Comments on: Investor misconduct and investment treaty arbitration: mapping the terrain http://kluwerarbitrationblog.com/blog/2010/01/25/investor-misconduct-and-investment-treaty-arbitration-mapping-the-terrain/ An optional catch phrase or slogan goes here Thu, 29 Jul 2010 09:42:06 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: Juan Pablo Argentato http://kluwerarbitrationblog.com/blog/2010/01/25/investor-misconduct-and-investment-treaty-arbitration-mapping-the-terrain/comment-page-1/#comment-12896 Juan Pablo Argentato Tue, 26 Jan 2010 13:50:33 +0000 http://kluwerarbitrationblog.com/?p=1480#comment-12896 I agree with the last post of A. Newcome, there is certainly an importance for the State in pursuing an arbitration already started by a bold investor (that started arbitration even if he had acted illegally or in bad faith, with misrepresentation or fraud or others) to have things settled and an "easier" judgment to enforce in the investors' state. Further we find many cases in which Investors do start arbitrations for enormous amount in order to put pressure on states (even if they are not sure of their possibilities of winning) in order to finally solve or make an agreement with the state in more reasonable or mid-terms. Having this said when a State is actually for one time sure of its possibilities of winning (which does not happen a lot, notwithstanding that incredibly or not they actually win in a lot of cases) or maybe only confident that this time he did not act wrongly, to give to the investor’s misconduct a jurisdictional analysis in simplifying the terms. For me it is clear that there are other requirements to analyze in the jurisdictional phase which are objective (in terms of ICSID, if there was an investment, the nationality of the parties, etc) The merits would have to cover the more subjective object of the dispute, this is to say if the respondent acted not according to the treaty (breaches of articles, standards of treatment, expropriation, discrimination) or ALSO if the investor acted in an unfair way -its misconduct-. I can see the point in treating the investor’s misconduct as jurisdictional issues as nobody can seek protection given by laws if they had acted illegally. Once illegal or fraudulent actions are proved in the jurisdictional phase, tribunals are not willing to start a whole legal procedure that can protect a party acting illegally. (This also having into account possible implications of 'droit penale' or criminal law, which is governed by the sovereign state, and can not be settled by private arbitral justice) Having this said, and continuing with an example of criminal law, when a person is judged for murder, it is not enough to say that because it has committed murder he has no protection from the law. He has the right not to any condemnation, but to the fair condemnation according to his act, to a process and other right afterwards in prison. What I am trying to say is that the investor that acted with 'misconduct' has also the right to be judged accordingly to his acts, and not to be denied an award on the merits -that I assume it can be contrary to his interest- when balancing the investor’s wrong actions with the State actions. I agree with the last post of A. Newcome, there is certainly an importance for the State in pursuing an arbitration already started by a bold investor (that started arbitration even if he had acted illegally or in bad faith, with misrepresentation or fraud or others) to have things settled and an “easier” judgment to enforce in the investors’ state. Further we find many cases in which Investors do start arbitrations for enormous amount in order to put pressure on states (even if they are not sure of their possibilities of winning) in order to finally solve or make an agreement with the state in more reasonable or mid-terms.
Having this said when a State is actually for one time sure of its possibilities of winning (which does not happen a lot, notwithstanding that incredibly or not they actually win in a lot of cases) or maybe only confident that this time he did not act wrongly, to give to the investor’s misconduct a jurisdictional analysis in simplifying the terms. For me it is clear that there are other requirements to analyze in the jurisdictional phase which are objective (in terms of ICSID, if there was an investment, the nationality of the parties, etc) The merits would have to cover the more subjective object of the dispute, this is to say if the respondent acted not according to the treaty (breaches of articles, standards of treatment, expropriation, discrimination) or ALSO if the investor acted in an unfair way -its misconduct-.

