Consequences of incorporation/annexation of territory for the spatial scope of application of investment treaties

As China emerges as a prominent economic powerhouse and a key stakeholder in the international economic legal order, academic discourse beams the searchlight on its approach to international investment law. While discussions often center on the “external adjustment perspective” and explicate China’s participation in international investment law by analyzing different iterations of Sino-Foreign investment treaties, a noteworthy yet underexplored inquiry pertains to how Chinese domestic legal frameworks assimilate and repurpose investment treaty norms. This article elucidates China’s investment treaty policy through the lens of the “domestication of International Economic Law”, which is a new and significant theoretical development under current “de-globalization” challenges. It delves into how China’s domestic legal constructs pertaining to investment treaties and arbitration subtly but significantly discourage foreign investors from initiating investment treaty arbitration, forming an integral part of China’s investment treaty policy. Essentially, the dual-track approach arises from China’s simultaneous need to actively engage in the investment treaty regime to reap practical benefits, while maintaining deep-seated ideological and political reservations towards investment arbitral claims. This article explores the Chinese experience as a contributor to enhancing the understanding of how domestic-level legal framings may have implications for international investment law and international adjudication in the context of the domestication of IEL. It also juxtaposes China’s approach towards international investment law with its participation in general international law, unveiling a strategic alignment marked by “selective adaptation” to international norms. Essentially, China’s approach to international law mirrors its consistent diplomatic strategy.

There is extensive literature on the implications of the investment treaty regime for public interest regulation. However, little systematic attention has been paid to the capacity of states to make investment treaties and the obligations states can or cannot agree to under those treaties in light of their public interest obligations. This issue is of fundamental importance because both the duty to regulate in the public interest and the capacity to conclude investment treaties are determined by constitutions and general international law. Does a state the constitution of which requires it to act within its constitution and general international law in the public interest have the capacity to conclude investment treaties that directly or indirectly prohibit the performance of that duty? With reference to Ghana, this article argues that the legal source and public purpose of the State's powers prevent it from concluding agreements that directly prohibit public interest regulation or indirectly achieve that effect. Accordingly, it is suggested that the express and implied limitations on the duty to regulate in the public interest placed on investment treaty making powers of the State must inform the making and interpretation of investment treaties.

