HANDBOOK ON

INVESTMENT
ARBITRATION IN INDIA

MAHARASHTRA NATIONAL LAW UNIVERSITY MUMBAI

CENTRE FOR ARBITRATION AND RESEARCH
© Centre for Arbitration and Research, Maharashtra National
Law University Mumbai (2021).

All rights reserved.

This publication is produced by the Centre for Arbitration and Research,

MNLU Mumbai and is intended for information and education purposes
only. It is not a substitute for the legal advice. Centre for Arbitration and
Research, MNLU Mumbai holds all copyright and other intellectual
property rights in this work. Links to the third-party websites are provided
in good faith and for information only.

Any responsibility for the materials contained in any third-party website

referenced in this work is disclaimed. All reasonable e orts have been
taken to give the correct information. Any mistake which might have
inadvertently crept in may be urgently brought to the notice of publisher. No
part of this work may be reproduced, translated or adapted in any form or
by any means except as permitted by law without written permission.

ISBN: 978 - 93 - 5526 - 773 - 3

Cite this guide as:

Chirag Balyan, Handbook on Investment Arbitration in India, CAR-MNLUM

(2021).

Cite chapters in this guide as (illustrative):

Parina Muchhala, ‘Chapter 7 - Careers in Investment Arbitration’ in Chirag

Balyan, Handbook on Investment Arbitration in India, CAR-MNLUM,
144-160 (2021).

Hitesh Nagpal, ‘Chapter 2 - Investment Arbitration’ in Chirag Balyan,

Handbook on Investment Arbitration in India, CAR-MNLUM, 18 (2021).

Salomi Kalwade & Parina Muchhala, ‘Chapter 5 - Enforcement of

Investment Arbitration Award’ in Chirag Balyan, Handbook on Investment
Arbitration in India, CAR-MNLUM, 111-122 (2021).
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PREFACE
The ‘Handbook on Investment Arbitration in India’ is prepared
by the team at the Centre for Arbitration and Research (CAR),
Maharashtra National Law University (MNLU) Mumbai to create an
open access, reliable and authentic source for the students,
researchers and practitioners to learn, understand and critically
analyse the nuances of the Investment Treaty Arbitration (ITA) in
the Indian context.

It is designed with an understanding that the ITA is not taught in

most of the Indian universities as a core subject. Only select Indian
universities o ers this course but, even then the open access
resources for the students and teachers are lacking. There are
quite a few good blogs but, the information is not systematic and
not India focussed.

This handbook is meant for the beginners and is not intended

to be a full edged treaties on the subject. However, to facilitate
the further learning it provides an elaborate list of reference
materials in the end notes. The presumption in preparing this book
is that the reader is already aware about the basics of public
international law, private international law and relevant domestic
legal systems. Apart from it, a general sense of evidentiary and
procedural principles as applicable in International Arbitration is
also required to fathom the subject.

In fact, ITA is such a wide, dynamic and practice oriented

subject area that no single treatise, commentary or text book will
ever be able to comprehensively cover all of its aspects.

ITA lies at the intersection of law, politics and economy. A better

understanding of the subject requires an appreciation of this
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intersectionality. The changing legal, political and economic

realities of a country can have a signi cant impact on the
investment rule-making. For example, the ‘backlash’ after the
infamous White Industries Case resulted in ‘Indian model’ of BIT’s
in 2016 in contrast to ‘European model’ and ‘American model’. The
Indian model can be viewed as her increasing domination as a
capital exporting State from a capital importing State.

Further, ITA is in the state of ux due to the exponential rise of

BIT’s and International Investment Agreements (IIA’s) providing for
Investor State Dispute Settlement (ISDS) mechanism. This has
signi cantly contributed to the investment rule-making. The arbitral
tribunals while interpreting the broad language employed in such
treaties have also engaged in the law-making activity. The private
adjudicators performing the sovereign function of law-making have
put a scanner on ISDS mechanisms. The ISDS legitimacy crisis is
further deepened by the concerns such as, imposition of a
limitation on regulatory power of host States by the BIT’s and the
lack of transparency in the ITA proceedings. In light of these issues,
ITA has become a high pro le area of contestation. Working Group
(WG) III of UNCITRAL is already looking at a reform framework for
the ISDS mechanism.

This handbook delves into the key conceptual, substantive,

jurisdictional, procedural and post award issues in ITA. It also looks
into the legitimacy issues and examines some of the undergoing
reforms.

It is hoped that this handbook will be a step forward in

democratising the knowledge of ITA and will assist the interested
people in making an informed choice to pursue a career in this
eld. The idea of this handbook could be realised with the support
and motivation of our Hon’ble Vice-Chancellor, Prof. (Dr.) Dilip Ukey
- an eminent constitutional law and human rights expert.

Chirag Balyan
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FOREWORD
Over the recent years, India has emerged as a prominent
participant in the movement of foreign investment. Despite being
predominantly a recipient of foreign investment, its role as a home
State of corporations investing abroad is conspicuous and
expanding. This makes the legal regime of protection foreign
investment in relation to India of immense practical and academic
signi cance. The current handbook is an important contribution
towards the understanding of this regime.

The highlight of the handbook is its depth of analysis and

comprehensive coverage of issues from a practical as well as
scholarly perspective. The handbook addresses all aspects of
investment arbitration, from both procedural and substantive law
side that are pertinent in the life of an investment arbitration. The
handbook starts with the background of the investment arbitration
regime, then discusses jurisdictional issues, followed by a
discussion on substantive standards and concludes by challenges
one may face enforcing an investment arbitration award.

The handbook provides extensive information originating from a

wide range of sources. It touches upon what may seem theoretical
questions but actually of immense practical in uence, such as the
nuanced distinction between commercial and investment
arbitration. Some important practical steps for conducting an
investment arbitration, from the time of its commencement till the
realization of the outcome of an award are elaborated in a simple
and understandable manner. The role of arbitral institutions in
administering investment arbitrations is extensively discussed. The
di erences in procedures of institutions, the practical di erences
that would arise when a case is administered by an institution vis-à-
vis ad hoc arbitration at di erent stages of the arbitration
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proceedings have been given the necessary and deserved

attention. Another more serious question, maturely and extensively
handled, is the relationship between human rights and investment
arbitration. This is a recurring issue amidst the debate about the
role of functioning of investment arbitration and its impact on other
regimes and on the much broader issue of the freedom of States to
regulate.

The handbook provides the broader background of the regime

of international investment law and investment treaty arbitration
and ts the speci c discussion about India in this broader context.
This contextualization helps understand the trends in the law at the
international level and the reactions, shifts and transformations
taking place within India. For example, the provisions of the Indian
Model Bilateral Investment Treaty are discussed in light of the
existing jurisprudence of investment tribunals. This would help
understand the way some of these provisions may be interpreted.

These discussions are informative and instructive for other

States as well that are looking at di erent policy options while
formulating their own approach towards investment arbitration. In
particular, the second half of the handbook with its focus on
arbitrations in which India was involved and recently concluded or
ongoing investment treaty negotiations hints at future trends. The
ongoing discussions in the UNCITRAL Working Group III about the
reforms to the regime and other related developments would also
be of interest for the readers.

The handbook even o ers a peek into how one could get
involved in the eld of investment arbitration, through a chapter
dedicated to careers in investment arbitration. Persons interested
in becoming a part of this exciting and expanding eld of law would
certainly nd the description in that chapter very helpful.

As expected of an ideal handbook, the present handbook

provides a ‘beginning-to-end’ functioning of investment arbitration
proceedings in the Indian context. In fact, it goes a couple of steps
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beyond as well. It is an essential aid for researchers and practitioners

alike – or for that matter for anyone interested in knowing about
investment arbitration in India.

Aniruddha Rajput
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CREDITS
Patron: Prof. (Dr.) Dilip Ukey,
Vice-Chancellor, MNLU Mumbai

Foreword by: Dr. Aniruddha Rajput

Member, United Nations International Law Commission &
Consultant, Public International Law and International
Arbitration, Withers LLP (London).

Edited by: Chirag Balyan

Assistant Professor (Law) &
Coordinator, CAR, MNLU Mumbai

Contributors:

Parina Muchhala*
Authored chapter numbers: I, IV, V, VI & VII.
Hitesh Nagpal*
Authored chapter numbers: II & III.
Salomi Kalwade**
Authored chapter number: V and assisted in proof-reading
and updating the content of the book.
Chaitanya Shah*
Authored a part on ’Human Rights and Investment
Arbitration’ in Chapter VI and assisted in formatting.

* Law Student at Maharashtra National Law University Mumbai.

** Law Student at University of Mumbai.
 viii

Expert Reviewers:

Rahul Donde
Counsel at Lévy Kaufmann-Kohler, Geneva
Dr. Julian Scheu
Jun. Professor, IILCC, University of Cologne
Badrinath Srinivasan
Senior Manager (Legal), Directorate General of
Hydrocarbons under MOPNG, Government of India

Acknowledgment:

We are thankful to Dr. Anil G. Variath (Registrar I/c) at MNLU

Mumbai and the University administration including Mr.
Manohar Kharatmol for their support in timely publication of
this handbook.
 ix

TABLE OF CONTENTS
Preface i
Foreword iii
Credits vii
Table of Contents ix
Abbreviations xv
Index of Cases xix

Chapter 1 1
Introduction 1
A. History of International Investment Law 5
B. India and International Investment Law 15

Chapter 2 18
Investment Arbitration 18
A. Key Di erences between Investment and Commercial Arbitration 18
B. Institutional Arbitration and Ad Hoc Arbitration 20
C. International Centre for Settlement of Investment Disputes 22
D. Preconditions to Arbitration 26

1. Exhaustion of Local Remedies 26

2. Cooling o Period 30

3. Notice of Arbitration 33
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Chapter 3 35
Fundamental Concepts of Investment Arbitration 35
A. Interpretation of Investment Treaties 35
B. Jurisdiction 37

1. Ratione Voluntatis 37

2. Ratione Personae 39

i. Natural Person 40

ii. Juridical Person 41

3. Ratione Materiae 43

4. Ratione Temporis 47
C. Substantive Rights 49

1. Expropriation 50

i. Direct Expropriation 51

ii. Indirect Expropriation 51

iii. Creeping Expropriation 56

iv. Regulatory Measures 58

2. Fair and Equitable Treatment 60

i. FET and Minimum Standard Requirement 64

3. National Treatment 66

i. Like circumstances 67

ii. Di erentiation between investors 69

iii. Discriminatory intent of host state 70

4. Most Favoured Nation 71

4. Full Protection and Security 77

5. Denial of Bene ts 79
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Chapter 4 82
India’s Tryst with Investment Arbitration 82
A. Arbitration Cases Involving India 83

1. The Dabhol Power Project case 83

2. White Industries v. India 86

3. Deutsche Telekom v. India 89

4. Khaitan Holdings Mauritius Limited v. India 92

5. Louis Dreyfus Armatures v. India 93

6. Vodafone Group v. India 95

7. Nissan Motor Co. Ltd. v. India 97

B. Other Noteworthy Cases 99
C. Select Investment Arbitrations Initiated by Indian Investors Against
other Host States 102
D. Developments in India’s BITs and Foreign Investment Law 104

1. The signing of the India-Brazil BIT 104

2. New foreign investment protection law by Finance Ministry 106

3. Imposition of stricter FDI norms 107

4. FDI in the insurance sector 108

5. India and EU to resume negotiations on the India-EU Bilateral Trade

and Investment Agreement (BTIA) 108

6. Canada-India Foreign Investment Promotion and Protection

Agreement negotiations 109

Chapter 5 110
Enforcement of Investment Arbitration Award 110
A. Understanding the conundrum 112
B. Analysing the current Indian scenario 114
 xii

C. Looking beyond the A&C Act 117

Chapter 6 122
Reforms in Investment Arbitration 122
A. UNCITRAL Working Group III 124
B. ICSID-UNCITRAL Code of Conduct 128
C. Singapore International Mediation Convention 129
D. Human Rights and Investment Arbitration 131

1. Fruition of Human Rights as a Defence of Host State 132

2. Human rights in the Substantive Jurisprudence of International

Investment Law 137

3. Future Outlook 141

Chapter 7 143
Careers in Investment Arbitration 143
A. Arbitrators 144

1. Selection of Arbitrators 144

B. Counsel 149

1. Joining the Dispute Resolution Practice of a Law Firm 149

2. Joining the Chamber 150

C. Tribunal Secretary 150
D. Independent Expert/Amicus Curiae 153
E. Researcher/Policy Expert 155

1. Research Centres 156

2. Ministry of External A airs, Government of India 156

F. Building an Interest in Investment Arbitration during Law School 157
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ABBREVIATIONS

% Percentage
& And
€ Euro
A&C Act / ACA / Act, 1996 Indian Arbitration
and Conciliation Act, 1996
AIR All India Reporter
Arb Arbitration
Art Article
BIPA Bilateral Investment
Protection Agreement
BIT Bilateral Investment Treaty
Bom Bombay
CAFTA Central America Free
Trade Agreement
CAR Centre for Arbitration and
Research
CEO Chief Executive O cer
CIArb Chartered Institute of
Arbitrators
CTIL Centre for Trade and
Investment Law
CV Curriculum Viate
Del Delhi
DIAC Dubai International
Arbitration Centre
ECtHR / ECHR European Court of Human
Rights
ETA Economic and Trade
Agreement
EU European Union
FDI Foreign Direct Investment
FEMA Regulations Foreign Exchange
Management (Transfer or
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 xvi

Issue of Securities by a
Person Resident Outside
India) Regulations 2000
FEMA Foreign Exchange
Management Act, 1999
FET Fair and Equitable
Treatment
FOSFA Federation of Oils, Seeds
and Fats Associations
Limited
FTA Free Trade Agreement
GOI Government of India
HC High Court
HKIAC Hong Kong International
Arbitration Centre
ICAI Institute of Chartered
Accountants of India
ICC International Chamber of
Commerce
ICCA International Council for
Commercial Arbitration
ICJ International Court of
Justice
ICSID International Centre for
Settlement of Investment
Disputes
ICSID Convention Convention on the
Settlement of Investment
Disputes between States
and Nationals of Other
States
Id Previous citation
IIAM Indian Institute of
Arbitration & Mediation
INR Indian Rupee
ISDS Investor-State Dispute
Settlement
ISRO Indian Space Research
Organisation
KFCRI Kovise Foundation Con ict
Resolution International
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LCIA London Centre for

International Arbitration
LDCs Least Developed Countries
LPG Liberalisation, Privatisation
and Globalisation
Ltd Limited
MCIA Mumbai Centre for
International Arbitration
MFN Most Favoured Nation
MIT Multilateral Investment
Treaty
MST Minimum Standard of
Treatment
NAFTA North American Free Trade
Agreement
NCLT National Company Law
Tribunal
New York Convention, 1950 United Nations Convention
on the Recognition and
Enforcement of Foreign
Arbitral Awards, 1958
No. Number
NPAC Nani Palkhivala Arbitration
Centre
OECD Organisation for Economic
Cooperation and
Development
p./pg. Page
Para Paragraph
PCA Permanent Court of
Arbitration
Pt. Point
Pvt. Private
SC Supreme Court
SCC Arbitration Institute of the
Stockholm Chamber of
Commerce
SCRA Securities Contracts
(Regulation)Act, 1956
SIAC Singapore International
Arbitration Centre
 xviii

Supra above
Geneva Convention Convention on the
Execution of Foreign
Arbitral Awards, 1927
UAE United Arab Emirates
UK United Kingdom
UNCITRAL United Nations
Commission on
International Trade Law
UNCTAD United Nations Conference
on Trade and Development
US / USA United States of America
USD / $ US Dollar
v. Versus
VAT Value Added Tax
WTO World Trade Organisation
 xix

INDEX OF CASES
A
ADC v. Hungary, Award, Oct. 2, 2006………………………………………………….….…60
ADF Group Inc v. United States, ICSID Case No ARB(AF)/00/1, Award, 9
January 2003………………………………………………………………………………………….……65
Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of
Estonia, ICSID Case No. ARB/99/2, (June 25,
2001)………………………………………………………………………………………………………………61
Amco Asia Corp. and Others v. Republic of Indonesia, ICSID Case No.
ARB/81/1………………………………………………..………………………………………………………26
AMT v. Zaire, 5 ICSID Rep. 11 (February 21,
1997)…………………………………………………………………..….………………………………………78
Antoine Goetz et consorts v. République du Burundi, ICSID Case No. ARB/
95/3 (Feb. 10, 1999)………………………………………………………………………………………54
Ashok Sancheti v. Germany, 2000……………………………………………………….……102
Ashok Sancheti v. United Kingdom, 2006………………………………………………..102
Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No.
ARB/87/3…………………………………………………………………………………………………….…77
Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Award,
(Jul. 14, 2006)…….………………………………………………………………………………………….78

B
Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain),
Second Phase, Judgment of 5 February 1970, 1970 ICJ Rep. 3……………….…7
Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of
Pakistan, ICSID Case No. ARB/03/29 (Nov. 14,
2005)…………………………………………………………………………………………………………….76
Bharat Catering Corp. v. Indian Railway Catering & Tourism Corp. Ltd.,
(2009) 162 DLT 219………………………………………………………………………………………116
Biwater Gau (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case
No. ARB/05/22, (July 12, 2008)……..……………………………………………..…….32, 156
Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS,
2014 SCC OnLine Cal 17695…………………………………………………………………94, 117
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 xx

Burlington Resources Inc. v. Republic of Ecuador, ICSID Case No. ARB/

08/5, Decision on Liability (Dec. 14,
2012)…………………………………………………………………………………………………………..….51

C
Cairn Energy PLC and Cairn UK Holdings Limited v. Republic of India, PCA
Case No. 2016-07…………………………………………………………………………………………101
Capital India Power Mauritius I and Energy Enterprises (Mauritius)
Company v. India, ICC Case No 12913/MS, IIC 43
(2005)……………………………………………………………………………………………………………83
CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited.,
and Telcom Devas Mauritius Limited v. The Republic of India, PCA Case
No. 2013-09…………………………..………………………………………………………………..……89
Centre for Public Interest Litigation v. Union of India, AIR 2003 SC
3277………………………………………………………………………………………………………………92
Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case
No. ARB/97/4, (May 24, 1999)………………………………………………………………..43-44
Champion Trading Company, Ameritrade International, Inc. v. Arab
Republic of Egypt, ICSID Case No. ARB/02/9, (Oct. 21,
2003)…………………………………………………………………………………………………………….40
CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial award
(Sep. 13 2001)…………………………………………………………………………………………38, 79
CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case
No. ARB/01/8, (Sep. 25,
2005)…………………………………………………………….………………………………………………26
CMS v. Argentina, Award 10 February 2005, 44 ILM 1205
(2005)…………………………………………………..………………………………………………..26, 55
Comed Chems. Ltd. v. C.N. Ramachand, (2009) 1 SCC
91………………………………………………………………………………………………………….……….116
Compania de Desarrollo de Santa Elena SA v Costa Rica, ICSID Case No.
ARB/96/1, Award on the Merits, 17 February 2000………………………………..…138
Consortium RFCC v. Morocco, Award, 20 ICSID Review FILJ (Dec. 22,
2003)………………….………………………………………………………………………………….……..63

D
Deutsche Telekom v. India, ICSID Additional Facility, Notice of Arbitration
(not public) (Sept. 2, 2013)…………………………………………………………..…..……88, 89

E
Elettronica Sicula SpA (ELSI) (US v. Italy), Judgment of 20 July 1989, 1989
ICJ Rep. 15………………………………………………………………………………………………..……..7
 xxi

Emilio Agustín Ma ezini v. The Kingdom of Spain, ICSID Case No. ARB/
97/7 (Nov. 9, 2000)…………………………………………………………………………………….…73
Ethyl Corporation v. Canada, NAFTA-UNCITRAL Case, Award on
Jurisdiction, 24 June 1998………………………………………………………………………..32
Eudoro Armando Olguín v. Republic of Paraguay, ICSID Case No. ARB/
98/5 (Aug. 8, 2000)……………………………………………………………………………..……40
European Grain and Shipping Ltd. v. Bombay Extractions Ltd., AIR 1983
Bom 36…………………………………………………………………………………………………….…113

F
Flemingo Duty Free Private Limited v. The Republic of Poland (August 12,
2016),,,…………………………………………………………………………………………………..……103

G
Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/
00/9………………………..………………………………………………………………………….…..30, 57
Greece v. Great Britain, 1924 PCIJ………………………………………………………….……10
Gokul Das Binani and Madhu Binani v. Republic of North Macedonia (PCA
Case No. 2018-38)………………………………………………………………………………….…..104

H
Harendra H. Mehta, et al. v. Mukesh H. Mehta, et al., 1999 (3) SCR
562…………………………………………………………………………………………………………..……116
Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No.
ARB/02/7 (July 7, 2004)………………………………………………………………..………..40, 41

I
ICS Inspection and Control Services Limited (United Kingdom) v. The
Republic of Argentina, UNCITRAL, PCA Case No. 2010-9, (Feb. 10,
2012)…………………………………………..……………………………………………………………….28
Indian Metals & Ferro Alloys Ltd v. Republic of Indonesia, PCA Case No.
2015-40……………………………………………………………………………………….……..103, 104

J
James and ors v United Kingdom, [1986] ECHR
2……………………………………………………………………………………………………….…………….8

K
Kamani Engg. Corp. Ltd. v. Societe De Traction Et D’Electricite Societe
Anonyme, AIR 1965 Bom
114………………………………………………………………………………………………………………….117
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 xxii

Khadamat Integrated Solutions Private Limited (India) v. The Kingdom of

Saudi Arabia…………………………………………………………………………………………..……103
Klöckner Industrie-Anlagen GmbH and others v. United Republic of
Cameroon and Société Camerounaise des Engrais, ICSID Case No. ARB/
81/2, Award, 21 October 1983…………………..………………………………………………….41

L
Lanco International Inc. v. The Argentine Republic, ICSID Case No. ARB/
97/6, (Dec. 8, 1998)………………………………………………………………………………………29
LFH Neer and Pauline Neer v. Mexico (US v Mexico) (1926) 4 RIAA
60………………………………………………………………………………………………….……8, 64, 65
Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005 (Mar.,
26 2008)…………………………………………………………………………………………………….80
Loewen Group, Inc. and Raymond L. Loewen v. United States of America,
ICSID Case No. ARB(AF)/98/3, (June 26, 2003)………………………………………30

M
Maritime International Nominees Establishment v. Republic of Guinea,
ICSID Case No. ARB/84/4………………………………………………………………………..42
Marvin Feldman v. Mexico, Award of 16 December 2002 (Kerameus,
Covarrubias Bravo, Gantz), 18 ICSID-Rev.- FILJ 488
(2003)………………………………………………………………………………………………..……67, 68
Maxim Naumchenko, Andrey Poluektov and Tenoch Holdings Limited v.
Republic of India, PCA Case No. 2013-23……………………………….……………..…100
Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case
No. 2012-17……………………………………………………………………………………………………49
Metalclad Corporation v. The United Mexican States, ICSID Case No.
ARB(AF)/97/1……………………………………………………………………………………………..….54
Mondev International Ltd. v. United States of America, ICSID Case No.
ARB(AF)/99/2, (Oct. 11, 2002)……………………………………………………..…………61, 65
MTD v. Chile, MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile (ICSID
Case No. ARB/01/7)…….………………………………………………………………………………63
Murphy Exploration and Production Company International v. Republic of
Ecuador, ICSID Case No. ARB/08/4, (Dec. 15, 2010)……………………………30, 31

N
Nissan Motor Co., Ltd. v. Republic of India (PCA Case No.
2017-37)…………………………………………………………………………………………………..……97
Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11 Award, (Oct. 12,
2005)……………………………………………………………………………………………………………36
 xxiii

Norwegian Shipowners’ Claims. Norway v. United States of America.

Permanent Court of Arbitration. Award of 13 October
1922………………………………………………………………………………………………………………52
Nottebohm case (Liechtenstein v. Guatemala), Second Phase, Judgment
of 6 April 1955, 1955 ICJ Rep.
4…………………………………………………………………………………………………………………….7
Nykomb Synergetics Technology Holding AB v. The Republic of Latvia,
(SCC Case No. 118/2001)……………………………………………………………………….……58

O
Occidental Exploration and Production Company v. The Republic of
Ecuador, LCIA Case No. UN3467, Final Award, (July 1,
2004)…………………………………………………………………………………………………………..…61

P
Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/
09/12…………………………………………………………………………………………………………..….81
Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/
05/8, Award, (Sep. 11, 2007)…………………………………………………………………………73
Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL,
PCA Case No. 2012-12…………………………………………………………………………………49
Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/
03/24 (Aug. 27, 2008)…………………………………………………………………………….80, 81

R
RosInvest Co. UK Ltd. v. The Russian Federation, SCC Case No.
V079/2005……………………………………………………………………………………………………74
R.M. Investments & Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC
1136…………………………………………………………………………………………………………115, 116
RFFC v. Morocco, Award, 22 December 2003, 20 ICSID Review- FILJ 391
(2005)……………………………………………………………………………………………………….…..55
Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award, (Sep. 3,
2001)………………………………..…………………………………………………………31, 36, 69, 137

S
S.D. Myers, Inc. v. Government of Canada, UNCITRAL,
2000-2002………………………………………………………………………………………68, 70, 71
Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No.
ARB/05/07, (Mar. 21, 2007)……………………………….……………………………………..….30
Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite of Jordan,
ICSID Case No. ARB/02/13…………………………………………………………………………..74
 xxiv

Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco [I],

ICSID Case No. ARB/00/4, Decision on Jurisdiction (July 31,
2001)……………………………………………………………………………………………………….…….44
Saluka investments BV v. The Czech Republic, Partial Award (Mar. 17,
2006)………………………………………………………………………………….………….….61, 62, 78
SEDCO, Inc. v. National Iranian Oil Co., [Interlocutory Award No.) ITL
55-129-3 (Oct. 28, 1985) (Chamber 3)……………………………………………………..…138
SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan,
ICSID Case No. ARB/01/13, Decision of the Tribunal on Objections to
Jurisdiction, (Aug. 6 2003)………………………………………………………………………..…32
Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, (Feb.
6, 2007)……………………………………………………………………………………………………71, 73
Southern Paci c Properties (Middle East) Limited v. Arab Republic of
Egypt, ICSID Case No. ARB/84/3…………………………………………………………….…39
Starrett Housing Corporation v. Iran, Interlocutory Award No. ITL 32-24-1
(Dec., 19 1983)………………………………………………………………………………………………39
Suez, Sociedad General de Aguas de Barcelona S.A. v. Argentine
Republic, ICSID Case No. ARB/
03/17………………………………………………………………………………………………………..…..193
Suez, Sociedad General de Aguas de Barcelona, S.A. and Vivendi
Universal, S.A. v. Argentine Republic (II)(ICSID Case No. ARB/
03/19)……………………………………………………………………………………………………..……155
Swiss Singapore Overseas Enters. Pvt. Ltd. v. M/V African Trader, Civil
Application No. 23 of 2005, H.C.
Guj……………………………………………………………………………………………………………….116

T
Tecmed v. Mexico, Award, 29 May 2003, 43 ILM 133
(204)……………………………………………………………………………………..48, 51, 56, 61, 63
Técnicas Medioambientales Tecmed, S.A. v. The
United Mexican States, ICSID Case No. ARB (AF)/00/2 (May
2003)………………………………………………………………………………………….48, 51, 62, 64
Telenor Mobile Communications AS v. Republic of Hungary, ICSID Case
No. ARB/04/15, (Sep. 13, 2006)……………………………………………..……….55, 56, 74
The Factory at Chorzów (Claim for Indemnity) (The Merits), Germany v.
Poland, Permanent Court of International Justice, Judgment, 13
September 1928, 1928 P.C.I.J. (ser. A) No. 17………………………………………….….53
Thunderbird v. Mexico, UNCITRAL, Award (15 November
2004)……………………………………………..…………………………………………………………..…69
Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on
Jurisdiction (Apr. 29, 2004)…………………………………………………………………………42
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Too v. Greater Modesto Insurance Associates, Award of December 29,

1989, 23 Iran-U.S. Cl. Trib. Rep.
378………………………………………………………………………………………………………………..59

U
Union of India v. Khaitan Holdings (Mauritius) Ltd. & Ors., 2019 SCC
OnLine Del 6755……………………………………………………………………………………93, 117
Union of India v. Lief Hoegh Co, AIR 1983 Guj 34,
(1983)……………………………………………………………………………………………………..116, 119
Union of India v. Vodafone Group PLC United Kingdom, 2018 SCC OnLine
Del 8842…………………………………………………………………………………………….….96, 117
United Parcel Service of America Inc. v. Government of Canada, ICSID
Case No. UNCT/02/1…………………………………………………………………….……………..66
United States v. India, Request for Arbitration, Nov. 4,
2004………………………………………………………………………………………………………..……86

V
Vladimir Berschader and Moïse Berschader v. The Russian Federation,
SCC Case No. 080/2004………………………………………………………………………..……74
Vodafone International Holdings BV v. Union of India, [2012] 1
SCR…………………………………………………………………………………………………..…….92, 95
Vodafone Group v. India, PCA Case No.
2016-35…………………………………………………………………………………………..…………….95

W
Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of
Egypt, ICSID Case No. ARB/05/15, Decision on Jurisdiction (Apr. 11,
2007)…………………………………………………………………………………………………………….40
Waste Management, Inc v. United Mexican States, ICSID Case No
ARB(AF)/00/3, Award (30 April 2004)………………………………………………….66, 79
Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4,
Decision on Annulment, (Feb. 5, 2002)…………………………………………….…25, 77
Western NIS Enterprise Fund v. Ukraine, ICSID Case No. ARB/04/2, (March
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Yaung Chi Oo Trading Pte Ltd. v. Government of the Union of Myanmar,

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2003)………………………………………………………………………………………………….………..26
 1

CHAPTER 1
INTRODUCTION
By the end of World War II, a new chapter of the global
economy unfolded: increasing technological advancement
propagated by signi cant global trade and transnational exchange.1
Within this backdrop, foreign direct investment (FDI) has become
an important component for the socio-economic development of a
country. FDI leads to technological advancement through constant
development, assists human capital formation through skilled and
unskilled employment generation, integrates international trade, and
fosters more competition in the business environment by enhancing
enterprise development.2 In terms of the operational costs, FDI is
driven by considerations related to the availability of raw materials,
cheap labour and a large market for sales, making developing
countries like India a viable destination for foreign investors.3 In
recent times, this has led to States making active diplomatic e orts
towards attracting more FDI – with initiatives like tax exemptions
and special economic zones ruling the roost.4 Notably, however,
FDI is equally dependent on the politico-economic and existing

1 World Economic Forum, A brief history of globalization, available at <https://

www.weforum.org/agenda/2019/01/how-globalization-4-0- ts-into-the-history-of-
globalization/> last accessed 12 May 2021.
2 Organisation for Economic Cooperation and Development, Foreign Direct Investment for
Development: Maximising Bene ts, Minimising Costs – Overview, available at <https://
www.oecd.org/investment/investmentfordevelopment/1959815.pdf> last accessed 12
May 2021.
3 Simplice Asongu, Uduak S. Akpan & Salisu Isihak, Determinants of foreign direct
investment in fast-growing economies: evidence from the BRICS and MINT countries, 4
Financial Innovation 26 (2018).
4 See, Holger Görg, Christiane Krieger-Boden, Theodore Moran & Adnan Serič, How to
attract quality FDI? G20 Policy Briefs, available at <https://www.g20-insights.org/
policy_briefs/attract-quality-fdi/> last accessed 13 May 2021.
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legal regime of a State.5 For foreign investors, the stability and

predictability of the legal regime are speci c decisive attributes
that contribute to the attractiveness of a country, because it
provides them with much-needed security to recover costs in
exchange for the risks borne by them through their investment.6

The expansion of foreign investment and trade in India began

especially after the ‘Liberalisation-Privatisation-Globalisation’
regime was institutionalised in 1991. Since then, India has been one
of the fastest growing countries and is increasingly being
considered as an FDI hub by investors worldwide.7 From the years
2014 to 2019, FDI in India rose to $284 billion.

This represents an impressive increase from the 2009 to 2014

total of $190 billion. It is believed that this results from the foreign
in ows growing at an exponential rate of 15%.8 Despite these
developments, the government has felt the need to revise the
existing legal regime to further increase foreign investment. The
intent to do so can be traced from the Finance Minister’s 2021
budget speech, which laid emphasis on attracting FDI in India and
relaxing restrictions prohibiting private funding, commercial
activities, and direct investment in infrastructure.9

5 Christoph Schreuer, Investment Arbitration in The Oxford Handbook of International

Adjudication (C. Romano et. al. ed.) (OUP, 2013) at 295.
6 Zachary Douglas, The juridical foundations of investment treaty arbitration in The

International Law of Investment Claims (Zachary Douglas ed.) (Cambridge University

Press, 2009) at 1, 2; See, Indu Malhotra, Commentary on the Law of Arbitration (Wolters
Kluwer, 2020)
7 See, PTI United Nations, India among top 10 FDI recipients, attracts $49 billion in ows in

2019: UN report, The Hindu Bus. Line (Jan. 20, 2020), available at <https://
www.thehindubusinessline.com/economy/india-among-top-10-fdi-recipients-attracts-49-
billion-in ows-in-2019-un-report/article30608178.ece> last accessed May 10, 2021.
8 Press Trust of India, Budget 2020: FDI in India rises to $284 billion during 2014-19, says

FM, Bus. Standard (Feb. 1, 2020), available at <https://www.business-standard.com/

budget/article/budget-2020-fdi-in-india-rises-to-284-billion-during-2014-19-says-
fm-120020100403_1.html> last accessed 09 May 2021.
9 Indian Budget 2021-2022 Speech of Nirmala Sitharaman Minister of Finance, available at

<https://www.indiabudget.gov.in/doc/Budget_Speech.pdf> last accessed 09 May 2021.

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In this respect, in addition to initiatives that attract FDI, there is a

pressing need for States to provide adequate protection to foreign
investors from any actions that may harm their foreign investments.
In other words, States must provide foreign investors with a neutral
and equipped mechanism to resort to if they believe that their
interests are prejudiced or their foreign investment is being
threatened by any State action. As mentioned above, this
mechanism provides the much-needed stability and predictability
to a legal regime and incentivises foreign investors. This is where
international investment law and its subset of investment
protection, a dynamic and important branch of international law,
steps in.

International investment law guarantees rights and protections

to a foreign investor by means of a bilateral investment treaty (BIT),
select comprehensive free trade agreements (FTA) or an economic
and trade agreement (ETA) signed between the foreign investor’s
home State and the State in which the investment is made (also
called Host State).10 These treaties are signed between two State
parties but lay down standards of protection for foreign
investments undertaken in the other’s territory, akin to State
a rmations guaranteeing such protection. The aforementioned
protection standards are available to investors in the form of ‘clauses.’
Standard clauses include fair and equitable treatment (FET), national
treatment, most favoured nation standard (MFN), denial of justice, full
protection and security, protection from unlawful expropriation, etc.
These are based on general standards prescribed in international
investment law and are usually negotiated by the States in such a
manner that any derogation would give rise to the foreign
investor’s right to initiate proceedings against the Host State.11 They
aim to recognise investment risks and protect foreign investors

10 For a comprehensive di erence between BITs, BIPAs, FTAs and CEPAs, see, Chang Fa-LO,
A Comparison of Bit and the Investment Chapter of Free Trade Agreement from Policy
Perspective, 3 Asian Journal of WTO & International Health Law and Policy 1 (2008).
11 Notably, the India-Brazil BIT does not provide for ISDS but only SSDS. See Part D, Chapter
IV.
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from adverse political, regulatory or legal actions of Host States

having the potential to a ect the working of such investments.

If the foreign investor is a ected by any State actions that

damage her investment, she can allege the violation of the terms of
the aforementioned international investment law treaties and
invoke the dispute resolution clause within the treaty.12 Depending
on the arbitral rules applicable to the treaty, the concerned arbitral
institution will then assist the parties to constitute an arbitral
tribunal that will hear the dispute and deliver an award. Since the
arbitrators chosen are often experts in the principles of
international law and international investment law, it is widely
believed that their outcome is more ‘just’ than the one delivered by
a domestic court.13

This mechanism of resolving treaty-based disputes through

independent arbitration (as opposed to local proceedings with
potentially biased courts)14 is popularly called investment arbitration
or investor-State dispute settlement (ISDS). This mechanism is also
important because it allows foreign investors to le a claim with

12 However, many BITs require foreign investors to ‘exhaust local remedies’ prior to invoking
the dispute resolution clause. Exhaustion of local remedies refers to the criterion
whereby foreign investors are required to approach all relevant domestic courts of the
Host State for adjudication, and can only resort to investor-State arbitration in the event
that all such outcomes do not take the foreign investor’s protection standards under the
BIT into consideration. See, for example, Indian Model BIT (2016): Article 15.1 of the
Model BIT mandates that the investor must seek remedy for the particular dispute
before the relevant domestic courts or administrative bodies of the host state as a
precondition to ling a claim before the tribunal. Article 15.2 speci es a temporal
requirement for the exhaustion of local remedies, insofar as it clari es that the investor
must exhaust all judicial and administrative remedies relating to the measure underlying
the claim for at least a period of ve years prior to arbitration. Article 15.3 further adds
that even after a notice to arbitrate has been sent, 6 months must be spent by parties on
amicable consultation and negotiation.
13 See, Albert Jan van den Berg, Quali ed Investment Arbitrators? A Comment on Arbitrators

in Investment Arbitrations, available at <http://www.hvdb.com/wp-content/uploads/

Quali ed-Investment-Arbitrators.pdf> last accessed 16 July 2020.
14 A notable exception to this concept is the ‘exhaustion of local remedies’ requirement, that

has recently become a prominent occurrence in investment treaties.

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respect to actions emerging from the conduct of all organs of the

Host State, including its judiciary.15 By providing a level-playing eld
to foreign investors and Host States alike, it creates a desirable
environment for FDI by guaranteeing foreign investors an unbiased
hearing in case of prejudicial State action.

A. History of International Investment Law

The United States of America, in the late 1700s, signed a series

of ‘Friendship, Commerce and Navigation’ treaties with many
countries under the leadership of John Adams. This is widely
recognised as being the source of contemporary investment
protection law.16 A few instruments, such as the commercial treaty
between the United States and France (1778) also existed prior to
these but were fewer in number. Nevertheless, their existence
denotes that there has been a general understanding and
acknowledgement of the need for investment protection
throughout the ages.17 However, since various parts of the world
were facing an ideological clash between capitalism and
communism in the period leading up to and during World War II, no
special heed was paid to the protection of foreign investments, as
it was widely believed that domestic laws were su cient to
protectforeign investments.18 Additionally, no institutionalised

15 Asaf Niemoj, Investment Arbitrations: Do Tribunals Take the Role of a Supra-National

Appellate Court above National Courts?, Kluwer Arbitration Blog (27 July 2018),
available at <http://arbitrationblog.kluwerarbitration.com/2018/07/27/investment-
arbitrations-tribunals-take-role-supra-national-appellate-court-national-courts/?
doing_wp_cron=1594901284.0653278827667236328125> last accessed 15 July 2020.
16 Kenneth J. Vandevelde, A Brief History of International Investment Agreements, 12 U.C.
Davis Journal of International Law & Policy 1 (2005).
17 Doreen Lustig, From NIEO to the International Investment Law Regime: The Rise of the
Multinational Corporation as a Subject of Regulatory Concern in International Law in
Veiled Power: International Law and the Private Corporation 1886-1981 (2020).
18 There is extensive literature on this convergence. To understand how ideological clashes
were pivotal to the development of international investment law, see generally, Jacek
Zralek, The Impact of Economic Nationalism on Investment Arbitration - A Central
European Perspective, available at < https://ssrn.com/abstract=3573507> last accessed
15 July 2020.
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investment arbitration framework was set up at the international

level.

