The role of precedent in investor-state arbitration has gained considerable attention in legal scholarship.9 This is not surprising given the sometimes inconsistent and contradictory conclu- sions on points of law reached by different arbitral tribunals.10 Inconsistent application of law in investor-state arbitration hampers the predictability of the investment regime and the credibility of the dispute resolution system,11 and can therefore undermine legitimacy of the award and the investment arbitration system as a whole. Since relying on the experience of past decisions can contribute to a more coherent, predictable, and stable legal framework, the interest in the role of precedent in investor-state arbitration is understandable.12 What appears to be missing, however, is an analysis of the role of precedents issued by courts or tribunals other than investment arbitral tribunals. This section will briefly outline the legal status and value of ICSID precedents in ICSID arbitration and compare them to those of ICJ precedents.
1. THe LegAL STATUS OF A PReCeDeNT
It is well established that the doctrine of binding precedent (stare decisis)13 according to which courts or tribunals are bound by previous decisions of other courts or tribunals does not gener- ally apply in international law.14 Investor-state arbitration is no exception as there is no obligation
9. See e.g., Andres Rigo Sureda, ‘Precedent in investment treaty arbitration’ in Christina Binder and others (eds), International Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford University Press 2009); Christoph Schreuer and Matthew Weiniger, ‘A doctrine of precedent?’ in Christoph Schreuer, Peter Muchlinski and Federico Ortino (eds), The Oxford Handbook of International Investment Law (Oxford University Press 2008); Gabrielle Kaufmann-Kohler, ‘The 2006 Freshfields Lecture—arbitral precedent: dream, necessity or excuse?’ (2007) 23(3) Arbitration International 357; Jan Paulsson, ‘The role of precedent in investment arbitration’ in Katia Yannaca Small (ed), Arbitration Under International Investment Agreements (Oxford University Press 2010); Tai-Heng Cheng, ‘Precedent and control in investment treaty arbitration’ (2007) 30 Fordham International Law Journal 1014.
10. See e.g., SGS Societé Générale de Surveillance S.A. v Republic of the Philippines (Decision on Jurisdiction, 29 January 2004) ICSID Case No ARB/02/6, and SGS Societé Générale de Surveillance S.A. v Islamic Republic of Pakistan (Decision on Jurisdiction, 6 August 2003) ICSID Case No ARB/01/13.
11. Kaufmann-Kohler (n 9) 376.
12. Schreuer and Weiniger, ‘A doctrine of precedent?’ (n 9) 1189.
13. The doctrine originates in the Latin maxim ‘stare decisis et non quita movera’ (to stand firmly by things decided and not to disturb settled points). Black’s Law Dictionary (7th ed., 1999) 1414. The article uses the term precedent loosely as a judicial or arbitral decision (or more specifically, the rule of law established therein) ren- dered in a previous legal case that is either binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts.
14. Mohamed Shahabuddeen, Precedent in the World Court (Cambridge University Press 1996) 97.
for an investment tribunal to follow a judgment issued in a decision of an earlier tribunal. Article 53(1) of the ICSID Convention supports this view by stating: “The award shall be binding on the parties … ,”15 which, according to Professor Schreuer, may be interpreted as “ … excluding the applicability of the principle of binding precedent to successive ICSID cases.”16 In addition, noth- ing in the Convention’s travaux préparatoires indicates that the doctrine of stare decisis should be applied.17
The practice of ICSID tribunals supports this position as they have repeatedly stated that they do not consider themselves to be bound by previous ICSID awards. This notwithstanding, tribunals have often paid due account to previous decisions of other arbitral tribunals, a view well illustrated in the award in El Paso v. Argentina:
[T] he present Tribunal knows of no provision … establishing an obligation of stare decisis. It is nonetheless a reasonable assumption that international arbitral tribunals, notably those estab- lished within the ICSID system, will generally take account of the precedents established by other arbitration organs, especially those set by other international tribunals.18
The holding that ICSID tribunals are not bound by previous decisions but will nevertheless consider such decisions when appropriate has become generally accepted in ICSID arbitra- tions.19 In rare cases tribunals went a step further and suggested that they actually have a duty to follow solutions adopted in a series of consistent cases (jurisprudence constante),20 and the duty to contribute to the harmonious development of investment law:
[The tribunal] believes that subject to compelling grounds, it has a duty to adopt solutions estab- lished in a series of consistent cases. It also believes that, subject to the specifics of a given treaty and of the circumstances of the actual case, it has a duty to seek to contribute to the harmonious development of investment law and thereby to meet the legitimate expectations of the commu- nity of States and investors towards certainty of the rule of law.21
15. Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for signature 18 March 1965, entered into force 14 October 1966) 575 UNTS 159 (ICSID Convention) art 53(1).
