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Daimler Financial Services v. Argentina

Type of decisionAward
Date of decision22 August 2012
Tribunal
Pierre-Marie Dupuy (President)
Domingo Bello Janeiro
Charles N. Brower (dissenting)
Legal instrumentBIT between Argentina and Germany (1991)
Further informationFull text of the decision

Statements from this decision

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International Investment Treaties (IITs)
International Law Rules Applicable to IITs
Relationship of IITs to Other Sources of International Law
System of Precedents
While there is no system of precedent, it is a fundamental principle of the rule of law that like cases should be decided alike, unless a strong reason exists to distinguish the current case from previous ones
Law of Treaties
Rules of Interpretation
Interpretation Rules of the Vienna Convention on the Law of Treaties (VCLT) as Reflecting Customary International Law
IITs must be interpreted using the rules of interpretation laid down in the VCLT
Object and Purpose as a Rule of Interpretation
It is for the states to decide how best to protect and promote investment; the text of the IITs they conclude is the definitive guide as to how they have chosen to do so; the duty of a tribunal is to discover and not to create meaning
The fact that the state parties adopted all of an IIT's provisions together as a whole evinces the state parties' belief that all provisions are consistent with the object and purpose of the IIT as expressed in its preamble
Special Rules of Interpretation
According to the principle of contemporaneity, the meaning and scope of a term have to be ascertained as of the time when the IIT was negotiated
Further Problems
Dispute resolution clauses should be interpreted no differently than any other treaty clause
On interpreting a term a tribunal should not undertake a separate three-step analysis (ordinary meaning, context, object and purpose), as the VCLT posits the methods as interrelated elements of a holistic approach to treaty interpretation rather than as a set of discrete and sequential steps
The word "shall" indicates an obligatory, not an optional character; in treaty terminology it means that what is provided for is legally binding
It is for the states to decide how best to protect and promote investment; the text of the IITs they conclude is the definitive guide as to how they have chosen to do so; the duty of a tribunal is to discover and not to create meaning
An evolutive interpretation does not entail an abandonment of the principle of contemporaneity
Protection of Investors under IITs
Character of IITs
The bilateral and synallagmatic dimension of IITs is not of a mere rhetorical nature; a growing number of investments are indeed bi-directional
The general purpose of BITs is to protect and promote foreign investments within the framework acceptable to both of the state parties
There are important differences between ordinary contracts and treaties, as the latter are concluded between sovereign states; where a treaty claim is invoked, tribunals not only interpret the asymmetric contractual relationship between state and investor, but also the international obligations by the state ("arbitration without privity")
Applicability of IITs
General Remarks
ICSID claims are at least in principle separable from their underlying investments; any qualifying investor who suffered damages as a result of the allegedly offending governmental measures at the time that those measures were taken has standing under the relevant IIT, provided the investor did not otherwise relinquish its right to bring an ICSID claim
Ratione Materiae – Definition of Investment
The Concept of "Investment"
Shares
The Barcelona Traction case is not relevant for the protection accorded to foreign shareholders under an IIT
The fact that "derivative suits" are inadmissible under local law is not relevant for the treaty based protection of a foreign shareholder owning shares in a local company
If shares are protected by an IIT, a shareholder can claim a breach of the IIT even if the state's measures were directed at the company and not him or her personally
Expropriation and Standards of Protection
Most-Favoured-Nation Treatment (MFN)
General Remarks
According to the ejusdem generis rule, an MFN clause can only attract matters belonging to the same category of subject as that to which the clause itself relates
In the German-Argentine IIT, the word "treatment" does not have different meanings when used in connection with "investments" as opposed to "investors"
Application to dispute settlement clauses
Dispute resolution clauses should be interpreted no differently than any other treaty clause
To determine whether the term "treatment" within an MFN clause also includes "procedural" treaty protection, a tribunal has to examine what meaning the state parties attached to the term; applying the principle of contemporaneity, the meaning must be ascertained as of the time when the IIT was negotiated; if no direct evidence in this regard exists, a tribunal has to look for clues to the meaning generally ascribed to the term by the state community at that time
If a state had intended for its IITs' MFN clause to apply to their international dispute resolution provisions, it would not have included a procedural requirement in the IIT that would instantly be rendered futile by the MFN clause
Neither the arbitral community nor state practice has yet reached a consensus whereby an MFN clause's reference to "treatment in the territory of the host state" may nowadays be understood as covering the international settlement of disputes
The application of the ejusdem generis rule on its own can neither categorically exclude international dispute resolution from the potential ambit of an IIT's MFN clause nor can it demonstrate that the ambit of the IIT's MFN clause necessarily includes international dispute resolution