Modern investment law is rooted in the legal status of aliens

under international law, which refers to persons that reside in a
country without a legal right to do so.19 One of the earliest methods
of resolving claims of foreign investors can be found within the
doctrine of diplomatic protection, being exercised from as early as
the 1850’s.20

Sometimes, this would translate to the use of economic

coercion or military force (also called gunboat diplomacy).
According to this doctrine, foreign investor interests are to be
represented through an exercise of diplomatic protection, whereby
a State espouses the claim of its national and pursues it in its own
name against the other State. The origins of this doctrine can be
traced back to the global expansion of European trading and
investment operations that occurred during the 17th to early 20th
centuries, which necessitated protecting their foreign investments
in colonies worldwide.21

Diplomatic protection was the only remedy available to foreign

investors back then because of the aforementioned ideological
clash, having the e ect of the non-availability of international

19 See, Rishab Gupta, Smrithi Bhaskar & Rishabha Meena, Study on Investor Perceptions
towards India’s Investment Treaties, Centre for Trade and Investment Law Report (2020),
available at <https://ctil.org.in/cms/docs/Papers/Publish
CTIL%20Study%20on%20BITs%20and%20Investments.pdf> last accessed 13 June 2021.
For an alternative perspective arguing that international commercial arbitration (and
parts of investment law) emerges from transatlantic slave trade under the Spanish
crown, see Anne-Charlotte Martineau, A Forgotten Chapter in the History of
International Commercial Arbitration: The Slave Trade's Dispute Settlement System,
Leiden Journal of International Law.
20 See, Cerutti case, Moore, International Arbitrations, History, Vol. II, 2117 (1898); Venezuelan

Preferential case (Germany, UK, Italy v. Venezuela), Award of 22 February 1903.

21 Christoph Schreuer, Investment Protection and International Relations, available at

<https://www.univie.ac.at/intlaw/wordpress/pdf/87_investment_protect.pdf> last
accessed 13 May 2021.
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remedies under traditional international law. However, it was not a

preferred form of dispute resolution because of various limitations.

A precondition to the exercise of diplomatic protection is the

exhaustion of local remedies by the foreign investor, which would
entail undergoing all relevant proceedings in local courts of the
Host State. This requirement was criticised because of the
possibility of local courts being biased towards then own
governments. Additionally, the foreign investors did not have the
right to diplomatic protection as it was dependent entirely on the
political discretion of her government, which can reject
representation if the political risks are high. States were often
cautious when exercising diplomatic protection on behalf of
investors because of the possibility of such proceedings disrupting
international relations by causing protracted litigation.22

This was further complicated in the case of developing

countries that are less keen on damaging relations with capital-
intensive countries that send FDI to their territory. A famous study
published by Argentine jurist Carlos Calvo in 1868 presented a
di erent perspective to the then prevalent diplomatic protection
route.23 Calvo’s theory, famously called the ‘Calvo doctrine’, stated
that the amount of protection Host States should accord both
foreign and domestic investments must reduce.

There are three major principles propounded by this doctrine:

22 See, Nottebohm case (Liechtenstein v. Guatemala), Second Phase, Judgment of 6 April

1955, 1955 ICJ Rep. 4; Barcelona Traction, Light and Power Company, Limited (Belgium v.
Spain), Second Phase, Judgment of 5 February 1970, 1970 ICJ Rep. 3; Elettronica Sicula
SpA (ELSI) (US v. Italy), Judgment of 20 July 1989, 1989 ICJ Rep. 15.
23 Named after Argentine jurist Carlos Calvo, the doctrine argues that since jurisdiction over
foreign investments lay with the domestic courts of the country where the investment
was located, local resources must be exhausted rst before diplomatic protection is
sought. For an English version of the ideas of Calvo, see generally Pattrick Julliard, Calvo
Doctrine/Calvo Clause, Oxford Public International Law Online, available at <https://
opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law-9780199231690-e689> last
accessed 15 July 2020.
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(i) foreign nationals are entitled to no better treatment than

nationals of the Host State;
(ii) rights of foreign nationals are only to be governed by laws of
the Host State, and
(iii) Courts of the Host State have exclusive jurisdiction over
disputes involving foreign nationals.

While these principles appear to be similar to those espoused

within the diplomatic protection route, it is important to note that
the doctrine prohibited diplomatic protection altogether.24 The idea
behind this doctrine was to prevent abuse of process of weaker
States by powerful, capital-exporting nations and was inspired by
political developments then. A large number of Communist
countries did not want to be accountable towards foreign investors
or their investments.25 It is important to note that despite
widespread discussions on the potential use of this doctrine and its
desirability amongst Communist countries, it did not gain universal
recommendation.

It was almost a decade after the collapse of the Soviet Union

that a large number of judicial proceedings were initiated based on
the treatment of investors during the 1917 Communist Revolution.
The verdicts26 delivered during this time, coupled with the
principles of Calvo Doctrine, formed the basis of discussion about
and e orts towards the subsequent creation of an international
minimum standard for the protection of foreign alien property.

This was to be maintained through a neutral agency that could

independently assess whether foreigners and natives were being

24 Bernardo Cremades, Resurgence of the Calvo Doctrine in Latin America, 7 Business Law
International, 53-4 (2006).
25 Shalaka Patil and Pratibha Jain, Bilateral Investment Treaties and their Impact on the

Global Economy, pt 2.2, NDA, available at <http://www.nishithdesai.com/ leadmin/

user_upload/pdfs/Research%20Articles/Bilateral%20Investment%20Treaties.pdf > last
accessed 15 July 2020
26 Neer v Mexico; James and ors v United Kingdom, [1986] ECHR 2.
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treated equally by States.27 Subsequently, the rst forms of

institutionalised investment arbitration came in the form of the Iran-
US Claims Tribunal28 and the Eritrea-Ethiopia Claims Commission29
It is for this reason that as a eld of study, investment protection
garnered the interest of international law and commentators only in
the aftermath of World War II.

Academic discourse strengthened, even more, when new BITs

were signed by now independent and developing countries that
were earlier colonies. They sought to challenge Western control
over customary international law governing investment
protection.30

Assuming centre-stage in the recently-constituted United

Nations General Assembly, these States advocated for a ‘New
International Economic Order’ that would give precedence to

27 For understanding the international minimum standard of treatment, see, Adriana Sánchez
Mussi, International Minimum Standard of Treatment (2008), available at <https://
asadip. les.wordpress.com/2008/09/mst.pdf> last accessed 15 July 2020.
28 The Iran-US Claims Commission was established in the Hague, Netherlands in 1981 by Iran

and the US to resolve claims by the States and nationals of these States against the
other State. The establishment of this Commission was pursuant to the Algiers Accords,
which brought an end to the impending embassy hostage crisis between the two
countries, having the e ect of a ecting foreign investments. See generally US
Department of State, ‘Iran-US Claims Tribunal’, available at <https://www.state.gov/iran-u-
s-claims-tribunal/> last accessed 12 May 2021; See also, The Origins of International
Investment Law: Empire, Environment, and the Safeguarding of Capital – Katie Miles
29 The Eritrea-Ethiopia Claims Commission was similarly established in the Hague,

Netherlands in 2000. This also occurred pursuant to the Algiers Agreement to arbitrate
claims for loss, damage or injury by one government against the other in lieu of the
armed con ict that had occurred between the two States. States could submit claims on
their own behalf and on behalf of their nationals (including both natural and legal
persons) in this respect. See, Permanent Court of Arbitration, Eritrea-Ethiopia Claims
Commission, available at <https://pca-cpa.org/en/cases/71/
#:~:text=The%20Claims%20Commission%20was%20established,Conventions%2C%20or%
20other%20violations%20of> last accessed 11 May 2021.
30 Kate Miles, Imperialism, Eurocentrism and International Investment Law: Whereto from

here for Asia?, Submission for the Second Biennial General Conference of the Asian
Society of International Law, available at <http://asiansil-jp.org/wp/wp-content/uploads/
2012/07/kate_miles.pdf> last accessed 9 May 2021.
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domestic law with respect to allegations of expropriation made by

foreign investors.31

However, the ideological shift from socialism to economic

liberalism (prompted in part by the fall of the Soviet Union and the
Latin American crisis) at around the same time ensured that this
was not possible.32 It is for this reason that in the period spanning
1945-1990, a number of BITs were signed amongst developed and
developing countries with terms similar to the international
minimum standard.

It was widely believed that the signing of investment treaties

would attract much needed foreign direct investment to rebuild
economies devastated by World War II and subsequent regional
clashes. Developing countries also hoped to attract employment
opportunities and economic growth through such FDI, leading
them to accept terms at par with the international minimum
standard. However, not all of these provided for a direct arbitration
clause: some required submission of the dispute to the
International Court of Justice (ICJ) or state-to-state arbitration.33

Apart from this gradual shift towards protection foreign

investment, a need was felt to institutionalise international
investment law through the creation of a multilateral treaty, so as to
promote uniformity. The rst codi ed attempt can be found within
discussions of the Hague Conference on the Codi cation of
International Law organised by the erstwhile League of Nations in

31 To know more about the political and legal angles to the New International Economic
Order, see, Antony Anghie, Legal Aspects of the New International Economic Order,
Humanity Journal available at <http://humanityjournal.org/wp-content/uploads/2014/06/
HUM-6.1- nal-text-ANGHIE.pdf> last accessed on 24 July 2020.
32 Kenneth J. Vandevelde, The Political Economy of a Bilateral Investment Treaty, 92 Am. J.

Int’l L. 621, 623.

33 Mavrommatis Case (Greece v. Great Britain, PCIJ 1924) & Case Concerning the Factory at

Chorzów (Germavy v. Poland, PCIJ 1928). These judgments re ected the view that states
owe a duty to other States to treat foreign nationals and their property according to an
international minimum standard of treatment, thus rea rming the importance of
customary international law for investment protection.
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1930. Records indicate a discussion about State responsibility for

harms caused to foreign investors in their territory during the
seventh plenary meeting. However, the Third Committee tasked
with the responsibility to submit a report was unable to do so.34

Another noteworthy development, albeit in the context of

international trade law, are the negotiations surrounding the
Havana Charter for an International Trade Organization. The
Charter sought to create extensive commitments between States
on substantive questions in trade law concerning numerous
economic activities.35 While the Charter never came into e ect, it is
generally acknowledged to have signi cantly in uenced the
General Agreement on Tari s and Trade (GATT) 1947. Much later in
1957, Hermann Josef Abs and Sir Hartley Shawcross36 called for
universalisation of investment protection standards and institutional
rules by creating a multilateral treaty to administer investment
disputes.37

It was popularly called the ‘Abs-Shawcross Draft Convention’, or

the ‘Draft Convention on Investments Abroad’.38 A noteworthy
feature of this draft is the FET protection standard and protection
against expropriation available to foreign investors against
discriminatory measures enacted by the Host State.

34 League of Nations, Acts on the Conference for the Codi cation of International Law,
available at <https://biblio-archive.unog.ch/Dateien/CouncilMSD/C-351-M-145-1930-
V_EN.pdf> p. 43 ¶ 16 last accessed on May 12, 2021.
35 Riyaz Dattu, A Journey from Havana to Paris: The Fifty-Year Quest for the Multilateral
Agreement on Investment, 24 Fordham Int’l. L. J. 1.
36 Hermann Josef Abs, then Chairperson of the Deutsche Bank was the rst to make a
recommendation in 1957 for a ‘Magna Carta for the Protection of Foreign Property.’The
Abs-Shawcross Draft Convention was a subsequent occurrence as a result of the
collaboration between Abs and Sir Hartley Shawcross, former Attorney General for
England and Wales.
37 Taylor St. John, The Rise of Investor-State Arbitration: Politics, Law, and Unintended
Consequences (2018).
38 Abs, Herman and Hartley Shawcross (1960). Draft Convention on Investments Abroad in
The proposed convention to protect private foreign investment: a round table, Journal of
Public Law (presently Emory Law Journal), vol. 1, Spring 1960, pp. 115-118.
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These attempts made by them led to a subsequent multilateral

treaty drafted by the Organisation for Economic Cooperation and
Development (OECD) in 1962. However, the treaty could not be
enacted and faced numerous protests because it was intended to
apply even to countries that were not members of the OECD.39 An
important development during this decade is the enactment of the
New York Convention, replacing the Geneva Protocol on
Arbitration Clauses of 1923 and the Geneva Convention on the
Execution of Foreign Arbitral Awards of 1927.40

It was created to streamline the process of recognition and

enforcement of foreign arbitral awards across countries and to
ensure that foreign and non-domestic arbitral awards should not be
discriminated against by the domestic courts that are asked to
enforce them. A universal enforcement procedure was created
through this Convention.41

The World Bank, under the leadership of then General Counsel

Aron Broches, was of the view that an international treaty
regulating the procedure, rather than substantive standards of
investment disputes would help countries in arriving at a much-
needed consensus towards investment protection and incentivise
them to make commitments through international treaties.

Thus, it decided to take the bold step to draft the Convention on

the Settlement of Investment Disputes between States and
Nationals of Other States (ICSID Convention) in 1965, which was a
framework for the impartial settlement of international investment

39 Ibid, Articles II and III.

40 The Geneva Protocol was established by the League of Nations (predecessor to the
United Nations) to make arbitration agreements enforceable internationally in a uniform
manner. However, due to various shortcomings, the Protocol was unsuccessful and
required replacement. For a detailed analysis of the development of and problems with
the Geneva Protocol, see, Jane Volz and Roger Haydock, Foreign Arbitral Awards:
Enforcing the Award against the recalcitrant loser, 21 William Mitchel L. Rev. 3.
41 See, In Brief: New York Convention, available at <https://www.newyorkconvention.org/
in+brief> last accessed 12 May 2021.
 13

disputes through an impartial organisation called ICSID.42 The

ICSID Convention entered into force in 1966 and was widely
accepted back then particularly by developed countries that were
then in dire need of capital through foreign investment.43 Other
multilateral investment treaties emerging within the same decade
included the Energy Charter Treaty (ECT) and the North American
Free Trade Agreement (NAFTA).44 While the former was enacted
for States to cooperate in the trade, transit, investments and energy
e ciency of foreign investment in the energy sector, the latter was
a trilateral agreement signed by Canada, Mexico, and the United
States for the creation of a trade bloc in North America.

In terms of additional institutional support, the growing

popularity of the ICSID Convention was further complemented by
the emergence of the 1994 World Trade Organisation (WTO)
Agreement, seeking to liberalise trade in goods and services by
reducing unfair trading practices.45 Despite the popularity of and
resort to these organisations by most countries worldwide, the

42 Antonio R. Parra, Establishing ICSID: an idea that was “in the air”, OUP Blog (8 September
2015), available at <https://blog.oup.com/2015/09/history-of-icsid-law/> last accessed 16
July 2020. For more information on the personal life and contributions of Aron Broches,
see, Antonio R. Parra, Remembering Aron Broches, Investment Claims, Oxford Public
International Law (14 October 2016), available at <https://oxia.ouplaw.com/page/546>
last accessed 16 July 2020; See also, Fali Nariman, Harmony amidst Disharmony, Vol II
at p. 245.
43 Developing countries and international investment law often have a varying relationship.

To contextualise such development, see, Graham Mayeda, International Investment

Agreements Between Developed and Developing Countries: Dancing with the Devil?
Case Comment on the Vivendi, Sempra and Enron Awards, 4 McGill International
Journal of Sustainable Development Law and Policy 2 (2008). For understanding this
development in India’s context, see, Prabhash Ranjan, India and Bilateral Investment
Treaties: Refusal, Acceptance and Backlash, 64-76 (2019).
44 For a brief overview of the NAFTA, see, M. Angeles Villareal & Ian F. Fergusson, The North

American Free Trade Agreement (24 May 2017) Congressional Research Service,
available at <https://fas.org/sgp/crs/row/R42965.pdf> last accessed May 10 2021. For a
brief overview of the ECT, see, Kaj Hober, Investment Arbitration and the Energy Charter
Treaty, 1(1) Journal of International Dispute Settlement (2010).
45 History of the Multilateral Trading System, World Trade Organisation, available at <https://

www.wto.org/english/thewto_e/history_e/history_e.htm> last accessed 16 July 2020.

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ICSID and WTO Agreement have repeatedly faced opposition from

developing countries, who believe that their legitimate regulatory
rights are diminished in the name of foreign investment protection.

Nevertheless, BITs have assumed importance worldwide as an

e ective means for protection for foreign investments today. Over
2897 BITs have been signed between countries since the 1990s, of
which 2340 are currently in force46. On the other hand, the number
of investment arbitrations has increased steadily over the years.
Over 1020 claims have been led by foreign investors.47 This
indicates that investment arbitration seems to be a primary choice
for investors to initiate claims to protect their assets abroad. The
trend has been visible and continued during the pandemic, with
ICSID reporting a record of 58 new cases being registered with it
last year, up from 56 in 2018 and 39 in 2019.48

However, it is pertinent at this stage to note that there is

sizeable opposition to the current ISDS regime’s legitimacy.49 Inter
alia, these concerns stem from ISDS’ inherent investor-centric
provisions, encroachment of a State’s sovereign regulatory ability
and an inability to appeal decisions, which does not bene t Host

46 UNCTAD, International Investment Agreement Navigator, Investment Policy Hub, available

at <https://investmentpolicy.unctad.org/international-investment-agreements> last
accessed 16 June 2021.
47 UNCTAD, International Dispute Settlement Navigator, Investment Policy Hub, last updated

31 December 2019, available at <https://investmentpolicy.unctad.org/investment-dispute-

settlement> last accessed 16 June 2021.
48 Clea Bigelow-Nuttal, Record year for arbitration cases registered with ICSID, available at

<https://www.pinsentmasons.com/out-law/news/record-year-arbitration-cases-registered-
icsid> last accessed on 13 May 2021.
49 For a concise understanding of these criticisms, see, Jane Kelsey, The crisis of legitimacy

in international investment agreements and investor-state dispute settlement, ISDS

Platform (9 January 2018), available at <https://isds.bilaterals.org/?the-crisis-of-
legitimacy-in&lang=en> last accessed 16 July 2020. These concerns have also led to the
creation of the UNCITRAL Working Group III on ISDS Reforms, where proposals for
reforming the process are being considered by States. To view a more recent and
detailed account of these criticisms and understand this chain of developments, see
Thomas Dietz, The legitimacy crisis of investor-state arbitration and the new EU
investment court system
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States. A host of reforms, aiming to eliminate these systemic

concerns, are currently being discussed and debated by countries
in a bid to make investment arbitration more equipped to handle
competing interests (see Chapter 6).

B. India and International Investment Law

The Indian perception of and attitude towards foreign

investment protection has evolved over time. In the early years
after independence, the Indian government was receptive towards
foreign investment because they believed that this would lead to a
transfer of technology, skill and control to Indians in due course.
However, the period ranging from early 1955 led to sector-wise
nationalisation within the country, in line with the ‘New International
Economic Order’ propagated by developing countries at the United
Nations General Assembly, discussed above.50 During the 1980s,
India was su ering from an acute balance of payment crisis which
meant that the country could not enter into BITs.51

During the mid-1990s, at the time of implementation of the

Liberalisation, Privatisation and Globalisation regime, the Indian
government decided to enter into BITs with other countries to o er
favourable conditions and treaty-based protection to the foreign
investors. The long-term aim was to attract other investors from
abroad to invest in India with enhanced securities against adverse
changes, thus promoting investment in ow. It is within this context
that India signed her rst BIT with the United Kingdom in 1994. By
1999, India had entered into 26 BITs and was party to 83 BITs in
2011.52 The BIT signed with the United Kingdom served as the
basis for India’s 2003 Draft Model BIT. Whilst this was largely

50 Aniruddha Rajput, Protection of Foreign Investment in India and International Rule of Law:
Rise or Decline? KFG Working Paper, Series No. 10 (June 2017), available at <https://
dx.doi.org/10.2139/ssrn.3135261> last accessed 9 May 2021.
51 Ibid.

52 Law Commission of India, Report No 260: Analysis of the 2015 Draft Model Indian Bilateral

Investment Treaty, available at <https://lawcommissiono ndia.nic.in/reports/

Report260.pdf> last accessed 12 May 2021.
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investor-centric, a slew of developments (notably, the White

Industries proceedings discussed infra) led India to re-think its
commitment to the breadth of investment protection available to
foreign investors.

During this period, India also entered into its rst FTA with
Singapore in 2005, called the India-Singapore Comprehensive
Economic Cooperation Agreement. At the time, there were
disparities in the standards prescribed by the BITs and FTAs
because the nodal ministries for negotiating them were di erent.
The FTAs were more carefully drafted as compared to the BITs and
gave more precedence to regulatory freedom.53

In December 2015, the government of India devised a new text

of the Indian Model BIT.54 It contained 38 Articles present within 7
Chapters and laid down the standards, types and conditions for the
protection of foreign investment. Important developments included
a broader right of regulation given to the Host State (India), lower
FET protection and a requirement of exhausting local remedies
prior to ling a notice of arbitration. This was seen as the Indian
government’s attempt to ‘reduce’ investor protection and prioritise
sovereign discretion. Apart from these changes to the text, the
Indian government called for termination, renegotiation or
reinterpretation of 69 existing treaties with other nations.55

As per the Indian Department of Economic A airs website, 69

out of 84 BITs have been shown to be terminated on various dates
since 2016. Between 2019 and 2021, India has terminated BITs with
Turkey, Finland, Serbia (Yugoslavia), Sudan, Bahrain, Saudi Arabia,
Bosnia & Herzegovina, Jordan, Mexico, Iceland, Macedonia, Brunei

53 Prabhash Ranjan, Comparing Investment Provisions in India’s FTAs with India’s Stand-
Alone BITs, 16.5-6 The Journal of World Investment & Trade, 899-930 (2015).
54 Indian Model BIT (2015), available at <https://dea.gov.in/sites/default/ les/
ModelBIT_Annex_0.pdf> last accessed 16 July 2020.
55 Rajendra Barot and Sonali Mathur, India: Investor-State Arbitration 2020, available at
<https://iclg.com/practice-areas/investor-state-arbitration-laws-and-regulations/india> last
accessed 31 July 2020.
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Darussalam, Syrian Arab Republic, Myanmar and Mozambique.56

Furthermore, several BITs and joint interpretative statements are
under discussion with Morocco, Kuwait, Ukraine, UAE, San Marino,
Mauritius, Hong Kong and Israel.

In January 2020, India signed the Investment Cooperation and

Facilitation Treaty with Brazil, which re ects India’s new approach
towards foreign investment.57 Article 18 states that a Joint
Committee, composed of government o cials of both States, are
to look into allegations of breach of the BIT and recommend
ndings therefrom. In a way, this brings us back to the diplomatic
protection route that was being utilised in the early 1850s, insofar
as the investor has to depend on the administrative avenue (Joint
Committee) between India and Brazil for their claims.58 Thus, it is
an interesting time for exploring investment arbitration in the Indian
context, to reconcile India’s FDI ambitions with the current legal
framework for investment protection within the country.

56 Bhavana Sunder & Kshama Loya, Investment Arbitration and India: 2020 Year in Review,
The National Law Review, available at <https://www.natlawreview.com/article/
investment-arbitration-and-india-2020-year-review> last accessed 12 May 2021.
57 For discussion on the India-Brazil BIT, see, Prabhash Ranjan, India-Brazil Bilateral

Investment Treaty – A New Template for India, Kluwer Arbitration Blog (19 March 2020),
<http://arbitrationblog.kluwerarbitration.com/2020/03/19/india-brazil-bilateral-
i n v e s t m e n t - t r e a t y - a - n e w - t e m p l a t e - f o r - i n d i a / ?
doing_wp_cron=1594888308.6954579353332519531250> last accessed 16 July 2020.
58 Martin Dietrich Brauch, The Best of Two Worlds? The Brazil–India Investment Cooperation

and Facilitation Treaty, Investment Treaty News (10 March 2020), available at <https://
cf.iisd.net/itn/2020/03/10/the-best-of-two-worlds-the-brazil-india-investment-
cooperation-and-facilitation-treaty-martin-dietrich-brauch/> last accessed 16 July 2020.
See also, Ashutosh Ray & Kabir Duggal, Dispute Resolution in the India-Brazil BIT:
Symbolism or Systemic Reform?, Kluwer Arbitration Blog (9 April 2020), available at
<http://arbitrationblog.kluwerarbitration.com/2020/04/09/dispute-resolution-in-the-india-
b r a z i l - b i t - s y m b o l i s m - o r - s y s t e m i c - r e f o r m / ?
doing_wp_cron=1594888397.0009570121765136718750> last accessed 16 July 2020.
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CHAPTER 2
INVESTMENT ARBITRATION
Investment arbitration is a tool to resolve disputes between a
foreign investor and the host State. It is also referred to as Investor-
State Dispute Settlement. The basis of Investment arbitration may
exist in the relevant investment treaties or even sometimes in the
local legislation of the host State. Ultimately, such treaties or law
shall signify the consent of the host State for utilisation of
investment arbitration in case of a dispute. There are however
some pre-conditions before an investor can initiate an investment
arbitration. Importantly, the investor and investment must qualify as
such in the relevant investment treaty. This chapter will discuss the
nuances of investment arbitration.

A. Key Differences between Investment and

Commercial Arbitration

Investment arbitration or investor-state dispute settlement is

di erent from international commercial arbitration primarily due to
the nature of the claim and the parties involved in the dispute.1 As
opposed to commercial arbitration, where the dispute arises out of
a contractual obligation, investment arbitration deals with disputes
arising out of an investment contract or bilateral/ multilateral

1 Faraz Alam Sagar & Samilksha Pednekar, International Investment Arbitrations and
International Commercial Arbitrations: A Guide to the Di erences, Cyril Amarchand
Mangaldas Blog, available at <https://corporate.cyrilamarchandblogs.com/2019/05/
international-investment-arbitrations-international-commercial-arbitrations-guide-
di erences/> last accessed 27 August 2021.
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investment treaty.2 With respect to the parties involved, commercial

arbitration deals with a dispute between private parties whereas,
investment arbitration involves a foreign investor (private individual
or legal entity) and a state. Though the procedure in both types of
arbitration resembles, the applicability of public international law in
investment treaty arbitration makes it distinct from commercial
arbitration.

The jurisdictional issues are usually more complex in investment

arbitration as the jurisdictional disputes in investment arbitration
are more frequent. The jurisdictional disputes in commercial
arbitration typically pertain to the scope of the contractual
arbitration clause whereas, the jurisdiction of an investment
tribunal is determined by the consent of the host state, which
depends on whether the claimant quali es as an ‘investor’ and
whether the subject activity amounts to an ‘investment’ under the
applicable bilateral or multilateral investment treaty.

When dealing with the existing laws on the enforcement of a

commercial award and an investment award, there are certain
di erences. The most relevant legal framework for commercial
arbitration in international law would be the New York Convention,
whereas in investment arbitration there are several treaties like the
ICSID Convention, the New York Convention, etc.3 It is pertinent to
note that the New York Convention, which is the most relevant
legal treaty in commercial arbitration, only deals with the
recognition and enforcement of foreign arbitral awards.

Insofar as the national law is concerned, its applicability is di erent in international

commercial arbitration and investment arbitration. In international commercial arbitration,
procedurally, the legal framework of the seat of the arbitration governs the arbitration and
the domestic courts of the seat have supervisory jurisdiction on the arbitral procedure. On

2 See, Laurence Boisson de Chazournes, The Blurring of the Line Between Contract-Based
and Treaty-Based Investment Arbitration, ITA IN Review, available at <https://
www.itainreview.org/articles/Fall2019/the-blurring-of-the-line-between-contract-based-
and-treaty-based-investment-arbitration.html> last accessed 16 July 2020.
3 Karl-Heinz Bockstiegel, Commercial and Investment Arbitration: How Di erent Are They
Today? 28(4) Arbitration International, 787–792 (2012).
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the other hand, in ISDS, the mandatory provisions of national law are important only if the
ISDS is governed by the rules of the international institutions such as the London Court of
International Arbitration (LCIA), the International Chamber of Commerce (ICC), etc. instead of
the investment treaties such as the ICSID, NAFTA, etc.4

With respect to the substantive law, in commercial

arbitration, substantive law is applied by the arbitrators to
deal with the merits of the dispute.5 Insofar the investment
arbitration is concerned, majority BITs explicitly state that the
substantive law of the host state would apply.6 Since the
substantive law of the host state would apply to investment
arbitration, the foreign investor is bound by the changes in
the domestic law of the host state.7

B. Institutional Arbitration and Ad Hoc Arbitration

The dispute resolution clause in the investment treaties gives

the right to foreign investors to initiate proceedings against the
host state with respect to their investments. The dispute between
the host state and the foreign investor can be conducted under the
ad-hoc or institutional format, depending upon the dispute
settlement clause of the relevant investment treaty. With respect to
the institutional format, the proceedings are administered by
specialised institutions in accordance with their own set of rules.
Institutional arbitration proceedings are usually conducted by the
International Centre for Settlement of Investment Disputes (ICSID),

4 Faraz Alam Sagar & Samilksha Pednekar, International Investment Arbitrations and
International Commercial Arbitrations: A Guide to the Di erences, Cyril Amarchand
Mangaldas Blog, available at < https://corporate.cyrilamarchandblogs.com/2019/05/
international-investment-arbitrations-international-commercial-arbitrations-guide-
di erences/> last accessed 27 August 2021.
5 Ibid.

6 Karl-Heinz Bockstiegel, Commercial and Investment Arbitration: How Di erent Are They

Today? 28(4) Arbitration International, 787–792 (2012).

7 Faraz Alam Sagar & Samilksha Pednekar, International Investment Arbitrations and

International Commercial Arbitrations: A Guide to the Di erences, Cyril Amarchand

Mangaldas Blog, available at < https://corporate.cyrilamarchandblogs.com/2019/05/
international-investment-arbitrations-international-commercial-arbitrations-guide-
di erences/> last accessed 27 August 2021.
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the International Court of Arbitration of the International Chamber

of Commerce (ICC), or the Arbitration Institute of the Stockholm
Chamber of Commerce (SCC). The majority of the institutional
arbitrations are conducted before the ICISID tribunals in
accordance with the rules provided in the ICSID Convention. Unlike
other institutions, the ICSID Convention includes certain
jurisdictional requirements under Article 25, which provides that:

{T}he jurisdiction of a Centre shall extend to any legal dispute

arising directly out of an investment, between a Contracting State
(or any constituent subdivision or agency of a Contracting State
designated to the Centre by that State) and a national of another
Contracting State, which the parties to the dispute consent in
writing to submit to the Centre.8

Since, article 25 of the ICSID Convention limits the jurisdiction

to disputes between a contracting state and a national of a
contracting state, some BITs of countries such as India, who are not
contracting parties to the ICSID Convention, provide for the ad hoc
format, usually referring under the UNCITRAL Arbitration Rules.
Other sets of arbitration rules that are commonly referred to
include the Rules of Arbitration of the ICC and the Arbitration Rules
of the SCC.9

The arbitration format is determined by the mutual consent of

the disputing parties. Insofar as the proceeding is concerned, the
tribunal rst determines whether it has jurisdiction over the dispute
between the disputing parties. Once the jurisdiction is determined
and the tribunal nds that it has the requisite jurisdiction, the
tribunal deals with the merits of the case.

As mentioned above, according to article 25 of the ICSID

Convention, the jurisdiction of an ICSID tribunal extends to disputes

8 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals
of Other States, art. 25, 18 March 1965.
9 Katia Yannaca-Small, Arbitration under International Investment Agreements (Oxford
University Press 2010) at p. 107.
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between a contracting state and a national of a contracting state.

However, it shall be noted that the Administrative Council of ICSID
has adopted Additional Facility Rules, which empowers the
Secretariat of ICSID to administer disputes which are not governed
by the ICSID Convention. Therefore, the ICSID Additional Facility
Rules can be made applicable for adjudication of disputes between
a State and a foreign national, when one of which is not an ICSID
member state or a national of an ICSID member state.10

C. International Centre for Settlement of Investment

Disputes

The International Centre for Settlement of Investment Disputes

(ICSID), which was established in 1966 by the Convention on the
Settlement of Investment Disputes between States and Nationals
of Other States (ICSID Convention), administers the resolution of
investment disputes by conciliation, arbitration or fact- nding. The
provisions of the ICSID Convention are complemented by
Regulations and Rules which includes Administrative and Financial
Regulations, Rules of Procedure for the Institution of Conciliation
and Arbitration Proceedings, Rules of Procedure for Conciliation
Proceedings and Rules of Procedure for Arbitration Proceedings.11
As of May 2021, 155 countries have rati ed the ICSID Convention
and become contracting states.12 Moreover, eight member states
have signed the ICSID Convention but not rati ed it. A State
becomes a contracting party 30 days after ratifying the ICSID
Convention13 and a contracting state may denounce the Convention

10 Overview of Arbitration under the Additional Facility Rules, ICSID, available at <https://
icsid.worldbank.org/services/arbitration/additional-facility/process/overview> last
accessed 10 June 2021.
11 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals

of Other States, p. 25, 18 Mar. 1965.

12 Database of ICSID Member States, International Centre for Settlement of Investment

Disputes, available at <https://icsid.worldbank.org/en/Pages/about/Database-of-Member-

States.aspx> last accessed June 25, 2020.
13 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals

of Other States, art. 68, 18 March 1965.

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by written notice to the World Bank and the denunciation shall take
e ect 6 months after the receipt of such notice.14

ICSID usually provides for the settlement of disputes between a

contracting state and an investor who is a national of another
contracting state. However, in certain circumstances, it administers
arbitration of disputes between parties, of which one is neither a
contracting state nor a national of a contracting state.15 The
arbitration proceedings conducted by ICSID are free from the
interference of courts in the place where they are conducted,
however, the parties may through an agreement seek provisional
or interim measures from domestic courts.16

Investor-state dispute settlement (ISDS) has been negatively

perceived by India and other developing countries and several
countries have denounced the ICSID Convention. Bolivia, Ecuador,
and Venezuela have denounced the ICSID Convention and
Argentina has threatened to withdraw.17 The developing countries
fear that the protection accorded to the foreign investors a ects
the regulatory powers of the Host State. It is argued that ISDS
undermines the sovereignty of the host state as they are bound by
the undertakings in the investment treaties which prevent them
from implementing various measures. 18 ISDS has been
unfavourably looked at by India particularly after the decision in
White Industries v. India.

The award which was rendered in favour of the foreign investor

resulted in a series of investment proceedings against India
pertaining to the regulatory and other measures adopted by the

14 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals
of Other States, art. 71, 18 March 1965.
15 Katia Yannaca-Small, Arbitration Under International Investment Agreements, p. 65 (Oxford

University Press 2010).

16 ICSID Rules of Procedure For Arbitration Proceedings, R. 39(6).

17 Aniruddha Rajput, Protection of Foreign Investment in India and Investment Treaty

Arbitration (Kluwer Law International 2017) at pp. 171, 194.

18 Kaj Hobér, Investment Treaty Arbitration and Its Future - If Any, 7 Y.B. Arb. & Mediation 58

(2015).
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Indian Government. It shall be noted that after the White House

Industries case in 2011, India signed only one BIT till 2015 and
terminated 58 BITs.19 Moreover, even though India participated in
the drafting of the ICSID, it chose to not ratify the Convention.
Indian has not provided reasons for not joining the Convention
however, the Indian Council for Arbitration had recommended to
the Finance Ministry to not sign the Convention because the rules
of the ICSID favours the developed countries and there is no scope
for a review of the award by an Indian court even if the award is
against the public interest.20

ISDS has been criticised for being pro investor and therefore,
many BITs such as the India Model BIT 2016, stipulates that the
foreign investor shall exhaust its local remedies before initiating
international investment proceedings.21 ISDS has also been criticised
for a lack of transparency in proceedings. Until 2006, the ICSID
Convention did not include provisions to ensure transparency in
the proceedings conducted by the ICSID tribunals. The level of
transparency in an ICSID proceeding depends on the parties’
agreement, the relevant treaty and the decision of the tribunal. The
ICSID Convention does not include a general presumption of
transparency and therefore, the parties can decide the level of
transparency or con dentiality applicable to their proceedings.
Moreover, the applicable investment treaty may include speci c
provisions pertaining to con dentiality or transparency. If the
parties do not agree on the level of transparency and the
proceedings are not subject to speci c provisions, the parties may
request the arbitral tribunal to decide the level of transparency and
confidentiality.

19 Nishith Desai Associates, Bilateral Investment Treaty Arbitration and India: With a special focus
on Indian Model BIT, 2016, available at <http://www.nishithdesai.com/fileadmin/user_upload/
pdfs/Research_Papers/Bilateral_Investment_Treaty_Arbitration_and_India-PRINT-2.pdf>
(2018). last accessed 25 June 2020.
20 ICA against India joining global dispute settlement body, The Hindu Indian Business Line

(Jun. 11, 2000), available at <https://www.thehindubusinessline.com/todays-paper/tp-

others/article29064097.ece> last accessed 25 June 2020.
21 India's Model Bilateral Investment Treaty, art. 15.1, 28 Dec. 2015.
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Another major criticism of ICSID and ISDS, in general, is the

absence of an appeal process. An award rendered by the ICSID
tribunal is nal and the contracting states are under the obligation
to enforce it within their jurisdiction and comply with the award.22
Article 53 of the ICSID Convention stipulates that:

The award shall be binding on the parties and shall not be

subject to any appeal or to any other remedy except those
provided for in this Convention.23

One of the remedies provided for in the ICSID Convention is the

annulment of the award. Upon request for annulment, an ad hoc
committee is established which has the authority to annul the
award on any of the following grounds set forth under article 52(1):

a. that the Tribunal was not properly constituted;

b. that the Tribunal has manifestly exceeded its powers;
c. that there was corruption on the part of a member of
Tribunal;
d. that there has been a serious departure from a fundamental
rule of procedure; or
e. that the award has failed to state the reasons on which it is
based.24

In Wena Hotels v. Egypt, the tribunal, while referring to the

ground of annulment under article 52(1)(d), said that:

In order to be a “serious” departure from a fundamental rule

of procedure, the violation of such a rule must have caused the
Tribunal to reach a result substantially di erent from what it would
have awarded had such a rule been observed.25

22 ICSID Convention on the Settlement of Investment Disputes Between States and

Nationals of Other States, art. 53, 18 Mar. 1965.
23 Ibid.

24 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals

of Other States, art. 52(1), 18 Mar. 1965.

