National investment codes may function as potential sources of international investment law. In other words, states may make unilateral undertakings within the framework of national investment legislations and, as a result, be considered as having “created international obligation[s]”. The addressees of national investment legislations are foreign investors as well as the state that is itself the ‘author’ of the investment legislation.
That states commit themselves through bilateral or multilateral investment treaties or through contracts with foreign investors is rather standard. That states may subject themselves to binding investment obligations via national investment legislations is rarer, but reflects a growing trend in developing countries.
National investment codes embody, inter alia, substantive rules of investment treatment (fair and equitable treatment, national and most-favored-nation treatment, protection from arbitrary and discriminatory measures, protection from nationalization and expropriation, and the right to free transfer of capital), as well as provisions defining the notions of an investment and of an investor. However, of all the provisions contained in national investment codes, those dealing with the settlement of disputes between the host state and the foreign investor appear to be the most problematic. This is particularly true of provisions concerning investor-to-state arbitration.
Investor-to-state arbitration is subject to consent, which traditionally emanates from a preexisting agreement. That agreement often takes the form of a treaty between the host state and the state of nationality of the foreign investor. It can also be shaped as a contract between the host state and a foreign investor. In contrast, when given through foreign investment legislations, consent to investment arbitration does not involve an agreement between two states or between a state and a foreign investor. Rather, consent to arbitration proceeds from a unilateral undertaking of the host state in its domestic investment law(s). For instance, a state can decide “by means of a unilateral commitment […] set forth in its legislation” to “propose […] to submit the differences, arisen from any investment or any kind of investment, to the jurisdiction.”
In that sense, the ‘offer to arbitrate’ made under national investment codes is broader than the offer to arbitrate made by virtue of BITs or investment contracts. Consent to arbitration through BITs is an offer limited to foreign investors whose states of nationality have concluded a s constitutes an offer made to the foreign investment community as a whole with no real possibility of individualizing the scope of the offer. This is a particular feature of foreign investment legislation, which should be taken into account by states when deciding to draft such pieces of legislation.with the host state against which they intend to initiate arbitration proceedings. In the same vein, consent to arbitration through investment contracts is an offer strictly limited to foreign investors that are parties to those contracts. By contrast, consent to arbitration through national investment legislation
In practice, national investment codes apply differential language and stipulate different levels of engagement when it comes to consent to arbitration. Four main patterns can be distinguished.
To consent or not to consent to arbitration? The four patterns arising from national investment legislation
The first pattern can be qualified as the ‘no-arbitration pattern’ or ‘opt-out arbitration pattern’ as it refers to those national investment laws that do not encompass any provision regarding dispute-settlement and are, thus, silent on international investment arbitration. Sometimes, national investment codes of that type merely provide for dispute settlement before the host state’s domestic courts.
The second pattern can be characterized as the ‘opt-in arbitration pattern.’ National investment legislations that are governed by such a pattern require the settlement of foreign investment disputes by domestic courts. It is only when an investment treaty (e.g., a BIT) or an investment contract explicitly allows for recourse to investment arbitration that the latter supersedes settlement by domestic courts. This kind of national investment legislations does also not, formally speaking, incorporate a standing offer of consent to arbitrate. Investment arbitration is only foreseen as a derogatory mechanism. A good illustration of the ‘opt-in arbitration pattern’ is to be found in the Mongolian Foreign Investment Law.
The third pattern can be designated as the ‘optional arbitration pattern.’ Foreign investment legislations that include such a pattern do not entail a strict consent to arbitration. They simply recommend or authorize, among other possibilities, recourse to international arbitration in order to settle foreign investment disputes. The usual language tends to say that an investment dispute “may be settled” through arbitration or that arbitration “as may be mutually agreed by the parties”. A relevant example of the ‘optional arbitration pattern’ can be seen in the Investment Code of Seychelles.
