Originally from European International Arbitration Review

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The interaction of conflict of laws and international investment arbitration, as well as the problems arising from their interaction, has attracted the attention of legal writing from the first days of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”).  In his 1968 article in the Indiana Law Journal, Phillipe Kahn was satisfied to see that the ICSID Convention created “a system - perhaps a controversial one – for determining the law applicable to investments.”  Fifty years later, despite the success story of the International Centre for the Settlement of Investment Disputes (“ICSID”), little progress has been made in better understanding this conflict-of-law system,  despite ICSID’s success story and despite awards’ abundance. Arbitral tribunals address conflict-of-law problems often only superficially and are satisfied with referring to ICSID Convention art. 42 or the respective provision of the investment treaty. 

In this article, I seek to raise the awareness for conflict-of-law problems arising in international investment arbitration; and, I propose solutions for some of them. In order to do so, section I will outline briefly the notion of the terms “conflict of laws” and “international investment arbitration” as I will use them in this article. Then I will make makes some general observations on contractual choices of law and their limits in order to develop general principles of (private international) law in Section II. After these general elaborations, I will discuss rules for determining the applicable substantive law in international investment arbitration proceedings under the ICSID Convention in section III, as well as under rules for commercial arbitration in section IV. I will continue with painting a broader picture, which not only considers the applicable law stricto sensu, but which includes the important role of municipal law for the interpretation of bilateral and multilateral international investment agreements (“IIAs”) in section VI. After these discussions of applicable substantive law, I will conclude with procedural implications in section V and give a general outlook in section VII.