By: Gurkaranbir Singh
Parallel proceedings in investor-state arbitration are an emerging phenomenon which operates as a stumbling block against the expeditious dispute resolution process. Such proceedings are possible in an international legal framework as international law does not provide a strict application of domestically practised principles of Res Judicata and Lis Pendens. This phenomenon of “parallel proceedings” has been identified as a serious problem in the fora as it leads to inconsistent arbitral awards by different arbitral tribunals adjudicated on the same set of facts.[i] It further leads to undermining the application of international legal principles, the coherence of a stable legal order, and the finality of awards and thus leads to the fragmentation of adjudicatory process within the regime.[ii] This article seeks to critically analyse the applicability of these two municipally practised principles in a self-contained (special) investor-state arbitration regime.
PARALLEL PROCEEDINGS IN INVESTMENT-TREATY ARBITRATIONS: PRELIMINARY REMARKS
The problem of parallel proceedings is inherent in the investor-state arbitration regime. There are a number of ways in which parallel proceedings can be initiated in international arbitrations, for example, an international court and an international tribunal, a state court and an international arbitral tribunal and two international arbitral tribunals.[iii] The latter aspect has caused a serious problem in the modern arbitration regime.[iv] It occurs because of the dual or multiple rights and liabilities arising out of the contract and the bilateral investment treaty [hereinafter ‘BIT’] with the host state.
The problem arises when the investor employs the dispute resolution clause and initiates parallel proceedings by invoking its right as given both under the contract and the BIT and subsequently abuse the process.[v] With the proliferation of the BITs in the modern investor-state arbitration regime, it causes a peculiar problem. The BIT not only tends to protect the investments made directly by the investor but also goes on to protect the investments by the minority or majority shareholders residing in a state different from the host state. Thus, it causes a problem when the investor brings a claim against the host state under different BITs but on the same subject matter.[vi]
In Sempra vs. Argentina, Enron vs. Argentina, LG & E vs. Argentina and CMS vs. Argentina, several cases were filed against the Argentinian government by different investors on the same subject matter because of the privatisation of several government-run industries. In a multi-level corporate structure with different entities in a chain, several claims can be brought by different but related parties in a structured investment, such as minority/majority shareholders and a company against a host state. In CME Czech Republic BV vs. The Czech Republic and Ronald S. Lauder vs. The Czech Republic, several claims were brought against the Czech Republic media council both by the shareholders and the company. A single investor may also initiate different proceedings based on the same set of facts against the host state by invoking different options arising either out of BIT or the substantive contractual agreement with the host state.
Establishing Special Regimes in International Law vis-á-vis Relationship with General International Law
The raison d’etre for establishing special regimes is that it seeks to create a unique normative ecosystem with super-specialised knowledge. Special regimes are highly equipped with technical knowledge of the subject matter and take better account of the subject matter to which they relate; they regulate it more effectively and efficiently than the general international law. Such is the case with international arbitration or investor-state arbitration regime. It is often argued that such special regimes come with its own principles, ethos, and form of expertise, not necessarily in tandem or identical to the general international law. In investor-state arbitrations, it is argued that the principles enshrined in general international law cannot be strictly applied in a self-contained regime as each tribunal in investor-state arbitration is hermetically sealed and derives its jurisdiction to adjudicate on a matter from a distinct investment treaty.
However, the author seeks to argue that no regime is in stricto sensu a self-contained regime.[vii] Even in super-specialised regimes, broadly general international law, serves two basic functions. First, it seeks to provide a normative framework of interpretation and serves as a background, controlling the way and manner in which special regimes needs to be interpreted. Second, the rules of general international law automatically come into operation when a special regime fails to function in a manner as envisaged. Thus, it is submitted that the validity of a special regime or its existence is substantially derived from the broader normative principles of general international law.[viii]
Procedural Fragmentation vis-á-vis Failure of a Specialised Regime
Procedural fragmentation within a self-contained regime poses a greater problem than the proliferation of a normative substantive legal framework. It is often seen in investor-state arbitrations that when two different tribunals adjudicate on the same subject matter without considering the each other, consistency and uniformity is undermined within a self-contained regime. For instance, in CME Czech Republic BV vs. The Czech Republic and Ronald S. Lauder vs. The Czech Republic several claims were brought against the Czech Republic media council both by the shareholders and the company and different awards were rendered by two tribunals. Thus, it is argued that such inconsistencies lead to the ‘failure of procedural or adjudicatory function’ of a self-contained regime. It can further pose a greater threat as it would undermine the application of international legal principles, the coherence of a stable legal order, and most crucially, the finality of awards. It is further argued that in case of substantive or procedural failure of a special regime, rules applicable in general international law must be substantially considered. Thus, to avoid such inconsistencies by different arbitral awards in investor-state arbitrations, the two principles of Res Judicata and Lis Pendens must be made applicable as principles of general international law.
