5 Preconditions to Arbitration: Express and Implied Requirements of Good Faith

Subject(s):

Exhaustion of local remedies — Definition of investment — Good faith — General principles of international law — Remedies and costs

This chapter focuses on requirements contained in international investment agreements for parties to use local remedies and to negotiate in good faith. It also examines a paradox in this regard: despite the express requirements to conduct these activities in good faith, tribunals rarely deny jurisdiction based on failure to comply. The chapter first considers the elements that must be met by claimants to create a dispute that is admissible before discussing the general rule regarding exhaustion of local remedies and its application in investment arbitration. It then explores the concept of negotiating in good faith under international law and national laws and explains the pre-submission consultations required between parties that want to bring a dispute to an ICSID tribunal. Finally, it analyses the importance of the language of a contract or a treaty in investment arbitration and the role of silence in good faith negotiation.