Month: October 2011

When uniform laws are enacted, one usual criticism is that the absence of a jurisdictional body to interpret them gives place to contradictory applications and inconsistent decisions. One explanation for this contradiction is the lack of binding force of domestic court decisions of different countries when they apply uniform laws[1]. The “nationalistic” interpretation of uniform law would certainly be “contrary to the goals intended to be achieved by the elaboration of a uniform law,” as affirmed by Franco Ferrari[2].

Most of the time, it follows that consistency can only be “attained if the interpreter in interpreting the provisions has regard to the practice of the other Contracting States.”[3] There is sometimes a more ambitious possibility when there is an international interpretative court entitled to issue binding decisions on a particular uniform law.  That is the case with the Court of Justice of the European Union (“ECJ”), the binding interpretative body of European Union law. However, this has proven to be untrue at least in the case of liability of air carriers for the delay or cancellation of flights, where the ECJ has not contributed to a more homogenous interpretation of uniform law. Conversely, it has increased the number of conflictive court decisions inside and outside the EU.

There are two uniform laws in the EU regarding air carrier liability whose interpretation falls to the ECJ: Regulation (EC) No 261/2004 of the European Parliament and of the Council of 11 February 2004 establishing common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of flights; and the Convention for the Unification of Certain Rules for International Carriage by Air signed in Montreal, 28 May 1999 (the “Convention” or the “Montreal Convention”)[4], part of EU Law, by Council Decision 2001/539/EC of 5 April 2001 (OJ 2001 L 194, p. 38).

The two statutes should not give rise to a conflict or create contradictory application. The Montreal Convention is exclusively concerned with delays, whereas Regulation 261/2004 does not create any compensation rights in cases of flight delays[5], but isapplicable only to cases of denial of boarding (Article 4), and cancellation of flights (Article 5), creating the right of a lump sum payment for an amount determined under Article 7. On the other hand, the Montreal Convention sets in Article 19 its applicability in cases of flight delays, with a liability cap of SDR 4,150 as stated in Article 22.

The autonomous concept of delay can be inferred from Regulation 261/2004. As stated in ECJ Joined Cases C-402/07 and C-432/07 Christopher Sturgeon and Others v Condor Flugdienst GmbH and Stefan Böck and Cornelia Lepuschitz v Air France SA (“Sturgeon”): There is a delay in the case where none of the elements of the trip but the times of departure and arrival are altered. If the number of the flights changes or new boarding passes are issued, we therefore face a cancellation.

As defined, delays and cancellation not only have different spheres of application, but also give rise to different liabilities.  The Regulation constitutes neither an instrument to determine the amount of the damage nor a cap on the compensation, if any. The payment under the Regulation is aimed to be simply a lump sum, or “flat rate compensation”, as defined by the ECJ in Case C-204/08 Peter Rehder v. Air Baltic Corp.

The Montreal Convention established that any liabilities that arose under its application would be limited to a maximum of SDR 4,150 (Article 22). The content of the compensation it creates is thus very clear: compensation in the case of flight delays only if the plaintiff proves the damages suffered, limited to the Article 22 cap.

However, the ECJ affirmed in the Sturgeon case that it is in accordance with the high level of protection of consumers governing the EU to equate long delays (Article 6) with cancellation (Article 4) and denial of boarding (Article 5). The ECJ not only re-wrote the Regulation, granting the lump sum payment of Article 7 to flight delays, but also created a conflict in the application of uniform laws that did not exist before: The ECJ does not mention Article 29 of the Montreal Convention[6], nor does it clarify how this Article is affected. The ECJ based its decision on Case C-344/04 International Air Transport Association v. Department for Transport [2006] (“IATA”)[7]. However, in that case, the ECJ just affirmed the validity of Regulation 261/2004 and recognized the powers of the Commission to legislate on EU flight passengers, irrespective of the Montreal Convention. The IATA decision never discussed the lump sum payment defined in Article 7. Neither the IATA decision nor the Regulation itself allowed the ECJ to reach the conclusion of the Sturgeon decision.

Prior to the Sturgeon case, the Montreal Convention was the right instrument to obtain compensation in case of flight delays, and the Regulation was the right instrument to obtain compensation in case of flight cancellations or denials of boarding. Now, both norms are in conflict.

The inconsistency created by the ECJ in the Sturgeon case may have multiple consequences.

In principle, compensation is excluded in cases of extraordinary circumstances: Article 5(3) of Regulation 261/2004 and Article 19 of the Montreal Convention so establish.

The concept of extraordinary circumstances is to be interpreted strictly when Regulation 261/2004 is concerned, as clarified by the ECJ in case C-549/07 Friederike Wallentin-Hermann v. Alitalia [2008] (“Alitalia”). The ECJ affirmed that political instability or meteorological conditions incompatible with the operation of the flight are relevant only if they create an unexpected risk, but are not directly an exemption. For instance, a technical problem in an aircraft would be “extraordinary” only if it comes out from an event that is not normal to the activity of the aircraft. This has multiple technological implications and makes the air carrier responsible for assuming all regular checks to avoid these inconveniences. This is acceptable in the context of a lump sum payment, and in cases of flight cancellation or denial of boarding, but seems clearly burdensome in cases of delays. After Sturgeon, this distinction is no longer possible .

Furthermore, the value of Article 19 of the Montreal Convention, which excludes liability in case of delay if the carrier proves that it and its servants and agents took all measures that could reasonably be required to avoid the damage, or that it was impossible for it or them to take such measures, is partially derogated without justification. If we accepted the argument of the ECJ that Regulation 261/2004 intervenes at an earlier stage than the Convention, exclusion of liability under the Regulation would amount to an exclusion of the more burdensome liability under the Montreal Convention. This is unpersuasive: First, because the nature of both amounts is different; second, because the text of both clauses is also different.

Unlike affirmations by some commentators[8], this is not necessarily the last word. In 9 December 9 2010 (case no. Xa ZR 80/10)[9], the BGH filed a question before the ECJ regarding the position of the Regulation with respect to its application to delays.

However, even if these particular situations are eventually clarified by the ECJ, they will shed only a small amount of light into a sky full of clouds. The ECJ has proven unable to give reliable orientation to domestic courts and litigants and the binding character of its decisions only makes the situation more inconsistent because it inoculates an element of incoherence into the European judicial system. It can be argued that the European Union should consider establishing a system of informal inter-court communication that would operate at a lower level of coordination¾less ambitious but certainly more useful, given the deep differences between European courts at this moment of the European integration.

Manuel Gimenez Rasero is an attorney at Areilza abogados and was Rafael del Pino Scholar at the New York University School of Law (LL.M. ’11).

