Investment treaty tribunals have repeatedly held that an investor’s failure to use available local remedies against administrative measures may reduce its chances of being successful in claiming that investment protection standards have been breached. At the same time, where an investor seeks local recourse against an administrative measure in the host State’s domestic courts and the measure is confirmed, a number of tribunals have taken the view that this confirmation can limit the review in a later investment treaty arbitration. The combined effect of these findings is that local remedies risk becoming simultaneously a requirement for and an impediment to successfully bringing claims under an investment treaty. This situation makes it difficult for investors to decide whether or not to pursue them. This article seeks to solve this conundrum by reassessing the relationship between investment treaty tribunals and domestic courts. It shows that the confirmation of an administrative measure by the courts of a host State can neither preclude a treaty tribunal from considering whether that measure breaches an investment treaty nor undo a treaty breach that already exists. It further suggests that proceedings in the domestic courts can breach an investment treaty even without amounting to a denial of justice. Finally, it argues that the decisions of the domestic courts of a host State should never have any binding effect for a treaty tribunal. By proposing clear rules in an area that has lent itself to a considerable amount of confusion in the past, the article aims to provide investors with much-needed certainty regarding the effect of local recourse.
Journal of International Arbitration