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Dispute Settlement Arrangements in Investment Treaties*

Published online by Cambridge University Press:  07 July 2009

Paul Peters
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The idea for this study came from the realization that I am in possession of a largely untapped reservoir of valuable treaty materials: the network of bilateral investment treaties (BITs hereafter) which I have collected and studied for a number of years. In these treaties more than one hundred governments have taken a position on a number of issues relating to the promotion and protection of international investments. The three key issues are expropriation, transfer rights with regard to capital and revenues, and dispute settlement.

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Netherlands Yearbook of International Law , Volume 22 , December 1991 , pp. 91 - 161
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Copyright © T.M.C. Asser Press 1991

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References

1. The quantitative analyses in this study are mainly based on 168 of these BUs, as the texts of the others were not available to me at the time.

2. See the Appendix at the end of this paper.

3. Disregarding the fact that some of them are also developing countries seeking foreign investment.

4. Sometimes there are three parties, as for instance in the recent treaty between Belgium, Luxemburg and the USSR. Most of the treaties in the Belgian series are, however, bilateral in the sense that they were concluded between the Belgio-Luxemburg Economic Union (BLEU) and the other party; some leave out Luxembourg altogether, e.g., Belgium/Indonesia and Belgium/Zaire.

5. Cf., Shea, D.R., The Calvo Clause, a Problem of Inter-American and International Law and Diplomacy (1955) p. 16Google Scholar; L.A. Potesta, Costa and Ruda, J.M., Derecho international público (1984) pp. 220 and 247 at fa 83Google Scholar. The doctrine did not aim at the elimination of all diplomatic protection but sought to prevent flagrant abuses. It should not be confused with the Calvo clause (ibid., p. 210 et seq.) which is often included in contracts between Latin American States and foreign companies. These clauses sometimes represent a rather more uncompromising position; they usually provide for disputes to be submitted to the local courts in accordance with the domestic law; sometimes they specify that disputes shall not be submitted to diplomatic protection.

6. The reference to ‘all States concerned’ is confusing. It is reasonable to assume that it refers only to the host and home countries related to the investment that was nationalized. However, those who consider this provision to be jus cogens, with application erga omnes, may take the view that an exception is allowable only if it is agreed by other concerned States as well. Cf., Peters, , Schrijver, and De Waait, , in Permanent Sovereignty over Natural Resources in International Law pp. 104–105Google Scholar, infra, a 12.

7. Examples are the initial reluctance of some countries (e.g., Switzerland and Germany) to include provisions on ICSID arbitration in their BITs, which has gradually given rise to the acceptance of such clauses as a standard item; the gradual liberalization of Chinese and East European clauses on international arbitration between the host country and the investor, initially restricted to disputes about compensation in case of expropriation and gradually widened to include other matters; the virtual dwindling away of the rule requiring exhaustion of local remedies before international arbitration is found acceptable; and the streamlining of the US standard clauses (which in their earlier versions were trying to regulate the procedure in such detail and in so tortuous a manner that inadvertently a loophole was created by which reluctant countries could avoid compliance with the procedures) with a view to making the system truly compulsory. We shall return to these and other trends.

8. Asian-African Legal Consultative Committee.

9. In fact the standard of draftsmanship was found to be disappointingly inadequate in a number of instances. Examples are given below, see nn. 75, 85, 87, 92, 93, 119; section 3.11 following n. 144. See also Germany/Poland Art. 11.4 where the expressions ‘Vertragspartei’ (Contracting Party) and ‘Streitpartei’ (party to the dispute) are confused, a situation that required an exchange of verbal notes in order to achieve a satisfactory solution; all US BITs concluded in the years 1982-86 contain ambiguous language which appears to give precedence to previously agreed procedures over arbitration intended to be compulsory (cf., Vandevelde, infra a 12, pp. 264-265); Switzerland/Sri -Lanka Art. 9.2 which gives the investor the usual choice between arbitration and conciliation although in that BIT no provision is made for conciliation; Sweden/Tunisia where the testimonial clause contains the usual wording ‘les deux textes faisant également foi’, even though this BIT was drawn up in one language (French) only.

10. Cf., Verzijl, J.H.W., International Law in Historical Perspective, vol. 1 (1969) p. 39Google Scholar; Doehring, K., ‘Gewohnheitsrecht aus Verträgen’, 36 ZaöRV (1976) in particular pp. 82, 83, 90Google Scholar; Dolzer, R., ‘New Foundations of the Law of Expropriation of Alien Property’, 75 AJIL (1981) p. 565CrossRefGoogle Scholar; Scheuner, U., ‘Internationale Verträge als Elemente der Bildung von völkerrechtlichem Gewohnheitsrecht’, in Festschrift für F.A.Mann (1977) p. 410, at p. 420Google Scholar; Meijers, H., ‘Rond net internationale gewoonterecht in Nederland’Google Scholar, a preliminary report (preadvies) for the Netherlands Branch of the ILA, p. 79, in Mededelingen NVIR (1985) No. 91. Judge Oda, in his separate opinion in the ELSI case (see infra, n. 123) refers to another way in which a network of treaties may help to shape a common interpretation of certain concepts (which in turn may contribute to the creation of customary law). Oda interprets ‘taking’, which is ‘expropriare’ in a US/Italy treaty and ‘enteignen’ in a corresponding US/Germany treaty, as excluding requisitioning (ICJ Rep. (1989) p. 91). Another example of harmonization of different terms in a cluster of treaties, with similar effect, is to be found in three Swedish investment treaties where the Swedish term ‘otvetydiga’ is rendered as ‘distinct’, ‘clear’ and ‘explicita’, respectively (Art. 4 of the treaties with Poland, Czechoslovakia and Bolivia).

