The Timing of Treaty Party Interpretations

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Treaty interpretation by treaty Parties was initially planned to be discussed in the 39th session of UNCITRAL Working Group III scheduled to take place in New York in March-April 2020. A Note prepared by the UNCITRAL Secretariat in anticipation of the now-postponed session addressed treaty interpretation in the context of ISDS, pointing to the existing interpretive tools and outlining ‘how to foster their use’. Treaty interpretation by treaty Parties commands attention, in light of States’ increasing efforts to safeguard their ability to influence the interpretation of their IIAs. A seminal and potentially controversial aspect of treaty Party interpretations is their timing. This is also the topic of this contribution. The post reviews the timing of treaty Party interpretations, in light of treaty Party interpretations issued outside treaty negotiations, during negotiations, at the time of treaty signature, and post-treaty conclusion.

Outside treaty negotiations

Outside IIA negotiations, States can guide the interpretation of their IIAs through interpretive statements, model BITs, official statements, commentaries, parliamentary debates, and constitutional court decisions. For example, interpretive guidance might be inferred from various statements in Opinion 1/17 of the Court of Justice of the European Union and judgment C-252/119 of Colombia’s Constitutional Court on the Colombia-France BIT. The UNCITRAL Secretariat has tabled an interesting proposal concerning multilateral consensus-building outside concrete treaty negotiations to clarify ‘core obligations in investment treaties or [shed] light on the relationship between such treaties and other fields of international law such as climate change’.

During treaty negotiations

During negotiations, States can influence the interpretation of their IIAs through treaty drafting. Negotiations should aim to incorporate precise and clear treaty language. This is the most appropriate moment to capture the desired meaning of treaty provisions. If no agreement can be reached during the negotiations, it is unclear that agreement can be reached later. In this respect, it is debated whether joint interpretations should reflect the Parties’ original intentions or whether they can reflect meaning agreed upon later.

New IIAs offer numerous examples of meticulous drafting of substantive and procedural standards, including through clarifications, ‘for greater certainty’ statements, and interpretive annexes. CPTPP’s investment chapter contains 42 ‘for greater certainty’ statements. CETA’s fair and equitable treatment provision lists behaviours that constitute a violation of the standard. Depending on how broad or narrow such interpretative statements are, they may invite further interpretation by tribunals called to apply them.

It is also possible to capture the desired interpretation outside the treaty text. An example is the so-called ‘disappearing Maffezini footnote’. By way of illustration, an interpretive footnote was inserted in the final draft of US-DR-CAFTA aimed to define the scope of the MFN clause. According to the footnote:

‘The Parties agree that the following footnote is to be included in the negotiating history as a reflection of the Parties’ shared understanding of the Most-Favored-Nation Treatment Article and the Maffezini case. This footnote would be deleted in the final text of the Agreement… The Parties share the understanding and intent that [the MFN] clause does not encompass international dispute resolution mechanisms… and therefore could not reasonably lead to a conclusion similar to that of the Maffezini case.’

At the time of signature and until entry into force

Parties can also introduce interpretive statements once negotiations have been concluded, at the time of signature and until the IIA enters into force. Interpretive statements, declarations, side-instruments, protocols, exchanges of letters, official statements, commentaries, recitals to national laws approving the IIA, parliamentary debates, constitutional court decisions, are some of the means by which States do so. Recent examples include the CPTPP Joint Declaration on Investor State Dispute Settlement, CETA’s Joint Interpretative Instrument, USMCA side letters, and the unilateral Statement 36 by the Commission and the Council on investment protection and the Investment Court System.

Subsequent interpretive statements

Once an IIA has been concluded, the Parties can clarify the meaning of their treaty and guide interpretation, notably through subsequent agreement or practice. According to the Vienna Convention on the Law of Treaties of 1969, which codifies customary international law, the Parties’ subsequent agreement on interpretation or subsequent practice that establishes such agreement must be taken into account. Some, especially new, IIAs digress from customary international law and provide for joint interpretive statements that not only must be taken into account but are binding on tribunals.

Joint interpretations enhance consistency but they are often difficult to achieve. Unsurprisingly, few such interpretations exist. Obtaining agreement on an interpretation may prove challenging. It may represent a further negotiation on language that States may have already had difficulty landing on. The level of precision – or vagueness – reflected in the treaty text may be all that the Parties are able to agree upon. The persuasiveness of subsequent treaty interpretations, at least when not binding, can depend inter alia on their timing: if perceived as an attempt to influence the outcome of a specific dispute, they may be met with scepticism.

IIAs that provide for joint interpretive statements binding on a tribunal tend not to address their impact in time. E.g. the Korea-Vietnam FTA of 2015 provides that an interpretation issued by the treaty’s Joint Committee ‘shall be binding on a Tribunal’ and an award ‘shall be consistent with that interpretation’. Such joint interpretations are binding for the future and if issued in the course of ISDS they are presumed to bind tribunals hearing pending disputes.

