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Crafting the International Economic Order: The Public Function of Investment Treaty Arbitration and Its Significance for the Role of the Arbitrator

Published online by Cambridge University Press:  27 April 2010

STEPHAN W. SCHILL
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Abstract

Investment treaty arbitration, unlike commercial arbitration, is not a purely private dispute settlement mechanism that is entirely subject to party autonomy and limited in its effects to the parties to the proceedings. Rather, it fulfils a public function in influencing the behaviour of foreign investors, states, and civil society more generally by crafting and concretizing international standards of investment protection. Investment treaty arbitration thus implements and operates as part of a public system of investment protection. Arbitrators, as a result, incur obligations not only towards the parties to the proceedings, but vis-à-vis the whole system of investment protection. These obligations can be conceptualized as part of the public law implications of investment treaty arbitration and affect, inter alia, the role and status of arbitrators in investment treaty disputes, the procedural maxims that such arbitrations should follow, and the way arbitral awards should be crafted.

Keywords

commercial arbitrationinvestment treatiesinvestment treaty arbitrationprocedural maximsrole of arbitrators
Type
CURRENT LEGAL DEVELOPMENTS
Information
Leiden Journal of International Law , Volume 23 , Issue 2 , June 2010 , pp. 401 - 430
Copyright
Copyright © Foundation of the Leiden Journal of International Law 2010

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References

1 The number of investor–state arbitrations under investment treaties has risen only within the last decade to over three hundred. See UNCTAD, ‘Latest Developments in Investor–State Dispute Settlement’, (2009) IIA Monitor No.1, at 1–2, available at www.unctad.org/en/docs/webdiaeia20096_en.pdf (recording an aggregate of 317 investment disputes by the end of 2008).

2 See UNCTAD, ‘Recent Developments in International Investment Agreements (2008–June 2009)’, (2009) IIA Monitor No.3, at 2, available at www.unctad.org/en/docs//webdiaeia20098_en.pdf (recording an aggregate of 2,676 bilateral investment treaties by the end of 2008).

3 On investment treaties and investment treaty arbitration see generally C. McLachlan, L. Shore, and M. Weiniger, International Investment Arbitration – Substantive Principles (2007); A. Lowenfeld, International Economic Law (2008), 467–591; R. Dolzer and C. Schreuer, Principles of International Investment Law (2008); P. Muchlinski, F. Ortino, and C. Schreuer (eds.), The Oxford Handbook of International Investment Law (2008); A. Newcombe and L. Paradell, Law and Practice of Investment Treaties – Standards of Investment Protection (2009).

4 575 UNTS 159 (1965).

5 UNCTAD, supra note 1, at 2.

6 On shortcomings of investor–state dispute settlement in domestic and international courts as well as under investor–state agreements see Schill, S., ‘Enabling Private Ordering – Function, Scope and Effect of Umbrella Clauses in International Investment Treaties’, (2009) 18 Minnesota Journal of International Law 1, at 20–26Google Scholar.

7 M. Sornarajah, ‘A Coming Crisis: Expansionary Trends in Investment Treaty Arbitration’, in Karl P. Sauvant, (ed.), Appeals Mechanism in International Investment Disputes (2008), 39, at 39–45; Afilalo, A., ‘Meaning, Ambiguity and Legitimacy: Judicial (Re-)construction of NAFTA Chapter 11’, (2005) 25:2Northwestern Journal of International Law & Business 279, at 282Google Scholar; Franck, S. D., ‘The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law through Inconsistent Decisions’, (2005) 73 Fordham Law Review 1521, at 1523Google Scholar; Afilalo, A., ‘Towards a Common Law of International Investment: How NAFTA Chapter 11 Panels Should Solve Their Legitimacy Crisis’, (2004) 17 Georgetown International Environmental Law Review 51Google Scholar; Brower, C. N. II, ‘Structure, Legitimacy, and NAFTA's Investment Chapter’, (2003) 36 Vanderbilt Journal of Transnational Law 37Google Scholar; Brower, C. N., Brower, C. H. II, and Sharpe, J. K., ‘The Coming Crisis in the Global Adjudication System’, (2003) 19 Arbitration International 415CrossRefGoogle Scholar; C. N. Brower, ‘A Crisis of Legitimacy’, National Law Journal, 7 October 2002, B9.

