International arbitration instruments

 

Rationale | Key considerations | Assessment | Resources | Back

 

1.8  Has the government ratified and implemented binding international arbitration instruments for the settlement of investment disputes?


Rationale

International arbitration instruments provide a binding mechanism for resolving disputes between a host country government and an investor, typically relating to commitments made in international investment agreements (see Question 1.7). Most international investment agreements contain provisions for international arbitration (in limited instances contingent upon having exhausted local remedies). They afford recourse to a usually cost-effective, prompt, flexible, impartial and confidential channel for settling disputes for domestic businesses collaborating in cross-border joint ventures and international investors doing business with the government. While international arbitration should normally be perceived as a last resort, its existence as an option provides a credible form of reassurance to investors and signals a government’s commitment to the rule of law and to observe its investment treaty obligations. They thereby bolster the confidence of investors that their property is secure (see also Question 1.2 and Question 1.4) and contribute to establishing a reliable and stable environment for investment.

 

Key considerations

  • Making international arbitration instruments operational
    The preferred instrument for resolving disputes specified in investment treaties is the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention). In order for a dispute to be brought before it, there must be a written agreement to arbitrate, most often in the form of an investment treaty. When a dispute is based on a contract and not an investment treaty (i.e. non-ICSID arbitral awards), the 1958 New York Convention on Recognition and Enforcement of Arbitral Awards makes, with certain exceptions, arbitral awards rendered in one party to the Convention enforceable in any other party to the Convention. For these Conventions to function properly and credibly, a country must sign and ratify them, as well as introducing national legislation and procedural rules so that foreign arbitral awards are recognised and enforced by local courts.
     
  • Improving how treaty arbitration functions
    The preferred instrument for resolving disputes specified in investment treaties is the 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention). In order for a dispute to be brought before it, there must be a written agreement to arbitrate, most often in the form of an investment treaty. When a dispute is based on a contract and not an investment treaty (i.e. non-ICSID arbitral awards), the 1958 New York Convention on Recognition and Enforcement of Arbitral Awards makes, with certain exceptions, arbitral awards rendered in one party to the Convention enforceable in any other party to the Convention. For these Conventions to function properly and credibly, a country must sign and ratify them, as well as introducing national legislation and procedural rules so that foreign arbitral awards are recognised and enforced by local courts.

 

Policy practices to scrutinise

Key issues in assessing international arbitration instruments are to examine whether the state is a signatory to international arbitration instruments, whether local laws and practices recognise and enforce foreign arbitral awards, and what efforts are being made to improve how treaty arbitration functions.

 

Among policy practices and criteria to be considered are:

  • The implementation of international arbitration instruments.
    • Has the government signed and ratified the major international arbitration conventions (e.g. Washington and New York Conventions) and regional arbitration conventions (e.g. the Olivos Protocol for the Settlement of Disputes in Mercosur, the ASEAN Protocol on the Dispute Settlement Mechanism)? If the country is not a party to ICSID, is the ICSID Additional Facility used?
       
    • Has the government made operational its commitments under the international and regional arbitration conventions? Are national legislation, regulations and enforcement systems in place so that parties can choose to commit themselves irrevocably to arbitrate disputes internationally and so that foreign arbitral awards are recognised and enforced by local courts and without undue delay?
       
    • Do practices or restrictions on agreements to arbitrate disputes hinder the use and effectiveness of international arbitration instruments (e.g. mandatory procedures for the conduct of arbitration proceedings, regulations that limit who can serve as an arbitrator)? Do national courts interfere with valid arbitrations (e.g. accepting to hear a dispute or an appeal to an award that the parties had agreed to submit to international arbitration)? How clear is supporting national legislation (e.g. ambiguities which may affect arbitral efficiency)?
  • How treaty arbitration functions.
    • What efforts has the government made to promote the transparency of international arbitration without compromising confidential business and government information? When the parties agree, are the outcomes of awards involving the country communicated widely (e.g. posted on relevant government websites)? Does the government participate in intergovernmental organisations that facilitate arbitration and other forms of dispute settlement between states (e.g. the Permanent Court of Arbitration)?
       
    • What has the government done to strengthen its expertise in handling international dispute settlement instruments and managing the cases brought before international forums?
       
    • Have the government and business organisations regularly drawn lessons from the public body of jurisprudence aimed at enhancing the effectiveness of international investment arbitration? Where possible, the PFI user should also try to obtain the views and practical experiences of parties, which have invoked international arbitration.

 

Further resources

The following resources provide additional information on international arbitration instruments:

  • The International Centre for Settlement of Investment Disputes (ICSID) is an autonomous international institution established under the Washington Convention on the Settlement of Investment Disputes to provide facilities for conciliation and arbitration of international investment disputes. Its website provides information on its services, how it functions, its rules and regulations, a list of signatory countries and the text of the Convention.
     
  • Lex Mercatoria (www.lexmercatoria.org), an online law site dedicated to the provision of information on international commercial law, has compiled a comprehensive set of resources on International Commercial Arbitration and other Dispute Settlement.
     
  • An OECD paper on “Transparency and Third Party Participation in Investor-State Dispute Settlement Procedures” surveys issues related to transparency and third party participation in investor-state dispute settlement procedures. It examines the way in which the current rules apply to these issues, describes the steps taken to improve the transparency of the system at the governmental level, by the arbitral Tribunals and the ICSID and examines the perceived advantages as well as the challenges of additional transparency.
     
  • The UN held a conference on the status of the New York agreement and prepared a useful set of papers entitled “Enforcing Arbitration Awards under the New York Convention: Experience and Prospects” that outlines the purpose and the experiences of various countries using the international system for enforcing foreign arbitral awards.
     
  • The International Treaty Arbitration (ITA) website provides access to all publicly available investment treaty awards; information and resources relating to investment treaties and investment treaty arbitration; and links to further resources.
     
  • UNCTAD provides a database of treaty-based investor-state dispute settlement cases that are pending or which have been concluded. Only those claims that were disclosed by the parties or arbitral institutions are included.
     
  • The International Council for Commercial Arbitration (ICCA) website includes a comprehensive set of on-line resources relating to international treaties and conventions on arbitration, national arbitration law and national, regional and international institutions involved in arbitration.

 

previous | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 

 

Back

 

Related Documents