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Good Faith in International Investment Law and Policy

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Handbook of International Investment Law and Policy

Abstract

This chapter aims to provide a comprehensive framework for understanding how principle of good faith functions within international investment law in order to outline the roles the good faith plays within the discipline. This assessment covers different conceptualizations of the principle of good faith within the rules, arguments, and arbitral awards, but also the practical advantages it may provide for parties in the course of arbitral proceedings. The offered conceptual framework comprises the evaluation of the principle in general international law and in relation to international investment law and arbitration, overview of substantive and procedural derivatives of the principle, and overall assessment of the function and relevance of the principle in contemporary investment law, policy, and arbitration. How the good faith principle, within existing procedural concepts and substantive rules, but also as a self-standing standard, may play out is demonstrated by the overview of relevant arbitral jurisprudence and presented through different stages of an arbitral proceeding. States tend to rely on good faith to deny claimants’ rights to seize the tribunal (Article 41(5) of the ICSID Rules), to challenge jurisdiction or admissibility, to limit obligations arising under investment treaties or otherwise employ good faith as a defense in merits, and to minimize or exclude compensation. Claimants primarily rely on good faith as a part of the substantive standard of fair and equitable treatment, to expand interpretation of investment treaties and maximize their chances for compensation. Recent trends demonstrate the inherent balancing function of the good faith principle given that claimants and respondents alike rely on the good faith argument using it both as entitlement and defense, while arbitral tribunals have shown readiness to employ different variants of the good faith principle.

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Notes

  1. 1.

    This chapter draws on previous research published as Djajić S (2012) Mapping the good faith in international investment arbitration: assessment of its substantive and procedural value. Zbornik radova PF NS 47(3):207–233

  2. 2.

    “It is difficult to find any international arbitration award not based on, or that does not at least mention, good faith. The omnipresence of good faith does not mean (rather quite the contrary) that it is clearly understood, that we know how to use it, or that we are able to predict how an arbitral tribunal may apply good faith in a particular case.” – Cremades B (2012) Good faith in international arbitration. Am Univ Int Law Rev 27(4):761–789, 761

  3. 3.

    “All Members, in order to ensure to all of them the rights and benefits resulting from membership, shall fulfil in good faith the obligations assumed by them in accordance with the present Charter.” – Charter of the United Nations Art 2(2)

  4. 4.

    Art 26: “Every treaty in force is binding upon the parties to it and must be performed by them in good faith.”

    Art 31(1): “A treaty shall be interpreted in good faith 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 purpose.”

    Vienna Convention on the Law of Treaties, opened for signature 22 May 1969, 1155 UNTS 331 (entered into force 27 January 1980), (hereinafter “VCLT”)

  5. 5.

    “Every State has the duty to carry out in good faith its obligations arising from treaties and other sources of international law, and it may not invoke provisions in its constitution or its laws as an excuse for failure to perform this duty.” UNGA, Draft Declaration on Rights and Duties of States, UN Doc A/RES/375(IV) (6 December 1949) Art 13

  6. 6.

    “The principle that States shall fulfil in good faith the obligations assumed by them in accordance with the Charter:

    • Every State has the duty to fulfil in good faith the obligations assumed by it in accordance with the Charter of the United Nations.

    • Every State has the duty to fulfil in good faith its obligations under the generally recognized principles and rules of international law.

    • Every State has the duty to fulfil in good faith its obligations under international agreements valid under the generally recognized principles and rules of international law.” – UNGA, UN Declaration on Principles of International Law concerning Friendly Relations and Cooperation Among States, UN Doc A/RES/2625 (XXV) (24 October 1970)

  7. 7.

    Art 3.10, Understanding on Rules and Procedures Governing the Settlement of Disputes, Marrakesh Agreement Establishing the World Trade Organization, Annex 2, 1869 U.N.T.S. 401 (opened for signature 15 April 1994, entered into force on 1 January 1995). See Chaisse J (2015) Deconstructing the WTO conformity obligation: a theory of compliance as a process. Fordham J Int Law 38(1):57–98.

  8. 8.

    “States Parties shall fulfil in good faith the obligations assumed under this Convention and shall exercise the rights, jurisdiction and freedoms recognized in this Convention in a manner which would not constitute an abuse of right.” – Art 300 (Good faith and abuse of rights), United Nations Convention on the Law of the Sea, opened for signature 10 December 1982, 1833 U.N.T.S. 397 (entered into force 16 November 1994)

  9. 9.

    “Nothing in this Convention may be interpreted as implying for any State, group or person any right to engage in any activity or perform any act aimed at the destruction of any of the rights and freedoms set forth herein or at their limitation to a greater extent than is provided for in the Convention.” – Art 17 (Prohibition of abuse of rights), European Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature 4 November 1950, ETS No. 5 (entered into force 3 September 1953), (hereinafter “ECHR” or “European Convention on Human Rights”)

  10. 10.

    “Nothing in the present Covenant may be interpreted as implying for any State, group or person any right to engage in any activity or perform any act aimed at the destruction of any of the rights and freedoms recognized herein or at their limitation to a greater extent than is provided for in the present Covenant.” – Art 5(1), International Covenant on Civil and Political Rights, adopted by the UNGA on16 December 1966, 999 UNTS 171 (entered into force 23 March 1976) (hereinafter “ICCPR”)

  11. 11.

