INTERNATIONAL TRADE &

INVESTMENT DISPUTE
SETTLEMENT

Seminar 6-8
SETTLING INTERNATIONAL
INVESTMENT DISPUTE

LLM. NGUYEN Cong Dinh

Overview
 INTRODUCTION

• One of the most important purposes of International

investment agreements is to give protections to
investors => need mechanisms which allow investors
to seek direct redress against host states;
• Mechanisms for disputes in international investment?
• the ICSID;
• UNCITRAL Arbitration Rules;
• State-to-state and alternative systems of dispute
resolution.
 STATE VS STATE DISPUTES

Diplomatic protection

• Under traditional international law, investors often

depended on diplomatic protection by their home states;
• The investor seeking diplomatic protections is shall meet
several conditions;
• The usefulness of diplomatic protection is limited, and it can
carry important disadvantages for the states concerned;
• Method of dispute settlement: Negotiations, International
adjudication (Court or Arbitration).
 INVESTOR VS STATE DISPUTES

Domestic courts

• If not agree otherwise, an investment dispute between

a state and a foreign investor would normally have to
be settled by the host state’s courts ( );
• Can such dispute settle by the courts of the investor’s
home country and of third states:
• Lack territorial jurisdiction;
;
.
 INVESTOR VS STATE DISPUTES

Arbitration and conciliation

• Arbitration carries advantages for both the investor and

the host state;
• Investment arbitration uses a mechanism originally
developed for the settlement of commercial disputes
between private parties (however, such method has its own
distinctive features;
• Another method is conciliation which is flexible and
relatively informal;
• It is designed to assist the parties in reaching an agreed
settlement.
 INVESTOR VS STATE DISPUTES

Arbitration institutions and regimes

Investor-state arbitration may take place in the framework of a

variety of institutions or rules
ICSID - Convention on the Settlement of Investment
Disputes between States and Nationals of Other States
• Provides a system of dispute settlement that is designed
exclusively for investor-state disputes;
• Offers standard clauses for use by the parties, detailed rules of
procedure, and institutional support;
;
• …
 INVESTOR VS STATE DISPUTES

Arbitration institutions and regimes

ICSID - Convention on the Settlement of Investment

Disputes between States and Nationals of Other States
(CONT)
• …
• Proceedings under the ICSID Convention are self-contained;
• ICSID proceedings are
;
• CSID Awards are binding and final [in all states parties to the
Convention] and not subject to review except under the narrow
conditions provided by the Convention itself (Arts 49–52).
 INVESTOR VS STATE DISPUTES

Arbitration institutions and regimes

ICSID Additional Facility (ICSID AF)

• Open to parties that submit to its jurisdiction in certain
cases that are outside ICSID’s jurisdiction;
• Arbitration under the AF is not governed by the ICSID
Convention but by separate AF Rules:
• The ICSID Convention’s provisions on the recognition and
enforcement of awards are not applicable to awards
rendered under the AF;
• Awards rendered under the AF are not exempt from the
scrutiny of and setting aside by competent national courts
(subject to the New York Convention).
 INVESTOR VS STATE DISPUTES

Arbitration institutions and regimes

Non-ICSID investment arbitration

ICSID has been the main forum for the settlement of disputes
between a foreign investor and the host state but is not the
only institution for foreign investment arbitration
;
;
.
 INVESTOR VS STATE DISPUTES

The subject matter of the dispute

An investment arbitration only has jurisdiction over a “legal

dispute arising directly out of an investment” (Art.25(1) of
ICSID Convention).
• the existence of a dispute;
(a dispute can be political
or economic nature);
;
• the existence of an .
 INVESTOR VS STATE DISPUTES

The parties to the dispute

The host state

• Only a contracting state will be subject to the Centre’s
jurisdiction if it has given its consent to jurisdiction;
• The host state may deal with foreign investors:
• through a central (a government ministry);
• provinces and municipalities (sub-national authorities);
• through a .
• Acts in violation of international law will be attributed to
the central government even if they were committed by a
sub-entity of the host state.
 INVESTOR VS STATE DISPUTES

