TradeLawGuide is an essential tool when researching investment treaty (investor-state) arbitration issues.
WTO law has been referred to frequently in investor-state arbitrations in various contexts. Tribunals have explicitly found that WTO law is relevant to investor-state arbitration. For example, in Methanex Corporation v. United States of America, the Tribunal stated:
[T]he Tribunal may derive guidance from the way in which a similar phrase in the GATT has been interpreted in the past. Whilst such interpretations cannot be treated by this Tribunal as binding precedents, the Tribunal may remain open to persuasion based on legal reasoning developed in GATT and WTO jurisprudence, if relevant. (Methanex Corporation v. United States of America, Final Award of the Tribunal on Jurisdiction and Merits, 3 August 2005, para. 6 )
The difference in the scope of application of WTO law and investor-state treaties and their context must be taken into account when interpreting and applying WTO legal concepts in investor-state arbitrations. Some aspects of WTO law, such as the law elaborating upon the rules of treaty interpretation, are directly applicable to investor-state arbitration. Other aspects of WTO law may provide guidance on the interpretation and application of similar terms and concepts in investment treaties or simply offer a different perspective from which to identify and analyze issues. Reference to WTO law may be particularly useful in borderline cases where it is unclear whether the facts demonstrate a violation of a provision of an investment treaty.
Both WTO dispute settlement and investor-state arbitration are treaty-based, and, therefore, the rules of treaty interpretation in the Vienna Convention on the Law of Treaties (Vienna Convention) play an important role in determining the meaning of applicable provisions.
Section 3 of Part III of the Vienna Convention, which governs the interpretation of treaties and comprises Articles 31 (General Rule of Interpretation), 32 (Supplementary Means of Interpretation) and 33 (Interpretation of Treaties Authenticated in Two or More Languages), has been elaborated upon in a considerable body of WTO jurisprudence. For example, over 100 WTO cases have substantively cited Article 31.
In addition to interpreting and applying the provisions of Articles 31-33 of the Vienna Convention, WTO jurisprudence elaborates on numerous interpretative issues including:
Accidental or an inadvertent oversight in drafting
A contrario sensu
Antecedent/precursor agreements and provisions
Avoiding aberrant or perverse results
Common intention of the parties
Decisions and declarations
Device to simplify the drafting
Effective treaty interpretation (ut res magis valeat quam pereat), giving meaning and effect to all of the terms of a treaty
Examination of comparable treaties
Exceptions and limitations
Expressio unius est exclusio alterius
Holistic approach to treaty interpretation
In dubio mitius
Lex specialis derogat legi generali
Logic and structure of a provision
Municipal or domestic law (relevance to treaty interpretation)
Narrow or strict interpretation
Placement of provisions
Precedent and stare decisis
Presumption against conflict
Relevant date/time for interpretation or determination of ordinary meaning (e.g., date of conclusion of treaty versus another date)
Same words same meaning, different words different meaning
Silences and omissions
Similar words and phrases in other provisions of the covered agreements
Subject matter of provisions
Technological developments and other changes
Since the same rules of treaty interpretation apply in both the WTO and investment treaty contexts, the rich body of WTO jurisprudence elaborating upon the rules of treaty interpretation can be used in investor-state arbitration. A review of the WTO jurisprudence in the area of treaty interpretation shows a highly sophisticated and nuanced appreciation of the Vienna Convention. It compares favourably to the often pro forma references to the Vienna Convention in investor-state arbitral awards.
Similar to WTO agreements, investment treaties typically (but not always) contain national treatment provisions. However, even where there are apparent commonalities in drafting, depending on the specific investment treaty and WTO provision at issue, their language and context can differ considerably.
The national treatment provisions in investment treaties use varying language. The phrase "no less favourable" or "less favourable" is common to national treatment provisions. Qualifying language "like circumstances" and "like situations" is also widespread.
National treatment provisions are found in a number of WTO agreements. Most of these national treatment provisions include the phrase "no less favourable". The qualifying term "like" is used in most but not all of these examples. In one instance, the qualifier "where identical or similar conditions prevail" is used. With one exception, the terms "like circumstances" and "like situations", which are used in national treatment provisions in investment treaties, are not used in any of the WTO national treatment provisions.
Thus, there are commonalities in investment treaty and WTO law (e.g., less favourable treatment) and differences (e.g., like circumstances). The national treatment provisions in investment treaties and
WTO agreements must be interpreted within their context which includes their surrounding treaty text. Of critical importance is that many of these provisions have additional obligations, qualifications and exceptions which are not shown in the extracts and which may further distinguish them from other provisions which, on their face, may seem similar.
WTO law concerning national treatment has been referred to in numerous investor-state arbitrations. Issues addressed include:
- whether a "disproportionate advantage test" should be applied to determine the existence of "less favourable treatment" when applying the national treatment obligation;
- whether a measure imposed dissimilar taxation on directly competitive products and thereby violated the national treatment obligation;
- whether the national treatment obligation extends beyond formal parity (i.e., it extends to de facto discrimination);
- the burden of proof for raising the presumption of de facto discrimination, thereby establishing prima facie a case of national treatment violation;
- whether the qualifying language, "like circumstances" or "like situations", contained within national treatment provisions incorporates similar characteristics as "like products" under WTO law; and
- whether and to what extent basic concepts expressed in GATT Article XX, as interpreted and applied in the GATT/WTO system, are of assistance in interpreting national treatment provisions in investment treaties, even where the text of the treaty does not expressly refer to Article XX of the GATT 1994.