    “Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties.” – Treaty of the European Union, 2012/C 326/13, Art 4(3)

  12. 12.

    Case T-115/94 Opel Austria GmbH v Council of the European Union [1997] ECR II-43, para. 2

  13. 13.

    See, e.g., Ziegler AR, Baumgartner J (2015) Good faith as a general principle of (international) law. In: Mitchell AD, Sornarajah M, Voon T (eds) Good faith and international economic law. Oxford University Press, New York, pp. 9–36, 10, Chap 2; Tanzi A (2018) The relevance of the foreign investor’s good faith. In: Gattini A, Tanzi A, Fontanelli F (eds) General principles of law and international investment arbitration. Brill Nijhoff, Leiden/Boston, p 193, Chap 10; Sipiorski E (2020) Introducing good faith in international investment law. Investment claims, Oxford University Press, para 1.03. http://oxia.ouplaw.com, https://oxia.ouplaw.com/view/10.1093/law/9780198826446.001.0001/law-9780198826446-chapter-1

  14. 14.

    Nuclear Tests Case (Australia v. France), Judgment, 20 December 1974, ICJ Reports 1974, p. 268, para. 46

  15. 15.

    Border and Transborder Armed Actions (Nicaragua v. Honduras), Jurisdiction and Admissibility, Judgment, 20 December 1988, ICJ Reports 1988, p. 105, para. 94

  16. 16.

    Immunities and Criminal Proceedings (Equatorial Guinea v. France), Preliminary Objections, Judgment, 6 June 2018, ICJ Reports 2018, p. 336, para. 150; Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment, 13 February 2019, ICJ Reports 2019, p. 42, para. 113

  17. 17.

    “122. Without having to take a position on the ‘clean hands’ doctrine, the Court considers that, even if it were shown that the Applicant’s conduct was not beyond reproach, this would not be sufficient per se to uphold the objection to admissibility raised by the Respondent on the basis of the ‘clean hands’ doctrine (…). 123. Such a conclusion is however without prejudice to the question whether the allegations made by the United States, concerning notably Iran’s alleged sponsoring and support of international terrorism and its presumed actions in respect of nuclear non-proliferation and arms trafficking, could, eventually, provide a defence on the merits.” – Certain Iranian Assets (Islamic Republic of Iran v. United States of America), Preliminary Objections, Judgment, 13 February 2019, ICJ Reports 2019, p. 42, paras. 122–123

  18. 18.

    Delimitation of the Maritime Boundary in the Gulf of Maine Area (Canada/United States of America), Judgment, 12 October 1984, ICJ Reports 1984, p. 292, para. 87; Fisheries Jurisdiction (United Kingdom v. Iceland), Merits, Judgment, 25 July 1974, ICJ Reports 1974, pp. 33–34, paras. 78–79; Fisheries Jurisdiction (Federal Republic of Germany v. Iceland), Merits, Judgment, 25 July 1974, I.C.J. Reports 1974, p. 202, para. 69; Nuclear Tests (Australia v. France), Judgment, 20 December 1974, ICJ Reports 1974, p. 268, para. 46; Nuclear Tests (New Zealand v. France), Judgment, 20 December 1974, ICJ Reports 1974, p. 473, para. 49; North Sea Continental Shelf (Federal Republic of Germany/Denmark; Federal Republic of Germany/Netherlands), Judgment, 20 February 1969, ICJ Reports 1969, pp. 46–47, para. 85

  19. 19.

    Application of the Interim Accord of 13 September 1995 (the former Yugoslav Republic of Macedonia v. Greece), Judgment, 5 December 2011, ICJ Reports 2011, para. 132

  20. 20.

    Ibid., para. 131

  21. 21.

    Cremades B (2012) Good faith in international arbitration. Am Univ Int Law Rev 27(4):761–789, 786

  22. 22.

    Djajić S (2012) Mapping the good faith in international investment arbitration: assessment of its substantive and procedural value. Zbornik radova PF NS 47(3):207–233, 209

  23. 23.

    Signed on 30 October 2016. Not yet in force. Provisionally applied in part since 21 September 2017, Official Journal of the European Union, L11/23 (14 January 2017)

  24. 24.

    For example, Art 3.27 of the EU-Vietnam Investment Protection Agreement (signed on 30 June 2019, not yet in force) excludes claims made through “fraudulent misrepresentation, concealment, corruption or conduct amounting to an abuse of process,” while Art 4.43 (Anti-circumvention) declines jurisdiction for disputes over investments where ownership restructuring occurred after the dispute had arisen or become foreseeable. The similar provision is to be found in Art 3.7(5) of the EU-Singapore Investment Protection Agreement (signed on 19 October 2018)

  25. 25.

    “The Tribunal 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 of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.” – Convention on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature 18 March 1965, 575 UNTS 159 (entered into force 14 October 1966), Art 42(1) (hereinafter “ICSID Convention”)

  26. 26.

    Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Jurisdiction, Award (2 August 2006), [249] (hereinafter “Inceysa v. El Salvador, Award”); World Duty Free Company Limited v. The Republic of Kenya, ICSID Case No. ARB/00/7, Award (4 October 2006), [139], [179] (hereinafter World Duty Free Company Limited v. Kenya, Award); Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008), [141]–[143] (hereinafter Plama v. Bulgaria, Award)

  27. 27.

    Plama v. Bulgaria, Award, [144]

  28. 28.

