The backlash against investment arbitration : perceptions and reality / edited by Michael Waibel [and others].
2010
K3829.8 .B33 2010 (Map It)
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Title
The backlash against investment arbitration : perceptions and reality / edited by Michael Waibel [and others].
Published
Austin, Tex. : Wolters Kluwer Law & Business ; Alphen aan den Rijn, The Netherlands : Kluwer Law International, [2010]
Distributed
Frederick, MD : Sold and distributed in North, Central and South America by Aspen Publishers
Copyright
©2010
Call Number
K3829.8 .B33 2010
ISBN
9789041132024 (acid-free paper)
9041132023 (acid-free paper)
9041132023 (acid-free paper)
Description
liv, 614 pages ; 25 cm
System Control No.
(OCoLC)591405306
Note
"This book, the outgrowth of a conference organized by the editors at Harvard Law School on April 19, 2008, aims to uncover the drivers behind the backlash against the current international investment regime."--P. xxxvii-xxxviii.
Bibliography, etc. Note
Includes bibliographical references and index.
Record Appears in
Added Author
Table of Contents
Foreword to the Backlash against Investment Arbitration / Detlev Vagts
xxiii
Biographies of Editors
xxvii
Biographies of Contributors
xxix
The Backlash against Investment Arbitration: Perceptions and Reality / Claire Balchin
xxxvii
Acknowledgments
liii
pt. I
The Protection of International Investment: Assessing Treaty Obligations
1
ch. 1
Disregarding the Corporate Veil and Denial of Benefits Clauses: Testing Treaty Language and the Concept of "Investor" / Jennifer Doucleff
3
I.
. Introduction
3
pt. 1
Definitions of Investor in Investment Treaties and Denial of Benefits Clause: An Overview of Their History, Objective, and Purpose
5
I.
Definition of Investor and Denial of Benefits Clauses
5
A.
Definition of Investor
6
1.
Place of Incorporation
6
2.
Siege Social
7
3.
Control
8
4.
Combined Factors
8
B.
Denial of Benefits Clauses
9
pt. 2
The Legal and Interpretive Issues Raised by the Definition of Investor and Denial of Benefits Clauses in the Decisions and Awards of International Tribunals
11
I.
Disregarding the Corporate Form and the Definition of Investor
12
A.
Investor Narrowly Defined as Place of Incorporation
13
B.
Piercing the Corporate Veil to Determine Control
15
II.
Piercing the Corporate Form for Abuse or Fraud
18
III.
Defining the Threshold Level of Economic Activity within a Contracting Party
21
IV.
Burden of Proof when a State Invokes a Denial of Benefits Clause
23
V.
The Effect of Denial of Benefits Clause
25
A.
Notice Requirement
25
B.
When a Denial of Benefits Clause Must Be Invoked
25
VI.
Concluding Remarks and Practical Implications
26
ch. 2
Private Enforcement of International Investment Law: Why We Need Investor Standing in BIT Dispute Settlement / Stephan W. Schill
29
I.
Introduction
29
II.
Credible Commitments, Dispute Settlement, and Investment Cooperation
31
III.
The Lack of Efficient Dispute Resolution in Domestic Legal Orders
33
IV.
The Structural Deficiencies of Customary International Law
36
V.
The Insufficiencies of Alternative Schemes of Foreign Investment Promotion and Protection
45
VI.
Conclusion
48
ch. 3
Drawing the Limits of Free Transfer Provisions / Facundo Perez Aznar
51
I.
Introduction
51
A. Early Cases
53
II.
The Biwater Gauff Award: The Provision Is Not a Guarantee of Funds
55
III.
The Continental Award
56
A.
Background of the Argentine Emergency Situation
58
B.
Landmark Findings of the Continental Award
59
C.
Findings Regarding the Free Transfer Provision
66
IV.
The Validity of Exchange Restrictions due to Balance-of-Payments Difficulties or Other Exceptional Situations
72
V.
Free Transfers Provisions and the Applicability of Non-precluded Measures Clauses, Emergency Situations Clauses, and the Necessity Defense
75
VI.
