What is the future of the precedent in investment arbitration?

Master Thesis

International and European Law: Public International Law University of Amsterdam

What is the future of the precedent in investment arbitration?

Oana-Jeanina Astilean

Thesis Supervisor: Prof. Kevin Jon Heller

TABLEOFCONTENTS

ABSTRACT...3

I. INTRODUCTION ...3

1. Research inquiry and aim ...5

2. Methodology ...5

II. THE ROLE OF THE PRECEDENT IN INVESTMENTARBITRATION: PRESENTAND FUTURE DEVELOPMENTS ...6

1. Is there a doctrine of precedent in investment arbitration? ...7

1.1. The weight attributed to precedent ...9

1.2. De facto stare decisis in ICSID jurisprudence ...11

1.3. Skepticism against the recognition of precedent ...15

2. Analysis of concepts and trends behind the emergence of investment precedent 19 .. 2.1. Degrees of precedent. Persuasive precedent v. binding precedent ...20

2.2. Source of precedent. Moral obligation v. legal obligation ...22

2.3. Precedent before international courts and tribunals ...24

2.4. Precedent in commercial arbitration ...28

3. Possible developments of the doctrine of stare decisis in investment arbitration 30 . 3.1. Toward a justified doctrine of precedent in the ICSID system? ...31

3.2. Toward a parallel with the role of precedent in the WTO? ...33

3.3. A future for precedent in the context of the TTIP? ...36

III. CONCLUSION ...37

A

While it is widely recognized that there is no doctrine of stare decisis in international law, the precedential value of awards rendered by investment arbitrators appears remarkably significant for the evolution of the investment jurisprudence. A de facto practice of precedent certainly exists in international investment law, in spite of the views that the tribunal's sole duty is to resolve the dispute before it. Well-reasoned awards regarded as persuasive precedents do not only represent a useful instrument for maximizing the normative potential of transnational arbitration, but their subsequent publication and enforcement might lead to the creation of a general arbitral principle of stare decisis possessing a transnational stature. In the broader context, it is apparent that most international dispute settlement bodies officially reject the principle of binding precedent, while at the same time they effectively embrace it. In the end, the development of arbitral precedent significantly depends on the availability of the awards to the legal community and the existence of a body of treaties susceptible to case law development. Lines of precedent stand out more firmly whereas a dispute settlement system consists of an appellate body. Nevertheless, an attempt to revival the role of precedent in investment arbitration by establishing an appeals facility comes at certain expenses, apparently unbearable for the current state of investment arbitration. Ultimately, the key lessons from precedent reside in its forward-looking aspects, encompassed by the “Darwinian struggle”, in which only the well-reasoned awards survive whereas the unfit will perish.

I.

I

The importance of minimizing uncertainties and enhancing predictability in the transnational business world goes hand in hand with the general principle that similar cases should be treated alike. A cursory examination of awards in investment arbitration, a field of

recent vintage that has come into existence with remarkable speed, demonstrates unequivocally that arbitrators frequently refer to previous decisions of other tribunals.

For litigants, precedent can serve as an instrument of persuasion. For business managers and government planners, it provides a way to predict how future disputes will be resolved. And for the arbitrators, prior rulings can justify awards to the rest of the world and enhance the prospect that similar cases will be treated similarly.” As such, past investment 1 awards have a direct and immediate impact on the realities of international investment life, the attitude of states, and the mind of arbitrators in later cases.

Irrespective of the considerations behind including references to previous rulings, the question emerges as to the role and weight which they should play in the tribunal’s determination of the issues in the case before it. Whereas the legal status of the corpus of investment decisions as a source of law is in theory equal to that of other types of international courts or tribunals, the current practice advances the query of whether past judgements are invested with a particular type of authority. The incidence of both identical lines of reasoning and contrary judgments in similar or identical factual contexts, gives rise to serious concerns for investors as regards consistency, the respect for their legitimate expectations and the destiny of future outcomes.

As shrewdly put forward, “that a special jurisprudence is developing from the leading awards in the domain of investment arbitration can only be denied by those determined to close their eyes.” Whether such a stare decisis practice is workable in the context of 2 investment arbitration and to what extent it might further develop, given the decentralized mode of regulation with ad hoc tribunals and no central institution binding them together, remains a task to determine by the present paper.

William W. Park, The Predictability Paradox: Arbitrators and Applicable Law, Dossiers XI of the

1

ICC Inst. of World Bus. L. (ICC Publication No. 753E) (2014), p. 14.

Jan Paulsson, International Arbitration and the Generation of Legal Norms: Treaty Arbitration and

2

International Law, Presentation, ICCA Annual Congress 2006, May 21, 2006, accessed at

1. Research inquiry and aim

This thesis seeks to provide a better and realistic understanding as to how precedent ought to function in investment arbitration in the present and future contexts. Starting from the premise of the ongoing debate as regards the standing of investment decisions and awards, the inquiry is designed to progressively identify and evaluate the concepts and rationales behind the use of a doctrine of stare decisis in investment disputes. In the attempt to anticipate an evolution path of the precedent, further reforms are challenged to the effect of ascertaining a possible framework for the operation of a de facto precedent going forward.

2. Methodology

The present research inquiry calls for an elaborate and systematic methodology. As such, I develop my thesis in three Parts.

Part 1, having a descriptive nature with some normative nuances, introduces a review of the decisions and awards rendered by investment tribunals with the aim of establishing what is the status of the precedent in investment arbitration. It addresses the emerging views on the role of stare decisis and the dimensions of the arbitrators reasoning as to the contour of a practice of precedent.

Part 2 is construed in an evaluative fashion and analyzes in depth, on the basis of fundamental rationales for the existence of precedent, whether it is possible to speak of an investment jurisprudence developing from a series of otherwise disconnected tribunals with ever-revolving members. The discussion further evolves beyond a purely investment law viewpoint and aims at taking into account international trends in order to determine sources of inspiration for precedent. A brief consideration of the place of precedent before international courts and tribunals and in international commercial arbitration advances the particular grounds on which the arguments for precedent in investment arbitration could be premised.

Part 3 makes recommendations to further redefine the system of precedent in response to the emerging global trends. Elaborated in an advisory manner, it seeks to provide some incentives to the research inquiry, alongside suggestions for reforms and constructive criticism.

The thesis concludes with an alternative approach that reconciles the reluctance against a precedent in the sense of a strict decisional constraint with the reality that investment awards and decisions play a decisive role for the progressive and dynamic development of investment law.

II. T

: P

The latin maxim ‘stare decisis’ expresses the basis of the doctrine of precedent which means to ‘stand by what is decided’, to abide by former decisions when the same points arise again in litigation, or from the common law approach, refers to the situation under which a 3 court, when deciding a point of law, follows a holding of a prior court on that point if that prior court is superior in the judicial hierarchy.4

Precedent in investment treaty arbitration has recently received substantial attention and a unique position in the arbitration universe due to its public dimension that has favoured an unprecedented level of transparency and availability of the awards. Investment disputes 5 always involve a state party and concern matters of great public interest. The regime of

Oxford Dictionary of Law (Oxford: OUP, 1997) 348, 443. See also Black’s Law Dictionary (7th edn,

3

1999), p. 1195.

