Interpreting treaties in investment arbitration is central to resolving disputes where the applicable international instruments are often complex and open to competing readings. Practical interpretation determines jurisdiction, scope of protection and ultimately the outcome of disputes. In a previous note, we outlined how investment tribunals approach treaty interpretation. In this note, we take a closer look at the Vienna Convention on the Law of Treaties (“VCLT”) and how its rules are applied in practice.
Investor–State arbitrations arise under bilateral or multilateral investment treaties concluded by States. These treaties grant protections to foreign investors, and when breached, investors may bring claims directly against the host State before international tribunals.
International investment law, with arbitration as its primary dispute resolution mechanism, often sparks debate around sovereignty, regulatory autonomy, and investor protection. At the heart of addressing these debates lies treaty interpretation. It is the process that gives life to international agreements, translating abstract provisions into concrete legal rights and obligations. It is what brings “black and white texts” to life in real-world disputes.[1] As has been said, “the law is interpretation, and interpretation is the life of law.”[2]
The Foundational Role of the Vienna Convention on the Law of Treaties
Interpreting treaties is not an exact science and has long been the subject of scholarly debate.[3] Yet, the foundation remains stable. The VCLT, adopted in 1969, sets out the established framework for treaty interpretation.[4] As the VCLT reflects customary international law,[5] arbitral tribunals apply it universally, including to States that have never formally ratified it.[6]
The VCLT devotes three articles to interpretation: Articles 31, 32 and 33. The starting point is always Article 31, which lays down the general rule of interpretation. This article identifies four elements that must be considered together: good faith, ordinary meaning, context, and object and purpose. While tribunals often begin with the ordinary meaning of the terms, Article 31 does not establish a hierarchy among these elements. Instead, they are to be applied in combination, in what the tribunal in Beijing Everyway Traffic v. Ghana (I) described as a “process of progressive encirclement.” [7]
Suppose this integrated analysis under Article 31 leaves the meaning ambiguous, obscure, or manifestly absurd. In that case, tribunals may then turn to Article 32, which provides for supplementary means such as travaux préparatoires and the circumstances of the treaty’s conclusion to be considered. Finally, Article 33 governs the interpretation of treaties authenticated in two or more languages.
Good Faith Under Article 31 of the VCLT
As a general rule, interpreting treaties in investment arbitration requires that international treaties be read in “good faith”.[8] Tribunals regularly invoke Article 31(1) of the VCLT, which enshrines this principle.[9] Although the principle lacks a precise definition, investment tribunals generally regard it as a general principle of law.[10] In Inceysa v. El Salvador, the tribunal explained the scope and content of this principle by referring to the Latin expression bona fide, which reflects “the spirit of loyalty, respect for the law and fidelity”.[11] Commentators likewise view good faith as a general standard of conduct for interpreters, requiring them to act reasonably and properly.[12] It is not an independent criterion but rather a guiding principle that permeates the interpretive process.[13] Interpreting treaties in good faith, therefore, means applying Articles 31 to 33 of the VCLT with a “balanced, unbiased and not preconceived” approach.[14]
Ordinary Meaning Under Article 31 of the VCLT
Interpreting treaties in investment arbitration requires giving effect to the “ordinary meaning” of treaty terms, as mandated by Article 31 of the VCLT.[15] The tribunal in HEP v. Slovenia explained that the ordinary meaning is the meaning attributed to treaty terms at the time of conclusion.[16] It emphasised that “the terms of the treaty must be interpreted according to the meaning they possessed, or which would have been attributed to them, in light of the linguistic usage at the time.”[17] The tribunal added that, as a normal principle of interpretation, “a court or tribunal should endeavour to give a meaning to each of the words being interpreted.”[18]
Hence, ordinary meaning is understood as what a text conveys to a reasonable reader through the “meanings of words” and the “accepted precepts of grammar and syntax.”[19] This meaning must be ascertained objectively, without reference to the subjective intentions of the signatories.[20] As language is dynamic, identifying the ordinary meaning involves understanding both the original and contemporary perceptions of terms, unless parties expressly intended otherwise.[21]
Context Under Article 31 of the VCLT
As we explained in a previous note on context in treaty interpretation, Article 31(1) of the VCLT requires that the meaning of treaty terms be understood in their context. It refers to the terms’ position within the treaty, not the broader circumstances of the treaty’s conclusion.[22] Article 31(2) of the VCLT further defines this context, stipulating that it comprises, in addition to the text itself (including its preamble and annexes): any agreement relating to the treaty which was made between all the parties in connection with its conclusion, and any instrument made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as related to the treaty.[23] This scope, limited primarily to the “co-text” and “inter-textual” material, reflects what courts and tribunals consider the “linguistic context”.[24]
Object and Purpose Under Article 31 of the VCLT
Interpreting treaties in investment arbitration also involves considering their object and purpose.[25] It means that the treaty should be analysed as a whole, including the “reasons for its conclusion” and the “possible intentions expressed in its text”.[26] As the object and purpose of investment treaties are typically formulated in the preamble,[27] tribunals often look to preambles when interpreting international treaties.