    World Duty Free Company Limited v. Kenya, Award, [139]

  29. 29.

    South American Silver Limited (Bermuda) v. The Plurinational State of Bolivia, UNCITRAL, PCA Case No. 2013-15, Award (22 November 2018), [452]–[453] (hereinafter South American Silver v. Bolivia, Award)

  30. 30.

    Malicorp Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Award (7 February 2011), [116] (hereinafter Malicorp v. Egypt, Award)

  31. 31.

    “General principles of law are an autonomous and direct source of International Law, along with international conventions and custom.”- Inceysa v. El Salvador, Award, [226]

  32. 32.

    Mobil Investment Canada v. Government of Canada, ICSID Case No. ARB/15/6, Jurisdiction and Admissibility, Decision (13 July 2018), [169]

  33. 33.

    Malicorp v. Egypt, Award [116]

  34. 34.

    South American Silver v. Bolivia, Award [453]

  35. 35.

    Hulley Enterprises Limited (Cyprus) v. The Russian Federation, UNCITRAL, PCA Case No. 2005-03/AA 226, Final Award (18 July 2014), [1357]–[1363] (hereinafter “Hulley v. Russia, Final Award”)

  36. 36.

    Phoenix Action Ltd. v. The Czech Republic, ICSID Case No. ARB/06/6, Award (15 April 2009) [106], [113] (hereinafter “Phoenix v. The Czech Republic, Award”)

  37. 37.

    Inceysa v. El Salvador, Award, [230]

  38. 38.

    Ponce JE, Cevallos RA (2016) Good faith in investment arbitration. Transnatl Dispute Manag 13(5):1–36, 35. www.transnational-dispute-management.com/article.asp?key=2388

  39. 39.

    Global Trading Resource Corp. and Globex International, Inc. v. Ukraine, ICSID Case No. ARB/09/11, Respondent’s Objection under Rule 41(5) of the ICSID Arbitration Rules, Decision (1 December 2010) [34]

  40. 40.

    “The principles of ‘good faith’ and ‘abuse of process’ in assessing the submissions of investment treaty claims have often been used in these cases, essentially to avoid abuses of the direct access to investment arbitration. Both principles are increasingly taking a prominent role in investment arbitration.” De Brabandere E (2012) The ICSID Rule on Early Dismissal of Unmeritorious Investment Treaty Claims: Preserving the Integrity of ICSID Arbitration. Manchester J Int Econ Law (9)1: 23–44, 24 (references omitted)

  41. 41.

    ICSID, Decisions on Manifest Lack of Merit. https://icsid.worldbank.org/en/Pages/Process/Decisions-on-Manifest-Lack-of-Legal-Merit.aspx

  42. 42.

    Rachel S Grynberg, Stephen M Grynberg, Miriam Z Grynberg, and RSM Production Corporation v. Grenada, ICSID Case No. ARB/10/6, Respondent’s Objection under Rule 41(5) of the ICSID Arbitration Rules, Decision (10 December 2010)

  43. 43.

    Joubin-Bret A (2008) Admission and establishment in the Context of Investment protection. In: Reinisch A (ed) Standards of investment protection. Oxford University Press, Oxford, pp 9–28, 27

  44. 44.

    Khan Resources Inc., Khan Resources B.V., CAUC Holding Company Ltd. v. The Government of Mongolia, MonAtom LLC, An Arbitration under the Founding Agreement for the Creation of a Company with Limited Liability, the Energy Charter Treaty, the Foreign Investment Law of Mongolia, UNCITRAL, PCA Case No. 2011–09, Jurisdiction, Decision (25 July 2012), [380]–[385] (hereinafter “Khan Resources v. Mongolia, Decision”)

  45. 45.

    Yackee JW (2012) Investment treaties and investor corruption: an emerging defense for host states. Va J Int Law 52(3):723–745

  46. 46.

    Inceysa v. El Salvador, Award, [226], [229]–[230], [237], [239]

  47. 47.

    World Duty Free Company Limited v Kenya, Award, [157]

  48. 48.

    Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25, Award (16 August 2007) (hereinafter “Fraport v. Philippines, Award”)

  49. 49.

    Khan Resources v. Mongolia, Decision, [383]. The similar position was undertaken by the tribunal in the Hulley v. Russia, one of the Yukos cases. There the tribunal ruled that although the ECT does not have clause with legality requirement, there still exists obligation of making legal and bona fide investment in order to gain protection of the ECT (Hulley v. Russia, Final Award, [1352]). The tribunal also found that such implicit good faith and legality requirement do not extend to the performance but only to making of an investment. – Ibid., [1354]–[1356]

  50. 50.

    Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID Case No. ARB/15/29, Award (22 October 2018), [308]

  51. 51.

    “Le Tribunal arbitral est d’accord avec la Défenderesse que seuls les investissements légaux et réalisés dans la bonne foi sont à protéger par l’arbitrage CIRDI et que le Tribunal arbitral doit se déclarer incompétent s’il apparaît que l’investissement a été fait frauduleusement ou à la suite de corruption.” – Getma International, NCT Necotrans, Getma International Investissements, NCT Infrastructure & Logistique c. La Republique de Guinee, ICSID Case No. ARB/11/29, Award (16 August 2016), [174]

  52. 52.