J.W. Harris, Legal Philosophies, 168 (1980).

4

Most awards and decisions are now publicly available after they have been issued. The ICSID

5

database of pending and concluded cases can be accessed at https://icsid.worldbank.org/en/Pages/ cases/searchcases.aspx. See also Jean-Jacques Arnaldez, Yves Derains, Dominique Hascher (eds.), Collection of ICC Arbitral Awards 1996–2000, Vol. IV (2003). Other sources include ICSID reports, printed publications such as International Legal Materials, Journal de Droit International and ICSID Review Foreign Investment Law Journal, or online commercial legal service providers like Kluwer Arbitration, LEXIS and Westlaw. The continued publication of the tribunals reasoning is also envisaged by ICSID Rule 48 of the Arbitration Rules according to which the Centre shall “promptly include in its publications excerpts of the legal reasoning of the Tribunal.”

investment law envisages the sovereigns’ commitment to protect investments made by foreign investors by granting the latter certain substantive rights and the possibility to bring a claim against the former. Typically, bilateral investment treaties (BITs) and international agreements (IAs) contain specific standards of protection, i.e. adequate compensation in case of expropriation, fair and equitable treatment, full protection and security. By interpreting such open-ended and ambiguous concepts, investment arbitrators have a crucial role in the development of investment law and customary international law.

Whereas the fundamental goal of the investment scene is to create an attractive business environment, a key condition favourable to investments is a stable legal framework. For this reason, recognition and control over the the outcomes of investment disputes, translated in an evolution of the precedent in investment arbitration, are considered to be necessary to promote certainty in investment awards and to protect the legitimacy of international investment law in the eyes of investors and host States.6

1. Is there a doctrine of precedent in investment arbitration?

While it is widely recognized that there is no doctrine of stare decisis or binding precedents in international law, the precedential value of awards rendered by investment arbitrators appears remarkably significant for the evolution of the investment jurisprudence. 7 International investment law is rapidly developing through a mounting case-law which is dominated by the presence of both convergent and conflicting arbitral decisions. When a 8 dispute arises between the host State and the foreign investor, the question of how the

Tai-Heng Cheng, Precedent and Control in Investment Treaty Arbitration, (2007) 30 Fordham Int'l

6

L.J., p. 1022.

Jeffery P. Commission, Precedent in Investment Treaty Arbitration, (2007) 24 J Int’l Arb, p. 129.

7

Devrim Deniz Celik, Absence of Precedent in Investment Arbitration: A missed Opportunity to

8

tribunal will construe the outcome as regards the parties’ substantial rights and obligations under the BITs cannot be answered with certainty.9

Arbitral tribunals are allowed to interpret the standards of protection narrowly or broadly and are not prevented from taking different views in deciding the case before them. This originates from the absence of a legally binding precedent in investment arbitration which further facilitates the tendency of arbitrators to ‘cherry pick’ from past decisions to support their findings or, on the contrary, to totally distance themselves from them. 10

The variety of claims settled by tribunals usually concern the same legal issues due to the similarity of the legal instruments under which disputes are brought. As such, based on the resemblances of the language of the BITs and sometimes the factual background in question, investment tribunals increasingly refer to prior decisions of other investment tribunals in their own reasoning. Reliance on past awards represents, as it will be observed below, a regular trend and tribunals actively engage in discussions of previous cases and their interpretation, given the fact they are publicly available.

When a coherent line of reasoning appears on a given legal issue, the question has emerged of whether arbitrators should follow the same approach or whether they benefit of total discretion to deliver a different judgement in respect of the matter at stake. Domestic laws, institutional rules of arbitration or international agreements do not contain explicit provisions about the effects of previous arbitral decisions in the investment environment. However, contrasting outcomes in respect of this issue leave the status of arbitral precedent unclear both in theory and practice and question the extent to which awards are possibly 11 bound by a system of precedent.

In this context, two main positions are defended in the academic debate on the role of the doctrine of stare decisis in investment arbitration, positions that also divide tribunals in

Ole Kristian Fauchald, The Legal Reasoning of ICSID Tribunals: An Empirical Analysis, (2008)

9

19(2) Eur J Intl L 301, p. 337.

Efraim Chalamish, The Future of Bilateral Investment Treaties: A De Facto Multilateral

10

Agreement, (2009) Brook J Intl L 303, p. 315.

W. Mark C. Weidemaier, Toward a Theory of Precedent in Arbitration, 51 Wm. & Mary L. Rev.

11

practice. On one hand, there is the view that arbitrators consistently rely on prior decisions 12 and even feel compelled to follow these decisions when resolving a dispute. This approach confirms the practice of a de facto system of precedent. On the other hand, it is argued that there is no regard for previous rulings and they do not create precedential authority, as arbitrators act on an ad hoc basis and retain a discretionary power to resolve the case in accordance with the factual and legal background at issue.

In the following, I will present how the two emerging approaches develop in practice and which are the considerations adopted by tribunals in order to either acknowledge their increasing citation to precedent, or, to distance themselves from previous awards.

1.1. The weight attributed to precedent

The attitude of arbitral tribunals varies between different trends as to the role of the precedent in the margins of the two emerging positions. The review of decisions and awards further discussed in sub-sections 1.2. and 1.3., illustrates the practical importance of the debate and the various degrees of the weight conferred to previous cases in investment arbitration. As a preliminary roadmap, a classification of the tribunals’ perspectives in four categories can be identified in respect of the consideration attributed to precedent in their 13 reasoning.

A first category, which could be regarded as the persuasive authority category, includes the tribunals view that there is a reasonable assumption that international arbitral tribunals generally take into account the precedents set by other international tribunals, or 14

Florian Grisel, Precedent in Investment Arbitration: The Case of Compound Interest, 2 Peking U.

12

Transnat'l L. Rev. 2014, p. 218.

Andrés Rigo Sureda, Precedent in Investment Treaty Arbitration, Oxford University Press, 2009, p.

13

835.

El Paso Energy International Co v Argentine Republic, Decision on Jurisdiction, 27 April 2006,

14

ICSID Case No ARB/03/15, para. 39. See also BP American Production Co v Argentine Republic, Decision on Jurisdiction, 27 July 2006, ICSID Case No. ARB/04/8, para. 42.

that the interpretations of other tribunals are instructive or carefully considered. 15 16 Moreover, certain tribunals outlined that their task was rendered easier by the fact that previous decisions have already addressed the issue at stake17or analyzed precedents as a broad trend which emerges from ICSID jurisprudence and which has a persuasive authority 18 that may advance the body of law.19

In the second category, tribunals go even further and consider they are bound to adduce reasons for departing from the obligation of consistency and of observance of settled principles. This policy articulated by the Saipem tribunal aims at providing 20 21 22 predictability, consistency, legal stability and respect for the expectations of investors as part of the treatment guaranteed by the investment treaties.