16. Schreuer and Weiniger, ‘A doctrine of precedent?’ (n 9) 1190.
17. ibid.
18. El Paso Energy International Co. v Argentine Republic (Decision on Jurisdiction, 27 April 2006) ICSID Case No ARB/03/15, [39] (El Paso).
19. See e.g., AES Corp v The Argentine Republic (Decision on Jurisdiction, 26 April 2005) ICSID Case No ARB/02/17, [17]-[33] (AES); Suez, Sociedad General de Aguas de Barcelona S.A. v Argentine Republic (Decision on Jurisdiction, 16 May 2006) ICSID Case No ARB/03/17, [26] (Suez); ADC Affiliate Limited and ADC &
ADMC Management Limited v Republic of Hungary (Award, 2 October 2006) ICSID Case No ARB/03/16, [293] (ADC Affiliate Limited); Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v Islamic Republic of Pakistan (Decision on Jurisdiction, 14 November 2005) ICSID Case No ARB/03/29, [76].
20. For more on ‘jurisprudence constante,’ see e.g., Kaufmann-Kohler (n 9) 360; Andrea K. Bjorklund,
‘Investment Treaty Arbitral Decisions as Jurisprudence Constante’ (2008) UC Davis Legal Studies Research Paper No. 158, <http://ssrn.com/abstract=1319834>.
21. Saipem S.p.A. v People’s Republic of Bangladesh, (Decision on Jurisdiction, 21 March 2007) ICSID Case No ARB/05/7, [67]. See also Quiborax SA Non-Metallic Minerals SA v Plurinational State of Bolivia, (Decision on Jurisdiction, 27 September 2012) ICSID Case No ARB/06/2, [46]. On divergent views of arbitrators, see Burlington Resources, Inc. v Republic of Ecuador (Decision on Liability, 14 December 2012) ICSID Case No ARB/08/5, [187].
Whether or not tribunals indeed have such a law-developing duty or, on the other hand, a duty to settle the dispute at hand as conferred upon them by the parties, it is an undisputable fact that the vast majority of ICSID tribunals have referenced previous ICSID decisions in some manner. In fact, the growth of the body of ICSID case law has led to the growth of citations to prior investment treaty decisions and awards.22 This confirms that despite the absence of the doctrine of binding precedent, there nevertheless exists a strong, informal system of precedent, which operates by the authority of persuasiveness.
ICSID tribunals, however, do not only consider previous decisions of other ICSID tribunals in the reasoning of their awards, but rely also on precedents of adjudicative bodies which do not operate within the ICSID dispute resolution system and even those which are not primar- ily vested with jurisdiction to settle investment treaty disputes (external precedents).23 The use of precedents across different legal regimes has become a popular research topic and has been described by different names. While international jurisprudential dialogue implies a recipro- cal use of precedents of adjudicative bodies of different judicial regimes,24 the terms borrowing of precedent or monologue denote a one-sided use of precedents of one adjudicative body by another, clearly pointing out the asymmetric nature of such interaction.25
In their awards, ICSID tribunals have been citing decisions of different international courts and tribunals, including decisions of the ICJ and its predecessor, the Permanent Court of International Justice (PCIJ),26 the World Trade Organization’s (WTO) dispute settlement and appellate bodies, the European Court of Human Rights, the European Court of Justice (ECJ), and the International Tribunal on the Law of the Sea.27 Interestingly, but not surpris- ingly, ICJ precedents have been by far the most frequently quoted by ICSID tribunals, which makes the interaction between these two judicial systems a fruitful subject of research.28 At first blush, the reasons for compendious use of ICJ jurisprudence may seem obvious, ranging from the prestige and the authority of the World Court as a “principal judicial organ of the UN”29 to its well-established role in pronouncing customary international law and develop- ment of international law in general. They will be further discussed in the subsequent sections.
