The Necessity of Establishing an Appellate Body in International Investment Arbitration

MOHEBI, Mohsen; EBRAHIMI LOUYEH, Soheila

doi:10.29252/lawresearch.22.87.357

The Necessity of Establishing an Appellate Body in International Investment Arbitration

Document Type : Original Article

Authors

Mohsen MOHEBI ¹

Soheila EBRAHIMI LOUYEH ²

¹ Assistant Professor at the Faculty of Law, Theology, and Political Science of Islamic Azad University – Science and Research Branch (First Author)

² PhD Candidate in International Law at Shahid Beheshti University

10.29252/lawresearch.22.87.357

Abstract

Despite its significant role in settling disputes between sovereign States and foreign investors, the international investment arbitration has been subject to substantial criticisms the most important of which is the inconsistency of awards in similar cases; a serious issue that dismantles the coherence and predictability of awards and undermines the legitimacy of international investment arbitration. In this article, the issues that give rise to the current crisis as well as the potential impacts of an appellate body to be established to review the inconsistent investment arbitration awards will be discussed. In the following, various options that can serve for this purpose will be theoretically and practically assessed. Eventually, after evaluating all the proposed options, the article concludes that the International Center for Settlement of Investment Disputes (ICSID) is the best option for this purpose in a manner that the Annulment Committee of ICSID is modified in order to transform into a comprehensive, fixed, and permanent appellate body acting within ICSID to review and, if necessary, correct the appealed awards. This proposal of course entails the structural modification of ICSID and thus requires the revision of ICSID Convention. Moreover, the article proposes a number of other suggested modifications to the ICSID Convention including expansion of appeal grounds, appointing fixed appellate judges familiar with public international law, preventing judges of the appellate body from simultaneously arbitrating other investment disputes, and fixing a deadline for the appellate body to decide.

Keywords

International Investment Arbitration

Legitimacy Crisis

Inconsistent Awards

Appellate Body

ICSID

ف

فهرست منابع

پیران، حسین، شرط التزام در معاهدات دوجانبه سرمایه‌گذاری، مجله حقوقی بین‌المللی، 1388، شماره 40، صص 259-288.

