International Investment Law System Research Articles

Transparency, Accountability, and Influence in the International Investment Law System

Transparency, Accountability, and Influence in the International Investment Law System

Missing Masters: Causes, Consequences and Corrections for States’ Disengagement from the Investment Treaty System

Abstract Proponents of the international investment law system have treated the concept of depoliticization as a key justification of the investor–state arbitration mechanism. However, this rationale has been increasingly questioned. The system is itself a reflection of the asymmetrical power relations that exist among various actors. We examine data on states’ exercise of their interpretive powers through unilateral interpretations, as a potential means of shifting power away from capital, and identify the factors that may make such engagement more or less likely. What emerges is the asymmetrical patterns of engagement and influence in shaping the law, tilting the balance not just away from states generally, but from Global South states in particular. We propose various reforms that seek to recognize and address the enduring role of politics in the system, produce more just outcomes, and be more inclusive of all state parties in the development of international investment law.

Justice and the Reform of International Investment Law

Abstract This paper focuses on the reforms proposed to investment law, in particular in relation to dispute resolution, from the standpoint of justice. It sets out the ways that the proposed adoption of a standing investment court with an appellate instance would impact the justice of the international investment law system by focusing on the notion of justice as fairness. By assessing the impacts of the proposed changes’ limits on the discourse about investment law, I argue that the effects of the proposed reforms will dampen tribunal exchanges about contentious legal interpretations. This will not move the system closer to a fully just international order because the core values are not ones of discourse but rather those of protecting state sovereignty. Justice, if it follows, will be only that which fits within the framework of heightened sovereign power.

Reform and Retrenchment in International Investment Law

These Keynote Remarks were prepared for the Santander Roundtable Discussions on International Economic Law, co-hosted by Kenyatta University School of Law, (Nairobi); Riara Law School, (Nairobi); and the International Investment Law Center, at University of Cologne, January 13, 2021. The main claim is that the ISDS-centric focus of the current UNCITRAL Working Group III and ICSID Rule processes do not deal with some of the most fundamental challenges international investment law poses. These challenges are: How rights conferred on investors by international investment law effectively undermine domestic regulatory choices; How international investment law creates an asymmetrical private system of justice in which only investors have rights, whereas States are duty-bearers with no rights; How ISDS cases, and even the threat of investors bringing ISDS claims, creates a regulatory chilling effect; and how reform processes overlook market failures arising from the incentive structure of the international investment law system, allowing investors to externalize massive environmental, human rights and other costs. Perhaps therefore, the ISDS centric nature of the reforms raises the possibility that this reform process has the hallmarks of the most organized constituencies that benefit from its continuation.

Three Dimensions of Inequality in International Investment Law

• This paper puts the system of international investment law into its historical context, examines economic data as well as most recent statements of states on inequalities in international investment law. It examines inequalities between foreign investors and states, between developed and developing states as well as between foreign and domestic investors. It shows that each dimension of inequality has its own raison d'etre and proposes ways to tackle them in the context of today’s political and economic realities. • First, this paper asserts that the international investment law’s asymmetric model giving the foreign investor only rights and the host state only obligations no longer reflects the new economic and political realities. The equilibrium between corporate and state actors has significantly shifted and international investment law should be reformed accordingly. The existing model furthers the accumulation of wealth and capital in the Global North and the concentration of corporate power. • Second, the paper shows that in theory, both developing and developed states should be able to equally benefit from international investment agreements. However, in practice, this system dis-proportionally benefits states in the Global North (capital-exporting states, law firms and arbitrators) while those in in the Global South (primarily developing States) are struggling to find expertise and resources to cope with the influx of investor-state disputes. • Third, the original idea that host states may discriminate against foreign investors is still valid in many cases. However, states are increasingly concerned about the less favourable treatment of their domestic investors, compared to foreign investors, both on procedural and substantive levels. • Finally, the paper recommends several measures to reduce inequalities in international investment law. Reform of the system should tackle the lack of accountability of economically powerful corporations, enduring legacies of colonialism in economic development, as well as give states a greater say on their public policies aimed at protecting human rights, environmental standards, strengthen the rule of law and reduce inequalities. • More specifically, the paper proposes to give greater prominence to the law of host states as applicable law. Further, to widen the inclusion in international investment agreements obligations of the investors related to labor rights, human rights, environmental standards and corruption. It also calls for more effective mechanisms allowing states to assert claims and counterclaims against investors and for measures to reduce the cost and length of investor-state disputes. Finally, it emphasizes the need to strengthen the capacity of states to avoid and better handle investor-state disputes.