The question of relation between the treaty and custom does not present a topic worth particular scientific attention there where the two institutions are not being confused. This does not only occur in Czechoslovak Doctrine of international law, but the reasons for such confusion imprint – in juristic works interpretation – on the functionality of the two institutions a content that is no longer in harmony with the development stage of the contemporary general international law and above all with its peremptory rules. The qualification of international custom as tacit treaty hitherto upheld in Czechoslovak writings of international jurists – is in respect of development essentially in accord with the international law prior to the Great October Socialist Revolution and the actual exposition of the relation between treaty and custom corresponds rather to the period when the coming Soviet power was confronted (also from the power aspect) with the imperialist international legal superstructure. This old conception is, therefore, incapable to express the nowadays indisputable normative reflection of the presence of the socialist social system within the class structure of the international community of states, in the content of its legal order – in the contemporary general international law. The question of the grounds of the origin and binding character of the customary law too little pursued by our juristic works is one of the main reasons for scientifically unfounded favouring of the international treaty to the detriment of international custom – of its functional importance in present day international law. This is in particular evident in the definition of peremptority of profiling rules of the contemporary general international law, their origin and reason for their binding character can not possibly be grasped by treaty form at all. Inapplicable, therefore, are also positivistic interpretations of the origin and binding character of customary law – the interpretation both by fiction of tacit treaty and by means of the so called “recognition” theory – at their time intentionally restricting attention to form which was to be complied with by rule makers, though from such mere form the content of unwritten law can not be known: or just in order to provide room to the positivistic doctrine for speculative deductions about the law as it should be. If it is impossible to elucidate the binding character of treaty rules without taking acount of material sources only sometimes (clausula rebus sic stantibus), then it is necessary to take acount of social and political circumstances – i. e. of material sources – attendant upon the origin of a rule of law and in abstractness expressed in the hypothesis of such rule, in the customary law always. This is indirectly but convincingly corroborated by the most refined of schools of legal formalism – the normativist school – declaring, namely, as a point of its programme material sources an unfit subject of interest of the international law theory, yet in the end the Very same school came to confess its inability to elucidate the origin and reasons for the binding character of international custom just by means of the formal sources of the law. The theoretical foundation for the exposition of the grounds of origin and binding character of international customary law – making use of the material sources of the law – was laid by the Anglo-Saxon law school and so by the school working currently with the instrument of custom even in the domestic field. Decisive for the school is not an a-priori form hypothetically set down by the international law, with which – according to the requirement of the doctrine – practice must comply to enable a customary rule to come into existence, but the very practice of the states is law constituting if it is also general (usus generalis) and if accompanied by awareness of necessity (opinio necessitatis), i. e. by the realisation of unfortunate consequences in the event of different procedure. The Anglo-Saxon interpretation of the grounds of the origin and binding character of the international customary law was adopted by authors of Soviet Doctrine of international law by stating (G. I. Tunkin) that for individual countries it is necessary to regard as binding rules that are recognised by the absolute majority of countries and governed by them, if among them are states of both systems, big powers included. Here the parallel appearing endeavour to bridge the existing dissension in the interpretation of the origin and binding character of international customary law led, however, in the end (most significantly in the instance of G. I. Tunkin) to emphasizing consensus and thereby – conformably to the positivistic school – to the qualification of the international customary law as unwritten treaty; from there is but a little step to absolute favouring of the written treaty against custom, if custom be so described as unwritten treaty. In the Czechoslovak juristic works the treaty is favoured too not only because it is accompanied by an explicit expression of will compared to the hypothetical tacit and moreover presumed expression of will in the instance of custom (whereby treaty character is assigned to custom), but also because written law is attributed a higher value as compared to unwritten law and written treaty rules owing to their precision are designated as more reliable for legal regulation among states, in particular of different systems. The misconception of the value approach is proved by the relation between the customary (i. e. unwritten) general international law as treated in this country on the one hand and its codification on the other which relation is considered to be determined by the principle lex posterior derogat priori. Actually codification does not override any prior generally valid custom regulation, since universality in the acceptance of a codification treaty is as a matter of principle not required for coming in force in the instance of codification. In particular it is impossible Ito split jus cogens by such codification treaty in two particular regulations – one acting among the treaty signatories, the other for the remaining relations, since thereby would be abolished the jus cogens itself which in general international law is invalid ab initio – as also worded in Art. 53 of the Vienna Convention on the Law of Treaties (1969). The purport of codification is, therefore, merely to provide the general international customary law with a binding interpretation otherwise taken care of in the first place by the doctrine. Regarding the rules with which a codification treaty contributes to international law developments, these are of particular validity so long until rendered generally valid by law-creating custom, to which quality the codification treaty could have given just the stabilising impuls, but not the very binding character of legal validity: the same result could be brought about by a universal adoption of the codification treaty which is practically unrealistic. It is therefore wrong to see in the codification primarily a formulation of new rules in written form as currently handed down in the Czechoslovak international law literature, a codification treaty serving in the first place the written exposition of the general international law, a quality not met by newly provided rules in such treaty. Favouring of the treaty on the grounds of its written character to the detriment of custom because of its unwritten form has in the Czechoslovak Doctrine of international law the most serious consequences possibly there where written statements acquire principles of international law in the acts of potentially universal international organisations. To them should allegedly belong the part of general international law or even of a “constitution” wherefrom the validity of concrete rules of the international law is derived, though the very acts of such organisations are but of a recommending nature and the principles contained therein are no rules of international law whatever, being just a generalising interpretation of concrete rules of this law.