Conclusion
77
ch. 4
A Comparison of ICSID and UNCITRAL Arbitration: Areas of Divergence and Concern / Jeffrey Sullivan
79
I.
Introduction
79
II.
Constitution of the Tribunal
81
A.
ICSID
81
B.
UNCITRAL
82
C.
Comment
84
III.
Jurisdiction
85
A.
ICSID
85
UNCITRAL
87
C.
Comment
88
IV.
Provisional Measures
88
A.
ICSID
89
B.
UNCITRAL
91
C.
Comment
92
V.
Confidentiality and Transparency
93
A.
ICSID
93
B.
UNCITRAL
94
C.
Comment
96
VI.
Role of Domestic Courts
96
A.
ICSID
97
B.
UNCITRAL
97
C.
Comment
98
VII.
Recognition, Enforcement, and Review of Awards
99
A.
ICSID
100
B.
UNCITRAL
102
C.
Comment
104
VIII.
Costs
105
A.
ICSID
105
B.
UNCITRAL
106
C.
Comment
107
IX.
Conclusion
108
pt. II
Parallel Proceedings and Conflicting Awards
111
ch. 5
The Issues Raised by Parallel Proceedings and Possible Solutions / August Reinisch
113
I.
Introduction
113
II.
Dangers of Multiple Proceedings
114
III.
The Particularly Fragmented Universe of Investment Arbitration
114
IV.
The Central Risk of Multiple Proceedings: Inconsistent Outcomes
115
A.
Divergent Views on Legal Issues
115
B.
Divergent Assessments of Identical Facts
116
C.
Conflicting Results in the Same Dispute
117
V.
Possible Solutions
118
A.
An Appellate Mechanism for Investment Arbitration
118
B.
Preliminary References in Investment Matters
118
C.
Consolidation of Proceedings
119
D.
Res judicata and. Lis pendens
120
E.
Precedent
124
ch. 6
Parallel Proceedings: A Practitioners̀ Perspective / Richard H. Kreindler
127
I.
Parallel Proceedings in International Arbitration from the Practitioners̀ Perspective
128
A.
Parallel Proceedings in International Arbitration
128
1.
Lack of Contractual Privity
128
2.
Presence of Contractual Privity
130
3.
Parallel Proceedings and Issues of the Seat and/or Applicable Arbitral Rules
132
4.
The Applicable Substantive Law
133
B.
Motivations for Forum Shopping from the Practitioners̀ Perspective
138
II.
Possibilities to Hold Arbitral Forum Shopping in Check
140
III.
Do Parallel Proceedings and Forum Shopping Impact Negatively on International Arbitration?
146
ch. 7
Annulment and Its Role in the Context of Conflicting Awards / Christina Knahr
151
I.
Introduction
151
II.
Jurisdiction of Ad hoc Committees
152
III.
Grounds for Annulment
153
A.
Manifest Excess of Powers
154
B.
Failure to State Reasons
157
C.
Serious Departure from a Fundamental Rule of Procedure
159
IV.
The Role of Annulment in the Context of Conflicting Awards
160
A.
Manifest Excess of Powers?
161
B.
Failure to State Reasons?
162
V.
Conclusions
162
ch. 8
Compensation for Non-expropriatory Investment Treaty Breaches in the Argentine Gas Sector Cases: Issues and Implications / Kathryn Khamsi
165
I.
Compensation for Non-expropriatory Investment Treaty Breach: Reasoning in ihe Argentine Gas Sector Cases
170
II.
Use and Calculation of the "Fair Market Value" Measure in the CMS, Enron, Sempra, and BG Group Awards
171
A. Refusal to Compensate Lost Future Profits in the LG&E Damages Award, and Consequent Rejection of the "Fair Market Value" Measure
174
III.
Issues Raised by the Compensation Reasoning in the Argentine Gas Sector Cases
176
A.
The Measure of Compensation: Its Choice and Implications
176
B.
Compensating Lost Future Profits: The Requirement of Reasonable Certainty and Its Satisfaction
179
IV.
Conclusion: Implications of the Compensation Reasoning in the Argentine Gas Sector Cases
184
pt. III
Protecting The Public Interest
187
ch. 9
Arbitrator Integrity / William W. Park
189
I.
