Uzbek-Japanese Academic Forum

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Uzbek-Japanese Academic Forum

• CONSENT TO ARBITRATION IN INTERNATIONAL
  INVESTMENT LAW
• Presenter Otabek Ismailov
• Master Student, GSID,
• Nagoya University
• September 23, 2010, Nagoya, Japan

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Table of contents

• 1. Introduction
• 2. Problem Statement
• 3. Research Question
• 4. Research Task
• 5. Research Purpose
• 6. Fundamental Concepts of Consent to Arbitration
• 7. Consent to Arbitration in Legislation of
  Uzbekistan
• 8. Research methodology
• 9. Reference

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Introduction

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Problem Identification

• Article 25 of ICSID Convention requires consent
  of both Parties for Jurisdiction of ICSID
• In practice of ICSID, there is a trend of
  interpreting consent to arbitration for the
  foreign investor s benefit
• Unbalanced interpretation of consent to
  arbitration harms the States interests

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Problem Statement

• The trend of interpreting consent to arbitration
  for the foreign investor s benefit creates
  unbalance of interests which affects the
  efficiency of ICSID mechanism in settling
  investment disputes

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Research Question

• Main How Arbitral Tribunals can reach a
  balanced interpretation of Consent to Arbitration
• Sub-question 1. What is a legal nature of consent
  to Arbitration ?
• Sub-question 2. What type of consent is mostly
  practiced by foreign investors and host states in
  International law and to what extent?
• Sub-question 3. To what extent the consent to
  arbitration in National legislation of Uzbekistan
  is balanced?
• Sub-question 4. What concrete preconditions
  should be met in order to establish legitimate
  tribunal jurisdiction on investment dispute which
  corresponds to balanced interpretation of consent
  to it?

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Research Purpose

• To work out conclusions and recommendations on
  balanced interpretation of consent to arbitration
  in investment disputes by analyzing both
  theoretical and practical legal aspects of
  international as well as Uzbekistans experience.

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Research Task

• Research the legal meaning and essence of consent
  to arbitration from the view point of
  international law as well as national law.
• Comparative analysis of consent to arbitration in
  national laws and bilateral investment treaties
  of different countries
• Review hard cases in respect of interpretation
  of consent to arbitration

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Investment Arbitration

• Investment Arbitration is based on agreement
• Consent to arbitration by Host State and the
  Investor is indispensible

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Methods of Expressing Consent

• Direct agreement between parties
• Dispute Settlement Clauses in Contracts
• A National Legislation of the Host State
• Investment Code, Law
• Treaty between the Host State and the Investors
  State of nationality
• - Arbitration Clauses of BITs

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Forums for Investment Arbitration

• ICSID International Center for Settlement
  Investment Disputes
• ICC International Chamber of Commerce
• LCIA London Court for International Arbitration
• Arbitration Institute of Stockholm Chamber of
  Commerce

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Statistical Data on Investor-State Disputes

• In 2009 32 cases (Total- 357)
• 202 (57) cases initiated during the last 5 years
• 225cases filed with ICSID
• 91 cases UNCITRAL
• 19 cases Stockholm Chamber of Commerce
• 8 cases Permanent Court of Justice
• 5 cases ICC
• 4 cases Ad Hoc

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Consent by Direct Agreement

• Compromissory Clause in Investment Agreement
• - An Agreement on Consent need not be recorded in
  a single instrument
• - Investment Application made by investor may
  provide for arbitration
• - Need the approval of competent authority of
  Host State
• An Agreement may record consent by referring to
  another legal instrument (BIT)
• - Incorporation of BITs consent into contract

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Host State Legislation

• Consent in general terms to foreign investors
• Consent to certain categories of foreign
  investors
• However,
• Not every reference to International Arbitration
  amounts to consent to arbitration
• Therefore,
• It needs to be studied carefully

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Investment Laws

• Unequivocal provision of Dispute Settlement by
  International Arbitration
• - Albanian Law on Foreign Investment of 1993
• Art.8(2) the foreign investor may submit the
  dispute for resolution and the Republic of
  Albania hereby consents to the submission
  thereof, to ICSID.
• Unclear provisions. Art.8 of Egypts Law N.43 of
  1974

