Since the end of World War II, the nations of the world have made approximately 3,000 investment treaties.1 As new agreements emerge almost monthly from diplomatic negotiations, investment treaty-making continues unabated. The rapid growth in investment treaties has led to a burgeoning number of international arbitration decisions that have applied and interpreted treaty provisions in disputes between investors and states concerning their respective rights.
2 This flurry of treaty-making and arbitral decisions has resulted in the creation of a new branch of international law - the law of investment treaties.3 This new law has been both a consequence and a cause of the increasing economic globalisation and vast growth in capital movements that have characterised the last half of the twentieth century and the beginning of the twenty-first.4 Investment treaties have become important factors that corporate executives, lawyers, bankers, and government officials must consider in planning, executing, and managing foreign investments.5
Investment treaties, which grant special international protection to foreign investors and give them a means to enforce those rights against States in which they have invested, have become increasingly important in planning, executing, and managing international investments.6 The Law of Investment Treaties explain the nature, history, and significance of investment treaties and their impact on international investors and investments, as well as on the governments that are parties to them.7
The international law governing transnational investments has undergone a remarkable transformation in a relatively short time. The fundamental tool for effecting that transformation has been the investment treaty, in which contracting countries set down rules to govern investments by their respective nationals in each other's territories.8 They include the North American Free Trade Agreement,9 the Energy Charter Treaty, and over 2600 bilateral investment treaties.10 This trend is bound to grow in the future. While differing in particular provisions, investment treaties all do two things:1) they grant special protective rights to foreign investors, and 2) they provide for mechanisms that allow investors to enforce those rights, usually by international arbitration.11
Although the precise provisions of investment treaties are not uniform and some treaties restrict host country governmental action more than others, virtually all investment treaties address the same issues.12 There is a growing body of arbitration decisions showing application and interpretation of investment treaties.13 The common issues, include the scope of application, and general standards of treatment of foreign investments (including increasingly common concepts such as 'fair and equitable treatment', 'national treatment', 'most-favoured-nation treatment' etc). Monetary transfers, operational conditions, protection against expropriation and dispossession, and compensation for losses are also explored.
This existing problem confronts us with the existing debate on the relationship between general public international law and international investment law. This confrontation is based on certain premises: first, as already indicated, the authors conduct their research from a perspective of public international law based on the fact that at least BIT-based investment law has its roots in public international law.
Second, it is the firm belief of the authors that the complexity of the relationship between general public international law and international investment law can only be understood, if one asks not only how public international law influences investment law, but also tries to analyse how investment law has an impact on principles and rules of general public international law.
Embedding international investment law firmly in public international law helps to broaden the focus beyond questions of treaty interpretation and arguably helps to legitimise investment treaties and investor-state arbitration by drawing on the public international law framework and its function not only to limit states in their interaction with each other but also to facilitate inter-state and investor-state co-operation and therefore empower states.
Furthermore, it is the 'internationalisation of the rule of law' and the legally binding nature of economic actions accompanying bilateral investment treaties and investor-state arbitral proceedings which do not only serve the interests of investors.
They serve the interests of the states and the international community as a whole in providing a basis for legal settlements in investment disputes between the host state and the investor, as well as in the enforcement of international law.
In this regard, exceeding the concrete case at hand, international investment law also fulfils an ordering function for international investment relationship.14 The legal implementation of international investment law can itself be described as a global public good.15 Bilateral investment treaties and investor-state arbitration as an institutionalised form of an 'investment law culture' remain committed to the common aim of promoting international economic exchange and development through the rule of law.
The treaty states like Germany, as well as the arbitral tribunals themselves16, bear the responsibility for assuring the reasonable form and functionality of this system of international investment arbitration. (The writer is an advocate and is currently working as an associate with Azim-ud-Din Law Associates) 1. Bilateral Investment Treaties: 1959-1999, United Nations (2000).
2. UNCTAD World Investment Report (2007), observes: "since the early 1990s, the number of BITs has increased significantly. A considerable degree of conformity has emerged in terms of the main contents of BITs, although with significant differences concerning their substantive details. On the other hand, the surge in BITs has been accompanied by a degree of normative evolution. This development presents new challenges for policymakers.
