Cooling-Off Period and Futility in Investment Arbitration

Over 90% of international investment agreements and many foreign investment laws contain “cooling-off” or “waiting” periods geared towards enabling the parties to resolve a dispute without arbitration. Although the treaty wording of cooling-off clauses varies considerably, a typical clause requires the claimant to refrain from commencing the arbitration within a specified period and instead make efforts to resolve the dispute amicably.

Furthermore, it is critical not to confuse a cooling-off period with other similar time limits provided in the Bilateral Investment Treaties (“BITs”), such as limitation periods or time requirements for giving notice of intent to arbitrate, as compliance with one of them does not necessarily mean that the others cease to apply.

As a rule, the cooling-off period starts running when a foreign investor sends a trigger letter to the competent public authority. However, the mere submission of this letter does not negate the investor’s obligation to act for amicable dispute settlement. Notwithstanding that the content of a trigger letter may vary, it should contain sufficient details to identify the dispute and serve as a basis for good faith negotiations. Moreover, the letter should also be sent to the proper government body, which is authorized to represent the state’s interests in negotiations with the investor.

After the trigger letter is sent, the parties may set up meetings and agree on confidentiality. They can also engage a third-party facilitator to make the negotiations more efficient. Importantly, pre-arbitration negotiations during the cooling-off period do not prevent future settlement discussions between the parties by the time an arbitral award is rendered. In any case, the foreign investor must be proactive and take all possible measures to facilitate an amicable dispute settlement with the state. In practice, the appropriate action is evidenced by exchanging meaningful written communications or participating in the respective working group on investment dispute resolution.

Before entering negotiations with a government agency authorized to represent the state’s interests in arbitration proceedings, a foreign investor should explore the dispute resolution clause in the relevant BIT.

Nowadays, modified cooling-off period clauses are incorporated into new generation investment treaties. They differ from previous clauses by being more detailed and explicit and referring to mediation and conciliation procedures during negotiations between parties. For example, the Canada Model BIT of 2021 envisages that an investor shall seek to resolve the dispute through consultations, which may include non-binding, third-party procedures, such as good offices, conciliation or mediation. Moreover, this BIT sets out the time limits for submitting a request for consultations, the requirements for the content of such a request, the mode and time limits of consultations, and the limitation period for filing a statement of claim with the arbitral tribunal.

Case law analyzing the effect of trigger letters has developed two main approaches to the consequences of non-compliance with the requirement to observe a cooling-off period. Under the first approach, failure to comply with the cooling-off period prevents further steps from resolving the dispute through investment arbitration (in particular, through inadmissibility or lack of jurisdiction). The second approach requires a good-faith effort to reach an amicable dispute settlement, which, if failed, does not preclude recourse to arbitration. In such cases, it does matter whether an investor was proactive in initiating negotiations with the state authorities and whether the investor’s efforts were knowingly futile. The tribunals held that the failure to comply with a “cooling-off period” was a procedural matter that did not affect the tribunal’s jurisdiction[1].

Some tribunals find that if a party does not satisfy the “cooling-off period,” its claim is inadmissible[2]. It will not prevent the claimant from re-submitting its claim provided that it cures the previous flaw causing the inadmissibility[3].

Other tribunals held that failing to comply with “cooling-off period” requirements prevented them from entertaining jurisdiction. The lack of jurisdiction, in turn, will prevent the parties from successfully re-submitting the same claim to the same arbitration body[4].

It is highly probable that tribunals would not uphold jurisdiction if an investor did not attempt to notify a state of the alleged treaty’s breach, especially when a clause provided for such notification. As the Tribunal in Guaracachi v. Bolivia[5] asserted:

“The explicit wording requiring a written notification and the expiry of a period of six months from that notification leads the Tribunal to consider that the ‘cooling off period’ narrows the consent given by the Contracting Parties to international arbitration.

… the ‘cooling off period’ is a jurisdictional barrier conditioning the jurisdiction of the Tribunal rationae voluntatis, since it is not up to a claimant to decide whether and when to notify the host state of the dispute, just as it is not up to such claimant to decide how long they must wait before submitting the request for arbitration.”

