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Mr Anže Arko

Senior Associate - ODI Law Firm

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Ms Charis Tan

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Denial of Justice in FET

I. Definition

1.

This Note focusses on denial of justice as a breach of fair and equitable treatment (FET). This should be distinguished from denial of justice under customary international law and from the lack of effective means to assert claims and enforce rights (see Section III below).

2.

Denial of justice was developed as an international delict to protect foreigners against acts of the judiciary of a foreign State1 and forms part of customary international law.2 In the context of investment protection treaties, it is usually regarded as evidence of the FET violation.3 It is commonly understood to encompass;4

  1. a denial of access to courts;5
  2. excessive length of proceedings;6
  3. serious procedural defects in proceedings (e.g. violations of equal treatment of the parties, the right to be heard);7 and
  4. irrational or abusive outcome going beyond mere misapplication of the law.8
3.

Denial of justice has also been applied to administrative proceedings9 (see Section X below) and to the actions of the prosecution before trial, the trial itself and post-trial actions.10

II. Treaty practice

4.

Most investment protection treaties do not specifically refer to a prohibition of denial of justice although some recent treaties specifically list denial of justice as an example of breach of the fair and equitable treatment standard.11 However, it is generally accepted that the standard is encompassed by the fair and equitable treatment (FET)12 obligation or the minimum standard of treatment (MST).13

III. Relationship to other standards of protection

5.

Some tribunals have considered that the denial of justice under the FET standard is neither broader nor narrower than the protection against denial of justice under customary international law.14 The Tribunal in Arif v Moldova emphasized that the concepts remain distinct and subject to different requirements.15

6.

The factual predicates of the denial of justice are sometimes examined in the context of other treaty standards, such as expropriation,16 prohibition of arbitrary or discriminatory measures17 and full protection and security.18 The standard of effective means to assert claims and enforce rights was considered either as a more general guarantee against a denial of justice19 or as “lex specialis”, subject to a less stringent test for a finding of a violation than it applies to a denial of justice.20 

7.

The prohibition of denial of justice encompasses Due process.21 Due process is also sometimes considered as a separate element of FET and some recent treaties list denial of justice and Due process separately as different aspects of the FET obligation (see examples in Section II above).

IV. Burden of proof

8.

The party alleging denial of justice bears the burden of proving the breach.22

V. Standing

9.

As a matter of standing, some tribunals have found that only an investor who was a party to the national procedure can pursue a denial of justice specific claim under customary international law, whereas indirect investors can pursue a denial of justice claim as part of the fair and equitable treatment standard.23

VI. Temporal application

10.

Tribunal in ATA Construction v Jordan considered that a denial of justice occasioned by judicial actions occurs when the final judicial instance which is plausibly available has rendered its decision.24

11.

Tribunals refused to find jurisdiction ratione temporis when the dispute originated before the treaty entered into force or over judicial acts occurring before that.25 However, some tribunals considered that such acts may be relevant in establishing a breach of the treaty obligation through acts continuing after the entry into force of the treaty.26

VII. Requirement of the exhaustion of local remedies

12.

It is generally accepted that a claim for denial of justice requires a prior exhaustion of local remedies,27 (which according to Tribunal in Manchester Securities v Poland should be exhausted only once28), notably because a judicial system should be allowed to correct itself.29

13.

However, this precondition is not required when this would be evidently futile or unreasonable,30 such as when the claim relates to excessive delays in judicial proceedings31 or when there is evidence of a manifestly defective judicial or administrative system32 (including no available or inadequate remedy).33

14.

Some tribunals have emphasized that the exhaustion of local remedies is a substantive, rather than a jurisdictional or an admissibility requirement.34

15.

Failure to comply with this requirement has led tribunals to reject denial of justice claims.35

VIII. Threshold applied by tribunals to find a violation

A. High threshold applied by tribunals

16.

It is generally accepted that tribunals will not act as courts of appeal when deciding on claims for denial of justice and that the standard of review is limited.36

17.

The test for establishing a denial of justice sets a high threshold,37 sometimes labelled as “a wilful disregard of due process of law, an act which shocks, or at least surprises, a sense of juridical propriety”,38 “administer[ing] justice in a seriously inadequate way,39 “fundamentally unfair proceedings and outrageously wrong, final and binding decisions,40 a fundamental “failure of a national system as a whole41 or an “extremely gross” misconduct.42

B. Cases in which arbitral tribunals rejected denial of justice claims

18.

Tribunals regularly find that the local courts’ conduct does not meet the high threshold for a denial of justice.43 

19.