11. My own view was expressed in a report of September 1989 (cf., infra, n. 12): ‘It is clear that we are still some way removed from a state of consensus, as some 30 States at present abstain from treaty regimes aimed at internationalization of investment arrangements. Accordingly, generally speaking the norms and principles included in the treaties cannot be considered to have become customary law yet, although closer analysis may show that on some of these norms or principles a general practice accepted as law, in the sense of Art. 38 of the Statute of the Id, already exists.’

12. We mention in particular:

On the Swiss treaties: Krafft, M.C., ‘Les accords bilatéraux sur la protection des investissements conclus par la Suisse’, in Dicke, D.C., ed., Foreign Investment in the Present and a New International Economic Order (1987) pp. 72–95Google Scholar; and Nguyen, Huu-Tru, ‘Le réseau suisse d'accords bilatéraux d'encouragement et de protection des investissements’, RGDIP (1988) pp. 577–671Google Scholar. On the US treaties: Vandevelde, K.J., ‘The Bilateral Investment Treaty Program of the United States’, 21 Cornell ILJ (1988) pp. 201–276Google Scholar.

On the Chinese treaties: Li, Shishi, ‘Bilateral Investment Promotion and Investment Agreements; Practice of the People's Republic of China’, in de Waart, P.J.L.M. et al. , eds., International Law and Development (1988) pp. 163–184Google Scholar.

On the British treaties: Mann, F.A., Further Studies in International Law (1990) pp. 234–247Google Scholar.

Generally, Laviec, J.P., Protection et promotion des investissements, étude de droit international économique (1985) 331 pp.Google Scholar; and a report of the UN Centre on TNCs, ‘Bilateral Investment Treaties’, ST/CTC/65 (1988) 194 pp.

Cf., also reports on this subject which have been presented to the NIEO Committee of the ILA since 1982. The first report, prepared in 1981, was entitled Permanent Sovereignty, Foreign Investment and State Practice, by P. Peters, N. Schrijver and P.J.L.M. de Waart; it was presented at the Montreal Conference of the ILA in 1982, together with a postscript of July 1982 in which the (then) most recent 100 BITs were analyzed. This report (without the postscript) was later reprinted in S. Roy, Chowdhury and Hossain, K., eds., Permanent Sovereignty over Natural Resources in International Law, Principle and Practice (1984)Google Scholar. This material was further expanded in ‘Investment Risk and Trust: The Role of International Law’, in de Waart, P.J.L.M., Peters, P. and Denters, E., eds., International Law and Development (1988)Google Scholar. My report Investment Treaties: An Updating was presented at the Warsaw Conference of the ILA in 1988. A further updating was presented at the Bergamo meeting of the NIEO Committee in September 1989, together with a report of 14 August 1989 containing a Review of Latin American BITs in the Light of the Calvo Doctrine.

13. Of the 220 BITs concluded since 1980 which are listed in the present report, Laviec (1985) included 32, while 113 were included in the CTC study of 1988.

14. Art. 11 of the BIT between Germany (FRG) and Nepal, signed 20 October 1986, in force 7 July 1988.

15. Art. 6 requires that the host State should recognize the subrogation of the home State into the rights of the investor if the latter has been compensated by its government under investment insurance; Art. 6 contains a saving clause to the effect that assignment of rights to the home State shall be without prejudice to the right of the home State to go to arbitration under Art. 11.

16. Cf., Eisemann, F., ‘L'“arbitre-partie”’, in Sanders, P., ed., Liber Amicorum Martin Domke (1967) p. 78.Google Scholar

17. Even more outspoken is Italy/Tunisia Art. 9.6 which refers to ‘les frais relatifs à son membre et à son avocat plaidant.’

18. In Netherlands/Hungary Art. 9.9 and Netherlands/Bulgaria Art. 6.S, respectively. Other Dutch BITs, e.g., those with Sri Lanka and Turkey, unashamedly refer to ‘its own’. Most recent Dutch BITs wisely leave out the cost clause altogether and thus avoid the problem.

19. A similar quandary may arise under the multilateral ASEAN investment treaty, which leaves disputes between member States to be resolved by the meeting of ASEAN Economic Ministers. This is of course primarily a political body and may be unable or unwilling to setde the dispute in a binding manner.

20. Art. 52 provides that such a dispute may, upon the mutual consent of the parties, be submitted to the arbitration system laid down.

21. Cameroon/Romania Art. 9.3.

22. BLEU/Cameroon and US/Morocco.

23. Romania/Senegal provides that the chairman (third arbitrator) shall be a national of a third State designated by the two parties. Should the appointing authority ignore this if one of the parties fails to cooperate in such designation? A similar problem may arise under China/Japan Art. 13.3 which says that ‘the Contracting Parties’ (presumably both of them) must make the request to the appointing authority. As the English text of the treaty is the decisive text, it is difficult to believe that this is a translation error.