The third category envisages the Canadian Cattlemen case principle, according to 23 which the tribunal seeks to reinforce the relevance of precedents by reference to international law, linking Article 32 VCLT with the provisions of Article 38 of the Statute of the ICJ, in light of Article 42(1) ICSID Convention. Also, a de facto role of precedent can also be

Liberian Eastern Timber Corporation (‘LETCO’) v The Republic of Liberia, Award, 31 March

15

1986, ICSID Case No. ARB/83/2, 2 ICSID Reports 352.

AES Corporation v. The Argentine Republic, Decision on Jurisdiction, 26 April 2005, ICSID Case

16

No. ARB/02/17. See also Jan de Nul N.V. and Dredging International N.V. v Arab Republic of Egypt, Decision on Jurisdiction, 16 June 2006, ICSID Case No. ARB/04/13, para 64.

CMS Gas Transmission Co. v. Argentina, Decision on Objections to Jurisdiction, 17 July 2003

17

ICSID Case No. ARB/01/8, para. 72.

Malaysian Historical Salvors, SDN, BHD v Malaysia, Award, 17 May 2007, ICSID Case No. ARB/

18

05/10, para. 104.

ADC Affiliate Limited and ADC & ADMC Management Limited v. Republic of Hungary, Award, 2

19

October 2006, ICSID Case No. ARB/03/16, para. 293.

H. Lauterpacht, The Development of International Law by the International Court (1958), p. 15.

20

As regards the contention that tribunals should not depart from earlier decisions without a

21

compelling reason for doing so, See also AWG Group Ltd v The Argentine Republic, UNCITRAL, Decision on Liability, 30 July 2010, para. 189; Glamis Gold, Ltd. v. The United States of America, UNCITRAL, Award, 8 June 2009, para. 8; Christian J. Tams, An Appealing Option? The Debate about an ICSID Appellate Structure, 4 Transnat'l Disp. Mgmt., Issue (2007), p. 41.

Saipem S.p.A. v. The People's Republic of Bangladesh, Award, 30 June 2009, ICSID Case No. ARB/

22

05/7, para. 90.

Canadian Cattlemen for Fair Trade v United States, NAFTA, Award on Jurisdiction, 28 January

23

2008. See also AWG Group Ltd v The Argentine Republic, UNCITRAL, Decision on Liability, 30 July 2010, para. 189.

formally inferred from Art. 1131 (1) of the NAFTA which calls for application of the “applicable rules of international law”.24

As to the last category, arbitral awards and decisions are predominated by the tribunals’ effort to distinguish the instant case from preceding cases and to distance themselves from previous rulings on the grounds examined in the part dedicated to the skepticism against the recognition of the precedent.

1.2. De facto stare decisis in ICSID jurisprudence

The International Centre for Settlement of Investment Disputes (ICSID), the only arbitral institution centred entirely on investment disputes, has significantly contributed over the past years to the expanding corpus of investment jurisprudence. With the increase of the number of BITs awards, the phenomenon of an ICSID precedent has been shaped and further addressed as a hot topic at numerous international conferences and examined in leading 25 commentaries.26

A review of the burgeoning case-law indicates that a de facto practice of precedent certainly exists in international investment law. Such de facto stare decisis exists when a 27

International Thunderbird Gaming Corp. v. United Mexican States, NAFTA/UNCITRAL, Separate

24

Opinion, 26 January 2006, para.129.

Alejandro A. Escobar, The Use of ICSID Precedents by ICSID and ICSID Tribunals, Presentation at

25

the British Institute of International and Comparative Law (BIICL) Annual Meeting panel, Used and Abused: The Role of Precedent in Investment Protection Arbitration, June 19, 2005; Christoph Schreuer, The Interpretation of Investment Treaties: Diversity and Harmonization, Presentation at Lincoln's Inn, Interpretation under the Vienna Convention on the Law of Treaties: 25 Years On, January 17, 2006; Matthew Weiniger, Is Past Performance a Guide to Future Performance? Precedent in Treaty Arbitration, Presentation at the BIICL, Seventh Investment Treaty Forum Public Conference, Procedural Aspects of Investment Treaty Arbitration, September 8, 2006.

Meg N. Kinnear, Andrea K. Bjorklund & John F.G. Hannaford, Investment Disputes Under NAFTA:

26

An Annotated Guide to NAFTA Chapter 11, 1136, 4–6 (2006); Christoph H. Schreuer, The ICSID Convention: A Commentary, p. 617 (2001).

C. Schreuer and M. Weiniger, A Doctrine of Precedent?, in P Muchlinski, F Ortino and C Schreuer

27

tribunal follows a prior ruling in the absence of a legal obligation in this regard and, in our 28 case, is based on the plentiful occasions in which ICSID tribunals have routinely invoked and relied on previous decisions in order to support their findings. While the principle remains that tribunals in investment arbitration are not formally bound by previous decisions of other tribunals, the legal relevance of prior ICSID awards and their effect on subsequent decisions 29 is evidenced by the following illustrative cases.

AES v. Argentina, one of the awards in which the importance of the ICSID precedent 30 was discussed extensively, emphasizes the legal weight to be given to past decisions. The tribunal not only rejected the assertion that that due to the specificity and identity of each case absolutely no consideration might be given to other decisions in similar cases, but also 31 outlined that special attention should be accorded to prior judgements in the situation where the US-Argentina BIT, in conjunction with the ICSID Convention, provide the very same basis for the claim at issue in the current case and in some previous ones. Moreover, past 32 decisions dealing with the same or similar issues were considered as to indicate lines of reasoning of real interest which the tribunal is free to adopt if it shares the views already expressed by other tribunals. Also, precedents may be rightly considered as a matter of 33 comparison or inspiration when a tribunal has set a point of law or a certain interpretation to some relevant facts which is or will be met in other cases whatever the specificities of the dispute may be. Not least, the tribunal highlighted the contribution of the control 34 mechanisms provided for under the ICSID Convention to the development of a common legal opinion or jurisprudence constante to resolve difficult legal issues discussed in various cases with same substantial features.35

M. Weiniger, Special Issue on Precedent in Investment Arbitration, TDM 3 (2008).

28

Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd edition,

29

Oxford University Press 2012), p. 34. Supra n. 16. 30 Ibid., paras. 27-28. 31 Ibid., para. 29. 32 Ibid., para. 30. 33 Ibid., para. 31. 34 Ibid., para. 33. 35

The practice of a developing de facto case law has also been reiterated in the Gas Natural v. Argentina case where the tribunal, after reaching its conclusions, summarized 36 several incidental decisions and confirmed that it has not found or referred to any decisions or awards reaching a contrary conclusion.37

Further, in El Paso v. Argentina, the tribunal claimed that there is a “reasonable assumption that international arbitral tribunals, notably those established within the ICSID system, will generally take account of the precedents established by other arbitration organs, especially those set by other international tribunals. The present tribunal will follow the same line, especially since both parties, in their written pleadings and oral arguments, have heavily relied on precedent.’’38

Moreover, certain tribunals make no mention about the doctrine of precedent in general, and while simply refer to the ‘cases’ and ‘precedents’ throughout, they do not disguise their outright reliance on previous cases. For example, the CMS Gas tribunal 39 considered twelve prior ICSID cases, and noted that the “the task of the Tribunal is again rendered easier by the fact that a number of recent ICSID cases have had to discuss and decide on similar or comparable provisions concerning contracts and the scope of the Treaty”,40making reference to the well-known Lanco precedent and concluding that it shares the views expressed in the aforementioned decisions.