Before exploring the main features of the treatment of the ICJ precedent in ICSID arbitra- tion, it is important to determine its legal status. Clearly, the absence of a stare decisis doctrine in ICSID system applies not only to ICSID but also to ICJ and other external precedents. While Article 53(1) of the ICSID Convention refers only to ICSID awards, its equivalent, Article 59
22. Commission (n 7) 142 and 149; Fauchald (n 7) 335. Schreuer notes that the ‘reference to previous ICSID decisions used to be relatively scant but has increased with the passage of time. The reason for the infrequent references … was their relatively small number and the difficulty in gaining access to them.’ See Christoph Schreuer, The ICSID Convention: A Commentary (Cambridge University Press 2001) 617.
23. This term is to be distinguished from ‘foreign precedent’ as understood in a municipal context. See below, Guillaume (n 169). Pellet uses terms ‘exogenous’ or ‘external’ case law. Pellet (n 6) 230.
24. Anne-Marie Slaughter, ‘A typology of transjudicial communication’ (1994) 29 University of Richmond Law Review 99, 112.
25. ibid; Erik Voeten, ‘Borrowing and nonborrowing among international courts’ (2010) 39 Journal of Legal Studies 547, 548.
26. To avoid repetition, references to the ICJ precedents also include precedents issued by its predecessor, the PCIJ. The following denotations are further used to describe the ICJ and the PCIJ: ‘World Court’ and ‘Court.’
27. Commission (n 7) 152; Fauchald (n 7) 342.
28. ibid.
29. Charter of the United Nations (entered into force 24 October 1945) (UN Charter). 1 UNTS XVI, art 7(1) and art 92
of the ICJ Statute, makes clear that “the decision of the [ICJ] has no binding force except as between the parties and in respect of that particular case.”30 The more general rule stripping an external precedent of its binding effect is contained in Article 38 of the ICJ Statute, which includes an authoritative list of the sources of international law. It ranks “judicial decisions”
only in the fourth place, describing them as “subsidiary means for the determination of rules of law,” as opposed to the first three sources, which are primary means for establishing rule of law. On the flip side of the coin, this same provision provides a ground for using external precedents in ICSID arbitrations. Namely, under Article 42(1) of the ICSID Convention, ICSID tribunals, in the absence of any agreement of the parties, apply the law of the host state of the investment, and international law, whereby the reference to the latter has been deemed by the Executive Directors of the World Bank to be the same international law as that applied by the ICJ under Article 38 of the ICJ Statute.31
Another way to accommodate ICJ precedents in an arbitral award, even in the absence of parties’ express agreement on international law as applicable law, is provided by Article 31(3) (c) of the Vienna Convention on the Law of the Treaties (VCLT).32 The VCLT requires that, in interpreting a treaty, “there shall be taken into account, together with its context … any relevant rules of international law applicable in the relations between the parties.”33 In that vein, the ICSID tribunal in Asian Agricultural Products stated “that the non-reference to inter- national law in [the bilateral investment treaty] should not be taken as implying the Parties’
intention to avoid its application under any aspect, including its role as supplementary source providing guidance in the process of interpretation.”34 Before proceeding to quote the ICJ deci- sion in ELSI,35 the tribunal reiterated that the absence of international law reference in the bilateral investment treaty does not prevent it from relying on the precedent.36
ICSID tribunals made no distinction between their own and external precedents when considering their binding effect. The ad hoc committee in Amco v. Indonesia confirmed this by stating: “Neither the decisions of the International Court of Justice in the case of the Award of Spain nor the [ICSID] Decision of the Klửckner ad hoc Committee are binding on this ad hoc Committee.”37 The non-applicability of stare decisis, of course, does not mean that ICJ decisions do not have any precedential effect.38 Similar to ICSID decisions, their precedential influence depends on their persuasiveness, which can be determined by their relevance to the case in question, the quality of the reasoning therein, and the reputation of the adjudicative
30. Statute of the International Court of Justice (adopted 26 June 1945, entered into force 24 October 1945) (ICJ Statute).
