Khóa luận tốt nghiệp: The role of precedents in investment treaty arbitration

However, a cursory glance into available investment arbitration awards shows that international tribunals cite the rulings of their predecessors with increasing frequency.* In addition,

MINISTRY OF JUSTICE MINISTRY OF EDUCATION

MINISTRY OF JUSTICE MINISTRY OF EDUCATION

THE PLEDGE

I hereby certify that this is my own research work Theconclusions and data presented in the thesis are honest andensured /

Supervisor's confirmation Dissertation Author

LLM Ngô Trọng Quan Pham Phi An

LIST OF ABBREVIATIONS

BIT Bilateral Investment Treaty

cIL Customary International Law.

Icc International Chamber of Commerce

1CJ International C ourt of Justice

ICSID International C entre for Settlement of Investment Dispute.

HA International Investment Agreement

ITA Investment Treaty Arbitration

NAFTA North American Free Trade Agreement.

spc Supreme People’s C oust

UNCITRAL United Nations Commission on International Trade Law

UNCTAD United Nations C onference on Trade and Development.

TABLE OF CONTENTS

PagenumberCover page iThe Pledge itList of Abbreviation iiiTable of Contents ivINTRODUCTION 1CHAPTER 1: OVERVIEW OF PRECEDENT IN 9INVESTMENT TREATY ARBITRATION

1.1 Definitions of precedent 9

1.1.1 Definitions of precedent in national law 91.1.2 Definitions of precedent in international law 161.2 Investment Treaty Arbitration 19

1.2.1 Investment treaty 191.2.2 Investment Treaty Arbitration 211.3 Precedents in the realm of investment treaty arbitration 23

1.3.1 The theoretical status of precedents 23

1.3.2 The practical status of precedents 24Conclusion of Chapter 1 28

CHAPTER 2: THE ROLE OF PRECEDENTSIN

INVESTMENT TREATY ARBITRATION

2.1 Precedents as a law interpreter

3.1.1 The challenges surrounding applicable law in investment

treaty arbitration

2.1.2 Arbitral precedents as a subsidiary means for the

determination of the rules of law

3.13 Arbitral precedents as a resource for comparative

analysis

ie) ie Precedents as a source for development

2.2.1 The impact of precedents on subsequent arbitration cases

2.2.2 Material sources for the development of international

investment law

Conclusion of Chapter 2

CHAPTER 3: RECOMMENDATIONS FOR’ USING

PRECEDENTS IN INVESTMENT TREATY ARBITRATION

3.1 The challenges surrounding the adoption of a precedent

1 The necessity of the topic

Investment treaty arbitration (ITA) is nowadays one of the most important

dispute settlement mechanisms in international law Despite having fairly ancientroots, the protection of foreign investors has over the past two decades evolved from

arather peripheral branch of the law, which had attracted little attention in scholarshipand practice, to one of the most vibrant areas of research, interest and concern in

public international law.! Given the unprecedented surge in cross-border investments,

the necessity for a structured and equitable framework to manage conflicts hasbecome increasingly apparent ITA operates as a forum where investors can seekcompensation for damages incurred by host states, ensuring a fair and impartialresolution that aligns with the complexities of contemporary global investments Thesignificance of ITA extends beyond the immediate parties involved, influencing thebroader landscape of international law and shaping the delicate balance betweeninvestor protection and state regulatory authority

In the realm of investment treaty arbitration, precedents are among the mostwidely used instruments Referring to precedent is a common practice in legalproceedings, and it serves to establish persuasive authority for the arguments putforth As arbitrators draw upon prior decisions, the ITA's legal framework gainsstability and predictability, benefiting both investors and states entangled in disputes.These characteristics of precedent would be valuable for investors, states, and legal

practitioners who are seeking to anticipate outcomes and make well-informed

decisions Additionally, these precedents play a pivotal role in the development and

evolution of international investment law By citing and building on previous

decisions, investment treaty arbitration could be a more nuanced and sophisticated

legal landscape

While bringing in undeniable values, precedent, however, is only considered

as a “subsidiary means”? in the realm of ITA More importantly, there is no duty, as

‘De Brabandere E (2014), “hvestmnent Treaty Arbitration as Public International Law: Procedural Aspects and Implications”, Canbriäge University Press, p.1

` Article 38(1)(@) of the ICTS tatate

such, to refer to previous decisions An arbitral award will be valid even if it contains

no references to any previous cases.? Similarly, there is no “doctrine of precedent” or

“stare decisis” in investment arbitration in the sense of tribunals being obliged to

follow previous decisions when the same point falls for determination in a subsequentcase In theory, given its limited principal rights, arbitral precedent is anticipated to

have minimal impact on the practice of international investment law However, a

cursory glance into available investment arbitration awards shows that international

tribunals cite the rulings of their predecessors with increasing frequency.* In addition,

precedent seems to lay the principal authority for the rules of international law onwhich they base their awards There might be several reasons for this contradictoryrole of precedent, including perhaps fractured legal frameworks of ITA, thus there arenot much of consistent legal frameworks for arbitrators to rely on Therefore, itrequires them to have recourse to some highly subjective threshold of what constitutes

“compelling contrary grounds’ that allow them not to ‘adopt’ the ‘solutions’ to which

they supposedly lead * Another reason for this practice may simply be as a matter of courtesy, because the parties refer to past awards.

Regardless of the motivation for incorporating references to prior judgments,the fundamental question persists regarding the contradictions in the role of precedent

in ITA and how it affects the cases before it still remains an ambiguous andworthwhile question This article endeavors to explore and elucidate this matter Bydelving into the role of precedent, the outcome of this paper would inform relatedparties, especially arbitrators and scholars in this field Due to the aforementionedconsiderations, the author chose the topic "The Role of Precedents in InvestmentTreaty Arbitration" for this dissertation

3 Judith Gill (2010), Is There a Special Role for Precedent in Investment Asbitration?, ICSID

Review - Foreign investment Law Jornal Volione 25, Issue 1 p8S,

https-//doi org/10.1093/icsidreview [25.187

* Richard C Chen (2019), Precedent and Dialogue in Investment Treapy Arbitration, Harvard

Jnternational Law Jounal, Vol 60, p.47

* Jan Paulsson (2018), The Role of Precedent in Investment Treaty Arbitration, Arbitration Under

Jnternational Invespment Agreements: A Guide to the Key Issues (Second edition), para 4.07

* Marvin Roy Feldman Karpa v United Mexican States, Award, 16 December 2002

para 107

2 Literature Review

2.1 Foreign literature

Since the beginning of the 21st century, tribunals in investment treatyarbitration (ITA) have been referencing prior decisions with growing frequency.Scholarship in this area has focused on explaining the rise of de facto doctrine ofprecedent and evaluating the merits of the practice The course of delving into thissubject has referred to various relevant research papers and works The articlesmentioned below are among what I found most suitable and beneficial during the

thesis-making process.