There are additional opportunities to obtain guidance from WTO law when analyzing national treatment provisions in investment treaties. For example, there is considerable jurisprudence on the meaning of "less favourable" treatment, including a long list of measures which have been examined in the context of such treatment. Another example is guidance on the meaning of the term "like". This term is used in WTO law in the context of "like circumstances", "like conditions", "like products", "like or directly competitive product", "like services and/or service suppliers", "like commodity", and "like merchandise". Terms similar to or that contrast "like" are also used in the WTO agreements such as "comparable situation", "identical or similar conditions", "similar goods", "substitutable product", "closely approximates", "goods of the same class or kind" and "identical product/goods".
Most-Favoured-Nation (MFN) Treatment
Most-favoured-nation (MFN) provisions are found in both investment treaties and WTO agreements. The general purpose of MFN provisions is to ensure that the parties to a particular treaty treat each other no less favourably than they treat other parties or third parties. Similar to national treatment provisions, there are some commonalities in the drafting of MFN provisions; however, differences in language, qualifications and context create a variance in the scope of such provisions.
Many treaties combine national and MFN treatment into the same provision, and thus, the phrase "no less favourable" or "less favourable" is common in MFN provisions as it is in national treatment provisions (discussed above). Qualifying language, such as "like circumstances" and "like situations", is found in some treaties and absent in others. In response to expansive interpretations of MFN provisions, qualifying language is more pronounced in recent investment treaties.
MFN provisions are found in a number of WTO agreements and instruments. Some of the MFN provisions include the phrases "no less favourable"; others provide that a party shall be accorded "any advantage, favour, privilege or immunity" granted to a third party. Qualifying "like" phrases are also found in some of these provisions.
As in the case of the national treatment obligation, there is considerable WTO jurisprudence on the meaning of "less favourable" treatment, including a long list of measures which have been examined in the context of such treatment. There is also a considerable body of WTO law that could provide guidance on the meaning of the term "like".
Performance requirement provisions are occasionally found in investment treaties and are addressed to a limited extent in the WTO agreements. The general purpose of such provisions is to limit the ability of parties to a treaty or agreement to impose certain types of performance requirements on other parties, investments, goods or services. Performance requirement provisions are now typically included in bilateral investment treaties and are often not apparent in the WTO agreements. There is considerable variation in the kinds of performance requirements that are disciplined by such provisions. There are, however, certain commonalities.
Although not expressly labeled as "performance requirements", several WTO provisions in the TRIMS Agreement, SCM Agreement, Procurement Agreement, and GATT 1994 impose disciplines on such requirements. The application of the provisions to performance requirements may not be readily apparent from the text of the provision but has been clarified in WTO jurisprudence. For example, there is useful WTO and GATT 1947 jurisprudence on the interpretation and application of Article III:4 of the GATT 1994 to conditions that an enterprise accepts in order to receive an "advantage".
Fair and Equitable Treatment
A possible interface between the fair and equitable treatment provision in investment treaties and WTO law lies in the argument that the phrase "in accordance with international law" and similar phrases could incorporate WTO rights and obligations and, therefore, a breach of a WTO obligation that results in harm to a foreign investor could amount to a denial of fair and equitable treatment.
Other Applications of WTO Law
WTO law has been used in several other ways in investor-state arbitrations:
- WTO law has been referred to by one arbitrator when interpreting the meaning of "legitimate expectations" in the context of fair and equitable treatment.
- The interpretation of the term "relating to" in WTO jurisprudence has been referenced when interpreting the meaning of the same phrase in NAFTA, Article 1101(1).
- WTO law has been referenced to support the view that different provisions should be treated as cumulative and complementary except in cases of conflict.
- WTO jurisprudence concerning the same or similar measures as those subject to an arbitral claim could also be relevant. The legitimacy of a measure has been questioned by a tribunal on the basis that it was the successor to a program that was found to discriminate in a WTO ruling. A WTO ruling that two products were "like" for the purpose of the GATT 1994, Article III was found by a Tribunal to be highly relevant to the determination of whether a foreign and domestic investor were in "like circumstances".
- Statements by a responding government to a WTO panel regarding the nature and character of a measure have been used against that government in an investor-state arbitration.
- Reference has been made to WTO law to provide guidance on the application of the doctrine of judicial economy.
- WTO law has been referred to in order to elaborate upon the scope of Article 15(1) of the UNCITRAL Rules and to determine whether a tribunal has the power to accept amicus curiae submissions from a third party.
- Reference has been made to WTO law to support the finding that a tribunal has the power under Article 44 of the ICSID Convention to admit amicus curiae submissions from suitable non-parties in appropriate cases.
- Tribunals have referred to WTO law to provide guidance on the rules concerning the burden of proof in international law.
- Tribunals have referred to WTO law in interpreting necessity or emergency clauses. For example, it was referenced to support the conclusion that "self-judging" emergency clauses must be expressly stated in the terms of the treaty. It was also referred to in support of a determination of the content and application of a necessity clause in the context of an economic and social crisis.
- WTO law has been referred to in support of the existence of a universal practice for measures concerning the reimbursement of value-added tax.
- Reference has been made to WTO law to elicit the importance of the general principal of good faith in international law.
The content of this paper is based, in part, on Utilizing WTO Law in InvestorState Dispute Settlement, by Greg Tereposky and Morgan Maguire, published in Arthur Rovine, Editor, Contemporary Issues in International Arbitration and Mediation, The Fordham Papers 2010, Martinus Nijhoff Publishers, 2011