Author

Ms Lucy Winnington-Ingram

International Arbitration Associate - Reed Smith LLP

Editors
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Effective Means to Assert Claims and Enforce Rights

I. Definition

1.

Effective means clauses require each State party to provide effective means of asserting claims and enforcing rights with respect to covered investments.

II. General treaty practice

2.

Effective means clauses were first introduced in the 1994 US model BIT, but omitted from the subsequent 2004 and 2012 versions.1 Outside of US BITs these provisions are rare, appearing in only a handful of non US BITs2 and in the Energy Charter Treaty.3

III. Effect and scope

3.

Effective means provisions require that a host State’s legislative and institutional framework provides for an effective means for the assertion of claims and the enforcement of rights. This requires the host State to establish a proper system of laws and institutions that guarantee matters such as legislation for the recognition and enforcement of rights,4 access to courts, due process and rights of appeal.

4.

Tribunals have adopted differing approaches as to whether an effective means clause operates to guarantee individual investors’ rights. Whilst some tribunals have held that individual failures will only breach the protection where they evidence systematic inadequacies,5 others have held that the system must operate effectively in any given case.6 On either interpretation, it is accepted that effective means provisions do not operate to guarantee the substantive correctness of each and every domestic decision.7

5.

The issue of whether or not effective means have been provided by the host State is to be measured against an objective, international standard,8 however the threshold for “effectiveness” requires a measure of deference to the domestic courts in keeping with the prohibition against investment tribunals acting as courts of appeal from the domestic process.9

6.

Breaches of the effective means protection have been found in the following circumstances:

  1. State intervention in judicial proceedings;10 and
  2. An undue or unjustified delay to judicial proceedings.11

IV. Effective means and other standards of protection

7.

The inter-play between effective means clauses and other protections is debated.

8.

On the one hand, a majority of tribunals have held that an effective means clause does no more than guarantee access to the courts and the existence of institutional mechanisms for the protection of investments. As such, it is a positive formulation of an obligation with respect to aspects of the prohibition on denial of justice within the fair and equitable treatment standard and under customary international law.12

9.

On the other, two tribunals (both seized with claims arising out of lengthy delays to court proceedings) have held that an effective means clause constitutes a lex specialis to which a distinct and potentially less demanding test is applicable as compared to denial of justice under customary international law.13 Conduct insufficient to meet the high threshold of a denial of justice14 may nevertheless constitute a breach of the effective means provision. Another key distinction under this less demanding test is the absence of the requirement that the investor exhaust its local remedies in order to bring a claim in circumstances where the investor is able to demonstrate that the available remedies are ineffective or futile.15 This interpretation has been criticised by some commentators,16 on the basis that the requirement of exhaustion of local remedies cannot, by definition, apply to a case of delay, since otherwise the very insistence on exhaustion could itself produce a denial of justice.17

Bibliography

Douglas, Z., International Responsibility for Domestic Adjudication: Denial of Justice Deconstructed, The International and Comparative Law Quarterly, Vol. 63, No. 4, 2014, p. 29.

McLachlan, C., Shore, L., and Weiniger, M., International Investment Arbitration: Substantive Principles, 2nd ed., 2017, pp. 297-302.

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