Multilateral Agreement on Investment
Draft, Distributed January 13, 1997

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A. General Provisions1

1. The rules and procedures set out in Articles A-C shall apply to the avoidance of conflicts and the resolution of disputes between Contracting Parties regarding the interpretation or application of the Agreement unless the disputing parties agree to apply other rules or procedures. However, the disputing parties may not depart from any obligation regarding notification of the Parties Group and the right of Parties to present views, under Article B, paragraph[s l.a and] 3.c, and Article C, paragraphs l.a, 3.c, and 4.e.

2. Contracting Parties and other participants in proceedings shall protect any confidential or proprietary information which may be revealed in the course of proceedings under Articles B and C and which is designated as such by the Party providing the information. Contracting Parties and other participants in the proceedings may not reveal such information without written authorisation from the Party which provided it.

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1The European Commission has requested the inclusion of a provision that recognises the right of the European Community to associate itself with any case, whether state-state or investor state, touching on Community Law. The provision, which would be modified slightly for the investor-state context, is as follows:

"a. When a member State of the European Community implements Community law and the implementing measure is challenged by another Contracting Party, the European Community and its Member States shall be considered to be one party to a dispute settlement case even if the action is directly only against either of them."

"b. When a measure or a set of measures challenged in a dispute settlement procedure has partly been adopted by the European Community and partly by one or more Member States, the European Community and the Member States concerned shall determine their respective responsibility and become joint parties to the procedure."

The Norwegian and Iceland delegates reserved their position on this point. They could not accept any new competence under the MAI for the European Commission in relation to Iceland, Liechtenstein or Norway on issues which, pursuant to the Treaty establishing the European Economic Area, fall under the competence of the EFTA Surveillance Authority.

Some delegations questioned any specific European Commission provision, preferring to draft in general terms for any Regional Economic Integration Organisation which might become Party to the MAI.

end footnote

B. Consultation, Conciliation And Mediation

1. Consultations

a. One or more Contracting Parties may request any other Contracting Party to enter into consultations regarding any dispute about the interpretation or application of the agreement.2 The request shall be submitted in writing and shall provide sufficient information to understand the basis for the request, including identification of the measures at issue. The requested Party shall promptly enter into consultations. The requesting Contracting Party [may] [shall] notify the Parties Group of the request for consultation.

b. A Contracting Party may not initiate arbitration against another Contracting Party under Article C of this Agreement unless the former Contracting Party has requested consultation and has afforded that other Contracting Party a consultation period of no less than 60 days after the date of the receipt of the request.

[2. Multilateral Consultations

a. In the event that consultations under paragraph 1 of this Article, have failed to resolve the dispute within 50 days after the date of receipt of the request for those consultations, [either Contracting Party in dispute] [the Contracting Parties in dispute, by agreement] may request the Parties Group to consider the matter.

b. Such request shall be submitted in writing and shall give the reason for it, including identification of the measures at issue, and shall indicate the legal basis for the complaint.

c. The Parties Group may only adopt clarifications on issues of law and on the provisions of the agreement that have been raised by [one of] the Parties in dispute, in accordance with Article _ [article which will allow the Parties Group to adopt clarifications in accordance with a procedure to be defined]. The Parties Group shall conclude its deliberations within [60] days after the date of receipt of the request

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2France suggests that the scope of consultations be no broader than the scope of arbitration and that this paragraph utilise whatever language is ultimately adopted in Article C, paragraph l.a.

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[d. In the event that a dispute is submitted to the Parties Group, none of the Contracting Parties shall submit the case to the arbitral tribunal before the expiration of the delay mentioned in paragraph c.]]3

3. Mediation or Conciliation

If the Parties are unable to reach a mutually satisfactory resolution of a matter through consultations, they may have recourse to good offices, including those of the Parties Group, or to mediation or conciliation under such rules and procedures as they may agree.4

4. Confidentiality of Proceedings, Notification of Results

a. Proceedings involving consultations, mediation or conciliation shall be confidential.

b. No Contracting Party may, in any binding legal5 proceedings, invoke or rely upon any statement made or position taken by another Contracting Party in consultations, conciliation or mediation proceedings initiated under this Agreement.

c. The Parties to consultations, mediation, or conciliation under this Agreement shall inform the Parties Group of any mutually agreed solution.6

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3This proposal is supported by a number of delegations which consider it important to preserve the possibility that traditional OECD methods, including peer pressure, be available to help resolve a dispute before resort to arbitration is needed. A number of other delegations expressed reservations about or opposition to formally providing for multilateral consultations. In their view, such a possibility would pose a serious risk of politicising the dispute and making its resolution more difficult to achieve. The later group note that the omission of an institutionalised role for the Parties Group in the dispute settlement mechanism would be without prejudice to the ability of any Contracting Party to raise a matter relating to the general interpretation of the agreement within the Parties Group. These delegations were of the opinion that this latter role is more properly considered in the discussion of the general role of a Parties Group.

A number of questions are raised in connection with this proposal, including the number of contracting Parties which must request Parties Group consideration and whether this could be done without consent of both sides to the dispute, the voting rule for adopting any clarification, and the status of any clarification, in particular whether a consensus clarification should be binding.

