Despite the critical importance of applicable law in international arbitration, the concept remains misunderstood and often ignored. In the field of international investment law, whether the arbitration proceedings arise from an investment treaty or from a contract, the cornerstone principle of party autonomy applies when it comes to the choice of applicable law, as provided, for example, in article 42 of the ICSID Convention. Even that principle, however, is subject to debate, for example with respect to whether initiating arbitration proceedings under an investment treaty amounts to an implicit choice of applicable law. In an attempt to clarify the notion of applicable law, this contribution first distinguishes the rules of decision, i.e. the law applicable to the specific claims submitted by an investor against a state, from incidentally applicable law, i.e. the other laws which may be relevant for the resolution of the dispute but that do not form a basis for the decision on the merits. In a second part, this contribution analyses several questions arising from the application of choice-of-law provisions in practice, with an emphasis on article 42 of the ICSID Convention. Finally, the consequences of erring in the application of the correct applicable law are examined.

The multi-faceted role of arbitrators is complex and protean. While there is consensus on the fact that the nature of the international arbitrator’s role entails according the arbitrator wide-ranging powers and that the arbitrator also undertakes a panoply of obligations, the scope of these powers and duties is not always well defined.Views about the nature and scope of these powers and duties might diverge depending on whether arbitrators are seen as service providers, justice purveyors, or both. Following a brief overview of this core question, the contribution proceeds to identify the sources of an arbitrator’s powers. Next, the most important duties of international arbitrators, including those pertaining to ethical obligations, the need to ensure due process, the necessity to apply the proper law, the duty to provide a reasoned award, and several others are explored. This contribution also highlights the most important rights of international arbitrators, such as the right to receive good faith cooperation from the parties, as well as the rights to remuneration and immunity, amongst others. Finally, we make some observations on ways in which the rights and duties entailed by the complex mandate of arbitrators can be reconciled in the event of conflict.

The issue of applicable law is something that all investment tribunals must inevitably address. Yet it is one of the most misunderstood and misaddressed (or ignored) topics in the field. The basics of applicable law are relatively straightforward – the law applicable to the dispute is that which arbitrators use to come to a decision about whether or not there has been a breach of that law. Thus, whether they are adjudicating a contractual or treaty-based dispute, investment arbitrators must first identify the law applicable to the dispute and then use it to assess the liability of the defending party or parties. These statements are deceptively simple, since the selection of applicable law, its application, and its intersection with other laws, whether international or domestic, continue to be contentious and difficult questions.

This chapter focuses on the shareholder and its increasingly important place in international economic law and, in particular, international investment law. The increasing importance of the place and role played by shareholders is a consequence of the increasing importance of multinational corporations on the international scene. The more pronounced place and role played by private actors on the international scene leads to the appearance of “new” real parties in interest. Because shareholders qualify as “investors,”,+ they are protected under international investment treaties and can have recourse to investor-state arbitration. As investors, the protection of shareholders in international investment law must be acknowledged in order to preserve the latter’s legitimacy. This chapter also identifies the different conflicts of interest which may exist among different categories of shareholders (minority and majority shareholders or foreign and domestic shareholders), as well as among shareholders and creditors. These conflicts of interest are important to understanding the dynamic at stake in shareholders’ claims for reflective loss and, in some instances, can justify shareholders’ claims for reflective loss in investment arbitration.

This chapter addresses shareholders’ claims for reflective loss in the context of international investment law. It starts by analyzing the treatment of shareholders and shares in international investment agreements and under the ICSID Convention. In this regard, it sets forth the extent to which shares are considered as covered investments and to which shareholders qualify as foreign investors in investment treaty practice, as well as whether shares qualify as investments under article 25 of the ICSID Convention as interpreted by investment tribunals. This chapter also studies the difference between shareholders’ claims for reflective loss and claims brought under article 25(2)(b) of the ICSID Convention, as well as derivative actions in investment arbitration. Finally, this chapter undertakes an exhaustive analysis of investment arbitration cases that have addressed shareholders’ claims for reflective loss and highlights the reasons relied upon by investment tribunals to generally accept such claims.

This chapter addresses the issue of the calculation of damages in shareholders’ claims for reflective loss. The particularities of such claims and of the nature of the investment (i.e., shares) raise intricate questions that must often be dealt with by investment tribunals. In this regard, this chapter first addresses the specificities associated with the calculation of damages in multiparty proceedings, such as in mass claims and consolidated proceedings. It also explains the methods that have been used by investment tribunals to assess the damages suffered by shareholders in investment arbitration and proposes more cooperation among courts and tribunals at the damage phase in order to reduce the risks of double recovery. This chapter also analyses an innovative means of answering risks of double recovery: the share purchase option.

