It is widely acknowledged that the location, or seat, of arbitration is a key, if not vital, consideration. 2 However, while the choice of seat and its ramifications have received a lot of attention in the context of international commercial arbitration, there has been little, if any, consideration of how this option affects investment treaty arbitration. This may be due, in part, to the fact that the majority of investment treaty arbitrations (about 53%),3 have been filed under the ICSID Convention, with seat not being a problem in the context of such delocalised arbitrations. However, the choice of seat will be just as important for the remaining 47% of non-ICSID investment treaty arbitrations as it is for commercial arbitrations.
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Unlike arbitration clauses in commercial contracts, most investment treaties do not include an agreement on the seat of arbitration, as detailed in this chapter. The subject of seat selection is thus likely to emerge only after the investment arbitration has begun, and the method for selecting it will be substantially different from that of selecting a seat in the context of a commercial arbitration.
This chapter examines the legal foundation for selecting a seat in investment treaty arbitration. We examine the factors to consider when choosing an investment arbitration seat, focusing on the attitude of courts in the most prevalent investment arbitration seats to the review and setting aside of awards.
II. The Seat’s Importance in International Arbitration
The selection of the legal seat has significant legal and practical ramifications for commercial and investment treaty arbitrations. Most crucially, the choice of seat would expose the arbitration to the supervisory jurisdiction of the court of the seat, which would have the right to set aside the judgement. 4 They would also use additional authorities to aid arbitration (e.g., potentially consider challenges to arbitrators,5 make default arbitrator appointments, assist the tribunal with the taking of evidence or order provisional measures in support of arbitration).
The seat of arbitration is also important in terms of the execution of an arbitral ruling. The award shall be considered lawfully given at the seat. Although the 1958 New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) applies to all ‘arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought,’6 a number of contracting states have made reservations under Article 1(3) of the Convention, stating that they will only recognise and enforce foreign arbitral awards on the basis o (i.e., where the award was rendered in the territory of another contracting state). 7 As a result, a judgement made in a state that is not a signatory to the New York Convention may be more difficult to enforce globally. However, because the most frequent seats for investment treaty arbitration are state parties to the New York Convention, this is less likely to be a serious problem in the investment treaty setting.
Finally, the selection of the legal seat of arbitration will have practical and logistical repercussions. While the selection of a seat of arbitration does not always imply that the hearing location will be at the seat,8 this is more often than not the default position, especially when the parties are unable to agree on another place that is suitable for all hearing participants. Assuming the hearing takes place at the seat of arbitration, its choice can thus significantly affect the costs incurred by the parties, and potentially inconvenience one side more than the other (owing to, inter alia, the duration of travel, jet lag and availability of office premises that the parties can use during If a hearing must be held virtually, the law of the seat may determine whether this is possible. 9 Finally, the legislation of the jurisdiction’s seat may prohibit remote signature of the award and require it to be signed in person. 10 All these variables should be taken into account in the choosing of seat.
The basis for selecting a seat in investment treaty arbitration.
It is unusual for investment treaties to specify the location of arbitration under the treaty.
11 Many investment treaties require arbitration to take place in a state party to the 1958 New York Convention12, in order to maximise the enforceability of the ensuing judgement. Some bilateral investment treaties (BITs) also provide that arbitration cannot take place on the territory of a contractual party. 13 The now-defunct North American Free Trade Agreement (NAFTA) stated that the location of arbitration must be in one of the NAFTA nations.
The lack of focus on the seat of arbitration in investment treaties may be due to the fact that the vast majority of investment treaty arbitrations have been handled under the International Centre for Settlement of Investment Disputes (ICSID) Convention. Because ICSID arbitrations are not subject to the supervisory jurisdiction of state courts, they are considered ‘delocalised’ and lack a legal seat.
Nonetheless, in non-ICSID Convention investment treaty arbitration, such as arbitration under the ICSID Additional Facility Rules, other institutional rules (such as the rules of the Stockholm Chamber of Commerce (SCC), International Chamber of Commerce (ICC), or London Court of International Arbitration (LCIA), and ad hoc arbitration, the choice of seat will remain a significant issue (whether under the UNCITRAL Rules or not). Most arbitration rules include provisions dealing with seat selection in the case that the arbitration agreement does not specify a seat.
The ICSID Additional Facility Rules, in instance, establish that arbitration procedures may only be held in states that have signed the 1958 New York Convention. 16 Subject to this criterion, the tribunal will choose the location of the arbitration after consulting with the parties and the Secretariat. 17 Similarly, in the absence of agreement between the parties, the arbitral tribunal shall choose the venue of arbitration “with respect to the facts of the case.”
When the parties cannot agree on a seat, the institution determines it under SCC and ICC regulations. 19 The seat of the arbitration shall be London (United Kingdom) unless and until the Arbitral Tribunal orders, in view of the circumstances and after having given the parties a reasonable opportunity to make written comments to the Arbitral Tribunal, that another arbitral seat is more appropriate, according to the LCIA Rules.