I can see the point in treating the investor’s misconduct as jurisdictional issues as nobody can seek protection given by laws if they had acted illegally. Once illegal or fraudulent actions are proved in the jurisdictional phase, tribunals are not willing to start a whole legal procedure that can protect a party acting illegally. (This also having into account possible implications of ‘droit penale’ or criminal law, which is governed by the sovereign state, and can not be settled by private arbitral justice)

Having this said, and continuing with an example of criminal law, when a person is judged for murder, it is not enough to say that because it has committed murder he has no protection from the law. He has the right not to any condemnation, but to the fair condemnation according to his act, to a process and other right afterwards in prison. What I am trying to say is that the investor that acted with ‘misconduct’ has also the right to be judged accordingly to his acts, and not to be denied an award on the merits -that I assume it can be contrary to his interest- when balancing the investor’s wrong actions with the State actions.

]]> By: Andrew Newcombe http://kluwerarbitrationblog.com/blog/2010/01/25/investor-misconduct-and-investment-treaty-arbitration-mapping-the-terrain/comment-page-1/#comment-12862 Andrew Newcombe Mon, 25 Jan 2010 15:24:14 +0000 http://kluwerarbitrationblog.com/?p=1480#comment-12862 I agree that the state counterclaim issue is probably not a central concern. As a practical matter, if the state has a serious counterclaim it is unlikely to contest jurisdiction. Nevertheless, there may be cases (similar to the recent Turkey cases) where the investors want to abandon the claim, but the state wants to proceed against the investor, perhaps for strategic reasons or to simply make an example. Further, it may be easier for the state to enforce an international arbitration award against the investor in its home state (where assets are located) rather than a host state judgment (which the home state courts might look on with suspicion particularly if there is a perception that the local courts are not independent). I agree that the state counterclaim issue is probably not a central concern. As a practical matter, if the state has a serious counterclaim it is unlikely to contest jurisdiction. Nevertheless, there may be cases (similar to the recent Turkey cases) where the investors want to abandon the claim, but the state wants to proceed against the investor, perhaps for strategic reasons or to simply make an example. Further, it may be easier for the state to enforce an international arbitration award against the investor in its home state (where assets are located) rather than a host state judgment (which the home state courts might look on with suspicion particularly if there is a perception that the local courts are not independent).

]]> By: Mohammed Talib http://kluwerarbitrationblog.com/blog/2010/01/25/investor-misconduct-and-investment-treaty-arbitration-mapping-the-terrain/comment-page-1/#comment-12859 Mohammed Talib Mon, 25 Jan 2010 14:02:07 +0000 http://kluwerarbitrationblog.com/?p=1480#comment-12859 This is an interesting post and looks to be the beginning of an interesting series. In relation to the final point on the ability of states to bring a counterclaim being stymied by the jurisdiction requirement, I think this may not really be a concern. As the sovereign actor, states always have the upper hand in dealing with investments. They will be able to rely on domestic law provisions (either by applying existing law or passing new laws) to ensure that whatever actions they take to obtain satisfaction of their counterclaim in relation to the investment are legal. If the investor is already barred from obtaining a remedy from international arbitral tribunals (due to having unclean hands) then there is no remedy available to the investor given that diplomatic protection is already ousted by Article 27 of the ICSID Convention. With no domestic law remedies, and no international law tribunals willing to exercise jurisdiction, the investor would be left at the whim of the host state in an unfortunate Catch 22. This is an interesting post and looks to be the beginning of an interesting series.

In relation to the final point on the ability of states to bring a counterclaim being stymied by the jurisdiction requirement, I think this may not really be a concern.

As the sovereign actor, states always have the upper hand in dealing with investments. They will be able to rely on domestic law provisions (either by applying existing law or passing new laws) to ensure that whatever actions they take to obtain satisfaction of their counterclaim in relation to the investment are legal.

If the investor is already barred from obtaining a remedy from international arbitral tribunals (due to having unclean hands) then there is no remedy available to the investor given that diplomatic protection is already ousted by Article 27 of the ICSID Convention.

With no domestic law remedies, and no international law tribunals willing to exercise jurisdiction, the investor would be left at the whim of the host state in an unfortunate Catch 22.

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