Introduction

            When a legal dispute arises, one of the first questions to address is whether the tribunal has the authority to hear the case. In domestic legal systems, courts typically have compulsory jurisdiction over disputes within their territory. However, in international law, tribunals do not have automatic jurisdiction—rather, their authority depends on state consent. Jurisdiction may be defined as the legal power to adjudicate. If a tribunal does not have such a power, then it cannot address the case at hand and render a decision. In relation to this, Article 33 of the United Nations Charter (“UN Charter”) stipulates a well-established principle in international law, the principle of freedom of choice in methods of dispute settlement. Even the jurisdiction of the International Court of Justice (“ICJ”) relies on state consent, in accordance with Article 36 of the ICJ Statute.

            It is international tribunals themselves who determine the scope of their jurisdiction, which also constitutes another important general principle of law, Komepetenz-Kompetenz. Article 41(1) of the Convention on the Settlement of International Investment Disputes between States and Nationals of Other States (“ICSID Convention”) stipulates this principle by stating that “The Tribunal shall be the judge of its own competence.”

            ICSID Convention offers a general procedural framework for investment arbitration. However, being a signatory state of the Convention does not mean an offer for arbitration. States consent to the ICSID arbitration through either a unilateral act or a negotiated agreement such as a bilateral investment treaty (“BIT”).

            Parties to investment disputes are always the same: a host State, in whose territory an investment in being made, and a foreign investor. Therefore, consent needed for jurisdiction of an arbitral tribunal are those of the host State’s and the investors. Moreover, once a host State consents, as long as it does not withdraw its consent, investors can always take this offer to arbitration and bring their allegations before arbitral tribunals.

            Understandably, as they are sovereign entities, States can always withdraw their consent to arbitrate. However, most BITs contain a survival clause which allows treaties to survive for another 10 to 20 years after the withdrawal, allowing investors to bring their investment claims to arbitration.

State Consent

            As mentioned before, state consent is the basis of arbitral tribunals’ jurisdiction. There are three modalities for giving consent: (i) arbitration clauses in investor-State contracts; (ii) domestic legislation where host State offers arbitration and (iii) BITs or multilateral investment treaties (“MIT”). The latter two are also referred to as arbitration without privity. In this concept, host State’s consent is detached from the contractual relationship between the host State and the foreign investor. The first instance where the investor and the host State were in privity was in SPP v. Egypt tribunal in 1985.

            Investment treaties rely on an offer and accept model. To clarify, what BITs and MITs do is not necessarily to grant jurisdiction to the ICSID but simply offer arbitration to any arbitral tribunal of choice. The foreign investor then accepts this offer to arbitrate by initiating arbitration.

Article 25 of the ICSID Convention

Article 25 of the ICSID Convention sets out 4 key requirements for an ICSID tribunal to have jurisdiction:

1) The dispute must be legal in nature, meaning it involves a disagreement over law or fact. The ICJ has been persistently relying on the definition given in Mavrommatis Palestine Concessions in 1924. Accordingly, the ICJ defines a dispute as “a disagreement on a point of law or fact, a conflict of legal views or interests between parties”. In investment arbitration, disputes are legal if the investor presents one or more claims, alleging breaches of procedural and substantive guarantees owed by the host State.

2) The dispute must arise out of an investment. The definition of “investment” has been a subject of debate. Different tribunals have different approaches particularly on how to define an investment and where to derive it from. On the latter, there are two different schools: the first one suggesting that there must be an investment in accordance with both article 25 of the Convention and the instrument of consent. In short terms, this school, favoured by the tribunal in Phoenix Action v. Czech Republic, suggest a double reviewmechanism for deciding whether there is an investment or not. On the other hand, according to the second school the definition of an investment in the instrument of consent should be decisive, as the instrument of consent is lex specialis with respect to the Convention. The lex specialis character of the instrument of consent arises from the fact that concluding parties have specifically chosen to deviate from the Convention via concluding an investment treaty. The Biwater tribunal favoured this approach.

On the former, the definition of an investment given by the Salini tribunal in 2001 is of importance, particularly for ICSID arbitration, as afterwards tribunals either totally adopted this definition or made a few amendments to it. According to the Salini tribunal for a commercial transaction to amount to an “investment” it needs have (i) the contribution of the investor, (ii) a duration, (iii) a risk which is shared by the host State and the investor and (iv) a contribution to the economic development of the host State. It must also be emphasized that in accordance with more recent decisions of tribunals, the fourth criterion is no longer considered necessary for an investment. (The Mitchell tribunal has admitted the fourth criterion in 2004, whereas the MHS tribunal refused it in 2007.)

3) The dispute must be between a contracting state of the ICSID Convention and a national of another contracting state. While the states are primary respondents, they may also designate constituent subdivisions or agencies to appear on their behalf. On the other hand, investors can be individuals or companies.

4) The parties must have consented in writing to ICSID arbitration. The critical date for jurisdiction is the date of request for arbitration; and it is quite decisive. All criteria under article 25 of the Convention must be met at the time of critical date. This is especially important for State consent, as without it, the tribunal will not be able to exercise its jurisdiction.

Admissibility

            While jurisdiction concerns the tribunals’ authority to hear a case, admissibility relates to whether the claim is ready for adjudication. Admissibility issues focus on the defects of the claim.

            Unlike the ICJ Rules of the Court, neither the ICSID Convention nor the UNICATRAL rules make any reference to admissibility issues. This leaves arbitral tribunals with considerable discretion in their approach to objections to admissibility, they may choose to examine these in the preliminary stages of the arbitration or in the merits. Furthermore, unlike the assessment of tribunal’s jurisdiction, developments arising after the critical date concerning admissibility may still be considered by the tribunals.

            To name a few examples of admissibility issues: lack of standing, meaning that the investor does not posses the legal entitlement to bring the issue before the tribunal; failure to exhaust local remedies; lis alibi pendens, which refers to the tribunal’s discretion not to hear a dispute on the ground that another court has been seized with an identical claim and res judicata, referring to an earlier judgment which is final and without appeal.