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To this effect, the whole apparatus of popular will enters into the equation, as a form of justifying public power. In contrast, participation seems to play a rather subsidiary role. It is, at best, instrumental for the achievement of positive externalities -but not necessary for that purpose. Now, this poses no fundamental problem in domestic politics, for participation seems like a bonus in that context: public participation is not expected to provide the rationale justifying public power, but is rather the cherry on top of the pie.

On top of having a democratic or charismatic, or technocratic regime, which is justified on its own terms, we have spaces of public participation. Part I of this paper presented a general theoretical framework to understand participation in global governance. It analyzed its benefits and underlying agendas, and proposed the "Public Interest Narrative" as an alternative category, instrumental to understand the dynamics of global political participation. Part II of this paper shall apply that category to arbitration in foreign investment law.

As was stated in the introduction, the argument in this Part is not normative. Rather, I seek to show how participation is a crucial part of the investment arbitration mindset, not in a subsidiary role or as a mere legitimating devise, but as an expression "public interest narrative" in foreign investment arbitration. But, before we go there, let us get to know better the context and importance of foreign investment arbitration. In order to grasp the stakes behind participation in foreign investment arbitration, we need to understand first the important change implicit in such type of international adjudication.

International investment agreements IIAs may be the single most important factor transforming the global economic landscape today. A tightly-knit net of almost IIAs covers the planet, 29 crucially influencing decisions with a potential impact in sustainable development. However, despite their great importance, the specific scope and risks of this phenomenon seem to be hardly grasped by governments and the general public.

One reason for this is the decentralized nature of the current IIA wave. Unlike work at institutions like the WTO or the World Bank, investment deals are commonly stricken on a bilateral basis: 30 there is no single decision-making centre to follow. Moreover, a considerable part of international investment regulation is developed through arbitration awards; consequently, important legal principles have to be inferred from bits and pieces of awards that are, in any case, adopted under a veil of secrecy.

The Reasons Requirement In International Investment Arbitration Critical Case Studies

There is no one decision or instrument that can be singled out as the cause of change. And yet, a general change is indeed taking place. As hinted by their name, an IIA is an agreement between two or more States setting down rules that govern investments by their respective nationals in the other's territory. IIAs are not overviewed by a single treaty organ, and come in different forms and shapes.

The most common presentation is the Bilateral Investment Treaty, BIT, such as that concluded between the US and Singapore, 31 which is a self-standing instrument dealing integrally with investment. IIAs are most often concluded between a developed and a developing country, yet so-called ' South-South ' agreements are increasingly common. To be sure, the most important one is the belief that the agreements will foster direct foreign investment FDI , which will in turn bring development and general prosperity. Such premise has drawn considerable fire from different fronts, as studies by the UN, the World Bank and other independent experts have concluded that there is no compelling evidence showing that IIAs actually stimulate FDI.

Notwithstanding this, IIA continue being concluded by dozens -a paradox that is perhaps better explained by heavy-handed politics and strategic geopolitics, than by the economic benefits of the agreement in and of itself. Substantively, the standard IIA provides investors with protection in four areas: market access, treatment, expropriation, and dispute settlement. Market access assures investors the opportunity of participating in the market of the other party. Such assurance, in turn, would be irrelevant if investors could be discriminated or ill-treated by host States.

Therefore, the second substantive provision often included in IIAs relates to, on one hand, non-discrimination provisions e.

The Future of International Investment Regulation: Towards a World Investment Organisation?

Investment agreements usually give jurisdiction to arbitration tribunals over disputes between private investors and the Host State, giving private parties right of standing before such international tribunals, often allowing the investor to choose between exhausting domestic remedies and recurring directly to the international jurisdiction. As we saw, IIAs impose certain obligations on host States with regards to foreign investors acting under their jurisdiction.

These obligations are, in turn, often subject to adjudication in the form of arbitration, whose procedural rules set the background for discussing spaces of participation in this form of global power. In turn, NAFTA features an interesting application of such rules in the North American context, which will be also enlightening for the purpose of understanding the stakes of participation in foreign investment arbitration. In what follows, we will briefly discuss each of them, having an eye in their respective interaction with global political participation.