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• Investment disputes in respect of the
  implementation of the provisions of this law
  shall be settled in a manner to be agreed upon
  with the investor, or within the framework of the
  agreements in force between Arab Republic of
  Egypt and investors home country, or within the
  framework of the Convention for the Settlement of
  Investment Disputes between the State and
  nationals of other countries to which Egypt has
  adhered by virtue of Law N.90 of 1971, where such
  Convention applies.
• Egypts arguments it needs separate implementing
  agreement with the investor and it only informs
  about one of a variety of dispute settlement
  methods

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Acceptance by Investor

• Legislative provision of consent is an offer by
  the state to investors
• Investor may accept the offer simply by
  instituting arbitration

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Scope of Consent

• Broad refer to disputes concerning foreign
  investment
• Narrow
• - the dispute must be in respect of an approved
  enterprise
• - certain issues expropriation, compensation for
  expropriation, discrimination

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Bilateral Investment Treaties

• In most cases jurisdiction is established through
  BITs
• Arbitration clauses offer unequivocal consent
• - each contracting party hereby consents or the
  dispute shall be submitted to arbitration
• Arbitration clauses with alternative choices
• -Domestic courts, procedures agreed by the
  parties to dispute, ICSID Arbitration, ICC
  arbitration or Ad Hoc arbitration under UNCITRAL
  rules
• All of these require a subsequent agreement of
  parties to select one

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Acceptance by Investor

• Investor may accept an offer of consent by
  instituting ICSID proceedings by filing Notice
  of Arbitration at the ICSID Center
• Nothing in BIT to suggest that the investor must
  communicate its consent in a different form
  directly to the State
• Once the arbitration agreement is perfected
  through the acceptance of the offer contained in
  the treaty, it remains in existence even if the
  State Parties to the BIT agree to amend or
  terminate the treaty

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Scope of Consent

• All disputes concerning investments or any
  legal disputes concerning investment
• Different interpretations
• Salini v Morocco and SGS v Philippines cases
• The Tribunal found that the term included a
  dispute arising from both the BIT and an
  investment contract
• In SGS v Pakistan case no jurisdiction with
  respect to contract claims

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Procedural Requirements

• Waiting Periods for Amicable Settlement
• Domestic Remedies
• Fork in- the- Road Provisions

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Waiting Periods

• Before instituting arbitration proceedings
  amicable settlement should be attempted
• - Consultations and Negotiations
• - Time limit from 3 to 12 months (Average 6)
• Some tribunals found that non-compliance with
  waiting periods did not affect their jurisdiction
  (Ethyl v Canada, Wena Hotel v Egypt, SGS v
  Pakistan) waiting periods is a procedural
  requirement not jurisdictional
• Contrary in Goetz v Burundi, Enron v Argentina

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Domestic Remedies

• Art.26 of ICSID Convention excludes the
  requirement to exhaust remedies unless otherwise
  stated
• A Venue for a host State to make the exhaustion
  of local remedies a condition of its consent is
  open (In older BITs)
• Mandatory attempt to settle the dispute in the
  host states domestic courts for a certain period
  of time not the exhaustion of local remedies
  rule. Ex. Argentina-Germany BIT (18 months)

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Domestic Courts of Host Countries

• It will delay a definitive decision
• Increase investors costs
• Discourage investors from the pursuit of their
  claims
• In contrast, strengthening the role of domestic
  courts is a good strategy for host state that
  wish to limit its exposure to investment
  Arbitration than outright withdrawal(Bolivia
  2007, Ecuador 2010)

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Fork in the Road Provisions

• Offer the investor a choice between the host
  States domestic courts and International
  Arbitration
• The choice is final
• Domestic Courts No International Arbitration
• Vise Versa

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Is it possible to rely on consent to Arbitration
in a treaty of the Respondent State with a third
Party???

