Investment Tribunals Research Articles

The Fate of EU Environmental and Investment Law after the Achmea Decision

In the landmark Slowakische Republik v. Achmea BV judgment, the ecj arguably took a resolute stance against the compatibility of International Investment Agreements between EU Member States and the inherent functioning of EU’s legal order. However, the issue as to whether the foreign investment protection regime is at odds with the sound application of EU law is far from being settled. Furthermore, the international investment protection regime as interpreted by investment tribunals may hamper EU Member States’ regulatory space, especially in the implementation of ambitious environmental and climate policies. The recent surge of litigation before international investment tribunals triggered by retrospective changes to supporting schemes for renewable energy sources and the phase-out of nuclear power plants in some European Member States is a telling example. The purpose of this article thus is to analyse the avenues currently available to ensure consistency between EU’s environmental and climate policies as implemented by EU Member States and the investment protection regime as applied by investment tribunals in the wake of the Achmea decision, with a view to devising a benchmark to prevent and avoid, rather than foster, policy conflicts.

Investment Arbitration - Rule of Law Demands of the Domestic Judiciary (Denial of Justice, Effective Means, Judicial Expropriation)

Promotion of the “rule of law” is a strong argument in favour of international investment law. This chapter addresses the actual and potential role of rule of law criteria for investment tribunals in three areas: whether measures taken by domestic courts constitute expropriation, a denial of justice or a violation of the effective means standard. It demonstrates that rule of law criteria were often the decisive standard in examining judicial decisions of national courts although many of the investment tribunals did not refer to the concept of the rule of law explicitly. Rule of law criteria can serve as a useful toolbox for investment tribunals when dealing with alleged denials of justice, judicial expropriation and violations of the effective means standards. The rule of law standards used by investment tribunals are fairly similar to the requirements of human rights treaties and those developed in the case law of the European Court of Human Rights in the context of rule of law and judicial proceedings. So far, investment tribunals have not made explicit reference to the concept of the rule of law to justify the criteria they apply when assessing measures of domestic courts. An explicit linkage to the concept of the rule of law could give these criteria additional authority and highlight their importance.

The Uses of the Work of the International Law Commission on State Responsibility in International Investment Arbitration

The Articles on State Responsibility for Internationally Wrongful Acts (‘ARSIWA’) constitute an experiment in international law-making. Unlike other successful projects of the International Law Commission (‘ILC’), such as its work on the law of treaties and diplomatic and consular relations, the ARSIWA have not yet led to the adoption of a multilateral treaty. Yet, their text is cited commonly as the authoritative statement of the law on state responsibility with investment tribunals being by far their most frequent users. This well-recorded paradox calls for a reflection on the ways in which investment tribunals make use of the ARSIWA. This paper examines the methods which investment tribunals explicitly or implicitly employ when using the ARSIWA in order to determine the content of rules of general international law on state responsibility. Specifically, it identifies common patterns in the ways in which investment tribunals justify their reliance on the ARSIWA and deal with their ambiguities. The paper then proceeds to critically assess these findings from two perspectives: the overarching aims of the law of state responsibility and the doctrine of sources of international law. The paper synthesises these empirical and doctrinal insights into a proposal for a common framework for the use of ARSIWA. Such framework is based on a distinction between the ascertainment of the legal status of a normative proposition and the determination of the content of a normative proposition whose status is undisputed.

The Uneasy Relationship between Intra-EU Investment Tribunals and the Court of Justice’s Achmea Judgment

This article focuses on the ways in which investment tribunals constituted under intra- EU BITS and the Energy Charter Treaty (in an intra-EU dispute) have reacted to the Court of Justice’s Achmea judgment of 6 March 2018. The first part of the article maps out the existing intra-EU arbitrations in which the issues arising from Achmea appear in one form or another. We then take a critical look at how the disputing parties have used Achmea in their argumentation and how the investment tribunals have dismissed these arguments and upheld their jurisdiction. The second part of the article is analytical. When the tribunals uphold their jurisdiction and decide on the merits, they knowingly deliver an award, which is unenforceable in the Respondent State and the entirety of the EU. By drawing parallels with decisions rendered by other international tribunals, we argue that the rendering of potentially unenforceable awards is not specific to intra-EU investment disputes. We then look at why international tribunals render potentially unenforceable awards. The third part of the article presents several suggestions of how intra-EU investment tribunals should tackle the Achmea conundrum, either by declining their jurisdiction pursuant to judicial comity or upholding their jurisdiction but dismissing the cases as inadmissible.