    In Mamidoil v. Albania, the tribunal extensively discussed whether the claimant applied for and was granted a set of necessary permits in order to assess whether there was a legal and bona fide investment. The Mamidoil tribunal upheld the principle that only legal and good faith investments were covered by the applicable treaties (BIT, ECT). Although it did find that majority of necessary permits were neither applied for nor granted, it still found that these illegalities did not make the whole investment illegal to the extent that would leave it without the protection of the applicable agreements. The tribunal implied that such illegality was not finally settled because the Respondent State did not sanction the construction without permits timely and still offered negotiations to resolve the issue. See Mamidoil Jetoil Greek Petroleum Products Societe S.A. v. Republic of Albania, ICSID Case No. ARB/11/24, Award (30 March 2015), [289], [359], [492]–[495]

  53. 53.

    Gustav F W Hamester GmbH & Co KG v. Republic of Ghana, ICSID Case No. ARB/07/24, Award (18 June 2010), [129]

  54. 54.

    Ibid., [122]–[123]

  55. 55.

    Europe Cement Investment & Trade SA v. Turkey, ICSID Case No. ARB (AF)/07/2, Award (13 August 2009) (hereinafter “Europe Cement v. Turkey, Award”)

  56. 56.

    Cementownia “Nowa Huta” SA v. Republic of Turkey, ICSID Case No. ARB (AF)/06/2, Award (17 September 2009 (hereinafter “Cementownia v. Turkey, Award”)

  57. 57.

    Europe Cement v. Turkey, Award [175]

  58. 58.

    Cementownia v. Turkey, Award [179]

  59. 59.

    Ibid., [162]

  60. 60.

    “Likewise, the principles of good faith and legality cannot be incorporated into the definition of Article 25(1) of the ICSID Convention without doing violence to the language of the ICSID Convention: an investment might be “legal” or “illegal,” made in “good faith” or not, it nonetheless remains an investment. The expressions “legal investment” or “investment made in good faith” are not pleonasms, and the expressions “illegal investment” or “investment made in bad faith” are not oxymorons.

    While a treaty should be interpreted and applied in good faith, this is a general requirement under treaty law, from which an additional criterion of “good faith” for the definition of investments, which was not contemplated by the text of the ICSID Convention, cannot be derived.” – Saba Fakes v. Republic of Turkey, ICSID Case No. ARB/07/20, Award (14 July 2010) [112]–[113]

  61. 61.

    Metal-Tech Ltd. v. Republic of Uzbekistan, ICSID Case No. ARB/10/3, Award (4 October 2013), [126]–[127]

  62. 62.

    Bear Creek Mining Corporation v. Republic of Peru, ICSID Case No. ARB/14/21, Award (30 November 2017), [321]

  63. 63.

    Inceysa v. El Salvador, Award, [144]

  64. 64.

    Fraport v. Philippines, Award, [401]

  65. 65.

    Europe Cement v. Turkey, Award, [145]

  66. 66.

    Cementownia v. Turkey, Award [179]

  67. 67.

    Ceretelli C (2020) Abuse of process: an impossible dialogue between ICJ and ICSID tribunals? J Int Dispute Settlement 11(1):47–68, 77

  68. 68.

    See, e.g., Chaisse J (2015) The issue of treaty shopping in international law of foreign investment – structuring (and restructuring) of investments to gain access to investment agreements. Hastings Bus Law Rev 11(2):225–306.

  69. 69.

    “The importance of the Phoenix decision lies in its application of the sole international legal principle of ‘good faith’ outside the formal context of the question whether the investment was in accordance with the national laws of the host State.” – De Brabandere E (2012) ‘Good Faith’, ‘Abuse of Process’, and the initiation of investment treaty claims. J Int Dispute Settlement 3(3):609-636, 625

  70. 70.

    Phoenix v The Czech Republic, Award, [106]

  71. 71.

    Ibid., [113]

  72. 72.

    ST-AD GmbH (Germany) v. The Republic of Bulgaria, UNCITRAL, PCA Case No. 2011-06 (ST-BG), Award on Jurisdiction (18 July 2013) (hereinafter “ST-AD v. Bulgaria, Award on Jurisdiction”)

  73. 73.

    Ibid., [422]

  74. 74.

    Ibid., [431] (operative part of the Award)

  75. 75.

    Ibid., [423]

  76. 76.

    Renée Rose Levy and Gremcitel S.A. v. Peru, ICSID Case No. ARB/11/17, Award (9 January 2015)

  77. 77.

    Philip Morris Asia Ltd. v. The Commonwealth of Australia, UNCITRAL, PCA Case No. 2012–12, Award on Jurisdiction and Admissibility (17 December 2015) [588]

  78. 78.

    Transglobal Green Energy de Panama, SA v The Republic of Panama, ICSID Case No ARB/12/28, Award (2 June 2016)

  79. 79.

    Ceretelli C (2020) Abuse of process: an impossible dialogue between ICJ and ICSID tribunals? J Int Dispute Settlement 11(1):47–68, at 54–55

  80. 80.

    Mobil Corporation, Venezuela Holdings, B.V., Mobil Cerro Negro Holding, Ltd., Mobil Venezolana de Petróleos Holdings, Inc., Mobil Cerro Negro, Ltd., and Mobil Venezolana de Petróleos, Inc., ICSID Case No. ARB/07/27, Decision on Jurisdiction (10 June 2010) (hereinafter “Mobil v. Venezuela, Decision on Jurisdiction”)

  81. 81.

