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Ms Tejas Shiroor

Associate - Eversheds Sutherland, Paris

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Admissibility (Procedure)

(Tejas Shiroor is an Associate with the international arbitration and public international law practice of Eversheds Sutherland LLP. The opinions expressed in this publication are those of the author. They do not purport to reflect the position of Eversheds Sutherland LLP.)

I. Conceptual distinction between admissibility and jurisdiction

1.

Challenges to admissibility of claims in investment arbitration often overlap with challenges to jurisdiction. A discussion on the admissibility of claims therefore necessarily entails an appraisal of the inter-relationship between the concepts of jurisdiction and admissibility in investment arbitration.

A. Defining admissibility and jurisdiction

2.

Most international investment treaties do not expressly refer to the term “admissibility”.1 In the absence of such an express reference, certain tribunals have found a distinction between admissibility and jurisdiction to be irrelevant.2 

3.

However, tribunals3 and academics4 that do recognise a distinction between jurisdiction and admissibility generally concur that jurisdiction pertains to the ability or power of an arbitral tribunal to hear a claim, whereas admissibility relates to the characteristics of a particular claim. A tribunal will thus first have to decide, as a primary issue, whether it has jurisdiction, before determining whether a particular claim is admissible.5

4.

In deciding issues relating to the admissibility of a claim, tribunals will give due consideration to the factual circumstances relevant to the claim, as well as to the need to ensure the proper administration of justice.6

B. Relevance of the distinction between admissibility and jurisdiction

5.

Distinguishing between matters of jurisdiction and admissibility is important, as each carries different consequences.7 For example:

  1. Contrary to decisions on jurisdiction, decisions on admissibility may not generally be reviewed by State courts or other controlling authorities.8 A decision on admissibility will only be set aside if the decision fails to state sufficient reasons or was taken in breach of a fundamental rule of procedure.9
  2. Tribunals have greater procedural flexibility in cases over which they have jurisdiction. For example, rather than dismissing a claim as inadmissible, certain tribunals have suspended the proceedings with directions for resumption upon the fulfilment of the relevant conditions of admissibility.10
  3. While some tribunals may consider their jurisdiction proprio motu, such as in cases where host States fail to appear,11 tribunals are generally unlikely to consider questions of admissibility on their own motion.12
  4. Unlike jurisdictional requirements, certain objections to admissibility, such as the requirement to exhaust local remedies, may be waived.13
  5. The distinction may have strategic implications with respect to the procedure adopted by the tribunal in considering preliminary objections. In bifurcated proceedings, tribunals have the discretion to decide whether to consider questions of jurisdiction and admissibility together, or whether to join questions of admissibility to the merits of the case.14
  6. A tribunal’s decision as to the admissibility of a claim does not become res judicata.15

II. Overlap in objections to jurisdiction and admissibility in practice

6.

In practice, the delimitation between jurisdiction and admissibility is not always straightforward.16

7.

A number of issues that most commonly arise in the context of admissibility have been characterised interchangeably as issues of jurisdiction and admissibility, depending on the circumstances of the case.17 For instance:

  1. A failure to comply with procedural prerequisites has been held to pertain to both jurisdiction and admissibility, depending on whether these prerequisites have been formulated as a condition for consent to arbitration.18
  2. Similarly, a failure to comply with the exhaustion of local remedies where an applicable investment treaty requires it as a condition of the host State’s consent to arbitration has been held to be an obstacle to jurisdiction19 and not a question of admissibility.20 However, attempts at invoking a failure to exhaust local remedies as being a jurisdictional impediment have rarely been successful.21
  3. A failure to comply with negotiation or “waiting” periods has been found to pertain to both jurisdiction22 and admissibility.23 However, some tribunals have refused to characterise negotiation or waiting periods as either an issue of jurisdiction or admissibility, finding instead that they are simple procedural requirements.24
  4. Objections relating to denial of benefits clauses have generally been held to pertain to admissibility or merits, where the denial of benefits pertains to substantive rights (such as under the Energy Charter Treaty),25 but an issue of jurisdiction where it pertains to procedural rights (such as in the Central America Free Trade Agreement).26
  5. A plea of a violation of domestic law by the State (or a plea of illegality by the investor)27 has been found to be a jurisdictional requirement by certain tribunals28 and an issue of admissibility or merits29 by others. Tribunals’ treatment of a plea of illegality depends on a range of factors, such as whether the underlying treaty contains an explicit requirement to comply with host State law, in the form of an “in accordance with host State law” clause, as well as the timing of the violation of domestic law. Where investors have failed to abide by explicit host State law conditions at the initiation of the investment (such as a violation of domestic law conditions for the admission of the investment or the obtaining of an investment by illegal means), tribunals have ordinarily refused jurisdiction over such claims.30 Where the underlying treaty does not contain an explicit “in accordance with host State law” clause, most tribunals have nevertheless sanctioned a breach of domestic law at the initiation of the investment, but have dealt with it as an issue of admissibility or merits.31 Where domestic law has been violated not at the inception, but during the lifetime of the investment, tribunals have taken this into account at the stage of merits or quantification.32
  6. As regards whether Most-Favoured-Nation (“MFN”) clauses can be used to import procedural benefits, the jurisdiction/admissibility dichotomy has been articulated as follows: cases where claimants have used an MFN clause to “override a procedural requirement that constitutes a condition for the submission of a claim to international arbitration,”33 such as a procedural requirement to resort to local courts before bringing an arbitration, have been examined as issues of admissibility,34 and tribunals have generally accepted the application of the MFN clause in such cases.35 However, attempts to use an MFN clause to expand the scope of jurisdiction of the applicable Bilateral Investment Treaty, such as by unjustifiably bringing contract claims before an ICSID tribunal, have been dealt with as issues pertaining to jurisdiction, and have largely been unsuccessful.36

