Originally from Dispute Resolution Journal

Adapted from the author’s presentation at the 24th annual meeting of the ICC Institute of World Business Law, in Paris on November 15, 2004, this article considers the issue of multiple arbitral proceedings relating to the same or similar issues in the context of investment arbitration. It examines how this problem has arisen and how it threatens the legal security of international arbitration. It also offers some practical approaches to resolving this problem.

Investment arbitration has brought enormous changes to the field of international arbitration. It has expanded the dispute resolution choices available to investors, but it has also enabled investors to commence parallel investment arbitration proceedings relating to the same subject matter. Such parallel proceedings could give rise to awards with inconsistent conclusions, or even scandalously contradictory awards. The question is: Will this problem tarnish the high regard in which international arbitration is held? This article highlights the importance of flexibility in order to maintain international arbitration’s well-deserved reputation in the brave new world of investment arbitration.

Enforceability of Treaty Obligations

It is now widely accepted in arbitral jurisprudence that an offer, made by a sovereign State party to a multilateral or bilateral investment treaty (BIT), to submit disputes to arbitration, if accepted by a foreign investor, establishes an enforceable arbitration agreement.1 The undertakings made by Host States (i.e., states where foreign investments are made) under these treaties, such as an agreement to provide “just and equal treatment,” “nondiscriminatory treatment,” or “most-favored-nation treatment,” are binding and enforceable.

Investment protection treaties also impose obligations on Host States not to directly or indirectly expropriate an investor’s property. As a result, in investment arbitration, arbitral tribunals often must assess the legal consequences of actions by a Host State that affect a foreign investment and determine whether, for example, the State’s fiscal framework constituted an indirect expropriation of an investment for treaty purposes.