24. See infra, section 3.2 on defective arbitration clauses.

25. Many BITs follow the principle set out in Art 27 of the ICSED Convention: No Contracting State shall give diplomatic protection, or bring an international claim, in respect of a dispute which one of its nationals and another Contracting State shall have consented to submit… to arbitration … unless such other Contracting State shall have failed to abide by and comply with the award rendered. The reference to denial of justice, etc., although probably another valid reason for invoking government-to-government arbitration, is not usually used in the relevant BIT clauses. They do appear, however, in the Switzerland/Uruguay BIT Art. 9.8 as a cause for submitting a claim to arbitration between the investor and the host country. It is interesting to note that most UK BITs contain a variation on the formula of ICSID Art. 27; they purport to restrict pursuance of disputes through diplomatic channels (i.e., diplomatic protection) but not international claims (which would include submitting the dispute to govemment-to-government arbitration).

26. There are one or two apparent exceptions; e.g., Germany/Uruguay provides for arbitration by a single arbitrator to be agreed between the parties, but goes on to call for a panel of three arbitrators to be set up in the usual way if no agreement is reached on the single arbitrator within three months.

27. An exception is the multilateral investment treaty concluded in June 1981 by member States of the Organization of the Islamic Conference. It entered into force on 26 February 1988. As of 1 April 1991 it had been signed by 18 and ratified by 13 States. Art. 17 provides for arbitration, with the Secretary-General of the Organization acting as appointing authority. It does not require the umpire to be of a neutral nationality.

28. In fact, all too often parties do not even trust their ‘own’ arbitrators to select and appoint the third arbitrator. In two-thirds of the BITs the parties reserve for themselves the right of final approval or the actual appointment of the third arbitrator designated by the first two arbitrators. An example is Art. 11.3 quoted in section 2.1 above. In some BITs the first two play no role at all (Austria/Bulgaria, China/Singapore). Only the Belgian, Dutch, Japanese, Swiss and US models show confidence in this respect, by leaving the appointment of the umpire to the party arbitrators.

29. The last two sentences of Art. 11.4 (see supra, section 2.1 above) conduct the search for the appointing authority in three stages: first the President; if he has the wrong nationality or is otherwise prevented, then the Vice-President; if the same applies to the Vice-President, then the member ‘next in seniority’ who has an acceptable nationality (without regard to any other prevention!). Sometimes the vice-presidential stage is skipped (e.g., Austria/China). Sometimes age is taken as a criterion in the last stage rather than seniority (BLEU/Rwanda: ‘le membre le plus âgé de la Cour’; the 1958 ILC Model Arbitration Rules Art. 4.2: ‘the oldest member of the Court’).

30. Bulgaria, China, Czechoslovakia, Hungary, Poland, Romania and the USSR. The other three BITs are Japan/Sri Lanka, US/Turkey and France/Egypt.

31. Bulgaria, China and Poland. The exceptions are Kuwait/Pakistan and Italy/Tunisia.

32. Those with BLEU, Germany and the Netherlands.

33. Two months under the Netherlands/Bulgaria treaty.

34. These three Bulgarian BITs make the same requirement (all three arbitrators must be nationals of States which maintain diplomatic relations with both Contracting Parties) in the rules applicable to arbitration between the host country and the investor. Cf., section 3.4 at a 104.

35. The last stipulation is standard language. It may be thought to be redundant because parties can always agree to change a previous agreement. However, the stipulation is useful in that it allows the two governments some leeway without having to engage in the tedious procedure of amending the treaty.

36. The statistics are as follows: ICJ in 124 BITs; UN Secretary-General in 26; 3 allow choice; ICSID in 2; the President or Vice-President of the ICC in one; and the Secretary-General of the Organization of the Islamic Conference or his deputy also in one BIT. In two cases (US/Morocco and US/Grenada) the designation is effected by reference to Art. 4 of the Model Arbitration Rules of the International Law Commission, which in turn designates the President of the ICJ.

37. Up to March 1974 French BITs, like most others, designated the President of the ICJ as the appointing authority. The turning point came with the Nuclear Test cases (Australia v. France and New Zealand v. France) in which France as the respondent failed to appear in the proceedings. Since these judgements of 20 December 1974 (ICJ Rep. (1974) p. 253 and p. 457) France has never again relied on the President of the ICJ as the appointing authority.

38. France/Egypt Art. 11: Les Parties contractantes pourront s'entendre à l'avance pour désigner, pour une période de cinq ans renouvelable, la personnalité qui remplira, en cas de litige, les fonctions de troisiéme arbitre. A similar clause is in BLEU/Liberia.

39. Those with Austria, the Netherlands, Switzerland and the US.

40. China/Kuwait.

41. UK/Mauritius, after one month; Germany/Uruguay after three months.

42. BITs with Egypt, Panama, Haiti, Zaire and Cameroon.

43. ‘Meinungsverschiedenheiten’ (in German), ‘divergences’ and ‘divergencias’ in French and Spanish. Since 1980 only the German BITs with Bangladesh, Lesotho, Bulgaria, Nepal, USSR and Poland have retained the term ‘dispute’.

