Jurisdiction of Arbitral Tribunals

The power of a court or judge to entertain an action, petition or other proceeding is called jurisdiction.¹

The jurisdiction of arbitral tribunals may be based on investor-State consent,² contained in an arbitration clause,³ in an investor-State contract, in investment codes of a host State,⁴ or in the provisions of investment treaties.⁵ In arbitration without privity, consent is one layer removed from particular investment transactions.⁶

Whereas jurisdiction considerations typically look at the dispute as a whole, admissibility is concerned with particular claims.⁷ See further Section VI below.

Jurisdiction pertains to the competence of a tribunal to adjudicate a particular case, whereas questions as to applicable law are concerned with the rules the tribunal should apply.⁸

See also other general jurisdiction-related matters such as bifurcation and the prima facie test.

The arbitral tribunal’s power to determine its own jurisdiction is called competence-competence.⁹ 

Once jurisdiction exists, arbitral tribunals have the duty to exercise it.¹⁰ Exception to this duty can only arise out of clear language or for strong reasons.¹¹ A tribunal refusing to exercise jurisdiction as conferred to it by the parties would be acting in excess of powers.¹²

There must be a legal dispute for the existence of the jurisdiction of an arbitral tribunal.¹³ The existence of a single legal dispute is debated in the context of mass claims.

Once the jurisdiction of a tribunal is established, the host State can raise counterclaims against the investor for the breach of the obligations it may owe to the host State.¹⁴

The jurisdiction of arbitral tribunals can be divided into four subjects: personal jurisdiction (ratione personae); territorial jurisdiction (ratione loci); temporal jurisdiction (ratione temporis); and subject-matter jurisdiction (ratione materiae):

1. Personal jurisdiction is limited to disputes "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."¹⁵
2. Territorial jurisdiction is a characteristic feature of "investment",¹⁶ which is to be made in the territory of the host State, as contemplated in Article 25 of the ICSID Convention.¹⁷
3. Temporal jurisdiction must exist on the date when the proceedings are instituted.¹⁸ The only limitation on temporal jurisdiction in general international law is the entry into force of the substantive obligation on which the claim is based.¹⁹ The intertemporal rule requires that tribunals assess cases before them in light of contemporaneous law, binding on the host State at the time of alleged breach.²⁰ Temporal reservations in the instrument of consent in investment arbitration dictate that tribunals have jurisdiction ratione temporis for the existing and future disputes, not retrospectively.²¹
4. As per Article 25 of the ICSID Convention, subject-matter jurisdiction arises out of "any legal dispute arising directly out of an investment."²² For example, a contested criteria for "investment" was considered by the Salini tribunal.²³ In UNCITRAL arbitrations, however, the agreement of the parties is the sole determinant of the tribunal’s jurisdiction.²⁴ Treaty-based jurisdiction usually encompasses treaty-based claims. See also Umbrella clause.

Practitioners should also consider the impact on jurisdiction of overlapping agreements and resulting obligations. For example, no jurisprudence constante exists on whether investors can use Most favoured nation clauses to import more favourable dispute resolution provisions from third-party Bilateral Investment Treaties (BITs).²⁵

The respondent will often challenge the jurisdiction of the tribunal based on one or more of the four main grounds cited above. Examples of specific grounds for jurisdictional objections include among others:²⁶

1. The absence of a protected investment. See further Definition of investment, Salini test, Double barreled test;
2. Violation of the legality requirement;
3. Intra-EU claims;
4. Abuse of process;
5. Res judicata;
6. Forum non conveniens and lis pendens objections; and
7. A lack of standing. See further Control, Indirect ownership.