The ‘optional arbitration pattern’ is not to be confused with ordinary choice of forum clauses. The latter usually give the possibility to foreign investors to choose between investment arbitration or settlement by domestic courts. The choice made by the foreign investor is then imposed on the host state. In contrast, national investment laws that are based on the ‘optional arbitration pattern’ require a previous agreement (i.e., a preexisting arbitration clause in an investment contract) or a subsequent agreement (i.e., what is commonly called a compromis) between the host state and the foreign investor. In absence of such an agreement, no consent to arbitration can be determined. The sole remaining choice for the foreign investor would be to initiate a dispute before the host state’s domestic courts. Accordingly, the ‘optional arbitration pattern’ allows host states to exercise a margin of discretion in deciding on whether or not to submit themselves to investment arbitration. Because of these characteristics, the ‘optional arbitration pattern’ constitutes a sort of safety valve for those states that do not want to make standing unilateral offers to arbitrate while preserving the option to subject themselves to arbitration under some circumstances.
The fourth pattern can be referred to as the ‘mandatory or compulsory arbitration pattern.’ By contrast to national investment codes governed by the three above-mentioned patterns, some national investment legislations embody a clear-cut unilateral offer to arbitrate. The semantics generally used to express such standing offer to arbitrate are either “the host state hereby consents” or “the consent of the host state is constituted by this article.” The best illustrations of this trend are to be found in the Albanian Foreign Investment Law as well as in several investment codes enacted by African states. Furthermore, the ‘mandatory arbitration pattern’ encompasses those national investment codes which—albeit not containing explicit statements of consent by the host state—are worded so as to grant foreign investors an unequivocal right to submit a dispute to arbitration. Noteworthy are the examples of the Georgian Foreign Investment Law and the El Salvador Foreign Investment Law.
Of all the four patterns identified, the ‘mandatory arbitration pattern’ seems to be the more straightforward and at the same time the more risky for states. Indeed, it allows foreign investors to directly initiate investment arbitration proceedings against the host state without additional ad hoc consent required. Consent to arbitration through foreign investment legislations is, thus, susceptible of producing legal effects at the international level. As a consequence, a host state that is governed by a ‘mandatory arbitration pattern’ is precluded from claiming that only its domestic courts have competence in interpreting the scope and content of the consent to arbitration embodied in its national investment code. Once a clear-cut offer to arbitrate has been formulated in a domestic law, the host state relinquishes its power to interpret its own law. It is up to an international arbitral tribunal to decide on the proper interpretation to be given to an alleged consent to arbitration even when embodied in a national legislation. 
This rationale also applies to ambiguous offers to arbitrate under national investment legislations. In the case of unclear and imprecise formulations of consent to arbitration-related provisions, foreign investors may still initiate arbitration proceedings against host states. There is indeed a ‘grey area’ of consent to arbitration that can be exploited in order to subject a state to arbitration. It is within the power of an international arbitral tribunal to decide by means of interpretation whether such a ‘grey area’ constitutes a unilateral offer to arbitrate or not. This is noteworthy. Regardless of whether a state has not clearly consented to arbitration under its investment code, it can still be subject to the jurisdiction of an arbitral tribunal which will have the final say on the meaning of the investment legislation.
Therefore, it is advisable for states that do not want to enter the realms of arbitration to simply avoid any reference or whatsoever to international arbitration when drafting or amending foreign investment legislations. It is preferable that states, in particular in developing countries, subscribe to the ‘opt-out arbitration pattern’ or to the ‘optional arbitration pattern’ to prevent unwanted legal effects.
The ‘grey area’ of consent to arbitration: Interpreting national investment legislations
In recent arbitral practice, much controversy has arisen in relation to obscure consent to arbitration-related provisions under national investment legislations. The most prominent example is Article 22 of the 1999 Venezuelan Law for the Promotion and Protection of Investments.