44. Those with Sri Lanka, Malta, Yemen, Oman, Uruguay, Pakistan, Ghana and the USSR.

45. According to Netherlands/Pakistan the tribunal may decide ‘in justice and good faith’; Netherlands/USSR speaks of decisions ‘on the principle of equity’. It may be assumed that in all cases the same latitude is meant to be given to the tribunal to deviate from the strict rule of the applicable law if in the view of the tribunal that is necessary in order to reach an equitable result. The tribunal is not entitled to disregard the applicable legal rules and principles. However, having considered them, it has some leeway not to apply them. Cf., Scheuner, U., ‘Decisions Ex Aequo et Bono by International Courts and Arbitral Tribunals’, in Sanders, , ed, op. cit. n. 16, pp. 275–288.Google Scholar

46. All US treaties except those with Turkey, Bangladesh, Poland and Tunisia.

47. Attached to UNGA Res. 1262 (XIII), cf., ILC Yearbook 1958 Vol. II p. 12 et seq.

48. US/Poland and US/Tunisia.

49. Some 24 BITs — mostly Swiss and Dutch — stipulate that the parties have an overriding say in the matter (‘unless the Contracting Parties agree otherwise’ or similar wording).

50. Netherlands/China Art. 13.8.

51. Netherlands/China Art. 13.9.

52. The Turkish BITs with Austria, the Netherlands and the US.

53. The Finnish BITs with Egypt and Bulgaria require the English language.

54. A few examples: general rules and principles of international law; general rules of international law; applicable principles of law; applicable principles in international law; generally accepted rules and principles of international law; applicable rules of international law; generally recognized principles of international law; the procedural standards called for by international law.

55. Netherlands/Bulgaria. Netherlands/China refers to ‘applicable international law recognized by both Contracting Parties’ and in a different context to ‘the principles of international law accepted by both Contracting Parties’. UK/China refers to ‘the rules of general international law accepted by the two Contracting Parties’. BLEU/China refers to generally recognized principles ‘adopted by the Contracting Parties’. Italy/China uses similar language. Other Chinese BITs, such as those with Denmark and Germany, on the other hand, have avoided such confusing language.

56. The Danish text is ‘procedureregler’ (Denmark/Poland Art. 8.5), suggesting mat the introduction of the concept ‘standard’ is a question of translation rather than substance.

57. Germany/Bulgaria, Netherlands/Turkey, Netherlands/China.

58. This article deals with settlement of disputes arising from investment in deep sea mining and provides that, if a company brings an action against a State, the respondent State may ask the sponsoring State to appear on behalf of the company. The sponsoring State will normally be the home State of the company investing in deep sea mining. Another instance of States' unwillingness to be drawn into litigation at the instigation of a private party is provided by States failing to make the declaration required by Art. 25 of the European Human Rights Convention.

59. The 2+2 formula is found in 87 BITs, but there are many variations on this theme, from 1+1 month (Japan/Sri Lanka) to 3+3, or 3 months + an indefinite period (four of the US treaties and Mauritania/Tunisia).

60. The second formula is used in 40 BITs. Again, there are variations in the timetable: 2+4, 3+4 and 3+5 months.

61. The third formula is applied in 20 BITs, 11x with a 2-month period, 5x with 12 months.

62. In US/Egypt this is reduced to 4+1 months; in US/Bangladesh it is extended to a single 12 month period. A similar clause is included in the BLEU/Burundi BIT: the tribunal is required to give a decision within 10 months after being set up. The average for the 9 BITs is 8.3 months.

63. Cf., Art. 11.6 in section 2.1 above.

64. Cf., Art. 11.6, last sentence, in section 2.1 above.

65. The words quoted occur in all US treaties. The word Parties is consistently written with a capital P and therefore denotes the Contracting Parties of the BIT (i.e., the home State and the host State) and not the parties to the investment insurance arrangement (i.e., the home State and the investor). The US has concluded a large number of bilateral treaties on investment insurance and subrogatioa The intent of this clause is no doubt to give precedence to the dispute settlement arrangements provided by those treaties over the intergovernmental dispute settlement arrangements in the BIT.

66. The enterprise need not be multinational (companies of a concern in two or three countries suffice); a group of associated companies in different countries may be called transnational, but certainly do not farm a (single) corporation as the name suggests. A more correct term would be: an internatioanl group of companies (or ‘concern’).

67. Cf., supra, section 2.14 in relation to Art. 190 of the Law of the Sea Convention.

68. Swiss BITs did not include ICSID clauses until 1980; cf., Dominicé, C., ‘La clause CIRDI dans les traités bilateraux suisses de protection des investissements’, in Festschrift Dietrich Schindler (1989) p. 459Google Scholar. German BITs up to 1986, with a few exceptions, lacked ICSID clauses.

69. Cf., supra, section 2.17 on Art. 27 of the ICSID Convention.

70. In the Netherlands a problem arose under the old Art. 163 of the Constitution, which guaranteed to everyone access to the courts; this guarantee, which had been in the Constitution since 1814, was omitted as part of the 1983 amendment. A BIT which prescribes submission to ICSID arbitration for all disputes between a foreign investor and the Netherlands (as the host country) might have been unconstitutional, but the problem could of course be simply avoided by making ICSID arbitration available to the investor at its option.