BOOK
1. Lauterpacht, E. Aspects of the Administration of International Justice, Cambridge: Cambridge University Press, 1991.
ARTILCES
1. Alexandrov, S. “Breaches of Contract and Breaches of Treaty: The Jurisdiction of Treaty-Based Arbitration Tribunals to Decide Breach of Contract Claims in SGS v Pakistan and SGS v Philippines”, Journal of World Investment and Trade 5, 2006.
2. Bradley, C., “International Delegations, the Structural Constitution, and Non-Self-Execution”, Stanford Law Review 55, 2003.
3. Brower, C. “Structure, Legitimacy, and NAFTA's Investment Chapter”, Vanderbilt Journal of Transnational Law 36, 2000.
4. Brown, C. “A Multilateral Mechanism for the Settlement of Investment Dispute. Some Preliminary Sketches”, ICSID Review 32(3), 2017.
5. Burke-White,W. “The Argentine Financial Crisis: State Liability under BITs and the Legitimacy of the ICSID System”, Asian Journal of WTO & International Health Law and Policy 3, 2008.
6. Coe, J. “Taking Stock of NAFTA Chapter 11 in Its Tenth Year: An Interim Sketch of Selected Themes, Issues, and Methods”, Vanderbilt Journal of Transnational Law 36, 2003.
7. Dempsey, P. “Flights of Fancy and Fights of Fury: Arbitration and Adjudication of Commercial and Political Disputes in International Aviation”, The Georgia Journal of International and Comparative Law 32, 2004.
8. Franck, S. “The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public International Law Through Inconsistent Decisions”, Fordham Law Review 73, 2005.
9. Gantz, A. “An Appellate Mechanism for Review of Arbitral Decisions in Investor-State Disputes: Prospects and Challenges”, Vanderbilt Journal of Transnational Law 39, 2006.
10. Gill, J., Gearing, M. & Birt, G. “Contractual Claims and Bilateral Investment Treaties: A Comparative Review of the SGS Cases”, Journal of International Arbitration 21, 2004.
11. Kaufmann-Kohler, G. “Annulment of ICSID Awards in Contract and Treaty Arbitrations: Are They Difference?”, in Gaillard, E. Annulment of ICSID Awards: A Joint IAI-ASIL Conference, Washington: Bern: Stämpfli, 2004.
12. Kaufmann-Kohler, G. “Arbitral Precedent: Dream, Necessity or Excuse? The 2006 Freshﬁelds Lecture”, Arbitration International 23(3), 2003.
13. Lee, J. “Introduction of an Appellate Review Mechanism for International Investment Disputes—Expected Benefits and Remaining Tasks” in Kalicki, J. & Joubin-Bret A. Reshaping the Investor-State Dispute Settlement System, Leiden: Brill-Nijhoff, 2015.
14. Martinez, E. “Understanding the Debate Over Necessity: Unanswered Questions & Future Implications of Annulments in the Argentine Gas Cases”, Duke Journal of Comparative & International Law 23, 2012.
15. Pauwelyn, J. “Rational Design or Accidental Evolution? The Emergence of International Investment Law” in Douglas, Z., Joost Pauwelyn, J., Vinuales J. The Foundations of International Investment Law: Bringing Theory into Practice, Oxford: Oxford University Press, 2014.
16. Posner, E., Yoo, J. “Judicial Independence in International Tribunals”, California Law Review 93, 2005.
17. Reinisch, A. “The Role of Precedent in ICSID Arbitration”, in Klausegger, C. & Klein P. et al., Austrian Arbitration Yearbook 2008, Vienna: Manz’sche Verlags- und Universitätsbuchhandlung, 2008.
18. Roberts, A. “Power and Persuasion in Investment Treaty Interpretation: The Dual Role of States”, American Journal of International Law 104, 2010.
19. Sinclair, A. “The Origins of the Umbrella Clause in the International Law of Investment Protection”, Arbitration International 20, 2004.
20. Steger, D. “Enhancing the Legitimacy of International Investment Law by Establishing an Appellate Mechanism” in Armand De Mestral, A. & Lévesque, C. Improving International Investment Agreements, London: Routledge, 2012.
21. Stephan, P. “Courts, Tribunals, and Legal Unification—The Agency Problem”, Chicago Journal of International Law 3, 2002.
22. Thomas, C., Dhillon, H. “The ICSID Convention, Investment Treaties and the Review of Arbitration Awards: The Evolution of Investment Treaties and Arbitration”, ICSID Review 32(3), 2017.
23. van Aaken, A. “Control Mechanisms in International Investment Law”, in Douglas, Z., Joost Pauwelyn, J. & Vinuales J. The Foundations of International Investment Law: Bringing Theory into Practice, Oxford: Oxford University Press, 2014.
E-RESOURCE
1. European Commission, Commission proposes new Investment Court System for TTIP and other EU trade and investment negotiations (16 September 2016), available at: http://europa.eu/rapid/press-release_IP-15-5651_en.htm. (last visited on 19/10/2018)
2. European Commission, Public Consultation on Modalities for Investment Protection and ISDS in TTIP (March 2014), available at: http://trade.ec.europa.eu/doclib/docs/2014/march/tradoc_152280.pdf (last visited on 19/10/2018).
3. European Commission, Report on Online public consultation on investment protection and investor-to-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership Agreement (January 2015), available at: http://trade.ec.europa.eu/doclib/docs/2015/january/tradoc_153044.pdf (last visited on 19/10/2018).
4. European Union, Text of the proposal on Investment Protection and Resolution of Investment Disputes and Investment Court System in Transatlantic Trade and Investment Partnership (31 July 2015), available at: http://trade.ec.europa.eu/doclib/docs/2015/july/tradoc_153669.pdf (last visited on 19/10/2018).
5. ICSID Secretariat, Possible Improvements of the Framework for ICSID Arbitration - Discussion Paper, 22 October 2004, available at: https://icsid.worldbank.org/en/Documents/resources/Possible%20Improvements%20of%20the%20Framework%20of%20ICSID%20Arbitration.pdf (last visited on 19/10/2018).
6. International Centre for Settlement of Investment Disputes, ICSID 2017 Annual Report , available at: https://openknowledge.worldbank.org/handle/10986/28558 (last visited on 19/10/2018).
7. International Centre for Settlement of Investment Disputes, Updated Background Paper on Annulment for the Administrative Council of ICSID – 6 May 2016, pp. 2-4, available at: https://icsid.worldbank.org/en/Documents/resources/Background%20Paper%20on%20Annulment%20April%202016%20ENG.pdf (last visited on 19/10/2018).
8. Kaufmann-Kohler, G. Annulment of ICSID Awards in Contract and Treaty Arbitrations: Are There Differences?,
