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M. Yusuf Islam Özkan

Associé - Yerlikaya & Özkan Attorney Partnership

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Fork in the Road

I. Definition


“Fork in the road” clauses, included in some investment treaties, “provide that the investor must choose between the litigation of its claims in the Host State’s domestic courts or through international arbitration and that the choice, once made, is final”.1


It is also expressed by the Latin maxim of una via electa non datur recursus ad alteram (“once one road is chosen, there is no recourse to the other”).2 Hence, the fork in the road clauses result in that the investor has a choice of forum that is irrevocable.3 These two elements (having a choice that is irrevocable) were used by arbitral tribunals to determine whether provisions were actually fork in the road provisions.4

II. Treaty practice


Fork in the road clauses currently appear in around 23% of the bilateral investment treaties worldwide.5 These clauses are mostly inserted to avoid duplication of procedures and claims and conflicting decisions.6

III. Distinction with other related procedural issues


In contrast, the exhaustion of local remedies clauses impose a procedural requirement on the investor to resort to all available and effective local remedies that exist in a domestic legal order. Fork in the road clauses oblige the investor to make a final choice between domestic or international remedies, rather than requiring it to file a claim in one forum after the other.7


Although they prima facie seem undistinguishable, a waiver of local remedies "requires the investor to refrain from turning to a domestic court prior to filing an arbitration by submitting a written waiver, whereas the former (fork in the road clauses) allows the investor to choose between a domestic proceeding and an investment arbitration."8 Arbitral tribunals established this distinction when examining the fork in the road provisions in article 1121 of NAFTA9 and article 26(3) of the ECT.10


By examining its structure, one can state that fork in the road clauses aim to tackle the problems that may arise from the existence of parallel proceedings (lis alibi pendens) by narrowing the investor’s choice of fora into one.11 Additionally, investment tribunals often uses the “triple identity” test of parallel proceedings to decide on the legality of the triggering the fork in the road clause.

IV. Conditions to trigger a fork in the road clause

A. General considerations


Only procedures filed before domestic courts after the entry into force of the relevant investment treaty may fall within the scope of a fork in the road provision.12


Claims filed before both international13 or domestic14 arbitral tribunals may also fall within the scope of this provision.


To establish whether the fork in the road is triggered by an investor having filed a claim before a domestic court, arbitral tribunals consider whether the domestic bodies at stake have a judicial binding function and independence.15


Nevertheless, arbitral tribunals often noted that investors may be required to appear before domestic courts or administrative tribunals during the course of their investment activities, which does not necessarily characterize a “choice” with respect to the applicable fork in the road provision.16


The interpretation of fork in the road provisions by tribunals varies depending on the specific wording of each fork in the road provision,17 which sometimes contains specific conditions or restrictions.18

B. The "triple identity" test


Arbitral tribunals frequently assess the investors’ choice of jurisdiction pursuant to a fork in the road clause by applying the “triple identity” test19 which requires that (i) the same dispute20 (ii) involving the same cause of action21 (iii) between the same parties22 be submitted to the domestic courts of the host State prior to the choice of international arbitration.23


While dealing with the second condition (identity of cause of action between the case filed before the domestic courts and before the investment tribunal), arbitral tribunals often distinguish “treaty claims” from the “contractual claims” (i.e. claims arising out of the investment treaty and claims arising out of the underlying investment contracts concluded with the host State).


Investment tribunals have considered that contractual claims handled before domestic courts do not have the same cause of action as claims under the relevant BIT and that they are each are “on a different road”.24 Accordingly, tribunals have ruled correlatively that exclusive dispute resolution provisions in an investment contract would not bar the commencement of an arbitration based on a BIT.25

C. The "fundamental basis" approach


Other arbitral tribunals departed from the distinction between “contractual” and “treaty” claims and from the triple identity test and simply relied on the “fundamental basis” of a claim, which focuses on the subject matter of the dispute brought before the different forums.26 In doing so, investment tribunals are focused on claims having the “same normative sources” and acknowledge that “the same facts can give rise to different legal claims and similarity of prayers doesn’t necessarily bespeak an identity of causes of action.”27 Nevertheless, it should also be noted that the specific wording of the fork in the road clauses will play a key role to interpret the jurisdictional issue at the concrete case.

V. Fork in the road clause and provisional measures proceedings before domestic courts


As seeking provisional measures from Host State’s courts naturally entails a domestic judicial process, the question may arise whether the hearings of provisional measures before domestic courts could trigger the fork in the road clause.28


In this respect, tribunals have regard primarily to the provisions of the applicable BIT and the arbitration rules. The majority of these rules explicitly state that as long as it is stipulated in the consent to arbitration, requesting domestic courts to order provisional measures shall not be deemed incompatible with the filing of an international arbitration.29

VI. Fork in the road and most-favoured nation clause


Fork in the road provisions cannot be bypassed30 nor incorporated31 by invoking a most-favoured nation (MFN) clause to benefit from a third-party agreement that does not contain such clauses.

VII. Fork in the road and bifurcation


Although it is usually a matter of jurisdiction,32 fork in the road objections can sometimes be treated as a matter related to admissibility.33


However, bifurcation requests to hear a fork in the road objection first have been rejected on the basis that the analysis required was intertwined with the merits.34

VIII. Fork in the road and denial of justice


Tribunals held that claimants should not be barred from submitting denial of justice allegations in the arbitration in the presence of a fork in the road provision.35

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