71. They have not entirely disappeared, cf., section 3.S, in particular the reference to Italy/Sri Lanka following n. 110. Another red light is shown in Art 307 of the 1989 Lom6 Treaty, which surprisingly shows great hesitation in accepting international arbitration as the best, or even as an acceptable, solution. According to this article disputes between a public authority of an ACP country and a foreign company acting as a contractor, supplier or provider of services (this would include most foreign investors) are to be resolved, if the parties to the conflict so agree, in accordance with the national legislation of the ACP State in question and in accordance with its ‘established international practices’; or otherwise by arbitration according to procedures to be fixed by the Council of Ministers once the treaty has entered into force.

72. Cf., Li Shishi, loc. cit. n. 12, p. 181.

73. Those with (a) Portugal, (b) Papua New Guinea, (c) Bangladesh, (d) Somalia, (e) Lesotho, (f) Mauritania, (g) Burundi, (h) Dominica and (i) St.Vincent & the Grenadines. In all these BITs, except (c) and (i), reference is made to ICSID in a non-committal way, merely to indicate that if the parties to the dispute choose to submit it to ICSID, that would preclude intergovernmental arbitration.

74. Art. 25.1 of the ICSID Convention provides that, once a party to the dispute has given its consent, it may not withdraw its consent unilaterally.

75. Krafft, loc. cit. n. 12, p. 85 interprets this BIT in the same sense. Dominicé, loc. cit n. 68, p. 470 finds ‘une totale incohérence dans cet article’, but on the basis of a detailed analysis believes that the host State cannot block the ICSID procedure except during the 12-month ‘cooling off’ period of Art. 9.2.

76. Viz., the Swedish BITs with Egypt (1978), Yugoslavia (1978) and Malaysia (1979).

77. See section 3.3(b)(v) for the text. Art. 9.2 requires the mutual consent of the parties to the dispute.

78. ICSID preference in 100 out of 145 BITs, ICSID as an option in 12. The corresponding figures for UNCITRAL are 20 and 10; those for the ICC are 3 and 3. Five BITs mention the Stockholm Arbitration Institute as an option (none express a preference for it).

79. In 11 out of the 13 British BITs.

80. In one case (UK/Bolivia) six months.

81. In the case of the USSR this is understandable as that country did not presumably expect to become a member of the World Bank Group and therefore of ICSID.

82. This applies to 73 BITs.

83. Cf., Art. 34.2 of the ICSID Convention.

84. UK/Panama, like many UK BITs, specifies that in their own proceedings the parties to the dispute may agree to modify the UNCITRAL rules.

85. It is an interesting point whether ‘at present’ means the date of signature (8 December 1981) or the date of entry into force (this BIT was not yet in force as of November 1990). Some other UNCITRAL clauses refer to the UNCITRAL Rules ‘as adopted in 1976’. A curious provision is mat in UK/Belize which refers to the UNCITRAL Rules in force three months after notice of claim had been given. These are the only ex tunc clauses I have come across in the BITs, i.e., clauses whereby the rules to be followed are those in force at some date in the past Most clauses refer to the Rules ‘as then in farce’, i.e., at the time when the parties begin their arbitration (ex nunc). Such subtle distinctions may be obscured, however, by translation: for instance, the English text of Denmark/Poland Art. 9.2 refers to the UNCITRAL arbitration rules ‘as then in force’, while the Danish text is non-committal, merely referring to the UNCITRAL rules ‘der gaelder’ (i.e., which apply).

86. Twenty BITs (including 13 British and 5 BLEU). Also the multilateral ASEAN Investment Treaty.

87. The 1976 UNCTTRAL arbitration rules do not provide for institutional arbitration; the language used in Art. lO of the 1987 ASEAN Investment Treaty: ‘the dispute may be brought before the UN Commission on International Trade Law (UNCITRAL)’, is therefore misleading.

88. The 1966 Arbitration Rules of the UN Economic Commission for Europe, in UN Doc. E/ECE/625/Rev.l, reproduced recently in Schmitthoff, C.M., ed., International Commercial Arbitration (1989) Part II, p. 11Google Scholar (in BLEU/Poland).

89. Or any other regional centre for arbitration in ASEAN (cf., Art. 10 of the 1987 ASEAN Investment Treaty, 27 ILM (1988) p. 614).

90. UK/China.

91. BLEU BITs with China and the USSR; UK/USSR; US/Poland. BLEU/Hungary and BLEU/Poland seek a more balanced solution: if the host State is the claimant, it must give the investor one month to choose the system, otherwise the host State may choose itself.

92. Netherlands/Ghana. This may lead to complications where there are claims and counterclaims; it would be highly inefficient to deal with them separately in two arbitral proceedings under different rules.

93. BLEU/Malta; it is difficult to see how this formula can work if the parties make different choices at about the same time.

94. Cf., Arts. 5 and 38 of the ICSID Convention.

95. US/Poland.

96. Finland/Egypt.

97. Cf., Art.2 of the ICC Rules of Conciliation and Arbitration in force as from 1 January 1988.

98. Germany/Bolivia, Germany/Uruguay, Netherlands/Yemen, Netherlands/Uruguay.

99. The Swiss BITs with Bolivia, Uruguay and Poland.

100. Some BITs (e.g., Austria/China, BLEU/Bulgaria, the German BITs with China, Bulgaria, Hungary and USSR) refer to the Court of Arbitration of the Stockholm Chamber of Commerce. Others (France/China) to the President of this Court. The majority, however, refer to the President of the International Arbitration Institute of the Stockholm Chamber of Commerce or to that Institute itself.