Abuse of Rights in the Context of Corporate Nationality Planning

Investment tribunals have applied the abuse of rights doctrine to distinguish between legitimate corporate nationality planning and objectionable manipulation of corporate nationality. This doctrine is further concretized into “the foreseeability test”, which examines whether there is a foreseeable dispute at the time of nationality planning. After revisiting related investment arbitral decisions and academic commentaries, this article argues that the abuse of rights doctrine is an appropriate tool for tribunals to combat abusive nationality planning. That said, it also identifies several unsettled issues under current case law and suggests corresponding solutions.

Human Rights and IP in Investor to State Dispute Settlement

As the few existing intellectual property (IP) related investment arbitration awards demonstrate, human rights issues such as protection of public health might appear in such contexts, making IP-related investment disputes prone to human rights argumentation. The chapter focuses on the overlap of human rights, IP and IIAs. It evaluates the impact human rights have had on the relevant ISDS practices. The main emphasis is on the reasons for the increasing overlaps and the ways in which investment tribunals should approach them. The chapter rejects human rights proportionality as the proposed solution to increase the legitimacy of investment treaty arbitration. Through proportionality, courts seek to define an appropriate relationship between different conflicting interests at hand, each entitled to legal protection. Instead of suggesting a broad integration of human rights law under the investment tribunals’ operational sources of law, the chapter posits that a more legitimate way forward – pending more profound reform of the whole investment arbitration system – would be to decrease the overlaps through IIA design and to develop deference as an approach in ISDS, especially through the doctrine of margin of appreciation. The problem is not too little human rights in ISDS but too extensively applied and interpreted investment treaty standards, encroaching on host states’ regulatory powers and ability to protect and fulfil human rights obligations.

The Composition of a Multilateral Investment Court and of an Appeal Mechanism for Investment Awards

This report is a supplement to the report by the same authors entitled “Can the Mauritius Convention serve as a model for the reform of investor-State arbitration in connection with the introduction of a permanent investment tribunal or an appeal mechanism? Analysis and roadmap” (“CIDS Report”). It analyzes in more depth one aspect already addressed in the CIDS Report, namely the composition of a multilateral investment court (or ITI) and of an appeal mechanism for investor-State awards (or AM). For that purpose, it carries out a comparative analysis of the composition of existing international adjudicatory bodies and in part also arbitral institutions, and seeks to chart the main options for the composition of a prospective ITI and AM. If States were to pursue a reform initiative aimed at institutionalizing investor-State dispute settlement through the creation of these types of adjudicatory bodies, adjudicators would no longer be appointed by disputing parties but would essentially (though nor necessarily exclusively) be chosen by the parties to the instrument establishing the new adjudicatory bodies (section II). This fundamental shift poses a myriad of questions, which the paper seeks to examine.

The Role of Travaux in Interpreting BIT Provisions: Are Tribunals Over-Prepared to Resort to Preparatory Works?

Abstract While multilateral investment treaties have formed the centrepiece of much academic discourse, an uncharacteristic literary silence has eclipsed the issue of interpretation of bilateral investment treaties under the scheme of the Vienna Convention on the Law of Treaties (VCLT). This article travels this untraversed territory by revisiting the basics of the principles encapsulated in the hierarchical set-up of Articles 31 and 32 VCLT, and juxtaposing this foundational set-up against its frequent oversights by investment tribunals. These oversights are exemplified by the divergent interpretative analyses afforded to umbrella and most-favoured-nation clauses, and emanate from a premature resort to the travaux préparatoires of investment treaties under Article 32 VCLT. Ultimately, the article argues that a proper application of the VCLT would go a long way in eliminating the contradictions tainting the understanding of the aforesaid clauses.

