THE APPLICABLE SUBSTANTIVE LAW TO THE DISPUTE IN CONTEXT OF ICSID ARBITRATION SYSTEM (IN THE ABSENCE OF PARTIES’ AGREEMENT)

Document Type : Research Paper

Authors

1 Professor, Department of Law, Shahid Beheshti University, Iran

2 PhD Candidate, Shahid Beheshti University, Iran

Abstract

The 1965 Washington Convention on the settlement of investment disputes between states and nationals of other states created international center for settlement of investment disputes (ICSID). This center conducts investment disputes arbitration according to the rules of the convention. The choice of law rules of the Washington Convention have been provided in article 42. Second sentence of article 42(1) specifically deals with the applicable law in the absence of choice of the parties and set forth that “the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.” Regarding to this rule, different interpretations have been made both in practice of ICSID arbitral tribunals and in views of scholars and arbitration authors. The differences of interpretations are from one extreme of the application of internal law of host state alone and in all circumstances, up to the other extreme of supremacy of international law and independent application of it. After considering all view points, this article reaches to the conclusion that initial purpose of the Washington Convention or ICSID and the parties’ (investor and host state) interests require that the national law of the host state must necessarily be applied, but, also in certain and special circumstances another law or rules of law including rules of international law will be applicable.

Keywords

References

  1. 1.  Aron Broches (1972) The Convention on Settlement of Investment Disputes between States and Nationals of other States, Recuil des Cours , vol. 11

    2.  Aron Broches (1979), in “International Arbitration”, Liber Aamicorum for Martin Domke, pp. 13-19 (The Hague)

    3. Aron Broches (1993) Convention on the Settlement of Investment Disputes between State and Nationals of Other States of 1965: The Convention, Explanatory Notes and Survey of its Application, 18 Yearbook of Commercial Arbitration

    4. Antonio R. Parra (2001) Applicable Substantive Law in ICSID Arbitrations Initiated Under Investment Treaties, ICSID Review 16 (1)

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    6. Georges R. Delaume (1988) The Proper Law of State Contracts and the Lex Mercatoria: A Reappraisal, ICSID Review  3 (1)

    7. Giorgio Sacerdoti (2004) Investment Arbitration Under ICSID and UNCITRAL Rules: Prerequisites, Applicable Law, Review of Awards, ICSID Review  19 (1)

    8. Ibrahim F.I. Shihata and Antonio R. Parra (1994)  Applicable, Substantive Law in Disputes Between States and Private Foreign Parties: The Case of Arbitration under the ICSID Convention, ICSID Review 9 (2)

    9. John A. Westberg (1987) The Applicable Law Issue in International Business Transactions with Government Parties—Rulings of the Iran-United States Claims Tribunal, ICSID Review 2 (2)

    10. John A. Westberg (1993) Applicable Law, Expropriatory Takings and Compensation in Cases of Expropriation; ICSID and Iran-United States Claims Tribunal Case Law Compared, ICSID Review 8 (1)

    11. UNCTAD (2009) Latest developments in investor-State dispute Settlement.

    آراء:

    1. Amco Asia Corporation and others v. Republic of Indonesia (Case No. ARB/81/1) Award, 20 November 1984.
    2. Amco v. Indonesia, Decision on the Application for Annulment of may 16 1986 (ICSID Case No. ARB/81/1) 16 May 1986.
    3. Asian Agricultural Products Ltd. v. Republic of Sri Lanka (Cited as AAPL v. Sri Lanka) (ICSID Case No. ARB/87/3) Award rendered on June 27, 1990.
    4. Compañía del Desarrollo de Santa Elena, S.A. v. The Republic of Costa Rica (cited as CDSE v. Costa Rica) (ICSID Case No. Case No. ARB/96/1) Award rendered on February 17, 2000.
    5. Fedax v. Venezuela, (ICSID Case No. ARB/96/3) award of Mar. 9, 1998.
    6. Klöckner Industrie-Anlagen GmbH v. Republic of Cameroon, (cited as Klockner v Cameroon) (ICSID Case No. ARB/81/2) Decision on Annulment of May 3 1985.
    7. Liberian Eastern Timber Corp (“LETCO”) v. Government of the Republic of Liberia (ICSID Case No. ARB/09/20) Award rendered on March 31, 1986.
    8. SOABI v. Senegal (ICSID Case No. ARB/82/1) Award, 25 February 1988.
    9. Wena Hotels Limited v. Arab Republic of Egypt (ICSID Case No. ARB/98/4), Decision on Application for Annulment of Feb.5, 2002, 41 ILM 933(2002).
    10. Wena Hotels Ltd. v. Arab Republic of Egypt (ICSID Case No. ARB/98/4) Award rendered on December 8, 2000.
Law Quarterly
Volume 44, Issue 4 - Serial Number 4
January 2015
Pages 613-631

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