This book has undertaken a detailed analysis of the practice of investment arbitration tribunals of allowing shareholders’ claims for reflective loss. In particular, this book aimed to go further than merely illustrating why shareholders’ claims for reflective loss are not necessarily as harmful as often depicted. Instead, the primary objective of this book was to demonstrate why allowing shareholders’ claims for reflective loss is critical to allow international investment law to fulfill its raison d’être: the promotion and protection of investments in order to achieve greater trade and investment liberalization.

The central actor around which this book revolves is the shareholder. For decades domestic corporate law regimes have regulated the rights and obligations attached to the status of shareholder. One nearly universal rule is the prohibition of shareholders’ claims for reflective loss. Indeed, domestic regimes generally bar shareholders’ claims for reflective loss by limiting their right to a remedy to instances where their direct rights have been infringed upon.

This chapter identifies the nature of shareholders’ claims for reflective loss, which entails addressing considerations of applicable law as well as the “clash of polices” undergirding them. This chapter starts by refuting the argument according to which the scope of shareholders’ rights in international investment law is defined by domestic law because the notion of “share” in international investment treaties must be understood by reference to municipal law. Contrary to this argument, this chapter explains that the notion of “share” as provided in international investment agreements must be interpreted in accordance with principles of interpretation of international law and must be understood in the specific context of international investment law that shares a different narrative than domestic law. This chapter further clarifies the nature of shareholders’ claims for reflective loss, which are direct claims brought by shareholders for their own and personal loss caused indirectly to their own investment (shares), and they do so by virtue of their own rights conferred upon them by the applicable investment agreement. This chapter then summarizes the main policy considerations that weigh against and in favor of shareholders’ claims for reflective loss in the specific context of international investment law.

International investment law is a small part of the international economic law normative universe and whose distinctive characteristics form its constitutive legitimacy. Robert M. Cover once wrote in his famous “Nomos and Narrative” that “[n]o set of legal institutions or prescriptions exists apart from the narratives that locate it and give it meaning.” Norms cannot be understood if taken out of their context, their narrative. International investment law norms are a good example: international investment law norms are created in a specific context characterized by highly particularized features that are, arguably, found nowhere else. Taking an investment norm outside of its context would strip away its constitutive legitimacy and render it inapplicable and obsolete in another context and another narrative. In other words, for one to fully grasp the meaning of an international investment norm or practice, one has to understand the context in which it is generated and applied.

This chapter analyses the regime for shareholders’ claims respectively in domestic regimes, under the customary international law of diplomatic protection and in human rights law. It begins with the analysis of domestic regimes and the very broad application of the no-reflective loss principle. This prohibition is justified by policy considerations such as the protection of creditors. In the context of diplomatic protection in the realm of international law, the International Court of Justice also opted for the prohibition of shareholders’ claims for reflective loss, as demonstrated by its landmark judgement in Barcelona Traction. This chapter explains, however, that the decisions of the ICJ addressing shareholders’ claims are not applicable by analogy to international investment law and arbitration as a consequence of the specific context in which they were generally adopted: the customary international law of diplomatic protection. Finally, this chapter provides a brief overview of the prohibition of shareholders’ claims for reflective loss which has generally been adopted by human rights courts and is applicable in human rights law.

This chapter addresses a second set of answers to parallel proceedings in the context of shareholders’ claims for reflective loss, the risks of double recovery, and the inconsistent decisions they lead to: a broader use of the mechanism of consolidation and mass claims in international investment arbitration. First, the mechanism of consolidation is analyzed in the context of investment arbitration by focusing on treaty practice and investment case law. This chapter explains why this mechanism can be useful to reduce instances of parallel proceedings and why it is particularly well suited in the context of such proceedings created by shareholders’ claims for reflective loss. The same analysis is undertaken with respect to the practice of mass claims in investment arbitration, and for similar reasons as with respect to consolidation, this chapter suggests a broader use of such multiparty proceedings in investment arbitration, especially with respect to shareholders’ claims for reflective loss.

This chapter analyses what is probably the biggest concern raised by shareholders’ claims for reflective loss: parallel proceedings and the risks they engender such as inconsistent decisions and double recovery. Parallel proceedings, which can lead to double recovery and inconsistent or contradictory decisions, can severely impact the legitimacy of international investment arbitration by creating uncertainty, inconsistency, and unfairness. This chapter scrutinizes the different types of parallel proceedings to which shareholders’ claims for reflective loss can lead. It also undertakes an in-depth analysis of the dangers created by parallel proceedings. Finally, this chapter focuses on a specific instance of parallel proceedings involving proceedings before domestic courts and international courts or tribunals. In particular, it is explained why traditional claim-limiting provisions found in international investment agreements are of limited practical use in the context of shareholders’ claims for reflective loss.