• Maffezini case the consent clause in the
  Argentina-Spain BIT required prior resort to
  domestic courts for 18 months
• Argentinian claimant relied on the Chile-Spain
  BIT which did not contain such a requirement
• The Tribunal concluded Claimant had the right
  to arbitration without first accessing Spanish
  Courts
• Gas Natural v Argentina MFN provisions in
  BITs should be understood to be applicable to
  dispute settlement

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Restrictive Attitude towards MFN

• Not procedural obstacles to arbitration but the
  scope of consent clauses in question
• Salini v Jordan consent in Italy-Jordan BIT
  extend to contract claims as well as treaty
  claims (refusal)
• does not apply insofar as dispute settlement
  clauses are concerned
• Plama v Bulgaria - Bulgaria-Cyprus BIT had no
  access to arbitration, but MFN clause referring
  to Bulgaria-Finland BIT to establish ICSID
  jurisdiction
• Telenor v Hungary Consent was limited to
  compensation or other consequences of
  expropriation

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Consent to Arbitration in Uzbekistans Legislation

• Law of the Republic of Uzbekistan "On guarantees
  and measures of protection of foreign investors'
  rights" dated April 30, 1998, Article 10
• Dispute associated with foreign investments
  (investment dispute) directly  or  indirectly, 
  can  be  settled  on agreement of the parties by 
  consultation  between  them.  If  the  parties 
  will  not be able to achieve agreed settlement, 
  than such dispute  should be settled  either by
  an economic court of the Republic of Uzbekistan
  or by arbitration  in accordance with  the rules 
  and procedures  of international agreements
  conventions)  on  settlement  of  investment 
  disputes,  to which  the Republic of Uzbekistan
  has been joined.

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The issue of investment dispute settlement in
International Arbitration

• CONVENTION ON THE
• SETTLEMENT OF INVESTMENT DISPUTES
• BETWEEN STATES AND NATIONALS
• OF OTHER STATES
• Chapter II
• Jurisdiction of the Centre
• Article 25
• (1) The jurisdiction of the Centre shall extend
  to any legal dispute arising directly out of an
  investment, between a Contracting State (or any
  constituent subdivision or agency of a
  contracting State designated to the Centre by
  that State) and a national of another Contracting
  State, which the parties to the dispute consent
  in writing to submit to the Centre.When the
  parties have given their consent, no party may
  withdraw its consent unilaterally.

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The final decision of Constitutional Court of
Uzbekistan

• Article 10 of the Law defines possible
  alternative ways of settling investment disputes,
  but does not contain any written consent of
  parties to settle the dispute by any of these
  alternative ways.
• According to part 1 Article 25 of the
  abovementioned Convention , International Center
  for Settlement International Disputes only
  examines the dispute when there is an obligatory
  written consent of parties.
• Article 10 of law does not include in the true
  sense the notion of Consent of the Party and
  is not considered as an expression of
  Uzbekistans consent to settle investment
  disputes by the Center.

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Experts comment

• The main deficiency of investment laws of
  Uzbekistan is that they do not clearly define
  provisions and the reader can interpret in
  different ways what the law actually means by
  that provision.
• Thats why many experts in investment law
  consider that the reason for making laws with
  such unclear provisions leaves Uzbekistan
  government a wide discretion to interpret in a
  way that is advantageous for itself.

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Methodology

• Inductive and Deductive Analysis
• Comparative approach
• Case study

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References

• Ian A.Laird, Todd J.Weiler, Investment Treaty
  Arbitration and Internatioonal Law, 2010
• Jeswald W. Salacuse, The Law of Investment
  Treaties, 2010.
• M.Sornarajah, The International Law on Foreign
  Investment, 2004
• M.Sornarajah, The Settlement of Foreign
  Investment Disputes, 2001
• Dugan, Walace, Rubbins, Sabahi. Investor-State
  Arbitration, 2008
• S. Subedi, International Investment Law
  Reconciling Policy and Principle, 2008
• Zachary Douglas, The International law of
  Investment Claims, 2009
• R. DolzerCh.Schreuer, Principles of
  International Investment Law, 2008
• Ch.Schreuer, The ICSID Convention A Commentary,
  2009
• P.Muchlinski, F.Ortino, Ch.Schreuer, The Oxford
  Handbook of International Investment Law, 2008
• www.unctad.org. UNCTAD, World Investment Report,
  2005
• Latest Developments in InvestorState Dispute
  Settlement, IIA Issues Note No. 1 (2010)

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Thank You for your attention!

• For your additional questions and comments
• Contact information
• E-mail isotabek2006_at_yahoo.com
• Tel [phone]