The parties to the dispute

The investor
• Investors are corporations (can include state-owned
corporations and state entities if they act in a private
commercial capacity) or individuals;
• An investor is required to be a “national of another
Contracting State” (dispute settlement under the ICSID
Convention);
• The is relevant for several purposes;
• Question: Can local companies which are not qualify as
foreign investors enjoy the ICSID Convention’s protection
against their host state
 INVESTOR VS STATE DISPUTES

Consent to arbitration

• Investment arbitration is always based on an agreement

(both parties must have expressed their consent);
• Consent is given in one of three ways:
• be included in a between the parties (in
contracts);
• a provision in the ;
between the host state and the investor’s
state of nationality (BITs);
• through multilateral treaties (The ICSID Convention does not
offer consent to arbitration).
• Scope of consent to arbitration offered in treaties varies.
 INVESTOR VS STATE DISPUTES

Procedure

In investment arbitration the most commonly applied

set of rules are those provided in
 INVESTOR VS STATE DISPUTES

Remedies

• In investment arbitration, the remedy nearly always consists

of monetary compensation (Restitution in kind or specific
performance is ordered infrequently)
• The
is quite a complex undertaking;
• The
follows different standards.
 INVESTOR VS STATE DISPUTES

Challenge and review of decisions

Review in non-ICSID arbitration

• The normal way to challenge an award is through national courts;
• A domestic court can base on a limited number of grounds listed in
Article V of New York Convention to refuse to recognise and enforce a
non-national arbitral award;
• The most important grounds for the setting aside of awards:
• the invalidity of the arbitration agreement;
• lack of proper notice of the arbitration proceedings;
• a decision in the award beyond the scope of the submission to arbitration;
• improper composition of the tribunal;
• a subject matter not capable of settlement by arbitration under the law of
the state in question; and
• an award that is in conflict with the public policy of that state.
 INVESTOR VS STATE DISPUTES

Annulment under the ICSID Convention

• ICSID awards are not subject to annulment by domestic

courts;
• the ICSID Convention offers its own self-contained system
for review (the under the ICSID
Convention);
• Only awards are subject to annulment (there is no
annulment in respect of other decisions, except if they are
subsequently incorporated into the award);
• An ad hoc committee may stay the enforcement of the
award while annulment proceedings are pending (Art.52(5)
ICSID Convention);
 INVESTOR VS STATE DISPUTES

Annulment under the ICSID Convention

• Is annulment different from an appeal

• The grounds for annulment under the ICSID Convention are
listed exhaustively in Article 52(1):
• that the Tribunal was not properly constituted;
• that the Tribunal has manifestly ;
• that there was corruption on the part of a member of the Tribunal;
• that there has been a
; or
• that on which it is
based.
• An ad hoc committee has the authority to annul the award
(Art.52(3) of ICSID Convention).
 INVESTOR VS STATE DISPUTES

Annulment under the ICSID Convention

• A decision by an ad hoc committee upholding a request for

annulment invalidates the original award, but it does not replace
it with a new decision on the merits;
• if the award is annulled, the dispute is to be submitted to a new
tribunal at the request of either party (Art.52(6) of ICSID
Convention);
• If the award is partially annulled, only the annulled portion of the
award falls to be re-litigated;
• Any determinations of fact and law made by the ad hoc
committee are not binding on the tribunal hearing the
resubmitted case.
 INVESTOR VS STATE DISPUTES

Enforcement of awards

• Arbitral awards are final (except for some limited possibilities) for
review and binding upon the parties and create an obligation to
comply with them;
• Under ICSID Convention, the parties may not seek another
remedy before another tribunal or in a domestic court which is
different to ;
• Under ICSID Convention, awards are to be recognized as
binding (no review) and to be enforced in the same way as final
domestic judgments in all states parties to the Convention;
• Recognition and enforcement may be sought in any member
states of the ICSID Convention.
 INVESTOR VS STATE DISPUTES

Enforcement of awards

• The obligation to enforce pecuniary obligations arising from

ICSID awards does not affect any immunity from execution that
states enjoy (Art.55 ICSID Convention);
• Execution is permitted against commercial property but not
against property serving official or governmental functions;
• Successful reliance on state immunity does not alter the fact
that non-compliance with an award is a breach of the ICSID
Convention;
• The right of diplomatic protection will revive in the event of
non-compliance with the award (Art. 27 of ICSID Convetion)