Under that Chapter, parties to the Agreement undertake to treat investors from other parties in accordance to the standards put forward in the Chapter. To that effect, NAFTA features, in broad terms, the same characteristics as most others IIA's: market access, treatment, expropriation, and dispute settlement.

The standards of treatment, in turn, are also common: national treatment Article , most favoured nation, MFN Article , fair and equitable treatment, and full protection and security Article , among others. Expropriation is defined as to include the possibility of indirect or regulatory measures Article , and dispute settlement Article NAFTA meant a fundamental break with prior foreign investment law, at least in two accounts: first, it was by far the farthest reaching system of investor rights put forward until that moment.

And second, it was the first multilateral treaty to provide individuals and, to be sure, corporations with direct access to international adjudication on investment disputes. However, NAFTA's interest to us lies not there, but in the controversies that surrounded the application of such procedural rules with regard to the participation of non-parties in investment arbitration. Even though there was no innovation in the text provided by the agreement, NAFTA is the first case where amicus curiae ' friend of the court ' briefs were proposed and actually accepted by an investment tribunal.

Originally incorporated in common law systems, amici briefs are, in essence, memorials submitted to the court by someone that is not a party to the conflict, but who volunteers an opinion under the belief that it will help the court adopt a better decision. The case in point is Methanex. In , the Governor of California ordered the Energy Commission in that state to develop a timetable for the removal of MTBE no later than December , arguing that ' on balance, there is significant risk to the environment from using MTBE in gasoline in California '.

The Methanex dispute clearly featured issues that involved the interest of a wider audience, especially those interested in energy and the environment. Two amici submissions for amici standing were presented, 53 which were followed by a Supplemental Application and a Final Submission by the petitioners. Furthermore, Mexico argued, amici curiae are a paradigmatic common law institution, wholly foreign to the Mexican civil law system.

Accepting amici submissions would, in their opinion, disrupt the balance between common law and civil law procedures achieved in the text of NAFTA. The question was, then, whether admitting amici submissions would fall under such competence. The Tribunal decided it did. And why was it necessary in the Methanex case? For the Tribunal,. It is hard to exaggerate the importance of this line of argument. The Tribunal understood the issue as a bilateral conflict, with public consequences. There is an underlying idea here that, despite the fact that the dispute is of commercial nature and involves only two parties, there are other issues at stake in the arbitration.

Such other issues would provide the rationally for accepting the amicus in this, as the Tribunal indeed did. This statement was complemented by a ' Statement of the Free Trade Commission on non-disputing party participation ', whose section A 1 held specifically that ' No provision of the North American Free Trade Agreement NAFTA limits a Tribunal's discretion to accept written submissions from a person or entity that is not a disputing party a "non-disputing party" ', and put forward certain procedures to implement such possibility.

Critical Case Studies

Following the procedure provided in the Federal Trade Commission's FTC Statement, the defendant submitted in March that the Tribunal should grant the permission requested by the potential amici , and Methanex indicated that it did not object to the granting of such permission.

The final award in Methanex is notable in that it went deeply into the issue of corruption. In that regard, the Tribunal established its own competence to address the issue, and adopted a self labeled ' connect the dots ' methodology to perform the task. The dots in this case, though, did not lead to a finding of corruption.

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On the issues that were discussed by the submissions, the Award is less bold, but still found strongly against the investor. National Treatment was decided on the basis of a narrow notion of likeness, which featured the rejection of a trade law namely, WTO inspired interpretation. The expropriation ruling is also quite favorable to the host State, and seems to follow the mindset proposed by amici. It accepted that an intentionally discriminatory regulation against a foreign investor fulfils a key requirement for establishing expropriation.

By the same token, a non-discriminatory measure would only be expropriatory if the government had committed to refrain from regulation. Such commitments, according to the Tribunal, can be expressly given by officials, or reasonably understood by the investor. Neither of them occurred in this case. For the Tribunal, Methanex entered an investment context that is well-known for its leadership in environmental issues; hence, regulation could be reasonably expected. Moreover, Methanex's charges of ' corruption ' are read by the Tribunal as part of a general, foreseeable, political process that, in fact, also benefited Methanex.

