As the telecommunications sector continues to undergo changes caused by privatization, liberalization, and convergence, it becomes increasingly important for countries and regulators to have an effective and efficient dispute resolution system1. The failure to resolve disputes quickly can limit competition, cause delays in the introduction of new services and infrastructures, block or reduce investment in the sector, and impede liberalization and development of the sector.2 The appropriate dispute resolution mechanisms, however, vary depending on the stage of a country’s telecommunications market and regulatory development, regulatory framework and approaches, as well as general business culture.

The following sections review the various dispute resolutions mechanisms employed in the telecommunications sector, with particular emphasis on regulatory adjudications and the various mechanisms of alternative dispute resolution. In addition, Section tracks the systems of dispute resolution available to foreign telecommunications operators, mainly international investment disputes and trade dispute arbitrations.

Overview of the main types of disputes in the telecommunications sector

Disputes in the telecommunications sector generally arise out of various circumstances. However, disputes with the greatest impact on telecommunications investment and growth typically relate to: (i) interconnection; (ii) relations between service providers and with consumers; (iii) liberalization; (iv) foreign investment and trade; and (v) radio frequency use.

Interconnection disputes are the most prevalent type of disputes between service providers, as operators of all different types of access networks (e.g., fixed-mobile, wire line-wireless) must be able to interconnect with each another. (See Box 7-8.) Many aspects of the interconnection relationship involve key policy considerations for the telecommunications sector; therefore, most regulators consider it important to maintain some form of regulatory oversight of the negotiation and implementation of interconnection arrangements In recent years, for example, an increasing issue regarding mobile interconnection has been the often high rates charged by mobile providers to terminate traffic on their networks. As a result, many regulators have made determinations that mobile providers have a monopoly over their networks and should be regulated. Regulators have opted between various mechanisms in order to strike an appropriate balance between the need to protect the interests of new market entrants while also leaving room for parties to negotiate agreements on their own. Among such approaches are: (i) prescribing interconnection arrangements on an ex ante basis; (ii) establishing interconnection guidelines; (iii) approving reference interconnection offers (RIOs) or model interconnection agreements; (iv) policing operators with significant market power; and (v) generally overseeing the interconnection process.

Disputes between service providers and consumers are also common and occur in every jurisdiction. These conflicts principally stem from the consumer’s lack of bargaining power or the absence of competitive options to the incumbent operator. The main type of disputes arising between consumers and service providers derive from the following causes: (i) service charges; (ii) billing; (iii) payment of charges; (iv) “slamming”;3 (v) quality and terms of service; (vi) violation of privacy; and (vii) false or deceptive advertising.4 To ensure effective resolution of consumer disputes, regulators are using a variety of mechanisms, ranging from requiring service providers and consumers to initially resolve disputes themselves (the case of the United States and Botswana); using ombudsmen type institutions (as the telecommunications industry Ombudsman in Australia); and even employing the broadcast media (as is the case of the Nigerian “Consumer Parliament” evidences). For a further description of these consumer protection mechanisms see section 7.3.2.

In addition, disputes also may arise as a consequence of introducing competition into the telecommunications market. The liberalization process often undermines the established financial and business interests of incumbent network operators. These liberalization-related disputes generally derive from the incumbent’s desire to protect and maintain its dominant position in the market. Similarly, investment and trade disputes often occur where regulatory reforms or actions diminish the value of private-sector interests. These types of disputes have the potential to internationalize disputes arising between regulators and foreign investors in the telecommunications sector. Investment disputes typically stem from complaints by investors, operators, and service providers about early termination of exclusive rights, licensing of new competitors, new rate-setting structures and changes to licences. Current trends indicate a recent rise in international investment disputes within the telecommunications sector, based primarily on provisions of bilateral investment treaties. Trade disputes in the context of the WTO, on the other hand, are instituted by member states against other member states primarily due to lack of compliance with obligations assumed under the GATS and related documents.

Finally, radio frequency allocation and assignment disputes are dealt with internationally through mechanisms available through the ITU, particularly the Radiocommunications Bureau (ITU-R). Domestically, disputes may arise from interference, licence conditions, and pricing.

