Is a requirement of resort to prior remedies jurisdictional?

Abstract

The doctrine of resort to prior remedies has been a hot debate in some international investment proceedings in arbitration tribunals. Some groups argue that resort to prior remedies in international investment disputes under bilateral investment treaties is akin to exhaustion of local remedies in diplomatic protection doctrine. Therefore failure to exhaust local remedies before bringing the international investment claims to international plane leads to the case declared inadmissible before the international tribunals. The groups also further argue that in the event that the Bilateral Investment Treaty requires that disputes should be brought to local courts where the investment has been made, such requirement is jurisdictional. Therefore, failure to bring the disputes to local courts for remedies leads the tribunal in question lacks of jurisdiction to hear the case.

Accordingly, this paper provides an in depth examination of whether or not a requirement of resort of prior remedies jurisdictional. The paper concludes that a requirement to resort to prior remedies in international investment disputes under international investment treaties is not a jurisdictional requirement because of two reasons. First, jurisdiction means that the tribunal has power and competent to hear the investment disputes. Such power extends to any legal disputes between contracting parties and national of another contracting parties and the availability of consent of Contracting Party and national of another contracting party to bring the disputes to the tribunal in question. Second, the issue of resort to prior remedies in international investment disputes does not relate at all to the jurisdiction of the tribunal to hear the disputes. The issue is related to the claims itself whether or not the claims is matured enough to be brought to the international tribunal.

To add more benefit, this paper also considers impacts of the issue of resort to prior remedies on Indonesian law. Such consideration is important as there is an aspiration among the Indonesian government officials to include provisions on exhaustion of local remedies in the BITs. In reaching a conclusion on the (un)feasibility of the inclusion of exhaustion of local remedies in the BITs, investigation has been made on two issues, namely, an availability of Indonesian court remedies to deal with international investment disputes and an analysis on ASEAN Australia New Zealand Free Trade Agreement on Investment Chapter where Indonesia is a party, and its impact on the Indonesia’s aspiration.