31. ‘Report of the Executive Directors of the International Bank for Reconstruction and Development on the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States’ in ICSID Convention, Regulations and Rules (2003) 35, [40].
32. Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27 January 1980) 1155 UNTS 331 (VCLT).
33. Article 31 of the VCLT is considered to be a codification of customary international law. See Case concern- ing the Arbitral Award of 31 July 1989 (Guinea-Bissau v Senegal) (Judgment) [1991] ICJ Rep 53, 70.
34. Asian Agricultural Products Limited v Democratic Socialist Republic of Sri Lanka (Award, 27 June 1990) ICSID Case No ARB/87/3, [52] (Asian Agricultural Products).
35. Case concerning Elettronica Sicula S.p.A. (United States of America v Italy) (Judgment) [1970] ICJ Rep 15 (ELSI).
36. Asian Agricultural Products (n 34) [52].
37. Amco Asia Corporation and others v Republic of Indonesia (Decision on Annulment, 16 May 1986) ICSID Case No ARB/81/1.
38. Shahabuddeen (n 14) 107.
body rendering the decision. More interesting than comparing the legal status of both types of precedents thus seems to be the question of the value of ICJ precedent compared to ICSID precedent, or in other words, do ICSID tribunals attribute more weight to ICJ judgments than they do to awards emanating from their own dispute resolution system?
2. THe VALUe OF A PReCeDeNT
When evaluating the persuasiveness of a precedent, three factors seem to be of particular sig- nificance: (1) how relevant is the precedent for finding a solution to the particular legal prob- lem, (2) what is the quality of its reasoning, and (3) is the precedent an intellectual product of a respected adjudicator.39 These three determinants will be briefly discussed below.
a. Relevance of a Precedent
A decision of a previous court or tribunal can be an example of excellent drafting by the most eminent lawyers and may spell out innovative legal solutions; however, if it does not bring to arbitrators any intellectual benefit, it must be dismissed as irrelevant or useless. That benefit could be the guidance or inspiration it provides for solving a particular legal problem perti- nent to deciding the case, the confirmation, and thus reassurance it gives arbitrators that the line of reasoning they are adopting is correct as it has been already tested in earlier decisions, or the knowledge or clarity that it offers on a given point of fact or law. The more similar the facts and law of the compared cases are the more likely it is that the precedent will be relevant, underlying the maxim that analogous cases should be treated in analogous ways. This is the main reason why ICSID decisions are more frequently cited than those of the ICJ. According to empirical research published in 2008, ICSID tribunals referred to other ICSID awards in 92% of their decisions while ICJ decisions have been cited in 47% of the cases.40 Obviously, it is more likely for an ICSID tribunal to find outcome-decisive considerations, which may provide guidance for the solution of similar problems, in decisions of other ICSID tribunals which were endowed with the same subject-matter and personal jurisdiction, have dealt with similar facts and have applied the same or similar law (i.e., international investment treaties), and were established and functioned within the same constitutive instrument. That said, ICJ precedents have still proved to be useful with respect to a number of issues, ranging from substantive (e.g., the scope of the “state of necessity” standard,41 the scope of compensation for breach of international law42), jurisdictional (e.g., consent-based jurisdiction43), procedural
39. Drahozal and Gibson similarly identified the following factors as determinative in considering the weight of precedent: (1) integrity and authoritative standing of the tribunal, (2) similarity of the relevant facts, (3) similarity of decisional law, and (4) merits of prior tribunal’s reasoning. See Christopher R. Drahozal and Christopher S. Gibson, ‘Iran-United States claims tribunal precedent in investor-state arbitration’ (2006) 23 Journal of International Arbitration 521, 529–537.
40. Fauchald (n 7) 356.
41. CMS Gas Transmission Company v Argentine Republic (Award, 12 May 2005) ICSID Case No ARB/01/8, [330], [372] (CMS Gas).