This is the most controverted use of binding joint interpretations. Joint interpretations with an impact on ongoing disputes involve the respondent State, i.e. one of the disputing parties. For this reason, concerns have been voiced about the parties’ equality of arms, participation of the executive or political organs in ISDS, and due process.

States could consider introducing safeguards in their provision on treaty interpretation to preclude joint statements from producing binding effects on pending disputes. The Dutch Model BIT of 22 March 2019 expressly prevents application of a joint interpretive statement to an ongoing dispute. An alternative way of allowing joint interpretations to bind a tribunal hearing a pending dispute while partially shielding the process from the identified concerns, would be to allow the tribunal or either of the disputing parties, if both parties agree, to seek a binding interpretation from the treaty Parties. The Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area comes close to this model but agreement of the disputing parties is not necessary.

Beyond joint interpretations, Parties can also issue subsequent unilateral statements. Notably, the home State can make a non-disputing party (NDP) submission during ISDS. Some IIAs encourage NDP submissions. According to the Colombia-Peru BIT of 2007, on the request of either disputing party, the tribunal shall communicate its proposed decision or award to the disputing parties and to the non-disputing State party. Non-disputing party submissions can also be encouraged if the treaty requires notification of disputes brought under the IIA to non-disputing State parties. The UNCITRAL Transparency Rules also provide for NDP submissions. Even beyond such enabling provisions, tribunals have de facto accepted NDP interventions.

When the NDP submission coincides with the interpretation of the respondent State it constitutes evidence of agreement that the tribunal shall take into account in accordance with the Vienna Convention on the Law of Treaties of 1969. In Bilcon v. Canada, Mexico made the following NDP submission:

‘Mexico concurs with Canada’s submission that decisions of arbitral tribunals are not themselves a source of customary international law and that the Bilcon tribunal’s reliance on [the Merrill & Ring v. Canada award on the minimum standard of treatment] was misplaced.’

NDP submissions, as well as submissions by the respondent State, may be relied upon later in other disputes to establish the Parties’ subsequent agreement on interpretation.

Finally, after a dispute has been concluded, the treaty Parties can react to the interpretation in order to offer guidance for the future. In the follow-up to SGS v Pakistan, the Swiss authorities issued a Note on the Interpretation of the Switzerland-Pakistan BIT declaring their ‘alarm’ at the ‘very narrow interpretation’ of the umbrella clause. But interpretive statements cannot impact decisions that are res iudicata.

Conclusions

This contribution has offered some reflections on the timing of treaty interpretations by treaty Parties. Overall, the best moment to accurately shape treaty content is during negotiations. Treaty content can also be clarified at other times, including after the conclusion of the IIA through joint interpretations or unilateral statements and practice. Under customary international law, States’ subsequent agreement on interpretation, or practice establishing agreement, must be taken into account. Such agreed interpretations are not binding on adjudicators, unless their binding effect is laid down in the treaty. States could consider safeguarding the dispute settlement process by precluding interpretive statements from yielding binding effects on ongoing disputes. As the UNCITRAL Working Group III negotiations progress, new issues are likely to emerge, such as whether and when to allow State Parties to a prospective standing multilateral mechanism to intervene, when interpretation concerns common drafting of provisions found in third-Party IIAs. Such issues are yet to be explored.

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Nicolas Boeglin says

August 19, 2020

Dear Professor Titi

Many thanks for this very valuable article.

I just wouldl like to add that in the case of the Canadian mining company Infinito Gold vs. Costa Rica (still pending at ICSID. See: https://icsid.worldbank.org/cases/case-database/case-detail?CaseNo=ARB/14/5), Costa Rica asked to Canada to send its views on the interpretation to give to some BIT dispositions of this treaty in force between Canada and Costa Rica.

An official answer to a Canadian Congressman of January 2019 confirms that Canada did it in 2018 following a request made by Costa Rica (see: https://peterjulian.ca/in-the-house-trudeau-governments-reply-on-q-2157-on-infinito-gold-against-costa-rica-case-before-the-icsid/).

In Costa Rica, we have some doubts on the exact sense to try understand such Costarican request, and I would be very interested to know if it is a very first "premiere" at ICSID proceedings, or if you have in mind cases where the home State made something similar with the other BIT State Party.

Please find a very short analysis (in Spanish, sorry) I published on this very peculiar case against Costa Rica still pending at ICSID since 2014 at:

https://ciarglobal.com/arbitraje-infinito-gold-costa-rica-la-polemica-mina-de-crucitas-ante-el-ciadi/

Sincerely yours

Nicolas Boeglin