Waiver of Local Remedies

The waiver of local remedies is an exception to the local remedies rule. The exception applies where a State expressly, impliedly or through its conduct, waives the customary international law requirement of the exhaustion of local remedies.

This definition relies on the local remedies rule being characterised as a procedural rule.¹ If the rule is characterised as substantive, then there can be no breach of international law by the State until local remedies are exhausted, therefore the rule would not be waivable.² Commentators in the 20^th Century debated the procedural or substantive nature of the local remedies rule, but it is now generally accepted that the nature of the rule is procedural, except in the case of denial of justice.³ 

The purpose of the local remedies rule is to protect the interest of the respondent State by giving it an opportunity to remedy a wrong it is alleged to have committed. It therefore follows that the State can waive this protection.⁴

The local remedies rule is exemplified in Article 14 of the Draft Articles on Diplomatic Protection. Waiver is one of the exceptions to the local remedies rule listed in Article 15 (Exceptions to the Local Remedies Rule) of the Draft Articles, which in paragraph (e) stipulates that, "local remedies do not need to be exhausted where…the State alleged to be responsible has waived the requirement that local remedies be exhausted."⁵

Express waiver may be found in an ad hoc agreement to resolve a dispute, bilateral and multilateral treaties, or a contract between an alien and a State.⁶ It is generally agreed that a waiver in this form is irrevocable, but it may be revoked by agreement of the parties or by agreement with the investor’s home State.⁷

Most bilateral investment treaties (BITs) waive the local remedies rule either expressly or impliedly, and the existence of wavier in these treaties is generally accepted,⁸ notwithstanding the range of provisions in BITs. Some BITs explicitly waive the local remedies rule,⁹ others explicitly include the rule,¹⁰ and others are silent. Recent discussions about the reform of the investor-State dispute settlement system have touched on explicitly including the local remedies rule in BITs.¹¹

In multilateral treaties, the best-known example is found in Article 26 of the ICSID Convention. It contains an express waiver to the local remedies rule in its first sentence, while preserving a State’s right to require local remedies in its second sentence.¹² It follows that BITs which refer to ICSID arbitration, but are silent on the local remedies rule, contain a waiver based on Article 26 ICSID Convention. Where treaties are silent on waiver in non-ICSID arbitrations, tribunals have generally interpreted the silence as implied waiver – in other words, the rule is waived, unless expressly required.¹³

Other examples of the express waiver of the local remedies rule are found in agreements for claims commissions such as in the Algiers Accord that established the Iran-US Claims Tribunal¹⁴ and the Convention establishing the US Mexican General Claims Commission.¹⁵

As for waivers in contracts, the choice of international arbitration in a contract is presumed to be a waiver of other possible remedies.¹⁶

An implied waiver of the local remedies rule is possible. There is no general rule for implied waiver, and whether there has been an implied waiver by the State will turn on the facts of the case. However, there is a presumption against implied waiver under customary international law,¹⁷ and the threshold is high¹⁸ – there has to be a clear intent to waive the rule. The seminal authority on implied waiver is the ruling of a chamber of the ICJ in the ELSI case, which held that implied waiver should not readily be inferred.¹⁹

The presumption, while strong, is not irrebuttable and waiver can be implied where a State enters into an arbitration agreement after the dispute has arisen, and the agreement is silent on retaining the local remedies rule.

In investment arbitration, tribunals have often found that waiver is implied in BITs which are silent on the local remedies rule. Multi-lateral treaties may also impliedly waive the rule. A prominent example is NAFTA, which impliedly waives the rule by requiring the investor to waive any right to pursue a claim in domestic courts of the respondent State before it can begin arbitration.²⁰ Several NAFTA tribunals have addressed this question.²¹

There has been some debate on whether waiver can be inferred from the conduct of a State, for example where a State remains silent about an alien not pursuing local remedies. The argument here is that the State is estopped from invoking the local remedies rule, but given the uncertain status of estoppel in international law, such a case is better treated as implied waiver.²²

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