Specifically, tribunals found that:

  1. mere error in law, disagreement with the reasoning of a judicial decision or contradictory rulings would not suffice to find a violation;44 rather, the relevant question is whether the court decision is itself inconsistent with the treaty,45 “inexcusable”,46 “malicious or clearly wrong”,47 “so lacking in seriousness as to indicate bias”48 or constitutive of “a breach of municipal law [that] is discriminatory against the foreign litigant”;49
  2. even gross misconduct by a lower court or manifest unfairness in its procedure is not necessarily sufficient to amount to a denial of justice, unless the available judicial remedies do not correct those deficiencies;50
  3. mere procedural errors, irregularity or an incompetent judicial procedure would not suffice to find a violation;51
  4. courts do not need to deal with every argument presented by parties to reach a conclusion52 and the brevity of a decision is not indicative of a denial of justice;53
  5. the complexity of the case, behaviour of litigants involved, significance of interests at stake and behaviour of courts themselves are factors to be considered in the assessment whether a delay in proceedings amounts to denial of justice54 (courts delays to litigate a claim were frequently not sufficient to characterize a denial of justice,55 with some exceptions;56 conversely deciding quickly on an application does not automatically constitute a denial of justice);57
  6. the refusal to exercise jurisdiction based on rules of immunity would not per se amount to a denial of justice;58
  7. the level of a jurisdiction’s court fees is not enough to characterize a denial of justice absent a showing that they are so high as effectively to preclude recourse to the courts or are otherwise shocking;59
  8. a litigant cannot commit a denial of justice unless its improper strategies are endorsed and acted on by the court, or unless the law gives it some extraordinary privilege which leads to a lack of due process;60
  9. political, even populist, statements by the host State’s executive branch do not amount to a denial of justice.61

C. Cases in which arbitral tribunals accepted denial of justice claims

20.

Tribunals found that a denial of justice could be characterized in the following situations:

  1. a failure to afford the investor due process of law in the context of court proceedings;62
  2. the investor’s criminal trial and conviction in abstentia and/or a failure to properly notify the sentence;63
  3. a court’s refusal to convene a hearing;64
  4. the absence of any appropriate relief within the host State’s legal system;65
  5. the investor’s arrest, prosecution and incarceration lacking any probable cause; an irregular prosecutorial proceeding, performed arbitrarily, in bad faith, with a willful disregard of any obligation to provide reasonable due diligence in the application of due process of law;66
  6. a decree issued by a quasi-judicial body of the State in the course of proceedings in which the investor was not entitled to participate;67
  7. the corrupt conduct of a judge regarding the “ghostwriting” of a judgment by a party’s representatives.68

IX. Distinction between procedural and substantive denial of justice

21.

Case law has occasionally distinguished between procedural (e.g. violation of the right to be heard, delays) and substantive denial of justice (e.g. extreme misapplication of national substantive law),69 but this division has been questioned.70 It has been argued that denial of justice is always procedural71 and that the substantive outcome of the case can be relevant as an indication of lack of due process or major procedural errors.72

X. Distinction between administrative and judicial proceedings

22.

The prohibition of denial of justice has also been applied to acts of organs of the State other than judicial ones73 as well as to administrative proceedings.74

23.

Some tribunals have considered that the level of due process required in administrative proceedings is lower than in judicial proceedings.75 For example, in Thunderbird v Mexico, the fact that the disputed administrative order was signed by an official who did not attend the hearing did not constitute denial of justice, because the investor was given a full opportunity to be heard and to present evidence at the hearing.76 Apotex v United States demonstrates that the requirement of notice and hearings before the adoption of a regulatory decision may be dispensed with when a delay would pose a risk to public health and if further administrative remedies against the decision exist.77

Bibliography

Dolzer, R. and Schreuer, C., Principles of International Investment Law, Oxford University Press, 2012, pp. 154-156 and 178-182.

Douglas, Z., International Responsibility for Domestic Adjudication: Denial of Justice Deconstructed, International and Comparative Law Quarterly, Vol. 63, 2014, pp. 867-900.

Francioni, F., Access to Justice, Denial of Justice and International Investment Law, European Journal of International Law, Vol. 20, Issue 3, 2009, pp. 729–747.

Gharavi, H.G., Discord Over Judicial Expropriation, ICSID Review - Foreign Investment Law Journal, Vol. 33, Issue 2, Spring 2018, pp. 349–357.

Kriebaum, U., Investment Arbitration - Rule of Law Demands of the Domestic Judiciary (Denial of Justice, Judicial Expropriation, Effective Means), 2020.

Mourre, A. and Vagenheim, A., Some Comments on Denial of Justice in Public and Private International Law After Loewen and Saipem, in Fernández-Ballesteros, M.A., Arias, D. (eds.), Liber Amicorum Bernardo Cremades, 2010, pp. 843-866.

Paparinskis, M., Franck Charles Arif v Republic of Moldova: Courts Behaving Nicely and What to Do About It?, ICSID Review - Foreign Investment Law Journal, Vol. 31, Issue 1, 2016, pp. 122–128.

Paulsson, J., Denial of Justice in International Law, Cambridge University Press, 2005.

Sattorova, M., Denial of Justice Disguised? Investment Arbitration and the Protection of Foreign Investors from Judicial Misconduct, International and Comparative Law Quarterly, Vol. 61, 2012, pp. 223-246.

Stevens, M. and Bishop, R.D., Chapter 21: Fair and Equitable Treatment: Denial of Justice, in Kinnear, M., Fischer, G.R., et al. (eds.), Building International Investment Law: The First 50 Years of ICSID, 2015, pp. 295-306.

UNCTAD, Fair and Equitable Treatment, UNCTAD Series on Issues in International Investment Agreements II, 2012, pp. 29-31, 80-81.

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