The Jurisdiction of Investment Tribunals to Adjudicate Claims and Incidental Questions Grounded in Domestic Law

Abstract

Abstract Over the past thirty years, arbitral tribunals tasked with determining their jurisdiction to adjudicate domestic law in investment disputes have frequently relied on one or a combination of two conventional approaches. The first approach interprets jurisdiction and applicable law provisions as serving separate functions and operating independently. The second approach contends that domestic law applies as a fact. However, these two approaches fall short in encompassing the distinct ways in which domestic law can apply in an investment dispute. This application of domestic law is contingent on the stipulations found within a jurisdiction provision – often referred to as the “arbitration agreement” – and the jurisdictional provisions that delineate a tribunal’s personal, material, and temporal scope of jurisdiction. To comprehensively elucidate how domestic law operates in investment arbitration, this article outlines the sources of a tribunal’s jurisdiction to adjudicate a claim and an incidental question grounded in domestic law. Firstly, the narrow or broad scope of a jurisdiction provision within an international investment agreement, domestic investment law, or investment contract determines whether a tribunal has the jurisdiction to hear a claim grounded in domestic law, pursuant to the severability doctrine. Secondly, the direct reference or lacuna in a jurisdictional provision determines whether a tribunal possesses jurisdiction to hear an incidental question grounded in domestic law, as a necessary and ancillary legal issue that a tribunal must preliminarily address to resolve the relevant claim, pursuant to the lex specialis principle. Given these considerations, tribunals and treaty drafters should not rely on the two conventional approaches, but should consider any stipulation within a jurisdiction provision and jurisdictional provisions concerning the application of domestic law as the legal foundation of a claim and an incidental question.