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[1] For this conclusion in case law, see Tribunale di Padova (Italy), 25 February 2004, available at: http://cisgw3.law.pace.edu/cases/040225i3.html; Last Checked: 9 May 2011.

[2] See Franco Ferrari, Uniform Interpretation of the 1980 Uniform Sales Law, 24 Ga. J. Int’l & Comp. L. 183, 198 (1994).

[3] Id.

[4]Available at http://www.jus.uio.no/lm/air.carriage.unification.convention.montreal.1999/

[5] Delayed flights (Article 6) just give rise to some “assistance obligations” under Article 9.

[6] Article 29, Basis of claims.

In the carriage of passengers, baggage and cargo, any action for damages, however founded, whether under this Convention or in contract or in tort or otherwise, can only be brought subject to the conditions and such limits of liability as are set out in this Convention without prejudice to the question as to who are the persons who have the right to bring suit and what are their respective rights.

[7] For an overview of the decision, see the summary of important judgments at:  http://ec.europa.eu/dgs/legal_service/arrets/04c344_en.pdf (last checked, 29 April 2011) or the full text of the decision at:

[8] Christiane Leffers, The Difference Between Cancellation and Long Delay under Regulation 261/2004: This is a commentary on the judgment of the European Court of Justice dated 19 November 2009 (Sturgeon v Condor Flugdienst GmbH and Böck & Lepuschitz v Air France SA, joined cases C-402/07 and C-432/07)” Travel Law Quaterly, 2010, available at: http://www.avocado-law.com/fileadmin/avocado-law.de/downloads/Difference_Cancellation_Delay_261_2004.pdf (Last checked 9 May 2011)

[9] Id.

In its recent decision of 20 September 2011, 4A_103/2011, the Federal Supreme Court of Switzerland had to determine whether a panel consisting of three arbitrators of the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland, had rightly decided that an arbitration clause contained in a licensing agreement also encompassed disputes arising out of sales agreements entered into by the same parties.

The facts of the case are straightforward. On January 1, 2006 a manufacturer of sports equipment and a boxing association entered into a licensing agreement which, inter alia, entitled the manufacturer to produce and commercialize boxing equipment carrying the label of the boxing association against payment of royalties. The arbitration clause contained in the licensing agreement read as follows:

“Should a disagreement over the interpretation of any terms of this Agreement arise, the Parties agree to submit the dispute to the Court of Arbitration for Sport, Lausanne, Switzerland, whose decision shall be final and binding on both Parties. While the pending question is being arbitrated, the remainder of this Agreement shall remain in effect.”

Subsequent to the execution of the licensing agreement the parties concluded several sales agreements according to which the manufacturer furnished the boxing association with boxing equipment produced under the licensing agreement.

In 2007, the boxing association claimed that the licensing agreement had expired on 31 December 2006. As a result, the manufacturer initiated arbitration proceedings before the Court of Arbitration for Sport (CAS). In turn, the boxing association objected to the jurisdiction of the CAS by submitting that the phrase “disagreement over the interpretation of any terms of this Agreement” contained in the arbitration clause of the licensing agreement merely referred to the licensing agreement rather than to the sales agreements. The CAS panel rejected this argument and assumed jurisdiction over the case by construing the arbitration agreement to encompass disputes connected with the licensing agreement.

On 4 February 2011, the boxing association challenged the issued CAS award before the Federal Supreme Court of Switzerland including for lack of jurisdiction of the arbitral tribunal (article 190(2)(b) of the Swiss Private International Law Act).

After observing that the existence of an arbitration agreement shall not be assumed off-handedly, the Federal Supreme Court of Switzerland – confirming prior case law on this issue (e.g. BGE 116 Ia 56; BGE 129 III 675) – stated that once there is no doubt about the parties’ consent to subject to arbitration the scope of the arbitration agreement is to be interpreted extensively.

The court then turned towards the issue of construction of the arbitration clause. Again confirming existing case law on the point, the court observed that the phrase “any dispute related to the interpretation of this Agreement” was not restrictive in any way and particularly included (i) disputes relating to the existence, validity and termination of contractual relationships originating from the contract containing the arbitration clause in question, as well as (ii) questions which were merely indirectly connected to the dispute submitted to arbitration. The court further held that, as a rule, the scope of an arbitration agreement contained in a contract could encompass additional contracts and annexes as long as the latter did not contain specific clauses providing for other dispute resolution mechanisms.

Albeit noting that the wording of the arbitration clause in question suggested that only the licensing agreement was subject to arbitration, the Federal Supreme Court of Switzerland concluded that such narrow interpretation of the arbitration clause would not account for the specific circumstances of the case at hand. The circumstances that militated for a broader interpretation were the following: First, the bylaws of the boxing association provided that any disputes shall be arbitrated before the CAS. Although these bylaws were not applicable in the present case, the court nevertheless found that the boxing association was acting inconsistently. Second, the court was not able to detect any objective reason why the dispute at hand should be resolved by a state court. Third and finally, the Swiss Federal Supreme Court found decisive that the parties had come to an understanding that exceeded the licensing agreement in itself and that was closely related to the subsequent sales agreements.

On all these grounds, the Federal Supreme Court of Switzerland held that the CAS tribunal had rightly asserted jurisdiction over the case at hand, and dismissed the challenge to the CAS award.

This recent decision is important in that it confirms the Swiss Federal Supreme Court’s practice to interpret the scope of an arbitration clause extensively once the parties’ intent to arbitrate is established. The reason why the court rather restrictively approaches the issue of consent to arbitrate is that an arbitration clause has far-reaching consequences insofar it ousts the jurisdiction of the state courts – at least as long as any one of the parties invokes the arbitration clause (see e.g. BGE 129 III 675). The Swiss Federal Supreme Court’s broad construction of the scope of the arbitration clause in the case at hand is not only a manifestation of the strong pro-arbitration policy underpinning the SPILA but also helps ensuring judicial economy and efficiency.

Simone Stebler graduated summa cum laude from the University of Fribourg School of Law and holds an LL.M. in International Business Regulation, Litigation & Arbitration from NYU (Arthur T. Vanderbilt Scholar). She is admitted to practice in Switzerland.

Introduction

Decisions by judicial bodies, in general, are often the result of complex debate arising out of different perceptions of law and evidence. Issuing a decision, irrespective of the importance of the dispute, is most delicate a task that invariably requires not just legal skills but also, and perhaps especially, a great deal of balance and common sense.

Such a difficult equation becomes even more complex in the field of international disputes, public or private, to be adjudicated by judges or arbitrators with different legal and cultural background. The struggle endured by international adjudicators goes too many times unnoticed. The vast number of unanimous decisions rendered every day is indeed an achievement that has never been properly celebrated.