25 Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on

Annulment ¶48, (05 Feb. 2002)

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While the proceedings of annulment are pending, the award

can be enforced unless the enforcement is stayed by the ad hoc
committee. The annulment committee has very limited powers as it
cannot review the award on errors of fact and misapplication of the
law is not subject to annulment.26 Moreover, the committee is not
empowered to amend the award, replace the award or remand it to
the tribunal for a renewed decision. In CMS v. Argentina, the
annulment committee pointed out that the tribunal had committed
a ‘manifest error of law’, however, the committee rejected to annul
the award due to its limited power under article 52 of the
Convention. 27

D. Preconditions to Arbitration

1. Exhaustion of Local Remedies

The foreign investor may be required to exhaust local remedies

in the host state before initiating investment arbitration
proceedings. The requirement of exhausting local remedies can be
found in the relevant BIT, domestic legislation of the host state or in
the arbitration agreement between the foreign investor and the
host state.28 Many BITs are silent on exhaustion of local remedies
and some treaties even expressly waive this requirement.29 In a
plethora of cases, it has been held that the exhaustion of local
remedies rule is waived unless expressly required. For instance, in
Yaung Chi Oo v. Myanmar30, the host state contended that the
tribunal does not have jurisdiction over the dispute as the foreign

26 Amco Asia Corp. and Others v. Republic of Indonesia, ICSID Case No. ARB/81/1, Decision
on Annulment ¶23 (16 May 1986).
27 CMS Gas Transmission Company v. The Republic of Argentina, ICSID Case No. ARB/01/8,
Decision on Annulment ¶¶135-136 (25 Sep. 2005).
28 Martin Dietrich Brauch, Exhaustion of Local Remedies in International Investment Law,
International Institute for Sustainable Development (January 2017).
29 Various BITs signed by Luxemburg, Belgium and other countries waive of the right to
require exhaustion of local remedies.
30 Yaung Chi Oo Trading Pte Ltd. v. Government of the Union of Myanmar, ASEAN I.D .Case
No. ARB/01/1, Award, ¶¶ 40–41 (31 March 2003),
 27

investor failed to exhaust local remedies. The tribunal dismissed

the host state’s objection as the applicable agreement did not
require the investor to exhaust local remedies.

Few treaties like the Argentina-Netherlands BIT, allows the

foreign investor to initiate international proceedings if the courts of
the host state fail to render a decision within a speci ed period of
time.31 Other BITs such as the Austria-Philippines BIT, allows the
foreign investor to initiate international proceedings if the domestic
courts fail to settle the dispute between the parties.32 Moreover,
BITs like the Italy-Uruguay BIT authorises the foreign investor to
initiate investment proceedings if the decision of the domestic
court is contrary to the norms of international law or it is manifestly
unjust or constitutes a denial of justice.33

BITs that require the investors to exhaust local remedies usually

include the mandate to exhaust such remedies for a speci ed
period,34 ranging from a minimum of three months to maximum of
ve years. An example of this can be found in article 41 of
Argentina-UK BIT:

1. Disputes with regard to an investment which arise within

the terms of this Agreement between an investor of one
Contracting Party and the other Contracting Party, which have not
been amicably settled shall be submitted, at the request of one of
the Parties to the dispute, to the decision of the competent
tribunal of the Contracting Party in whose territory the investment
was made.
2. The aforementioned disputes shall be submitted to
international arbitration in the following cases:

31Argentina - Netherlands BIT, art. 10(3), Oct. 20, 1992.

32 Austria - Philippines BIT, art. 9(3), Apr. 10, 2002; Josefa Sicard Mirabal & Yves Derains,
Introduction to Investor-State Arbitration 41 – 74 (Kluwer Law International 2018).
33 Italy - Uruguay BIT, art. 9(3), Feb. 21, 1990.

34 Nishith Desai Associates, Bilateral Investment Treaty Arbitration and India: With a special focus

on Indian Model BIT, 2016, available at <http://www.nishithdesai.com/fileadmin/user_upload/

pdfs/Research_Papers/Bilateral_Investment_Treaty_Arbitration_and_India-PRINT-2.pdf> last
accessed 25 June 2020.
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(a) if one of the Parties so requests, in any of the following

circumstances:
(i) where, after a period of eighteen months has elapsed from
the moment when the dispute was submitted to the competent
tribunal of the Contracting Party in whose territory the investment
was made, the said tribunal has not given its nal decision;
(ii) where the nal decision of the aforementioned tribunal has
been made but the Parties are still in dispute.35

In ICS Inspection and Control Services Limited v. Argentina, the

investor had initiated arbitral proceedings alleging that the host
state violated article 2(2) of the Argentina-United Kingdom BIT,
which imposes an obligation on the host state to accord fair and
equitable treatment to the investments. In the said case, the
tribunal held that it had no jurisdiction over the dispute as the
investor failed to pursue the matter in domestic courts i.e. exhaust
local remedies for 18 months, as required by the Argentina-UK BIT.
36

The India Model BIT 2016 provides that a foreign investor is

allowed to initiate international proceedings if he has exhausted
the local remedies for a period of 5 years.37 However, it is pertinent
to note that the foreign investor is not required to exhaust the local
remedies if he can prove that there are no available local remedies
capable of reasonably providing any relief pertaining to the
investor’s claim.38 For instance, article 15 of the India Model BIT
2016 provides that:

[T]he requirement to exhaust local remedies shall not be

applicable if the investor or the locally established enterprise can
demonstrate that there are no available domestic legal remedies
capable of reasonably providing any relief in respect of the same

35 Argentina - United Kingdom BIT, art. 41, 12 Dec. 1990.

36 ICS Inspection and Control Services Limited (United Kingdom) v. The Republic of
Argentina, UNCITRAL, PCA Case No. 2010-9, Award on Jurisdiction ¶250 (10 Feb. 2012).
37 India's Model Bilateral Investment Treaty, art. 15.2, 28 Dec, 2015.

38 India's Model Bilateral Investment Treaty, art. 15.1, 28 Dec, 2015.

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measure or similar factual matters for which a breach of this

Treaty is claimed by the investor.39
Article 26 of the ICSID Convention recognises the rule of
exhaustion of local remedies as a condition to host state’s consent
to international arbitration. The article reads as follows:

Consent of the parties to arbitration under this Convention

shall, unless otherwise stated, be deemed consent to such
arbitration to the exclusion of any other remedy. A Contracting
State may require the exhaustion of local administrative or judicial
remedies as a condition of its consent to arbitration under this
Convention.40

In Lanco International Inc. v. Argentina, the arbitral tribunal

while dealing with article 26 of the ICSID, stated that:

[A} State may require the exhaustion of domestic remedies as

a prior condition for its consent to ICSID arbitration. This demand
may be made (i) in a bilateral investment treaty that o ers
submission to ICSID arbitration, (ii) in domestic legislation, or (iii) in
a direct investment agreement that contains an ICSID clause.41

In Generation Ukraine v. Ukraine, Ukraine contended that the

tribunal lacked the requisite jurisdiction as the claimant failed to
exhaust local remedies as required under article 26 of the ICSID
Convention. The claimant submitted that the second sentence of
article 26 of the ICSID Convention prevails over article VI(4) of the
USA-Ukraine BIT, which does not contain the local remedies rule.
The tribunal pointed out that the fact the relevant BIT did not
require the exhaustion of local remedies shows that the contracting
parties have chosen to ‘omit any requirement that an investor must
rst exhaust local remedies before submitting a dispute to ICSID
arbitration in the BIT’. In light of this, the tribunal held that the

39 Ibid.
40 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals
of Other States, art. 26, 18 Mar. 1965.
41 Lanco International Inc. v. The Argentine Republic, ICSID Case No. ARB/97/6, ¶39 (08 Dec.

1998).
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claimant was under no obligation to exhaust local remedies in the

courts of Ukraine before initiating arbitral proceedings.42

The requirement of exhaustion of local remedies does not apply

to cases dealing with denial of justice. In Saipem v Bangladesh43,
the arbitral tribunal, while dealing with the claim based on
expropriation, held that the requirement to exhaust local remedies
would not be a ground to deny jurisdiction over claims brought on
the ground of expropriation. In Loewen v. USA, it was held that a
decision of the court would constitute a ‘denial of justice’ if the
decision is nal and it is issued by the court of last resort of the
state. Moreover, it was stated the question of the applicability of
requirement of local remedies in cases of denial of justice claim,
shall be decided “in the light of the investor’s situation, including its
nancial and economic circumstances.”44

2. Cooling o Period

Majority of BITs provide for a ‘cooling o ’ period or waiting

period, which requires the parties to resolve the dispute amicably
before the initiation of arbitral proceedings by the foreign
investor.45 During this period, the parties engage with each other in
a good faith attempt to resolve the dispute through consultation,
negotiation, etc. The duration of this period, provided in the
majority of investment treaties is six months, however, the parties
are not required to reach a speci c result during this period.46

The cooling o period is initiated by the foreign investor by

sending a ‘notice of dispute’ to the Host state. The India Model BIT

42 Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, ¶¶13.1-13.6 Award.
43 Saipem S.p.A. v. The People's Republic of Bangladesh, ICSID Case No. ARB/05/07,
¶¶150-156 (21 March 2007).
44 Loewen Group, Inc. and Raymond L. Loewen v. United States of America, ICSID Case No.

ARB(AF)/98/3, ¶169 (26 June 2003).

45 Josefa Sicard Mirabal & Yves Derains, Introduction to Investor-State Arbitration 41 – 74

(Kluwer Law International 2018).

46 Murphy Exploration and Production Company International v. Republic of Ecuador, ICSID

Case No. ARB/08/4, Decision on Jurisdiction ¶135 (15 Dec. 2010).

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2016 provides for six months waiting period47 and it states that the
‘notice of dispute’ shall:

specify the name and address of the disputing investor or the

enterprise, where applicable; set out the factual basis of the
claim, including the measures at issue; specify the provisions of
the Treaty alleged to have been breached and any other relevant
provisions; demonstrate compliance with Article 15.1 and 15.2,
where applicable; specify the relief sought and the approximate
amount of damages claimed; and furnish evidence establishing
that the disputing investor is an investor of the other Party.48

In Western NIS Enterprise Fund v Ukraine, the tribunal held that

“proper notice is an important element of the State’s consent to
arbitration, as it allows States, acting through its competent organs
to examine and possibly resolve the disputes by negotiations.”49
The tribunal in Lauder v Czech Republic held that the cooling o
period does not start from the date at which the alleged breach
occurred, but from the date, the host state was made aware of the
alleged breach by sending notice of arbitration.50

In Murphy v. Ecuador, the ICSID tribunal held that it lacked

jurisdiction over the dispute as the investor failed to comply with
the cooling o period as provided in the applicable BIT. 51However,
there are many cases wherein the tribunals have adopted a
di erent view and held that failure to comply with the cooling o
period does not result in a lack of jurisdiction. For instance, in SGS
v. Pakistan52, the tribunal placed reliance on Ethyl Corporation v.
The Government of Canada and held that:

47 India's Model Bilateral Investment Treaty, art. 15.4, 28 Dec. 2015.

48 India's Model Bilateral Investment Treaty, art. 15.3, 28 Dec. 2015.
49 Western NIS Enterprise Fund v. Ukraine, ICSID Case No. ARB/04/2, Oder ¶5, (06 March

2006).
50 Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award ¶185, (03 Sep. 2001).

51 Murphy Exploration and Production Company International v. Republic of Ecuador, ICSID

Case No. ARB/08/4, Decision on Jurisdiction ¶135 (15 Dec. 2010).

52 SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No.

ARB/01/13, Decision of the Tribunal on Objections to Jurisdiction ¶185, (06 Aug. 2003).
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[T]ribunals have generally tended to treat consultation periods

as directory and procedural rather than as mandatory and
jurisdictional in nature. Compliance with such a requirement is,
accordingly, not seen as amounting to a condition precedent for
the vesting of jurisdiction. 53

The same view was adopted in Biwater Gau v. the United

Republic of Tanzania, wherein the tribunal held that the cooling o
period is:

[P]rocedural and directory in nature, rather than jurisdictional

and mandatory. Its underlying purpose is to facilitate
opportunities for amicable settlement. Its purpose is not to
impede or obstruct arbitration proceedings, where such
settlement is not possible. Non-compliance with the six month
period, therefore, does not preclude this Arbitral Tribunal from
proceeding. If it did so, the provision would have curious e ects,
including:
- preventing the prosecution of a claim, and forcing the
claimant to do nothing until six months have elapsed, even where
further negotiations are obviously futile, or settlement obviously
impossible for any reason;
- forcing the claimant to recommence an arbitration started
too soon, even if the six month period has elapsed by the time
the Arbitral Tribunal considers the matter.54

In light of the above, there is a lack of consensus on whether

failure to comply with the cooling o period results in a lack of
jurisdiction of the tribunal.55 In certain cases, where the claimant
fails to comply with the cooling-o period, the tribunal has

53 Ethyl Corporation v. Canada, NAFTA-UNCITRAL Case, Award on Jurisdiction, 24 June

1998, available at <https://www.italaw.com/sites/default/ les/case-documents/
ita0300_0.pdf> last accessed 06 July 2020.
54 Biwater Gau (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22,
Award ¶343 (12 July 2008).
55 See, Arvind Ganesh, Cooling Off Period (Investment Arbitration), Max Planck Institute
Luxembourg. Department of International Law and Dispute Resolution (Nov. 2017),
available at <https://www.mpi.lu/fileadmin/mpi/medien/research/MPEiPro/
Cooling_Off_Periods__EiPro_Sample_Entry.pdf> last accessed 10 July 2020.
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assumed jurisdiction but issued costs order against the claimant for
not complying with the waiting period. For instance, in Ethyl
Corporation v. The Government of Canada, even though the
claimant initiated arbitral proceedings without complying with the
cooling-o period, the tribunal assumed jurisdiction and awarded
costs against the claimant. The tribunal held that the investor was
responsible for the costs of the proceedings as the proceedings
could have been avoided if the investor had complied with the
cooling-o period.

3. Notice of Arbitration

If the parties fail to resolve the dispute during the cooling o

period, the foreign investor may initiate arbitration proceedings by
issuing a ‘notice of arbitration’, which refers to a request to submit a
dispute to arbitration. A notice to Arbitration is a crucial step after
the decision to arbitrate the dispute has been taken by the claimant
as it signi es the intention to commence arbitral proceedings. In ad
hoc arbitration, the claimant is required to send a ‘notice of
arbitration’ to the host state whereas, in institutional arbitration, the
claimant is usually required to send a ‘request for arbitration’ to the
relevant institution, which sends a copy of the request to the
respondent.

Under the UNCITRAL Rules as well as the PCA rules, the

proceeding is deemed to commence on the day on which the
notice of arbitration is received by the respondent. Certain
information like the name and contact details of the parties, the
reference of the dispute, and the remedy sought are needed to be
included in the notice, that is to be served to the respondent by the
claimants. With respect to arbitral proceedings before an ICSID
tribunal, the proceeding is deemed to commence upon the
constitution of the tribunal.56

56 ICSID Rules of Procedure for Arbitration Proceedings, Rule 6(1).

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The India Model BIT 2016 provides that a ‘notice of arbitration’

shall be sent to the host state at least 90 days prior to submitting
any claim to arbitration. Moreover, it stipulates that the notice of
arbitration shall:

a. attach the notice of dispute and the record of its

transmission to the Defending Party with the details thereof;
b. provide the consent to arbitration by the disputing investor,
or where applicable, by the locally established enterprise, in
accordance with the procedures set out in this Treaty;
c. provide the waiver as required under Article 15.5 (iii) or (iv),
as applicable; provided that a waiver from the enterprise under
Article 15.5 (iii) or (iv) shall not be required only where the
Defending Party has deprived the disputing investor of control of
an enterprise;
d. specify the name of the arbitrator appointed by the
disputing investor57

57 India's Model Bilateral Investment Treaty, art. 15.5(v), 28 Dec. 2015.

 35

CHAPTER 3
FUNDAMENTAL CONCEPTS OF
INVESTMENT ARBITRATION
This chapter discusses some of the fundamental concepts of
investment arbitration including, treaty interpretation, jurisdiction
and substantive rights and treaty shopping.

A. Interpretation of Investment Treaties

Unlike commercial arbitration, where the usual contractual

means of interpretation, mainly derived from domestic legal orders,
are applicable, investment arbitration is based on bilateral or
multilateral treaties.1 In principle, investment treaties are ordinary
investment treaties and therefore, public international law principles
are applicable for the interpretation of investment treaties. While
interpreting investment treaties, majority tribunals invoke article 31
of the Vienna Convention on Law of Treaties (VCLT), which
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 light of its object and purpose.2

The investment tribunals have frequently interpreted treaties by

referring to their preamble that lays down the object and purpose

1 Katia Yannaca-Small, Arbitration Under International Investment Agreements (Oxford

University Press 2010) at p. 829.
2 Vienna Convention on the Law of Treaties, art. 31, 23 May 1969.
 36

of the respective treaty.3 The object and purpose of a treaty play a

very important role because as mentioned in article 31 of the VCLT,
tribunals are required to interpret treaties in the light of the object
and purpose of the relevant treaty.

Moreover, in accordance with article 32 of the VCLT, tribunals

have also relied on supplementary means of interpretation, including
preparatory work (travaux preparatoires) of the treaty. In Noble
Ventures v. Romania, a dispute arose out of a bilateral investment
treaty (BIT) entered between Romania and the USA. The contention
was that Romania’s action was inconsistent with the provisions
under the BIT that provided for promotion and protection of
investment of nationals or companies of the party in the territory of
the other party. The tribunal in this case, after referring to article 31
of the VCLT, which is also known as the general rule of
interpretation, pointed out:

…recourse may be had to supplementary means of

interpretation, including the preparation work and the
circumstances of its conclusions, only in order to con rm the
meaning resulting from the application of the aforementioned
methods of interpretation.4

Tribunals can resort to preparatory work only if it is available.

ICSID tribunals have frequently relied on the preparatory work of
the ICSID Convention as the drafting history of the convention is
documented in detail and is readily available. On the other hand,
the drafting history of BITs is usually not documented and
therefore, tribunals cannot rely on its preparatory work.5

Unilateral assertions on the relevant BIT’s interpretation made

by the disputing state party in the course of arbitration proceedings

3 Lauder v. Czech Republic, Award, 3 September 2001, ICSID Reports 66, ¶292.
4 Noble Ventures, Inc. v. Romania, ICSID Case No. ARB/01/11 Award, ¶50 (12 Oct. 2005).
5 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd

ed., 2012) at p. 33.

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are of limited value.6 However, the contracting states may issue a

joint, non-binding statement on a question of interpretation
pending before the arbitral tribunal.7

B. Jurisdiction

The jurisdiction of an investment arbitral tribunal is based on the

consent of the Host State (ratione voluntatis), which is given
through investment treaties, domestic legislation or arbitration
clauses in investor-state contracts.8 The scope of the investment
tribunal’s jurisdiction can be understood through four kinds of
jurisdictions viz. Ratione Voluntatis, Ratione Personae, Ratione
Materiae and Ratione Temporis.

1. Ratione Voluntatis

Ratione Voluntatis (consent to arbitration) refers to the desire of

the parties to submit their dispute to arbitration. The consent of the
investor company and the host state is an important element in
Investment Arbitration as the jurisdiction of the arbitral tribunal will
be contingent on this consent. The ICSID Convention also relies
heavily on the consent required by the ICSID tribunal to have
jurisdiction over a particular dispute, and such consent may be
expressed, either through Public international law like the
Investment treaties or state legislations of the Host State or in the
lodging of a claim with the ICSID.9 The ICSID Convention has not
provided for any speci c requirements, form, or structure for giving
consent, leaving the parties free to give consent in the manner
they desire, provided it is free and written. Thus, consent may be

6 Ibid at p. 34.
7See, CME Czech Republic B.V. v. The Czech Republic, UNCITRAL (13 Sep. 2001).
8 Michael Waibel, Investment Arbitration: Jurisdiction and Admissibility, Legal Studies

Research Paper Series- University of Cambridge (Paper No. 9/2014).

9 Bernardo M. Cremades, Arbitration in Investment Treaties: Public O er of Arbitration in

Investment-Protection Treaties, available at <https://www.cremades.com/pics/contenido/

File634528980336478688.pdf> last accessed 18 June 2021.
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given either directly through an agreement10 between the host

state and the foreign investor or through Bilateral or Multilateral
treaties or by the state legislature mostly through investment
code.11

Mere signing of the treaty by the parties does not mean that
they have consented to the jurisdiction of the ICISD tribunal. The
ICSID convention under Article 25 requires the express consent of
the parties.12 It also prohibits the unilateral withdrawal of consent
by a party but, does not bar them from withdrawal by mutual
consent. The tribunal must satisfy itself as to the component of
mutuality of the parties in determining whether the consent is free
or not. However, the underlying presumption is that the contracting
parties must be signatories to the ICSID Convention.

In SPP v. Egypt, the investor had led a request by placing

reliance on article 8 of Egypt’s Law No. 43 of 1974 Concerning the
Investment of Arab and Foreign Funds and the Free Zone. The said
article reads as follows:

Investment disputes in respect of the implementation of the

provisions of this Law shall be settled in a manner to be agreed
upon with the investor, or within the framework of the agreements
in force between the Arab Republic of Egypt and the investor’s
home country, or within the framework of the Convention for the
Settlement of Investment Disputes between the State and the

10 Model clauses have been published by ICSID to facilitate parties to such agreements, see,
ICSID 1993 Model Clauses, Doc. ICSID/5/Rev. 2 of 1993.
11 UNCTAD, Course Module on International Centre for Settlement of Investment Arbitration,

Module 2.3 Consent to Arbitration, UNCTAD/EDM/Misc.232/Add.2, available at <https://

unctad.org/system/ les/o cial-document/edmmisc232add2_en.pdf> last accessed 18
June 2021.
12 Article 25.1 of the ICSID Convention lays down that: “The jurisdiction of the Centre shall

extend to any legal dispute arising directly out of an investment, between a Contracting
State (or any constituent subdivision or agency of a Contracting State designated to the
Centre by that State) and a national of another Contracting State, which the parties to
the dispute consent in writing to submit to the Centre. When the parties have given their
consent, no party may withdraw its consent unilaterally.”
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nationals of other countries to which Egypt has adhered by virtue

of Law No. 90 of 1971, where such Convention applies.13

The host state contended that the arbitral tribunal lacked the
requisite jurisdiction as the said article does not amount to consent
to arbitration. However, the arbitral tribunal rejected Egypt’s
contention and stated:

Article 8 of Law No. 43 establishes a mandatory and

hierarchic sequence of dispute settlement procedures, and
constitutes an express “consent in writing” to the Centre’s
jurisdiction within the meaning of Article 25(1) of the Washington
Convention in those cases where there is no other agreed upon
method of dispute settlement and no applicable bilateral treaty.14

It was observed that the parties had not agreed upon any
method of dispute resolution and there was no applicable BIT.
Therefore, the tribunal held that it had the requisite jurisdiction to
deal with the dispute.

2. Ratione Personae

An investment tribunal is said to have ratione personae

jurisdiction over a dispute if the dispute is between a host state
and a foreign investor.15 Article 25 of the ICSID Convention, which
is the jurisdictional provision, stipulates that ICSID tribunals have
rationae persone jurisdiction over disputes:
between a Contracting State (or any constituent subdivision or
agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State.16

13 Southern Paci c Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No.
ARB/84/3, Decision on Jurisdiction I, (Nov. 1985).
14 Ibid.

15 C.F. Amerasinghe, Interpretation of Article 25(2)(b) of the ICSID Convention in International

Arbitration in the 21st Century: Towards Judicialization and Uniformity? (Lillich, R. B./
Brower, Ch. N. eds.) 2 (1994).
16 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals

of Other States, art. 25, 18 Mar. 1965.

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Investors can be either natural or juridical persons and the

nationality of an investor is an essential requirement to determine
the jurisdiction of an investment tribunal.

i. Natural Person

Article 25(2) (a) of the ICSID Convention lays down the

nationality requirement for a natural person and states that a
natural person, who is a party to the dispute, shall have the
nationality of a state other than the host state.17 The burden of
proof is on the investor to prove his nationality and the nationality18
is decided in accordance with the laws of the host state whose
nationality is claimed by the investor.19 The investor shall have the
relevant nationality at the time of the alleged breach continuously
thereafter until the time the arbitral proceedings are commenced.20

Over the years, cases involving natural persons having dual

nationality have attracted the most attention. In Eudoro Armando
Olguín v. Republic of Paraguay, Mr. Olguín claimed dual nationality
of USA and Peru and invoked Peru-Paraguay BIT. The tribunal
investigated the claim and found that the claimant held dual
nationality and both were e ective. In light of this, the tribunal held
that Mr. Olguín, being a national of Peru, is entitled to bring a claim
under the Peru-Paraguay BIT. 21In Hussein Nuaman Soufraki v.
United Arab Emirates, the investor claimed dual nationality of Italy
and Canada and sought protection under the Italy-UAE BIT. The

17 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals
of Other States, art. 25(2)(a), 18 Mar. 1965.
18 Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of Egypt, ICSID Case

No. ARB/05/15, Decision on Jurisdiction (11 Apr. 2007).

19 Champion Trading Company, Ameritrade International, Inc. v. Arab Republic of Egypt, ICSID

Case No. ARB/02/9, ¶¶282-289 (21 Oct. 2003).

20 Zachary Douglas, International Law of Investment Claims, 16 (Cambridge University Press

2009); See Mr. Leonid Shmatenko, Continuous Nationality Rule, JusMundi, available at
<https://jusmundi.com/en/document/wiki/en-continuous-nationality-rule> last accessed
10 June 2021.
21 Eudoro Armando Olguín v. Republic of Paraguay, ICSID Case No. ARB/98/5 (08 Aug.

2000).
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tribunal found that the investor ceased to be an Italian national

when he acquired Canadian citizenship and therefore, held that he
was not entitled to invoke the Italy-UAE BIT.22

It shall be noted that an investor is barred from bringing claims

before an ICSID tribunal if he holds dual nationality and one of
which is that of the host state’s.23 The India Model BIT 2016 states
that in case of dual nationality/citizenship, the nationality of the
investor shall be that of the dominant and e ective nationality/
citizenship where the investor ordinarily or permanently resides.24

In certain cases, tribunals have treated a locally incorporated

company as a foreign investor because of the inclusion of an
arbitration clause.25 For instance, in Klöckner v. Cameroon, the
foreign investor was involved in the incorporation of a joint venture
company in Cameroon and subsequently, an agreement was
executed between Cameroon and the company. The agreement
had an ICSID arbitration clause however, Cameroon contented that
the tribunal lacked the requisite jurisdiction because the other
party was a Cameroonian company as it was established in
Cameroon. The tribunal rejected this contention and held that the
mere inclusion of an ICSID clause shows that the parties intended
to treat the company as a foreign company by agreeing that the
company was under foreign control.26

ii. Juridical Person

The nationality of juridical persons such as companies are

determined on the basis of the laws of the State under which the

22 Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7 (07 July
2004).
23 ICSID Convention on the Settlement of Investment Disputes Between States and Nationals

of Other States, art. 25 (2) (a), 18 March 1965.

24 India's Model Bilateral Investment Treaty, art. 1.9, 28 Dec. 2015.

25 United Nations Conference on Trade and Development, Requirements of Ratione

Personae (2003) at p.24.

26 Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société

Camerounaise des Engrais, ICSID Case No. ARB/81/2, Award, 21 October 1983.
ff
 42

company is incorporated.27 Moreover, article 25 of the ICSID

Convention provides that a locally incorporated juridical person is
eligible to bring claims before the tribunal if it is foreign controlled.
The same approach has been adopted by the India Model BIT 2016
in Article 1.5.

In Tokios Tokelés v. Ukraine, the tribunal held that the claimant,

which was incorporated in Lithuania but controlled and 99 percent
owned by Ukrainian nationals, was entitled to bring a claim against
Ukraine under the Lithuania-Ukraine BIT. The investor was quali ed
as a Lithuanian national under the Lithuania-Ukraine BIT that
de ned nationality on the basis of the place of incorporation.28 A
similar view was adopted by a BIT established tribunal in Flemingo
v. Poland. The tribunal allowed the Indian incorporated investor to
invoke India- Poland BIT even though the investor was
headquartered in the UAE.29 Moreover, in MINE v. Guinea, an
agreement was executed between Guinea and the investor which
included an ICSID arbitration clause. MINE was incorporated in
Liechtenstein however, the agreement stated that MINE was a
Swiss national as the company was controlled by a Swiss national.
Liechtenstein had not rati ed the ICSID Convention and on the
other hand, Switzerland had rati ed the Convention. During the
proceedings, the issue of rationae personae jurisdiction was not
raised as the agreement clearly stated MINE’s jurisdiction.
Moreover, Guinea was aware of the circumstances underlying
MINE’s nationality when it gave the consent to resolve the dispute
through ICSID. Therefore, in such cases, the tribunal would have
the jurisdiction to deal with the disputes.30

27 United Nations Conference on Trade and Development, Requirements of Ratione

Personae (2003) at p. 15.
28 Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction (29 Apr.

2004).
29 Flemingo DutyFree Shop Private Ltd v Republic of Poland, UNCITRAL (12 Aug. 2016).

30 Maritime International Nominees Establishment (MINE) v. Republic of Guinea, ICSID Case

No. ARB/84/4.
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It is pertinent to note that the mere fact the ICSID’s Preamble

refers to ‘private international investment’, it does imply that partly
or wholly owned governmental companies are excluded from the
jurisdiction of the ICSID tribunal. In CSOB v. Slovakia, the tribunal
held that the concept of ‘national’ under the ICSID Convention is
not restricted to privately owned companies. The tribunal stated
that a partially or wholly owned governmental company would be
included if it is acting in a commercial capacity and not discharging
an essential governmental function.31 Therefore, the decisive
criterion is whether the investor was discharging an essential
government function.

3. Ratione Materiae

Jurisdiction ratione materiae refers to the subject matter of the

dispute falling under the jurisdiction of the tribunal. 32Article 25 of
the ICSID Convention stipulates that ICSID tribunals have ratione
materiae or subject matter jurisdiction over "any legal dispute
arising directly out of an investment.” The term ‘directly’ used in this
article does not require that the investment shall be a foreign direct
investment33 rather, it requires that the dispute submitted shall be
‘reasonably closely connected’ to an investment.34 The ICSID
Convention does not de ne the term ‘investment’ and therefore,
there exists a lack of consensus over the de nition of investment.
The following are the criteria that are usually taken into
consideration by ICSID tribunals to determine whether the subject
matter constitutes an investment:35

31Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4.
32 Simon Weber, Jurisdiction Ratione Materiae, Jus Mundi, available at <https://
jusmundi.com/en/document/wiki/en-jurisdiction-ratione-materiae> last accessed on 20
June 2021.
33 Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4,

Decision on Jurisdiction, ¶¶275-276 (24 May 1999).

34 Christoph H. Schreuer, ICSID Convention - A Commentary,(Cambridge University Press,

2001) at p. 67.
35 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd

ed., 2012) at p. 68.

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a. Contribution by the investor

b. The duration of the project
c. Existence of operational risk
d. Contribution to the Host’s state development

The above-mentioned criteria were applied by the tribunal in

Salini v. Morocco36 and the application of these criteria is referred
to as the Salini test. However, these criteria shall be reviewed in
their totality and assessed in light of the circumstances of each
case. It shall be noted that the requirement of contribution to the
host state’s development has become the subject of some
disagreement.37

In various cases, the tribunals have held that investments

usually include various interrelated economic activities each of
which shall not be viewed in isolation. In CSOB v. Slovakia, the
tribunal held:

An investment is frequently a rather complex operation,

composed of various interrelated transactions, each element of
which, standing alone, might not in all cases qualify as an
investment. Hence, a dispute that is brought before the Centre
must be deemed to arise directly out of an investment even when
it is based on a transaction which, standing alone, would not
qualify as an investment under the Convention, provided that the
particular transaction forms an integral part of an overall
operation that quali es as an investment.38

In Amco v. Indonesia, the tribunal distinguished between rights

and obligations that are applicable to legal or natural persons who
are within the reach of a host state's jurisdiction, as a matter of
general law; and rights and obligations that are applicable to an

36 Salini Costruttori S.p.A. and Italstrade S.p.A. v. Kingdom of Morocco [I], ICSID Case No.
ARB/00/4, (July 31, 2001).
37 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd
ed., 2012) at p. 69.
38 Ceskoslovenska Obchodni Banka, A.S. v. The Slovak Republic, ICSID Case No. ARB/97/4,
Decision on Jurisdiction, (24 May 1999).
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investor in furtherance to an investment agreement concluded

between the investor and the host state. The tribunal held that:

legal disputes relating to the latter will fall under Article 25(1)
of the Convention. Legal disputes concerning the former in
principle fall to be decided by the appropriate procedures in the
relevant jurisdiction unless the general law generates an
investment dispute under the Convention.39

BITs and multilateral treaties providing for ICSID jurisdiction

usually include their own de nitions of ‘investment’.40 Usually,
investment treaties de ne investment as ‘any asset’ and then lay
down a non-exhaustive list of assets that might qualify as an
investment.41 Majority of BITs de ne ‘investments’ in a
comprehensive manner by adopting either an asset based
approach or an enterprise based approach.42 The asset based
approach includes every asset with economic value, established or
acquired by the foreign investor whereas, an enterprise based
approach recognises only those investments that have been
constituted or operated as a legal entity that has real and
substantive business presence in the Host State.43 The India Model
2016 adopts an enterprise approach however, all previous BITs of
India, except the India-Mexico Bilateral Investment Promotion and
Protection Agreement (BIPPA), have adopted an asset based
approach.

39 Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1,
Decision on Jurisdiction (25 Sep. 1983).
40 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd
ed., 2012) at p. 61.
41 Zachary Douglas, International Law of Investment Claims (Cambridge University Press
2009) at p. 164.
42 Berk Demirkol, The Notion of ‘Investment’ in International Investment Law, I Turkish
Commercial Law Review 41 (01 Feb. 2015)
43 NDA, Bilateral Investment Treaty Arbitration and India: With a special focus on Indian
Model BIT, 2016, available at <http://www.nishithdesai.com/ leadmin/user_upload/pdfs/
Research_Papers/Bilateral_Investment_Treaty_Arbitration_and_In> last accessed 20
June 2021.
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As mentioned above, many investment treaties contain a broad

de nition of investment, which includes ‘every kind of asset’.
Moreover, such de nitions also lay down a non-exhaustive list of
investments. For instance, article 1 of ASEAN Agreement for the
Promotion and Protection of Investment de nes investment as:

The term ‘investment’ shall mean every kind of asset and in

particular shall include though not exclusively:
a) movable and immovable property and any other property
rights such as mortgages, liens and pledges;
b) shares, stocks and debentures of companies or interests in
the property of such companies;
c) claims to money or to any performance under contract
having a nancial value;
d) intellectual property rights and goodwill;
e) business concessions conferred by law or under contract,
including concessions to search for, cultivate, extract or exploit
natural resources.44

The ve categories of investment as laid down under the

ASEAN Agreement are common in many investment treaties.45 The
scope of such a broad de nition of investment would include every
kind of asset and therefore, many investment treaties include
various limitations on the scope of the investment covered under
the relevant treaty. There are various types of limitations that can
be imposed to exclude certain types of investment. For instance,
India-Brazil BIT categorically states that investment does not mean:

i. an order or judgment sought or entered in any judicial,

administrative or arbitral proceeding;
ii. debt securities issued by a Party or loans granted from a
Party to the other Party, bonds, debentures, loans or other debt
instruments of-a State-owned enterprise of a Party that is
considered to be public debt under the law of that Party;

44 ASEAN Agreement for the Promotion and Protection of Investments, article 1(3).
45 UNCTAD Series on issues in international investment agreements, Scope and De nition,
UNCTAD/ITE/IIT/11 p. 31 (vol. II), 1999, available at <https://unctad.org/system/ les/o cial-
document/psiteiitd11v2.en.pdf> last accessed 20 June 2021.
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 47

iii. any expenditure incurred prior to the obtainment of all

necessary licenses, permissions, clearances and permits required
under the law of a Party;
iv. portfolio investments of the enterprise or in another
enterprise;
v. claims to money that arise solely from commercial contracts
for the sale of goods or services by a national or an enterprise in
the territory of a Party to an enterprise in the territory of another
Party;
vi. goodwill, brand value, market share or similar intangible
rights;
vii. claims to money that arise solely from the extension of
credit in connection with any commercial transaction; and
viii. any other claims to money that do not involve the kind of
interests or operations as set out in the de nition of investment in
this Treaty.46

4. Ratione Temporis

Ratione Temporis jurisdiction refers to the e ect of date/time on

a tribunal’s jurisdiction to deal with the dispute between the
investor and the host state under the relevant investment treaty.47
The tribunal’s ratione temporis jurisdiction extends to the claims
relating to the claimant’s investment, which are founded upon
obligations in force and binding upon the host state at the time of
the alleged breach.48 The principle of application of treaties is laid
down in article 28 of the VCLT, which reads as follows:

Unless a di erent intention appears from the Treaty or is

otherwise established, its provisions do not bind a party in
relation to any act or fact which took place or any situation which

46 India-Brazil BIT, art. 2.4.1 (24 Jan. 2020).

47 Armand Terrien, Jurisdiction Ratione Temporis, Jus Mundi, available at <https://jusmundi.com/
e n / d o c u m e n t / w i k i / e n - j u r i s d i c t i o n - r a t i o n e -
temporis#:~:text=Jurisdiction%20ratione%20temporis%20refers%20to,contained%20in%20t
he%20applicable%20treaty> last accessed 16 April 2021.
48 Zachary Douglas, International Law of Investment Claims (Cambridge University Press

2009) at p. 328.
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ceased to exist before the date of the entering into force of Treaty
with respect to that party.49

This rule is also expressed in article 13 of the International Law

Commission’s (ILC) Articles on State Responsibility:

An act of a State does not constitute a breach of an

international obligation unless the State is bound by the
obligation in question at the time the act occurs.

The international practice has also complied with this rule. The
investor’s investment can be made prior to or after the investment
treaty entered into force, subject to an express provision to the
contrary in the treaty. In Tecmed v. Mexico, the investor placed
reliance on article 2(2) of the Spain-Mexico BIT and contended that
the treaty applied to Mexico’s conduct before the treaty had come
into force because article 2(2) stipulates that the BIT “shall also
apply to investments made prior to its entry into force by the
investors of a Contracting Party”.50 The tribunal rejected this
contention on two grounds. Firstly, it referred to article 28 of the
VCLT, which lays down a general presumption of the non-
retrospective application of treaties. Secondly, it referred to various
substantive provisions of the relevant BIT and observed that the
substantive obligations were couched in the future tense. In light of
this, the tribunal stated:

The continuous use of the future tense, which connotes the

undertaking of an obligation linked to a time period, rules out any
interpretation to the e ect that the provisions of the Agreement,
even in relation to investments existing as of the time of its entry
into force, apply retroactively.51

The tribunal would not have the requisite jurisdiction if the

investment was made after the breach. In Messa Power v. Canada,

49 Vienna Convention on the Law of Treaties, art. 28, 23 May 1969.

50 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No.
ARB (AF)/00/2 (May 2003).
51 Ibid, para 65.
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it was held that the tribunals’s jurisdiction extends only to the

investment that existed “at the time the challenged measure was
adopted.”52 A similar view was adopted by the tribunal in Phillips
Morris Asia v. Australia.53 It shall be noted that the tribunal can take
into consideration the facts pertaining to the claim but occurring
before the tribunal’s ratione temporis jurisdiction provided that
such facts do not form the basis of the claim.

With respect to the India Model BIT 2016, article 2.1 provides
that the treaty applies only to investments:

in existence as of the date of entry into force of this Treaty or

established, acquired, or expanded thereafter and which have
been admitted by a Party in accordance with its law, regulations
and policies as applicable from time to time.

