Examining the Mechanisms for Dismissal of Frivolous and Abuse of Process Claims in the International Investment Regime: a Case of Failed Legal Transplant?
Investor-state arbitration is in a phase of reform. One aspect of this reform process is that the recently-negotiated treaties and updated arbitration rules include mechanisms for the early dismissal of frivolous claims (including those manifestly without legal merit and those unfounded as a matter of law). Some ISA tribunals have also, without an express provision empowering them and only in narrow circumstances, dismissed investors’ claims as an abuse of process. The mechanisms for early dismissal of frivolous and abuse of process claims in ISA vary across investment treaties and arbitration rules, but they all share a fundamental characteristic borrowed from domestic legal systems: that the same tribunal empowered to rule on the merits is also charged with identifying such claims and curtailing them early in the arbitral process. The system of investment arbitration, however, radically departs from the structural organization of the domestic legal systems, with their integrated judicial hierarchies, application of precedent, judicial review of administrative actions, and traditions of job tenure and other career safeguards that protect judicial independence. The comparative law literature teaches that legal transplants often fail when attention is not paid to the structural and doctrinal context of the recipient legal order. This thesis situates the dismissal of frivolous and abuse of process claims within the broader context of the structures of the international investment regime and the incentives those structures create for decision-makers. It shows that the outcome of these factors is that arbitrators utilize and will continue to utilize the mechanisms for early dismissal only in overly narrow circumstances. This thesis then examines alternative mechanisms that may be used to identify and deter frivolous and abuse of process claims, and proposes a mandatory evaluative conciliation procedure prior to arbitration as the effective option to facilitate early dismissal of frivolous and abuse of process claims. This pre-screening mechanism would provide opportunities for assessment of claims in a flexible and non-adversarial context, and would take the gatekeeping function out of the hands of arbitral tribunals, which are not well placed to perform it.