Preliminary Issues

International arbitral tribunals are not permanent adjudicatory bodies; they are set up to resolve a specific dispute based on the parties’ consent. To perform this function, they must ascertain whether they have the power to decide which government can represent the state in the proceedings.

There is no other forum that can decide the issue of representation for the arbitral tribunals. Contrary to the position expressed by the Venezuelan special attorney general José Ignacio Hernández in his letter sent to the International Centre for Settlement of Investment Disputes’ (ICSID) secretary general on April 29, 2019,Footnote ⁴ ICSID is not vested with the power to decide the representation of parties in investment disputes. ICSID’s sole purpose is “to provide facilities for conciliation and arbitration of investment disputes between Contracting States and nationals of other Contracting States.”Footnote ⁵

Similarly, international arbitral tribunals not operating under the ICSID Rules are not bound by the position on the recognition of governments taken by the state where the arbitration is seated.

Institutional rules and national arbitration laws offer no direct guidance on this issue. However, several ICSID arbitral tribunals have found that they possess inherent powers to take measures to preserve the integrity of the arbitral proceedings. ^{Footnote 6} The existence of inherent powers can equally be deduced from institutional rules, which generally allow arbitral tribunals to decide all questions of procedure that might arise, and which are not governed by the applicable national arbitration law, the institutional rules or the parties’ agreement.

The representation of the parties before the tribunal is a procedural question, intrinsically linked to the protection of the parties’ procedural rights and thus to the integrity of the arbitral proceedings. The existence of competing governments both claiming the right to represent the state party is a circumstance that threatens both parties’ right to a fair trial as well as the arbitral tribunal’s mission to decide the dispute and render justice. Moreover, if the representation of a party in the proceedings remains unclear, it can lead to the annulment of the arbitral award on grounds of violation of the parties’ procedural rights.Footnote ⁷

Equally, arbitral tribunals do not have the power to designate no government to represent the state in the proceedings. States are abstract entities capable of acting only through their governments. However, the arbitral tribunal might consider suspending the proceedings, and thus postponing its decision, when the country is in a period of transition during or after a civil uprising, for instance. The suspension must be closely monitored and should not extend over a longer period.

In practice, annulment committees arrived at divergent conclusions when faced with the request to decide which of two competing governments can validly represent a state.

The Annulment Committee in the Valores v. Venezuela case reasoned that allowing competing governments to represent the state party in parallelFootnote ⁸ would defy the principle that each state can only have one government capable of representing it, and would also have negative consequences on the parties’ procedural rights.

The Annulment Committee in the ConocoPhillips v. Venezuela case took a different stance when it decided to allow two law firms, one appointed by the Guaidó and one by the Maduro government, to appear on behalf of Venezuela,Footnote ⁹ and confirmed its decision twice.Footnote ¹⁰ It is true that by the time the annulment proceedings commenced, two governments were representing Venezuela, as the tribunal in the underlying case declined to decide the issue during the rectification proceedings considering that submissions by both regimes were substantially identical.Footnote ¹¹ The fact that annulment proceedings have a narrow scope and both regimes moved to annul the award, as well as the claimant’s agreement to respond to submissions made by both governments, may have contributed to the Annulment Committee’s decision.

In addition, the Committee explained that it could not possibly decide which government is the legitimate government of Venezuela, since different branches of the state held diametrically opposed positions on this issue.Footnote ¹² The National Assembly of Venezuela passed the Statute that Governs the Transition to Democracy to Re-establish the Full Force and Effect of the Constitution of the Bolivarian Republic of Venezuela, according to which Nicolás Maduro Moros ceased to hold office as president of Venezuela on January 10, 2019.Footnote ¹³ However, on February 8, 2019, this law was declared null and void under Venezuelan law by the Constitutional Chamber of the Tribunal Supremo de Justicia.Footnote ¹⁴ In response to this decision, on April 28, 2020, the National Assembly decided that, because of the illegitimate composition of the Supreme Court, none of the judgments of the Constitutional Chamber of the Supreme Court since 23 December 2015 may be considered as valid within the terms of Article 335 of the Constitution.Footnote ¹⁵

This situation admittedly rendered the Annulment Committee’s task delicate, but it could not absolve the Annulment Committee of its duty to identify one government to represent the state in the arbitral proceedings.

The Annulment Committee in ConocoPhillips v. Venezuela also found that the possible divergences between the positions of the two governments did not mean that the committee would not hear and answer all their different arguments.Footnote ¹⁶ An annulment committee might get away with such an approach given the legal nature of the arguments and the fact that prayers for relief in annulment proceedings are always binary. However, the problem of divergent positions would be exacerbated in first instance arbitral proceedings, where the reliefs requested and the arguments, both legal and factual, sustaining them can be many or even contradictory, and the burden on claimants consequently heavier. Under these circumstances, violations of the parties’ procedural rights would be practically inevitable.

