A bilateral investment treaty (BIT) is an agreement between two states which contains guarantees aiming at promoting investment. Over 170 countries have signed one or more bilateral investment treaties 1 and more than 2,900 BITs have been signed. 2 As of today, the overwhelming majority of BITs contain a clause for recourse to the International Centre for the Settlement of Investment Disputes (ICSID). 3 Created in 1965 under the Convention on the Settlement of Investment Disputes between States and Nationals of other States [hereinafter “ICSID Convention”] 4 , the establishment of ICSID was motivated by a desire to promote international investment by providing a neutral forum for dispute resolution.
This means that in case of a dispute, a foreign investor can file a complaint against a state before the ICSID without having to exhaust domestic remedies. 5 ICSID may also administer disputes under non-ICSID rules; namely, the UNCITRAL Arbitration Rules. While these types of forums were initially created to ensure stability for investors fearing arbitrary decisions by states, they have led to the application of significant protection for investors and the granting of important financial penalties for states. Hence, they have become an important obstacle for states wanting to implement public policy measures which would potentially affect investors’ revenues. The multiplication of investor-state disputes, the tendency of arbitrators to favour investors, the scarce attention paid to human rights law in the settlement of these disputes as well as the ongoing debates surrounding the human rights responsibilities of multinationals have generated wide criticisms in relation to investment tribunals such as ICSID. Numerous trade agreements currently in place include clauses for international investor-state arbitration in case of disputes between foreign investors and governments. Investor-state tribunals are criticized for granting disproportionate protection to investors, at the expense of human rights, environmental protection and national sovereignty. More and more voices oppose the implementation of new trade agreements based on objections to the investor-state dispute settlements mechanisms they usually encompass.
In the face of these criticisms and since many cases brought to these forums were matters of public interest, arbitrators have accepted, in certain cases, the submission of amicus curiae by third parties, such as NGOs. It is therefore crucial for victims to have their voices heard during the arbitration proceedings of investment tribunals such as ICSID. 6 Since the amendment of the ICSID rules of procedures in 2006, third parties can access hearings if both parties agree. 7 In addition, new UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration 8 were adopted in July 2013, significantly improving the transparency of the proceedings. The rules are not exclusive to UNCITRAL arbitrations. The UNCITRAL Transparency Rules came into effect on April 1, 2014. 9
Such rules provide for the publication of key documents such as the tribunal’s decisions and the parties’ statements (the company’s claims and the State’s defence). T hey allow in certain circumstances the participation of non-disputing third parties, as well as open hearings. However, these rules only apply to arbitration proceedings based on investment treaties that entered into force after 1 April 2014. They can apply to earlier treaties only if the parties agreed so. To facilitate such agreement, a UN Convention on Transparency in Treaty-Based Investor-State Arbitration (the Mauritius Convention) was opened for signature in March 2015, so that the UNCITRAL Rules on Transparency apply automatically to the parties of this Convention, regardless of the date of entry into force of their investment treaties. As of March 2021, 23 States had signed the Convention (among them Germany, France, the United Kingdom, Canada and the United States), and seven states (including Australia, Canada, and Switzerland) had ratified it. 10 The Convention entered into force in October 2017. 11
The Vivendi case 12 is related to a water dispute resulting from a concession contract made between the French Compagnie Générale des Eaux – subsequently Vivendi Universal – and its Argentine subsidiary, the Compañía de Aguas del Aconquija S.A. The French investors accused Argentina of having breached the Bilateral Investment Treaty (BIT) it had concluded with France, because it had entrusted the water supply and the management of used waters to another company. Argentina argued that such concession was necessary to ensure access to water to its population, with referring to its obligations under international human rights law. Parts of the Respondent’s arguments were built around the necessity to interpret investment clauses, and specifically States’ obligation to provide fair and equitable treatment to investors, in light of their human rights commitments on the international plane. In 2007, the ICSID Tribunal accepted to receive amicus curiae briefs written by a coalition of NGOs 13 . It was one of the first times that it decided in favour of the admissibility of such submissions. Like the Respondent, NGOs sustained that Argentina was under an international law obligation to guarantee the right to water under, and that it was therefore constrained to undertake measures ensuring water accessibility and affordability to its citizens.
Registered in 2003, the case ended up with a final decision rendered in July 2010. Despite the central place of their human rights arguments, the tribunal considered that the non-disputing parties had not provided sufficient evidence to prove their capacity to bring “a perspective, particular knowledge or insight that is different from that of the disputing parties” 14 .
Actually, despite the occurrence of several similar disputes, the Biwater Gauff case that involved an Anglo-German consortium against the Tanzanian State remains one of the very few cases where the arbitral tribunal having accepted the submission of amicus curiae effectively took their content and relevance into account 15 .
Bechtel v. Bolivia the “water revolt” in Cochabamba (Bolivia) 16
In 1997 the World Bank informed Bolivia that it would provide additional aid for water development under the condition that the government privatises the public water systems of two of its largest urban centres, El Alto/La Paz and the city of Cochabamba.
In September 1999, in a confidential process involving only one bidder, Bolivia’s government turned over Cochabamba’s water to a company controlled by the California engineering giant, Bechtel. Within a few weeks, Bechtel raised water rates by an average of more than 50%, sparking a citywide rebellion that has come to be known as the Cochabamba Water Revolt. In April 2000, following the declaration of martial law by the President, the death of a seventeen- year-old boy, Victor Hugo Daza, who was killed by the army, and more than a hundred wounded civilians, the citizens of Cochabamba refused to back down and Bechtel was forced to leave Bolivia. Eighteen months later Bechtel and its Spanish co-investor, Abengoa filed a $50 million dollar legal demand against Bolivia before the ICSID. For the following four years, Bechtel and Abengoa found their companies and corporate leaders so dogged by protest, damaging press, and public demands from five continents, that they dropped the case.
On January 19, 2006, representatives of Bechtel and Abengoa travelled to Bolivia to sign an agreement in which they abandoned the ICSID case for a token payment of 2 bolivianos (30 cents). This is the first time that a major corporation has ever dropped an international investment arbitration case, as a direct result of public pressure and multi-faceted local and international action.
Other controversial cases have been filed before the ICSID. A case opposing the Canadian-Australian mining company Oceanagold to the state of el Salvador is currently pending before the ICSID. 17 Oceanagold, formerly known as Pacific Rim, filed a lawsuit against El Salvador in 2009 for not granting permission to the company’s el Dorado gold mine, after the project failed to meet national regulatory requirement. The government denied approval to the mining proposal over fears of contamination of the el Salvador’s already scarce water resources, and correlated impacts on local communities’ health and on the environment. In 2008, the government instituted a moratorium on new mining permits which is still in force and receives broad popular support. OceanaGold originally filed the lawsuit for US$77 million, and raised it to US$301 million, which represents just under 2 percent of El Salvador’s GDP. Such a fee would significantly weaken the states’ capacity to protect and fulfill health and education rights.
NGOs such as la MESA, CIEL and FESPAD worked together to intervene in this case. The arbitral tribunal accepted their submission, but refused them to make an oral presentation at the jurisdictional hearing. Through La MESA’ submission, NGOs provided a different perspective on the case, insisting on public participation, democracy principles and respect for human rights. In July 2014, a second submission was filed. A hearing on the merits took place in September 2014. Post-Hearing Briefs and submissions on costs were filed in November and December 2014. ICSID found in favor of El Salvador in 2016, and the government was awarded $8 million to cover legal costs for the claim, first brought by Vancouver-based Pacific Rim Mining in 2009. 18
NGOs involved published a useful report with lessons learned when engaging in investor-state dispute proceedings. (see below)