This article has been authored by Anmol Tyagi, 3rd year student at Rajiv Gandhi National University of Law, Patiala
Introduction
Under International Law, treaties are the fundamental source of law. In this regard, interpreting the relevant provision of a treaty becomes important for courts and arbitration tribunals (“Tribunals”). One such interpretation is for the temporal scope of a Bilateral Investment treaty (“BIT”), which incidentally simplifies the Jurisdiction ratione temporis of an arbitration tribunal under International Investment Law. Jurisdiction ratione temporis refers to the effect of time on a tribunal’s power to adjudicate.
In investor-state dispute Settlement (“ISDS”), when a BIT operates within an established temporal scope, the timing of the breach of the relevant treaty and an objective determination of the date of Crystallization of a dispute becomes naturally relevant for assessing jurisdiction ratione temporis over such dispute.
The temporal scope of a treaty and the date of crystallization of a dispute are crucial for arbitration tribunals in determining Jurisdiction. In this article, the author explores the application of the general principle of non-retroactivity of treaties in different possibilities, the role of the date of dispute crystallization in the jurisdiction ratione temporis, and the pattern that disputing parties follow to establish or oppose jurisdiction ratione temporis in ISDS Claims with the help of precedents.
Interpreting the temporal scope and its effects
Schwarzenberger refers to interpretation as the process of establishing the legal nature and the effects of the consensus to which the parties have reached. One such interpretation is when Arbitration tribunals interpret the BIT provision for the scope of application, which elucidates the retroactive or non-retroactive application of the BIT. With regard to the interpretation of a treaty, Investment tribunals have referred to Customary International Law, which includes the Vienna Convention on Law of Treaties (“VCLT”). The case is no different for interpreting the provision regarding the temporal scope of a BIT. Regarding such an interpretation, a differentiation can be drawn according to the language of the provision:
Explicit Provision for the temporal scope
Article 31 of the VCLT provides for the general rule of interpretation of treaties. With explicit provision, there is little difficulty regarding the interpretation as it is in consonance with the ordinary meaning being given to the terms of the treaty. Provisions for temporal scope that provide for an explicit inclusion or exclusion of retroactive application of a treaty must be interpreted in their natural and ordinary sense.
The Libya-turkey BIT (2009) that states “…..this agreement shall not apply to disputes that have arisen before its entry into force.” and the Cuba-Hungary BIT (1999) that states “ …..the agreement shall not apply to disputes which arose prior to its entry into force.” are examples of an explicit exclusion of retroactive application of the BIT. The effect of such an exclusion makes the BIT not applicable to disputes that arose prior to the signing of the BIT.
Non-explicit provision for the temporal scope
Sovereign states usually explicitly exclude or include the retroactive application of the BIT in the provision for the scope of application, however, there can exist language that opens the scope of interpretation to tribunals. In cases where the BIT is silent with regard to the retroactive application of the BIT, article 28 of the VCLT persists, which provides for the principle of non-retroactivity of treaties in cases where an intention to the contrary does not appear—such a principle, as the tribunal in SGS v. Philippines and OKO v. Estonia clarified is based on the rationale that a state cannot be held responsible for breach of law before the law even existed.
The principle of non-retroactivity persists in the absence of a contrary intention or an explicit provision allowing the retroactive application of the BIT. Such an intention on the contrary must be clearly derived from the factual matrix and shall not be vague. The burden of proving the opposite lies upon the party making such a claim and the mere fact that the measure or act has gone unremedied cannot be a reason to allow jurisdiction over a dispute.
Hence, in the absence of a clear provision for retroactivity or a similar intention allowing it, the BIT does not apply retroactively over disputes that arose and crystallized prior to the signing of the BIT.
Additionally, with regard to the interpretation of a treaty, the BIT signatories may also issue a joint interpretative declaration upon the temporal scope of the BIT. Such a Declaration is in consonance with Article 31(3)(a) of the VCLT, which allows for subsequent agreements as an authentic means of interpretation.
Determination and relevance of dispute crystallization
The temporal scope of a BIT may be applicable retroactively or non-retroactively. In cases where BIT applies retroactively, it applies to all disputes irrespective of their date of origin. In cases where the BIT applies non-retroactively or when the principle of non-retroactivity prevails, the BIT only applies to disputes that arose and crystallized after the signing of the BIT.
In this regard, the date of origin and crystallization of the dispute becomes highly relevant. The date of crystallization of the dispute or dispute origin is thus objectively determined by the Arbitration tribunals. The dispute origin has an evolved jurisprudence of its own in international law. Tribunals refer to the generally accepted definition of a dispute: “a disagreement on a point of law or fact, a conflict of legal views or of interests between two persons.” While the date of dispute is a usual point of conflict between the parties, tribunals have referred to a case-by-case analysis of the facts in order to assess the date of dispute crystallization.
Analysis and Conclusion
Usually, for objections on jurisdiction, contentions with regard to the temporal application of a treaty arise first. With it, while the respondent state usually proffers a non-retroactive interpretation of the BIT, thereby allowing Jurisdiction over only such disputes that crystallized after the signing of the BIT; the Claimant (Investor) asserts a retroactive interpretation, allowing jurisdiction over all disputes irrespective of their date of origin or crystallization.
In the absence of such contentions on temporal scope, two different situations can arise. First, in the case when the tribunal refers to the non-retroactive interpretation of the BIT, the respondent state can contextualize the facts to establish a lack of jurisdiction based on the Crystallization of the dispute before the signing of the BIT, whereas the Claimant (Investor) asserts jurisdiction by proving that the dispute crystallized after the signing of the BIT.
The outcome of these jurisdictional challenges ultimately depends on the careful analysis of the dispute’s crystallization date and the precise wording of the BIT, ensuring that the tribunal’s jurisdiction is grounded in the parties’ intentions and the treaty’s legal framework. As international investment law continues to evolve the interpretation of these principles will remain crucial in shaping the future of ISDS and the relationship between states and investors.