Abstract
Abstract A fundamental feature of international investment law is that it only applies to foreign investment. This has historical reasons and is connected to deep-rooted principles of international law. It has also been a historical cause of controversy because it requires states to treat foreign investors better than they treat their own nationals. This article shows how the international minimum standard for treatment of foreigners nevertheless developed in a dialogue with such a concern for equality. The article argues that the way in which international investment law has developed in recent years into an effective remedial mechanism that can be invoked by individual foreign investors against host states ignores this historical lesson and now poses a particular challenge to its legitimacy. It privileges foreign investors as a select group worthy of more effective legal protection than ordinarily provided under municipal law, challenging the ideal of equality before the law as a basic constitutional value. The article discusses possible justifications of such privilege, arguing that only a more traditional international minimum standard rationale provides a convincing justification of special treatment of foreign investment. This has important implications for the reform of the current investment regime, suggesting that it should be redesigned to adopt a more supplementary role and deferential attitude to domestic law and courts – for example, through a requirement to exhaust local remedies.
Highlights
The international law protecting foreign investment, and its arbitral mechanism for investor-state dispute settlement (ISDS), has been controversial almost since its inception, and its fundamental legitimacy is persistently debated
The article argues that the way in which international investment law has developed in recent years into an effective remedial mechanism that can be invoked by individual foreign investors against host states ignores this historical lesson and poses a particular challenge to its legitimacy
As held by Anne Peters, this right to a domestic remedy may be seen as a ‘correlate’ of the local remedies rule in cases of ‘international individual rights’.71. It would undeniably have a role in a protective regime that was really aimed at strengthening international rights for foreign investors under domestic law
Summary
The international law protecting foreign investment, and its arbitral mechanism for investor-state dispute settlement (ISDS), has been controversial almost since its inception, and its fundamental legitimacy is persistently debated. We may call it the problem of foreign privilege: the essential characteristic and premise of the law that it only protects foreign investors.[4] Historically, this was one of the fundamental criticisms against international investment law, often associated with the so-called Calvo Doctrine of the 19th century.[5] It is still a critique that is sometimes raised and an occasional government concern, but mostly it is directed against the content of substantive standards[6] or launched as an assault on the very existence of the system.[7] In contrast, the focus of this article is the legitimacy challenge it poses to certain key remedial characteristics of investor-state arbitration, its intended function as a substitute for domestic courts and law The premise of this challenge is the basic notion of equality before the law. I discuss in Part 5 the more concrete implications of this for reform initiatives, before I conclude in Part 6
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