101. Austria/Poland and Switzerland/China. The last clause is a shortened version of the usual clause which substitutes the Vice-President or most senior Judge if the President is incapacitated (the Vice-President is skipped in this BIT).

102. The one exception is Finland/China, which is curious as according to the same BIT the third arbitrator in intergovernmental arbitration proceedings must be a citizen of a third State which has diplomatic relations with the host and home countries.

103. In 14 BITs, viz., nine Chinese and three Bulgarian BITs and in Switzerland/Bolivia and BLEU/Czechoslovakda. In these Bulgarian and BLEU BITs the diplomatic relations condition applies to all three arbitrators.

104. The same applies to the Bulgarian BITs with Germany and the Netherlands. Cf., section 2.8 at n. 34.

105. Romania's BITs with the UK (1976), Austria (1976), France (1976), BLEU (1978) and Germany (1979) are virtually the same in this respect, except that Germany/Romania imposes a time limit: ICSID proceedings must be started within two months from the final decision of the courts. The same time limit is given in the Romanian BITs with Cameroon and Tunisia.

106. Cf., the Romanian BITs with Cameroon (1980), Denmark (1980), Sri Lanka (1981), the Netherlands (1983) and Tunisia (1987); and the Bulgarian ones with Austria (1981), Germany (1986), the Netherlands (1988) and BLEU (1988). The only sign of potential liberalization was an undertaking in a letter exchange of 1983 relating to the Romania/Netherlands BIT in which the parties agreed to renegotiate the scope of arbitration once Romania became a party to the ICSID Convention (Romania has since become a member, but renegotiation has not yet taken place).

107. SuchrenegotiationprovisionsexistinRomania/Metherlands(1983)andintheChineseBITs with France (1984), the Netherlands (1985), Singapore (1985), Kuwait (1985), SriLanka(1986), the UK (1986) and Switzerland (1986). In two of these (with Singapore and Sri Lanka) the clause is reinforced with a most-favoured-nation clause.

108. Experience shows that once there is a dispute it will often be too late for the parties to be able to agree on an arbitral procedure.

109. Viz., in three Swiss BITs (with China, Hungary and Poland) and in Sweden/Hungary, Germany/Poland, Kuwait/China and Japan/China.

110. Cf., Art. 25.1 of the ICSID Convention: ‘When the parties have given their consent, no party may withdraw its consent unilaterally.’

111. This applies to 17 UK BITs, 10 Sri Lankan BITs and 9 others. The dividing line between legal and non-legal disputes is hardly ever defined satisfactorily and is, in fact, difficult to define. An attempt is made in the US BITs where three elements are distinguished: (a) interpretation or application of the investment contract; (b) interpretation or application of the investment authorization; (c) breach of a right under the BIT. Nine US BITs contain a definitional formula encompassing all three elements, but in two others (those with Egypt and Morocco) element (b) has been omitted. The definition in Turkey/Switzerland contains only element (c): a dispute involving an alleged breach of any rights and obligations conferred or created by that BIT. The one in Turkey/Netherlands has taken over elements (b) and (c).

112. Viz., BLEU/Malta and Netherlands/Ghana (text in section 3.3(b)(iv) and (v)) and nine British BITs.

113. Austria/Malaysia, Germany/Nepal, Singapore/Sri Lanka.

114. Germany/Panama; cf., supra, section 2.11, at n. 43.

115. The Chinese BITs with Denmark, Singapore, Sri Lanka, Japan and New Zealand exclude from the arbitral procedure disputes submitted to the courts of the host State. There is a similar provision in France/China and Switzerland/Turkey, though with an interesting difference: Switzerland/Turkey excludes from arbitration disputes submitted to the host State's courts when a final decision has been given; France/China excludes them only if a final decision is given within one year. Both go well beyond the usual clause requiring exhaustion of local remedies (section 3.6) which does allow international arbitration after the local courts have given a decision or after a certain period has elapsed. E.g., Netherlands/Uruguay specifically allows arbitral review of court decisions which as a result of incorrect application of domestic legislation violate international law or which are manifestly inequitable (this specific language may make it difficult, however, for the arbitral tribunal to find against the host State).

116. BLEU/Bangladesh and Netherlands/Philippines.

117. Germany/Uruguay.

118. Cf., the corresponding clauses in intergovernmental arbitration provisions, discussed in section 2.17 and n. 65 above. US/Egypt contains only exclusion (a), all others contain both (a) and (b).

119. UK/Jamaica Art 9.1. Submission to ICSID is allowed only if ‘agreement cannot be reached through pursuit of local remedies in accordance with international law’ [emphasis added]. If judicial proceedings are meant, the word ‘agreement’ is inappropriate. If agreement is meant, the local remedies in question may be some form of local conciliation, although the reference to international law is then unclear.

120. Viz., two years in one BIT (Netherlands/Romania); 18 months in eight BITs (four Uruguayan and one Argentinian BIT, in addition to Austria/Hungary, BLEU/Rwanda and BLEU/Malta); 12 months in Austria/Poland, France/Sri Lanka, France/China and US/Morocco; six months in Cameroon/Romania and Tunisia/Romania; and three months in Finland/Egypt and UK/Malta.

