The use of ICSID precedents by ICSID and ICSID tribunals Alejandro A. Escobar Latham & Watkins Investment treaty arbitration has presented ICSID and ICSID tribunals with significant new challenges. For the ICSID Secretariat, a particular challenge is posed in relation to its screening duties by what we have come to know as arbitration without privity : 1 consent to arbitration formulated not in relation to a specific party but rather to a category of investors defined in general and sometimes open-ended terms. For tribunals, the particular challenge seems to be ruling on multimillion dollar disputes on the basis of what in one case was described as a fairly terse agreement of limited length. 2 The reference is to the dilemma of applying an investment treaty in its relation both to the general corpus of international law and to the law of the disputing State, all of this in the light of Article 42 of the ICSID Convention regarding applicable law. The first case ever decided under an investment treaty (AAPL v Sri Lanka 3 ) did not have the benefit of the two-odd dozen jurisdictional decisions from ICSID tribunals and similar number of decisions on the merits (from ICSID and other tribunals) that exist today. Its rulings are marked not only by an involved consideration of the text of the treaty in combination with early 20 th century cases concerning the international law of State Responsibility, but also by an abundant reference to doctrine. We are reminded here of the subsidiary sources of international law envisaged in Article 38 of the ICJ Statute that are also relevant to ICSID arbitration. The situation was not much different at the time of the first ICSID investment treaty case against a Latin American country (Fedax N.V. v Venezuela 4 ). There, as regards jurisdiction, the tribunal dealt more closely with the ICSID Convention and related instruments, including the ICSID Additional Facility Rules and the instruments governing MIGA, ICSID s sister organizations within the World Bank Group. This analysis was aimed at giving meaning to the 1 2 3 4 See J. Paulsson, Arbitration Without Privity, 10 ICSID Review FILJ 232 (1995 No. 2). Wena Hotels Ltd. v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Award dated 8 December 2000, paragraph 79, 41 ILM 896 (2002), at 910. Asian Agricultural Products Ltd. v. Republic of Sri Lanka (ICSID Case No. ARB/87/3), Award dated 27 June 1990, 6 ICSID Review FILJ 526 (1991 No. 2). Fedax N.V. v. Republic of Venezuela (ICSID Case No. ARB/96/3), Decision on Objections to Jurisdiction dated 11 July 1997, 37 ILM 1378 (1998); Award dated 9 March 1998, 37 ILM 1391 (1998). 1
central term investment in Article 25 of the ICSID Convention. The tribunal then went on to parse the terms of the relevant investment treaty in that context. This trend of deciding cases in the absence of case-law concerning investment treaties was continued in the first decision on the merits under the North America Free Trade Agreement (Azinian et al. v Mexico 5 ). The award was based almost entirely on first principles, with reliance on the writings of publicists. The factual background of the case may have assisted the tribunal. Be this as it may, the award starkly reminded us that throwing case-law at arbitrators will not be enough to win the day. Labelling is no substitute for analysis, said the tribunal. Certain terms may serve as a way to describe breaches [of contract] which are to be treated as extraordinary, and therefore as acts of expropriation, but they certainly do not indicate on what basis the critical distinction between expropriation and an ordinary breach of contract is to be made. The egregiousness of any breach is in the eye of the beholder and that is not satisfactory for present purposes. 6 In the light of the above decisions, the central question that this panel could consider is whether the users of ICSID arbitration may have any basis for reminding those who will decide future cases to abide by the Azinian tribunal s maxim when they rely on ICSID and other investment treaty decisions in their awards. To be sure, ICSID arbitration users may legitimately expect ICSID tribunals to consider previous cases in their decisions. Although those decision are not binding, this does not mean that they do not contain relevant discussion of applicable principles and standards. For a tribunal to decide an issue without demonstrating some awareness of other cases that deal with the same or cognate issues would be highly unusual. At the same time, the last year or so has witnessed an important qualification to the persuasive force of pre-existing case-law. While the inclination in many arbitration decisions is to consider the case at hand as unique in its factual circumstances, in SGS v Philippines 7 the tribunal focused 5 6 7 Robert Azinian et al. v. United Mexican States (ICSID Case No. ARB(AF)/97/2), Award dated 1 November 1999, 14 ICSID Review FILJ 535 (1999 No. 2). Azinian v. Mexico, Award, paragraph 90. Société Générale de Surveillance S.A. v. Republic of the Philippines (ICSID Case No. ARB/02/6), Decision on Objections to Jurisdiction dated 29 January 2004, www.worldbank.org/icsid/cases. 2
on the uniqueness of the law. It said: [A]lthough different tribunals constituted under the ICSID system should in general seek to act consistently with each other, in the end it must be for each tribunal to exercise its competence in accordance with the applicable law, which will by definition be different for each BIT and each Respondent State. 