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Investor-state tribunals rarely decide everything at once. Bifurcation in ISDS — splitting a case into separate phases — lets a tribunal resolve jurisdiction before the merits, or liability before damages. For respondent states, it offers a chance to end an expensive case early. For investors, it can mean serious delay. This article explains how the mechanism works, how tribunals decide contested requests, and how both sides approach the question strategically.
What Bifurcation in ISDS Means
Bifurcation divides an arbitration into sequential stages. The most common split sends preliminary objections to jurisdiction into a first phase, with the merits heard only if the claim survives. The second common split separates liability from quantum, so the tribunal values the loss only after finding a breach. Occasionally, tribunals even trifurcate, taking jurisdiction, liability, and damages in three separate rounds.
The logic is straightforward. If the tribunal lacks jurisdiction, nobody should pay for a merits phase that never needed to happen. However, the savings only materialize when the split issue is genuinely separable. Otherwise, the parties end up arguing the same facts twice.
Why Respondents Push for Bifurcation in ISDS
Respondent states typically raise a familiar menu of objections: the claimant does not qualify as a protected investor, the asset is not a covered investment, the claim falls outside the treaty’s consent, or a time bar applies. If any of these succeeds, the case ends at a fraction of the cost of full proceedings. Therefore, states usually ask the tribunal to hear the objections first.
Investors generally resist. A bifurcated schedule can add substantial time to an already long process, and delay itself pressures a claimant whose treasury is finite. Moreover, where jurisdictional questions overlap with the merits — as they often do in expropriation and treatment claims — bifurcation forces witnesses and experts to appear twice on connected facts.
Claimants are not passive in this contest. They typically argue that the objections are intertwined with the merits, propose a single consolidated calendar, and remind the tribunal that it can join any objection to the merits without prejudging it. In addition, a well-prepared claimant addresses jurisdiction squarely in its first memorial. That way, even a bifurcated schedule starts from a record the claimant has already shaped.
How Tribunals Decide Bifurcation in ISDS Cases
Tribunals across institutions weigh a consistent set of factors. First, is the objection serious and substantial rather than tactical? Second, if upheld, would it dispose of the whole case or at least a substantial part of it? Third, are the split issues so intertwined with the merits that a separate phase would save nothing? The 2022 ICSID Arbitration Rules now address bifurcation expressly and put requests on tight timelines, a change designed to curb purely dilatory motions. Our overview of ICSID procedure places these steps in the wider arc of a case.
Under the UNCITRAL Arbitration Rules, the position is similar in substance. The tribunal may rule on jurisdictional pleas as a preliminary question or join them to the merits, exercising its broad discretion over procedure. In short, no rulebook guarantees a split; the movant must earn it.
Timing matters as much as substance. Requests for bifurcation in ISDS cases usually surface at the first case management conference, alongside the procedural calendar. A tribunal that denies the request is not endorsing jurisdiction; it is simply joining the objections to the merits. Furthermore, tribunals retain a quiet sanction: a party that pursued a hopeless split can feel the consequences later in the allocation of costs.
A Real Example: Philip Morris v. Australia
The dispute over Australia’s tobacco plain-packaging laws shows the mechanism at full power. The tribunal agreed to hear Australia’s preliminary objections separately. As a result, the case ended in 2015 without any merits phase: the tribunal found the claim inadmissible as an abuse of rights, because the investor had restructured into the treaty’s protection at a time when the dispute was already foreseeable. Australia never had to defend its legislation on the merits. The case remains the standard illustration of why respondents treat bifurcation in ISDS as a first-order strategic question rather than a housekeeping detail.
Procedural choices like this shape outcomes across investor-state practice. For a longer illustration of how strategy and procedure interact over a case’s life, see our analysis of the Chevron v. Ecuador ISDS case.
Liability and Quantum: The Other Common Split
Damages phases are expensive. Valuation experts, discounted cash flow models, and competing datasets consume enormous effort. Consequently, many tribunals decide liability first and reach quantum only if a breach exists. A liability award also opens a natural settlement window, since both sides can finally price the case with some confidence.
Nevertheless, this split has costs of its own. The record goes stale between phases, hearings must be reassembled, and valuation-date questions can become tangled when years pass between breach and award. Parties should weigh those risks before treating a quantum split as the obvious choice.
ISDS tribunals therefore look for a concrete payoff before they separate liability from quantum. For example, a genuinely disputed causation question can justify the split, because a finding for the state ends the case. By contrast, where liability is barely contested, bifurcation merely postpones the inevitable valuation fight and adds a second hearing for no benefit.
Practical Considerations Before Requesting a Split
Success rates vary from tribunal to tribunal, and no two treaties or records are alike. Nevertheless, parties weighing bifurcation in ISDS proceedings can improve their odds by preparing the request with the tribunal’s incentives in mind:
- Tie the objection to a dispositive outcome. Tribunals split cases for objections that can end them, not trim them.
- Show clean separation. Demonstrate that the preliminary issue rests on facts distinct from the merits.
- Present a realistic calendar. Quantify the time and cost the split would actually save.
- Anticipate the intertwinement argument. Claimants will say everything overlaps; be ready to prove otherwise.
- Mind the optics. A request that looks purely dilatory can color the tribunal’s view of later applications.
Speak With Experienced ISDS Counsel
Whether to seek or resist bifurcation in ISDS is a strategic decision with consequences that run through the entire case. Our international investment law practice advises investors and states on treaty claims from the first procedural order to enforcement. If a dispute is taking shape, contact our Miami office to talk through the strategy early.