One delegation suggested that consideration be given as well to a provision allowing the state-state and investor-state arbitral proceedings to be suspended for the Tribunal to seek Parties Group clarification of a disputed provision of the MAI.

4Some delegations pointed out that the proposal for multilateral consultations may the reference to Parties Group good offices in this paragraph at least in part. Another delegation suggested that this reference would obviate the need for a provision on formal Parties Group consultations.

5The United States maintains a scrutiny reserve on the words "binding legal".

6Some delegations reserve on this requirement out of concern that it may inhibit agreement.

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C. Arbitration

1. Scope and Initiation of Proceedings7

a. Any dispute between Contracting Parties concerning8 [the interpretation or application on [an alleged non-compliance with] [the inconsistency of a measure9 of one of them with] this Agreement shall, at the request of any Contracting Party that is a party to the dispute and has complied with the consultations requirements of Article B, be submitted to an arbitral tribunal10 for binding11 decision. A request, identifying the matters in dispute, shall be delivered to the other Party through diplomatic channels, [unless a Contracting Party has

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7The United States suggest that, in this paragraph or elsewhere, there be a provision establishing a default set of terms of reference. It suggests the following text:

"Unless the disputing Parties otherwise agree within 20 days after the request for the establishment of the tribunal, the terms of reference shall be: 'To examine, in light of the relevant provisions of the Agreement, the measures referred to in the request for consultations.'"

8The bracket alternatives which follow reflect differences among the delegations as to when a dispute is ripe for arbitration. Some wish to be able to take a Party to arbitration when it has adopted a law or regulation likely to result in a violation of obligations under the MAI. These delegations favour the first option, which is the broadest, though one expressed the view that the second ("alleged non-compliance") might meet the concern. Some others believe that arbitration should only be permitted when the Party has no discretion remaining under its law or regulation to act consistently with the MAI. Norway, which considers that this issue can only be resolved at a later stage of the negotiations, suggests that a dispute should be ripe for arbitration only when a Party "has acted in contravention" of the MAI.

9The US proposes to include a definition of "measure" but a number of delegations question its utility. A suggestion is being considered for dealing with the definition of measure and concern about the meaning of "dispute" with the following note in the Expert Group report:

This text is based on the understanding that (i) a "measure" of a Contracting Party for purposes of an arbitrable dispute encompasses, inter alia, any law, regulation, procedure, requirement, practice, act, or failure to act and (ii) "dispute" means a legal dispute ripe for arbitration.

10Norway maintains a reservation on submission of MAI disputes to ad hoc arbitration and has submitted an alternative proposal giving Parties the ability to choose the ICJ instead.

A suggestion is being considered that this concern, which is related to the law of the sea, be dealt with through a reservation. The signatories might note in the record of the negotiations or its Final Act that they will not object to a reservation by which a Party addresses the case in which resolution of a dispute under this Agreement would require decision on a disputed question of the law of the sea. Such a reservation may provide that the Party does not consent to the decision of any disputed question of the law of the sea by an arbitral tribunal formed under this Agreement, provided that the reservation is accompanied by the Party's consent to submission of such a question and, at the option of the other party to the dispute, the entire dispute to the International Court of Justice or other competent international tribunal.

One delegation noted that the entire question of reservations may have to be addressed in the overall context of whether or not to allow Contracting Parties to go beyond specifically identified country exceptions to MAI measures.

Some delegations consider that the word "binding" should not be 11stated here, but only in the paragraph 5.f) on awards.

end footnote

designated another channel for notification and so notified the Depositary,]12 and a copy of the request shall be delivered to the Parties Group.

b. A Contracting Party may not initiate proceedings under this Article for a dispute which its investor has submitted, or consented to submit, to arbitration under Article D, unless the other Contracting Party has failed to abide by and comply with the award rendered in that dispute.13, 14

2. Formation of the Tribunal

a. [Alternative A] Within 30 days after receipt of a request15 for arbitration, each Party or, in the event there is more than one requesting Party, each side to the dispute shall appoint one member of the tribunal. Within 30 days after their appointment, the two members shall, in consultation with the Parties in dispute, select a national of a third state who will be Chairman of the tribunal. At the option of any party or side, two additional members may be appointed, one by each party or side.

[Alternative B] Within 30 days after receipt of a request for arbitration, the Parties to the dispute shall appoint by agreement three members of the tribunal and designate one of them as Chairman. Except for compelling reasons, the members shall be persons proposed by the [Parties Group Secretariat] [Secretary General ICSID]16. If the Parties agree, the tribunal shall include two additional members, one appointed by each Party or side to the dispute.

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12Diplomatic channels are the normal channel for notice of state-state disputes. See, e.g., Article 2, paragraph 1, of the PCA Optional Rules for Arbitrating Disputes Between Two States. The United States suggests that consideration be given to permitting Contracting Parties to designate a special channel for MAI dispute notices.