For example, in EBL and Tubo Sol v. Spain, the tribunal identified the object and purpose of the Energy Charter Treaty (“ECT”) by reference to Article 2 of the ECT (“Purpose of the Treaty”) and the preamble of the European Energy Charter.[28] The tribunal concluded that the ECT’s object and purpose is to establish a legal framework for long-term cooperation in the energy field, balancing State sovereignty and investment promotion, and that neither objective dominates the other.[29] Therefore, the tribunal was unable to accept the claimants’ argument that investment-promotion objectives take inherent priority over State sovereignty.[30]
Furthermore, interpretation based on a treaty’s object and purpose is limited by the treaty’s text.[31] It cannot replace the ordinary meaning of the terms or amount to revising the treaty, unless the treaty itself expressly provides otherwise.[32]
Principle of Effectiveness
The principle of effectiveness (effet utile) plays an essential role in interpreting treaties in investment arbitration.[33] Although not expressly mentioned in the VCLT, tribunals often invoke it to ensure that treaty provisions have practical effect.[34] According to tribunals, this principle requires that provisions of a treaty be read together and that “every provision in a treaty be interpreted in a way that renders it meaningful rather than meaningless (or inutile)”.[35] The principle of effectiveness is linked to the object and purpose of treaties.[36]
For instance, in Yukos Universal Limited v. The Russian Federation, the tribunal applied the principle of effectiveness without citing it when interpreting the taxation carve-out in the ECT.[37] The tribunal dismissed Russia’s narrow reading of “Taxation Measures” and “taxes,” reasoning that it would leave investors without protection against expropriatory taxation and undermine both the claw-back provision and the Charter’s purpose.[38]
However, tribunals also emphasise the limits of the principle. In Kappes v. Guatemala, the tribunal cautioned that effet utile does not justify departing from the ordinary meaning of the text unless an alternative interpretation would leave a provision with no effective meaning at all.[39] It is not enough to prefer an interpretation that is merely more attractive or beneficial; the tribunal must be convinced that the alternative would render the provision purposeless.[40]
Supplementary Means of Interpretation Under Article 32 of the VCLT
When the primary means of interpretation laid out in Article 31 of the VCLT (ordinary meaning, context, and object and purpose) prove insufficient, international tribunals may turn to supplementary means of interpretation as defined in Article 32 VCLT.[41] According to this article, recourse to supplementary means is admissible in two specific scenarios:[42]
- To confirm the meaning resulting from the application of Article 31.
- To determine the meaning when interpretation according to Article 31:
- Leaves the meaning ambiguous or obscure; or
- Leads to a result which is manifestly absurd or unreasonable.
