Originially from: World Arbitration and Mediation Review (WAMR)

ICSID Tribunal Constituted Under Switzerland-Philippines
BIT Split on the Impact of a Forum Selection Clause
on Its Jurisdiction
by
Professor Frédéric Bachand
Faculty of Law, McGill University
Investment Arbitration Editor
[Editor’s Note: WAMR provided a brief report on the SGS decision in the
August 2004 issue at pages 229-30. Professor Bachand’s commentary
supplements that initial account.]
Can an exclusive forum-selection clause contained in an
investment contract affect the jurisdiction of an arbitral tribunal
constituted under a bilateral investment treaty (BIT) between the host
State and the foreign investor’s State? The issue has arisen in a number of
recent ICSID cases1 and is proving to be divisive, as is illustrated in a
decision on jurisdiction rendered on January 29, 2004 in the SGS Société
Générale de Surveillance S.A. v. Republic of the Philippines case.2
The request for arbitration filed by SGS, a Swiss corporation,
alleged that the Philippines had breached an investment contract
concluded in 1991 and that those contractual breaches gave rise to various
causes of action under a 1997 BIT between Switzerland and the
Philippines. One of the objections to jurisdiction raised by the host State
was based on a clause contained in the 1991 contract providing that
“actions concerning disputes in connection with obligations of either party
to this Agreement shall be filed at the Regional Trial Courts of Makati or
Manila.” Because SGS’s claims were essentially based on alleged
contractual breaches, the Philippines contended, they could only be
brought before the contractually chosen forum.
In the now-famous annulment decision in the Vivendi case, a
comparable jurisdictional objection was dismissed. The claims in that
case were similar in that they also relied on alleged contractual breaches
which were argued to constitute violations of several provisions of the
applicable BIT. The Committee held that a sharp distinction had to be
drawn between contractual claims and treaty claims: “whether there has
been a breach of the BIT and whether there has been a breach of contract
are different questions.”3 Consequently, the Committee stated, “where the
essential basis of a claim brought before an international tribunal is a
breach of contract, the tribunal will give effect to any valid choice of