On Fork-In-The-Road Clause In BIT

This paper consists of four parts. Partâ… provides the introduction to the concept and the cause of the fork-in-the-road clause in bilateral investment treaties. In case of disputes in modern and recent international investment, the host country holds that the foreign investor should exhaust the local relief while the foreign investor insists on submission to international arbitration. Thus the fork-in-the-road clause is triggered by compromise from both side. The investor could choose to either resort to an international tribunal or to submit the claim to the national court. Finally typical descriptions of the clause in investment treaties are presented. Partâ…¡is about the arbitration proceedings of the fork-in-the-road clause. Three cases are given here with facts and awards by ICSID. They are:Compania de Aguas del Aconquija, S.A.&Compagnie Generale des Eaux v.Argentine Republic; Pantechniki S.A. Contractors & Engineers v. Republic of Albania; Toto Costuzioni Generali S.P.A. v. Republic of Lebanon.Partâ…¢covers the application of the fork-in-the-road clause by the international tribunal. Was there award on the fork-in-the-road clause by the international tribunal in the arbitration practice under ICSID? Discussion of the three cases confirm that such awards exist. In view of the different awards from the cases, how did the tribunal interpret the clause in the arbitration under ICSID? This paper finds out that ICSID based their decision on whether or not the claimant submitted the same type of dispute to domestic courts and to the international tribunal and holds that contract claims and treaty claims are different. For example, the tribunal's idea is that since subject of litigation, the cause of action and legal grounds all differ, the two disputes should not be considered the same and therefore the international tribunal has jurisdiction. Some scholars think that tribunals are reluctant to deal with pursuit of claims that have previously selected proceedings. Some hold that res judicata is adopted in international tribunals. The fork-in-the-road clause is not applied because the interpretation of the clause is too harsh, only in the interest of the investor but not the host country. As a matter of fact, parties may be different from resort to domestic courts to international tribunals It is the locally-incorporated company, usually the joint venture, that presents the dispute to the domestic courts, for joint venture is the vehicle of foreign investment. On the other hand, the foreign investor is often the parent company. Their claims may be intended for the same purpose. As a result, a new way to interpret the fork-in-the-road clause emerges in arbitration, in which the tribunal does not only examine whether the parties are consistent, rather, whether the same subject of claims exist. If the subject of claims are found to be the same, the tribunal then determine they constitute the same claim, which arguably means a progress of the tribunal. But the tribunal's interpretation brings about a number of issues. How can the tribunal determine what claims amount to treaty claims or contract claims? This leaves us food for thought. Due to the fact that the tribunal may produce different awards for similar provisions or even revoke its own previous decision, countries have reason to doubt the fair and equity in the tribunal's interpretation of the fork-in-the-road clause under ICSID, as is evidenced by mistrust in ICSID by many countries. Bolivia, for instance, claims that it is always the multi-national conglomerates that win the case rather than developing countries in Latin America. Nicaragua expressed its withdrawal from ICSID. Ecuador demands a preclusion from jurisdiction under ICSID in investment treaties. Some non-governmental agencies and scholars worry that the respective levels of development in various countries may have impact on awards under ICSID. Though such worries are not groundless, the past arbitration experiences prove that bias in favor of the developed or against the developing countries never occurred. True that ICSID system needs to be perfected, its advantages still outweigh the demerits considering what it has done. In the end, some suggestions are offered with regard to what the host country can do to improve the application of the fork-in-the-road clause under BIT. For example, special attention should be directed to the wording of the contract; investors should exercise prudence and make an effort to launch international arbitration. This paper also gives some comments on how China should respond to the fork-in-the-road clause. China should draw lessons from the Argentine case and apply the clause and accept ICSID arbitration with caution in bilateral investment treaties.