Territoriality in Intellectual Property Law: Examining the Tension between Securing Societal Goals and Treating Intellectual Property as an Investment Asset

By Emmanuel Kolawole Oke. The principle of territoriality is one of the foundational principles of International Intellectual Property Law. This principle allows countries to design their intellectual property laws in a manner that facilitates the achievement of specific societal goals. However, while it is true that this principle has managed to survive the incorporation of intellectual property into the international trade law system (via the WTO’s TRIPS Agreement), some scholars have expressed concern that the incorporation of intellectual property into the international investment law system via investment agreements (such as bilateral investment treaties) constitutes a potential threat to the principle of territoriality in the international intellectual property system. This paper will investigate the tension between the principle of territoriality and the global harmonisation of intellectual property standards in the context of the current iteration of intellectual property as an asset in investment agreements. Specifically, it will critically examine how this tension was resolved in two recent investment arbitration disputes. The first is the dispute between Philip Morris and Uruguay which concerned the latter’s implementation of certain measures to curb the consumption of tobacco products in its country but which Philip Morris construed as an expropriation of its trademarks. The second is the dispute between Eli Lilly and Canada which concerned the interpretation of the utility requirement under Canadian patent law. These cases will be used to assess whether there is still scope for the preservation of the principle of territoriality within the investor-state dispute settlement system.

Too Many Butterflies? The Micro-Drivers of the International Investment Law System

Too Many Butterflies? The Micro-Drivers of the International Investment Law System

Rethinking the International Investment Law System

The debate over investor-state dispute settlement (ISDS) has been increasingly contentious, while at the same time becoming less focused on the substantive issues involved. This article seeks to provide a balanced critique of ISDS, emphasizing three main points: (1) foreign investment today is often courted by host governments, rather than treated badly; (2) in today's globalized world, the distinction between 'foreign' and 'domestic' investment is less clear; and (3) international judicial review is a controversial idea that should be pursued with some caution. It also suggests alternative approaches to dealing with any negative treatment that foreign investors face.

Investment Arbitration, Investment Treaty Interpretation, and Democracy

It has become a widespread concern in recent years that there exist frictions between international investment law and arbitration and democratic governance. In particular, investor-state tribunals can issue awards that may reverse, at least de facto, decisions by democratically legitimated and democratically accountable domestic decision-makers that are deemed pivotal, by those decisionmakers, for the pursuit of the public interest of their constituency. The pressure on domestic and regional decision-makers to find responses to such frictions, through treaty-drafting or otherwise, has increased considerably in recent years and arguably has led to a shift in the official policy of traditional proponents of the established system of international investment law and arbitration. This paper explores the potential and the pitfalls of democracy as an argumentative topos informing our view on investment arbitration and the interpretation of international investment agreements, with a specific focus on the allocation of interpretative authority among the contracting parties, investor-state tribunals and state-state tribunals.

Treaty versus Contract: Comments on US Supreme Court's Opinion on BG Group Plc. Petitioner v. Republic of Argentina

In BG Group Petitioner v. Republic of Argentina, the Majority Opinion of US Supreme Court held that local litigation requirement stipulated in Article 8 (2) of pertinent BIT was a procedural condition precedent to arbitration, rather than the consent of arbitration, and therefore the interpretation and application thereof was primarily for the arbitrators. Reviewing courts must give considerable deference to tribunal instead of reviewing their decision de novo. However, the Dissenting Opinion rightly pointed out local litigation requirement was the part of the very consent of Contracting States to arbitrate and the compliance of investors to such requirement was the acceptance to Contracting State’s standing offer in BIT until which a completed arbitration agreement was constituted. Local litigation requirement was a condition on consent to arbitrate and therefore whether an investor has complied with that requirement was a question a court must decide de novo, rather than an issue for the arbitrator to decide subject only to the most deferential judicial review. The Majority Opinion is legally inaccurate and political unsustainable. The Majority Opinion may in the present dispute protect US investor’s interest in the Award but on cost of unnecessary systematic disturbance to the evolution of whole international investment law system as well the risk of future exposure of US to wrong arbitral decisions and enforcement scenarios. On the contrary, the Dissenting Opinion is conducive to avoid the unnecessary systematic disturbance and save the troublesome subsequent maneuvers of pertinent states, and contributes to the coherence and consistency of international investment law.

