International Investment Law Regime Research Articles

Taking Stock of the Scholarship on the Relationship between International Investment Law and the Need for Raised Climate Ambition

Abstract Increasingly dire warnings about the climate crisis mean that it is more urgent than ever that different legal regimes, including international investment law, are aligned with climate objectives and not implemented in discord with climate solutions. Many works have been produced over the last twenty years which examine whether the norms underlying climate law and international investment law necessarily conflict or can be reconciled. These works reflect deeply contested views amongst scholars as to whether regulation aimed at ensuring climate ambition can, or is likely to, be adequately safeguarded by the international investment law regime that is designed to provide conditions of stability for investors – including those that are large greenhouse gas emitters. This article provides an overview of the different perspectives that have been offered on the relationship between climate change law and international investment law in respect of three role-players – namely, arbitrators, civil society, and states. It concludes by offering tentative thoughts on the course that the interaction between the two regimes may take in the future.

How the International Investment Law Regime Undermines Access to Justice for Investment-Affected Stakeholders

How the International Investment Law Regime Undermines Access to Justice for Investment-Affected Stakeholders

Sovereignty or State Responsibility? Expropriation and the Right to Regulate in International Law on Foreign Investment

A state is entitled to be bound by investment agreements, including expropriating alien property on its territory. In international law, both represent the state’s sovereign principle within the boundaries of territorial integrity. Expropriation and the right to regulate are usually included in investment agreements as part of the substantive rules. This study uses a normative juridical approach. This approach is carried out by examining the library materials, which are secondary data; especially the principles and norms of law. While the aim of this research is to examine the legal aspects of several key concepts within the international investment law regime—the right to regulate and expropriation, both in terms of its regulation and implementation, in order to find best practices. Expropriation and the right to regulate are essentially like two sides of the same coin. This is because lawful expropriation implies state obligations (compensation), whereas unlawful expropriation implies state responsibilities (restitution or reparations). Meanwhile, the right to regulate (police powers), which is based on the concept of state sovereignty, does not. Lawful expropriation is defined as the state measures carried out with the due process of law, in a non-discriminatory manner, for the purpose of the public interest and is accompanied by the payment of compensation. In terms of expropriation, the right to regulate can be regarded as a form of lawful expropriation that does not necessitate compensation.
 Keywords: international investment law, expropriation, the right to regulate

International Investment Law Reforms and the Draft Business and Human Rights Treaty: The More Things Change, the More They Remain the Same?

Abstract Foreign investors enjoy the best of both worlds, often to the detriment of local communities, indigenous groups and other rightsholders who suffer violations in their wake. Such investors operate transnationally and access vast amounts of resources in host States around the world enjoying substantial rights secured through numerous trade and investment agreements while their human rights and other obligations remain less clear and more difficult to enforce. Given the relatively undertheorized interaction between efforts to come up with a binding treaty within the regime of business and human rights (BHR) and the reforms currently underway in the regime of international investment law (IIL), this contribution argues that despite reforms in IIL and progress towards a BHR treaty, rightsholders are likely to remain under protected in reality.

Treaty influencers: a computational analysis of the development of international investment law

ABSTRACT This article uses computational methods to analyse the development of the international investment law regime, seeking to understand how, when, and by whom change in treaty language occurs. The study uses a novel computational method to explore the influence of different states on the language of international investment treaties and the spread of language patterns. The analysis reveals a hegemony of Western European, rather than North American influence, and further highlights a clear early mover advantage for obtaining language spread. The article discusses the implications of these findings for the investment treaty system, particularly the limited impact of hard negotiating power compared to early entrance and convincing legal language.

The Impact of Digitalization on International Investment Law: Are Investment Treaties Analogue or Digital?

AbstractThis article explores digitalization’s impacts on the existing international investment law regime. In particular, it examines whether international investment agreements (IIAs) apply to the digital economy, analyzing their scope of application, including the definition of protected investment and protected investor, as well as the territorial application of those treaties. We conclude that the IIAs and their provisions are, in principle, not intended for the digital era. However, their usually broad definitions are likely to cover investments in digital assets, if there is a flexible interpretation of the required territorial nexus. However, we believe caution should be exercised about including digital transformation commitments in IIAs, as they could increase the chance of investor-state dispute settlement (-ISDS-).

