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CCDD005 International Trade and Investment Dispute Settlement

  • Run: Yearly
  • Rating: 45 credits
  • Assessment:
    Four Assignments (max 1,500 words – 15% each)
    Final take home exam (40%)
  • Module convenor: Ms Norah Gallagher

Module aims:

The principle aim of the course is to familiarise students with the dynamic area of investment treaty arbitration, its evolution, language and growing jurisprudence. Indeed recent and rapid changes in investment arbitration prompted by globalisation and widespread foreign investment make this a topic of increased interest especially now after the credit crisis which prompted protectionist measure being adopted by government. This module explores:

  • ICSID – there has been a significant and unprecedented increase in cases filed at the International Centre for the Settlement of Investment Dispute (ICSID). ICSID is one of the principal centres for dealing with investment disputes set up under the Washington Convention 1965 under the Auspices of the World Bank.. In the first fifteen years of its existence 9 arbitrations were registered by the secretariat. However, this number has increased rapidly in recent years; on average in 2012 three investment dispute cases per month were registered with ICSID. This trend is predicted to continue both by the commercial world and by the Secretary General of ICSID. This is especially true as companies become increasingly aware of the rights available to them under both multinational and bilateral investment treaties.
  • Bilateral Investment Treaties (BITs) – there has been a substantial growth in the number of BITs being entered into by States. The first modern form of BIT was signed in 1959 between Germany and Pakistan. The modern BIT is based on the more general Friendship Commerce and Navigation treaties that were being entered into at the end of the 19th century. By the end of the 1980s some 385 BITs had been entered into, however, by 2001 it was estimated that over 2,000 BITS had come into force. There is now according to UNCTAD over 3000 BITs signed by states around the globe. This change was largely as a result of foreign investors insisting on a more structured and secure investment environment. The protections provided in the provisions of many BITs follow a similar format in many cases. The protections provided by the Host State include most favoured nation, fair and equitable treatment to foreign investors, protection and security and a commitment not to expropriate an investment without providing fair and just compensation. There are often dispute resolution provisions providing for arbitration directly between the investor and the Host State. Thus keeping any dispute which may arise in the future out of the national courts and providing a more neutral dispute resolution process. There has been a new trend by some States to include restrictions on the application by tribunals of the protections in the treaty for example the qualification on regulatory expropriation in the US Model BIT (2012).
  • World Trade Organisation (WTO) – since the WTO began its operation in 1995, its Members have actively resorted to the dispute settlement mechanism available within its framework. In the first seven years of its functioning over 270 complaints were notified, which resulted in the adoption of over 60 panel and Appellate Body reports. The WTO offers a unique quasi-judicial system of dispute settlement where reports of panels, appointed on an ad hoc basis, may be appealed for review by a standing judicial organ, the Appellate Body. The disputes cover a very broad scope of issues, from “classical” trade disputes in goods involving non-discrimination principles developed under the GATT 1947, such as most favoured nation treatment and national treatment, through trade in services and intellectual property. The WTO dispute settlement mechanism may be truly called one of the most dynamic contemporary systems of settlement of trade disputes.
  • Multilateral Treaties – in addition to the increase in BITs other recent developments include investor protections provided in multilateral treaties including NAFTA (North American Free Trade Agreement) and the Energy Charter Treaty. There has been many arbitration cases decided since the NAFTA entered into force in January 1994. The investors have relied on Chapter Eleven which contains the investment protection provisions. The Energy Charter Treaty entered into force in 1998 and has seen a growing jurisprudence with over 30 cases commenced under its dispute resolution provisions in Article 26. It provides a sophisticated mechanism for the resolution of disputes both between investors and the Host State and also at Article 27 for inter-state disputes in the energy industry. Many of the awards deal with public international law principles, for example, the principles of expropriation or acts tantamount to expropriation and how to quantify fair and equitable compensation. This is a unique and important multilateral treaty dealing as it does with the largest and one of the most important industries in the world today.

Module outline:

The legal environment for international trade and foreign investment has changed dramatically since the end of the Cold War. Foreign investors are much more willing to pursue a claim of, for example, alleged expropriation or discriminatory behaviour by a host State. Further, public international law principles must also be considered once a state is involved. Principles of state responsibility, expropriation and acts tantamount to expropriation, what comprises fair and just compensation, immunity from suit and immunity from execution. These public international law principles overlap somewhat uncomfortably with the commercial interests of foreign investors. Developments in investment arbitration and trade dispute resolution have been rapid in recent years. It is now crucial that academics and legal practitioners are aware of the complex international legal elements involved in the resolution of investment and trade disputes.

Learning outcomes:

By the end of the module you should:

  • Understand the overlap between public international law, international economic law and international investment disputes.
  • Be aware of the history (and its effect today) of the investment regime including the use of stabilisation clauses in certain host-State contracts.
  • Be aware of the evolution of international trade law regulation and the establishment of specific dispute settlement mechanisms.
  • Be able to advise on the various, often overlapping, options now available to an investor to commence arbitration against a State, even if no direct contract has been entered into between the two parties. Investors are no longer exclusively limited to rights provided by an investor Host State contract, they can now look to the extensive BIT protections and multilateral investment treaties which provide alternative recourses.
  • Be able to identify the most favourable options available to an aggrieved investor which will vary depending on the form and content of the BIT or multilateral treaty at issue in the case.
  • In addition, they will be aware that many countries have implemented foreign investment laws which also provide an investor with minimum standards of protection under international law.
  • Be able to identify the types of trade disputes subject to the WTO dispute settlement mechanism, as well as its institutions and procedures, and understand the basic principles developed in GATT/WTO jurisprudence.

Preliminary reading

  • Collier and Lowe The Settlement of Disputes in International Law – Institutions and Procedures
  • Lew, Mistelis and Kröll, Comparative International Commercial Arbitration
  • R.Doak Bishop, James Crawford and W. Michael Reisman, Foreign Investment Disputes, Case, Materials and Commentary (copy of this book will be supplied)
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