The Allocation of Jurisdiction Between International Arbitral Tribunals and Local Courts in Investor—State Disputes

March 2007
Eckhard R. Hellbeck, Abby Cohen Smutny

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When handling an international investment dispute, counsel early on will face challenging jurisdictional questions. Often, a contract will govern the investment,and that contract will contain a choice of forum clause by which the parties have agreed to submit all disputes arising out of or in connection with the contract to a local forum. The investment also may be protected by a bilateral or multilateral treaty between the home State of the investor and the host State of the investment providing for international arbitration of investment disputes. In such a case, the dispute may give rise to claims based both on the contract and on the investment protection treaty, and counsel will have to determine not only whether or not each of the local forum and an international arbitral forum have jurisdiction, but also the scope of jurisdiction of each forum. In other words, the question arises whether and to what extent a breach of contract claim can be brought before a treaty-based international arbitral tribunal or must be brought exclusively before the local forum.