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Financial institutions Energy Infrastructure, mining and commodities Transport Technology and innovation Life sciences and healthcare A basic guide to international arbitration

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Financial institutionsEnergyInfrastructure, mining and commoditiesTransportTechnology and innovationLife sciences and healthcare

A basic guide to international arbitration

Norton Rose Fulbright

Norton Rose Fulbright is a global legal practice. We provide the world’s preeminent corporations and fi nancial institutions with a full business law service. We have more than 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: fi nancial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offi ces and to maintain that level of quality at every point of contact.

Norton Rose Fulbright US LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP and Norton Rose Fulbright South Africa Inc are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients.

References to ‘Norton Rose Fulbright’, ‘the law fi rm’, and ‘legal practice’ are to one or more of the Norton Rose Fulbright members or to one of their respective affi liates (together ‘Norton Rose Fulbright entity/entities’). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a ‘partner’) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifi cations of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specifi c legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright.

© Norton Rose Fulbright LLP NRF20889 02/15 (UK) Extracts may be copied provided their source is acknowledged.

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A basic guide to international arbitration

The preferred option

Arbitration is a consensual, binding method of dispute resolution. It is an increasingly popular means of resolving disputes, particularly in relation to international contracts. There are many reasons for choosing arbitration but the key ones are given below.

Enforcement

Arbitration awards can be easier to enforce internationally than the judgments of national courts. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 – known as the New York Convention – has been ratified by 154 countries. This means that, in principle, an arbitration award can be enforced in any of those countries. By contrast, court judgments are generally only enforceable in countries where there are reciprocal enforcement arrangements in place.

So, for example, whilst an English court judgment can be enforced easily in any EU state through the Brussels

Regulation on the Recognition and Enforcement of Judgments, it can be difficult to enforce an English court judgment in many other countries. By contrast, an English arbitration award can be enforced in 154 countries.

Where the assets of the potential defendant are in a country where a national court judgment cannot be enforced, arbitration is the obvious choice.

See page 09 on enforcement.

See www.uncitral.org for the text of the New York Convention and a list of signatories.

Greenland

Libya

SudanChad

Angola● Ethiopia

Namibia

Iraq

● Somalia

● Yemen

South Sudan

Congo

Turkmenistan

Papua NewGuinea

Western Sahara

Tajikistan

Malawi

North Korea

Togo

Sierra Leone

●●

Taiwan

Belize

Guinea-Bissau

Swaziland

Eritrea

Suriname

French Guiana

Equatorial Guinea

Gambia

Signatories to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958

Data source: UNCITRAL

Country status

Member

Non-member

0 2,500 5,0001,250km

NRF20634

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A basic guide to international arbitration

Neutrality and confidentiality

Parties to international contracts often want to avoid using the home courts of one of the parties in order to ensure neutrality. In addition, arbitration avoids problems with unfamiliar or unpredictable local court procedures.

Court proceedings are usually public, whereas the parties can agree to keep arbitration proceedings confidential. In this way, the parties can protect commercial practices, trade secrets, industrial processes and knowledge of the dispute itself. In some countries, however, confidentiality may be lost if arbitration proceedings end up in court – for example, if the arbitration award is appealed.

If confidentiality is important then it is sensible to include a confidentiality provision in the arbitration agreement.

See page 06 on drafting confidentiality clauses.

Finality

The parties can, subject to the applicable procedural law, agree that an arbitration award is final and binding, and cannot be appealed to a court. In many jurisdictions, awards (particularly those in domestic arbitration) will not be set aside on the ground of errors of fact or will only be set aside in very exceptional circumstances. Whilst most jurisdictions permit the parties to agree not to appeal to the courts on a point of law, in many jurisdictions the right to appeal on grounds of serious procedural irregularity is mandatory and cannot be excluded, even by agreement. The ability to restrict appeals on points of law means that arbitration proceedings can be concluded more quickly than court proceedings.

Choice

In arbitration, the parties have considerable choice over the way in which their dispute is conducted. They can choose in which country, city and, even, in which building they wish to hold their arbitration (although, unlike court proceedings, they will have to pay for the venue).

The parties are also free to select the arbitrators themselves. This can be helpful where the dispute is of a technical nature, since they can ensure that the arbitrators have particular technical skills or expertise. (Bear in mind, however, that, unlike judges, arbitrators must be paid by the parties.) It is important to agree to the appointment of an odd number of arbitrators (either a sole arbitrator or a panel of three): if two, or four, arbitrators are selected, the panel may be unable to reach a decision due to deadlock.