Level Playing Fields
189
A.
Heracleitus Meets the Psalmist
189
B.
Why Bias Matters
191
C.
Two Ways to Sabotage Arbitration
193
II.
Problematic Relationships and Attitudes
194
A.
The Basics: Independence and Impartiality
194
B.
Can Integrity Be Waived?
197
C.
The Devil in the Detail
199
1.
Clear Conflicts
199
2.
Variations on a Theme
199
D.
The Parties' Role in Arbitrator Selection
201
III.
New Frontiers
205
A.
Issue Conflict and Role Confusion
205
B.
Institutional Bias and Professional Affiliation
207
C.
Repeat Players
209
D.
Duty to Investigate
209
IV.
Challenges in Investor-State Arbitration
211
A.
The Paradigm Shift
211
B.
Critiques of Arbitrator Integrity in Investor-State Cases
212
1.
Systemic Bias in Favor of Investors
213
2.
Disillusionment with Arbitration
216
C.
Mechanics of Challenge: Basic Texts
220
D.
Filling the Gaps
223
1.
The Effect of Institutional Rules and Case Law
223
2.
The Specificity of Investment Cases
225
E.
Transnational Standards and "Soft Law"
226
F.
Professional Guidelines
228
1.
International Bar Association Guidelines
228
2.
American Rules
229
G.
Synthesizing Legal Norms
231
V.
Three Recurring Problems
233
A.
Trivial and "De minimis" Contacts
233
B.
Saying Too Much Too Early
235
C.
Barristers
236
1.
Shared Chambers
236
2.
The IBA Guidelines
237
3.
Collegiality and the "Outside" Arbitrator
238
VI.
Intellectual Integrity
239
A.
Baby Splitting
239
B.
Amiable Composition
241
C.
Creeping Legalism
243
D.
Arbitrators and the Search for Truth
245
VII.
The Object of an Arbitrators̀ Duties
246
ch. 10
Amicus Curiae: A Panacea for Legitimacy in Investment Arbitration? / Caroline Richard
253
I.
Introduction
254
II.
Evolution of Amicus Curiae
257
A.
Evolution of Amicus Curiae in Domestic Legal Systems
257
B.
Evolution of Amicus Curiae in Interstate Dispute Resolution
258
C.
Evolution of Amicus Curiae in Investment Treaty Arbitration
259
1.
Within NAFTA
259
2.
Within ICSID
262
III.
Amicus Curiae Alone Cannot Cure the Democratic Deficit and Lack of Transparency in Investment Treaty Arbitration
266
A.
The Admission of Amicus Curiae Briefs Alone Does Not Increase Transparency in Investment Treaty Arbitration
266
B.
The Admission of Amicus Curiae Briefs Alone Does Not Cure the "Democratic Deficit" in Investment Treaty Arbitration
268
C.
Increasing Transparency and the Legitimacy of Investment Arbitration as the Sole Reason for Admitting Amicus Curiae Briefs?
270
D.
Public Participation and the Risk of the Politicization of the Investment Treaty Arbitration
272
IV.
Conclusion
273
ch. 11
Participation of Non-governmental Organizations in Investment Arbitration as Amici Curiae / Amokura Kawharu
275
I.
Introduction
275
II.
NGO Participation in International Law
277
II.
Why the Rise in NGO Interest in Investment Arbitration?
280
IV.
Evaluating NGO Participation as Amici Curiae
282
A.
Representation of an Interest
283
1.
Addressing a Legitimacy Deficit; Representation of Public Interest Considerations
283
2.
Representation of a Private Interest
288
3.
Implications Regarding Criteria for Admission of Amicus Briefs
289
B.
Contribution of Expertise
291
1.
Assistance to the Tribunal
291
2.
The Issue of Relevancy
292
C.
The Tribunals̀ Role
294
V.
Conclusion
295
ch. 12
Legality of Investments under ICSID Jurisprudence / Gabriel Bottini
297
I.
Introduction
297
I.
Illegal Investments before ICSID Tribunals
301
A.
