The myth of a multilateral framework in international investment law

Abstract

In past, various attempts at creating a multilateral treaty for the protection of foreign investment have failed. Yet, scholars have tried to fill in the void through theoretical arguments to the effect that even in the absence of a multilateral treaty, the bilateral investment treaties create a multilateral normative framework. This framework imposes external disciplines on States. These theoretical arguments do not find any basis in the treaty text and result into expanding the scope of standards of treatment provided in the bilateral investment treaties (BITs). The first part establishes that States are not ready for a multilateral treaty on investor protection and the reasons for this position based on past experiences. The theoretical arguments used as a substitute for a multilateral treaty have various aspects. It is claimed that the BITs have created a framework which is uniform due to a large number of BITs and consistency in their language. BITs allow corporate restructuring and contain Most Favoured Nation (MFN) clause, which allows any foreign investors to choose the most beneficial BIT to file a claim and most beneficial provision from the all the BITs entered into by the host state. This process is said to have resulted into multilateralization – another form of a multilateral framework. These arguments do violence to the treaty language and stretch the treaty text beyond its purview. The extravagant interpretations proposed by scholars and adopted by tribunals have forced the regime of investment arbitration into an uncertain future.