The language(s) in which the arbitration is conducted can also be specified by the parties.

The legal framework International arbitration is subject to a number of layers of regulation and in this respect is more complex in structure than national court litigation. What follows is a summary of the different laws and rules that make up this framework.

The law governing the contract

The substantive law of the contract between the parties is the law governing the contract. Regardless of where the arbitration takes place, the arbitrators will apply the substantive law of the contract when deciding the issues in dispute under the contract.

The law governing the arbitration agreement

It must be remembered that the arbitration clause within the main contract is a contract in its own right, collateral to the main contract. It is, in effect, a contract within a contract and is severable from the main contract.

If the arbitration agreement is contained within the main contract, the law of the main contract will usually govern the arbitration agreement (if no other law is chosen by the parties to govern the arbitration agreement – and generally none is). However, if an arbitration agreement is entered into after the main contractual dispute has arisen (because the main contract contains no arbitration clause), it will not necessarily follow that the arbitration agreement will be governed by the same law as the main agreement (if no separate choice of law is made in the arbitration agreement).

Although it is by far the most usual case that the arbitration agreement is governed by the same law as the main contract, it is possible to provide for the law of the arbitration agreement to be a different governing law from that of the main contract. Institutional rules – such as the ICC Rules – do not deal with the governing law of the arbitration agreement. Their standard clauses do not include a choice of law clause for the arbitration agreement itself – but they do stress the desirability of stipulating the governing law of the main contract.

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The law governing the arbitration agreement covers substantive matters relating to the agreement to arbitrate, as, for example, the interpretation and validity of the agreement to arbitrate. The issue of whether a particular dispute falls within the terms of an arbitration clause will be governed by the law governing the arbitration agreement.

It will also be relevant to issues relating to the recognition and enforcement of the award. For example, under article 5 of the New York Convention, recognition and enforcement of an award may be refused if the arbitration agreement is not valid under the law to which the parties have subjected it.

The procedural law

The nature and scope of the law of the seat of the arbitration determines the procedure for the arbitration. Clients will often require that the place at which any arbitration is to take place is a place that is neutral to all parties. It is vitally important to ensure that, when selecting a seat for the arbitration, the requirements and scope of the laws of that place of arbitration are understood. Different countries can import different requirements into their own law and, to be effective, an award will have to comply with all the mandatory requirements imposed by the law of the seat of the arbitration.

The procedural law acts in concert with the institutional or ad hoc rules (if any) under which the arbitration is to be conducted. The procedural law and the rules govern the conduct of the arbitration; by adopting certain rules, the parties may find that they have contracted into or opted out of various of the default non-mandatory provisions of the procederal law.

Typically, the procedural law covers questions relating, for example, to the arbitral tribunal itself, such as its appointment and any revocation of its authority, its powers and duties and remedies for any breach of duty. It also determines the availability of interim and procedural remedies. The form and validity of the award and grounds for challenges to the award where challenge is made at the place of arbitration will also be determined by the procedural law. In some instances, the law of the seat of the arbitration can also stipulate that a particular type of dispute cannot be settled by arbitration under local law. In some states, if the proper law of the contract has not been chosen by the parties, it is normally determined by the ‘conflict of law rules’ of the procedural law: this enables the tribunal to work out which national law to apply to interpret the procedural laws applying to the contract – usually the law of the place where the arbitration is taking place.

The law of the place of recognition and enforcement of the award

The law of the place of recognition and enforcement of any potential award should also be considered. Is the country a signatory to the New York Convention? What is that country’s national courts’ reputation in relation to ease of enforcement of arbitration awards? There can be substantial differences in the approach of local courts to the enforcement of a ‘foreign’ arbitration award. It is important to obtain local advice at the outset (preferably when drafting the dispute resolution clause) on the prospects of enforcing an award in a particular jurisdiction.

See page 03 on enforcement and the New York Convention.

The procedural rules of the arbitration

The parties can (within the constraints of the procedural law) choose their own rules to govern the procedure. There are essentially two options here: institutional rules or ad hoc procedures.

Institutional rules are chosen when the arbitration is administered by an arbitration institution. The rules of the major institutions are well known and their application is reasonably predictable.

An arbitration is ad hoc when it is not administered by an arbitration institution. In theory, it is possible for the parties to write their own rules but this is rarely, if ever, done in practice. Instead, the parties use the procedural rules that either they have chosen or on which the arbitrator(s) has decided. Alternatively, the arbitration may be governed solely by the procedural law of the arbitration.

