Arbitration - Investing into North African Solar Power - page 100

2.4.2.2 Applicable Law According to Art. 42 of the ICSID Convention

According to Art. 42(1) sentence 1 of the ICSID Convention, the ICSID tribunal
decides the respective case based on the law agreed upon by the parties. Art. 42
(1) sentence 2 of the ICSID Convention mentions that:

( ... ) (i)n the absence of

'

( ) agreement, the Tribunal shall apply the law of the Contracting State party to

the dispute (

...

As
illustrated in No. 10 of the ICSID Model Clauses and its commentary, the parties
are free to choose any law and can refer to

... ) and such rules of international law as may be applicable. '

national law, international law, a
combination of national and international law, or a law frozen in time or subject to
certain modifications.

'

Thus, Art. 42(1) of the ICSID Convention is an expression
of the freedom of party doctrine, which is characteristic of arbitration
proceedings. 394
A mere choice of domestic law is rare as applicable law of the contract between
the state and the investor. 395 On the other side, the choice of the investor

'

s home
law would create a lot of difficulties. 396 The investor is closely linked to domestic
regulations, e.g. administrative law, labor law, and the tax law of the host state. 397 It
is also not advisable to detach the contract from domestic and international law and
to treat it as self-contained. 398
Art. 42(1) of the ICSID Convention talks about

'

, which means that
it is generally accepted that parties are free to combine rules or sets of rules from
different legal origins as applicable law. 399 In addition, there is no doubt that the
choice of law must be reasonable and connected to the investment. 400 In practice, in
most investment related cases domestic law is chosen as applicable law. 401 How-
ever, the application of international law is chosen as well. 402

rules of law

' '

2.4.2.3 Internationalization of Contracts

An internationalization clause is a contract clause stipulating the application of
international law for the respective contract. 403 Such a clause can also be

394 Hobe and M ¨ ller ( 2009 ), 65 (73); Bockstiegel ( 1999 ), 141 (144-145); Griebel ( 2008 ), 138;
Schobener and Markert ( 2006 ), 65 (101).
395

Dolzer and Schreuer ( 2008 ), 265; Schreuer ( 2009 ), 558 para 24.

396

Schreuer ( 2009 ), 559 para 27.

397

Dolzer and Schreuer ( 2008 ), 265; Schreuer ( 2009 ), 559 para 27.

398

Schreuer ( 2009 ), 562 para 37.

399

Schreuer ( 2009 ), 563 para 39.
400 Schreuer ( 2009 ), 564 para 43.
401 Tietje ( 2003 ), 5 (11).
402 Tietje ( 2003 ), 5 (11).
403 Metje ( 2008 ), 66; Schreuer ( 2009 ), 560-561 para 33; Krajewski ( 2009 ), 183; Sch

€ obener

et al. ( 2010 ), 244-245, Kap. 4 § 16 para 90.