Standard of Review in Investment Arbitrations and India’s Approach Towards Addressing the Legitimacy Crisis

Investment Tribunals sitting in review of a State’s public policy decisions often do not give much deference to the State’s rationale. However, it would only be reasonable for a State to expect that its legitimate authority to determine policy decisions taken in the best interest of the people are given weight by the tribunal. Identifying and applying an appropriate standard of review thus becomes exceedingly important to address this dichotomy. With this premise, this article will examine the standard of review adopted by investment tribunals while reviewing states’ policy decisions and how investment tribunals failure to exercise self-restraint has given rise to a ‘legitimacy crisis’ for the entire investment law regime. Further, the article will go on to discuss how India has taken the first affirmative step towards establishing a coherent and uniform standard of review in its revised Model BIT of 2015.

Conflicting Conceptions of Constitutionalism: Investment Protection from the European Union and International Perspectives

International investment law as it is currently being transformed in the European Union (EU) proves to be an ideal test case for assessing global constitutionalism—whether it is in fact occurring and, if so, the direction of this process. While economic rights are protected by the laws of the EU, many of these rights were protected by bilateral treaties before internal mechanisms existed. The EU is now disregarding the protections that exist outside of the normative framework of the EU treaties, resulting in conflicting ‘constitutional’ rights. Following the decision by the Court of Justice of the European Union in Achmea, the dispute resolution provisions in intra-EU investment treaties are now considered incompatible with the laws of the EU. The decision was based on ‘mutual trust’ and ‘sincere cooperation’ between the Member States, pointing to formalized constitutional values. These ideals and their reflection in the changing internal and external positions of the EU towards investor-state disputes speak to perceptions of investors’ rights, and thus imply transforming ideas of constitutionality with respect to those rights. Investment tribunals, convened under international treaties, however, have continued to uphold a different position regarding the specific rights of investors. An inevitable conflict emerges in the protection of similar rights, namely the right to certain standards of treatment and dispute resolution for private investors, revealing an incongruence in the realization of constitutional values. The following article examines more closely the incompatibility of these positions and analyses the consequences of these actions for the progression of a globally-relevant constitutionalism.

Legitimate Expectations and the Rule of Law in International Investment Law

The rule of law is one of the yardsticks by which both critics of and apologists for international investment law evaluate the regime, but it has been thus far insufficiently theorised. This chapter offers some thoughts on how the concept of the rule of law might be deployed to justify and delimit the contours of legitimate expectations in international investment law. The chapter deliberately adopts a formal, largely Razian approach to the rule of law, focusing on two of its dimensions: legal certainty and the prohibition on arbitrariness. It argues that legal certainty provides the most compelling justification for the recognition of legitimate expectations in international investment law, when compared to other rationales emerging from investment tribunals and the literature. The chapter analyses four common types of government action arising in investment cases through the lens of legal certainty, arguing that the strength of the claim for recognition of legitimate expectations depends on the government conduct at issue, with government interference with legal rights or formal decisions generating the strongest claim for protection, and changes to the extant legal framework generating the weakest claim. The chapter then identifies the prohibition on arbitrary conduct as the relevant touchstone for protection of legitimate expectations, explains how the two elements of the legal test fit together, and suggests that this interpretation accords with evolving state practice in treaty design, and more recent tribunal decisions concerning legitimate expectations.

A Duty to Consult Foreign Investors When Changing the Regulatory Framework? Implications for Tobacco Control and Beyond

Several decisions of international investment tribunals can be read as suggesting that fair and equitable treatment may oblige governments to consult foreign investors in the course of developing new laws and policies. This position would significantly expand the concept of fair and equitable treatment, and goes far beyond what most domestic legal systems require of governments. Generally speaking, there may be sound instrumental and normative reasons for engaging in consultation with affected stakeholders in the course of legislative and policy development. However, with the exception of treaty provisions that otherwise so provide, no duty of consultation in the lawmaking process arises from fair and equitable treatment clauses, customary international law or general principles of law. Therefore, industries such as the tobacco industry are unlikely to succeed in a claim of failure to properly engage in consultation in the process of lawmaking.

