Originially from: Originally from World Arbitration and Mediation Review

English High Court Renders Fundamental Decision on Nature of
Investment Treaty Arbitration
By
Frédéric Bachand
WAMR Editor, Investment Arbitration
What kind of right does an international investor assert when he
invokes the arbitration provisions of a bilateral investment treaty (BIT)
and files a claim against the host State? Is that right to arbitrate granted
by—and to be assessed by reference to—public international law? Should
it rather be conceived as a right arising out of a legal relationship falling
within the ambit of domestic legal orders—and thus governed by
municipal law? This fundamental question arose in a recent decision of
the High Court of Justice of England and Wales in the Republic of
Ecuador v. Occidental Exploration and Production Co. case, [2005]
EWHC (Comm), April 29, 2005, Mr. Justice Aikens, available on Prof.
Andrew Newcombe’s Investment Treaty Arbitration website at:
http://ita.law.uvic.ca/documents/oxyecuadorcourtopinion.pdf.
The case came before the High Court by way of an application
made by Ecuador pursuant to Section 67(1) of the Arbitration Act 1996.
Ecuador sought the annulment, on jurisdictional grounds, of an award
rendered by an international arbitral tribunal seized pursuant to a BIT
entered into by Ecuador and the United States in 1993. The award, which
ordered Ecuador to pay US $75 million to Occidental, was made in
London—the seat of arbitration, as determined by the tribunal—and the
arbitration was held under the UNCITRAL Rules.
The fundamental question of the arbitration’s true nature arose
because Occidental challenged the High Court’s power to hear Ecuador’s
annulment application on the basis of the English doctrine of nonjusticiability,
which “establishes a general principle that the Municipal
Courts of England and Wales do not have the competence to adjudicate
upon rights arising out of transactions entered into by independent
sovereign states between themselves on the plane of international law” (¶
1). Occidental argued that the case fell squarely within the nonjusticiability
doctrine, because the jurisdictional objections asserted by
Ecuador concerned exclusively the interpretation of provisions of the
BIT—an international treaty to which the United Kingdom is not even a
party. In response, Ecuador contended that the arbitration agreement on
the basis of which the award was made and the rights asserted by
Occidental were essentially private in nature. Ecuador added that such a
characterization was wholly consistent with reference to the 1958 New
York Arbitration Convention found in the BIT and which suggest that