Identifying the Government Capable of Representing the State

After having established its power and duty to determine the government capable of representing the state in the proceedings, the arbitral tribunal shall make its decision based on international law. While municipal law will determine which organ can represent the state as an agent in the arbitration proceedings and with what authority; it cannot answer the question through which government the state can act in the arbitral proceedings or on the international plane.Footnote ¹⁷

The exact contours and the conditions of recognition of governments under international law remain uncertain due to the lack of consistency and uniformity of state practice in the field. On the one hand, some consider that the effectiveness of the entity claiming to be the government is the single most important, and generally undisputed, condition of recognition of governments under public international law.Footnote ¹⁸ Effectiveness means control of at least a larger part of the territory and the administration of the state with no real risk of losing this control in the future.Footnote ¹⁹ On the other hand, others submit that an autonomous constitutional claimant to governmental status should enjoy governmental status, and that an unconstitutional ostensible government may attain governmental status only in the absence of rival constitutional claim and if it exercises effective control over the territory and population of the state.Footnote ²⁰

Arbitral tribunals do not seem to adhere to either doctrinal position or to apply a uniform set of criteria.

Some tribunals apply a version of the criterion of effectiveness. The Tinoco Arbitration opposing Great Britain and Costa Rica did not strictly concern the representation of a state in arbitral proceedings but the validity of two contracts entered into by the Tinoco government of Costa Rica and British companies.Footnote ²¹ However, the arbitral tribunal stated that the Tinoco government was “sufficiently established to give reasonable assurance of its permanence, and of the acquiescence of those who constitute the state in its ability to maintain itself, and discharge its internal duties and its external obligations.”Footnote ²² In a similar vein, the Annulment Committee in the Valores v. Venezuela case refused to recognize the special attorney general appointed by Guaidó as the rightful representative of Venezuela as he failed to prove by way of concrete facts that Guaidó’s government controlled Venezuelan territory as a valid authority.Footnote ²³

It is indeed reasonable to consider, in the specific context of arbitral proceedings, that arbitral tribunals should primarily focus on the criterion of effectiveness when deciding on which government can represent the state. Considerations of fairness to the parties and the efficiency of the proceedings dictate that the government acting on behalf of the state should be able to take effective decisions and make commitments in the arbitration. Arbitral tribunals are not concerned with interstate relationships; their mission is to decide a dispute and give effect to the rights of the parties.

The application of the criterion of effectiveness is itself fraught with difficulties. It is not clear what degree of effectiveness is required, and whether there should be a presumption in favor of the previous government. Beyond that, evidentiary hurdles can be considerable when it comes to establishing which government exercises effective control over the territory, population, or state apparatus.

Arbitral tribunals rely on the parties to submit evidence in support of their position, and the burden of proof rests on the party alleging that one particular government should act on behalf of the state. However, at times of internal turmoil or transition periods, it is nearly impossible for private investors to obtain meaningful evidence, and evidence presented by the state party’s competing governments is unlikely to be more helpful. Moreover, the situations investment tribunals must assess are increasingly complex and ever-changing. Thus, despite publicly available information provided for instance by UN reports or NGOs present in these countries, it will almost always be difficult to establish with reasonable certainty the facts and whether these amount to effective control.

Not all arbitral tribunals seem to consider effectiveness to be the determining factor when deciding which competing government can act on behalf of the state. In the UN Commission on International Trade Law arbitration commenced by Telephony Saba Fon against Yemen, before the hearings took place in 2018, the arbitral tribunal was tasked with deciding which government should represent Yemen in the proceedings.Footnote ²⁴ The Hadi government claimed to represent Yemen, but it had only limited presence in the port city of Aden and with its leader in exile in Saudi Arabia since 2015.Footnote ²⁵ The other government was the Houthi government based in the capital city of Saana, controlling key central and Northern provinces of the country.Footnote ²⁶ In 2015, the UN Security Council expressed its support for the legitimacy of President Hadi.Footnote ²⁷ The arbitral tribunal, in an unpublished ruling, decided that the Hadi government, owing to its international recognition by other states and by the UN Security Council, should represent the state in the proceedings.Footnote ²⁸

Indeed, if a government set up by foreign intervention or the existence of which was declared a threat to the peace by the UN Security Council is allowed to represent the state in arbitration proceedings, there is a risk that the award will be annulled or will not be enforced for violation of international public policy.

The Consequences of Decisions by Arbitral Tribunals

The decisions by arbitral tribunals on the representation of the state will not have legal effects beyond the specific arbitral proceedings, except for the possibility that these decisions might be considered as persuasive authority by other courts and tribunals. It is undisputed that arbitral tribunals cannot determine the recognition of governments by states or the international community, nor the extent and nature of the international relations which will be established between the government and other states.

The more difficult question is what happens if the state, when the internal situation stabilizes and one single government is established, considers that the arbitral tribunal designated the wrong government to represent the state in the proceedings. It is possible to apply for the annulment or oppose the enforcement of an arbitral award based on the violation of the state’s fundamental procedural rights if it was not validly represented in the proceedings. It is submitted that the annulment and enforcement court (or annulment committee in ICSID arbitrations) should review the tribunal’s decision on representation fully, even if it proves to be a difficult and delicate task, given the uncertain contours of recognition of governments under customary international law.