The significant relevance of past ICSID awards was also nuanced in ADC v. Hungary, where the tribunal stated that a “cautious reliance on certain principles developed in a number of those cases, as persuasive authority, may advance the body of law, which in turn may serve predictability in the interest of both investors and host States.”41

A landmark award that conferred an unprecedented value to previous decisions is Saipem v. Bangladesh. The ICSID tribunal expressed its views on the weight of past

Gas Natural SDG, S.A. v. The Argentine Republic, Decision on Jurisdiction, 17 June 2005, ICSID

36

Case No. ARB/03/10. Ibid., para. 36.

37

Supra n. 14.

38

Jeffery P. Commission, supra n. 7, p. 145.

39

Supra n. 17.

40

Supra n. 19.

decisions, as short of binding precedent, on the basis of the following considerations: “The Tribunal considers that it is not bound by previous decisions. At the same time, it is of the opinion that it must pay due consideration to earlier decisions of international tribunals. It believes that, subject to compelling contrary grounds, it has a duty to adopt solutions established in a series of consistent cases. It also believes that, subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the community of States and investors towards certainty of the rule of law.” 42 As such, by identifying the duty to adopt solutions in a series of consistent cases, along with the duty to contribute to the harmonious development of investment law, the tribunal gave a precedential and legitimizing effect to earlier cases, in order to promote depoliticized disputes and to foster certainty and predictability as regards their outcomes.

The above survey of decisions and awards outlines the tribunals’ various methods to address the issue of the precedent in their reasoning. There is no doubt that reliance on case law represents a common feature in investment disputes, in spite the various levels on which is construed. Whereas there is unanimity on the absence of a legal obligation to follow previous arbitral decisions within the meaning of a strict stare decisis, ICSID tribunals have developed a consistent practice of analyzing, referring to and even relying on earlier cases in rendering their awards. This has been interpreted as a de facto system of precedent within the ICSID framework, where past decisions are regarded as quasi-authoritative manifestations of the law. Also, it is important to observe that the arbitrators deciding the aforementioned 43 cases and other major arbitrations (i.e. Gabrielle Kaufmann-Kohler, Jan Paulsson, Francisco Orrego Vicuña, Albert Jan van der Berg, Karl-Heinz Böckstiegel), who share the same views as regards the tendency to follow precedents, are world leading arbitrators and practitioners with the highest numbers of appointments. This supporting factual argument denotes the 44

Supra n. 22.

42

August Reinisch, Chapter VI: Investment Arbitration - The Role of Precedent in ICSID Arbitration,

43

in Gerold Zeiler, Irene Welser, et al. (eds), (2008) Austrian Arbit. YrBk 495, p. 507.

Jeffery P. Commission, supra n. 7, p. 138. See also Sergio Puig, Social Capital in the Arbitration

44

practical significance attributed to the weight of precedent in investment arbitration by the most influential players in the field.

1.3. Skepticism against the recognition of precedent

At the other end of the debate is the contention that tribunals in investment arbitration are not bound in any way by previous decisions of other tribunals and, in particular, ICSID 45 tribunals have taken the absence of a rule of stare decisis in the ICSID arbitration system for granted. The basis for this approach takes into account the peculiarities of investment 46 disputes as differently constituted tribunals are established in an ad hoc manner for the purpose of resolving disputes independently, pursuant to their own factual circumstances.

Despite the fact some authors do not consider it convincing, the absence of a 47 doctrine of stare decisis is usually linked to Article 53(1) of the ICSID Convention, according to which ‘the award shall be binding on the parties’. Whereas the majority affirms that, in light of the Convention’s travaux preparatoires, this provision ‘may be read as excluding the applicability of the principle of binding precedent to successive ICSID cases’,48other scholars maintain that ‘nothing in the travaux preparatoires suggests that it should not be applied’.49

The departure from past decisions is motivated by arbitrators on multiple grounds. For instance, several tribunals claimed that no explicit provisions, either in the Convention or in the BIT, establish an obligation of stare decisis. Also, an emphasis is placed on the 50

Rudolf Dolzer and Christoph Schreuer, supra n. 29.

45

August Reinisch, supra n. 43, p. 508.

46

Gabrielle Kaufmann-Kohler, Arbitral Precedent: Dream, Necessity or Excuse?, (2007) 23 Arb Int’l,

47

p. 368.

C Schreuer and M Weiniger, supra n. 27.

48

See P Duprey, Do Arbitral Awards Constitute Precedents? Should Commercial Arbitration be

49

Distinguished in this Regard from Arbitration Based on Investment Treaties? in E Gaillard (ed), Towards a Uniform International Arbitration Law? (Juris Publishing 2005) 267; C Schreuer, Diversity and Harmonization of Treaty Interpretation in Investment Arbitration, (2006) 3–2 TDM 11.

El Paso v Argentina, supra n. 14, para. 39.

fundamental principle to examine every case in light of its own circumstances and the duty 51 to decide it on its own merits, independently of any apparent jurisprudential trend. In this 52 sense, the BITs provisions and the factual circumstances of the case should be decisive.53

Furthermore, tribunals repeatedly deny that they must follow earlier decisions even in relation to the meaning of the same or similar treaty provisions. This issue, along with other considerations regarding the insignificant relevance to be conferred to past awards, has been addressed in the SGS v. The Philippines case, in respect of umbrella clauses: “As will 54 become clear, the present Tribunal does not in all respects agree with the conclusions reached by the SGS v. Pakistan Tribunal on issues of the interpretation of arguably similar language in the Swiss-Philippines BIT. This raises a question whether, nonetheless, the present Tribunal should defer to the answers given by the SGS v. Pakistan Tribunal. The ICSID Convention provides only that awards rendered under it are ‘binding on the parties’ (Article 53(1)), a provision which might be regarded as directed to the res judicata effect of awards rather than their impact as precedents in later cases. In the Tribunal’s view, although different tribunals constituted under the ICSID system should in general seek to act consistently with each other, in the end it must be for each tribunal to exercise its competence in accordance with the applicable law, which will by definition be different for each BIT and each Respondent State. Moreover there is no doctrine of precedent in international law, if by precedent is meant a rule of the binding effect of a single decision. There is no hierarchy of international tribunals, and even if there were, there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals.”55

Similarly, as regards the meaning of the “in accordance with the laws of the host State” requirement, the Fraport tribunal clarified that the provision in question is a matter of treaty interpretation, and not of precedent or analogy, which must be determined in light of

Enron Corporation and Ponderosa Assets, LP v The Argentine Republic, Decision on Jurisdiction

51

(Ancillary Claim), 2 August 2004, ICSID Case No ARB/01/3, para. 25.