THE COLONIALITY OF INTERNATIONAL INVESTMENT LAW IN THE COMMONWEALTH CARIBBEAN

AbstractThis article argues that although most Caribbean States have in the last 60 years ascended to statehood, colonialism continues to exist in new and variable forms. It relies upon the concept of ‘coloniality’ as advanced by Schneiderman to contend that the international investment law regime, whose history and evolution is rooted in colonialism, relentlessly pursues the economic interests of foreign investors and capital-exporting countries. It draws important connections between historic colonialism and the contemporary regime for the protection of foreign direct investment by situating the Caribbean's experience in the light of the rationales, tropes and methods arising in the past which endure in investment law's domains, as advanced by Schneiderman in his new book, Investment Law's Alibis, namely (a) profitability and privilege; (b) a discourse of improvement; (c) distrust of local self-rule; and (d) construction of legal enclaves. It is argued that each of these features of colonial rule, from a Caribbean perspective, is inscribed in the discourse and practices of the international investment law regime.

Reforming Investor-state Dispute Settlement: The EU Multilateral Investment Court Perspective

Rapid changes to the global socio-political dynamics have led the emergence of new challenges to the investor-state dispute settlement (ISDS) mechanism. The imperfections of the existing ISDS system have shown a clear need for reforming this institution. Moreover, this is evidenced by the desire of a number of countries to create a multilateral investment court as proposed by the European Union. Will the new EU Multilateral Investment Court System be better than the current ISDS mechanisms? The Multilateral Investment Court System is the latest proposed measure in the context of multilateralism and the institutionalization of a decentralized international investment law regime. The success of the proposal will declare a new era for international investment law around the world. Still, the proposed reform of ISDS has both benefits and disadvantages. The main goal of this paper is to examine investor-state dispute settlement (ISDS) reform in the context of the EU Multilateral Investment Court by pointing out the shortcomings and rooms for improvement. In addition, this paper indicates that the MIC project has the greatest chance of support by majority of countries, as compared to other possible options for the proposed ISDS reform but at the same time, it has difficulties in achieving the goals of ISDS and fully realizing potential. The results of this research should help to proceed with smooth transition of the MIC to ISDS system and review issues for further discussion.

DONALD TRUMP, TPP, NAFTA AND INTERNATIONAL INVESTMENT LAW: TIME TO PANIC OR TIME FOR HOPE?

When newly elected President Donald Trump took the office he almost immediately, with a stroke of a pen, withdrew the US from Trans Pacific Partnership (TPP) and vowed to do the same with North American Free Trade Agreement (NAFTA). Given the magnitude and the significance of both of these treaties not only for international trade, but also for international investment, the urgency of such decisions seem unprecedented. This article examines potential impact of these developments on international investment law regime in the broader context of globalization issues.

Improving the distribution of FDI benefits: The need for policy-oriented research, advice, and advocacy

This article explores the different ways in which governments can increase the benefits of FDI and manage the relationship between governments and international investors in a mutually beneficial manner. It focusses on three concrete policy fields in which discussions are afoot that bear on this issue, and where opportunities to exercise influence exist: encouraging more sustainable FDI; enhancing the distribution of benefits associated with FDI; and anchoring sustainable FDI, corporate social responsibility, and responsible business conduct in the international investment law and policy regime and, specifically, in the context of the negotiations of an Investment Facilitation Framework for Development at the WTO. These are examples of policy areas that warrant attention, with a view toward scholars seeking to influence the way in which they are tackled, through applied multidisciplinary policy-oriented research, concrete recommendations, and targeted advocacy.

The Principle of Clean Hands in International Investment Arbitration: What is the Extent of Investment Protection in Investor-State Disputes?

In the last decade, the investor-state dispute settlement system has been subject to criticism. It is mainly due to the fact that the standard of protection under investment treaties significantly tips the scales in investors’ favor. Such a tilted protection mechanism has been referred to as “asymmetric treaties.” It creates an unbalanced investment law regime under which two-thirds of the cases are settled or lost by states. However, despite the vast protection of investors, it is not unlimited. One of the bars to having a dispute resolved by an arbitral tribunal in investor-state arbitration proceedings is the illegality of the investment. It is understood as the non-conformity of the investment with the laws and regulations of the host state. There is a prevailing view that the illegality of the investment would deprive the investor of a treaty protection to a certain extent. The illegality can influence the jurisdiction of the tribunal and the admissibility of the claim, as well as have negative consequences with regard to the merits of the case, such as resulting in a reduced compensation. The more contentious issue, which is a subject of this article, present in both legal writing as well as case law refers to the presence of the so-called principle of clean hands in the international investment law regime. As explained further, the clean hands principle concerns one of the prerequisites the party seeking relief has to comply with. Therefore, if a party has “unclean hands,” i.e. if the party has engaged in a certain type of a wrongdoing (including but not limited to fraud, misrepresentation, violation of state’s laws and regulations) related to its own claim, the clean hands doctrine will prevent that party from benefiting from its own unlawful behavior.