Approaches towards dispute resolution

Dispute resolution can be addressed from two separate approaches, namely through official and non-official mechanisms. Governmental authorities, statutory bodies and courts commonly discharge official functions in dispute resolution, their authority deriving principally from the constitutional, legislative and regulatory framework applicable to the telecommunications sector. Non-official dispute resolution – or alternative dispute resolution (ADR) – consists of mechanisms such as arbitration, mediation, and negotiation, where the individuals associated with these processes do not discharge any executive or judicial duties.

A well-resourced “official” sector, utilizing regulatory adjudication and the courts, is crucial to a successful dispute resolution environment. Alternative approaches, however, are often useful to deal with the lack of available regulatory or judicial resources, or where less formal techniques offer particular advantages.5 Therefore, it is important to identify those circumstances in which the use of each mechanism is more appropriate.

ADR mechanisms, such as arbitration and mediation, traditionally have been associated with solving private and commercial disputes, while regulatory adjudication has been understood as best suited for public policy issues. This compartmentalization may be too strict. As the case of interconnection disputes in the United States and Jordan evidence, regulators are increasingly using arbitration tools, either informally or formally. Moreover, in light of the rapid changes in the telecommunications sector, countries such as Saudi Arabia have instituted highly flexible approaches to determine which mechanisms (i.e., mediation, arbitration, or regulatory adjudication) to adopt for resolving specific disputes.6

From a different perspective, other countries, as is the case of the United Kingdom, take the position that ADR techniques can be employed where disputing parties have similar levels of market power, since in that case parties are more likely to negotiate solutions that meet their mutual or on-going needs.7 In such cases, regulatory intervention is more often considered necessary where disparities of market power mean that one party effectively requires the protection of the official sector from abuse of process by the other.8

Thus, when designing and evaluating the role of the official sector in dispute resolution processes, the concern should be:

    • Less about rigid lines between official and non-official sectors, and
    • More about seeking the roles in which the official sector can best use its efforts and presence to assist in the speedy resolution of disputes – and in a manner consistent with regulatory policy, the rule of law, and due process.9

As will be seen in the Sections and, due to differences in social, legal, and commercial traditions the approach for selecting a method of dispute resolution varies considerably between jurisdictions; even with regard to similar types of disputes. The following are certain elements to consider when making such a determination:10

  • Drawing on "non-official” resources

The commercial world’s extensive experience with arbitration and other ADR techniques can help policy-makers and regulators encourage the use of non-official dispute resolution approaches in a regulated industry. Commercial arbitration illustrates how regulators can keep control over important policy issues and also ensure the usefulness of their dispute resolution systems – while easing their workload burdens.

  • Quality control over official and non-official processes

The type of dispute resolution process that is chosen influences what role regulators and courts will play in dispute resolution. Regulatory adjudication and arbitration require court oversight of procedures, because the parties have relinquished control over the outcome to the adjudicator or arbitrator. Regulatory adjudication also may be subject to various levels of “internal” agency and “external” court review for substantive appeal. It is important, however, not to undermine the credibility or timeliness of regulatory adjudication through over-use of review procedures.

The success of voluntary negotiated processes, including mediation, depends on their freedom from official review. Even where doubts exist about the efficacy of voluntary negotiations, regulators may be able to provide incentives for good faith engagement in negotiations instead of imposing substantive decisions.

  • Confidence factors in relying on non-official approaches

There are several important factors in gauging whether non-official dispute resolution approaches are as mature and suitable as regulatory adjudication or court action in any given setting. These factors include how professional the arbitration and mediation boards are, how well developed the arbitration and mediation institutions are, and the effective use of the oversight procedures.

Regulatory Adjudication

Regulatory adjudication refers to the legal powers exercised by regulators pursuant to the resolution of the disputes brought before them. Currently, regulatory adjudication is recognized as the cornerstone of dispute resolution in telecommunications sector. However, regulatory adjudication is a relatively new mechanism since until recently, with the exception of a few countries, regulatory and policy-making responsibilities were concentrated in a single governmental structure. With liberalization and the introduction of competition in the telecommunications market, these functions were separated and regulatory authorities were created and charged with responsibility for overseeing and regulating the telecommunications sector.

