ICSID Jurisdiction Over International Mass Investment Arbitrations: Due Process and Default Rules

Abstract

In Abaclat and Others v. The Argentine Republic (formerly Giovanna a Beccara and Others v. The Argentine Republic), approximately 60,000 Italian investors are attempting to convince a panel of arbitrators at the International Centre for the Settlement of Investment Disputes (ICSID) that Argentina’s default on sovereign bonds held by the investors constitutes a violation of the Argentina-Italy Bilateral Investment Treaty (BIT). The Abaclat case is highly significant because it is the first mass investment arbitration to be heard before ICSID. The decision asserting jurisdiction over the mass claim has attracted significant commentary because of its implications for sovereign debt restructuring, the procedure by which a defaulting government offers to exchange new bonds of reduced value for outstanding bonds that it cannot repay.

The prominence of the due process discussion in the Abaclat opinions set the stage for an array of legal commentary about the case that focused on the due process issue. But due process is an unhelpful way to conceptualize the issues raised by mass investment arbitrations. Whether mass arbitrations are permissible depends not on parties’ background due process rights, but rather on the scope of parties’ consent to arbitrate. This Article challenges the framing of the issue of whether ICSID can hear mass claims as an issue of due process. It argues, instead, that the question is best understood as an issue of treaty and contract interpretation, and of the selection of an appropriate default rule where the consent-granting clause in an investment contract (such as a bond) is ambiguous on the issue of whether the consent to arbitrate extends to mass claims.