Diplomatic Protection and International Investment Arbitration: Preliminary Observations of Diallo Case

Abstract

The ICJ judgment of Diallo case gives us the opportunity to discern the coordination and competition between traditional diplomatic protection and international investment protection regime. In this preliminary observations, I summary three possible approaches of the ICJ tribunal concerning the protection of foreign investors and the protection of host state local companies - formalistic approach, conservative approach and positive approach, involving several parameters, include but not limited to, the rights of investors’ direct to diplomatic protection as a shareholder, the rights of investors’ direct to diplomatic protection for the interest of the company, and the rights of investors to claim the indirect damages adduced by infringement to the company. Considering the core status of sovereign state in the evolution of international law, this article argues that the states should have and de facto have the driving forces to the evolution of CIL about whether or not investor-state arbitration and diplomatic protection of shareholder’s nationality state for the host state company constituting customs. Considering the incentives and implications of three possible approaches as well as the location and orientation of ICJ, we argue that the conservative approach is the best approach, in general, for the ICJ, to coordinate the competing interests between investors and host states and in large sense, two international regimes of investment protection - diplomatic protection and international investment arbitration.