Study On The Interpretation Of The Fork In The Road Clause

Since World War Two, the international investment shot up, having positive and negative effect on the world. On the one hand, it promotes the recovery and growth of the host state’s domestic economy; on the other hand, due to the complexity of investment environment and high risk overseas, investors can not be guaranteed economic interests. In order to promote and protect foreign investment, many countries has signed the friendship commerce navigation treaty with other countries. With the practice of the international investment, many countries begin to sign the international investment treaties gradually to meet the requirements of different interests. By 2014, based on 27 international investment treaties increasing in the world, the number of international investment treaties signed has reached 3268, including more than 2,000 bilateral investment treaties(BITs).In the process of overseas investment, based on the different interests of the contracting parties, it’s inevitable that dispute arises between the host state and the foreign investor. Traditional dispute resolution is often prescribed to exhaust local remedies as a precondition. But in recent years, international tribunals led by ICSID play an important role in dispute settlement. This means that it is no longer necessary for foreign investors to exhaust local remedies. But in order to save cost of litigation resources, eliminate the risk of parallel proceedings, many bilateral investment treaties provide for fork in the road clause. When the investor makes a choice, it’s final. So the clause can limit the right of the choice that the foreign investor has made. Now, there are a growing number of bilateral investment treaties signed includes fork in the road clause, which gradually becomes an important norms of international investment dispute settlement. But in the practice of the international investment arbitration, there is a problem about the application of the clause. Different arbitration tribunals interpret the fork in the road clause differently in different cases. Analyzing of the case awarded by the arbitration tribunals in recent years, the tribunals often adopt the methods of the extensive interpretation, the restrictive interpretation and the pragmatic interpretation to interpret the clause. In general, the arbitration tribunals adopt the strict restrictive interpretative approaches to interpret the clause, as long as the parties and the cause of case of the dispute submitted to the host country and the international arbitration tribunal are different, the arbitration tribunals award the disputes are not sameness, so there are not having a case applying to the fork in the road clause. In the circumstance of the extensive interpretative approaches, the tribunals expand the interpretation of the broad words in the BITs, the case of Vivendi v. Argentina is the best proof. But it is important to note that the case of Vivendi v. Argentina triggers the fork in the road clause theoretically and the tribunal interpret the clause expansively only for favor of the attitude of the foreign investor. Not only the extensive interpretation but also the restrictive interpretation, they all reflect the tendency to interpret the clause, that is the tribunals tend to protect the interests of foreign investors and ignore the host country’s sovereignty interests. It results in lots of dissatisfaction with the international arbitration tribunals and they is going through the challenge of the legitimacy crisis. Until 2009, in the case of Pantechniki S.A. Conterctors & Engineers(Greece) v.The Republic Of Albania, the tribunal applies to the method of the pragmatic interpretation, it’s first time triggering the fork in the road clause. Therefore, it contributes to a heated discussion all over the world. At the same time, many host countries regain the confidence in the international arbitration tribunals. However, how to interpret the fork in the road clause is correct and reasonable, there is no unified standard.With the strategies of the “going out” and “bring in” are strengthen, our country has been transformed from the traditional host country to the host country and the capital output country equal. In the situation of the double identity, we should establish and sign the bilateral investment treaties consistent with this in China. So when signing the bilateral investment treaties, we should distinguish different countries and sign the different bilateral investment treaties. In these treaties, the fork in the road clause may be contained and may not be contained. Moreover, we should also be aware that although the international arbitration tribunals made the different interpretations of the clause, some is because words of the clause itself is not rigorous and careful. As a result, we should improve and perfect the words and the meaning of the clause to reduce the rate of misunderstanding of the clause. In addition, the development of the investment treaties in China indicates that we are loosing the degree of the acceptance of jurisdiction over the international arbitration, it will bring much of challenges to us. Anyway, we should not give up the four safeguards, otherwise it will be harmful.Apart from the introduction and epilogue, the thesis consists of three chapters.Chapter one is about the macro introduction of fork in the road clause. First is the concept of the clause and the cause of it in bilateral investment treaties. In traditional international investment, when the dispute arose, the host state held that the foreign investor should exhaust the local remedies, while the foreign investor insisted on submission to international arbitration, because the foreign investor feared the host state’s domestic court discriminating in favor of the host state, which damaged the interests of them. So later, the fork in the road clause is triggered by compromise from both side. Under such a clause, the party initiating the proceedings would have to make a choice between pursuing a claim through the host states’ s domestic court and through international arbitration such as the ICSID. Once the investor chooses to settle the dispute in the host stat’s court and submits the dispute to the court, it loses the option to resort to arbitration. Second, typical description of the clause in investment treaties are presented. Before deciding whether the fork in the road clause applies to bar access to international arbitration, the tribunal must determine what conditions should be met.Chapter two is about the international arbitration proceedings of the fork in the road clause and the analysis. First, introducing the general methods of the interpretation made by international arbitration tribunals. Second, classifying the methods of the interpretation for the fork in the road clause and introducing typical cases which are awarded by international arbitration tribunals. They are Tza Yap Shum v. Republic of Peru, Vivendi v. Argentina, Hulley enterprises limited( CYPRUS)v.The Russian Federation, Azurix v.Argentina, Pantechniki S.A. Conterctors & Engineers(Greece) v.The Republic Of Albania and Toto Costruzioni Generali S.P.A. v. Republic Of Lebanon. Then, in view of different awards from the cases, how did the international tribunal interpret the clause ? Last, evaluating the interpretation of the fork in the road clause and analyzing whether the interpretation by the arbitration tribunal is reasonable, discussing the academic debate towards whether the clause should continue existing because of its impracticability and make a point that which interpretative appoach is the writer favor of. What are the possible reasons of strict interpreting the fork in the road clause? This is the writer need to explore.Chapter three is about the current situations of fork in the road clause signed in china’s BITs. There are some advantages and disadvantage. We should learn from each other in the light of the actual circumstances. Some suggestions about the revision of China’s BITs are also offered and what China can do to improve the application of the fork in the road clause is suggested too. For example, special attention should be directed to the wording of the contract. The interpretation of fork in the road clause should be stipulated in detail. Pay close attention to arbitration tribunal’s awarding under ICSID.