In the United States, a country with long-developed administrative tradition, the FCC interprets, coordinates, and adjudicates policy issues, as well as disputes arising out of them. The FCC’s internal processes for dispute resolution include a final decision handed out by a Commissioner or a panel of Commissioners. Such decisions may be subject to internal review by the agency within a prescribed period, and can also be appealed before the U.S. Court of Appeals. In Canada, the CRTC follows court-like dispute settlement procedures. An Industry Committee consisting of parties and experts also has been established to resolve most telecommunications issues. Recourse to the CRTC is taken only when consensus cannot be reached by the Committee. In the United Kingdom, Ofcom follows a methodology for dispute settlement that involves the placing of evidence into a complaint before initiating a formal investigation. Investigation into the complaint involves clear identification of a relevant obligation or abuse under the Competition Act and deadlines are given for settlement of a complaint or dispute.

Many countries with newer regulatory authorities also have empowered such agencies to consider and adjudicate disputes among telecommunications market players. In Morocco, for example, the regulator has been given broad power over interconnection dispute resolution (Box 7-9).

Advantages and disadvantages of regulatory adjudication

When effectively and efficiently applied, regulatory adjudication has certain distinct advantages.

    • It can draw upon the legitimacy of the official sector, as well as the benefits of its enforcement mechanisms;
    • A well-staffed regulatory agency can access staff resources with different expertise (e.g., technical, economic, and legal) to provide input into decisions;11
    • The adjudication process can give the public a channel to provide input into the decision-making process.

However, the potential drawbacks to regulatory adjudication can be significant, and thus warrant paying close attention to the alternative approaches of dispute resolution. Some of these disadvantages are the following:

    • It can result in lengthy and cumbersome procedures;
    • Possibility of misuse of regulatory intervention by market-players, particularly incumbent operators, as part of a strategic response in order to hinder competitive conditions;
    • Legislative mandates dealing with issues of sector development, such as convergence, can reduce the regulator’s flexibility in confronting significant disputes and sector issues; and
    • A tendency of regulatory bodies to fragment or compartmentalize decisions into separate proceedings, as regulatory adjudication is the response of a single regulatory body, based on a narrow jurisdictional mandate and limited enforcement powers, to individual claims defined by parties on specific legal grounds.

Alternative Dispute Resolution

Alternative Dispute Resolution (ADR) encompasses different processes and procedures directed at settling disputes by means other than litigation and administrative adjudication. ADR methods include arbitration and mediation, and several other hybrids and variations.12

ADR is based on the general premise that, where possible, it is more beneficial for private parties to settle disputes by private process and negotiated agreement as opposed to contentious litigation or regulatory adjudication. These methods have the benefit of preserving and, in some cases even enhancing, business relations that otherwise may be negatively affected by an adversarial process.13 Moreover, ADR can aid in saving costs associated with litigation. ADR procedures may either take the place of formal adjudication or complement adjudication and litigation by producing settlements within those fields. Flexibility is thus another principal advantage of ADR, as it usually allows parties to address different kinds of disputes through different procedures and approaches.

These mechanisms also may serve to alleviate the burden on official institutions in charge of settling disputes, by redirecting many types of disputes away from traditional courts and regulatory authorities. In Europe, for instance, the EU Framework Directive explicitly contemplates that national regulatory authorities should encourage the use of ADR mechanisms, such as mediation, where they are available.14 Pursuant to such initiatives, the Office of the Telecommunications Adjudicator was created in the United Kingdom to facilitate swift implementation of the processes necessary to enable competitors to gain access to the local loop. The Telecommunications Adjudicator also has the function of bringing all parties together to find prompt, mediated resolution of working-level implementation disputes. The scheme is a private contractual mechanism for dispute resolution agreed between the parties, and in this respect is similar to arbitration.15

ADR procedures fall into three primary categories: (i) negotiation; (ii) mediation and conciliation; and (iii) arbitration.


Negotiation is the premise upon which all consensual ADR activity is based. It is a consensual process designed to allow parties to arrive at a mutually agreeable solution. Negotiations are usually held on a confidential basis, and “without prejudice” to any legal recourse to which the parties may have a right. Negotiation differs from mediation because no third-party facilitator is usually involved. This provides additional flexibility because parties can generally schedule the process of negotiations on their own, avoiding adversarial processes present in other ADR mechanisms.

Mediation and Conciliation

Mediation is a consensual process involving a neutral third party whose role is to facilitate resolution of the dispute. Both regulators and private individuals not involved in the regulatory process may act as mediators.

In discharging its duties, the mediator must initially solicit the views of the parties on the nature of the dispute and its key issues. The objective here is to seek potential points of agreement between the parties and propose constructive “win-win” solutions. The mediator often serves as a neutral third party that conveys views of the dispute between the parties to facilitate communication, and potentially develop a direct negotiation. At the appropriate time in the mediation process, the mediator may be able to suggest potential solutions or views of the underlying issues to both sides. For example, in Japan, mediation is used to resolve interconnection disputes.

Conciliation is closely related to mediation, but involves more formal procedures. Here, the parties do not meet together, as the conciliator assumes the roll of an intermediary or liaison. The conciliator’s primary function is to communicate each disputant’s position to the other, relay settlement options, and sometimes offer nonbinding advice in an effort to bring the sides closer to settlement.16

The United Nations has long encouraged conciliation and mediation to resolve disputes among states, and has recently recognized that mediation and arbitration are becoming common in commercial practice. On 19 November 2002, the United Nations General Assembly adopted a resolution encouraging all member states to give due consideration to enacting the Model Law on International Commercial Conciliation, which had been completed and adopted by the United Nations Commission on International Trade Law (UNCITRAL). See Box 7-10 below for the UNCITRAL Model on International Commercial Conciliation.

Advantages and disadvantages of mediation

Mediation has many benefits. These include the following:17

    • It may preserve long-term relationships upon which the telecommunications industry is based;
    • Mediation costs are usually lower than adjudication or litigation;
    • Parties can select a compatible mediator, usually without regulatory intervention;
    • Mediation processes are more structured than negotiation (specific rules and procedures are available);
    • Professional organizations are available to assist;
    • Mediation allows the selection of a mediator with specific technical experience on the issue;
    • Mediation facilitates resolution without public adversarial processes; and
    • In addition to regulatory support, the benefits of mediation have led to judicial support for established mediation services and institutions.

Notwithstanding such benefits, mediation has certain drawbacks:

    • The success of this method depends on the willingness of the parties to work together in good faith; and
    • Mediation can also be subject to abuse by parties seeking to protract a dispute or obtain information that may be relevant at another stage of a dispute resolution process.

Factors for success

Various factors can contribute to the success of mediation:

    • The parties involved should be committed to arriving at an agreeable outcome;
    • Mediators and the parties must be able to establish a successful rapport;
    • While the parties have ultimate control over their participation in the process, the mediators’ management of the discussion makes it more structured than negotiation;
    • By diplomatic “reality checking” on the positions and assumptions of the parties, the mediator can enable parties to ease back from rigid, embedded, and unrealistic positions;
    • The mediator plays a critical role by focusing parties on their underlying interests rather than the abstract merits of their positions; and
    • Good mediators demonstrate patience, insight, and psychological finesse to convince parties to modify their entrenched positions.

Successful mediation in the regulatory context can depend on the role of regulatory officials. Involving regulatory staff as mediators, or having a neutral mediator report to the regulator, can discourage disputing parties from taking unreasonable positions during the mediation process. In some cases, however, involvement of regulatory staff may compromise the confidentiality of the dispute resolution process. Such confidentiality is a key element in the success of mediation because parties may wish to avoid potentially self-damaging consequences of changing their positions on important regulatory issues. In these cases, it may be preferable to use an outside neutral mediator, who can be trusted by both parties to maintain the confidentiality of the mediation process.18


Arbitration is a dispute resolution method that takes the place of conventional litigation. Through this consensual process, parties agree to submit a dispute to a neutral third party arbitrator or panel of arbitrators for resolution. The commitment to arbitrate may arise at the outset of commercial agreements through arbitration clauses that bind parties to seek arbitration for future disputes or it may derive from legal instruments or international agreements. Arbitration may also be chosen as an alternative to litigation or regulatory adjudication when a dispute arises.

Arbitration is of particular importance in the international context, since arbitral awards are enforceable in a large number of different countries under the provisions of the New York Convention of 1958 on the Recognition and Enforcement of Arbitral Agreements and Awards.19

Advantages and disadvantages of arbitration

Arbitration has several advantages. First, since it is generally a private or non-official procedure, it can better assure privacy and secrecy, protecting against disclosure of a party’s confidential business information. Parties can agree on the confidentiality of the information and documents disclosed during arbitration proceedings. In addition, the fear of a negative precedent may be reduced due to the private nature of ADR mechanisms.

The flexibility of ADR mechanisms allows parties to combine arbitration with informal negotiations or mediation, thus resolving their dispute in a manner similar to an assisted negotiation. This helps foster a continuing working relationship which is valuable if the parties’ dealings require ongoing interaction.

Arbitrations can sometimes take less time than conventional litigation or regulatory adjudication because of several factors, including the following:

    • ability to design and schedule the steps needed at an early stage of the proceedings;
    • ability to reduce steps that are otherwise mandatory in conventional litigation; and
    • increased availability and flexibility of arbitrators.

From industry’s perspective, the potential shorter timeframe offers commercial advantages, including reduced interference with business objectives. In the case of international arbitration, a considerable advantage is the availability of more neutral forums for adjudicators than parties would find in either party’s national courts.20

Among some of the potential drawbacks of arbitration are the following:

    • Arbitration is an essentially adversarial process, thus when used in isolation, it generally does not create “win-win” solutions or improve relationships;
    • Arbitration may be more expensive than litigation when the issues in dispute are complex and a considerable amount of time is required to hear the dispute; and
    • Arbitration proceedings cannot be consolidated into one action without the consent of all the parties, thus they create a risk of contradictory decisions on closely related issues.

Using arbitration in telecommunications disputes

Although arbitration as a dispute resolution tool is generally agreed upon by the parties involved in a specific contractual relation, in certain instances arbitration is compulsory or encouraged either by regulatory policy or legislation. For example, in certain countries internal regulation require interconnection disputes to be resolved through arbitration. Such is the case in Brazil, where disputes pertaining to the application and interpretation of the regulations during interconnection contract negotiations must be resolved by Anatel through arbitration, which is conducted by an Arbitration Council composed of three members appointed by the President of Anatel. The arbitration process begins when a party submits a petition to the President of the Council. The petitioning party then must submit all relevant information and documentation within the next 10 days. The Council is required to arbitrate the interconnection conditions within 15 days.21

In some countries, the regulatory framework adopts a more flexible approach and allows disputants to select the type of dispute resolution method. This is the case of interconnection dispute resolution in Jordan, where after a dispute continues 20 working days after the parties have begun negotiating a solution, the parties may either: (i) ask the regulator to intervene; or (ii) seek the assistance of an arbitrator. The consent of both parties is necessary to send a dispute to arbitration, while a dispute may be referred to the regulator for resolution on the request of only one party. The Jordanian interconnection dispute resolution process also explicitly provides that referring a dispute to arbitration, or to the regulator for resolution, does not prejudice the rights of the parties to seek remedies through the courts.22

In addition, arbitration is also used in the context of consumer disputes in the telecommunications sector. For example, some privately-run ADR bodies have created specific programs resolving such disputes. This is the case of the The American Arbitration Association (AAA) Wireless Industry Arbitration Rules.23

Factors for success

Numerous issues arise out of the use of arbitration mechanisms in the telecommunications regulatory context, including: (i) the role of the regulatory authority in the arbitration process; (ii) whether the arbitrators will be regulatory officials or independent persons approved or appointed by the regulatory authority; and (iii) whether the results of the arbitration proceeding will be subject to public comment and ultimately approved by the regulatory authority.

Because of this, the use of arbitration techniques and tools in the telecommunications sector requires addressing several important public policy concerns such as:24

    • potential limitations in the scope of proceedings (i.e., dealing with the precedent-related aspects of a dispute or with implications for related issues);
    • potential concerns about the enforceability of proceedings and about initiatives of the regulator to protect the integrity of its own jurisdiction at the expense of the credibility of the arbitration process;
    • concerns about the expertise and experience of the arbitrator(s);
    • concerns about the potential for conducting protracted proceedings in a quasi-judicial context without taking full advantage of opportunities for procedural streamlining;
    • concerns about confidentiality-related considerations versus the interest in transparency that is usually characteristic of public decision-making;
    • concerns about the legitimacy of a private dispute resolution process as a venue for resolution of issues affecting public policy and government interests;
    • concerns about costs (which can be similar to concerns about litigation); and
    • concerns with respect to a party’s limited rights of appeal.

Where these concerns are successfully addressed, it may be possible to structure credible, efficient, and effective alternatives to regulatory agency adjudication through arbitration, thus possibly improving the overall quality of dispute resolution in the telecommunications sector.24

Disputes Involving Foreign Operators

The privatization and liberalization trends that have characterized telecommunications regulations in the past decade have introduced a steady flow of foreign investment into the telecommunications sectors of many countries. However, such processes also may give rise to disputes between investors of telecommunications companies and regulatory agencies or ministries responsible for regulatory reform.

This section addresses two specific types of disputes resolution regimes directly related to foreign investment in the telecommunications sector, namely: (i) international investment disputes; and (ii) international trade disputes.

Investment disputes

Investment disputes tend to arise when the process of regulatory reform negatively affects the value of foreign investors’ stakes in the sector. Among the examples of such regulatory changes are: (i) the termination of an incumbent operator’s monopoly; (ii) rate rebalancing; (iii) mandatory interconnection; (iv) the introduction of a new rate-setting structure; and (v) changes in the terms and conditions of concessions or licences.25

The legal basis on which investors may initiate a claim against the government varies from jurisdiction to jurisdiction. An investor may argue that a government’s actions constitute an unlawful seizure of property or diminish the value of their property rights. Furthermore, investors may claim that the government has not complied with existing legislation or its statutory obligations (e.g., in a rate-setting case, an investor may argue that the government did not take into account certain statutorily required criteria). Such a claim has been made in various cases recently instituted against the Government of Argentina due to price-freezes associated with the emergency economic measures taken in the wake of the 2001 financial crisis.

Claims also may derive from an alleged breach of contract between the investor and the government. In such cases, failure to comply with contractual commitments to conduct regulation of the telecommunications sector in a certain way may serve as a basis for an investor’s compensation claims. These types of disputes may arise in the case of privatization of publicly-owned telecommunications companies, where it is not uncommon for contracts governing the sale of a government-owned stake in a telecommunications operator, to include an exclusivity period and a minimum rate of return, as well as to allow an increase in rates within a certain timeframe.

As an increasing number of countries have dropped foreign investment restrictions, sometimes in conjunction with commitments to open market access under the WTO GATS, it has become common for local operators, including incumbents, to be owned in whole or in part by foreign investors. Disputes arising in this context often become more complicated because they may raise issues of international law, the application of bilateral and multilateral treaties, conflicts between laws in different jurisdictions, and whether the laws of the parent company’s home jurisdiction apply to the dispute.

International investment disputes

International investment disputes (i.e., disputes between states and nationals of different states), may be referred for resolution to the World Bank Group’s International Centre for Settlement of Investment Disputes (ICSID), as well as other centers such as the International Chamber of Commerce (ICC). This may be achieved through: (i) provisions in contracts between governments of member countries and investors from other member countries; and (ii) the operation of local investment laws and bilateral investment treaties.

A vast majority of the claims currently pending before the ICSID were brought pursuant to bilateral investment treaties. This reflects a trend whereby the ICSID caseload has shifted in recent years away from disputes brought pursuant to individual investment contracts toward cases invoking an international investment treaty.26

Relevant aspects of bilateral investment treaty based disputes27

Investment treaties typically provide foreign investors with the ability to bypass local and national legal systems, in favour of international arbitration, as they rarely require investors to exhaust their domestic legal remedies as a prerequisite to pursuing an international claim. This holds true even where contracts between an investor and a state expressly limit recourse to local dispute settlement options. For example, in the dispute between the Government of Ghana and Malaysia Telekom (further developed in Box 7-12) the arbitral tribunal upheld its jurisdiction to hear treaty claims, notwithstanding the fact that the contract in question provided for different means of dispute resolution.

Thus, once concluded, investment treaties containing open offers to investor-state arbitration open the door for foreign investors to take their claims out of the local legal system. Proponents of such mechanisms often describe them as safety valves that operate in the event that foreign investors may not be able to receive a fair hearing in a host government’s courts.

In addition, investment treaty arbitration also insulates proceedings from extensive review by local court systems. Arbitrations under ICSID rules, for example, are exempt from the supervision of local courts, with awards subject only to an internal annulment process. Meanwhile, arbitrations under other sets of rules may be subject to limited challenge in domestic courts. This is evidenced in a case instituted by France Telecom against Lebanon were appeals were brought before the Swiss courts. Such review will typically be circumscribed by laws designed for ordinary commercial arbitrations, which, as a result, may accord a higher degree of deference to the findings of the arbitral tribunal.

Furthermore, investment arbitration can be plagued by lack of consistency in the interpretation of the substantive provisions of investment treaties from one case to the next. Thus, tribunals can, and have, reached widely divergent conclusions in parallel cases.28 Governments can take steps during treaty drafting to minimize some of these problems, by including rules for the consolidation of related claims under the jurisdiction of a single tribunal, thus reducing the risk that parallel proceedings will lead to divergent rulings.

Hence, governments acceding to investment treaties should be aware that these agreements may serve to internationalize disputes that arise between regulators and foreign investors in sensitive sectors, including telecommunications. In such cases, foreign investors may bypass domestic legal systems in favour of international dispute resolution forums.

International investment disputes in the telecommunications sector

The number of international investment disputes has increased in the past years, including telecommunications disputes.29 Prior to August 2004, merely one telecommunications-related arbitration proceeding had been instituted before ICSID.30 In the last year alone, four separate disputes between telecommunications sector participants and various States have been registered before ISCID.31

Out of these five telecommunications-related cases currently before the ICSID, three were brought against the Argentine Government,32 based on claims that the foreign investors are entitled to compensation for losses derived from emergency measures adopted during the 2001 financial crisis, mainly related to price freezes. For example, in the case of Telefónica S.A. v. Argentine Republic, investors are alleging that the emergency measures amounted to the expropriation of their investments, and are seeking monetary compensation for their damages. These cases evidence the risk, noted above, of similar disputes being resolved by separate tribunals operating in parallel, thus raising the prospect of a succession of different rulings.

The following Box 7-11 provides a short summary of certain telecommunications-related investment disputes before the ICSID.

Box 7-11: Telecommunications-related Investment Disputes Currently Before the ICSID

    • Telefónica S.A. v. Argentine Republic. Telefónica S.A., which provides basic telephone and long-distance service in Argentina, filed a claim alleging that the Argentine Government partially expropriated its investment following the imposition of emergency measures during the recent Argentine financial crisis.33 Telefónica S.A. asserts that a freeze in service tariffs imposed by the Argentine Government, coupled with the 70 percent currency devaluation, cost the company US$3.8 billion.34 As of September 15, 2005 no decision had been issued in this dispute.
    • Telenor Mobile Communications v. Hungarian Government. The Norwegian firm Telenor Mobile Communications has registered a claim against the Hungarian Government in relation to Telenor's subsidiary Pannon GSM, which has a cellular telephone concession in the eastern European state. Telenor’s ICSID claim was brought pursuant to the Norway-Hungary bilateral investment treaty and seeks to challenge regulatory rate-setting measures imposed on Pannon by the Hungarian Government.

In addition, several other telecommunications-related investment disputes have been brought to arbitration outside the scope of ICSID. As of April 2004, at least four telecommunications-related claims had been conducted outside of ICSID, based upon provisions in bilateral investment treaties in force between the host and investor’s countries. These cases include Ameritech v. Polish Government; Telekom Malaysia v. Government of Ghana; France Telecom v. Lebanon; and William Nagel v. Czech Republic. These proceedings involve claims of expropriation of investments, as in the cases against Lebanon and the Government of Ghana, as well as violations of contractual obligations related to the award of licences (i.e., the cases against the Government of Poland and the Czech Republic).

The following Box 7-12 highlights these proceedings.

Disputes related to international trade: WTO dispute settlement

International trade law is applicable, under certain situations, to disputes within a country’s telecommunications sector. The WTO’s GATS is the principal multilateral trade agreement affecting the provision of telecommunications services. In addition, a series of related documents contain specific commitments pertaining to the opening and regulation of telecommunications markets: (i) the Fourth Protocol to the GATS Agreement; (ii) the Schedules of Specific Commitmentsof Individual GATS Signatories; and (ii) the WTO Reference Paper, which was included in the commitments of most signatories.

In many cases, these obligations are applicable to telecommunications disputes arising in GATS signatory countries. An international trade dispute arises when one country adopts a trade policy measure or takes some action (e.g., interconnection rate regulation) that one or more WTO members consider to be in breach of pre-existing WTO agreements, or to be a failure to comply with validly acquired obligations. In such cases, WTO members have agreed to use the multilateral system of dispute settlement, rather than take unilateral action.

The following Figure 7-F is a diagram of the dispute resolution procedure before the WTO:

Figure 7- F: WTO Dispute Resolution Procedure

Source: WTO available at

The main objective of WTO dispute resolution proceedings is to settle disputes, through consultation if possible.35 To date, only one telecommunications case has been before a WTO Dispute Settlement Body (DSB) for resolution, the U.S.-Mexico case. In that case, the United States argued that Mexico had failed to comply with its commitments and obligations under the GATS, specifically it had failed to: (i) ensure that Telmex provided interconnection to U.S. cross-border basic telecommunications suppliers on reasonable rates, terms and conditions; (ii) ensure reasonable and non-discriminatory access to, and use of, public telecommunications networks and services for U.S. basic telecommunications suppliers; and (iii) provide national treatment to U.S.-owned commercial agencies. The panel’s report on “Mexico – Measures Affecting Telecommunications Services”, later adopted by the DSB on 1 June 2004, principally sided with the U.S. position. Nevertheless, following its adoption the parties notified the DSB that they had arrived at a mutually agreed solution to the conflict by which Mexico would, within a 13 month period: (i) adopt revised International Long Distance Rules eliminating the “uniform settlement rate” and “proportional return” systems in force at the time; and (ii) implement a regulation to allow the resale of international long distance public switched telecommunications service.36 For further detail on this case see Chapter 3, Section 3.2.

Other telecommunications-related disputes between WTO Members have been under discussion and at least two cases have nearly come to the WTO but have been settled through purely bilateral channels, including: (i) a dispute between the United States and Japan on interconnection; and (ii) a dispute between the United States and the European Communities on standards for licensing mobile services.

Under WTO rules, individual service providers lack “standing” to seek remedies through the GATS dispute resolution procedures. As such, typically, the service provider’s country of origin puts pressure on another country’s government to comply with its GATS obligations. These mechanisms have the potential of turning what could initially be characterized as a domestic dispute (e.g., about licensing or interconnection) into an international trade law dispute.

Practice Notes

Reference Documents

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