T-TIP Negotiations Round Two: An Opportunity to Redirect the Trajectory of International Investment Law

Over 2,5000 international investment agreements govern trillions of dollars in foreign direct investment that crisscrosses the globe. Nonetheless, the international investment law regime formed by those agreements faces a legitimacy crisis. Critics argue that international investment treaties’ dispute-resolution mechanisms favor foreign investors and that their substantive obligations undermine countries’ sovereignty. As the world’s largest exporters and recipients of foreign direct investment, the European Union and United States hold the keys to reform. Until now, however, they have differed on solutions. A well-designed investment chapter in a free trade agreement between the European Union and United States could simultaneously resolve those differences and redirect the trajectory of international investment law.

More Attention to Policies! Improving the Distribution of FDI Benefits: The Need for Policy-Oriented Research, Advice and Advocacy

This article explores different ways in which governments can increase the benefits of FDI and manage the relationship between governments and international investors in a mutually beneficial manner. It focusses on three concrete policy fields in which discussions are afoot that bear on this issue, and where opportunities to exercise influence exist: encouraging more sustainable FDI; enhancing the distribution of benefits associated with FDI; and anchoring sustainable FDI, corporate social responsibility and responsible business conduct in the international investment law and policy regime and, specifically, in the context of the negotiations of an Investment Facilitation Framework for Development at the WTO. These are examples of policy areas that warrant attention, with a view toward scholars seeking to influence the way in which they are tackled, through applied multidisciplinary policy-oriented research, concrete recommendations and targeted advocacy.

The Role of Proportionality in International Investment Law and Arbitration: A System-Specific Perspective

Abstract In this article, we examine the place of proportionality and related tests in international investment law and arbitration by looking specifically at the challenges faced by this field on applying proportionality coherently and consistently. We also assess where proportionality has been used in international investment law and arbitration. We argue that a sound appreciation of proportionality in international investment law requires taking into account the inherently imbalanced conception of international investment agreements, the incoherence of the international investment law regime, and the ad hoc dispute settlement method tasked with applying and interpreting a variety of imprecise and diverging norms. Therefore, international investment law and arbitration have not developed an institutionalised approach towards proportionality. Since investment agreements and international investment arbitration form a rather incoherent collective of cases and, as a result, have not developed a single or uniform approach towards proportionality, there is a tendency to individually approach cases.

The Unified Patent Court and the frustrated promise of IP protection: Investors’ claims in (post-)Brexit Britain

Tensions between the EU’s legal order and the international investment law regime are not exclusive to the Brexit era, but they certainly gained momentum in the aftermath of this referendum. By incautiously declaring that the UK will remain a party to the Unified Patent System regardless of Brexit, the British government arguably shaped (il)legitimate expectations on the part of investors who aimed at exploiting their intellectual property rights in the UK while benefitting from the judicial protection of the forthcoming Unified Patent Court as much as of the European institutions (and market) as a whole. Indeed, not only the System itself will undergo a process of major rebalancing after London’s departure from the EU, but more importantly, the UK will most probably be unable to retain its membership in the System after the actual delivery of Brexit. These complications trigger a wide spectrum of fundamental dilemmas investing the definition and scope of concepts such as unilateral declaration, indirect expropriation, reasonable expectation, estoppel, and public policy exception, under both EU law and international investment law. It is therefore essential to explore these intersections as to anticipate possible scenarios in the event of both domestic court and international arbitral claims lodged by patent investors pre- and post-Brexit, having due regard for competition concerns on the side of the EU, yet referring to recent Canadian case law which opened the gate to investor-State claims in the field of intellectual property.

WTO Dispute Settlement, Investor-State Arbitration and Investment Courts: Exploring Themes of State Power, Adjudication & Legitimacy

U.S. assertion of political power in the World Trade Organization (WTO)’s appointment process reminds us of the tenuous balance that exists between state power, adjudication and legitimacy in WTO dispute settlement. Even more fundamentally, it prompts questions about whether reformation of investor-state dispute settlement based on the WTO’s dispute settlement mechanism will solve the legitimacy crisis (real or perceived) that currently threatens the international investment law regime. To address that question this paper explores the contours of state power and adjudication in the dispute settlement mechanisms underpinning the international trade and international investment law regimes. An overview of the historical development of dispute settlement mechanisms in each of these regimes reveals the existence of a long-standing tension between adjudication and sovereign regulatory authority, with the legitimacy of each regime coming under question. Responses to these so-called legitimacy crises vary between the international trade and international investment law regimes and, to some extent, depend on the power states have to respond to such crises. Whether innovations, such as the investment court established in the Comprehensive Economic Trade Agreement between Canada and the European Union, will solve international investment law’s legitimacy crisis remains an open question.