The Indian Model BIT 2016 does not apply to any pre-
investment activity related to the establishment, acquisition or
expansion of any investment, or to any measure related to such
pre-investment activities. Moreover, article 2.3 of the Indian Model
BIT 2016 states that the treaty shall not apply to claims arising out
of events that occurred before the treaty was entered into force.

C. Substantive Rights

Foreign investors are guaranteed the protections in terms of

substantive rights which they can rely in case of qualifying
investments under the relevant investment treaty or in some cases
under foreign investment laws. The common form of substantive
rights are protection from expropriation, fair and equitable
treatment, national treatment, most favoured nation treatment and
full protection and security.

52 Mesa Power Group, LLC v. Government of Canada, UNCITRAL, PCA Case No. 2012-17.
53 Philip Morris Asia Limited v. The Commonwealth of Australia, UNCITRAL, PCA Case No.
2012-12.
 50

1. Expropriation

Expropriation refers to the act of the state to take the property

of the private individual for the bene t of the public at large. Under
international law, states have a sovereign right to take the property
of the nationals or aliens through nationalisation or expropriation
for various reasons such as economic, political, social, etc.54 Most
of the claims bought under BITs pertain to steps taken by the Host
state which amounts to expropriating the foreign investment. Under
international law, host states are allowed to expropriate foreign
investment provided certain requirements are ful lled. The
requirements that shall be satis ed are that the investment shall be
taken for a public purpose, as provided by law, in a non-
discriminatory manner and with compensation.55 Of these
requirements, the measure of compensation has been the most
controversial one. The method of determining compensation is
often included in the BIT. For instance, article 6 of the Canada-
Slovakia BIT, states:

Investments or returns of investors of either Contracting Party

shall not be nationalized, expropriated or subjected to measures
having an e ect equivalent to nationalization or expropriation
(hereinafter referred to as “expropriation”) in the territory of the
other Contracting Party, except for a public purpose, under due
process of law, in a non-discriminatory manner and provided that
such expropriation is accompanied by prompt, adequate and
e ective compensation. Such compensation shall be based on
the real value of the investment at the time of the expropriation,
shall be payable from the date of expropriation at a normal
commercial rate of interest, shall be paid without delay and shall
be e ectively realizable and freely transferable.56

54 Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United

Nations Conference on Trade and Development, available at <https://unctad.org/en/
Docs/unctaddiaeia2011d7_en.pdf> last accessed 20 June 2021.
55 Katia Yannaca-Small, Arbitration Under International Investment Agreements (Oxford

University Press 2010) at p. 447.

56 Canada-Slovakia BIT, art. VI, 20 Jul. 20 2010.
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Expropriation can be direct or indirect and it covers not only

tangible property but also intangible property such as intellectual
property, contractual rights, etc.

i. Direct Expropriation

Direct expropriation of the property refers to the action of a host

state which results in the involuntary transfer of title of the property
or absolute seizure of assets. The tribunal in Tecmed v. Mexico,
de ned expropriation as:

the forcible taking by the Government of tangible or intangible

property owned by private persons by means of administrative or
legislative action to that e ect.57
Host states usually do not take such drastic measures and
therefore, cases pertaining to direct expropriation have become
rare.

Article 5.3(1) (a) of the 2016 India Model BIT states that:

direct expropriation occurs when an investment is

nationalised or otherwise directly expropriated through formal
transfer of title or outright seizure.

ii. Indirect Expropriation

Indirect expropriation refers to the actions of the host state

which does not a ect the title of the owner but prevents him from
using the investment in a meaningful way. Indirect expropriation
occurs when the measures taken by the host state results in
interference with the use, enjoyment or disposition of investment,
loss of control and management over investment, and/or
substantial deprivation in the value of the investment. Although

57 Técnicas Medioambientales Tecmed, S.A. v. The United Mexican States, ICSID Case No.
ARB (AF)/00/2 (May 2003); See, Burlington Resources Inc. v. Republic of Ecuador, ICSID
Case No. ARB/08/5, Decision on Liability ¶396 (14 Dec. 2012).
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majority investment treaties expressly provide protection to foreign

investors against direct as well as indirect expropriation, there are
few treaties that do not refer to indirect expropriation. However, the
de nition of expropriation provided under such treaties is usually
broad enough so as to include both direct and indirect
expropriation. 58

In the India Model BIT 2016, there is an express reference to

indirect expropriation. Article 5.3(a)(ii) states that “indirect
expropriation occurs if a measure or series of measures of a Party
has an e ect equivalent to direct expropriation, in that it
substantially or permanently deprives the investor of the
fundamental attributes of property in its investment, including the
right to use, enjoy and dispose of its investment, without formal
transfer of title or outright seizure.” De nition of indirect
expropriation can be found in Starrett Housing v. Iran:

…it is recognized under international law that measures taken

by a State can interfere with property rights to such an extent that
these rights are rendered so useless that they must be deemed
to have been expropriated, even though the State does not
purport to have expropriated them and the legal title to the
property formally remains with the original owner.59

In some early arbitral decisions, as early as 1922, it was held

that a measure taken by the host state can constitute indirect
expropriation.60 In Chorzo Factory case, the tribunal di erentiated
between lawful and unlawful expropriation and their nancial
takings. The tribunal held that in cases of lawful expropriation, the
damage shall be remedied through the payment of fair
compensation or the “just price of what was expropriated “ at the
time of the expropriation, i.e., the “value of the undertaking at the

58 Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United

Nations Conference on Trade and Development, available at <https://unctad.org/en/
Docs/unctaddiaeia2011d7_en.pdf> last accessed 20 June 2021.
59 Starrett Housing Corporation v. Iran, Interlocutory Award No. ITL 32-24-1 (19 Dec. 1983).

60 Norwegian Shipowners’ Claims. Norway v. United States of America. Permanent Court of

Arbitration. Award of 13 October 1922.

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moment of dispossession, plus interest to the day of payment”. In

cases of unlawful expropriation, the tribunal said that “international
law provides for restitutio in integrum or, if impossible, its monetary
equivalent at the time of the judgment”. Moreover, the tribunal held
that:

The essential principle contained in the actual notion of an

illegal act – a principle which seems to be established by
international practice and in particular by the decisions of arbitral
tribunals – is that reparation must, as far as possible, wipe out all
the consequences of the illegal act and re-establish the situation
which would, in all probability, have existed if that act had not
been committed. Restitution in kind, or, if this is not possible,
payment of a sum corresponding to the value which a restitution
in kind would bear; the award, if need be, of damages for loss
sustained which would not be covered by restitution in kind or
payment in place of it – such are the principles which should
serve to determine the amount of compensation due for an act
contrary to international law.61

Bilateral and multilateral treaties usually contain a reference to

indirect expropriation or to measures tantamount to
expropriation.62 For instance, article 1110 of the North American
Free Trade Agreement (NAFTA) which relates to expropriation and
compensation, refers to “…a measure tantamount to nationalization
or expropriation”.63 Moreover, few investment treaties make direct
reference to indirect expropriation.64 For instance, article 4 of the
Egypt- Germany BIT states:

Investments by investors of either Contracting State shall not

directly or indirectly be expropriated, nationalized or subjected to

61 The Factory at Chorzów (Claim for Indemnity) (The Merits), Germany v. Poland, Permanent
Court of International Justice, Judgment, 13 September 1928, 1928 P.C.I.J. (ser. A) No. 17,
p. 47.
62 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd

ed., 2012) at p. 93.

63 North American Free Trade Agreement, art. 1110, 01 Jan. 1994.

64 Mexico - United Kingdom BIT, art. 7 (2006); Japan - Lao People’s Democratic Republic BIT,

art. 12 (2008).
 54

any other measures the e ects of which would be tantamount to

expropriation or nationalization in the territory of the other
Contracting State except for the public bene t and against
compensation.65

In Metalclad v. Mexico, the claimant was granted a permit by the

Mexican Government to develop and operate a hazardous waste
land ll. However, the local municipal authorities refused to grant
the required construction permit to the investor and the regional
government declared the particular land a national area for the
protection of cactuses. The investment tribunal held the actions of
the Mexican authorities were in violation of article 1110 of NAFTA.66
In Goetz v. Burundi, Burundi revoked the free zone status, which
was provided to the claimant. Even though, there was no formal
taking of property of the investor, the ICSID tribunal held that the
actions of Burundi amount to measures having a similar e ect to
expropriation. The tribunal held:

Since […] the revocation of the Minister for Industry and

Commerce of the free zone certi cate forced them to halt all
activities […], which deprived their investments of all utility and
deprived the claimant investors of the bene t which they could
have expected from their investments, the disputed decision can
be regarded as a ‘measure having similar e ect’ to a measure
depriving of or restricting property within the meaning of Article 4
of the Investment Treaty.67

Additionally, a measure taken by the host states amounts to

indirect expropriation if the e ect upon the economic bene t and
the control over investment is substantial and lasts for a signi cant
period. In RFCC v. Morocco, the tribunal held that an indirect
expropriation takes place if the measure of the host state has:

65 Egypt - Germany BIT, art. 4.

66 Metalclad Corporation v. The United Mexican States, ICSID Case No. ARB(AF)/97/1 (Jan.,
1999).
67 Antoine Goetz et consorts v. République du Burundi, ICSID Case No. ARB/95/3 (10 Feb.
1999).
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substantial e ects of an intensity that reduces and/or removes

the legitimate bene ts related with the use of the rights targeted
by the measure to an extent that they render their further
possession useless.68

In CMS v. Argentina, Argentina had inter alia unilaterally

suspended an agreed tari adjustment formula for gas transport in
light of the economic and nancial crisis. The foreign investor
argued that the steps taken by Argentina amount to indirect
expropriation. The tribunal pointed out that though, the suspension
had an e ect on the investment, it does not amount to indirect
expropriation. The tribunal held:

The essential question is therefore to establish whether the

enjoyment of the property has been e ectively neutralised. The
standard that a number of tribunals have applied in recent cases
where indirect expropriation has been contended is that of
substantial deprivation [….] the investor is in control of the
investment; the Government does not manage the day to day
operations of the company; and the investor has full ownership
and control of the investment.69

In Telenor v. Hungary, the investor held a telecom concession,

which was a ected by a levy imposed on all telecommunications
service providers. The tribunal stated that for an indirect
expropriation to occur, the conduct complained must have a major
adverse impact on the economic value of the investment.
Moreover, the tribunal said:

[T]he interference with the investor’s rights must be such as

substantially to deprive the investor of the economic value, use or
enjoyment of its investment. In considering whether measures
taken by the government constitute expropriation the
determinative factors are the intensity and duration of the

68 RFFC v. Morocco, Award, 22 December 2003, 20 ICSID Review - FILJ 391 (2005).
69 CMS v. Argentina, Award ¶¶262,263, 10 February 2005, 44 ILM 1205 (2005).
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economic deprivation su ered by the investor as the result of

them.70

In light of this, the tribunal held “it is evident that the e ect of
the measures by Hungary of which Telenor complains fall far short
of the substantial economic deprivation of its investment required
to constitute expropriation.”71

It shall be noted that the intention of the host state is not a

decisive factor in deciding whether the measure taken by the host
state amounts to indirect expropriation. In Tecmed v. Mexico, the
tribunal held:

The government’s intention is less important than the e ects

of the measures on the owner of the assets or on the bene ts
arising from such assets a ected by the measures; and the form
of the deprivation measure is less important than its actual
e ects.72

iii. Creeping Expropriation

Expropriation of investment does not always occur all at once.

Expropriation of the investment may occur incrementally or step by
step and such type of expropriation is referred to as a ‘creeping
expropriation’. Creeping expropriation can be de ned as the:

Incremental encroachment on one or more of the ownership

rights of a foreign investor that eventually destroys (or nearly
destroys) the value of his or her investment or deprives him or her
of control over the investment. A series of separate State acts,
usually taken within a limited time span, are then regarded as

70 Telenor v. Hungary, Award ¶64 (13 Sep. 2006).

71Ibid, ¶79.
72 Tecmed v. Mexico, Award ¶116, 29 May 2003, 43 ILM 133 (204).
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constituent parts of the uni ed treatment of the investor or

investment.73

In Generation Ukraine v. Ukraine, the claimant contended that

the series of acts of the host state amounted to creeping
expropriation as it interfered with the claimant’s rights to its
investment and blocked the completion of the project. The tribunal
rejected the claimant’s contention and held:

Creeping expropriation is a form of indirect expropriation with a

distinctive temporal quality in the sense that it encapsulates the
situation whereby a series of acts attributable to the State over a
period of time culminate in the expropriatory taking of such
property. The case of German Interests in Polish Upper Silesia is
one of many examples of an indirect expropriation without a
“creeping” element—the seizure of a factory and its machinery by
the Polish Government was held by the PCIJ to constitute an
indirect taking of the patents and contracts belonging to the
management company of the factory because they were so
closely interrelated with the factory itself. But although
international precedents on indirect expropriation are plentiful, it
is di cult to nd many cases that fall squarely into the more
speci c paradigm of creeping expropriation.74

As mentioned above, the India Model BIT 2016 covers direct

and indirect expropriation. It shall be noted that it lays down
provisions pertaining to creeping expropriation as well. According
to section 5.3(ii), a series of measures adopted by a host state
would amount to indirect expropriation if the measures have:

an e ect equivalent to direct expropriation, in that it

substantially or permanently deprives the investor of the
fundamental attributes of property in its investment, including the

73 Expropriation, UNCTAD Series on Issues in International Investment Agreements II, United

Nations Conference on Trade and Development, available at <https://unctad.org/en/
Docs/unctaddiaeia2011d7_en.pdf> last accessed 20 June 2021.
74 Generation Ukraine, Inc. v. Ukraine, ICSID Case No. ARB/00/9, ¶¶13.1-13.6 Award.
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right to use, enjoy and dispose of its investment, without formal

transfer of title or outright seizure.

iv. Regulatory Measures

Exercise of regulatory function is the primary responsibility of

the state. Regulations are essential for the protection of public
interest and in genuine regulatory actions, non-economic factors
play a prominent role. Usually, while performing regulatory
functions, the actions of the state a ect private parties.75 Measures
of the host state taken in exercise of its police power or right to
regulate might signi cantly a ect the property rights of an investor.
In Saluka Investments B.V. v. The Czech Republic, the tribunal held
that host states are not liable to compensate an investor when, in
the normal exercise of their regulatory powers, they adopt in a non-
discriminatory manner bona de regulation that is aimed at the
general welfare. The tribunal held:

Faced with the question of when, how and at what point an

otherwise valid regulation becomes, in fact and e ect, an
unlawful expropriation, international tribunals must consider the
circumstances in which the question arises. The context within
which an impugned measure is adopted and applied is critical to
the determination of its validity.76

In Nykomb Synergetics v. Latvia, the tribunal held that:

‘regulatory takings’ may under the circumstances amount to

expropriation or the equivalent of an expropriation. The decisive
factor for drawing the border line towards expropriation must
primarily be the degree of possession taking or control over the
enterprise the disputed measures entail.77

75 Aniruddha Rajput, Regulatory Freedom and Indirect Expropriation in Investment Arbitration

(Kluwer Law International 2018) at pp. 1 – 6.
76 Saluka Investments B.V. v. The Czech Republic, UNCITRAL (1979).

77 Nykomb Synergetics Technology Holding AB v. The Republic of Latvia, SCC Case No.

118/2001.
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Many BITs include provisions which state that regulatory taking

of the property does not constitute expropriation. For instance,
Article 6 of the Colombia-India BIT stipulates:

Non-discriminatory regulatory actions by a Contracting Party

that are designed and applied to protect legitimate public welfare
objectives including the protection of health, safety and
environment do not constitute expropriation or nationalization;
except in rare circumstances, where those actions are so severe
that they cannot be reasonably viewed as having been adopted
and applied in good faith for achieving their objectives.78

Public purpose, due process and non-discrimination are the

three important factors in determining the validity of an
expropriation. In Methanex v. USA, the government of California
had imposed a ban on the gasoline additive MTBE and the investor
argued that this measure taken by the government amounts to
expropriation. The tribunal rejected the investor’s claim on the
grounds that the ban imposed was for a public purpose and non-
discriminatory.79

In Too v. Greater Modesto Insurance Associates, the foreign

investor demanded compensation as his liquor licence was seized
by the Internal Revenue Service of the United States. The tribunal
rejected the investors claim and held that action was within the
police power:

A State is not responsible for loss of property or for other

economic disadvantage resulting from bona de general taxation
or any other action that is commonly accepted as within the
police power of States, provided it is not discriminatory and is not
designed to cause the alien to abandon the property to the State
or to sell it at a distress price.80

78 Colombia - India BIT, art. 6.2, 10 Oct. 2009.

79 Methanex v. The United States of America, Award, 03 August 2005.
80 Too v. Greater Modesto Insurance Associates, Award of 29 December 1989, 23 Iran-U.S.

Cl. Trib. Rep. 378.

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In ADC v. Hungary, Hungary adopted various measures which

deprived the foreign investor to operate and bene t from the
investments in an airport project. Hungary argued that the
measures were adopted to comply with the European Union
requirements and it was for the ‘strategic interest of the state’. The
tribunal rejected Hungary’s contention and held them liable as the
host state failed to prove that the measures were adopted in the
‘interest of the public’.81

2. Fair and Equitable Treatment

Majority of investment treaties provide for fair and equitable

treatment (FET) of foreign investments. This standard protects the
investors as it prevents the host state from acting in an arbitrary,
discriminatory or abusive manner. The FET standard is frequently
invoked and a majority of successful claims pertain to the violation
of this standard. FET is a rule of international law and is not
decided by the laws of the host state.82 An example of the FET
clause can be found in the India- UAE BIT:

Each Contracting Party shall, at all times, ensure Investments

made in its territory by Investors of the o her Contracting Party,
fair and equitable treatment. Such treatment shall not be less
favourable than that which it accords to Investments of its own
investors or investors of any third Party, whichever is the most
favourable.83

Notably, the 2016 Model BIT does not include a FET clause, but
includes a ‘treatment of investment’ clause which provides
protection against denial of justice, a fundamental breach of due
process, targeted discrimination on manifestly unjusti ed grounds,
or manifestly abusive treatment.84

81ADC v. Hungary, Award, 02 Oct. 2006.

82 Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment
Agreements II, United Nations Conference on Trade and Development, available at
<https://unctad.org/en/Docs/unctaddiaeia2011d7_en.pdf> last accessed 20 June 2021.
83 India - United Arab Emirates BIT, art. 5, 12 Dec. 2013.

84 India's Model Bilateral Investment Treaty, art. 3.1, 28 Dec. 2015.

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While deciding whether the host state has violated the FET
standard, discrimination against foreign investor is considered as
an important indicator and at times, tribunals have included other
standards such as ‘important and discreditable’,85 or ‘unreasonable
conduct’.86 The FET standard may be violated even if the foreign
investor receives the same treatment as accorded to the investor
of the host state’s nationality and it does not depend on whether
the host state has acted in good faith or not.87

FET standard is broad and its meaning is determined on a case

to case basis. In Modev v. USA, the tribunal observed that
“judgement of what is fair and equitable cannot be reached in the
abstract; it must depend on the facts of the particular case”.88
Similarly, in Waste Management v. Mexico, the tribunal said that
“the standard is to some extent a exible one which must be
adapted to the circumstances to the circumstances of each case”.89
In Genin v. Estonia, the tribunal pointed out that acts violating the
FET standard “would include acts showing a wilful neglect of duty,
an insu ciency of action falling far below international standards,
or even subjective bad faith.”90 An elaborative description of the
FET standard was provided by the tribunal in TECMED v. Mexico:

The Arbitral Tribunal considers that these provisions of the

Agreement, in light of the good faith principle established by the
international law, requires the Contracting Parties to provide to
international investments treatments that does not a ect the
basic expectations that were taken into account by the foreign

85 Mondev v. USA, Award, ¶127, (11 Oct. 2002).

86 Saluka investments BV v. The Czech Republic, Partial Award, (17 March 2006)
87 Occidental Exploration and Production Company v. The Republic of Ecuador, LCIA Case

No. UN3467, Final Award ¶48, (01 July 2004).

88 Mondev International Ltd. v. United States of America, ICSID Case No. ARB(AF)/99/2,

Award ¶118 (11 Oct. 2002).

89 Waste Management, Inc. v. United Mexican States, ICSID Case No. ARB(AF)/00/3, Award

¶99 (03 Sept. 2001).

90 Alex Genin, Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, ICSID

Case No. ARB/99/2, Award ¶367, (25 June 2001).

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investors to make the investment. The foreign investor expects

the host State to act in consistent manner, free from ambiguity
and totally transparently in its relations with the foreign investor,
so that it may know beforehand any and all rules and regulations
that will govern its investments, as well as the goals of the
relevant policies and administrative practices or directives, to be
able to plan its investment and comply with such regulations…
The foreign investor also expects the host state to act
consistently, i.e., without arbitrarily revoking any pre-existing
decisions or permits issued by the State that were relied upon by
the investor to assume its commitments as well as to plan and
launch its commercial and business activities. The Investor also
expects the State to use the legal instruments that govern the
actions of the investor or investment in conformity with the
function usually assigned to such instruments, and not to deprive
the investor of its investment without the required
compensation.91

In Saluka v. Czech Republic, an ailing bank in which the

claimants had invested, was taken over by a competitor, who had
received nancial aid from the Czech Republic for the purpose of
the takeover. However, the bank had not received similar
assistance when the claimants tried to negotiate the conditions to
keep the bank viable. The tribunal held that the actions of the
Czech Republic amount to a violation of FET standard as the FET
standard requires that an investor whose interests are protected
under a treaty is entitled to expect that the Host state will not act in a
manner that is manifestly inconsistent, non-transparent, unreasonable,
or discriminatory.92

In various cases, tribunals have held that the host state’s failure
to comply with the contractual obligations would amount to a
violation of FET standard. In Nobel Ventures v. Romania, the
tribunal stated that the FET standard imposes an obligation upon

91 Técnicas Medioambientales TECMED S.A. v. The United Mexican States, ICSID Case No.
ARB(AF)00/2, award dated 29 May 2003, para 154.
92 Saluka investments BV v. The Czech Republic, Partial Award, (17 Mar. 2006).
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the host state to comply with the terms of the contract. In light of
this, it held that:

…one can consider this to be a more general standard which

nds its speci c application in inter alia the duty to provide full
protection and security, the prohibition of arbitrary and
discriminatory measures and the obligation to observe
contractual obligations towards the investor.93

However, it shall be noted that there are various cases wherein

it has been held that a mere breach of a contract by the host state
would not amount to a violation of the FET standard. In Consortium
RFCC v. Morocco, the investor and the host state were involved in
a dispute arising out of a contract pertaining to the construction of
a motorway. The tribunal held a breach of the terms of a contract,
that could have been committed by an ordinary contracting party,
would not amount to result in a violation of the FET standard. The
tribunal held that:

a State may perform a contract badly, but this will not result in
a breach of treaty provisions, unless it be proved that the state…
has gone beyond its role as a mere party to the contract, and has
exercised the speci c functions of a sovereign.94

In MTD v. Chile, it was observed that the host state shall create
favourable conditions for investments.95 In TECMED v. Mexico, the
tribunal stated that the contracting party shall act in good faith and
ensure that that the actions of the host state do not a ect the basic
expectations that were taken into account by the investor to make
the investment. Moreover, the tribunal held:

The foreign investor expects the host State to act in a

consistent manner, free from ambiguity and totally transparently in
its relations with the foreign investor, so that it may know
beforehand any and all rules and regulations that will govern its

93 Nobel Ventures v. Romania, Award ¶162, 12 Oct. 2005.

94 Consortium RFCC v. Morocco, Award ¶391, 20 ICSID Review –FILJ (22 Dec. 2003).
95 MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Chile (ICSID Case No. ARB/01/7), para 104.
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investments, as well as the goals of the relevant policies and

administrative practices or directives, to be able to plan its
investment and comply with such regulations. Any and all State
actions conforming to such criteria should relate not only to the
guidelines, directives or requirements issued, or the resolutions
approved thereunder but also to the goals underlying such
regulations. The foreign investor also expects the host State to
act consistently, i.e. without arbitrarily revoking any pre-existing
decisions or permits issued by the State that were relied upon by
the investor to assume its commitments as well as to plan and
launch its commercial and business activities. The investor also
expects the State to use the legal instruments that govern the
actions of the investor or the investment in conformity with the
function usually assigned to such instruments, and not to deprive
the investor of its investment without the required compensation.
In fact, failure by the host State to comply with such pattern of
conduct with respect to the foreign investor or its investments
a ects the investor’s ability to measure the treatment and
protection awarded by the host State and to determine whether
the actions of the host State conform to the fair and equitable
treatment principle.96

i. FET and Minimum Standard Requirement

A signi cant number of investment treaties link FET to the

Minimum Standard of Treatment (MST), which shall be provided to
investors under customary international law. MST refers to a bare
minimum treatment to foreign investors by host states to ensure
that a foreign investor is protected against unacceptable and
excessive actions of the host state by established rules and
standards of customary international law which are independent of
the domestic law of the state. The scope of MST was laid down in
the case of Neer v. Mexico. In the said case, a claim was brought
before the Mexico-US General Claims Commission on behalf of a
US national, who was killed in Mexico. It was alleged that the
Mexican authorities had failed to exercise due diligence in

96 Técnicas Medioambientales TECMED S.A. v. The United Mexican States, ICSID Case No.
ARB(AF)00/2, award dated 29 May 2003, para 154.
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prosecuting the individual responsible for it resulting into a denial

of justice. The Commission rejected this claim and stated:

Without attempting to announce a precise formula, it is in the

opinion of the Commission possible to […] hold ( rst) that the
propriety of governmental acts should be put to the test of
international standards, and (second) that the treatment of an
alien, in order to constitute an international delinquency, should
amount to an outrage, to bad faith, to wilful neglect of duty, or to
an insu ciency of governmental action so far short of
international standards that every reasonable and impartial man
would readily recognize its insu ciency. Whether the
insu ciency proceeds from de cient execution of an intelligent
law or from the fact that the laws of the country do not empower
the authorities to measure up to international standards is
immaterial.97

Even though Neer v. Mexico is a landmark case pertaining to

the MST standard, it shall be noted that the said case dealt with the
physical security of the alien and not the treatment of foreign
investment. In Mondev International v. United States98 and ADF
Group Inc v. United States99, it was held that the MST standard is
not con ned to the Neer case standard. However, it is pertinent to
note that in neither of the two cases, the tribunals laid down a new
test pertaining to MST.

In Waste Management II, the tribunal noted down the circumstances in

which host State conduct can be said to be infringing investors
MST-FET. It observed the State infringes MST-FET:

…if the conduct is arbitrary. grossly unfair. unjust or

idiosyncratic. is discriminatory and exposes the claimant to
sectional or racial prejudice. or involves a lack of due process
leading to an outcome which o ends judicial propriety - as might

97 LFH Neer and Pauline Neer v Mexico (US v Mexico) (1926) 4 RIAA 60, pp. 61-62.
98 Mondev International Ltd v. United States, ICSID Case No. ARB (AF)/99/2, Award, 11
October 2002.
99 ADF Group Inc v. United States, ICSID Case No ARB(AF)/00/1, Award, 9 January 2003.
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be the case with a manifest failure of natural justice in judicial

proceedings or a complete lack of transparency and candour in
an administrative process. 100

Notably, treatment of the host State must be in breach of its

representations and the investor must have ‘’reasonably relied
upon such representations. However, the standard is exible and
can be adapted to the circumstances of the case.

3. National Treatment

National treatment standard seeks to ensure that the host state

extends to the foreign investor's treatment that is as favourable as
the treatment granted to its domestic investors. The purpose of
including the national treatment clause in investment treaties is to
ensure that the host state does not make negative di erentiation
between foreign and domestic investors.101 National Treatment
clause provides that the foreign investor and his investments are
‘accorded treatment no less favourable than that which the host
state accords to its own investors’.102 This obligation extends to
both de jure and de facto discrimination and any di erentiations
made are justi able if rational grounds are shown by the host
state.103

Determining whether the host state has breached the national

treatment clause requires the identi cation of the appropriate
comparator, as the violation of this obligation usually depends on
whether the foreign investor was accorded less favourable
treatment than the alleged domestic investor, who is in like

100 Waste Management, Inc v United Mexican States (Number 2), ICSID Case No ARB(AF)/
00/3, Award (30 April 2004), para 98.
101 National Treatment, UNCTAD Series on Issues in International Investment Agreements,

available at <https://unctad.org/system/ les/o cial-document/psiteiitd11v4.en.pdf.> last

accessed 20 June 2021.
102 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd

ed., 2012) at pp. 198-206.

103 See, United Parcel Service of America Inc. v. Government of Canada, ICSID Case No.

UNCT/02/1.
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circumstances or situations with the foreign investor. Thus, there is

a three-part analysis that tribunals must undertake to determine
whether there is a breach of this clause:

- Whether there existed ‘like circumstances’ within which the

domestic and foreign investors were situated?
- Whether the treatment accorded to foreign investors is at
least as favourable as that accorded to domestic investors?
- if there is a di erential treatment, whether it is justi ed?104

i. Like circumstances

Tribunals have often faced di culties in determining what

would constitute ‘like circumstance.’105 Tribunals have frequently
grappled with the question of whether the ‘likeness’ is to be broad
and include the entire economic sector or be restricted to
companies performing the same type of business only. Thus, while
the tribunal in Occidental v Ecuador suggested an extremely broad
interpretation of the term ‘circumstances’, an alternative approach
is being followed by tribunals like those in SD Myers v Canada.

In Occidental v Ecuador, a US-owned company had entered

into a contract with Petroecuador (a state-owned entity of Ecuador)
for oil exploration in Ecuador. Ecuador had a VAT refund
programme that allowed exporters dealing in certain products, like
owers and seafood, to claim a refund of the VAT on all products
exported from the country. The foreign investor was not allowed to
claim a refund for the exports of oil and in light of this, it claimed
that Ecuador violated the national treatment obligation under the
Ecuador- US BIT. Ecuador contended that there was no
discrimination against foreign investors as the VAT refund was not
available to any exporters of oil, including the state-owned oil
company. The tribunal rejected his contention and held that ‘like
situations’ cannot be interpreted in a narrow sense because the

104 Gami Investments Inc. v. Mexico, UNCITRAL, Award, Nov. 15, 2004.
105 See Marvin Feldman v. Mexico, Award of 16 December 2002 (Kerameus, Covarrubias
Bravo, Gantz), 18 ICSID-Rev.- FILJ 488 (2003).
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purpose of national treatment is to protect foreign investors and

therefore, it would be inappropriate to address ‘exclusively the
sector in which that particular activity is undertaken’. Moreover, it
was held that the exporters should not be placed at a disadvantage
in foreign markets because they had to pay more taxes in the
country of origin.106

On the other hand, SD Myers v Canada was based on a breach

of the North American Free Trade Agreement (NAFTA). This case
concerned the imposition of an export ban on a particular type of
hazardous waste. The claimant contended that the Canadian
export ban constituted a form of discrimination under the national
treatment standard. In order to determine breach of this standard,
the Tribunal held that the term ‘like circumstances’ must take into
account principles emerging from the NAFTA, WTO jurisprudence
and the OECD Declaration on International and Multinational
Enterprises. Thus, it held that the key test was whether the
domestic investors are in the same ‘business sector’ or ‘economic
sector’ as the claimant.107 In the ICSID context, a similar verdict was
rendered by the Tribunal in Feldman v Mexico, where ‘like
circumstances’ was interpreted to refer to the same business, i.e.,
the exporting of cigarettes.108

The India Model BIT 2016 provides that a Party shall not apply
measures that accord less favourable treatment than it accords, in
like circumstances, to its own investors with respect to the
management, conduct, operation, sale or other disposition of
investments in its territory. Moreover, it lays down the criteria for
which ‘like circumstance’ is to be determined:

106 Occidental Petroleum Corporation and Occidental Exploration and Production Company
v. The Republic of Ecuador, ICSID Case No. ARB/06/11.
107 S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award dated 13 Nov. 2000,

para 250.
108 Marvin Feldman v. Mexico, Award of 16 December 2002 (Kerameus, Covarrubias Bravo,

Gantz), 18 ICSID-Rev.- FILJ 488 (2003), para. 171

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like circumstances depends on the totality of the

circumstances, including whether the relevant treatment
distinguishes between investors or investments on the basis of
legitimate regulatory objectives. These circumstances include, but are
not limited to, (a) the goods or services consumed or produced by
the investment; (b) the actual and potential impact of the
investment on third persons, the local community, or the
environment, (c) whether the investment is public, private, or
state-owned or controlled, and (d) the practical challenges of
regulating the investment.109

It is pertinent to note that article 4.2 states that treatment

accorded by a party in ‘like circumstances’ means the treatment
accorded by a sub-national government to the investors and
investments within its area. Therefore, an investor cannot allege a
breach of the national treatment standard in respect of a measure
imposed by a state in India on the basis that another state accords
domestic investors better treatment within its jurisdiction.
Therefore, the national treatment standard would be breached only
if the same state accords favourable treatment to domestic
investors in like circumstances.110

ii. Di erentiation between investors

In terms of a de nition, the tribunal in Lauder v Czech Republic

held that a discriminatory measure is one that fails to provide
national treatment.111 This de nition requires evidence only
demonstrating less favourable treatment to the foreign investor,
regardless of whether the same is motivated by its nationality.112

It is common for host States to cite justi cations for such

di erentiation during their arguments, based on their national

109 India's Model Bilateral Investment Treaty, art. 4, 02 Dec. 2015.

110 Lucia Raimanova, Indian Model Bilateral Investment Treaty, Allen & Overy, available at
<https://www.allenovery.com/en-gb/global/news-and-insights/publications/indian-model-
bilateral-investment-treaty> last accessed 20 June 2021.
111 Ronald S. Lauder v. Czech Republic (UNCITRAL, Final Award).

112 Thunderbird v. Mexico, UNCITRAL, Award (15 November 2004), para 114.
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policies. The prevalent view seems to be that while national

policies favouring domestic investors may constitute an objective
justi cation for such conduct, tribunals are free to assess their
legality under international law or determine the legality of their
motive.

The landmark case in this regard remains SD Myers v Canada,

which is discussed herein above. Here, the tribunal recognised that
the policy of the host State was enacted with the intention to save
an important local sugar industry, demonstrating an absence of
intent to discriminate against the foreign investor. 113

iii. Discriminatory intent of host state

To prevail on a national treatment claim, the foreign investor is

not required to prove the discriminatory intent of the host state as it
is the impact of the host state’s action that is taken into
consideration by the tribunal. Although most BITs do not have an
express requirement to show intent, the same needs to be shown
in practice to demonstrate that the di erentiations are
unjusti able.114 With respect to this part of the analysis, Tribunals
have mixed views as to whether ‘intent to discriminate’ or ‘impact
of discriminatory measure’ is the correct standard of assessment. In
the latter, the intent becomes irrelevant as mere practical
discrimination su ces to show a breach of the national treatment
clause.

In S.D. Myers v. Canada, the tribunal concluded that when a

measure of the host state accords favourable treatment to a
domestic investor the practical impact of the measure rather than
the intent of the host state assumes priority in determining whether

113 S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award dated 13 Nov. 2000.
114 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd
ed., 2012) at pp. 183, 202.
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the host state has breached the national treatment standard.115

Currently, this seems to be the prevalent view amongst tribunals.

This was also agreed upon by the Tribunal in Siemens v.

Argentina:

The Tribunal concurs that intent is not decisive or essential for

a nding of discrimination, and that the impact of the measure on
the investment would be the determining factor to ascertain
whether it had resulted in non-discriminatory treatment.116

4. Most Favoured Nation

Most Favoured Nation (MFN) clauses are included in investment

treaties to ensure that the relevant parties treat each other in a
manner at least as favourable as they treat third parties. MFN
clause may not have any signi cance if the host state fails to confer
any relevant bene t to a third party. However, once the concerned
state grants a relevant bene t, it is automatically extended to the
state that bene ts from the MFN clause.An example of the MFN
clause can be found in the China–Benin BIT:

Neither Contracting Party shall subject investments and

activities associated with such investments by the investors of the
other Contracting Party to treatment less favorable than that
accorded to the investments and associated activities by the
investors of any third State.117

It shall be noted that the 2016 India Model BIT does not include
a MFN clause. It is believed that not including the MFN clause in an
investment treaty can be detrimental to the foreign investors and
their investments in the host state as the host may accord di erent
treatment by discriminating among foreign investors pertaining to
the application of domestic measures or regulations.

115 S.D. Myers, Inc. v. Government of Canada, UNCITRAL, Partial Award dated 13 Nov. 2000,
para 254.
116 Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, (06 Feb. 2007).

117 China - Benin BIT, art. 3.2, 18 Feb. 2004.

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Many BITs link MFN with national treatment to ensure that the
host state treats foreign investor no less favourably than they treat
domestic investors or investors of other states. For instance, article
3 of the United Kingdom- Turkey BIT stipulates:

1. Neither Contracting Party shall in its territory subject

investments or returns of nationals or companies of the other
Contracting Party to treatment less favourable than that which it
accords to investments or returns of its own nationals or
companies or to investments or returns of nationals or companies
of any third State.
2. Neither Contracting Party shall in its territory subject
nationals or companies of the other Contracting Party, as regards
the management, maintenance, use, enjoyment or disposal of
their investments, to treatment less favourable than that which it
accords to its own nationals or companies or to nationals or
companies of any third State.118

In Parkerings v. Lithuania, the claimant contended that Lithuania

had violated the FET standard as Lithuania refused to sign a
contract with the claimant but later entered into a similar contract
with other companies, which were facing similar circumstances.
The tribunal pointed out that:

Most-favoured-nation (MFN) clauses are by essence very

similar to “National Treatment” clauses. They have similar
conditions of application and basically a ord indirect advantages
to their bene ciaries, namely a treatment no less favourable than
the one granted to third parties. Tribunals’ analyses of the
National Treatment standard will therefore also be useful to
discuss the alleged violation of the MFN standard (….) The
essential condition of the violation of a MFN clause is the
existence of a di erent treatment accorded to another foreign
investor in a similar situation. Therefore, a comparison is
necessary with an investor in like circumstances. The notion of
like circumstances has been broadly analysed by Tribunals”.
Therefore, the tribunals that link the MFN standard with national

118 United Kingdom - Turkey BIT, art. 3, 15 March 1991.

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treatment, analysed the notion of ‘like circumstances’ to determine

breach of the MFN standard.119

Majority cases before tribunals involving the MFN clause pertain

to circumstances in which bene ts accorded in investment treaties
with third states are invoked.120 MFN clause has been invoked by
foreign investors to seek both procedural and substantive bene ts.
However, in most disputes, investors have sought procedural
rights, contending that the MFN clause in the treaty allows them to
secure a more favourable dispute settlement mechanism by
invoking investment treaties with third states. The rst BIT dispute
to address such an issue was Ma ezini v. Spain, in which the
tribunal pointed out that MFN treatment extends to procedural
provisions pertaining to more favourable dispute resolution
clauses.121 The same approach has been adopted by the tribunals
in several other cases. For instance, in Siemens v. Argentina,
Argentina argued that the tribunal lacked jurisdiction as the
claimant failed to comply with the Germany-Argentina BIT, which
requires the claimant to pursue the matter in the local courts before
initiating international investment proceedings. The tribunal
rejected Argentina’s contention by interpreting the MFN clause of
the applicable BIT and allowed the claimant to invoke third party
investment treaties.122 The MFN clause of Germany- Argentina BIT
reads as follows:

Article 3(1): None of the Contracting Parties shall accord in its

territory to the investments of nationals or companies of the other
Contracting Party or to investments in which they hold shares, a
less favorable treatment than the treatment granted to the

119 Parkerings-Compagniet AS v. Republic of Lithuania, ICSID Case No. ARB/05/8, Award

¶366, (Sep. 11, 2007).
120 Rudolph Dolzer and Christoph Schreuer, Principles of International Investment Law (2nd

ed., 2012) at p. 187.