See pages 08 for a discussion of the relative merits of institutional and ad hoc arbitrations.

The powers of the tribunal

The authority of the tribunal (or panel of arbitrators) comes from the contractual arbitration agreement between the parties. The powers of the tribunal are set out in the relevant procedural law and procedural rules. The limits of the arbitrators’ powers will therefore differ, depending on the procedural law and rules chosen.

The powers of the court

The powers of the court to hear applications relating to an arbitration will be determined by the procedural

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law of the arbitration, the procedural rules chosen (if any) and the arbitration agreement. All three of these will affect whether a particular court can hear an appeal of an arbitration award, consider the jurisdiction of the arbitral tribunal or provide interim relief (such as freezing orders) in support of the arbitration.

Drafting arbitration clauses No one arbitration clause will be suitable for all agreements. The benefit of arbitration is that it can be tailored to meet the needs of the parties.

That said, the key to drafting a successful arbitration clause is simplicity. This principle applies in the most complex of situations, including multiparty disputes and resolving disputes arising out of a group of related but separate contracts. A skilfully engineered, straightforward clause will enable the parties to avoid further conflict once a dispute has arisen.

Before agreeing on an arbitration clause, it is important to consider the issues set out below.

Location of assets

Identify where the other party’s assets are located now and where they are likely to be located after any award is obtained. If they are located in the country where the award will be obtained, can the local courts be relied upon to enforce the award? If the assets are located outside the jurisdiction in which the award will be obtained, seek advice on the recognition and enforcement of arbitration awards against assets in that country, both in theory and in practice. An arbitration award is of no value unless it can be effectively enforced.

Protection

If one of the parties to the agreement is a State, consider whether the ICSID Convention can apply and whether there is scope for investment treaty protection (through bilateral or multilateral investment treaties).

See page 09 on investment treaties.

Type of arbitration

Decide whether the arbitration should be institutional and administered according to the rules of the institution (and if so which institution) or ad hoc with no formal administration agency, where the parties create their own rules and procedures.

Choice of seat

Before choosing a particular seat, consider the extent to which the local courts will support the arbitration proceedings (by, for example, providing interim relief such as injunctions or conservatory measures).

Model clauses

Most arbitration institutions provide recommended model arbitration clauses. These make a good starting point when drafting arbitration clauses. Variations to a model clause can lead to undesirable results if not carefully drafted. The meaning of a poorly drafted arbitration clause can be the subject of separate proceedings, leading to increased costs and delay. In the worst case, the clause may be found to be ineffective. It is also important to consider how an arbitration clause will be viewed by the state in which the award will be enforced. A poorly drafted clause can lead to problems with enforcement.

Mandatory There are seven basic elements that must be included in your clause.

Referral of the existing or future dispute to arbitration Draft the clause in broad terms to ensure that all disputes, tortious or contractual, are referred to arbitration. Wording such as ‘all disputes and claims arising out of or in connection with this Agreement will be referred to arbitration’ is recommended. When drafting a clause for a group of contracts, include a reference to the arbitration clause in the main contract.

Incorporation of rules governing the arbitration The parties may select rules in order to regulate the conduct of the arbitration. They may be the rules of an institution, such as the ICC, or ad hoc rules, such as the UNCITRAL rules.

See page 08 for more information on UNCITRAL.

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Reference to the place of arbitration The place of arbitration, which is often referred to as the seat of arbitration, is important for three reasons: firstly, it determines the place where the award is made or published (and hence whether the award will be treated as an award of a party state for the purposes of the New York Convention); secondly, the arbitration will be subject to the procedural law, including the arbitration laws, of the jurisdiction in which the place is located; thirdly, the courts of that jurisdiction will have a supervisory or supportive function in connection with the arbitration itself (and the parties can ascertain in advance to what extent the courts will issue interim relief or entertain appeals).

Reference to the place of hearing The parties may wish to agree that hearings be held at a place other than the place or seat of arbitration. However, they should first check to ensure that this is permissible under the law of the place of arbitration.

The choice of language The parties should agree on the language of the arbitration, as this will be the language of the pleadings and the hearings.

The preferred number of arbitrators Three arbitrators should generally be appointed in anything but a simple, low value case. Qualifications, such as industry experience, may be stipulated.

Reference to the substantive law of the agreement or contract This is the law that will govern the merits of the dispute.