Consequently, the Tribunal found that measures in question were for a public purpose, non-discriminatory and accomplished with due process. The Tribunal finally assessed whether a lost customer base, goodwill and market share can be deemed ' investments ' in the sense of Article , and thus subject to expropriation. It agreed they could, but not alone-rather, as part of the valuation of the taking of an enterprise. In this case, no taking had taken place. The Methanex precedent and the ' Statement of the Free Trade Commission on non-disputing party participation ' have since become the standard approach to participation in NAFTA investment arbitration, and have, in turn, influenced further developments of the area.

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  7. The main lesson to be taken from here is the Tribunal's and FTC's implicit understanding of what was at stake in the problem of participation. For them, the dispute at hand represented a conflict between two parties with formal standing before the Tribunal. However, the subject matter of the controversy would call for an additional variable in the equation: while the parties are still masters of the controversy, this additional variable would explain that other voices are taken into account -in this case, those of the intervening NGOs.

    The reasons requirement in international investment arbitration: critical case studies

    This is hardly a fully fledged theory put forward by the adjudicators, but is an actual departure from the strict view they try to pass as their argument, exclusively focused to the investor-State duet. I will not try to read more into this strategy than it actually allows. And still, even if one reads Methanex from a narrow point of view, the whole saga features an unmistakable understanding that the issue at hand is not exhausted in reference to the parties in the dispute.

    More is at stake -what, exactly, is never explained. Yet, what interests me here is the structure of such narrative: a narrative of public good, of public interests that are beyond the mere conflict of private actors, which informs and justifies the idea of participation. Despite having more than members, 71 ICSID is a fairly small international organization, featuring only an Administrative Council and a Secretariat Articles 4 to 11 of the Convention. Under Article 25 of the Convention, ICSID has jurisdiction over any legal dispute arising directly out of an investment, between a Contracting State and a national of another Contracting State, which the parties to the dispute consent in writing to submit to the Centre.

    Importantly, under the same provision, when the parties have given their consent, no party may withdraw its consent unilaterally. The difference lies, essentially, in the parties subject to each set of norms. While the Convention covers disputes where both parties are ICSID contracting States, the additional facility rules provides procedures for services rendered in conflicts where one party is not an ICSID contracting State, or where the dispute does not arise directly from an investment and provided that the underlying operation is not an ordinary commercial transaction.

    Under Article 36 a , any Contracting State or any national of a Contracting State wishing to institute arbitration proceedings needs simply to address a request to that effect to the Secretary- General, who in turn sends a copy of the request to the other party. To be sure, under Article 25 of the Convention, consent on behalf of the defendant is required to initiate arbitration procedures: that is where IIAs enter into play.

    As we saw in the last section, one pillar of IIAs is their dispute settlement provision, which often refer to ICSID procedures and leave to the investor who is often the complainant the ability to establish, unilaterally, whether arbitration is applicable in their particular case. It should be noted, moreover, that the Convention does not require the exhaustion of local remedies before acceding to international arbitration, and only exceptionally do IIAs provide for that requirement. Under Article 53 1 of the Convention, the award is binding on the parties and cannot be subject to any appeal or to any other remedy except those provided by the Convention.

    As importantly, all parties to the Convention that is, States in the world are required to enforce the award, even if they were not parties of the dispute Article 54 1. In practice, then, investors have the power to bypass domestic courts and seek a decision that, once taken, is recognized around the world, and is only contestable at ICSID. Such is the case of Ecuador, which notified in November that it was unwilling to submit before ICSID any dispute arising from ' economic activities related to the exploitation of natural resources, like oil, gas, minerals and others.

    Procedural norms of participation should be understood against this background. It is not merely the wish of being recognized as an active party to the conflict, but rather the need to open spaces that are not available at the domestic level, because investors are able to bypass the latter. Such spaces need to be understood, in turn, with reference to the three legal instruments that govern them: the Convention, the Additional Facility Rules, and the Rules of Procedure for Arbitration Procedures.