- Richard C Chen (2019), “Precedent and Dialogue in Investment TreatyAgbitration”, Harvard International Law Journal, Vol 60 The article delineates threekey values of precedent in ITA and then explains the need for a unique operationalmodel to pursue those merits Notably, it is the first to introduce a comprehensiveframework to guide ITA tribunals in both applying and authoring precedent Itaddresses the dual perspectives of how much deference is owed when applyingprecedent and the extent to which precedent should be authored, considering thebalance between predictability, accuracy, and legitimacy The proposed frameworkrecogmzes the distinctive features of ITA that differentiate it from common lawsystems, advocating for a departure from stable, incremental decision-making toembrace a model of robust and contentious dialogue This approach encouragestribunals to scrutinize past decisions skeptically and in crafting their own decisions,contribute to advancing the broader discourse within the field

- Patrick M Norton (2018), “The Role of Precedent in the Development ofInternational Investment Law”, IC'SID Review, Vol 33, No 1 (2018), pp 280-301This article examines the contradiction in the role of precedent inITA On one hand,ITA tribunals practically rely on previous arbitral decisions as a principal source ofinternational law, and in some cases re-apply prior reasonings to similarcircumstances Orthodox international legal doctrine, on the other hand, totally rejectsthe rulings of earlier tribunals as a source of that law This paper encompasses sevensections, the first two sections provide a brief review of the sources of internationallaw as well as a cursory glance at the predominance of precedent on the backgroundITA jurisprudence Sections 3-4 delineate the foundation for the utilization ofprecedent in International Investment Treaty Arbitration (ITA) Initially, the authorprovides commentary excerpts from preceding awards elucidating the necessity fortribunals to reference precedent in their rulings Subsequently, the paper identifiesvarious textual ambiguities within the International Investment Agreement (ILA)

terms, contributing to arbitrators’ subjective interpretations of the highlyindeterminate aspects of ILAs Concluding in Sections 5-6, the article asserts thatarbitrators rely on past judgments to validate their decisions Crucially, it underscoresthe principal obstacles preventing judges from avoiding precedent, inherent in thenature of international law These impediments encompass the absence of effectiveinternational legislative and judicial institutions authorized to establish primary rules

of international law, the positivist underpinnings of orthodox international legaldoctrine, and the inductive reasoning applied in identifying and applying customary

international law rules.

- Irene M Ten Cate (2013), “The Costs of Consistency Precedent inInvestment Treaty Arbitration”, Coltanbia Jotznal of Transnational Law, Vol 51This paper is one of the few works that stand against the application of the precedentdoctrine or “stare decisis” in investment arbitration It suggests that to maintainconsistent rulings, some important things like accuracy, sincerity, and transparencymight be compromised This trade-off is often considered acceptable in many legalsystems because it helps achieve goals like fairness, certainty, predictability, andperceived legitimacy in resolving disputes However, in the context of investmenttreaty arbitration, parties value transparency and independence in decision-making

In addition, the rules are constantly changing and there are many different lawsinvolved, relying on previous decisions may not be the best approach Instead,arbitrators should focus on making decisions that contribute to the development ofthe law in this area While they should not blindly follow past decisions, they arecounseled to consider how their rulings will impact future cases and the publicinterest by providing reasons that benefit the wider investment community and futuretribunals, even though they aren't bound to follow precedent

- Jan Paulsson (2018), The Role of Precedent in Investment Treaty Arbitration,Arbitration Under International Investment Agreements: A Guide to the Key Issues(Second edition), 4.01 - 4.82 Jan Paulsson explores the role of precedent inITA and

contends that while it lacks a “legal term of art’, its use is known for ensuring the

legitimacy of dispute resolution by treating similar cases alike The article discusses

two contradictory conceptions regarding the arbitrator's role, with one emphasizing a

duty to presume the applicability of rules derived from a consistent series of cases forthe harmonious development of investment law, while the other insists on decidingeach case on its own merits, potentially leading to unpredictability The author

? words or expressions that have thuough usage by legal professionals acquired a distinct legal

meaning

underscores the need for arbitrators to consider parties reliance on prior decisions,suggesting it as a matter of due process, and raises questions about arbitratorsawareness of pertinent decisions not invoked by the parties Finally, the authorconcludes that since arguing with the ICJ statute would be an enduring process, theICSID tribunals should operate with intentional flexibility, thus emphasizing theimportence of self-restraint on the part of international adjudicators

- Tai-Heng Cheng (2006), “Precedent and Control in Investment TreatyAgbitration” Fordham International Law Journal, Volume 30, Issue 4 This articleaddresses the proliferation of arbitrations in the field of investment treaty arbitrationdue to the substantial growth in global trade and investment treaties It highlights thelower levels of confidentiality in these arbitrations compared to commercialarbitrations and the resulting public scrutiny The central thesis suggests that, despitenot being formally bound by precedent, there exists aninformal yet influential system

of precedent in investment treaty arbitration that shapes arbitrators decisions andcontributes to the stability of international investment law The article emphasizes theneed for clarity and publicity regarding this informal system, careful selection ofarbitrators by investors and States, and informal self-regulation within theinternational arbitration community to manage potential conflicts and pressures faced

by arbitrators The discussion is structured into three parts, covering the concept andpolicies of precedent, its application in investment treaty arbitration, andrecommendations for refining the system in response to emerging global trends

2.2 Domestic literature

In Vietnam, this topic has been discussed recently in a few papers Those

include:

- Tran Thang Long (2022), The Role of International Investment Arbitration

Precedents, Legal Sciences Journal, No 4Š This article explores the significance of

precedent in Investor-State Arbitration (ITA), particularly in disputes involvinginvestors and states The author identifies four key roles of precedent in such disputes:serving as a secondary means to establish standards in international investment law,acting as material sources for future international lew, influencing subsequent arbitraldisputes, and emphasizing the practical importance of reviewing previous ITAdecisions during the substantive preparation stage in conflicts between foreigninvestors and the Vietnamese government The article concludes by advocating forincreased scholarly projects in the field of international investm ent law

* Original title: “Vai trò của án lệ của trong tài đầu tr quốc tế”

- Nguyen Thi Anh Tho (2021), “Commentary on International Investment Lawand the Application of International Investment Law in Tiemam“?, Truth National

Political Publishing House, Hanoi This book provides a comprehensive analysis ofinternational investment law and its application within the context of Vietnam Thebook consists of eight chapters, with Chapter I focusing on fundamental theoreticalissues related to international investment law, while Chapters II to VIII delve intospecific judgments related to seven key principles of international investment law.The book covers essential topics such as expropriation, compensation forexpropriation, fair and equitable treatment, protection against denial of justice, non-discrimination, and free transfer principle Through commentary on internationalinvestment decisions, the author presents insights into the development ofinternational investment law and highlights policy and legal issues that underliechanges in international investment agreements By analyzing these judgments, thebook provides valuable reference material for understanding the evolution ofinternational investment law and offers insights into how Vietnam can address similarissues and prevent disputes in its investment agreements

3 Scientific and practical significance

The dissertation contributes a clearer understanding of general theoreticalissues regarding the role of precedents in investment treaty arbitration From that, itdelves into each specific role of precedent that is considered the most noticeableSimultaneously, this paper elucidates the significance of precedent in shaping a robustlegal system and offers a comprehensive analysis of its application in investmenttreaty disputes The dissertation concludes by presenting recommendations andstrategies aimed at developing the arbitration legal framework concerning theutilization of precedent in investm ent treaty arbitration

4 Research objectives

The thesis aims to achieve three main objectives:

Firstly, it aims to establish the fundam ental theoretical framework concerningprecedent and the doctrine of stare decisis within the domain of investment treatyarbitration

Secondly, it endeavors to dissect the principal roles of precedent ininternational investment arbitration and assess its influence on arbitrators decision-making processes

* Original title: “Bình lận án lệ đầu tr quốc tế va việc áp dung án lệ đầu tr quốc tế tai Việt Nam”

Thirdly, it seeks to examine and assess the existing legal framework andpractical implementation of precedent in international arbitration Following thisanalysis, the paper puts forth several recommendations aimed at fostering a cohesivelegal framework for precedent in the mentioned context.