8 Bolivia withdrew from the ICSID Convention as of 3 November 2007. See ‘Bolivia Denounces ICSID Convention’, (2007) 46 ILM 973. On 12 June 2009, Ecuador's Congress voted to withdraw from the ICSID Convention. Discussion of withdrawal from the ICSID Convention has also been reported with respect to Nicaragua, Venezuela, and Cuba. See M. Schnabl and J. Bédard, ‘The Wrong Kind of “Interesting”’, National Law Journal, 30 July 2007. On 30 April 2008, Venezuela communicated to the Netherlands its intention to terminate the Dutch–Venezuelan Bilateral Investment Treaty as of 1 November 2008. Investment Arbitration Reporter, ‘Venezuela Surprises the Netherlands with Termination Notice for BIT; Treaty Has Been Used by Many Investors to “Route” Investments into Venezuela’, 16 May 2008, available at www.iareporter.com/Archive/IAR–05–16–08.pdf. More generally on the perceived ‘legitimacy crisis’ in investment treaty arbitration see Brower, C. and Schill, S., ‘Is Arbitration a Threat or a Boon to the Legitimacy of International Investment Law?’, (2009) 9 Chicago Journal of International Law 471Google Scholar.

9 Gagné, G. and Morin, J., ‘The Evolving American Policy on Investment Protection: Evidence from Recent FTAs and the 2004 Model BIT’, (2006) 9 Journal of International Economic Law 357, at 363CrossRefGoogle Scholar; Schwebel, S., ‘The United States 2004 Model Bilateral Investment Treaty: An Exercise in the Regressive Development of International Law’, (2006) 3 (2)Transnational Dispute Management 1, at 3–7Google Scholar; Kantor, M., ‘The New Draft Model US BIT: Noteworthy Developments’, (2004) 21 Journal of International Arbitration 383, at 385Google Scholar. See generally Alvarez, G. Aguilar and Park, W. W., ‘The New Face of Investment Arbitration: NAFTA Chapter 11’, (2003) 28 Yale Journal of International Law 365 (discussing the phenomenon of developed countries as respondents in investment treaty arbitration)Google Scholar.

10 See, e.g., Brower, ‘Structure, Legitimacy’, supra note 7, at 52.

11 See Franck, supra note 7, at 1545–7; S. Schill, The Multilateralization of International Investment Law (2009), 285–7 (both explaining the different scenarios under which inconsistencies most commonly occur).

12 G. Van Harten, Investment Treaty Arbitration and Public Law (2007), 152–84; G. Van Harten, ‘The Public–Private Distinction in the International Arbitration of Individual Claims against the State’, (2007) 56 ICLQ 371; similarly questioning the suitability of investor–state arbitration as a mechanism to review sovereign acts of host states, see, e.g., Been, V. and Beauvais, J., ‘The Global Fifth Amendment? NAFTA's Investment Protections and the Misguided Quest for an International “Regulatory Takings” Doctrine’, (2003) 78 NYU Law Review 30Google Scholar.

13 On the aspect of publicness in international law see von Bogdandy, A., Dann, P., and Goldmann, M., ‘Developing the Publicness of Public International Law: Towards a Legal Framework for Global Governance Activities’, (2008) 9 German Law Journal 1375, at 1381–6Google Scholar; B. Kingsbury, ‘The Concept of “Law” in Global Administrative Law’, (2009) 20 EJIL 23, at 31–2; J. d'Aspremont, ‘Contemporary International Rulemaking and the Public Character of International Law’, IILJ Working Paper 2006/12, available at www.iilj.org/publications/documents/2006–12-dAspremont-web.pdf.

14 The 2006 changes to the ICSID Rules have been made in reaction to the repeated calls for increased transparency in investor–state arbitration and, inter alia, require ICSID to publish ‘excerpts of the legal reasoning of the Tribunal’ (Rule 48(4)), and allow tribunals to open hearings to the public (Rule 32(2)) and to accept amicus briefs (Rule 37(2)). On the 2006 changes to the ICSID Rules see Antonietti, A., ‘The 2006 Amendments of the ICSID Rules and Regulations and the Additional Facility Rules’, (2007) 21 ICSID Review: Foreign Investment Law Journal 427CrossRefGoogle Scholar.

Some tribunals allowed public hearings even before the amendments to the ICSID Rules. See Sampliner, G. and Teitelbaum, R., ‘Investor–State Treaty-Based Arbitration in 2004’, (2005) 4 Law and Practice of International Courts and Tribunals 465CrossRefGoogle Scholar, at 487 (referencing the NAFTA cases Methanex Corp v. United States and Canfor Corporation v. United States). See also Knahr, C. and Reinisch, A., ‘Transparency versus Confidentiality in International Investment Arbitration – The Biwater Gauff Compromise’, (2007) 6 Law and Practice of International Courts and Tribunals 97CrossRefGoogle Scholar.

Similarly, amici curiae had been accepted in several investment treaty arbitrations prior to those changes. See further C. Zoellner, ‘Third-Party Participation (NGOs and Private Persons) and Transparency in ICSID Proceedings’, in R. Hofmann and C. Tams (eds.), The International Convention for the Settlement of Investment Disputes (ICSID): Taking Stock after 40 Years (2007), 179; Tams, C. and Zoellner, C., ‘Amici Curiae im internationalen Investitionsschutzrecht’, (2007) 45 Archiv des Völkerrechts 217CrossRefGoogle Scholar; Knahr, C., ‘Transparency, Third Party Participation and Access to Documents in International Investment Arbitration’, (2007) 23 Arbitration International 327CrossRefGoogle Scholar.