9. Available at: https://lk-k.com/wp-content/uploads/annulment-icsid-awards-contract-and-treaty-arbitrations-are-there-differences-annulment.pdf. (last visited on 19/10/2018).
10. UNCTAD, Investor–State Dispute Settlement: Review of Developments in 2017, International Investment Agreement Issues Note, Issue 2, June 2018, p.1. available at: https://unctad.org/en/PublicationsLibrary/diaepcbinf2018d2_en.pdf (last visited on 19/10/2018).
11. U.S. Model Bilateral Investment Treaty (2004), Art. 28.10, available at: https://ustr.gov/archive/assets/Trade_Sectors/Investment/Model_BIT/asset_upload_file847_6897.pdf (last visited on 19/10/2018).
CASES
1. Arbitral Award of 31 July 1989, Judgment, I.C.J. Reports 1991.
2. Case concerning the Arbitral Award made by the King of Spain on 23 December 1906, Judgment of 18 November 1960: I.C. J. Reports 1960.
3. CME Czech Republic BV v The Czech Republic, UNCITRAL Arbitration, Final Award on Damages (14 March 2003), available at: https://www.italaw.com/sites/default/files/case-documents/ita0180.pdf (last visited on 19/10/2018).
4. CME Czech Republic BV v The Czech Republic, UNCITRAL Arbitration, Partial Award (13 September 2001), available at: https://www.italaw.com/sites/default/files/case-documents/ita0178.pdf (last visited on 19/10/2018).
5. CMS Gas Transmission Company v. Argentine Republic (ICSID Case No. ARB/01/8), Decision of the ad hoc Committee on Application for Annulment (25 September 2007), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C4/DC687_En.pdf (last visited on 19/10/2018).
6. Continental Casualty Co. v. Argentine Republic, ICSID Case No. ARB/03/9, Award (5 Sept. 2008), available at: https://www.italaw.com/sites/default/files/case-documents/ita0228.pdf (last visited on 19/10/2018).
7. El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction (27 April 2006), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C17/DC511_En.pdf (last visited on 19/10/2018).
8. Emilio Agustin Maffezini v Kingdom of Spain, ICSID Case No. ARB/97/7, Decision on Jurisdiction (25 January 2000), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C163/DC565_En.pdf (last visited on 19/10/2018).
9. Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Award (22 May 2007), available at: https://www.italaw.com/sites/default/files/case-documents/ita0293.pdf (last visited on 19-10/2018).
10. Enron Creditors Recovery Corp. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on Application for Annulment of the Award (30 July 2010), available at: https://www.italaw.com/sites/default/files/case-documents/ita0299.pdf (last visited on 19/10/2018).
11. Eureko B.V. v. Republic of Poland, Partial Award, (19 August 2005), available at: https://www.italaw.com/sites/default/files/case-documents/ita0308_0.pdf (last visited on 19/10/2018).
12. Gas Natural SDG, S.A. v Argentine Republic, ICSID Case No. ARB/03/10, Decision of the Tribunal on Preliminary Questions on Jurisdiction (17 June 2005), available at: https://www.italaw.com/sites/default/files/case-documents/ita0354.pdf (last visited on 19/10/2018);
13. LG&E Energy Corp., LG&E Capital Corp., and LG&E Int’l, Inc.v. Argentine Republic, ICSID Case No. ARB/02/1, Decision on Liability (3 October 2005), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C208/DC627_En.pdf (last visited on 19/10/2018).
14. Obligation to Negotiate Access to the Pacific Ocean (Bolivia v. Chile), Judgment of 1 October 2018, paras. 160-162, available at: https://www.icj-cij.org/files/case-related/153/153-20181001-JUD-01-00-EN.pdf (last visited on 04/11/2018).
15. Pan American Energy LLC v 8 e Argentine Republic, ICSID Case No. ARB/04/8, Decision on Jurisdiction (27 April 2006), available at: https://www.italaw.com/sites/default/files/case-documents/ita0616.pdf (last visited on 19/10/2018).
16. Plama Consortium Limited v The Republic of Bulgaria, ICSID Case No. ARB/03/24, Decision on Jurisdiction (8 February 2005), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C24/DC521_En.pdf (last visited on 19/10/2018).
17. Pope & Talbot Inc. v. The Government of Canada, Arbitration Under Chapter 11 of NAFTA, Award in respect of Damages (May 2002), available at: https://www.italaw.com/sites/default/files/case-documents/ita0686.pdf (last visited on 19/10/2018)
18. Ronald S. Lauder v. The Czech Republic, UNCITRAL Arbitration, Award (3 September 2001), available at: https://www.italaw.com/sites/default/files/case-documents/ita0451.pdf (last visited on 19/10/2018).
19. Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID Case No. ARB/02/13, Decision on Jurisdiction (29 November 2004), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C218/DC635_En.pdf (last visited on 19/10/2018).
20. Sempra Energy Int’l v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 Sept. 2007), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C8/DC694_En.pdf (last visited on 19/10/2018).
21. Sempra Energy Int’l v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on Annulment of the Award (29 June 2010), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C8/DC1550_En.pdf (last visited on 19/10/2018).
22. Siemens A. G. v Argentine Republic,ICSID Case No. ARB/02/8, Decision on Jurisdiction (3 August 2004), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C7/DC508_En.pdf (last visited on 19/10/2018).
23. SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan (ICSID Case No. ARB/01/13), Decision of the Tribunal on Objections to Jurisdiction (6 August 2003), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C205/DC622_En.pdf (last visited on 19/10/2018).
24. 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 (January 29, 2004), available at: https://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB/02/6 (last visited on 19/10/2018).
25. Suez, Sociedad General de Aguas de Barcelona S.A., and InterAguas Servicios Integrales del Agua S.A. v Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction (16 May 2006), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C18/DC514_En.pdf (last visited on 19/10/2018).
26. Telenor Mobile Communications AS v The Republic of Hungary, ICSID Case No. ARB/04/15, Award (13 September 2006), available at: http://icsidfiles.worldbank.org/icsid/ICSIDBLOBS/OnlineAwards/C240/DC652_En.pdf (last visited on 19/10/2018).