    The original Convention, for starters, is in force since and seems to consider participation of non-parties as irrelevant. More interesting for the purposes of this project, though, are the amendments of the Additional Facility Rules and the Rules of Procedure for Arbitration Procedures. As several privatization projects failed in the early years of this century, ICSID saw itself under the public spotlight, due to an unexpected wave of disputes involving developing countries.

    To be sure, the spotlight revealed controversial aspects of the procedures in the original Convention, and its rules of arbitration. This feeling was much stronger in developing countries and within activist organizations, where the situation was perceived to have reached a critical phase. As a consequence, wealthy households, industry and agroindustry would pay low prices for each unit of the large amounts they consumed, while the poorest families would pay very high prices per unit of the little water they used.

    In September , the city signed a lease with Aguas de Tunari, a consortium owned partly by Bechtel, a US infrastructure corporation. The Tribunal was constituted in July When informed about the arbitration procedures, La Coordinadora and other organizations filed a petition before the Tribunal in August , where the organizations requested to be granted the status of parties in the dispute and, in the alternative, to be granted ' the right to participate in such proceedings as amici curiae, in accordance with the principles of fundamental justice, at all stages of the arbitration.

    In a letter addressed to the petitioners, the President of the Tribunal argued stated:. The contrast between this decision and the approach taken in Methanex two years before is clear. While the Methanex tribunal seemed to understand that the issue at hand was not exhausted in reference to the parties in the dispute, the Aguas del Tunari ' Aguas ' tribunal did the exact opposite.

    It stuck to its interpretation that the masters of the dispute were the parties -and since no party had given consent, the Tribunal could not go beyond. Yet, petitioners in Aguas presented an interpretation of Article 44 of the Convention that closely resembled that of Rule 15 in Methanex 87 -in accepting the petition, the Aguas tribunal would have simply followed the momentum initiated by Methanex. But it did not do so. Instead, it decided to deny the petition, and acknowledged its jurisdiction over the dispute in October To be sure, the Aguas decision regarding amicus curiae did not help at all.

    The idea that these disputes involved nothing beyond the parties, as was held in Aguas , seemed to shock everyone that took some time to consider the matter. The changes tried to tackle complains of lack transparency.

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    For this purpose, the most notable amendment was the new Rule 37 of the Rules of Procedure for Arbitration, which concerns the submission of amicus briefs. New Rule 37 created a formal space for such submission before ICSID tribunals, and allowed for parties to the dispute to be consulted -however, and this is the part that is particularly notable, parties lack the right to veto the admission of the amicus brief. How has Rule 37 worked in connection to global political participation? The first and, to the time of writing, only case to have been tried in its entirety under the new rule is Biwater.

    To be sure, the dispute caught the attention of several activist organizations and some academic observers. First of all, BGT claimed that Tanzania's effort of regulating its domestic water supply had expropriatory effects, and violated standards of fair and equitable treatment. Host States would now have second thoughts when taking regulatory measures regarding water, affecting thus their ability to protect their environment, the health of their population, and their sustainable development.

    Moreover, and perhaps more importantly, Biwater appeared to be an exceptional example of an often commented, but rarely confirmed, practice in privatization in developing countries: underbidding, also called a ' renegotiation strategy. Once the deal is secured and advance payments have been done, the investor complains that rates included in the original contract are too low, due, for example, to exchange rate variations or a changing tax environment.

    Email Updates. RSS Updates. International Law Reporter. Michael Reisman Yale Univ. Here's the abstract: This collection of essays emerged from a seminar on international investment law taught jointly by the editors at the Yale Law School. The participants brought a rich experience and, as important for a subject like this, a rich national diversity. Q: What does an arbitrator do? Answer by Funke Adekoya. Q: What are IIAs? Answer by Dr Chrispas Nyombi.

    Q: What is international investment arbitration? Q: What does a mediator do? Answer by Thierry Ngoga. Q: What is the role of counsel in arbitration?