The complexity of international adjudication is particularly clear in the case of international commercial arbitration, where arbitrators coming from countries with different legal traditions are faced with complex issues to be settled under a law that they may have a limited knowledge of. Furthermore, and perhaps most importantly, they are faced with issues of a procedural nature that may be alien to their legal background.

In this context, the idea of insurmountable disagreement should neither surprise nor, indeed, concern excessively. The question, however, is whether such disagreement should be expressed through the issuance of dissenting opinions.

International Courts

Dissenting opinions have been an important feature of international courts for many years. Particularly, the dissenting opinions rendered in the jurisprudence of the International Court of Justice have played a remarkable role in the development of international law.[1] The importance of dissents before international courts, particularly the ICJ, is due to the public nature of the proceedings and the fact that such decisions often address novel issues over which no solid body of jurisprudence has yet developed. Nonetheless, and in spite of this, dissent has not been spared a share of criticism. It has been suggested, for example, that: “disastrous consequences might follow for a high judicial institution which can command observance of its judgment and opinions only by its prestige and by the persuasion which the statement of its conclusions imparts.”[2]

History is, in fact, proving the contrary. The frequent and highly regarded dissenting opinions rendered by ICJ judges, for example, if anything, have somehow added to the prestige and reliability of the Court. It has been observed in support of dissenting opinions that anonymity of the judgment may encourage a judge to vote in support of the cause of his State without incurring the embarrassment of partisanship. On the other hand, a well reasoned and earnest dissent serves the purpose of showing that the case was thoroughly assessed and evaluated.[3]

It is therefore debatable whether – as it has been suggested on the issue with regard to the ICJ’s predecessor, the Permanent Court of International Justice – when dissenting opinions multiply, contradict and attack each other on the basis of the majority decision itself and affirm contradictory and sometimes erroneous theories, the very authority and the prestige of the Court and its decisions are downgraded.[4] To the contrary, as it has been observed by a great scholar such as Sir Hersch Lauterpacht, dissenting opinions have contributed a great deal to the development of international law and, particularly, to the authority of international justice. According to Sir Hersch, moreover, dissenting opinions act as a safeguard of the independence and impartiality of the judges and provide a better understanding of the Court’s judgments.[5]

State courts

Dissenting opinions have served the important purpose of law development also under domestic law. Some of the best-known dissenting opinions rendered in the US, for example, might be described as tools through which the law managed to move to a higher and more civilized stage during time. It is often recalled in this respect the dissenting opinion rendered by Justice Harlan in 1896 in a Supreme Court racial segregation case.[6] That dissenting opinion was at the heart of the decision, almost fifty years later, in the case of Brown v. Board of Education,[7] which ended racial segregation in American schools. The importance of dissenting opinions in the US legal system has been aptly described by United States Supreme Court Chief Justice Charles Evans Hughes. In his often-quoted remark he explained that: “[a] dissent in a court of last resort is an appeal to the brooding spirit of the law, to the intelligence of a future day, when a later decision may possibly correct the error into which the dissenting judge believes the court to have been betrayed.”[8]

Similarly, in the United Kingdom, a dissenting opinion is believed to have contributed to a radical change, interestingly enough, of the law on arbitration. In the well-known Ken Ren case the then House of Lords, now Supreme Court, addressed the issue as to whether or not to make an order for security for costs in an arbitration. The Lord Justices agreed that the English courts had a discretionary power to issue any such orders. In Lord Mustill’s dissenting opinion, which Lord Browne-Wilkinson agreed upon, it was argued that an order for security for costs did not conform to the type of procedure that the parties had selected for the protection of their rights and that any court application to that effect should have been denied.[9]

Interestingly, the 1996 English Arbitration Act, which was enacted one year later the Ken Ren decision, took the power to order security for costs in arbitration away from the English courts and vested it in the arbitrators.[10]

Dissenting opinions in international arbitration

It is undeniable that dissenting opinions in international and domestic courts can contribute to the development of law. A dissenting opinion by an ICJ judge may be relied upon in subsequent ICJ cases. Similarly, a dissenting opinion by a domestic court judge may well provide guidance and inspiration to appellate or supreme court judges as well as to future court judges in similar cases.

It is, however, less obvious how dissenting opinions could serve any such purpose in international commercial arbitration, where the proceedings are predominantly confidential and awards are generally not published. Furthermore, in most jurisdictions, domestic courts cannot review the merits of arbitral awards. In other words, there is generally no appellate system in international arbitration and domestic courts’ scrutiny is mainly limited to issues of jurisdiction and due process.

What is then the role of dissent in international commercial arbitration? Should this be encouraged, tolerated or altogether prohibited?

The issue was addressed, a while ago, by the International Chamber of Commerce’s Commission on International Arbitration through the Working Party on Dissenting Opinions. In that Report it was agreed that: “[…] it is neither practical nor desirable to attempt to suppress dissenting opinions in ICC arbitrations. A minority opinion was expressed to the effect that the ICC should seek to minimize the role of dissenting opinions, but the prevailing view was that the ICC should neither encourage nor discourage the giving of such opinions.” [11] That criticism had been expressed by the French National Committee according to which (a) dissenting opinions underscore the link between the arbitrator and the party who nominates him; (b) the arbitrators no longer feel obliged to search for a unanimous decision after confronting each other’s opinions and (c) a dissenting opinion may introduce a debate on the merits of the case before the Court of Arbitration.

The ICC Commission recognized the force of the French National Committee’s arguments. However, it was noted that the vast majority was in favor of the opposite opinion and that the freedom of expression of each arbitrator should have been respected.[12]

While the policy behind the freedom for each arbitrator to issue dissenting views may be understandable, it remains to establish whether, more generally, such a freedom might serve any systemic purpose.

This is surely an issue that should not be underestimated because, irrespective of the position that one may wish to take in this respect, it is undeniable that a dissenting opinion is likely to create a certain degree of turbulence in any arbitration proceedings. It has been suggested in this regard by international arbitration specialists Larry Shore and Kenneth Figueroa that “when serving on a commercial panel, an arbitrator should strive to reach unanimity with his or her colleagues. Unanimity is an important part of the panel’s mission, and is consistent with the development of commercial arbitration.”[13]

Moreover, dissenting opinions are, by themselves, evidence of starch disagreement, if not controversy, amongst the members of arbitral tribunals. Indeed, dissenting opinions are sometimes acrimonious and filled with disheartening language towards the majority. This, however, has more to do with lack of courtesy and consideration rather than dissenting opinions. Arbitrators should never forget that they are performing judicial functions and should therefore adjust their behavior accordingly. Needless to say that disagreement might be extreme. Yet, language should not.