13This paragraph, based on ICSID Article 27, is intended to assure that the initiation of any form of investor-state arbitration provided by the MAI would restrain parallel state-state proceedings under the MAI to the same extent as, but no more than, would initiation of ICSID arbitration for a MAI contracting party which is also an ICSID party. This is a very limited preclusion, effecting the right to bring the very same claim. The ICSID observer confirmed that ICSID Article 27 should not preclude a state-to-state arbitration of an issue of treaty interpretation or application which was also involved in the investor-state dispute, as long as this did not amount to the espousal of the claim of the investor. It was recognised that an award in such a state-state proceeding would not affect an award rendered in the investor-state proceeding.

14One delegation is still examining the potential implications of any overlap of state-state disputes under this Article with the provisions for dispute settlement procedures in the WTO.

15One delegation raised for consideration the question of timing if more than one request for arbitration were made.

16Norway suggests the Secretary-General of the Permanent Court of Arbitration (PCA).

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b. If the necessary appointments have not been made within the periods specified in subparagraph a, above, either Party or side to the dispute may, in the absence of any other agreement, invite the Secretary General of the Centre for the Settlement of Investment Disputes17 to make the necessary appointments. The Secretary-General shall do so, as far as possible, in consultations with the Parties and within thirty days after receipt of the request.

c. Parties and the [Secretary-General] [Parties Group Secretariat] should consider appointment to the tribunal of members of a roster of highly qualified individuals willing and able to serve on arbitral tribunals under this Agreement, nominated by the Contracting Parties. If arbitration of a dispute requires special expertise on the tribunal, rather than solely through expert advice under the rules governing the arbitration, the appointment of individuals possessing expertise not found on the roster should be considered18. Each Contracting Party should nominate up to [four] members of the tribunal roster. Nominations are valid for renewable terms of five years.

d. Any vacancies which may arise in a tribunal shall be filled by the procedure by which the original appointment had been made.

e. Members of a particular arbitral tribunal shall be independent and impartial.

3. Joinder/Consolidation19

a. Contracting Parties in dispute with the same Contracting Party over the same matter should act together as far as practicable for purposes of dispute settlement under this Article. Where more than one Contracting Party requests the submission to an arbitral tribunal of a dispute with the same Contracting Party relating to the same measure,20 the disputes shall, if feasible, be considered by a single arbitral tribunal.

b. To the extent feasible, if more than one arbitral tribunal is formed, the same persons shall be appointed as members of both and the timetables of the proceedings shall be harmonised.

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17Norway suggests the Secretary General of the PCA here as well.

18One delegation stated that this was a possible approach, but it required further consideration in light of the sensitivity of assuring appropriate participation of experts in MAI arbitration.

An alternative approach would be to provide for special rosters of tax, environment and other experts as the Parties Group may decide. A number of delegations expressed doubt about additional rosters.

19This proposal is based on the WTO approach. An alternative is found in the investor-state consolidation provision in Article D, paragraph 8, which is NAFTA based.

20France suggests substituting "question" for "measure."

end footnote

4. Third Parties21

Any Contracting Party wishing to do so shall be given an opportunity to present its views to the arbitral tribunal on the issues in dispute. The tribunal shall establish the deadlines for such submissions in light of the schedule of the proceedings and shall notify such deadlines, at least thirty days in advance thereof, to the Parties Group.

5. Proceedings and Awards

a. The arbitral tribunal shall decide disputes in accordance with this Agreement[, interpreted and applied in accordance with the applicable rules of international law].22

b. The tribunal may, at the request of a Party, recommend provisional measures which either Party should take to avoid serious prejudice to the other pending its final award.23

c. The tribunal, in its award, shall state the reasons for its findings and may, at the request of a Party, award the following forms of relief.24

i. a declaration that [a measure of a Party is incompatible] [a Party has failed to comply] with its obligations under this Agreement;

ii. a recommendation that a Party bring its measures into conformity with the Agreement:

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21Canada, at the request of the Group, has prepared an alternative text on third Party rights to present views, which is also being considered. Some delegations questioned certain features of the Canadian paper, e.g., the legal consequences it would impose on a failure to join as a complaining Party, and the extensive rights of participation it would grant Contracting Parties which do not join as Complaining Parties.

22The "applicable rules" referred to are those concerning the interpretation and application of treaties. Accordingly, this provision would not provide a basis for a Panel to rule on a dispute about a Contracting Party's compliance with other international legal obligations.

Canada noted that it accepted this proposal on the basis that it was without prejudice to the question of the incorporation into the MAI of an international law standard in the minimum standard of treatment owed investors.

23The delegate of the United States questioned the appropriateness of recommendations of provisional measures in state-state disputes that do not involve espousal of an investor's claim and suggested that the entire paragraph 5 may need to be reviewed in light of this distinction in types of cases.

