Investor Presentaiton
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of the options. The second approach permits an investor to make a
final decision on the venue at a later stage, e.g. after starting
proceedings in the host State courts. Once the investor has opted for
international arbitration, however, it cannot shift back to domestic
courts ("no-U-turn" provisions). While "fork-in-the-road" clauses
may discourage recourse to local courts, "no-U-turn" provisions do
not have this effect. Each type of clause will be examined in more
detail in turn.
"Fork-in-the-road" clauses require investors to choose
between domestic courts and international arbitration at the outset.
Once an investor starts domestic proceedings, it loses the right to
resort to arbitration, and vice versa. An example of a "fork-in-the-
road" provision is Article XIII.3 of the Chile-Indonesia BIT (1999),
which provides that:
"Once an investor has submitted the dispute to the competent
tribunal of the Contracting Party in whose territory the
investment was made or to international arbitration, that
election shall be final." (Emphasis added).
"Fork-in-the-road" clauses may be a disincentive for the
investor to use national courts. Indeed, if an investor wishes to
preserve its right to resort to international arbitration, it is likely to
avoid domestic litigation. This, in turn, is not in the interest of host
States; governments normally have a preference to settle the dispute
in their own courts.
In practice, however, "fork-in-the-road" clauses have often not
prevented investors from seeking relief in two forums. Litis pendens
principles suggest that a party will be prevented from seeking relief
in a second forum if there is “identity of the parties, object and
cause of action in the proceeding pending before two or more
tribunals"; i.e. the parties, object and cause of action must be the
UNCTAD Series on International Investment Agreements IIView entire presentation