Application of International Investment Agreements by Domestic Courts

Application of International Investment Agreements by Domestic Courts

Memorandum to UNCTAD by Bahakal Yimer, Nicolas Cisneros, Laura Bisiani, Rahul Donde.

Executive Summary

This is an abstract of a Memorandum to UNCTAD by Bahakal Yimer, Nicolas Cisneros, Laura Bisiani, Rahul Donde. The full work can be downloaded in pdf format here. 

This memorandum is the outcome of the research topic submitted by the United Nations Conference for Trade and Development in the framework of the Investment and Trade Law Clinic at the Graduate Institute of International and Developmental Studies. Our project, as requested by UNCTAD, was to explore whether domestic courts in various countries are in a position to apply international investment treaties. This question has to be considered  in  a  context in which more and more states and actors are calling for an increased role of host-State courts in settling investment disputes.

Some countries have recently revised their policy relating to the conclusion of IIAs by excluding investor-State arbitration for the settlement of disputes (Australia), calling for a greater involvement of the host country domestic courts. This has occurred as an attempt to protect their public policies from investor’s claims (South Africa) or by denunciating the ICSID convention (Ecuador and Bolivia). Investors are reluctant to submit their disputes to host-State courts on the assumption that they are biased, lack expertise in the area of international investment law, or that they will only apply national laws.

In this context, this paper seeks to explore the current role and future  potential  of  domestic courts in investment dispute resolution. Consequently, our paper has sought to identify any existing practice on international treaty application (IIA and non-investment related) by domestic courts. Where direct IIA application was not present, there was an attempt to explore    the feasibility and permissibility by analyzing general direct treaty  application.

In order to assess the possibility of domestic courts applying IIAs, the research has gone through the legal structure, BIT framework, and legal practice of nine countries selected to offer    a diverse view at different legal regimes. Our first finding is that so far, there has been little practice in regards to application and interpretation of IIAs by domestic courts. Indeed, few countries have been faced with questions of interpretation and/or application of IIAs and their domestic courts have either evaded the question, or have adopted a lackadaisical approach to the matter. This paper found a very diverse country practice; many jurisdictions do not have the power to interpret or apply IIAs, others readily interpret and apply BITs, and others have not considered the question.

The drafters of this paper have suggested that the outcome is dependent on the legal  system of the country concerned, for example whether it is a monist or dualist system. Another factor that plays a significant role is the type of dispute settlement clauses. In general, dispute settlement clauses restrict the role that local courts can have. Many of them give a role to   domestic courts, but in most cases international arbitration is always an option. Relatively few   IIA contain dispute settlement clauses which give domestic courts a strong role in investment dispute resolution. The role of domestic courts could be significantly increased by redrafting the dispute settlement clauses in BITs, giving them a more significant role. Nevertheless this cannot happen in isolation. Arbitral tribunals also have to do their part by interpreting fork-in-the-road clauses, for example, in a more restrictive way.

This research has made clear that no universal formula can be laid down: every country’s legal system and its relation with international law should be carefully assessed. Even when there was a lack of conclusive and homogenous findings, this paper does point to the possibility of domestic courts directly applying IIAs. This can have important implications for the future of international investment law.


Click this link to download the full memorandum in pdf format.