State-to-State dispute settlement provisions in IIAs are textually
diverse. The practical implications of arrangements on the settlement of
inter-State investment disputes flow from the choices and agreements
made during the negotiation of IIAs. In this connection, the main issues
concerning DSAs that arise within the context of the negotiation of IIAs
are the following:
• the scope of disputes that could trigger DSAs;
• the procedures governing dispute settlement mechanisms;
• the applicable standards for the settlement of disputes;
• the nature and scope of outcomes of dispute settlement
mechanisms; and
• compliance with dispute settlement awards.
A. The scope of disputes that could trigger DSAs
The nature and scope of the type of disputes that could be
submitted under the provisions of a DSA determine its effectiveness. At
the same time, there may be a need to strike a balance between the
expectation of the parties to an IIA as to how certain issues will be
addressed should a dispute arise. In these circumstances, it is recognized
that, on the one hand, no dispute should be left outside the scope of the
DSA, while, on the other hand, not all disputes are amenable to settlement
through the same dispute settlement mechanisms. This balance is
particularly important in terms of emerging issues that go beyond
protection afforded by IIAs in the classical instances of nationalizations
and direct and indirect expropriations, and that involve the exercise of
domestic jurisdiction to regulate matters such as the environment, labour
standards and the competitive structure of national markets. The determination of the nature and scope of disputes that trigger
the DSA in an IIA thus first involves the task of the determination of how
a dispute or matter that gives rise to a dispute is defined in DSA
provisions. Second is the analysis of the extent to which a given question
is to be addressed by the mechanisms included in the DSAs. In this regard,
“matters” involve either the interpretation or the application of the
provisions of the IIA, or both. A related issue that completes the analysis is
whether or not there exist any limitations on recourse to a DSA, which
will, by definition, circumscribe the types of disputes that could be
submitted thereto.
The typical formulations for DSAs refer to “disputes” (other
terminology used are “differences”, “divergences”, “matters” or
“questions”) concerning or arising out of IIAs, without providing a formal
definition of what is meant by the terminology. Thus, the first issue that
might arise in a dispute is whether or not a genuine dispute exists that
would trigger the DSA, which absent a definition, would need to be
defined.1
In most instances, the term will, absent express indications to the
contrary, be defined to cover as broad a range of disagreements between
the parties as possible. It should be noted that a “legal dispute” could be
considered as a term of art, and connotes a particular set of circumstances
between States. These include first, that a claim could be formed under
international law, which means that the claim should be based upon an act
or omission that gives rise to State responsibility. Second, the claim must
be rejected, or there must be a disagreement as to its disposition. The third
element, which is not universally agreed upon, is that the subject matter of
the claim must be disposable through the application of international law,
as evidenced by recourse to one or more of its accepted sources. In this
way, legal disputes are sometimes differentiated from “political disputes”.
If they appear in an IIA, “matters” or “questions” are intended to
cover a much wider set of issues than “disputes”. Thus, in some IIAs,
consultations may be available although there is no “dispute” between
States as to the interpretation or application of a provision. A proposed
measure or action could be the subject of consultations between the parties
in areas of serious controversies so as to avoid or prevent a dispute from
arising between the parties and to facilitate its settlement when it arises. It