The Convergence of Renewed Nationalization, Rising Commodities, and "Americanization" in International Arbitration and the Need for More Rigorous Legal and Procedural Defenses

Abstract

I. INTRODUCTION By end of 20th century, international arbitration had emerged as preeminent mechanism to resolve international commercial disputes, particularly disputes between foreign investors and sovereign nations. Indeed, in 1990s, globalization grew exponentially with previously-closed markets-such as Latin America-opening to foreign investors for first time in decades. Accompanied with this globalization was often acceptance of international arbitration, as exemplified by its inclusion in dozens of bilateral investment treaties (BITs) and regional trade pacts, such as North American Free Trade Agreement (NAFTA). However, over past decade new trends have materialized presenting challenges to international arbitration. First, a rising tide of nationalization emerged in many countries, including some of countries that welcomed foreign investment and privatization in 1990s. second, many of foreign investments made in 1990s related to natural resources such as oil, gas, timber, copper, tin, and other minerals;1 and market price for these commodities, which had bottomed out for many in 1990s, has now risen to all-time high levels. Accordingly, monetary consequences of expropriation and breached investment contracts have grown enormously. Finally, arbitration has evolved from a primarily European institution to one reflecting some degree of American-style aggressive tactics. Thus, nations now utilize increasingly hard-line, multi-layered, and novel strategies in defending arbitral claims they face and improving their leverage with aggrieved investors. To maintain its position as standard bearer for fair, cost-effective, and timely resolution of disputes, international arbitration must manage these new challenges with strategies of its own. Part I of this article outlines international arbitration and trend of Americanization. Part II provides a historical perspective on nationalization, from resolution of significant early arbitral disputes to its current resurgence, along with development of modern concession agreements. Part III sets forth use of more sophisticated and aggressive defenses to expropriation claims, particularly substantial and multi-varied counterclaims. Finally, we address need for procedural changes in arbitral practice-as well as application of well-established legal principles such as prescription, laches, estoppel, and waiver-so that arbitration can fulfill its primary mission to provide justice through cooperation by focusing and resolving the central issues of case.2 II. BURGEONING INTERNATIONAL ARBITRATION A. Overview of International Arbitration International commercial arbitration can generally be defined as any private adjudication of a commercial dispute with some international facet.3 This term is sufficiently broad enough to encompass both institutional arbitrations, which are administered by organizations specializing in dispute resolution, and ad hoc arbitrations, which are conducted in a manner specified by parties. Ideally, international commercial arbitration provides parties with a private dispute resolution system that is faster and fairer than court proceedings.4 Institutional arbitrations proceed before organizations such as International Chamber of Commerce,5 LCIA,6 International Centre for Dispute Resolution,7 Permanent Court of Arbitration in The Hague,8 and Hong Kong International Arbitration Centre.' Typically, an arbitral institution will have enacted procedural rules setting out basic framework for arbitration process, including how to determine whether an agreement to arbitrate exists, procedures for appointing arbitrators and challenging appointment of arbitrators, determining location of arbitration, and even (at some institutes) scrutinizing awards. Ad hoc arbitrations proceed without assistance or supervision of an arbitral institution. …