121 Emilio Agustín Ma ezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7 (09 Nov.

2000).
122 Siemens A.G. v. Argentina, ICSID Case No. ARB/02/8, Decision on Jurisdiction ¶103, (03

Aug. 2004).
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investments of its own nationals or companies or to the

investments of nationals or companies of third States.
Article 3(2): None of the Contracting Parties shall accord in its
territory to nationals or companies of the other Contracting Party
a less favourable treatment of activities related to investments
than granted to its own nationals and companies or to the
nationals and companies of third States.123

The tribunal held that “the term ‘treatment’ and the phrase
‘activities related to the investments’ in the MFN clause are
su ciently wide to include settlement of disputes.”124

However, it shall be noted that the tribunals in many cases such

as Salini v. Jordan125, Telenor Mobile v. Hungary126, RosInvest Co v.
Russia127, Berschader v. Russia128, have rejected the Ma ezini v.
Spain approach, thereby restricting the scope of MFN to limited
rights.

In Salini v. Jordan, the foreign investor initiated a proceeding

before the ICSID tribunal alleging violation of construction
agreement by the host state. The host state objected to the
tribunal’s jurisdiction by placing reliance on the Italy-Jordan BIT,
which stipulates that “in case the investor and an entity of the
Contracting Parties have stipulated an investment Agreement, the
procedure foreseen in such investment agreement shall apply”.129
In light of this, the host state contended that the tribunal lacks
jurisdiction as the agreement requires the host state to resolve the
dispute before domestic courts. However, the claimant invoked the

123 Germany - Argentina BIT, art. 3, 09 April 1991.

124 Siemens A.G. v. Argentina, ICSID Case No. ARB/02/8, Decision on Jurisdiction ¶103, (03
Aug. 2004).
125 Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID

Case No. ARB/02/13.

126 Telenor Mobile Communications A.S. v. The Republic of Hungary, ICSID Case No. ARB/

04/15, (13 Sep. 2006).

127 RosInvest Co UK Ltd. v. The Russian Federation, SCC Case No. V079/2005.

128 Vladimir Berschader and Moïse Berschader v. The Russian Federation, SCC Case No.

080/2004.
129 Italy - Jordan BIT, art. 9(2), 21 July 1997.
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MFN clause and argued that they shall be allowed to initiate a

proceeding before the ICSID tribunal. The MFN clause of Italy-
Jordan BIT reads as follows:

Both Contracting Parties, within the bounds of their own

territory, shall grant investments e ected by, and the income
accruing to, investors of the Contracting Party no less favourable
treatment than that accorded to investments e ected by, and
income accruing to, its own nationals or investors of Third
States.130

The claimant argued that the MFN clause allows them to invoke
third party investment treaties, which allows the foreign investor to
bring claims before the ICSID tribunal. The tribunal while holding
that Article 3 of BIT doesn’t apply to dispute settlement clauses
observed:

Article 3 of the BIT between Italy and Jordan does not include
any provision extending its scope of application to dispute
settlement. It does not envisage “all rights or all matters covered
by the agreement.” Furthermore, the Claimants have submitted
nothing from which it might be established that the common
intention of the Parties was to have the most-favored-nation
clause apply to dispute settlement. Quite on the contrary, the
intention as expressed in Article 9(2) of the BIT was to exclude
from ICSID jurisdiction contractual disputes between an investor
and an entity of a State Party in order that such disputes might be
settled in accordance with the procedures set forth in the
investment agreements. Lastly, the Claimants have not cited any
practice in Jordan or Italy in support of their claim.131

Therefore, the tribunal rejected the claimant’s contentions and

held that the tribunal did not have jurisdiction over the dispute.

130 Italy - Jordan BIT, art. 3, 21 July 1997.

131 Salini Costruttori S.p.A. and Italstrade S.p.A. v. The Hashemite Kingdom of Jordan, ICSID
Case No. ARB/02/13, Award dated 31 Jan. 2006, para 118.
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With respect to substantive rights, the MFN clause has been

invoked by foreign investors to request the tribunal to incorporate
a provision to their treaty that they can invoke as having been
violated by the Host state. For instance, in Bayinir v. Pakistan, the
ICISID tribunal permitted the invocation of the MFN clause to
incorporate the FET clause from the Pakistan–Switzerland BIT into
the Pakistan–Turkey BIT. The tribunal held that the MFN clause was
drafted vaguely which allowed such interpretation.132 Similarly, in
White Industries v. India, the tribunal allowed the insertion of an
obligation ‘to provide means of asserting claims and enforcing
rights’ from the India- Kuwait BIT into the India-Australia BIT.133
Moreover, in CME v. Czech Republic134, the claimant was allowed to
use the MFN clause in the Netherlands-Czech Republic BIT to rely
on a more favourable de nition of ‘just compensation’ from another
BIT of the Czech Republic.

Investment treaties usually provide exceptions to the

application of the MFN clause. One of the common exceptions is
that a foreign investor cannot invoke the MFN clause to claim
treatment that is accorded to investors of other states as a part of
an economic integration area or double taxation policy. Few BITs
exempt certain sectors from the application of the MFN clause. For
instance, the Canada–Peru BIT (2008) excludes “aviation, sheries,
maritime matters, including salvage” from the scope of the MFN
clause.135 Moreover, article 3 of China-Germany BIT, which deals
with the treatment of investment stipulates that:

This Article shall not be construed so as to oblige one

Contracting Party to extend to the investors of the other
Contracting Party the bene t of any treatment, preference or
privilege by virtue of

132 Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case
No. ARB/03/29 (14 Nov. 2005).
133 White Industries Australia Limited v. Republic of India, (UNCITRAL, Award, 30 Nov. 2011).

134 CME Czech Republic BV v Czech Republic (UNCITRAL, Award, 14 March 2003).

135 Canada - Peru FTA, Annex II of the Canada list, 01 Aug. 2008.
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(a) any membership or association with any existing or future

customs union, free trade zone, economic union, common
market;
(b) any double taxation agreement or other agreement
regarding matters of taxation136

4. Full Protection and Security

Majority of investment treaties include clauses guaranteeing ‘full

protection and security’ to foreign investments. This standard imposes
a duty on the host state to take steps to protect the foreign
investments from adverse e ects such as invasion, encroachment,
etc.137 The purpose of this clause is to ensure that the host states
are duly diligent and take reasonable e orts to protect foreign
investments.138 However, it shall be noted that the host state is
under no obligation to provide absolute protection to
investments.139

As highlighted above, host States have a duty to provide

protection against physical violence such as invasion or
encroachment. In Wena Hotels v. Egypt, the employees of the host
state entity had seized the hotel. The police o cers, despite being
aware of the seizure, did not provide protection to the investment
against such physical violence and therefore, the tribunal held
Egypt liable for not providing full protection and security to the
claimant’s investment. This approach was subsequently relied on
by numerous other tribunals as well. 140

In AMT v. Zaire, the tribunal observed that the host state had
taken no action to protect the investor’s property’s during riots in

136 China - Germany BIT, art. 3.4 (01 Dec. 2003).

137 See, Sesbastian Blanco, Full Protection and Security in International Investment Law
(Springer International Publishing 2019).
138 Asian Agricultural Products Ltd. v. Republic of Sri Lanka, ICSID Case No. ARB/87/3.

139 Rudolf Dolzer & Margrete Stevens, Bilateral Investment Treaties (Martinus Nijho

Publishers 1995) at p. 61.

140 Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Award ¶84 (08

Dec. 2000).
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Zaire. The tribunal held that it was immaterial whether the acts on
the basis of which the claim was based was committed by the host
state or a common burglar because the host state had an
obligation to protect the investment and therefore, its liability was
invoked for failure to provide full protection and security and for
losses owing to riots or acts of violence.141

Physical damage to investments is not the only factor that

shows a violation of this clause. Many tribunals have found that this
standard covers all types of protection from physical to legal and
commercial.142 In Saluka investments BV v. The Czech Republic, it
was held that under the full protection and security standard, the
host state’s obligation to provide full protection and security also
extends to providing legal protection to investments.143 In Azurix v.
Argentina, the tribunal pointed out that “full protection and security
may be breached even if no physical violence or damage occurs”.
144 Few BITs such as the Germany - Argentina BIT, speci cally

provide for ‘full protection and legal security’ to foreign

investments.145 In CME v. Czech Republic, an ICSID tribunal found
the host state liable under the standard for not providing legal
protection to the investment. In the said case, regulatory authority
of the host state had created a legal situation that enabled the
claimant’s local partner to terminate the contract on which the
investment was dependent. The tribunal held:

The host State is obligated to ensure that neither by

amendment of its laws nor by actions of its administrative bodies

141AMT v. Zaire, 5 ICSID Rep. 11 (21 February 1997).

142 Omar Moussly, Same Concept, Di erent Interpretation: The Full Protection and Security
Standard in Practice, Kluwer Arbitration Blog, available at <http://
arbitrationblog.kluwerarbitration.com/2019/10/27/same-concept-di erent-interpretation-
the-full-protection-and-security-standard-in-practice/> last accessed 20 June 2021.
143 Saluka investments BV v. The Czech Republic, Partial Award ¶483 (17 Mar. 2006).

144 Azurix Corp. v. The Argentine Republic, ICSID Case No. ARB/01/12, Award, (14 Jul. 2006).

145 Germany - Argentina BIT, art. 4, 09 April 1991.

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is the agreed and approved security and protection of the foreign

investor’s investment withdrawn or devalued.146

The India Model BIT 2016 includes a full security clause.

However, it expressly states that this obligation is limited to
providing only physical protection to investments. Article 3.2
provides that “full protection and security only refers to a Party’s
obligations relating to the physical security of investors and
investments made by the investors of the other Party and not to
any other obligation whatsoever.”147 Therefore, under the India
Model BIT 2016, a host state is under no obligation to protect foreign
investments against legal infringement.

5. Denial of Bene ts

A denial of bene ts clause, which is included in most bilateral

and multilateral treaties, restricts foreign investor’s access to
investment arbitration that lack any substantial business activity in
the state of their incorporation.148 It aims to deny protection of the
relevant treaty to certain investors that the treaty did not intend to
protect.149 The idea is to avoid granting substantive protection to
companies that seek to bene t from provisions by establishing
‘mailbox or shell companies.’150 This phenomenon is commonly
referred to as ‘treaty shopping’, as it involves an attempt by a
foreign investor to avail bene ts that they are not entitled to under
a particular treaty.151 There are also speci c clauses that require

146 CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial award ¶613 (13 Sep.
2001).
147 India's Model Bilateral Investment Treaty, art. 3.2, 28 Dec. 2015.

148 Yas Banifatemi, Taking into account control under DOB clause, Jurisdiction in Investment

Treaty Arbitration (Jan., 2018).

149 Mr. Mohammed Bashir, Denial of Bene ts, JusMundi, available at <https://jusmundi.com/

en/document/wiki/en-denial-of-bene ts> last accessed 20 June 2021.

150 Lindsay Gastrell and Paul-Jean Le Cannu, Procedural Requirements of ‘Denial-of-Bene ts’

Clauses in Investment Treaties: A Review of Arbitral Decisions, 30(1) ICSID Review

(2015).
151 Waste Management, Inc v United Mexican States (Number 2), ICSID Case No ARB(AF)/

00/3, Award (30 April 2004) para 80.

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investors to have ‘real entrepreneurial activities in order to avail of

the protection of the treaty.152 However, such clauses are di erent
from denial of bene ts clauses as they specify the scope ratione
materiae. The denial of bene ts clause under the India Model BIT
2016 provides that:

A Party may at any time, including after the institution of

arbitration proceedings in accordance with Chapter IV of this
Treaty, deny the bene ts of this Treaty to:
i. an investment or investor owned or controlled, directly or
indirectly, by persons of a non-Party or of the denying Party; or
ii. an investment or investor that has been established or
restructured with the primary purpose of gaining access to the
dispute resolution mechanisms provided in this Treaty.153

In AMTO v. Ukraine, proceedings were initiated by AMTO under

the Energy Charter Treaty following an inability of the Ukrainian
government to pay outstanding dues to it. However, the State
pleaded that since AMTO did not have a substantial business
activity in the country, it could not avail the bene ts of this clause.
The tribunal de ned ‘substantial’ as “of substance and not merely
of form. It does not mean ‘large’, and the materiality not the
magnitude of the business activity is the decisive question.”154 Few
investment treaties contain ‘ownership’ and ‘control’ as conditions
for denying bene ts of the applicable treaty. In Plama Consortium
Limited v. Republic of Bulgaria, the tribunal described the terms
‘own or control’ mentioned under the Energy Charter Treaty as:

Ownership includes indirect and bene cial ownership; and

control includes control in fact, including an ability to exercise
substantial in uence over the legal entity’s management,
operation and the selection of members of its board of directors
or any other managing body.155

152 See, Chile - Finland BIT, art. 1.3(b), 27 May 1993.

153 India's Model Bilateral Investment Treaty, art. 35, 28 Dec. 2015.
154 Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005 (26 Mar. 2008)

155 Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24 (27 Aug.

2008).
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The AMTO approach generally remains prominent across

jurisprudence of this clause. In Pac Rim v El Salvador, a similar
claim was made by the Respondent State. While the tribunal
acknowledged that the group of companies of which the putative
investor formed a part had ‘substantial business activities’ in the
territory of the US, it held that for the purpose of the ‘denial of
bene ts’ clause, it was the claimant’s individual activities which
must have a substantial business activity in the state.156

156 Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Decision on
Jurisdiction dated. 01 June 2012, para 4.18.
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CHAPTER 4
INDIA’S TRYST WITH INVESTMENT
ARBITRATION
India can best be described as a ‘new entrant’ to the eld of
international investment arbitration, signing its rst BIT only after its
elaborate e orts towards globalisation and economic liberalisation
in 1991.1

The post-independence period in India was arguably one of

‘economic nationalism’, wherein the focus was more on
acknowledging India’s (then) new-found self-reliance and
sovereignty.2 This involved improving and giving primacy to
domestic production and vital industries, whilst permitting limited
foreign capital entry in selected industries, thus perpetuating the
idea that while India was open to embracing foreign investment,
the same would be permissible only if it speci cally contributed to
the country’s economic development. Thus, India was still averse to
the idea of foreign investment. This idea also permeated into the
late 1980s, with controls on foreign investment becoming stricter.3

However, things changed with the economic reforms initiated in

1991, which signi cantly opened up avenues for foreign investment
and eased norms from the erstwhile ‘License Raj.’ India signed its

1Prabhash Ranjan, India and Bilateral Investment Treaties: Refusal, Acceptance and Backlash
64-76 (2019).
2 Id at 71.

3 Id at 92.
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rst BIT with the United Kingdom in 1994.4 From 1994 to 2000,
India entered into BITs with major European ‘capital-exporting’
countries like Germany, Italy, France, Netherlands, Denmark,
Sweden, Poland, etc.5 In addition to this, India also signed BITs with
developing ‘capital-importing’ countries like Argentina, Mexico,
China, Thailand and least developed countries (LDCs) such as
Bangladesh, Sudan and Mozambique.6 With India signing close to
40 BITs until 2000, it was only a matter of time before investment
arbitration cases were led against her.7 By 2010, another 39 BITs
were signed, showing India’s new-found embrace of the neoliberal
order.

This section brie y highlights some of the investment arbitration

cases involving BITs entered into by India.

A. Arbitration Cases Involving India

1. The Dabhol Power Project case

The dispute in the Dabhol Power Project case arose, inter alia,
over a contract entered into between the State of Maharashtra and
the Dabhol Power Corporation, a joint venture between Enron
Corporation, General Electric Corporation and Bechtel Enterprises
entered into in 1992.8 The purpose of the contract was to initiate a

4 Nishith Desai Associates, Bilateral Investment Treaty Arbitration and India: With a special focus
on Indian Model BIT, 2016, available at <http://www.nishithdesai.com/fileadmin/user_upload/
pdfs/Research_Papers/Bilateral_Investment_Treaty_Arbitration_and_India-PRINT-2.pdf > last
accessed 25 June 25 2020.
5 Id.

6 Prabhash Ranjan, India and Bilateral Investment Treaties—A Changing Landscape, 29(2)

ICSID Review - Foreign Investment Law Journal 420 (2014).

7 Prabhash Ranjan, How Manmohan Singh played a key role in India signing its first bilateral

investment treaty, The Print, available at <https://theprint.in/pageturner/excerpt/how-

manmohan-singh-played-a-key-role-in-india-signing-its-first-bilateral-investmenttreaty/
279710/#:~:text=India%20signed%20as%20many%20as,6%2D7%20BITs%20each%20year.>
last accessed 25 June 2020.
8 Capital India Power Mauritius I and Energy Enterprises (Mauritius) Company v. India ICC

Case No 12913/MS, IIC 43 (2005).

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two-phase electricity generation project in Maharashtra, with the

rst phase mandating the construction of a fuel power plant and
the second phase of a gas- red power plant.9 Phase-I involved the
production of 695 megawatts and would use locally produced
natural gas, while Phase-II would produce 1,320 megawatts by
making use of natural gas imported from Qatar.10 This was
subsequently followed by an agreement wherein the Maharashtra
State Electricity Board agreed to purchase electricity from the
Dabhol Power Plant that would be operated by Enron. Multifarious
investors, bank guarantees, and insurances from foreign
companies were also obtained, for it was India’s largest investment
project in those days.

This case proves to be a complicated study, for it involves

recourse to domestic remedies, commercial arbitration, investor-
state arbitration and state-state arbitration within the same set of
facts. The initial set of disputes occurred when a new state
government assumed power in Maharashtra, ordering for
termination of the power plant’s construction after having
publicised doing so in their election manifesto to win state
elections.11 This is largely seen as a political move because there
was public opposition to the manner in which the erstwhile
government had agreed to the terms of the deal and other aspects
such as charging of electricity tari . Thus, the government ordered
the termination of the project on nationalistic grounds that the
project was aimed at ‘hurting the poor’ Indian citizens. The Enron
Corporation invoked the commercial arbitration clause within the
original agreement citing breach of contract. This was
subsequently challenged in domestic courts by the state. The State
sought to invalidate the arbitration by alleging that the contract was

9 Preeti Kundra, Note: Looking Beyond the Dabhol Debacle: Examining its Causes and
Understanding its Lessons, 41 Vand. J. Transn’tl. L. 907 (2008).
10 See, Enron’s Indian Negotiation Debacle, available at <https://www.negotiations.com/

case/negotiation-project-india/> last accessed 13 June 2021.

11 Amulya Reddy, Lessons from Enron, available at <http://www.amulya-reddy.org.in/Publication/

Lessons%20from%20Enron.pdf> last accessed 13 June 2021.

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a product of illegal negotiations and that there was no further

political will to renegotiate the same.

However, Enron approached the government of Maharashtra to

consider renegotiation of various aspects such as the electricity tariff,
the capital costs of the project, the payment plan and allied
environmental concerns. The negotiations were successful and a
new plan was approved by the Indian government in 1996.
Nevertheless, the project was unable to continue because unions,
activists and other public interest groups challenged these
measures. Courts put a stay on the project till it completed hearing
these objections, but eventually dismissed the suits by the end of
the year.12 Thus, Phase-I commenced in early 1997 with some
external nancing through development nance agreements.

Within nearly ve years of the beginning of the project in India

(May 1999), the next set of disputes arose when Enron again
invoked arbitration on grounds that the State’s Electricity Board
defaulted on making payments. A case was led in the Bombay
High Court stating that such a dispute can only be resolved by the
Maharashtra Electricity Commission and not an arbitral tribunal, and
the order was appealed to the Supreme Court. While the matter
was remanded back to the Bombay High Court and then again
appealed, it continued to remain pending when investment
arbitration proceedings commenced.

Simultaneously, the government of Maharashtra obtained an

anti-arbitration injunction against the Corporation, preventing
access to any remedy in India. Thus, the American insurance
companies that had backed the Corporation instituted arbitration
proceedings in America. The American arbitral authority ruled that
the Maharashtra State Electricity Board was liable for paying
damages for breach of contract and preventing access to
arbitration, leading the US government to initiate arbitration against

12 Preeti Kundra, Note: Looking Beyond the Dabhol Debacle: Examining its Causes and
Understanding its Lessons, 41 Vand. J. Transn’tl. L. 907 (2008).
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India under their investment protection agreement.13 Investors in

the Dabhol joint venture initiated investor-state arbitration based
on the India-Mauritius BIT and India - Netherlands BIT under the
International Chamber of Commerce (ICC) Rules. They did so
through their subsidiaries companies, to prevent acting against the
anti-arbitration injunctions that the State of Maharashtra possessed
against the parent companies.

The investors alleged unjust expropriation of their investment

by the government. However, the dispute was subsequently settled
between the parties and hence the international investment award
was not delivered. Amidst various political and legal problems, the
Dabhol Power Plant case also served as a major turning point in
Indian electricity law. The importance of the Dabhol power plant
case as being India’s rst tryst with investment arbitration cannot
be understated. However, it did not result in any policy shift in
India’s stance towards ISDS and India continued to enter into BITs
with numerous countries. It only served as a tting reminder of the
impact of political interference on foreign investments.14

2. White Industries v. India

The White Industries case is a landmark investment arbitration

proceeding against India alleging violation of substantive investor
protection clauses due to the ine ciency of the Indian judicial
system.

The basis of the dispute was a 1989 contract between White

Industries and Coal India (a government entity) for the supply of
equipment and development of a coal mine in India. White entered
into a contract with Coal India for the supply of equipment to and
development of a coal mine at Piparwar. In return, White was to be
paid approximately A$206.6 million. India entered into this contract

13 United States v. India, Request for Arbitration, 04 Nov. 2004, available at <http://
www.opic.gov/sites/default/ les/docs/GOI1 10804.pdf> last accessed 25 June2020.
14 See, Prabhash Ranjan & Pushkar Anand, The 2016 Model Indian Bilateral Investment
Treaty: A Critical Deconstruction 38 NW. J. INT'L L. & BUS. 1 (2017).
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during the 1980s and 1990s, which was a time when the country
wished to develop its coal resources.

Disputes arose between Coal India and White Industries as to

whether White was entitled to the bonuses or Coal India was
entitled to penalty payments. A number of other related technical
disputes also arose, primarily concerning the quality of the washed
and processed coal and the sampling process by which quality
would be measured. White Industries subsequently led a request
for commercial arbitration with the ICC under the ICC Rules, and a
majority of the tribunal decided in its favour.

On 11th September 2002, White Industries applied to Delhi High

Court for enforcement of the Award. However, Coal India had
already led an application for setting aside the arbitral award
before the Calcutta High Court on 6th September 2002. White
Industries initially applied to the Supreme Court of India to transfer
the proceedings to the Delhi High Court. The High Court granted
an ex parte stay on proceedings before the Calcutta High Court.
When the matter was nally heard by the Supreme Court, the Court
advised White Industries to withdraw its transfer petition lieu of res
judicata.15

Thus, White Industries led an appeal in the Calcutta High Court

challenging the jurisdiction of the Court to ‘set aside’ a foreign
award, which was rejected. When the matter reached the Supreme
Court subsequently through appeal, it similarly refused to grant a
stay on the set aside proceedings before the Calcutta High Court.
but granted White Industries the leave to appeal. Parallelly, the
enforcement proceedings that commenced at the Delhi High Court
were stayed by the Court, granting White Industries leave to revive
the proceeding on receipt of appropriate orders of either the
Supreme Court of India or the Calcutta High Court.

15 Sumeet Kachwaha, The White Industries Australia Limited – India Bit Award: A Critical
Assessment, 29(2) Arbitration International 912, 913 (2013).
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By 2008, the Special Leave Petition (SLP) reached the Supreme

Court of India, which was referred to a special bench constituted by
the Chief Justice of India. Constituting this bench took close to 3
years, as the Chief Justice of India believed that a Constitution
Bench would be better equipped to address the question of law
arising out of the dispute. It was at this time, in 2011, that White
Industries initiated arbitration proceedings against the Government
of India pursuant to the India-Australia BIT inter alia alleging denial
of justice and fair and equitable treatment. Denial of justice was
alleged owing to inordinate judicial delays in enforcing the award
against Coal India Limited within India. White Industries argued that
because of the judicial delays, India had failed to provide an
“e ective means of asserting claims and enforcing rights” to White
Industries and had thus “denied justice”.16 The tribunal found in
favour of White Industries, awarding them with compensation worth
USD 4.08 million as compensation on grounds that the Indian
government, through delays in its judicial system, had failed to
provide White with the ‘most e ective means’ to enforce its rights
(i.e. enforcement of the ICC arbitral award). This was done by
borrowing the protection standard from the India - Kuwait BIT, by
means of an MFN clause in the India - Australia BIT.

After this award, a plethora of foreign corporations initiated

ISDS against India, challenging various regulatory measures such
as the imposition of retrospective taxes17, cancellation of spectrum
licences18, and revocation of telecom licenses19. Thus, this case
served as a major turning point for India’s approach towards
investment arbitration from a policy standpoint. In light of the
adverse award in White Industries and the surge in investment
treaty claims, in 2015, India decided to revisit its BIT program. It
renegotiated its existing obligations with most countries by

16 4.3: Breach of Article 3(2) of the BIT, Award.

17 See, Vodafone v. India, UNCITRAL, Notice of Arbitration (not public) (17 Apr. 2014).
18 See, Deutsche Telekom v. India, ICSID Additional Facility, Notice of Arbitration (not public)

(02 Sept. 2013).

19 Tenoch Holdings Limited, Mr Maxim Naumchenko & Mr. Andre Poluektov v. The Republic of

India, PCA Case No. 2013-23.

ff
ff
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terminating existing BITs, and also released a new Model BIT (in
2016) which notably diluted substantive investment protection
available to foreign investors, such as the removal of the MFN
clause.20

3. Deutsche Telekom v. India

In 2007, Deutsche Telekom (a German foreign investor)

purchased 19.62% share in Devas Multimedia through a
Singaporean subsidiary. The dispute arose based on a 2008
contract entered into between Devas Multimedia and Antrix. The
latter is the commercial arm of the Indian Space Research
Organisation (ISRO), which contracted with Devas for leasing
transponders to provide broadband services to rural areas in India
through Indian satellites.

According to the agreed terms of the aforementioned contract,

Antrix’s responsibility was to lease 90% transponders to ISRO’s
satellites GSAT-6 and GSAT-6A. Back when the contract was
entered into, these satellites were only proposed satellites. No
work had taken place with respect to their construction. Devas, in
turn, was to pay Antrix a total of 300 million US dollars over the
next 12 years.21

20 Nicholas Peacock and Nihal Joseph, Mixed messages to investors as India quietly
terminates bilateral investment treaties with 58 countries, HSF Arbitration Notes,
available at <http://hsfnotes.com/arbitration/2017/03/16/mixed-messages-to-investors-
as-india-quietly-terminates-bilateral-investment-treaties-with-58-countries/> last
accessed 25 June 25 2020. For other impacts, see also Prabhash Ranjan, The White
Industries Arbitration: Implications for India’s Investment Treaty Programme 2(3)
Investment Treaty News 13-14 (April 2012); Manu Sanan, The White Industries Award:
Shades of Grey 13(4) J. World Investment and Trade 661 (2012); Patricia Nacimiento &
Sven Lange, White Industries Australia Limited v Republic of India, 27(2) ICSID Review
274-280 (2012).
21 CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited., and Telcom Devas
Mauritius Limited v. The Republic of India, PCA Case No. 2013-09; See generally, Antrix-
Devas case: Fifteen points to help you understand the deal, Firstpost, available at
<https://www. rstpost.com/business/antrix-devas-case- fteen-points-to-help-you-
understand-the-deal-2918312.html> last accessed 25 June 2020.
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By 2011, numerous news reports surfaced, alleging irregularities

between the terms of the contract, indicating possible favouritism
to Devas. Amidst such uncertainties, the Indian Cabinet Committee
decided to cancel the deal due to security concerns by invoking
the ‘force majeure’ clause in the contract.22 This led Deutsche
Telekom (through its subsidiary Devas) to le for an investment
arbitration proceeding under the India-Germany BIT in 2013,
claiming USD 1.6 billion in damages.

The tribunal found in favour of Deutsche Telekom, awarding

them USD 672 million in damages for violation of the ‘fair and
equitable treatment’ clause in the BIT. The jurisdictional objections
raised by India were rejected by the Swiss Federal Supreme Court,
which ruled in Deutsche Telekom’s favour.23 The tribunal, in May
2020, awarded $101 million plus interest in compensation to
Deutsche Telekom, which held 19 % shareholding in Devas.24

On the other hand, an allied development is a similar

investment arbitration proceeding initiated by Mauritian investors in
Devas before the Permanent Court of Arbitration (PCA),
administered by the UNCITRAL Arbitration Rules. The tribunal
found India to be in breach of unlawful expropriation and for
breach of the fair and equitable treatment clause under the India-
Mauritius BIT. Notably, India’s “essential security interests” defence
was also rejected. The Tribunal further found that the termination of
the contract amounted to an expropriation of the claimants’
investments in India and constituted a denial of FET. Thus, it ruled

22 Nishith Desai Associates, Investment Arbitration & India, available at <http://

www.nishithdesai.com/information/news-storage/news-details/article/investment-
arbitration-india-2019-year-in-review.html> last accessed 25 June 2020.
23 The judgment has been published in French. However, for an analysis of the same, please

see: Nicholas Peacock, Kritika Venugopal and Karan Talwar, Swiss Federal Tribunal
refuses to set aside the Deutsche Telekom v India Award, HSF Arbitration Notes,
(available at <https://hsfnotes.com/arbitration/2019/01/24/swiss-federal-tribunal-refuses-
to-set-aside-the-deutsche-telekom-v-india-award/> last accessed 25 July 2021.
24 Pushkar Anand, Antrix-Devas, BIT Arbitrations and India’s quixotic approach, The Wire (31

May 2021), available at <https://thewire.in/business/antrix-devas-bit-arbitrations-isro-

india-nclt> last accessed 12 June 2021.
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that India must compensate the claimants for 40% of the

investment that is not protected by India’s essential security
interests.25 After this, India challenged the award before the Hague
District Court, which upheld the award.26 Finally, the award on
quantum was rendered as recently as October 2020, which is
currently not public.27 It awarded $111.30 million plus interest in
compensation to the investors. Devas has filed an enforcement
petition before the District Court for the District of Columbia in
January 2021, which is likely to be challenged by India.28

As of May 2021, Devas’ winding up has been ordered by the

National Company Law Tribunal (NCLT) citing ‘corrupt functioning of
the organisation’, a move that may have possible consequences on
the enforcement of the awards in both cases and is being viewed
as an attempt to resist enforcement of the award. The NCLT is an
Indian quasi-judicial body (tribunal) in India that has been
constituted under the Indian Companies Act, 2013 to adjudicate
issues relating to Indian companies.

Being one of the rst cases against India in the aftermath of the
White Industries dispute, the importance of this dispute lies in the
fact that it was part of a series of repeated subsequent attempts by
foreign investors to challenge unfair Indian regulatory measures. It
serves as a case in point to reconsider the implications of policy

25 Gladwin Issac, PCA tribunal holds India liable for unlawful expropriation and FET
breach under India–Mauritius BIPA, Investment Treaty News, available at <https://
cf.iisd.net/itn/2018/10/17/pca-tribunal-holds-india-liable-for-unlawful-expropriation-
and-fet-breach-under-india-mauritius-bipa-gladwin-issac/
#:~:text=In%20a%20proceeding%20brought%20by,to%20a%20contract%20conclude
d%20between> last accessed June 25, 2020.
26 Judgment of the Hague District Court, available at <https://www.italaw.com/sites/default/
les/case-documents/italaw10801_1.pdf > last accessed 25 July 2021.
27 S e e , D e v a s v. I n d i a , ( P C A C a s e N o. 2 0 1 3 - 0 9 ) , a v a i l a b l e a t < h t t p s : / /
investmentpolicy.unctad.org/investment-dispute-settlement/cases/484/devas-v-india>
last accessed 25 July 2021.
28 Antrix-Devas case: India to question US court jurisdiction, The Hindu Business Line
(January 17, 2021) available at <https://www.thehindubusinessline.com/companies/antrix-
devas-case-india-to-question-us-court-jurisdiction/article33594384.ece> last accessed
25 July 2021.
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measures enacted (largely) for the bene t of locals. Additionally, a

foreign investor might likely be dissuaded by the extent to which
e orts at enforcement is being avoided by the government. In sum,
the picture painted is not pro-investment.

4. Khaitan Holdings Mauritius Limited v. India

The subject matter of dispute, in this case, arises from the 2-G
scam and the subsequent cancellation of licenses given to Loop
Telecom, an Indian company having investments of Mauritian
investor Khaitan Holdings. In 2008, Loop was awarded a 2G
license by the Government of India, which was later cancelled by
the Supreme Court in the renowned ‘2G Scam case’29 for
irregularities in the bidding process.30 At the same time, Khaitan
Holding acquired a roughly 27% stake in Loop. While Loop
requested a refund of license fees, the same was denied, leading
Khaitan Holdings to initiate investment arbitration proceedings
against India pursuant to the India-Mauritius BIT.31 This was
administered under the UNCITRAL Arbitration Rules and led in
2018, while the notice to arbitrate was served to India in early 2013.

However, India, in a move similar to that in the Vodafone

International Holdings BV v. Union of India, applied for an anti-
arbitration injunction before the Delhi High Court stating that since
Indian investors were the true “bene ciary shareholders,” and not
Khaitan, such proceedings cannot be commenced and must be
stopped. Denying such injunction, the Delhi High Court relied on
the Vodafone case and reiterated its observations on the scope of
the A&C Act, stating that while Indian Courts retained jurisdiction to
intervene in investment arbitration proceedings under Sections 20
(b) and (c) of the Civil Procedure Code, in lieu of the judgment in

29 Centre for Public Interest Litigation v. Union of India, AIR 2003 SC 3277.
30 Devidutta Tripathy, India court orders licences cancelled in telecom scandal, Reuters,
available at <https://www.reuters.com/article/us-india-telecoms/india-court-orders-
licenses-cancelled-in-telecom-scandal-idUSTRE8110NV20120202> last accessed 25
June 2020.
31 Khaitan Holdings Mauritius Limited v. India, PCA Case No. 2018-50.
ff
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Vodafone, such intervention is restricted only to the extent of

granting injunctions and not enforcing awards.32 Subsequently, the
tribunal was constituted in 2019 and the decision on merits is
pending.33

This case is particularly important in the context of enforcement

of investment arbitration awards in India.

5. Louis Dreyfus Armatures v. India

Louis Dreyfus Armatures, a French company, had invested in an

Indian company Haldia Bulk Terminals Private Limited. Haldia Bulk
Terminals was awarded a contract by the Calcutta Port Trust,
containing an arbitration clause that was invoked when disputes
arose between the parties.34 These problems formalised in 2012,
when Haldia Bulk Terminals terminated the contract citing
mounting losses, non-allocation of cargo and other factors like
declining law and order issues.

Simultaneously, Louis Dreyfus, being a foreign investor under

the India-France BIT, initiated investor-state arbitration against the
Union of India, State of West Bengal and the Port Trust. This was
administered under the UNCITRAL Arbitration Rules. It claimed that
India failed to protect its investment made in the project and led
for claims amounting to $36.15 million (₹260 crores). Speci cally, it
stated that treaty commitment to provide full protection and
security was absent.

32 Union of India v. Khaitan Holdings (Mauritius) Ltd. & Ors., 2019 SCC OnLine Del 6755, at
35.
33 See, Khaitan Holdings Mauritius Limited v. India, (PCA Case No. 2018-50), available at
<https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/553/khml-v-
india> last accessed 25 June 2021.
34 See, Nicholas Peacock and Jake Savile-Tucker, Tribunal awards India rst BIT case win,
dismissing claims of French investor, HSF Notes, available at <https://hsfnotes.com/
arbitration/2018/09/17/tribunal-awards-india- rst-bit-case-win-dismissing-claims-of-
french-investor/> last accessed 12 June 2021.
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The Calcutta Port Trust approached the Calcutta High Court

seeking an anti-arbitration injunction restraining Louis Dreyfus from
continuing with the arbitral proceedings initiated pursuant to the
India – France BIT.

Presuming that investment arbitrations come under the scope

of Section 44 of the A&C Act and that BITs constitute a valid
“arbitration agreement” for the purposes of Section 7, the High
Court granted an anti-arbitration injunction to Kolkata Port Trusts,
stating that the BIT was enforceable only against the Union of India
and not against other government bodies like the Port.35 It can be
stated that since thus judgment was rendered in the context of the
‘abuse of process’ doctrine, it was not anti-arbitration in nature and
also made reasonable attempts to acknowledge the arbitral
tribunal’s autonomy to decide on the merits of a dispute.36

Nevertheless, the first round of arbitration that commenced in

2015 ended in India’s favour,37 as the tribunal found that Louis
Dreyfus, lacking 51% investment in the Indian intermediary
company, did not qualify as an investor and hence lacked the
requisite jurisdiction to initiate the claim.38 However, it was given
time to reformulate its claim. During the second round of
proceedings, the UNCITRAL tribunal again upheld India’s
jurisdictional objection and dismissed its USD 36 million claim
against India. According to press releases available publicly, Louis

35 Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS, 2014 SCC OnLine
Cal 17695.
36 Bhushan Satish and Shreyas Jayasimha, Indian Courts’ First Brush with Investment Treaty

Arbitration: Taking Some Lessons from the Calcutta High Court, Kluwer Arbitration Blog,
available at <http://arbitrationblog.kluwerarbitration.com/2015/03/16/indian-courts- rst-
brush-with-investment-treaty-arbitration-taking-some-lessons-from-the-calcutta-high-
court/?doing_wp_cron=1592129029.4178979396820068359375> last accessed 25
June 2020.
37 India wins arbitration against French co. LDA, The Hindu Business Line (September 11,

2018), available at <https://www.thehindubusinessline.com/companies/india-wins-

arbitration-against-french-co-lda/article24928835.ece> last accessed 25 June 2020.
38 Louis Dreysfus Armateurs v. Republic of India, PCA Case No. 2014-26.
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Dreyfus was also instructed to pay approximately USD 7 million

towards India’s legal expenses.39

6. Vodafone Group v. India

Vodafone was a foreign entity that undertook the acquisition of

the Indian-based Hutchison Whampoa telecoms business to enter
the mobile service provider market in India in 2007. The
transaction, stated to be worth $11.206 billion, was approved by the
Indian government’s Foreign Investment Promotion Board on 7
May 2007. In 2012, the Indian income tax authorities led a case
against Vodafone for allegedly evading tax liability (capital gains
tax) with respect to this acquisition. The alleged amount was tax to
the tune of around Rs. 12000 crores.40 However, the Supreme
Court of India held in Vodafone’s favour, absolving them of any
liability to pay taxes.41 In order to e ectively nullify the impact of
this judgment, the legislature brought about retrospective changes
to the Indian Income Tax Act, 1962 to impute liability to Vodafone.