5 Subject matter and scope of research

§.1 Subject matter

This thesis concentrates on clarifying fundamental theoretical aspects,international investment law regulations concerning precedent This includes athorough examination of provisions within the ICJ Statute, ICSID Convention, andinternational investment agreements on a global scale Significantly, the central object

of this study is arbitration awards in international investment cases within the realm

of ITA and its practical application

§.2 Scope

The subject of precedent is multifaceted, offering numerous aspects forexploration This dissertation specifically centers on the study of precedent ininternational investment arbitration, excluding examinations of precedent inadministrative or civil litigation While it may reference legal provisions from selectjurisdictions regarding precedent, the primary focus remains on analyzing precedentwithin the realm of international arbitration, rather than within national legalframeworks

6 Methodology

This thesis is conducted using various methods, namely:

The doctrinal research method (or the black letter method): systematicallyexamines relevant legal sources, particularly investm ent treaties, arbitral awards, andacademic writings The analysis focuses on identifying instances where precedentshave beenreferenced in arbitral decisions and evaluating their impacts on arbitrator’sdecision-making process over time This approach includes assessing the application

of precedents, analyzing dissenting opinions, considering non-arbitral sources, andconducting a normative analysis of the impact on predictability and consistency

International and comparative legal research: looking into crossed-boundarycategories of law, comparing public and private international law with domestic law

It aims to facilitate our understanding of the operation of international law and legalsystems and its impact on the formulation of public policy in an era of globalinterdependence

7 Structure of the thesis

The thesis consists of three chapters (apart from the introduction, bibliography

and conclusion) listed below:

Chapter 1: Overview of precedent in investment treaty arbitration

Chapter 2: The role of precedents in investment treaty arbitration

Chapter 3: Recommendations for using precedents in investment treatyarbitration

implement precedent in their decision-making process By analyzing how legalsystems handle and apply precedent to their works, several functions of preceding

decisions will be clarified The later part provides a contextual history of internationalinvestment law in order to determine duties along with the legal status of precedent

in international lew, particularly international investment arbitration

1.1 Definitions of precedent

1.1.1 Definitions of precedent in uational law

It is generally accepted that the idea of precedent, as an extensively broadconcept, extends beyond legal situations or resolution of legal disputes Human

behavior, in general, heavily relies on past experiences Legal professionals aboveany other groups perhaps have exploited and developed the concept of precedent themost Within the legal profession, precedent not only flourishes in terms of quantitybut also in terms of quality over time The doctrine of precedent has been influentialnot only in the modern-day professions but also since the dawn of history As noted

by social anthropologist Hoebel: “In law, the doctrine of precedent is not the uniquepossession of the Anglo-American common law jtist Primitive law also balds onprevious precedents, for there too, new decisions rest on old rules of law or norms ofcustom, and new decisions which are sound tend to supply the foundations of fubre

action “?° At first, the idea of precedent may have been recognized and accepted

through irrational or unreflecting attitudes, however, the initial concept of legal

9E, A Hosbel (2009), “The law of primitive man: A Study in Comparative Legal Dynamics”,

Harvard Univensity Press, p 19

precedent has been supported by a variety of cogent arguments.!! By origin, Aristotle

asserted that it is a basic principle of the administration of justice that like cases

should be decided alike”? This statement has become the fundamental grounds for

the arguments on precedent in general jurisprudence, including but not limited to civillaw and common law Those legal traditions might have varying approaches and

views toward the role of precedent In fact, there are substantial historical andconceptual differences between the doctrines of precedent in common law and civillaw traditions Although both legal traditions regard legal precedent as the presence

of a sequence of consistent decisions in similar cases over time, these principlesoperate differently in the two traditions The following sections examine the historicaldevelopment of common law and civil law in operating the stare decisis principle inadjudication

The first recorded principle of precedent was identified at the end of the 16thcentury when English courts started to adhere to previous customs in matters of

procedure and pleading ¥ However, it was not until the 17th and 18th centuries that

a substantive rule of precedent developed in common law systems In that period,

courts were entrusted with the task of “finding” the law, rather than “making” the

law.! The presence of several cases recognizing the same legal principle increased

the persuasive force of judicial findings: precedents became more authoritative when

they were reaffirmed by a sequence of consistent decisions over time ' During the

late 18th and early 19th centuries, under Bentham’s positivist influence, the doctrine

of stare decisis moved from practice to principle, giving rise to the common lawnotion of binding authority of precedent By the end of the 19th century, the concept

of formally binding rules of precedent was established The system of precedents was

"Gale Group, Dictionary of the History of Ideas,

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° Did

© Berman & Reid (1996), The Transformation of English Legal Science: From Hale to Blackstone,

Emory Law Jounal, Vol 45, p 446

“ According to Blackstone (1764), the function of common la, which comists of the original common cusfomand the role of courts, was to find and declare such custom and to provide permasive

evidence of its content ami existence

*S Berman & Reid (1996), supra note 13, p 448

no longer viewed as persuasive evidence of the law, but itself became a primarysource of lew.

The developing process of the precedent doctrine went quite differently in civillaw systems In such traditions, case law was relegated to a secondary legal source,

while codes and special legislation were recognized as the primary sources of law.During the 19th century in Europe, there was a strict interpretation of the doctrine ofthe separation of powers, with courts seen as having the role of resolving disputesrather than making laws or regulations In the same manner, Article 5 of the FrenchCivil C ode 1804 also expressly denied the law-making role of judges by stating that:

‘The judges are forbidden to pronounce, by way of general and legislative

determination, on the causes submitted to them 16 This historical conception of

separation of powers stemmed from a general distrust of courts, which had been

manipulated by the king before the French Revolution !’ The need for certainty and

comprehensiveness in the law led to legislative provisions being formulated and

interpreted with precision, aiming to eliminate any discretion or arbitrary decisions

or toss depending on one’s ambulatory needs° 1Ê On the other hand, common law

advocates argue that judges in a subsequent case must regard case law and they are

not allowed to simply refer to those materials as something that may be considered

when making their decision ® Therefore, before discussing current practice, it may

‘ France, & Spence, G (2004), The Code Napoleon, or, the French Civil Code, The Lawbook

Exchange, Ltd.

`? Troper & Grzegorezyk (1997), “Precedent in France”, Interpreting Precedents: A Comparative

Study, p 103.

'* Raj Bhala (1999), “The Myth about Stare Decisis and International Trade Law (Part One of a

Trilogy)”, American University Intemational Lay Review Vohame 14, Issue 4, p 940-942

* Rupert Cross and J.W Hamis (1991), “Precedent in English Law”, Clarendon Press, p 5

be useful to examine the variable definitions of precedent in certain national legal

government, the public, lawyers and (in most cases) by the courts themselves.” To

enhance this view, Black’s Law Dictionary similarly defines precedent as: “J Themalang of law by a coat in recognizing and applying new rides while administeringjustice 2 A decided case that firnishes a basis for determining later cases involving

similar facts or issues “2Ì In this sense, the term "precedent" encompasses at least

two vital components The first component of the doctrine is that the decisions of

superior courts create law The second part of the doctrine is that courts are bound bythe decisions of courts higher in the judicial hierarchy and also (to a more limited

extent) by their own earlier decisions” This principle, often termed “stare decisis”.

Latin for “to stand by things decided’ ensures consistency, predictability, andfairness in the application of lay When a court follows precedent, it means that it isbound by decisions made in higher courts within the same jurisdiction or by its ownprevious decisions However, the extent to which United States courts are bound byprecedent varies, as judges may choose to distinguish or overrule earlier decisionsunder certain circumstances For instance archaic precedents, when experience hasproved them to be umvorkable or a long line of subsequent precedents has gradually

undermined their foundations.?

