Brexit has drawn attention to the need or potential need for the United Kingdom to negotiate and put in place bilateral investment treaties with other countries with which it wishes to trade. Can this be a straightforward process? What mechanisms are available and how best can they be used? What will happen if an international dispute arises?

Let me consider one particular treaty, the “Agreement between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Antigua and Barbuda for the Promotion and Protection of Investments” (Click here to see treaty in full) which was enacted in 1987 and therefore assumed to have been made when negotiating skills were at their best illustrates a number of conflicts of interpretation.

Article 8 of this agreement deals with the settlement of disputes between an investor and “a host state”. Immediately it is obvious that this treaty is a treaty which has not been prepared especially for Antigua as the heading should refer to the state with whom the treaty is made and not  “a host state”.

Paragraph 1 then refers to disputes between “a national or company of one Contracting Party and the other Contracting Party concerning an obligation of the other contracting party” under this agreement.

Therefore it is clear that paragraph 1 only refers to disputes where there is a “breach” of an obligation.

Paragraph 2 then says –

“Where this dispute is referred to international arbitration …”.

It seems to me that this is  a ridiculous comment. The two parties are not envisaged to be in the same country. Any dispute will naturally be international.  However the wording implies there is an option but in practice there is not.

A successive paragraph sets out three possible options for resolving the international dispute.

The first is a reference to the International Centre for the Settlement of Disputes;

The second is the reference to the Court of Arbitration or International Chamber of Commerce;

The third is an option to refer the dispute to an international arbitrator (what is this? No explanation is provided) or an ad hoc arbitration tribunal appointed by a special agreement or established under the arbitration rules of  the UN trade body, UNCITRAL.

The difficulty of choice as to the mechanism for solving or arbitrating the dispute is obvious. There is no clear direction to the parties. Choices such as these require consensus. Whenever a dispute has arisen consensus will not occur.

This is not the only area of confusion. The last paragraph of Article 8 directs that where the parties cannot agree as to which of the above options they will adopt then the dispute will be referred to arbitration under the UNCITRAL rules.

This last option would be excellent except there is no administration carried out by UNCITRAL. The parties are left to their own devices.

Confusion continues when Article 9 is taken into account. Article 9 refers to disputes between the contracting parties. However, the contracting parties are investor and the host state as referred to in Article 8.

Immediately then a question arises as to what Article 9 is referring to. Paragraph 1 states:
“Disputes between the contracting parties concerning the interpretation or application of this agreement should, if possible, be settled through the diplomatic channel.”

Immediately the question arises as to what is an “ obligation” and how that differs from an “interpretation or application”. Secondly there is no other definition of “diplomatic channel.”

The problems continue……………..

The second paragraph states:
“If a dispute between the contracting parties cannot thus be settled it shall upon the request of either contracting party be submitted to an arbitral tribunal.”

No reference is made to the various options outlined in Article 8. In fact a different procedure is described.

In summary here is what should be an eminently simple treaty encased in with complexity. It appears to have been produced as a result of arrogance and ignorance.

What happens now? The whole process of reviewing a sequence of unfathomable options and possibly expending huge amounts of time and money along the way is not an attractive option. Different agreements or treaties that cover the same ground might then have different dispute resolution mechanisms, something that results in even more confusion and uncertainty. Additionally, this does not solve the jurisdictional problems that may have to be addressed to those who are subject to existing treaties.

The answer may well be to draft treaties which are simple and consistent and which can be applied in all parts of the world.