    “As stated by the Claimants, the aim of the restructuring of their investments in Venezuela through a Dutch holding was to protect those investments against breaches of their rights by the Venezuelan authorities by gaining access to ICSID arbitration through the BIT. The Tribunal considers that this was a perfectly legitimate goal as far as it concerned future disputes.” – Mobil v. Venezuela, Decision on Jurisdiction, [204]

  82. 82.

    Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Decision on Jurisdictional Objections (1 June 2012)

  83. 83.

    Tidewater Inc., Tidewater Investment SRL, Tidewater Caribe, C.A., Twenty Grand Offshore, L.L.C., Point Marine, L.L.C., Twenty Grand Marine Service, L.L.C., Jackson Marine, L.L.C. and Zapata Gulf Marine Operators, L.L.C. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/10/5, Decision on Jurisdiction (8 February 2013)

  84. 84.

    ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V., and ConocoPhillips Gulf of Paria B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/30, Decision on Jurisdiction and Merits (3 September 2013)

  85. 85.

    Cervin Investissements SA & Rhone Investissements SA v Republic of Costa Rica, ICSID Case No. ARB/13/2, Decision on Jurisdiction (15 December 2014)

  86. 86.

    There seems to be difference among the tribunals whether it is the jurisdiction that is being denied (jurisdictional issue) or that jurisdiction exists, but the tribunal is precluded to exercise it (admissibility issue). While this discussion may not have much practical relevance, it still can be useful to note opinion of the Pac Rim tribunal on the issue: “the Tribunal has noted that the Respondent’s jurisdictional objection based on Abuse of Process by the Claimant does not, in legal theory, operate as a bar to the existence of the Tribunal’s jurisdiction; but, rather, as a bar to the exercise of that jurisdiction, necessarily assuming jurisdiction to exist.” – Pac Rim Cayman LLC v. Republic of El Salvador, ICSID Case No. ARB/09/12, Decision on Jurisdictional Objections (1 June 2012), [2.10]

  87. 87.

    Gaillard E (2017) Abuse of process in international arbitration. ICSID Rev 32(1):17–37, 30

  88. 88.

    Tokios Tokelės v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction (29 April 2004) (hereinafter “Tokios Tokelės v. Ukraine, Decision on Jurisdiction”)

  89. 89.

    The Rompetrol Group N.V. v. Romania, ICSID Case No. ARB/06/3, Decision on Jurisdiction and Admissibility (18 April 2008) (hereinafter “Rompetrol v. Romania, Decision on Jurisdiction and Admissibility”)

  90. 90.

    TSA Spectrum de Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/05/5, Award (19 December 2008)

  91. 91.

    “This method of defining corporate nationality is consistent with modern BIT practice and satisfies the objective requirements of Article 25 of the Convention. We find no basis in the BIT or the Convention to set aside the Contracting Parties’ agreed definition of corporate nationality with respect to investors of either party in favor of a test based on the nationality of the controlling shareholders. While some tribunals have taken a distinctive approach, we do not believe that arbitrators should read in to BITs limitations not found in the text nor evident from negotiating history sources.” – Tokios Tokelės v. Ukraine, Decision on Jurisdiction [52]

  92. 92.

    Ibid., [56]

  93. 93.

    Dissenting opinion of Prosper Weil, [21] (emphasis original) – Tokios Tokelės v. Ukraine, Decision on Jurisdiction

  94. 94.

    Aguas del Tunari SA v. Bolivia ICSID Case No. ARB/02/3, Decision on Respondent’s Objections to Jurisdiction (21 October 2005); ADC v. Hungary, ICSID Case No. ARB/03/16, Award (2 October 2006); Saluka v. Czech Republic, UNCITRAL, PCA Case No. 2001-04, Partial Award (17 March 2006)

  95. 95.

    Rompetrol v. Romania, Decision on Jurisdiction and Admissibility [110]

  96. 96.

    E.g. KT Asia Investment Group BV v Kazakhstan, ICSID Case No. ARB/09/8, Award (17 October 2013)

  97. 97.

    Mera Investment Fund Limited v. Republic of Serbia, ICSID Case No. ARB/17/2, Decision on Jurisdiction (30 November 2018), [153]–[154]

  98. 98.

    ST-AD v. Bulgaria, Award on Jurisdiction [423]

  99. 99.

    Gaillard E (2017) Abuse of process in international arbitration. ICSID Rev 32(1):17–37, 23

  100. 100.

    “174. Even assuming that the doctrine of abuse of process could find application here, the Arbitral Tribunal is the only forum with jurisdiction to hear Mr. Lauder’s claims based on the Treaty. The existence of numerous parallel proceedings does in no way affect the Arbitral Tribunal’s authority and effectiveness, and does not undermine the Parties’ rights. On the contrary, the present proceedings are the only place where the Parties’ rights under the Treaty can be protected.

    175. Therefore, the Arbitral Tribunal holds that the seeking of the same remedies in a different fora does not preclude it from having jurisdiction in the present proceedings.” - Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award (3 September 2001) [174]–[174]

    CME Czech Republic B.V. v. The Czech Republic, UNCITRAL, Partial Award (13 September 2001) [412]

  101. 101.

    Cementownia v. Turkey, Award [162]

  102. 102.

