Rodrigo Polanco, The Return of the Home State to Investor-State Disputes: Bringing Back Diplomatic Protection?

Abstract

Is the past of investor-state dispute settlement (‘ISDS’) also its future? This is the question at the heart of Rodrigo Polanco’s new monograph The Return of the Home State to Investor-State Disputes: Bringing Back Diplomatic Protection? (Cambridge University Press 2019). The current dispute settlement regime, providing access for investors to institutional arbitral proceedings before an international tribunal based on international treaty norms, is a fairly recent phenomenon. The International Centre for Settlement of Investment Disputes (ICSID) Convention, providing the main procedural framework, entered into force in 1966, whereas the first investment treaty award was only decided in 1990, and ISDS only took off in the late 1990s or early 2000s. Before this, the protection of investments abroad was a matter for the investor’s home state, with diplomatic protection as the adequate legal mechanism for such intervention with the host state. Under the Vattelian paradigm the investor’s dispute with the host state, under international law, constituted actually a dispute between the home and the host state: violating the interest of investors of the home state meant violating the home state’s rights. Conversely, as its own rights were at issue (and not the investor’s), it was within the home state’s exclusive discretion whether or not to take up the matter with the host state. This is what ISDS fundamentally changed: The dispute became a matter between the investor and the host state, with the investor enjoying authority over the decision whether or not to pursue its (international treaty) rights on the international level before an international tribunal—and with the home state mostly out of the picture, not at least due to Article 27 of the ICSID Convention. Polanco’s book confronts us with the question whether we are about to enter an age—or have already reached it—in which diplomatic protection and the home state’s influence on the investment dispute again play a more prominent role.