Possible Arguments for the Application of Res Judicata and Lis Pendens
The Vienna Convention on the Law Treaties, 1969 works as a principal tool for the interpretation of treaties. Article 31 of the Convention provide general rules for interpretation and Article 31 (3) (c) specifically mentions “any rules of international law.” The phrase “any rules of international law” read with Article 38 (1) of the ICJ Statute for the settlement of disputes covers all sources of international law including conventions, international custom, and general principles of law recognised by civilised nations.[ix]
It is argued that Res Judicata and Lis Pendens are covered under “any rules of international law” as “general principles of international law.” In Waste Management Inc vs. Mexico, the tribunal reaffirmed that the doctrine of Res Judicata is a recognised principle of international law and even under Article 38 (1) (c) of ICJ. Further, former president of the ICJ, Mr. Abdulqawi Ahmed Yusuf’s Statement on “the International Court of Justice and unwritten sources of International law,” specifically recognised the fact that Res Judicata forms a part of the general principle of international law under the international procedural law.
Further, the International Law Association has prepared a final report on the applicability of the doctrine and has identified a few conditions before the doctrine is to be applied. As per the report, it says that the previous award must be final, binding, and capable of being enforced. Second, the previous award and the subsequent proceedings must relate to the same established legal order. Last, that the previous and subsequent proceedings must be on the same issue, same parties, and have the same set of facts. Thus, if the above conditions are met then the principle of res judicata can be applied. Further, international law commission in its final report on the applicability of Lis Pendens gave certain recommendations.[x] One of the foremost of them was based on the principle of competence-competence of the tribunal. The recommendation was envisaged with the view that if a suit is already pending before another tribunal, then the subsequent tribunal shall exercise its inherent power to decline its jurisdiction or stay the proceedings.
The article has critically examined the applicability of Res Judicata and Lis Pendens in the investor-state arbitration regime. The above discussion seeks to unfold the fact that both legal doctrines are not strictly applied in the investor-state treaty arbitrations but are a part of general principles of international law. The author has argued that these two principles should be made applicable in investor-state arbitration regimes.
Apart from it, to avoid the problem of parallel proceedings, a few possible solutions can be employed. These include drafting the BITs in a manner to expressly exclude such eventualities wherein dual/multiple rights vests with the investor, consolidation or joinder of related claims, waiver clause, or formulation of an appellate body for international investment disputes.
[i] Loukas A Mistelis and Julian DM Lew, Pervasive Problems in International Arbitration (1st edn, Kluwer Law International 2006).
[ii] Koskenniemi M and Leino P, ‘Fragmentation of International Law? Postmodern Anxieties’ (2002) 15 Leiden Journal of International Law 553.
[iii] (n i) 331.
[v] Herve Ascensio, ‘Abuse of Process in International Investment Arbitration’ (2014) 13 Chinese J Int’l L 763.
[vi] Lee Carroll, ‘Parallel Proceedings in Investment Arbitration: Moving Forward after Orascom TMT Investments v Algeria’ (2017) 23 Austl Int’l LJ 147.
[vii] ILC, Report of the Study Group of the International Law Commission on the Fragmentation of International Law: Difficulties Arising from The Diversification and Expansion of International Law, 44 (1 May-9 June and 3 July-11 August 2006) A/CN.4/L.682.
[viii] ibid 44.
[ix] Daniel Rosentreter, Article 31(3)(c) of the Vienna Convention on the Law of Treaties and the Principle of Systemic Integration in International Investment Law and Arbitration,(Nomos 2015) 100.
[x] Winnie Ma, ‘Parallel Proceedings and International Commercial Arbitration: The International Law Association’s Recommendations for Arbitrators’ (2009) 2 Contemp Asia Arb J 49.
(Gurkaranbir is a law undergraduate at Symbiosis Law School, Noida. The author may be contacted via email at firstname.lastname@example.org).
Cite as: Gurkaranbir Singh, ‘ Applicability of Res Judicata and Lis Pendens in the Self-Contained Investor-State Arbitration Regime’ (The RMLNLU Law Review Blog, 19 March 2023) <https://rmlnlulawreview.com/2023/03/19/applicability-of-res-judicata-and-lis-pendens-in-the-self-contained-investor-state-arbitration-regime/>date of access.