Inceysa Vallisoletana, S.L. v. Republic of El Salvador
301
B.
World Duty Free v. Kenya
304
C.
Fraport v. Philippines
307
D.
Plama v. Bulgaria
310
III.
Conclusion
313
ch. 13
Invoking State Defenses in Investment Treaty Arbitration / Alexis Martinez
315
I.
Introduction
315
II.
Force Majeure
316
III.
Necessity
318
IV.
Bribery/International Public Policy
327
V.
Legitimate Exercise of Sovereignty
331
VI.
Conclusion
336
pt. IV
Investment Arbitration And Its Discontents
339
ch. 14
Backlash to Investment Arbitration: Three Causes / Louis T. Wells
341
I.
Introduction
341
II.
First Cause: Inconsistent Decisions
342
III.
Second Cause: A Rigid View of Contract
342
A.
One-Way Impact
345
IV.
Third Cause: Corruption and Incompetence
347
V.
Remedying the Causes of Backlash
348
A.
Ideal: Multilateral Agreement
348
B.
Appellate Process
349
C.
Symmetry
350
D.
Midpoint Guidance
351
VI.
Conclusion
351
ch. 15
Denunciation of the ICSID Convention and Consent to Arbitration / Christoph Schreuer
353
I.
Introduction
353
II.
The Denunciations̀ Effective Date
355
III.
Consent to Jurisdiction under the ICSID Convention
355
A.
The Reciprocal Nature of Consent
356
B.
The Date of Consent
361
C.
The Irrevocability of Consent
362
IV.
Rights or Obligations under the Convention Arising out of Consent
364
V.
Consent "Given by One of Them"
366
VI.
Conclusions
367
ch. 16
Competing for Capital: The Diffusion of Bilateral Investment Treaties, 1960-2000 / Beth Simmons
369
I.
Securing Investors' Legal Rights
371
A.
From Customary Law to Bilateral Investment Treaties
371
B.
The Spread of BITs
373
C.
Leaders and Followers in BIT Agreements
378
II.
A Competitive Theory of Bit Diffusion
381
A.
BITS as a Credible Commitment
381
B.
Competitive BIT Signings: Logic and Implications
383
III.
Empirical Methods and Data
386
A.
Analytical Design
386
B.
Data and Measures
387
1.
Spatial Lags of the Dependent Variable: Competition and Cultural Emulation
388
IV.
Findings
395
V.
Conclusion
401
ch. 17
The Argentine Financial Crisis: State Liability under BITs and the Legitimacy of the ICSID System / William W. Burke-White
407
I.
Introduction
407
II.
The Argentine Financial Crisis and the Governments̀ Response
409
III.
Argentinas̀ Legal Arguments for Policy Flexibility in Response to an Economic Crisis
411
IV.
The Jurisprudence of the ICSID Tribunals
415
A.
The ICSID Tribunals and Non-precluded Measures Provisions
416
B.
The ICSID Tribunals and the Customary Defense of Necessity
421
V.
The CMS Annulment Committee Report and the Viability of ICSID Arbitration
425
VI.
Conclusion
431
ch. 18
Perceived Bias in Investment Treaty Arbitration / Gus Van Harten
433
I.
Introduction
433
II.
The Uniqueness of Investment Treaty Arbitration
434
III.
Standards of Impartiality and Independence of Domestic Courts
436
A.
The Inappropriate Influence of Appointing Authorities
441
B.
The Inappropriate Influence of Private Parties
445
IV.
Responses to Possible Counterarguments
446
V.
Conclusion
452
ch. 19
European Law Challenges to Investment Arbitration / Markus Burgstaller
455
I.
European Law Challenges to Investment Arbitration: An Introduction
455
II.
European Law Challenges to Jurisdiction: The Validity and Applicability of Member States' BITs
457
III.
European Law Challenges on the Merits: The Applicability of EU Law in Investment Arbitration
467
IV.
European Law Challenges to Enforcement: Securing the Correct Application of EU Law
472
V.
European Law Challenges to Investment Arbitration: An Outlook
475
ch. 20
Out of Order / Luke Peterson
483
I.
Costly Disputes
484
II.
