“Cooling-off periods” (also called “Waiting periods”) are features of International Investment Agreements which require the investor to abstain, for a specified period, from initiating arbitration proceedings against a host State and to attempt to settle the alleged dispute amicably. The obligation to attempt settling the dispute amicably has been described in itself as an obligation of means instead of an obligation of result, implying good effort negociations from both parties.1 Other tribunals have however upheld less stringent standards.2
II. General treaty practice
Although they are a common feature of BITs, cooling-off periods can vary significantly in duration. The most common duration is 6 months,5 although periods ranging from 60 days6 to 24 months7 may be found. Periods shorter than 6 months are more common than cooling-off periods of a longer duration.8
The cooling-off period often begins when an investor sends a written notification of the existence of a dispute to the host State, commonly referred to as a trigger letter.9 Other, less formal triggers for the cooling-off period, however, have been accepted by the tribunals in the past.10 Tribunals have held that where a BIT requires investors to send a formal notice of the dispute, the cooling-off period should be calculated from the date of the notification and not the date of the alleged breach of the treaty.11 Tribunals have also held that formal notifications must detail the existence and nature of the dispute in sufficient detail and cover all claims the investor expects to make, so as to give the parties a realistic picture of the matter before them and enable them to reach a negotiated settlement.12 The cooling-off period typically cannot be waived but there have been exceptions.13 A Most Favoured Nation clause has however been used in the past to circumvent the requirement of a cooling-off period.14 Moreover, a showing of futility may obviate the need to observe the cooling-off period.15
Four main views have been taken on the consequences of an investor’s failure to comply with a clause providing for a cooling-off period:
Akhman, A., Consent to Submit Investment Disputes to Arbitration under Article 26 of the Energy Charter Treaty, International Arbitration Law Review, 2007, p. 61.
Born, G. and Šćekić, M., Pre-Arbitration Procedural Requirements: ‘A Dismal Swamp’, in Caron, D. and Others, Practising Virtue: Inside International Arbitration, 2015.
Schreuer, C., Travelling the BIT Route: Of Waiting Periods, Umbrella Clauses and Forks in the Road, Journal of World Investment and Trade: Law, Economics, Politics, 2004, pp. 231-256.
Deutsch, R., An ICSID Tribunal Denies Jurisdiction for Failure to Satisfy BIT’s Cooling-Off Period: Further Evidence of a Sea-Change in Investor-State Arbitration or a Meaningless Ripple?, Houston Journal of International Law, 2011, p. 590.
Chapman, S., Multi-Tiered Dispute Resolution Clauses: Enforcing Obligations to Negotiate in Good Faith, Journal of International Arbitration, 2010, p. 89.
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