Maffezini v Kingdom of Spain ARB/97/7 Jurisdiction

Dispute arise from injuries suffered by EAMSA Spanish entity owned by the claimant Claimant invokes 1991 Argentine-Spain Bilateral Investment Treaty BIT, and by way of most favoured nation MFN clause the Chile-Spain BIT IV A-S BIT ‘in all matters… treatment shall nor be less favourable than that extended by each party to the investment made by investors of 3rd country’ 10(2) Ch-S BIT ‘investor can opt for arbitration after six-month period allowed for negotiations has expired’ Spain objected the Jurisdiction of the ICSID tribunal: 1. Claimant failed to comply with the requirement of art X ‘settlement of disputes’ A-S BIT ‘disputes shall be settle amicably, failure within 6 months then national tribunal. Arbitration only takes place if 18 months after proceedings in court + agreement of parties; since local remedies were not exhausted, and dispute was not submitted to Spanish Court. 2., 3. not analysed here. Resolution Spain argued that A-S BIT wanted the courts to have the opportunity to resolve the case within 18 months Maffezini replied that it was not the intention because only at the end of the period the party would still be free to take the case to arbitration, regardless of the outcome of court proceedings If the only argument has been the previous one, the tribunal would have to conclude that because of the failure to present the case to the Spanish courts, the tribunal lacked competence to hear the case

However because of MFN, IV A-S BIT; 10 (2) Ch-S BIT the claimant alleged that Chilean investors in Spain are treated more favourably than Argentine ones, since they can refer to arbitration without prior referral to domestic courts. Spain argued that ‘matters’ can only be understood to refer to substantive matters and not procedural questions ICSID 26 reverses the traditional rule of exhaustion of local remedies: ‘arbitration shall be deemed to exclude other remedy. Exhaustion of local remedies may be a condition to arbitrate’. Art X A-S BIT does not require exhaustion of local remedies since it simply says that it has to be referred to a Spanish court and let pass 18 months. Even if it requires exhaustion of local remedies, it does not prevent the subsequent reference to international arbitration, as soon as local remedies have been exhausted. The clauses are designed to give foreign investor the right to have their disputes under a BIT decided exclusively or ultimately by international arbitration. It is true that MFN clause can only attract matters belonging to the same category of subject as that to which the clause itself relates. The Tribunal considers that today dispute settlement arrangements are inextricably related to the protection of foreign investors. If a 3rd party treaty contains provisions for the settlement of disputes more favourable to the protection of the investor’s rights than those of the basic treaty, such provisions may be extended to the beneficiary of the MFN clause… of course the 3rd party treaty has to relate to the same subject matter as the basic treaty, protection of foreign investments. This approach can be thought to take to the harmonization and enlargement of the scope of such arrangements, but the MFN clause cannot override public policy considerations if they were important in the acceptance of the agreement in question. Other situations as exhaustion of local remedies (fundamental rule of CIL) and the fork in the road (choice domestic court/international arbitration) can not be overlooked by MFN clause