While all BITs limit the regulatory flexibility within which contracting parties can pursue their economic development policies, more recent BITs include a wider variety of disciplines affecting more areas of host country activity in a more complex and detailed manner. At the same time, these treaties put more emphasis on public policy concerns, in particular through, inter alia, the inclusion of safeguards and exceptions relating to public health, environmental protection and national security.
Furthermore, the interaction of BITs with other agreements at different levels, including the bilateral, regional, plurilateral and multilateral levels, becomes more complicated. As global economic integration deepens, managing the impacts of integration on the domestic economy becomes more demanding and the challenges involved in concluding BITs are correspondingly greater."
3. See Schill, The Multilateralization of International Investment law (2009), 281-293.
4. See, however, eg; Mc Lachlan, Investment Treaties and General International Law, 1CLQ 58 (2008), 361.
5. See, eg, on the one hand Waste Management Inc u. United Mexican States, ICSID Case No ARB(AF)/00/2, Final Award of 20 April 2004, para. 85 (no room for implying into the treaty additional requirements of general public international law), and on the other Enron Corporation and Ponderosa L.P. v. Argentine Republic, ICSID Case No ARB/01/3, Decision on Jurisdiction of 14 January 2004, para. 46 ("Each instrument must be interpreted autonomously in the light of its own context and in the light of its interconnections with international law").
6. For details see, eg, Vandevelde, in: Sauvant/Sachs (eds.), The Effects of Treaties on Foreign Direct Investment (2009).
7. However, scholarly research in this regard has mostly concentrated on very specific questions or cases, or on the more general question whether the number of existing BITs in conjunction with the practice of arbitral tribunals has actually established certain rules of investment protection law as customary international law. See, eg, McLachlan, Investment Treaties and General International Law, 1CLQ 58 (2008), 361 et seq.; Schwebel, The Influence of Bilateral Investment Treaties on Customary International Law, ASIL Proceedings 98 (2004), 27; 1C], Diallo (Republic of Guinea v. DR Congo), 24 May 2007.
General List No 103 [Assertion of an investment by an investor not anchored in customary international law]; Gazzini, The Role of Customary International Law in the Protection of Foreign Investment, JWI I' 8 (2007), 691; Pope &" Talbot Inc v Government of Canada, Award in Respect of Damages, 31 May 2002, 41 ILM, 1347, para. 55 et sec/.; United Parcel Service of America Inc v Government of Canada, Award on Jurisdiction of 22 November 2002, para. 86 et seq.; for a possible supposition: Lowcnfeld, International Economic Law (2008), 584; Mann, British Treaties for the Promotion and Protection of Investment, BYIL 52 (1981), 241 (249); Wiilde, The Specific Nature of Investment Arbitration, in: KahnW/alde (eels.), New Aspects of International Investment Law (2007), 96 et seq.; cautious: Schwebel, The Influence of Bilateral Investment Treaties on Customary International Law, Proc. 98" Annual Meeting of the ASIL (2004), 27; Sornarajah, The International Law of Foreign Investment (2004), 206; Hindelang, Bilateral Investment Treaties, Custom and a Healthy Investment Climate The Question of whether BITs Influence Customary International Law Revisited, JWI'F 5 (2004), 789; Kishoiyian, The Utility of Bilateral Investment Treaties in the Formulation of Customary International Law, North-western Journal of International Law and Business (1993), 14 (327); I'aruque, Creating Customary International Law through Bilateral Investment 1 reaties: A Critical Appraisal, Indian J. of Intl L. 44 (2004), 292; GriebeL, Internationales Investitionsrecht (2008), 109 et seq.; Schwebel, The Overwhelming Merits of Bilateral Investment Treacles, in: Investor-State Arbitration: Perspective on Legitimacy and Practice, Suffolk University Law School (2008), 168 (174).
8. Ever since its early days, the OECD has been tackling the issue of international arrangements regarding investment. Although the Code of Liberalization of Capital Movements enacted in 1961 covers a wide range of investment types and provides for the Liberalization of transactions except in certain cases, its enforceability is weak as it lacks dispute settlement provisions.
The Guidelines for Multinational Enterprises, drafted in 1976, describe when governments of member countries should recommend that multinational enterprises behave responsibly, as their behaviours may affect the development of the world economy. The guidelines were subsequently revised four times to add descriptions on the environment, employment relations, disclosure and new chapters on consumer interests and combating bribery, in accordance with developments of the world economy and changes in the actions of multinational enterprises.