Optional It can at times be useful – even essential – to include some or all the following elements.

Multiple related contracts Where there are interrelated contracts, it would be sensible for the parties to consider whether disputes arising under the different contracts should be consolidated into one hearing, heard concurrently or resolved by the same tribunal. This is not a straightforward matter, and it is wise to seek detailed advice on a case by case basis.

Third parties cannot be joined to arbitration proceedings without their consent. If this is likely to be an important issue, then litigation should be considered instead.

Excluding rights to appeal Parties can exclude (as far as is permissible by the laws of the relevant state) the right to appeal on a point of law, in order to ensure any award is final and binding at the end of the arbitration. In some jurisdictions it is possible to exclude the

right to appeal in any circumstances (including procedural irregularity), but this is not recommended as it leaves the parties with no redress in the event of an abuse of process.

Service of process provision Although the strict rules on court service do not apply, the inclusion of a service provision (specifying on whom and where documents should be served) makes service of proceedings straightforward.

Waiver of sovereign immunity If contracting with a state or stateowned body, it is important to include a waiver of sovereign immunity clause to enable any award to be enforced.

Stepped clauses Stepped clauses allow for different methods of dispute resolution at different stages of the dispute. These clauses can be helpful in some situations, as they require the parties to attempt to resolve their differences at an early stage before formal proceedings have begun. In other situations, they can simply lead to delay. Care should be taken to ensure that they are enforceable within the particular jurisdiction.

Interim measures The ability to apply to the arbitral tribunal or national courts for interim relief depends on the chosen procedural law and the powers given to the arbitrators under any agreed rules governing the arbitration and the arbitration clause itself. It is important to consider this issue when drafting the arbitration clause and, if necessary, to extend the powers of the arbitrators.

Drafting confidentiality clauses In some jurisdictions confidentiality of the proceedings and the award is implied during the arbitration and protected in any related court proceedings. However, in many jurisdictions this is not the case. If confidentiality is important to the parties then a confidentiality provision, such as the clause below, should be added to the arbitration agreement.

General confidentiality clause The Arbitral Tribunal shall maintain the confidentiality of the arbitration and conduct the arbitration in an impartial, practical and expeditious manner, giving each party sufficient opportunity to present its case.

Unless the parties expressly agree in writing to the contrary, the parties undertake to keep confidential all awards and orders in their arbitration as well as all materials in the arbitral proceedings created for the purpose of the arbitration and all other documents produced by another party in the arbitral proceedings not otherwise in the public domain, save to the extent that disclosure is required of a party by a

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legal duty, to protect or pursue a legal right or to enforce or challenge an award in legal proceedings before a state court or other judicial authority.

Adapted from the rules of the Arbitration Institute of the Stockholm Chamber of Commerce and of the London Court of International Arbitration.

Institutional arbitration There are a number of benefits to conducting arbitration under the auspices of one of the major institutions.

Firstly, the arbitration institution will supervise the conduct of the arbitration. It will assist in the appointment of arbitrators and will give practical guidance on how to interpret its procedural rules. Some institutions (notably the ICC) will review the arbitration award and recommend any changes to the tribunal. This adds another layer of protection against errors in the arbitration award – of particular importance when the ability to appeal an award has been curtailed through the arbitration clause, the procedural rules or procedural law.

Secondly, the institution can act as an appointing authority. Arbitration clauses can provide that the institution is responsible for appointing the chair arbitrator after the parties have each nominated one arbitrator on a three person panel or that the institution appoint the entire panel of one or three arbitrators. The institution can also appoint an arbitrator if one party fails to nominate an arbitrator. In this respect, arbitration institutions can act as a form of quality control, appointing arbitrators with appropriate experience and a proven track record.

A third benefit in using institutional arbitration is that it can make the recognition of an award more straightforward, since the procedures adopted by the institution will be well known and less open to challenge.

Arbitration institutions charge a fee for the administration of the arbitration and this can make administered arbitrations more expensive. However, the predictability of institutional rules and the assistance of the institution in administering the arbitration can lead to fewer procedural difficulties, which may reduce time and costs. It is important to consider the way in which the institution’s fees are structured, as the proportion of fees required at an early stage in the arbitration varies.

Ad hoc arbitration

Ad hoc, or unadministered, arbitration can be flexible, relatively cheap and fast – if the parties cooperate. It works best when conducted in a jurisdiction with a recognised arbitration law.