Role of National Law in International Investment Law System: A Competitor, a Supplementary or a Cooperator?

As a typical area of transnational law, international investment law is piercing the veil of sovereignty and blurring, if not dissolving, the boundaries between municipal law system (NL) and international investment law system (IIL). The interaction between NL and IIL is further complicated when considerable discretion of arbitral tribunal over reviewing governmental actions encounters inconclusive but multifaceted relevance of law of host state in arbitral proceedings. The legal status, the impact and the potential function of national law at both specific arbitral proceeding level and institutional level in international investment law system are under-theorized, which partly present itself as and partly generate the seemingly divergent arbitral practices of tribunals. Therefore, it is of great practical and theoretical significance to figure out the (potential) role of national law in international investment law system from a dynamic institutional perspective. This paper first appraises the role of NL in specific investment treaty arbitration from three perspectives, namely, NL as fact, NL as evidence and NL as governing law. The inquiry then goes beyond the sphere of individual arbitration to the systematic dynamics of IIL: NL as a template for negotiation and renegotiations of investment agreements, NL as state practices leading to the development of customary law and NL as recognition and enforcement of IIL.The paper further explores the institutional structure of governance system over transnational investment activities and argues that IIL and Investor-State Dispute Resolution (ISDS) mechanisms are smart governance mechanisms for purely or mainly economic disputes concerning investment. However, IIL is not of institutional advantages over NL when investment related disputes are of great social influence and political impacts. The normative delimitation of regulatory boundary of NL vis-a-vis IIL over transnational investment related activities lies in the equilibrium between competing parameters, namely marketable interest concerns and socialized (and political, to the most extent thereof) interest concerns. The more marketable the targeted investment related matter is, the more involved IIL should be. The paper further argues that an interdependent, hybrid and poli-contextual governance network is emerging in transnational investment regulation. Based on comparative advantages of both NL and IIL system, the governance network is and shall be distinct from both totally free competitive approach and total hierarchy approach, and of the institutional capacity to exercise the comparative advantages of both systems without functionally distorting the other while capable of coping cope with the constantly changeable and multifaceted regulatory context in transnational investment sphere.

Public Health Regulation in Investor-State Arbitration: A Case Analysis

Is a State free to adopt measures to protect public interest in general, and the public health of its citizens in particular? If so, what are the limits, if any, to such regulatory powers? Are investment treaties compatible with states' obligations to protect public health? Whether or under what condition could investor-state arbitration work as a Governance Mechanism to safeguard public interests? This article addresses these questions by focusing on the clash between the regulatory autonomy of host state over public health issue and international investment governance in international investment law system. As a relative self-contained obligations system, investment treaties specify the most fundamental rights vested to foreign investors and use relative broad terms to protect hardly-to-be-specified ex ante rights, such as Fair and Equitable Treatment and Full Protection and Security. However, even the most fundamental concepts in BIT is far from clear delimitation, such as Investment. Too overwhelming treaty stipulations encompass nearly non-exceptional property rights protection guarantee which may contradict the public policy maneuvers of host state government. Under public health regulation disputes, international tribunal shall strike a dedicated balance between protection of investor’s rights in BIT and safeguard of public interest in host state, considering procedural requirements, namely due procedure and substantive requirements, namely necessity doctrine (including scientific basis, severity of regulatory measures and reasonableness). Economic deconstruction of marginal benefit and marginal cost of host state government’s measures will provide constructive guidance to determine whether or not host state government has violated proportionate principle. State has the inherent sovereign power to regulate public interest related matter, while with broad treaty terms, compulsory jurisdiction of International tribunal, and relatively well recognition and enforcement of international awards, Investor-state arbitration can be perceived as a governance mechanism of public interest of host state. However, how to coordinate the two governance mechanisms and how to delegate and delimit discretion of international tribunals as a governance mechanism remain inconclusive and call for further elaborations.