    “In the Tribunal’s opinion, while the same party in interest might reasonably seek to protect its claim in two fora where the jurisdiction of each tribunal is unclear, once jurisdiction is otherwise confirmed, it would crystallize in an abuse of process for in substance the same claim is to be pursued on the merits before two tribunals. However, the Tribunal wishes to make it very clear that this resulting abuse of process is in no way tainted by bad faith on the part of the Claimants as alleged by the Respondent. It is merely the result of the factual situation that would arise were two claims to be pursued before different investment tribunals in respect of the same tranche of the same investment.” – Ampal-American Israel Corporation and others v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Jurisdiction (1 February 2016) [331]

  103. 103.

    Ibid., [339], [346e]

  104. 104.

    Ampal-American Israel Corporation and others v. Arab Republic of Egypt, ICSID Case No. ARB/12/11, Decision on Liability and Heads of Loss (21 February 2017) [11]

  105. 105.

    Ibid., [22]

  106. 106.

    Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Final Award (31 May 2017), [545]

  107. 107.

    Ibid., [547]

  108. 108.

    Ponce JE, Cevallos RA (2016) Good faith in investment arbitration. Transnatl Dispute Manage 13(5): 1–36, 35. www.transnational-dispute-management.com/article.asp?key=2388

  109. 109.

    Sipiorski E (2020) Introducing good faith in international investment law. Investment claims. Oxford University Press, [1.41]. http://oxia.ouplaw.com https://oxia.ouplaw.com/view/10.1093/law/9780198826446.001.0001/law-9780198826446-chapter-1

  110. 110.

    Ibid., [1.42]–[1.48]

  111. 111.

    Tanzi A (2018) The relevance of the foreign investor’s good faith. In: Gattini A, Tanzi A, Fontanelli F (eds) General principles of law and international investment arbitration. Brill Nijhoff, Leiden/Boston, p 211, Chap 10

  112. 112.

    “In part, this emphasis on good faith reflects the fundamental significance of the concept for the understanding of all obligations in international law. More specifically, however, the subject matter of the field itself may direct tribunals to apply the principle, in view of the long-term relationship in which the investor provides most of the required resources at the outset of the project expecting to receive a fair return in a stable relationship within the legal order of the host state thereafter. The financial long-term risk of the investor finds its legal corollary in the protection of good faith without which investment flows would be hampered.” Dolzer R, Schreuer C (2008) Principles of international investment law. Oxford University Press, Oxford, 5

  113. 113.

    Dolzer R (2005) Fair and equitable treatment: a key standard in investment treaties. Int Lawyer 39(1):87–106, 90

  114. 114.

    MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004), [109]; Siemens A.G. v. the Argentine Republic, ICSID Case No. ARB/02/8, Award (6 February 2007), [308]; Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Award (28 September 2007) [297]; Waguih Elie George Siag and Clorinda Vecchi v. The Arab Republic of Egypt, ICSID Case No. ARB/05/15, Award (1 June 2009), [450] (hereinafter: “Siag and Vecchi v. Egypt, Award”); Ioan Micula, Viorel Micula, S.C. European Food S.A, S.C. Starmill S.R.L. and S.C. Multipack S.R.L. v. Romania, ICSID Case No ARB/05/20, Award (11 December 2013) [831]–[834]; Urbaser S.A. and Consorcio de Aguas Bilbao Bizkaia, Bilbao Biskaia Ur Partzuergoa v. The Argentine Republic, ICSID Case No. ARB/07/26, Award (8 December 2016), [621] (hereinafter: “Urbaser et al. v. Argentina, Award”). See Qian X (2020) Rethinking judicial discretion in international adjudication. Conn J Int Law 35(2):251–310.

  115. 115.

    “[B]ad faith acts of States comprise an autonomous type of per se violation of the ‘fair and equitable treatment’ standard under various international law instruments.” – Draguyev D (2014) Bad faith conduct of states in violation of the ‘fair and equitable treatment’ standard in international investment law and arbitration. J Int Dispute Settlement 5(2):273–305, 273

  116. 116.

    Ibid., 285–300

  117. 117.

    Tecnicas Medioambientales Tecmed v. United Mexican States, ICSID Case No. ARB (AF)/00/2, Award (29 May 2003) [153]; Saluka Investments B.V. (the Netherlands) v. Czech Republic, UNCITRAL, PCA, Partial Award (17 March 2006) [301]–[302]; International Thunderbird Gaming Corporation v. United Mexican States, NAFTA/UNCITRAL, Award (26 January 2006) [147]; Total S.A. v. Argentina, ICSID Case No. ARB/04/1, Decision on Liability (27 December 2010), [111]; Gold Reserve Inc. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB(AF)/09/1, Award (22 September 2014), [576]

  118. 118.

    “The good faith origin does not provide a credible explanation of the term ‘legitimate expectations’.” – Sornarajah M (2015) Resistance and change in the international law on foreign investment. Cambridge University Press, Cambridge, 260

  119. 119.

    See Potestà M (2013) Legitimate expectations in investment treaty law: understanding the roots and the limits of a controversial concept. ICSID Rev 28(1):88–122

  120. 120.

    “Good faith is, of course, of great systemic importance in international law, but that does not mean that assertions about the existence of principles or rules derived from it have to be accepted without satisfying the usual law-making criteria, or that such assertions have to be preferred over principles or rules that have satisfied those criteria.” Paparinskis M (2015) Good faith and fair and equitable treatment in international investment law. In: Mitchell AD, Sornarajah M, Voon T (eds) Good faith and international economic law. Oxford University Press, New York, p. 171, Chap 7

  121. 121.

