The Interplay Between Investor-State Arbitration and Domestic Courts in the Existing IIA Framework

Abstract

This chapter surveys how the inter-relationship between domestic courts and investor-State arbitration plays out in the current investment treaty framework. It first looks at the allocation of jurisdiction over investment disputes between courts and arbitral tribunals. Because multiple fora, national and international, may be empowered to adjudicate what in substance is one and the same dispute, jurisdictional overlaps are bound to occur and have indeed become more frequent. In order to coordinate national and international proceedings, States have devised several models in their IIAs, which respond to different needs and policies. The diverse solutions contained in IIAs include rules on exhaustion of local remedies, domestic litigation requirements short of exhaustion, fork-in-the-road clauses, and waiver provisions. Despite their potential to address jurisdictional overlaps, these clauses could be improved in order to better capture certain undesirable consequences arising from duplicative proceedings in national and international fora. Significant interactions between domestic courts and international tribunals occur also when courts exercise supervisory functions over investment arbitration proceedings, in particular at annulment and enforcement. In a further facet of the interplay, investor-State tribunals scrutinize the decisions of domestic courts when faced with a claim alleging court misconduct.