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Faculdade de Direito da Universidade de Lisboa

Litigation on Economic and International Law

Dr. Millán Requena Casanova

Consent through bilateral investment treaties

Ana Mêlissa Ferreira Candeias

Nº 28060
Consent through bilateral investment treaties

It’s important to establish that, over the years are based in bilateral investment treaties,
the BITs.
We can defined BIT by saying they’re international agreements that establish the terms
and conditions for private investment by nationals and companies of one state in another
Although that’s not the only function of the BITs, they aim at stimulating the flow of
foreign investment and creating a stable and predictable legal environment for their
Those two objectives are intimately related and mutually supportive.
There are two generations of these treaties, the firt one we call them Friendship,
Commerce and Navigation Treaties (FCNs), and then the second the BITs.
With the end of the WWII, the importance of the BITs kept growing because many
European countries depended on private and foreign investment and they started to use
the BITs to establish the rules of those investments.
Almost every bilateral investment treaty has a clause regarding to the investment
arbitration, as a form of protection for both parties in case of litigation.
Arbitration can be defined by a process which parties voluntarily refer their disputes to
an impartial third person, with the understanding that they will obey the arbitrator's
The basis of an investment arbitration is the fact that it is voluntary, which means
agreement and consent, and that's what I'm going to focus, because a BITs it’s a way to
show that consent.
It's important to refer that the BIT on its own cannot consent to ICSID’ s jurisdiction
by the parties to the dispute, but the treaty may contain the host State’s offer, this
proposal must be followed by a positive response by the other party.
The consent must be interpreted by a restrict maner.

A) The offer
It must be unilateral, binding on the party issuing same, have a set term and solely
revocable by another instrument of equal rank
It must offer unequivocal consent, otherwise it may occur situations that only exists a
simple promise of consent and this may mean that in case of dispute the party may
refuse and not be consider a breach under the BIT.
B) Acceptance by the investor
Is required, the treaty provision cannot replace the need of the acceptance, if not we
don’t have consent.
 Once the investor has accepted the offer contained in the BIT, either party may
start the proceedings.

After the parties give their consent and because of the principle of “pacta sunt
servanda”, no party may withdraw its consent unilaterally, which means that they can
terminate consent to arbitration by agreement.
It’s important to refer that in the cases where a clause providing for ICSID’s jurisdiction
is alleged invalid we must consider the same for the consent clause.

 Limitation and conditions to consent

Usually the clauses concerning arbitration matter refer to all disputes, but according to
Article 25 of the ICSID Convention the parties can limit de consent.
Typically, they are clauses that exclude certain questions and problems of the
The parties may also select some condition to access the Center but they cannot be
contrary to the Convention's mandatory provisions and they must comply with the
Center's Rules and Regulations.

Scope of consent
 All disputes concerning investments
The core of application of the BIT is economic investments but it doesn´t mean that in
matters of arbitration, the tribunal is restrict to claims arising from the BITs substantive
This means that the consent clause also applies to other subjects, for example, a contract
related with the investment

 Umbrella clauses
These clauses can be characterized by a situation when the parties include a provision
on the BIT that protects any contractual obligations.
It doesn´t exist a unique interpretation about umbrella clauses, some courts defend the
violations of an umbrella clause as a violation of the treaty, because if it’s in the BIT we
have to respect that under he principle of pacta sunt servanda, others don´t, for example,
the case between Siemens vs Argentina, where the court said even if the contract
obligations are under the protection of the treaty we cannot compare a contract to a
treaty, they don´t have the same value.

Procedural Requisites
The parties must follow a certain procedural requirements before the arbitration starts,
such as:

A) Waiting Periods for Amicable Sttlement

Has a duration of 3 to 12 months and consists of a negotiation and consultation phase to
lead to an amicable agreement.

B) Domestic remedies
This point is a little inconsistent because one of the goals of arbitration is to facilitate
the procedure by avoiding the delays and complications of an internal/State procedural.
The other problem is the fact the expression “exhaustion of domestic remedies” it’s kind
of vague, some Tribunal defend that even if the parties went to the nation courts and
then arbitration they don´t exhaust the domestic remedies.
So, this type of clauses are rare.

C) Fork-in-the-road provisions
This type of provisions offers the investor choice between the host States domestic
courts and international arbitration.
It´s basically the opposite of the exhaustion of domestic remedies.

 Conclusion
We must conclude that consent through BITs if on the one hand is the most difficult to
obtain, on the other hand it is perhaps the safest, maybe that´s why it’s the most
commonly used form of consent

 Dolzer, Rudolf; 1995, Bilateral Investment Treaty Claims: The Essentials, Kluwer Law

 Small, Katia Yannaca; 2010, Arbitration under international investment agreements, 1 st

Edition, Oxford University Press Inc, New York

 Schreuer, Christopher, 2008, The Oxford Handbook of International Investment Law,

Oxford University Press Inc

 Acessed on 21 December 2018, International centre for settlement of investment disputes,

Consent to arbitration:

 Acessed on 21 December 2018,Tarcisio Gazzini; 2012, Bilateral investment treaties:

 Acessed on 21 December 2018, Prof. Dr. Bernardo M. Cremades, ARBITRATION IN


 Accessed on 21 December 2018, on Web site of Legal Information Institute:

 Accessed on 21 December 2018, on Web site of International Institute for Sustainable


 Accessed on 21 December 2018, on Web site of International Arbitration information:

 Acessed on 21 December 2018, Prof. Dr. Bernardo M. Cremades, ARBITRATION IN