Are Bilateral Investment Treaties and Free Trade Agreements Drafted with Sufficient Clarity to Give Guidance to Tribunals?

By Hanotiau, Bernard | American University Business Law Review, January 3, 2016 | Go to article overview

Are Bilateral Investment Treaties and Free Trade Agreements Drafted with Sufficient Clarity to Give Guidance to Tribunals?


Hanotiau, Bernard, American University Business Law Review


Introduction

The issue that I have chosen to address is whether Bilateral Investment Treaties ("BITs") and Free Trade Agreements ("FTAs") are drafted with sufficient clarity to give guidance to arbitral tribunals. I will say at the very outset that, in my view, the answer to this question is a resounding no.

This problem has become more and more apparent with the large increase in the number of disputes submitted to the International Centre for Settlement of Investment Disputes ("ICSID") and the United Nations Commission on International Trade Law ("UNCITRAL") tribunals based on BITs in particular.1 This increase in the number of disputes submitted and the corresponding publication of resulting awards have demonstrated that arbitral panels often interpret BITs inconsistently with the consequence that there is a lack of clarity and transparency as to the nature and extent of the commitments made by the States vis-å-vis foreign investors.

Why is there such inconsistency between arbitral tribunals? The main reason is that many of the BITs, particularly the older ones, are not drafted with sufficient clarity. The provisions are generally vague.2 They are comparable to general clauses in civil codes such as "good faith" or "bonos mores" that allow the decision maker to ascertain the normative content and the precise standards applicable to certain situations. In this respect, Article 31 of the Vienna Convention on the law of treaties provides that "[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose."3 But what if the actual terms of the treaty are unclear or are ambiguous? In these circumstances, the arbitrator will have difficulty determining the meaning to be given to the terms or to the intent of the negotiators. Furthermore, BITs are written in multiple languages and this tends to accentuate the interpretive problems even further. Specifically, the lack of precise linguistic equivalence and differences in legal systems throughout the globe make it "virtually certain that multiple language versions will include terminological differences that lead to conflicting interpretations of the text."4

Lack of clarity leads to inconsistent decisions and inconsistency creates uncertainty and damages the legitimate expectations of investors and States.5 Investors that have structured their investments in a manner designed to take advantage of the protection afforded by investment treaties suddenly discover that they will not receive those benefits.6 Likewise, States find themselves in an untenable position of having to try to explain to tax payers why they are subject to damages of hundreds of millions of U.S. dollars in one case but not in another.7

There have been numerous examples of inconsistent decisions over what essentially amounted to the same dispute.8 For example, in the Lauder arbitration, a Stockholm tribunal held that the Czech Republic breached a variety of its obligations to the Dutch corporate arm of a U.S. investor under the Netherlands-Czech Republic BIT.9 Only ten days previously, on exactly the same set of facts, a London tribunal held that the Czech Republic only discriminated against a United States investor in violation of the United States-Czech Republic BIT.10 The relevant provisions in the two treaties were identical. This inconsistency has presented challenges. After the Lauder awards, there was speculation that the Czech Republic might consider pulling out of its BITs.11

Another example of inconsistent cases is the SGS cases.12 Both the Switzerland-Pakistan BIT and the Switzerland-Philippines BIT contained an umbrella clause.13 The issue confronting the arbitrators in both cases was whether an umbrella clause in a treaty transforms a breach of contract into a breach of treaty.14 The Pakistan tribunal definitely said no, and the Philippines tribunal said yes. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Are Bilateral Investment Treaties and Free Trade Agreements Drafted with Sufficient Clarity to Give Guidance to Tribunals?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.