When parties are not able to cooperate, the assistance of an institution to move the arbitration forward can be very helpful. However, since ad hoc arbitration is cheaper (there are no institutional fees to pay), it can be a popular choice.

It is possible to have an ad hoc arbitration with an institution designated as the appointing authority. This can solve one of the difficulties associated with ad hoc arbitration – namely, constituting the tribunal itself. In such circumstances, parties can also choose, once the tribunal has been constituted, to have the arbitration administered by the institution as well.

UNCITRAL UNCITRAL is the United Nations Commission on International Trade Law. It exists to make the rules of international business simpler, clearer and more contemporary; it was established in 1966. The UN General Assembly elects 60 member states to form the Commission for a term of six years apiece. Their goal is commercial law reform, allowing international trade to flow smoothly and disputes to be settled in good order.

UNCITRAL rules UNCITRAL does not act as an arbitration institution or administer arbitrations, but it has created a set of procedural rules: the UNCITRAL Arbitration Rules. These rules are widely used in ad hoc (or unadministered) arbitrations.

UNCITRAL model law The UNCITRAL rules should be distinguished from the UNCITRAL model law. This is a recommended pattern or template for lawmakers in national governments to consider adopting as part of their domestic legislation on arbitration. Many national arbitration laws are based on the UNCITRAL model law.

IBA The International Bar Association (IBA) provides rules on taking evidence in international commercial arbitrations that are commonly used. The IBA also provides guidelines on conflicts of interest in international arbitration which are used to deal with conflict issues relating to arbitral appointments. The IBA also produced guidelines governing party representation in international arbitration. These rules are widely available on the Internet.

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Enforcement

One advantage of arbitration over other forms of dispute resolution is the ease with which awards can be enforced in other states. The New York Convention is the primary tool for enforcement and has been ratified by (to date) 154 countries. The wide acceptance of the New York Convention across the world’s industrialised countries is recognised as one of the greatest achievements of public international law.

The New York Convention The New York Convention is the United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards, New York, 1958.

See www.uncitral.org for the full text.

The New York Convention deals with the recognition and enforcement of foreign arbitration awards. (‘Foreign’ for these purposes means an award made in a state other than that where the recognition and enforcement is sought.) It has been signed and ratified by most industrial states and provides the mechanism by which international arbitration awards are enforced around the world.

See www.uncitral.org for a list of signatories.

Thanks to the New York Convention, arbitration awards can be enforced where it would be impossible to enforce a similar judgment from a national court.

By signing up to the New York Convention, a contracting state agrees that it will recognise an agreement in writing between parties who have undertaken to submit to arbitration all or any differences which have arisen in respect of a defined legal relationship, whether contractual or not.

A contracting state also affirms that it will recognise arbitration awards as binding, and that it will enforce them in accordance with the procedural rules of the territory where the award is to be enforced. It also agrees that it will not impose substantially more onerous conditions or higher fees or charges on the recognition and enforcement of foreign awards than are imposed on the recognition or enforcement of domestic awards.

Refusal to enforce There are a limited number of circumstances in which a court in the relevant state may refuse to enforce an arbitration award.

• The agreement is not valid under the law to which the parties have subjected it, or the law of the country where the award was made.

• The party against whom the award was made was not given proper notice of the proceedings.

• The award deals with a difference which does not fall within the terms of the submission to arbitration.

• The arbitration procedure was not in accordance with the agreement, or was not in accordance with the laws of the country in which the arbitration took place.

• The award has not yet become binding on the parties, or it has been set aside or suspended by a competent authority of the country in which the award was made.

In addition, recognition and enforcement may be refused if the competent authority in the country of enforcement finds that the subject matter of the dispute is not capable of settlement under the arbitration laws of that country; or finds that the recognition or enforcement of the award is contrary to the public policy of that country.

Public policy is one of the most common grounds for enforcement of an arbitral award to be refused. Although most industrialised countries are signatories to the New York Convention, the way that it is applied varies from jurisdiction to jurisdiction.

Investment treaties Bilateral Bilateral investment treaties (BITs) are reciprocal agreements made between two nation states which give certain protections and benefits to investments made by citizens and companies of the other country. The rights and obligations arising under a BIT may be invoked by a qualifying investor from one of the two countries to which the BIT relates directly against the other nation state. Many BITs provide that the rights they give can be enforced under ICSID – the governments thereby provide advance consent to submit investment disputes to ICSID. This is not the case for all BITs; some go to ICC or other arbitration institutions.