Thus, Vodafone initiated investment arbitration proceedings

against India challenging these discriminatory measures targeted
specifically to them, under the protection provisions of the India-
Netherlands BIT.42 After the constitution of the tribunal, the initial
India-appointed arbitrator vacated his seat, after which the
President of the Tribunal followed suit. While a replacement to the
India-appointed arbitrator was appointed, the new tribunal
members were unable to agree on a President that could be
appointed. Thus, Vodafone moved the Chief Justice of the ICJ for

39 Nicholas Peacock and Jake Savile-Tucker, Tribunal awards India rst BIT case win,
dismissing claims of French investor, HSF Notes, available at <https://hsfnotes.com/
arbitration/2018/09/17/tribunal-awards-india- rst-bit-case-win-dismissing-claims-of-
french-investor/> last accessed 12 June 2021.
40 Abir Dasgupta and Paranjoy Guha Thakurta, The Vodafone Tax Saga and India’s

Arbitration Worries, NewsClick, available at <https://www.newsclick.in/vodafone-tax-

saga-and-indias-arbitration-worries> last accessed 25 June 2020.
41 Vodafone International Holdings BV v. Union of India, [2012] 1 SCR, at 573, 778.

42 Vodafone Group v. India, PCA Case No, PCA Case No. 2016-35.
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this nomination.43 However, this was subsequently contested by

India on grounds that the nationality of the arbitrator appointed,
being the same as Vodafone Group’s origin, revealed a con ict of
interest. This plea was rejected and the arbitration commenced. In
the meantime, a subsequent proceeding was also initiated by
Vodafone Group PLC, the English parent company, under the India-
UK BIT citing similar facts and violations.44

At this time, India approached the Delhi High Court seeking an

anti-arbitration injunction to restrain Vodafone from continuing with
the second proceeding, it being an “abuse of process.” India
argued that this would amount to an abuse of process as two
di erent arbitrations on the same issue would amount to parallel
proceedings and inconsistent awards. The Delhi High Court held
that since investment awards were not based on a commercial
cause of action, they could not be included under the scope of
Section 44 of the A&C Act and were hence unenforceable.45
However, the Court rejected the claim that they did not have
jurisdiction to listen to claims arising out of BITs and BIPAs. It traced
the emergence of any BIT arbitration to public international law
principles and not private contracts. Hence, it found that no relief
can be sought under Section 45 of the A&C Act and that such
awards are unenforceable in India. In terms of relief, the Delhi High
Court initially granted an ex parte interim order restraining
arbitration under India-UK BIT. However, later, it passed another

43 See, President of ICJ Nominates Chair For Vodafone v. India Arbitration – and Then
Rejects India’s E ort To Disqualify The Nominee, available at <http://
www.iareporter.com/articles/president-of-icj-nominates-chair-for-vodafone-v-india-
arbitration-and-then-rejects-indias-e ort-to-disqualify-the-nominee/> last accessed 25
June 2021.
44 Danish Khan, Vodafone Group serves second notice on India to formally start 2nd
arbitration in tax case, Telecom Economic Times, available at <https://
telecom.economictimes.indiatimes.com/news/vodafone-group-serves-second-notice-on-
india-to-formally-start-2nd-arbitration-in-tax-case/58697253> last accessed 25 June
2020.
45 Union of India v. Vodafone Group PLC United Kingdom, 2018 SCC OnLine Del 8842, at
89-92.
ff
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nal judgment dismissing the plea seeking an anti-arbitration

injunction.46

In a unanimous decision of the PCA, the arbitral tribunal

constituted ruled in favour of Vodafone on the grounds that India’s
retrospective demand of capital gains and withholding tax violated
the “fair and equitable treatment” guaranteed under the
Netherlands-India BIT.47 According to the award, the government
needed to reimburse Vodafone 60 per cent of its legal costs and
half the cost borne by it for appointing an arbitrator on the panel.
Hence, the government’s liability in the case would have come to
around Rs 75 crore.48 The Indian government has currently
challenged the award before the Singapore High Court.49 However,
the entire exercise may prove to be redundant as the Indian
government nulli ed the retrospective tax law by legislative route
subject to the ful lment of the speci ed conditions.50

7. Nissan Motor Co. Ltd. v. India

Nissan Motors is a Japanese incorporated motor company. It

acquired a 70 per cent share in Renault Nissan Automotive India

46 Pushkar Anand, Vodafone v. India – End of a Saga?, The Wire, available at <https://
thewire.in/business/vodafone-india-end-of-a-saga-investment-treaty-arbitration> last
accessed 12 June 2021.
47 Kshama Loya and Vyapak Desai, Vodafone Investment Treaty Arbitration Award – Part I:

Implications of Vodafone arbitration award on rights of investors to claim under treaties,

available at <https://www.nishithdesai.com/information/news-storage/news-details/
article/vodafone-investment-treaty-arbitration-award-part-i.html> last accessed 12 June
2021.
48 Dilasha Seth, India challenges Vodafone arbitration award, plans the same in Cairn case,

Business Standard, available at <https://www.business-standard.com/article/companies/

india-challenges-vodafone-arbitration-award-plans-the-same-in-cairn-
case-120122401064_1.html> last accessed 12 June 2021.
49 Vodafone tax case: India les application in Singapore High Court against arbitration

panel verdict, Economic Times, available at <https://economictimes.indiatimes.com/

news/economy/policy/vodafone-tax-case-india- les-application-in-singapore-high-court-
against-arbitration-panel-verdict/articleshow/80752018.cms?from=mdr> last accessed 12
June 2021.
50 Taxation Laws (Amendment) Act, 2021.
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Private Limited, an India-based entity that built an industrial

automotive facility in Chennai, Tamil Nadu. Nissan invested 61
billion rupees to set up the car manufacturing plant, having an
annual production capacity of 480,000 vehicles and creating
nearly 40,000 jobs.51 For this, it signed an agreement with the
government of Tamil Nadu in 2008 according to which it was
promised incentives in nature of output VAT incentives and/or CST
Incentives, input VAT incentives and Capital Goods VAT Incentives
by the State government.52 However, the State did not pay these
dues to Nissan. Thus, they initiated investment arbitration
proceedings against India under the India-Japan Economic
Partnership Agreement, seeking USD 770 Million as compensation
for the unpaid incentives and damages due to delay. A tribunal was
constituted by the Permanent Court of Arbitration, seated in
Singapore. India raised numerous jurisdictional objections to the
case at the very beginning. All of these were rejected by the
Tribunal, and news reports indicate that the rst evidentiary hearing
was to occur in February 2020.53 The award on jurisdiction has
been challenged before the Singapore International Commercial
Court.

However, there is con rmed the news of a settlement that has

been reached between Nissan and the State of Tamil Nadu,
leading Nissan to withdraw its claims against India. The settlement
amount was roughly valued at around 14-18 billion rupees

51 Aditi Shah and Sudarshan Varadhan, Exclusive: Nissan settles dispute with Indian state
over unpaid dues – sources, Reuters, available at <https://www.reuters.com/article/us-
nissan-india-arbitration-exclusive/exclusive-nissan-settles-dispute-with-indian-state-over-
unpaid-dues-sources-idUSKBN2342AR> last accessed 25 June 2020.
52 Nishith Desai Associates, Investment Arbitration & India, available at <http://

www.nishithdesai.com/information/news-storage/news-details/article/investment-
arbitration-india-2019-year-in-review.html> last accessed 25June 2020.
53 Aditi Shah and Sudarshan Varadhan, Exclusive: Arbitration court rejects India's plea in

case against Nissan - sources, document, Reuters, available at <https://

www.reuters.com/article/us-nissan-india-arbitration-exclusive/exclusive-arbitration-court-
rejects-indias-plea-in-case-against-nissan-sources-document-idUSKCN1SZ0X8> last
accessed 25 June 2020.
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(equivalent to USD 185-238 million) against an amount in dispute of

some USD 660 million.54

B. Other Noteworthy Cases

Two Malaysian investors, part of the satellite-TV group Astro,

led investment arbitration proceedings against India. However, it
was later reported that these claims were withdrawn before the
hearing.55 In line with the claims for retrospective tax measures,
bilateral investment treaty arbitration was sought to be initiated by
Nokia against India (Nokia v. India), as Indian tax authorities issued
a tax notice for outing tax norms since 2006 while making royalty
payments to its Finnish parent company. The income tax department
was of the view that capital gains must be paid on such transaction
since the transfer occurred through an Indian permanent
establishment. Disputing the claim, the company initially filed a case
in the Delhi High Court seeking a stay on such payment, which was
granted.56 In the meantime, the company decided to initiate
investment arbitration proceedings under the India-Finland BIT.
However, the Indian government sought to resolve this through the
‘Mutual Agreement Procedure’ clause in the BIT, and the settled tax
amount was eventually paid by the company in March 2019.57

54 Aditi Shah and Sudarshan Varadhan, Exclusive: Nissan settles dispute with Indian state
over unpaid dues – sources, Reuters, available at <https://www.reuters.com/article/us-
nissan-india-arbitration-exclusive/exclusive-nissan-settles-dispute-with-indian-state-over-
unpaid-dues-sources-idUSKBN2342AR> last accessed 25 June 2020.
55 Cosmo Sanderson, Treaty claims against India withdrawn ahead of hearing, Global

Arbitration Review (June 16, 2019), available at <https://globalarbitrationreview.com/

article/1194127/treaty-claims-against-india-withdrawn-ahead-of-hearing> last accessed
June 25, 2020.
56 Delhi High court asks Nokia to give simple undertaking, no Rs 3,500 crore escrow

account deposit, available at <https://economictimes.indiatimes.com/industry/telecom/

delhi-high-court-asks-nokia-to-give-simple-undertaking-no-rs-3500-crore-escrow-
account-deposit/articleshow/29314601.cms?from=mdr> last accessed 12 June 2021.
57 Nokia says it paid 202 million euro to settle tax row with India, Economic Times, available

at <https://economictimes.indiatimes.com/tech/hardware/nokia-paid-202-million-euro-to-
settle-tax-row-with-india/articleshow/63942891.cms?from=mdr> last accessed 25 June
2020.
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In 2012, Korean Western Power Company Ltd. (KOWEPO), a

South Korean utility invested in India’s natural gas sector by
acquiring an approximately 40% stake in the Pioneer Gas Power
Plant in Maharashtra. Despite promising smooth functioning of the
plant, the Indian government did not allocate gas to them on time,
delaying the beginning of the operation. In addition to this, since
the government-operated Gas Authority of India (GAIL) did not
complete its pipeline on time, KOWEPO could not participate in the
government’s subsequent scheme for allocations.58

These factors led KOWEPO to issue a notice of arbitration to

India in 2018 under the India-South Korean BIT and the India –
Korea Comprehensive Economic Partnership Agreement (CEPA).59
While the notice is not public, the compensation claim is estimated
to be about USD 400 million. After issuance of the notice of
arbitration, an inter-ministerial group for exploring possible options
of settlement. The government of South Korea also reached out to
the Indian government to resolve the pending dispute.60

There are also reports that a tribunal constituted to adjudicate

the case of Maxim Naumchenko, Andrey Poluektov and Tenoch
Holdings Limited v. Republic of India61 (PCA administered case
under UNCITRAL Arbitration Rules) dismissed the claims of foreign
investors in entirety. The case reportedly dealt with the cancellation
of letters of intent in light of the telecommunication scam in India.

58 Cosmo Sanderson, Korean state entity launches claim against India, Global Arbitration
Review (10 December 2019), available at <https://singularitylegal.com/public/
GAR_Article2.pdf> last accessed 12 June 2021.
59 International Arbitration Newsletter – November 2018 (Asia-Paci c), Garrigues (19

November 2018), available at <https://www.garrigues.com/en_GB/new/international-

arbitration-newsletter-november-2018-regional-overview-asia-paci c> last accessed 14
June 2021).
60 Sarita Singh, Korean company starts arbitration against India, Economic Times, available at

<https://economictimes.indiatimes.com/industry/energy/power/korean-company-starts-
arbitration-against-india/articleshow/72449677.cms?from=mdr> last accessed 25 June 2020.
61 Maxim Naumchenko, Andrey Poluektov and Tenoch Holdings Limited v. Republic of India,

PCA Case No. 2013-23.

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India was believed to have invoked the “essential security

interests” defence for such an act.62

Another important and extremely recent case is Cairn Energy

PLC and Cairn UK Holdings Limited v. Republic of India.63 The
proceedings in this case also begun in the backdrop of income tax
proceedings. In October 2006, Cairn India Holdings Limited sold its
shares to Cairn India Limited in an internal group restructuring by
way of a share subscription and share purchase agreement and a
share purchase deed. Thus, shares constituting the entire issued
share capital of CIHL were transferred to CIL for consideration
partly in cash and partly in the form of shares of Cairn India
Limited.64 The Income Tax Department similarly issued a notice for
attracting capital gains, which was challenged by investors such as
Cairn and Vodafone (case discussed above). The Supreme Court
held in favour of the investors, but the legislature introduced a
subsequent retrospective amendment to the Income Tax Act to
impose taxes on such transactions. 65Aggrieved by these
measures, Cairn invoked investment arbitration in 2015 under the
India - UK BIT. The proceedings continued in the backdrop of
attempts by the income tax authorities to undertake
reassessment.66 The tribunal nally passed a verdict on 21

62 Ministry of Finance, BIT claims against India dismissed, Press Information Bureau,
available at <https://www.italaw.com/sites/default/ les/case-documents/italaw11106.pdf>
last accessed 25 June 2020.
63 Cairn Energy PLC and Cairn UK Holdings Limited v. The Republic of India, PCA Case No.

2016-07.
64 Kshama Loya, Moazzam Khan and Vyapak Desai, ‘Cairn v India – Investment Treaty

Arbitration’ available at <https://www.natlawreview.com/article/cairn-v-india-investment-

treaty-arbitration> last accessed June 12, 2021.
65 Retrospective taxation: India loses Cairn Energy arbitration case but goes after Vodafone,

Economic Times (24 December 2020), available at <https://

economictimes.indiatimes.com/news/economy/policy/retrospective-taxation-india-loses-
cairn-energy-arbitration-case-but-goes-after-vodafone/challenging-the-judgement/
slideshow/79941576.cms> last accessed 12 June 2021.
66 Arbitration Tribunal delays award in ₹10,247-cr Cairn retro tax case to mid-2020, The

Hindu Business Line, available at <https://www.thehindubusinessline.com/companies/

arbitration-tribunal-delays-award-in-10247-cr-cairn-retro-tax-case-to-mid-2020/
article29812914.ece> last accessed June 25, 2020.
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December 2020, wherein it held that India had failed to uphold its
obligations under the India-UK BIT and international law. The
Tribunal ordered India to compensate Cairn by paying them USD
1.2 billion plus interests and costs. Currently, India has led an
appeal in a Dutch court to challenge enforcement of the award but
also o ered to settle the dispute under the ‘Vivad se Vishwas’
direct tax dispute resolution scheme.67

As of June 2021, the following is a tabular representation of

India’s participation in investment arbitration cases:

Cases in which India is a Respondent State 26

Cases in which India is a home state of the 9
Claimant

C. Select Investment Arbitrations Initiated by Indian

Investors Against other Host States

One of the rst few cases launched by an Indian investor

abroad is Ashok Sancheti v. Germany, which appears to have been
settled or discontinued before a decision on liability was rendered
by the tribunal.68 The same investor also launched proceedings
under the India-United Kingdom BIT through Sancheti v. United
Kingdom. Largely, the claims arose out of the increase in the rent
price for the investor’s lease of a commercial space owned by the
city of London. However, the records of the arbitration were never
made public.69

67 Gireesh Chandra Prasad, India les appeal against Cairn arbitration award, LiveMint,
available at <https://www.livemint.com/companies/news/india- les-appeal-against-cairn-
arbitration-award-11616522417671.html> last accessed 12 June 2021.
68 See generally https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/
46/sancheti-v-germany.
69 See generally <https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/
234/sancheti-v-uk> last accessed 25 June 2020.
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Indian investor Khadamat Integrated Solutions Private Limited

has brought a claim against Saudi Arabia under the India-Saudi
Arabia BIT in early 2018.70 It has been reported that the dispute
concerns a large-scale development project in Saudi Arabia.71 The
Permanent Court of Arbitration administered the claim and a
tribunal was constituted under the UNCITRAL rules in September
2019. However, the case has been decided in favour of Saudi
Arabia.72

Another recent and renowned case lodged by an Indian

investor abroad is that in Flemingo Duty Free Shop v. Poland,
where the cause of dispute arose from the Polish Government’s
steps to ‘evict’ them from Chopin Airport without compensation.73
According to the Polish government, such concerns were
necessary for ‘modernisation’ of the airport. Flemingo Group had
purchased a stake in BH Travel, which owned duty free stores at
this airport, and was thus naturally a ected. In 2014, the Group
initiated arbitration in 2014 citing unlawful expropriation pursuant to
the India-Poland BIT. By 2016, the tribunal rendered its award in
favour of the Group, holding that Poland had expropriated
Flemingo DutyFree’s investment without compensation, thus
violating the fair and equitable treatment protection under the BIT.
Costs of over €20 million were also imposed on Poland. Around
the same time, another case Indian Metals & Ferro Alloys Ltd v.
Republic of Indonesia74 was led in Indonesia in the context of
overlaps between the claimants’ coal mining permits and those of
other companies, resulting in con icting rights to mine coal in the
same territory. However, all claims were dismissed on the merits.

70 Khadamat v. Saudi Arabia Khadamat Integrated Solutions Private Limited (India) v. The
Kingdom of Saudi Arabia (PCA Case No. 2019-24).
71 See generally <https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/

1021/khadamat-v-saudi-arabia> last accessed 25 June 2020.

72 See generally https://pca-cpa.org/en/cases/222/.

73 White & Case Wins Award for Indian Investor Against Poland, White & Case, available at

<https://www.whitecase.com/news/white-case-wins-award-indian-investor-against-
poland> last accessed 25 June 2020.
74 See generally <https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/

682/imfa-v-indonesia>.
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In Bosnia and Herzegovina, Indian investors Naveen Aggarwal

and Neete Gupta (owners of New Delhi-based chemicals company
Usha Industries) led a request for UNCITRAL arbitration under the
India-Bosnia 2006 BIT, seeking US $40 million for fraudulent
acquisition of their shares by the government in pursuance of
privatisation of a company by the name of Krajina osiguranje. While
it appears that the case was decided in favour of the State, further
details are not available.75

It was also reported that a case has been initiated against

Macedonia by an Indian investor couple, over alleged expropriation
in awarding a mining contract in Macedonia. This case goes by the
name of Binani v. Macedonia.76 Currently, the case has been
discontinued.77

D. Developments in India’s BITs and Foreign

Investment Law

1. The signing of the India-Brazil BIT78

India and Brazil recently signed a BIT as part of a strategic

partnership by both countries to develop commercial and cultural
relations.79 Scholars have noted that this BIT draws more
similarities to the Brazilian Model BIT as compared to the Indian

75 See generally <https://investmentpolicy.unctad.org/investment-dispute-settlement/

country/96/india/investor>.
76 Nicholas Peacock, Kritika Venugopal and Nihal Joseph, Recent Developments in India-
Related Treaty Arbitration, HSF Arbitration Notes, available at <https://hsfnotes.com/
arbitration/2019/11/08/recent-developments-in-india-related-investment-treaty-
arbitration/> last accessed 25 June 2020.
77 See generally <https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/
946/binani-v-north-macedonia>.
78 Henrique Choer Moraes and Pedro Mendonça Cavalcante, The Brazil-India Investment
Cooperation and Facilitation Treaty: Giving Concrete Meaning to the !Right to Regulate"
in Investment Treaty-Making, ICSID Rev. (forthcoming).
79 David Matthews, India-Brazil BIT: A Step in the Right Direction, The Arbitration Brief,
available at <https://thearbitrationbrief.com/2020/04/12/india-brazil-bit-a-step-in-the-
right-direction/> last accessed 25 June 2020.
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Model BIT. It is also evident that this BIT gives precedence to the
right of States to regulate foreign investments.

Some of the interesting features of this BIT include:

a. De nition of Investment

The India Brazil BIT adopts an enterprise-based approach to

de ne ‘investment’ and recognizes both tangible and intangible
investments. The enterprise-based de nition of investment
comprises a comprehensive list of asset inclusion, exclusion and
characteristics to identify an investment.

b. Expropriation

Unlike the India Model BIT 2016, the India Brazil BIT accords
protection to foreign investments only against direct expropriation
and not indirect expropriation. The India Model BIT expressly
recognises indirect expropriation and stipulates that “indirect
expropriation occurs if a measure or series of measures of a Party
has an e ect equivalent to direct expropriation, in that it
substantially or permanently deprives the investor of the
fundamental attributes of property in its investment, including the
right to use, enjoy and dispose of its investment, without formal
transfer of title or outright seizure.” However, Article 6.3 of the
India Brazil BIT, which is in accordance with the Brazil Model
BIT, states:
For greater certainty, this treaty only covers direct
expropriation, which occurs when an investment is nationalised or
otherwise directly expropriated through a formal transfer of title or
outright seizure.

c. Dispute Prevention and Settlement

The India-Model BIT provides for a signi cantly di erent

mechanism to resolve investment disputes. Though the India
Model BIT 2016 provides for Investor-State Dispute Settlement
(ISDS), the India Brail BIT provides for state-to-state arbitration and
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there is no provision of ISDS. The state-to-state dispute settlement

mechanism is consistent with the Brazil Model BIT.

Article 13 of the India Brazil BIT states that a joint committee

shall be established for the administration of the treaty and it shall
include government representatives of both states. One of the
functions of this joint committee is to resolve disputes concerning
investments of investors in an amicable manner. Article 18, which
provides for a dispute prevention procedure, stipulates that:

if a party considers that a speci c measure adopted by the

other party constitutes a breach of this treaty, the party may
initiate dispute prevention procedure within the Joint Committee.

If the joint committee fails to resolve the dispute, a party may

initiate state to state arbitration in accordance with article 19 of the
investment treaty. It is pertinent to note that the ad hoc tribunal
constituted under article 19 is not empowered to award
compensation.

2. New foreign investment protection law by Finance

Ministry

In January 2020, numerous Indian80 and international81

newspapers reported that the Indian Finance Ministry has
proposed a 40-page draft (not public) that is rumoured to have
recommended mediation and the establishment of special fast-
track courts. This has been done for boosting foreign investor
con dence in India, especially since most BITs have been
terminated and/or reinterpreted. Recently, a large number of Indian

80 Kshama A Loya and Moazzam Khan, View: Balancing state regulation & investor rights,
<https://economictimes.indiatimes.com/markets/stocks/news/view-balancing-state-
regulation-investor-rights/articleshow/73792172.cms?from=mdr> last accessed June 25
2020.
81 Aditi Shah and Aftab Ahmed, Exclusive: India plans new law to protect foreign investment
– sources, Nasdaq, <https://www.nasdaq.com/articles/exclusive-india-plans-new-law-to-
protect-foreign-investment-sources-2020-01-15-2> last accessed June 25 2020.
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states have also defaulted in contract enforcement, causing

additional woe to investors. 82Alternatively, the draft is also
believed to make a suggestion to consider vesting jurisdiction for
such disputes with the NCLT.

The draft was aimed at creating a domestic regime similar to

BIT-based investment protection for foreign investments, as it is
believed that India is in dire need of infusion of capital in the
economy through investment.83 However, there are no con rmed
reports on the contents of this draft proposal. More clarity in this
regard is awaited.

3. Imposition of stricter FDI norms

The economic e ects of the pandemic have led to India revising

its foreign direct investment policy. This has been done to prevent
opportunistic takeovers and/or acquisitions of Indian companies
during the pandemic.84 Under this new FDI Policy, amended
through a Press Note, mandatory prior government approval has
now become a prerequisite for foreign investments in the form of
direct or indirect acquisition or transfer of an Indian company,
where the acquirer or bene cial owner of such investment is based
out of a country which “shares land borders with India”.85

82 Govt plans new law to protect foreign investment; draft proposal aims at di using investor
mistrust on agreements, Firstpost <https://www. rstpost.com/business/govt-plans-new-
law-to-protect-foreign-investment-draft-proposal-aims-at-di using-investor-mistrust-on-
agreements-7910681.html> last accessed June 25 2020.
83 Rajeev Jayasmal, Long-awaited FDI protection provision expected in Budget, Hindustan

Times <https://www.hindustantimes.com/india-news/long-awaited-fdi-protection-
provision-expected-in-budget/story-0V3o1e6SvvfS8ZcPyAUAIL.html> last accessed June
25 2020.
84 India Introduces Stricter FDI Rules for Foreign Investment From China And Other Border

Countries, Mondaq, <<https://www.mondaq.com/india/inward-foreign-investment/

926764/india-introduces-stricter-fdi-rules-for-foreign-investment-from-china-and-other-
border-countries> last accessed 25 June 2020.
85 For the Press Note No. 3 of 2020, see generally <https://dipp.gov.in/sites/default/ les/

pn3_2020.pdf>
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Furthermore, the number of countries whose investors will have to

seek government approvals have also been increased.

While it is believed that this move has come to ensure that

Chinese investors do not take advantage of the pandemic to buy a
large stake in Indian companies,86 the same cannot be conclusively
said as there is no o cial comment from the government about
this.

4. FDI in the insurance sector

In the 2021 budget, the Indian Finance Minister announced that

FDI in insurance companies would be permitted up to 74% as
against the existing cap of 49%. Conditions for eligibility and
compliances were also introduced through the subsequent
Insurance (Amendment) Act, 2021 e ective from 1 April 2021.87

5. India and EU to resume negotiations on the India-EU

Bilateral Trade and Investment Agreement (BTIA)

Negotiations on the India-EU BTIA began in 2007 but were

suspended in 2013 after 16 rounds of negotiation and little
progress.88 However recently, in the rst India-EU leaders’ meeting
held virtually in May, the two parties agreed to resume talks
separately on trade, investment and geographical indications (GIs)
that earlier formed a part of BTIA negotiations. A joint statement of
intent was also released subsequently by both sides. It appears
that the idea is to negotiate three separate deals on each of these

86 Saibal Dasgupta, New FDI policy: Can India manage to stem Chinese predatory trade
practices? Economic Times, available at <https://economictimes.indiatimes.com/news/
economy/policy/new-fdi-policy-can-india-manage-to-stem-chinese-predatory-trade-
practices/articleshow/75361718.cms?from=mdr> last accessed 25 June 2020.
87 Insurance (Amendment) Bill, 2021, available at https://prsindia.org/ les/bill_track/
2015-03-15/The%20Insurance%20(Amendment)%20Bill,%202021.pdf.
88 Asit Ranjan Mishra, India, EU see tricky restart to FTA talks, LiveMint, available at <https://
w w w. l i v e m i n t .c o m / n e w s / w o r l d / i n d i a - e u - s e e - t r i c k y - r e s t a r t - t o - f t a -
talks-11620409702854.html> last accessed 13 June 2021.
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considerations.89 Furthermore, India intends to resume similar

negotiations with the United Kingdom as well.90 In this regard, the
UK has already begun a 14-week public consultation process
seeking views from businesses and key stakeholders.91

6. Canada-India Foreign Investment Promotion and

Protection Agreement negotiations

Canada and India have been in negotiations to nalise a

Foreign Investment Promotion and Protection Agreement (FIPA).
The negotiations commenced in September 2008 and 10
negotiation rounds have taken place till date. A virtual bilateral
meeting was held in June 2020 between the Chief Negotiators
from both countries. After this, another meeting occurred in
October 2020 to explore the possibility of an interim agreement. In
this regard, India shared a ‘scoping paper’ with Canada, which was
discussed in November 2020 virtually.

89 Asit Ranjan Mishra, EU may gain from negotiating separate trade and investment pacts
with India, India Brie ng <https://www.livemint.com/news/india/eu-may-gain-from-
negotiating-separate-trade-and-investment-pacts-with-india-11620590461896.html> last
accessed 13 June 2021.
90 Asit Ranjan Mishra, India to begin FTA negotiations with EU and UK by year end, LiveMint,

available at https://www.livemint.com/news/world/india-to-begin-fta-negotiations-with-
eu-and-uk-by-yearend-11622729132316.html (last visited 13 June 2021).
91 Melissa Cyrill, UK Initiates Public Consultation Process to Prepare for Trade Negotiations

with India, India Brie ng, available at <https://www.india-brie ng.com/news/uk-initiates-

public-consultation-process-to-prepare-for-trade-negotiations-with-india-22321.html/>
last accessed 13 June 2021.
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CHAPTER 5
ENFORCEMENT OF INVESTMENT
ARBITRATION AWARD
A stable legal system is an important concern for foreign
investors.1 Of this, an important consideration is the presence of a
domestic mechanism that permits the enforcement of investment
arbitration awards through local Indian courts. For foreign investors
having a favourable award against India, a domestic enforcement
mechanism is most preferred because it allows them to pursue
domestic assets located within the territory of the Host State itself.
In the event that this is not possible, foreign investors have to go
through the painful procedure of locating foreign assets of the Host
State and pursue enforcement in those local courts.2 Additionally,
having a domestic enforcement mechanism provides a policy
assurance to investors that the State will be more receptive
towards enforcement and not refuse its obligations under the
award, and goes a long way towards demonstrating the
seriousness of the Host State’s commitments to investment
protection. Currently, there is no law in India that expressly governs
investment arbitration, as a result of which the enforcement of an
investment treaty arbitral award becomes a dilemma. The Indian

1 Daksha Baxi, Radhika Dubey and Sanskriti Sidana, BIT arbitration awards: Enforcement
regime in India, Bar and Bench, available at <https://www.barandbench.com/columns/
bit-arbitration-awards-enforcement-regime-in-india> last accessed 20 May 2021.
2 Michael S. Kim, Pursuing Protected Assets of Sovereign Award Debtors, available at

<https://www.arbitration-ch.org/asset/ecb76fc ca5ebaf61bec65b973525/article-
michael-kim-pursuing-protected-assets-of-sovereign-award-debtors.pdf> last accessed
27 March 2021.
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A&C Act does not prima facie appear to be equipped with

addressing any issues arising out of investment arbitration.3

Furthermore, the implementation of a separate law governing

investment arbitration would ipso facto not be enough if no
systematic enforcement mechanism is in place. The non-existence
of any mechanism in India to enforce an investment arbitration
award may also itself be contended to lead be a breach of
obligations under the BIT between States.

The enforceability of investment awards has become a widely

discussed topic among Indian academicians, researchers and
scholars.4 While India has terminated most of its investment
treaties,5 the sunset clauses present within most of these treaties

3 See generally, Part II, Arbitration and Conciliation Act. Section 44 states that “In this
Chapter, unless the context otherwise requires, “foreign award” means an arbitral award
on di erences between persons arising out of legal relationships, whether contractual or
not, considered as commercial under the law in force in India…” (emphasis supplied).
4 See for example, Kshama A Loya & Moazzam Khan, Enforcement of BIT Awards at Bay in
India as the Courts Rule Out the Applicability of the Arbitration and Conciliation Act
1996, Asian Dispute Review available at <http://www.nishithdesai.com/ leadmin/
user_upload/pdfs/NDA%20In%20The%20Media/News%20Articles/
200122_A_Asian_Dispute_Review_Jan_2020.pdf> last accessed 20 May 2021; Sahil
Tagotra & Ishita Mishra, Recent Developments in the Enforcement of New York
Convention Awards in India Kluwer Arbitration Blog, available at <http://
arbitrationblog.kluwerarbitration.com/2020/07/06/recent-developments-in-the-
enforcement-of-new-york-convention-awards-in-india/?
doing_wp_cron=1594011608.7542729377746582031250&print=print> last accessed 21
May 2021; Prabhash Ranjan & Deepak Raju, The enigma of enforceability of investment
arbitration awards in India, Asian Journal of Comparative Law (2011); Prabhash Ranjan &
Pushkar Anand, Indian Courts and Bilateral Investment Treaty Arbitration, 4 Indian L.
Rev. 1, 15 (forthcoming 2020); Pratyush Miglani, Nikhil Varma & Prakhar Srivastava, BIT
Arbitral Awards Virtually Non-Enforceable in India: Does the Delhi High Court Need
Course Correction, SCC Online, available at <https://www.scconline.com/blog/post/
2021/04/10/arbitral-awards-2/> (last visited May 20, 2021); Siddharth S. Aatreya, Can
investment arbitral awards be enforced in India?, Kluwer Arbitration Blog available at
<http://arbitrationblog.kluwerarbitration.com/2019/04/04/can-investment-arbitral-awards-
be-enforced-in-india/> last accessed 21 May 2021.
5 See generally <https://investmentpolicy.unctad.org/international-investment-agreements/
countries/96/india>.
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continue to protect existing investments as of the date of

termination.6 In e ect, this would mean that such foreign investors
would continue to have a valid claim under the erstwhile BIT and
hence the enforcement of any favourable awards in Indian courts is
a key concern for them.

A. Understanding the conundrum

Part II of the A&C Act deals with recognition and enforcement of

foreign awards in India and is based on the principles of the New
York Convention, making it most relevant for this situation. The
wordings of Section 44, which broadly lays down the scope and
applicability of Part II, speci cally provides that a foreign award
must be “considered as commercial under the law in force in India”
to be enforced under the A&C Act.7 For investment arbitration
awards to be enforced in India, they need to be considered
‘commercial' not just by virtue of the New York Convention, but by
virtue of other legal principles, guidelines or laws of India. This
requirement re ects India’s ‘commercial reservation’ to Article 1(3)
of the New York Convention, by virtue of which Indian courts are to
determine the commerciality of transactions under existing Indian
law prior to determining whether awards arising out of these
transactions are enforceable.8 The problem is exacerbated by the
fact that the word “commercial” is not de ned under the A&C Act.
The absence of any interpretative mechanism within the A&C Act
itself means that reference to both itself and foreign jurisprudence,

6 See generally Nicholas Peacock & Nihal Joseph, Mixed messages to investors as India
quietly terminates bilateral investment treaties with 58 countries, Herbert Smith Freehills
Notes, available at <https://hsfnotes.com/publicinternationallaw/2017/03/16/mixed-
messages-to-investors-as-india-quietly-terminates-bilateral-investment-treaties-with-58-
countries/> last accessed 19 May 2021.
7 Section 44, Arbitration & Conciliation Act, 1996.

8 European Grain and Shipping Ltd. v. Bombay Extractions Ltd., AIR 1983 Bom 36, ¶ 17 (1982)

(India). See generally United Nations Comm'n on International Trade Law, UNCITRAL
Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, art I (2016), available at <https://newyorkconvention1958.org/pdf/
guide/2016_Guide_on_the_NY_Convention.pdf> last accessed 2 April 2020.
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two key sources of interpretation for Indian courts when dealing

with arbitration law, become unavailable.

This would not have been a problem by itself if India was a

signatory to the ICSID Convention. The ICSID Convention is a self-
contained regime for enforcing investment arbitration awards.
Section 6 of the Convention lays down an elaborate mechanism for
the enforcement of arbitral awards in national courts. For instance,
Article 54(1) provides nality and bindingness to investment
arbitration awards. Article 53 states that parties will not be
permitted to appeals or remedies apart from those speci ed in the
ICSID Convention, which means that there is complete immunity to
such awards from challenge in domestic courts. There is also
another safeguard for foreign investors seeking enforcement.
While ICSID itself has no formal role in the recognition and
enforcement of an award, if a party informs ICSID of the other
party’s non-compliance, ICSID generally contacts the non-
complying party to request information on the steps that party has
taken, or will take, to comply with the award.9

However, since India is not a party to the ICSID Convention,

majority arbitrations are likely to be administered under the ad hoc
UNCITRAL Arbitration Rules or the ICSID Additional Facility Rules,
which do not provide the same protection to investment arbitration
awards.10 Additionally, since Part II of the A&C Act recognises
‘public policy’ as a scope of challenge of foreign awards (much in
line with the New York Convention), even if investment arbitrations
are hypothetically recognised as enforceable under Indian law, the
scope for judicial interference is much higher in cases where India
is the seat of the arbitration.

9 See generally, International Centre for Settlement of Investment Disputes, Process of

Recognition and Enforcement, available at <https://icsid.worldbank.org/services/
arbitration/convention/process/recognition-enforcement> last accessed 19 May 2021.
10 See generally Giammarco Rao, ICSID and non-ICSID awards, Jus Mundi, available at

<https://jusmundi.com/en/document/wiki/en-icsid-and-non-icsid-awards> last visited 21

May 2021.
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It is for this reason that it is key for the Indian regime to

domestically recognise and permit enforcement of investment
arbitration awards. Owing to the array of public and State
sovereignty related considerations involved in such disputes, there
appears to be a conundrum as to whether these disputes and their
resulting awards, are indeed ‘commercial’ as per Indian law. This is
further complicated by the fact that the parties to an investment
arbitration involve a private investor and a Sovereign State,
indicating that the causes of dispute and implications of any ruling
on the dispute are likely to have e ects on third parties that are not
present within the dispute itself.

B. Analysing the current Indian scenario

When interpreting the word ‘commercial’ under Section 44, let

us rst examine jurisprudence generally laid down by Indian courts
in this respect. An overview of di erent cases suggests that there
exists a disparity between di erent Indian courts about the
understanding of the term itself. One of the earlier cases in this
respect was R.M. Investments & Trading Co. Pvt. Ltd. v. Boeing
Co.,11 before the Supreme Court, where the Court had to determine
whether a dispute arising out of an investment consultancy service
contract between the parties was a commercial transaction.12 This
was a case under the Foreign Awards (Recognition & Enforcement)
Act, 1961, which was the enforcement regime that existed prior to
the A&C Act.

The Court referred to the intent of Section 2 of the erstwhile

Act, noting that this was done to facilitate and promote
international trade. Therefore, while answering in the a rmative,
the Court went on to de ne the term, stating that:

11 R.M. Investments & Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC 1136.
12 Nishith Desai Associates, International Commercial Arbitration; Law and Recent
Developments in India, available at <https://www.nishithdesai.com/ leadmin/
user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf> last
accessed 27 August 2021.
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The expression ‘commercial’ should, therefore, be construed

broadly having regard to the manifold activities which are integral
part of international trade today.13

The aforementioned interpretation is extremely wide and can

easily be argued to encompass investment arbitration awards since
the very presence of foreign investment is integral to international
trade. However, the problem arose through the subsequent ruling
of the Gujarat High Court in Union of India v. Lief Hoegh & Co.
(Norway), wherein it was held that the term ‘commerce’

is a word of the largest import and takes in its sweep all the
businesses and trade transactions in any of their forms, including
the transportation, purchase, sale and exchange of commodities
between the citizens of di erent countries.14

Although the underlying idea of the term remains the same, the
scope is narrowed down only to transactions between individuals.
This poses a major challenge to investment arbitrations involving
the sovereign state of India, which are to be enforced within India.