    “Legitimate expectations cannot be solely the subjective expectations of the investor. They must be examined as the expectations at the time the investment is made, as they may be deduced from all the circumstances of the case, due regard being paid to the host State’s power to regulate its economic life in the public interest.” – EDF (Services) Ltd v. Romania, ICSID Case No ARB/05/13, Award (8 October 2009), [219]

  122. 122.

    “The host State is not required to elevate the interests of the investor above all other considerations, and the application of the FET standard allows for a balancing or weighing exercise by the State and the determination of a breach of the FET standard must be made in the light of the high measure of deference which international law generally extends to the right of national authorities to regulate matters within their own borders.” – Antaris Solar GmbH and Dr. Michael Göde v. Czech Republic, PCA Case No. 2014-01, Award (2 May 2018), [360(9)]

  123. 123.

    For a detailed overview of arbitral practice regarding the relevance of socio-political circumstances and economic crisis in developing countries and countries in transition in relation to their responsibility under the FET standard, see Islam R (2018) The fair and equitable treatment (FET) standard in international investment arbitration – developing countries in context. Springer Nature, Singapore, pp 99–167

  124. 124.

    El Paso Energy International Company v. The Argentine Republic, ICSID Case No. ARB/03/15, Award (31 October 2011), [342]

  125. 125.

    Draguyev D (2014) Bad faith conduct of states in violation of the ‘fair and equitable treatment’ standard in international investment law and arbitration. J Int Dispute Settlement 5(2):273–305, 284

  126. 126.

    GAMI Investments Inc. v. Mexico, UNCITRAL, Final Award (15 November 2004), [97]

  127. 127.

    Muchlinski P (2006) ‘Caveat investor’? The relevance of the conduct of the investor under the fair and equitable treatment standard. Int Comp Law Q 55(3):527–557, 532

  128. 128.

    Robert Azinian, Kenneth Davitian, & Ellen Baca v. The United Mexican States, ICSID Case No. ARB(AF)/97/2, Award (1 November 1999), [104], [121]–[122]; Alex Genin Eastern Credit Limited, Inc. and A.S. Baltoil v. The Republic of Estonia, ICSID Case No. ARB/99/2, Award (25 June 2001), [380]

  129. 129.

    Plama Consortium Limited v. Republic of Bulgaria, ICSID Case No. ARB/03/24, Award (27 August 2008), [135], [145]–[146]

  130. 130.

    Bayindir Insaat Turizm Ticaret Ve Sanayi A.S. v. Islamic Republic of Pakistan, ICSID Case No. ARB/03/29, Award (27 August 2009), [301]–[315], [461]; Malicorp Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Award (7 February 2011); Urbaser et al. v. Argentina, Award [1005]

  131. 131.

    Hesham Talaat M. Al-Warraq v. Republic of Indonesia, UNCITRAL, Final Award (15 December 2014) (hereinafter: “Al-Warraq v. Indonesia, Final Award”)

  132. 132.

    “The investor shall be bound by the laws and regulations in force in the host state and shall refrain from all acts that may disturb public order or morals or that may be prejudicial to the public interest. He is also to refrain from exercising restrictive practices and from trying to achieve gains through unlawful means.” – Article 9 of the Agreement on Promotion, Protection and Guarantee of Investments among Member States of the Organisation of the Islamic Conference (opened for signature 5 June 1981, entered into force 23 September 1986)

  133. 133.

    Al-Warraq v. Indonesia, Final Award, [645]–[648]

  134. 134.

    Ibid., [654]. See Beharry CL, Méndez Bräutigam E (2020) Damages and valuation in international investment arbitration. In: Chaisse J, Choukroune L, Jusoh S (eds) Handbook of international investment law and policy. Springer, Singapore

  135. 135.

    “The Tribunal concludes that, although it has been established that the Claimant did not receive fair and equitable treatment, as set out in paragraphs 555 to 603 above however, by virtue of Article 9 of the OIC Agreement the Claimant is prevented from pursuing his claim for fair and equitable treatment.” – Ibid., [648]

  136. 136.

    Newcombe A, Marcoux J-M (2015) Hesham Talaat M. Al-Warraq v Republic of Indonesia: imposing international obligations on foreign investors. ICSID Rev 30(3):525–532

  137. 137.

    Article 21(1): Except as otherwise provided in this Article, nothing in this Treaty shall create rights or impose obligations with respect to Taxation Measures of the Contracting Parties. In the event of any inconsistency between this Article and any other provision of the Treaty, this Article shall prevail to the extent of the inconsistency.

  138. 138.

    Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No. AA 227, Final Award (18 July 2014), [1404]

  139. 139.

    Isolux Infrastructure Netherlands, B.V. v. Kingdom of Spain, SCC Case No. V2013/153, Award (17 July 2016), [739]

  140. 140.

    Belenergia S.A. v. Italian Republic, ICSID Case No. ARB/15/40, Award (6 August 2019), [376]–[379]

  141. 141.

    Gaillard E (2017) Abuse of process in international arbitration. ICSID Rev 32(1):17–37, 18

  142. 142.

    IBA Rules on the Taking of Evidence in International Arbitration. International Bar Association. Adopted by a resolution of the IBA Council 29 May 2010

  143. 143.