Fair and Equitable Treatment As Boilerplate

The super-norm in the investment treaty regime is the treatment standard of fair and equitable treatment (“FET”) — a standard that has no analogue in the trade regime. FET features in nine out of ten investment treaties. The paper contends that fair and equitable treatment provisions in investment treaties are a prominent example of boilerplate provisions. It argues that the character of FET as boilerplate suggests that investment tribunals ought to adopt a modified interpretive stance compared to negotiated provisions in treaties. Boilerplate provisions should be interpreted using the contra proferentem principle — with ambiguities resolved against the drafter of the FET provision — and considering the reasonable expectations of the contracting state that received a draft boilerplate FET provision from its counterparty. Section II explains the dataset and this article’s text-as-data-methodology. Section III sets out the main types of FET provisions, drawing on the existing literature. Section IV examines the clusters that emerge from this paper’s text-as-data methodology and considers FET as a social network. Section V contends the FET standard is a prominent example of a boilerplate provision. Section VI argues that the character of FET as boilerplate suggests that investment tribunals ought to adopt a modified interpretive stance compared to negotiated provisions in treaties.

CJEU Judgment in Case C-284/16 Achmea: Single Decision and Its Multi-Faceted Fallout

Abstract Recent decisions of European and national courts, as well as those of arbitral tribunals, concerning the Achmea saga seem to be plentiful enough to draw preliminary conclusions as to the relationship between EU law, intra-EU international investment agreements (IIAs) and the national laws of EU-Member States. In order to get the proper picture of the situation, however, it is necessary not only to analyse the recent decisions of the Court of Justice of the European Union (CJEU) and their consequences from these three perspectives, but, equally, to understand how they interact with each other. Such an analysis indicates the real possibility of the emergence of a rift between the practice of the EU and national courts rejecting the validity of investment arbitration agreements, on the one hand, and investment tribunals, on the other. In any case, such a divergence would put into question the IIAs’ claim to provide a stable regulatory framework for international investments in the EU, which, in turn, would strengthen the argument for termination of intra-EU IIAs.

The ‘Social License to Operate’: An Emerging Concept in the Practice of International Investment Tribunals

The ‘Social License to Operate’: An Emerging Concept in the Practice of International Investment Tribunals

Judicial Conduct and Investment Treaty Claims: Lessons from the Israeli Gas Cases and the Eli Lilly Award

As the debate on the future of ISDS is ongoing and given the rise in investment treaty claims based on domestic judicial measures, this article focuses on the relationship between domestic judicial measures, arbitral tribunals and potential state liability in investment arbitration. This article examines the circumstances under which domestic judicial measures might amount to a violation of a state’s international obligations towards a foreign investor. Specifically, the article discusses the controversial and increasingly poignant question of whether a state’s liability for its courts’ measures should be restricted to the Denial of Justice (DoJ) concept. The fact that the Eli Lilly tribunal recently recognized that in certain circumstances judicial conduct, characterized other than as a DoJ, may engage a state’s liability, can suggest a new path for investors’ claims, even more so in non-NAFTA cases. This new legal path may be useful in light of the growing judicial involvement in balancing investor-state rights, and in particular in legal systems where traditional DoJ claims may be less relevant. To illustrate, this article explores in depth recent judgements by Israeli courts on the regulation of the newly discovered gas market, which set an example of domestic courts determining the balance between the protection of a foreign investor’s rights and a state’s freedom to regulate its natural resources. Following these cases, foreign investors may need to cope with new substantial risks because it is not evident whether investment agreements, in their current form, can protect investments against the growing involvement of domestic courts. This article provides an overview of the relationship between foreign investors and states under public international law and international investment law followed by a review of the complex relationship between investment tribunals and the state's legal order, in particular its courts. The article then analyzes the proper legal meaning of the term Fair and Equitable Treatment, with particular attention to its relationship with the DoJ concept, because broadening the spectrum for arbitral tribunals’ review of domestic courts’ decisions, representing an important dimension of a state’s sovereignty, raises delicate issues. The article concludes with observations on how these issues may come into play in future investment treaty claims arising from judicial measures.