International Investment Law as a Global Public Good

The key characteristic of a public good is that it serves the well-being of the public. Today, however, individual well-being is often conditioned not only on the receipt of state public goods, but also on the receipt of global public goods. In part, this is because the rise of globalization has resulted in complex interconnections between states. For this reason, global public goods can bestow benefits on much of the world’s population.The system of international investment law (IIL) is slowly arising as one type of a global public good. Principally, the system of IIL meets the two characteristics of public goods: non-rivalrous and non-excludable. First, it is non-rival in that use of IIL by one state or one foreign investor does not detract from the system’s utility for other users. Second, with the adoption of over 3,000 international investment agreements (IIA), the system of IIL is becoming less of a club good and more of a system of law whose benefits are non-excludable. The standardization of many of the agreements’ provisions has resulted in commonalties despite the lack of a multilateral agreement and some have even argued that aspects of IIL have reached the status of customary international law. As a result, many of the benefits of IIAs transcend the individual agreements to be available to more than just signatories and their nationals.In this sense, the system of IIL – the actual standards of protection, the meaning of those standards and the behavioral expectations they entail – has resulted in a type of global public good that benefits the world at large. These benefits include first, the provision of an overarching legal framework that guides foreign direct investment (FDI) activity and enhances its predictability and, second, the creation of a system that ensures that FDI benefits both states and investors alike.The system of ILL, however, is failing to bestow both of its benefits. First, the system is exhibiting failures in indicators of legitimacy – for example by producing incoherent jurisprudence and using indeterminate rules – thereby limiting the system’s ability to establish an overarching framework for FDI activity. Second, a failure by arbitral tribunals to recognize the role of FDI in promoting a state’s development is hindering its ability to ensure that FDI benefits both investors and states. Viewing the system of ILL through a global public good lens thus highlights the system’s shortcomings, allowing for correction of these issues, and allows the system of ILL to attain the status of global public good that it deserves.

Means of Harmonising: Are We Ready for Balancing States Rights in Relation to Public Policies against the Rights of Private Investors?

Despite several recommendations for reforms the struggle of international investment law system to reach balance and consistency remains present. The investor-State dispute settlement (ISDS) is controversial and causes disquiet. The ISDS’ decentralized nature encounters problems with inconsistency. Further concerns are in relation to legitimacy and suitability of the arbitral regime originating in commercial principles and left in the hands of predominantly commercially oriented decision-makers. The States’ delegation of authority out of adjudication by tenured judges raises further issues in relation to public principles and accountability. The ISDS is manifested in an ability to curtail States’ sovereign rights and powers leading to a negative impact on the public. The commercially originated system lacks public consideration, democratic principles and scrutiny. This is demonstrated in a shift swayed in the investor’s favor causing a legal imbalance between competing public and private interests and concerns over the system’s fairness. This article aims to explore the contemporary issues and the means of the system's harmonization.

Legitimacy and Reflexivity in International Investment Arbitration: A New Self-Restraint?

There are at least two views within investment arbitration about how to respond to legitimation problems associated with inconsistent rulings, latitudinal interpretations, and arbitral bias and conflicts of interest. Some prefer to keep the regime on course and not respond to these outside perturbations. Others prefer to take into account external influences, such as human rights and environmental commitments, in the course of investment treaty interpretation. Both understand that, whatever the response, these questions will be determined by lawyers, scholars, and arbitrators operating within the system of international investment law and not by actors operating outside of it. Both views, in other words, are congenial to systems-theoretic accounts. As articulated by Teubner, there is a proliferation of functional legal sub-systems, developing autonomously of states, each of which, in the course of maximizing internal rationality, potentially is on a collision course with other operative sub-systems. These can only be forestalled if sub-systems act reflexively by devising strategies of self-limitation that selectively internalize objections emanating from external spheres. As this maps on to selfunderstandings of actors operating within investment arbitration, this paper takes up systems theory as a heuristic for assessing the regime’s responsiveness to outside influences. In order to take stock of the degree of reflexivity, the paper examines the direction investment law is taking in a few key areas: first, in the shift in emphasis away from expropriations (the ‘takings rule’) to the fair and equitable treatment standard, which is performing similar functions; second, in the attempt to merge global standards by embracing World Trade Organization Appellate Body decision making; and third, the hesitant embrace of proportionality doctrine as a means of weighing public interests into the equation. These moments of reflexivity turn out to be modest in reach and so unlikely to calm objections emanating from states and social movements. What likely will be necessary is