24The United States proposes the following alternate drafting for this chapeau:

"The tribunal shall render an award setting out its findings of law and fact and its decision regarding whether the relevant measures are inconsistent with the Agreement, together with its reasons therefor, and may, at the request of a Party, award:"

end footnote

iii. [pecuniary compensation;]25 and

iv. any other form of relief to which the Party against whom the award is made consents, including restitution in kind.

d. The tribunal shall draft its award consistently with the requirement of confidentiality set out in Article A, paragraph 2 and the requirements of subparagraph e, below.26 It shall issue its award in provisional form to the Parties to the dispute, as a general rule within [180] days after the date of formation of the tribunal. The parties to the dispute may, within [15][30] days thereafter, submit written comment upon any portion of it. The tribunal shall consider such submissions, may solicit additional written comments of the parties, and shall issue its final award within [15] days after closure of the comment period.27

e. The tribunal shall promptly transmit a copy of its final award to the Parties Group as a publicly available document.

f. Tribunal awards shall be final and binding28 between the parties to the dispute [unless the Parties Group, by [consensus] [consensus minus one], otherwise decides within thirty days after receipt of a copy of the award.]29

g. Each party shall pay the cost of its representation in the proceedings. The costs of the tribunal shall be paid for equally by the Parties unless the tribunal directs that they be shared differently.30 Fees and expenses payable to tribunal members will be subject to schedules established by the Parties Group and in force at the time of the constitution of the tribunal.

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25The delegate of France suggested that, at minimum, the MAI should state the conditions in which this relief could be awarded. The United States delegate noted that, if this element remains, it might need to be aligned with the drafting of the corresponding provision in investor-state arbitration, particularly where a state was an investor bringing a state-state case for itself.

26The United States has a scrutiny reserve on this drafting solution to the problem of confidential information and public awards.

27Several delegations questioned issuance of all or part of an award in provisional form for comment.

28The United States delegation questioned the meaning of "final and binding" in the state-state context. They also suggested that consideration be given to enabling the Parties Group later to establish an appellate procedure, on a consensus basis, without requiring amendment of the MAI.

29Some delegations question this approach to aberrant awards. One suggests that much of the problem can be dealt with at the enforcement stage. Another suggests considering a more judicial appeal procedure.

30The United States delegate questioned whether it made sense to allow a Panel to award costs in a state-state proceeding.

end footnote

6. Default Rules

The [UNCITRAL arbitration rules] [PCA Optional Rules for Arbitrating Disputes between Two States]31 shall apply to supplement provisions of these Articles.32, 33

7. Enforcement of Awards

a. In the event of non-compliance34 with an award of an arbitral tribunal, the Contracting Party in whose favour it was issued may raise the matter in the Parties Group. The Parties Group shall endeavour to bring about compliance. It may, by consensus minus the defaulting Party, suspend the non-complying Party's right to participate in decisions of the Parties Group.35

b. [Possible exhaustive list of permitted countermeasures - no draft provided].

c. [Possible procedural safeguards on resort to countermeasures - no draft provided]

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31The Permanent Court of Arbitration, in 1992, with the advice of an expert committee, adopted a modern set of arbitral rules based on the UNCITRAL rules with modifications to adapt them for state to state arbitration. The principal changes were to replace "contract" with "treaty or other agreement", to double the various time limits in Light of the institutional requirements of states, to provide for the role of the Secretary-General and the International Bureau of the PCA, and to provide for the parties to choose a tribunal of one, three or five persons.

32Once a set of default rules have been chosen, the text of the entire article should be reviewed to eliminate elements which are adequately provided for in the rules, e.g., the use of diplomatic channels in the PCA rules., and the possible need for additional specific departures from the default rules.

33The United States suggest that consideration be given to authorising the Parties Group to adopt supplementary rules, for general application, should deficiencies in the MAI provisions and the default rules become apparent. This would avoid requiring the more cumbersome treaty amendment procedures to be used.

34The delegate of Germany suggested that there may be disputes about whether or not a Party is complying with an award.

35Some delegations expressed reservations about this sentence.

end footnote


D. Disputes Between an Investor and a Contracting Party36

1. Scope and Standing

This article applies to disputes37, 38 between a Contracting Party39 and an investor of another Contracting Party concerning an alleged breach of an obligation of the former under this Agreement [or under an investment agreement with or authorisation to the investor]40 which causes[, or is likely to cause,] loss or damage to41 the investor or his investment.42

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36Some delegations noted that, if investment agreements between Contracting Parties and investors are brought within the scope of this Article through a respect clause or procedural option, the question of providing equal rights for Contracting Parties under this Article would arise and its provisions would need to be reviewed. One delegate pointed to the technical difficulty of an intergovernmental agreement providing the prior consent of the investor necessary for the Contracting Party to have the right to initiate arbitration. Another delegate noted that States were always free to use their own courts to enforce agreements with investors.

37The delegate of the United Kingdom suggests inserting the word "legal" before disputes which should allow deletion of the last bracketed language. Some delegations do not consider the word "legal" to narrow standing adequately.

38Norway wishes to restrict the scope of this Article to commercial disputes. The ICSID observer noted that this would cause a problem under the ICSID texts which distinguish between commercial and investment disputes, a problem which was avoided by leaving the reference to commercial disputes in paragraph 15, where it was limited to the New York Convention.

39The European Commission would wish to provide for the European Community to participate in appropriate cases brought against a Member state. See footnote 1.

40This text is a "procedural" option regarding the protection of investor rights from other sources. Some delegations prefer to restrict dispute settlement to "this Agreement", i.e., the "zero" option. The delegate of the United States suggests that, if the procedural option were to be adopted, there would be a need to define "investment agreement or authorisation". (See Commentary).

