Originally from World Arbitration and Mediation Review (WAMR)

ABSTRACT

States often turn to subsequent agreements (“SAs”) to interpret treaties, including investment treaties. Yet, grappling with the implications and roles of such agreements in the interpretation and application of Bilateral Investment Treaties (“BITs”) is challenging. This article endeavors to offer a framework for navigating this complex terrain. The initial step in our analysis distinguishes between SAs and de facto amendments (“DFA” or “DFAs”), as this differentiation provides a foundational basis for arbitral tribunals confronted with SAs. The key question is whether an SA genuinely seeks to elucidate a treaty. Where the answer is no, we posit that the SA transcends interpretation and becomes a DFA. A central argument of our article is that arbitral tribunals may refuse to enforce DFAs that violate investors’ legitimate expectations. We then provide guidance on discerning binding from non-binding SAs. We argue that arbitral tribunals should uphold truly binding post-settlement agreements, as doing so upholds the integrity of the treaty while not undermining investors’ legitimate expectations. In conclusion, we offer recommendations for arbitrators when dealing with SAs and provide insights on how tribunals may prevent states from overstepping their authority in the execution of SAs. This article contributes to the ongoing discussion about the interpretation and enforcement of investment treaties, and specifically SAs, by addressing a pressing issue at the intersection of international law and foreign investor protection.