Introduction This first chapter focuses on defining the contours of the concept of customary international law in both general international law and international investment law. We will therefore not examine the different notions of custom that have been put forward by scholars and tribunals in other sub-fields of international law, such as international human rights law, international criminal law or international humanitarian law (Section 1.1). The following five questions will be addressed in this chapter. First, we will begin with an analysis of the complex nature of custom as one of the formal sources of international law (Section 1.2). Any book dealing with the sources of law in investor-State arbitration must be solidly grounded on general public international law. The following basic (yet fundamental) questions will be examined in this section: – Where does custom fit amongst the formal sources of international law? – How do customary rules emerge? – Why are customary rules obligatory? – What is the role of the consent of States in the development of customary rules? Second, another basic question that must be assessed at the outset of this book is the so-called double requirement of State practice and opinio juris which has been adopted by international tribunals to draw conclusions on the existence of customary rules (Section 1.3). We will briefly explore the so-called traditional and modern approaches, which have been adopted by scholars, regarding the necessity to demonstrate both requirements. This will bring us to the next issue, which is how this double requirement has been applied by investor-State arbitration tribunals. Moreover, I will examine the position that States have adopted in their pleadings and treaties regarding the necessity to demonstrate the two requirements of State practice and opinio juris . Third, I will address the basic requirement that the party who is alleging the existence of a customary rule must demonstrate that the norm has acquired such status by presenting relevant evidence of State practice and opinio juris (Section 1.4). I will observe that this basic principle has been adopted by all investment tribunals. Fourth, I will analyse the role played by judges and courts, including arbitral tribunals, in the formation and identification of customary rules in both general international law and investment arbitration (Section 1.5).

Moral damages under international investment law have been extensively addressed in the literature. Notoriously, arbitral tribunals have subjected any claim for moral damages to a requirement unknown to general international law, that is exceptional circumstances. This practice is widely criticised in the field mainly due to the seeming inconsistency with general international law. This article challenges this view by arguing that a deviation from general international law does not – in and of itself – suffice to discard the tribunals’ approach. This argument is based on the insight that general international law only deals with inter-State responsibility and is, thus, open to deviations from general international law in case of State responsibility vis-à-vis the individual. On that basis, the article explores possible legal bases for exceptional circumstances in international law. While it discards the idea that such a requirement for awarding moral damages is implicit in prior inter-State cases, the article rather argues that the arbitral practice witnesses the emergence of a new rule of customary international law applicable to the responsibility of a State vis-à-vis the individual. Thereby, the article seeks to contribute to the wider debate on the content and contours of State responsibility for claims of the individual.

The Temporal Scope of Application of Investment Treaties and the Effects on General International Law

This paper discusses the sources of international investment Law and highlighted the distinctive features of this branch of international law vis-a-vis general international law. Bilateral investment treaties have a predominate role in investment relations and this fact raises several questions regarding the relationships between investment and non-investment treaties. Though investment tribunals have seriously examined arguments regarding the interactions between such treaties, thus far no investment tribunal has absolved a party to investment disputes from its investment obligations (nor significantly reduced the amount of compensation to be paid to the injured party) in such cases. Despite the major role of treaties, customary rules of international law play a significant role in investment disputes, prominently to fill gaps in existing treaty law (lacuna) and interpret the particular treaty provisions in light of customary law. General principles of law played a significant role in the formative period of international investment law, prominently in the oil concession arbitrations and in the pre-BIT era (such as in the Iran-US Claims Tribunal) but recent empirical studies indicate that they are largely neglected by contemporary arbitral tribunals. The relative insignificant role of general principles of law in contemporary investment jurisprudence may be explained by the interrelationships between the various sources of international investment law (the growing numbers of treaties and tribunals' pronouncements regarding customary rules) as well as inherent vague character of this source of law. Though 'judicial decisions' are considered as a 'subsidiary' source of public international law, almost all investment awards include numerous references to prior decisions of investment tribunals. Writers' publications are also considered as a 'subsidiary' source of international law but they are often cited by investment tribunals. In stark contrast to the practice of the ICJ, the WTO Appellate Body and the European Court of Human Rights (which rarely refer to writers' opinions), investment arbitrators refer to scholarly writings in almost all instances.Different rules deriving from various sources of investment law may contradict each other, and investment tribunals have resorted to some rules of public international law regarding such inconsistencies (prominently the principle of 'lex specialis'); but they have effectively not applied the hierarchical rules embodied in Article 53 of the Vienna Convention regarding jus cogens, and Article 103 of the UN Charter regarding the superiority of the Charters' obligations vis-a-vis investment treaties.