41Delegations agree that an investor should be concretely affected by an alleged breach of the MAI to have standing to bring a claim against the host state, but disagree on whether damage must have been incurred before the dispute is ripe for arbitration. The delegate of Japan suggests inserting "actual" before "loss".

The question has also been raised as to the adequacy of the "loss or damage" formulation for pre-establishment cases. However, discussion confirmed the understanding that a lost opportunity to profit from a planned investment would be a type of loss sufficient to give an investor standing to bring an establishment dispute under this article, without prejudice to the question of whether a specific amount of lost profits might later prove too remote or speculative to be recoverable as damages. In this connection, it was noted that the claim would be initiated on the basis of allegations of loss or damage, but their existence and actual amount would remain to be demonstrated, along with the remainder of the investor's case, during the proceedings on the merits of the dispute.

42Under this drafting, which includes effects on the investor, and therefore applies to all the investor's rights including those relating to establishment, there is no need to state expressly that the reference to "investment" means "whether or not established."

Australia, Denmark, Finland, Hungary, Japan, Mexico and Norway maintain a reservation on the inclusion of pre-establishment disputes. Austria is reflecting further on this point.

end footnote

2. Means of Settlement

Such a dispute should, if possible, be settled by negotiation or consultation. If it is not so settled, the investor may choose to submit it for resolution:

a. to the competent courts or administrative tribunals of the Contracting Party to the dispute43;

b. in accordance with any applicable [previously]44 agreed dispute settlement procedure; or

c. by arbitration in accordance with this Article under:45

i. the Convention on the Settlement of Investment Disputes between States and Nationals of other States (the "ICSID Convention"), if the ICSID Convention is available;

ii. the Additional Facility Rules of the Centre for Settlement of Investment Disputes ("ICSID Additional Facility"), if the ICSID Additional Facility is available;

iii. the Arbitration Rules of the United Nations Commission on International Trade Law ("UNCITRAL")[, if neither the ICSID Convention nor the ICSID Additional Facility is available]46; or

iv. the Rules of Arbitration of the International Chamber of Commerce ("ICC")47 [if neither the ICSID Convention nor the ICSID Additional Facility is available]

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43Some delegations wish to keep open the option of treating the MAI as not self-executing and therefore not giving their courts competence to deal with claims arising directly under the MAI as opposed to claims arising under implementing legislation. They note that the term "competent" may preserve that option. Some delegations expressed concern about this possibility. One delegation suggested that the acceptability of the approach would depend on the adequacy of those countries' implementing legislation in incorporating the obligations imposed by the MAI. Another suggested this be dealt with by country specific reservations.

44Some delegations wish to retain this word to protect investors from undue pressure to accept disadvantageous arrangements. Others wish to delete this word to maximise investor choice.

45Japan wishes the choice of forum within paragraph 2.c) to be that of the Contracting Party.

46Norway questions inclusion of dispute settlement other than through ICSID and the ICSID Additional Facility. Some delegations consider that, since only ICSID and the ICSID Additional Facility are designed for arbitration between a state and a private party, the UNCITRAL and ICC options should be available only if the former are not.

47Some delegations question making the ICC an available choice of the investor.

end footnote

By submitting a dispute to arbitration in accordance with this Article under paragraph 2.c, the investor consents to the application of all provisions of this Article[, including the assumption of jurisdiction over the dispute by a panel constituted under paragraph 8, Consolidation of Multiple Claims].48

3. Contracting Party Consent

a. Subject only49 to paragraph 3.b, each Contracting Party hereby50 gives its unconditional consent to the submission of a dispute to international arbitration in accordance with the provisions of this Article.51

b. A Contracting Party may, by notifying the Depositary upon deposit of its instrument of ratification or accession, provide52 that its consent given under paragraph 3.a only applies on the condition that the investor and the investment waive the right to initiate any other dispute settlement procedure with respect to the same dispute53 and withdraw from any such procedure in progress before its conclusion. A Contracting Party may, at any time, reduce the scope of that limitation by notifying the Depositary.54

4. Time periods and notification

An investor may submit a dispute for resolution pursuant to paragraph 2.c of this Article after [sixty] [ninety] days following the date on which notice of intent to do so was received by the Contracting Party in dispute, but no later than [three] [six] years from the date the investor first acquired [or should have acquired] knowledge of the events which gave rise to the dispute.55 Notice of intent, a copy of which shall be delivered to the Parties Group, shall specify:

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48This provision may not be legally necessary, since an investor submitting a case under any provision of the Article, would be consenting to the entire Article; but the provision may be useful to avoid disputes, e.g. over whether an investor has consented to a consolidation tribunal under paragraph 8. The United Kingdom maintains a reservation against forcing the investor to consent to consolidation.

49Norway would also want to be able to condition consent on prior exhaustion of local remedies.

50Norway maintains a reservation on granting advance consent in the treaty itself and proposes specifying in this paragraph either:

"The Contracting Parties listed in Annex _ give their consent" or

"The Contracting Parties listed in Annex _ do not give their consent."

51Japan suggests that, in the context of across-the-board prior consent, there should be clear limits on standing, e.g., a requirement of concrete damage, and procedural safeguards against frivolous claims, e.g., clear provision for preliminary objections.

