Diplomatic Protection Under the State-to-State Arbitration Clauses of Investment Treaties

Abstract

Not all that long ago, diplomatic protection was the most efficient mechanism to resolve disputes arising out of an investment. Although today the prevalence for the resolution of investment disputes has shifted to investment arbitration, diplomatic protection has still maintained certain benefits and advantages. While the system of international investment agreements has led to a decline of diplomatic protection proceedings as a matter of fact, it may have established at the same time a new and explicit legal basis for diplomatic protection in the framework of international investment law.

This paper focuses on the questions that arise in respect of the adjudication of diplomatic protection under the state-to-state dispute resolution clauses of investment treaties and is intended to contribute to the current debate on the availability and scope of these clauses.

In the course of the analysis, I argue that first, diplomatic protection is available as a means to resolve investment disputes through state-to-state arbitration under investment treaties. Second, that diplomatic protection under investment treaties is subject to distinct rules and prerequisites, governed by the treaty rather than by customary international law. Thereby a particular focus is placed on the necessity to exhaust local remedies when diplomatic protection is exercised under state-to-state dispute resolution clauses.

Ultimately, the paper concludes by presenting a comprehensive approach to diplomatic protection disputes under dispute-resolution clauses of investment treaty and their interplay with other types of state-to-state disputes under the same treaty.

Keywords: Diplomatic Protection, State-to-State Arbitration, Public International Law, Investment Agreements, Bilateral Investment Treaties, Exhaustion of Local Remedies, Italy v. Cuba, Investor-State Arbitration, Art 27 ICSID, Declaratory Relief