Burlington Resources Inc. v. Republic of Ecuador, Decision on Liability, 14 December 2012, ICSID

52

Case No. ARB/08/5, para. 187.

R. Rayfuse & E. Lauterpacht, 1 ICSID Rep. IX (1993).

53

SGS Société Générale SA v Republic of Philippines, Decision on Jurisdiction, 29 January 2004,

54

ICSID Case No ARB/02/6. Ibid., para. 97.

the terms, context, object and purpose of each BIT. As such, “the integrity of this interpretative process must not be compromised by the pronouncements of other arbitral tribunals in their interpretation of different treaties in wholly unrelated factual and legal contexts.”56

The proponents of the view that arbitrators should distance themselves from previous rulings strongly emphasize that the tribunal's sole duty is owed to the parties before it and the harmonization of investment treaty law is not a premise ought to influence its decision. The 57 partizan of this approach is in particular the Romak tribunal which held that arbitral awards 58 remain “mere sources of inspiration, comfort or reference to arbitrators” as they cannot be deemed to constitute the expression of a general consensus of the international community. Their examination is “not for the purposes of extracting from them rules of law, but as a means to provide context to the Parties’ allegations and arguments, and as to explain succinctly the Arbitral Tribunal’s own reasoning.” In this context, the role of the arbitral 59 tribunal to strictly resolve the dispute and not to develop a uniform body of case law is put forward in the following: “the Arbitral Tribunal has not been entrusted, by the Parties or otherwise, with a mission to ensure the coherence or development of arbitral jurisprudence. The Arbitral Tribunal’s mission is more mundane, but no less important: to resolve the present dispute between the Parties in a reasoned and persuasive manner, irrespective of the unintended consequences that this Arbitral Tribunal’s analysis might have on future disputes in general. It is for the legal doctrine as reflected in articles and books, and not for arbitrators in their awards, to set forth, promote or criticize general views regarding trends in, and the desired evolution of, investment law.”60

Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, Decision on

56

Jurisdiction, 16 August 2006, ICSID Case No. ARB/03/25, Dissenting Opinion Cremades, para. 7. Urbaser S.A. and Consorcio de Aguas Bilbao Biskaia, Bilbao Biskaia Ur Partzuergoa v. Argentina,

57

Decision on Claimants' Proposal to Disqualify Professor Campbell McLachlan, Arbitrator, 12 August 2010, ICSID Case No. ARB.07/26, para. 49 (noting that “despite many statements made in ICSID awards affirming the necessity or the duty to achieve consistency through ICSID case law, the principle remains that each Tribunal is sovereign in its decision making”).

Romak S.A. v. The Republic of Uzbekistan, Award, 26 November 2009, PCA Case No. AA280.

58

Ibid., para. 170.

59

Ibid., para. 171.

A sensitive issue that encourages the detachment from prior decisions is the misuse and abuse of precedents in the tribunals’ reasoning. With the aim of assuring a rigorous 61 scrutiny of awards, essential for the legitimacy of the adjudicative process in investment cases, it is fundamental to examine and debate both the merits and deficiencies of awards of interest, rather than simply rely on them. Otherwise, “repeating decisions taken in other cases, without making the factual and legal distinctions will affect the integrity of the international system for the protection of investments and its jurisprudence.”62Thus, while a proper reference to a past award can be of assistance, the misuse and mischaracterization of precedent could threaten the system itself.63

Moreover, it is argued that such careless reliance may constitute a reason for annulment under Article 52(1) of the ICSID Convention which sets forth the grounds upon which a party can invoke the annulment of an ICSID award. An allegation for either an excess of powers on the basis of Article 52(1)(b) or for a failure to state the reasons on which the award is based pursuant to Article 52(1)(e) can succeed if the tribunal has simply relied on earlier decisions without making an independent decision or developing its own reasons.64 As such, the concern of most arbitral tribunals to prove their distance from precedent and to emphasize their independent reasoning is also triggered by the possibility of annulment of the award in the situation where the facts or law of the case cannot be reasonably connected to the conclusions reached in the award by a tribunal that has entirely relied on a past judgement.

Not least, a less categorical view as to the rejection of the role of precedent in investment arbitration recognizes a certain weight that past decisions might carry in the tribunal’s determination. Whereas an investment treaty tribunal must interpret and apply the text of the relevant BIT, beyond the text of the treaty at issue, the tribunal will also consider

Jeffery P. Commission, supra n. 7, p. 154.

61

AES v. Argentina, supra n. 16, para. 22.

62

Matthew Weiniger, Is Past Performance a Guide to Future Performance: Precedent in Treaty

63

Arbitration, at the BIICL's Seventh Investment Treaty Forum Public Conference: Procedural Aspects of Investment Treaty Arbitration, September 8, 2006.

C. Schreuer and M. Weininger, Conversations across Cases: Is there a Doctrine of Precedent in

64

Investment Arbitration, in P. Muchlinski, F. Ortino, and C. Schreuer (eds), The Oxford Handbook of International Investment Law (2008) 8.

international law. The sources of international law are listed in Article 38(1) of the Statute 65 of the International Court of Justice (ICJ) and according to subparagraph (d), judicial decisions (which are presumed to include arbitral decisions) are considered subsidiary 66 means for the determination of rules of law. Thus, when applying international law, past decisions can have a confirmatory or explanatory effect and their use can only provide limited assistance for the identification or determination of rules of law, and not their creation or establishment. In the Canadian Cattlemen case, the tribunal addressed the relevance of 67 68 precedent through a correlation between Article 32 of the Vienna Convention on the Law of Treaties (VCLT) and Article 38 of the Statute of the ICJ. In the tribunal’s view, this provision “permits, as supplementary means of interpretation, not only preparatory work and circumstances of conclusion of the treaty, but indicates by the word ‘including’ that, beyond these two means expressly mentioned, other supplementary means may be applied. Article 38 [paragraph 1.d] of the Statute of the International Court of Justice provides that judicial decisions are applicable for the interpretation of public international law as ‘subsidiary means’. Therefore, they must be understood to be also supplementary means of interpretation in the sense of Article 32 VCLT.”69

2. Analysis of concepts and trends behind the emergence of investment precedent

Article 42(1) of the ICSID Convention provides: “The Tribunal shall decide a dispute in accordance

65

with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.”