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    Answer by Tayeb Hassabo. Q: What do parties want from arbitration? Answer by Xander Meise. Q: What does an arbitration centre do? Answer by Ismail Selim. Answer by Tsegaye Laurendeau. Q: How should international investment arbitration be reformed? A range of international reform processes have commenced in order to redress critiques of Investor-State Dispute Settlement. Six issues have triggered criticism of ISDS: 1 legal costs; 2 duration of proceedings; 3 legal consistency; 4 decisional correctness; 5 arbitral diversity; and 6 arbitral independence and impartiality.

    Nineteen of the 29 international investment agreements concluded in carefully regulate ISDS, and four omit it. First and foremost, some treaties do not entitle investors to refer their disputes with the host State to international arbitration. Secondly, some treaties replace the system of ad hoc investor—State arbitration and party appointments with a standing court-like tribunal including an appellate level , with members appointed by contracting parties for a fixed term. For example, the European Union. Thirdly, some treaties include a requirement to exhaust local judicial remedies or to litigate in local courts for a prolonged period before turning to arbitration.

    For example, India. Last but not least, some treaties preserve the system of investor—State arbitration but with certain important modifications. Such modifications aim at increasing State control over the proceedings, opening proceedings to the public and third parties, enhancing the suitability and impartiality of arbitrators, or limiting the remedial powers of ISDS tribunals. I therefore believe that holistic and synchronised reform through an inclusive and transparent process is the best way forward.

    Answer by Eunice Shang-Simpson. The wording of the old-style Model BITs were usually put forward by the Western States and adopted totally by host States, who were usually developing nations. Arbitral proceedings under the auspices of BITs are commenced at the instigation of the Investor. The core protections were:. It is therefore clear that investors had a wide range of protections under BITs. The frequency with which these protections were upheld to the detriment of host States resulted in a backlash, with some host States deciding to leave the system whereas others decided to remain but utilise a range of options aimed at redressing the balance and reasserting their control over investment treaty arbitration.

    This led to the emergence of the new generation BITs. It is therefore clear that the new-style BITs aim to strike a balance between investor protection and State Sovereignty. Answer by Rose Rameau. Q: Why do parties choose Arbitration? Answer by Adebolanle Adebola. Assume you had a company in Ghana, wishing to export cocoa to a company in Switzerland who wishes to process this into high value chocolate.

    Well, international commercial arbitration offers them an alternative. And increasingly we have found that commercial parties prefer to resolve their disputes through international commercial arbitration for two principal reasons. Enforcement of awards is regulated by the Convention on the Recognition and Enforcement of International Awards which was put in place in That enjoins countries to recognise awards that have been made in jurisdictions outside of their own, as well as to recognise the intention of the parties to resolve their disputes as evidenced by their arbitration agreement.

    Another key reason why parties choose international commercial arbitration is because of neutrality: the neutrality of the place of arbitration, the neutrality of the arbitrators, as well as the neutrality of the framework of laws that regulate the proceedings between them. Q: Why study international arbitration? Answer by Prof Paul Obo Idornigie.

    My name is Professor Paul Idornigie. Generally arbitration is either national or international. With globalisation, any arbitrator that wants to be competitive internationally should study international arbitration. The question often asked then is, when is an arbitration international? Now, we look at the nature of the dispute or the nationality of the parties or where the contract is to be performed or where the contract is entered into.

    Where the parties to the contract are in different countries, an arbitration can be said to be international. When an arbitration is international, which law governs it? This is a matter that the parties should agree but generally, they do not. Conflict of laws rules are deployed to determine the governing law of the contract.

    What makes this a bit pronounced is that in a particular international arbitration, you can have as many as five laws applying to it.

    Prof. Jes Salacuse: Investment Arbitration

    You can have the law that determines the nationality of the parties; the law that regulates the contract itself; the law that regulates the arbitration clause; the law of the place of arbitration and; the law of the place of enforcement. All these must be studied for an arbitrator to be an effective arbitrator internationally. Thank you very much. Q: Why do States sign bilateral investment treaties?