The Authority of Domestic Courts in Adjudicating International Investment Disputes: beyond the Distinction between Treaty and Contract Claims
| DOI | 10.1093/jnlids/ids026 |
| Date | 03 January 2013 |
| Pages | 175-195 |
| Year | 2013 |
| Published By | Oxford University Press |
Journal of International Dispute Settlement, Vol. 4, No. 1 (2013), pp. 175–195
doi:10.1093/jnlids/ids026
Published Advance Access January 3, 2013
The Authority of Domestic Courts in
Adjudicating International Investment
Disputes: Beyond the Distinction Between
Treaty and Contract Claims
THIAGO BRAZ JARDIM OLIVEIRA*
While it is widely acknowledged that international tribunals may, depending on their
jurisdictional entitlements, entertain treaty claims as well as claims arising out of
breaches of contract, the exercise of jurisdiction by domestic courts has generally
been deemed to be limited to matters of national law. What is more, domestic
adjudication has generally been considered without consequence for the outcome of
a number of international proceedings. However, is deference to international
dispute settlement mechanisms really compatible with dispute settlement clauses
contained in investment treaties and contractual agreements that foresee a role to be
played by domestic courts? The answer attempted by this article is in the negative.
On the one hand, the identity of a legal dispute within the jurisdiction of different
forums is not dependent on the cause of action that might be invoked, nor is the
distinction between contract claims and treaty claims one that necessarily justifies the
existence of two wholly separate layers of legal obligations. This may be illustrated
through an assessment of how international jurisdictional entitlements exist and
interact with specific dispute settlement clauses contained in contracts and treaties.
On the other hand, where a distinction based on the causes of action might exist,
municipal courts that deal strictly with matters of domestic law ought not to be
deprived of influence on the outcome of international proceedings. In this regard, an
analysis of the consequences for international tribunals of adjudication by municipal
courts over derivative claims and investment disputes in general will be of avail.
1. Introduction
While it is widely acknowledged that international tribunals may, depending on
their jurisdictional entitlements, entertain treaty claims as well as claims arising
out of breaches of contract,
1
the exercise of jurisdiction by domestic courts has
* Teaching assistant (Faculty of Law, University of Geneva); PhD Candidate in international law (Graduate
Institute, Geneva). Email: thiago.jardim@graduateinstitute.ch. I am grateful to Arianna Whelan for her helpful
comments on earlier drafts of this paper.
1
The acknowledgement of a tribunal’s ability to entertain treaty and contract claims has also been made in
ways that go beyond the interpretation of the actual jurisdictional entitlement contained in the one single treaty
instrument. In the unpublished decision on jurisdiction in Noble Energy v Ecuador, the tribunal said that the
claims arising under two distinct domestic law contracts and the Ecuador–US investment treaty could be
disposed of together. Each of the three distinct legal instruments envisaged settlement by an ICSID tribunal in
relation to their own, not strictly identical, subject-matters. 5 March 2008, ICSID Case No ARB/05/12, paras
188–207.
The Author 2013. Published by Oxford University Press. All rights reserved. For permissio ns,
please e-mail: journals.permissions@oup.com
generally been deemed to be limited to matters of national law.
2
What is more,
domestic adjudication has generally been considered without consequence to
the outcome of a number of international proceedings.
3
However, is deference
to international dispute settlement mechanisms really compatible with dispute
settlement clauses contained in investment treaties and contractual agreements
that foresee a role to be played by domestic courts?
To say that application by domestic courts of international law (and all its
accompanying consequences) is dependent on the nature of the national legal
system involved is to state only part of the truth. As a matter of international
law, treaty enforcement by domestic courts may simply be permitted, required
or prohibited. In fact, whether monist or dualist, a domes tic legal system might
decide to confer jurisdiction upon its nation al judiciary over certain matter s but
lack the authority under international law to do so. This is generally the case in
domestic adjudication over a foreign State that would normally be entitled to
jurisdictional immunities. Municipal courts may, too, not be domestically
empowered where international law allows them to be. For example, the for um
non conveniens doctrine might prevent municipal courts from assuming
jurisdiction over matters more closely connected with a foreign for um,
although, from the point of view of international law, these could perfectly
be subjected to the authority of the former. While the way in which domestic
legal systems give effect to international law commitments is left to the
discretion of States, international law is ultimately concer ned with the actual
consequences for the international legal system.
For adjudication by domestic courts of international law to be opposable at
the level it purports to act it must, for example, be grounded on a proper
jurisdictional entitlement conferred by internation al law itself.
4
Investment
agreements usually embody such jurisdictional entit lements. Indeed, whenever
consent to jurisdiction exists, resort to domestic cour ts is often provided for as
a complementary or alternative method of international dispute settlement.
5
Here it is submitted that, inasmuch as such jurisdiction is exercised over a
dispute that exists in relation to international law, an international tribunal
called in over a matter already (or being) settled by national courts cannot
2
For this view regarding general international law, see Sean Murphy, ‘Does International Law Obligate
States to Open Their National Courts to Persons for the Invocation of Treaty Norms That Protect or Benefit
Persons?’ in David Sloss (ed), The Role of Domestic Courts in Treaty Enforcement (CUP 2009) 61–119.
3
Most remarkable are cases in which tribunals have overlooked the importance of recourse to domestic
litigation despite the existence of an express requirement of prior recourse to municipal cour ts. Maffezini v Spain,
Decision on Jurisdiction 25 January 2000 (2001) 40 ILM 1129 paras 38 ff; Siemens v Argentina, Decision on
Jurisdiction, 3 August 2004, paras 82 ff. In both instances, the tribunals relied upon most-favoured-nation
clauses to circumvent the requirement. For an analysis on whether jurisdictional limits can be modified through
most-favoured-nation clauses, see Zachary Douglas, ‘The MFN Clause in Investment Arbitration: Treaty
Interpretation Off the Rails’ (2011) 2 JIDS 97–114.
4
This is no more than the positive aspect of ‘a fundamental rule, repeatedly reaffirmed in the jurisprudence
of the ICJ, that a State cannot, without its consent, be compelled to submit its disputes with other States to
[international] adjudication’. Western Sahara (Advisory Opinion) ICJ Rep [1975] 23, 28.
5
Prior recourse to domestic courts: see for example Argentina/Spain BIT 1991, signed 3 October 1991,
1699 UNTS 202 Art 10(3)(a); Germany/Argentina BIT 1991, signed 9 April 1991, BGBl II 1993, 1245 Art
10(a); United Kingdom/Egypt BIT 1975, signed 11 June 1975, UKTS 97 (1976), Cmnd 6638 Art 8(1); France/
Morocco BIT 1996, signed 13 January 1996, (24 March 2000) 71 Journal Officiel de la Re
´publique Franc¸aise
4536 Art 10. Fork in the road: see for example UK-Chile BIT Art 7(3); Argentina/United States BIT 1991,
signed 14 November 1991, S Treaty Doc No 103-2 (1993), (1992) 31 ILM 124 Art 3(a); Italy/Lebanon BIT
1997, signed 7 November 1997, GU 19.11.99 n 272 s.o. n 202 Art 7(2); Energy Charter Treaty signed 17
December 1994 [1994] OJ L380/24 Art 26(3)(b)(i).
Journal of International Dispute Settlement176
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