Under Rule 41(1) of the ICSID Rules of arbitration, jurisdictional objections should be made “as early as possible”²⁷ and no later than the deadline for the counter-memorial,²⁸ unless the facts on which the objection is based are unknown to the parties at the time.²⁹ Rule 26(3) provides that objections made after this time should be disregarded except in “special circumstances.”³⁰ Tribunals have exercised discretion in applying this exception, weighing the seriousness of the allegations of the respondent³¹ or the delay in which the claimants’ ancillary claims were brought.³²

Tribunals have drawn varied consequences from untimely objections. Some tribunals have considered that Rule 41(1) does not necessarily deprive the tribunal from its mandate to decide on every objection.³³ Indeed, under Rule 41(2), the tribunal may, in compliance with Rule 41(1), consider jurisdictional objections ex officio³⁴ even if it is not bound to do so.³⁵

Other tribunals have held that by not objecting in a timely manner, the party had effectively waived its procedural right to object and was unable to raise objections at a later time in accordance with Rule 27 of the ICSID Arbitration Rules.³⁶ However, a respondent’s statement that it does not intend to file objections to jurisdiction does not preclude it from raising objections at a later stage of the proceedings, subject to the time-limits fixed by the tribunal under Rule 26.³⁷ Furthermore, objections made past the time-limits set by the Rules may be admissible if they are of the same legal nature as those already before the tribunal, even if the relied upon facts have evolved.³⁸

Rules 45(2)³⁹ and 33(3)⁴⁰ of the ICSID Additional Facility Rules mirror the ICSID Rules. The UNCITRAL Rules⁴¹ and the LCIA Rules⁴² subject jurisdictional objections to similar time-limits as well.

The claimant bears the burden of proving the tribunal’s jurisdiction. This burden may be shifted to the respondent whenever it raises jurisdictional objections or affirmative defenses. See further Burden of proof, Section III.B.

Jurisdiction and admissibility are terms that are sometimes used interchangeably.⁴³ Classifying a matter as relating to jurisdiction, or alternatively as relating to admissibility, may have serious consequences for the parties and their dispute.⁴⁴ Examples of issues arising from such classification include:

1. Procedural requisites, which may be characterized as a matter of either jurisdiction or admissibility.⁴⁵
2. Fork in the road clauses that potentially offer an investor a choice between a host State’s domestic courts and international arbitration, but not both.⁴⁶
3. The non-compliance of cooling off periods. See Cooling off period, Section IV.
4. The characterization of exhaustion of local remedies as a matter of admissibility.⁴⁷ Exhausting local remedies requirement is not applicable to arbitrations under the Energy Charter Treaty (ECT) and the North American Free Trade Agreement (NAFTA).⁴⁸ Many bilateral investment treaties (BITs) waive the local remedies rule either expressly or implicitly.

This Note examines some important issues concerning jurisdiction of arbitral tribunals in international investment disputes including investor-State consent, competence of tribunals, personal, territorial, temporal, subject-matter jurisdiction, investment, MFN clauses, distinction between jurisdiction and admissibility, procedural requisites, and fork in the road clauses. In ICSID cases, the tribunal’s jurisdiction is determined under Article 25 of the ICSID Convention and the instrument of consent. Any determination of jurisdiction and admissibility will have important consequences for the parties.

Charris Benedetti, J.P., The Proposed Investment Court System: Does it Really Solve the Problems?, Revista Derecho del Estado, Vol. 42, 2019 pp. 83-115.

Cavallini, C., On Arbitral Jurisdiction. How to Deal with the Complementarity between Arbitral Tribunals and the Courts?, Global Jurist, Vol. 18(2), 2018.

Pérez-Aznar, F., The Use of Most-Favoured-Nation Clauses to Import Substantive Treaty Provisions in International Investment Agreements, Journal of International Economic Law, Vol. 20(4), 2017, pp. 777-805.

Rosenfeld, F., Arbitral Praeliminaria- Reflections on the Distinction between Admissibility and Jurisdiction after BG V. Argentina, Leiden Journal of International Law, Vol. 29(1), 2016, pp.137-153.

Hassan Sadeghi Moghadam, M. and Jafari Nedoushan, S., The Effect of “Fork in the Road” and on the Jurisdiction of Investment Treaty Arbitral Tribunal in Foreign Investment Disputes, Journal of Public Law Research, Vol. 17(49), 2016, pp. 37-56.

