Horror Vacui: Or Why Investment Treaties Should Apply to Illegally Annexed Territories

Abstract

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.