International Construction Law Review
THE AVAILABILITY OF TREATY ARBITRATION IN CONSTRUCTION
JOHN UFF
CBE, QC, Emeritus Professor, Kings College London
AND
ALEXANDER UFF
BA, LLM, Barrister, Attorney, New York Bar
Introduction
Parties to international construction contracts should now be aware of a possible alternative to resolving disputes through the traditional and familiar avenue of commercial arbitration, through recourse to arbitration under an investment treaty. Contractors who undertake projects for a foreign state or state agency, or suffer loss as a result of actions that are attributable to the state, might have the right to pursue a claim under an investment treaty1 between the state of the contractor and the host state. An investment treaty claim, if available, gives the opportunity to claim damages for breach of obligations owed by the state under the treaty, as opposed to a claim for breach of obligations under a commercial contract. The breach must be in relation to a duty owed under public international law, to which investment treaties are subject. In recent years a number of investment treaty claims have been brought arising out of construction projects and it can now be said that the possibility of bringing an investment treaty claim should be considered as an alternative, or possibly in addition, to a conventional commercial arbitration claim.
An initial step in pursuing an investment treaty claim is to establish that events which have taken place in the context of a commercial contract can give rise to breach of treaty rights. This issue was considered by tribunals in two well-publicised cases arising out of services contracts brought in 2001 and 2002: SGS v. Pakistan
2 and SGS v. Philippines,3 each involving contractual debts. Decisions on jurisdiction in these two cases were rendered in 2003 and 2004, respectively. Neither case established a clear and immediate right to pursue claims essentially deriving from a contract through the treaty route. Further light was cast on the relationship between claims based on contract and those based on treaty in the long-running case known as
1 The substantial majority of investment treaties are Bilateral Investment Treaties or “BITs”, however, there are also several important multilateral investment treaties.
2 ICSID Case No ARB/01/13, 8 ICSID Rep 383.
3 ICSID Case No ARB/02/6, 8 ICSID Rep 515.
Pt 4] Availability of Treaty Arbitration in Construction
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