Upon their revision in 2000, National Contact Points were established to promote the Guidelines, handle enquiries and help to resolve issues. However, the guidelines themselves are not legally binding and their application and implementation are left to the discretion of each enterprise, UNCTAD "World Investment Report 2006," chapter 5.
9. A new approach to investment agreements that emerged in the 1990s held that they should address entry barriers to investment such as foreign capital restrictions in addition to providing post-establishment protection. Investment agreements reflecting this approach have been executed.
Such investment agreements provide national treatment and most-favoured-nation treatment during the pre-investment phase as well as the post-establishment phase and prohibit "performance requirements," which are considered to have a distorting effect on investments.
These provisions are mostly included in FTAs/EPAs as a chapter on investment. A typical example is the investment chapter in NAFTA. These may be referred to as "investment protection/Liberalization agreements." Ibid n.8
10. The Energy Charter Treaty was signed in 1994 and became effective in 1998. The three pillars of the Energy Charter Treaty are the provisions on the trade in goods, investment rules and energy transport. Although limited to energy-related investments, it contains elements of so-called investment protection agreements.
Japan signed the treaty in 1995 and ratified it in 2002. Each country of the former Soviet Union continues to participate in the treaty following the collapse of the Soviet Union, but the treaty is treated as being provisionally applied to Russia since Russia has signed but not yet ratified the treaty. Ibid n.8
11. Investment agreements can be classified into two types: "investment protection agreements" and "investment protection or Liberalization agreements," which contain provisions relating to both investment protection and Liberalization. However, elements contained in investment agreements vary from state to state.
A commonly used provision in these agreements is that each party shall accord to investors of the other party and to their investments national treatment or most-favoured nation treatment with respect to all investment activities, which include the "establishment, acquisition, expansion, management, conduct, operation, maintenance, use, enjoyment and sale or other disposition of investments/' In the case of investment protection agreements, because NT or MFN treatment is accorded in the post-establishment phase, the terms "establishment, acquisition, expansion" are often excluded and such agreements provide "national treatment or most-favoured nation treatment with respect to management, conduct or other disposition."
12. The Vienna Convention on the Law of Treaties, Art 1 (a) defines a 'treaty' as 'an international agreement concluded between States in written form and governed by international law, whether embodied in a single instrument or in two or more related instruments and whatever its particular designation'. Vienna Convention on the Law of Treaties (22 May 1969); UN Doc A/Conf.39/27; 1155 UNTS 331; (1969) 8 ILM 679; (1969) 63 AJIL 875 (VCLT).
13. Article 53(1) of the ICSID Convention states: 'The award shall be binding on the parties.' Schreuer suggests that this provision may be interpreted as 'excluding the applicability of the principle of binding precedent to successive ICSID cases'. He also notes that there is nothing in the preparatory work of the Convention suggesting that the doctrine of precedent should be applied to ICSID arbitration. C Schreuer, 'A Doctrine of Precedent?" in P Muchlinksi et al, The Oxford Handbook of International Investment Law (2008) 1190.
14. See generally Schill, The Multilateralization of International Investment Law (2009), I7 ("Investment treaties are not designed to function like private law contracts that order the relationship between a limited number of parties and contain the exchange of specific transactions, but have a constitutional function in providing a legal framework within which international investment activities can take shape and expand. As such, investment treaties are embedded in a larger framework of international law that overarches the individual bilateral treaty relations and establishes uniform rules for the conduct of host States that consist in adopting a liberal attitude vis-a-vis market mechanisms and that accept the limited role of the State vis-a-vis the economy.").
15. Classically: Samuelson, The pure theory of public expenditure, in: Review of Economics and Statistics 36 (1954), 387; Kaul/Grunberg/Stern, Global Public Goods, International Co-operation in the 21st Century (1999); referring to international economic law: Tietje, in: Tietje (ed.), Internationales Wirtschaftsrecht (2009); Meesen, in: Meesen/Bungenberg/Puttler (eds.). Economic Law as an Economic Good (2009), 3.
16. MCI Power Group and New Turbine v Republic of Ecuador, Decision on Annulment of 19 October 2009, available at:
Comments
Comments are closed for this article.