Having said that, the dissenting opinions the purpose of which is being taken into account, here, are those issued out of a genuine and civilized disagreement as to how the dispute should have been decided and, perhaps, how the proceedings should have been carried out. Partisanship and dishonesty are of course out of any meaningful analysis.

Having clarified this, it is observed that dissenting opinions may increase the quality of majority awards. In other words, when confronted with structured dissents, the majority may somehow feel compelled to address all controversial issues more in depth and draft the award with the utmost care. For this reason, if the dissenting opinion is genuinely meant to fulfill constructive and cooperative purposes, it should be provided to the majority arbitrators before the majority award is finalized.  Indeed, while it is true and indeed desirable that the dissenting arbitrator would have already made his or her position clear to the fellow arbitrators, providing them with the written dissent may amount to an additional and final chance to review and reconsider any controversial issues.

Moreover, dissenting opinions, instead of weakening the arbitral tribunal’s authority, can instill confidence in the process. In other words, a balanced and non-acrimonious dissenting opinion may provide evidence to the losing party that all arguments were taken into account and exhaustively analyzed by the arbitral tribunal during deliberation.

Finally, it is signaled that the last decade has registered an increasing call for publication of arbitral awards with a view to creating some kind of consistent jurisprudence on certain recurrent features of international trade law. It goes without saying that the more “public” arbitral decisions are the stronger the case for dissenting opinions would be. Indeed, what has been said with regard to dissenting opinions in international and domestic courts would become increasingly applicable and relevant to international commercial arbitration.

The peculiar case of dissenting opinions in investment arbitration

It is perhaps worth signaling a recent debate on dissenting opinions in international investment arbitration. As is well-known, investment arbitration aims at settling dispute between a foreign investor and a sovereign State. This is a special type of arbitration which, in its most frequent form, is governed by public international law. An important feature of investment arbitration is that most of the awards, in fact virtually of all them, are normally published. The publication of investment arbitral awards is part of a generally shared view according to which States’ accountability should be pursued through transparency and the general public’s access to information. As a result, it is believed that any State conduct potentially in breach of an international duty should be the object of public scrutiny. In line with this trend, ICSID amended its Rules in 2006 and, more recently, UNCITRAL launched a working Group on transparency in investment arbitration.

It has been observed, with some understandable disconcert, by the leading scholar and arbitrator Albert Jan van den Berg that dissenting opinions have been issued in about 22% of the around 150 investment arbitral awards rendered so far in this comparatively recent and expanding forum. According to data that the prominent author describes as astonishing, nearly all of those dissenting opinions were issued by the arbitrator appointed by the party that lost the case.[14]

Without entering into an “in depth” analysis about the issue raised by such a distinguished author, as far as the number of dissenting opinions is concerned, there seems to be little of a surprise or indeed of a concern. The percentage of dissenting opinions recorded in his study does not differ too much from the the data available in relation to ICJ cases, where dissenting opinions are just as frequent. Any decision relating to a novel or developing body of law will inevitably, and perhaps hopefully, entail different opinions. Moreover, it is perhaps desirable that any views about such a comparatively new and developing body or rules, such as foreign investment law, should be made available to the general public with a view to encouraging the discussion on that issue. It is well known, for example, how unsettled issues such as the scope of fair and equitable treatment provisions and the reach of MFN clauses are.

Shore & Figueroa seem to support the idea that “when serving as an arbitrator on an investment treaty tribunal, should take a different approach. The development of international investment law is usually tied to a treaty case. So an arbitrator on that side of the divide must be prepared to do precisely the opposite – and not bend his or her view to achieve unanimity. Instead an arbitrator should state his or her view both to develop the law and to demonstrate his or her thinking to the broader investment treaty community (which is very broad indeed, given that virtually every state is a member).”[15]

It is certainly also arguable that investment arbitrations should not be seen as a stage for mere academic debating. Some of the dissenting opinions issued in recent investment arbitrations share are very close to PhD thesis, sometimes stretching for hundreds of pages. It is sometimes to be wondered whether, at least as a professional courtesy to those that are somehow compelled to read, the dissenter could try and express himself or herself in a more concise and considerate fashion.

Having said that, novelty of issues and publicity of proceedings do play a role in many arbitrators’ decision to publish dissenting opinions. Irrespective of appropriateness and fashion, it is undeniable that those dissenting opinions can contribute to the analysis and the development of such new body of law.

While the number of dissenting opinions in general does not seem to be out of line with the general practice, the fact that most dissenting opinions are issued by arbitrators appointed by the losing party may, as suggested by Prof. van den Berg, also have some additional significance.

The standing of most individuals serving as arbitrators in investment disputes is such as to rule out, out of hand, any concerns in terms of partiality or lack of neutrality.

The answer may be found in the fact that investment arbitration is characterized by the same features that often advise judges sitting in international courts to issue dissenting opinions. That is, novelty of issues, which spurs need for debating, and publicity of the decisions, which provides for a medium allowing debate to effectively take place. Arbitrators in investment disputes may therefore feel to be under an obligation to dissent.

However, investment arbitration is characterized by an additional feature that might explain the remarkable data highlighted by Prof. van den Berg. This is the fact that parties in investment arbitration, unlike parties in court proceedings, do have the right to appoint arbitrators of their choice. Understandably, parties are minded to appoint arbitrators that, based on the available information, such as lecturing and publications, might have a certain take on the issues to be settled in the proceedings. Perhaps this is not enough, by itself, to explain the startling figures highlighted by Prof. van den Berg even though it is an additional element to be taken into account to analyze the above-mentioned path in dissenting opinions. Be it as it may, it is submitted that dissenting opinions are too important a tool in the development of investment arbitration to be discouraged or indeed prohibited.

Finally, as it can be observed with regard to dissenting opinions in general, dissent is often the judge of itself. Genuine and well-reasoned dissenting opinions can do a great deal of good. Partisan and impolite ones can only harm the dissenter.

Domenico Di Pietro

Lecturer, International Arbitration, University or Rome, “Roma Tre” and Fellow, Center for Transnational Litigation and Commercial Law, New York University School of Law.

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[1] Anand, The Role Of Individual And Dissenting Opinions In International Adjudication, International And Comparative Law Quarterly (1965), 14: 788-808.

[2] Hudson, Twenty-Eighth Year of the World Court, 44 Am. J. Int’l L. 21 (1950). This article was written mainly with reference to the work of the PCIJ but it also addressed the first few years of operation of the ICJ.