121. Switzerland/Uruguay wisely lays down that judicial review in one instance only is sufficient.

122. Viz., four BLEU BITs (Cameroon, Bangladesh, Mauritania, Burundi); two Austrian BITs (Malaysia, Hungary) and Italy/Tunisia. Examples of such clauses are given at the end of this section.

123. Judgment of 20 July 1987 in the Case concerning Elettronica Sicula SpA (US v. Italy), ICJ Rep. (1989) p. 15.

124. Cf., supra, n. 77.

125. Recourse to the courts as here meant is usually not mandatory; it is an option open to the parties and it therefore falls short of the local remedies rule. E.g., Malta's BITs with BLEU and UK provide that local remedies have to be resorted to first unless some other method, including arbitration, had been agreed between the investor and the host State. US/Poland, however, contains an exhortatory clause: each Contracting Party shall encourage its investors to resort to local courts.

126. The language used is not always clear. Finland/Bulgaria provides that, prior to arbitration, ‘the amount of…compensation may be checked in the order provided for in the legislation [of the host country].’ This presumably means that the question may be (but need not be) submitted for review to the proper judicial or administrative authority designated in the legislation. English is the authentic and only language of this BIT.

127. BLEU BITs with Rwanda and Sri Lanka.

128. Conciliation is a feature of virtually all US BITs, five BLEU BITs, two Turkish ones as well as France/Egypt. The BLEU BITs refer to ‘conciliationpar voie diplomatique’. France/Bangladesh also indicates the use of diplomatic channels. It is odd, and probably undesirable from the investor's point of view, that the latter should be directed to invoke the help of the home State in order to help settle his dispute with the host State.

129. The rationale of this odd restriction may be a remnant of the Calvo thinking: once the BIT was in force any special arrangement made between the Government of Panama and the investor was null and void; such arrangements were tolerated only if made in accordance with the treaty. Why, however, should such a restriction apply to a Panamanian investor in France?

130. It is 3 months in 44 BITs, 6 in 7 1BITs, 12 in 12 BITs, 18 in 4 BITs and indefinite in 6 BITs.

131. Two months according to Romanian BITs with Germany, Cameroon and Tunisia. Cf., n. 105 supra.

132. Two months in Italy's BUs with Hungary and Kuwait.

133. Australia/China.

134. US/Egypt and US/Marocco leave out (b).

135. The Turkish BITs with Austria and the Netherlands use only elements (b) and (c); the one with Switzerland only element (c).

136. Cf., section 3.5, at a 112.

137. Cf., section 2.11. See in particular three Italian BITs (with Kuwait, Malaysia and the Philippines) and two Panamanian ones (with Germany and Switzerland).

138. Under BLEU/Cameroon (1980) BLEU is to endeavour to take measures conducive to inducing its industry to participate in the development of Cameroon (there is no vice-versa clause). According to UK/Bangladesh (1980), Bangladesh territory includes its continental shelf, UK territory does not. A number of BITs — including Italy/Egypt (1975), France/Singapore (1975) and Germany/Bangladesh (1981) — were provisionally applied in a unilateral manner in order to enable investments in the developing country to be insured against political risks as soon as possible.

139. Cf., the restriction of arbitrable disputes to those concerning a breach of obligations by the host country (section 3.9 at n. 136). A similarly lop-sided definition may be found in US/Poland, where only claims by the investor seem to be recognized as arbitrable disputes; this follows from Art. 9.1 (a) which requires a dispute to be notified, together with a detailed aide-memoire, addressed by the investor to the host State.

140. Cf., the ICSID Convention Art. 34.2. This point was made earlier in section 3.4 at n. 83.

141. Cf., section 3.4 at n. 91.

142. Art. 6.3(a). See Vandevelde, loc. cit. n. 12, p. 271, who confirms my second (more reasonable) interpretation.

143. Cf., section 3.3(a)(ii) and (iii) above.

144. Cf., section 3.3(b)(v) above.

145. Cf., section 3.3(b)(iv) above.

146. Cf., section 3.3(b)(iv) above.

147. Netherlands BITs with Philippines and Pakistan and UK/Philippines.

148. Cf., Netherlands/Ghana Art. 9.4, reproduced in section 3.3(b)(v).

149. Cf., supra, section 3.6, at n. 123.

150. In total 59 BITs, including those quoted in section 3.3(a)(ii) and (iii).

151. In 14 BITs, of which 9 are French.

152. In total 15, including virtually all Norwegian and Swedish and some Chinese and Tunisian ones.

153. Cf., supra, section 2.17, at n. 64. This point applies to virtually all German BITs. The construction is somewhat complicated. Starting from the rule of Art. 27 of the ICSID Convention which prohibits intergovernmental arbitration between ICSID members of a claim which may be submitted to ICSID or still before an ICSID tribunal, several exceptions are then formulated. One exception allows intergovernmental arbitration if there has been an assignment of rights to the subrogated home State.

154. In the Netherlands the insurer against political risks is not the State itself but the Neder-landse Credietverzekeringsmaatschappij, a private company, which, however, reinsures such risks with the State.

155. BLEU BITs with Liberia, Poland, Burundi and Czechoslovakia; and Switzerland/Turkey.

156. The translation in 29ILM (1990) p. 318 and the accompanying comment on this clause (Art. 6) are misleading. Art. 6 provides that investments will not be insured by the home State except ‘s'ils out, au préalable, obtenu l' agrément’ [of the host country]. Contrary to the comment in ILM it is clear that it is the investment, not the insurance, that needs the agrément.

