Auteur

M. Yusuf Islam Özkan

Lawyer - Canadian Institute for International Law Expertise

Editors
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Fork in the Road

I. Definition

1.

“Fork in the road” (FITR) clauses, included in some 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 This attribute with respect to the fork in the road clauses also results in that the investor’s choice is irrevocable.3

II. General investment arbitration practice

2.

Fork in the road clauses currently appear in around 23% of the bilateral investment treaties worldwide.4

III. Distinction with other related procedural issues

3.

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 essentially force him to file a claim in one forum after the other.5

4.

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."6

5.

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.7 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. Application

6.

Primarily, it is often held by the investment tribunals that the investors may be required to appear before a domestic court or an administrative tribunal in course of their investment activities and this kind of proceedings do not necessarily form a “choice” with regards to fork in the road clauses.8

A. The permissive approach: the "triple identity" and "contractual/treaty claims" tests

7.

As stated above, arbitral tribunals frequently evaluate whether a choice of jurisdiction made by the investors pursuant to fork in the road clause by applying the “triple identity” test which requires the existence of (i) the same dispute (ii) involving the same cause of action (iii) between the same parties has been submitted to the domestic courts of the Host State.9 It is also deemed determinant by the tribunals whether the domestic administrative bodies have the judicial function and independence and if not, the conditions for triggering the fork in the road clause would not be met.10 Lastly, in order that fork in the road clauses to be operated against the international arbitration, the domestic proceedings must have been chronologically instituted prior to the choice of international arbitration.11 

8.

Regarding the permissive approach on the fork in the road clauses, one also need to consider that the underlying investment contracts (such as concession contracts or contracts of transfer of operational rights) concluded with the Host State are the stepping stone which enables foreign investors to operate their investments protected under the BITs. Hence, while dealing with whether the case filed in the domestic courts and one before the investment tribunal have the same cause of action, the tribunals often try to distinguish the “treaty claims” from the “contractual claims”. It is acknowledged by the investment tribunals that contractual claims that are handled before the domestic courts do not have the same cause of action as claims under the relevant BIT and they are each are “on a different road”.12 Accordingly, the tribunals had ruled correlatively that exclusive dispute resolution provisions in the investment contract would not bar commencement of a BIT arbitration that arose out of that investment contract.13 

B. A more restrictive approach: the "fundamental basis" approach

9.

As the case law of the international investment law is not unanimous on the subject of the approach on applying the fork in the road clauses, other arbitral tribunals are diverging away from the notion of distinguishing “contractual” and “treaty” claims and simply suggest to rely on the “fundamental basis” of a claim. 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.”14 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.

C. Fork in the road clause with regards to the proceedings of provisional measures before domestic courts

10.

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. In this respect, primarily the provisions of the applicable BIT and the arbitration rules may navigate the tribunals. Thus, 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 procedure of international arbitration.15 Nonetheless, concerning the application of the fork in the road clause, if the applicable procedural and substantive rules are silent on the matter, such domestic proceedings may be subjected to the tests of “triple identity” and “fundamental basis” depending on the extent of the domestic claim.

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