispute to arbitration. In that point of view, commitment to arbitration under a bilateral investment treaty requires a specific "compromis" in which both parties will agree to that submission and its modalities. True enough, this was the traditional modality of inter-State arbitration in the early part of the twentieth century, States agreed to the arbitration of disputes under a treaty, but this was regarded only as a "pactum de contrahendo", the implementation of which required an additional and specific "compromis".
This is, however, the question that has fundamentally changed in the context of the settlement of investment disputes. Interestingly enough this is not the result of the ICSID Convention that only requires the parties to consent in writing to the submission of the dispute to the Centre.4 It is rather the result of the network of bilateral investment treaties that have provided for the overall expression of consent by States parties in respect of disputes that might arise with foreign investors. This same result can be obtained by a general offer of submission to ICSID arbitration in domestic law.
As these investors are not a party to the treaty but are the beneficiaries of rights bestowed directly upon them under international law, or under domestic law, their own expression of consent might come later in time or under separate instruments. This happens typically when consent by the investor is given in a direct agreement with the State concerned or simply by resorting to such a choice in writing, or even by instituting proceedings in the Centre.
ICSID tribunals have had no difficulty in rinding that the offer by the State to submit to arbitration, followed by acceptance, is a definite binding legal obligation without further steps needed to establish jurisdiction.5 This incidentally is not just the result of the operation of the bilateral investment treaty in respect of ICSID but also in so far other choices are available to the investor, particularly arbitration under UNCITRAL rules.
But also ICSID tribunals have controlled exaggeration in this matter notPage 192accepting modalities that are far remote from a proper consent. In Cable TV v. St KItts and Nevis, for example, the tribunal ruled that references to an ICSID clause in domestic proceedings did not amount to consent to arbitration,6 On the other hand, however, tribunals have also been strict in not allowing a State that has expressed its consent to elude its obligations in respect of the foreign investor. So happened in CSOB v, Slovakia, where the Tribunal found that an ICSID clause included in a BIT not yet in force had been embodied by the parties in a direct agreement and upheld jurisdiction on this basis.7
In this same case, although the pertinent treaty provided that upon the agreement of both parties the dispute would be submitted to the Centre, it was held that this did not mean, as alleged, that submission had to be made jointly as this would imply the need for an additional agreement to put into practice the consent expressed by the State in the treaty.8 The "pactum die contrahendo" approach was thus expressly ruled out,
"Arbitration without privity" is here to stay, as evidenced not only by a variety of bilateral investment treaties but also by multilateral arrangements.9 The NAFTA, in the context of the operation of the ICSID Additional Facility, like the Energy Charter Treaty, contain forms of unconditional consent to ICSID or UNCITRAL arbitration.
A rather disquieting view has been recently held by a Respondent State in the context of a dispute submitted to ICSID under a bilateral investment treaty. Because there had been diplomatic demarches by the State of the investor's nationality in support of the investor's right to take the dispute to arbitration, the Respondent State made the argument that there was a State to State dispute that had to be settled first through the operation of the ad-hoc arbitration that investment treaties normally provide for disputes between States parties. It should be noted that diplomatic exchanges directed to facilitate the settlement of the dispute are not considered a form of diplomatic protection under Article 27(2) of the Convention.
That argument would have meant that recourse to ICSID arbitration by a private investor and the Centre's jurisdiction would be paralysed until a different arbitration finalizes. As diplomatic exchanges not amounting to diplomatic protection regularly take place when there is an investment dispute, it would be easy for any Respondent State to elude its obligations toward the investor by claiming the existence of an inter-State dispute. This situation would entangle ICSID's jurisdiction for long periods of time to the disadvantage of the investor. Moreover, it is quite evident that the kind of disputes between States parties toPage 193which the inter-State procedures could apply are very different from those affecting the investor's rights under a bilateral treaty, a situation somewhat paralleled by Article 64 of the Convention and its negotiation history. The tribunal was wise to reject the request for staying of the proceedings before...
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