157. It occurs in 29 BITs, including in particular many UK, Dutch, Norwegian and Swedish BITs.

158. Investment is defined in these BITs as ‘any kind of investment owned or controlled… including companies or shares or stock or other interests in companies.’

159. Including 15 UK and 8 Scandinavian BITs; one of these is quoted in section 3.3(a)(iii) supra.

160. Cf., Art. S3 of the ICSID Convention from which this phrase is taken.

161. Similar provisions are made for intergovernmental arbitration in most US BITs as well as -Australia/China.

162. Art. 9.3(d) refers to the 1958 United Nations Convention on the recognition and enforcement of foreign arbitral awards.

163. This is important to ensure that the arbitral award will not be reviewed by the courts of the host or home country and that the arbitral procedure will not be subject to the procedural laws of one of these countries. Even if the legislation of the countries in question excludes such review or control, the possibility of a change in the legislation must be taken into account, as the arbitral tribunal would inevitably be subject to the new legislation.

164. Most of these BITs involve China or East European countries. The others are BLEU/Rwanda, BLEU/Burundi, UK/Burundi and Italy/Sri Lanka. An example may be found in section 3.3(c)(vii).

165. In France/China only two elements, viz., (a) host State law (without explicitly including conflict rules) and (b) the terms of the BIT itself.

166. BLEU/Czechoslovakia quoted in section 3.3(c)(vii).

167. China/Kuwait.

168. UK/Burundi.

169. China/BLEU, China/Italy, Italy/Sri Lanka.

170. Italy/Hungary, Italy/Bulgaria.

171. Netherlands/China, Netherlands/Bulgaria.

172. Some BLEU clauses are as follows: les régies applicables à l'arbitrage seront la loi nationale de l'Etat [host country], etc. Cf., BLEU/Rwanda Art. 10.6.

173. All Austrian BITs; BLEU BITs with China, Poland, Bulgaria, the USSR, Czechoslovakia; US BITs with Panama, Haiti, Poland; Italian BITs with Hungary, Sri Lanka, Kuwait, Bulgaria; and some others. Cf., an example in section 3.3(c)(vii).

174. China/Kuwait, China/Australia, Austria/Bulgaria.

175. BITs with the USSR and Poland.

176. Cf., paras. 16-18 of the Preliminary Award of 27 November 1975, 53 ILR (1979) p. 389. The same conclusion was reached by Mahmassani as Sole Arbitrator in the Liamco v. Libya case, 20 ILM (1981) p. 1. Cf., Von Mehren, R.B. and Kourides, P.N.: ‘International Arbitrations between States and Foreign Private Parties; The Libyan Nationalizations’, 75 AJIL (1981) p. 476, at pp. 502–504.CrossRefGoogle Scholar

177. US/Poland.

178. The rule in question should not be understood as saying that there is an obligation upon States to submit their disputes to arbitration. It is clear that such a rule could not exist if there is not at least a basic agreement on arbitration, indicating the manner in which it is to be conducted, as there is not sufficient uniformity on certain essential elements such as the question of who should act as the appointing authority. The rule under discussion is nothing more than an application of the rule of pacta servanda or good faith.

179. The United Nations Treaty Series has so far published at least 1, 325 volumes containaing 22, 111 treaties. The UNTS numbers given in this list are the numbers under which treaties have been registered; the text of treaties numbered higher than 22, 111 may not yet be available in print.

180. International Legal Materials.

181. International Centre for the Settlement of Investment Disputes in Washington DC.

182. OP = Oceana Publications according to the September 1988 indices of Investment Promotion and Investment Treaties.

183. BGB = Bundesgesetzblatt, where Austrian treaties are published.

184. No. 869 Beilagen Protokollen Nationalrat 13 April 1989.

185. MB = Moniteur Beige.

186. Also registered as UNTS 23626.

187. Lt C = Lovtidende Part C (the Danish treaty series).

188. FS = Fördragsserie (the Finnish treaty series).

189. JO = Journal Officiel.

190. BGB n = Pan n of the German Bundesgesetzblatt, in which treaties are published.

191. GU (so)=Gaizetta Ufficiale, supplemento ordinario, in which Italian treaties are published

192. JAI L = Japanese Annual of International Law.

193. Trb = Tractatenblad, the Netherlands treaty series.

194. OFS = Overenkomster med fremmede stater, the Norwegian treaty series.

195. SÖ = Sveriges Överenskommeher med främmande makter, the official Swedish treaty series.

196. RO = Recueil Offlciel des lois fédérales, in which Swiss treaties are published.

197. TS = Treaty Series. Cmnd = Command paper.

198. STD = Senate Treaty Doc. submitted to 99th Congress, 2nd Session (1986).

199. GG(ts) = Singapore Government Gazette (treaties supplement).

200. OB = Official Bulletin (Buletinul Oficial România).

201. Algeria, Bahrein, Djibouti, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco,

202. The 18 signatories are: Djibouti, Egypt, Indonesia, Kuwait, Malaysia, Mali, Morocco,

203. Brunei, Indonesia, Malaysia, Philippines, Singapore and Thailand.

204. Algeria, Libya, Mauritania, Morocco and Tunisia.

205. Buletin Oficial Español.