    “The taking of evidence shall be conducted on the principles that each Party shall act in good faith and be entitled to know, reasonably in advance of any Evidentiary Hearing or any fact or merits determination, the evidence on which the other Parties rely.” – Ibid., Preamble

  144. 144.

    “If the Arbitral Tribunal determines that a Party has failed to conduct itself in good faith in the taking of evidence, the Arbitral Tribunal may, in addition to any other measures available under these Rules, take such failure into account in its assignment of the costs of the arbitration, including costs arising out of or in connection with the taking of evidence.” – Ibid., Article 9(7)

  145. 145.

    “If a Party fails without satisfactory explanation to produce any Document requested in a Request to Produce to which it has not objected in due time or fails to produce any Document ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such document would be adverse to the interests of that Party.” – Ibid., Article 9(5)

    “If a Party fails without satisfactory explanation to make available any other relevant evidence, including testimony, sought by one Party to which the Party to whom the request was addressed has not objected in due time or fails to make available any evidence, including testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer that such evidence would be adverse to the interests of that Party.” – Ibid., Article 9(6)

  146. 146.

    ST-AD v. Bulgaria, Award on Jurisdiction, [404]

  147. 147.

    Ibid., [427]–[429]

  148. 148.

    “The possibility to resort to equity could enable the arbitrators to adjust the quantum of equity in light of the peculiar features of the case, such as the intensity of the State’s violation, or the fact that it acted in good faith or bad faith, or the fact that the State has been enriched by it, or the conditions of the host State’s economy.” – Crespi Reghizzi Z (2018) General rules and principles on state responsibility and damages in investment arbitration: some critical issues. In: Gattini A, Tanzi A, Fontanelli F (eds) General principles of law and international investment arbitration. Brill Nijhoff, Leiden/Boston, p 193, Chap 4 (references omitted)

  149. 149.

    “Ascertainment of the investor’s good faith and the investment’s legality informs the tribunal’s determinations regarding its own jurisdiction, the claim’s admissibility, the State’s liability and the quantum of compensation.” – Tanzi A (2018) The relevance of the foreign investor’s good faith. In: Gattini A, Tanzi A, Fontanelli F (eds) General principles of law and international investment arbitration. Brill Nijhoff, Leiden/Boston, p 63, Chap 10

  150. 150.

    E.g., Desert Line Projects LLC v. Republic of Yemen, ICSID Case No. ARB/05/17, Award (6 February 2008)

  151. 151.

    Al-Warraq v. Indonesia, Final Award, [645]. See Nadakavukaren Schefer K (2020) Crime in international investment arbitration. In: Chaisse J, Choukroune L, Jusoh S (eds) Handbook of international investment law and policy. Springer, Singapore

  152. 152.

    Cementownia v. Turkey, Award, [162]

  153. 153.

    “While this Tribunal cannot prevent Peru from exercising in the future what it then considers to be its legal rights, the Tribunal can, and it does, admonish Peru to bear in mind, if that scenario should arise, Renco’s submission that Peru’s conduct with respect to its late raising of the waiver objection constitutes an abuse of rights.” – The Renco Group Inc. v. Republic of Peru, UNCITRAL, UNCT/13/1, Partial Award on Jurisdiction (15 July 2016), [188]

  154. 154.

    MTD Equity Sdn. Bhd. and MTD Chile S.A. v. Republic of Chile, ICSID Case No. ARB/01/7, Award (25 May 2004), [242]–[243]

  155. 155.

    Siag and Vecchi v. Egypt, Award [545]

  156. 156.

    Les Laboratoires Servier, S.A.A., Biofarma, S.A.S., Arts et Techniques du Progres S.A.S. v. Republic of Poland, UNCITRAL, Award (14 February 2012), [642], [645]

  157. 157.

    E.g. Phoenix v The Czech Republic, Award, [151]–[152]; Europe Cement v. Turkey, Award, [182]–[186]; Cementownia v. Turkey, Award, [175]–[178]; Rachel S Grynberg, Stephen M Grynberg, Miriam Z Grynberg, and RSM Production Corporation v. Grenada, ICSID Case No. ARB/10/6, Respondent’s Objection under Rule 41(5) of the ICSID Arbitration Rules, Decision (10 December 2010), [8.34]–[8.36]; Renée Rose Levy and Gremcitel S.A. v. Peru, ICSID Case No. ARB/11/17, Award (9 January 2015), [201]

  158. 158.

    In Cortec v. Kenya the respondent prevailed with its objection based on illegality of an investment but was not awarded full arbitration costs partly because of its conduct in the proceedings. – Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited v. Republic of Kenya, ICSID Case No. ARB/15/29, Award (22 October 2018), [388]–[401]

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  1. Department for International Law, School of Law, University of Novi Sad, Novi Sad, Serbia

    Sanja Djajić

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  1. School of Law, City University of Hong Kong, Kowloon, Hong Kong

    Julien Chaisse

  2. School of Business and Law, University of Portsmouth, Portsmouth, UK

    Leïla Choukroune

  3. Institute of Malaysia and International Studies, National University of Malaysia, Bangi, Selangor, Malaysia

    Sufian Jusoh

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Djajić, S. (2020). Good Faith in International Investment Law and Policy. In: Chaisse, J., Choukroune, L., Jusoh, S. (eds) Handbook of International Investment Law and Policy. Springer, Singapore. https://doi.org/10.1007/978-981-13-5744-2_115-1

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