CHAPTER 23

INTERNATIONAL INVESTMENT ARBITRATION

INTRODUCTION

The definition of "investment" holds pivotal significance within the framework of

International Centre for Settlement of Investment Disputes (ICSID) arbitrations The tribunal's
jurisdiction is derived from the ICSID Convention, particularly Article 25, which stipulates
that disputes that qualify for ICSID proceedings must originate from investments.
Unfortunately, there is still disagreement in the field of international law regarding the
Convention's definition of "investment.

INVESTMENT ARBITRATION

 Investment arbitration is like a special way for foreign investors to resolve conflicts
with the countries they invest in. It's also known as Investor-State Dispute Settlement
(ISDS).
 The idea is that if a problem comes up, the foreign investor can take the matter to
independent arbitrators instead of relying on the legal system of the country they
invested in.
 This is seen as a guarantee for fairness because it ensures the arbitrators are unbiased
and qualified.
 The approval of the host State is the main requirement for investment arbitration,
which is frequently made possible by International Investment Agreements (IIAs)
such as Free Trade Agreements (FTAs), Bilateral Investment Treaties (BITs), and
multilateral agreements like the Energy Charter Treaty (ECT). Although this consent
is frequently stated in IIAs, it can also be found in agreements made directly between
a State and a foreign investor or in the domestic laws of the host State, such as those
that control investment or mining.

ARBITRAL INSTITUTIONS

 Permanent court of Arbitration

 International Court of Arbitration
 International Centre for Settlement of Investment Disputes (ICSID)

APPLICABLE LAW
A key tenet of investment arbitration is respect for party autonomy, which highlights the
significance of the disputing parties' selection of the relevant law. Party-selected laws have
the upper hand when it comes to resolving disputes in international arbitration cases, as
demonstrated by the rules of ICSID, UNCITRAL, ICC, and other organisations. Investment
protection treaties often explicitly specify applicable laws, and in their absence, parties can
reach agreements. Tribunals have discretion to identify applicable laws when not designated
by the treaty or parties. The treaty itself serves as the primary source of law in investment
disputes, with additional support from customary law, general international law, and local
law.

PRE-CONDITIONS

Preconditions for investment arbitration often include:

 Exhaustion of local remedies: Foreign investors must first pursue all available legal
avenues within the host state before resorting to international arbitration, with some
exceptions in certain Bilateral Investment Treaties (BITs).
 Cooling-off period: Most BITs mandate a period, typically six months, during which
parties are encouraged to resolve disputes amicably before initiating arbitration
proceedings. The India Model BIT 2016, for instance, stipulates a 90-day notice
period before arbitration can commence.
 Arbitration notice: If disputes remain unresolved after the cooling-off period,
arbitration procedures can begin with the issuance of a "notice of arbitration,"
marking the official commencement of formal proceedings under UNCITRAL and
PCA Rules. The India Model BIT 2016 specifies the required content of such notices.

TIME PERIOD

 Slightly more than 3 years

 On an average 39 months

PART 2- ENFORCEMENT OF FOREIGN ARBITRAL AWARDS

Articles 53 to 55 of the ICSID Convention set forth the guidelines for the enforcement of
foreign investment awards, which host states are required to abide by. The ICSID
Convention states that "each Contracting State shall recognise an award rendered
pursuant to this Convention as binding and enforce the pecuniary obligations imposed by
that award within its territories as if it were a final judgement of a court in that State."
 Enforcement of the award is carried out in compliance with the 1958 Convention on the
Recognition and Enforcement of Foreign Arbitral Awards if the host State is not a party to
the ICSID Convention.

"Foreign award" is defined as an arbitral award on disputes between parties arising out of
legal connections, whether contractual or not, that are regarded as commercial under Indian
law under Section 44 of the Arbitration and Conciliation Act, 1996. Sections 44 to 52 of the
Arbitration and Conciliation (Amendment) Act, 2015 contains provision regarding foreign
awards passed under the New York Convention. Section 44, Arbitration & Conciliation Act,
1996 Conciliation (Amendment) Act, 2015 contains provisions relating to foreign awards
passed under the Geneva Convention.

KEY CRITERIA

For an award to be recognized as foreign under the Act, it must meet two key criteria.

 Firstly, the award must address disputes stemming from a legal relationship, be it
contractual or otherwise, and recognized as commercial according to Indian laws.
 Secondly, the country where the award is issued must be one that the Indian
Government has officially notified as a country covered by either the New York
Convention or the Geneva Convention

In accordance with Section 47 of the Act, the party applying for the enforcement of a foreign
award must, at the time of application, submit the following to the court:

 The original award or an authenticated copy thereof.

 The original arbitration agreement or a certified copy of the agreement.
 Necessary evidence establishing the foreign award's status.
 In instances where the award or agreement is in a foreign language, a certified
translated copy in English is required.

Under Section 48(1) of the Arbitration and Conciliation Act, 1996, Indian courts have the
power to refuse the enforcement of a foreign award upon the presentation of substantial
evidence on any of the grounds mentioned. These Section 48 provisions serve as options for
defence for the party contesting the enforcement application. Foreign award enforcement may
be resisted by the party against whom the award is invoked on a number of grounds. These
justifications consist of:
 The arbitration agreement's invalidity under the applicable law or the parties'
incapacity under that law.
 either failing to give the party against whom the award is invoked enough notice or
being unable to adequately defend their position.
 non-adherence to the arbitral procedure, the agreed-upon composition of the arbitral
authority, or the applicable laws of the nation in which the arbitration was held.
 The award addressing a dispute outside the terms of the arbitration submission.
 The award not being binding yet, or having been set aside or suspended by a
competent authority in the country of the award.

The subject matter of the dispute not being capable of settlement through arbitration
under Indian law