Choice of Law In Investment Treaties - Chapter 2 - Investor-State Arbitration--Lessons for Asia

Author(s): 

Matthew Gearing

Page Count: 

6 pages

Media Description: 

PDF from "Investor-State Arbitration--Lessons for Asia"

Published: 

August, 2008

Jurisdictions: 

Asia

Practice Areas: 

Investment Disputes,

Dispute Resolution & Litigation,

ADR,

International Litigation

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Originally from Investor-State Arbitration--Lessons for Asia

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I have been given a very, very difficult subject: choice of law. It is also not a particularly fashionable subject. Some may say that is why it is appropriate that it has been given to me. If you look in your packs at some stage you will see that this is an area replete with case law. It is also an area where, and this is a recurring theme I think for today, where the case law conflicts.

 

I will try to answer a simple question: investment treaty arbitration, which laws apply? Indeed, do the parties have a choice? Let us take a step back to start with. I have put in the pack a quote from the famous American writer Ralph Waldo Emerson: “Good men must not obey the laws too well.” Now, that is all very well and that is perhaps a statement of aspiration, but which law does one apply in this situation and do the parties necessarily know in advance which law they must comply with? There is an interplay here between municipal law and state law. Often, states will seek refuge in their own law, whilst investors may seek refuge in international law.

 

To give you one example of this, I will mention briefly the case of World Duty Free and Kenya. This is a case where World Duty Free brought a claim in respect of, not surprisingly, a duty-free contract with Kenya, and Kenya effectively sought to avoid their obligations on the basis that they said that the initial contract was procured by a bribe, a bribe paid directly to the Kenyan president. Now I hesitate to say too much about this case because one of the arbitrators is in this room, I just want to mention one point, which is that the investor said it does not matter, because even if there was a bribe, under Kenyan law, that is perfectly acceptable. Now, in fact the tribunal found, as a matter of Kenyan law, that was not the case, but more interestingly the tribunal said, well, actually that does not matter because what is controlling here is international law, not municipal law. But there is in all of these cases often a conflict where one party will say, well, what you, the tribunal, should be looking at here is the municipal law, and the other party will be saying, well actually what you need be looking at is international law or the body of laws which makes up international law.