Judith Gill, Is There a Special Role for Precedent in Investment Arbitration?, ICSID Review 2010,

66

25 (1), p. 91, available at https://academic.oup.com/icsidreview/article-abstract/25/1/87/617898/Is-There-a-Special-Role-for-Precedent-in?redirectedFrom=PDF

J. Paulsson, International Arbitration and the Generation of Legal Norms: Treaty Arbitration and

67

International Law, (2006) 3(5) Transnat’l Disp. Mgmt., at 2. Supra n. 23.

68

Ibid., para. 50.

Having discussed what is the current status of the precedent before investment tribunals, in this Part I will examine the dimensions of the doctrine of stare decisis in investment arbitration by assessing to what extent it is possible to speak of precedent and how it develops in practice in terms of its constraining force and the sources from which it derives. Next, a brief consideration of the place of precedent before intentional courts and tribunals and in international commercial arbitration will shape the current international trend as well as the distinctions that foster and individualize a different course of development for precedent in investment arbitration.

2.1. Degrees of precedent. Persuasive precedent v. binding precedent

Coherence and predictability of dispute settlement decisions is a fundamental aspect of any judicial or arbitration mechanism. At the same time, the values promoted by a system of precedent include stability, certainty, reliability, equality and uniformity of treatment. In 70 order to attain these ideals, it is possible that, as anticipated above, stare decisis exists both in a de jure (formal) and a de facto form. Whereas in the former situation the court has a legal 71 obligation to follow precedents, as practiced in common-law jurisdictions, in the latter case, specific to civil-law traditions, it follows a precedent without legally being bound to do so.72

Within this framework, where is the apparent doctrine of precedent in investment arbitration situated and why is it relevant in practice? In the context of arbitral precedent, it articulates the authority of prior awards to persuade future arbitrators to adhere to their solution.

While not having the status of a truly binding precedent as no legal instruments explicitly confer them this effect, past awards have acquired a very influential position,

Robert A. Sprecher, The Development of the Doctrine of Stare Decisis and the Extent to which it

70

Should Be Applied, 31 A.B.A. J. 501 (1945), pp. 505–506.

Raj Bhala, The Myth about Stare Decisis and International Trade Law (Part One of a Trilogy,

71

(1999) 14 Am. U Int’l L Rev. 845, pp. 940–942.

Klaus Peter Berger, International Economic Arbitration (1993), p. 514.

highly reminiscent of stare decisis in the common-law systems. As shown above, it is 73 evident that investment tribunals do cite previous decisions, analyze and consider their reasoning, and frequently even feel bound by them in light of the duty of consistency of legal interpretation. As such, precedents are followed not on the basis of an intrinsic binding value, but rather due to their persuasive force. A persuasive precedent is a decision that is not 74 binding but is entitled to respect and careful consideration. This concept has been nuanced 75 in the Eureko v. Poland case, where the tribunal had to decide which SGS decision to follow 76 in the interpretation of the umbrella clause. After carefully examining the ruling of both tribunals, the Eureko tribunal has conformed to the SGS v. Philippines view, finding its reasoning “cogent and convincing”, in contrast to the SGS v. Pakistan approach which it considered “less convincing”. Thus, the persuasive effect resides in the strength of the 77 argument expressed in tribunal’s judgement that will command adherence.

Some authors claim that in order for past decisions to become persuasive precedents, their content must share some degree of homogeneity and they should also be accessible to the public. As discussed in the first Part, this criteria is fulfilled by most investment awards, 78 based on the frequent uniform interpretation given to the same standards of protection provided by the BITs and the availability of decisions to the public.

Why is it important at all to acknowledge the role of arbitral precedent as a means of persuasion? The absence of a de jure stare decisis in investment arbitration cannot totally exclude the idea of a de facto system of precedent due to the persuasive authority that

Meg Kinnear, Treaties as Agreements to Arbitrate: International Law as the Governing Law, ICCA

73

Congress Series No. 13; Christian J. Tams, An Appealing Option? The Debate about an ICSID Appellate Structure, 57 Essays in Transnat’l Econ. L. 19 (2006).

August Reinisch, supra n. 43, p. 509.

74

See Black’s Law Dictionary (7th edn, 1999), p. 1215.

75

Eureko B.V. v. Republic of Poland, Partial Award, 19 August 2005, available at http://ita.law.uvic.ca/

76

documents/Eureko-PartialAwardandDissentingOpinion.pdf

Ibid., para. 257.

77

Jeffery P. Commission, supra n. 7, p. 135.

reasoned previous decisions have upon arbitrators. Well-reasoned awards regarded as 79 persuasive precedents do not only represent a useful instrument for maximizing the normative potential of transnational arbitration, but their subsequent publication and enforcement might lead to the creation of a general arbitral principle of stare decisis possessing a transnational stature.80

In this context, the experience of past decisions invested with persuasive authority plays a fundamental role in securing the necessary uniformity and stability of the law as 81 well as in providing information about what the international business world considers the right solution to similar problems and guaranteeing a fair and predictable mechanism to resolve disputes within the transnational arena.82

2.2. Source of precedent. Moral obligation v. legal obligation

Over the course of time, investment tribunals not only surveyed the field of previous awards, but relied on those decisions worthy of precedential effect to resolve the dispute before them. By distinguishing such authoritative rulings from the poorly-decided ones, the arbitral consensus have developed around a preferred legal standard. This progressive 83 emergence of rules through lines of consistent cases has contoured a steady and deliberate 84 process of precedent which operates behind the appearance of arbitrary decision-making and

This has been articulated by the Glamis Gold tribunal which stated that “there may not be a formal

79

‘stare decisis’ rule as in common law countries, but precedent plays an important role. Tribunals and courts may disagree and are at full liberty to deviate from specific awards, but it is hard to maintain that they can and should not respect well-established jurisprudence.” (Glamis Gold, Ltd. v. The United States of America, UNCITRAL, Award, 8 June 2009, para. 8)

Thomas E. Carbonneau, Rendering Arbitral Awards with Reasons; the Elaboration of a Common

80

Law of International Transactions, 23 Colum. J Transnat’l L 579 (1985), p. 581. C. Schreuer and M. Weiniger, supra n. 27, p 1.

81

William W. Park, supra n. 1, p. 64.

82

Tai-Heng Cheng, supra n. 6, p. 1037.

83

Doug Jones, Investor-State Arbitration: The Problem of Inconsistency and Conflicting Awards,

84

which develops in an evolutionary fashion, as opposed to the domestic stare decisis systems. 85

What is the driving force behind this ‘persisting jurisprudence’ in investment 86 arbitration? Do most of tribunals feel actually constrained to consider previous awards in light of any obligation possibly incumbent upon them? The president of the Saipem tribunal underlined that “it may be debatable whether arbitrators have a legal obligation to follow precedents – probably not – but it seems well settled that they have a moral obligation to follow precedents so as to foster a normative environment that is predictable”. It is argued 87 that with respect to a body of rules less developed and still in the process of formation, such as sports law or investment law, the role of arbitrators towards the establishment of predictable rules is much more important. Hence, this ‘moral obligation’ to follow 88 precedents, as identified by Gabrielle Kaufmann-Kohler, arises out of the fact that investment law develops through dispute settlement and is in need of predictability. Nonetheless, this desideratum of predictability that justifies the precedent is based on an economic efficiency argument, rather than a purely moral one. The credibility of the system depends on 89 consistency as “unpredictable results will lose the confidence of the users in the long term and defeat its own purpose.” 90

Tai-Heng Cheng, supra n. 83.