Some scholars firmly believe that Article 22 of the Venezuelan legislation is an expression of consent to arbitration at the International Centre for Settlement of Investment Disputes (ICSID). However, the arbitral tribunal in the CEMEX v. Venezuela case reached a different conclusion, finding that a unilateral offer to arbitrate could not be deduced from the Venezuelan investment legislation. It is not within the scope of the present article to discuss whether the arbitral tribunal was correct in the interpretation achieved. Nevertheless, it is important to address briefly the proper way of interpreting national investment codes.
In order to determine the effect of ambiguous offers to arbitrate, interpretation should follow to a certain extent the basic methodology of treaty interpretation. The methodology consists in giving prevalence to the ordinary meaning of the terms (what is strictly said in the unilateral offer), in their context (foreign investment codes as instruments of protection and promotion of foreign investment) and in light of their object and purpose (i.e., to provide legal assurances and safeguards to foreign investors). While relevant, the criterion of the intention of the host state (what the state was seeking by inserting a sort of arbitration clause in its legislation) should not prevail.
National investment legislations are “not similar to a diplomat’s off-the-cuff apparent promise or a leader’s political statements.” Rather, they create legal relations between host states and foreign investors. When a state makes so-called unilateral offers to arbitrate in its foreign investment code, good faith must be the guiding principle with respect to the determination of the binding nature of the said offers. Ambiguity in the formulation of unilateral commitments within the frame of foreign investment legislations should neither profit the state nor the investor.
In conclusion, states remain free to draft investment legislation according to their own interests and standards. What is sure is that consent to arbitration through national investment codes is not necessary. Attraction of foreign investment in the developing world is not dependent on the insertion of unilateral offers to arbitrate in domestic law. This is a myth. For instance, Mauritius is generally considered as providing a safe environment for investments without having inserted any dispute-settlement clause in its national investment code. Should a sovereign state consider that it is appropriate to incorporate a unilateral consent to arbitration in its legislation, it should do so in the least ambiguous way. Consent to arbitration is not a sine qua non but legal predictability is.
Author: Makane Moïse Mbengue is Associate Professor, Geneva University Law School and Visiting Professor, Sciences Po Paris (School of Law).
 In the context of the present contribution, national investment legislations will be indifferently referred to as ‘foreign investment legislations’ or ‘national investment codes’.
 Mobil Corporation, Venezuela Holdings, B.V. et al v. The Bolivarian Republic of Venezuela, ICSID Case ARB/07/27, Decision on Jurisdiction, 10 June, 2010, para. 85. Unless otherwise indicated, all the awards are available on the following website: www.italaw.com.
 See, e.g., the 1998 Foreign Investment Law of Myanmar.
 See Tradex Hellas (Greece) v. Republic of Albania, ICSID Case No. ARB/94/2, Decision on Jurisdiction, 24 December 1996, (1999) 14 ICSID Rev. – Foreign Inv. LJ, pp. 186–187.
 IBM World Trade Corporation v. Republic of Ecuador, ICSID Case No. ARB/02/10, Decision on Jurisdiction, 22 December 2003, para. 24.
 Ibid. See also, Ceskoslovenska Obchodni Banka, a.s. v. The Slovak Republic, ICSID Case No. ARB/97/4, Decision on Jurisdiction, 24 May 1999, para. 45.
 This is the case, e.g., of the 1998 Foreign Investment Law of Myanmar (comprised of the “Statement on Foreign Investment Law on Myanmar” and the “Union of Myanmar Foreign Investment Law”), available at: http://missions.itu.int/~myanmar/t&b/invest01.html. See also, the 2000 Investment Promotion Act of Mauritius (amended in 2009), available at:
8. Article 25 of the Mongolian Foreign Investment Law reads as follows: “Disputes between foreign investors and Mongolian investors as well as between foreign investors and Mongolian legal or natural persons on the matters relating to foreign investment and the operations of the foreign invested business entity shall be resolved in the Courts of Mongolia unless provided otherwise by international treaties to which Mongolia is a party or by any contract between the parties.” Quoted in Khan Resources Inc., Khan Resources B.V., and CAUC Holding Company LTD. v. The Government of Mongolia and MONATOM Co., LTD, ibid., para. 67.
