Summary LLM International Dispute Resolution - Investment Treaty Arbitration I - Module 4 (Ratione Personae & Materiae)
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Course
LLM
Institution
Queen Mary, University Of London (QMUL)
Jurisdiction ratione personae
- Contracting state
- Constituent subdivision/agency
- Investor’s nationality
- Natural person
- Juridical person
- Investor
Jurisdiction ratione materiae
- Legal dispute
- Dispute directly arising from investment
- Investment
- Time of dispute (ratione ...
What are the jurisdictional requirements under the ICSID Convention?
These include: (1) Consent; (2) Jurisdiction ratione personae; and (3) Jurisdiction ratione
materiae. These are found in Article 25 of ICSID Convention and they are mandatory.
What is jurisdiction ratione personae?
‘Ratione personae’ means ‘by reason of the person’1. It means the tribunal’s power to admit,
hear and decide claims and make orders in respect of a particular party. Article 25(1)
provides that ICSID arbitration is available for Contracting States of the ICSID Convention,
their constituent subdivisions or agencies and their nationals. ‘The jurisdiction of the Centre
shall extend to any legal dispute arising directly out of an investment, between a Contracting
State (or any constituent subdivision or agency of a Contracting State designated to the
Centre by that State) and a national of another Contracting State’. Also tribunals have to
determine the nationality requirement for individuals and corporations, and consider whether
local companies under foreign control comply with the nationality rule according to Article
25(2)(b).
Contracting states
Mere ratification by the contracting states to the ICSID Convention does not constitute their
consent to arbitration, which is contained in one or more several separate instruments.
States can give consent to ICSID arbitration before becoming a contracting state. In
Toto Costruzioni Generali v Lebanon2, tribunal confirmed that ‘the Tribunal's jurisdiction is
not affected by the fact that Lebanon has made the general offer to accept ICSID arbitration
for investment disputes with Italian investors, well before the ICSID Convention entered into
force for Lebanon’. However, if it was not Contracting State at the time of registration of an
RFA, the jurisdictional requirements will not be met. In Holiday Inns v Morocco3, Morocco
objected to Tribunal’s jurisdiction because neither Morocco nor Switzerland (Investor’s state
of nationality) was a contracting state when consent was given. As both countries ratified
ICSID Convention before Investor’s request for arbitration, Tribunal held that their consent
became effective when both became Contracting Parties. Similarly, in Aucoven v Venezuela4,
consent to ICSID arbitration was given in a BIT but only became effective when both States
ratified the ICSID Convention.
Constituent subdivisions/agencies
Entities like provinces, states or public companies that exercise public functions, but are
legally distinct from the State, often enter investment agreements. Article 25(1) of ICSID
Convention provides that they become parties instead of/in addition to Host State. ‘The
jurisdiction of the Centre shall extend to any legal dispute arising directly out of an
investment, between a Contracting State (or any constituent subdivision or agency of a
Contracting State designated to the Centre by that State) and a national of another
Contracting State [...].’ Article 25 contains two key requirements: (1) Host State’s
1
Fellmeth, Aaron X., and Maurice Horwitz. ‘Ratione personae’ in Guide to Latin in International Law (OUP
2009) accessed 1 October 2018.
2
Toto Costruzioni Generali S.p.A. v Lebanon, ICSID Case No. ARB/07/12, Decision on Jurisdiction (11
September 2009)
3
Holiday Inns v Morocco, ICSID Case No. ARB/72/1, Decision on Jurisdiction (12 May 1974) (unpublished).
4
Aucoven v Venezuela, ICSID Case No. ARB/00/5
,designation of the subdivision/agency (Article 25(1)); and (2) Host State’s approval of that
entity’s consent (Article 25(3)).
‘Constituent subdivision’ generally refers to any territorial entity below the State,
such as a state/province/municipality. ‘Agency’ is determined functionally rather than
structurally. Ultimately, they must perform a public function, regardless of whether it is a
corporation, to what extent it is government-owned, and whether it has separate legal
personality. Thus the designation requirement reduces the importance of defining these terms
precisely. Designation will create a strong presumption in favour of finding that the entity is a
constituent subdivision/agency5. In Noble Energy v Ecuador6, Ecuador designated
CONELEC to the Centre on 21 August 2002 for purposes of Article 25, which was
considered an agency of the Republic of Ecuador.
Designation does not have to be made in any particular form. It can be done through
domestic law, bilateral agreement or by directly informing the Centre. But it must be
communicated to the Centre. Contracting States can designate before/after the dispute
arose, provided the designation exists on the day a request for arbitration is made to the
Centre. However, this is not always the case. In Klöckner v Cameroon7, the Tribunal allowed
Cameroon to designate SOCAME (second respondent) as a constituent subdivision eight
months after RFA against Cameroon and SOCAME was registered. States are open to make
designations not only for the future, but also for specific investment projects or after an
investment dispute arose. Such ad hoc designations must also be communicated to the Centre.