The Role of International Investment Law in the Business and Human Rights Legal Process

Abstract This article examines the interplay between international investment law and international human rights law in order to assess whether the former can be used to foster corporate accountability for violations of human rights. The role of international investment agreements in ensuring corporate compliance with human rights will be addressed, together with the approach to human rights violations of corporations by international investment tribunals. Whilst acknowledging some inherent limits of IIL, the underling argument of the paper is that rebalancing rights and obligations of investors may give teeth to corporate human rights accountability, while also benefitting the legitimacy of IIL.

The Uneasy Relationship between Intra-Eu Investment Tribunals and the Court of Justice's Achmea Judgment

This paper focuses on the ways in which investment tribunals constituted under intra-EU BITs and the Energy Charter Treaty (in an intra-EU dispute) have reacted to the Court of Justice’s Achmea judgment of 6 March 2018. The first part of the paper maps out the existing intra-EU arbitrations in which the issues arising from Achmea appear in one form or another. We then take a critical look at how the disputing parties have used Achmea in their argumentation and how the investment tribunals have dismissed these arguments and upheld their jurisdiction. The second part of the paper is analytical. When the tribunals uphold their jurisdiction and decide on the merits, they knowingly deliver an award, which is unenforceable in the Respondent State and the entirety of the EU. By drawing parallels with decisions rendered by other international tribunals, we argue that the rendering of potentially unenforceable awards is not specific to intra-EU investment disputes. We then look at why international tribunals render potentially unenforceable awards. The third part of the paper presents several suggestions of how intra-EU investment tribunals should tackle the Achmea conundrum, either by declining their jurisdiction pursuant to judicial comity or upholding their jurisdiction but dismissing the cases as inadmissible.

The Uneasy Relationship between Intra-EU Investment Tribunals and the Court of Justice’s Achmea Judgment

This article focuses on the ways in which investment tribunals constituted under intra-EU BITs and the Energy Charter Treaty (in an intra-EU dispute) have reacted to the Court of Justice’s Achmea judgment of 6 March 2018. The first part of the article maps out the existing intra-EU arbitrations in which the issues arising from Achmea appear in one form or another. We then take a critical look at how the disputing parties have used Achmea in their argumentation and how the investment tribunals have dismissed these arguments and upheld their jurisdiction. The second part of the article is analytical. When the tribunals uphold their jurisdiction and decide on the merits, they knowingly deliver an award, which is unenforceable in the Respondent State and the entirety of the EU. By drawing parallels with decisions rendered by other international tribunals, we argue that the rendering of potentially unenforceable awards is not specific to intra-EU investment disputes. We then look at why international tribunals render potentially unenforceable awards. The third part of the article presents several suggestions of how intra-EU investment tribunals should tackle the Achmea conundrum, either by declining their jurisdiction pursuant to judicial comity or upholding their jurisdiction but dismissing the cases as inadmissible.

Promises Unfulfilled: How Investment Arbitration Tribunals Mishandle Corruption Claims and Undermine International Development

In recent years, the investment-arbitration and anti-corruption regimes have been in tension. Investment tribunals have jurisdiction to arbitrate disputes between investors and host states under international treaties that provide substantive protections for private investments. But these tribunals will typically decline to exercise jurisdiction over a dispute if the host state asserts that corruption tainted the investment. When tribunals close their doors to ag-grieved investors, tribunals increase the risks for investors and thus raise the cost of international investment. At the same time, the decision to decline jurisdiction creates a perverse incentive for host states to turn a blind eye to corruption. Together, these distorted incentives hinder developmental goals and undermine the fight against corruption. To correct these problems, this Note proposes a framework to guide arbitral tribunals when faced with a corruption-tainted dispute. Specifically, this Note argues that when both parties participate in corruption, arbitral tribunals should invoke equitable estoppel to accept jurisdiction over the dispute. When considering the corruption claims, investment tribunals should use a contributory-fault approach that evaluates each party’s role in the corrupt act to determine the final award. This framework not only helps align the investment-arbitration and anticorruption regimes but also advances developmental objectives.