[3] Mosk & Ginsburg Dissenting Opinions In International Arbitration, Liber Amicorum Bengt Broms, 1999.

[4] Politis, How the World Court has Functioned (1926) 4 Foreign Affairs 451 (April).

[5] Lauterpacht, The Development of International Law by the International Court, 1958, 68.

[6] Plessy v. Ferguson (1896).

[7]Brown v. Board of Education, 347 U.S. 483 (1954).

[8] Hughes, The Supreme Court of the United States, 1928, 68.

[9] Chopée Levalin NV v. Ken Ren Chemicals and Fertilisers Ltd. [1995] 1 A.C. 38.

[10] See on this issue Redfern, Dissenting Opinions in International Commercial Arbitration: The Good, the Bad and the Ugly, 20 Arbitration International, 223, 242 (2004).

[11] Final Report on Dissenting and Separate Opinions of the Working Party on Dissenting Opinions and Interim and Partial Awards of the ICC Commission on International Arbitration. Adopted by the Commission on April 21, 1988. Available at www.iccdrl.com

[12] It may be argued that the publication of the French Committee’s minority might lend some evidence about the role that may be played by dissenting opinions.

[13] Shore & Figueroa, Dissents, Concurrences and a Necessary Divide Between Investment and Commercial Arbitration, 3 Global Arbitration Review. 18, 20 (2008).

[14] van den Berg, Dissenting Opinions by Party-Appointed Arbitrators in Investment Arbitration Arsanjani et al. (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman.

[15] Shore & Figueroa, Dissents, Concurrences and a Necessary Divide Between Investment and Commercial Arbitration, 3 Global Arbitration Review, 18, 20 (2008).

Introduction

The debate about the law applicable to foreign investment disputes developed into an operational discussion at beginning of the twentieth century, when the number of private investments in foreign countries increased considerably. The debate gained momentum as a result of the spreading feeling that applying traditional private international law (or conflict of laws rules) rules to foreign investment disputes may not be entirely appropriate. The feeling was grounded on the observation that most foreign investment agreements were entered by sovereign States to fulfil their institutional obligations as acta jure imperii. Because of this, treating such relationships as mere commercial agreements seemed somehow inappropriate.

However, the suggestion that public international law should be applied was not received without controversy. It was indeed traditionally maintained that any legal relationship where one of the parties was not a subject of international law should not be governed by the rules of international law but rather by the domestic law of a country. This argument was supported by the famous words of the Permanent Court of Justice in the case of the Serbian Loans where it stated that: “any contract which is not a contract between States in their capacity as subjects of international law is based on municipal law of some country.”[1]

The commentators favouring the application of international law, however, observed that investment agreements should be regarded as quasi public international or internationalised contracts because of “the brooding omnipresence”[2] of international law in such transactions. It was indeed suggested that a foreign investment transaction is sui generis. For this reason, it should be regarded as a treaty or as a quasi-international self-contained instrument which, as such, should be, to the possible extent, be detached from domestic courts and domestic law.

Despite the fact that the suggestion to apply international law to foreign investment disputes involving a State was gaining currency, many doubts remained as to the feasibility of this suggestion. Indeed, many authors recognised that there was still little solid evidence that such an idea could find support within the existing international law.

The uncertain legal status of international investments led to the adoption of contractual devices which would provide for the highest possible detachment from the courts and the law of the contracting States. This was attempted through the adoption of arbitration clauses providing for international arbitration and choice of law clauses providing for international law as the law governing the contract.

However, such new approach was heavily criticised on the ground that it confused the separate domains of public and private international law. Furthermore, it was observed that in the absence of any choice of law clause providing for the application of international law, the presumption in favour of the law of the host State should still be regarded as valid and applicable.

Although the efforts to detach international investment agreements from the law of the host State was gaining momentum, by the beginning of the 1960’s there was still uncertainty as to the actual rules of international law which would be taken into account by arbitral tribunals in any given case.

An attempt to identify the rules of international law which may be considered applicable to foreign investments was made by the United Nations in 1962, when a number of resolutions relating to national sovereignty over natural resources were drafted. In particular, the General Assembly adopted a statement to the effect that “foreign investment agreements freely entered into by or between sovereign States shall be observed in good faith.”[3] However, the General Assembly’s attempt failed to achieve more than that. Indeed, the task of the United Nations proved much more complex than originally thought. As a result, no decision was eventually taken by the Commission on the production of a draft Convention on State responsibility.[4]

The ICSID Convention

Despite the somewhat unsatisfactory result of previous negotiations in the field of foreign investments, in 1962 the Executive Directors of the World Bank were asked to explore the possibility of establishing an institutional framework for the conciliation and arbitration of investment disputes between States and foreign private parties. After wide-ranging and lengthy consultations, on March 18, 1965, the Executive Directors of the World Bank submitted what would eventually become the so-called ICSID Convention to the World Bank’s Member Governments. The Convention was approved and entered into force on October 14, 1966.

Amongst other things, the Convention incorporated the International Centre for the Settlement of Investment Disputes (ICSID) which was given the task of providing administrative and operational facilities necessary for the settlement of investment disputes under the Contention. The ICSID Convention was adopted and ICSID was established because it was evident that foreign investment disputes could not be effectively resolved either in the domestic judicial forum of the host State, or in the national courts of the foreign investors. It was felt that the provision of a neutral forum for the settlement of investment disputes would improve the investment climate by reducing the “fear of political risks [which] operate as a deterrent to the flow of private foreign capital.”[5]

Rather unsurprisingly, during the drafting of the Convention it appeared necessary to reconcile the above-mentioned factions that had formed on the issue of the law applicable to investment disputes. The compromise reached by the drafters of the Convention on the issue is fully reflected in the adopted text.

The system devised by the Convention: Article 42

As is well known, the Convention contains no substantive rules of law concerning investments in a State by nationals of another State. It is indeed believed that, if an attempt had been made to provide for such rules, the Convention would not have proved equally successful. The Convention limits itself to guaranteeing party autonomy and, in case no choice is made in the relevant contract, it provides for a default choice to be qualified, or limited, through the application of international law.

Article 42 of the Convention states that:

(1) The Tribunal shall decide a dispute in accordance 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.

(2) The Tribunal may not bring in a finding of non liquet on the ground of silence or obscurity of the law.

(3) The provisions of paragraphs (1) and (2) shall not prejudice the power of the Tribunal to decide a dispute ex aequo et bono if the parties so agree.