15 B. Kingsbury and S. Schill, ‘Investor–State Arbitration as Governance: Fair and Equitable Treatment, Proportionality and the Emerging Global Administrative Law’, IILJ Working Paper (Global Administrative Law Series) 2009/6, 2009, at 21–40, available at www.iilj.org/publications/documents/2009–6.KingsburySchill.pdf.

16 Tams, C., ‘An Appealing Option? The Debate about an ICSID Appellate Mechanism‘, (2006) 57 Beiträge zum Transnationalen Wirtschaftsrecht, available at www.telc.unihalle.de/Heft57.pdfGoogle Scholar.

17 Brower, C. II, ‘The Functions and Limits of Arbitration and Judicial Settlement under Private and Public International Law’, (2008) 18 Duke Journal of International and Comparative Law 259, at 265–91Google Scholar; C. Grey and B. Kingsbury, ‘Developments in Dispute Settlement: Inter-state Arbitration Since 1945’, (1992) 63 BYIL 97.

18 See International Thunderbird Gaming Corporation v. The United Mexican States, UNCITRAL/NAFTA, Arbitral Award of 26 Jan. 2006, Separate Opinion by Prof. Wälde, para. 13. All awards and decisions by arbitral tribunals are available via the Investment Treaty Arbitration website at http://ita.law.uvic.ca or the Investment Claims website via www.investmentclaims.com.

19 Public international lawyers stress the application of the Vienna Convention on the Law of Treaties as the authoritative tool for treaty interpretation; commercial lawyers are occasionally influenced by drawing analogies between the interpretation of contracts and the interpretation of treaties. For an example of the latter approach see Plama Consortium Ltd. v. Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction of 8 February 2005, para. 200. See generally T. Wälde, ‘Interpreting Investment Treaties: Experiences and Examples’, in C. Binder et al. (eds.). International Investment Law for the 21st Century – Essays in Honour of Christoph Schreuer (2009), 724.

20 J. Paulsson, ‘Avoiding Unintended Consequences’, in K. Sauvant and M. Chiswick-Patterson (eds.), Appeals Mechanism in International Investment Disputes (2008), 241, at 262–3 (observing that public international lawyers tend to be driven by a more principled approach to ascertaining the normative content of treaty standards, while commercial lawyers often primarily follow a case-by-case approach focusing on the facts of the case). See also Wälde, supra note 19, at 725–7.

21 It needs to be noted, however, that the distinction between private and public functions of dispute settlement should not be equated with a distinction between private and public law, or necessarily go hand in hand with the mindset of commercial lawyers and public (international) lawyers. The distinction, as used here, relates to the purpose, function, and effect a dispute settlement proceeding has in relation to the parties to the proceedings. The private function is one that is limited to the solution of the dispute; any function beyond that is understood as a public function. Thus dispute settlement processes in private as well as public law have private and public functions. Similarly, in dispute settlement under international law, private and public functions can be assigned to international adjudication. On private and public functions in international adjudication see C. Brown, ‘The Inherent Powers of International Courts and Tribunals’, (2006) 76 BYIL 195, at 229–37.

22 Note that the description of the ethos of commercial arbitrators in the text is deliberately stereotypical in order to squeeze out the essence of how they perceive arbitration. Needless to say, reality is more complex and nuanced. This mindset is quite similar to the perception of dispute settlement under the old GATT system. See J. H. H. Weiler, ‘The Rule of Lawyers and the Ethos of Diplomats’, (2001) 35 Journal of World Trade 191, at 194–7.

23 Cf. Legum, B., ‘Investment Treaty Arbitration's Contribution to International Commercial Arbitration’, (2005) 60 Dispute Resolution Journal 71Google Scholar, at 73 (noting that ‘for most international practitioners today, private international commercial arbitration is the only form of the genre they have ever known. The private arbitration model, thus, has naturally become the default template for all kinds of international arbitration today-including investment treaty arbitration’).

24 Brown, supra note 21, at 230.

25 Chayes, A., ‘The Role of the Judge in Public Law Litigation’, (1976) 89 Harvard Law Review 1281 at 1282CrossRefGoogle Scholar.