The 2014 Crimea crisis, in addition to issues of general international law, triggered questions relating to international investment law and arbitration. One of these is to what extent a state’s investment treaties bind that state on another state’s territory which it has put under its control by means of annexation. Starting from the assumption that annexation must not be recognized as legal, it seems necessary to adjust the application of this principle of non-recognition in the case that it ultimately benefits an aggressor. Such a situation might arise with respect to investment claims. Having impaired investments in an annexed territory, investors might want to hold the annexing state liable. However, as a jurisdictional hurdle, they need to satisfy a common criterion of investment treaties, which require investments in the territory of the contracting parties. A strict application of this territorial nexus by a tribunal would deprive investors of protection under international investment law. The interest of the international community to sanction illegal acquisition of territory thus clashes with the individual’s interest to have the investment protected under international law. The result might leave the investors in a legal vacuum. Addressing the issue on an abstract level, this article argues that an extension of a state’s investment treaties to annexed territories can well be founded in the law of treaties and is supported by custom and general principles.

Regulatory autonomy inheres in state sovereignty. Legally, it arises out of states’ primary duties to regulate in the public interest which are sourced from national constitutions and general international law. Accordingly, states commonly invoke national constitutions and general international law in defence of measures challenged in investor-state arbitration. The capacity of states to make treaties is equally founded on these legal norms which are necessary for the coming into existence, legal status and juridical consequences of a treaty. The premise of this book, then, is that an analysis of investment treaties and states’ right to regulate must start with the legal and normative limits to states’ capacity to conclude investment treaties. Thus, based on a constitutional-general international law imperatives analysis, this book develops the imperatives theory as a legal and principled framework for explaining the intersection of investment treaties and regulatory autonomy, and the legal status of investment treaties and investor-state arbitration in Africa. It addresses, and answers affirmatively, the a priori question of whether fundamental constitutional and general international law obligations of African states towards citizens place limitations on their competence to conclude investment treaties. It makes a case for the public interest to be prioritised in Africa’s participation in international investment rule-making and for investment treaties to be concluded subject to states’ public interest obligations. This book, a form of resistance towards the investment treaty regime, presents revolutionary perspectives on the necessity, making and reform of investment treaties and investor-state arbitration in Africa with global implications and significance.

This chapter discusses the use of sources of international law in the settlement of disputes arising under bilateral, regional and multilateral investment treaties and investment chapters in free trade agreements. It focuses specifically on particularities this field of international law displays in comparison to general international law and assesses to which extent these specificities are a Sonderweg of international investment law that has little relevance outside the field, or whether investment law can serve as a loadstar for how the use and relative importance of sources of international law more generally may change also elsewhere is the focus of the present chapter. The chapter addresses, first, the importance of bilateral treaties in international investment law and shows that their bilateral form is not opposed to the emergence of a genuinely multilateral regime of international investment governance. Second, the chapter discusses the preeminent importance arbitral decisions assume in determining and developing the content of international investment law. Third, the chapter addresses the increasing influence of comparative law in investment arbitration and its impact on its understanding of sources. Fourth, the chapter discusses how soft law instruments influence international investment law, even though they are not binding law. The chapter argues that the particular 'sources-mix' in international investment law is chiefly a product of the existence of compulsory dispute settlement through investment treaty arbitration and the sociological composition of the field. International investment law may therefore serve as an indicator of how the sources of international law may evolve also in other international legal regimes in the presence of standard recourses to binding dispute settlement.

This chapter introduces the research theme and questions and covers the history of international investment law in Africa, establishing that gaining political independence by African states was central in making investment treaties in Africa. The history of investment treaties in Africa is thus a post-colonial one. This chapter also analyses the standards of investment protection in African investment treaties such as fair and equitable treatment, full protection and security, national treatment, most-favoured-nation treatment, expropriation, repatriation/transfer of investment and returns, and provision for investor–state arbitration. It establishes that the ill-defined nature of the substantive standards is the reason they limit public interest regulation. This chapter reviews investor–state arbitration globally and as it involves African states and analyses fundamental constitutional and general international law rights and corresponding duties of African states. The object, contribution, scope, methodology, and overall structure of the monograph are also covered in this chapter. This chapter thus gives a complete picture of the book in terms of the intersection of the right to regulate under national constitutions and in general international law and investment treaty obligations to protect foreign investment in Africa.

