The investor-State dispute settlement (isds) system has been much debated over the past decade as an increasing number of states began voicing concerns regarding its integrity. Perhaps the most complex of those concerns is the risk of double compensation that isds creates. This is not merely a risk of “double-recovery” by the investors, as the term favoured in the literature would suggest, but also a risk of the state being liable to pay twice for the same harm inflicted on a foreign investment that is protected by the relevant international investment agreement(s). Whence the term used in the title, “double-compensation”, which conveys both sides of the issue.
Issues of double compensation are increasingly common in the isds context. A double compensation issue may arise when foreign shareholders initiate arbitration proceedings against the host state based on their treaty rights, while the investment vehicle pursues contractual claims in local courts or in commercial arbitration, where the same facts are relied upon, and the same wrongful measures alleged. Another scenario that may give rise to a double compensation issue is one where foreign investors located at different levels in a chain of corporate ownership initiate separate investment arbitration proceedings, relying on different but applicable international investment agreements. Double compensation issues are thus liable to arise, in both scenarios, because different legal bases for the claims in the separate fora are invoked. A complicating factor is that the claims are often brought by different claimants. The problem has been exacerbated by the lack of a thorough analysis of its many forms and instantiations, in both case law and commentary, resulting in the absence of a comprehensive mechanism for managing it. The time was certainly ripe for a thorough examination of this problem and for the development of an effective solution.
The problem is in significant measure one of procedural fragmentation, compounded by the non-hierarchical structure of arbitration. The issue, however, not only throws light on the possible limitations of a fragmented system, but also challenges us to test the resilience of that system by tapping the vast resources afforded by the general principles underlying it. Dr Bahmany takes up the challenge and, instead of imagining pie-in-the-sky multilateral schemes to eliminate, reduce or manage the risk, sets out to tease a workable solution to the problem out of existing doctrine and practice. In other words, the proposed solution neither suggests a fundamental change to the existing isds system, nor does it call for a fundamental shift in practice.
Dr Bahmany establishes that a principle against double compensation has long been recognized in international law, and convincingly argues that it should be viewed as a general principle of law. The real question is how the principle can be implemented in international investment law in such a way as to cover all scenarios where the risk may arise. She argues, first, that the risk should be contained at the preliminary phase of the proceedings where possible. Double compensation objections usually concern the admissibility of the overlapping claims and can therefore very often be handled as a preliminary matter. The identification of problematic claims is the more difficult task. In spite of their apparent limitations, the principles of res judicata and lis pendens are singled out, after careful analysis, as the best available tools to tackle the issue. They require adaptation, however, to the realities and needs of isds. Crucially, Dr Bahmany argues that the relevant identify test (parties, issues and legal order) requires adaptation so as to provide a practicable solution to the problem in all of the scenarios she identifies. The proposed solution is well-grounded in established legal principles and eminently reasonable.
Dr Bahmany deserves praise for this book. It strikes a much sought-after balance between investors’ and States’ interests, and pursues the broadly recognized underlying policies of international investment law. In this age of fragmentation, the book represents a very significant contribution to scholarship, demonstrating the concrete rejuvenating potential and adaptability of international law. The book draws on the depth of normative resources afforded by international law to resolve, in a manner that accords with both theory and practice, one of the most difficult problems arising from isds. It does so in a manner that encourages a harmonious and flexible relation between general and particular international law. This work will not only form a constructive part of the global conversation about investment arbitration, shareholders’ claims, and how to handle multiple proceedings, but will also have a direct impact on both doctrine and legal practice.
Dr Bahmany’s work draws on an impressive knowledge base and a deep understanding not only of international and transnational law, but also of
Fabien Gélinas
12 January 2023