III. The effect of a declaration of inadmissibility

8.

In circumstances where the inadmissibility of a claim is linked to conditions of consent to arbitration, a tribunal will be unable to exercise jurisdiction over the dispute.37

9.

Where a tribunal finds that a claim that is within its jurisdiction is inadmissible, a declaration of inadmissibility will normally result in a dismissal of the claim on the merits; nevertheless, such a dismissal would be without prejudice to the right of the claimant to initiate new proceedings upon removing the obstacle to admissibility.38 As has been mentioned above at paragraph ‎5‎b), in deciding whether to dismiss a claim as inadmissible, tribunals have considered whether it would, in light of the circumstances of the dispute, be appropriate to give the parties an opportunity to remove the obstacle to admissibility.39

10.

Finally, it is recalled from paragraph ‎5 above, that although a lack of jurisdiction or admissibility may lead to the same result, i.e. the refusal of a tribunal to hear the case, this refusal will carry different consequences, depending on whether it is based on a lack of jurisdiction or a finding of inadmissibility.40

Bibliography

Paulsson, J., Jurisdiction and Admissibility, in Aksen, G. (ed.), Global Reflections on International Law, Commerce and Dispute Resolution, Liber Amicorum in honour of Robert Briner, 2005, pp. 601-617.

Brownlie, I., Principles of Public International Law, 7th ed., 2008.

Heiskanen, V., Ménage à trois? Jurisdiction, Admissibility and Competence in Investment Treaty Arbitration, ICSID Review-Foreign Investment Law Journal, 2013, pp. 1-16.

Douglas, Z., The Plea of Illegality in Investment Treaty Arbitration, ICSID Review-Foreign Investment Law Journal, 2014, pp. 155-186.

Waibel, M., Investment Arbitration: Jurisdiction and Admissibility, 2014.

Wehland, H., Jurisdiction and Admissibility in Proceedings under the ICSID Convention and the ICSID Additional Facility Rules, in Baltag, C. (ed.), ICSID Convention after 50 Years: Unsettled Issues, 2017, pp. 227-248.

Fontanelli, F. and Tanzi, A., Jurisdiction and Admissibility in Investment Arbitration. A View from the Bridge at the Practice, The Law and Practice of International Courts and Tribunals, 2017, pp. 3-20.

Reinisch, A., Jurisdiction and Admissibility in International Investment Law, The Law and Practice of International Courts and Tribunals, 2017, pp. 21-43.

Santacroce, F.G., Navigating the Troubled Waters Between Jurisdiction and Admissibility: an Analysis of Which Law Should Govern Characterization of Preliminary Issues in International Arbitration, Arbitration International, 2017, pp. 539-570.

Calamita, N.J. and Sardinha, E., The Bifurcation of Jurisdictional and Admissibility Objections in Investor-State Arbitration, The Law and Practice of International Courts and Tribunals, 2017, pp. 44-70.

Pauker, S.A., Admissibility of Claims in Investment Treaty Arbitration, Arbitration International, 2018, pp. 1-78.

Fouchard Papaefstratiou, A. and Shiroor, T., Investors’ Obligation to Comply with Domestic Law, OGEL/TDM Special Issue on Foreign Direct Investment Operations and Investment Disputes in the African Extractive Sector: Challenges and Opportunities for Africa’s Growth & Development, Transnational Dispute Management, 2019.

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