52Some delegations suggest requiring, as a precondition to this limitation, that the Contracting Party have a constitutional impediment to accepting arbitration without the fork in the road.

53It was noted that the fork in the road would only be triggered by the same dispute, i.e., one arising under the MAI or provisions putting its obligations into force as domestic law, not by disputes over the same measure arising under other provisions of a Contracting Party's law.

54The delegate of Austria put down a reserve to permit review of this new drafting.

55A more precise version of the cut-off provision is found in NAFTA Article 1116, paragraph 2.

end footnote

a. the name and address of the disputing investor;

b. the name and address, if any, of the investment;

c. the provisions of this Agreement alleged to have been breached and any other relevant provisions;

d. the issues and the factual basis for the claim; and

e. the relief sought, including the approximate amount of any damages claimed.

5. Written Agreement of the Parties

The consent given by a Contracting Party in subparagraph 3.a, together with either the written submission of the dispute to resolution by the investor pursuant to subparagraph 2.c or the investor's advance written consent to such submission, shall constitute the written consent and the written agreement of the parties to the dispute to its submission for settlement for the purposes of Chapter II of the ICSID Convention, the ICSID Additional Facility Rules, Article 1 of the UNCITRAL Arbitration Rules, the Rules of Arbitration of the ICC, and Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention").

6. Appointments to Arbitral Tribunals

a. Unless the parties to the dispute otherwise agree, the tribunal shall comprise three arbitrators, one appointed by each of the disputing parties and the third, who shall be the presiding arbitrator, appointed by agreement of the disputing parties.

b. If a tribunal has not been constituted within 90 days56 after the date that a claim is submitted to arbitration, the arbitrator or arbitrators not yet appointed shall, on the request of either disputing party, be appointed by the appointing authority. For arbitration under paragraph 2, subparagraphs c.i, c.ii and c.iii, and paragraph 8, the appointing authority shall be the Secretary-General of ICSID. For arbitration under paragraph 2, subparagraph c.iv, the appointing authority shall be the International Court of Arbitration of the ICC.

c. The parties to a dispute submitted to arbitration under this article and the appointing authority should consider the appointment of:

i. members of the roster maintained by the Contracting Parties pursuant to Article C, paragraph 2.c: and

begin footnote

56Some delegations expressed concern that the various time periods in this and other paragraphs were longer than for state-state arbitration and would unduly delay formation of a Tribunal to hear an investor-state dispute. The ICSID observer noted that the time periods provided for state-state were, in practice, very short and that parties often required ninety or more days to form an ICSID tribunal.

end footnote

ii. individuals possessing expertise not found on the roster, if arbitration of a dispute requires special expertise on the Tribunal, rather than solely through expert advice under the rules governing the arbitration.

d. The appointing authority shall, as far as possible, carry out its function in consultation with the parties to the dispute.

e. In order to facilitate the appointment of arbitrators of the parties' nationality on three member ICSID tribunals under Article 39 of the ICSID Convention and Article 7 of Schedule C of the ICSID Additional Facility Rules, and without prejudice to each party's right independently to select an individual for appointment as arbitrator or to object to an arbitrator on grounds other than nationality:

i. the disputing Contracting Party agrees to the appointment of each individual member of a tribunal under paragraph 2.c.i or ii of this Article; and

ii. a disputing investor may initiate or continue a proceeding under paragraph 2.c.i or ii only on condition that the investor agrees in writing to the appointment of each individual member of the tribunal.57

begin footnote

57This subparagraph, based on NAFTA Article 1125, is intended to assure that a three member panel may include nationals of the parties to the dispute, without requiring that each member of the panel be, in fact, chosen by agreement.

end footnote

[7. Standing of the Investment58

An enterprise constituted or organised under the law of a Contracting Party but which, from the time of the events giving rise to the dispute until its submission for resolution under paragraph 2.c, was an investment of an investor of another Contracting Party, shall, for purposes of disputes concerning that investment, be considered "an investor of another Contracting Party" under this article and "a national of another Contracting State" for purposes of Article 25(2) (b) of the ICSID Convention.]

begin footnote

58This clause is a variant of the clauses which appear in many investment agreements, allowing the established company to have standing to bring the claim to arbitration against the host state. Such a clause would be redundant under the drafting approach of the French BIT.

Germany, Ireland, Mexico and Portugal expressed serious reservations about this approach, in particular giving the established investment standing to bring the host government to international arbitration. Some of these delegations also suggested that this provision fails to protect against the parent restarting the case if the investment were to lose.

The NAFTA countries suggest adopting the alternative approach found in Articles 1117, 1121, paragraph 2, and 1135, paragraph 2, of the NAFTA. (See Appendix). The NAFTA specifically provides for the investor to have the right to bring a claim as representative of the investment, and provides for waivers by the enterprise itself and for payment of any award of damages and the making of any restitution directly to the enterprise. A text inspired by NAFTA might read as follows:

"If a dispute involves a claim of loss or damage to a juridical person of one Contracting Party that is an investment of an investor of another Contracting Party which is not the investment's sole owner, that investor may bring a claim on behalf of the investment, i.e., for the entire loss or damage to the investment, provided that:

a. the investment remains a going concern at the time of the submission of the dispute for resolution or can reasonably be expected to resume functioning as a going concern if the claim is successful;

b. the investment waives its right to initiate or continue any dispute settlement proceedings regarding the measure alleged by the investor to breach this Agreement; and

c. any damages or interest awarded shall be paid to and any restitution awarded shall be made to the investment.