As the process of fragmentation of international public law has enabled the formation of numerous legal regimes, the question of the qualification of the legal order of the European Union (EU) arises. For a long time, it was not percieved as an self-contained regime. The classification contained in the International Law Commission's Report "Fragmentation of International Law: Difficulties arising from Diversification and Dissemination of International Law" indirectly contributed to such qualification. This Report classifies the EU legal order within the section on regionalization, thus relativizing it by reducing it to the cooperation of states determined only by geographical criteria. Although indisputable, the geographical criterion is of secondary value to a number of other arguments that take into account its qualitative dimension. Thus, the paper raises the key question of whether the EU legal order has reached such a level of development and quality that it can be considered a self-contained legal regime. Searching for answers to the research question, the paper analyzes arguments pro et contra. Arguments against the notion of the EU legal order as a self-contained legal regime relate to the omnipresence of general international public law, which necessarily implies the connection of the specialized EU law with general international law. In addition, the arguments on the origin, subjects and the manner of creating EU law are emphasized because they are inseparable from international law, for which reason it is denied the characteristic of independence. The emphasis on these arguments supports the thesis that EU law is and remains only a subsystem of international law, which would be especially visible in case of inadequate regulation of state responsibility in EU law. In such situations, it would be necessary to resort to the provisions of international public law (so-called fall-back). In contrast, arguments in favor of the independence of the EU legal order are analyzed and emphasized. Without denying the fact that the EU legal order evolved from international public law, that it represented a nasciturus within it, that it was based on an international treaty, and that the EU itself represents an international organization, we must also accept the facts pertaining to its decades-long evolutionary development and a constantly increasing degree of autonomy from general international public law, which has been confirmed and supported by case law and attitudes from the legal doctrine. In addition, the specific way of filling legal gaps with solutions from EU law itself, rather than by applying the logic of the fall-back system, speaks in favor of the autonomy of the EU legal order. All of this points to the exceptional and unique nature of the EU legal order, and its comprehensive framework. Therefore, even if there were arguments in favor of imperfection and incompleteness of the EU legal order, its dynamic development leads us to the conclusion that nowadays it is at such a developmental and qualitative stage that it should be recognized as a self-contained legal regime.

Investment tribunals have fleshed out the requirements of the defence of necessity in Article 25 of the Articles on State Responsibility. This article considers the impact of necessity in international investment law and in general international law. The decided cases of the early twenty-first century have revealed three difficulties in Article 25 and in the defence of necessity. First, rather than assessing necessity from the vantage point of the State invoking necessity, they assess it ex post with hindsight bias. Second, the standard of proof required to demonstrate the existence of a grave and imminent peril is infeasible for many situations of risk and uncertainty. Third, the ‘only way’ criterion is not only unduly strict and virtually impossible to prove, but is wholly unrealistic for macro-level crises, such as pandemics or financial crises. To account for these difficulties, tribunals should avoid hindsight bias, especially with respect to ‘grave and imminent peril’ and the ‘only way’ criterion. The defence of necessity is a blunt instrument and has not afforded States a significant ‘safety valve’. As a result, States have begun to reconsider the substantive standards in investment treaties and to include internal exceptions in their investment treaties.

Necessity 20 Years On: The Limits of Article 25 ARSIWA

This contribution identifies the systemic risks posed by the permissibility of shareholders’ claims for reflective loss in international investment law. It revisits existing investment treaty mechanisms under which shareholder recourse can be limited, and evaluates their effectiveness in the particular context of reflective loss. Drawing on ‘traditional’ and ‘new generation’ treaty language, as well as on domestic and general international law, the article then proposes new treaty language with the aim of eliminating the risks of reflective loss claims from investment treaties.