The Problems of Using the Latest Institutional Arbitration Rules for Investment Treaty Disputes

Chinese Taipei - 1 December 2022

Trade topics: Trade Dispute Settlement Systems, Trade & Investment Facilitation

International arbitration institutions have been requested to administer an increasing number of investment disputes. In investment arbitration, a responding state usually stipulates its standing offers to arbitrate in the bilateral investment treaty (BIT). When choosing a specific arbitration institution to settle an investment dispute, the arbitration rules of that organization become the procedural rules governing the arbitral proceeding.
Nevertheless, when an institution’s arbitral rules are modified after the BIT conclusion, the issue of temporal application of arbitration rules occurs. If there are temporal conflicts of arbitration rules, should the treaty parties’ consent to arbitrate always refer to the latest version of the arbitration rules?

This paper begins by navigating several prominent institutions’ rules and the practice of international commercial arbitration. Then, this paper examines the investor-state dispute settlement provisions embedded in BITs to comprehensively analyze how BITs refer to those arbitration rules. Taking the decisions of emergency arbitral proceedings in investment arbitration as examples, this paper questions the “dynamic reference” approach to interpreting treaty parties’ consent to arbitrate and argues that assuming the latest arbitral rules were always applied may not be appropriate for investment arbitration due to its unique features. Building on such an understanding, this paper proposes an interpretative approach to assist investment arbitral tribunals in better deciding the applicable version of arbitral rules when temporal conflict arises. Additionally, this paper offers legislative proposals to clarify the scope of states’ consent to arbitrate in terms of the applicable version of arbitral rules.