Some delegations questioned the need for either the provision in paragraph 7 or the NAFTA approach.

end footnote

8. Consolidation Of Multiple Proceedings

a. In the event that two or more disputes submitted to arbitration with a Contracting Party under paragraph 2.c have a question of law or fact in common, the Contracting Party59 may submit to a separate arbitral tribunal, established under this paragraph, a request for the consolidated consideration of all or part of them. The request shall stipulate:

i. the names and addresses of the parties to the proceedings sought to be consolidated,

ii. the scope of the consolidation sought, and

iii. the grounds for the request.

The Contracting Party shall deliver the request to each investor party to the proceedings sought to be consolidated and a copy of the request to the Parties Group.

b. The request for consolidated consideration shall be submitted to arbitration [by the means chosen by agreement of the investor parties from the list contained in paragraph 2.c. The investor parties shall act as one side for the purpose of the formation of the tribunal.

c. If the investor parties have not agreed upon a means of arbitration and the nomination of an arbitrator within 30 days after the date of receipt of the request for consolidated consideration by the last investor to receive it:

i. the request shall be submitted to arbitration]60 in accordance with this article [under the ICSID Convention or under the ICSID Additional Facility Rules, where available, or, if neither is available,] under the UNCITRAL rules, and

ii. the appointing authority shall appoint the entire arbitral tribunal, in accordance with paragraph 6.

d. The arbitral tribunal shall assume jurisdiction over all or part of the disputes and the other arbitral proceedings shall be stayed or adjourned, as appropriate if, after considering the views of the parties, it decides that to do so would best serve the interest of fair and efficient resolution of the disputes and that the disputes fall within the scope of this paragraph.

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59Some delegations object to consolidation without the investor's consent. The United Kingdom considers that this provision is not consistent with accepted jurisprudence under which an arbitral tribunal has jurisdiction only if and to the extent it is given it by consent of the parties. The delegate of Sweden suggested that an investor should be allowed to withdraw from arbitration if it does not wish to participate in the consolidated proceedings; it should then still and have available recourse to domestic courts or the diplomatic protection of its government.

60The United States delegation, while willing to consider this approach, requested that the NAFTA approach be shown as an alternative. That approach, which would result from deleting the words in these and the next set of brackets. provides directly for the establishment of an arbitral Panel under the UNCITRAL rules, and for the Panel to be named by the appointing authority, with no opportunity for investor choice. (See Appendix)

It has been suggested that, even if the investors are to be given an opportunity to select, the UNCITRAL rules, rather than an institutional arbitration, be chosen as the default mechanism.

end footnote

e. At the request of the Contracting Party, the arbitral tribunal established under this paragraph may decide, on the same basis and with the same effect as under paragraph 8.d, whether to assume jurisdiction over all or part of a dispute falling with the scope of paragraph 8.a which is submitted to arbitration after the initiation of consolidation proceedings.

9. Indemnification

A Contracting Party shall not assert as a defence, counter-claim, right of set-off or for any other reason, that indemnification or other compensation for all or part of the alleged damages has been received or will be received pursuant to an indemnity, guarantee or insurance contract.

10. Third Party Rights

[The arbitral tribunal may, after hearing the views of the parties on doing so, give to any Contracting Party requesting it an opportunity to present views on the legal issues in dispute.]61

11. Applicable law

A tribunal established under this Article shall decide the issues in dispute in accordance with this Agreement[, interpreted and applied in accordance with the applicable rules of international law].62

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61Some delegations question allowing other Contracting Parties, not party to the dispute, to submit views to an investor-state arbitral tribunal on the grounds that this could interfere with the investor's conduct of its claim or bring pressure on governments to intervene, thus politicising a dispute. Others believed that the MAI Contracting Parties all have sufficient interest in the proper interpretation and application of the agreement to warrant allowing them to submit views on legal issues in dispute. One delegation expressed the view that the need for this possibility would be eliminated if the Parties' Group were to have a role in interpreting the agreement.

62Some delegations prefer the approach of ICSID article 42, which provides that a Tribunal, absent agreement of the parties, "shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable." Some others prefer to adopt the same standard as in state-state arbitration and suggest that there may need to be some reference to national laws only if disputes under an investor-state agreement or an investment authorisation are brought within the scope of the investor-state mechanism.

end footnote

12. Interim measures of relief

a. An arbitral tribunal established under this Article may [order or]63 recommend an interim measure of protection to preserve the rights of a disputing party or to ensure that the Tribunal's jurisdiction is made fully effective, including an order to preserve evidence in the possession or control of a disputing Party. A Tribunal may recommend the non-application of the measure alleged to constitute the breach of obligation subject to the dispute.64

b. The seeking, by a party to a dispute submitted to arbitration under this article, of interim relief not involving the payment of damages, from judicial or administrative tribunals, for the preservation of its rights and interests pending resolution of the dispute, is not deemed a submission of the dispute for resolution for purposes of a Contracting Party's limitation of consent under paragraph 3.b, and is permissible in arbitration under any of the provisions of paragraph 2.c.65

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63A few delegations wish to study this further.