Reasons not to exit? A survey of the effectiveness and spillover effects of international investment arbitration

One of the most important characteristics of an investment treaty is that often it grants aggrieved investors access to international arbitration. This arbitration system does not require a foreign investor to petition his home state in order to bring claims against a host state, and provides an alternative to resolving disputes in the host state’s local court. Although international investment arbitration is beneficial for countries in terms of foreign direct investment, it has been accused of not being transparent or effective especially in relation to environment or public health cases. Some countries expressed their discomfort with the current international investment law regime by radical exit solutions such as denunciation of the Convention on the settlement of investment disputes between states and nationals of other states, rejection of investor-state dispute settlement provisions and unilateral denunciation of investment treaties. Based on a vast law, economics and political science literature, this paper proposes arguments to examine these criticisms. First, it is argued that investor-state arbitration is currently a concern in both developing and developed countries. Second, although assessing the spillover effects of arbitration outcomes on some dimensions of public interests such as the environment or public health is not straightforward, the uncertainty that leads to arbitrariness and sometimes inconsistencies in arbitral decision-making exists and needs to be properly identified. Finally, this article argues that exit is not efficient at either the national or international levels, and that it is possible for countries to adapt the current regime to new situations without wholesale exit.

Pursuing and Reimagining the International Rule of Law Through International Investment Law

In challenging times for international law, the international rule of law as a connecting thread of the global legal order is a particularly salient topic. By providing a working understanding of the content and contexts of the international rule of law, and by taking the regime of international investment law as a case study, I argue that assessing ‘rise’ or ‘decline’ motions in this sphere warrants a nuanced approach that should recognize parallel positive and negative developments. Whilst prominent procedural and substantive aspects of international investment law strongly align with the international rule of law requirements, numerous challenges threaten the future existence of the regime and the appeal of international rule of law more broadly. At the same time, opportunities exist to adapt the substantive decision-making processes in investor-state disputes so to pursue parallel goals of enhancing the rule of law at both international and national levels. Through recognizing the specificities of interaction between the international and national spheres, arbitrators can reinvigorate the legitimacy of the international rule of law through international investment law—benefitting thus the future of both.

The Bits in the Age of Globalization

Summary India’s BIT program is the largest among the developing countries and its integration into the global economy has also increased its exposure to BIT claims. Sev­eral foreign corporations presented ITA notices against various Indian regulatory mea­sures prompting India to suspend all trading of BITs in progress that led to a change in its position in the International investment law regime with repercussions in the International business community eager to participate in its business. These recent developments have then determined the need to review India’s BIT program in a global vision. The paper ‘International Investment Agreements Between India and Others Countries’ (2011), showed the importance of ensuring a balance between investor rights and national policy which India has not been able to make guarantor pushing in differ­ent circumstances to revise their existing BITs and defining new perspectives for future negotiations. The paper reflects on experiences of BITs in a global vision..

Multinational Enterprises and the Global Investment Regime: Toward Balancing Rights and Responsibilities

The question of balancing rights and responsibilities of MNEs and host states is of cardinal importance for the legitimacy and stability of the international investment regime. Many of the shortcomings of the regime are the result of its expansion during a period when the focus was almost exclusively on the responsibility of host countries, as well as the speed with which the regime developed over the past 30 years or so. The rebalancing that is underway, and the various improvements that are being discussed, will help to rectify this situation, and hence need to be pursued vigorously. This chapter takes stock of where we stand in the evolution of the investment regime. It also shows that finding the proper balance regarding the rights and responsibilities of all stakeholders in the international investment regime is an ongoing struggle. Particularly now, the regime is very much in flux, given the various changes in the international economy: we are in the middle of a dynamic process in which key actors are reassessing their interest situations and objectives, including in the light of changing attitudes vis-a-vis FDI and changing expectations regarding the role of the regime. In the end, we might well have to transcend the combination of international investment agreements, customary international law, judicial decisions, authoritative statements, and voluntary rules that make up the international investment law and policy regime today and move toward a binding Multilateral Framework for Investment that comprehensively accommodates the rights and responsibilities of the various stakeholders in a manner that provides legitimacy to the entire regime.