that they lacked jurisdiction over a claim (or that they have jurisdiction, but that the claim is inadmissible) based on the ground that an investor had failed to make its investments ‘in accordance with the law’ of the host State (hereinafter referred to as the ‘legalityrequirement’). In fact, a
cial action. When norm cre- ation meets these criteria and, third, is matched with norm application that also satisﬁ es the legalityrequirements, international law will have legitimacy and generate a sense of commitment among those to whom it is addressed. We ﬁ rst highlight key steps in the norm
In Álvarez y Marín Corporación and others v. Panama, the majority declined to take jurisdiction over a dispute arising from an investment made in indigenous regions of Panama due to the investors’ serious breach of Panamanian law. Although the tribunal found no explicit requirement of legality in the relevant treaties, it held that such a requirement is inherent to the very notion of investment and can be implied by general principles of good faith and nemo auditur propriam turpitudinem allegans. After examining the timing of the breach as well as the seriousness of it, the majority concluded that it was proportionate to deprive the investors of treaty protection. The Álvarez y Marín award sheds light on many important yet highly contentious legal issues concerning legality requirements. This includes the qualification of the admission clause, the implied legality requirement, the material scope of such requirement and whether legality goes into jurisdiction or merits. It is submitted that the Álvarez y Marín tribunal has adopted many innovative approaches toward these issues and, consequently, the case is expected to have a significant impact on the practice of investment arbitration going forward.
implemented. In reply, Metal-Tech asserted that the bit ’s legalityrequirement applies only to illegal acts that occur during the establishment rather than operation of the investment. Metal-Tech further argued that the bit ’s most favoured nation ( mfn ) clause allows for the application of a more
dismissed all objections to jurisdiction, whereas another three have rendered decisions dismissing certain objections to jurisdiction. 63 The decisions, however, are not public, so the reasoning of the tribunals is unclear.
The third issue of jurisdiction and
, Kalicki, Evseev, and Silberman find that tribunals in both cases differed over the consequences of the existence (or absence) of an express or implicit legalityrequirement in a BIT ; the assessment of a violation of this requirement (e.g. presence of illegal or intentionally wrongful investor conduct
This Latin maxim is an expressions of the clean hands doctrine. 101
Many other tribunals have also concluded to the existence of an implicit legalityrequirement even in the absence of such a clause in the instrument. 102 This is also an expression of the clean hands doctrine. 103 A good
a requirement in investment treaty arbitration, particularly in relation to treaties which do not contain an express legalityrequirement.
Hepburn also analyses the circumstances in which estoppel may have a role to play in assessing whether or not an investor has complied with host State law, and
, ultimately rejecting the respondent’s objections on this point. 69
Furthermore, in Fakes v Turkey , the respondent argued that breaches of its laws would trigger the legalityrequirement in the relevant BIT. 70 In addition to opining that the legalityrequirement in the BIT only concerned laws governing
investment in violation of a Philippine anti-dummy law “by means of secret shareholder agreements.” 336 The tribunal concluded that Fraport thus had failed to comply with the “explicit and hardly unreasonable” legalityrequirement contained in the BIT , which deprived the tribunal of jurisdiction. 337