64ICSID arbitral rules appear to contemplate recommended interim measures only. UNCITRAL rules provide for interim measures without characterising them as recommendations. ICC rules do not provide expressly for interim measures. This provision would theoretically give all MAI arbitral tribunals the same right to order certain interim relief, while restricting that them all to recommendations for injunction. However, an interim order may not constitute an enforceable award under the Parties' applicable arbitral award enforcement arrangements. Some authorities believe that the arbitrator's general powers make even non-binding interim measures significant.

65This last phrase, which would permit a party to ICSID Convention arbitration to seek interim relief where available in domestic tribunals, has been included to meet a technical problem raised by the ICSID observer and is subject to further review.

end footnote

13.66 Final awards

a. An arbitration award may provide the following forms of relief:

i. a declaration [of the legal rights and obligations of the parties] [that the Contracting Party has failed to comply with its obligations under the MAI];

ii. compensatory monetary damages, which shall include interest from the time [of the award] [the loss or damage was incurred] until time of payment;

iii. restitution in kind in appropriate cases, provided that the Contracting Party may pay monetary damages in lieu thereof where restitution is not practicable; and

iv. with the Agreement of the parties to the dispute, any other form of relief67

b. An arbitration award shall be final and binding between the parties to the dispute and shall be carried out without delay by the party against whom it is issued, subject to its post-award rights.68

c. The award shall be drafted consistently with the requirements of paragraph 14 and shall be a publicly available document.69 A copy of the award shall be delivered to the Parties Group by the Secretary-General of ICSID, for an award under the ICSID Convention or the Rules of the ICSID Additional Facility; by the Secretary-General of the ICC International Court of Arbitration, for an award under its rules; and by the tribunal, for an award under the IJNCITRAL rules.

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66Two additional provisions have been suggested for Article D, which would precede the section on Final Awards.

The United States suggests a provision giving the parties to the dispute the freedom to agree on modifications of the rules.

Japan suggests the inclusion of a provision on preliminary objections. While some provision on this is made in the ICSID rules, this is not the case for the UNCITRAL or ICC rules. Japan suggests the following provision:

"a. Any objection by the Contracting Party to the jurisdiction of the Tribunal or to the admissibility of the application, or other objection the decision upon which is requested before any further proceedings on the merits, shall be made in writing within fifteen days after the appointment of the Tribunal.

b. Upon receipt by the Tribunal of a preliminary objection, the proceedings on the merits shall be suspended.

c. After hearing the parties, the Tribunal shall give its decision, by which it shall either uphold the objection or reject it. The decision should be given within 60 days after the date on which the objection was made."

67This final possibility may provide a means for the parties to work out an award of relief, tailored to the circumstances of the case, which will have legally binding force.

68The post-award rights include Section 5 of the ICSID Convention on interpretation, revision and annulment, and the rights of a party regarding enforcement of awards in national courts.

69The United States has a reserve on the drafting of this provision and the related paragraph 14.

end footnote

14. Confidential and Proprietary Information

Parties and other participants in proceedings shall protect any confidential or proprietary information which may be revealed in the course of the proceedings and which is designated as such by the party providing the information. They shall not reveal such information without written authorisation from the party which provided it.

15. Place of Arbitration and Enforceability of Awards

Any arbitration under this article shall be held in a state that is party to the New York Convention. Claims submitted to arbitration under this article shall be considered to arise out of a commercial relationship or transaction70 for purposes of Article 1 of that Convention. [Each Contracting Party shall recognise an award rendered pursuant to this Agreement as binding and shall enforce the pecuniary obligations imposed by that award as if it were a final judgement of its courts.]71

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70Norway questioned whether it would be correct to characterise a dispute concerning a concession as one arising out of a commercial relationship and suggested that the paragraph on scope of investor-state dispute settlement be limited to disputes arising out of a commercial relationship or transaction.

71Norway and Iceland questioned whether Contracting Parties could constitutionally meet an unqualified obligation to enforce all MAI awards domestically. Norway suggested that consideration be given to making awards binding only under international law. The question was raised as to what this would mean for an investor.

Some delegations question the utility of this sentence, given the provisions for enforcement under the ICSID and New York Conventions. However, this sentence, based on the ICSID article 54, would make the limitation of enforcement obligations to pecuniary awards applicable under New York Convention enforcement too. The sentence would also serve to counter potential loopholes under the New York Convention, e.g., it would preclude a Contracting Party from denying enforcement based on limitations in its acceptance of the New York Convention, or on a claim that the subject matter was incapable of settlement by arbitration or that enforcement of the award would be contrary to its public policy.

end footnote

16. Tribunal member fees

Fees and expenses payable to a member of an arbitral tribunal established under these Articles will be subject to schedules established by the Parties Group and in force at the time of the constitution of the tribunal.

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