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The case law of the ICJ in investment arbitration

By Alain Pellet

The dialogue between the International Court of Justice (ICJ) and investment tribunals is, at first sight, mainly a one-way dialogue: investment tribunals often refer to the case law of the World Court in their reasoning, the Court, on the other hand, has always ignored the awards of these tribunals.

Although the ICJ is conscious of the existence of an important “State practice and decisions of international courts and tribunals in respect of” the protection of investment, it considers that they belong to “special legal regimes governing investment protection” created by “various international agreements, such as agreements for the promotion and protection of foreign investments and the Washington Convention.” For this reason, they may not, for example, impact — or, at least, have not impacted yet — applicable rules of general international law on diplomatic protection. This is debatable position.

By contrast, investment tribunals are keen to “accord deference to relevant statements by the International Court of Justice of general principles.” This is hardly surprising. International investment law is rooted in public international law. The rules and standards of protection of investors are today mainly codified in public international law instruments, bilateral or multilateral treaties concerning the protection of investment, and the disputes are generally settled by international arbitral tribunals. It is therefore only logical that these tribunals seek support in the case law of the ICJ to settle the numerous questions of public international law that arise.

As a consequence, investment tribunals do not hesitate to transpose and apply the Court’s jurisprudence when issues of general international law are at stake, for example when the issue before them concerns the jurisdiction of, or the procedure before, international courts and tribunals, the law of treaties, or state responsibility. (In this last respect, they consistently base themselves on the ‘Chorzów dictum’ on the obligation of reparation.)

“Reciprocally” public international law is also “enriched” by the case law of investment tribunals. They have brought some interesting clarification on several important and difficult questions of general international law. To take only a few examples, the state of necessity, the joint responsibility of a plurality of States, the application over time or the termination of treaties can be mentioned.

Palais de la Paix vue de face depuis la place de Carnegie. Photo by Lybil BER, 2007. CC-BY-SA-3.0 via Wikimedia Commons.
Palais de la Paix vue de face depuis la place de Carnegie. Photo by Lybil BER, 2007. CC-BY-SA-3.0 via Wikimedia Commons.

But this deference does not mean that investment tribunals consider themselves bound by the Court’s jurisprudence. There is no rule of precedent in international law and, therefore, the International Court of Justice’s case law can only be guiding, not binding. Nor does it mean that investment tribunals treat ICJ judgments as superior precedents and the weight of the Court’s jurisprudence in the arbitrators’ reasoning varies significantly depending on the problem being addressed.

Thus, it appears that investment tribunals do not hesitate to discard the Court’s jurisprudence when they deem it irrelevant. For example, investment tribunals have constantly rejected arguments on the need of an effective nationality based on the Nottebohm case. Although not undisputable, this rejection is quite understandable given the differences between natural and juridical persons.

In other cases, International Centre for Settlement of Investment Disputes (ICSID) tribunals’ ignorance of well-considered solutions adopted by the World Court is to be regretted. Thus, many investment tribunals have set aside the Barcelona Traction case without much explanation, simply noting that the Court “was concerned only with the exercise of diplomatic protection […] and involved what the Court considered to be a relationship attached to municipal law, but it did not rule out the possibility of extending protection to shareholders in a corporation in different contexts.” However, as Z. Douglas points out, in so doing, these tribunals ignore an important point which “is relevant to investment treaty arbitration” that the “International Court and several individual judges addressed”: the question of “how to approach the concept of a shareholding on the international plane.”

On the contrary, it can happen, that investment tribunals take shelter behind International Court of Justice judgments to avoid difficult legal discussions. The binding character of provisional measures indicated by investment tribunals is probably the most striking example. In 2001, the Tribunal in Pey Casado transposed by analogy the solution adopted by the ICJ in its 2001 Order in the LaGrand case and affirmed the binding character of interim measures under Article 47 of ICSID (para 20). It prefered the support of the Court’s jurisprudence over a thorough analysis of Article 47 and ignored that “the relevant enquiry remains for the Tribunal to interpret and apply the terms of the [treaty] itself” — as the Tribunal in Tulip Real Estate wisely recalled in its 2013 Decision on Bifurcation (para 47).

Less controversial is the destiny of Judge Higgins’ opinion appended to the 1996 International Court of Justice Judgment in the Oil Platforms case in which she proposed a test to verify whether a dispute falls rationae materiae within the jurisdiction of the Court (ICJ Rep 809–10, para 16). The ‘Higgins test’ has been referred to and developed by investment tribunals over the past decade and is now part of positive general international law as well as of investment law.

Finally, it seems that, apart from few unfortunate examples, the dialogue between investment tribunals and the International Court of Justice is a fruitful dialogue from which general international law emerges strengthened — which confirms that “fragmentation” is not a risk but a chance.

AP - CIJAlain Pellet is a Professor at University Paris Ouest, Nanterre La Défense, former member and Chairperson of the International Law Commission of the United Nations, President of the French Society for International Law and member of the Institut de Droit International. In 2011, he has been designated to the ICSID Panel of Arbitrators by the Chairman of the Administrative Council. He has been consulted by numerous governments and international organisations. He has acted and is still acting as Counsel and lawyer in more than 50 cases before the International Court of Justice and the International Tribunal for the Law of the Sea as well as several international and transnational arbitrations, international investment cases. He has also served as an arbitrator in several investor-State arbitration cases (including ICSID and UNCITRAL). He is the author of “The Case Law of the ICJ in Investment Arbitration” (available to read for free for a limited time) in the ICSID Review. He is also the author of numerous books and articles with special emphasis on General International Law and International Investment Law.

ICSID Review is a specialized periodical devoted exclusively to foreign investment law and international investment dispute settlement. It offers legal and business professionals an up-to-date review of the field and includes articles, case comments, documents, and book reviews on the law and practice relating to foreign investments as well as the procedural and substantive law governing investment dispute resolution. Oxford University Press publishes ICSID Review on behalf of the International Centre for Settlement of Investment Disputes.

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