Local Litigation Requirements in International Investment Agreements: Their Characteristics and Potential in Times of Reform

Abstract

A number of international investment agreements (IIAs) set out a ‘local litigation requirement’, i.e. specify that recourse to investor-State arbitration becomes possible only after a certain period of time spent litigating in domestic courts. Numerous tribunals have dealt with this type of provision but they have followed different approaches as to its nature, function and scope, or as to whether non-compliance with it can be excused. This article focuses on the different aspects of local litigation requirement clauses in search of an interpretation that gives effectiveness to the provision, paying particular attention to the experience of Latin American countries and arbitral decisions discussing this topic, which in most cases involve countries from this region. It is argued that this precondition has an enormous potential to foster good governance and could serve to achieve a better coexistence between investor-State dispute settlement (ISDS) and local tribunals.

Keywords: investment treaties, arbitration, International Centre for Settlement of Investment Disputes (ICSID), Latin America, exhaustion of local remedies, procedural preconditions, jurisdiction, admissibility