Treaties under Scrutiny
484
III.
Closing the Floodgates
485
IV.
Balanced Model
486
V.
Playing Both Sides
487
VI.
A Change of Nationality
488
pt. V
ICSID Arbitrations̀ Fall From Grace: The Way Forward
489
ch. 21
Globalization: The Driving Force in International Investment Law / Tillmann Rudolf Braun
491
I.
The Importance and Origins of International Investment Law
492
II.
The Lynchpin of International Investment: Procedural Enforcement Mechanisms and Partial Subjectivity in International Law for the Individual
495
III.
Norm Generation and Norm Interpretation: The Interplay Between State and Arbitral Responsibility
497
IV.
Norm Generation and the Forming of International Investment Law
501
V.
The Structure of the Actors in International Investment Law in Historical Context
502
ch. 22
A Dispute Systems Design Diagnosis of ICSID / Ilija Mitrev Penusliski
507
I.
Introduction
507
II.
Dispute Systems Design
509
A.
Principles
509
B.
Methodology
512
III.
Applying DSD to ICSID: Assessing Foreign Investment Disputes
515
A.
Nature of Foreign Investment
515
B.
Stakeholders
516
C.
Nature of Disputes
517
IV.
Applying DSD to ICSID: Assessing ICSIDs̀ Dispute Resolution Procedures
518
A.
The ICSID Mechanism
518
B.
ICSID in a Crisis?
520
1.
Encroachment of Regulatory Autonomy
520
2.
Impaired Legitimacy
522
3.
Cost and Length
525
V.
Applying DSD to ICSID: A New Design for ICSID
526
A.
Mediation
527
B.
Appellate Body
529
C.
Improved Judicial Scrutiny
531
D.
Arbitrator Selection and Conduct
532
VI.
Applying DSD to ICSID: Implementation
533
VII.
Conclusions
535
ch. 23
The International Investment Protection Regime through the Lens of Economic Theory / Anne van Aaken
537
I.
Introduction
537
II.
International Investment Law: An Overview
538
III.
The Contract Theory Approach
540
IV.
A Contract Theory Approach to Investment Law
543
A.
Flexibility through Explicit Escape Clauses and Exceptions
545
B.
Flexibility through Vague Terms
547
V.
The Instability of the Investment Protection Regime
549
VI.
Conclusion and Outlook
554
ch. 24
"History Aiǹt Changed": Why Investor-State Arbitration Will Survive the "New Revolution" / Timothy G. Nelson
555
I.
Introduction
556
II.
Concession Arbitrations
557
A.
The Lena Goldfields Arbitration
557
B.
Concession Arbitration: The Oil Cases of the 1950s and 1960s
559
1.
The Gulf State Cases of the Early 1950s
559
2.
The ARAMCO Arbitration
560
3.
Sapphire: An Early Iranian Expropriation
561
C.
The 1970s: The Libyan Nationalization Cases
562
D.
The ICSID Convention and UNCITRAL Rules Emerge
565
E.
"Concession Arbitration" Continues
566
III.
Claims Tribunal Arbitrations
567
A.
Early Claims Tribunals
567
B.
The ICJ and Limits on Diplomatic Protection
569
C.
The Iran-US Claims Tribunal
570
D.
More Recent Claims Tribunals
570
E.
The ICSID/BIT System Lineal: Descendant of the Claims Tribunals
571
IV.
Backlash? History Aiǹt Changed
573
ch. 25
The State, a Perpetual Respondent in Investment Arbitration? Some Unorthodox Considerations / Thomas Schultz
577
I.
Introduction
577
II.
The State as Claimant in Treaty-Based Arbitration
578
A.
Private Parties, Human Rights, and Investment Treaties
580
B.
Private Parties and Sustainable Development
585
C.
Conclusion: Is the State the Sole Debtor under Investment Treaties?
588
III.
The State as Claimant in Contract-Based Arbitration
589
A.
Tanesco v. IPTL
591
B.
East Kalimantan v. Kaltim Prima Coal
595
C.
The State as Claimant in Investment Arbitration: Veering toward Political Dispute Resolution?
600
IV.
Conclusion
602
Index
603