26 T. Wälde, ‘The Specific Nature of Investment Arbitration’, in P. Kahn and T. Wälde (eds.), Les Aspects Nouveaux du Droit des Investissements Internationaux/New Aspects of International Investment Law (2007) 43, at 112 ff.; Van Harten, Investment Treaty Arbitration, supra note 12, at 58 ff.; G. Van Harten and M. Loughlin, ‘Investment Treaty Arbitration as a Species of Global Administrative Law’, (2006) 17 EJIL 121, at 145–50; International Thunderbird Gaming v. Mexico, supra note 18, Separate Opinion by Prof. Wälde, para. 12 (arguing that investment treaty arbitration ‘does not set up a system of resolving disputes between presumed equals as in commercial arbitration, but a system of protection of foreign investors that are by exposure to political risk, lack of familiarity with and integration into, an alien political, social, cultural, commercial, institutional and legal system, at a disadvantage’).

27 See also Schill, supra note 11, at 17 (‘Investment treaties are . . . not designed to function like private law contracts that order the relationship between a limited number of parties and contain the exchange of specific transactions, but have a constitutional function in providing a legal framework within which international investment activities can take shape and expand. As such, investment treaties are embedded in a larger framework of international law that overarches the individual bilateral treaty relations and establishes uniform rules for the conduct of host States that consist in adopting a liberal attitude vis-à-vis market mechanisms and that accept the limited role of the State vis-à-vis the economy.’).

28 Brown, supra note 21, at 230.

29 Chayes, supra note 25, at 1281. See also Glamis Gold, Ltd. v. United States of America, UNCITRAL/NAFTA, Award of 8 June 2009, paras. 3–9 (stating, in the context of NAFTA, that investment treaty arbitration is not only ‘a creature of contract, tasked with resolving a particular dispute arising under a particular contract’ (ibid., para. 3) but part of ‘a significant public system of private investment protection’ (ibid., para. 5)).

30 See Van Harten and Loughlin, supra note 26, at 139–40.

31 See supra notes 4 and 5 and accompanying text (pointing out that even the ICSID Convention as well as other arbitral rules are, in essence, rules for commercial arbitrations).

32 For ICSID awards see Arts. 53–55 of the ICSID Convention. Non-ICSID awards will usually be recognized and enforced under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York on 10 June 1958, 330 UNTS 38.

33 See Van Harten and Loughlin, supra note 26, at 140–5.

34 See, for example, CMS Gas Transmission Co. v. Argentine Republic, ICSID Case No. ARB/01/8, Award of 12 May 2005; LG&E Energy Corp., LG&E Capital Corp., LG&E International Inc. v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability of 3 October 2006; Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award of 28 September 2007; Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award of 22 May 2007; BG Group Plc v. Argentina, UNCITRAL Award of 24 December 2007; Continental Casualty Company v. Argentine Republic, ICSID Case No. ARB/03/9, Award of 5 September 2008; National Grid plc v. The Argentine Republic, UNCITRAL, Award of 3 November 2008.

35 Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award of 24 July 2004; Aguas del Tunari S.A. v. Republic of Bolivia, ICSID Case No. ARB/02/3, Decision on Respondent's Objections to Jurisdiction of 21 October 2005.

36 Methanex Corporation v. United States, UNCITRAL/NAFTA, Final Award of the Tribunal on Jurisdiction and Merits of 3 August 2005; Chemtura Corporation (formerly Crompton Corporation) v. Canada, NAFTA (pending).

37 Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3, Award on the Merits of 20 May 1992; Glamis Gold v. United States, supra note 29.

38 Piero Foresti, Laura de Carli and Others v. Republic of South Africa, ICSID Case No. ARB(AF)/07/1 (pending).

39 See on the specificities of state consent in modern investment treaties Legum, B., ‘The Innovation of Investor–State Arbitration under NAFTA’, (2002) 43 Harvard International Law Journal 531Google Scholar.

40 See B. Cremades, ‘Arbitration in Investment Treaties: Public Offer of Arbitration in Investment-Protection Treaties’, in R. Briner (ed.), Law of International Business and Dispute Settlement in the 21st Century (2001), 149; Bjorklund, A., ‘Contract without Privity: Sovereign Offer and Investor Acceptance’, (2001) 2 Chicago Journal of International Law 183Google Scholar.

41 Van Harten, Investment Treaty Arbitration, supra note 12, at 63 ff.; Van Harten, ‘Public–Private Distinction’, supra note 12, at 378–80.

42 See ‘Claims Settlement Declaration’, Art. II, para. 1, reprinted in (1983) 1 Iran–US Claims Tribunal Report 9.

43 Paulsson, J., ‘Arbitration without Privity’, (1995) 10 ICSID Review: Foreign Investment Law Journal 232CrossRefGoogle Scholar.

44 Franck, S., ‘International Arbitrators: Civil Servants? Sub Rosa Advocates? Men of Affairs? The Role of International Arbitrators’, (2006) 12 ILSA Journal of International and Comparative Law 499, at 503–4Google Scholar.

45 See generally Paulsson, J., ‘International Arbitration Is Not Arbitration’, (2008) 2 Stockholm International Arbitration Review 1Google Scholar.

