Consent of the parties is the basis of all arbitration. In contract-based arbitration, the consent is specific to disputes arising from the contract. It is usually expressed in the arbitration clause. In treaty-based arbitration, the consent of the state is said to be given to all present and potential investors who satisfy nationality criteria and whose investment is protected by the treaty in advance of the dispute. The rule can be so simply put. But, much dispute has arisen as to the jurisdictional criteria that have to be satisfied before an arbitral tribunal can proceed to the merits of a case. In virtually every treaty-based dispute that has arisen, the jurisdiction of the tribunal has been queried. So, it is necessary to examine the jurisdictional criteria that need to be established. Since most treaty-based arbitrations take place before ICSID tribunals, the rules are best stated on the basis of ICSID arbitration, which is likely to provide the standard for other types of treaty-based arbitration. ICSID arbitration has been in existence for fifty years. But it is only after the notion of jurisdiction based on investment treaties came to be accepted in AAPL v. Sri Lanka (1991) that ICSID had a large volume of cases. Now, other arbitral institutions are also referred to in investment treaties. They also attract significant number of arbitrations.
As may be realised, with an increase in the number of claims, states have invested much effort in exploring the methods of excluding jurisdiction, and have met with a measure of success. Cases are fought with tenacity, and states are resistant to the use of treaties for the imposition of responsibility. This, again, raises doubts as to the utility of treaties as an investment protection device. For the costs of arbitration are very high both for the foreign investor and the state.
There is no doubt that, in light of the experience accumulated in contesting jurisdiction, states will continue to argue against the assumption of jurisdiction, and will strengthen provisions in the investment treaties negotiated in the future to enable them to better challenge jurisdiction. As multinational corporations explore the outer jurisdictional limits under the treaties, states will react by closing loopholes through which arguments to expand jurisdiction are made.