Other relationships that have been considered ‘commercial’ in

India include a charter party agreement,15 a catering contract,16 a
contract for shipment of goods,17 an employment contract of the
Chief Executive O cer,18 and an agreement for the division of
property and businesses.19 On at least one occasion20, a contract

13 R.M. Investments & Trading Co. Pvt. Ltd. v. Boeing Co., AIR 1994 SC 1136 at ¶12.
14 Union of India v. Lief Hoegh & Co. (Norway), Vol. IX (1984) Y.B. Com. Arb. 405, ¶6.
15 Swiss Singapore Overseas Enters. Pvt. Ltd. v. M/V African Trader, Civil Application No. 23

of 2005, ¶35.
16 Bharat Catering Corp. v. Indian Railway Catering & Tourism Corp. Ltd., (2009) 162 DLT 219,

¶5.
17 European Grain & Shipping Ltd. v. Bombay Extractions Ltd., AIR 1983 Bom 36.

18 Comed Chemicals Ltd. v. C.N. Ramachand, (2009) 1 SCC 91 at ¶33.

19 Harendra H. Mehta, et al. v. Mukesh H. Mehta, et al., 1999 (3) SCR 562.

20 Kamani Engg. Corp. Ltd. v. Societe De Traction Et D’Electricite Societe Anonyme, AIR 1965

Bom 114, ¶19.

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of technical assistance was not considered ‘commercial’ because

no consideration of it being ‘commercial' was at issue.

An overall review of these cases reveals the reluctance of

Indian courts to enlarge the meaning of the term ‘commercial’ to
include transactions beyond private party contracts whose remedy
for breach is also necessarily monetary. Therefore, it appears that
the nature of the ‘legal relationship’ is to be determined by the
nature of the ‘transaction', which traces its nature from the type of
and parties to the contract/instrument from which the dispute
emerges. Another implied requirement is that the subject matter of
the contract must ideally involve the existence of a tangible good
or service and must not be based on services.

It appears that similar questions have reached courts when

dealing with enforcement of investment arbitration awards under
the A&C Act itself. The rst case in this respect is the Board of
Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS and
Ors., which dealt with problems arising out of a contract concerning
the Kolkata Port Trust.21 The High Court delivered a pro-arbitration
judgment, insofar as it presumed that investment arbitrations come
under the scope of Section 44 of the A&C Act and held that BITs
constitute a valid “arbitration agreement” for the purposes of
Section 7.

The same stance, however, did not re ect in subsequent

judgments of the Delhi High Court. Through its two judgements in
Union of India v. Vodafone Group PLC United Kingdom (arising out
of the contentious proceedings between Vodafone India and the
income tax authorities about charging capital gains taxes)22 and
Union of India v. Khaitan Holdings (Mauritius) Ltd. & Ors. (arising
out of cancellation of licenses in the aftermath of the 2G scam),23

21 The Board of Trustees of the Port of Kolkata v. Louis Dreyfus Armatures SAS and Ors, 2014
SCC OnLine Cal 17695. Refer to chapter 4, pt 5 for further explanation.
22 Union of India v. Vodafone Group PLC United Kingdom, 2018 SCC OnLine Del 8842. Refer

to chapter 4, pt 6 for further explanation.

23 Union of India v. Khaitan Holdings (Mauritius) Ltd. & Ors., 2019 SCC OnLine Del 6755.
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the Court refused to acknowledge that investment arbitration

awards are ‘commercial’.

In both these cases, the Court made common points to the

e ect that since investment awards are not based on a commercial
cause of action and hence fall outside the scope of Section 44 of
the A&C Act. Additionally, there exist certain fundamental
di erences between investment treaty and commercial arbitration,
as the former is based on violations resulting from general
principles of public international law and international
administrative law. Khaitan Holdings further broadened the scope
of judicial interference in investment arbitration awards, by holding
that Indian Courts retained limited jurisdiction to intervene in
investment arbitration proceedings under Sections 20 (b) and (c) of
the Civil Procedure Code (CPC). In the absence of a conclusive
ruling by the Supreme Court of India on a direct question
pertaining to the enforcement of investment arbitration awards,
reference to these con icting High Court judgments is not of much
avail.

Thus, it is necessary to refer to other Indian legislations or

instruments that may be useful to address this apparent anomaly.

C. Looking beyond the A&C Act

Literature on this topic argues that the very act of foreign

investment is based entirely on a commercial relationship between
the State and the foreign investor, insofar as the investor seeks to
derive some form of commercial returns from the investment
itself.24 Therefore, any award addressing the dispute based on this

24 Prabhash Ranjan & Pushkar Anand, Indian Courts and Bilateral Investment Treaty
Arbitration, Indian L. Rev. (forthcoming); See also N. Jansen Calamita, UNCITRAL
Working Group III Debate: Enforceability of awards by an appellate mechanism or an
investment court under the ICSID and New York Conventions, Investment Treaty News,
available at <https://cf.iisd.net/itn/2020/03/10/uncitral-working-group-iii-debate-
enforceability-of-awards-by-an-appellate-mechanism-or-an-investment-court-under-the-
icsid-and-new-york-conventions-jansen-calamita/#_ftn14> last accessed 27 August 2021.
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commercial relationship becomes commercial by itself. It can also

be argued that since Section 44 itself envisages ‘legal
relationships’ that are ‘commercial’ even if they are not
‘contractual’, an investment arbitration award will be enforceable in
India as the underlying relationship is established with a
commercial advantage in mind for both parties.

In addition, reference to Section 2(c) of the Commercial Courts

Act, 2015 is important as it provides an exhaustive de nition of
“commercial disputes”, making it the starting point for any
examination in this respect. While the de nition is exhaustive and
lists various transactions/contractual arrangements, Section 2(c)
(xxii) speci cally states that any other transaction that may be so
considered needs to be expressly noti ed by the Central
Government.25 This means that the de nition is likely intended to
be wide and expand with time. A cue is found within the second
Explanation to Section 2(1)(c), which states that merely because
one of the contracting parties is the State does not mean that a
commercial dispute will cease to be one. Thus, it appears that a
‘commercial dispute' can accrue between a State and a private
investor. This overcomes the challenges posed by the Gujarat High
Court’s interpretation in Union of India v. Lief Hoegh & Co.
(Norway).

Article 27 of the Indian Model BIT is also a useful indicator of

legislative intent. Clause 5 of Article 27 considers any claim
submitted to arbitration under this article to be of a ‘commercial
nature’ for the purpose of the New York Convention.26 A simple
understanding of this would mean that India’s Model BIT includes
investment treaty arbitration under the umbrella of commercial in
nature. However, this being within the Model BIT would still not
address major concerns pertaining to enforcement because (i) it

25 The Commercial Courts Act, No. 04, § 2(c)(xxii), India Code (2015).
26 Model Text for the Indian Bilateral Investment Treaty 2016, Finality and enforcement of
awards - Article 27.5 “A claim that is submitted to arbitration under this Article shall be
considered to arise out of a commercial relationship or transaction for purposes of
Article I of the New York Convention.”
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solely provides a background of how India wishes to negotiate

treaties with other countries; (ii) it is not ‘law in force’ in India for the
purposes of Section 44 and would require to be so adopted by
Courts or express legislative amendment to meet the criteria; and
(iii) there remains an ambiguity on the manner of interpretation of
BITs that were NOT modelled on the 2016 Model BIT/were
released prior to it.

Therefore, there is a chance that Indian courts will interpret the

term ‘commercial’ in a broad manner because that seems to be the
approach of both the Indian judiciary and the legislature. If this
happens, investment treaty awards may be enforceable in India
under the New York Convention, which is incorporated under Part II
of the A&C Act. That being said, it remains to be seen whether
courts will examine and pay heed to their narrow interpretation of
the word ‘commercial’ and to what extent this can serve as a
counter-argument to the enforcement of investment arbitration
awards in India. There are various important considerations that the
Court must decide upon as well to ensure that there is proper
clarity:

- The scope of the challenge of investment arbitration awards

(whether this should be at par with the ICSID Convention or permit

-
a wider range of challenges, as the New York Convention permits)
The fate of awards rendered under treaties prior to the

-
release of the 2016 Model BIT
The scope of ‘commercial’ in the context of the A&C Act.

To conclude, Investment protection is a paramount

consideration for foreign investors looking to invest in countries,
and for Host States themselves to attract much-needed funding.
The basis of such claims is a BIT signed between the Host State
and the country of the foreign investor’s nationality. Investment
arbitration is a mode of dispute resolution of claims made based on
BITs. Thus, despite its shortcomings, it is particularly bene cial for
developing countries like India.
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That being said, India’s tryst with ISDS is akin to a mixed bag.
Our policy approach to the system has undergone a drastic change
across the past 30 years. Beginning with an ambitious start in the
post-1991 reforms era, India currently nds itself renegotiating and
terminating existing BIT obligations. Whilst our former aim was to
provide protection to foreign investors to increase credibility in the
market, India has recently come to realise the importance of
balancing such protections with its own right to regulate internal
a airs, a power challenged frequently before arbitral tribunals by
foreign investors. It is widely believed that India’s approach to
investment protection changed as a result of its experience in the
Dabhol Power Project case, White Industries Case and Vodafone
case. Dabhol revealed the negative e ects of changing political
control on investors, White Industries exposed the government to
the problems associated with the Indian judicial system, and the
Vodafone case challenged the sovereign right to regulate entirely.
These cases made India realise the importance of giving its
sovereign rights supremacy in the arbitral process.

The 2016 Model BIT is a re ection of India’s attempt towards

formalising this balance through its future negotiations with other
countries, re ective of a rather protectionist stance. Since India has
signed only four new BITs since the release of the 2016 Model
Treaty, it remains to be seen whether other states, speci cally
capital-exporting in nature, would be ready to agree to such terms.

That being said, investment arbitration is most likely to pick up

in India, since the sunset clauses in most existing BITs have already
led to a large number of claims by foreign investors. Sunset
clauses stipulate that all investments made prior to the termination
of the relevant investment treaty continue to be protected by a
speci c period of time. For instance, India-Slovenia BIT provides
that investments are protected for a period of 10 years from the
termination of the treaty.

Furthermore, considering India’s policy considerations to

increase the ease of doing business, it cannot shy away from
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entering into newer investment protection agreements. Even at an

international level, cross-border investment arbitration is an
exciting career choice for anyone wishing to practice in the EU,
USA, etc. There are a variety of career options, in India and abroad,
which can be tapped at this time to create a name in a niche area
of law. Since there do not currently exist many Indian authorities
(academicians and practitioners) within investment arbitration, now
is a good time to tap any opportunities in this eld. Within the EU,
with negotiations for treaties underway, there are exciting policy,
research and advocacy opportunities. There is also a need for
cutting-edge research in this eld to balance India’s recently
adopted nationalist objectives with its desire to become an FDI
superpower through the correct drafting of newer treaties.
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CHAPTER 6
REFORMS IN INVESTMENT
ARBITRATION
Investment arbitration is generally acknowledged to host
multiple oft-competing considerations. While this can and is largely
attributed to the fact that a Host State and private investor are
di erently situated parties,1 the past decade has witnessed
numerous scholars pointing towards a ‘legitimacy crisis’ building up
against investment arbitration, having the e ect of challenging the
very auspices and foundation upon which it is built.

In principle, investment arbitration resolves public issues having

economic and political consequences in private amongst a
particular set of individuals, having the liberty to issue di erent
decisions on the same or similar points of law.2 This becomes
potentially problematic for Host States that are subjected to
di erent liability in respect of the same action. Additionally, the
absence of jurisprudence constante (the ability to predict
outcomes through previous jurisprudence) adds to the uncertainty
of the process and deters Host States from complying with these

1International Arbitration: International Arbitration Information by Aceris Law LLC, available

at <https://www.international-arbitration-attorney.com/investment-arbitration/
#:~:text=Investment%20arbitration%20is%20a%20procedure,State%20Dispute%20Settle
ment%20or%20ISDS).&text=For%20a%20foreign%20investor%20to%20be%20able%20t
o%20initiate%20an,have%20given%20consent%20to%20this> last accessed 10 May
2021.
2 Susan D. Franck, The Legitimacy Crisis in Investment Treaty Arbitration: Privatizing Public

International Law through Inconsistent Decisions, 73 Fordham L. Rev. 1521 (2005).

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decisions.3 A common example in this respect involves con icting

decisions issued by several tribunals constituted in the aftermath of
the Argentine peso crisis. In the period ranging from 2003-2007,
claims against Argentina represented a quarter of all the cases
initiated within the framework of the ICSID Convention and
challenged the economic measures taken by Argentina to contain
the potentially disastrous e ects of an ongoing economic cycle.4
Despite there being a common cause of action (with di erent
effects on individual investors), tribunals differed on the key issue
concerning the liability of Argentina for violation of obligations under its
BITs.

Commentators have argued that this tendency undermines the

Host State’s goals of stability and sovereignty by scrutinising their
emergency measures without giving undue importance to the
context within which these developments are ideally to be
located.5 There is also a prevalent view that the regime has become
overly pro-investor and biased against developing countries, in part also
accentuated by the high costs, high compensation and low
transparency currently a orded by the regime.6 There remain
concerns about the possibility of di erent interpretations of the
same key concepts within investment law (eg. Fair and Equitable
Treatment) that cause further furore amongst stakeholders. While
there have been defenders of the regime that argue in favour of its

3 Akshay Kolse-Patil, Precedents in Investor-State Arbitration 3(1) Indian, Journal of

International Economic Law 37 (2010).
4 For a breakup of the number of cases and the outcomes of these proceedings, available at

<https://www.southcentre.int/wp-content/uploads/2015/07/IPB2_Crisis-Emergency-
Measures-and-the-Failure-of-the-ISDS-System-The-Case-of-Argentina.pdf> last accessed
10 May 2021.
5 To understand these arguments and for a subsequent rebuttal of these criticisms, See

José E. Alvarez and Gustavo Topalian, The Paradoxical Argentina Cases 6(3) World
Arbitration and Mediation View 491 (2012); See also, Benedict Kingsbury and Stephan
Schill, Investor-State Arbitration as Governance: Fair and Equitable Treatment,
Proportionality, and the Emerging Global Administrative Law, 2 TDM (2011).
6 Gus Van Harten, Arbitrator Behaviour in Asymmetrical Adjudication: An Empirical Study of

Investment Treaty Arbitration, 50 Osgoode Hall Law Journal 211, 251 (2012); Zachary
Douglas, The MFN Clause in Investment Arbitration: Treaty Interpretation o the Rails, 2
Journal of International Dispute Settlement 97 (2011).
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evolution to accommodate such problems, the controversy sparked

by ISDS has led to stakeholders demanding a ‘reform’ of the
system in a manner that balances all interests and takes the
sensitivity and possible political implications of these proceedings
into consideration.

The initial response of States to these issues were multifarious,

ranging from individual to regional measures. For instance, a cohort
of Latin American countries (Bolivia, Ecuador and Venezuela)
withdrew from the ICSID Convention, while countries such as India,
Indonesia and South Africa made public announcements about
termination of existing BITs in the period ranging from 2012-17. Brazil,
United States of America and Australia are a few countries that
opted for the development of new model treaties and revisiting
existing IIAs. The EU publicly announced its intention to replace
arbitration with an Investment Court System (ICS) while numerous
countries refused to pay awards issued against them. In order to
prevent these responses from threatening the long-term survival of
ISDS, it was believed that ‘reforms’ were the need of the hour.

These measures for ‘reform’ will be discussed in greater detail

throughout this chapter. Although the guide is India-centric, the
reforms highlighted are not necessarily of direct relevance to India
but have been included because they deal with the larger issue of
international legitimacy of investment arbitration.

A. UNCITRAL Working Group III

The aforementioned legitimacy crisis and the reactions by

States were undertaken only by select countries and aimed to
tackle only a few pressing issues, owing to which they were
inadequate in addressing structural concerns and contributed to
reducing the popularity of investment arbitration. Thus, there was a
pressing need for deliberated and comprehensive attempts towards
multilateral reform to reduce individual State measures that may
reduce the relevance of investment arbitration. It is with this
objective that the United Nations Commission on International Trade
 125

Law (hereinafter, UNCITRAL) constituted and entrusted its Working

Group III (hereinafter, WG III) with the wide agenda to work towards
reforming ISDS multilaterally in 2017.7 The reform process aims to
tackle particular procedural concerns with ISDS, such as excessive
costs and lengthy proceedings, inconsistent and potentially
incorrect jurisprudence contributing to reduced predictability, and a
lack of arbitral diversity and independence in adjudication.8

WG III divided its areas of work into three areas or “phases” and
meets biannually in April and November, respectively in New York
and Vienna for discussions.9 It began work from the 34th session
held in Vienna in 2017. In addition to having discussions amongst
the Member States, various research organisations and public
welfare institutes have been provided with an ‘observer status’ as
non-governmental organisations to attend sessions and provide
submissions.10

After each session, WG III publishes a report of the proceedings

throughout each session providing a brief overview of the
discussions, comments and suggestions oated by participants. In
revisiting the legitimacy debate, WG III has established two major
courses of action through its discussion: one is the (total or partial)

7 Esme Shirlow, UNCITRAL Working Group III: An Introduction and Update, available at
<http://arbitrationblog.kluwerarbitration.com/2020/03/23/uncitral-working-group-iii-an-
introduction-and-update/> last accessed May 10 2021.
8 Marike R. P. Paulsson, UNCITRAL Working Group III: Reforms in the Realm of Investor-State

Disputes – UNCITRAL’s Proposals for an Appellate Mechanism and its Impact on

Duration and Cost, available at <http://arbitrationblog.kluwerarbitration.com/
2020/03/26/uncitral-working-group-iii-reforms-in-the-realm-of-investor-state-disputes-
uncitrals-proposals-for-an-appellate-mechanism-and-its-impact-on-duration-and-cost/>
last accessed May 10 2021.
9 International Institute for Sustainable Development, available at <https://www.iisd.org/

projects/uncitral-and-reform-investment-dispute-settlement> last accessed May 9 2021.

10 Investment Treaty News, UNCITRAL receives mandate to work on ISDS reform;

Transparency Convention to enter into force on October 18, 2017, available at <https://
www.iisd.org/itn/2017/09/26/uncitral-receives-mandate-to-work-on-isds-reform-
transparency-convention-to-enter-into-force-on-october-18-2017/> last accessed May 9
2021.
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replacement of the system; and the second is incremental reforms

within the system.11

Within its inaugural 34th session, WG III discussed the duration

and costs of investment arbitration proceedings, allocating these
costs (and apportioning nancial responsibility) along with
increasing transparency in investment arbitration. Sometime close
to the next session of WG III, the Council of the European Union
notably submitted a paper highlighting its desire to establish a
‘Multilateral Investment Court’ to alleviate the impending legitimacy
crisis by becoming a substitute to the current system of creating
independent arbitral tribunals. The EU further submitted that such a
court may have an appellate mechanism and a list of empanelled
arbitrators to prevent irregularity and streamline the standard for
appeals. 12

At subsequent sessions, the discussions ranged along

considering possible reform options for broader themes and issues
such as the establishment of an investment advisory centre and its
nancing, creation of a code of conduct for adjudicators laying
down thresholds for determination of impartiality, development of a
uni ed appellate mechanism for consistency, creating a framework
for the enforcement of awards (similar to international commercial
arbitration) and possible ways to address issues of third-party
funding in ISDS.13 Additionally, the 39th and 40th session involved
discussions on the EU’s proposal of a standalone Multilateral

11Marike R. P. Paulsson, UNCITRAL Working Group III: Reforms in the Realm of Investor-State
Disputes – UNCITRAL’s Proposals for an Appellate Mechanism and its Impact on
Duration and Cost, available at <http://arbitrationblog.kluwerarbitration.com/
2020/03/26/uncitral-working-group-iii-reforms-in-the-realm-of-investor-state-disputes-
uncitrals-proposals-for-an-appellate-mechanism-and-its-impact-on-duration-and-cost/>
last accessed May 10 2021.
12 EU’s proposal available at <https://documents-dds-ny.un.org/doc/UNDOC/LTD/

V17/088/32/PDF/V1708832.pdf?OpenElement>.
13 Esme Shirlow, UNCITRAL Working Group III: An Introduction and Update, available at

<http://arbitrationblog.kluwerarbitration.com/2020/03/23/uncitral-working-group-iii-an-
introduction-and-update/> last accessed May 10 2021.
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Investment Court, which seeks to serve as an institutionalised

alternative to ISDS clauses in BITs.14

Although these sessions were postponed in lieu of the

pandemic and subsequent worldwide lockdown, WG III published
draft working papers on pertinent issues to provide information to
members attending subsequent sessions for a background of
proposed reforms. Topics considered included appellate
mechanisms (such as the ones proposed by the EU) and conditions
for selection and appointment of tribunal members.15 In the recently
concluded 40th session of the WG III, discussions centred around
enforcement and the selection of adjudicators in a potential
institutionalised mechanism. The 40th session is to be resumed in
Vienna in May 2021.

All in all, the mandate of the WG III seems aptly captured within
the statement made in its 38th session: “reform e orts should focus
on improving the existing regime rather than replacing it”.16

India is currently not a party to the ICSID Convention.

Additionally, it appears from India’s recent steps to renegotiate/
terminate/amend its existing BITs that it is keen on entering into
arrangements that re ect and recognise its sovereignty.17
Therefore, the impact of these discussions of the WGIII on India
cannot directly be ascertained, more speci cally since India has
attended discussions but has never provided a public stance with

14 Christian Leathley, Andrew Cannon & Helin Laufer, ‘Update on the future of ISDS: latest
Working Group III UNCITRAL discussions’, available at https://hsfnotes.com/
publicinternationallaw/2019/11/29/update-on-the-future-of-isds-latest-working-group-iii-
uncitral-discussions/> last accessed May 10, 2021.
15 Ibid.

16 UNCITRAL WG III 38th session.

17 See generally Abhisar Vidyarthi, Revisiting India’s Position to Not Join the ICSID

Convention’ KLUWER ARBITRATION BLOG (August 2, 2020), available at <http://

arbitrationblog.kluwerarbitration.com/2020/08/02/revisiting-indias-position-to-not-join-
the-icsid-convention/> last accessed June 13 2021.
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respect to these measures.18 Nevertheless, since the discussions

are centred around the general structural reform of ISDS, it is likely
that they may prove to be an important consideration for India
should she reconsider her decision to remain a non-signatory to
the ICSID Convention. It may also impact India’s future BIT
negotiations with other countries.

B. ICSID-UNCITRAL Code of Conduct

In May 2020, ICSID and UNCITRAL’s secretariats jointly

released the ‘Draft Code of Conduct for Adjudicators in Investor-
State Dispute Settlement’ (hereinafter, Code).19 The Code
addresses a range of potential ethical issues in investor-State
dispute settlement by propagating independence and impartiality
amongst adjudicators. This development is to be contextualised in
light of wider ISDS reform initiatives, such as ICSID’s proposals to
amend its rules of procedure for e ective adjudication,20 and the
aforementioned work and discussions of WG III to create a code of
conduct for impartiality. The Code was drafted after comments
were received from the Member States to create a more
streamlined mechanism through the prescription of standards of
impartiality.

It consists of 12 articles and is based on a comparative review of

the standards of conduct set out in investment treaties, arbitration
rules applicable to ISDS, and codes of conduct of international
courts. Since it applies to ‘adjudicators’, the scope is broad and
encompasses existing and possible future participants including

18 See generally United Nations Commission on Internationalo Trade Law, Draft report of
Working Group III (Investor-State Dispute Settlement Reform) on the work of its thirty-
sixth session, available at <https://uncitral.un.org/sites/uncitral.un.org/ les/
draft_report_of_wg_iii_for_the_website.pdf> last accessed June 13 2021.
19 ICSID & UNCITRAL Secretariat, Draft Code of Conduct for Adjudicators in Investor-State

Dispute Settlement, available at <https://icsid.worldbank.org/sites/default/ les/

amendments/Draft_Code_Conduct_Adjudicators_ISDS.pdf> last accessed May 9 2021.
20 International Centre for Settlement of Investment Disputes, Proposals for Amendment of

the ICSID Rules, available at <https://icsid.worldbank.org/sites/default/ les/

WP_4_Vol_1_En.pdf>.
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arbitrators, ad hoc committee members, candidates to become

adjudicators, appeal judges, and judges in permanent bodies.21
The Code identi es key ethical and contested issues (double
hatting, issue con ict, pre-appointment interviews, threshold of
disclosure) and seeks to provide standards through 12 articles and
their commentaries.

The Secretariats invited comments to consider underlying

proposals,22 after which a revised ‘Version 2’ of the Draft Code was
released.23 Substantial changes were made to provisions
concerning the availability of arbitrators, issue con ict
requirements and potential enforceability of the Code.
Nevertheless, it will be interesting to witness the options that are
selected by WG III for inclusion in the nalised Code after its
discussions.

C. Singapore International Mediation Convention

The Singapore International Convention on Mediation

(Convention) entered into force on 12 September 2020. An
examination of the travaux preparatoires of the Convention reveals
an intention24 to include “commercial” disputes to which even a

21Ibid.
22 For comments submitted on behalf of the Centre for Arbitration and Research, please see
<http://iriarb.com/comments-on-daft.pdf>. Our comments were acknowledged and
considered within the o cial ‘Comments by Article & Topic’ jointly released by the ICSID
and UNCITRAL secretariat subsequently, available at <https://icsid.worldbank.org/sites/
default/ les/Code%20of%20Conduct%20-%20Comments%20by%20Article%20-
%20Update%2001.14.21.pdf>.
23 Draft Version 2, UNCITRAL & ICSID Draft Code of Conduct for Adjudicators in Investor-

State Dispute Settlement, available at <https://uncitral.un.org/sites/uncitral.un.org/ les/

media-documents/uncitral/en/draft_code_of_conduct_v2.pdf> <last visited May 8 2021>.
24 Mushegh Manukyan, Singapore Convention Series: A Call for a Broad Interpretation of the

Singapore Mediation Convention in the Context of Investor-State Disputes, available at

http://mediationblog.kluwerarbitration.com/2019/06/10/singapore-convention-series-a-call-
for-a-broad-interpretation-of-the-singapore-mediation-convention-in-the-context-of-investor-
state-disputes/?_ga=2.155589115.1310292540.1620368252-1919973272.1616052505 last
accessed May 8 2021.
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State is a party. Importantly, the Convention (much like its

counterpart New York Convention) provides for the enforceability
of mediated settlements between parties across national borders.25
Contracting Parties will now have the choice of directly enforcing
mediated settlement agreements in states that ratify the
Convention, instead of relying on a mediated settlement
agreement as a contract to be enforced in a local court.

Since India is a signatory to the Convention,26 there is a

theoretical possibility that after rati cation, foreign investors can
resort to the mediation of their investor-state disputes, so long as
the dispute is “commercial”.

However, owing to the stringent requirements of exhaustion of

local remedies under the Indian Model BIT,27 this appears unlikely.
Additionally, it appears that India’s commercial reservation to the
New York Convention re ects India’s stance to consider
“commercial” and “investment” disputes to be disjunctive – which
is why investment arbitration awards are currently unenforceable in
the country. Thus, only the enactment of a speci c legislation
legalising mediation of such disputes or a shift in India’s policy
stance can likely change this trend.

In order to bridge the gap that exists currently between

preference for mediation and arbitration of investor-state disputes
(with the former being extremely low), the WG III’s Pre-Inter
sessional Meeting discussed the possibility of hybrid ISDS
mechanisms (such as mandatory pre-arbitral mediation or
institutionalised med-arb-med clauses) to do away with these
concerns. Additionally, they discussed the possibility of developing

25 Article 3(1), United Nations Convention on International Settlement Agreements Resulting

from Mediation 2019.
26 Status of Treaty: United Nations Convention on International Settlement Agreements

Resulting from Mediation (2019), available at <https://treaties.un.org/pages/

ViewDetails.aspx?src=TREATY&mtdsg_no=XXII-4&chapter=22&clang=_en> last
accessed May 9 2021.
27 Article 15, Indian Model BIT (2016).
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model mediation-related treaty clauses and capacity building for

structural, long-term reform.28

D. Human Rights and Investment Arbitration

Consider two small seeds being planted in neighbouring

backyards such that they are unintentionally being planted quite
close to each other. As time passes by and each neighbour
nurtures the seed in his backyard, the seeds grow into strong trees.
The growth of these trees inevitably leads to their branches inter-
tangling with each other and more often than not tend to stunt the
other’s growth. Such is the case with the di erent elds of
international law. For our consideration, we take the two seeds of
‘International Investment Law’ and ‘Human Rights Law’. For a
considerable time period, both these elds have followed through
their individual growth trajectory and have developed quite a
considerable amount of jurisprudence. Much like the neighbours,
the proponents of these elds of law did not foresee the problems
of their convergence and a dispute arises. This con ict gives us the
opportunity to analyse how the branches of these trees will have to
be shaped so as to make enough space for the growth and
seamless convergence of both trees.

The essential issues of such convergence are two-fold. Firstly,

in analysing how Human Rights have operated as a defence for
host-states in the protection of their actions. This aspect implicitly
also looks at how human rights been side-lined in the progress of
international investment law and how can they be brought again
into the picture. And secondly, how has the jurisprudence and
content of Human Rights Law informed or played its role in the
development of International Investment Law.

28 Vincent Cheung, Investor-State Mediation: Insight and Inspiration from the First Pre-
Intersessional Meeting of UNCITRAL WG III, available at <http://
arbitrationblog.kluwerarbitration.com/2021/01/18/investor-state-mediation-insight-and-
inspiration-from-the- rst-virtual-pre-intersessional-meeting-of-uncitral-wgiii/> last
accessed May 10 2021.
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The development of two elds of law in their own spheres

creates a lot of issues. Most prominently, it leads to the eld
developing and building its own set of doctrines and principles
without regard to the adjoining elds of law or general principles of
international law.29 This fragmentation of international law leads to
regular con icts and di culties in the harmonious enforcement of
the law while allowing for considerations inherent in the primary
eld of the law taking precedence over considerations of
secondary elds of law. The purported model of the eld operating
in a ‘clinical isolation’30 fails miserably in light of the multi-layered
nature of activities it aims to govern.

With the sophistication of the IIAs regime and the emergence of

the Investor-State Dispute Settlement (ISDS) mechanisms, the
international investment law is ripe for con icting with principles of
human rights law and their objectives. The discussion below is
divided into two parts: rstly discussing the combative aspects of
the convergence and discussing how Human Rights have been
preserved by way of a defence of the Host State’s actions;
secondly, discussing the collaborative aspects of the convergence
and discussing how jurisprudence of Human Rights Law has
informed the development of International Investment Law.

1. Fruition of Human Rights as a Defence of Host State

With the growth and expansion of elds of international

investment law as well as human rights law, their convergence is
inevitable and hence e orts of their conciliation are of prime
importance. Preliminary e orts since the 1970s in this regard were
aimed at curbing the power of the MNCs.31 However, such efforts for
creating a comprehensive treaty only saw some concretisation in
1988 with draft UN Norms being released by a working group and
subsequently the ‘Guiding principles’ which contained a mix of

29 ILC at ¶8.
30 ILC at ¶ 163.
31 Karl P. Sauvant, The Negotiations of the United Nations Code of Conduct on Transnational

Corporations, 16 J. OF WORLD INV. & TRADE 11, 12-13 (2015).

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voluntary and mandatory obligations.32 However, these e orts are

seen as a failure of international e orts to counter problems of
human rights e ectively.33

Human Rights and their protection, by all means, is an objective

taken quite seriously by a host-state; and hence they are capable
of shielding its actions from the scrutiny of arbitral tribunals and its
contractual obligations under the IIA. Such usage, therefore, allows
human rights to enjoy fruition in the thicket of international
investment law. The idea behind the IIA is of a ‘grand bargain’.34 It
implies that the states promise to protect investment in exchange
for the hope that this will increase investment in the state. This
premise leads to various IIAs employing similar terms and clauses,
however, they are essentially based on private negotiations
between states and therefore are subject to conditions and
relations between the concerned states. Generally, the treaties are
biased towards the investors and provide four primary protections
which are national treatment, most-favoured nation treatment, fair
and equitable treatment and prohibitions on expropriation.35

A prime example of usage of human rights defence is when

Phillip Morris had unsuccessfully initiated arbitration against
Uruguay and Australia against the anti-smoking regulations of the
countries.36 These cases have reemphasised the impact that

32 U.N. Commission on Human Rights, Norms on the Responsibilities of Transnational

Corporations and Other Business Enterprises with Regard to Human Rights, U.N. Doc. E/
CN.4/Sub.2/2003/12/Rev.2 (Aug. 26, 2003).
33 See Florian Wettstein, Normativity, Ethics, and the UN Guiding Principles on Business and

Human Rights: A Critical Assessment, 14 J. HUM. RTS. 162, 166 (2015).

34 Jeswald W. Salacuse & Nicholas P. Sullivan, Do BITs Really Work?: An Evaluation Of

Bilateral Investment Treaties And Their Grand Bargain, 46 HARV. INT'L. L. J. 67, 77
(2005).
35 The exact content and nature of these protections is discusses above in the Handbook

and they are also discussed in the context of human rights in the second part of this
chapter.
36 Bob Violino, An Uruguayan Lawsuit With International Implications For Philip Morris,

FORBES (Sep. 22, 2014), available at <http://www.forbes.com/sites/greatspeculations/

2014/09/22/an-uruguayan-lawsuit-with-internationalimplications for-philip-morris/>.
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international investment law can have on public health issues. The

argument is that these cases show the convergence of the elds of
law and further point how a recon guration of the IIAs amongst the
contracting states can help inject an appreciation of human rights
goals.

The impediment to this exercise is that IIAs are traditionally

biased towards the investor but they can be changed to ensure the
state has enough regulatory space for legislating on its human
rights objectives without upsetting its treaty obligations.

While placing human rights within an established regime of

investment law is di cult but if rightly done can catalyse the entire
process that is clogged by international politics at the UN. The
primary interest under the agreement is the promotion of
development in the state, and this development further in itself
includes the human rights goals of the states.37 The arbitral
tribunals strike a balance between the investor and the state where
the rights of the investor are not absolute in any regard.38

The international investment law has protections that are

contingent on the legitimacy of the investor’s expectations.39 One
of the most triggered protections is the obligation on the state to
provide a fair and equitable treatment (FET) to the investor. In such
claims, it is contingent on the basis of a special commitment or
representation granted to the investor.40 Further, inherent
principles of the law help arbitral tribunals aim at assessing the
validity of the state action on a deep analysis of the treaty

37 Yannick Radi, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from
within the International Investment Law Toolbox, 37 N.C. J. Int'l L. & Com. Reg. 1107 (2011).
38 Kate Miles, International Investment Law: Origins, Imperialism and Conceptualizing the

Environment, 21 COLO. J. INT'L ENVTL. L. & POL'Y 1, 2 (2010).

39 Stephen Fietta, Expropriation and the "Fair and Equitable" Standard The Developing Role

of Investors' "Expectations" in International Investment Arbitration, 23 J. INT'L ARB. 375,

380 (2006).
40 Bayindir Insaat Turizm Ticaret Ve Sanayi A.S v. Islamic Republic of Pak., ICSID Case No.

ARB/03/29, Decision on Jurisdiction, T 240 (Nov. 14, 2005), available at <http://

italaw.com/documents/Bayandiraward.pdf>.
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provisions and other principles.41 Because these are international

instruments they allow for the inclusion of international principles of
interpretation which include considerations of human rights
through Article 31(3)(c) of the Vienna Convention on Law of
Treaties.42 Such exibility legitimises the usage of the purpose of
upholding human rights as a strong defence for host states. The
jurisprudence and the speci c facts of the situation are closely
looked at by the tribunal in striking a balance and therefore the
‘investor’s expectations’ are trimmed and shaped by the human
rights considerations of the state.

The arguments above make a good case for IIAs to be capable

of helping enforcement of human rights when they con ict with the
actions of investors; however, these arguments are not without
opposition. The essential problem that emerges in the human
rights discussion in international investment law emerges from a
schizophrenic ethos of the law. This ethos generally looks at the
problem from the investor’s point of view and is therefore to a
great extent biased.43 The considerations involved are generally
from the side of investors and that is re ected in the drafting of
such agreements that essentially declare the rights of the
investors.44 It is generally the case that IIAs have no mention of
human rights obligations in them.45 For instance, no explicit
reference to human rights is found in the Model BITs of Germany
(2008), France (2006), China (2003), India (2003) the United
Kingdom (2005), or the United States (2004).46

41 Vassilis Tzevelekos, The Use of Article 31(3)(C) of the VCLT in the Case Law of the ECtHR:
An E ective Anti-Fragmentation Tool or a Selective Loophole for the Reinforcement of
Human Rights Teleology-Between Evolution and Systemic Integration, 31 MICH. J. INT'L
L. 621, 653-54 (2010).
42 Ibid.

43 ILC at ¶ 21.

44 Marc Jacob, International Investments Agreements and Human Rights, in I.N.E.F. Research

Paper Series: Human Rights, Corporate Responsibilities And Sustainable Development 6

(Mar. 2010).
45 OECD, ʹInternational Investment Agreements: A Survey of Environmental, Labour and Anti‐

Corruption Issuesʹ (2008).

46 For model BITs, see annexes of Dolzer and Schruer, supra note 14.
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However, it is important to realise that the IIAs also further the

state’s interests and the interests of their population. This is clearly
spelt out in the preamble of the ICSID convention,47 and this has
also been relied upon by arbitral tribunals48 to show that the
purpose of the treaty is to also protect the right of development of
the state. However, the lack of their direct reference in the
substantive part of the IIA has led to some problems. This lack of
reference gives the arbitral tribunal ample amount of discretion on
how to treat human rights in the present dispute. Hence, leading to
a pool of case law that is inconsistent and further muddled with
various considerations. A particular instance are the two cases of
CME and Lauder arbitrations49 that were decided completely
di erently even when the facts of the dispute were essentially the
same. This is further demonstrated when we look closely at the
ICESCR and the CEDR provisions. In Article 2(1) of the ICESCR, the
covenant provides for the progressive realisation of the state in
light of resource constraints.50

However, the covenant also includes certain immediate

obligations such as the adoption of legislative measures and the
provision of judicial remedies.51 This ingrains certain obligations of

47 Convention on the Settlement of Investment Disputes between States and Nationals of

other States, Int'l Ctr. For Settlement Of Investment Disputes, available at <http://
icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR English nal. pdf>.
48 Amco Asia Corp. v. Republic of Indon., ICSID Case No. ARB/81/01, Award on Jurisdiction,

23 (Sept. 24 1985), 1 ICSID Rep. 389 (1993).

49 CME Czech Republic B.V. v. Czech Republic, Ad hoc—UNCITRAL Arbitration Rules, Partial

Award of 13 September 2001 and IIC 62 (2003), Final Award of 14 March 2003 and
Lauder v. Czech Republic, Ad hoc—UNCITRAL Arbitration Rules, Final Award, 3
September 2001.
50 International Covenant on Economic, Social and Cultural Rights, 19 December 1966,

United Nations, Treaty Series, vol. 993, p. 3, available at <https://treaties.un.org/doc/

Treaties/1976/01/19760103%2009-57%20PM/Ch_IV_03.pdf accessed 10 October 2020>.
51 Committee on Economic Social and Cultural Rights (CESCR) General Comment No. 3, The

nature of States parties obligations (art 2, para 1), 14 December 1990, available at
<https://www.refworld.org/docid/4538838e10.html> last accessed 10 October 2020.
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respecting52 and protecting53 certain rights which informs the

interpretation of certain clauses in the BIT. As mentioned before in
this strive to strike a balance, the tribunals promulgate a
jurisprudence that has no coherent shape and meaning. For
instance, certain tribunals54 rely on these obligations of the state
and a rm the state’s powers to regulate while others55 focus solely
on the economic impact on the investment of the regulatory
measure. All of this puts the fate of human rights in the hands of
uncertain circumstances and contingencies while rendering the
force of their character weak. Further, many have argued the use of
the principle of systemic integration in IIAs56 however, admittedly
the interpretation only nds light in academic writings and not in
arbitral awards. The arbitration as a method of dispute resolution is
in itself of a private nature and sits in judgement of speci c
questions posed before it. Hence, it seems to be an unsuitable
forum to discuss questions of public relevance such as human
rights.