42. LG&E Energy Corp., LG&E Capital Corp. and LG&E International Inc. v Argentine Republic (Award, 25 July 2007) ICSID Case No ARB/02/1, [31]–[32] (LG&E).
43. Tulip Real Estate and Development Netherlands BV v Republic of Turkey (Decision on Bifurcation, 5 March 2013) ICSID Case No ARB/11/28, [61]–[63] (Tulip Real Estate).
(e.g., admissibility of counter-claims,44 effect of provisional measures45), and evidentiary issues (e.g., burden of proof46) to questions of treaty interpretation.47 Their usefulness is not limited only to a handful of judgments in which the ICJ decided investment disputes, but extends to other judgments and opinions addressing questions of general public international law unre- lated to investment.48
While the relevance of a precedent may serve as a mechanism of self-restraint for arbitra- tors when surveying earlier decisions for inspiration, it often happens that advocates invoke in their pleadings precedents which are not relevant to the case at hand. This may be due to some distinguishing features, such as different facts or law, or even subtle differences in the context.
In situations like these, arbitrators must resist the influence of the “putative precedent,”49 but may explain why they consider it irrelevant. In fact, it is advisable that they do so. According to Jan Paulsson, such an explanation may be viewed as a type of “anti-arbitrariness vaccine”
since the tribunals “cannot ignore the prior awards [invoked by the parties] without running the risk of seeming arbitrary.”50 Thus, in a recent case, Standard Chartered Bank v. Tanzania, the tribunal duly explained why none of the eight arbitral awards put forward by the claimant as “persuasive authority” is of “assistance,”51 summing up its conclusion: “None of these cases speaks to either the facts or the treaty text at issue in this case. None is sufficiently pertinent either to confirm or to determine the meaning of the disputed treaty text in accordance with Article 32 of the Vienna Convention.”52
ICJ judgments have not been exempt from such treatment. Thus ICSID tribunals have not hesitated to reject extending Barcelona Traction to deny the standing of foreign shareholders seeking to recover on account of prejudice suffered by local corporations. Accordingly, the tribunal in CMS Gas made clear that the invoked ICJ judgment was useless to its case, while at the same time paying due respect to it: “Barcelona Traction is therefore not directly relevant to the present dispute, although it marks the beginning of a fundamental change of the applicable concepts under international law and State practice.”53 A similar approach arguing “respectful irrelevance” has been adopted in many subsequent awards addressing the question of the protec- tion of shareholders.54
44. Antoine Goetz and others v Republic of Burundi (Award, 21 June 2012) ICSID Case No ARB/01/2, [54].
45. Victor Pey Casado and President Allende Foundation v Republic of Chile (Decision on Provisional Measures, 25 September 2001) ICSID Case No ARB/98/2, [20] (Victor Pey Casado).
46. Salini Costruttori S.p.A. and Italstrade S.p.A. v Hashemite Kingdom of Jordan (Award, 31 January 2006) ICSID Case No ARB/02/13, [72] (Salini).
47. Wintershall Aktiengesellschaft v Argentine Republic (Award, 8 December 2008) ICSID Case No ARB/04/14, [79]–[82] (Wintershall).
48. Shahabuddeen (n 14) 76.
49. Paulsson (n 9) 700.
50. ibid. Pellet talks about ‘polite indifference’ or ‘respectful irrelevance’ when the tribunal pays lip service to the case law but does not defer to it. Pellet (n 6) 233.
51. Standard Chartered Bank v United Republic of Tanzania (Award, 2 November 2012) ICSID Case No ARB/10/12, [245]–[256].
52. ibid [256].
53. CMS Gas Transmission Company v Argentine Republic (Decision on Jurisdiction, 17 July 2003) ICSID Case No ARB/01/8, [43]–[44].
54. Pellet (n 6) 234. See e.g., LG&E Capital Corp, and LG&E International Inc v Argentine Republic (Decision on Jurisdiction, 30 April 2004) ICSID Case No ARB/02/1, [52]; Sempra Energy International v Argentine Republic (Decision on Jurisdiction, 11 May 2005) ICSID Case No ARB/02/16, [151], [153]; Suez (n 19) [50].