Is the Legitimacy Crisis in the Eye of the Beholder?


Essay presented on the Topic: “How Do We Design for Legitimacy?” for The University of Miami School of Law and Young ICCA full-tuition scholarship competition.
March 2012

This essay examines the current state of affairs regarding Ecuador’s challenge to the legitimacy of the international investment arbitration system following the tension created by the Lago Agrio domestic litigation and the related international arbitration under the US-Ecuador BIT. The essay reflects on Ecuador’s precise submissions to the legitimacy debate while providing support for the literature in the defense of the current system of investor-state arbitration. After analyzing the detailed reasons for Ecuador’s current critique; and finding them to respond mostly to endogenous factors related to the country’s new mandates under the 2008 Constitution, this essay attempts to provide a design for legitimacy through treaty drafting and negotiation for the Country’s future participation in the international investment arbitration scenario.


Download PDF: SGJ_Legitimacy_Essay.pdf (253 kb)


Switzerland’s Department of Foreign Affairs endorsed Federal Supreme Court decision (BGE 136 III 379) not to lift Bank of International Settlement’s (BIS) immunity due to an attempt of NML Capital to freeze $300m (£186m) on Argentina’s bank accounts.

by: Dimitrij Euler, MLaw, PhD Candidate, University of Basle, Switzerland.

Obtaining an award is only half way through; the final step – i.e. to enforce the award or verdict – will be the cherry on the cake. Immunity of states and state entities challenges councils for claimant after investor-state arbitration. Successful claimants against Argentina are facing difficulties to enforce their debts adjudicated in awards and verdicts. In very creative attempts, lawyers enforce debts against boats, airport facilities and assets of international organisations. Numerous international organisations have their seat in Switzerland and enjoy extensive immunities. A limitation of the immunity would set an unfortunate precedent for Switzerland.

Continue reading Switzerland’s Department of Foreign Affairs endorsed Federal Supreme Court decision (BGE 136 III 379) not to lift Bank of International Settlement’s (BIS) immunity due to an attempt of NML Capital to freeze $300m (£186m) on Argentina’s bank accounts.

Making a profit on the back of Australian plain cigarette packaging law

Local business have found innovative ways to profit from the Australian plain cigarette packaging law at the hear of the investment treaty arbitrations being launched by certain tobacco companies.  The law requires manufacturers to incorporate large graphic images on three quarters of the front of Australian cigarette packs.  Examples have included photographs of gangrenous feet or a skeletal man dying of cancer. Local entrepreneurs have launched hugely successful cigarette packs boxes that intend to hide the displeasing images and offer an additional stylish accessory available in various colours and designs.  The new phenomenon raises questions as to the effectiveness of the law and adds an interesting dimension to the legal proceedings brought to date.

Recent changes to CIETAC arbitration rules may prove ineffective as top arbitrators continue to deny work due to low remuneration and high administrative charges of China’s largest arbitral institution

The increasingly international nature of commercial disputes in Asia, and an attempt to make China a major international dispute resolution centre, has been the major driving force behind the recent amendments to arbitration rules of China International Economic and Trade Arbitration Commission (CIETAC).  Under the new rules, CIETAC, unless otherwise agreed by the parties, may now designate the language for the arbitration (previously this was Mandarin by default).  Additionally, in the absence of an agreement, CIETAC can choose the most suitable arbitration seat, including seats outside China.

Notwithstanding these recent changes, CIETAC’s high administrative charges leave the arbitrators, in many cases, with as little as $2,000 for a simple case and $10,000 for a complex case, compared with tens or even hundreds of thousands of dollars that the arbitrators could receive in Hong Kong or Singapore.  This, in turn, forces top lawyers to either reject work or spend less time than that is usually necessary for a case.  This could result in awards of sub-standard quality.

The insufficient remuneration of CIETAC arbitrators deters reputable clients, who are looking for quality proceedings, from arbitrating their disputes under CIETAC rules.  This likely renders the recent changes obsolete and creates an international dispute resolution environment where the quality of awards is uneven.


Weather Investments lauch claim against Algerian Government

Weather Investments, owned by Egyptian telecoms magnate Naguib Sawiris, launched a $5 billion claim against Algerian Government for alleged harassment and interference with the country’s telecoms operator Orascom Telecom Algerie.  Weather Investments havs invested over $3 billion and created 4,000 jobs after winning a competitive bid to build Algeria’s telecommunications infrastructure in 2001.  The claim has been lodged with the International Centre for the Settlement of Investment Dispute (ICSID) and is one of the largest claims to be brought before the international arbitration tribunal so far.

Weather Investments claim that the Algerian Government has repeatedly breached its responsibilities under the “agreement between the Belgo-Luxembourg Economic Union and the People’s Democratic Republic of Algeria concerning the reciprocal encouragement and protection of investments” signed by both parties in 1991.  The breaches include imposition of unjustified tax, customs blockades – preventing the company from importing necessary network equipment, and imposition of unjustified fines.

The Algerian Government, represented by Emmanuel Gaillard – head of international arbitration group at Shearman & Sterling, stated that they intend to defend the case vigorously and that they cannot see any room for the treaty breach.

Weather Investments had issued a notice of dispute earlier this year with an intention to settle within six months, and after failure to reach such settlement, the claimant had filed the ICSID arbitration which was acknowledged last Friday.