* Sellers, M N § (2006), “The doctrine of precedent in the United States of America”, The

Anxrican Journal of Comparative Law, Vol 54, Ífdoi.ore/10.1093/ajcl/54.supp]] 67, p.

+ BrianA Gamer (2004) Black Las Dictionary West Legabroric

» Grant Lamond, “The Doctrine of Precedent and the Rule of Recognition”, Philosophical

Foundations of Precedent, https ://doi org/10_1093/o50/9780192857248 003.0003, p 21

> Sellers, M N.S (2006), supra note 20, p 8S

Overall, the concept of precedent by courts in the United States of America isbetter understood as a tradition or a practice rather than a strictly legal doctrine.** This

is because it is deeply ingrained in the culture of the legal profession and the judiciary,

often occurring without extensive deliberation by judges At its core, the doctrine of

stare decisis mandates that lower courts adhere to the precedents set by higher courts,

accepting their interpretations of the law and refraining from attempting to overturntheir decisions While American courts recognize the importance of respectingprecedent to provide clarity, aid planning ensure efficient adjudication, and maintainpublic trust, they also acknowledge the need for flexibility when circumstances

warrant it2* Courts overturn precedents cautiously, with extensive citations to prior

cases, scholarly opinions, and other authorities to support their decisions As such,while precedent may not be codified as a formal doctrine, its influence andsignificance in shaping legal practice and jurisprudence cannot be overstated

Within the English legal system, the centrality of the doctrine of precedent is

undoubtedly crucial Embedded within the hierarchical structure of English courts isthe notion that certain cases are bound by prior decisions, while others enjoy moreflexibility Operating on the principle of stare decisis “the doctrine dictates that legalrulings made by higher courts serve as precedents, obligating lower or equal courts

to adhere to these decisions in future cases.” This adherence is believed to imbue theEnglish legal system with a sense of certainty In rendering judgments, judges arerequired to articulate two distinct elements: the ratio decidendi and the obiter dicta.The Ratio decidendi represents the core rationale behind a decision, constituting abroad principle of law intended to guide future cases For instance, in Donoghue v.Stevenson (1932), the establishment of a duty of care towards foreseeable individuals

set a significant precedent in negligence law Conversely, statements outside the

ratio decidendi, known as obiter dicta, do not hold the same binding authority for

future cases Although not legally binding, certain Obiter dicta may be referenced to

** Seller, M.N.S., supra note 20, p 86

* Sellers, M.N.S., supra note 20, p87

3% Donoghue v Stevenson (1932), A C 562, [1932] UKHL 100, 1932 §.C HL.) 31, 1932S LT.

317, [1932] WN 139.

strengthen legal arguments, as seenin Carlill y Carbolie Smoke Ball Co Ltd (1892) 3

Precedent comes in three distinct forms: original, binding, and persuasive Originalprecedent arises when a novel decision sets anew standard due to the absence of prior

rulings This was evident in Donoghue v Stevenson (1932), where Lord Atkins

“neighbor principle" expanded the concept of duty of care Binding precedent dictates

that lower courts must adhere to decisions from higher courts with similar factualscenarios Conversely, persuasive precedent offers more flexibility, allowing judges

to draw upon various sources such as obiter dicta, dissenting judgments, foreigndecisions, and scholarly articles to inform their rulings Ultimately, while bindingprecedent ensures consistency and predictability within the legal system, persuasiveprecedent allows for adaptability and broader considerations in judicial decision.making

Itis undeniable that judicial decisions influence judges in subsequent cases in

any country* However, the subscription to the precedent may be somewhat partial

in civil law countries In such legal systems, cases are not formally recognized as asource of law, and the doctrine of stare decisis is not recognized When considering

precedent, courts often view prior decisions as interpretations of the law, with thefreedom to either align with or depart from the previous court's understanding of the

law Additionally, the judicial system may still promote consistency in the law byrequiring strong reasons to depart from prior decisions Some civil law jurisdictions

even have their own equivalents to stare decisis, such as “arrét de principe“ and

‘jurisprudence constante:** which do not necessarily mandate strict adherence to

precedent set by a single previous case For instance, in the Swiss legal system,departures from prior case law by the Supreme Court must be justified by objectivereasons, such as a better interpretation of legislative intent, changes in circumstances,evolving legal concepts, or societal norms Even when a valid reason for change

* Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256

** John Hanna (1957), “The Role of Precedent in Judicial Decision”, Villanova Law Review, Vol 2,

p.375

* Pierre Tercier and Cluistian Roten (2003), “La recherche et la rédaction jmidiques", para 1181

‘In legal contexts, “jurispradence constante" refers to a series of cases that comsistently resolve a

particular issue in a specific manner, thereby establishing a guiding precedent for future cases

involving the same issue.

exists, courts in such systems tend to maintain the status quo in cases of uncertainty.

In general, whether a jurisdiction follows a common-law tradition or not, the domesticunderstanding of precedent and its associated doctrine continues to exert a profound

influence on the decision-making process in most jurisdictions

In France, the definition of precedent contains no formal bindingness ofprevious judicial decisions in the country In fact, it could be argued that there is a

prohibition against following a precedent solely because it is a precedent.>! Article

455 of the French C ode of Civil Procedure reinforces this stance by requiring courts

to provide reasoning behind their decisions and making it illegal for a judicial

decision to be based solely on precedent * Despite this lack of binding nature,

decisions of higher courts in the French judicial system hold weight for lower courts,whose decisions may be subject to appeal to those higher courts While lower courtsmust analyze cases presented to them based on enacted law, they are aware that highercourts may reverse their decisions if they are inconsistent with earlier rulings Assuch, decisions of higher courts serve as authoritative arguments for lower courts oninterpreting enacted law, although lower courts are not legally obligated to followthese arguments This approach, while not binding lower courts to precedent,effectively creates a “de facto obligation” to consider and potentially follow

precedents due to the hierarchical structure of the court system While French courtsare bound to follow official sources of law such as the Constitution, European law,statutes, and codes, precedents are frequently cited to aid in interpreting and applyingthese sources C onsequently, casesinterpreting statutes often serve as de facto sources

of law for lower courts, representing accepted interpretations of statutes while notbound by the doctrine of precedents, still consider them as a crucial mechanism forshaping and refining the law In fact, many significant legal principles in French.jurisprudence find their roots in prior judicial decisions

In Vietnam, the definition of precedent is primarily stipulated in Article 1 ofResolution No 04/NQ-HĐTP dated June 18, 2019: “Judicial precedents are thearguments, decisions in the judgments, and effective legal decisions of the Coit on

`! Michel Tioper & Chuistophe Grzegorezyk, supra note 17, p 115

» dbid, p 117-119

aspecific case chosen by the Judicial Council of the SPC and announced by the Chief

Justice of the SPC as a judicial precedent for other courts to study and apply in

trials 33 Due to its non-disclosure characteristics, “precedents in I†etmam is not the entire verdict or decision of the Court.“ They do not contain the detailed procedure

of argument-making, or individual judge's reasonings, opinions and explanations on

the case The precedents encompass solely “the reasoning, rulings in the judgment,and decisions that have legal effect of the Court.” These are the contents within the

judgment or decision of the Court containing arguments to explain legal issues,

events, pointing out principles or legal violations that need to be applied, or

expressing justice for issues that do not have specific statutory regulations 35 In

addition, a distinctive feature of precedents is that they must receive formal issuance

by the Supreme People's Court (SPC) Notably, the application of precedents iscurrently confined to a small number of cases There are only 70 precedentsauthorized by the Supreme C out until then’ These policy limitations have relegatedprecedents to a subordinate role in Vietnam, being considered merely as a

supplementary legal source

In summary, the concept of precedent is diverse, national courts generallyadhere to earlier cases but also reserve the ability to depart from them The level of

deference to prior cases and the latitude to depart from established rulings can varysignificantly among jurisdictions and even within the same jurisdiction, depending

on the specific court and the nature of the issue at hand In civil law countries, theprecedent value of cases may be comparatively weaker than in common law systems,although it remains a well-established practice

1.1.2 Definitions of precedent in international law

For a long time, the concept of precedent in international law has remainedincomplete In 1967, Sir Robert Jennings commented that “Very little has been done

* Resohution No 04/NQ-HDTP dated June 18, 2019, of the Judicial Council of the Supreme People’s Court (SPC) on the procedure for selection, announcement, and application of judicial precedents.

