Fork-in-the-Road clauses

Divergent paths in recent decisions

Publication October 2015


Two recent cases have shaken up the approach most often taken by tribunals in situations where states raise jurisdictional issues in state investor proceedings, bringing into question the clear distinction between ‘treaty’ and ‘contract’ claims.

In ‘Fork-in-the-Road’ (FITR) clauses in bilateral investment treaties (BITs), the claimant investor must make a choice between pursuing its claims against the state either through the arbitration mechanisms provided in the relevant BIT or in local courts or other venues provided for in the relevant contractual mechanisms.

However, where a FITR clause has been invoked by a state to raise a jurisdictional issue in state investor proceedings, tribunals often base their approach on a separation of ‘treaty’ claims from ‘domestic law’ or ‘contractual’ claims, so that investors bringing contractual claims in state courts or elsewhere are not precluded from raising international law treaty claims arising out of BITs or a submission by the state to ICSID.

Two recent cases contradict this previously permissive grain of jurisprudence.

Permissive approach

The permissive approach is exemplified by the tribunal’s decision in a case on the contested issue of Ecuadorian legislation denying certain VAT refunds to the claimant.

In Occidental v Ecuador,1 Ecuador argued that the USA-Ecuador BIT contained a FITR provision which prevented the claimant from bringing an investment treaty claim due to its already having challenged the offending legislation before local courts.

The tribunal demurred, accepting instead the claimant’s argument that the investment treaty claim was founded upon the question of its rights under the BIT; and the local action was founded upon the question of the legality of the legislation under local law.

Although the objective of these actions – a declaration that the local legislation was illegal – was similar, the causes of action underlying the claims were distinct. The tribunal also suggested that FITR clauses are predicated on a true and free ‘choice’ between alternate avenues, which may be defeated if there are onerous timelines which urge a claimant toward choosing one over the other (e.g. 20 days for the claimant to challenge the VAT law under Ecuadorian law, failing which it became final and binding).

In Toto Costruzioni,2 Lebanon argued that the FITR provision in the Italy-Lebanon BIT meant that Toto’s pursuit of domestic remedies precluded the tribunal taking jurisdiction over Toto’s investment treaty claims. The tribunal rejected Lebanon’s interpretation of the treaty and reinforced the distinction between the causes of action, stating that:

‘[i]n order for a fork-in-the-road clause to preclude claims from being considered by the Tribunal, the Tribunal has to consider whether the same claim is ‘on a different road,’ i.e. that a claim with the same object, parties and cause of action, is already brought before a different judicial forum. Contractual claims arising out of the Contract do not have the same cause of action as Treaty claims’. (emphasis added)

‘Fundamental basis’ test v ‘contractual/treaty claims’ test

In 2009, in a case3 involving the ransacking of a contractor’s worksite in Albania following massive losses incurred by the populace in the wake of Ponzi schemes, the claimant (contractor Pantechniki) first launched local proceedings – and later ICSID proceedings – under the Greece-Albania BIT, in an effort to recoup its losses of around US$1.8 million from the Ministry of Public Works.

Jan Paulsson, as sole arbitrator, deemed certain of the claimant’s claims inadmissible on the basis they were subsumed by the claim before the Albanian courts and thus excluded from ICSID jurisdiction by the FITR clause in the BIT.

In his treatment of the arbitration law on FITR clauses, Paulsson implicitly acknowledged the continuing distinction between claims that can be brought before local courts and those that can be brought before international fora. In doing so, however, he avoided the semantics of ‘contractual’ and ‘treaty’ claims, which he suggested were simplistic and constituted ‘argument by labelling – not by analysis’.

He stated it was:

‘common ground that the relevant test is … whether or not the “fundamental basis of a claim” sought to be brought before the international forum is autonomous of claims to be heard elsewhere’.

“The arbitrator avoided the semantics of ‘contractual’ and ‘treaty’ claims, which he suggested were simplistic and constituted ‘argument by labelling – not by analysis’.”

Establishing an identical or fundamental basis requires more than a simple assertion that the factual basis and the relief claimed are the same. Equally, however, an assertion that two claims do not have the same fundamental basis requires more than mere reliance on the assumption that the claim before the tribunal is made under a treaty, while the other before a local court is made under a contract or local law, and the two are thus automatically and inherently different.

Paulsson took pains to emphasise that the ‘same facts can give rise to different legal claims. The similarity of prayers for relief does not necessarily bespeak an identity of causes of action’. However, if his line of reasoning is adopted by subsequent tribunals, claims that may previously have been characterised as ‘treaty’ claims could be rejected if there is established some normative or fundamental basis on which they are identical to claims brought locally.

A recent unpublished 2014 decision on merits indicates that this view may be finding some early support. In that case, a Californian company, H&H Investments, sued Egypt under the US-Egypt BIT for alleged mistreatment of a resort investment in the Gulf of Suez. The decision apparently involved the tribunal enforcing an FITR clause and refusing jurisdiction on the basis that the FITR provision of the US-Egypt BIT was triggered by the claimant’s previous submission of claims with ‘the same fundamental basis’ to an arbitral tribunal and to Egyptian courts. [Based on publicly available information from press releases by Egypt’s counsel.]

Where next?

While these two cases constitute a refinement of the test to determine the applicability of FITR clauses – and may be seen to signal a more onerous burden for the claimant investor – the general trend still seems to favour a finding of jurisdiction, allowing BIT/ICSID arbitrations to proceed.

“… the Pantechniki decision has muddied the waters in terms of a clear distinction between ‘treaty’ and ‘contract’ claims.”

The effect of these cases cannot be ignored. Although the wording of individual FITR clauses will continue to frame the approach and interpretation of tribunals in arbitrations to come, the Pantechniki decision has muddied the waters in terms of a clear distinction between ‘treaty’ and ‘contract’ claims.

It remains to be seen if the rationale behind the decision is followed, and if so, how the new test is applied. The ‘fundamental basis’ approach may mean that tribunals take a more substantive and case-by-case approach to assessing the applicability of FITR provisions to related claims that have been heard before local fora. Alternatively, in implicitly acknowledging the continuing distinction between claims arising out of the same facts, the new approach may simply result in a semantic reordering of claims that may be brought before local courts versus those that may be brought before international tribunals.

Deborah Ruff is a partner and Trevor Tan an associate in Norton Rose Fulbright’s London office.



Occidental v The Republic of Ecuador (UNCITRAL Case No. UN3467).


Toto Costruzioni Generali SpA v Republic of Lebanon (ICSID Case No ARB/07/12) (Decision on Jurisdiction).


Pantechniki SA Contractors & Engineers (Greece) v The Republic of Albania (ICSID Case No ARB/07/21).

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