Deciphering the OIC Investment Agreement in Light of the Itisaluna v. Republic of Iraq Award

Abstract

Promulgated in 1981, the purpose of the Agreement on Promotion and Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference (nowadays the Organization of Islamic Cooperation) (the “OIC Investment Agreement” or the “Agreement”) is to provide guidelines for the treatment of investments between member States of the Organization. The Agreement provides for investor compensation if the State hosting the investment breaches the Agreement’s substantive terms. Disputes arising under the OIC Investment Agreement are subject to the resolution provisions in Article 17, which provides for conciliation and arbitration. Although, since its entry into force, several investors have attempted to make use of its dispute resolution mechanism, since information on the outcome of these cases is limited. The two arbitral awards that are publicly available, in conjunction with recent practice followed by investors, reveal that the dispute settlement provisions of the Agreement are not free from ambiguity. In light of the recent Itisaluna Iraq LLC and others v. Republic of Iraq case, this article sets out to elucidate a series of problematic issues pertaining to the interpretation and the application of the Agreement’s dispute settlement provisions, as they have risen from publicly availably arbitral awards and other decisions. These include whether: a) the Agreement provides for investor-State dispute settlement; b) conciliation is a precondition to arbitration; and c) investors can use the Most Favored Nation clause (MFN) of the Agreement for dispute settlement purposes. These issues are of significance for pending and future cases under the OIC Investment Agreement. Given the ambiguities of the language of the OIC Investment Agreement, it is preferable that future claimants follow the OIC dispute settlement process as faithfully as possible. Such an approach will immunize them to a great degree from jurisdictional pitfalls of importing separate dispute resolution frameworks via MFN.