* Nguyên Minh Tuân (2022), “Discussing Judicial Precedents and the Application of Judicial

Precedents in Vietnam”, Legislative Research Jornnal No 01, p.449

}$ Tran Thang Long (2022), The role of intemational investment arbitration precedents, Legal

Sciences Jounal, No 4, p 71 š

`5 According to the govermment-operated legal news portal about legal cases (Trang tin điện tir về an 16), https ://anle toaan gov-vavivebcenter/portaV/anle/anle, accessed 25th March 2024

to elaborate principles governing the use of precedent in international law.” 37

Historically, the issue of precedent in international law was carefully considered forthe first time during the establishment of the Permanent C ourt of Arbitration in the

Hague Conventions of 1899 and 1907 The drafters of these agreements werecertainly aware that the Court they had created was limited and was not permanent

However, they hold a strong belief that “when a controversial issue has been settled

in the same way by several arbitration tribunals, the chosen solution will enter the

body of international law “3! This expectation might be true to some extent at the

time being, but first, it is important to concede that there is completely no de juredoctrine of precedent in any major international legal regimes However, it wouldappeer that at least tro major international legal regimes adopt a type of de factostare decisis doctrine

The first regime to which this study refers is the International C ourt of JusticeCJ) ot World Court In the ICJ jurisprudence, judgments are also explicitly subject

to Article 59 of the Court's Statute, emphasizing that “The decision of the Court has

no binding force except as between the parties and in respect of that particular

case “3? This approach, indeed, excludes the formal doctrine of precedent out of the

ICJ realm It indicates that in a subsequent case featuring different parties but

conceming the same or a similar issue, a previous ruling is not legally bindingMoreover, it extends this principle by stating that even if one of the partiesis involved

in a subsequent case where the same or a similar issue arises, a prior ruling carries no

‘binding authority Finally, we can infer from it that if the ICJ is not bound by its ownprevious decisions, theoretically, there is no collective memory in the internationallegal system, if by “collective memory* we mean prior decisional law is a source of

lew for the future.

On the other hand it would be unwise to completely deny the influence ofjudicial decisions in ICJ In fact, past decisions are highly persuasive to the World

Y Robert Jennings (1967), “General Course on Principles of International Law, Acadenp: of

Juernational Law” 121 Recueil des cous 2, p 342.

** Gilbert Guillaume (2011), “The Use of Precedentby Intemational Judges and Arbitrators,” Jounal

of International Dispute Settlement, Volione 2, https //doi.org/10.1093/jnlidsfidgO25, p 15

» Article 59, Statute of the ICJ,

“ Raj Bhala, supra note 18, p 865

Court in practice The custom of citing prior decisions was begun in 1949 when the

Court referenced “to the views expressed by the Permanent Cotzt of International

Justice with regard to similar questions of interpretation ““! Since then, this practice

has been consistently followed, with occasional citations of extracts from priordecisions As the Court's jurisprudence grows, the catalogue of preceding cases

lengthens, yet this has not discouraged the C ourt from explicitly referring to many, ifnot all, of them For instance, in recent instances such as the Kasikili/Sediudt case,

the Court cited seven earlier cases to underscore the significance of subsequent party

practice in treaty interpretation? Similarly, in its 2004 Wall advisory opinion

spanning merely three printed pages, the Court made an impressive 28

cross-references to its prior decisions.*? The court itself explains its approach to prior cases

in the following manner: “It is not a question of holding [the parties in the instantcase] to decisions reached by the court inprevious cases The real questionis whether

in this case, there is cause not to follow the reasoning and conclusions of earlier

cases, “44

Interms of regulations, Article 38(1)(d) of the ICJ Statute listed earlier judicial

decisions as: “stibsidiary means for the determination of rtiles of law”, this referenceencourages the Court to consider its own case law as a privileged means ofdetermining the rules of law to be applied in a particular case.*’ Moreover, it is

perhaps more accurate to recognize the in-built limitations of subparagraph (đ) as a

tribute to its potential potency In specific, legal practitioners, when in seek of more

concrete authority for their reasoning, may be led to the inclusion of judicial decisionsand the teachings of highly qualified publicists as subsidiary means for determiningrules of law Due to its ability to offer immediate and precise answers to highly

“ Corfi Channel case, Umted Kingdom v Albania, ICJ Reports (1949),

httpz:Íhrwwicj-€lj.orgfcazel1.

© Kasikili/Sedudu Island (Bobwana/Nanvbia) Judgement, ICJ Reports (1999),

https:/hrerv.icj-cij.org/case/98.

* Legal Consequences of the Comtmetion of a Wall in the Occupied Palestinian Temitory, ICJ

Reports (2004), https:/Avwvr icj-cij org/ease/131

* Land and Mazitime Boundary between Cameroon and Nigena, Preliminary Objections Jadgment,

(11 Fane 1998), ICJ Report, https :/hywrw icj-cij org/case/94, para 28

* Article 38 ICJ Statute

* Jan Paulsson (2018), supra note 5, para 4 25.

specific legal questions, precedent is always examined with cưcumspecionf?

Overall, judicial decisions lack binding force on third parties, and this category isexplicitly designated as a “subsidiary means” for determining rather than

establishing rules of law

Sharing the same view with the ICJ Court, the WIO Appellate Body also

finds that reports on previous cases are vital although the formal doctrine of

precedent is non-existent in WTO As stated in the Shrimp Turtle II case: “Adoptedpanel reports are am important part of the GATT acquis They create legitimateexpectations among WIO Members and therefore, should be taken into account

where they are relevant to any dispute "4t

In summary, the theory surrounding the legal status of precedents ininternational law reflects a delicate balance between their potential influence andinherent limitations While there is nothing such as formal doctrine of stare decisis, itappears that there is a type of de facto stare decisis doctrine that lies within at least

two major international legal regimes In the realm of international investment

arbitration, this feature becomes even more crucial as the corpus of decided casesrapidly expands, establishing its status as a source of law equal to other internationalcourts and tribunals The following sections of this paper provide a concise overview

of precedent within the particular domain of international investment arbitration

1.2 Investment Treaty Arbitration

1.2.1 Investment treaty

Foreigninvestment plays a pivotal role in the global political economy Recent

analysis indicates that the global foreign direct investment has reached roughly 1.3

trillion US dollars in 2022 Foreign investment exerts a significant influence on

worldwide economic development, fostering intense competition among bothdeveloped and developing nations to attract such investments Traditional approaches

“ibid

+* United States Import Prohibition of Certain Š lưimp and Shrimp Products, WTO Appellate Body Report, 12 October 1998, WT/DS 5S/ABIR, para 108.