There are several types of supplementary means according to Article 32 of the VCLT:
- Travaux Préparatoires: These documents may offer powerful insights when interpreters seek to explore the signatories’ intentions for concluding a treaty.[43]
- Circumstances of the treaty’s conclusion: This refers to the historical context. However, in South American Silver v. Bolivia, the tribunal emphasised that Article 32 VCLT allows recourse only to the circumstances of a treaty’s own conclusion and historical context, not to unrelated treaties that were not shown to form part of those circumstances.[44]
Moreover, although not mentioned in the VCLT, model investment treaties drafted by governments may be considered in interpretation.[45] In Siemens v. Argentina, for example, the tribunal treated them as a secondary source, [46] comparable to travaux préparatoires, useful mainly to confirm an interpretive result.[47]
Interpretation of Treaties Authenticated in Two or More Languages Under Article 33 of the VCLT
The interpretation of treaties concluded and authenticated in multiple languages is governed by Article 33 of the VCLT. The fundamental principle established by the VCLT is that when a treaty has been authenticated in two or more languages, the text is equally authoritative in each language.[48] Furthermore, the terms of the treaty are generally presumed to have the same meaning in each authentic text.[49] Where differences arise, tribunals either apply a prevailing text, if one is specified,[50] or reconcile the authentic versions in light of the treaty’s object and purpose. [51]
Disputes can arise over the nuance of specific terms across authentic languages. A good illustration is Junefield Gold v. Ecuador, where the tribunal had to interpret the dispute-resolution clause in the China–Ecuador BIT. The English version limited jurisdiction to disputes “involving the amount of compensation for expropriation.”[52] The controversy centred on the Chinese term “涉及” (shèjí), the equivalent of “involving”. Ecuador argued that “涉及” is semantically neutral, capable of meanings such as “cover”, “concern”, “involve”, “implicate”, “relate to”, or “deal with”. [53] On this basis, and among other arguments, it claimed the clause referred only to disputes over the amount of compensation, excluding the legality of expropriation.[54] The investor, by contrast, pushed for a broader reading, under which “涉及” included all disputes connected to expropriation, including its legality.[55]
The tribunal analysed all three authentic texts (English, Chinese, and Spanish), as required by Article 33 of the VCLT. It noted that the English version prevails in case of divergence.[56] Still, all versions were considered in the interpretive process.[57] It expressly rejected both a restrictive and an overly broad reading. It stated that “involving” (and its Chinese equivalent “涉及” (shèjí)) is not to be interpreted as either too restrictive (i.e., “only disputes related to compensation for expropriation”) or too broad (i.e., “any standard of protection whatsoever under the Treaty, as long as compensation for expropriation is included in the claims”).[58]
Conclusion
Interpreting treaties in investment arbitration is not just a technical exercise. For investors and States alike, the way tribunals apply the Vienna Convention on the Law of Treaties can determine whether a treaty offers protection, limits regulatory autonomy, or even opens the door to arbitration. Understanding how provisions are read in practice, through good faith, ordinary meaning, context, and object and purpose, is key to assessing the strength of potential claims or defenses.
[1] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 2.
[2] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 2, citing C. Douzinas, Law and Justice in Postmodernism, in S. Connor (ed.), The Cambridge Companion to Postmodernism, 2004, pp. 196-223.
[3] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 6; K. Pan, International Organizations’ Practice in the Interpretation of their Constituent Instruments, 16 (1) Journal of International Dispute Settlement 1, p. 15.
[4] VCLT, s. 3; Sempra Energy International v. Argentine Republic, ICSID Case No. ARB/02/16, Decision on Objections to Jurisdiction, 11 May 2005, para. 141.
[5] Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/10/1, Decision on Article VII.2 of the Turkey-Turkmenistan Bilateral Investment Treaty, 7 May 2012, para. 6.4; Beijing Everyway Traffic and Lighting Company Limited v. Ghana, PCA 2021-15, Final Award on Jurisdiction, 30 January 2023, para. 142; Junefield Gold Investments Limited v. The Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Juridisction, 2 June 2025, para. 102.
[6] Kılıç İnşaat İthalat İhracat Sanayi ve Ticaret Anonim Şirketi v. Turkmenistan, ICSID Case No. ARB/10/1, Decision on Article VII.2 of the Turkey-Turkmenistan Bilateral Investment Treaty, 7 May 2012, para. 6.3; M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 8.
[7] Beijing Everyway Traffic & Lighting Tech. Co., Ltd v. The Republic of Ghana (I), PCA Case No. 2021-15, Final Award on Jurisdiction (Save as to Costs), 30 January 2023, para. 149.
[8] VCLT, Art. 31(1).
[9] Sanum Investments Limited v. Lao People’s Democratic Republic (I), PCA Case No. 2013-13, Award, 6 August 2019, para. 172.
[10] L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), pp. 192-193; S. Rowe, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 222.