Parties’ agreement

The “rules of law”

Article 42(1) provides the parties with a broad discretion as to the identification of the law governing their relationship.[6] It is interesting to note that the first sentence of Article 42(1) allows parties to agree on the “rules of law” applicable to the substance of their dispute.[7] With this rather broad term, the Convention intends to make clear that the choice of the parties is not limited to one or more national laws or legal systems, but may, for example, “incorporate” a national law in existence at a certain moment in time or exclude certain provisions of such a law. As a matter of fact, the provision is believed to be so broad and permissive that the parties are not restricted to choosing a national law or part of it at all.[8] The parties are indeed permitted to agree to have their dispute governed by general principles of law as well as rules of international conventions, even if not yet in force in the States concerned.[9]

The permissive wording of the first sentence of Article 42(1) allows the application of complex choice of law clauses, which the parties can enter into by using, for example, well known techniques such as depeçage.[10]

Application of domestic law(s)

The application of the host State law is perhaps one of the most frequent choices in investment transactions, even though the parties would normally qualify their choice by requiring the arbitral tribunal to settle the dispute by applying the law of the host State in conjunction with either another domestic law or international law. Equally, because of the dynamics of investment relationships, it is also uncommon for the parties to select the law of the foreign investor rather than the law of the host State as the governing law.

International law as the parties’ choice

A choice by the parties of international law as the only applicable law, although not frequently adopted, would be enforced by an ICSID Tribunal. This is normally done in order to provide for the highest level of internationalisation of the contract and therefore to protect the rights of the foreign investor from either a change in the domestic law of the host State. The choice of international law as the law governing the relationship between the parties has also been made in important international conventions.[11]

Absence of agreement as to the applicable law

Cases involving no agreement as to the applicable law fall under the second sentence of Article 42(1) pursuant to which the dispute is to be resolved according to the law of the State party – including its rules of conflict of laws – and international law. Several important issues have been raised in this respect. Arguably, the most problematic of all such issues is the definition and role which international law must be given in adjudicating disputes falling under the provisions of Article 42(1) second sentence.

The relationship between domestic law and international law

The wording of the final version of Article 42(1) was adopted to balance the expectations of both capital-importing countries, which opposed the idea of giving ICSID tribunals the power to determine the applicable law, and capital-exporting countries, which feared that the exclusive application of the host’s State law could disadvantage foreign investors.

One of the issues which have arisen out of the final version of Article 42(1) is how the combination of host State law and international law should work. According to leading commentators, ICSID tribunals should normally apply the law of the State party. The result of the application of that law should then be tested against international law to detect any unfair outcomes. In case of inconsistency with or violation of international law the relevant ICSID tribunal may decide not to apply the host State’s law or part of it.[12]

Several ICSID cases seem to have supported this view as to the interplay of international law and the host State’s law. It seems now settled and undisputed that the second sentence of Art. 42(1) gives international law two roles. One is complementary and comes into play in the case of lacunae in the law of the host State. The other role, the so-called corrective role, comes into play if the State’s law does not conform to the principles of international law.

International law as identified and applied by ICSID Tribunals

As regards the actual rules of international law to be applied by ICSID tribunals, the Report of the Executive Directors[13] explains that the reference to international law which Article 42(1) makes reference to should be understood in the sense given by Article 38 of the Statute of the International Court of Justice (ICJ).[14]

As suggested by leading commentators, it is open to discussion whether the list of sources provided by Article 38 of the ICJ Statute actually resolves the problem of the identification of the actual rules of international law to be applied in investment disputes.[15]

The interesting aspect of the reference to Article 38(1) is that it provides ICSID tribunals with a broad range of sources on which the tribunals can rely upon to identify the most suitable rules of international law to settle the case. Indeed such reference provides ICSID tribunals with the same ample power for the identification of the actual rules of international law given to the ICJ[16] even though ICSID tribunals should exercise such power bearing in mind the peculiar nature of investment disputes and investment arbitration.

Consequences for failure to apply the law

Section VII of the Convention avails the parties to ICSID proceedings the right to file an application for the interpretation, revision or annulment of an ICSID award in the presence of certain circumstances.

An application for annulment can be brought, pursuant to Article 52(1), in the presence of one or more of the following grounds:

• that the Tribunal was not properly constituted;
• that the Tribunal has manifestly exceeded its powers;
• that there was corruption on the part of a member of the Tribunal;
• that there has been a serious departure from a fundamental rule of procedure;
• that the award has failed to state the reasons on which it is based.

The failure to identify and apply the correct applicable law is believed to amount to an excess of power for the purpose of applying Articles 50 and 52 of the ICSID Convention.

In MINE v. Guinea[17] the Ad Hoc Committee confirmed the view that failure to decide the dispute in accordance with the applicable rules of law would constitute an excess of power leading to the annulment of the award.

More recently, in the annulment proceedings related to the cases of Enron v. Argentina[18] and Sempra v. Argentina[19], the relevant Ad Hoc Committees annulled the arbitral award because the Arbitral Tribunals had exceeded their powers by failing to apply the applicable law. In those cases the Arbitral Tribunals had rendered decisions on the basis that Argentina was precluded from relying both on Article XI of the USA/Argentina BIT and the principle of necessity under customary international law. Identifying the applicable law proves particularly complex an exercise in cases, such as the two just mentioned,  arising out of bilateral investment treaties which – as opposed to those arising out of investment contracts – are often thought to require no reference to a domestic law. While this might be true generally, sometimes this may not be the case since some bilateral investment treaties do make reference to domestic law for the settlement of certain issues such as the definition of investment.

Domenico Di Pietro is a Lecturer of International Arbitration at University “Roma Tre” in Rome and Fellow of the Center for Transnational Litigation and Commercial Law of New York University School of Law. This is an abridged, revised and updated version of the author’s article Applicable Law Under Article 42 of the ICSID, in Weiler, ed., International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and Customary International Law, 2005.

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[1] See the Serbian Loans case 1929 BCIJ, series A, No’s 20, 21 & 41.

[2] This interesting description was made by Lillich The Law Governing Disputes Under Economic Development Agreements: Re-examining the Concept of Internationalisation in Lillich & Brower International Arbitration in the Twenty-first Century, Towards Judicialization and Uniformity, 1993 at 92.

[3] United Nation Documents A/5100 ADD1 1962).

[4] Garcia Amador’s reports appear in Yearbook of International Law Commentaries 1957, 1961.

[5] Broches, The Convention on the Settlement of Investment Disputes between States and Nationals of other States (1972) Recueil des Cours at 343.

[6] See Shihata & Parra, Applicable Substantive Law in Disputes Between States and Private Foreign Parties: The Case of Arbitration Under the ICSID Convention (1994) 9 ICSID Review, 183.

