CYIL 2014

VOJTĚCH TRAPL CYIL 5 ȍ2014Ȏ the observance of commitments it has entered into with respect to the investments of the investors of the other Contracting Party . ” 15 It also asserted that “most or all of Pakistan’s acts and omissions…qualify as breaches of the PSI Agreement as well as violations of the BIT.” 16 While BIT claims and contract claims appear reasonably distinct in principle, complexities arise on the ground, however, particularly in the present case, each party claims that one tribunal (this Tribunal or the PSI Agreement arbitrator) has jurisdiction over both types of claims which are alleged to co-exist. 17 During the hearing on the Respondent’s Objections to Jurisdiction, counsel for the Claimant characterized this clause as an “elevator” or “mirror effect” clause, which takes breaches of contract under municipal law and elevates them immediately to the level of a breach of an international treaty. 18 The Arbitral Tribunal came to the conclusion that a treaty interpreter must seek to give effect to the object and purpose projected by that Article and by the BIT as a whole. Applying these familiar norms of customary international law on treaty interpretation, the Arbitral Tribunal did not find a convincing basis for accepting the Claimant’s contention that Article 11 of the BIT had the effect of entitling a Contracting Party’s investor, like SGS, to “elevate” its claims grounded solely in a contract with another Contracting Party, like the PSI Agreement, to claims grounded on the BIT, and accordingly to bring such contract claims to this arbitration for resolution and decision. 19 Considering the widely accepted principle that, under general international law, a violation of a contract entered into by a State with an investor of another State is not, by itself, a violation of international law, the Arbitral Tribunal further considered that the legal consequences were so far-reaching in scope and so automatic and unqualified and that there was not any clear and convincing evidence about shared intent of the Contracting Parties to the Swiss-Pakistan Investment Protection Treaty in incorporating Article 11 in the BIT. 20 The consequences of accepting the Claimant’s reading of Article 11 would amount to incorporating by reference an unlimited number of State contracts, as well as other municipal law instruments, setting out State commitments, including unilateral commitments to an investor of the other Contracting Party. Any alleged violation of those contracts and other instruments would be treated as a breach of the BIT and the Claimant’s view of Article 11 tends to make Articles 3 to 7 of the BIT substantially superfluous. There would be no real need to demonstrate a violation of those substantive treaty standards if a simple breach of contract, or of a municipal statute or regulation, by itself, would suffice to constitute a treaty violation on the part of Contracting parties. 21 The Tribunal was not saying that States may not agree with each other in a BIT and that henceforth 15 Ibid note 14. 97.

16 Ibid at 84. 17 Ibid at 97. 18 Ibid at 163. 19 Ibid at 165. 20 Ibid at 167. 21 Ibid at 168.

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