 See article 13.2 of the 2005 Investment Code of Seychelles Act which reads as follows: “Disputes which cannot be resolved by the parties themselves may be settled: a) by an arbitration procedure whether local or international that is based on a previous agreement between the parties; or b) by legal proceedings in accordance with the Law of Seychelles”.
 “The Interpretation of Consent to ICSID Arbitration Contained in Domestic Investment Laws”, 27 Arbitration International 2 (2011), p. 156.
 See D. Caron, “The Interpretation of National Foreign Investment Laws as Unilateral Acts Under International Law”, in M. H. Arsanjani et al. (eds.), Looking to the Future: Essays on International Law in Honor of W. Michael Reisman, Martinus Nijhoff Publishers, Leiden/Boston, 2011, p. 655.
 See V. J. Tejera Pérez, “Do Municipal Laws Always Constitute a Unilateral Offer to Arbitrate? The Venezuelan Investment Law: A Case Study”, in I. A. Laird, T. J. Weiler (eds.), Investment Treaty Arbitration and International Law, JurisNet, LLC, Huntington, 2008, p. 89.
 See, e.g., CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments B.V. v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/08/15, Decision on Jurisdiction, 30 December 2010. See also, Mobil Corporation, Venezuela Holdings, B.V. et al v. The Bolivarian Republic of Venezuela, ICSID Case ARB/07/27, Decision on Jurisdiction, 10 June, 2010. See also, Brandes Investment Partners, LP v. The Bolivarian Republic of Venezuela, ICSID Case No. ARB/08/3, Award, 2 August 2011.
 Article 22 provides as follows: “Disputes arising between an international investor whose country of origin has in effect with Venezuela a treaty or agreement on the promotion and protection of investments, or disputes to which the provisions of the Convention establishing the Multilateral Investment Guarantee Agency (OMGI-MIGA) or the Convention on the Settlement of Investment Disputes between States and nationals of other States (ICSID) are applicable, shall be submitted to international arbitration according to the terms of the respective treaty or agreement, if it so provides, without prejudice to the possibility of making use, when appropriate, of the dispute resolution means provided for under the Venezuelan legislation in effect.”
 V. J. Tejera Pérez, op. cit., p. 101: “although with an awkward wording, Article 22 of the Venezuelan Investment Law contains in itself an offer of ICSID arbitration from the Bolivarian Republic of Venezuela to settle disputes with all foreign investors.”
 The arbitral tribunals in Mobil Corporation, Venezuela Holdings, B.V. et al v. The Bolivarian Republic of Venezuela (op. cit.) and in Brandes Investment Partners, LP v. The Bolivarian Republic of Venezuela (op. cit.) reached the same conclusion with approximately similar reasoning.
 The arbitral tribunal considered that “if it had been the intention of Venezuela to give its advance consent to ICSID arbitration in general, it would have been easy for the drafters of Article 22 to express that intention clearly” (CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments B.V. v. The Bolivarian Republic of Venezuela, op. cit., para. 137) and “that such an intention hav[ing] not been established […] it cannot conclude from the obscure and ambiguous text of Article 22 that Venezuela, in adopting the 1999 Investment Law, consented unilaterally to ICSID arbitration for all disputes covered by the ICSID Convention in a general manner” (ibid., para. 138).
 See CEMEX Caracas Investments B.V. and CEMEX Caracas II Investments B.V. v. The Bolivarian Republic of Venezuela, ibid., para. 90.
 D. Caron, op. cit., p. 674.
 See Malicorp Limited v. The Arab Republic of Egypt, ICSID Case No. ARB/08/18, Award, 7 February 2011, para. 115.
 See the website of the National Investment Promotion Agency of Mauritius which says: “According to the latest World Bank Doing Business Survey, Mauritius is the No.1 in Africa and 23rd globally in terms of ease of doing business. Canadian Fraser Institute also ranked Mauritius 1st in Africa and 9th worldwide on its chart of economic freedom”, available at: