On the importance of defining “frivolous” claims in ISDS

Among the issues chosen by the UNCITRAL Working Group III on ISDS reform (WGIII) to focus on is the problem of frivolous claims. For clarity, the Merriam-Webster dictionary specifies that the term “frivolous” means “having no sound basis” and “of little weight or importance.”[1] During the deliberations, the governments have noted that frivolous claims can result in “excess cost” for the states-respondents and undermine legitimacy of ISDS as a mechanism of dispute resolution.[2] If governments are dragged into the lengthy and costly arbitration process in response to a frivolous claim, it can result in even greater mistrust toward the system of dispute settlement and, eventually, result in even greater unwillingness of the governments to participate in it. Among other concerns, some governments have highlighted a possibility of frivolous claims undermining host states’ reputations and resulting in regulatory chill.[3]

This contribution will focus on the meaning of the term “frivolous” as understood by the governments participating in the WGIII. Further, it will show that so far, the participating states have focused on the procedural aspects of the problem by identifying ways to limit frivolous claims without undertaking the important substantive task of defining such claims.[4] Here, the term procedural refers to the question of “how” to address the issue and the term “substantive” reflects the question “what” is the content of the very issue. However, the question of “what” is no less important from a normative perspective. If governments establish mechanisms for the dismissal of frivolous claims without determining the criteria for identifying such claims, it means that the tribunals will retain full discretion in identifying the types of claims to dismiss as frivolous.

If states choose to design the mechanisms for dismissal without setting the ex ante criteria for identifying frivolous claims, the arbitrators will continue to play a role of gatekeeping by determining which claims can proceed or must be dismissed. In contrast, if the WGIII decides to answer the “what” question, the ex ante criteria can be set by means of political contestation. If governments wish to retain more control over the ISDS process, the former option is preferable.[5]

This article encourages participating governments to focus not only on the question “how” but also on the question “what” with respect to the problem of frivolous claims. This recommendation corresponds to the proposition made by the UNCITRAL Secretariat for the WGIII to consider “[t]he type(s) of claims to be addressed, including those that have the potential to increase duration and costs of the ISDS proceedings, for example, claims by shell companies, inflated and unsubstantiated claims.”[6] The Secretariat also suggests (correctly, in my view) that governments should agree on the language that pertains to frivolity, i.e., that governments should determine “the terminology to be used, for example, “frivolous” claims, claims in which an award in favour of claimant cannot be made, or those “manifestly lacking legal merit.”[7] The linguistic determination is vital because on its basis, the tribunals (if they retain this function) will set the threshold for dismissal.

This article proceeds as follows. First, it shows that the problem of frivolous claims is not novel for WGIII and demonstrates that governments have previously put an emphasis on developing mechanisms for the dismissal of frivolous claims rather than on setting the criteria for identifying such claims. Second, it shows that the governments do not necessarily share a unified vision of what counts as a frivolous claim. Third, it discusses why tribunals are not necessarily best equipped to exercise full discretion in identifying frivolous claims. Finally, it argues that if governments truly want to address a problem of frivolous claims, they should adopt criteria that will guide tribunals in defining and dismissing them.

Previous institutional efforts to address frivolous claims

The concern over a possibility of frivolous claims is not new in the ISDS context. For example, during the negotiations of the ICSID Convention, some governments warned about the possibility of frivolous claims, with the representative of Guinea arguing that the Convention should distinguish between “frivolous” and “irresponsible” claims, whereas the representatives of El Salvador and Cameroon debated whether the best way to address such claims would be through cost allocation.[8] Andreas Lowenfeld, a member of the U.S. delegation for the ICSID negotiations, agreed that the losing party should bear the costs of the proceedings only if it “could be shown that the claim was frivolous.”[9] During the negotiations, the Secretariat suggested that the Secretary-General of the Centre could fulfill a function of “dissuading” the claimant from bringing a frivolous claim.[10] Notably, the governments and the Secretariat focused on the ways to limit such claims without clearly identifying what claims can be regarded as frivolous. Ultimately, neither the ICSID Convention nor the ICSID rules adopted the language of “frivolity.”

However, concerns about frivolous claims did not entirely disappear. In 2004, in its revision of the arbitration rules, ICSID had to address the concerns by governments that investors could bring unmeritorious claims and, thus, impose additional defence costs upon the governments.[11] In response, the Centre amended the rules by introducing Rule 41(5) that empowered the tribunals to dismiss the claims manifestly without legal merits early in the proceedings.[12] By 2018, most major arbitration rules would adopt a similar model.[13] In parallel to the revision process of the ICSID rules, the United States (spurred by the Methanex claim) introduced the provision in its Model BIT on the dismissal of claims in which an award in favour of claimant cannot be made.[14] This provision can now be found both in U.S. and non-U.S. treaties.[15] For instance, the Canada–European Union Comprehensive Economic and Trade Agreement (CETA) includes both provisions.[16] As I have argued previously, CETA provides a unique framework for dealing with such claims because, in addition to incorporating two provisions for dismissal, it structurally changes the ISDS mechanism by establishing a standing tribunal.[17] Yet even CETA does not establish any specific criteria for identifying such claims except for indicating that the claims must be manifestly without legal merit and/or unfounded.[18]

This is frivolous or that: On “Sasquatch” claims

During the 1990s, frivolous lawsuits were the bogeyman of wastefulness that highlighted the existing problems of the U.S. legal system, which boiled down to inefficiencies in the usage of litigation.[19] In Canada, the concern over frivolous claims is also alive. Recently, one Canadian court, for example, summarily dismissed a claim that sought a declaration by the court to establish the existence of the mythical Sasquatch, “also known as Bigfoot.”[20] The defendant requested summary dismissal on the basis that the claim was frivolous and disclosed no reasonable cause for action.[21] The court satisfied the request given that the claim had “no reasonable prospect of success.”[22] The case is curious because it identifies the category of the “Sasquatch claims,” which are claims without a reasonable prospect of success because they have no sound basis in factual reality.

Presumably, WGIII participants do not have these types of “Sasquatch claims” in mind when they express concerns over frivolous claims in ISDS. However, when governments and tribunals argue that a legal claim is “frivolous,” do they share a universal vision on the meaning of “frivolity”?

The records of treaty negotiations and arbitral practice can help to understand what governments may mean when they speak of “frivolous” claims. For example, during the negotiations of the ICSID Convention, governments argued in favour of distinguishing frivolous claims from the claims made in bad faith.[23] Claims made in bad faith may have merit and be legally sound yet the claimants bring them with the purpose of manipulating the system or taking unfair advantage of the rules. A classic example would be a submission made by the claimant in violation of the clean hands principle.[24] Arbitral practice demonstrates consistency with this approach. In the Trans-Global Petroleum v Jordan case, for example, the tribunal distinguished between claims that are “frivolous,” “vexatious,” “inaccurate,” and those “made in bad faith.”[25] Further, at the intersessional meeting organized by the government of Korea, some governments agreed that it was necessary to distinguish the concept known as abuse of process from the concept of frivolous claims.[26]

Arbitration rules and investment treaties do not employ the term “frivolous.” Instead, the terms used in the treaties and arbitration rules are “the claims manifestly without legal merit” and “the claims in which an award in favour of claimant cannot be made.”[27] The treaties and the rules typically include no definition or criteria for the assessment of such claims, so the tribunals retain control over identifying them in each case.

Under the existing mechanisms for dismissal modelled after Rule 41(5) of the ICSID Arbitration Rules, only claims that manifestly lack merit can be dismissed. As per the tribunal in the RSM Production Corporation v. Grenada case, the objection that a claim manifestly lacks merit “may go either to jurisdiction or the merits,” “must raise a legal impediment to a claim, not a factual one,” and “must be established clearly and obviously, with relative ease and dispatch.”[28] The lack of attention to the “what” question is even more surprising given that tribunals “have applied a rather high threshold for satisfying the prima facie requirement of a manifest lack of merit.”[29] As I have argued elsewhere, structurally the tribunals have little incentive not to set a high threshold, given that the arbitrators are paid by the hour and the foreign investors (as claimants) generate the demand in arbitral appointments.[30] In addition to these structural disincentives, the evaluative nature of the investment standards makes a wide range of claims arguable.[31]

The mechanism on the dismissal of claims in which an award in favour of the claimant cannot be made arguably allows for a lower threshold and, hence, potentially for more types of claims to be dismissed.[32] However, tribunals have (so far) not explained what standard for the dismissal exactly applies.[33] For example, in Renco v. Peru, the tribunal characterized the objection as to the “legal sustainability” of the claim and at the same time indicated that under such provision it must be established “whether the claim is legally hopeless.”[34] However, the tribunal did not provide any explanation of how these standards should be interpreted. Arguably, the assessment of “legal sustainability” and “hopelessness of the claim” already sets two different thresholds for assessing the claim.

Further, the discussions at UNCITRAL show that not all governments conceive of frivolous claims as simply manifestly unmeritorious or those in which an award in favour of the claimant cannot be made. For example, according to a submission by Indonesia, the government views claims “with exaggerated claims of compensation” as frivolous.[35] The government of South Africa suggests that information disclosure may be necessary to find “defects” in the claims to “justify early dismissal.”[36] According to the submission, the required disclosure should include “[c]rucial information regarding the nationality of the investor, the existence of a qualifying investment, and the nature and extent of claimed damages.”[37] Arguably, this disclosure requirement reflects the view of the government regarding what claims it might potentially see as frivolous, and such claims are not simply limited to those lacking merit. Instead, they can potentially include claims for unduly high compensation, those submitted by shell companies or where the investment in question does not meet specific requirements. Future deliberations at UNCITRAL can reveal more details on the governments’ perceptions as to the meaning and types of frivolous claims.

More control or less?

It is evident that the determination of what constitutes frivolity is a discretionary exercise. The question is who should be in control to set the criteria that will guide it. In the domestic legal systems, adjudicators make their determinations on balance by identifying which claim has no prospect of success.[38] Judges are, however, guided by systemic considerations of proper administration of justice, a constraint that ad hoc arbitration does not necessarily structurally enable.[39] However, if the legal system includes mostly evaluative standards, as is the case with ISDS, adjudicators can have the broadest possible discretion to determine the meaning of the legal obligation and, thus, in theory, can choose to view any claim as a plausible claim under uncertainty.[40] From this perspective, the determination of which claim can be defined as frivolous is always linked to the scope and nature of the applicable legal standards. In the context of evaluative standards, the vision of tribunals may not necessarily correlate with states’ expectations. For instance, under the current dismissal rules, it is difficult to imagine how tribunals could dismiss the investor’s claim as manifestly lacking merit or unfounded, if the claim exaggerates the amount of compensation, as proposed by Indonesia.

In the ISDS context, uncertainty and inconsistency is particularly exacerbated by the absence of corrective mechanisms that can limit arbitral discretion. Wolfgang Alschner examines three corrective mechanisms in the ISDS context, namely the states’ interpretative statements, jurisprudence constante, and the annulment procedure under the ICSID Convention. He concludes that “[s]haky legal principles rather than explicit legal rules […] govern the consequences of the three corrective mechanisms and leave large discretion to subsequent interpreters.”[41] Alschner further explains that “decisions found to be incorrect by a significant number of tribunals have ‘survived’ this collective assessment and continue to be cited in future cases.”[42]

The question of frivolous claims in international investment law is both procedural and substantive.[43] Accordingly, I suggest that the question of “what” should come before the question of “how” in the ISDS context due to persisting uncertainty of the applicable legal standards and the tendencies of tribunals to interpret the newly negotiated treaties in light of the old cases i.e., in a broad fashion.[44] In other words, given how the corrective mechanisms to manage uncertainty function, tribunals (absent any guidance) are not necessarily best equipped to fulfill the function of identifying frivolous claims. If governments choose to settle the ex ante criteria for identifying frivolous claims, they should keep in mind competing priorities not to discourage potentially unsuccessful yet plausible claims that can alter the existing law, and, potentially, bring positive change within a legal system.[45]


Governments should begin with the “what” question to determine what they count as “frivolous” in investment law, and only after such determination should they turn to the “how” question, by reviewing possible ways to discourage such claims. It would be a mistake for governments to reduce the issue of frivolous claims to the issue of procedure as if it is a simple matter of mechanical determination not worthy of political consideration. Such an approach can create a situation when the expectations of some governments and tribunals may not match in defining the meaning of frivolous claims in the ISDS context. As argued above, governments should identify the spectrum of claims that they view as frivolous. Such an approach will not cure all the problems of the ISDS mechanism but can contribute to greater clarity and predictability in international investment law.


Ksenia Polonskaya is an assistant professor in the Department of Law and Legal Studies at Carleton University.


[1] Merriam-Webster Dictionary. (n.d.). frivolous. https://www.merriam-webster.com/dictionary/frivolous>.

[2] UN General Assembly. (2020, January 15). Possible reform of investor-state dispute settlement (ISDS) security for cost and frivolous claims. A/CN.9/WG.III/WP.192, para.19.

[3] Ibid.

[4] UN General Assembly. (2019, July 11). Submission from the Government of Turkey ) A/CN.9/WG.III/WP.174 At 3. UN General Assembly. (2019, March 4). Submission from the Government of Morocco, A/CN.9/WG.III/WP.161, Para. 9. UN General Assembly. (2019, July 31), Submission from the Government of Costa Rica, A/CN.9/WG.III/WP.178 at 5.