46 On water disputes in international investment law see Vinuales, J., ‘Access to Water in Foreign Investment Disputes’, (2009) 21 Georgetown International Environmental Law Review 733Google Scholar.

47 See supra notes 34–8.

48 Van Harten, Investment Treaty Arbitration, supra note 12, at 46 ff.

49 Cf. Choudhury, B., ‘Recapturing Public Power: Is Investment Arbitration's Engagement of the Public Interest Contributing to the Democratic Deficit?’, (2008) 41 Vanderbilt Journal of Transnational Law 775Google Scholar; see further D. Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy's Promise (2008); Sampliner, G., ‘Arbitration of Expropriation Cases under U.S. Investment Treaties: A Threat to Democracy or the Dog that Didn't Bark?’, (2003) 18 ICSID Review: Foreign Investment Law Journal 1CrossRefGoogle Scholar.

50 See supra note 14.

51 Cf. AES Corporation v. The Argentine Republic, ICSID Case No. ARB/02/17, Decision on Jurisdiction of 26 April 2005, para. 23; SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004, para. 97 (both holding that the ICSID Convention does not impose the binding authority of earlier ICSID decisions). See also C. Schreuer et al., The ICSID Convention: A Commentary (2009), Art. 53, para. 16 (noting that in the preparatory works for the ICSID Convention nothing implies the applicability of a stare decisis rule).

52 Cf. d'Aspremont, supra note 13, at 5 (arguing that ‘International Law is public, not only because of its inter‑public character, but also because it can promote a global interest. A rule can be seen as promoting a global interest when it addresses matters of concern to the International Society’).

53 Von Bogdandy, supra note 13, at 1381–6.

54 See ICSID Rule 48(4) (stating that ‘[t]he Centre shall not publish the award without the consent of the parties. The Centre may, however, include in its publications excerpts of the legal rules applied by the Tribunal’).

55 Non-ICSID awards are subject to the national rules applicable at the seat of arbitration, allowing, to a certain degree, court-based review of arbitral awards. Such proceedings enter the public domain with investment treaty awards thus potentially becoming public. The award in BG v. Argentina, supra note 34, for example, became public that way.

56 Awards in commercial arbitration, by contrast, largely remain confidential and thus purely private, although the reasoning of some international awards is equally published in commercial arbitration reporters. Yet such publications are much less systematic than in investment treaty arbitration.

57 See generally for the thesis that international investment law constitutes an essentially multilateral system despite the bilateral form of investment treaties and its implementation based on one-off arbitral tribunals Schill, supra note 11.

58 Ibid., at 288–92.

59 Commission, J., ‘Precedent in Investment Treaty Arbitration: A Citation Analysis of a Developing Jurisprudence’, (2007) 24 Journal of International Arbitration 129Google Scholar; O. Fauchald. ‘The Legal Reasoning of ICSID Tribunals: An Empirical Analysis’, (2008) 19 EJIL 301.

60 Commission, supra note 59, at 148. In particular, his results show a ‘marked increase of citation to ICSID decisions by ICSID tribunals’ (ibid., at 149). While ICSID tribunals between 1990 and 2001 cited on average approximately two earlier ICSID decisions and awards, this number increased to an average of more than seven within the period between 2002 and 2006. ICSID decisions on jurisdiction even cited an average of nine earlier ICSID decisions or awards. Similar trends are also present with regard to decisions under the ICSID Additional Facility and non-ICSID investment treaty awards (ibid., tables 3–5, at 149–50).

61 See also Kaufmann-Kohler, G., ‘Arbitral Precedent: Dream, Necessity or Excuse?’, (2007) 23 Arbitration International 357CrossRefGoogle Scholar.

62 Waste Management Inc. v. The United Mexican States, ICSID Case No. ARB(AF)/00/3, Award of 30 April 2004, para. 98.

63 Ibid., paras. 99 ff.

64 Tecnicas Medioambientales Tecmed S. A. v. The United Mexican States, ICSID Case No. ARB(AF)/00/2, Award of 29 May 2003, para. 154.

65 MTD Equity Sdn. Bhd. & MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award of 25 May 2004, paras. 113 ff.

66 Occidental Exploration v. Ecuador, Final Award of 1 June 2004, para. 185.

67 Siemens A. G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Award of 6 February 2007, paras. 298–299.

68 See for a discussion of the standards of international investment protection and the case law that has developed in that respect McLachlan, supra note 3; Dolzer, supra note 3; Newcombe, supra note 3.

69 El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction of 27 April 2006, para. 39. See also AES v. Argentina, supra note 51, para. 18 (observing that the investor relied on earlier investment awards ‘more or less as if they were precedent [tending] to say that Argentina's objections to the jurisdiction of this Tribunal are moot if not even useless, since these tribunals have already determined the answer to be given to identical or similar objections to jurisdiction’).