[11] Inceysa Vallisoletana S.L. v. Republic of El Salvador, ICSID Case No. ARB/03/26, Award, 2 August 2006, para. 230; L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 193.
[12] L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 195.
[13] L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 195.
[14] L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 196.
[15] VCLT, Art. 31(1).
[16] Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24, Decision on the Treaty Interpretation Issue, 12 June 2009, para. 159.
[17] Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24, Decision on the Treaty Interpretation Issue, 12 June 2009, para. 159.
[18] Hrvatska Elektroprivreda d.d. v. Republic of Slovenia, ICSID Case No. ARB/05/24, Decision on the Treaty Interpretation Issue, 12 June 2009, para. 159.
[19] K. Hosseinnejad, Rethinking the Meaning of Ordinary Meaning in Light of the ICJ’s Jurisprudence, pp. 270-271.
[20] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 9.
[21] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 10.
[22] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 9.
[23] VCLT, Art. 31(2).
[24] K. Hosseinnejad, Rethinking the Meaning of Ordinary Meaning in Light of the ICJ’s Jurisprudence, p. 277.
[25] VCLT, Art. 31(1).
[26] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), pp. 11-12.
[27] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 138.
[28] EBL (Genossenschaft Elektra Baselland) and Tubo Sol PE2 S.L. v. Kingdom of Spain, ICSID Case No. ARB/18/42, Award, 11 January 2024, para. 682.
[29] EBL (Genossenschaft Elektra Baselland) and Tubo Sol PE2 S.L. v. Kingdom of Spain, ICSID Case No. ARB/18/42, Award, 11 January 2024, para. 683.
[30] EBL (Genossenschaft Elektra Baselland) and Tubo Sol PE2 S.L. v. Kingdom of Spain, ICSID Case No. ARB/18/42, Award, 11 January 2024, para. 683.
[31] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 11.
[32] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 11.
[33] Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017, para. 288.
[34] Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017, para. 288.
[35] The Renco Group, Inc. v. Republic of Peru (I), ICSID Case No. UNCT/13/1, Decision as to the Scope of the Respondent’s Preliminary Objections under Article 10.20(4), 18 December 2014, para. 177.
[36] Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Award, 31 May 2017, para. 288; M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 12.
[37] Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No. 2005-04/AA227, Final Award, 18 July 2014, para. 1413; L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 196.
[38] Yukos Universal Limited (Isle of Man) v. The Russian Federation, PCA Case No. 2005-04/AA227, Final Award, 18 July 2014, para. 1413; L. Achtouk-Spivak, in L. Achtouk-Spivak et al. (eds.), Good Faith in International Arbitration – A Versatile Chameleon? – Institute Dossier XXII (2025), p. 196.
[39] Daniel W. Kappes and Kappes, Cassidy & Associates v. Republic of Guatemala, ICSID Case No. ARB/18/43, Decision on Respondent’s Preliminary Objections, 13 March 2020, para. 149.
[40] Daniel W. Kappes and Kappes, Cassidy & Associates v. Republic of Guatemala, ICSID Case No. ARB/18/43, Decision on Respondent’s Preliminary Objections, 13 March 2020, para. 149.
[41] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 17.
[42] VCLT, Art. 32.
[43] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 17.
[44] South American Silver Limited v. The Plurinational State of Bolivia, PCA Case No. 2013-15, Award, 22 November 2018, para. 303.
[45] M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 46.
[46] Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 August 2004, para. 106; M. Clasmeier, Arbitral Awards as Investments: Treaty Interpretation and the Dynamics of International Investment Law (2017), p. 46.
[47] Siemens A.G. v. The Argentine Republic, ICSID Case No. ARB/02/8, Decision on Jurisdiction, 3 August 2004, para. 106.
[48] VCLT, Art. 33(1).
[49] VCLT, Art. 33(3).
[50] VCLT, Art. 33(1).
[51] VCLT, Art. 33(4).
[52] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, paras. 16, 68, 88.
[53] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, para. 125.
[54] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, paras. 108-156.
[55] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, paras. 159-186.
[56] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, para. 224.
[57] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, para. 224.
[58] Junefield Gold v. Republic of Ecuador, PCA Case No. 2023-35, Partial Award on Jurisdiction, 2 June 2025, para. 247.
