Implementation of Investment Treaty Obligations and

Management of Investment Disputes

José Antonio Rivas

International Investment and ADR

W&L University and UNCTAD Conference

Lexington, VA, March 29, 2010

Abstract

Implementation and management of investment treaty obligations refers to those measures and

actions that a State Party to an international investment agreement (IIA) undertakes in order to

comply with IIAs, minimize the chance of international investment arbitration claims and improve

its readiness to face these sorts of claims. IIAs usually do not spell out measures to be taken

following the signature of the treaty, or after its entry into force, as a component to guarantee

consistency with the particular IIA.

Usually, whether or not there is compliance with a particular IIA constitutes an analysis done in

front of an arbitration tribunal, after an investor alleges that acts or omissions of the host State

have breached the IIA. By contrast, other international economic agreements, e.g. certain trade

chapters of free trade agreements (FTAs) after their signature are often followed by a set of

measures and actions that the trading partners shall take in order to guarantee compliance with

the FTA. The question is whether an implementation and follow-up approach would benefit

host States, investors and the system of international investment law as a whole, in contrast to

only having a reactive posture – defensive most of the time – when facing investor State

arbitration claims. This approach encourages the implementation of investment treaty

obligations at the domestic level, first through the inclusion of implementation clauses into the

IIA; and second through the development of certain steps to prevent as far as possible, minimize

and face investor-State disputes.

I. Generally IIAs do not require implementation of legislation or modifications of existing regulations after their entry into force

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations

III. Measures and actions derived from model clauses on management and implementation of IIAs obligations

IV. Conclusions

I. Generally IIAs do not require implementation of legislation or modifications of existing regulations after their entry into force

1. IIAs as self executing agreements – IIAs do not specify that additional domestic legislation should be enacted after their entry into force

a. Enacting domestic legislation for Treaty implementation

2. Other international economic agreements entail the enactment of domestic legislation for their implementation

3. IIAs include certain obligations demanding a proactive stance from State Parties

4. Deference to State Parties on how to implement their IIA obligations

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations

1. Legitimate concerns:

Proliferation of disputes requires efforts from host State Parties to minimize the risk of international arbitration claims and increase the State Parties’ readiness to face

them.

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations (cont’d.)

2. a.Investment Committee of the Colombia - Canada FTA

"Article 817: Committee on Investment

1. The Parties hereby establish a Committee on Investment, comprising representatives of each Party.

2. The Committee shall provide a forum for the Parties to consult on issues related to this Chapter that are referred to it by a Party.

3. The Committee shall meet at such times as agreed by the Parties and should work to promote cooperation and facilitate joint initiatives, which may address issues such as:

(a) capacity building, to the extent resources are available, in legal expertise on investor-State dispute settlement, investment negotiations and related advisory matters;

(b) promoting corporate social responsibility; and

(c) other investment-related issues identified as a priority by the Parties."

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations (cont’d.)

3. Alternatives for implementation clauses

a. A binding and detailed option;

 b. A binding and deference option; or

 c. A Soft Law option.

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations (cont’d.)3. Alternatives for implementation clauses

Binding and detailed Implementation Model Clause:

“ As part of the implementation of this Agreement each Contracting Party shall

establish a lead State agency (“LSA”) which shall:

i. coordinate communications between investors of the other Contracting

Party and the Contracting Party in case an international investment arbitration

arises;

ii. coordinate the State’s actions and defense in an international investment

arbitration; and

iii. have the power and authority to collect evidence domestically when the

Contracting Party which it represents acts as a party in an international

investment arbitration;

iv. have the power and authority to negotiate, on behalf of the Contracting

Party, settlement agreements with disputing investors of the other Contracting

Party.”

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations (cont’d.)

3. Alternatives for implementation clauses

b. Binding and Deference Implementation Model Clause:

“As part of the implementation of this Agreement each Contracting Party shall increase its ability to prevent investor-State disputes and its readiness in case of international investment arbitrations.”

II. International investment law, host States and investors would benefit from IIAs encouraging State Parties to implement legislation to prevent, minimize and address international investment arbitrations (cont’d.)

3. Alternatives for implementation clauses

c. Soft Law Implementation Model Clause:

“Each Contracting Party should, to the extent possible, prevent investor-State disputes and increase their readiness in case of international investment arbitrations.”

III. Measures and actions derived from the model clauses on management and implementation of IIAs obligations

1. Monitoring investment obstacles as a component of investment facilitation

2. Effective administration of investment obligations

a. Designation of a lead state agency – LSA

b. Granting authority to LSA to collect evidence

c. Procedures for interagency consultations

d. Designation of contact persons for investment matters

e. Budget of LSA

f. Application of non-procurement but transparent rules to effectively advance the State’s defense

III. Measures and actions derived from the model clauses on management and implementation of IIAs obligations

2. Effective administration of investment obligations

a. Designation of a lead state agencyi. Resource on investment treaty obligations;

ii. Provide support in investment treaty negotiations;

iii. Record keeper of investor-State proceedings for use of policy makers and counsel in future claims;

iv. State contact for alleged aggrieved investors;

v. Facilitate early amicable settlement of disputes;

vi. In case of claims lead the defense of the State – liaise with outside counsel, experts and witnesses where appropriate

III. Measures and actions derived from the model clauses on management and implementation of IIAs obligations2. Effective administration of investment obligations

b. Granting authority to LSA to collect evidence

- Power to direct the gathering of evidence and information relevant to the dispute, including power to request evidence from all relevant government agencies.

- Punitive and disciplinary consequences by uncooperative agencies?

c. Procedures for interagency consultations

- Prior establishment of rules giving authority to the LSA may prevent agencies from questionning who should lead the case.

- LSA should consult agencies with technical knowledge but should be empowered to proceed with a defense strategy absent unanimity in the interagency consultation process

III. Measures and actions derived from the model clauses on management and implementation of IIAs obligations

2. Effective administration of investment obligations

d. Designation of contact persons for investment matters

- Who will be the contact person in each investment related agency?

- Who will receive the training on investment treaty obligations?

e. Budget of LSA

- Sufficient resources to cover first year of expenses of an i-S dispute – arbitral tribunal, administration fees, attorney and expert witnesses

III. Measures and actions derived from the model clauses on management and implementation of IIAs obligations

2. Effective administration of investment obligations

f. Application of non-procurement but transparent rules to effectively advance the State’s defense

- Expeditiousness in assembling and hiring a defense team in a transparent manner may be achieved if certain rules are in place prior to the existence of a dispute.

IV. Conclusions

Thank you,

Managing Investment Treaty Obligations and Investor-State Disputes: A Guide for Government Officials’, Jose Antonio Rivas and David Pawlak, in T.E. Carbonneau and M.H. Mourra (ed), Latin American Investment Treaty Arbitration. The Controversies and Conflicts, (The Hague: Kluwer Law International, 2008)

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