70 See on the emergence of expectations in the reference to, application of, and justified departure from precedent Japan – Taxes on Alcoholic Beverages WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, Appellate Body Report, 4 Oct. 1996, 14 (observing that ‘[a]dopted panel reports are an important part of the GATT acquis. They are often considered by subsequent panels. They create legitimate expectations among WTO Members, and, therefore, should be taken into account where they are relevant to any dispute. However, they are not binding, except with respect to resolving the particular dispute between the parties to that dispute’).

71 Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/07, Decision on Jurisdiction and Recommendation on Provisional Measures of 21 March 2007, para. 67. See also International Thunderbird Gaming v. Mexico, supra note 18, Separate Opinion by Prof. Wälde, para. 16 (‘While individual arbitral awards by themselves do not as yet constitute a binding precedent, a consistent line of reasoning developing a principle and a particular interpretation of specific treaty obligations should be respected; if an authoritative jurisprudence evolves, it will acquire the character of customary international law and must be respected’). See further ibid., paras. 129–130. See also M.C.I. Power Group L.C. and New Turbine Inc. v. Republic of Ecuador, ICSID Case No. Arb/03/6, Decision on Annulment of 19 October 2009, para. 24 (observing that ‘[t]he responsibility for ensuring consistency in the jurisprudence and for building a coherent body of law rests primarily with the investment tribunals’).

72 See Von Bogdandy, supra note 13, at 1381–2 (defining ‘authority as the legal capacity to determine others and to reduce their freedom, i.e. to unilaterally shape their legal or factual situation . . . The capacity to determine another legal subject can also occur through a non-binding act which only conditions another legal subject. This is the case whenever that act builds up pressure for another legal subject to follow its impetus’ (emphasis in original). This would encompass precedent as an exercise of authority).

73 See on this and the following Schill, supra note 11, at 285–7 (with further references).

74 This has been the case, for example, with respect to the inconsistent interpretations of Argentina's necessity defence under the United States–Argentina BIT relating to claims by different investors in the gas distribution sector about the effect of Argentina's economic emergency legislation. See Schill, S., ‘International Investment Law and the Host State's Power to Handle Economic Crises’, (2007) 24 Journal of International Arbitration 265Google Scholar.

75 Schill, supra note 6.

76 Schill, supra note 11, at 151–73.

77 Compared with the several hundred known investment treaty awards and decisions today, only a small number of manifestly inconsistent decisions exist. While this constitutes a significant problem with respect to individual disputes, from a systemic perspective the issue is less grave than is often considered.

78 Schill, supra note 11, at 347–52.

79 Ibid., at 341–7.

80 See also M.C.I. Power Group v. Ecuador, supra note 71, para. 24 (observing that ‘[t]he responsibility for ensuring consistency in the jurisprudence and for building a coherent body of law rests primarily with the investment tribunals. They are assisted in their task by the development of a common legal opinion and the progressive emergence of “une jurisprudence constante”, as the Tribunal in SGS v. Philippines declared.’).

81 See UNCTAD, Investor–State Dispute Settlement and Impact on Investment Rulemaking (2007), available at http://unctad.org/en/docs/iteiia20073_en.pdf.

82 See Draft of the Central America–United States Free Trade Agreement, dated 28 January 2004, available at www.interaction.org/files.cgi/2605_CAFTAFullDraftText.pdf, Art. 10.4(2) n. 1.

83 Art. 10.5(2)(a) of the Dominican Republic–Central America–United States Free Trade Agreement, available at www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/Section_Index.html, for instance, stipulates – in departing from the broader treaty language in earlier treaties – that ‘fair and equitable treatment includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world.’

84 Chayes, supra note 25, at 1285.

85 See supra notes 7–13 and accompanying text.

86 See, e.g., UNCITRAL Arbitration Rules, Arts. 9–12.

87 But see ASM Shipping Ltd. v. TTMI Ltd., [2005] All ER (D) 271 (Nov) (concerning the conflict of serving as arbitrator in a commercial arbitration when prior involvement as counsel concerned a case involving the same witness whose honesty in the earlier case had been in question).

88 Levine, J., ‘Dealing with Arbitrator “Issue Conflicts” in International Arbitration’, (2006) 61 Dispute Resolution Journal 60Google Scholar.

89 Buergenthal, T., ‘The Proliferation of Disputes, Dispute Settlement Procedures and Respect for the Rule of Law’, (2006) 22 Arbitration International 495, at 498CrossRefGoogle Scholar; see also F. Marshall and H. Mann, Revision of the UNCITRAL Arbitration Rules – Good Governance and the Rule of Law: Express Rules for Investor–State Arbitrations Required (2006), 4–5, available at www.iisd.org/pdf/2006/investment_uncitral_rules_rrevision.pdf.

