International investment protection and the national rule of law : a normative framework for a new approach

Abstract

The relationship of international investment law (IIL) with the rule of law is an increasingly important topic. There is a broad agreement that the rule of law is a guiding notion for IIL and investor-State dispute settlement (ISDS), both in terms of their own operation and regarding the obligations imposed on host States. One of these obligations – the FET standard – has been specifically interpreted as requiring respect for certain fundamental rule of law principles such as predictability, non-arbitrariness and transparency. The principal argument of this thesis is that the FET standard should be seen, in addition to securing international rule of law for foreign investors, as a tool to strengthen the national rule of law in the host States. Progressive development of the FET subprinciples should be complemented with a systematic taking into account the existing national rule of law framework in a host State. This can both enhance ex ante predictability of FET decision-making, and allow for other broader benefits that come out of rule of law improvement. The proposed approach would involve a systematic recourse to a holistic set of existing municipal and international obligations beyond the investment treaty so to help interpret and apply the FET standard. These obligations embody a specific national vision of the rule of law that should be given recognition and support, within limits and without jeopardizing the international character of the IIL norms. Furthermore, decision-making can be enhanced by having recourse to comparative benchmarks to provide persuasiveness of determinations and by limiting the role of good faith considerations. With a complementary focus on the national rule of law, investment awards can become a clearer source for suggesting needed reforms, bringing benefits to a wider circle of domestic stakeholders and more broadly supporting the host State development.