Arbitral Jurisdictional Regulation in Investment Treaty Arbitration and Domestic Courts

The context of investor–state dispute settlement is susceptible to allegations of tensions between the international and the domestic. The tension starts from the proposition that by signing investment treaties states surrender parts of their sovereignty,¹ and that by consenting to international arbitration with foreign investors states delegate, in certain respects, part of their domestic jurisdiction to international arbitrators.² It continues with a number of jurisdictional overlaps of investment arbitral tribunals and domestic courts.³ The tension is further reinforced by the ability of domestic courts to set aside or deny recognition and/or enforcement of investment arbitral awards,⁴ with the record of some prominent investment awards being set aside.⁵ But in order to inquire whether domestic judges are indeed keen to challenge what international arbitrators do, one needs to move away from the macro perspective focusing on outcomes, and take a micro perspective observing the details of judicial analyses. This article will do so in respect of one peculiar activity of arbitral tribunals, namely their law-making regarding their own jurisdiction.

The evolution of investment treaty arbitration has witnessed a rise of arbitral law-making.⁶ Within that broad topic one peculiar phenomenon can be identified, and that is the arbitral law-making function in respect of their own jurisdiction. This is an intriguing development because conventional theory holds that jurisdictional regulation in this field is governed by the principle of consensualism, which essentially means that the jurisdiction of arbitral tribunals is defined by party consent. However, practice demonstrates that investment arbitral tribunals have generated rules that direct the interpretation and application of party-provided jurisdictional rules, and even impose independent jurisdictional limits. I label the production of such rules arbitral jurisdictional regulation.⁷ It can be intuitively expected that domestic courts would contest the development of arbitrator-made jurisdictional rules on first sight, simply because of the consensual theory of jurisdictional regulation in this field. The question is whether that has indeed been the case.

This article examines the effect of the controlling role of domestic courts on the development of arbitral jurisdictional regulation. Specifically, the article tracks the treatment of arbitrator-made jurisdictional rules by domestic courts reviewing investment arbitral decisions in set aside and recognition/enforcement proceedings. The article answers the above-stated question in the negative: domestic courts have not been resistant to but rather supportive of the proliferation of arbitrator-made jurisdictional rules. This can be observed in two respects. First, domestic courts have relied on arbitrator-made rules and treated their development as parts of interpretative exercises and as part of the arbitral judicial function. Secondly, domestic courts have engaged in discourses on the appropriateness of arbitrator-made jurisdictional rules in substance. These findings contradict the narratives about the tension between the international and the domestic and the backlash against investment treaty arbitration. Domestic courts have been cooperative with arbitral tribunals, and they have refrained from challenging the arbitral law-making function in principle. The practice appears positive overall, because of the potential of domestic courts to contribute to the law-making process and the production of nuanced rules governing the jurisdiction of investment arbitral tribunals. However, the engagement of domestic courts in the law-making process has not been substantial so far, and domestic courts should make an effort to increase their engagement. It is important to bear in mind that this discussion is limited to investment treaty arbitration, and its conclusions do not apply to contractual and statutory arbitrations governed by domestic laws.

Section 2 sets the stage by addressing the concept of arbitral jurisdictional regulation, paying attention also to its treatment by annulment committees within the framework of the International Centre for Settlement of Investment Disputes (ICSID). Section 3 addresses the potential resistance of domestic courts towards arbitral jurisdictional regulation, and Section 4 then analyses the actual practice of domestic courts in this respect. Section 5 puts the findings of Section 4 in the context of a communicative law-making process and discusses the potential of domestic courts to advance their engagement in the making of arbitrator-made jurisdictional rules. Section 6 concludes.

Before proceeding to the treatment of arbitral jurisdictional regulation by domestic courts, this section will first address its concept (A), and briefly discuss the attitude of ICSID annulment committees towards that phenomenon (B).