Breach of Contracts in Investor-State Arbitration Based on International Investment Agreements

Author Name HAMAMOTO Shotaro  (Kobe University)
Creation Date/NO. July 2008 08-J-014
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This study examines the question whether and in which cases it is possible to settle disputes arising from investment contracts concluded between a foreign investor and a recipient State through the dispute settlement procedure (typically, arbitration) provided in international investment agreements (IIAs) concluded between the investor's State of nationality and the recipient State.

The issue of whether the arbitration based on IIAs can deal with disputes over investment contracts arises in cases in which the IIA contains an observance of commitments clause (Section I) or a general dispute settlement clause (Section II). Arbitral precedents are contradictory in each case to the point that it is not possible at the current stage to talk about a "jurisprudence constante" or a "common view." In face of this rather confusing situation, this paper, going back to the basic principles of the treaty interpretation, advocates an interpretation faithful to the text and offers concrete suggestions with regard to the ways in which observance of commitments clauses and general dispute settlement clauses should be drafted.

Even in cases in which either of these clauses is included, it is not possible to rule out the possibility that investment companies will waive their right to resort to arbitration based on IIAs. It is therefore necessary to clarify the circumstances under which such a waiver is deemed to have been made (Section III).