Habibzadeh, T . and Gholami, A., Foreign Investment Contract and Scope of Host State Commitments Arising from Treaty, Journal of Public Law Research, Vol. 18(51), 2016, pp. 81-109.

Fontanelli, F., Deference in International Courts and Tribunals-Standard of Review and Margin of Appreciation, European Journal of Risk Regulation, European Journal of Risk Regulation, 2016, Vol.7(1), pp. 230-233

Lee, J., Resolving Concerns of Treaty Shopping in International Investment Arbitration, Journal of International Dispute Settlement, 2015, Vol. 6(2), pp. 355-379.

Perrone, N.M., The Governance of Foreign Investment at a Crossroad: Is an Overlapping Consensus the Way Forward, Global Jurist, Vol. 15(1), 2015, pp. 1-28.

Cook, A., Kompetenz-Kompetenz: Varying Approaches and a Proposal for a Limited Form of Negative Kompetenz-Kompetenz, Pepperdine Law Review, 2014, pp. 17-101.

Rodner, J.O., Marcano, A., Jurisdiction of the Arbitral Tribunal in the Case of Multiple Contracts, Journal of Arbitration Studies, Vol. 24(3), 2014, pp.1-31.

Đundić, P., Consent of the State to Arbitration with Foreign Investor: Modes of Consent, Restrictions and Applicable law, Zbornik Radova: Pravni Fakultet u Novom Sadu, Vol. 47(3), 2013, pp. 359-375.

Priem, C., International Investment Treaty Arbitration as a Potential Check for Domestic Courts Refusing Enforcement of Foreign Arbitration Awards, N.Y.U. J. L. & Bus., Vol.10 2013, pp. 189-513.

Rigo Sureda, A., Investment Treaty Arbitration: Judging under Uncertainty, Cambridge University Press, 2012.

Born, G., A New Generation of International Adjudication, Duke Law Journal, Vol. 61(4), 2012, p. 775.

Đundić, P., Provisions on Waiting Periods in International Investment Protection Treaties and their Impact on the Jurisdcition of Arbitral Tribunals, Zbornik Radova: Pravni Fakultet u Novom Sadu, Vol. 46(2), 2012, pp. 355-374.

Hatchondo, J. and Martínez, L., Legal Protection to Foreign Investors, Economic Quarterly - Federal Reserve Bank of Richmond, Vol. 97(2), 2011, pp.175-187.

Blanchard, S., State Consent, Temporal Jurisdiction, and the Importance of Continuing Circumstances Analysis into International Investment Arbitration, Washington University Global Studies Law Review, Vol. 10, 2011, pp. 419-837.

Garnett, R., National Court Intervention in Arbitration as an Investment Claim, International and Comparative Law Quarterly, Vol. 60(2), 2011, pp. 485-498.

Jansen Calamita, N., Countermeasures and Jurisdiction: between Effectiveness and Fragmentation, Georgetown Journal of International Law, Vol. 42 (2), 2011, p. 233 (69).

Smith, S., Foster, D. et al., International Arbitration, The International Lawyer, Vol. 45(1), 2011, pp. 95-110.

Cole, T., Vaksha, A.K., Power-Conferring Treaties: The Meaning of ‘Investment’ in the ICID Convention, Leiden Journal of International Law, Vol. 24(2), 2011, pp. 305-330.

Buxbaum, H., National Jurisdiction and Global Business Networks, Indiana Journal of Global Legal Studies, Vol. 17(1), 2010, p. 165 (17).

Crawford J., Treaty and Contract in Investment Arbitration, Arbitration International, Vol. 24, 2008, pp. 351-374. 

Friedland, P.D., Martínez, L. and Caron, D.D., The UNICTRAL Arbitration Rules: A Commentary, A.J.I.L., Vol. 101, 2007, pp. 519-941.