90 See, e.g., Statute of the International Court of Justice, Art. 17(1).

91 Once issue conflicts are understood as affecting the impartiality and independence of arbitrators, the traditional means of implementing and safeguarding impartiality will come into play, including arbitrator disclosure and the possibility of challenging arbitrators based on involvement as counsel in other cases. See Levine, supra note 88; see also L. Shore, ‘Disclosure and Impartiality: An Arbitrator's Responsibility vis-à-vis Legal Standards’, (2002) 57 Dispute Resolution Journal 32 (on the importance and scope of disclosure).

92 Statute of the International Court of Justice, Art. 2.

93 Statute of the International Tribunal for the Law of the Sea, Art. 2(1).

94 Statute of the International Criminal Court, Art. 36(3).

95 WTO Dispute Settlement Understanding, Art. 17(3).

96 ICSID Convention, Art. 14(1). Similarly, no provision on the competence of arbitrators in investment treaty disputes is included in other arbitral rules, such as the UNCITRAL, LCIA, SCC or ICC Rules.

97 When the ICSID Convention was adopted, investment treaties were still a rare phenomenon. Furthermore, until the late 1960s investment treaties did not provide for investor–state arbitration as a dispute settlement mechanism. On the history of the inclusion of investor–state arbitration clauses in investment treaties see Newcombe, supra note 3, at 44–6.

98 NAFTA, Art. 1124(4).

99 Brower, C., ‘W(h)ither International Commercial Arbitration? – The Goff Lecture 2007’, (2008) 24 Arbitration International 181, at 191–4CrossRefGoogle Scholar.

100 Cf. Statute of the International Court of Justice, Art. 38.

101 M. Kazazi, Burden of Proof and Related Issues – A Study on Evidence before International Tribunals (1996), 42–50 (with reference to the relevant case law of the Permanent Court of International Justice and the International Court of Justice).

102 For this reason the recent decision of the Tribunal in Glamis Gold v. United States, supra note 29, paras. 598–618, which resolved the question whether the customary international law minimum standards had evolved since the 1927 decision of the US–Mexican General Claims Commission in the Neer case in favour of the respondent because the claimant could not prove such evolution, is critical.

103 See G. Cordero Moss, ‘Tribunal's Powers versus Party Autonomy’, in Muchlinski, supra note 3, 1207, at 1241–2.

104 Kazazi, supra note 101, at 66–117. See on the same approach in investment arbitration, for example, ADF Group Inc. v. United States, ICSID Case No. ARB (AF)/00/1, Final Award of 9 January 2003, para. 185.

105 See the discussion in World Duty Free Company Limited v. The Republic of Kenya, ICSID Case No. ARB/00/7, Award of 4 October 2006, paras. 138–157. See also Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award of 2 August 2006, paras. 245–252.

106 See, e.g., § 86(1) VwGO (Verwaltungsgerichtsordnung–German Law on Administrative Litigation). On Swiss law see M. Pfeifer, Der Untersuchungsgrundsatz und die Offizialmaxime im Verwaltungsverfahren (1980). On French law see R. Chapus, Droit administrative général (2001), I, 811–15.

107 Teitelbaum, R., ‘Recent Fact-Finding Developments at the International Court of Justice’, (2007) 6 Law and Practice of International Courts and Tribunals 119, at 135–9CrossRefGoogle Scholar.

108 Ibid., at 139–57 (for a parallel discussion of the reliance of the ICJ via the concept of public knowledge, on UN Reports, Security Council and General Assembly Resolutions and findings of other commissions and courts).

109 On inherent powers of international courts and tribunals generally see Brown, supra note 21. Independent fact-finding powers are also conferred on other international courts and tribunals, even if they follow, in principle, an adversarial system. See Kazazi, supra note 101, at 165–76. See, in particular, Statute of the International Court of Justice, Arts. 49 and 50. See in more detail A. Zimmermann, C. Tomuschat, and K. Oellers-Frahm (eds.), The Statute of the International Court of Justice (2006), Arts. 49 and 50. These fact-finding powers, however, have been applied restrictively by the International Court of Justice. Critical in this respect, for example, is Kazazi, supra note 101, at 174–6; R. Goldstone and R. Hamilton, ‘Bosnia v. Serbia: Lessons from the Encounter of the International Court of Justice with the International Criminal Tribunal for the Former Yugoslavia’, (2008) 21 LJIL 95, at 108. On the power to raise questions of jurisdiction proprio motu see, e.g., Wintershall Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/04/14, Award of 8 December 2008, paras. 40–44.

110 A failure to state reasons also constitutes one of the grounds for the annulment of an ISCID award under the ICSID Convention, Art. 52(1)(e). Similarly, other arbitration rules specify that awards have to be reasoned; see, e.g., UNCITRAL Arbitration Rules, Art. 32(3) (unless the parties agreed otherwise).

