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Boost your understanding of international arbitration instruments

International arbitration instruments provide a binding procedure for the resolution of disputes between host governments and investors. Most investment agreements stipulate international arbitration as the dispute resolution method of choice. In my view, international arbitration should only be resorted to when push comes to shove. However, the mere availability of arbitration as an option reassures investors and indicates a government’s readiness to adhere to the rule of law and to honour its investment treaty obligations. This engenders confidence in investors that their property rights are secure. It fosters an investment environment that is perceived as stable and reliable.


Nearer home, the Zimbabwe Investment and Development Agency Act [Chapter 14:37] (Zida) has gone a long way in clarifying the government’s attitude towards international arbitration. Section 38 of Zida recognises the submission of investment disputes to international arbitration as well as other dispute settlement mechanisms provided for in any treaty or agreements on the promotion and protection of investments between Zimbabwe and the country from which the foreign investor originates.

There are several international conventions and treaties which provide for the recognition and enforcement of arbitral awards and the protection of investments. These instruments are explored in detail below.

  • The New York Convention

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, known as the New York Convention has been described as the single most important pillar on which the edifice of international arbitration rests. It allows arbitral awards to be enforced in most countries around the world. In total, 166 states are party to this agreement thus making arbitral awards almost universally recognisable and enforceable. To realise the benefits of this convention, the seat of the arbitration should be in a country that is a signatory to the Convention and the counter-party (or its assets) against whom an agreement or award is to be enforced should be from a country that is a party to the New York Convention.

  •  Regional conventions

There are numerous regional conventions which seek to confer benefits similar to those emanating from the New York Convention. A good example is the Inter-American Convention on International Commercial Arbitration (Panama Convention) that came into force in 1975. There is also the Sadc Protocol on Finance and Investment (FIP) which requires Member States to harmonise their investment policies, laws and practices with a view to creating a Sadc investment zone. Other noteworthy regional conventions include the Arab Convention on Commercial Arbitration, the European Convention and the Moscow Convention.

  • The Washington or ICSID Convention

The ICSID Convention was concluded in 1965 under the sponsorship of the World Bank and came into force in 1966. It provides a dispute resolution forum for investment disputes between foreign investors and host states in the form of conciliation and arbitration. The ICSID Convention allows a host state which is a Contracting Party to the Convention and a national of another Contracting Party to settle their investment disputes through arbitration.

It is important to note that domestic investors are excluded and, therefore, cannot insist on taking their disputes with host governments to ICSID. The Convention further makes provision for an effective regime for the enforcement of arbitral awards issued under the Convention. Contracting parties are obligated to enforce arbitral awards in their territory in the same manner that they would enforce judgments of their own courts.

There are currently 157 states that have signed the treaty, of which 147 states have ratified it. Contracting States improve their investment climate through ratifying the ICSID Convention and investors gain direct access to an effective forum that provides its own enforcement mechanism.

  •  Energy Charter Treaty

The Energy Charter Treaty (ECT) came into force in April 1998. It focuses on energy investments and provides investment promotion and protection, including prohibitions on expropriation, and dispute resolution mechanisms for such investments.

The ECT provides dispute resolution mechanisms for disputes between parties to the Treaty. These disputes include transit, trade, competition and environmental disputes. It also caters for disputes between investors and host governments. An investor can elect to take its dispute to arbitration in any of the following fora:

(i) ICSID if the Contracting Party and the Investor’s state are both parties to the Washington Convention;

(ii) ICSID under the Additional Facility Rules if one state is a party to the Washington


(iii) Ad hoc arbitration under the UNCITRAL Rules; and

(iv) Arbitration Institute of the Stockholm Chamber of Commerce (SCC) under its


Bilateral Investment Treaties (BITs)

BITs are treaties concluded by two countries with a view to encouraging and protecting investments between the two countries. The first BIT was concluded between Germany and Pakistan in 1959. Presently the number of BITs exceeds 2 500. A BIT usually deals with the following:

Prohibition of direct or indirect expropriation;

Fair and equitable treatment of investments;

Most favoured nation status.

A BIT may contain a “fork in the road” provision for initiating disputes. This means that the investor must choose either litigation in the local courts, arbitration under the contract, or arbitration of its treaty claims through ICSID or its additional facilities. Choosing a particular path will prevent following another path later on; for instance, choosing to arbitrate under the contract will constitute an election not to proceed under the BIT at ICSID.

Multilateral Trade Agreements

States that are a party to these agreements may give their consent to ICSID arbitration. These treaties also contain offers by party States to consent to ICSID jurisdiction, which offers may be taken up by investors of any other party States to the treaty. Examples are the North American Free Trade Agreement and the Energy Charter Treaty.


A country’s ability to attract FDI often depends on whether or not the economic and legal situation of the recipient country enables the investment to be profitable. Investment arbitration goes a long way in engendering in investors a feeling that their investment is safe.

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