[7] The term “rules of law” (rather than “law” as in Art. 33(1) of the UNCITRAL Arbitration Rules) was subsequently used in Art. 28(1) of the UNCITRAL Model Law on International Commercial Arbitration.

[8] Broches Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965 Explanatory Notes and Survey of its Application Yearbook C. A. XVIII (1993) 627.

[9] As clearly stated in the UNCITRAL Model Law on International Commercial Arbitration which adopted the ICSID formula (Report of the Commission, U.N. Doc. A/40/17, para. 232).

[10] The principle of parties’ freedom allows the use of the so-called depeçage technique which consists in subjecting the contract to certain provisions of different domestic laws.

[11] The applicable law provision provided by Article 1131 of the NAFTA for example reads: “A Tribunal established under this Section shall decide the issues in dispute in accordance with this Agreement and applicable rules of international law.”

[12] See Broches, Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965 Explanatory Notes and Survey of its Application Yearbook C. A. XVIII (1993) at 627.

[13] International Bank for Reconstruction and Development. Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals of other States (1965) at 13, 1 ICSID Reports 25.

[14] This provisions, which is considered a most authoritative statement of the sources of international law, reads at paragraph 1: The Court whose function is to decide in accordance with international law such disputes as are submitted to it shall apply:

(a)           international conventions whether general or particular establishing rules expressly recognised by the contesting states;

(b)           international custom as evidence of a general practice accepted as law;

(c)            the general principles of law recognised by civilised nations;

(d)           subject to the provisions of Article 59, judicial decisions and the teaching of the most highly qualified publicists of the various nations as subsidiary for the determination of rules of law.

[15] Schreuer, The ICSID Convention: A Commentary, 2001, at 610. See also the 2009, second edition, by the same author with Malintoppi, Reinish and Sinclair.

[16] Kahn, The Law Applicable to Foreign Investments: The Contribution of the World Bank Convention on the Settlement of Investment Disputes, 44 Indiana Law Journal 1 (1968) at 28.

[17] Maritime International Nominees Establishment v Government of Guinea, 5 ICSID Review (1990) at 95.

[18] ICSID Case No. ARB/01/3, annulment proceedings

[19] ICSID Case No. ARB/02/16, annulment proceedings

The Argentinian financial crisis in 2001 and the entailing legislation provoked a considerable number of ICSID arbitral proceedings. But disputes at the very heart of the crisis, those concerning the Argentinian default on its state bonds, were left to be decided by domestic courts in New York, London or Frankfurt, the jurisdiction of which was based on choice of forum clauses contained in the terms and conditions of the debt instruments.

However, in its recent Decision on Jurisdiction of August 4, 2011, the ICSID arbitral tribunal in the case Abaclat and Others v. Argentine Republic, ICSID Case No. ARB/07/5 (available at: http://italaw.com/documents/AbaclatDecisiononJurisdiction.pdf) held that it has jurisdiction to rule on a dispute concerning Argentina’s sovereign debt restructuring despite the choice of forum clauses. This award is remarkable in two regards: First, it is the first ICISD award concerning sovereign debt restructuring. Second, it is also the first mass arbitration ever, involving on the side of the claimants over 180,000 persons. For the purpose of this article, only the first aspect will be elucidated and the second – despite the interesting questions it involves – left to a later discussion.

A. The facts underlying the dispute are as follows: On December 23, 2001, Argentina publicly announced that it would default on over USD 100 billion of its bond debt denominated in foreign currencies, which were owed to foreign and domestic creditors. In order to restructure its debt, Argentina made the so-called Exchange Offer 2005: Argentina offered its creditors new bonds either with a lower principal or a lower interest rate. By law of February 11, 2005, the Government was prohibited to re-enter into the exchange process with respect to those bonds that were eligible for the exchange and that were not exchanged though. By February 25, 2005, approximately 75% of all bond holdings participated in the exchange.

On September 14, 2006, a group of 180,000 Italian holders of Argentinian bonds that did not participate in the Exchange Offer 2005 filed a Request for Arbitration with the International Center for the Settlement of Investment Disputes (“ICSID”). They claimed that Argentina had breach the bilateral investment treaty concluded between Argentina and Italy in 1990 (“the BIT”), which contained an ICSID arbitration clause. Due to the large number of claimants, the claim was administered by the Task Force Argenina (“TFA”), an associazione non riconosciuta under Italian law. After Argentina made another exchange offer in 2010, approximately 120,000 claimants withdrew from the arbitration.

B. In its Decision on Jurisdiction of August 4, 2011, the Tribunal (Tercier, Abi-Saab, van den Berg) held that it has jurisdiction over the dispute. It rejected the preliminary objections raised by Argentina concerning its jurisdiction and the admissibility of the claim.

Argentina’s first objection concerning jurisdiction was that the claims raised by the claimants were not “treaty claims”, i.e. that they did not concern a breach of the BIT. According to Argentina, deferring payments due under the bonds was a mere breach of contract, which could not amount to a violation of Argentina’s obligations under the Argentina-Italy BIT (para. 307).  However, the Tribunal reasoned that, for purposes of determining jurisdiction, it was not necessary to establish that the BIT was breached. Rather, it only had to establish whether – on the basis of the facts brought forward by the claimants – a breach of the BIT could be established prima facie (para. 311). This prima facie standard would only not apply to the assessment of the facts, but also the “determination of the meaning and scope of the relevant BIT provisions invoked”. The Tribunal found that the facts alleged by the claimants could constitute an unfair and inequitable treatment, an expropriation as well as discrimination (para. 314).

Although the Tribunal agreed that it has no jurisdiction to rule on mere contractual claims, which had to be brought before the state courts having jurisdiction, the claims at stake could not be considered merely contractual. It reasoned that the Emergency Law adopted by Argentina “had the effect of unilaterally modifying Argentina’s payment obligations” (para. 321). Therefore, also the choice of forum clauses in the terms and conditions of the debt instruments were irrelevant (para. 499). It is worth noting that the Tribunal did not discuss Argentina’s argument that the bonds were not governed by Argentinian law (but Swiss or New York law) and that thus the Argentinian legislation was unable to affect the claimants’ rights.

The Tribunal further reasoned that the deferral of payments was not justified by contractual or legal provisions like force majeure. Argentina tried to justify its non-performance by referring to its situation of insolvency. However, the Tribunal was not convinced by this argument since the debt contracts contained no provisions in this regard. Although insolvency could constitute a justification for non-payment under domestic law, this would not apply to the situation at hand: the Tribunal pointed out that Argentina was – by adopting the Emergency Law – acting as a sovereign. No international insolvency regime for States would exist, although the Tribunal acknowledged that some legal principles concerning the insolvency of states had evolved. However, these questions would concern the merits of the dispute and not a matter of jurisdiction (para. 323).