#*“ G Kauôuamn-Koler (2006), “arbitral precedent: Dream, necessity or excuse?: The 2006 Freshfields

Lecture Arbitration Intemational”, https ://doi.org/10.109 3/arbitration/23.3.357, p 361

8° UNCTAD's World Investment Report 2023, https://unetad

org/publicationhvorld-investment-report-2023

to luring foreign investment include economic sector liberalization, provision of tax

incentives, and enhancement of dispute resolution mechanisms Another strategy for

encouraging foreign investment involves the establishment of investment treaties 5}

Investment treaties are agreements between two or more governments, they

help safeguard investments made by eligible investors within the territories of thesignatory nations For instance, bilateral investment treaties, such as one between theUnited States and Ukraine, or regional trade agreements like the Central AmericanFree Trade Agreement (CAFTA), grant reciprocal investment rights to private

investors from participating countries? Substentively, these treaties guarantee

investors certain protections, such as protection against expropriation withoutcompensation, freedom from discrimination based on nationality, the right to fair and.equitable treatment, and assurance that states will honor contractual obligations.Procedurally, the existence of investment treaties enables investors to seek redressthrough dispute resolution mechanisms if they believe their substantive rights havebeen violated by the host state This mechanism aims to move beyond traditionalforms of dispute resolution, providing a neutral forum for resolving investment

disputes Nowadays, the international investment agreement is one of the mostcommon types of international investment agreement, consisting of 2,832 bilateral

investment treaties with 2220 treaties in force and 455 other treaties with investment

protection provisions.‘ According to ICSID reports, until 2021, there are over 200

states have entered into more than 3,300 international investment agreements,enabling investor—state arbitration under the ICSID Arbitration Rules or alternative

systems This proliferation of agreements has formed the background for over 800 investment treaty arbitrations against more than 100 states in the last 25 years 5

1.2.2 Investment Treaty Arbitration

'! Susan D Franck (2007), “Integrating Investment Treaty Conflict and Dispute Syztenu Design’,

Minnesota Law Review, Vol 92, p 161.

* Susan D Franck (2009), “Development and outcomes of investment treaty arbitration”, Harvard

Fnternational Law Journal, Vol 50, p 442.

S Data of United Natiom Conference on Trade and Development,

hittp:/Amvestmentpolicylmb unctad org/ILA (accessed at 1 April 2024).

“Introducing ICSID,

hittps-Hficsid worldbank org/sites/defaultifiles/publications/ICSID_Primer_Dec2021 pdf

‘SICSID, The ICSID Caseload—Statistics, Issue 2017, p 18

Investment treaty arbitration traces its roots back to the commencement of the

Convention on the Settlement of Investment Disputes between States and Nationals

of Other States (ICSID Convention) in 1965 55 This convention is drafted following

an unsuccessful attempt to negotiate a comprehensive multilateral agreement onsubstantive rules governing international investment law Recognizing the political

challenges, the authors of the ICSID Convention prioritized the establishment of aframework for investor—State arbitration over the pursuit of one comprehensivesubstantive rules Initially, the authors of ICSID Convention fully acknowledged ofundeveloped and controversial nature of international investment law As in Article42(1) of ICSID Convention the drafters empowered tribunals to “apply such rules ofgeneral international law as may be applicable.” Additionally, in Article 42(2), theyprohibited tribunals from declaring anon liquet “on the ground of silence or obscurity

of the law ” This foresight anticipated the need for tribunals to develop more specificrules of international investment law to resolve disputes effectively Therecommendations outlined in the Report of the Executive Directors of the World Bank

emphasized that when tribunals applied international law in investor-State disputes,

they should interpret this term in alignment with Article 38(1) of the ICJ Statute.5? In

this manner, the ICSID introduced two main aspects to investment treaty arbitration:

an expectation that tribunals would help shape international investment law and arequirement for them to use established legal sources

While the number of investment treaties is substantial, when it comes toinvestment arbitration, investors retain much fewer options Generally, they can elect

to arbitrate before one or more of the following an ad hoc tribunal organized underthe United Nations Commission on Intemational Trade Law (“UNCITRAL”)Arbitration Rules, the Stockholm Chamber of Commerce, or a tribunal organized

through the World Bank's ICSID.*® The mechanics of those arbitration are relatively

straightforward Investors initiate arbitration by submitting a Request for Arbitration

S* Patrick M Norton (2018), “The Role of Precedent in the Development of Intemational Investment

Law”, ICSID Review, Vol 33 No I, p 283

“Intemational Bank for Reconstmction and Development (1965), “Report of the Execunve Directors

on the Convention”, on the Settlement of Intemational Disputes betyeen States and Nationals of Other States

** Susan D Franck (2009), supra note 50, p.443

to their selected forum Then, the process of selecting a tribunal begins Typically

panels of three arbitrators resolve investment disputes The investor selects onearbitrator and the respondent state picks a second arbitrator The default rules for

selecting the final arbitrator, the presiding arbitrator or chair, vary according to theinstitution chosen At ICSID, parties can agree on the appointment of the presiding

arbitrator, and where the parties cannot agree, ICSID makes the final appointment.

In contrast, in ad hoc UNCITRAL arbitration, party-appointed arbitrators agree on

the presiding arbitrator All arbitrators are generally required to be impartial and to

contribute to the adjudicatory outcome Nevertheless, the presiding arbitratorperforms a different role than the party-appointed arbitrator, and his or herappointment is a matter of vital importance The presiding arbitrator can influencethe style of international arbitration and make critical procedural decisions Somesuggest that presiding arbitratarsresolve disputes between party- appointed arbitratorsand, in some cases, become the ultimate decision makers For these reasons, the role

of the presiding arbitrator is most interesting to parties Once the tribunal is

constituted fully, the parties gather evidence and present arguments The tribunal thenrenders an award on the merits of the dispute that is enforceable worldwide

Investment treaty conflicts also vary Some conflicts can involve political

elements, such asthe “Cochabamba Water Wars,” in which the privatization of waterand sewer services in Bolivia led to social unrest, protests, deaths, and the imposition

of martial law.5Ì A more common type of investment treaty dispute is a private one,

such as the governmental revocation of a private banking license or a breach of acommercial contract to which the government is a party Irrespective of howpoliticized the conflict may appear, the cause of action generally involves: foreigninvestors asserting that a host government has behaved in a manner that violates thetreaty and has damaged their investment, and if the dispute is not otherwise resolved,

investors seek redress by requiring the government to arbitrate the dispute.

* Article 29 ICSID Convention

“ Article 7(1) UNCITRAL Anbitation Rules

*! Olivera, O., & Lewis, T (2004) “Cochabamba!: Water War in Bolivia”, South End Press, p 47

33-1.3 Precedents in the reabn of Investment Treaty Arbitration

1.3.1 The theoretical status of precedents

Understanding the status of precedent in investment treaty arbitration beginswith recognizing the disregard of “stare decisis“ doctrine in this realm Similar to

other international law regimes such as ICJ or WTO, substantive investm ent treatiesand the procedural rules in the ICSID Convention do not incorporate a doctrine ofstare decisis Article 53 (1) of the ICSID Convention, states that arbitral awards “shall

be binding on the parties,” this provision is interpreted by some scholars as

incompatible with a doctrine of precedent in the strict sense of binding authority?

Additionally, past arbitral awards are not expressly identified as valid sources ofauthority in the ICSID Convention Given that Article 42(1) clearly states that: “TheTribunal shall decide a dispute in accordance with such rules of law as may be agreed

by the parties In the absence of such agreement, the Tribunal shall apply the law ofthe Contracting State party to the dispute (including its rules on the conflict of laws)and such rules of international law as may be applicable”, of which precedent 1s notmentioned at all However, there is an argument supporting the consideration of pastawards by tribunals The ICSID Convention instructs tribunals to apply “rides of

international law,“ Although it is beyond doubt that judicial decisions do not hold

the force of law in the hierarchy of international law sources, they are recognized as

“subsidiary means for determining rules of law” as definedin Article 38(1)(d) of ICIStatute The International C ourt of Justice cites its own decisions and those of arbitral

tribunals for precedential guidance, akin to how common law courts cite case law.