111 While providing reasons does not mean that there are no lacunae, the reader has to be able ‘to follow the reasoning’ (CMS Gas Transmission Company v. Argentine Republic, ICSID Case No. ARB/01/8, Decision of the Ad Hoc Committee on the Application for Annulment of the Argentine Republic of 25 September 2007, para. 97; see also Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on Annulment of 28 January 2002, para. 81).

112 Eastern Sugar B.V. v. The Czech Republic, SCC Case No. 88/2004, Partial Award of 27 March 2007, paras. 222–343.

113 See on fair and equitable treatment Choudhury, B., ‘Evolution or Devolution? Defining Fair and Equitable Treatment in International Investment Law’, (2005) 6 Journal of World Investment & Trade 297CrossRefGoogle Scholar; Schreuer, C., ‘Fair and Equitable Treatment in Arbitral Practice’, (2005) 6 Journal of World Investment & Trade 357Google Scholar; Dolzer, R., ‘Fair and Equitable Treatment: A Key Standard in Investment Treaties’, (2005) 39 International Lawyer 87Google Scholar; S. Schill, ‘Fair and Equitable Treatment under Investment Treaties as an Embodiment of the Rule of Law’, IILJ Working Paper (Global Administrative Law Series) 2006/6, 2006, available at www.iilj.org/20066SchillGAL.htm.

114 Eastern Sugar v. Czech Republic, supra note 112, para. 272.

115 In this sense, for example, G. Schwarzenberger, Foreign Investments and International Law, (1969) at 113–116.

116 Schill, supra note 113, at 2 (with further references).

117 See also Glamis Gold v. United States, supra note 29, para. 8; International Thunderbird Gaming v. Mexico, supra note 18, Separate Opinion by Prof. Wälde, para. 129; Duke Energy Electroquil Partners & Electroquil S.A. v. Republic of Ecuador, ICSID Case No ARB/04/19, Award of 18 August 2008, paras. 116–117; Saipem v. Bangladesh, supra note 71, paras. 66–67; Noble Energy, Inc. and Machalapower CIA. LTDA v. The Republic of Ecuador and Consejo Nacional de Electricidad, ICSID Case No. ARB/05/12, Decision on Jurisdiction of 5 March 5, 2008, paras. 49–50.

118 SGS Société Générale de Surveillance S.A. v. Republic of the Philippines, ICSID Case No. ARB/02/6, Decision of the Tribunal on Objections to Jurisdiction of 29 January 2004, paras. 119–126.

119 El Paso Energy v. Argentina, supra note 69, paras. 71–82.

120 See, e.g., Plama v. Bulgaria, supra note 19, paras. 210–226. See also Wintershall v. Argentina, supra note 109, paras. 160–197; Renta 4 S.V.S.A et al. v. Russian Federation, SCC No. 24/2007, Award on Preliminary Objections of 20 March 2009, paras. 68–120. Differently RosInvestCo UK Ltd. v. The Russian Federation, SCC Case No. V 079/2005, Award on Jurisdiction of October 2007, para. 137 (stating that ‘there is no need to enter into a detailed discussion of these decisions’).

121 LG&E v. Argentina, supra note 34, paras. 226–266. Compare CMS v. Argentina, supra note 34, paras. 323–331, 353–394. See for a more detailed comparison of both decisions Schill, supra note 74; A. Reinisch, ‘Necessity in International Investment Arbitration – An Unnecessary Split of Opinions in Recent ICSID Cases? Comments on CMS v. Argentina and LG&E v. Argentina’, (2007) 8 World Investment & Trade 191; M. Waibel, ‘Two Worlds of Necessity in ICSID Arbitration: CMS and LG&E’, (2007) 20 LJIL 637.

122 LG&E v. Argentina, supra note 34, paras. 125, 128, 171.

123 For a critical analysis of the treatment of the defence of necessity in LG&E v. Argentina, see, e.g., Schill, supra note 74, at 277–84.

124 Similarly M. Shahabuddeen, Precedent in the World Court (1996), 130–1.

125 Enron v. Argentina, supra note 34, paras. 260, 262, 263, 274.

126 Ibid., paras. 288–345.

127 Albert Jan van den Berg sat in both the Enron case and the LG&E case; Francisco Rezek sat in both LG&E and CMS v. Argentina.

128 See also Sovereignty over Pulau Ligitan and Pulau Sipadan (Indonesia/Malaysia), Judgment, 17 December 2002, Dissenting Opinion of ad hoc Judge Franck, [2002] ICJ Rep. 691, at 694, para. 11 (stating that the function of the dissent also lies in the fact that it ‘presents to the law's universal marketplace of ideas certain principles of law and nuances of analysis which, even if not adopted in the instant case, may be of use in another, as yet unforeseen, context’).

129 Ibid., para. 12.

130 See supra notes 54 and 55 and accompanying text on the ways in which investment treaty awards become public.