Reasonableness: a guiding light—A probe into the World Court’s landmark judgment on substantive standards of investment protection and its takeaways for investment treaty tribunals

Abstract

Abstract In its recent Judgement on Certain Iranian Assets, the International Court of Justice (ICJ) extensively addressed various international investment law issues that arose from the interpretation and application of an FCN (Friendship, Commerce, and Navigation). This represents a rare instance of the World Court addressing such matters to such a great extent. Chief amongst the Court’s holdings was the test put forward by the ICJ for assessing the ‘reasonableness’ of state measures for the purpose of evaluating their compliance with international standards of investment protection such as ‘fair and equitable treatment’ and ‘non-expropriation’. Acknowledging a trend in investment treaty jurisprudence, the Court went on to introduce more concrete yardsticks for examining the ‘reasonableness’ of state measures. The ICJ’s holdings on this matter could contribute to the enhanced ‘certainty’ and ‘predictability’ in decisions concerning ‘fair and equitable treatment’ standard and ‘non-expropriation’ obligation. The application of the tests of ‘reasonableness’ formulated by the ICJ in the field of investment treaty law could provide states with a greater margin of appreciation when exercising their ‘right to regulate’. In practical terms, as opposed to a stringent ‘proportionality’ analysis, the ICJ’s formulation of ‘reasonableness’ would mean an alleviated burden of proof for states to justify the propriety of their measures towards foreign investors.