While declining jurisdiction based on this reason, arbitral tribunals found that otherwise the state would not receive an opportunity to redress the problem before the investor submits the dispute to arbitration. When tribunals arrive at such conclusions, they are usually faced with a specific wording of the clause. In Almasryia v. Kuwait[6] the tribunal substantiated its ruling that a “cooling-off period” is a jurisdictional prerequisite by paying attention to the text in the clause. It stated that the words “shall,” “if,” and “then” indicate that complying with the “cooling-off period” is an obligation of a party, steps that are to be complied with before initiating the arbitration. Moreover, it states that “this requirement is an integral part of the state’s consent rather than a negligible formality.”

Specific cooling-off clauses employ very permissive language suggesting, if not expressly stating, that the clause does not affect the right to start arbitration proceedings. In that case, the arbitral tribunal might either accept to continue the proceedings or suspend the procedure requiring the parties to attempt settlement.

An investor that has commenced the cooling-off period may not be considered compliant with the BIT’s condition on pre-arbitration settlement unless the investor has made efforts to settle the pre-arbitration dispute with the state. For instance, the arbitral tribunal in the Murphy Exploration and Production Company International v. the Republic of Ecuador[7]  case has noted that “the obligation to negotiate is an obligation of means, not of results. There is no obligation to reach, but rather to try to reach, an agreement. To determine whether negotiations would succeed or not, the parties must first initiate them. The obligation to consult and negotiate falls on both parties”. That said, an investor that has made a cooling-off period running should take all possible actions to enter official negotiations on an amicable settlement.

Also, as the Tribunal in Biwater Gauff v. Tanzania[8] observed “[i]ts [‛cooling-off period’s’] purpose is not to impede or obstruct arbitration proceedings, where such settlement is not possible“.

Notably, this approach has become more prevalent in recent cases[9]. It is for the claimant to prove that the negotiations were futile. A shred of evidence here can be a declaration from a state that it is no longer willing to participate in dialogue or numerous attempts to enter negotiations have been left unanswered.

Considering the above approaches towards compliance of the cooling off period, the following recommendations could be made for investors: 

  1. During the cooling-off period (as at all other times during the life of an investment), both investors and host states are advised to document their interactions diligently. An accurate record can help to resolve the dispute early, avoiding arbitration. If the dispute is not resolved during the cooling-off period, the record could end up before an arbitral tribunal judging the conduct of the parties during this period. Finally, investors and host states should consider the degree to which publicizing the dispute during the cooling-off period might help to achieve their objectives.
  1. Trigger letters should provide all the information necessary for the host state to assess the facts and evaluate the claims that the foreign investor is advancing. Where possible, they should also identify, to a reasonable extent, the lamented breach of a treaty (or contract) and the type of claim that the investor would be pursuing. Claims not contained in the trigger letter and developed or added during the ensuing arbitration proceedings may be at risk of being regarded as not complying with the BIT’s relevant provisions on the cooling-off period. An incomplete trigger letter would also limit the chances of settling the dispute amicably before the instigation of arbitration proceedings.
  1. The language and tone employed in the trigger letter, as well as the number and frequency of substantial written correspondence sent by the investor to the foreign state, are of great importance in instigating the proper reaction.




[1] Mr. Franz Sedelmayer v. The Russian Federation, Arbitration Award (7 July 1998); Wena Hotels Ltd. v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision on Jurisdiction (29 June 1999); Ethyl Corporation v. The Government of Canada, UNCITRAL, Award on Jurisdiction (24 June 1998); Ronald S. Lauder v. The Czech Republic, UNCITRAL, Final Award (3 September 2001); SGS Société Générale de Surveillance S.A. v. Islamic Republic of Pakistan, ICSID Case No. ARB/01/13, Decision of the Tribunal on Objections to Jurisdiction (6 August 2003).