Any agreement between a designated subdivision or agency of a State and a foreign
investor to submit a dispute to arbitration must be approved by that State, unless the State
has notified the Centre that no such approval is required. But there is no particular form nor
communication of the approval required under the Convention. Yet in practice, Investor
should be informed that the State gave approval because information in this regard needs to
be furnished during the filing of an RFA. But the Convention does not state when the
approval must be obtained as it can be given in advance or after consent is given. Yet consent
by the constituent subdivision/agency is only perfected after the Host State approves,
which can ensure the State becomes aware of any pending claims. Once approval is given, it
becomes irrevocable under Article 25(1). In Cable Television v St. Kitts and Nevis 8,
Claimant entered an investment agreement with Nevis Island Administration (NIA) to
construct a cable television system on the island of Nevis, which contained NIA’s consent to
ICSID arbitration. Tribunal found that NIA was a constituent subdivision of the Federation of
St Kitts & Nevis. But because NIA was never designated to the Centre nor was the consent of
the Federation obtained, Tribunal held that it did not have jurisdiction over NIA. Thus Clause
16 of the Agreement had not yet in fact been activated.
Rule 2(1) of Institution Rules require that RFA must ‘(b) state, if one of the parties
is a constituent subdivision or agency of a Contracting State, that it has been designated to the
Centre by that State pursuant to Article 25(1) of the Convention; (c) indicate the date of
consent and the instruments in which it is recorded, including, if one party is a constituent
subdivision or agency of a Contracting State, similar data on the approval of such consent by
that State unless it had notified the Centre that no such approval is required’. Rule 2(2)
provides that ‘[t]he information required by subparagraphs (1)(c) [...] shall be supported by
documentation’. Otherwise, it could lead to a refusal of registration of the RFA by Secretary-
General exercising ‘screening power’ under Article 36(3).
5
Christoph Schreuer, ‘Jurisdiction’ in Christoph Schreuer, The ICSID Convention: A Commentary (Cambridge
University Press 2009) paras 230-267
6
Noble Energy v Ecuador, Decision on Jurisdiction (5 March 2008) para. 63
7
Klöckner v Cameroon, ICSID Case No. ARB/81/2, Award (21 October 1983)
8
Cable Television v St. Kitts and Nevis, ICSID Case No. ARB/95/2, Decision on Jurisdiction (13 January
1997)]
, Investor’s nationality
Investment protection extends to Investors as nationals of a contracting state other than the
Host State. This would encourage foreign direct investment by providing foreign investors
recourse directly against Host State. Article 25(2) of ICSID Convention defines ‘National of
a Contracting State’ for natural and juridical persons.
National of another Contracting State means ‘any natural person who had the nationality of
a Contracting State other than the State party to the dispute on the date on which the parties
consented to submit such dispute to conciliation or arbitration as well as on the date on
which the request was registered pursuant to paragraph (3) of Article 28 or paragraph (3) of
Article 36, but does not include any person who on either date also had the nationality of the
Contracting State party to the dispute’. However, Respondent may object upon Investor’s
nationality in two of the following situations.
Article 25(2)(a) excludes natural persons who are nationals of the Host State, as
well as nationals of both Contracting State and Host State (dual nationals). The Report of the
Executive Directors states this prohibition is absolute and cannot be waived by the Host
State. ‘(29) It should be noted that under clause (a) of Article 25(2) a natural person who was
a national of the State party to the dispute would not be eligible to be a party in proceedings
under the auspices of the Centre, even if at the same time he had the nationality of another
State. This ineligibility is absolute and cannot be cured even if the State party to the dispute
had given its consent.’ Although applied in other contexts in international law, the ‘effective
nationality’ test cannot avoid such prohibition. In Champion Trading v Egypt9, five
claimants (three as natural persons) brought a claim under Egypt-US BIT 1982. The natural
persons were brothers born in US to an Egyptian father. Egypt objected to Tribunal’s
jurisdiction over them because they had both American and Egyptian nationality when the
parties consented to arbitration and the RFA was registered. They were nationals of US by
birth and residence, and nationals of Egypt based on their father’s nationality when they were
born. Ultimately, Tribunal was denied jurisdiction under Article 25(2)(a). The individuals
argued that Tribunal should find their ‘real and effective nationality’ in terms of the ICJ’s
decision in Nottebohm10 and Iran-US Claims Tribunal’s interpretation of the Algiers
Declaration11. However, Tribunal rejected these arguments by stating ‘The Tribunal notes that
the above cited A/18 decision contained an important reservation that the real and effective
nationality was indeed relevant “unless an exception is clearly stated”. According to Article
31 of the Vienna Convention of 23 May 1969, a treaty shall be interpreted in good faith in
accordance with the ordinary meaning to be given to the terms of the treaties in their context
and in the light of their object and purpose. This Tribunal does not rule out that situations
might arise where the exclusion of dual nationals could lead to a result which was manifestly
absurd or unreasonable (Vienna Convention, Article (32)(b)). One could envisage a situation
where a country continues to apply the jus sanguinis over many generations. It might for
instance be questionable if the third or fourth foreign born generation, which has no ties
whatsoever with the country of its forefathers, could still be considered to have, for the
purpose of the Convention, the nationality of this state. In the present case this situation does
9
Champion Trading Co. v Arab Republic of Egypt, ICSID Case No. ARB/02/09, Decision on Jurisdiction (21
October 2003)
10
Nottebohm (Liechtenstein v Guatemala) [1955] ICJ Rep 4
11
Case No. A/18 Concerning the Question of Jurisdiction over Claims of Persons with Dual Nationality, 5 Iran-
US CTR 252 (1984 I); Declaration of the Government of the Democratic Popular Republic of Algeria
concerning the Settlement of Claims by the government of the United States of America and the Government of
the Islamic Republic of Iran
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