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.)

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.

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 

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. Accordingly, a tribunal would have to decide, as a primary issue, whether it has jurisdiction, before determining whether a particular claim is admissible.⁵ It thus follows that, once a tribunal has upheld a jurisdictional objection, it would dismiss the case and consequently not decide upon objections to admissibility.⁶

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

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

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 is generally considered as an issue of admissibility,¹⁹ under an applicable investment treaty requires it as a condition of the host State’s consent to arbitration - in which case it would be an obstacle to jurisdiction.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, where the practical consequences of making such a distinction would be the same.²⁴ Certain other tribunals have held negotiation or waiting periods to be simple procedural requirements,²⁵
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),²⁶ but an issue of jurisdiction where it pertains to procedural rights (such as in the Central America Free Trade Agreement).²⁷
5. A plea of a violation of domestic law by the State (or a plea of illegality by the investor)²⁸ has been found to be a jurisdictional requirement by certain tribunals²⁹ and an issue of admissibility³⁰ or merits³¹ 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.³² 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.³³ 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.³⁴ 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.³⁵
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,”³⁶ such as a procedural requirement to resort to local courts before bringing an arbitration, have been examined as issues of admissibility,³⁷ and tribunals have generally accepted the application of the MFN clause in such cases.³⁸ 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.³⁹
7. Whether abuse of process is an issue of jurisdiction or admissibility will vary depending on the circumstances of the case. Some tribunals have, however, found that this distinction is without importance.⁴⁰ (See further Abuse of process, Section I)
   
8. Tribunals have held different approaches as to whether parallel proceedings raise issues of admissibility.⁴¹
9. Although usually matters of jurisdiction, fork in the road objections have also been treated as a question of admissibility;⁴²
10. Estoppel is treated as a jurisdiction, admissibility or merits matter, depending on whether the defense is raised as a preliminary issue or as an issue of substantive rights. (See further Estoppel, Section IV) 

Finally, it bears mentioning that in exceptional circumstances, tribunals may treat issues that are usually examined at the merits stage as a question of admissibility. For instance, an expropriation claim, which is normally dealt with at the merits stage, has been considered as a question of admissibility when it was evident that there was no expropriation.⁴³

In deciding issues relating to the admissibility of a claim, tribunals give due consideration to various factors, such as whether the applicable treaty contains any express stipulations relevant to admissibility,⁴⁴ the factual circumstances relevant to the claim, as well as to the need to ensure the proper administration of justice.⁴⁵

Tribunals have found claims to be inadmissible on various grounds, such as: 

1. A failure to notify the respondent of a claim, in keeping with the notification requirements set out in the treaty (See further Trigger Letter);
2. A finding of corruption or other misconduct by the investor;⁴⁶
3. The claim not falling within the mandate of the tribunal;⁴⁷
4. A claim that is time-barred⁴⁸ or a claim that is untimely⁴⁹ (See further Jurisdiction Ratione Temporis, Section V and Jurisdiction)
5. The failure to articulate a claim sufficiently;⁵⁰
6. The doctrine of “clean hands”.

Similarly, objections to admissibility have been unsuccessful for a myriad of reasons,⁵¹ such as:

1. Where an objection to admissibility is an attempt to relitigate issues of jurisdiction;⁵²
2. An alleged risk of double recovery;⁵³
3. An objection based on a failure to advance security for costs.⁵⁴

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.⁵⁵

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;⁵⁶ nevertheless, such a dismissal would be without prejudice to the right of the claimant to initiate new proceedings upon removing the obstacle to admissibility.⁵⁷ As has been mentioned above at paragraph ‎4‎b), 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.⁵⁸

Finally, it is recalled from paragraph ‎4 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.⁵⁹

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, 7^th 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.