CYIL 2014

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AND NEVER THE TWAIN SHALL MEET: PARALLEL ARBITRAL AND COURT PROCEEDINGS…
The exuberant rise of both international investment and trade and commerce, and
the fact that “state immunity tends to have a distorting effect on litigation between
States and non-State parties before domestic courts”,1 brought an increase in the
number of investors opting for investment arbitration as a guarantee for a speedy, just
and effective end to a conflict which has arisen between an investor and a host State.
However, one of the drawbacks when talking about investment arbitration is the fact
that an effective and definite resolution may be undermined when the dispute on the
alleged breach attributable to a State entity, is litigated in front of multiple arbitral
tribunals, or/and subjected to court proceedings held between investors having the
same corporate identity and the State.
Parallel proceedings resulting in conflicting awards and decisions are not a novel
challenge to the arbitration world. The risk of parallel litigation has exponentially
risen with the number of disputes which have been submitted to the adjudication
of arbitral tribunals. There are several explanations for such tendencies. One of the
common scenarios is that while an investor seeks to invest in a State, the government
in question is aiming to stimulate growth of the business environment and the
economy. Therefore it offers a variety of options to investors based on international
investment law instruments such as bilateral investment treaties (“BITs”).2 These
treaties furnish particular protection and investment standards which have to be seen
as specific obligations taken up by the State. In addition, if the host country breaches
any of the treaty obligations, the investor has a right to action, through arbitration,
against the offending State.3 This happens because the State can go even a step further
in its investment enhancing approach by concluding a contract with an investor
1 Professor Lew QC rightly points out the national court’s involvement in international arbitration
is a fact of life, as prevalent as the weather; given the fact that national courts become involved in
arbitration for a whole host of reasons, they do so primarily because national laws are permissive and
parties invite or encourage them to do so. Prof. J. D. M. Lew QC, “Does National Court Involvement
Undermine the International Arbitration Process?”, 24 Am. U. Int’l L. Rev. (2009), p. 490 (The article
can be found also in 23(2) ICSID Rev. 260; 2008, published 2010). Trepidation of investors that the
state courts could be biased in the course of the proceedings is one of the primary impetuses for the
expansion of international arbitration. On the international level this is largely because of the mistrust
that each side feels toward the municipal law and judges of the other side, as well as to avoid giving the
other side a home court advantage in the dispute resolution process. C.F. Dugan, D. Wallance, N.D.
Rubins, B. Sabahi, Investor-State Arbitration, (Oxford University Press, 2008), p. 101.
2 Although there has been a slight decline in the number of concluded BITs, they maintain their position
as one of the most popular instruments of investment protection under international law. According to
Sornarajah, the latest count brings the figure close to 2,700 BITs concluded throughout the entire world.
Additionally,therearealsoaconsiderablenumberoffreetradeagreementswhichcontaininvestmentchapters
and which could increase this number. See: M. Sornarajah, The International Law on Foreign Investment,
(Cambridge University Press, 3rd ed., 2010), p. 172. A catalogue of the concluded BITs for 180 economies
can be found on the webpage of the United Nations Conference on Trade and Development, available at :
Country-specific-Lists-of-BITs.aspx; accessed: 4 April 2014.
3 B. M. Cremades, I. Madalena, “Parallel Proceedings in International Arbitration”, p. 19, originally available
at: