Enabling Private Ordering - the University of Minnesota Law School

68 MINNESOTA JOURNAL OF INT’L LAW [Vol. 18:1
the parties. 182 Accordingly, the violation of the substantive rights
and obligations contained in an investor-State contract can be
severed from the contractual forum selection clause.
Finally, reasons of efficiency and expediency militate for the
overriding effect of BIT arbitration. Uniting all claims for the
violation of a BIT, including those contractual breaches brought
under an umbrella clause, supports the effective dispute
settlement in a single forum and promotes the efficient solution
of disputes. 183 These concerns are not outweighed by the
argument, often invoked in favor of requiring parties to first
seize the contractually chosen forum, that the chosen forum, in
particular domestic courts, would be better placed to decide
disputes relating to the interpretation and application of the
substantive law that governs the investor-State relations. The
argument purports that domestic courts, or any other
contractually chosen forum, would be better placed to decide
contractual questions in the context of an umbrella clause
violation, because domestic judges have superior knowledge of
the governing law compared to arbitrators sitting at the
international level. Although this argument has some intuitive
appeal, it does not take into account that often investor-State
contracts do not primarily turn on intricate questions
concerning the interpretation and application of domestic law,
but are primarily difficult with respect to often comprehensive
factual issues. But even if it were true that intricate questions of
domestic law are decisive for a certain dispute, host State and
investor would be free to appoint arbitrators for resolving their
dispute in a unitary treaty-based forum that bring the requisite
expertise to the table. Apart from that, one of the reasons why
international arbitration has developed as a mechanism to
stabilize investor-State cooperation and enforce promises the
host State has given is precisely the insufficiencies that exist in
domestic dispute settlement. 184 Referring parties to a
contractually chosen forum may thus frustrate the very basis
and justification of investment treaty arbitration and the
182. See Weil, supra note 3, at 223.
183. Cf. Christoph Schreuer, Calvo’s Grandchildren: The Return of Local
Remedies in Investment Arbitration, 4 The Law & Practice of Int’l Courts and
Tribunals 1, 12 (2005) (“If competing competences exist, it makes more sense to have
the entire dispute heard by one forum, preferably the one with the most
comprehensive jurisdiction. If the terms of reference in the BIT are broad enough to
include contract claims in addition to treaty claims the international tribunal would
be the one with the broadest jurisdiction.”).
184. See supra Part II.B.1.