8 One might be tempted to say that the SGS v Philippines tribunal added a corollary the Azinian maxim: because each tribunal is ultimately responsible for its own analysis of the facts and the law, consistency does not necessarily mean correctness. While the tribunal in SGS v Philippines alluded to the need to apply each investment treaty on its own terms, there are manifold other distinctions that may come to mind when considering the value of previous investment treaty cases. A decision under the ICSID Convention will not be the same as a decision under the ICSID Additional Facility Rules, particularly as regards jurisdictional requirements. Is a decision on a bilateral investment treaty less relevant to disputes under detailed free trade agreements, particularly when these are multilateral (and vice versa)? Is a decision with a dissenting opinion less valuable than one without a dissenting opinion? Does it depend on who is dissenting an why? Is an earlier decision, or one that is made largely on first principles, less relevant than a recent decision that recites a string of investment treaty cases? In all of this one must not forget the general context of investment treaty arbitration, which is a relatively new phenomenon the procedural and substantive law for which is still being developed. This general context may allow far greater flexibility to tribunals in deciding often unique cases than in a domestic law setting. It is probably understood, however, that expanded 8 SGS v. Philippines, Decision on Jurisdiction, paragraph 97. The Tribunal added: Moreover there is no doctrine of precedent in international law, if by precedent is meant a rule of the binding effect of a single decision. There is no hierarchy of international tribunals, and even if there were, there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals. It must be initially for the control mechanisms provided for under the BIT and the ICSID Convention, and in the longer term for the development of a common legal opinion or jurisprudence constante, to resolve the difficult legal questions discussed by the SGS v. Pakistan Tribunal and also in the present decision. (Footnote omitted.) 3
flexibility does not amount to a licence for tribunals simply to pick and choose among their favourite arbitral pronouncements to justify a decision they believe embodies the correct outcome of the case. In other words, labelling, even via the use of precedents, should be no substitute for analysis. There is a further dimension to the use of precedents in the case of ICSID arbitration, which is the role of the ICSID Secretariat itself. As we know, the ICSID Secretary-General must register a request for arbitration unless he finds, on the basis of the information contained in the request, that the dispute is manifestly outside the jurisdiction of the Centre. 9 In the case of an investment treaty dispute, one could rightly ask: what is manifest? ICSID has invariably required requests based on investment treaties to address each jurisdictional basis derived from the application of a treaty as the source of the parties consent. Claimants must fit, as it were, under two treaties : the ICSID Convention and the investment treaty in which the State s consent is expressed. The decisions of ICSID tribunals will have a role to play in this respect. Two examples may be mentioned. First, recent ICSID decisions are relevant to the registration of requests that rely on a most-favoured-nation clause with respect to procedural requirements for investment treaty arbitration. In the case of Maffezini v Spain, 10 the scrutiny of the request for arbitration was probably no less meticulous than in other novel situations. The ICSID Secretary-General, however, registered the request because he found that the dispute was not manifestly outside the Centre s jurisdiction. By comparison, today it is highly unlikely that the use of an MFN clause for the purpose of initiating arbitration could prevail without the request addressing, perhaps in some detail, the recent ruling of Plama v Bulgaria. 11 9 10 11 ICSID Convention, Article 36. Emilio Agustín Maffezini v. Kingdom of Spain (ICSID Case No. ARB/97/7), Decision on Objections to Jurisdiction dated 25 January 2005, 16 ICSID Review FILJ 212 (2001 No.1). Plama Consortium Limited v. Republic of Bulgaria (ICSID Case No. ARB/03/24), Decision on Jurisdiction dated 8 February 2005, paragraphs 183-227, www.worldbank.org/icsid/cases. The Plama tribunal, while not disagreeing with the result reached by the Maffezini tribunal as regards the application of the MFN clause to procedural requirements, believed that result to be due to exceptional circumstances which should not be treated as a statement of general principle guiding future tribunals in other cases where exceptional circumstances are not present, Decision on jurisdiction, paragraph 224. The Plama tribunal thus reformulated the guiding principle, ibid., paragraph 223. For a discussion of the Plama decision and of the decisions relied on and distinguished therein, see S. Fietta, Most favoured nation treatment and dispute resolution under bilateral investment treaties: a turning point?, 2 TDM, Issue #03, June 2005, www.transnational-dispute-management.com. 4
A second example is the application of so-called fork-in-the-road provisions in investment treaties, which require investors to choose once and for all between submitting investment disputes to arbitration and submitting them to local courts. After a string of decisions that have rejected objections to jurisdiction based on this type of provisions, 12 investors who act advisedly are likely to be able to avoid triggering such provisions and thus avoid them becoming a significant obstacle to registration of a request for arbitration at ICSID. Finally, there is an important potential role for the ICSID Secretariat regarding the awareness of ICSID decisions that might be relevant for future cases. Under the proposed amendments to the Rule 48 of the ICSID Arbitration Rules, 13 ICSID shall publish excerpts of the legal conclusions of awards, even without the consent of the parties. 14 This could allow parties and tribunals to enrich their dialogue and, indirectly, contribute to the informed development of international investment law. 12 13 14 See, e.g., Enron Corporation and Ponderosa Assets L.P. v. Argentine Republic (ICSID Case No. ARB/01/3), Decision on Jurisdiction dated 14 January 2004, paragraphs 95-98, www.ita.law.uvic.ca/alphabetical_list.htm. See also, by the author, Argentina s deluge of investor-state arbitration proceedings, 1 TDM, Issue #03, July 2004, www.transnationaldispute-management.com. See ICSID, Suggested Changes to the ICSID Rules and Regulations: Working Paper of the ICSID Secretariat, 12 May 2005, page 9, www.worldbank.org/icsid. The Paper notes that a corresponding change would be made to Article 53(3) of the ICSID Additional Facility Rules. This would go some way officially to meet the SGS v. Philippines tribunal s observation that there is no guarantee that ICSID decisions will be published, Decision on Jurisdiction, paragraph 97, footnote 30. 5