The application of Article 42 of the ICSID convention — the irreconcilability of domestic and international law in the choice of applicable law for investment arbitration
Keywords:
international investment arbitration, ICSID convention, applicable lawAbstract
Investment disputes usually rise out of international free trade agreements and investment protection treaties. The ICSID Convention is a procedural framework for arbitration between investors and states. This article deals with Article 42(1) of the ICSID Convention which concerns choice of law by an investment tribunal when the applicable law has not been chosen by the parties. It states that the tribunal shall apply the law of the state party to the dispute, and the rules of international law. Article 42(1) of the ICSID Convention has been subject to extensive discussion ever since it was drafted. This article analyzes the decisions made in the application and interpretation of Article 42(1) of the ICSID Convention in particular through the approaches laid down in literature. Such theories are divided based on which assumption on regime of law they emphasize. This article attempts to reconcile the relationship between these two regimes of law and answer the question of which rules of law arbitration tribunals have applied in relation to Article 42(1) of the ICSID Convention. According to the conclusions, Article 42(1) of the ICSID Convention has been applied in various ways from the point of view of each regime. While there is no one way of interpretation, the rules of international law seem to have the more prominent role. The fluctuating approaches are problematic with regard to the realization of legal certainty in the arbitration process. Article 42(1) of the ICSID Convention reflects the hybrid character of ICSID arbitration: investment law penetrates the fields of both domestic and international law.
