Factor Subjetivo

A treaty is only as good as its dispute settlement mechanism.'' However, when a bilateral or multilateral agreement has been successfully negotiated, the parties sometimes fail to set out a comprehensive procedure for dispute resolution^ mainly because their relations are still good.3 When a conflict arises, States may regret their earlier approach.

This chapter addresses the settlement of inter-State and investor-State disputes. Conflicts at the inter-State level may arise out of the interpretation or application of the Convention or when a State espouses a claim of its national(s). Investor-State disputes are often concerned with compensation for expropriated investments. In addition, restrictions on monetary transfers or other aspects of treatment of foreign investors may give rise to controversies. The first section of this chapter explains different methods of dispute settlement. It covers both inter­ state and investor-State conflicts. The second and third section then focus in detail on the resolution of inter-State and investor-State disputes respectively. The final part of this chapter outlines the difficulties arising out of the recognition and enforcement of arbitral awards.

1. Methods o f Dispute Settlement

Disputes can be resolved in several different ways. First, by non-binding negotiations, conciliation or both. Secondly, inter-State conflicts could be adjudicated by the ICJ, and investor- State disputes could be submitted to the domestic courts of the host State. Thirdly, all sorts of disagreement could be settled through

ad hoc

Conciliation is a method of dispute resolution which is not binding upon the parties. It involves the use of a conciliator to assist negotiation of a settlement.^ The role of the conciliator is to attempt to bring about agreement between the disputing parties and to propose a compromise

1 ) Price, “Remarks to the Proceedings of the American Society of International Law" (1997) 91 ASIL Proceedings 492 at 493.

2 ) Certain BITs, for instance, do not deal with investor-State dispute settlement. See: e.g., Abkommen zwischen der Republik Osterreich und der Volsrepublik China über die Forderung und den gegenseitigen Schütz von Investitionen vom 12. Septem ber 1985 and Treaty between the Federal Republic of Germ any and Jordan Concerning the Encouragement and Reciprocal Protection of Investments, dated July 1 5 ,1 9 7 4 .

3 ) Peter, “Settlement of Investment Disputes” (1985) 5:1 J.Int'I.Arb. 67 at 81.

^ ) Nurick and Schnably, “The First ICSID Conciliation: Tesoro Petroleum Corporation v. Trinidad and Tobago” (1986) 1 ICSID-Rev. FILJ 340 at 342.

solution by recommending terms of settlement.^ Guideline V(1) lists conciliation as one form of resolving investor-State conflict. Most arbitration institutions have adopted rules for conciliation.^ They may serve as an initial procedure in attempting to settle a controversy in a peaceful and informal manner. Conciliation covers a variety of differences, including those which are not arbitrable.^ If conciliation fails, parties are free to resort to other means of dispute resolution.

Conciliation proceedings are rare in practice,^ mainly because of their non-binding character. Parties often regard such proceedings to be ineffective because they carry no guarantee of final dispute resolution.^ Conciliation may only be a waste of time.^o

A multilateral investment treaty should nevertheless make provision for optional conciliation.It is an adequate first step to settle any argument both between States and at the investor-States level. Conciliation is particularly suitable for parties who wish to continue a long­ term relationship, which might easily become sour if either party immediately turns to binding dispute resolution.12 Also, it is the least costly, most rapid and discreet form of resolving any differences. 13

5 ) Shihata, The Settlement of Disputes - General Propositions and the World Bank’s Approach and Experience, 226. 6 ) See: e.g., PCA Optional Conciliation Rules 1996, ICSID Convention, Arts. 28-35 and Rules of Procedure for Conciliation Proceedings, ICC Conciliation Rules. 1988, and UNCITRAL Conciliation Rules, 1980.

7 ) A dispute may not be arbitrable under certain arbitration regimes. The conflict may, for instance, not be an “investment dispute” as required by Art. 25(1) of the ICSID Convention. In the case of ad hoc arbitrations, mandatory domestic laws of the State where the proceedings take place may not allow particular kinds of conflicts to be settled through arbitration.

8 ) As of November 30, 2001 ICSID had concluded 58 cases, of which three were conciliation proceedings and 55 were arbitrations. As of the sam e date, 37 cases were still pending before ICSID tribunals. None of these pending

cases were conciliation proceedings. All 37 cases were arbitrations. See, for pending cases:

httD://www.worldbank.ora/icsid/cases/pendina.htm. For concluded cases:

http://www.worldbank.orq/icsid/cases/conclude.htm. So far there have been no conciliation proceedings under IC SID ’s Additional Facility Rules. See: Shihata and Parra, The Experience o f the intem ational Centre for Settlement o f investment Disputes, 794. On the rare use of conciliation in practice, see also: Redfern and Hunter, Law and Practice o f intemational Commercial Arbitration (London: Sweet & Maxwell, 1986), 21.

9 ) W egen, “Dispute Settlement and Arbitration” in Rubin and Nelson (eds.), intemational investment Disputes: Avoidance and Settlement (St. Paul, New York, Los Angeles, San Francisco: W est Publishing Company, 1985) 59 at 72.

10 ) Nurick and Schnably, The First IC SID Conciliation: Tesoro Petroleum Corporation v. Trinidad and Tobago, 340. 11 ) By contrast, mandatory conciliation prior to other means of dispute settlement may be counterproductive. It may only postpone the final dispute resolution and result in additional costs in cases where the conflict has already become rather hostile and one or both parties are not willing to attempt to settle it amicably. See also: Redfern and Hunter, Law and Practice o f international Commercial Arbitration, 21.

12 ) Broches, “Settlement of Disputes Arising out of Investments in Developing Countries” (1983) 11 Int’I.Bus.Law. 206.

13 ) UNCTAD, Bilateral investment Treaties in the mid 1990s, 104.

If conciliation fails, domestic litigation seems to be ttie most effective means to resolve conflicts at the investor-State level. Some States view recourse to arbitration as an attack on their sovereignty, and insist upon adjudication by their national courts.Even States which do submit controversies with foreign investors to arbitration may find it difficult to "adjust to the rules of the game”. They often expect procedural privileges not open to the in v e s to r .is Finally, arbitral

tribunals lack essential powers usually available to domestic courts. For instance, an arbitral tribunal cannot require the attendance of witnesses under penalty of fine or im p ris o n m e n t,^ ^ or

order consolidation of actions.''^