2. Human rights in the Substantive Jurisprudence of

International Investment Law

This section discusses the collaborative aspects of the

convergence of Human Right in the context of investment

52 General Comment No. 14 (2000), The right to the highest attainable standard of health
(article 12 of the International Covenant on Economic, Social and Cultural Rights), E/C.
12/2000/ 4, 11 August 2000, ¶ 50, available at <https://www.refworld.org/pd d/
4538838d0.pdf> last accessed 10 October 2020.
53 General Comment No. 15 (2002), The right to water (arts 11 and 12 of the International

Covenant on Economic, Social and Cultural Rights), E/C.12/2002/11, 20 January 2003,

available at <https://www.refworld.org/pd d/4538838d11.pdf> last accessed 10 October
2020>.
54 Methanex v United States, UNCITRAL Case No. ARB/98/3 (2005), at Part IV, Chapter D, p

7; Sedco Inc v Iran, 9 Iran-US Claims Tribunal Reports.

55 Metalclad v Mexico, ICSID Case No. ARB (AF)/97/ 1, Award on the Merits, 16 December

2002; Compania de Desarrollo de Santa Elena SA v Costa Rica, ICSID Case No. ARB/
96/1, Award on the Merits, 17 February 2000, ¶ 72.
56 Yannick Radi, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from

within the International Investment Law Toolbox, 37 N.C. J. Int'l L. & Com. Reg. 1107 (2011).
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arbitration. As explained above, the entire exercise of the

arbitrators in such disputes revolves around the balancing of
competing interests and many times, such an exercise highlights
the human dimension of investment law. This human dimension
shapes the body of investment law, speci cally the protections of
FET and indirect expropriation prohibition by the inclusion of
human rights considerations dressed in the names of ‘general’ or
‘public’ interest. One example for such a scenario was the case of
Biwater case57 revolving around the water service development
projects given to Biwater for management by the govt. of Tanzania.
While there were various human rights considerations mentioned
in the submissions stage, the awards only refers to such
submissions in a single paragraph and categorise them as
‘useful’.58 The award’s reasoning, however, is rooted in the idea of
the predominance of public interest, ultimately ruling in favour of
the host state. One possible explanation for such a disguise is that
arbitrators generally believe that rooting their decisions in their
competency in investment law will increase the legitimacy that their
actions enjoy. Nevertheless, the absence of direct references to
human rights does not imply their complete alienation.

As far as FET goes, it has developed itself into the most

frequently triggered protection, hence the over owing amounts of
jurisprudence. One reason for this is its malleable construction in
treaty provisions and hence the ever-expanding width of its
conceptual reach. Notably, in arbitrator decisions Argentine
Investment Disputes, tribunals have applied the criteria of larger
notions of equity and fairness in determining the disputes.59
However, owing to the inherent nature of the FET jurisprudence, it's
largely di cult to draw a concrete line of precedent that would

57 Biwater Gau (Tanzania) Limited v United Republic of Tanzania, ICSID Case No ARB/05/22,
(Award 24 July 2008). Award available at <http://icsid.worldbank.org/ICSID/
FrontServlet>.
58 Id at ¶112.

59 See S.M Perera, ‘Equity-Based Decision-Making and the Fair and Equitable Treatment

Standard: Lessons from the Argentine Investment Disputes – Part I’ (2012) 13 Journal of
World Investment & Trade 210.
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help de ne the four corners of the legal provision. Nevertheless, a

tribunal’s examination is therefore largely rooted in the speci c
facts of the case, however, the examination is not immune from
human rights considerations. In fact, certain notions of human right
consideration have crept into FET provisions and established a
permanent place for them. For example, the right to justice in the
form of protection of the investor’s access to justice are nowadays
common notions under the FET clause. They nd their presence in
treaty provisions, for example, the 2004 US Model Treaty, or even
directly in landmark arbitral decisions.60 In essence, this helps
investor claim a non-ful lment of the host state’s obligation to
establish a legal system for the e cacious exercise of substantive
rights ranging from the due procedure being followed to a right to
judicial review of government action.61 Increasingly, tribunals have
referred to the Investors’ legitimate expectations when assessing a
breach of FET protection.62 The concept of legitimate expectations
nds its place in domestic administrative law and the exercise
consists of rst determining the legitimacy of the investors’
expectation on the basis of the commitment of the host state and
further balancing these expectations against the larger public
interest.63 Owing to the inconsistency of arbitration practice across
cases, the way arbitrators examine the legitimacy of the investor’s
expectation di ers in relation to the type of claims.

In relation to the protection of indirect expropriation prohibition,

tribunals generally take consideration of the wider realm of all
relevant circumstances.64 Such a width of arbitrator discretion led

60 See for eg Waste Management v. Mexico, ICSID Case No. ARB(AF)/00/3. https://
investmentpolicy.unctad.org/investment-dispute-settlement/cases/54/waste-
management-v-mexico-ii-.
61 Rudolf Dolzer & Christoph Schreuer, Principles Of International Investment Law (2nd ed.

2012).
62 See generally Chester Brown, The Protection of Legitimate Expectations as a 'General

Principle of Law': Some Preliminary Thoughts, 6 Transnat'l Disp. Mgmt (2009).

63 See Elizabeth Snodgrass, Protecting Investors' Legitimate Expectations: Recognizing and

Delimiting a General Principle, 21 ICSID Rev. Foreign Inv. L.J. 1, 46 (2006).

64 Yannick Radi, Realizing Human Rights in Investment Treaty Arbitration: A Perspective from

within the International Investment Law Toolbox, 37 N.C. J. Int'l L. & Com. Reg. 1107 (2011).
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to di ering practices and opinions in relation to such expectations.

Nevertheless, the examinations traces its principles back to the
American doctrine of distinct investment-backed expectations as
elaborated in relation to the Fifth Amendment constitutional Right
to Property.65 As a result, the core of such expectations is tested on
the cornerstone of the state of the regulatory landscape of the
industry at the time of the investor’s entry.66 Hence, in a highly
regulated sector, it is considered as giving notice to the investor
that a future state measure may, hypothetically, a ect his property
and hence, the investor is said to not have a distinct investment-
backed expectation. The nature of the industry is however not the
only factor considered. There is a balancing of the economic
impact; the character; and the distinct investment-backed
expectation of the state measure.67 Beyond this, examining the
notions of non-discrimination and fairness will also inform the
investor’s expectations.68

In essence, the tests of legitimate expectations in FET and distinct

investment-backed expectation in indirect expropriation prohibition
both have an underlying aim of fairness. In that their conceptual
and technical make-up borrows from the jurisprudence revolving
around human rights. In this scenario, the legality of state measures
is tested with whether such measures are reasonable when seen
vis-à-vis the investor ‘expectations. Such exercises often provide
the tribunals with ample width of adjudicatory discretion to take
into consideration various factors of the case that may not have
been possible if the examination was strictly done within the
contours of traditional investment law. Hence, the usage and
reference to the doctrine of human rights law and their adoption in

65 Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978).
66 See J.A. Kupiec, Returning to Principles of "Fairness and Justice": The Role ofInvestment-
Backed Expectations in Total Regulatory Taking Claims,43 B. C. L. Rev. 865, 878 (2008).
67 See Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978).

68 See J.D. Bremer & R.S. Radford, The (Less?) Murky Doctrine of Investment-Backed

Expectations after Palazzolo, and the Lower Courts' Disturbing Insistence on Wallowing
in the Pre-Palazzolo Muck, 34 Sw. U. L. Rev. 351, 359 (2005).
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investment arbitration is a key aspect showcasing the collaborative

results of the convergence of the two elds of law.

3. Future Outlook

The analysis above has analysed the con ict between

International Investment and Human Rights and how far a role has
international arbitration has played in shaping this con ict. The
primary argument is that while there are rays of hope of realising
Human Rights through arbitration, the subjectivity, uncertainty and
inconsistency in the jurisprudence, to a great extent, threatens the
very reason of human right law in the international context. What is
therefore needed are methods and procedures in place to reduce
this inconsistency and ingrain a certain ethic in the international
investment law that not only respects but promotes human rights.
Only by carving out a cohabiting space of operation for both of
these elds, can the true bene ts they o er can be realised to the
optimum potential.
In this vein, in recent times, there have been some new Model
BITs69 by countries that do showcase a cognisance of the human
rights aspect to the investment. These model BITs are an evidence
of a point of in exion in the life of IIAs which impose obligations on
the investors directly. However, these agreements do not provide
the state with the right to bring a claim against the investor to
impose these obligations except in the form of a counterclaim that
presupposes an existing claim from the investor against the state.
Nevertheless, it is a step towards a more robust enforcement of
human rights. However, the problems regarding the incoherent and
fragmented jurisprudence produced by arbitral tribunals are still
prevalent.

Further, there have also been inclinations to move away from

the traditional mechanism of investment arbitration. The proposed
Transatlantic Trade and Investment Partnership (TTIP)70 is held back

69 Ibid.
70 EU Commission, Draft text on investment in TTIP, available at <http://trade.ec.europa.eu/
doclib/docs/2015/september/tradoc_153807.pdf>
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from signing primarily due to the dispute mechanism choice. The

EU has proposed an Investment Court System (ICS) as a method of
dispute resolution in lieu of ad hoc arbitration. The EU in general is
working towards the creation of a multilateral ICS to solve
investment disputes.71 In a concluded treaty with Canada, the EU
has already implemented the ICS however, the treaty is yet to
come into force.72 This ICS creates a permanent tribunal with
persons who occupy a judicial o ce or are ‘jurists of recognised
competence’.73 This permanent nature of the court helps ingrain a
certain consistency in the jurisprudence of IIAs. However, some
have argued that this is not enough, and the law requires the
establishment of a World Investment Organisation.74

71 EU Commission, A future multilateral investment court’, Press Release, 13 December 2016,

available at <http://europa.eu/rapid/press-release_MEMO-16-4350_en.htm>.
72 EU Commission, CETA, available at <https://ec.europa.eu/trade/policy/in-focus/ceta/ceta-
chapter-by-chapter/>.
73 Article 9 of TTIP, supra note 40.

74 Nicolette Butler and Surya Subedi, The Future of International Investment Regulation:

Towards a World Investment Organisation?, 64 Neth Int Law Rev 43 (2017).

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CHAPTER 7
CAREERS IN INVESTMENT
ARBITRATION
As is evident through earlier chapters, investment arbitration is
neither expressly recognised nor institutionalised in India. Thus, there
is not much publicly available information about the quali cations
required and jobs associated with investment arbitration
domestically. Considering the relatively under explored state of
investment arbitration in India, and the possibility of increased
investment arbitration cases in the future, a career in this eld
automatically becomes niche and maybe extremely high-paying
and in-demand in the post-COVID economy. This chapter attempts
to broadly collate and explain plausible career options in
investment arbitration.

In sum, the career opportunities available in international

arbitration are that of an arbitrator, an acting counsel for parties, a
tribunal secretary, an independent expert or a researcher. Career
opportunities in the fields of international commercial arbitration and
international investment arbitration do not vary as far as the
designations are concerned, but they may in terms of the
specialisation (meaning, the subjects studied or the degree applied
for) that can be undertaken.1

1 Rishabh Aggarwal, Career opportunities of an arbitrator, Legal Bites (December 18, 2019),
available at <https://www.legalbites.in/career-opportunities-of-an-arbitrator/> last
accessed June 25, 2020.
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A. Arbitrators

The rst job that may come to mind when considering

arbitration generally is to become an arbitrator. The arbitrator is the
neutral adjudicator of the dispute. Arbitrators are appointed by
parties to the dispute, following the much-known principle of party
autonomy. It is not incorrect to state that arbitration is only as good
as the arbitrator.2

1. Selection of Arbitrators

Most tribunals consist of three arbitrators, with one being the

‘President’ or ‘Presiding Arbitrator’. Article 37 of the ICSID
Convention states that a tribunal may consist of a sole arbitrator or
an uneven number of arbitrators appointed in accordance with the
agreement of the parties.3 In the absence of agreement between
parties, the tribunal will consist of three arbitrators: one arbitrator
appointed by each party, and the third presiding arbitrator
appointed by agreement of the parties. In the event that there is no
agreement between the parties or their arbitrators, the arbitral
institution itself appoints the third arbitrator.4 In the case of the
appointment of a sole arbitrator, institutional rules will have to be
followed. For instance, UNCITRAL Arbitration Rules require the
Secretary-General to prepare a list of suitable candidates and
return to the parties for their rankings. Depending upon the
responses received from both sides, the Secretary-General is to
make a decision and appoint the arbitrator.5

There are two common ways in which arbitrators are appointed

by parties:

2 Yves Derains and Laurent Levy (eds.), Is Arbitration Only as Good as the Arbitrator? Status,
Powers and Role of the Arbitrator (Paris: ICC Institute of World Business Law, 2012).
3 Article 37 of the ICSID Convention.

4 See, Article 38 of the ICSID Convention.

5 See, for example, Article 6(3) of the UNCITRAL Arbitration Rules 1976, Article 8(2) of the

UNCITRAL Arbitration Rules 2010, Articles 8(2) of the PCA Arbitration Rules 2012.
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Self-inspection: This method involves parties, assisted by their

counsel, identifying and approaching arbitrators they nd equipped
to handle the dispute. Generally, parties rely on their counsel, who
are aware of suitable candidates through experience or by having
knowledge of previously published investment awards and
decisions posted on websites like the ICSID and ITA Law.6

ICSID Panel of Arbitrators: If parties are unable to locate

arbitrators through a simple ‘google search’ or reference to
previous decisions, and belong to an ICSID Member State, they can
refer to the ICSID Panel of Arbitrators to identify potential suitable
candidates. The ICSID Convention entitles each Member State to
designate up to four persons to the Panel of Arbitrators.7

According to Article 14 of the ICSID Convention, which lists

down the quali cations of these arbitrators, candidates designated
by the Member States must:

be persons of high moral character and recognized

competence in the elds of law, commerce, industry or nance,
who may be relied upon to exercise independent judgment.
Competence in the eld of law shall be of particular importance in
the case of persons on the Panel of Arbitrators.8

However, this does not mean that these criteria are binding on
the Member States and they have the discretion to choose
candidates. The designees on the Panels can serve for a maximum
term of 6 years. These criteria provide a useful overview of the
quali cations that arbitrators should ideally have. Additional criteria
may depend upon whether there are any further requirements

6 Albert Jan van den Berg, ‘Quali ed Investment Arbitrators? A Comment on Arbitrators in
Investment Arbitrations’, available at <http://www.hvdb.com/wp-content/uploads/
Quali ed-Investment-Arbitrators.pdf> last accessed 18 May 2021.
7 See, Articles 12-16, ICSID Convention.

8 Article 14, ICSID Convention.

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within the treaty itself.9 It is also useful to refer to Article 1124(4) of

the NAFTA’s Chapter Eleven Rules on the appointment of
arbitrators, which provides that the contracting parties are to
establish a roster of presiding arbitrators, which need to meet “the
quali cations of the Convention and rules referred to in Article 1120
and experienced in international law and investment matters”.10

Apart from the aforementioned criteria, parties will often have

various practical considerations. Generally, anyone having
commercial knowledge relevant to the dispute between parties can
become an arbitrator, because the process often involves private
contractual considerations.

Owing to the legal aspects that are also involved in the dispute,
arbitrators are most likely to come from the legal profession, but
that may not always be the case as it is possible for parties to
choose a candidate that may be from a technical profession related
to the subject in dispute.

The attributes of the arbitrator, in most cases, depends on

concerns such as relevant work experience, case management skills
and an ability to understand and contextualise the nuances of the
dispute. Thus, it is often stated that knowledge about the law of
contract/tort/evidence and appropriate procedural law is important
for arbitrators. The specialised knowledge that will be useful is that
of public international law, international investment law, and some
experience of domestic or international commercial arbitration.

Another important consideration for parties is the independence

and impartiality of the proposed candidate. This requires arbitrators
to possess ‘absence from external control’ and ‘absence of bias or

9 Permanent Court of Arbitration, Mechanisms for selection and appointment of presiding

arbitrators or sole arbitrators, available at <https://uncitral.un.org/sites/uncitral.un.org/files/
media-documents/uncitral/en/pca_mechanisms_for_selection_and_appointment.pdf> last
accessed 18 May 2021.
10 Article 1124, North American Free Trade Agreement.
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predisposition towards a party’.11 This is extremely important

because parties will be allowed to challenge, or disqualify an
appointed arbitrator if found partial or dependent on either party in
any manner.12 Albeit not a ‘quali cation’, it is an important
requirement for parties and hence requires arbitrators to provide
relevant disclosures in a bid to maintain the sanctity of the process.
The latest development in this respect the ICSID and UNCITRAL’s
Code of Conduct (see Chapter 7), which creates streamlined
criteria for ensuring independence and impartiality of arbitrators.

Miscellaneous factors that impact the parties’ decision to

appoint an arbitrator would include their language pro ciency,
current availability to devote time to hearings/award and their
related previous track record, good health, etc. This may translate
to seniority of age, as that is often perceived as being indicative of
experience and credibility. Some other relevant factors may be the
geographic and gender diversity of the appointed candidates,
especially for parties belonging to or identifying themselves with
lesser-represented communities.13 In majority instances, parties
appoint professors of law, former international or domestic judges,
or retiring/practising lawyers with expertise in international
arbitration to become arbitrators.14 Additionally, parties prefer
public international lawyers because lawyers with a background in
international commercial arbitration are more likely to pay attention

11Suez, Sociedad General de Aguas de Barcelona S.A. v. Argentine Republic, ICSID Case No.
ARB/03/ 17, Decision on Proposal for Disquali cation (Oct. 22, 2007), ¶¶ 28–30; Fábrica
de Vidrios Los Andes, C.A. and Owens-Illinois de Venezuela, C.A. v. Venezuela, ICSID
Case No. ARB/12/21, Reasoned Decision on the Proposal to Disqualify L. Yves Fortier,
Q.C., Arbitrator (Mar. 28, 2016), ¶ 28; İçkale İnşaat Limited Şirketi v. Turkmenistan, ISCID
Case No. ARB/10/24, Decision on Claimant’s Proposal to Disqualify Professor Phillipe
Sands (July 11, 2014), ¶ 116.
12 Article 57, ICSID Convention.

13 Permanent Court of Arbitration, Mechanisms for selection and appointment of presiding

arbitrators or sole arbitrators, available at <https://uncitral.un.org/sites/uncitral.un.org/files/

media-documents/uncitral/en/pca_mechanisms_for_selection_and_appointment.pdf> last
accessed 18 May 2021.
14 Albert Jan van den Berg, Quali ed Investment Arbitrators? A Comment on Arbitrators in

Investment Arbitrations, available at <http://www.hvdb.com/wp-content/uploads/

Quali ed-Investment-Arbitrators.pdf> last accessed 20 May 2021.
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to the private function of investment treaty arbitration: being the

settlement of the dispute between the parties as opposed to the
public interest/public policy aspects of investment arbitration.

In the Indian context, the A&C Act also provides complete

autonomy to parties to decide upon the quali cations of potential
arbitrators. However, it is important to contextualise this in light of
the fact that the Act has currently not been expanded to
investment arbitration

Nevertheless, some Indian commercial arbitration institutions

have their own list of arbitrators that can be chosen by parties that
wish to utilise the services of the said institution.15 On the other
hand, MCIA does not have a published list of arbitrators but runs
training programmes along with the Chartered Institution of
Arbitrators to get them certi ed and quali ed.16 Recently, the MCIA
announced a rolling ‘Call for Arbitrators’ to be empanelled with
them, and publicised the selection criteria, which included the
following:

-- The number of cases the applicant has acted as an arbitrator

The number of years at the bar (if an advocate)
-- Area of expertise
Accreditation from bodies of repute, such as the CIArb
- Jurisdiction/location.17

15 See, for example, Nani Palkhivala Arbitration Centre: <http://www.nparbitration.com/

Arbitration/PanelOfArbitrators>; Indian Council for Arbitration: <http://www.icaindia.co.in/htm/
arbitrators.htm>
last accessed 20 June 2021.
16 Sonam Saigal, Arbitration centre in city pushes to be among global best, The Hindu,

available at <https://www.thehindu.com/news/cities/mumbai/arbitration-centre-in-city-
pushes-to-be-among-global-best/article28816946.ece> last accessed May 19, 2021
17 Ashutosh Ray, Interviews with our Editors: Mapping India’s Institutional Arbitration Journey

with Mumbai Centre for International Arbitration (MCIA), Klwuer Arbitration Blog,
available at <http://arbitrationblog.kluwerarbitration.com/2021/02/19/interviews-with-our-
editors-mapping-indias-institutional-arbitration-journey-with-mumbai-centre-for-
international-arbitration-mcia/> last accessed 17 May 2021.
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This reveals that the underlying considerations for the

appointment of an arbitrator, and basic quali cations that an
arbitrator can consider having, are similar. Over time, many become
full-time arbitrators who only spend their time adjudicating
disputes.

Some training programmes that can be undertaken by budding

arbitrator candidates include:

-- CIArb Training Program: https://www.ciarb.org/training/

FINRA (industry-speci c training): https://www. nra.org/
arbitration-mediation/arbitrator-training
- HKIAC Arbitrator Training Series: https://www.hkiac.org/
events/hkiac-arbitrator-training-series
- IIAM Training Programs (India speci c, thus no mention of
investment arbitration): https://www.arbitrationindia.com/
training.html

B. Counsel

Becoming a counsel in an investment arbitration proceeding is

also another lucrative career choice associated with investment
arbitration. The two best ways to become a counsel in the Indian
context includes:

1. Joining the Dispute Resolution Practice of a Law Firm

There are few rms in India that are engaged to represent

clients in bilateral investment treaty proceedings.18 Currently, many
Indian law rms do not appear to have speci c ‘investment
arbitration’ departments but deal with such cases through their
dispute resolution/international arbitration teams.

18 See, Legal 500 Dispute Resolution in Asia-Paci c, available at <https://

www.legal500.com/c/india/dispute-resolution/> last accessed 25 June 2020.
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Joining these teams as an associate, and then moving up the

ranks can help secure a long-term career in investment arbitration.19
These firms also provide associates opportunities to network and
represent the firm in cross-border conferences, which further assist
budding lawyers to gain a global perspective.

With respect to quali cations, these rms hire students either

through pre-placement o ers (PPOs) or on Day Zero Placements
conducted at law schools. People often undertake specialised
LLMs in international arbitration after a few years of work
experience. Indian and foreign rms alike have an additional lateral
hiring program, which you can apply to after a few years of
practice.

2. Joining the Chamber

There are a few senior advocates in India that are dual-quali ed

and/or partake in bilateral treaty proceedings.20 Joining their
chambers as a ‘junior’ and assisting in these proceedings (often
high-pro le) can be particularly bene cial for practical experience.
There is no need of speci c quali cations apart from a law degree
for this.

C. Tribunal Secretary

Becoming a tribunal secretary is another potential career

opportunity in international investment arbitration. Most investment
treaties do not expressly provide for the appointment of tribunal
secretaries, but their appointment has recently become popular with
institutional practice, complexities of incoming disputes, and

19See generally, Anubhab Sarkar, Co-founder, Triumvir Law on starting his own law rm and
a successful career in International arbitration, SuperLawyer (June 22, 2018), available at
<https://superlawyer.in/anubhab-sarkar-co-founder-triumvir-law-starting-law- rm-
successful-career-international-arbitration/> last accessed 25 June 2020.
20 Some noteworthy senior advocates include Gourab Banerji, Nakul Dewan, Harish Salve

QC, Darius Khambata,

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reference to international commercial arbitration. As a result, it has

been codi ed by several arbitral institutions, while others are silent
on the subject.21 The job of a secretary is to assist the tribunal with
administrative tasks like coordination of logistics and secretarial
services.22 They ensure the smooth functioning of the tribunal.
Their jobs are being given more and more importance even in
investment arbitration, with many scholars advocating for them to
be involved in substantive research assistance to the tribunal as
well.23 That being said, tribunal secretaries cannot currently
undertake any fundamental decision-making functions that are
generally discharged by arbitrators.24 In this regard, there is an
important debate about whether essential functions pertaining to
the adjudication of dispute can be ‘delegated’ to the Tribunal
Secretary and whether their actions, meant to be ‘assistive’, end up
being in uential.25

A ‘Tribunal Secretary Training Programme’ is conducted by

arbitral institutions like HKIAC to provide accreditation and training
to budding tribunal secretaries. These are two-day programs, with
some tailored courses that are also available for arbitrators, and

21 Abhisar Vidyarthi, The Problem of Assistance in Investment Arbitration?, available at

<http://arbitrationblog.kluwerarbitration.com/2019/04/17/the-problem-of-assistance-in-
investment-arbitration/> last accessed 17 May 2021.
22 Michael Polkinghorne and Charles B Rosenberg, The Role of the Tribunal Secretary in

International Arbitration: A Call for a Uniform Standard, International Bar Association, available
at <https://www.ibanet.org/Article/NewDetail.aspx?ArticleUid=987d1cfc-3bc2-48d3-959e-
e18d7935f542> last accessed 25 June 2020.
23 Claudia Wilmoth-Smith, Tribunal secretaries and decision-making in arbitration, Lexology,

available at <https://www.lexology.com/library/detail.aspx?g=4c359f86-f8f2-4e71-
a0c8-515f13e6227f > last accessed 25 June 2020.
24 The LCIA updates its guidance on the use of Tribunal Secretaries, HSF Arbitration Notes,

available at <https://hsfnotes.com/arbitration/2017/11/09/the-lcia-updates-its-guidance-
on-the-use-of-tribunal-secretaries/ > last accessed 25 June 2020.
25 These developments are beyond the scope of this chapter. For a general overview, see,

Peter Hirst, When Does a Tribunal Secretary Overstep the Mark?, available at <http://
arbitrationblog.kluwerarbitration.com/2017/04/18/when-does-a-tribunal-secretary-
overstep-the-mark/> last accessed May 16, 2021; Constantine Partasides, The Fourth
Arbitrator? The Role of Secretaries to Tribunals in International Arbitration 18(2)
Arbitration International (2002).
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provide excellent networking opportunities and feature panel

discussions and training sessions taken by renowned practitioners.
Owing to the absence of legislative recognition to tribunal
secretaries in Indian law, there is no clarity on their fees and role
within the arbitral process, much less on their role in investment
arbitration cases.26
Some training programmes that give accreditation for tribunal
secretaries include:

- HKIAC Tribunal Secretary Accreditation Programme: https://

hkiac.eventbank.com/event/tribunal-secretary-training-
programme-12904/ (week-long, intensive court teaching
administration of proceedings and drafting of documents)
- KFCRI Tribunal Secretary Course: https://kfcri.org/tribunal-
secretary.php (India-speci c: entails accreditation, membership
and quali cation)
- CIArb Tribunal Secretaries Course: https://www.lcia.org/
News/ciarb-tribunal-secretaries-course-and-swedish-arbitration-
days.aspx

Alternatively, one can pursue arbitrator quali cations in the

jurisdiction of choice to be equipped with relevant skills to be a
tribunal secretary. Networking through online training courses and
webinars is also useful and assists candidates with future
appointments after accreditation.27

26 Badrinath Srinivasan, Tribunal Secretaries & the Proposed Amendments to the Indian
Arbitration Law, Practical Academic (October 1, 2018), available at <http://
practicalacademic.blogspot.com/2018/10/tribunal-secretaries-proposed.html > last
accessed 25 June 2020.
27 See, Suvethan G.S. and Anubhav Garg, Being a Tribunal Secretary in India: Career, Job
pro le & skills, available at, <https://www.youtube.com/watch?v=5DOulriSOgY> last
accessed 20 June 2021.
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D. Independent Expert/Amicus Curiae

At the outset, it is to be noted that there is a slight di erence

between the two terms. An expert witness is called in to provide an
independent, technical opinion on the nuances of the dispute.
They are generally called to provide an opinion on the legal or
technical/scienti c intricacies and valuation/quantum of damages in
the dispute.28 There are two main types of expert witnesses in
international arbitration: party-appointed expert and tribunal-
appointed expert if permitted by the BIT.29 Additionally, Article 43
of the ICSID Convention read with Rule 35 of the ICSID Arbitration
Rules permits tribunals to examine experts before itself.

Independent experts are often called upon by the Tribunal

(independent experts) or parties (expert witnesses) to assist in the
determination of a certain issue, generally related to technicalities
of the dispute and/or valuation.30 They are called upon to provide
reports (common in the case of valuation experts) or express their
opinions on core topics of the dispute (mercantile law, trade terms,
etc.) in hearings. Their opinions are extremely relevant in
contemporary arbitrations. Importantly, the quali cations of such
experts can be wide-ranging, which is what helps them provide a
holistic perspective. Since the criteria is the possession of
“technical expertise”, this is not restricted to law and can be from
elds like engineering, economics, or even accounting.31 However,
the focus in international arbitration is currently to ensure that they

28 Alexey Drobyshev, Expert Witness, available at <https://jusmundi.com/en/document/wiki

en-expert-witness> last accessed 18 May 2021.
29 Xu Zhihe, Li Tingwei, The Use of Expert Witness in Arbitration from the Perspective of
SHIAC, available at <http://arbitrationblog.kluwerarbitration.com/2020/04/29/the-use-of-
expert-witness-in-arbitration-from-the-perspective-of-shiac/> last accessed 19 May 2021.
30 Richard Boulton QC, Joe Skilton and Amit Arora, The Function and Role of Damages

Experts, available at <https://globalarbitrationreview.com/chapter/1151334/the-function-

and-role-of-damages-experts> last accessed 25 June 25 2020.
31 Michael E. Schneider, Technical experts in international arbitration, introductory comments

to the materials from arbitration practice, available at <https://www.lalive.law/wp-content/

uploads/2019/10/mes_technical_experts.pdf> last accessed 25 June 2020.
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are independent and impartial under all circumstances, and do not

direct the parties to act in a particular way.32

In international investment arbitration, an amicus curiae is a

third party that intervenes in the proceedings with the view of
assisting the arbitral tribunal regarding some of the aspects of a
case, either through testimony, participation in proceedings or
through the presentation of written submissions.33 At the outset, it
is to be noted that this cannot be termed a ‘career’ as such
because it is generally a position of the responsibility conferred on
one who has gained reasonable expertise, repute and credibility in
the eld as a practitioner. However, it is an important opportunity
that arises out of engagement with investment arbitration and thus
nds mention within this chapter.

Generally, amici include public interest or non-governmental

organisations raising public welfare concerns through participation in the
arbitral proceedings. However, practitioners in the field also become
amici. Often, over time, a large number of practitioners gain repute
and are called to become amicus curiae to ongoing investment
arbitration proceedings. Tribunals worldwide have not been averse
to the idea of amici submissions. Generally, these are invited in
proceedings that have a public interest/imminent public health
concern that may be alleviated/increased by the verdict of the
tribunal and is not necessarily the immediate concern of the
disputing parties. Cases wherein amici participation has been
invited previously includes Methanex v. United States, Glamis Gold,
Ltd. v. The United States of America, Suez, Vivendi v. Argentina,

32 Jack Marshall, Use of Experts in Arbitration: An Arbitrator’s Perspective, ADR Institute of

Canada, available at <https://adric.ca/adr-perspectives/use-of-experts-in-arbitration-an-
arbitrators-perspective/ > last accessed 25 June 2020.
33 Pablo Jaroslavksy and Juan Pablo Blasco, Amici Curiae in Investment Arbitration,
available at <https://jusmundi.com/en/document/wiki/en-amici-curiae-in-investment-
arbitration#:~:text=The%20term%20amicus%20curiae%20(plural,view%20of%20assisting
%20the%20arbitral> last accessed 19 May 2021.
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Biwater Gau (Tanzania) Ltd. v. United Republic of Tanzania.34 In

the Indian context speci cally, Sumeet Kachwaha (Kachwaha and
Partners) was appointed as amicus curiae in the Vodafone case.
His interpretation of the BIT has also been referred to by the Delhi
High Court in their judgment.

E. Researcher/Policy Expert

International investment arbitration traces its roots in the

principles and ideology prescribed within international investment
law, which forms a part of international economic law (international
investment law, international trade law, legal issues pertaining to
economic integration and international taxation law). For someone
that is more inclined towards the academic or policy e ect of such
disputes, there are a plethora of research options available as well.

Currently, there is a dire need for in-depth policy research into

understanding how to strike the intricate balance between the
increasing use of nationalist policies within countries worldwide
and the inherent necessity of foreign investment for socio-
economic development.

Apart from this, there is also a need for rigorous academic

research into India’s investment protection practices (notable
examples include India’s decision to stay away from signing the
ICSID Convention, termination of BITs), their future impact, and
other relevant policy issues at both the domestic and international
level (for example, the e ects of discussions at the UNCITRAL’s
Working Group III on ISDS). In addition, there is also a need for
cutting-edge policy research in this domain to assist the
government with subsequent BITs, negotiations and legislative
measures in this regard.

34 Eugenia Levine, Amicus Curiae in International Investment Arbitration: The Implications of

an Increase in Third-Party Participation 29 Berkeley Journal of International Law 200
(2011).
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1. Research Centres

In India, a prominent organisation dealing with policy research

is the Centre for Trade and Investment Law (CTIL), established by
the Ministry of Commerce in 2016.35 They are mainly involved in
providing a thorough analysis of legal issues and possible
implications of measures (mainly through discussion papers)
pertaining to international trade and investment law to the
Government of India and other governmental agencies, for the
purpose of enhancing India’s participation in international trade
and investment negotiations and dispute settlement. Additionally,
the Centre hosts numerous training sessions, capacity building
programmes and webinars to foster interest in the eld and
sponsors initiatives at the law school level such as the GNLU
International Moot Court Competition, RGNUL-CTIL Multidisciplinary
Congress on Foreign Direct Investment in South Asian Region and
the RMLNLU-CTIL Conference on International Trade Law. While
their website does not mention any speci c quali cations as a
prerequisite to joining, an interest in trade and/or investment laws
demonstrated on the CV will be an added boost. They also provide
internship opportunities to law students.

Many law universities in India have also established Arbitration

Centres to promote research and training in arbitration. Centre for
Arbitration and Research of Maharashtra National Law University
Mumbai is one of such centres.

2. Ministry of External A airs, Government of India

Lastly, the Indian Ministry of External A airs has a ‘Legal and

Treaties’ Division that advises the government of India on important
matters concerning international law. They hire ‘Legal O cers’ or
‘Consultants’, for whom the responsibilities, application procedure
and remuneration are generally explained in greater depth in each

35 Centre for Trade and Investment Law, available at <https://ctil.org.in/ > last accessed 25
June 2020.
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opening. This pro le involves extensive research into the

diplomatic and policy consequences of initiatives, however the
same is not restricted to international investment law and can be
considered for a career in international law generally. As a
necessary prerequisite, Legal O cers would require:

-
Postgraduate experience in international law, international
organisations or international relations
--
10 years of speci ed relevant work experience
Preferably, knowledge of foreign languages.
On the other hand, Consultants may have a post-graduation in
any law and are expected to be less than 40 years of age on the
date of application.36

F. Building an Interest in Investment Arbitration

during Law School

In order to understand investment arbitration at the law school

level, students can consciously undertake numerous activities to
develop their liking or discover an inclination towards international
arbitration.

Some ways in which we believe the same is possible have been

listed below:

Join youth chapters initiated by Indian and international arbitral

institutions such as the ‘Young MCIA’, ‘Young ICCA’, ‘Young LCIA’,
‘Young CIArb’ etc. They frequently organise a large number of
seminars and online lectures for members of these chapters on
various contemporary topics in both international investment and
commercial arbitration. This, coupled with some background

36 For responsibilities and quali cations required, please see, <https://www.mea.gov.in/

Images/amb1/Advt_ nal.pdf> (The Applicant must be an Indian national, less than 40
years of age, and posses an LLM/postgraduate degree in law. Responsibilities include
development of a registry, collation of information and other relevant tasks).
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reading on the basic principles of investment arbitration, can assist

in garnering preliminary interest in the eld.

Reading authorities in the eld of international and domestic

principles pertaining to investment protection law can also be
particularly useful. Some international authorities in the eld of
investment arbitration include Christoph Schreur, Rudolph Dolzer,
Gabrielle Kaufmann-Kohler, Brigitte Stern, Jeswald Salacuse, Jan
Paulsson, and Zachary Douglas. Other international experts writing
regularly in the eld are inter alia Kabir Duggal, Julien Chaisse,
Loukas Mistelis, Jarrod Hepburn, Gus Van Harten and Stephan
Schill. Authors that write about investment arbitration in the Indian
context include Aniruddha Rajput, Kshama Loya, Bhavana Sunder,
Moazzam Khan, Shreyas Jayasimha and Vyapak Desai. For a more
theoretical and nuanced understanding of the basis of investment
arbitration in India, a reading of articles and books written by
Prabhash Ranjan, James Nedumpara and Pushkar Anand is
particularly useful. Reports by the Centre for Trade and Investment
Law are also extremely useful.
(This list is in no way exhaustive or in any particular order and is
intended to purely be recommendatory.)

Participating in moot courts having investment arbitration as

their subject matter can also help strengthen aptitude in the
subject or help in understanding the foundations of international
investment law. The Frankfurt Investment Arbitration Moot Court
Competition and Foreign Direct Investment Moot Court are two
such prestigious international moots. Apart from assisting one to
obtain a deeper insight into the eld, they can also provide
excellent networking opportunities, especially at the international
rounds.

Writing blog posts and research papers can help interested

students and researchers to demonstrate a continuous and
genuine interest in the eld of investment arbitration. Since there is
not much literature speci c to India, writing on such topics would
more often than not be contemporary and attract academic
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interest. This can be supplemented by doing research internships/

assistantships with quali ed arbitrators, lecturers and arbitration
practitioners to understand the contemporary relevance of one’s
research interests as well and obtain a deeper understanding of
the nuances and practicalities of the profession. Such internships
are particularly attractive on a CV.

By now, since someone would most likely have a strong

‘arbitration CV’ or a considerable amount of knowledge in
investment arbitration, applying to arbitration rms/dispute
resolution departments in renowned Indian rms can help students
obtain a practical overview of the process and decide if they really
wish to continue in the eld. Currently, there are no rms in India
that list investment arbitration as a speci c practice area. Thus, a
student interning in such rms must map such cases the rm is
dealing with during their internship and show interest to work on
related assignments. Applying to Chambers of practising
advocates having arbitration matters is also a probable and equally
enriching experience.

Lastly, one can apply for an LL.M. in International Arbitration/

International Investment Arbitration/International Economic Law,
depending on the nature of work they wish to undertake
subsequently. This is particularly bene cial to those who wish to
work at foreign arbitration rms or wish to undertake academic
writing/research in the eld. It may also provide a boost to
applicants looking to practice in India, particularly after a few years
of work experience, by providing a comparative experience. It is
widely recommended that a specialised LLM in arbitration should
be sought after a few years of relevant work experience has been
obtained.
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