The debate on whether the term "treatment" should be understood to comprise only "substantive" IIT protections or whether it may also include "procedural" ones is not the most appropriate one; in the end it should be decisive what meaning the state parties have attached to the term
If an MFN clause does not explicitly apply to "all matters subject to the IIT", this omission may constitute a supplementary indication that the state parties did not intend the MFN clause to cover dispute settlement provisions
The presence of certain exceptions in an MFN clause not mentioning dispute resolution provisions is no indication of the state parties' intention that the MFN clause should apply to such provisions; i.e. the principle expressio unius est exclusio alterius is not applicable
Even if the term "treatment" could be understood as applying to dispute settlement clauses, an additional territorial limitation may still be capable of excluding international dispute settlement clauses from the scope of the MFN clause
Differential treatment does not automatically constitute "less favourable" treatment; dispute settlement clauses in two IITs have to be compared as a whole, not part-by-part; a fork-in-the-road requirement in one IIT is not necessarily better treatment than a requirement to pursue local remedies for a certain amount of time
Dispute Settlement Clauses
Character of Investor-State Arbitration Clauses
Dispute resolution clauses should be interpreted no differently than any other treaty clause
The exact wording of dispute resolution clauses plays a key role, as they are one of the places where the imbalances between the interests of both state parties are often precisely defined as a result of the IIT's negotiation process
Waiting Clauses / Duty to Attempt Settlement Before Arbitration
Character of Waiting Clauses
If a dispute settlement clause requires the claimant to pursue local remedies for a certain time, this is to afford the domestic courts an opportunity to attempt to resolve investment claims in a prompt manner, not to guarantee a specific time horizon for their final resolution
A tribunal may not waive an 18-month domestic courts requirement on the grounds that it is "nonsensical"; sovereign states are free to agree to any treaty provision they so choose, provided these provisions are not futile and not otherwise contrary to peremptory norms
Further Problems
By ordering the basic steps of the dispute resolution process in discrete paragraphs and imbuing each step with a mandatory character, a dispute settlement clause makes clear that the state parties intended for the steps to follow one another in sequential fashion that must be strictly observed
Applicable Law / Choice of Law Clauses
The reference to "other agreements made between the parties" within Art. 10(5) of the Germany-Argentina BIT only extents to other treaties in force between the party
Waiver of Rights Under an IIT
A forum selection clause in a contract to which the respondent is not a party can have no bearing on a tribunal's jurisdiction for treaty claims
Contract and Treaty Claims
Distinction of Contract and Treaty Claims
There are important differences between ordinary contracts and treaties, as the latter are concluded between sovereign states; where a treaty claim is invoked, tribunals not only interpret the asymmetric contractual relationship between state and investor, but also the international obligations by the state ("arbitration without privity")
Investment Contracts
Choice of law clauses in international contracts should be respected
Investment Treaty Arbitration
General Remarks
There are important differences between ordinary contracts and treaties, as the latter are concluded between sovereign states; where a treaty claim is invoked, tribunals not only interpret the asymmetric contractual relationship between state and investor, but also the international obligations by the state ("arbitration without privity")
Distinction Between Jurisdiction and Admissibility
Admissibility analyses patterned on domestic court practices have no relevance for IIT-based jurisdictional decisions; all IIT-based dispute resolution provisions are by their very nature jurisdictional
Vienna Convention on the Law of Treaties
Article 31 - General rule of interpretation
General Remarks
On interpreting a term a tribunal should not undertake a separate three-step analysis (ordinary meaning, context, object and purpose), as the VCLT posits the methods as interrelated elements of a holistic approach to treaty interpretation rather than as a set of discrete and sequential steps
An evolutive interpretation does not entail an abandonment of the principle of contemporaneity
ICSID Convention
Jurisdiction of the Centre (Articles 25-27)
Article 25
Jurisdiction Ratione Materiae
Arising Directly out of an Investment
Although a tribunal does not have jurisdiction over measures of general state policy, it has jurisdiction to examine specific measures of that policy if they have a direct bearing on the investment
Further Problems
ICSID claims are at least in principle separable from their underlying investments; any qualifying investor who suffered damages as a result of the allegedly offending governmental measures at the time that those measures were taken has standing under the relevant IIT, provided the investor did not otherwise relinquish its right to bring an ICSID claim
ICSID Arbitration Rules
Rule 41
The goal of efficiency must be balanced against a tribunal's duty not to exceed its competence; additionally, a tribunal must ensure that both parties receive a full and fair opportunity to present their cases

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