A Study on Clause of ‘Effective Means’ in International Investment Agreement

Abstract

The International Investment Agreement (IIA) provides to investment and investor protection of contracting party’s obligations. It stipulates that if an investment and investor are damaged in violation of IIA’s protection clause, they will be subject to Investor-State Dispute Settlement (ISDS). Among the IIA's contracting party’s obligations, it does not provide for direct regulation of the conduct in judicial court of host countries. Regulations on the conduct of judicial courts are generally included in the category of ‘denial of justice’ in customary international law under the IIA’s ‘Minimum Standard of Treatment’ clause. It is established in the ISDS precedent. Recently, this is included in IIA's illegal indirect expropriation. The ISDS arbitral tribunal formed the legal principle of judicial expropriation. Judicial expropriation deals with deprivation of investment asset, indirect expropriation, and judicial procedures and substantive judgments. Regarding the conducts of the judicial authorities, it is regulated by the US model BIT and the Energy Charter Treaty (ECT) of the effective means clause of Article 12(10). The effective means clause provision be limited to the IIA. It was introduced as a US Model BIT policy in the 1980’s, and is regulated in a number of US BIT’s concluded by this model BIT. And, like the US model BIT, ECT also includes provisions on the receiving country's effective means clause for investor’s claims and rights enforcement. First, this paper examines the background of the introduction of the effective means clause in the IIA. Examining the legislative background can look into the criteria for interpreting provisions. Second, the specific types of violations of the provisions of effective means in ISDS arbitration cases were reviewed. Third, the relationship between the effective means clause of the IIA and judicial refusal was reviewed. In the case of the ISDS arbitration award, the violation of the ‘denial justice’ of the minimum standard treatment clause and the effective means clause was raised at the same time. The effective means clause is more flexible in interpretation and application than a denial justice. The effective means clause does not require the ‘Exhaustion of Local Remedies’ Rule. In the ISDS case of White vs. India, there is a case in which the MFN clause was invoked and an effective means clause was application. The effective means clause can be a useful guide for interpreting the access to justice clause in the Korea-Japan BIT and the Korea-China-Japan BIT.