85

Andrea K. Bjorklund, Investment Treaty Arbitral Decisions as Jurisprudence Constante, in Dougles

86

Arner et al., eds., International Economic Law: The State and Future of the Discipline (2008), p. 265. Gabrielle Kaufmann-Kohler, supra n. 47, p. 374.

87

Ibid., p. 375.

88

This moral obligation is not stemming from what is regularly known as morality, but from a

89

practical and systemic consideration of certain arbitrators for the preservation of the consistency and predictability of investment law. For more about economic efficiency, See Bonnitcha and Aisbett, An Economic Analysis of Substantive Protections Provided by Investment Treaties, in Sauvant, Yearbook in International Investment Law and Policy 2011-2012 (2013), p. 683.

Supra n. 87, p. 378.

However, it is noteworthy that in the case of Caratube v. Kazakhstan, the arbitral 91 tribunal relied on legal rules in order to confer legal effects on previous decisions. The 92 tribunal considered that past decisions could be applied as supplementary means of interpretation within the meaning of Article 32 VCLT, to the extent that, according to the tribunal, Article 38(1)(d) of the Statute of the ICJ lists judicial decisions and awards as subsidiary means “for the interpretation of public international law.”93

Nevertheless, contrary to the tribunal’s finding, I have previously outlined that under Article 38(1)(d) of the Statute of the ICJ, judicial decisions are classified “as subsidiary means for the determination of rules of law” and not for the interpretation of rules of law. As such, it is debatable whether decisions rendered by arbitral tribunals might qualify as a source of the intention of the States party to the treaty, to the extent they may be used in the interpretation of the treaty in the sense of Article 32 of the Vienna Convention, which would further provide a veritable legal basis for reliance on precedent in investment arbitration.

2.3. Precedent before international courts and tribunals

In examining the legitimacy of a system of precedent in investment arbitration, a question of interest arises as to whether and to what dimension other international courts or tribunals adhere to their own previous decisions, in a de facto or a de jure sense, and which is the international approach as regards stare decisis.

It is apparent that most international dispute settlement bodies officially reject the principle of binding precedent, while at the same time they effectively embrace it. As such, 94 there is a regular reliance on a de facto case law whereby judicial statements are regarded as

Caratube International Oil Company LLP v. The Republic of Kazakhstan, Decision on Provisional

91

Measures, 31 July 2009, ICSID Case No. ARB/08/12, para. 73.

Roberto Castro de Figueiredo, Previous Decisions in Investment Arbitration, Kluwer Arbitration

92

Blog, December 23 (2014).

Caratube v. Kazakhstan, supra n. 91, para. 73.

93

August Reinisch, supra n. 43, p. 497. See also H.P. Glenn, Persuasive Authority, 32 McGill L.J.

94

authoritative premises for further decisions. Some commentators even argue that “the well-95 worn formula that international law does not know a doctrine of stare decisis tends to obscure the effect of adjudication rather than help elucidate it.”96

The current trend is facilitated by the specific character of public international law, since under Article 38(1)(d) of the Statute of the ICJ, judicial decisions are counted among the subsidiary sources of international law. In this context,reliance upon past judgements serves as evidence for the existence and further development of both customary international law and general principles of law.97

For instance, the practice of the International Court of Justice is well-known for increasingly becoming precedent-oriented, as the Court almost exclusively cites its own precedent and rarely overrules itself. In the same fashion as ICSID tribunals, the Court does 98 not recognize any binding value to its own precedent on the basis of Article 59 of the Statute of the ICJ, which states that decisions of the Court “have no binding force except between the parties and in respect of the case in question.” It is nevertheless submitted that the ICJ’s previous rulings are highly persuasive and contribute to a de facto system of stare decisis. 99 This adherence to its settled case law is motivated by the Court on the aim of producing consistency of its jurisprudence. To this effect, more radical views consider that ICJ judges 100 create precedents no less than national courts do.101

Armin von Bogdandy and Ingo Venzke, In Whose Name? A Public Law Theory of International

95

Adjudication, Oxford University Press (2014), p. 116.

Georges Abi-Saab, Les sources du droit international: Essai de déconstruction, in Manuel

Rama-96

Montaldo (ed), El derecho internacional en un mundo en transformación: Liber amicorum en homenaje al Profesor Eduardo Jiménez de Aréchaga, vol 1 (Fundación de cultura universitaria 1994) p. 29.

Supra n. 95.

97

Mohamed Shahabuddeen, Precedent in the World Court (1996).

98

G Guillaume, The use of Precedent by International Judges and Arbitrators, (2011) 2 JIDS 1, p. 5–

99

23.

See the Joint Declaration of seven judges in the case of Kosovo Legality of Use of Force (Serbia

100

and Montenegro v. Portugal) (Preliminary Objections, Judgment) [2004] ICJ Rep 1160, 1208.

Competence of the General Assembly for the Admission of a State to the United Nations, Advisory

101

The role of de facto precedents can be identified in the ambit of other international dispute settlement mechanisms as well. The International Criminal Tribunal for the former Yugoslavia (ICTY), in reconciling the different uses of precedent in the civil law, common law and public international law systems, follows the approach that “it is necessary to stress that the normal rule is that previous decisions are to be followed, and departure from them is the exception.” Also, within the World Trade Organization (WTO) legal regime, which will 102 be extensively analyzed in the last Part, scholars forcefully assert that a de facto system of stare decisis, closer to the formal doctrine of precedent, has been adopted in practice.103

The novelty on the international plane with respect to a veritable precedent in investment arbitration is provided by the Caribbean Court of Justice (CCJ), an international court established by the Caribbean Community (CARICOM) to adjudicate on breaches of the Revised Treaty of Chaguaramas (RTC). The Court employs a de jure doctrine of horizontal 104 stare decisis in the exercise of its original jurisdiction whereby its adherence to precedent has a normative basis. The doctrine’s uniqueness represents an innovation for the international 105 conventional law and resides in the fact that it does not develop through the court’s own jurisprudence, but via the express mandate of Article XXI of the Agreement establishing the Caribbean Court of Justice which states that “the judgments of the Court constitute legally binding precedents for parties in proceedings before the Court.” The recent CCJ reasoning of Shanique Myrie v. Barbados confirmed the applicability of the doctrine and the rationale 106 beyond its development: certainty in the applicable norms, stability of expectations on the part of economic actors and predictability of outcomes for investment decisions by investors. Moreover, the adherence to a legally binding precedent in respect of CARIOM is 107

Prosecutor v. Aleksovski, Decision on Appeal, 24 March 2000, IT-95-14/1-T, para. 109. See also

102

Mark A. Drumbl and Kenneth S. Gallant, Appeals in the Ad Hoc International Criminal Tribunals: Structure, Procedure, and Recent Cases, (2001) 3 J App. Prac. and Process 589, pp. 632–633.

Raj Bhala, supra n. 71, pp. 941-942.

103

The horizontal dimension implies that judges are bound by their own previous decisions as

104

opposed to the vertical stare decisis where lower courts are bound by the decisions of higher courts. T Gazzini and Brabandere, International Investment Law: The Sources of Rights and Obligations,

105

Martinus Nijhoff Publishers 2012, 247 at fn 5. See also, David Simmons, The Caribbean Court of Justice: a Unique Institution of Caribbean Creativity, (2005) 31 Commonwealth L Bull 71, 83.

Shanique Myrie v Barbados, [2012] CCJ 3 (OJ).

106

Ibid., para. 20.

sought to create a legal and socio-economic environment where investors could reasonably have legitimate expectations as to the outcome of their investment decisions. 108

As such, it can be observed that although at the normative level the CCJ’s treaty-mandated doctrine of precedent is unique in the context of international law, in practice it is no different from the results produced by the de facto version adopted by other international courts and tribunals, namely securing the goals of certainty, unity and predictability . The 109 same objectives are also shared by most investment ad-hoc tribunals. Within this international framework, how the current trends affect or inspire the practice of investment tribunals?

The CCJ’s approach of relying on precedents as a matter of law in the event of similar disputes is directed at preventing arbitrariness and partiality, ensuring the uniform application of the legal principles at issue, protecting the expectations of investors and their ability to plan their investment well in advance with a high degree of confidence, and guaranteeing the legitimacy of the court. These considerations represent legitimate concerns also for the 110 practice of other investment tribunals called upon to decide the dispute before them by interpreting the same substantive standards of protection in a similar factual context. However, having in mind that the practice of investment arbitral tribunals presents some distinctive features resulting from the “marriage” between public international law and commercial arbitration, a rigid system of de jure horizontal stare decisis analogous to the 111 CCJ’s one, could affect the principle of party autonomy and the flexibility and dynamic jurisprudential evolution specific to investment arbitration. Additionally, the prospect of an erroneous precedent being perpetuated in future cases could be contrary to the progressive spirit of investment disputes discussed above. It is therefore apparent that the need for

CARICOM Secretariat, The Caribbean Court of Justice, (2000) Background Paper by the

108

CARICOM Secretariat <http://www.caricom.org/jsp/community_organs/caribbean_court.jsp? menu.cob>

Jason Haynes, The Emergence of a Doctrine of de jure horizontal stare decisis at the Caribbean

109

Court of Justice: Fragmentation or Pluralism of International Law?, Journal of International Dispute Settlement, 2014, 5, pp. 502–503.

Ibid., pp. 504-505.

110

Alain Pellet, The Case Law of the ICJ in Investment Arbitration, ICSID Review 2013; 28 (2):

111

stability, finality and predictability remains to be reconciled by a de facto use of precedents, closer to the approach developed by international courts and tribunals.

2.4. Precedent in commercial arbitration

Turning to the role of the precedent in the commercial sphere, it is argued that although arbitral tribunals in investment arbitration cases are increasingly relying on previous decisions, whether a similar trend currently exists in the international commercial arbitration practice is far less clear. The precedential authority of commercial disputes is significantly 112 reduced as international commercial rulings are too scarce to determine a tendency in this regard.113

Underlying why the precedent plays a relatively minor role in the traditional international commercial arbitration will help us understand the factors that possibly individualize a distinct path of development for stare decisis in investment disputes. In the following, I will assess the main differences between the two systems, as, undoubtedly, investment arbitration possesses distinctive characteristics which enable a certain evolution of the doctrine.

First, in commercial arbitration, the arbitrator benefits of much broader discretionary prerogatives in the decision process. The award is not necessarily subject to the incidence of legal arguments, but is rather based on contract interpretation and factual assessment. Thus, the rule of law plays a secondary role as the dispute is usually solved by taking into account the stipulations of the parties in their agreement, the facts from the submitted evidence and the equitable impression of the arbitral tribunal. In contrast, in investment treaty 114 arbitration, the arbitral tribunal goes beyond the evaluation of the facts in reaching a decision

Gary B. Born, International Arbitration: Law and Practice 365 (2012).

112

Gilbert Guillaume, The Use of Precedent by International Judges and Arbitrators, J. Int'l Disp.

113

Settlement 15, 16 (2011).

Bernard Hanotiau, Investment Treaty Arbitration and Commercial Arbitration: Are They Different

114

Ball Games? The Legal Regime/Framework, in AJ van den Berg ed, 50 Years of the New York Convention: ICCA International Arbitration Conference, 14 ICCA Congress Series (Kluwer 2009) pp. 146-150 .

and follows a multi-step and rigorous legal assessment in the pursuit of the outcome. For 115 instance, determining whether the arbitral tribunal has jurisdiction to adjudicate the dispute is a complex legal task which involves further issues, such as the existence of the investment or the qualification for protection under the BIT.

Secondly, with regard to the applicable law, the arbitral tribunal in commercial cases has a lot of flexibility in applying the appropriate rules and it usually refers to general principles of international commercial law. In most cases, the parties’ agreement is self-containing and incorporates the relevant provisions that are sufficient to resolve the dispute. International commercial awards rarely make interpretations of substantive law 116 that have any impact on other disputes. On the contrary, investment disputes are governed 117 by BITs (which are not self-contained regimes) and international law. The arbitral tribunal frequently engages in treaty interpretation in accordance with Articles 31 and 32 of the Vienna Convention in order to determine the applicable norms of international law or the meaning of the BITs substantive provisions. While commercial arbitration deals with highly technical and well-regulated legal issues, investment disputes concern always the same standards of protection and another reason why it may be more important to rely on precedents in investment arbitration than in commercial is their relative indeterminacy. It is 118 the practice of investment tribunals which in fact makes investment law. 119

Lastly, arbitral tribunals in commercial arbitration rarely refer to previous awards and the few citations usually concern procedural issues, due to the different contractual provisions encompassed by the parties’ agreement. However, the striking characteristic of commercial 120 arbitration and the main difficulty in creating jurisprudence within its ambit is the

Ibid.

115

Ibid.

116

Brooks W. Daly & Fedelma Claire Smith, Comment on the Differing Legal Frameworks of

117

Investment Treaty Arbitration and Commercial Arbitration as Seen Through Precedent, Annulment, and Procedural Rules, in 50 Years of the New York Convention 151, 151-52 (Albert Jan van den Berg ed., 2009).

August Reinisch, supra n. 43, p. 497.

118

From the formal perspective, both BITs and customary international law make investment law and

119

contribute to its development. Bernard Hanotiau, supra n. 114.