Thus, despite lacking formal status, past arbitral awards have been cited in a mannerresembling precedent development in common law contexts

There are several challenges that prevent the application of precedent in ITA.First, there is no institutional continuity, as each tribunal is formed ad hoc, they makedecision for the sole purpose of resolving that specific dispute Therefore, tribunallacks incentives to promote coherent legal development Each decision is made

© G Kanfimamr Kohler, supra note 47, p 368

* Article 42(1) ICSID Convention

“ Andrea K Bjorklund (2008), “Investment Treaty Arbitral Decisions as Jioisprudence Constante”,

UC Davis Legal Studies Research Paper No 158, p 265, 266-68

without concern for the values that strengthen the collective framework, or

subsequent cases in particular; let alone contributing to the growth of this arbitrationsystem Second, there isno hierarchical structure to ensure uniformity or authority to

determine correctness That means there isno appellate court to ensure uniformity byoverruling wrong decisions, but also that there is no authority to say which view iscorrect in the first place Third, the fragmented nature of substantive law across

numerous treaties complicates reliance on precedent due to variationsin language and

negotiation history Presently, there are over three thousand Bilateral InvestmentTreaties, each negotiated between different sovereign entities and under diverse

circumstances Additionally, investment arbitrators are not handling a fixed

caseload Despite calls for establishing a permanent appeals mechanism, institutionalcontinuity is absent within the current framework, where tribunals are constitutedbased on the agreement of the parties involved Given the nature of investment lawand the inherent characteristics of arbitration, it is not surprising that ensuring equaltreatment of litigants has not been a prominent consideration in advocating for

consistency in investment arbitration

Despite these challenges, the citation of past decisions has become routine.This practice is partly driven by the vagueness of treaty provisions, where precedent

is an irreplaceable resource in providing clarity and guidance By referencing earlierdecisions, tribunals can offer more reasoned analyses, narrowing the discretioninvolved in interpreting broad concepts like fair and equitable treatment

1.3.2 The practical status of precedents

The predominance of precedent in ITA awards is undeniable as evidenced byempirical studies indicating that case law is the most widely used and most important

source of interpretive argument in ICSID decisions Firstly, it might be useful to

examine the ICSID tribunal's approach to precedent in the process of interpretation

*$ Irene M Ten Cate (2013), “The Costs of Consistency: Precedent in Investment Treaty Arbitration”,

Cohanbia Jotgnal of Transnational Law, Vol 51, p 450

“ Ole Knsban Fanchald (2008), “The Legal Reasoning of ICSID Txbunals: An Empiical

Analysis”, European Jounal of International Law, Volume 19, Issue 2, p 335

Based on Ole Kristian F auchald’s study on various cases, this list outlines how caselaw was applied within the ICSID decisions.”

e References to how other tribunals approached similar issues, including testsapplied by former tribunals

e Citations of interpretive arguments used by other tribunals, such as justifying

references to preparatory work

e Incorporation of the reasoning, conclusions, and preferences of other tribunals.

e General references to case law as supportive arguments or establishing starting

points for subsequent reasoning

e Utilization of case law in a contrary argument or as an analogy argument,highlighting similarities in cases for the same conclusions

These uses were largely as expected and in line with common practices seen

in other tribunals The diverse approaches observed in the decisions were notsurprising, given the ad hoc nature of ICSID tribunals Secondly, for the purpose ofthis analysis, cases are categorized into four primary groups depending on the

investment tribunals These groups consist of UNCITRAL tribunals,® the Iran — US

Claims Tribunal, and various other investment tribunals The category labeled as

“other investment tribunals" encompasses a wide array of tribunals, which includesseveral claims commissions

In Fauchald’s study analyzing the legal reasoning of ICSID tribunals, of 98awards issued by the ICSID tribunals a significant majority of tribunals did notfrequently refer to Article 38(1) of the ICJ Statute and its recognized sources of

international law The study disclosed that only a small number of tribunals, merely

a fraction of the total, made explicit references to customary international law in 34

of the 98 awards, and general principles of law in a mere four instances related tosubstantive law Moreover, this paper highlighted the infrequent ex amination of state

© Fauchald, supra note 64, p 336

“ These are tnbunals established according to the 1976 Arbitration Rules adopted by the UN Commission on Intemational Trade Law (UNCITRAL) and reconunended by UN General Assembly

Resolutions 31/98.

*° Fauchald, supra note 64, 333-4

practice in the tribunal’s deliberations.” The most striking revelation from the study

was the widespread reliance on case law and the opinions of scholars within thejurisprudence of the tribunals Notably, ICSID case law was cited in 90 out of the 98

cases, ICJ case law in 46 cases, and case law from other investment treaty tribunals

in 30 cases Additionally, the tribunals referenced case law from the Iran-US Claims

Tribunal in 22 cases, showcasing the extensive reliance on precedents and decisions

from various legal forums.”!

Similarly, a study in 2007 examining 207 publicly available investment treatyarbitration awards found that citations of case law from prior investor—State tribunals

were prevalent”? The study noted widespread references to earlier ICJ, Iran-US

Claims Tribunal, and mixed arbitration tribunal rulings Particularly noteworthy wasthe period from 2004 to 2006, during which ICSID and ICSID Additional Facilityawards cited an average of 10-12 earlier ICSID awards

A third study conducted during the same period reported that nearly 45 percent

of ICSID awards on the merits and75 percent of party submissionsin NorthAmericanFree Trade Agreement (NAFTA) cases had made references to decisions of the Iran—

US Claims Tribunal These findings collectively highlighted the well-establishedpractice of citing and relying on precedents in the field of investment treaty

arbitration’?

While these studies may be slightly outdated, a quick examination of morerecent awards from UNCTAD affirms that referencing earlier cases has become a

nearly universal characteristic of investment treaty arbitration.” This trend is also

reflected in treatises on international investment lew, where tables of authorities often

”! Fauchald, supra note 64, 324-6

”! Fauchald, supra note 64, 356-7

* Jeffery Conunission (2007), “Precedent in Investment Treaty Arbitration - A Citation Analysis of

a Developing Jansprudence” Journal of International Arbitration, Vol 24, Issue 2, p.149-151.

?* Chnstopher Gibson and Cluistopher Drahazol (2006), 'ïranUruted States Claims Trbunal

Precedent in Investor-State Arbitration”, Journal of International Arbitration, Volume 23, Issue 6,

p 521, 544.

