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Legal basis and effect of denunciation under international investment agreements

This memorandum addresses the notion of consent to international investment arbitration and the possibility of the termination of such consent either by virtue of withdrawal from ICSID Convention or BITs. Through a detailed analysis of Articles 71 and 72 of the ICSID Convention, this memorandum discusses the varying interpretations and their repercussions on arbitral practice and treaty-making.

Clinic: Graduate Institute, Spring 2010
Beneficiary: United Nations Conference on Trade and Development

Executive Summary

Read the full report here

This memorandum is the result of a request submitted by the United Nations Conference on Trade and Development (hereinafter client) in the framework of the Trade Law Clinic at the Graduate Institute of International and Development Studies. The questions submitted by the client relate primarily to the notion of consent to international investment arbitration and the possibility of the termination of such consent either by virtue of withdrawal from the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (hereinafter ICSID Convention) or Bilateral Investment Treaties (hereinafter BITs).


The recent denunciations of ICSID Convention and a number of BITs by Ecuador and Bolivia have given rise to an intense academic debate as to the legal effects of such acts. In practice, the effects of Bolivia’s and Ecuador’s denunciation of the ICSID Convention seem to be limited by the ICSID Convention itself. It would not affect arbitration clauses contained in BITs that refer to arbitration fora other than ICSID. However, the effects of denunciation regarding arbitration clauses contained in BITs referring to the ICSID arbitration are far from clear. There are many grey areas, which require further clarification, in particular regarding the moment in time when denunciation of ICSID is effective and the effects this has on specific BITs unilateral offers to ICSID arbitration. In other words, may the host State revoke its consent to arbitrate given by BITs through an ICSID denunciation? If so, when?


One of the major question relates to the possibility of investors bringing cases to ICSID after the denunciation notice has been deposited with the World Bank, on the one hand, and after it has taken effect, on the other hand. The answer to this question depends upon an informed interpretation of Articles 71 and 72 of the ICSID Conv