“Eighteen-Month” Requirement: Its Application in Investor-State Arbitration and Review by Domestic Court or ICSID Ad Hoc Committee

Abstract

In some bilateral investment treaties (“BITs”), recourse to domestic remedies for a certain period of time is required before an investment dispute can be submitted to international arbitration. If that requirement is not fulfilled, a question would arise as to whether investment treaty tribunals would be able to hear the case. Particularly, under which circumstances, where non-compliance with the requirement is found, should the case be dismissed? How should arbitral tribunals address this issue? And to what extent could their awards be reviewed by domestic courts or ICSID ad hoc Committee? Having reviewed the relevant provisions in the BITs and investment treaty tribunals’ awards, this article proposes that the ordinary meaning of the provisions is obvious that the investor must comply with the requirement before its submission of dispute to arbitration. However, in certain circumstances, such interpretation may result in absurd or unreasonable consequences. For example, as a consequence of the host state’s measures, the domestic remedies become so seriously deficient that referring cases to such proceedings would not lead to any advantages but unnecessary delay and useless costs. Hence, the requirement should not be treated as an absolute impediment to the submission of disputes to international arbitration since it will attenuate the efficiency of the international dispute settlement system that has long been axiomatically considered one of the most important mechanisms used to promote and facilitate foreign investment. Moreover, the arbitral tribunal’s decision on this matter falls within its exclusive realm of authority, as it concerns the question of admissibility of dispute and not the tribunal’s jurisdiction. Therefore, the national court or the ICSID ad hoc Committee cannot review the tribunal’s award in this regard.