* UNCTAD, Investor-State Dispute Settlement: Review of Developments in 2014, No 2,

https -/Aanctad org/systenvfiles/official-document/vebdiaepcb 2014d4_en pdf

comprise extensive lists of case law citations.’ The analyses of the rules governing

international investment law presented in these treatises are frequently rooted inmeticulous examinations of tribunal awards Notably, references to the Article 38(1)

canon are as rare in the indices of these treatises as they are in the awards themselves

Overall, in interpreting the treaties, tribunals frequently examine analogouscase law and follow the reasoning of other tribunal This behavior is demonstrated inthe number of earlier cases cited in the moderately archaic and contemporary tribunalawards In contrast to this popularity, the ITA jurisprudence apparently does notrecogmze the doctrine of stare decisis and, concurrently considers precedent merely

as the secondary means of interpreting rules of law In fact, several tribunals havepointed out that they remain free to deviate from previous case law tribunals and theissues under each case must be determined on their own merits These contrastingaspects create a somewhat contradictory status for precedent in ITA

* Rudolf Dolzer and Christoph Scheuer, “Principles of International bwestment Law” (xiv-xxvi

(isting 12 pages of cases that are cited in the text)

CHAPTER 2THE ROLE OF PRECEDENTS IN INVESTMENT TREATY

ARBITRATIONChapter 2 of this paper examines the role of precedent in ITA awards First, itinvestigates the substantive role of precedent, which is the central role in tribunal’sidentification and application of mules of international investment law Second, thisstudy delves into the law developing function of them The case law contribution tothe consistency of ITA jurisprudence is ultimately considered

2.1 Precedents as a law interpreter

2.1.1 The challenges surrounding applicable law in investment treaty arbitration

To provide a deeper insight into the prevalent practice of citing arbitral caselaw as interpretative arguments in ITA awards, it is essential to start by examining thechallenges surrounding applicable law in this area of arbitration These challengesshed light on the complexities inherent in determining applicable law, therebyhighlighting why arbitral case law is such a crucial tool for the determination of rules

of law

(i) Ambignity in International Investment Agreement

The substantive legal provisions outlined in the applicable IIA establish

obligatory rules for the tribunal However, a significant challenge arises from the factthat the most crucial treaty terms are often highly ambiguous standards or, in the

words of Michael Reisman, “evaluation ries “6 This term refers to provisions or

standards within treaties that are subjective and open to interpretation It typicallyinvolves broad or vague language that requires evaluative judgment to determine theirapplication and scope Evaluation mules may include terms such as "fair and equitabletreatment, * “full protection and security ” or “just compensation," which lack precisedefinitions and specific guidance on what constitutes fair treatment or adequate

protection for foreign investors can be interpreted differently depending on thecircumstances of each case While these terms may evoke notions of justice and

* Michael Reisma (2015), “Canute Confronts the Tide: States vs Tribumals and the Evolution of the

Miminuon Standard in Custommy buernational Law”, Proceedings of the ASIL Ammal Meeting,

p6l6-617

fatrness, they offer little concrete guidance without more specific and authoritative

instructions Moreover, these terms grant tribunals a considerable degree ofdiscretion, creating tension with their limited authority to interpret treaty provisions.Consequently, arbitrators must assess and evaluate the specific facts and context ofeach dispute to apply these rules effectively, leading to potential inconsistency anduncertainty in their interpretation and application

Article 31(1) of the VCLT provided that: “A treaty shall be interpreted in goodfaith in accordance with the ordinary meaning to be given to the terms of the treaty

in their context and in the light of its object and prapose “7”, as a guidance to aid the

tribunals in comprehending and interpreting the vague text in treaty However, theordinary meaning of many treaty terms is often unclear, and the objectives and

purposes are typically equally vague.”Š Thus, interpreting ambiguous treaty clauses

by referencing equally ambiguous object and purpose clauses results in a circularargument, an endless loop of indeterminacy

(ii) Ambiguity in Customary International Law

In the circumstance of ambiguity that could not be resolved through treatyterms, investment treaty tribunals frequently rely on customary international law to

aid in interpreting the treaty”” Whether applied directly or used to ascertain the

ordinary meaning of a term in an IIA, tribunals still encounter significant ambiguityissues For instance, the concept of “fair and equitable treatment" has roots in CILdoctrines such as “denial of justice” end “minimuan international standard® (MIS).Several tribunals have sought to give content to these standards by identifying factorsthat may assist in determining whether the facts of a particular case violate the FET

or MIS standards However, these doctrines are also predominantly ambiguous, and

their interpretation is far from universally agreed upon The content and relationship

of these doctrines to modern interpretations of fair and equitable treatment remain.subjects of considerable debate

” Article 31(1) Vierma Convention on the Law of Treaties 1969

* Pahick M Norton, supra note 54 p 290-1

VCLT art 31(1)(c) males of CIL are “relevant rules of international law applicable in the relations

between the partiesTM and should be taken into account”

* SD Myers, Buc v Government of Canada, UNCITRAL, Partial Avvard (13 November 2000), para

134

(a) leaves the meaning ambiguous or obscure;

or (b) leads to a result that is manifestly abstzd or unreasonable

This article of the VCLT also permits reference to the treaty’s preparatory(Travaux Préparatoires) work or materials related to the drafting of a treaty orinternational agreement as a “subsidiary means” of interpretation These materialstypically include draft texts, reports, minutes of meetings, and correspondenceexchanged during the negotiation process leading to the finalization of the treaty, butthey are rarely available to tribunals or helpful when they are According toestablished doctrine, a rule of CIL requires evidence of reasonably consistent Statepractice and a demonstration that the practice was driven by a sense of legalobligation—an opinio juris However, satisfying both criteria is a difficult issue.Overall, the uncertainties surrounding specific rules of CIL reflect the fundamentaluncertainties in the secondary rules of international law governing the properidentification of primary CIL mules

2.1.2 Arbitral precedents as a subsidiary means for the determination of the rules

of law

Arbitral case law plays a crucial role in elucidating and interpreting the rules

of international investment law According to Luigi Condorelli prior decisions serve

as a "fianction of legislative stqplementaiten "È In cases where there are no treaty

rules or when treaty rules are unclear, international courts and tribunals use awards

to avoid complications and disputes related to the application of CIL The ICSIDtribunal considers awards as a tool to clarify legal rules They act as supplements tothe shortcomings of treaty law Secondly, awards serve as tools for legal

* Luigi Condorelli (2004), “Conclusions generals”, The Intemational Criminal Court and the Crime

of Aggression, Taylor & Francis

interpretation For example, in the Merrill & Ringv Canada case, arbitrators affirmed

the utility of arbitral awards as a basic tool for legal interpretation, although they also

noted that awards themselves “are not a type of legal source “83

The ICSID tribunals and general investment tribunals, consider awards as

“subsidiary means” in determining legal rules, as outlined in Article 38(1)(d) of theStatute of the ICJ implicitly referred to in Article 42(1) of the ICSID ConventionThis delicate connection between these two jurisprudences is started in Article38(1)(d) of the Statute of the International Court of Justice (CJ) enumerates thesources of international law, stating that the C ourt shall apply “judicial decisions andthe teachings of the most highly qualified publicists of the various nations, assubsidiary means for the determination of rules of law.” This provision essentiallyrecogmizes that judicial decisions can serve as supplementary source for determiningrules of law in international disputes While in the realm of international investmentlaw, Article 42(1) of ICSID C onvention states that the Tribunal established under the

Convention shall decide the dispute in accordance with such rules of internationallaw as may be applicable if “such rules of law as may be agreed by the parties” in

absent In essence, Article 42(1) of the ICSID Convention acknowledges that theTribunal may refer to sources of international law beyond the explicit agreement of

the parties, including judicial decisions and writings of legal scholars, to assist ininterpreting the agreed rules of law This provision aligns with the broader framework

of international law as recognized in Article 38(1)(d) of the ICJ Statute

The essence of subsidiary means will be explored through authoritativeinterpretation in this section As mentioned in part 2.1.1, many IIAs establishobligations regarding treatment in line with minimum international customarystandards, including obligations such as “fair and eqatable treatment” (FET) “fullprotection and security" (FPS), “indirect expropriation," or "national treatment.”These obligations in general, and FET standards specifically, often remain somewhatvague Thus, it inevitably led to earlier arbitral decisions to properly interpret thoseindeterminate terms This function of case law should be examined via the AIG v

© Merril & Ring Forestry LP v Canada, ICSID Case No UNCT/O7/01, Asvazd, para 188