James Fry and Odysseas Repousis (PhD candidate)
June 2015, Vol. 31, Issue 2, pp. 213-259
Abstract: The backlash against investor–State arbitration is building, to the point that some commentators even talk about termination or amendment of investment treaties in order to strip international arbitral tribunals of their jurisdiction after the arbitration process already has started. This suggestion has been made in the context of the Philip Morris Asia plain packaging ICSID arbitration involving the Australia–Hong Kong bilateral investment treaty (BIT). This suggestion raises a number of interesting issues for international law and dispute settlement, especially in relation to the limits of the intertemporal rule. States are free to agree to amend or terminate treaties, including ones relating to investment, even before they expire. Such amendments or termination do not have retroactive effects unless the parties to the treaty agree otherwise. This same freedom is available to states in relation to investment treaties. However, the analysis may vary in the context of investor–State arbitration. An arbitration clause in an investment treaty represents an offer made by those states to arbitrate disputes with investors. When investors accept that offer, the consent to arbitrate becomes perfected and cannot be withdrawn unless both parties to the arbitration—the investor and the host state—agree. This conclusion is based on the principle of irrevocability of the consent to arbitrate, which is a pillar of arbitration law and also is established in Article 25 of the ICSID Convention. Moreover, the applicable law to the dispute would be the law that was binding on the parties at the moment of the acts that created the dispute. The same principle applies in state responsibility disputes. Therefore, the argument that Australia simply can amend its BIT with Hong Kong to stop the Philip Morris arbitration might be incorrect. This article explores these issues.