[5] Kulick, A. (2016). Reassertion of control over the investment treaty regime. Cambridge University Press.

[6] WGIII supra note 2, at para.28.

[7] Ibid.

[8] History of the ICSID Convention, Vol II–1 at 276.

[9] Ibid., at 352.

[10] Ibid., 258.

[11] International Centre for Settlement of Investment Disputes. (2004). Possible improvements of the framework for ICSID arbitration. https://icsid.worldbank.org/sites/default/files/publications/Possible%20Improvements%20of%20the%20Framework%20of%20ICSID%20Arbitration.pdf. Polonskaya, K. (2017). Frivolous claims in the international investment regime: How CETA expands the range of frivolous claims that may be curtailed in an expedient fashion. Asper Review of International Business and Trade Law, 17(1) at 20.

[12] Rules of Procedure for Arbitration Proceedings, at Rule 41(5).

[13] SIAC Arbitration Rules, at Rule 29.

[14] Methanex v USA, Final Award of the Tribunal on Jurisdiction and Merits (2005) at para 3. Vandevelde, K. (2009). U.S. international investment agreements. Oxford University Press, at 71 (“U.S. officials regarded the Methanex claim as an especially egregious example of a frivolous claim”).

[15] Polonskaya, K. (2020). Frivolous and abuse of process claims in investor–state arbitration: Can rules on cost allocation become solution? Journal of International Dispute Settlement, 11 589, at 594.

[16] Comprehensive Economic and Trade Agreement between Canada and European Union at Articles 8.32 and 8.33.

[17] Polonskaya supra note 11, at 32-33.

[18] CETA, supra note 14, at Article 8.32 and 8.33.

[19] Alexandra Lahav, In Praise of Litigation Couverture (Oxford University Press, 2017).

[20] Standing v. British Columbia (Minister of Forests, Lands and Natural Resource Operations), 2018 BCSC 1499 at para 1.

[21] Ibid. para 2-3.

[22] Ibid. para 30.

[23] ICSID History, supra note 8, at 278.

[24] Sornarajah, M. (2015). Good faith, corporate nationality and denial of benefits. In A. Mitchell, M. Sornarajah, & T. Voon, Good faith and international economic law. Oxford University Press, at 117.

[25] Trans-Global Petroleum, Inc. v. Hashemite Kingdom of Jordan ICSID Case No. ARB/07/25, (2008, May 12), at para. 105.

[26] UN General Assembly. (2021, January 12). Summary of the inter-sessional meeting on investor–state dispute settlement (ISDS) reform submitted by the Government of the Republic of Korea. A/CN.9/WG.III/WP.214, para.19.

[27] E.g., Investment Protection Agreement Between the European Union and Its Member States, of the One Part, and the Socialist Republic of Vietnam, of the Other Part (2019) at article 3.44.

[28] RSM Production Corporation v Grenada (2010), Award ICSID Case No. ARB/10/6 at para 6.1.1.

[29] WGIII supra note 2, para.24. [Emphasis original]

[30] Polonskaya supra note 11, at 26-31.

[31] Reisman, M. (2015). Canute Confronts the Tide: States versus Tribunals and the Evolution of the Minimum Standard in Customary International Law. ICSID Review, 30(3), at 617.

[32] Polonskaya supra note 15, at 595

[33] Ibid.

[34] Renco Group v Peru, Decision As to the Scope of the Respondent’s Preliminary Objections Under Article 10.20.4 (2014) at paras. 205–206.

[35] Indonesia. (2019). Possible reform of Investor-State dispute settlement (ISDS) Comments by the Government of Indonesia, A/CN.9/WG.III/WP.156, para. 8.

[36] UN General Assembly. Possible reform of Investor-State dispute settlement (ISDS) Submission from the Government of South Africa, A/CN.9/WG.III/WP.176, para.71.

[37] Ibid.

[38] Kennedy, G. J. (2020). The Alberta Court of Appeal’s vexatious litigant order trilogy: Respecting legislative supremacy, preserving access to the courts, and hopefully not to a fault case comments. Alberta Law Review, 58(3), at p. 739.

[39] Ibid.

[40] Polonskaya, supra note 11, at 23.

[41] Alschner, W. (2019). Correctness of investment awards: Why wrong decisions don’t die. The Law and Practice of International Courts and Tribunals, 18(3), p. 345.

[42] Ibid.

[43] Polonskaya, K. (2020). Metanarratives as a trap: Critique of investor–state arbitration reform. Journal of International Economic Law, 23(4), 949.

[44] Alschner, supra note 41.

[45] Lahav, A. D. (2017). In praise of litigation. Oxford University Press.