[2] Antoine Goetz and Others v. Republic of Burundi, ICSID Case No. ARB/95/3; RREEF, supra n. 4; Burlington, supra n. 3; Western NIS Enterprise Fund v. Ukraine, ICSID Case No. ARB/04/2

[3] Abaclat and Others v. The Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility (4 August 2011);

[4] Abaclat and Others v. The Argentine Republic, ICSID Case No. ARB/07/5, Decision on Jurisdiction and Admissibility (4 August 2011); RREEF Infrastructure (G.P.) Limited and RREEF Pan-European Infrastructure Two Lux S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/30, Decision on Jurisdiction, (6 June 2016)

[5] Guaracachi America, Inc. and Rurelec PLC v. The Plurinational State of Bolivia, PCA Case No. 2011-17, Award (31 January 2014).

[6] Almasryia for Operating & Maintaining Touristic Construction Co. LLC v. Kuwait, ICSID Case No. ARB/18/2.

[7] Murphy Exploration and Production Company International v. Republic of Ecuador, ICSID Case No. ARB/08/4, Award on Jurisdiction (15 December 2010).

[8] Biwater Gauff (Tanzania) Ltd. v. United Republic of Tanzania, ICSID Case No. ARB/05/22, Award (24 July 2008).

[9] Kompozit LLC v. Republic of Moldova, SCC Emergency Arbitration No. EA (2016/095) & SCC Case No. 2016/113, Emergency Award on Interim Measures (14 June 2016); A11Y LTD. v. Czech Republic, ICSID Case No. UNCT/15/1, Decision on Jurisdiction (9 February 2017); Casinos Austria International GmbH and Casinos Austria Aktiengesellschaft v. Argentine Republic, ICSID Case No. ARB/14/32, Decision on Jurisdiction (29 June 2018).

  • Andrii Chornous

    Counsel, International Dispute Resolution, Hillmont Partners

Hillmont Partners

Address: 36-D Yevhena Konovaltsia Street, 5th Floor,

Kyiv, 01133, Ukraine;

Tel.: +380 44 277 2447


London Office: 105 Victoria Street, 6th Floor, Westminster,
London, SW1E 6QT, United Kingdom;

Tel.: +44 2034 572881;


Hillmont Partners is a leading law firm which was founded by British and Ukrainian partners with a view to providing high-quality legal services to investors and businesses either operating or looking to operate in Ukraine.

The firm offers the expertise and insight needed to help clients operate on the complex legal and regulatory landscape. We guide our clients through all stages of the regulatory and permitting process, advise on investment projects, assist with government relations and public affairs, regulatory and risk management, offer corporate governance, commercial, labor and tax law advice, and handle any litigation or arbitration involving our clients.

The firm’s lawyers provide commercially focused advice across a variety of industry sectors in the fast-changing business environment in Ukraine. Multinational companies, investors, financial institutions and project developers face numerous challenges in operating and investing in Ukraine. Our team is committed to forward thinking so as to help clients stay ahead of the curve, either identifying opportunities or managing uncertainty.

Hillmont Partners is especially strong in complex litigation, investment advisory and government relations and public affairs. Our experts work to defend the interests of our clients when they face the most challenging of threats to their businesses, and we help to ensure that those investing in Ukraine are appraised of all the risks and are comprehensively protected throughout the life of their projects.

Our team is made up of experienced commercial lawyers and criminal defence attorneys, finance professionals who have a wealth of knowledge about distressed investing and strategic communications professionals advising on interaction between businesses and state authorities.

We help our clients to navigate Ukraine’s dynamic transformation. Our experienced and professional team offers a full range of services in the field of government relations and public affairs, regulatory and risk management, including development and implementation of comprehensive GR&PA strategies; regulatory and policy analysis and monitoring; crisis communications and issue management; drafting legislation and advocacy.

Our firm’s industry-specific expertise covers counselling international and local businesses across many sectors, including mining, energy, metallurgy and machinery, banking and finance, IT and start-ups, agriculture, FMCG and retail, commercial real estate, etc.