Investment Arbitration and the Law of Countermeasures

Is State‐State Investment Arbitration an Old Option for Latin America?

“…First, it could be claimed that the clauses should be considered dysfunctional remainders of the old FCN treaties. However, if they persisted, the clauses are to be given meaning and purpose; otherwise they “would be rendered almost completely ineffective (an unacceptable result as a matter of treaty interpretation)” (Paparinskis , 296).…”

“…Drawing on how Latin American states positioned themselves in the negotiation of the ICSID Convention, some noticed that they expressed their skepticism against diplomatic protection (Paparinskis ). Peruvians indicated that it was not necessary or convenient to have diplomatic protection during or after arbitration for the enforcement of the award, the authority of which derived from the convention; this proposal, however, did not prosper (ICSID ).…”

“…The United States would only have been barred to include, in its diplomatic protection claim, investors who had already begun ICSID arbitration, due to Article 27 of the ICSID Convention. The decision could have a declaratory nature and base future ISA claims or, less persuasively, could include compensation for the companies subject to the commonsense approach of prohibiting double recovery (Paparinskis ). Arguably, the consistency would also be to the benefit of Argentina in litigation terms.…”

“…Recent state‐state cases involving Latin America ( Peru v. Chile , Italy v. Cuba , and Ecuador v. United States ) may indicate a resurgence of the practice in the area. They sparked interest and were followed by a new range of academic contributors in this field (Bernasconi‐Osterwalder ; Juratowitch ; Lo ; Macías, forthcoming; Muchlinski ; Paparinskis , 2014; Pérez 2012; Posner and Walter ; Potestà , , ; Recanati ; Roberts ; Sacerdoti and Recanati ; Trevino ; Wong ). This literature has opened up avenues for further research in the area.…”

Republic of Italy v. Republic of Cuba

“…14 It then turned for guidance to Article 27 of the ICSID Convention. Without characterizing the principle established in Article 27 as a codification of a customary norm (for which it would have been difficult to provide relevant practice), 15 the tribunal nonetheless applied the principle "by analogy" {id.). This solution may be applauded as a matter of policy, because it curtails the risk that the host state will be exposed both to a diplomatic protection claim and to an investor-state arbitration at the same time, as well as the risk of possibly conflicting decisions by two different tribunals on the same facts.…”