The existence of a dispute, or the lack thereof, is one of the most decisive elements of an investment arbitration tribunal’s jurisdiction ratione materiae. The tribunal’s jurisdiction rests on any given definition and/or scope of the term “dispute” in the applicable instruments. These include contracts, national investment legislations, and various bilateral and multilateral investment treaties in force.
However, in the absence of a clear definition in the applicable instruments, investment tribunals1 have traditionally relied on the well-established definition of “dispute” in general international law.2 The Permanent Court of International Justice in the Mavrommatis Palestine Concessions Case (Mavrommatis) defined a “dispute” as “a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons.”3 Tribunals evaluate whether a “dispute” exists or not on objective grounds, and not on the basis of statements made by either party.4
The term “dispute” is distinct from “any divergence of opinion or disagreement”.5 Investment treaty jurisprudence suggests that a number of other constituent elements are required for a “divergence of opinion or disagreement” to qualify as a “dispute” (see Section III below). A “dispute” is also distinct from “events leading to a dispute” -- which predate a dispute -- and a “claim”, which may succeed a dispute.6
AGIP SpA v. People’s Republic of Congo, ICSID Case ARB/77/1, Award, 30 November 1979, paras. 38-42; Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction, 25 January 2000, para. 94; Tokios Tokelés v. Ukraine, ICSID Case No. ARB/02/18, Decision on Jurisdiction, 29 April 2004, para. 106; Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly Empresas Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of Peru, ICSID Case No. ARB/03/4, Award, 7 February 2005, para. 48; Impregilo S.p.A. v. Islamic Republic of Pakistan (II), ICSID Case No. ARB/03/3, Decision on Jurisdiction, 22 April 2005, paras. 302-303; AES Corporation v. Argentine Republic, ICSID Case No. ARB/02/17, Decision on Jurisdiction, 26 April 2005, para. 43; El Paso Energy International Company v. Argentine Republic, ICSID Case No. ARB/03/15, Decision on Jurisdiction, 27 April 2006, para. 61; Suez, Sociedad General de Aguas de Barcelona, S.A. and Interagua Servicios Integrales de Agua, S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction, 16 May 2006, para. 29; M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, ICSID Case No. ARB/03/6 , Award, 31 July 2007, para. 63; Lao Holdings N.V. v. Lao People’s Democratic Republic (I), ICSID Case No. ARB(AF)/12/6, Decision on Jurisdiction, 21 February 2014, para. 120.
The Mavrommatis Palestine Concessions, PCIJ Series A. No 2, Judgment (Objection to the Jurisdiction of the Court), 30 August 1924, p. 11; Northern Cameroons (Cameroon v. United Kingdom), Judgment - Preliminary Objections, 2 December 1963, p. 27; South West Africa (Ethiopia v. South Africa), Judgment - Preliminary Objections, 21 December 1962, p. 328; Interpretation of Peace Treaties with Bulgaria, Hungary and Romania, Advisory opinion (first phase), 30 March 1950, p. 74; Case Concerning the Application of the International Convention on the Elimination of All Forms of Racial Discrimination (Georgia v. Russia), Judgment on Preliminary Objections, 1 April 2011, para. 30.
II. General treaty practice
Most applicable instruments, such as the NAFTA, ECT and the ICSID Convention, do not define the term “dispute”. However, they contain several qualifications which restrict the scope of disputes that could be brought before a tribunal. These include the legal nature of the dispute (see Section IV below), directness of the dispute to the investment (see Section V below) as well as the timing of the dispute.
III. Crystallization of a dispute
The tribunal in Sociedad Anónima Eduardo Vieira v. República de Chile has summarised the key characteristics of a “dispute” as evidenced in investment treaty jurisprudence.7 In order to qualify as a “dispute”, a disagreement should include a minimum level of communication between the parties, where a party must positively oppose the other’s views.8 One tribunal noted that a party’s failure to respond to the demands of the other does not affect the existence of a dispute between them.9 Another tribunal has clarified that lack of response or silence, unless justified, may indicate positive opposition to the other party’s views.10 Although the disagreement could be over a factual or legal point, the dispute must relate to issues arising out of their relationship, and not academic or hypothetical in nature. There must be a verbal or written evidence of the disagreement.11
Emilio Agustín Maffezini v. The Kingdom of Spain, ICSID Case No. ARB/97/7, Decision of the Tribunal on Objections to Jurisdiction, 25 January 2000, para. 96; Víctor Pey Casado and President Allende Foundation v. Republic of Chile, ICSID Case No. ARB/98/2, Award, 8 May 2008, para. 443; Limited Liability Company Amto v. Ukraine, SCC Case No. 080/2005, Final Award, 26 March 2008, para. 49.
IV. Legal character of dispute
Article 25(1) of the ICSID Convention restricts the scope of disputes that could be brought before it to disputes that are legal in nature. ICSID tribunals have clarified that the legal character of a dispute is not affected by the presence of an element within a dispute that is economic or political in nature.12 In contrast, it rests solely on the presentation of the claim by the investor, i.e. if the investor presents its claim on an (alleged) legal right, makes legal arguments in support of its claim, and requests for legal remedies such as restitution and damages.13 One ICSID tribunal held that the fact that the dispute was not over the principle of compensation (which was undisputed) but over the amount of compensation does not affect the legal character of the dispute.14
Ceskoslovenska Obchodni Banka, a.s. v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction, 24 May 1999, para. 61; Suez, Sociedad General de Aguas de Barcelona, S.A. and Interagua Servicios Integrales de Agua, S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction, 16 May 2006, paras. 33-37.
V. Directness of dispute to investment
Article 25(1) of the ICSID Convention also restricts the scope of disputes that could be brought before it to “disputes that directly arise out of an investment”. This directness is to be evaluated in respect of the dispute and not the investment15 and should be done on a case-by-cases basis.16 While the text of the ICSID Convention mandates the dispute to be connected to the investment, the text of Article 1101(1) NAFTA requires the measures to be directly related to the investment. This distinction has been recognised by several ICSID tribunals while rejecting the Respondent States’ objection that the measures leading to the dispute were general in nature and not directed at the investment.17 Other tribunals have upheld the general unity of an investment operation, rejecting similar objections by Respondent States that the dispute did not arise directly out of the investment but from an ancillary activity.18
Suez, Sociedad General de Aguas de Barcelona, S.A. and Interagua Servicios Integrales de Agua, S.A. v. Argentine Republic, ICSID Case No. ARB/03/17, Decision on Jurisdiction, 16 May 2006, para. 30; Total S.A. v. Argentine Republic, ICSID Case No. ARB/04/1, Decision on Objections to Jurisdiction, 25 August 2006, para. 66.
Holiday Inns S.A. and others v. Morocco, ICSID Case No. ARB/72/1, Decision on Jurisdiction, 12 May 1974; Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, L.P. v. Argentine Republic, ICSID Case No. ARB/01/3, Decision on Jurisdiction, 14 January 2004, paras 58-60; Ceskoslovenska Obchodni Banka, a.s. v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision of the Tribunal on Objections to Jurisdiction, 24 May 1999, para. 72.
Schreuer, C., Malintoppi, L., Reinisch, A. and Sinclair, A., The ICSID Convention: A Commentary, 2nd ed., 2010.