Since the late 1980s BITs have come to be universally accepted instruments for the promotion and legal protection of foreign investments; this is reflected in the rapid growth in their number. There are now more than 3000 BITs.

Rights The rights a BIT will provide to an investor will vary depending on the terms of the relevant BIT. There is no standard form of BIT; the terms of each BIT are a matter of negotiation and agreement between the contracting States.

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Typically, however, a BIT might confer upon investors the rights outlined below.

Dispute resolution This is perhaps the most useful element of any BIT for investors. The provisions typically provide that any breach of the BIT will entitle the investor to commence arbitration proceedings against the relevant State. Investors are therefore able to enforce their claims directly against the host State in a neutral forum, thus avoiding the need for their own government to take action and avoiding having to claim against the host State in the courts of the host State.

Protection from expropriation/nationalisation Each State agrees that it will not expropriate or nationalise (or take any step having an equivalent effect) any asset or investment belonging to nationals from the other State. The common exception to this prohibition is where the expropriation or nationalisation takes place for a public purpose, is nondiscriminatory and is subject to prompt and adequate compensation.

Most Favoured Nation and national treatment Each State agrees that it will treat investments made by investors from the other State in a manner that is at least as favourable as the manner in which it treats investments made either by investors from other States or by its own citizens.

Repatriation of investment and earnings Each State permits the unrestricted transfer of investments and returns made by nationals of the other State. These transfers are to be effected without delay and in the currency in which the investment was originally made (or in any other convertible currency agreed by the investor).

Observe contractual obligations Each State agrees that it will observe any obligation that it has entered into with investors from the other State. This type of provision will therefore give treaty protection to any obligations undertaken in a contract between the investor and the State, such as a concession contract or licence for a project.

Definition of ‘investor’ Who amounts to an ‘investor’ and what amounts to an ‘investment’ will vary from BIT to BIT. This is because there is no universally accepted notion of an ‘investment’ to which BITs apply. A BIT will normally define what amounts to an investment.

Most BITs are quite broad in this respect, and so it is possible that various types of activity could amount to investments for BIT purposes, depending on the facts in each case and the wording of the BIT. This could well extend beyond perhaps the most obvious types of activity, such as the acquisition of

all or some of the shares in a company in the host State, the setting up of a new local subsidiary in the host State, or the construction or financing of a project in the host State which benefits the host State.

The question of who amounts to a protected investor is usually more difficult, especially in the context of a multinational organisation. This is because, in the context of a group of companies based in multiple jurisdictions, the immediate or ultimate investor may be the parent company or some other group entity. This has to be considered on a case by case basis.

Central register There is no central register indicating which States have entered into BITs with which others, or, of the BITs entered into, which are in force. Neither is there any obligation on States to notify any international body, for instance the United Nations, of its BITs. Ultimately, it is a matter of checking with both States whether they regard a BIT as having been entered into; and whether it has been brought into force by any necessary ratifying legislation.

The United Nations Conference on Trade and Development (UNCTAD) contains a search engine on its website which is stated to set out the current status of BITs between all countries. Although its accuracy cannot be confirmed, it represents a starting point for any enquiry.

Multilateral Similar protection is available under a growing number of multilateral investment treaties (MITs); more and more MITs which focus primarily on trade now contain provisions on investment.

Energy Charter Treaty One of the most effective MITs is the Energy Charter Treaty, which came into force in April 1998. Developed on the basis of the European Energy Charter principles, it ‘establishes a legal framework in order to promote long-term cooperation in the energy field’. To date, 46 countries have ratified the ECT and a further four countries are signatories to it. The ECT imposes a common set of obligations on contracting states, seeking to reduce the risks of investment and trade in the energy sector, so encouraging investment and stabilising energy supplies. The ECT can be invoked against the contracting States by individuals or companies of other contracting States and the resulting disputes are settled through one of the mechanisms provided for in the treaty, the choice of mechanism (generally) remaining with the investor.

For more information about the Energy Charter Treaty, including a copy of the treaty text and a list of Members and Observers, see www.encharter.org.

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Contact

If you would like further information please contact:

Brett C. GovettPartner, DallasNorton Rose Fulbright US LLPTel +1 214 855 [email protected] James RogersPartner, Hong KongNorton Rose Fulbright Hong KongTel +852 3405 [email protected]

Shea R. HaassSenior Associate, DallasNorton Rose Fulbright US LLPTel +1 214 855 [email protected]

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