Second, Argentina contested that the dispute arose out of an investment as required by the BIT and Art. 25 ICSID Convention. In particular, Argentina argued that the bonds were subscribed to by certain banks and sold to intermediary banks, which then divided and distributed security entitlements in the bonds to their individual customers (like the claimants). The security entitlements could not be considered an investment. The Tribunal was not convinced by this argument: it found that the security entitlements had no value independent of the bonds; the process of distribution happened electronically, there was no physical transfer of title. But the bonds themselves constituted obligations and thus an investment as defined by the BIT (para. 356). As to Art. 25 ICSID Convention, the Tribunal rejected the so-called Salini criteria and contented itself by finding that there was an investment in the sense of the ICSID Convention because there was a contribution on behalf of claimants. It defined as contribution a value that is protected under the BIT (para. 365).

Argentina raised further objections concerning the specific nature of this dispute. It argued that its consent to arbitration contained in the BIT could not be construed in such a way as to include disput-es concerning sovereign debt restructuring. Since Argentina could have limited the scope of its consent under Art. 25(4) ICSID Convention, but did not so, the Tribunal refuted Argentina’s first contention (It is worth noting that some investment agreements, like for instance the Chile-US FTA, Annex 10-B, limit the scope of the protection to national treatment and MFN as far as debt restructuring is concerned).

In the following, the Tribunal elaborated on the specific procedural questions arising out of the fact that, initially, there were 180,000 claimants and that nearly 120,000 of them had withdrawn from the dispute after the Exchange Offer 2010.

C. The Tribunal’s decision is remarkable in several regards, as has been mentioned in the introductory remarks. Although this arbitration is the first ICISD case on the restructuring of foreign debt and although the jurisdiction of ICSID over such disputes is highly disputed in scholarly writing (an overview is provided by: Michael Waibel, Opening Pandora’s Box: Sovereign Bonds in International Arbitration, 101 Am.J.Int’l L. 711 (2007), available at SSRN: http://ssrn.com/abstract=1566482; id., Sovereign Defaults before International Courts and Tribunals 209-272 (CUP, 2011)), the Tribunal’s findings as to whether the bonds as well as the security entitlements are investments in the sense of the ICSID Convention are rather concise. Despite the fact that the Tribunal argued in favor of a “double barreled” test, which distinguishes between term “investment” used by the BIT and by Art. 25(1) ICSID Convention, it made a “contribution” that is “apt to create the value that is protected under the BIT” (para. 365) the only requirement of an investment under the ICSID Convention. Thus, the Tribunal de facto followed a subjective approach.

Bearing in mind the choice of forum clauses contained in the debt instruments, it first seems awkward that the Tribunal assumed its jurisdiction. However, the Tribunal followed a common distinction between contract and treaty claims. It is well accepted by international tribunals and scholarly writing that the mere breach of a contract between a state and an investor does not amount to a breach of an investment protection agreement. However, in case the State exercises its sovereign powers and no longer acts as a “normal” contracting party, a breach of contract can also constitute a breach of an investment treaty. Although it is not undisputed, most tribunals agree that a choice of forum clause in such a state contract can only affect contractual claims.

Thus, the Tribunal is thus in line with the rulings of other tribunals. However, one may ask whether the Tribunal’s decision is really convincing in this case.

First, the Tribunal’s finding that the dispute prima facie really concerns a breach of the treaty is largely labeling, but no analysis.

Second, the Tribunal’s approach is rather formal. Yes, Argentina enacted a law that prohibited to re-enter into the negotiation process with claimants and thus exercised sovereign powers. But from a legal perspective, the Argentinian legislation had no influence on the rights of the Claimants since a. the debt instruments were not governed by Argentinian law and b. Argentinian courts had no jurisdiction. Argentina’s creditors could still (and did so) seek legal redress in the courts of New York, London or Frankfurt. Thus, the Emergency law merely had internal effects on making-up the mind of the Argentinian state. It can be compared to a decision to default by the Board of Directors in a company directed to its chairman. The formal fact that a law was enacted can – at least in this case – not be decisive whether there was sovereign conduct. On the other hand, in case of Greek state bonds, which confer jurisdiction mostly to the courts of Athens, the situation would be different. A Greek law on debt restructuring would make it impossible to seek redress before the Greece or any other courts.

D. The decision raises several questions as to the future of sovereign debt restructuring. This is even truer in the light of the looming insolvency of Greece and other PIIGS-states (i.e. Portugal, Italy, Ireland and Spain). Will it be possible for States to restructure their foreign debts if the affected creditors can challenge these complex economic measures, which were taken in close cooperation with the World Bank, solely on the basis of legal criteria? Are ICSID Tribunals are really the pertinent forum to decide about sovereign debt restructuring?

Apparently, the Tribunal treated the abovementioned questions only superficially in order to be able to proceed to the merits of the case and to make general statements on sovereign debt restructuring under international law. Although the Tribunal did not accept the objection by Argentina, that it was insolvent, it acknowledged that there are principles under international law that govern the insolvency of states; it announced to discuss these principles during the merits-phase. Thus, one can assume that the Tribunal is aware of the relevance of its ruling for the coming state insolvencies.

Depending on the outcome, the Tribunal could set up criteria that would help to create legal certainty also for States in a state of economic necessity. One has to bear in mind that in the case of Argentina domestic courts in a dozen different jurisdictions have ruled on the admissibility of the Argentinian foreign debt restructuring measures – and thus have implicitly challenged the World Bank’s decisions. A decision on the merits then would not be the end, but the beginning of a new era of foreign debt restructuring – although there are doubts as to whether a Tribunal of three arbitrators is really a legitimate institution to re-define the law of State insolvency. Anyhow: The Tribunal has assumed this great responsibility; it remains to be seen whether it uses its power wisely.

Jan Asmus Bischoff

Dr. Jan Asmus Bischoff studied law at Hamburg University from 2000 to 2005. After his graduation, he worked as a researcher at the Max Planck Institute for Comparative and International Private Law until 2010. In 2008, he completed his Master Degree in International Legal Studies at NYU, School of Law as a Hauser Global Scholar. In 2009, he completed his doctoral thesis on “The European Community and the Uniform Private Law Conventions” under the supervision of Prof. Dr. Dr. hc. Jürgen Basedow. In 2010, he passed the Second State Examination at the Hanseatic Regional Appelate Court, Hamburg. He is currently working as an attorney (Rechtsanwalt) at Luther Rechtsanwaltsgesellschaft, Hamburg in the field of international investment law.